TIDMDTY
RNS Number : 0016Y
Dignity PLC
10 May 2021
For immediate release 10 May 2021
Dignity plc
First quarter trading update
Dignity plc (Dignity, the Company or the Group), the UK's only
listed provider of funeral related services, provides the following
updates:
Summary
13 week 13 week period
period ended ended
26 March 27 March Increase
2021 2020 (per cent)
Underlying revenue (GBPmillion) 94.7 83.1 14
Underlying operating profit (GBPmillion) 26.1 19.4 35
Number of deaths 204,000 161,000 27
Alternative performance measures ('APMs')
All measures marked as underlying in the table above and
throughout this announcement are alternative performance measures .
The Board believes that whilst statutory reporting measures provide
financial performance of the Group under GAAP, APMs are necessary
to enable users of the financial statements to fully understand the
trading performance and financial position of the business. The
APMs provided are aligned with those used in the day-to-day
management of the business and allow for greater comparability
across periods.
Financial summary
Operating performance in the first quarter was above the Board's
expectations as a result of the significantly higher than expected
number of deaths. Funeral market share and average revenue were
below the Board's expectations. Underlying operating profit by
division is summarised in the table below:
Funerals Crematoria Central
overheads Group
GBPm GBPm GBPm GBPm
Underlying operating profit
- Q1 2020 17.5 10.3 (8.4) 19.4
Impact of:
Number of deaths 13.2 4.3 - 17.5
Market share (3.7) (0.9) - (4.6)
Average revenues (5.4) 0.5 - (4.9)
Cost base changes - - (1.3) (1.3)
Underlying operating profit
- Q1 2021 21.6 14.2 (9.7) 26.1
Number of deaths
The absolute number of deaths increased by approximately 27 per
cent to 204,000 from 161,000 in the comparative period last year as
a result of COVID-19. Since the end of the quarter, the UK has
witnessed deaths falling below the five year average.
Funeral operations
Funeral market share
The Group performed 23,800 funerals in the first 13 weeks of the
year (Q1 2020: 20,000) in the United Kingdom. Just over one per
cent of the funerals in each period were performed in Northern
Ireland. Excluding Northern Ireland, these funerals represented
approximately 11.5 per cent (Q1 2020: 12.2 per cent) of total
estimated deaths in Great Britain. The year-on-year decline in
market share is primarily attributable to a decline in full service
and pre-arranged funeral plans partially off-set by continued
growth in Simplicity cremations.
Whilst funerals divided by estimated deaths is a reasonable
measure of Dignity's market share, the Group does not have a
complete national presence and consequently, this calculation can
only ever be an estimate. Allied to this, market share is
calculated based on a fixed assumption of one week between the
registration of the death and the date of the funeral. Therefore,
calculations of market share, particularly over shorter periods,
may not be comparable. Q1 2021 is impacted by COVID-19, as there is
a greater delay between the date of registration of the death and
the date of the funeral. The Group expects this to normalise during
Q2, providing the number of COVID-19 deaths continues to reduce. In
Q1 2020 COVID-19 had not yet had any material impact on the death
rate and funeral volumes.
Average funeral revenue
FY Q1 Q4 Q1
2020 2020 2020 2021
Funeral type Actual Actual Actual Actua l
Underlying average revenue (GBP) Full service 3,337 3,521 3 ,351 3,354
Simple services 1,941 1,972 1 ,937 1,929
Pre-need 1,911 1,894 1 ,979 1,943
Other (including Simplicity) 940 888 9 27 1,004
Volume mix (%) Full service 39 50 4 3 41
Simple service 25 14 2 1 21
Pre-need 28 29 2 8 29
Other (including Simplicity) 8 7 8 9
Underlying weighted average (GBP) 2,397 2,648 2,476 2,434
Ancillary revenue (GBP) 125 175 169 131
Underlying average revenue (GBP) 2,522 2,823 2,645 2,565
Full service volume as a percentage of full and simple 61 78 67 66
The table above shows the underlying weighted average revenue in
the first quarter of the year was lower than Q4 2020. This reflects
the change in mix, which has seen a one per cent increase in the
percentage of Simplicity and other cremations. Underlying ancillary
revenue per funeral was lower in the first quarter, primarily due
to lower sales of memorial items.
Crematoria operations
The Group conducted 22,600 cremations (Q1 2020: 18,600),
representing a market share of 11.1 per cent (Q1 2020 11.5 per
cent). As explained above, the increase in the time between
registering the death and the funeral taking place could impact on
the comparability of the market share calculation. The Group
expects this to normalise during Q2.
Crematoria grounds have been allowed to remain open during the
latest COVID-19 restrictions. Consequently, memorial sales activity
is in line with expectations and above the prior period.
Pre-need operations
Sales of pre-arranged funeral plans have exceeded expectations
in the first quarter, resulting in active pre-arranged funeral
plans of 571,000 compared to 558,000 at December 2020 and 532,000
at the end of March 2020.
The Group continues to progress with its preparations for
regulation of the funeral plan market by the Financial Conduct
Authority and has submitted its response to the March 2021
consultation paper.
Central overheads
Total
GBPm
Total overheads - 2020 8.4
Impact of:
Digital activities 0.7
IT support fees 0.2
Other 0.4
Total overheads - 2021 9.7
Central overheads are expected to reduce as part of the
strategic review.
Capital structure
Secured Notes
The Group's primary financial covenant under the Secured Notes
requires EBITDA to total debt service to be above 1.5 times. The
ratio at March 2021 was 2.28 times (March 2020: 2.06 times;
December 2020: 1.99 times). As such, the Group had EBITDA headroom
of approximately GBP26.5 million against its financial covenant at
the end of March 2021.
Whilst not a covenant, in order for the Group to transfer excess
cash from the securitisation group to Dignity plc, it must achieve
both a higher EBITDA to total debt service ratio of 1.85 times and
achieve a Free Cash Flow to total debt service (a defined term in
the securitisation documentation) of at least 1.4 times. This
latter ratio at March 2021 was 1.88 times (March 2020: 1.63 times;
December 2020: 1.57 times). These combined requirements are known
as the Restricted Payment Condition ('RPC'). Given the ratios
achieved, the RPC was achieved at March 2021. These covenant
calculations use a prescribed definition of EBITDA detailed in the
loan documentation and only represents the profit of a sub group of
the Group which is party to the loans (the 'securitisation
group').
Given the pressures created by COVID-19 and the risk of a big
drop in the death rate, whilst the Group anticipates achieving the
primary financial covenant, there is a possibility that the Group
will not achieve the RPC at June 2021. Failure to pass the RPC at
June would not be a covenant breach and would not cause an
acceleration of any debt repayments. Furthermore, any cash not
permitted to be transferred whilst the RPC is not achieved will be
available to be transferred at a later date once the RPC
requirement is achieved. Therefore, given the Group continues to
temporarily suspend dividend payments, in practical terms, failure
of the RPC will not have a material impact on the day-to-day
operation of the Group.
Cash balances
At the end of March 2021, the Group held cash of approximately
GBP71 million, approximately GBP39 million of which was held by
Dignity plc, which is freely available for use as the Group sees
fit. The plc cash balance has reduced by approximately GBP10
million, since December 2020, due to the additional tax payment
required relating to the corporate interest restriction described
in the 2020 Annual Report.
Board update
On 22 April 2021, Clive Whiley ceased to be a Director of the
Company and Gary Channon was appointed as Executive Chairman. The
Independent Non-Executive Directors, comprising Gillian Kent, Dean
Moore and Paul Humphreys, all resigned from the Board, in the case
of Gillian Kent and Paul Humphreys, this was with immediate effect.
Dean Moore, given his current role as Interim Chief Financial
Officer, will continue to serve as a Director for his three-month
notice period to enable an orderly transition.
On 26 April 2021, James Wilson, Non-Executive Director, stepped
down from the Board so as to keep the number of Phoenix Directors
on the board to one following Gary Channon's appointment.
The process to recruit three new Non-Executive Directors,
including a new Chairman, has commenced and this will result in a
new Board with a majority of Independent Directors. At such time
that a Non-Executive Chairman is appointed to the Board, Gary will
become CEO until a CEO is appointed and at such time he will
subsequently step down from the Board.
The current search for a CFO is continuing and the Board expects
to make an appointment before Dean Moore departs.
Outlook
COVID-19 has had a distorting impact on the business both in
terms of operations and the financial results, making comparisons
to the prior year difficult. It also makes the short-term future
hard to predict because we don't know whether we face a period of a
lower than the average death rate or another wave of contagion and
a subsequent higher number of deaths. The restrictions on funeral
sizes continue to impact the average revenue per funeral. Setting
all that aside, the Group remains financially robust and
profitable. As previously indicated, the Group's future strategy
will be outlined and presented at the time of the Group's AGM on 23
June 2021.
Gary Channon, Executive Chairman of Dignity, commented:
" A s the limits on mourner numbers begin to ease, we expect to
see a change in the services we are able to offer bereaved people
and look forward to helping those who have lost someone say goodbye
in a personal and meaningful way.
On 12 April 2021, I laid out my vision for Dignity which
contained a number of potential actions aimed at securing Dignity's
future and building a better business for bereaved people, our
staff and our partners. As we navigate out of the pandemic, and in
light of regulatory changes in our industry, our hope is to lead
positive change in our sector and become the true market leader
with an unrivalled focus on quality, standards and choice. We are
working hard on this plan and look forward to presenting it to
shareholders at our AGM on 23 June 2021.
I would like to thank all of our employees for their hard work
and dedication over the last year in the most challenging of
circumstances, and look forward to working alongside them as we
move into Dignity's next phase of growth together. In addition, we
have commenced a process to recruit a new Independent Chairman and
Non-Executive Directors to help steer the strategic direction of
Dignity's bright future. We will provide an update on appointments
made in due course."
For further information please contact:
Gary Channon, Executive Chairman
Dean Moore, Interim Chief Financial Officer
Dignity plc +44 (0)20 7466 5000
Richard Oldworth
Chris Lane
Tilly Abraham
Buchanan +44 (0)20 7466 5000
www.buchanan.uk.com dignity@buchanan.uk.com
Forward-looking statements
This announcement and the Dignity plc investor website may
contain certain 'forward-looking statements' with respect to
Dignity plc ('the Company') and the Group's financial condition,
results of its operations and business, and certain plans,
strategy, objectives, goals and expectations with respect to these
items and the economies and markets in which the Group
operates.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'will',
'would', 'expects', 'believes', 'intends', 'plans', 'targets',
'goal' or 'estimates' or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements
are not guarantees of future performance. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to
factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements. These
factors include, but are not limited to, changes in the economies
and markets in which the Group operates; changes in the legal,
regulatory and competition frameworks in which the Group operates;
changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of
accounting standards under IFRS, and changes in interest and
exchange rates.
Any forward-looking statements made in this announcement or the
Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualified in their
entirety by the factors referred to above. Each forward-looking
statement speaks only as of the date it is made. Except as required
by its legal or statutory obligations, the Company does not intend
to update any forward-looking statements.
Nothing in this announcement or on the Dignity plc investor
website should be construed as a profit forecast or an invitation
to deal in the securities of the Company.
Other information
Dignity (2002) Limited (the holding company of those companies
subject to the securitisation) has today issued reports to the
Rating Agencies (Fitch and Standard & Poor's), the Security
Trustee and the holders of the Secured Notes issued in October 2014
in connection with the securitisation.
Copies of these reports are available at
https://www.dignityplc.co.uk/investors/ .
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