TIDMDTY
RNS Number : 3723M
Dignity PLC
21 September 2021
For immediate release 21 September 2021
Dignity plc
Interim results for the 26 week period ended 25 June 2021
New strategy in place and already underway to enable the Group
to realise its significant unlocked value. Well prepared for CMA
obligations and FCA regulation
Dignity plc (Dignity, the Company or the Group), the UK's only
listed provider of funeral related services, announces its
unaudited interim results for the 26 week period ended 25 June
2021.
26 week 26 week
period period
ended ended
25 June 26 June (Decrease)
2021 2020 /increase
restated per cent
---------------------------------------------- --------- ---------- -------------
Underlying revenue (GBPmillion) 169.4 169.1 -
Underlying operating profit (GBPmillion) (2)
(3) 37.8 41.9 (10)
Underlying profit before tax (GBPmillion)
(2) (3) 23.2 27.0 (14)
Underlying earnings per share (pence) (2)
(3) 36.2 42.4 (15)
Underlying cash generated from operations
(GBPmillion) (2) (3) 56.6 62.3 (9)
Revenue (GBPmillion) 189.0 197.1 (4)
Operating profit (GBPmillion) (2) 40.8 44.2 (8)
Profit/(loss) before tax (GBPmillion) (2) 50.5 (12.1)
Basic earnings/(loss) per share (pence) (1)
(2) 62.4 (22.6)
Cash generated from operations (GBPmillion)
(2) 49.0 41.8 17
Number of deaths 340,000 368,000 (8)
---------------------------------------------- --------- ---------- -------------
Prior year adjustments
A number of prior year adjustments have been made as
follows:
(1) A prior year restatement has been made to the magnitude of
GBP2.2 million to increase the June 2020 taxation charge and
increase the corresponding corporation tax liability. This follows
the finalisation of the Group's 2019 detailed corporate interest
restriction return and an increase to the Group's interest
disallowance as a result of the inclusion of the fair value
movements on the Trusts debt investments. See note 1 for further
details.
(2) A prior year restatement has been made of a GBP1.2 million
credit to correctly reflect the application of IFRS 16 in June
2020. See note 1 for further details.
(3) Underlying performance measures throughout this announcement
for June 2020 have been restated to reflect the application of IFRS
16, Leases. This standard was adopted in 2020 using the modified
retrospective adoption which meant 2019 comparatives were not
restated. As a result, the Group chose to exclude it from its
underlying performance measures reported in 2020 in order to retain
comparability. Therefore, the underlying performance measures
reported above in both periods includes the application of IFRS 16.
See note 1 for further details.
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. For this reason, the APMs provided exclude the
impact of consolidating the Trusts and the changes which relate to
the application of IFRS 15, all of which are considered to mask the
underlying trading performance of the Group, as well as
non-underlying items comprising certain non-recurring and
non-trading transactions. Further detail may be found on pages 45
to 51.
Key points
-- New strategy in place and already underway, which will enable
the Group to realise its significant unlocked value for the benefit
of clients, employees, shareholders and wider stakeholders
-- Delivered a complex programme of work to ensure regulatory
preparedness in time for the Competition and Markets Authority
('CMA') statutory deadline
-- Reviewed and adapted the Group's pricing strategy, launching
competitively priced funeral services in the UK to truly lower the
cost of dying for families
-- Regulatory preparedness for Financial Conduct Authority
('FCA') regulation picked up pace as we neared the authorisation
window, which was opened by the regulator in September. A major
programme is underway within the business, across all areas of the
organisation, to ensure we have the right governance, processes,
products and infrastructure to meet our regulatory requirements
-- As announced at the AGM, we've also looked at how we can
improve efficiency through a new organisational structure so we can
truly operate as one company. We have reviewed how our regions are
structured, resulting in the creation of 12 new regions
-- Initiatives are underway to place those colleagues that serve
our communities and clients first in all we do. Part of this
strategy is the development of our Principles to reset
organisational culture, which will help guide how we make
decisions, how we treat each other and our clients, and how we
behave as a business
Gary Channon, Chief Executive of Dignity plc, commented:
"There are a number of significant projects underway at Dignity
that we are committed to delivering. Importantly we must take all
of our stakeholders along on this journey, including our
colleagues, clients and shareholders.
Our focus is to build a successful and growing business by
empowering our colleagues and giving them the tools to succeed
which include competitive prices, the authority to act with local
autonomy, great products and investment in people and premises. Our
most ambitious goal though is to cultivate a culture that will be
our true differentiator. Successful execution of our strategy will
unlock the significant value in our business."
For further information please contact:
Gary Channon, Chief Executive
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
Chairman's Statement
I'm delighted to have joined the Dignity team at such a pivotal
period in its development.
Our business continues to deal with the effects of COVID-19 and
in my short period with the company I have been extremely impressed
with the dedication of our colleagues in delivering a superior
service to our customers in very difficult circumstances.
The Group has also embarked on an ambitious plan to further
improve its operating model to better serve our customers and to
comply with the changes to our industry introduced by the CMA and
preparing for the upcoming FCA regulation and supervision.
During this period of significant change, the appropriate
corporate governance is even more important. To this end, I'm
pleased to report that in addition to my appointment, we have
secured the support of Graham Ferguson as an Independent
Non-Executive Director. I welcome Graham to the Board.
I am working on strengthening the governance further and for the
business to be Code compliant by the year end, including a
determination to introduce diversity to our Board. To this end we
have already started the process for recruiting an additional
Independent Non-Executive Director as well as the appointment of a
permanent Chief Financial Officer.
I look forward to working closely with the Executive team in
overseeing the successful execution of our strategy for growth.
John Castagno
Chairman
20 September 2021
Chief Executive's Statement
Financial summary
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. The death rate in quarter one was 22
per cent above the five year average (2015-2019) which reduced to
four per cent below the five year average in quarter two. As
restrictions eased on funeral attendance our average revenue per
funeral increased from GBP2,461 in the first half of 2020 to
GBP2,628 for the first half of 2021. That higher revenue per
funeral was on fewer funerals; we conducted 41,400 in the first
half of 2021, down from 46,000 in the first half of 2020. In the
2019 comparative period, which had no pandemic effect, we conducted
36,200 funerals. Amongst all this turbulence market share is much
harder to judge because the differences between time of death and
time of funeral change. However, we believe our underlying share
has declined outside of our trial areas. We observed the same
effect in our crematoria, details of which are outlined below.
Taken together, underlying operating profit for the first half
was down 10 per cent to GBP37.8 million versus GBP41.9 million last
year which was mainly driven by the decline in volume.
Further details on the Group's financial performance are
provided in the business and financial review.
Cash position
The business remains cash generative despite increased capital
expenditure and corporation tax. The Trading Group's period end
cash position is GBP81.7 million versus GBP73.6 million as at 25
December 2020 and GBP80.3 million at 26 June 2020.
Strategic update
The Group is engaged on many fronts with strategic initiatives
underway - many of which were unveiled at the time of our AGM in
June 2021. At the same time we are preparing for and applying new
rules and regulations from the CMA and the FCA.
I will share an outline of what is happening but as I write much
of this is just in early execution stage and so detail is either
too sensitive to share or not yet available. By the year end we
will be able to say more.
Our internal initiatives include defining and embedding the
principles and values that will shape our culture, achieving growth
through commercial competitiveness, empowering client facing
employees, investing in our infrastructure, introducing an
inverted, flatter and more co-operative structure, effective use of
digital, and a leaner central overhead. Work on all of these
initiatives is underway.
In September 2021 we announced a new regional structure that
organises our businesses into smaller groups where we will devolve
autonomy and the opportunity for decision making and local
developments. This restructuring is underway in two pilot regions
as we write. This process is sensitive in its nature as it involves
change for a lot of people, and we are working hard to ensure our
colleagues are fully informed and supported as we move through this
change. The goal is to give a better service to clients and be a
more effective business by empowering our local leaders to run
successful businesses serving their communities with help provided
by the wider Dignity group. We will take learnings from these
pilots to the rest of the regions. The whole exercise may take
around a year.
An accelerated programme of investment in our premises has
started with an initial focus on catching up on essential
maintenance work, followed by investing in our care for the
deceased facilities and then the aesthetics and presentation of our
branches. The pandemic hindered our ability to do work and resulted
in a drop in the run rate of capital expenditure, which is now
reversing, although it is still too early to estimate the total
amount of investment that will ultimately be necessary to ensure
that our estate meets the standards that we and our clients expect
.
A review of how we spend money centrally has identified areas
where we believe we can make savings. We will go about that in a
way that doesn't undermine our service delivery or our long-term
growth ambitions.
Dividends
We continue to work on our plans to improve our capital
structure so that the pursuit of the best long-term value for
shareholders is not compromised by the covenants attached to our
bonds. Until that has been done the Board will not be contemplating
dividends. We will make announcements at the appropriate times on
this matter.
CMA
The CMA introduced a new regime which includes a standardised
and comparable product from 16 September 2021 that will bring
greater price transparency for those arranging a funeral. In
advance of that deadline, we applied learnings from our trials to
introduce new products and price points which we believe position
us to be the best value for money in the communities we serve. It
is too early to judge the effects of this. We have also moved away
from restrictive packages to individually tailored funerals which
we believe are what clients prefer and which we are well positioned
to provide. This creates a platform for ongoing innovation in our
offering.
We believe it is important to compensate our front line
colleagues fairly, given the importance of the roles they fulfil -
as a first step we have raised our minimum pay to the Living Wage
(as set by the Living Wage Foundation) for all colleagues including
casuals. Price, premises and empowerment are points of friction to
our people, whom we believe are the key to our true
differentiation. In an increasingly competitive job market it is
essential that we align how highly we view them with how we
compensate and reward .
Pre-need regulation
The FCA has now opened up its application window for those who
want to sell, manage and carry out funeral plans and Dignity will
be applying. There is a considerable body of work going on in the
business to prepare for this new world. Our intention is to be
compliant and our aspiration is to set the highest standard. We are
also working to bring our existing funeral plan trusts into the new
FCA regime.
We have ended our relationship with those third party telephony
partners who sold plans on our behalf previously discussed at the
AGM. We are in the process of implementing the recommendations of
our internal investigation. We are focused on the development and
execution of a vision to excel in the new regulated environment
using all potential channels to find and delight new clients.
Our staff
I've spoken above about the importance of empowering our
colleagues and shaping the culture of our business. I also want to
thank our staff. While I have only been with Dignity a short while,
I continue to see and hear about demonstrations of commitment and
selflessness. You can see from the first quarter the surge in
deaths as a result of the COVID-19 pandemic. Without those
colleagues, tirelessly working everyday to serve the bereaved, we
would not have been able to deliver against the demand during that
period.
The Board
The appointment of John Castagno and Graham Ferguson means that
we now have two new Non-Executive Directors, including a Chairman,
which begins the normalisation of our corporate governance. It
allows the formation of the committees of the Board. Dean Moore has
also announced his intention to stay on once a permanent CFO is
appointed, and he will then resume his role as a Non-Executive
Director. As John says, it remains our goal and expectation to
further strengthen our Board and to be Code compliant by the time
of the annual results.
All of the above are a continuation of the overall strategy as
outlined at the AGM. Planning, analysis and discussion is turning
into actions and execution. Such a wholesale overhaul of a business
of this scale will inevitably have its setbacks and mistakes. We
are cultivating a culture that doesn't fear failure, but accepts it
as an inevitable consequence of trying new things and an
opportunity to learn and continuously improve. However, I remain of
the view that the direction we are on is the right one and will
create the most long-term value for shareholders.
Outlook
With all the recent changes just underway and the new regulatory
changes just beginning to impact as well as the unpredictability of
COVID-19 we will continue to refrain from providing guidance.
Gary Channon
Chief Executive
20 September 2021
Business and financial review
Introduction
For statutory purposes, the Group has two reporting segments,
Funeral services and Crematoria. See note 2 for further details.
Statutory financial results are shown on page 1.
The Group's underlying operations are managed across three
distinct divisions: funerals, crematoria and pre-arranged funeral
plans. Funeral services relate to the provision of funerals and
ancillary items, such as memorials and floral tributes. Crematoria
services relate to cremation services and the sale of memorials and
burial plots at Dignity operated crematoria and cemeteries.
Pre-arranged funeral plans represent the sale of funerals in
advance to customers wishing to make their own funeral
arrangements.
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.
We are a company in transition and so the way we report will
also need to transition. This business and financial review is
presented in a way consistent with the past. Many of the changes
taking place are only beginning to impact in the second half of the
current financial year and so it will be with our annual statement
for 2021 that we will start to report in a way that reflects the
new strategy as presented at the AGM. For example, one
manifestation of that will be the funeral type mix. We will no
longer be reporting a split between a standard and a simple funeral
because those products stopped being offered in September 2021 and
we moved to a new offering based upon a tailored solution. We will
though still in the future report average revenues per funeral.
Number of deaths
2021 2020 Increase/
(decrease)
per cent
Quarter 1 204,000 161,000 27
Quarter 2 136,000 207,000 (34)
First half of year 340,000 368,000 (8)
Deaths were above the prior year in the first quarter with the
second quarter falling below the five-year average (2015-2019). The
impact of COVID-19 deaths in 2020 and 2021 could possibly mean we
experience a lower number of deaths than originally anticipated by
the Office of National Statistics ('ONS') in 2022 and 2023. The
Group will not speculate on the most likely outcome.
Funeral operations
At 25 June 2021, the Group operated a network of 789 (June 2020:
807; December 2020: 795) funeral locations throughout the UK,
generally operating under established local trading names. The
change to the portfolio reflects eight closures and two openings.
Most closures represent locations where leases have naturally come
to an end and have not been renewed and also include three freehold
closures.
GBPm GBPm GBPm
Q1 Q2 H1
Underlying operating profit - 2020 restated (1) 19.1 16.9 36.0
Impact of:
Number of deaths 13.2 (21.4) (8.2)
Market share (3.7) 0.8 (2.9)
Average revenues (5.4) 11.6 6.2
Cost base changes (1.0) 1.5 0.5
Underlying operating profit - 2021 22.2 9.4 31.6
(1) (Restatement relates to the correction of the application of
IFRS 16 in June 2020. See page 28 for further details.)
The table above highlights the impact COVID-19 has had on the
financial performance in the first half of both periods. Whilst
overall deaths have fallen year on year, COVID-19 has had a
distorting impact on the timing of deaths and average revenues. The
pandemic restrictions which were introduced in quarter two 2020
have been eased in quarter two 2021.
Items totalling GBP4.3 million (2020: GBP7.6 million) are
excluded from underlying profit resulting in statutory operating
profit of GBP35.9 million (2020: GBP43.6 million). These items
relate to non-underlying items and the impact of the consolidation
of the Trusts and applying IFRS 15. See Non-GAAP measures note for
further details.
Market share
In the first half of 2021 the Group conducted 41,400 funerals
(June 2020: 46,000; December 2020: 80,300) in the United Kingdom, a
10 per cent decrease on the prior year. Approximately one per cent
of the funerals in each period were performed in Northern Ireland.
Excluding Northern Ireland, these funerals represented
approximately 12.0 per cent (June 2020: 12.4 per cent; December
2020: 12.0 per cent) of total estimated deaths in Great Britain. On
a comparable basis, excluding any funerals from locations not
contributing to the whole of the first half of 2021 and 2020,
market share was 12.0 per cent, compared to 12.3 per cent in
2020.
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. 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, due to COVID-19 and longer
delays between the date of registering the death and the date of
the funeral being performed, calculations of market share in 2020
and 2021 may not be comparable.
Funeral mix and underlying average income
FY Q1 Q2 H1 Q1 Q2 H1
Funeral type 2020 2021 2021 2021 2020 2020 2020 Actual
Actual Actual Actual Actual Actual Actual
Underlying
average revenue
(GBP) Full service 3,337 3,354 3,441 3,393 3,521 3,080 3,341
Simple and direct cremation 1,941 1,929 1,921 1,926 1,972 1,953 1,956
Pre-need 1,911 1,943 1,955 1,948 1,894 1,869 1,880
Other (including Simplicity) 940 1,004 982 982 888 992 987
Volume mix (%) Full service 39 41 46 43 50 26 37
Simple and direct cremation 25 21 17 20 14 37 26
Pre-need 28 29 28 28 29 28 28
Other (including Simplicity) 8 9 9 9 7 9 9
Underlying weighted average revenue (GBP) 2,397 2,434 2,545 2,478 2,648 2,136 2,360
Ancillary revenue (GBP) 125 131 168 150 175 49 101
Underlying average revenue (GBP) 2,522 2,565 2,713 2,628 2,823 2,185 2,461
Full service volume as a percentage of
full, simple and direct cremation (%) 61 66 73 68 78 41 59
As demonstrated in the table, overall average revenue in the
second quarter of 2021 has increased due to the easing of the
COVID-19 restrictions and the percentage of clients selecting a
full service rather than a simple or direct cremation has increased
to 73 per cent, which is five per cent lower than pre-pandemic
levels. Sales of ancillary items such as flowers and memorials have
also started to normalise at GBP168.
Crematoria operations
The Group remains the largest single independent operator of
crematoria in Great Britain operating 46 crematoria (June 2020: 46;
December 2020: 46).
GBPm GBPm GBPm
Q1 Q2 H1
Underlying operating profit - 2020 restated (1) 10.8 13.6 24.4
Impact of:
Number of deaths 4.3 (7.5) (3.2)
Market share (0.9) 0.5 (0.4)
Average revenues 0.5 4.1 4.6
Cost base changes (0.1) (0.1) (0.2)
Underlying operating profit - 2021 14.6 10.6 25.2
(1) (Restatement relates to the correction of the application of
IFRS 16 in June 2020. See page 28 for further details.)
The table above shows a similar story to funeral operations in
that the financial performance in the first half of 2021 compared
to 2020 is linked strongly to the impacts of COVID-19.
Non-underlying costs of GBP0.7 million (2020: GBP0.2 million)
are excluded from underlying profit resulting in statutory
operating profit of GBP24.5 million (2020: GBP24.2 million). See
Non-GAAP measures note for further details.
Crematoria grounds have been fully open for all of 2021 compared
to being closed in quarter two of 2020, and consequently total
memorial revenue was GBP10.4 million (2020: GBP6.4 million),
approximately 62 per cent higher despite cremation volume being
eight per cent lower.
The Group performed 38,900 cremations (June 2020: 42,500;
December 2020: 74,500) in the period. These volumes represent
approximately 11.4 per cent (June 2020: 11.6 per cent; December
2020: 11.2 per cent) of total estimated deaths in Great Britain.
Average revenue per cremation has increased to GBP892 (June 2020:
GBP875) which reflect a small increase in the percentage of full
cremations being selected.
The Group continues to offer direct cremations, where the
funeral director was either Dignity (i.e. the Simplicity offering)
or other funeral directors.
Pre-arranged operations
Trust plan sales have had a solid start to the year with sales
being above 2020 and 2019 levels with growth coming from Simplicity
plans and plans being sold by affinity partners.
Active pre-arranged funerals were approximately 580,000 at the
end of the period (June 2020: 537,000; December 2020: 558,000). Of
the sales in the period 20,000 plans were trust based funeral plans
(2020: 13,000). In addition, 15,000 (2020: 15,000) plans were
linked to life assurance plans with third parties. Not all of these
insurance backed plans include an obligation to provide a
guaranteed funeral and we anticipate the cancellation experience to
be significantly higher than is witnessed on trust based sales.
Active members 25 June 26 June 25 December
2021 2020 2020
Number Number Number
Supported by:
The Trusts 330,000 313,000 319,000
The Small Trusts 43,000 46,000 46,000
Insurance Plans 207,000 178,000 193,000
580,000 537,000 558,000
The financial position of the Trusts holding members' monies is
crucial, given the Group ultimately guarantees the promises made to
members. At the end of June 2021, the Trusts had average assets per
plan of GBP3,500 (June 2020: GBP3,200; December 2020: GBP3,400) in
respect of trust based funeral plans. Average assets per plan are
greater than the amount currently received by the Trading Group for
performing a funeral.
In its 2020 Annual Report, the Group disclosed that the
actuarial valuations of the Trusts that hold and invest monies of a
significant proportion of the active pre-arranged funeral plans
showed them to have a surplus of GBP4 million (as at 25 September
2020). This valuation is based on the amounts the Trusts are
expected to pay when a funeral is performed rather than the actual
cost of performance (being a lower amount) to the Group.
During the first half year the new investment strategy announced
last year was largely executed as the previous investment
allocations were unwound and the trusts assets placed in a
combination of high grade bonds (open-ended investment funds) and
low cost index funds (equities). This will reduce the ongoing fund
management cost and more rationally align the investments with the
liabilities with the intention of seeking in the long run to
outperform the cost of carrying out the funerals the trusts
support.
Central overheads
Central overheads relate to central services that are not
specifically attributed to a particular operating division. These
include the provision of IT, finance, personnel and Directors'
emoluments. In addition, and consistent with previous periods, the
Group records centrally the costs of incentive bonus arrangements,
such as Long-Term Incentive Plans ('LTIPs') and annual performance
bonuses, which are provided to over 100 managers working across the
business.
Underlying costs in the period were GBP19.0 million (2020:
GBP18.5 million). This reflects continued investment in digital
activities and central capabilities. The table below summarises the
key movements:
GBPm GBPm GBPm
Q1 Q2 H1
Central overheads - 2020 restated(1) 8.5 10.0 18.5
Impact of:
Digital activities 0.7 (0.1) 0.6
IT support fees 0.2 0.2 0.4
Salaries - (1.1) (1.1)
Other 0.3 0.3 0.6
Central overheads - 2021 9.7 9.3 19.0
(1) (Restatement relates to the correction of the application of
IFRS 16 in June 2020. See page 28 for further details.)
Salaries have reduced year-on-year primarily due to the prior
period including a performance bonus accrual of GBP1.0 million.
Central overheads are expected to reduce as part of the strategic
review.
Non-underlying items of GBP0.6 million (2020: GBP5.1 million)
are excluded from underlying costs resulting in total central costs
of GBP19.6 million (2020: GBP23.6 million). The reduction in
non-underlying items relates to GBP3.8 million less spent on the
abrogated Transformation Plan, GBP1.2 million less spent on
operating and competition review costs offset by an increase of
GBP0.5 million spent on marketing costs in relation to trials.
Corporate development activity
The Group has planning permission for six crematoria. The total
capital expenditure for these projects is expected to be
approximately GBP55.4 million, with GBP8.8 million of this amount
having already been invested. Each of the locations with planning
permission will take five to seven years to reach maturity,
performing 800 to 1,000 cremations per year.
In addition, the Group has one location where it is appealing
the planning decision and another one that is currently in the
planning process. Furthermore, the Group withdrew its interest in
one location following an unsuccessful planning appeal.
The Group's strategic review will determine the next course of
action for these locations.
Earnings per share
Underlying earnings per share decreased 15 per cent to 36.2
pence per Ordinary Share, principally driven by the 10 per cent
decrease in underlying operating profit.
Alternative performance measures
The alternative performance measures are stated before
non-underlying items and the effect of consolidation of the Trusts
and applying IFRS 15 as defined on page 45. These items have been
adjusted for in determining underlying measures of profitability as
these underlying measures are those used in the day-to-day
management of the business and allow for greater comparability
across periods.
Detailed information on non-underlying items including a
reconciliation of statutory revenue to underlying revenue is set
out on pages 32 and 45 to 51.
Accordingly, the following information is presented to aid
understanding of the performance of the Group:
26 week 26 week 52 week
period period period
ended ended ended
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated restated
GBPm GBPm GBPm
Operating profit for the period as reported
(a) 40.8 44.2 15.9
Add the effects of:
Acquisition related amortisation 2.1 2.3 4.6
External transaction costs in respect of completed
and aborted transactions 0.6 0.1 0.6
Marketing costs in relation to trials (b) 0.6 0.1 0.2
(Profit) / loss on sale of fixed assets (0.2) 0.1 (0.2)
Transformation Plan costs (c) - 3.8 4.7
Directors severance pay - - 1.6
Operating and competition review costs - 1.2 2.9
Trade name impairment - - 15.3
Goodwill impairment - - 28.7
Impact of Trust consolidation and IFRS 15 (6.1) (9.9) (14.0)
Underlying operating profit (d) (e) 37.8 41.9 60.3
Underlying net finance costs (14.6) (14.9) (29.7)
Underlying profit before tax (d) (e) 23.2 27.0 30.6
Tax charge on underlying profit before tax (5.1) (5.8) (7.4)
Underlying profit after tax (d) (e) 18.1 21.2 23.2
Weighted average number of Ordinary Shares
in issue during the period (million) 50.0 50.0 50.0
Underlying EPS (pence) (d)(e) 36.2 42.4 46.4
(a) Operating profit restatement relates to the correction of
the application of IFRS 16 in June 2020. See note 1 for further
details.
(b) A presentation adjustment has been made in June 2020 and
December 2020 to separately pull out the marketing costs in
relation to trials.
(c) Costs incurred in 2020 reflects expenditure up to the point
of the Transformation Plan being abrogated.
(d) IFRS 16 is no longer included as an adjustment to underlying
performance measures. See note 1 for further details.
(e) Fu rther details of alternative performance measures can be
found on pages 45 to 51.
Cash flow
The Group continues to be strongly cash generative. Underlying
cash generated from operations was GBP56.6 million (2020 restated:
GBP62.3 million). June 2020 underlying cash generated from
operations has been restated to include the application of IFRS 16
which was previously excluded. Other working capital changes were
consistent with the Group's experience of converting profits into
cash subject to timing differences and cash incurred in respect of
commission payments. These changes fluctuate year-on-year as a
result of timings of the Group's period end and the level of
bonuses paid.
In addition to the corporate development activity in the period,
the Group spent GBP10.3 million (2020: GBP6.5 million) on purchases
of property, plant and equipment.
25 26
Jun Jun
This is analysed as: 2021 2020
GBPm GBPm
Maintenance capital expenditure:
Funeral services 4.0 2.5
Crematoria 2.7 1.2
Other 1.3 0.8
Total maintenance capital expenditure(a) 8.0 4.5
Branch relocations 0.1 0.5
Transformation capital expenditure - 0.9
Development of new crematoria and cemeteries 2.2 0.6
Total property, plant and equipment 10.3 6.5
Partly funded by:
(
0.4
Disposal proceeds - properties ) (0.5)
Net capital expenditure 9.9 6.0
(a) Maintenance capital expenditure includes vehicle replacement
programme, improvements to locations and purchases of other
tangible and intangible assets.
Cash flow and cash balances for the Trading Group
Cash balances held by the Trading Group at the end of the period
were GBP81.7 million (June 2020: GBP80.3 million; December 2020:
GBP73.6 million). This includes GBP16.9 million of restricted cash
(June 2020: GBP16.9 million; December 2020: GBP16.9 million), see
note 10. Of the remaining amount, GBP33.6 million (June 2020:
GBP36.4 million; December 2020: GBP48.9 million) was held by
Dignity plc. Subsequent to the balance sheet date, GBP14.8 million
was transferred from the Securitisation Group to Dignity plc.
Please see the terminology section on page 26 for the definitions
of the Trading Group and the Securitisation Group.
Taxation
The Group's effective tax rate for 2021 is expected to be
approximately 22 per cent before the effect of non-underlying
items. The effective rate for 2022 and beyond is expected to be
approximately two to three per cent above the headline rate of
Corporation Tax for the relevant period principally due to
non-deductible expenses.
In the March 2021 budget, legislation to increase the main rate
of corporation tax from 19 per cent to 25 per cent from 1 April
2023 was announced. The change was substantively enacted at the
balance sheet date and is therefore recognised within this Interim
Report. The Group has recognised a non-underlying taxation charge
of GBP6.9 million through its income statement and a credit of
GBP1.9 million through other comprehensive income. See note 4 for
further details.
A prior year restatement has also been made to the magnitude of
GBP2.2 million to correct the June 2020 taxation charge and
corresponding corporation tax liability. The follows the
finalisation of the Group's detailed corporate interest restriction
return and an increase to the Group's interest disallowance as a
result of the inclusion of fair value movements on the Trusts debt
investments. Further details of the prior year restatement are set
out in note 1.
A judgement has been taken by management in relation to the June
2021 corporate interest restriction ('CIR') charge. The total
income reported in the Interim Report for investment income and
fair value movements on bonds and equities is GBP50.2 million. The
investments that this income arises on are predominantly consistent
with the investments held at December 2020. Therefore, in order to
estimate the total level of disallowance to assess the CIR charge
at June 2021, we have applied the same percentage split between
interest and non-interest bearing bonds and equities at June 2021
as compared to the position at 31 December 2020 to estimate a CIR
charge of GBP2.1 million.
Prior year restatement - insured plans
Following a review by the Board of the Group's accounting policy
for insurance plans in relation to the prepaid balance held on the
consolidated balance sheet within "deferred insurance commissions"
it has been amended to include a provision for expected future
cancellations. Further, the Group has reassessed the contracts with
the third party insurers and evaluated a requirement to recognise a
liability for commission payments expected to be paid under the
contract although not yet due. Further this liability has an
element for which an associated asset is also recognised
representing the level of future expected funerals. A detailed
analysis has been performed on the cancellation rates for insurance
products and a prior year restatement to opening reserves as at 28
December 2019 is required to the magnitude of GBP3.5 million,
reflecting the adjustment to the commission asset, the recognition
of a commission liability, and considered net of tax. See note 1
for further details.
Capital structure and financing
Secured Notes
The Group's principal source of long-term debt financing is the
Secured Notes issued in 2014. The principal is repaid completely
over the life of the Secured Notes and is therefore scheduled to be
repaid by 2049. The interest rate is fixed for the life of the
Secured Notes and interest is calculated on the principal.
The key terms of the Secured Notes are summarised in the table
below:
Secured A Notes Secured B
Notes
Total new issuance at par GBP238.9 GBP356.4
million million
Legal maturity 31 December 31 December
2034 2049
Coupon 3.5456% 4.6956%
Rating by Fitch A- BB+
Rating by Standard & Poor's A- B+
On 7 July 2021 Fitch revisited the rating of the Secured Notes,
reconfirming them at the above ratings.
The Secured Notes have an annual debt service obligation
(principal and interest) of circa GBP33.2 million.
It is not currently possible to issue further Secured Notes, as
such an issue would require the rating of the Secured B Notes to
raise to BBB by both rating agencies.
Secured Notes Financial Covenant
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 25 June 2021 was 2.12 times (June 2020: 2.15 times;
December 2020: 1.99 times). The Group therefore had EBITDA headroom
of approximately GBP21 million against its financial covenants at
the end of June 2021.
EBITDA for this calculation uses the last twelve months ('LTM')
results and can be reconciled to the Group's statutory operating
profit as follows:
H1 LTM LTM
25 25 25 Dec
Jun Jun 2020
2021 2021
restated
(b)
GBPm GBPm GBPm
EBITDA per covenant calculation - Securitisation
Group 46.1 72.0 67.6
A dd: Impact of IFRS 16 6.6 12.8 13.8
Add: EBITDA of entities outside Securitisation
Group 0.4 2.2 9.8
L ess : Non cash items(a) (0.8) (1.8) (1.9)
Underlying operating profit before depreciation
and amortisation - Group 52.3 85.2 89.3
Underlying depreciation and amortisation (14.5) (29.0) (29.0)
( 3.1
Non-underlying items ) (53.9) (58.4)
Impact of Trust consolidation and IFRS 15 6.1 16.9 14.0
Operating profit 40.8 19.2 15.9
Notes
(a) The terms of the securitisation require certain items (such
as pensions) to be adjusted from an accounting basis to a cash
basis .
(b) LTM for 25 December 2020 has been restated to reflect the
fact that IFRS 16 is now included within underlying results. As a
result, GBP13.8 million of EBITDA has been included within
underlying operating profit before depreciation and amortisation
which has therefore increased to GBP89.3 million. Underlying
depreciation and amortisation have increased by GBP9.2 million to
GBP29.0 million.
In addition, 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 June 2021 was 1.74 times (June 2020: 1.72 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 June 2021. If the RPC is not achieved, then
the Group's ability to pay dividends could be impacted. 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.
Furthermore, the calculations are unaffected by the consolidation
of the Trusts or the application of IFRS 15 and IFRS 16 described
elsewhere, as the Group was able to elect to disregard those
changes when making the calculations.
As set out in note 12, the Group's gross amounts owing on its
debt obligations were GBP537.2 million (June 2020: GBP547.0
million; December 2020: GBP542.2 million). Net debt was GBP467.4
million (June 2020: GBP478.8 million; December 2020: GBP480.6
million).
The market value of the Secured Notes at the balance sheet date
was GBP549.2 million (June 2020: GBP479.7 million; December 2020:
GBP488.4 million).
Whilst the Group has no plans to do so, should it wish to repay
all amounts due under the Secured Notes, the cost to do so at 25
June 2021 would have been approximately GBP759.7 million (Class A
Notes: GBP211.6 million; Class B Notes: GBP548.1 million) (June
2020: GBP850.8 million (Class A Notes: GBP234.5 million; Class B
Notes: GBP616.3 million); December 2020: GBP822.7 million (Class A
Notes: GBP226.0 million; Class B Notes: GBP596.7 million)).
The Group had a GBP10.0 million RCF facility at 25 June 2021.
The RCF is provided by the Royal Bank of Scotland, which is secured
against the remaining trade and assets held by legal entities
outside of the Group's securitisation structure. The facility
expired in July 2021 and the Group has decided not to renew this
facility.
Trust balances
At the balance sheet date, the Trusts had GBP1,006.8 million
(June 2020: GBP920.1 million; December 2020: GBP967.1 million) of
financial assets and GBP23.6 million (June 2020: GBP10.3 million;
December 2020: GBP21.6 million) of cash, which has been recognised
in the consolidated balance sheet. The movement in financial assets
from December 2020 to June 2021 is primarily attributable to
remeasurement gains recognised in the consolidated income statement
of GBP45.8 million (June 2020: remeasurement losses of GBP17.7
million; December 2020: remeasurement gain of GBP41.3 million) and
net disposals of financial assets of GBP5.8 million (June 2020: net
disposals of GBP8.6 million; December 2020: net disposals of
GBP18.7 million).
Aggregated contract liabilities totalled GBP1,330.5 million
(June 2020: GBP1,302.9 million; December 2020: GBP1,317.5 million)
with the primary movement from December 2020 to June 2021 being
sales of new plans of GBP48.6 million (June 2020: GBP37.6 million;
December 2020: GBP82.0 million), increases due to significant
financing of GBP25.9 million (June 2020: GBP26.8 million; December
2020: GBP53.1 million) and releases due to death or cancellation
totalling GBP61.5 million (June 2020: GBP66.1 million; December
2020: GBP122.2 million).
Post balance sheet events
On 5 July 2021, the FCA published their final rules for the
regulation of funeral plan activities and we are currently working
to apply as a registered provider of pre-arranged funeral plans,
further details for which can be found on page 4.
Forward-looking statements
Certain statements in this Interim Report are forward-looking.
Please see page 54 for further details.
Going concern
In order to assess the appropriateness of the application of the
going concern principle in these interim financial statements, the
Directors have considered the principal risks and uncertainties and
financial position of the Dignity Group.
The Group has carried out a diligent going concern analysis and
considered the ongoing impact of the COVID-19 pandemic, on these
financial statements. Full details of this analysis are set out in
Note 1 to the financial statements.
Following consideration of the base case forecasts, and the
range of downside and stress test scenarios, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. The
Directors formally considered this matter at the Board meeting held
on 15 September 2021. For these reasons, they continue to adopt the
going concern basis for preparing the Interim Report.
Our key performance indicators
We use non-financial and financial KPIs to both manage the
business and ensure that the Group's strategy and objectives are
being delivered.
Group Performance
KPI KPI definitions 26 week period Developments in 2021
ended
25 June 2021
Underlying earnings This is underlying 36.2 pence The reduction follows
per share (pence) profit after tax (H1 2020 restated: the decrease in underlying
divided by the weighted 42.4 pence)(a) operating profit
average number of (c) explained below.
Ordinary Shares (FY 2020 restated:
in issue in the 46.4 pence)(b)
period. (c)
Underlying operating This is the statutory GBP37.8 million Underlying operating
profit (GBP operating profit (H1 2020 restated: profit declined year-on-year,
million) of the Group excluding GBP41.9 million)(a) primarily driven
non-underlying items (c) by lower deaths,
and the impact of (FY 2020 restated: partially offset
consolidating the GBP60.3 million)(b) by higher average
trusts and IFRS (c) revenues.
15.
Underlying cash This is the statutory GBP56.6 million The Group continues
generated from cash generated from (H1 2020 restated: to convert operating
operations (GBP operations excluding GBP62.3 million)(a) pro t into cash e
million) non-underlying items (c) ciently.
and the impact of (FY 2020 restated:
consolidating the GBP88.9 million)(b)
trusts and IFRS (c)
15.
Underlying average Underlying funeral GBP2,628 Average revenue has
revenue per revenue divided (H1 2020: GBP2,461)(a) increased as restrictions
funeral (GBP) by the number of (FY 2020: GBP2,522)(b) in client choices,
funerals performed due to COVID-19,
in the relevant have started to ease.
period.
Total estimated This is as reported 340,000 Although deaths were
number of deaths by the Office for (H1 2020: 368,000) higher than originally
in Britain (number) National Statistics. (a) anticipated, due
(FY 2020: 663,000)(b) to the pandemic,
they are lower than
the prior period.
Funeral market This is the number 1 2 .0% Market share is lower
share excluding of funerals performed than H1 2020 and
Northern Ireland by the Group in in line with full
(per cent) Britain divided year 2020.
by the total estimated
number of deaths
in Britain.
(H1 2020: 12.4%)(a)
(FY 2020: 12.0%)(b)
Number of funerals This is the number 41,400 Changes are a consequence
performed (number) of funerals performed of the total number
by the Group according of deaths and the
to our operational Group's market share.
data.
(H1 2020: 46,000)(a)
(FY 2020: 80,300)(b)
Crematoria market This is the number 1 1 .4% Market share is broadly
share (per cent) of cremations performed stable.
by the Group divided
by the total estimated
number of deaths
in Britain.
(H1 2020: 11.6%)(a)
(FY 2020: 11.2%)(b)
Number of cremations This is the number 38,900 Changes are a consequence
performed (number) of cremations performed of the total number
according to our of deaths and the
operational data. Group's market share.
(H1 2020: 42,500)(a)
(FY 2020: 74,500)(b)
Active pre-arranged This is the number 580,000 This increase reflects
funerals (number) of pre-arranged (H1 2020: 537,000)(a) continued sales activity
funerals (both trust (FY 2020: 558,000)(b) (both trust funeral
funeral plans and plans and insurance
insurance backed) backed) offset by
where the Group the crystallisation
has an obligation of plans sold in
to provide a funeral previous periods.
in the future.
In addition to these key performance indicators, the Group
closely monitors the results of its client surveys. Highlights of
these results can be found on the following page.
(a) H1 2020 relates to the 26 weeks ended 26 June 2020.
(b) FY 2020 relates to the 52 weeks ended 25 December 2020.
(c) Restatements represent the inclusion of IFRS 16 in
underlying performance measures.
Maintaining consistent high-quality and standards
We closely monitor the results of our client surveys which are
conducted by our Funeral Services division. In the last five years,
we have received approximately 160,000 responses. This is our
measure of how these services meet or exceed client
expectations.
Our consistently high satisfaction scores reflect the strength
of our relationships with our clients. We listen to our clients and
use our survey responses to focus on areas in which we can improve
and add value.
The Dignity Client Survey 2021
Reputation and recommendation High Standards of facilities and
98.9% (December 2020: 98.9%) fleet
98.9 per cent of respondents said 99.7% (December 2020: 99.7%)
that we met or exceeded their expectations 99.7 per cent thought our premises
. were clean and tidy.
97.9% (December 2020: 97.9%) 99.2% (December 2020: 99.2%)
97.9 per cent of respondents would 99.2 per cent thought our vehicles
recommend us. were clean and comfortable.
Quality of service and care In the detail
99.9% (December 2020: 99.9%) 99.0% (December 2020: 98.9%)
99.9 per cent thought our staff 99.0 per cent of clients agreed
were respectful. that our staff had fully explained
what would happen before and during
99.6% (December 2020: 99.6%) the funeral.
99.6 per cent thought our staff
listened to their needs and wishes. 99.2% (December 2020: 99.2%)
99.2 per cent said that the funeral
99.1% (December 2020: 99.1%) service took place on time.
99.1 per cent agreed that our staff
were compassionate and caring. 98.0% (December 2020: 98.0%)
98.0 per cent said that the final
invoice matched the estimate provided.
Gary Channon
Chief Executive
20 September 2021
Principal risks and uncertainties
Our principal Group risks
Outlined here is our assessment of the principal risks facing
the Group. In assessing which risks should be classified as
principal, we assess the probability of the risk materialising and
the financial or strategic impact.
Risk appetite
Risk appetite is the level of risk the Group is willing to take
to achieve its strategic objectives and is set by the Board. The
Board looks at the Group's appetite to risk across a number of
areas including market, financing, operations, strategy and
execution, developments, cybersecurity and technology and
brand.
There has been no change to the Group's risk appetite in the
period.
Our approach to risk management
The Group has a well established governance structure with
internal control and risk management systems. The risk management
process:
-- Provides a framework to identify, assess and manage risks,
both positive and negative, to the Group's overall strategy and the
contribution of its individual operations.
-- Allows the Board to review a balanced and understandable
assessment of the operation of the risk management process and
inputs .
Responsibilities and actions
The Board
The Board is responsible for monitoring the Group's risk and
associated mitigating factors.
Following the General Meeting on 22 April 2021, Clive Whiley
ceased to be a director and two independent Non-Executive Directors
resigned from the Board. Gary Channon became Executive Chairman at
this time. Subsequently, John Castagno was appointed to the Board
as independent Non-Executive Chairman in July 2021 at which time
Gary Channon became Chief Executive. Graham Ferguson was recently
appointed to the Board as an independent Non-Executive Director and
Chair of the Audit Committee.
The Company continues to work towards meeting its corporate
governance responsibilities in respect of the composition of the
Board and is currently in the recruitment process for a Chief
Financial Officer and one further independent Non-Executive
Directors.
Risk process
Every six months the Audit Committee formally considers the
Group's Principal Risks and Uncertainties for subsequent adoption
by the Board .
Risk assessment
Executive Directors and senior management are responsible for
identifying and assessing business risks .
Identify
Risks are identified through discussion with senior management
and incorporated in the risk register as appropriate .
Assess
The potential impact and likelihood of occurrence of each risk
is considered .
Mitigating activities
Mitigating factors are identified against each risk where
possible .
Review and internal audit
The link between each risk and the Group's policies and
procedures is identified. Where relevant, appropriate work is
performed by the Group's internal audit function to assist in
ensuring the related key controls, procedures and policies are
understood and operated effectively where they serve to mitigate
risks.
Risk status summary
The ongoing review of the Group's principal risks focuses on how
these risks may evolve.
Pre-arranged funeral plans
In November 2020, the FCA issued a statement welcoming the
Government's laying of legislation setting out a timetable for
bringing the regulation of pre-need funeral plans within the remit
of the FCA, expecting to take responsibility for the regulation of
the sector in Summer 2022.
On 2 March 2021, the FCA released their consultation on funeral
plans and their proposed approach to funeral plans. Dignity engaged
constructively through the consultation process which closed on 13
April 2021 with the final rules published in quarter three
2021.
In order to carry out regulated funeral plan activities, firms
must be authorised by the FCA. Continuing with regulated activity
without authorisation will be a criminal offence.
Dignity believes that this regulation is necessary and welcomes
its planned introduction . Dignity is working with the FCA to apply
and be registered as a regulated provider of pre-arranged funeral
plans.
See also 'Regulation of pre-arranged funeral plans' on page
17.
COVID-19
COVID-19 has created new risks relating both to our ability to
deliver our services in the context of restrictions imposed by the
pandemic and the health and safety implications for our colleagues.
The potential risks are assessed regularly in light of the
developing guidance and commentary from HM Government.
The Group has business continuity and pandemic plans that are
invoked, reviewed and adapted as necessary.
Accordingly, the ability to maintain average revenue is
influenced by changes in the competitive landscape and the
continued impact of COVID-19.
See also 'COVID-19 Response Related Risks' on page 19.
Competition and Market Authority's Market Investigation:
The CMA's Final Decision Report into the supply of services by
funeral directors at the point of need and the supply of crematoria
services was published on 18 December 2020 such that the risk of
unexpected findings has now reduced. The Group supports the CMA's
Orders which focus on measures to support consumer choice and
transparency and which maintain quality and standards in the
UK.
Principal amongst the CMA's requirements are:
-- Funeral directors to display a Standardised Price List
-- Funeral directors not to make payments to incentivise
hospitals, palliative care services, hospices, care homes or
similar institutions to refer customers
-- Funeral directors not to solicit for business through the
provision of services under coroner and police contracts
-- Crematorium operators to provide certain price information
The Group has undergone a large project to comply with the CMA
orders in time of the deadline.
Operational risk management
Risk description and impact Mitigating activities and commentary Change
Significant movements in The profile of deaths has historically No change
the death rate seen intra year changes of +/- one
There is a risk that the per cent giving the Group the ability
number of deaths in any to plan its business accordingly.
year significantly reduces The ONS long-term projection is for
or increases. This would deaths to increase.
have a direct result on
the financial and operational The risk is mitigated by the ability
performance of both the to control costs and the price structure
funeral and crematoria divisions. although this would not mitigate a
short-term significant reduction in
the number of deaths.
The number of deaths in the first
quarter increased by 27 per cent to
204,000. Since quarter one, the UK
has witnessed deaths falling below
the five year average (2015-2019)
resulting in June 2021 year to date
deaths being eight per cent lower
than the same period to June 2020.
Funeral market share in the first
quarter 2021 was 11.5 per cent which
was lower than expected due to the
delay in the date of the death being
registered and the funeral being performed.
As expected, this has started to normalise
and June 2021 year to date funeral
market share is 12.0 per cent.
Average revenue per funeral in quarter
two has improved from the first quarter
with the Full Service volume as a
percentage of Full and Simple increasing
by two per cent to 68 per cent year
to date June. The quarter two 2021
Full Service volume as a percentage
of Full and Simple was 73 per cent.
Quarter one crematoria market share
was 11.1 per cent which was also lower
than expected for the reasons above,
although this has also started to
normalise and June 2021 year to date
crematoria market share is 11.4 per
cent.
Operationally, we have spent time
understanding lessons from the dramatic
increase in deaths due to COVID-19
to ensure we continue to respond professionally
and safely. A key part has been staffing:
absence levels peaked at circa 16
per cent compared to normal levels
of one or two per cent. Where required,
this was and continues to be managed
through a national provider of temporary
resource. In the Crematoria and Memorial
Group, staff have been upskilled and
cross trained to provide cover as
required.
------------------------------------------------- ----------
Nationwide adverse publicity The Group's strategy is to focus on No change
Nationwide adverse publicity increasing funeral and crematoria
for Dignity could result market share together with prioritising
in a significant reduction the sale of funeral plans through
in the number of funerals branches rather than telephony partners.
or cremations performed Contracts have been cancelled with
in any financial period. five telephony partners that have
For pre-arranged funeral been assessed by Dignity as both uneconomical
plans, adverse publicity but also not representative of the
for the Group or one of high standards we expect.
its partners could result
in a reduction in the number The Group maintains a strong system
of plans sold or an increase of internal control to ensure the
in the number of plans cancelled. business is managed in line with its
strategic objectives.
Staff training and the work of the
Quality and Standards Team led by
the Director for Standards, Regulation
and Compliance assist in mitigating
this risk.
In terms of quality of care for clients
and their loved ones, the introduction
of the Dignity Standards and Quality
Framework will assist in mitigating
reputational risk from poor practice
and the possibility of consequential
adverse press coverage.
------------------------------------------------- ----------
Risk description and impact Mitigating activities and commentary Change
Fall in average revenue The Group's strategic review has resulted Increased
per funeral or cremation in a more efficient business that
either resulting from market can accommodate more competitive pricing,
changes but which continues to provide clients
There has been increasing with a greater range of choice, underpinned
price competition in the by excellent client service. This
funeral market, resulting will be supported by strong reputational
in material price reductions management
by the Group in recent years.
It is highly likely that The Group will continue to adapt to
pricing pressure will remain serve evolving client needs. This
for the foreseeable future will be through investment in digital
and it may not therefore capabilities including an enhanced
be possible to maintain reporting capability of business intelligence
average revenue per funeral and management information which will
or cremations at the current enable risks and trends to be identified
level. promptly and accurately.
This risk has increased due to COVID-19
as the Group has experienced lower
average revenues than originally expected:
these are anticipated to return to
the levels previously experienced
although the period of time needed
for this to occur is currently unknown.
Awareness of Simple Funerals and Simplicity
Cremations has increased during the
pandemic.
The Group began low-price trials in
February 2020 and have been conducted
across around 70 branches with another
50 soon to go live. Large volume increases
have been experienced in all instances.
------------------------------------------------------------------ ----------
Disruptive new business The Group believes that this risk No change
models leading to a significant is mitigated by its reputation as
reduction in market share a high-quality provider and with recommendation
It is possible that external being a key driver to the choice of
factors such as new competitors funeral director being used. In addition,
and the increased impact the Group's actions on pricing and
of the internet on the sector, promotion seek to protect the Group's
could result in a significant funeral market share by offering more
reduction in market share affordable options. This focus on
within funeral and crematoria affordability has allowed our market
operations. This would have share to begin to stabilise.
a direct result on the financial
performance of those divisions. The Group will prioritise investment
into standards of care, facilities
and our estate, alongside a combination
of a competitive pricing and product
mix, cultural change and stronger
branding, to grow local market share.
For crematoria operations this is
mitigated by the Group's experience
and ability in managing the development
of new crematoria.
The Group will focus on:
* increasing both volume and yield per crematoria by
increasing throughput and growing ancillary sales
* continuing to build out the pipeline of crematoria
and build additional capacity into existing
facilities
* embracing direct cremation and become price leaders
for the location agnostic value segment of the market
Additionally, the combination of the
development of strong national brands
and significant investment in digital
capability together with a range of
product and price offerings to clients
will strengthen the Group's competitiveness.
------------------------------------------------------------------ ----------
Demographic shifts in population In such situations, Dignity would No change
There can be no assurance seek to follow the population shift
that demographic shifts by rebalancing the funeral location
in population will not lead network together with meeting the
to a reduced demand for developing cultural requirements.
funeral services in areas
where Dignity operates.
------------------------------------------------------------------ ----------
Risk description and impact Mitigating activities and commentary Change
Competition The vision is for Dignity to be the No change
The UK funeral services, UK's leading end of life business,
crematoria and pre-need renowned for its excellence and high
markets are currently fragmented. standards, represented and embedded
in the community with strong local
There could be further consolidation brands, whilst offering the best service
or increased competition for the best prices. Central to our
in the industry, whether strategy is a focus on improving the
in the form of intensified culture of our business, empowering
price competition, our colleagues and working openly
service competition, over together to be our best through teamwork.
capacity facilitated by
the internet or otherwise, Our appetite to develop new products
which could lead to an erosion and trials has expanded through the
of the Group's market share, greater collaboration and open debate.
average revenues or an increase Several trials are up and running
in costs and consequently with the objective of achieving the
a reduction in its profitability. right combination of price product
and promotion to not only grow our
Failure to replenish or local market share but to sustain
increase the bank of pre-arranged and grow our revenues. The Branch
funeral plans could affect Direct Cremation trial is proving
market share of the funeral that by introducing new competitively
division in the longer-term. priced products that can fit within
our existing price and product architecture.
Competition continues to
intensify, with additional We continue to develop a new tiered
funeral directors opening funeral pricing proposition, that
at varying price points, will provide greater flexibility to
alongside an increase in meet individual client needs.
the popularity of direct
cremations. By unbundling our prices and services
to provide our clients with greater
flexibility to create the right funeral,
we will be able to provide greater
consistency and competitiveness on
price, while reflecting Dignity's
premium service levels.
A significant online presence and
visibility leverages our scale and
addresses the needs of increasingly
digitally focused clients. Through
the Dignity and Simplicity names,
we are leveraging scale advantages
in the digital age. We also recognise
that our established local funeral
trading names continue to have significant
value in the communities they serve.
Through better allocation of our resources,
the resultant efficiencies will allow
us to reduce the number of funeral
locations and their associated cost.
Support functions are being centralised
where appropriate to ensure a cost
effective and consistent high standard
of service.
There are challenges to opening new
crematoria due to the need to obtain
planning approval and the costs of
development. Dignity has extensive
experience in managing the development
of new crematoria.
The Group offers a market leading
pre-need product, the marketing of
which will benefit from the current
and future significant investment
in marketing and enhanced digital
presence.
Dignity supports full regulation of
the sector which presents an opportunity
to gain competitive margin through
both pricing and good quality service
provision.
----------------------------------------------- ----------
Regulation of pre-arranged Changes apply to the industry as a No change
funeral plans whole and not just the Group.
FCA Regulation may result
in changes to processes, The FCA have now published their rules.
systems, pricing, funding, Areas affected:
capital requirements and * Commission
terms and conditions of
plans.
Regulation could affect * Customer documentation
the Group's opportunity
to sell pre-arranged funeral
plans in the future or could * Trust structures
result in the Trading Group
not being able to draw down
the current level of marketing * Product value and features
allowances.
We are working on Partner options
/ intentions to accommodate the new
rules. Our strong market presence
in the Whole of Life Funeral Benefit
market remains unchanged.
The changes affect the whole industry,
whilst we will experience a material
drop in volumes, Dignity will be in
a strong market position as a vertically
integrated provider to grow alternative
channels that remain open post FCA
regulation.
Regulation of the pre-need industry
by the FCA is now confirmed for Summer
2022. We believe that regulation is
necessary and welcome its planned
introduction
----------------------------------------------- ----------
Risk description and impact Mitigating activities and commentary Change
Regulation of the funeral The Group already operates at a high No change
industry standard, compared to the majority
Regulation could result of our competitors, using facilities
in increased compliance appropriate for the dignified care
costs for the industry as of the deceased. This will be further
a whole or other unforeseen enhanced through our focus on capital
consequence including capping investment and property improvements.
of funeral and cremation Additionally, the approach to Standards
prices . and Quality will prepare for statutory
regulation and compliance obligations
in Scotland and co-regulatory requirements
across the UK.
The significant impact and work required
to ensure compliance with, and implementation
of the impending CMA Orders was prioritised
for a level of central coordination
and decision-making to enable us to
act with pace and attention to detail.
Ten workstreams across the nine key
regulatory obligations (and one further
workstream for 'communication') were
developed and made excellent progress.
We launched our new pricing strategy
on 6 September 2021 which will not
only enable us to lead the market
with a competitively priced comparable
unattended and attended funeral service
but will also align to our desire
to provide bereaved families with
excellent quality and value for money.
----------------------------------------------- ----------
Changes in the funding of There is considerable regulation around No change
the pre-arranged funeral insurance companies which is designed,
plan business amongst other things, to ensure that
In the current regulatory the insurance companies meet their
environment, the Group has obligations.
given commitments to pre-arranged
funeral plan members to The Trusts hold assets of circa GBP1
provide certain funeral billion with an average duration of
services in the future. circa 10+ years: we will seek to generate
a surplus of at least +3 per cent
Funding for these plans returns over and above funeral cost
is reliant on either insurance inflation.
companies paying the amounts
owed or the pre-arranged
funeral plan Trusts having
sufficient assets.
If this is not the case
then the Group may receive
a lower amount per funeral.
----------------------------------------------- ----------
Direct cremations The Group has addressed this with No change
Growth in the direct cremation Simplicity Cremations which offers
market could reduce average low-cost direct cremations without
revenue in the funeral business any initial funeral service that are
and adversely affect the both respectful and dignified. They
volume mix and average revenue are an affordable alternative to a
in the crematoria business. full funeral or for those who wish
to have a simple cremation. The Group
also now offers a Simplicity pre-arranged
funeral plan option.
Simplicity Cremations is being promoted
via a strong online presence together
with TV advertising. Other media advertising
is also planned.
----------------------------------------------- ----------
Cyber Risk The Group has, in recent years, invested No change
Our business is at risk signi cantly in this area with the
of financial loss, disruption objective of both upgrading all aspects
or damage to reputation of our systems and our internal resources
resulting from the failure and also using external consultants
of its information technology to perform regular external and internal
systems. This could materialise penetration tests, using the results
in a variety of ways including to drive a continuous improvement
deliberate and unauthorised programme.
breaches of security to
gain access to information The chance of an organisation falling
systems. victim to a cyber-attack is growing.
Threats are more pervasive and sophisticated
than ever.
However, in addition to maintaining
appropriate levels of Cyber Insurance
we continue our investment in fit
for purpose security controls, processes,
and technology to allows us maintain
pace with the current threat landscape
whilst proactively monitoring for
breaches and improving internal understanding
and communication of initial risks,
mitigations and residual risks.
The Group is working with external
advisers at an operational level providing
a broad view of our current maturity
level of controls over multiple domains
associated with cyber security. Additionally,
this external assessment will include
a deep dive review of Dignity's Security
Architecture to confirm that our information
systems are in alignment with required
cyber security objectives addressing
where possible potential risks to
the technology environment.
The Group has its security controls,
processes and technology independently
audited to ensure it remains effective
or requires additional investment.
----------------------------------------------- ----------
Risk description and impact Mitigating activities and commentary Change
COVID-19 Response Related In addition to our business continuity Decreased
Risks and pandemic planning, the risk is
COVID-19 has created new mitigated by illness tracking, the
risks relating to our ability use of agency staff and staff redeployment.
to deliver our services In addition, HM Government's vaccination
in the context of restrictions programme supports control and mitigation.
imposed by the pandemic
The Group has issued Operational Guidance
The potential risks of COVID-19 and a PPE policy, secured an increased
to the Group are assessed supply of PPE and emphasised HM Government
regularly in light of guidance policy such as social distancing.
and commentary from HM Government.
Primary risks include: We have modelled forward- looking
scenarios considering volumes, changes
(i) a lack of availability to service and revenue and Government
of staff in operations due intervention.
to illness, self-isolation
or Government policy including We have contingency plans and an escalating
Test and Trace which may route for operations and central offices
result in a material number to redeploy resources from other teams
of colleagues needing to and locations.
self-isolate at the same
time impairing our ability We have established central planning
to provide services; of capacity, put new capacity in place,
(ii) the need to keep staff leveraged Local Resilience Forums
safe in the COVID-19 crisis; and super-mortuary facilities.
(iii) a loss of profit due
to the cost of our response In addition, the Group recognises
plans, or HM Government the toll that the pandemic has taken
intervention causes profit on colleagues. Issues include mental
or cash concerns; and health, isolation and matters arising
(iv) mortuary capacity and/or from working from home. The Group
supply of consumables is provides the Employee Assistance Programme
exhausted. to all which provides access to anonymous,
If continuing long-term, independent counselling services and
COVID-19 and related measures advice to help manage any personal
may result in lower revenues. wellbeing concerns and provide additional
emotional, physical, and financial
support.
We have also invested in the training
and accreditation of a number of colleagues
in Mental Health first aid.
--------------------------------------------- ----------
Financial risk management
Risk description and impact Mitigating activities Change
Financial Covenant under The nature of the Group's debt means No change
the Secured Notes that the denominator is now fixed
The Group's Secured Notes unless further Secured Notes are issued
requires EBITDA to total in the future. This means that the
debt service to be above covenant headroom will change proportionately
1.5 times. If this financial with changes in EBITDA generated by
covenant (which is applicable the securitised subgroup.
to the securitised subgroup
of Dignity) is not achieved, Current trading continues to support
then this may lead to an the Group's financial obligations,
Event of Default under the however lower reported profitability
terms of the Secured Notes, increases the risk of breaching covenants.
which could result in the
Security Trustee taking To act as a mitigation against this
control of the Securitisation risk, the Group undertook an internal
Group on behalf of the Secured restructure of its trading assets
Note holders. in August 2020 which increased covenant
headroom.
In addition, the Group is
required to achieve a more
stringent ratio of 1.85
times for the same test
in order to be permitted
to transfer excess cash
from the Securitisation
Group to Dignity plc.
----------------------------------------------- ----------
Emerging risk
The Group continues to scan for emerging risks through the
processes noted above. The key areas where additional risk is
appearing, all of which are extensions of risk already identified
above, are as follows:
Risk description and impact Mitigating activities and commentary Change
Sustainability The vision is for Dignity to achieve New
The need to operate businesses negative carbon impact.
sustainability and with
a focus on the environment Dignity is ranked in the Top 200 in
is now an imperative . the FT/ Statista's Europe's Climate
Leaders Report 2021 due to a 27 per
cent reduction in core emissions between
2014 and 2019.
Projects and objectives include:
* The fitting of a Flue Gas Treatment which reduces
heavy metals and the acid content of gasses. 25 have
been fitted so far
* Increased usage of Bio-gas from the current 10 per
cent with the aim of 100 per cent - of available
biogas
* Nitrogen Oxide abatement fitted on all sites
* Reclaiming heat from water cooling systems with heat
exchangers already fitted at each site
* New build crematoria to be carbon neutral
* Exploration of wind and solar energy generation on
our key and high energy consumption sites (including
manufacturing)
* Energy reduction surveys on high energy consumption
sites with return on investment.
With heat reclamation, Dignity could
achieve a negative carbon impact.
With the ever-changing legal requirements
on reporting for the Group, and a growth
in governing bodies involved in the
reporting of greenhouse gasses, carbon
and the financial impacts of these,
Dignity is looking to partner with
a key player in the market to support
and grow our reporting capabilities.
To assist with this an extensive programme
of smart meters and water meters are
being rolled out both to allow us to
have concise data to report against
and to identify quickly any wastage/leakage.
Dignity is also looking to introduce
multiple recycling schemes for specialist
products which are a biproduct of the
Group's core services, including Pacemaker
recycling, but also looking to increase
the general recycling threshold to
include uniform and plastics recycling.
The newly founded Environmental and
Sustainability Committee is committed
to driving change and has developed
a 3-year plan to mitigate risks against
emerging HM Government led initiatives
such as introduction of a single use
plastic tax and the banning of new
diesel vehicles from 2023.
------------------------------------------------------------ -------
Funeral Directors' Codes The Group is undertaking an assessment New
of Practice of compliance guidelines and works
A number of compliance requirements required to achieve compliance across
currently recommended by both the Scottish and UK network.
the Scottish Government
Funeral Directors' Code Consideration for the resource profile
of Practice (draft launched and methodology for responding to legal
in 2019) can reasonably registration in Scotland and a statutory
be expected to become law inspection response is being initiated
in late 2021/early 2022 as a pre-emptive measure in advance
(timeline to be confirmed of a published Scottish government
by the Scottish Government). position.
For example, one draft requirement
for funeral directors to Relationship management with the NAFD
have a ratio of 1 refrigerated and IFSO Chair is underway.
space per 50 funerals performed.
Additionally, the need to
respond to registration
and inspection requirements
which will be enacted in
law.
The introduction of the
Independent Funeral Standards
Organisation in late 2021/22
will necessitate compliance
with a UK co-regulatory
Code of Practice as described
by the Ministry of Justice.
Intended obligations include
transparency, quality and
standards measures with
risk ratings and public
reporting in subsequent
phases.
The relationship between
and requirements of the
two Codes of Practice have
yet to be finally determined.
------------------------------------------------------------ -------
Consolidated income statement (unaudited)
for the 26 week period ended 25 June 2021 52 week
period
ended
26 week period 25 Dec
ended 2020
-------------------
25 Jun 26 Jun (audited)
2021 2020
restated
Note GBPm GBPm GBPm
--------------------------------------------------- ------ ------- ---------- ------------
Revenue 2 189.0 197.1 357.5
Cost of sales (88.1) (92.5) (177.3)
Gross profit 100.9 104.6 180.2
Administrative expenses (60.1) (60.4) (164.3)
Operating profit 2 40.8 44.2 15.9
Finance costs 3 (14.6) (15.0) (29.8)
Finance income 3 - 0.1 0.1
Deferred revenue significant financing 3 (25.9) (26.8) (53.1)
Remeasurement of financial assets held by
the Trusts and related income 3 50.2 (14.6) 47.3
Profit / (loss) before tax 2 50.5 (12.1) (19.6)
Taxation 4 (19.3) 0.8 (5.9)
Profit / (loss) for the period attributable
to equity shareholders 31.2 (11.3) (25.5)
Profit / (loss) per share for profit attributable
to equity shareholders
* Basic (pence) 5 62.4p (22.6)p (51.0)p
* Diluted (pence) 5 62.4p (22.6)p (51.0)p
Comparatives for the 26 weeks ended 26 June 2020 have been
restated due to prior year adjustments in relation to taxation and
the application of IFRS 16. See note 1 for further details.
The alternative performance measures included within this
interim statement present information on a comparable basis with
that presented in prior periods.
Consolidated statement of comprehensive income (unaudited)
for the 26 week period ended 25 52 week
June 2021
period
ended
26 week period 25 Dec
ended 2020
----------------------
25 Jun 26 Jun (audited)
2021 2020
restated
GBPm GBPm GBPm
------------------------------------------- --------- ----------- ----------
Profit / (loss) for the period 31.2 (11.3) (25.5)
Items that will not be reclassified
to profit or loss
Remeasurement gain / (loss) on retirement
benefit obligations 10.5 (9.1) (11.7)
Tax (charge) /credit on remeasurement
on retirement benefit obligations (2.6) 1.7 2.2
Restatement of deferred tax for
the change in UK tax rate 1.9 0.5 0.5
Other comprehensive income / (loss) 9.8 (6.9) (9.0)
Total comprehensive income / (loss)
for the period 41.0 (18.2) (34.5)
6
------------------------------------------------------------------------------
Attributable to:
Equity shareholders of the parent 41.0 (18.2) (34.5)
Comparatives for the 26 weeks ended 26 June 2020 have been
restated due to prior year adjustments in relation to taxation and
the application of IFRS 16. See note 1 for further details.
Consolidated balance sheet (unaudited)
as at 25 June 2021 26 Jun 25 Dec
25 Jun 2020 20 restated
2021 restated (audited)
Note GBPm GBPm GBPm
Assets
Non-current assets
Goodwill 6 203.9 232.6 203.9
Intangible assets 6 118.3 138.2 120.5
Property, plant and equipment 241.2 246.4 240.9
Right-of-use asset 7 91.5 98.9 95.2
Deferred insurance commissions 9.2 9.7 9.4
Financial assets held by the Trusts 8 1,006.8 920.1 967.1
Deferred commissions 11 104.4 98.0 101.3
Deferred tax asset 6.7 23.7 20.3
1,782.0 1,767.6 1,758.6
Current assets
Inventories 9.1 9.6 9.0
Trade and other receivables 9 28.4 30.9 30.0
Deferred commissions 11 7.9 7.4 7.6
Cash and cash equivalents - Trading
Group 81.7 80.3 73.6
Cash and cash equivalents - held by
the Trusts 23.6 10.3 21.6
Cash and cash equivalents 10 105.3 90.6 95.2
150.7 138.5 141.8
Total assets 1,932.7 1,906.1 1,900.4
Liabilities
Current liabilities
Financial liabilities 16.0 10.4 15.7
Trade and other payables 72.5 69.6 68.2
Lease liabilities 7 7.1 6.6 7.3
Current tax liabilities 1.7 7.4 7.9
Contract liabilities 11 96.3 94.1 95.5
Provisions for liabilities 2.1 1.8 2.4
195.7 189.9 197.0
Non-current liabilities
Financial liabilities 524.3 539.5 529.5
Other non-current liabilities 2.2 2.1 2.1
Lease liabilities 7 77.2 83.8 81.2
Contract liabilities 11 1,234.2 1,208.8 1,222.0
Provisions for liabilities 9.6 9.3 9.5
Retirement benefit obligation 15 25.4 34.6 36.6
1,872.9 1,878.1 1,880.9
Total liabilities 2,068.6 2,068.0 2,077.9
Shareholders' equity
Ordinary share capital 6.2 6.2 6.2
Share premium account 12.9 12.7 12.7
Capital redemption reserve 141.7 141.7 141.7
Other reserves (2.6) (3.7) (3.0)
Retained earnings (294.1) (318.8) (335.1)
Total deficit (135.9) (161.9) (177.5)
Total equity and liabilities 1,932.7 1,906.1 1,900.4
Comparatives for the 26 weeks ended 26 June 2020 have been
restated due to prior year adjustments in relation to taxation,
insurance plans and the application of IFRS 16. Comparatives for
the 52 weeks ended 25 December 2020 have been restated due to a
prior year adjustment in relation to insurance plans. See note 1
for further details.
Consolidated statement of changes in equity (unaudited)
as at 25 June 2021
Ordinary Share Capital
share premium redemption Other Retained Total
capital account reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- --------- ------------ ---------- ---------- ---------
Shareholders' equity as at
27 December 2019 (1) - as previously
stated 6.2 12.5 141.7 (4.0) (297.9) (141.5)
Adjustment on initial application
of IFRS 16 on 28 December 2019
- prior year adjustment (2) - - - - 0.8 0.8
Impact of insurance plans on
28 December 2019 - prior year
adjustment (note 1) - - - - (3.5) (3.5)
Loss for the 26 weeks ended
26 June 2020 (as previously
stated) - - - - (10.3) (10.3)
Impact of corporate interest
restriction disallowance -
prior year adjustment - - - - (2.2) (2.2)
Impact of post initial application
of IFRS 16 - prior year adjustment 1.2 1.2
Overall loss for the 26 weeks
ended 26 June 2020 (restated) - - - - (11.3) (11.3)
Remeasurement loss on retirement
benefit obligations - - - - (9.1) (9.1)
Tax on retirement benefit obligations - - - - 1.7 1.7
Restatement of deferred tax
for the change in UK tax rate - - - - 0.5 0.5
Other comprehensive loss - - - - (6.9) (6.9)
Total comprehensive loss (restated) - - - - (17.4) (17.4)
Effects of employee share options - - - 0.6 - 0.6
Tax on employee share options - - - (0.1) - (0.1)
Proceeds from share issue (3) - 0.2 - - - 0.2
Gift to Employee Benefit Trust - - - (0.2) - (0.2)
Shareholders' equity as at
26 June 2020 (restated) 6.2 12.7 141.7 (3.7) (318.8) (161.9)
Loss for the 26 weeks ended
25 December 2020 - - - - (14.2) (14.2)
Remeasurement loss on retirement
benefit obligations - - - - (2.6) (2.6)
Tax on retirement benefit obligations - - - - 0.5 0.5
Other comprehensive loss - - - - (2.1) (2.1)
Total comprehensive loss - - - - (16.3) (16.3)
Effects of employee share options - - - 0.6 - 0.6
Tax on employee share options - - - 0.1 - 0.1
Shareholders' equity as at
25 December 2020 6.2 12.7 141.7 (3.0) (335.1) (177.5)
Profit for the 26 weeks ended
25 June 2021 - - - - 31.2 31.2
Remeasurement gain on retirement
benefit obligations - - - - 10.5 10.5
Tax on retirement benefit obligations - - - - (2.6) (2.6)
Restatement of deferred tax
for the change in UK tax rate - - - - 1.9 1.9
Other comprehensive income - - - - 9.8 9.8
-
--------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - - 41.0 41.0
Effects of employee share options - - - 0.5 - 0.5
Tax on employee share options - - - 0.1 - 0.1
Proceeds from share issue (4) - 0.2 - - - 0.2
Gift to Employee Benefit Trust - - - (0.2) - (0.2)
Shareholders' equity as at
25 June 2021 6.2 12.9 141.7 (2.6) (294.1) (135.9)
Consolidated statement of changes in equity (unaudited)
as at 25 June 2021 (continued)
(1) Shareholder's equity as at 27 December 2019 includes a
GBP4.3 million prior year adjustment in relation to corporate
interest restriction as reported in the 2020 Annual Report.
(2) IFRS 16 adjustment of GBP0.8 million relates to contractual
rent reviews not considered on initial application. This adjustment
was included in the 2020 Annual Report.
(3) Relating to issue of 7,745 shares under 2017 DAB scheme and
344 issued under the 2019 SAYE scheme.
(4) Relating to issue of 5,963 shares under 2018 DAB scheme and
1,980 shares under 2019 SAYE scheme.
Comparatives for the 26 weeks ended 26 June 2020 have been
restated due to prior year adjustments in relation to taxation,
insurance plans and the application of IFRS 16. Comparatives for
the 52 weeks ended 25 December 2020 have been restated due to a
prior year adjustment in relation to insurance plans. See note 1
for further details .
The above amounts relate to transactions with owners of the
Company except for the items reported within total comprehensive
income.
Capital redemption reserve
The capital redemption reserve represents GBP80,002,465 B Shares
that were issued on 2 August 2006 and redeemed for cash on the same
day and GBP19,274,610 B Shares that were issued on 10 October 2010
and redeemed for cash on 11 October 2010, GBP22,263,112 B Shares
that were issued on 12 August 2013 and redeemed for cash on 20
August 2013 and GBP20,154,070 B Shares that were issued and
redeemed for cash in November 2014.
Other reserves
Other reserves include movements relating to the Group's SAYE
and LTIP schemes and associated deferred tax, together with a
GBP12.3 million merger reserve.
Consolidated statement of cash flows (unaudited)
for the 26 week period ended 25 June 2021
52 week
period
ended
26 week period 25 Dec
ended 2020
25 Jun 26 Jun (audited)
2021 2020 restated
restated
Note GBPm GBPm GBPm
------------------------------------------------ ----- -------- ---------- ----------
Cash flows from operating activities
Cash generated from operations 13 49.0 41.8 62.7
Finance income received - 0.1 0.1
Finance costs paid (14.3) (14.6) (29.2)
Transfer from restricted bank accounts
for finance costs 10 12.0 12.1 12.1
Payments to restricted bank accounts
for finance costs 10 (11.9) (12.1) (12.0)
Total payments in respect of finance
costs (14.2) (14.6) (29.1)
Tax paid (12.4) (4.7) (6.9)
Net cash generated from operating
activities 22.4 22.6 26.8
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 0.4 0.5 1.1
Purchase of property, plant and equipment
and intangible assets (1) (10.3) (6.5) (11.1)
Purchase of financial assets (by the Trusts) (330.7) (447.9) (778.1)
Disposals of financial assets (by the Trusts) 336.5 456.5 796.8
Realised return on financial assets 2.0 1.9 3.8
Net cash (used)/generated in investing
activities (2.1) 4.5 12.5
Cash flows from financing activities
Payments due under Secured Notes (5.0) (4.9) (9.6)
Transfer from restricted bank accounts for
repayment of borrowings 10 4.9 4.8 4.8
Payments to restricted bank accounts for
repayment of borrowings 10 (5.0) (4.8) (4.9)
Total payments in respect of borrowings (5.1) (4.9) (9.7)
Principal elements of lease payments (5.1) (5.0) (7.8)
Net cash used in financing activities (10.2) (9.9) (17.5)
Net increase in cash and cash equivalents 10.1 17.2 21.8
Cash and cash equivalents at the
beginning of the period 78.3 56.5 56.5
Cash and cash equivalents at the
end of the period 10 88.4 73.7 78.3
Restricted cash - amounts set aside
for debt service payments 10 16.9 16.9 16.9
Cash and cash equivalents at the
end of the period as
reported in the consolidated balance
sheet 10 105.3 90.6 95.2
(1) See Business and financial review on page 9 for further
details.
Comparatives for the 26 weeks ended 26 June 2020 have been
restated due to a prior year adjustment in relation to the
application of IFRS 16. See note 1 for further details.
Notes to the interim financial information 2021 (unaudited)
for the 26 week period ended 25 June 2021
1 Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all periods presented, unless
otherwise stated.
Basis of preparation
The interim condensed consolidated financial information of
Dignity plc (the 'Company') is for the 26 week period ended 25 June
2021 and comprises the results, assets and liabilities of the
Company and its subsidiaries (the 'Group').
The interim condensed consolidated financial information has
been reviewed, not audited and does not constitute statutory
accounts within the meaning of s434 of the Companies Act 2006. This
interim condensed consolidated financial information has been
prepared in accordance with the Disclosure Guidance and
Transparency Rules of the FCA and with IAS 34 'Interim Financial
Reporting' as adopted pursuant to Regulation (EC) No. 1606/2002 as
it applied in the European Union.
They do not include all of the information required for full
annual financial statements, and should be read in conjunction with
the audited consolidated financial statements of the Group as at
and for the 52 week period ended 25 December 2020. The Directors
approved this interim condensed consolidated financial information
on 20 September 2021.
The accounting policies applied by the Group in this interim
condensed consolidated financial information are the same as those
applied by the Group in its audited consolidated financial
statements as at and for the 52 week period ended 25 December 2020,
which are prepared in accordance with International Financial
Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applied in the European Union, except for the
adoption of new accounting standards effective as of 26 December
2020. The basis of consolidation is set out in the Group's
accounting policies in those financial statements.
The preparation of interim condensed consolidated financial
information requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, and income and
expenses. In preparing this interim condensed consolidated
financial information, the significant judgements made by
management in applying the Group's accounting policies and key
sources of estimation uncertainty were the same as those applied to
the audited consolidated financial statements as at and for the 52
week period ended 25 December 2020. Comparative information has
been presented as at and for the 26 week period ended 26 June 2020,
and as at and for the 52 week period ended 25 December 2020.
The comparative figures for the 52 week period ended 25 December
2020 do not constitute statutory accounts for the purposes of s434
of the Companies Act 2006. A copy of the Group's statutory accounts
for the 52 week period ended 25 December 2020 have been delivered
to the Registrar of Companies and contained an unqualified
auditors' report which did not contain a statement made under
section 498 (2) or (3) of the Companies Act 2006.
Terminology:
Trusts refers to The National Funeral Trust and the Trust for
Age UK Funeral Plans considered for accounting purposes to be
controlled and therefore included in the consolidated financial
statements of Dignity plc.
Small Trusts refers to pre-arranged funeral plans from which the
Group receives funeral cover in the event that they deliver a
funeral service. Dignity is unable to influence variable returns,
such that the Group is not considered to control these trusts and
therefore these trusts are not consolidated.
Trading Group refers to Dignity plc and its subsidiaries
excluding the Trusts. Trading Group therefore represents what would
have been described as the 'Dignity plc Group' or 'Group' in
previous Annual Reports.
Group or Dignity plc Group refers to Dignity plc, including its subsidiaries and the Trusts.
Securitisation Group or Securitised Group refers to Dignity
(2002) Limited, including its subsidiaries, but excluding the
Trusts. It represents those entities over which security has been
granted in respect of the Secured Notes.
Prior year restatements
Taxation - Corporate interest restriction ('CIR')
Following the finalisation of the Group's 2019 corporation tax
returns for its subsidiary undertakings and the corresponding
detailed Group CIR return it became apparent that the interaction
of the consolidation of the Trusts and the application of the
complex tax provisions relating to the level of interest
deductibility within the Group had been understated and
consequently the 2020 interim results were misstated and an
additional CIR charge is required. Due to an increased amount of
disallowed interest expense arising predominantly from the
inclusion of realised and unrealised fair value movements on the
bond investments within the Trust consolidation a prior year
adjustment has been booked due to the magnitude of the
disallowance. The Group has therefore restated the interim
condensed consolidated financial information for 2020. The
restatement increases the tax charge by GBP2.2 million with a
corresponding increase in the Group's current tax liabilities by
GBP2.2 million. Accordingly, retained earnings as at 26 June 2020
have reduced by GBP2.2 million and statutory earnings per share has
also been reduced by 4.4 pence. There is no impact to underlying
earnings per share. A deferred tax asset cannot be recognised in
this respect as it is not considered probable that the Group will
be able to access the disallowed interest amounts under the
corporate interest restriction rules in the foreseeable future.
1 Accounting policies (continued)
A judgement has been taken by management in relation to the June
2021 CIR charge. The total income reported in the Interim Report
for investment income and fair value movements on bonds and
equities is GBP50.2 million. The investments that this income
arises on are predominantly consistent with the investments held at
December 2020. Therefore, in order to estimate the total level of
disallowance to assess the CIR charge at June 2021, we have applied
the same percentage split between interest and non-interest bearing
bonds and equities at June 2021 as compared to the position at 31
December 2020 to estimate a CIR charge of GBP2.1 million.
The impact on the 2019 financial statements was disclosed in the
consolidated financial statements as at and for the 52 week period
ended 25 December 2020. The restatement in 2019 increased the tax
charge by GBP4.3 million with a corresponding increase in the
Group's current tax liabilities by GBP4.3 million. Accordingly,
retained earnings as at 27 December 2019 were reduced by GBP4.3
million and is reflected in the opening balances in this Interim
Report.
Therefore, the overall restatement to June 2020 retained
earnings in respect of CIR is GBP6.5 million compared to the June
2020 Interim Report.
There is no impact on any further previous accounting
periods.
Insurance plans
The Group is the named beneficiary on a number of life assurance
products sold by third party insurance companies on which the Group
pays commission. The Group is entitled to recover commission paid
if plans are cancelled within two years of being sold. However, if
plans are cancelled outside this two year period, commissions paid
are not refundable. The majority of plans with these features
ceased to be written in October 2019 and the remainder in February
2020.
Following a review by the Board of the Group's accounting policy
for insurance plans in relation to the prepaid balance held on the
consolidated balance sheet within "deferred insurance commissions"
it has been amended to include a provision for expected future
cancellations. A detailed analysis has been performed on the
cancellation rates for insurance products and a prior year
restatement has been required to reflect the expected level of
future cancellations.
It was further noted that a liability was not held for the
active plans where a known commission is payable in future years.
The calculation for the liability includes an estimate of the level
of cancellations before the commission is payable and is discounted
using a risk free rate of return. Furthermore, an assessment has
been performed to determine the level of future expected funerals
and this element of the liability has been held as a corresponding
asset.
The impact of the above is as follows:
- At 28 December 2019 the deferred insurance commission
prepayment of GBP11.0 million has been impaired by GBP3.2
million;
- A liability has been recognised representing the future
commission payable of GBP3.5 million within financial liabilities.
This is split between current and non-current liabilities at GBP0.6
million and GBP2.9 million respectively;
- The corresponding entry of the liability is the recognition of
an asset of GBP2.4 million which represents the level of expected
future funerals. The net impact of these adjustments of GBP1.2
million is a charge to the consolidated income statement which has
been corrected through opening reserves as at 28 December 2019;
- The deferred commission prepayment of GBP11.0 million at 28
December 2019 has therefore overall reduced by GBP0.8 million to
GBP10.2 million;
- The tax impact at 28 December 2019 is a credit of GBP0.8
million and has reduced the current tax liability to GBP5.2
million; and
- The total impact of this impairment on opening reserves at 28
December 2019 is a reduction of GBP3.5 million to GBP145.0
million.
These adjustments have no impact on cash.
The above adjustments have been recorded in the funerals
segment.
When comparing the updated amortisation analysis and roll
forward of the assets and liabilities at 26 June 2020, 25 December
2020 and 25 June 2021 there is no material difference between the
original amounts charged to the income statement. Therefore, no
adjustments have been made to these accounting periods aside from
the adjustments to the assets and liabilities referred above. The
balance sheet at 25 December 2020 as presented in the annual report
and accounts for that period included a GBP0.5 million accrual and
a related GBP0.5 million deferred insurance commission asset. These
balances should have been recorded as of 28 December 2019 and have
been corrected as part of the above adjustment.
The key judgement used within the calculation of the above
assets and liabilities is a future expected cancellation rate of
1.5 per cent per annum for the remaining life of active plans held.
This is based on historical data of cancellation rates on similar
insurance plans sold by third parties in the past for which the
Group is the beneficiary. This estimate therefore is subject to
sensitivity. If this expected future rate of cancellation was to
reduce by 0.2 per cent to 1.3 per cent the impairment charge would
reduce by GBP0.4 million. If this expected future rate of
cancellation increased by 0.2 per cent to 1.7 per cent the
impairment charge would increase by GBP0.6 million.
Revised accounting policy
The Group is the named beneficiary on a number of life assurance
products sold by third party insurance companies, in consideration
for which the Group has committed to performing the funeral
(including some disbursements) of the plan holder at a discount to
its rates prevailing at the time of death.
Where a commission is paid to the insurers, these costs are
carried as a prepayment and charged to the consolidated income
statement as a funeral is performed. A provision is also made to
cover future expected cancellations and is assessed at each period
end.
1 Accounting policies (continued)
Where a commission is payable only on delivery of the funeral no
amounts are recorded until the funeral is performed.
Where a commission is payable in the future, before the delivery
of the funeral, a discounted liability is recognised on the
consolidated balance sheet. To the extent a funeral is expected to
be delivered a corresponding asset is recognised.
In the event of the death of the policyholder, if the Group
performs the funeral, it receives an agreed amount from the
insurers which is recognised as revenue within the funeral services
division. On occasions a third party will perform the funeral and
the Group will pass on all monies received to that party and in
this situation the Group is deemed to be acting as an agent and
revenue is treated as pass through revenue and not grossed up
within the consolidated income statement.
IFRS 16
Following the finalisation of adopting IFRS 16 for the first
time and as presented in the consolidated financial statements as
at and for the 52 week period ended 25 December 2020 a number of
restatements have been made to the interim condensed consolidated
financial information as at 26 June 2020 as follows:
-- Prepayments of GBP7.2 million representing amounts paid to
acquire the long leasehold interest in land at certain of the
Group's properties were not included within the right-of-use asset
transition balance as reported at 26 June 2020. Therefore, a
restatement has been made to include these balances within the
right-of-use asset in order to comply with IFRS 16. The
corresponding adjustment is to reduce financial and other
assets;
-- Onerous leases of GBP0.1 million has been reclassified within
lease liabilities on transition. Therefore, a restatement has been
made to increase the opening lease liability on transition to
GBP93.6 million and to reduce current provisions by GBP0.1 million
to GBP1.8 million;
-- GBP0.8 million has been credited to equity on transition at
28 December 2019, which represents rent reviews not contractually
concluded as at 28 December 2019. This GBP0.8 million is a
restatement from the transition balances reported at 26 June 2020
with the corresponding adjustment to trade and other payables;
-- Prepaid and accrued lease payments of GBP0.9 million were
included within the right-of-use asset balance as reported at 26
June 2020. However, these were not removed from the balance sheet
so a corresponding adjustment has been made to reduce trade and
other payables by GBP1.0 million and to reduce trade and other
receivables by GBP0.1 million. The movement in accruals and
prepayments of GBP1.5 million in the period December 2019 to June
2020 has been credited to the income statement with the closing
prepayment of GBP1.4 million being offset against the lease
liability;
-- A restatement of GBP1.5 million to reduce administrative
expenses, increase operating profit and to reduce the loss before
tax has been made to reflect the impact of prepaid and accrued
lease payments in the consolidated income statement. The
corresponding taxation impact is to increase the taxation charge by
GBP0.3 million. Consequently, the corresponding adjustment is to
increase retained earnings by GBP1.2 million and to increase
statutory earnings per share by 2.4 pence;
-- In arriving at the above restatements the data set as at
December 2020 was used and therefore some minor restatements have
been made to June 2020. Within the right-of-use asset analysis
additions has increased by GBP0.4 million to GBP0.9 million and the
impact of changes in lease payments has decreased by GBP0.1 million
to GBP0.9 million. Similarly, within the lease liability analysis
additions has also moved by GBP0.4 million to GBP0.9 million, the
impact of changes in lease payments has also decreased by GBP0.1
million to GBP0.9 million and payments has increased by GBP1.4
million to GBP7.4 million; and
-- Practical expedients have been restated by GBP0.1 million to
GBP0.2 million following an error in the data used.
The operating profit split within the segmental analysis has
also been restated as follows:
June 2020
o The operating profit impact of IFRS 16 in June 2020 was
originally reported within the funerals services segment within
"other adjustments" totalling GBP1.4 million, however this has now
been split between the funeral services, crematoria and central
overheads segments to better reflect where the leasing arrangements
are held;
o The impact of IFRS 16 has also now been moved into underlying
performance measures to reflect the application of IFRS 16. On
adoption in 2020 the modified retrospective approach was adopted
which meant 2019 comparatives were not restated. As a result, the
Group chose to exclude it from its underlying performance measures
reported in 2020 in order to retain comparability; and
o The total adjustment in relation to Group underlying operating
profit taking into account the above adjustments for June 2020 is
an increase of GBP2.9 million to GBP41.9 million and the following
restatements have been made within the segmental analysis:
1 Accounting policies (continued)
-- Funeral services - Underlying operating profit before
depreciation and amortisation has been increased by GBP6.1 million
to GBP45.9 million, underlying depreciation and amortisation has
increased by GBP3.8 million to GBP9.9 million giving an overall
increase in underlying operating profit of GBP2.3 million to
GBP36.0 million. The impact to funeral services
operating profit is an overall increase of GBP1.5 million to
GBP43.6 million;
-- Crematoria - Underlying operating profit before depreciation
and amortisation has been increased by GBP1.2 million to GBP27.8
million, underlying depreciation and amortisation has increased by
GBP0.5 million to GBP3.4 million giving an overall increase in
underlying operating profit of GBP0.7 million to GBP24.4 million.
The impact to crematoria operating profit is an overall increase of
GBP0.1 million to GBP24.2 million; and
-- Central overheads - Underlying operating loss before
depreciation and amortisation has been reduced by GBP0.2 million to
GBP17.3 million, underlying depreciation and amortisation has
increased by GBP0.3 million to GBP1.2 million giving an overall
increase in underlying operating loss of GBP0.1 million to GBP18.5
million. The impact to central overheads operating loss is an
overall increase of GBP0.1 million to GBP23.6 million.
Accordingly, the following restatements have also been made
within the segmental analysis:
-- IFRS 16 finance costs of GBP2.4 million have been transferred
out of other adjustments into underlying profit before tax. The
total underlying finance costs has been restated to GBP15.0
million;
-- The total impact of the above on the underlying profit before
tax is an increase of GBP0.5 million to GBP27.0 million;
-- Underlying taxation charge has increased by GBP0.2 million to GBP5.8 million; and
-- Underlying earnings for the 26 week period ended 26 June 2020
have been restated by GBP0.4 million to GBP21.2 million. Therefore,
underlying earnings per share has increased by 0.6p to 42.4p.
December 2020
o The operating profit impact of IFRS 16 in December 2020 was
reported within the funerals services segment within "other
adjustments" totalling GBP4.6 million, however this has now been
split between the funeral services, crematoria and central
overheads segments to better reflect where the leasing arrangements
are held;
o The impact of IFRS 16 has now been moved into underlying
performance measures to reflect the application of IFRS 16. On
adoption in 2020 the modified retrospective approach was adopted
which meant 2019 comparatives were not restated. As a result, the
Group choose to exclude it from its underlying performance measures
reported in 2020 in order to retain comparability; and
o The following restatements have been made within the segmental
analysis:
-- Funeral services - Underlying operating profit before
depreciation and amortisation has been increased by GBP9.7 million
to GBP71.8 million, underlying depreciation and amortisation has
increased by GBP7.8 million to GBP19.9 million giving an overall
increase in underlying operating profit of GBP1.9 million to
GBP51.9 million. Accordingly, 'other adjustments' has decreased by
GBP1.9 million to GBP13.9 million. There is no impact to statutory
operating profit;
-- Crematoria - Underlying operating profit before depreciation
and amortisation has been increased by GBP3.7 million to GBP52.4
million, underlying depreciation and amortisation has increased by
GBP1.1 million to GBP7.0 million giving an overall increase in
underlying operating profit of GBP2.6 million to GBP45.4 million.
Accordingly, 'other adjustments' has decreased by GBP2.6 million to
GBPnil million. There is no impact to statutory operating profit;
and
-- Central overheads - Underlying operating loss before
depreciation and amortisation has been reduced by GBP0.4 million to
GBP34.9 million, underlying depreciation and amortisation has
increased by GBP0.3 million to GBP2.1 million giving an overall
decrease in underlying operating loss of GBP0.1 million to GBP37.0
million. Accordingly, 'other adjustments' has decreased by GBP0.1
million to GBPnil million. There is no impact to statutory
operating profit.
Accordingly, the following restatements have also been made
within the segmental analysis:
-- IFRS 16 finance costs of GBP4.7 million have been transferred
out of other adjustments into underlying profit before tax. The
total underlying finance costs has been restated to GBP29.8
million;
-- Accordingly, the total impact of the above on underlying
profit before tax is a decrease of GBP0.1 million to GBP30.6
million;
-- There is no impact on the underlying taxation charge;
-- Underlying earnings for the 52 week period ended 25 December
2020 have been restated by GBP0.1 million to GBP23.2 million.
Therefore, underlying earnings per share has decreased by 0.2p to
46.4p; and
-- There is no impact to statutory loss after taxation or statutory earnings per share.
1 Accounting policies (continued)
Consolidated statement of cashflows
The consolidated statement of cash flows has also been restated
as follows:
June 2020
o Cash generated from operations has increased by GBP1.4 million
to GBP41.8 million reflecting the restatements made for IFRS 16 and
CIR. See note 13 for further details; and
o The "principal and interest elements of lease payments" has
been increased by GBP1.4 million to GBP7.4 million as a result of
the IFRS 16 corrections. The GBP7.4 million restated balance was
previously classified within cashflows from financing activities.
The interest element of IFRS 16 amounting to GBP2.4 million has
been reclassified into finance costs paid under cash flow from
operating activities. Total finance costs paid now totals GBP14.6
million, leading to a net cash generated from operating activities
of GBP22.6 million. Principal elements of lease payments have been
restated to GBP5.0 million leading to a net cash used in financing
activities of GBP9.9 million.
December 2020
o The "principal and interest elements of lease payments" was
previously classified within cashflows from financing activities.
The interest element of IFRS 16 amounting to GBP4.7 million has
been reclassified into finance costs paid under cash flow from
operating activities. Total finance costs paid now totals GBP29.2
million, leading to a net cash generated from operating activities
of GBP26.8 million. Principal elements of lease payments has been
restated to GBP7.8 million leading to a net cash used in financing
activities of GBP17.5 million.
Going concern
The key factors which impact the Group's financial performance
are death rate, market share, mix and average revenue per funeral.
As this Interim Report describes, 2021 has continued to be impacted
by the COVID-19 pandemic, whilst the death rate in the UK has
decreased from the prior period, the average revenue per funeral
has increased as the restrictions have been eased, with the take up
of full service funerals compared to simple funeral being
approximately 73:27 in the second quarter compared to approximately
68:32 in the fourth quarter of 2020. The Group's market share is
broadly stable compared to 2020.
The impact on its full year 2021 revenue and profitability will
depend on various factors outside of the Group's control, such as
the number of deaths in the UK, if any social distancing measures
are re-introduced in H2 2021 and any reaction to the CMA pricing
transparency order.
The financial performance of the Group and the Securitisation
Group has been forecast and those forecasts have been subjected to
a number of sensitivities. These forecasts reflect an assessment of
current and future market conditions and their impact on the future
profitability of the Group and the Securitised Group. The forecasts
continue to reflect full mix recovery at the beginning of 2022.
When considering the going concern assumption, the Directors of
the Group have reviewed the principal risks within the environment
in which it operates and have prepared relevant sensitised
scenarios, these include:
-- Continued mix and average revenue per funeral being lower
than pre-COVID 19 levels for the remainder of 2021;
-- A significant reduction in market share;
-- CMA pricing transparency order; and
-- A significant reduction in the number of deaths.
In all base scenarios modelled, the Group is forecast to have
sufficient liquidity and meet its debt service cover ratio ('DSCR')
in the period assessed through to 30 September 2022.
To provide further consideration of going concern, the Directors
also considered what would happen in an ongoing scenario of reduced
profitability significantly below management's forecasts, such as a
significant reduction in the market share or average revenues (the
year to date analysis through July 2021 does not indicate the
likelihood of such a scenario). In such a scenario, the Securitised
Group may not meet its DSCR covenant requirements before the
consideration of additional mitigating activities such as reducing
controllable spend. Under the terms of the Securitised Group's
borrowings, the Securitised Group is required to maintain a DSCR of
at least 1.5 times (see note 26), measured on a rolling 12 month
basis every quarter. However, a breach of the covenant does not
give rise to an immediate requirement to repay the associated
borrowings. Rather, such a breach results in a requirement for the
bond trustees to appoint a financial adviser who will review the
financial and operational circumstances of the Securitised Group
prior to making recommendations as to how the breach can be
resolved. Notwithstanding this, given the current cash on hand and
facilities available to it, the Securitised Group (as supported by
the Company) would have sufficient liquid resources to make all
required debt service payments for a period through to 30 September
2022.
Having considered all the above the directors remain confident
in the long-term future prospects for the Group and its ability to
continue as a going concern for the foreseeable future and for a
period through to 30 September 2022 and therefore continue to adopt
the going concern basis in preparing the Interim Report.
1 Accounting policies (continued)
New accounting standards, interpretations and amendments adopted
by the Group
There are no new accounting standards, interpretations or
amendments that have been adopted by the group for the period ended
31 December 2021.
Update to standards, amendments and interpretations to existing
standards that are not yet effective and have not been early
adopted
The following accounting standards, amendments and
interpretations to existing standards have been published that are
mandatory for accounting periods beginning on or after 1 January
2022 or later periods but which the Group has not early
adopted:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -
Interest Rate Benchmark Reform Phase 2. The standard is effective 1
January 2021 and will therefore impact on the Group's 2022 Annual
Report. The amendments address the effects of the reform on
financial statements that arise when an interest rate benchmark
used to calculate interest on a financial asset is replaced with an
alternative benchmark rate . This is not expected to have a
material impact on the Group.
IFRS 17, Insurance Contacts. The standard is expected to be
effective 1 January 2023 and will therefore impact on the Group's
2024 Annual Report. The new standard establishes principles for the
recognition, measurement, presentation and disclosure of insurance
contracts within the scope of the standard. The Group is in the
early stages of assessing whether the standard will have an impact
in relation to its pre-need funeral plans.
IAS 1, Presentation of financial statements. The amendment to
the standard is expected to be effective 1 January 2023 and will
therefore impact on the Group's 2024 Annual Report. The amendment
to the standard is to specify the requirements for classifying
liabilities as current or non-current. This is not expected to have
a material impact on the Group.
All other new accounting standards, amendments and
interpretations that have been published are not effective for 31
December 2021 and have been early adopted by the Group. These
standards are not expected to have a material impact on the Group
in the current or future reporting periods or on foreseeable future
transactions.
The Group's securitisation documents contemplate accounting
policy changes and provide a mechanism that ensure covenant
calculations are not materially impacted to the detriment of either
the Group or Noteholders.
2 Revenue and segmental analysis
Operating segments are reported in a manner consistent with
internal reporting provided to the chief operating decision maker
who is responsible for allocating resources and assessing
performance of the operating segments. The chief operating decision
maker of the Group has been identified as the three Executive
Directors.
For statutory purposes the Group has two reporting segments,
funeral services and crematoria, as under IFRS 15 only a single
performance obligation exists when a pre-arranged funeral plan is
sold, being the performance of a funeral. The Group also reports
central overheads, which comprise unallocated central expenses.
Revenue
Funeral services relate to two primary sources of revenue:
-- Funerals arranged and funded by the customer at the time of
need, in addition to ancillary items, such as memorials and floral
tributes; and
-- Funerals arranged and funded by a pre-arranged Trust funeral
plan, for which amounts recognised as revenue arise from the
de-recognition of deferred revenue on completion of the related
performance obligation.
Crematoria services relate to cremation services and the sale of
memorials and burial plots at the Dignity operated crematoria and
cemeteries.
Underlying revenue
For the purpose of alternative performance measures the Group
has three reporting segments, funeral services, crematoria and
pre-arranged funeral plans, as the chief operating decision maker
reviews segmental performance before applying the effect of IFRS
15.
Funeral services relate to the provision of funerals and
ancillary items, such as memorials and floral tributes.
Crematoria services relate to cremation services and the sale of
memorials and burial plots at the Dignity operated crematoria and
cemeteries .
Pre-arranged funeral plans represent the sale of funerals in
advance to customers wishing to make their own funeral arrangements
and the marketing and administration costs associated with making
such sales.
Substantially all Trading Group revenue is derived from, and
substantially all of the Trading Group's net assets and liabilities
are located in, the United Kingdom and Channel Islands and relates
to services provided. Overseas transactions are not material.
Underlying revenue and underlying operating profit are stated
before non-underlying items and the effect of consolidation of the
Trusts, and applying IFRS 15 as defined on page 45.
Underlying performance measures have been restated to reflect
the application of IFRS 16, Leases. This standard was adopted in
2020 using the modified retrospective adoption which meant 2019
comparatives were not restated. As a result, the Group choose to
exclude it from its underlying performance measures reported in
2020 in order to retain comparability. Therefore, the underlying
performance measures reported below for all periods includes the
impact of IFRS 16.
2 Revenue and segmental analysis (continued)
Reconciliations to statutory amounts
Non-underlying items represent certain non-recurring or
non-trading transactions. See alternative performance measures on
pages 45 to 51 for further details.
Other adjustments reflect the consolidation of the Trusts and
applying IFRS 15. Underlying revenue substitutes revenue arising
from the de-recognition of deferred revenue on completion of the
related performance obligation, which includes the impact of
significant financing, with the payments received from the Trusts
on the death of a plan member, and recognises marketing allowances
at the inception of a plan, net of an allowance for cancellations.
Underlying revenue also excludes amounts relating to disbursements
and external payments made when the performance of the plan funeral
is delivered by third parties.
Disaggregated revenue
The disaggregated revenue and operating profit/(loss), by
segment, is shown in the following tables.
Other
Underlying adjustments
revenue (1 Revenue
26 week period ended 25 June 2021 GBPm GBPm GBPm
Funeral services 108.7 35.2 143.9
Crematoria 45.1 - 45.1
Pre-arranged funeral plans 15.6 (15.6) -
Group 169.4 19.6 189.0
(1) See alternative performance measures on page 48 for a
reconciliation of other adjustments.
Within funeral services revenue GBP55.4 million relates to
deferred revenue arising on the completion of performance
obligations under pre-need trust plans.
In addition to the adjustments noted above relating to revenue,
in arriving at underlying operating profit further 'other
adjustments', reflecting the impact of consolidating the Trusts and
applying IFRS 15, have been recorded. This includes corresponding
entries relating to the exclusion of disbursements and external
payments made when the performance of the funeral is delivered by
third parties, adjustments are also made to exclude the Trusts
administration costs and to recognise commissions payable at the
inception of a plan rather than on delivery of the funeral or
cancellation.
Underlying
operating
profit/
(loss)
before Underlying Underlying
depreciation depreciation operating Non-underlying Other
and and profit/ items adjustments Operating
amortisation amortisation (loss) (1) (1) profit/(loss)
26 week period GBPm GBPm GBPm GBPm GBPm GBPm
ended
25 June 2021
Funeral
services 41.3 (9.7) 31.6 (1.7) 6.0 35.9
Crematoria 28.9 (3.7) 25.2 (0.7) - 24.5
Pre-arranged
funeral
plans - - - (0.1) 0.1 -
Central
overheads (17.9) (1.1) (19.0) (0.6) - (19.6)
Group 52.3 (14.5) 37.8 (3.1) 6.1 40.8
Finance costs (14.6) - - (14.6)
Finance income - - - -
Deferred revenue significant
financing (25.9) (25.9)
Remeasurement
of financial
assets held by
the Trusts
and related
income 50.2 50.2
Profit / (loss)
before
tax 23.2 (3.1) 30.4 50.5
Taxation -
continuing
activities (5.1) 0.4 (7.7) (12.4)
Taxation - rate change - (8.3) 1.4 (6.9)
Taxation (5.1) (7.9) (6.3) (19.3)
Underlying
earnings for
the period 18.1
Non-underlying
items (11.0)
Other
adjustments 24.1
Profit after
taxation 31.2
Loss per share for profit attributable to
equity shareholders
- Basic (pence) 36.2p 62.4p
(1) See alternative performance measures on page 48 for a reconciliation
of non-underlying items and other adjustments.
2 Revenue and segmental analysis (continued)
Other
Underlying adjustments
revenue (1) Revenue
26 week period ended 26 June 2020 GBPm GBPm GBPm
---------------------------------------------------------------- --------------- ------------- -------------
Funeral services 113.3 40.2 153.5
Crematoria 43.6 - 43.6
Pre-arranged funeral plans 12.2 (12.2) -
Group 169.1 28.0 197.1
(1) See alternative performance measures on page 49 for a reconciliation
of other adjustments.
Within funeral services revenue GBP63.6 million relates to deferred
revenue arising on the completion of performance obligations under
pre-need trust plans.
Underlying
operating
profit/
(loss) Other
before Underlying Underlying adjustments
depreciation depreciation operating Non-underlying restated Operating
and and profit/ items (1) profit/
amortisation amortisation (loss) restated (loss)
restated restated restated (1) restated
26 week period ended GBPm GBPm GBPm GBPm GBPm GBPm
26
June 2020 - restated
(2)
--------------------- ------------- ------------- ----------- --------------- ------------- ----------
Funeral services 45.9 (9.9) 36.0 (2.2) 9.8 43.6
Crematoria 27.8 (3.4) 24.4 (0.2) - 24.2
Pre-arranged funeral
plans - - - (0.1) 0.1 -
Central overheads (17.3) (1.2) (18.5) (5.1) - (23.6)
Group 56.4 (14.5) 41.9 (7.6) 9.9 44.2
Finance costs (15.0) - - (15.0)
Finance income 0.1 - - 0.1
Deferred revenue
significant
financing (26.8) (26.8)
Remeasurement of
financial
assets held by the
Trusts
and related income (14.6) (14.6)
(Loss)/profit before
tax 27.0 (7.6) (31.5) (12.1)
Taxation - Continuing
activities -
restated (5.8) 1.4 4.1 (0.3)
Taxation - rate
change
- restated (3) - (3.6) 4.7 1.1
Taxation (5.8) (2.2) 8.8 0.8
Underlying earnings
for the period 21.2
Non-underlying items (9.8)
Other adjustments (22.7)
Loss after taxation (11.3)
(Loss)/earnings per share for profit attributable
to equity shareholders
* Basic (pence) 42.4p (22.6)p
(1) See alternative performance measures on page 49 for a reconciliation
of non-underlying items and other adjustments.
(2) See pages 28 to 30 for further details on the restatement of
IFRS 16.
(3) The rate change classification between non-underlying items and
other adjustments has been restated to separate out the impact on
deferred tax balances arising on the consolidation of the Trusts through
other adjustments and the remainder through non-underlying items.
2 Revenue and segmental analysis (continued)
Other
Underlying adjustments
revenue (1) Revenue
52 week period ended 25 December 2020 GBPm GBPm GBPm
--------------------------------------- ----------- ------------- --------
Funeral services 202.6 72.2 274.8
Crematoria 82.7 - 82.7
Pre-arranged funeral plans 28.8 (28.8) -
Group 314.1 43.4 357.5
(1) (See alternative performance measures on page 50 for a
reconciliation of other adjustments) (.)
Within funeral services revenue GBP113.2 million relates to
deferred revenue arising on the completion of performance
obligations under pre-need Trust plans.
Underlying
operating
profit/
(loss) Underlying Underlying
before depreciation operating Other
depreciation and profit/ Non-underlying adjustments Operating
and amortisation amortisation (loss) items restated profit/(loss)
restated restated restated (1) (1) restated
52 week period GBPm GBPm GBPm GBPm GBPm GBPm
ended 25
December
2020 -
restated(2)
Funeral
services 71.8 (19.9) 51.9 (48.3) 13.9 17.5
Crematoria 52.4 (7.0) 45.4 (0.2) - 45.2
Pre-arranged
funeral plans - - - (0.1) 0.1 -
Central
overheads (34.9) (2.1) (37.0) (9.8) - (46.8)
Group 89.3 (29.0) 60.3 (58.4) 14.0 15.9
Finance costs (29.8) - - (29.8)
Finance income 0.1 - - 0.1
Deferred revenue significant
financing (53.1) (53.1)
Remeasurement
of financial
assets held by
the Trusts
and related
income 47.3 47.3
(Loss)/profit
before tax 30.6 (58.4) 8.2 (19.6)
Taxation -
continuing
activities (7.4) 6.1 (5.7) (7.0)
Taxation - rate
change - (3.6) 4.7 1.1
---------------- ----------------- ------------- ----------- --------------- ------------ --------------
Taxation -
total (7.4) 2.5 (1.0) (5.9)
Underlying
earnings for
the period 23.2
Non-underlying
items (55.9)
Other
adjustments 7.2
Loss after
taxation (25.5)
Earnings per share for profit attributable
to equity shareholders - restated (2)
- Basic (pence) 46.4p (51.0)p
- Diluted
(pence) (51.0)p
(1) See alternative performance measures on page 50 for a reconciliation
of non-underlying items and other adjustments.
(2) Underlying reporting measures have been restated to include the
application of IFRS 16 which were previously included within other
adjustments. See pages 28 to 30 for further details.
3 Net finance costs
52 week
26 week period period
ended ended
-------------------
25 Jun 26 Jun 25 Dec
2020 2020
restated restated
2021 (1) (1)
GBPm GBPm GBPm
Finance costs
Secured Notes 11.9 12.1 23.4
Other loans 0.1 0.2 1.1
Finance costs on IFRS 16 lease liability 2.3 2.4 4.7
Net finance cost on retirement benefit obligations 0.2 0.2 0.5
Unwinding of discounts 0.1 0.1 0.1
Finance costs 14.6 15.0 29.8
Finance income
Bank deposits - (0.1) (0.1)
Finance income - (0.1) (0.1)
Deferred revenue significant financing 25.9 26.8 53.1
Remeasurement of financial assets held by the
Trusts and related income
Investment income (4.4) (3.1) (6.0)
Changes in fair value of financial assets held
by the Trusts (45.8) 17.7 (41.3)
Remeasurement of financial assets held by the
Trusts and related income (50.2) 14.6 (47.3)
Underlying net finance costs
Underlying finance costs 14.6 15.0 29.8
Finance income - (0.1) (0.1)
Underlying net finance costs 14.6 14.9 29.7
(1) Underlying performance measures have been restated to
include the application of IFRS 16. See pages 28 to 30 for further
details.
4 Taxation
The taxation (credit)/charge on continuing operations in the
period is based on a full year estimated effective tax rate, before
the effects of non-underlying items, of 22.0 per cent (2020: 21.0
per cent) on profit before tax for the 26 week period ended 25 June
2021. The effective rate of tax is higher than the standard UK tax
rate of 19 per cent (2020: 19 per cent) due to the effects of
permanent disallowables and adjustments in respect of prior
periods.
52 week
26 week period period
ended ended
-------------------
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated
(1)
GBPm GBPm GBPm
Taxation 19.3 (0.8) 5.9
(2) Prior year comparatives have been restated due to a prior
year adjustment in relation to corporate interest restriction
disallowance and the application of IFRS 16. See note 1 for further
details.
Included within the above taxation charge is GBP2.1 million in
relation to the current year CIR charge. Further details can be
found in note 1.
In the March 2021 budget, legislation to increase the main rate
of corporation tax from 19 per cent to 25 per cent from 1 April
2023 was announced. The change was substantively enacted at the
balance sheet date and is therefore recognised in these financial
statements. As a result, the Group recognised a non-underlying
taxation charge of GBP 6.9 million through its income statement and
a credit of GBP1.9 million through other comprehensive income to
reflect the one off increase in the period of the Group's deferred
tax position.
5 Earnings per share (EPS)
The calculation of basic earnings per Ordinary Share has been
based on the profit attributable to equity shareholders for the
relevant period.
For diluted earnings per Ordinary Share, the weighted average
number of Ordinary Shares in issue is adjusted to assume conversion
of any dilutive potential Ordinary Shares.
The Group has two classes of potentially dilutive Ordinary
Shares being those share options granted to employees under the
Group's SAYE Scheme and the contingently issuable shares under the
Group's LTIP Schemes. At the balance sheet date, the performance
criteria for the vesting of the awards under the LTIP Schemes,
including any deferred annual bonus, are assessed, as required by
IAS 33, and to the extent that the performance criteria have been
met those contingently issuable shares are included within the
diluted EPS calculations. As the impact of these shares is
anti-dilutive for the 26 week period ended 25 June 2021, no
adjustment has been made in respect of arriving at diluted earnings
per share measures for that period (2020: no adjustment).
The Group's underlying measures of profitability exclude
non-underlying items, the application of IFRS 15 and consolidation
of the Trusts as set out on pages 45 to 51. These items have been
adjusted for in determining underlying measures of profitability as
these underlying measures are those used in the day-to-day
management of the business and allow for greater comparability
across periods.
Accordingly, the Board believes that earnings per share
calculated by reference to this underlying performance measure
helps users of the financial statements to fully understand the
trading performance and financial position of the Group.
Reconciliations of the earnings and the weighted average number
of shares used in the calculations are set out below:
Weighted
average
number Per share
Earnings of shares amount
GBPm millions pence
26 week period ended 25 June 2021
Underlying profit after taxation and EPS 18.1 50.0 36.2
Add: Non-underlying items (net of taxation
charge of GBP7.9 million) (11.0)
Add: Other adjustments (net of taxation charge
of GBP6.3 million) (1) 24.1
Profit attributable to shareholders - Basic
EPS 31.2 50.0 62.4
Profit attributable to shareholders - Diluted
EPS 31.2 50.0 62.4
26 week period ended 26 June 2020 - restated
(2) (3)
Underlying profit after taxation and EPS 21.2 50.0 42.4
Add: Non-underlying items (net of taxation
charge of GBP2.2 million) (9.8)
Add: Other adjustments (net of taxation credit
of GBP8.8 million) (1) (22.7)
Loss attributable to shareholders - Basic EPS (11.3) 50.0 (22.6)
Loss attributable to shareholders - Diluted
EPS (11.3) 50.0 (22.6)
52 week period ended 25 December 2020
Underlying profit after taxation and EPS -
restated (3) 23.2 50.0 46.4
Add: Non-underlying items (net of taxation
credit of GBP2.5 million) (55.9)
Add: Other adjustments (net of taxation charge
of GBP1.0 million) (1) 7.2
Loss attributable to shareholders - Basic EPS (25.5) 50.0 (51.0)
Loss attributable to shareholders - Diluted
EPS (25.5) 50.0 (51.0)
(1) See note 2 for further details.
(2) Prior year comparatives have been restated due to a prior
year adjustment in relation to taxation and IFRS 16. See note 1 for
further details.
(3) Underlying performance measures have been restated to
include the application IFRS 16 which were previously included
within other adjustments. See pages 28 to 30 for further
details.
6 Goodwill and other intangible assets
During the 26 week period ended 25 June 2021 the movement on
goodwill and other intangible assets of GBP2.2 million (2020:
GBP2.5 million) since the reported balance in the 2020 Annual
Report relates to the amortisation charge in the period.
An impairment charge of GBP44.0 million was booked in the 2020
Annual Report following the annual impairment test performed in
accordance with IAS 36, Impairment of Assets; GBP15.3 million
against trade names and GBP28.7 million against goodwill. The Group
has performed an assessment as at 25 June 2021 to determine whether
there have been any indicators of impairment during the 26 week
period. This has included looking at specific cash generating units
('CGU's') where specific factors were considered to determine
whether any impairment had occurred. No impairment has been
noted.
A full impairment test will be performed for the 53 week period
ending 31 December 2021.
7 Leases
Right-of-use asset
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated
(1)
GBPm GBPm GBPm
Balance at the beginning of the period 95.2 101.7 101.7
Additions 0.5 0.9 1.4
Depreciation charge (4.6) (4.6) (9.2)
Impact of changes in lease payments 0.4 0.9 1.3
Balance at the end of the period 91.5 98.9 95.2
(1) Prior year comparatives have been restated to include GBP7.2
million representing amounts paid to acquire the long leasehold
interest in land at certain of the Group's properties. Prior year
comparatives have also been restated to increase additions by
GBP0.4 million and decrease impact of changes in lease payments by
GBP0.1 million. See note 1 for further details.
All right-of-use assets are related to leasehold properties.
Lease liability
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated
(1)
GBPm GBPm GBPm
Balance at the beginning of the period 88.5 93.6 93.6
Additions 0.5 0.9 1.4
Impact of changes in lease payments 0.4 0.9 1.3
Interest expense 2.3 2.4 4.7
Payments (7.4) (7.4) (12.5)
Balance at the end of the period 84.3 90.4 88.5
Current 7.1 6.6 7.3
Non-current 77.2 83.8 81.2
(1) Prior year comparatives have been restated increase
additions by GBP0.4 million and decrease impact of changes in lease
payments by GBP0.1 million. See note 1 for further details.
The following are the amounts recognised in the consolidated
income statement:
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated
GBPm (1) GBPm
GBPm
Depreciation expense of the right-of-use asset 4.6 4.6 9.2
Interest expense on lease liabilities 2.3 2.4 4.7
Expense related to practical expedients applied 0.2 0.2 0.2
Total amount recognised in the consolidated income
statement 7.1 7.2 14.1
(1) Prior year comparatives have been restated to decrease
expense related to practical expedients applied by GBP0.1 million.
See note 1 for further details.
In addition, GBP0.7 million (June 2020: GBP0.6 million, December
2020: GBP1.4 million) has been recognised in the consolidated
income statement in respect of contingent rentals and other charges
on leases and is recognised within cash flows from operating
activities within the consolidated statement of cash flows.
The Group had total cash outflows for leases classified under
IFRS 16 of GBP7.4 million (June 2020: GBP7.4 million, December 2020
GBP12.5 million). The Group also had non-cash additions to
right-of-use assets and lease liabilities of GBP0.5 million (June
2020: GBP0.9 million, December 2020 GBP1.4 million).
8 Financial assets - held by the Trusts
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Financial assets - held by the Trusts 1,006.8 920.1 967.1
Analysis of the movements in financial assets held by the
Trusts:
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Fair value at the start of the period 967.1 947.5 947.5
Remeasurement recognised in the consolidated
income statement 45.8 (17.6) 41.3
Unrealised investment income 2.4 1.2 2.2
Purchases 330.7 447.9 778.1
Disposals (336.5) (456.5) (796.8)
Investment administrative expenses deducted
at source (2.7) (2.4) (5.2)
Fair value at the end of the period 1,006.8 920.1 967.1
Interest and dividend income received is included within
remeasurements recognised in the consolidated income statement.
9 Trade and other receivables
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated
(1)
GBPm GBPm GBPm
Trade receivables: Trusts 10.0 11.7 10.0
Trade receivables: at-need 20.8 21.6 21.3
Less: provision for impairment (7.3) (7.7) (7.2)
Net trade receivables 23.5 25.6 24.1
Prepayments and accrued income 3.6 2.9 3.2
Other receivables 1.3 2.4 2.7
28.4 30.9 30.0
(1) Prior year comparatives have been restated due to a prior
year adjustment in relation IFRS 16. See pages 28 to 30 for further
details.
Trust trade receivables represent amounts due to the Group's
Trusts in respect of plans sold, where the Group's performance
obligation has yet to be satisfied. Instalments due to the Trusts
after the balance sheet date are excluded as they are not
contractually due.
At-need trade receivables represent all other trade receivables
due to the Group.
10 Cash and cash equivalents
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Trading group 64.8 63.4 56.7
Trusts 23.6 10.3 21.6
-------------------------------------------------- ------- ------- -------
Operating cash as reported in the consolidated
statement of
cash flows as cash and cash equivalents 88.4 73.7 78.3
Amounts set aside for debt service payments 16.9 16.9 16.9
Cash and cash equivalents as reported in
the balance sheet 105.3 90.6 95.2
(a) Trusts cash balances
All assets of the Trusts can, by definition, only be used for
certain prescribed purposes such as, but not limited to, the
payment for a funeral or a refund on cancellation of a plan. They
cannot be used for day-to-day operational activities of the wider
Trading Group and could not, for example, be used to fund a capital
expenditure project. The cash is held in Trust bank accounts but is
accessible without restriction and can be used within the Trusts
for any allowable purpose, such as payment following the
performance of a funeral. As Dignity is considered to control the
activities of the Trusts, this cash balance meets the requirements
to be included in cash and cash equivalents for the purposes of IAS
7.
(b) Amounts set aside for debt service payments
Amounts are transferred to these restricted bank accounts
shortly in advance of making the bi-annual payments to the holders
of the Secured Notes, which include the payment of the interest and
principal on the Secured Notes, the repayment of liabilities due on
the Group's commitment fees due on its undrawn borrowing facilities
and for no other purpose. The Statement of Cash Flows shows the
gross amounts of payments to the restricted bank accounts as
"finance costs paid" and "payments due under Secured Notes", in
accordance with their nature. Supplementary information is provided
to show the actual payments to the noteholders and the movement in
the restricted bank accounts in the period. The amounts shown as
"transfer from restricted bank accounts for finance costs" and
"payments to the restricted bank accounts for repayment of
borrowings" relate to the opening and closing balances of the
account respectively, and hence the figures presented for the
52-week period ended 25 December 2020 exclude the mid-year
transfers and payments. I n June 2021 the amount of GBP16.9 million
was used to pay these respective parties on 30 June 2021.
11 Deferred commissions and contract liabilities
Deferred commissions
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Deferred commissions - current 7.9 7.4 7.6
Deferred commissions - non-current 104.4 98.0 101.3
Deferred commissions represent directly attributable costs in
respect of the marketing of the pre-arranged funeral plans where
the plan has yet to be used or cancelled. An amount of GBP5.0
million (June 2020: GBP4.1 million; December 2020: GBP7.8 million)
has been amortised to the consolidated income statement within
administrative expenses.
Contract liabilities
Note 25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Current
Contract liabilities - deferred revenue (a) 95.2 93.0 94.4
Contract liabilities - refund liability (b) 1.1 1.1 1.1
96.3 94.1 95.5
Non-current
Contract liabilities - deferred revenue (a) 1,220.3 1,194.8 1,208.1
Contract liabilities - refund liability (b) 13.9 14.0 13.9
1,234.2 1,208.8 1,222.0
11 Deferred commissions and contract liabilities (continued)
Movement in total contract liabilities
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Balance at the beginning of the period 1,317.5 1,304.6 1,304.6
Sale of new Trust plans 48.6 37.6 82.0
Increase due to significant financing 25.9 26.8 53.1
Recognition of revenue following delivery or cancellation
of a Trust plan (61.5) (66.1) (122.2)
Balance at the end of the period 1,330.5 1,302.9 1,317.5
(a) Contract liabilities - deferred revenue
Deferred revenue represents amounts received from pre-arranged
funeral plan holders adjusted to reflect a significant financing
component, and for which the Group has not completed its
performance obligations at the balance sheet date. The balance is
split between current and non-current based on historical
experience to reflect the expected number of plans to be utilised
within the next 12 months.
(b) Contract liabilities - refund liability
Refund liabilities represent amounts received from pre-arranged
funeral plan holders for which it is expected that the respective
plans will be cancelled based on historical experience. The balance
is split between current and non-current based on historical
experience to reflect the expected number of plans to be cancelled
within the next 12 months.
12 Net debt
25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Net amounts owing on Secured Notes per financial
statements (536.7) (546.5) (541.7)
Add: unamortised issue costs (0.5) (0.5) (0.5)
Gross amounts owing (537.2) (547.0) (542.2)
Accrued interest on Secured Notes (11.9) (12.1) (12.0)
Cash and cash equivalents - Trading Group
(note 10) 81.7 80.3 73.6
Net debt (467.4) (478.8) (480.6)
Net debt is an alternative performance measure calculated as
shown in the table. Net debt excludes any liabilities recognised in
accordance with IFRS 16.
The Group's primary financial covenant in respect of the Secured
Notes requires EBITDA to total debt service ('EBITDA DSCR') to be
at least 1.5 times. At 25 June 2021, the actual ratio was 2.12
times (June 2020: 2.15 times; December 2020: 1.99 times). The
calculations are unaffected by the consolidation of the Trusts or
the application of IFRS 15 and IFRS 16 described elsewhere, as the
Group was able to elect to disregard those changes when making the
calculations.
These ratios are calculated for EBITDA and total debt service on
a 12 month rolling basis and reported quarterly. In addition, both
terms are specifically defined in the legal agreement relating to
the Secured Notes. As such, they cannot be accurately calculated
from the contents of this report.
13 Reconciliation of cash generated from operations
52 week
26 week period period
ended ended
25 Jun 26 Jun 25 Dec
2021 2020 2020
restated restated
GBPm GBPm GBPm
Net profit/(loss) for the period 31.2 (11.3) (25.5)
Adjustments for:
Taxation (1) 19.3 (0.8) 5.9
Net finance costs 36.1 38.6 76.8
(Profit)/loss on disposal of fixed assets (0.1) 0.1 (0.1)
Depreciation charges on property, plant
and equipment 9.8 9.7 19.6
Depreciation charges on right-of-use
asset 4.6 4.6 9.2
Amortisation of intangibles 2.2 2.5 4.9
Movement in inventories (0.1) (1.7) (1.1)
Movement in trade receivables 0.4 0.9 2.4
Movement in trade payables 0.5 (0.9) (2.0)
Movement in contract liabilities (12.9) (28.5) (40.2)
Fair value movement on net assets (2) (45.8) 17.7 (41.3)
Net pension charges less contribution (0.8) (0.8) (1.6)
Trade name impairment (note 6) - - 15.3
Goodwill impairment (note 6) - - 28.7
Changes in other working capital 1.4 8.7 5.1
Trust investment administrative expenses
deducted at source (3) 2.7 2.4 5.2
Employee share option charges 0.5 0.6 1.4
Cash flows from operating activities 49.0 41.8 62.7
(1) Restatement reflects the corporate interest restriction
disallowance treated as a prior year adjustment. See note 1 for
further details.
(2) Restatement reflects the separation of fair value movements
on trust assets out of net finance costs/(income) to provide more
accurate presentation in line with the consolidated income
statement.
(3) Restatement reflects the separation of Trust investment
administrative expenses deducted at sources out of changes in other
working capital to provide more accurate presentation of working
capital.
14 Financial risk management and financial instruments
(a) Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including interest rate risk and other price
risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 25 December
2020. There have been no changes in the approach to risk management
or in any risk management policies since the year end.
(b) Liquidity risk
Compared to 25 December 2020, there was no material change in
the contractual undiscounted cash out flows for financial
liabilities, except for scheduled repayments of principal and
interest elements of the Group's securitised debt and leases.
14 Financial risk management and financial instruments
(continued)
( c) Fair value of Trust financial assets 25 Jun 26 Jun 25 Dec
2021 2020 2020
GBPm GBPm GBPm
Financial assets at fair value through consolidated
income statement
Index linked gilts and corporate bonds 77.1 174.3 174.3
Core growth investments - Equities 378.9 188.6 262.9
Growth fixed income and alternative investments
- property funds and emerging market debt 105.5 513.3 417.0
Liquid investments - Open-ended investment
funds 391.6 - 63.0
Illiquid investments - Private investments 53.7 43.9 49.9
Total financial assets at fair value 1,006.8 920.1 967.1
All other financial assets are held at amortised cost and there
is no difference between the book value and the fair value of these
assets, due to the short-term maturities of these instruments.
The following tables provide the fair value measurement
hierarchy of the Trusts' financial assets.
25 June 2021 Fair value measurement using
Quoted Significant Significant
prices observable unobservable
in active inputs inputs
markets (Level (Level
(Level 2) 3)
Total 1)
GBPm GBPm GBPm GBPm
Index linked gilts and corporate bonds 77.1 - 77.1 -
Core growth investments - Equities 378.9 378.9 - -
Growth fixed income and alternative
investments - property funds and emerging
market debt 105.5 - 89.9 15.6
Liquid investments - Open-ended investment
funds 391.6 142.8 248.8 -
Illiquid investments - Private investments 53.7 - - 53.7
During the 26 week period ending 25 June 2021 a number of investments
which were previously classed as a level 2 investment were divested
and then reinvested into different instruments which are classified
as level 1. Please see business and financial review on page 7 for
further details.
26 June 2020 Fair value measurement using
Quoted Significant Significant
prices observable unobservable
in active inputs inputs
markets (Level (Level
(Level 2) 3)
Total 1)
GBPm GBPm GBPm GBPm
Defensive investments - Index linked
gilts and corporate bonds 174.3 - 174.3 -
Core growth investments - Equities 188.6 - 188.6 -
Growth fixed income and alternative
investments - property funds and
emerging
market debt 513.3 - 331.6 181.7
Illiquid investments - Private
investments 43.9 - - 43.9
Illiquid investments represent market values as at 31 March 2020,
adjusted for subsequent purchases, disposals and the impact of foreign
exchange rate movements, as valuations were not available as at 26
June 2020. Given their illiquid nature, these valuations are considered
to be a reasonable approximation of their period end valuation.
There was no change in the classification of fair value of financial
assets during the 26 weeks ending 26 June 2020.
14 Financial risk management and financial instruments (continued)
(c) Fair value of Trust financial assets (continued)
----------------------------------------------------------------------------------------
25 December 2020 Fair value measurement using
Quoted Significant Significant
prices observable unobservable
in active inputs inputs
markets (Level (Level
(Level 2) 3)
Total 1)
GBPm GBPm GBPm GBPm
Defensive investments - Index linked
gilts and corporate bonds 174.3 - 174.3 -
Core growth investments - Equities 262.9 - 262.9 -
Growth fixed income and alternative
investments - property funds and
emerging
market debt 417.0 - 401.4 15.6
Liquid investments - Open-ended
investment
funds 63.0 - 63.0 -
Illiquid investments - Private
investments 49.9 - - 49.9
----------------------------------------------------------------------------------------------------
During the 52 week period ending 25 December 2020 GBP64.6
million which was previously classed as a level 3 investment was
divested and then reinvested into different instruments which are
classified as level 2.
The following methods and assumptions were used to estimate the
fair values:
Core growth investments and liquid investments - level 1
The fair values of equities are based on active market prices or
price quotations at the reporting date.
Defensive investments/Index linked gilts and corporate bonds -
level 2
The fair values of index linked gilts and corporate bonds are
based on active market prices or price quotations at the reporting
date. Whilst these assets have a quoted price on a recognised
exchange adjustments are required in respect of related inflation
factors, thereby making these measurements level 2 rather than
level 1.
Growth fixed income and alternative investments & liquid
investments - level 2
These represent pooled investment funds that do not have a
quoted price on a recognised exchange. The underlying assets of the
pooled fund have been valued using active market prices or price
quotations at the balance sheet date.
Growth fixed income and alternative investments & illiquid
investments - level 3
These investments hold some underlying investments that rely on
significant unobservable inputs to price or a premium or discount
may apply on exit.
In all cases, fair value information is provided by the
investment manager engaged by the Trusts. The Group has no input
to, or influence over the valuation methodologies applied by the
investment manager.
Within the above reconciliation of financial assets through the
consolidated income statement the following movements relate to
level 3 assets:
52 week
26 week period period ended
ended
----------------------
25 26 Jun 25 Dec
Jun 2020 2020
2021
GBPm GBPm GBPm
Fair value at the start of the period 65.5 239.4 239.4
Remeasurement recognised in the consolidated
income statement 2.9 2.2 (2.9)
Purchases 1.5 - -
Sales - (14.9) (168.9)
Investment administrative expenses (0.6) (1.1) (2.1)
Fair value at the end of the period 69.3 225.6 65.5
At 25 June 2021, the Trust financial assets (all level 2 or 3,
fair value of GBP485.1 million (June 2020: GBP920.1 million;
December 2020: GBP967.1 million)) are exposed to market sensitivity
and changes in valuation over time due to factors including
currency, interest rate, property and commodity prices. The total
fair value of level 2 and 3 Trust financial assets has reduced
since 2020 due to investments being divested and reinvested into
level 1 assets that do not form part of this disclosure.
As the fair value information is provided by the investment
manager who has not been able to provide sensitivity analysis on
the inputs to the fair values, the Group is unable to disclose this
information. However, a five per cent movement in the fair value of
these assets would result in a GBP24.3 million (June 2020: GBP46.0
million; December 2020: GBP48.4 million) increase/decrease to the
carrying value, with a corresponding movement in an unrealised
gain/loss in the income statement. A 10 per cent movement would
increase this movement to GBP48.5 million (June 2020: GBP92.0
million; December 2020: GBP96.7 million).
14 Financial risk management and financial instruments
(continued)
(d) Fair value of current and non-current financial assets and liabilities
25 Jun 2021 26 Jun 2020 25 Dec 202 0
Nominal Book Fair Nominal Book Fair value Nominal Book Fair
value value value value value GBPm value value value
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Secured A Notes -
3.5456% maturing
31 December 2034 180.9 180.8 199.3 190.6 190.5 202.7 185.8 185.6 199.2
Secured B Notes -
4.6956% maturing
31 December 2049 356.4 356.0 349.9 356.4 356.0 277.0 356.4 356.0 289.2
Total 537.3 536.8 549.2 547.0 546.5 479.7 542.2 541.6 488.4
The Secured Notes are held at amortised cost. Other categories
of financial instruments include trade receivables and trade
payables, however there is no difference between the book value and
fair value of these items.
The fair values of the Secured Notes are their market value at
the balance sheet date and are considered to be level 1.
15 Retirement benefit obligation
The retirement benefit obligation at the end of the period was
GBP25.4 million (June 2020: GBP34.6 million; December 2020: GBP36.6
million). The discount rate used was 1.85 per cent (June 2020: 1.45
per cent; December 2020: 1.35 per cent).
The triennial valuation was performed in April 2020. Following
the focus of the Group on its strategic direction an extension was
applied for and confirmed by the pension regulator until 6 October
2021. An update on the subsequent impact to future annual cash
obligations for the Group will be announced in the third quarter
Trading Statement.
16 Post balance sheet events
On 5 July 2021, the FCA published their final rules for the
regulation of funeral plan activities and we are currently working
to apply as a registered provider of pre-arranged funeral plans,
further details for which can be found on page 4.
17 Seasonality
The Group's financial results and cash flows have historically
been subject to seasonal trends between the first half and second
half of the financial period. Traditionally, the first half of the
financial period sees slightly higher revenue and profitability.
There is no assurance that this trend will continue in the future.
The impact of COVID-19 may mean that 2021 and future years
experience different seasonality to that experienced
previously.
Non-GAAP measures
(a) Alternative performance measures
The Board believes that whilst statutory reporting measures
provide financial performance of the Group under GAAP, alternative
performance measures are necessary to enable users of the financial
statements to fully understand the trading performance and
financial position of the business.
The alternative performance measures provided are aligned with
those used in the day-to-day management of the business and allow
for greater comparability across periods.
For this reason, the alternative performance measures provided
exclude the impact of consolidating the Trusts, the corporate
interest restriction disallowance arising as a result of
consolidating the Trusts and the changes which relate to the
application of IFRS 15. In addition, the deferred tax rate change
in both 2021 and 2020 arising on the deferred tax balances on
consolidating the Trusts and application of IFRS 15 have also been
included. All of the above are considered to mask the underlying
trading performance of the Group, as well as non-underlying items
comprising certain non-recurring and non-trading transactions.
IFRS 16 has previously been included within the alternative
performance measures for 2020 only. This was due to the modified
retrospective adoption of the standard, meaning the 2019
comparatives had not been restated and therefore were not
comparable. IFRS 16 is now included within underlying performance
measures and all comparatives have been restated accordingly. As a
result all references to IFRS 16 have been removed from the other
adjustments reconciliation tables in comparative periods.
Therefore, a prior year restatement has been made to June 2020
underlying performance measures to the magnitude of a GBP0.4
million credit to underlying profit This is made up of an
adjustment to remove the operating lease rentals of GBP7.5 million
which is replaced with a depreciation charge of GBP4.6 million, a
finance expense of GBP2.4 million and a tax charge of GBP0.1
million. The restatement to December 2020 underlying performance
measures is to the magnitude of a GBP0.1 million charge to
underlying profit. This is made up of an adjustment to remove the
operating lease rentals of GBP13.8 million which is replaced with a
depreciation charge of GBP9.2 million, a finance expense of GBP4.7
million and a tax charge of GBPnil million. See note 1 for further
details of the impact of this restatement on the interim condensed
consolidated financial statements.
Calculation of underlying reporting measures
Underlying revenue and profit measures (including divisional
measures) are calculated as revenue and/or profit before
non-underlying items and other adjustments.
Underlying net finance costs are calculated before the
application of IFRS 15 and the impact of consolidating the Trusts.
See note 3.
Underlying earnings per share is calculated as profit after
taxation, before non-underlying items and other adjustments (both
net of tax), divided by the weighted average number of Ordinary
Shares in issue in the period.
Underlying cash generated from operations excludes
non-underlying items and other adjustments on a cash paid
basis.
(b) Non-underlying items
The Group's underlying measures of profitability exclude:
-- amortisation of acquisition related intangibles;
-- external transaction costs;
-- profit or loss on sale of fixed assets (net of any insurance proceeds received);
-- Transformation Plan costs (see below);
-- Marketing costs in relation to trials;
-- Directors severance pay;
-- operating and competition review costs;
-- trade name impairments;
-- goodwill impairments; and
-- the taxation impact of the above items together with the impact of taxation rate changes.
Non-underlying items have been adjusted for in determining
underlying measures of profitability as these underlying measures
are those used in the day-to-day management of the business and
allow for greater comparability across periods.
Transformation Plan costs
Cost incurred in relation to the Group's now abrogated
Transformation Plan has resulted in significant, directly
attributable non-recurring costs in 2020 and these amounts are
excluded from the Group's underlying profit measures and treated as
a non-underlying item.
These costs will include, but are not limited to:
-- external advisers' fees;
-- directly attributable internal costs, including staff costs
wholly related to the Transformation (such as the Transformation
Director and project management office);
-- costs relating to any property openings, closures or relocations;
-- rebranding costs;
-- speculative marketing costs; and
-- redundancy costs.
Non-GAAP measures (continued)
(b) Non-underlying items (continued)
Pre-arranged
Funeral funeral Central
services Crematoria plans overheads Group
GBPm GBPm GBPm GBPm GBPm
26 week period ended 25 June 2021
Non-trading
Amortisation of acquisition related
intangibles 1.8 0.2 0.1 - 2.1
External transaction costs in respect
of completed and aborted transactions - 0.6 - - 0.6
Marketing costs in relation to trials - - - 0.6 0.6
Profit on sale of fixed assets (0.1) (0.1) - - (0.2)
1.7 0.7 0.1 0.6 3.1
Taxation (0.4)
Taxation - rate change 8.3
11.0
26 week period ended 26 June 2020 -
restated
(1) (2)
Non-trading
Amortisation of acquisition related
intangibles 2.0 0.2 0.1 - 2.3
External transaction costs 0.1 - - - 0.1
Marketing costs in relation to trials - - - 0.1 0.1
Profit on sale of fixed assets 0.1 - - - 0.1
Non-recurring
Transformation Plan costs - - - 3.8 3.8
Operating and competition review costs - - - 1.2 1.2
2.2 0.2 0.1 5.1 7.6
Taxation (1.4)
Taxation - rate change 3.6
9.8
(1) Comparatives have been restated in relation to taxation rate
change. The rate change classification between non-underlying items
and other adjustments has been restated to separate out the impact
on deferred tax balances arising on the consolidation of the Trusts
through other adjustments and the remainder through non-underlying
items.
(2) A presentation adjustment has been made in June 2020 to separately
pull out the marketing costs in relation to trials.
52 week period ended 25 December 2020
- restated (1)
Non-trading
Amortisation of acquisition related
intangibles 4.1 0.4 0.1 - 4.6
External transaction costs in respect
of completed and aborted transactions 0.2 - - - 0.2
Marketing costs in relation to trials - - - 0.6 0.6
Profit on sale of fixed assets - (0.2) - - (0.2)
Non-recurring
Transformation Plan costs - - - 4.7 4.7
Directors severance pay - - - 1.6 1.6
Operating and competition review costs - - - 2.9 2.9
Trade name impairment 15.3 - - - 15.3
Goodwill impairment 28.7 - - - 28.7
48.3 0.2 0.1 9.8 58.4
Taxation (6.1)
Taxation - rate change 3.6
55.9
(1) A presentation adjustment has been made in December 2020 to
separately pull out the marketing costs in relation to trials.
Non-GAAP measures (continued)
(c) Other adjustments reconciliation
Other adjustments enable a user of the financial statements to
assess the financial performance of the Trading Group as it was
historically reported prior to the consolidation of the Trusts and
the impact of IFRS 15, Revenue from Contracts with Customers. This
mirrors the financial reporting provided to management on a monthly
basis to monitor the performance of the underlying Trading
Group.
Adjustments to the Group's consolidated financial statements are
made to reflect the following:
-- Deferred revenue recognised on the delivery of a funeral is
replaced with the payment received by the Trading Group from the
Trust at the same time. Pre-need segment income, in the form of
upfront payments received by the Trading Group from the Trusts in
support of marketing are recognised when received at inception of a
funeral plan rather than being deferred as part of the
aforementioned deferred revenue.
-- Payments made by the Trusts on cancellation are no longer recognised.
-- Unlike disbursements on at-need funerals, disbursements on
pre-need funerals under IFRS 15 are recognised on a principal basis
within both revenue and cost of sales, but for consistency in the
alternative performance measure both are reduced as these items are
not included in either measure. Similarly, pre-need funerals
delivered by subcontracted funeral directors, which form part of
deferred income, are excluded within the alternative performance
measure with a corresponding adjustment to cost of sales.
-- Commissions payable on securing new Trust plans are
recognised at the inception of the plan rather than being deferred
and recognised at the time the funeral service is delivered.
-- The amounts recorded in respect of the remeasurement of
assets held in the Trust is removed as is the significant financing
component that only arises when deferred revenue is recognised on
consolidation of the Trusts.
-- The taxation impact of the above adjustments, including the
impact of changes in the rate of deferred tax associated with the
items noted above are removed. In addition, as described in note 1
the consolidation of the Trusts has given rise to a significant
reduction in the level of interest on which the Group is able to
obtain a corporation tax deduction. The impact of this is included
in arriving at other adjustments.
Non-GAAP measures (continued)
(c) Other adjustments reconciliation (continued)
Crematoria Pre-arranged Central
Funeral funeral overheads
services GBPm plans GBPm Group
26 week period ended 25 June 2021 GBPm GBPm GBPm
Revenue
Trust consolidation:
Release of deferred revenue on
death
or cancellation 61.5 - - - 61.5
Removal of payments received
from
the Trusts on death (29.5) - - - (29.5)
Payments on cancellation (6.1) - - - (6.1)
Derecognise pre-need segment
income - - (15.6) - (15.6)
IFRS 15:
Recognition of disbursement
element
of pre-need plans 9.3 - - - 9.3
Revenue - Total other adjustments 35.2 - (15.6) - 19.6
Cost of sales
IFRS 15:
Amounts paid on subcontracted
funerals (4.1) - - - (4.1)
Recognition of disbursement
element
of pre-need plans (9.3) - - - (9.3)
Administrative expenses
Trust consolidation:
Recognition of the Trust costs (3.5) - - - (3.5)
Transfer of pre-need costs
into funeral
segment (15.7) - 15.7 - -
IFRS 15:
Net increase of deferred costs
in
respect of commissions 3.4 - - - 3.4
Operating profit - Total other
adjustments 6.0 - 0.1 - 6.1
Finance income/(costs)
Trust consolidation:
Deferred revenue significant
financing (25.9)
Remeasurement of financial assets held by
the Trusts and related income 50.2
Finance costs - Total other
adjustments 24.3
Taxation:
Trust consolidation:
Taxation impact on above
adjustments (4.5)
Corporate interest restriction
disallowance (2.1)
Deferred tax rate change 6.9
IFRS 15:
Taxation impact on above
adjustments (1.1)
Deferred tax rate change (5.5)
Taxation - Total other adjustments (6.3)
Profit after taxation - Total
other
adjustments 24.1
Non-GAAP measures (continued)
(c) Other adjustments reconciliation (continued)
Crematoria Pre-arranged Central
Funeral funeral overheads
26 week period ended 26 June 2020 services GBPm plans GBPm Group
- restated GBPm GBPm GBPm
Revenue
Trust consolidation:
Release of deferred revenue on
death
or cancellation 66.1 - - - 66.1
Removal of payments received
from
the Trusts on death (33.7) - - - (33.7)
Payments on cancellation (3.3) - - - (3.3)
Derecognise pre-need segment
income - - (12.2) - (12.2)
IFRS 15:
Recognition of disbursement
element
of pre-need plans 11.1 - - - 11.1
Revenue - Total other adjustments 40.2 - (12.2) - 28.0
Cost of sales
IFRS 15:
Amounts paid on subcontracted
funerals (5.3) - - - (5.3)
Recognition of disbursement
element
of pre-need plans (11.1) - - - (11.1)
Administrative expenses
Trust consolidation:
Recognition of the Trust costs (3.0) - - - (3.0)
Transfer of pre-need costs into
funeral
segment (12.3) - 12.3 - -
IFRS 15:
Net increase of deferred costs
in
respect of commissions 1.3 - - - 1.3
Operating profit - Total other
adjustments 9.8 - 0.1 - 9.9
Finance income/(costs)
Trust consolidation:
Deferred revenue significant
financing (26.8)
Remeasurement of financial assets held by
the Trusts and related income (14.6)
Finance costs - Total other
adjustments (41.4)
Taxation:
Trust consolidation:
Taxation impact on above
adjustments 6.5
Corporate interest restriction
disallowance (2.2)
Deferred tax rate change 6.8
IFRS 15:
Taxation impact on above
adjustments (0.2)
Deferred tax rate change (2.1)
Taxation - Total other adjustments 8.8
Loss after taxation - Total other
adjustments (22.7)
Non-GAAP measures (continued)
(c) Other adjustments reconciliation (continued)
Crematoria Pre-arranged Central
Funeral funeral overheads
52 week period ended 25 December services GBPm plans GBPm Group
2020 - restated GBPm GBPm GBPm
Revenue
Trust consolidation:
Release of deferred revenue on
death
or cancellation 122.2 - - - 122.2
Removal of payments received
from
the Trusts on death (59.8) - - - (59.8)
Payments on cancellation (8.8) - - - (8.8)
Derecognise pre-need segment
income - - (28.8) - (28.8)
IFRS 15:
Recognition of disbursement
element
of pre-need plans 18.6 - - - 18.6
Revenue - Total other adjustments 72.2 - (28.8) - 43.4
Cost of sales
IFRS 15:
Amounts paid on subcontracted
funerals (8.8) - - - (8.8)
Recognition of disbursement
element
of pre-need plans (18.6) - - - (18.6)
Administrative expenses
Trust consolidation:
Recognition of the Trust costs (6.9) - - - (6.9)
Transfer of pre-need costs
into funeral
segment (28.9) - 28.9 - -
IFRS 15:
Net increase of deferred costs
in
respect of commissions 4.9 - - - 4.9
Operating profit - Total other
adjustments 13.9 - 0.1 - 14.0
Finance income/(costs)
Trust consolidation:
Deferred revenue significant
financing (53.1)
Remeasurement of financial assets held by
the Trusts and related income 47.3
Finance costs - Total other
adjustments (5.8)
Taxation:
Trust consolidation:
Taxation impact on above
adjustments (0.5)
Corporate interest restriction
disallowance (4.3)
Deferred tax rate change 6.8
IFRS 15:
Taxation impact on above
adjustments (0.9)
Deferred tax rate change (2.1)
Taxation - Total other adjustments (1.0)
Profit after taxation - Total
other
adjustments 7.2
Non-GAAP measures (continued)
(d) Non-underlying cash flow items
52 week
26 week period period ended
ended
----------------------
25 26 Jun 25 Dec
Jun 2020 2020
2021 restated restated
GBPm GBPm GBPm
Cash flows from operating activities 49.0 41.8 62.7
Cash flows of other adjustments - Trusts 5.8 15.7 16.3
Cash flows from operating activities
- Trading Group 54.8 57.5 79.0
External transaction costs 0.2 - 0.6
Marketing costs in relation to trials 0.5 - 0.2
Directors severance pay 0.9 - 0.7
Transformation Plan costs - 3.8 5.4
Operating and competition review costs 0.2 1.0 3.0
Underlying cash generated from operations 56.6 62.3 88.9
(December 2020 has been restated to separately pull out spend on
marketing costs in relation to trials out of external transaction
costs.)
(e) Funeral market share
Comparable funeral market share excludes any volumes from
locations not contributing for the whole of 2020 and 2021 to date
and therefore excludes 26 locations closed and one location opened
in 2020 and a further eight locations closed and two locations
opened in 2021.
(f) Average assets per plan
Average assets per plan are calculated as the net assets of the
Trusts divided by the number of active plans in the Trusts. Net
assets in this calculation will not equal amounts in the
consolidated balance sheet of the Group, as it includes instalment
amounts due in future that become payable immediately on death.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
(a) The interim condensed consolidated financial information has
been prepared in accordance with IAS 34 as adopted by the European
Union; and
(b) The Interim Report includes a fair review of the information as required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first half of 2021 and their impact on the interim condensed
consolidated financial information; and a description of the
principal risks and uncertainties for the remaining second half of
the year; and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
half of 2021 and any material changes in the related party
transactions described in the last Annual Report.
The Directors of Dignity plc and their functions are listed
below:
Gary Channon - Executive Chairman
Andrew Judd - Director of Funeral Operations
Dean Moore - Interim Chief Financial Officer
John Castagno - Independent Non-Executive Chairman
Graham Ferguson - Independent Non-Executive Director
On behalf of the Board
Dean Moore
Interim Chief Financial Officer
20 September 2021
Independent review report to Dignity plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim financial report for the 26
week period ended 25 June 2021 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated statement of cash flows and
notes 1 to 17. We have read the other information contained in the
interim financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this interim financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim financial
report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for 26 week period ended 25 June
2021 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Birmingham
20 September 2021
Forward-looking statements
This Interim Report and the Dignity plc investor website may
contain certain 'forward-looking statements' with respect to
Dignity plc ('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 Interim Report 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 in this statement. 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 Interim Report 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
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END
IR BLGDCXXDDGBG
(END) Dow Jones Newswires
September 21, 2021 02:00 ET (06:00 GMT)
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