14/03/2018
Preliminary results for the 52 week period ended 29 December 2017
Dignity plc (Dignity or the Group), the UK's only listed provider of funeral related services, announces its preliminary results for the 52 week period ended 29 December 2017.
| Financial highlights | 52 week Period ended 29 December 2017 | 53 week Period ended 30 December 2016 | Increase / (decrease) per cent |
|---|---|---|---|
| Revenue (£million) | 324.0 | 313.6 | 3 |
| Underlying operating profit(a) (£million) | 104.6 | 101.7 | 3 |
| Underlying profit before tax(a) (£million) | 77.8 | 75.2 | 3 |
| Underlying earnings per share(b) (pence) | 128.3 | 119.8 | 7 |
| Cash generated from operations(c) (£million) | 115.4 | 121.1 | (5) |
| Operating profit (£million) | 98.0 | 97.7 | - |
| Profit before tax (£million) | 71.2 | 71.2 | - |
| Basic earnings per share (pence) | 115.8 | 115.3 | - |
| Interim dividend paid in the period(d) (pence) | 8.64 | 7.85 | 10 |
| Final dividend proposed in respect of the period(e) (pence) | 15.74 | 15.75 | - |
| Deaths | 590,000 | 590,000 | - |
Non-GAAP measures
The Board believes that whilst statutory reporting measures provide a useful indication of the financial performance of the Group, additional insight is gained by excluding certain non-recurring or non-trading transactions. These measures are defined as follows:
(a) Underlying profit is calculated as profit excluding profit (or loss) on sale of fixed assets, acquisition related amortisation and external transaction costs.
(b) Underlying earnings per share is calculated as profit on ordinary activities after taxation, before profit (or loss) on sale of fixed assets, acquisition related amortisation, external transaction costs and exceptional taxation items (all net of tax), divided by the weighted average number of Ordinary Shares in issue in the period.
(c) Cash generated from operations excludes external transaction costs.
The Group’s underlying measures of profitability exclude profit (or loss) on sale of fixed assets, external transaction costs, amortisation of acquisition related intangibles and exceptional items in respect of taxation. 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.
In 2017, following the commencement of amortisation of acquired intangible trade names and other crematoria related acquired intangibles, acquisition related amortisation of £1.8 million (2016: £nil) has also been excluded in determining underlying profitability measures. Acquisition related amortisation is defined as being the amortisation arising in respect of trade names, use of third party brand names and other crematoria related acquired intangibles.
Other notes
(d) Interim dividend represents the interim dividend that was declared and paid in the period out of earnings generated in the same period.
(e) The 2017 final dividend is the proposed dividend expected to be approved at the annual general meeting on 7 June 2018. The 2016 final dividend is the dividend approved for payment by shareholders at the annual general meeting on 8 June 2017.
Key points
- Financial performance in line with market expectations;
- Deaths flat at 590,000 (2016: 590,000);
- Focus remains on customer service, which continues to be high, with 98 per cent of clients saying they would recommend us;
- Portfolio expanded through acquisition of 24 funeral locations and one small crematorium in the period;
- Total acquisition activity investment of £28.3 million (net of cash acquired); and
- Another good year of pre-arranged funeral plan sales, with active pre-arranged funeral plans increasing to 450,000 (2016: 404,000), helped by trust and insurance based sales.
Update on 2018 initiatives
Following our announcement on 19 January that we were reducing some of our funeral prices and holding others in response to changing market conditions, we have engaged L.E.K. Consulting ('L.E.K.') to work with us in developing our plan for the funeral business. We will be focusing on three fronts
(1) Understanding the relationship between price, service and volume to develop a broader proposition for customers across a number of market segments;
(2) Developing a more streamlined network operating model that can consistently deliver these propositions at a lower cost; and
(3) Developing a modern, efficient, central operating model to support the reconfigured network.
Initial analysis of the mix of funerals in the first seven weeks since the price of the simple funeral was reduced indicates that a step change in simple funerals conducted has occurred, as expected, albeit at this stage at a run rate of approximately 15 per cent of all funerals and therefore below the 20 per cent assumed in the January trading update. However, it is too early to conclude on whether the mix has now stabilised.
In addition, the Group is actively developing other trials of price and service combinations that will launch during the second quarter of 2018. These trials will be large enough to give the Group significant data to analyse and comment on in August when it releases its interim results and updates the market on the operational review conducted with L.E.K. Any early indications from these trials will be detailed in the Group’s first quarter trading update due for release on 14 May 2018. Given their potential to be commercially sensitive, no further detail on these trials will be provided at this time.
L.E.K. have collated detailed information from the Group's various information sources, which is being analysed and reviewed. They are making good progress in helping us to evaluate our revenue, network and central models.
Work has continued to develop the Group’s digital strategy. As at January 2018, our funeral website had the highest domain authority of any funeral related website in the UK and work continues in the development and optimisation of both our corporate and individual location’s web presence. Alongside continued investment in 'pay per click' advertising, this combination of activities should help the increasing number of people using the internet as their reference source, find our new lower prices and the help and support they need from us. Allied to this, we have developed new systems to help our staff deal with online and telephone price enquiries more efficiently and professionally. This investment, combined with a broader range of services and price points will enable us to be more competitive.
Our Simplicity Cremation business is operating at a run rate of approximately 1,000 cremations per year. We have launched the Simplicity pre-arranged funeral plan and the imminent extension of this service to include the ability to attend one of our crematoria should help this business continue to grow.
Our crematoria business continues to perform well and provides a robust underpinning to the Group's financial performance. Of the three new crematoria currently under construction, the first should open in the second quarter of 2018. The cash flow generated by this division helps to give the Group the flexibility to take the aggressive action required on our funeral business whilst still having significant headroom and the resources necessary to service our debt and investment obligations.
Our pre-arranged business continues to add to the number of active plan holders, which currently stands at 450,000. The purpose of this business is to deliver future funerals and a steady stream of cash flows for the Group. We expect 30 per cent of all our funerals in 2018 to come from these arrangements and received an average of £1,650 per funeral in 2017.
Outlook for 2018 and beyond
The business model for the Group’s funeral business is changing as the Board focuses on protecting market share by introducing new service offerings and price points. As indicated in January, the Board believes that whilst the combination of action being taken will lead to substantially lower profits in 2018, it should create a new platform to allow many years of further stable growth.
The Office for National Statistics anticipates approximately 580,000 deaths in 2018, a small decrease of 10,000 on the actual deaths in 2017. However, the number of deaths in the first two months of 2018 are approximately seven per cent higher than the prior year.
Mike McCollum, Chief Executive of Dignity plc commented:
"We are the only business with a national network of funeral and crematoria locations, giving us a unique position in the evolving funeral market. Following the trading update in January 2018, we have now begun a new chapter for Dignity and for the funeral business in particular. It does not change our focus on excellent client service, which remains core to how we operate. We will also continue to demonstrate industry leadership by seeking the regulated market that will be good for clients and society and which plays to our strengths as a compliant and well managed business."
For more information
| Mike McCollum, Chief Executive | |
| Steve Whittern, Finance Director | |
| Dignity plc | +44 (0)207 466 5000 |
| Richard Oldworth | |
| Catriona Flint | |
| Buchanan | +44 (0)207 466 5000 |
| www.buchanan.uk.com | dignity@buchanan.uk.com |