03/04/2020
Market update, Board and Broker changes
Dignity plc (Dignity, the Company or the Group), the UK’s only listed provider of funeral related services, provides the following updates:
COVID-19
As with all businesses, the impact of COVID-19 and associated guidance from the Government are having direct consequences for the Group. However, whilst the challenges are meaningful, they are temporary.
Whilst many staff can work productively at home, some staff (particularly operational) are unable to perform their duties from home and are also unable to come into work. This is providing some operational challenges to ensure the Group’s high levels of service can be maintained and the Group may need to close some of its branches. Notwithstanding Government support for furloughed workers this is likely to result in incremental operating costs for the Group.
Clients may also be forced into making different choices in the shorter term for example it may not be possible to hold services in church and they may choose not to use other ancillary services. Furthermore, in the interests of the welfare of our staff and consistent with many operators in the industry, the Group has also withdrawn its limousines from use. Alongside this, whilst most privately owned crematoria (including the Group’s) are allowing up to ten mourners, some local authority crematoria are preventing any attendees. Furthermore, the Group’s crematoria are likely to witness lower memorial sales in the coming months given this activity is conducted face to face and is not covered by the exemption funeral services receive that permit social gatherings. These changes could adversely impact the average income per funeral and per cremation in the Group’s operating divisions in the coming months.
The number of possible incremental deaths as a result of COVID-19 is a matter of substantial speculation. If 2020 witnesses a large number of incremental deaths, beyond the 600,000 originally anticipated by the Office for National Statistics (‘ONS’), then it is possible that 2021 and 2022 could experience a lower number of deaths than in 2019. The Group will not speculate on the most likely outcome.
The Group welcomes the measures announced by the Government, including tax reliefs and other forms of financial aid, which it will seek to utilise as they become available. For example, if rates relief applies for the whole of the 2020/21 rates year, then the Group expects the rates liability of its funeral division to be approximately £5.5 million lower.
Board changes
Mike McCollum
We have today agreed with Mike McCollum, who has been a significant influence behind the growth of the Group for over twenty years, that the current strategic crossroads which the Group is approaching represents an appropriate time for him to hand over as Chief Executive Officer. Hence Mike, who leaves the Group and the Board with immediate effect, does so with our thanks for his invaluable contribution and we wish him well with his future endeavours.
Accordingly, we are commencing a process to find a new Chief Executive Officer, aligned with the learnings from both our strategic review and the CMA investigation.
Clive Whiley
In the interim Clive Whiley, who was appointed as Non-Executive Chairman on 26 September 2019, has extensive change management experience and has agreed to temporarily step up to the role of Executive Chairman.
Jane Ashcroft
The Group announces that, following the completion of her contractual term, Jane Ashcroft will step down from the Board with effect from today. The Board has benefited from Jane’s wise counsel for the last eight years and she leaves with the Board’s thanks for her support during that time.
The Group continues to make progress with the appointment to the Board of a further independent nonexecutive director, with particular emphasis on digital transformation.
Change of adviser
The Group is delighted to announce the appointment of finnCap Ltd (“finnCap”) as Joint Broker and Joint Financial Adviser with immediate effect. Investec remain Joint Broker and Joint Financial Adviser.
CMA update
On 16 March 2020, the Competition and Markets Authority (‘CMA’) announced an extension to their reference period of six months to 27 March 2021. On 25 March, in light of the evolving situation regarding COVID 19, the CMA suspended the deadline for responding to working papers until further notice and confirmed that their timetable would not be updated until the situation has become clearer.
Outlook
Over the last few months, the Group has already taken significant measures to improve liquidity, by suspending dividend payments, constricting capital expenditure and pausing the Transformation Plan alongside a disciplined approach to our management of working capital.
Whilst we are conducting stress testing of the Group's liquidity requirements, because of the robust actions we have taken to manage our cost base and preserve cash, we believe that headroom remains adequate for our ongoing needs under various scenarios.
The Group's trading performance in 2020 was until last week broadly in line with its expectations. However, following the more stringent measures introduced by the Government, the current environment and the speed in which it is changing, the Group is not providing guidance on 2020 and beyond. The Group continues to monitor the situation carefully and will provide a further trading update in due course.
Clive Whiley, Chairman of Dignity plc, commented:
"First, I would like to thank Mike for his extensive efforts over many years, in particular in leading the Group as Chief Executive Officer for the last eleven. He has been a notable force throughout a period of significant growth, across all divisions, since the LBO in 2002.
Secondly, I would like to thank Jane both personally for her guidance since my appointment and on behalf of the Board, given the valuable contribution she has provided over the last eight years, and she leaves with our thanks.
Finally, whilst we are indeed operating in extraordinary circumstances, the acceleration of the root & branch strategic review of the business initiated upon my appointment, which is due to be completed in June 2020, was designed to strategically position the business for all eventualities."
For further information please contact:
| Clive Whiley, Executive Chairman | |
| Steve Whittern, Finance Director | |
| 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 |