TIDMDTY
RNS Number : 9723G
Dignity PLC
12 November 2018
For immediate release 12 November 2018
Dignity plc
Third quarter trading update
Dignity plc (Dignity or the Group), the UK's only listed
provider of funeral related services, announces its trading update
for the third quarter of 2018.
39 week 39 week period
period ended ended Increase/
28 September 29 September (decrease)
2018 2017 per cent
Revenue (GBPmillion) 244.2 243.9 -
Underlying operating profit(*)
(GBPmillion) 68.6 79.4 (14)
Number of deaths 455,000 440,000 3
* The reasons for the Group's use of alternative performance
measures, definitions and where relevant reconciliations, are
provided in the section on Non-GAAP alternative performance
measures at the end of this announcement.
Financial summary
Operating performance in the third quarter was in line with the
Board's expectations, reporting underlying operating profits of
GBP12.2 million, compared to GBP19.9 million in the same period in
2017. Underlying operating profit for the year to date is
summarised as follows:
13 weeks 13 weeks 39 week
ended ended period 39 week
28 September 29 September ended period ended
2018 2017 28 September 29 September
2018 2017
Underlying operating profit GBPm GBPm GBPm GBPm
by division
----------------------------- -------------- -------------- -------------- --------------
Funeral division 11.1 15.3 53.2 60.4
Crematoria division 8.8 8.8 32.2 29.7
Pre-need division (0.3) 1.6 2.5 6.5
Central overheads (7.4) (5.8) (19.3) (17.2)
----------------------------- -------------- -------------- -------------- --------------
Underlying operating profit 12.2 19.9 68.6 79.4
----------------------------- -------------- -------------- -------------- --------------
In aggregate, crematoria, pre-need and central overheads
generated an underlying operating profit of GBP1.1 million in the
quarter compared to GBP4.6 million during the same period in 2017.
This reduction reflects reduced profitability from pre-need
consistent with the reduction in marketing allowances described in
the Group's interim results on 1 August 2018, combined with
incremental costs arising from the further investment centrally in
marketing and digital activities.
Key changes in the profitability of the Group's funeral business
are detailed in the table below:
H1 Q3 YTD
Funeral operations GBPm GBPm GBPm
Underlying operating profit
- 2017 45.1 15.3 60.4
Impact of:
Number of deaths 5.5 (0.8) 4.7
Market share (1.5) 1.5 -
Lower average incomes (5.5) (5.2) (10.7)
Cost base increases (3.5) (0.6) (4.1)
Acquisition activity 2.0 0.9 2.9
Underlying operating profit
- 2018 42.1 11.1 53.2
Number of deaths
Whilst the number of deaths in the year to date increased three
per cent to 455,000, the third quarter, as expected, saw the number
broadly flat year on year. The Group continues to anticipate
600,000 deaths in 2018.
Market share
Funeral market share continued to show good momentum in the
third quarter. The Group performed 55,700 funerals in the first 39
weeks of the year (2017: 52,100), representing a market share of
12.1 per cent (2017: 11.7 per cent). On a comparable basis,
excluding any volumes from locations not contributing for the whole
of 2017 and 2018 to date (and therefore excluding two further
locations closed in the third quarter of 2018), market share was
11.4 per cent compared to 11.3 per cent for the same period in
2017.
Crematoria performed 49,900 cremations in the period (2017:
48,100), representing a market share of 11.0 per cent (2017: 10.9
per cent) for the first 39 weeks of the year.
Funeral mix and average income
As expected, the third quarter witnessed a reduction in average
income as a consequence of the ongoing pricing trials. The Group
continues to anticipate its average income will be lower in the
fourth quarter of 2018 and broadly in line with its original
expectation of GBP2,870. However, this is likely to be achieved as
a consequence of a different funeral mix and achievement of
different actual averages compared to original expectations.
FY 2018
Board's
original
expectations(*) Q3
H1 2018
Q3 2018 YTD
FY
2017 Q1 2018 Q2 2018 2018
Funeral type Actual Actual Actual Actual Actual Actual
Average
revenue
(GBP) Full service 3,800 3,800 3,875 3,700 3,695 3,800 3,775
Simple and
Limited
service 2,700 1,965 2,100 2,340 2,420 2,240 2,315
Pre-need 1,650 1,650 1,680 1,680 1,720 1,680 1,690
Other 500 500 580 535 550 560 550
Volume
mix
(%) Full service 60 44 55 48 44 52 49
Simple and
Limited
service 7 20 12 20 24 15 18
Pre-need 27 30 28 26 26 27 27
Other 6 6 5 6 6 6 6
Weighted average 2,945 2,590 2,883 2,713 2,688 2,799 2,756
Ancillary revenue 277 280 212 225 233 224 239
Average revenue 3,222 2,870 3,095 2,938 2,921 3,023 2,995
* As per January 2018 trading update
Marketing and digital activity
The Group continues to expand its digital offering, increasing
the amount of online advice and support it offers to consumers and
enhancing the digital services it offers to its clients. More than
one third of our branches are now trained to offer our Online
Funeral Notices service which is proving popular with clients. This
provides clients with a convenient way to share details of the
funeral arrangements through social media and the internet. It also
allows friends and family to arrange flowers and make
donations.
The Group's websites are performing well, with more than 1.2
million visits on a year to date basis, up 52 per cent on the same
comparable prior year period. Visits to our websites in the third
quarter were up 67 per cent on the prior year. Publishing our
prices online is still a key priority and we remain on track to
achieve this by the end of March 2019.
Update on the transformation plan
The Group's Transformation Director, has spent the weeks since
appointment in August setting up the project management office,
establishing an appropriately skilled team for the plan's
implementation and creating all the necessary detailed processes to
ensure the three year plan can be delivered on time and on
budget.
The early focus has been on the following areas:
- Establishing the senior leadership team within Funeral
Operations including a new national role to focus on Service
Delivery;
- Completing a thorough review of the existing IT applications
and support model against the requirements of the transformation
strategy;
- Commencing trials of the Group's funeral services focused
around unbundling the services offered within bespoke funeral
arrangements;
- Managing the ongoing development of the brand identity for the
Group's Simplicity offering; and
- Finalising a smaller number of larger branch networks in
advance of the testing of our new operating model.
Capital structure
The Group's principal source of long-term debt financing
continues to be the Secured Notes issued in 2014. The Group's
Secured A Notes are rated A by Fitch and Standard & Poor's. On
13 August 2018, Fitch lowered its rating of the Group's Secured B
Notes from BBB to BBB-. Standard & Poor's continue to rate the
Group's Secured B Notes as BB, following a downgrade from BBB
earlier in the year. These downgrades have no impact on the
financial covenant or any other obligation of the Secured Notes
from a Group perspective.
The Group's primary financial covenant under the Secured Notes
(which is applicable to the securitised subgroup of Dignity)
requires EBITDA to total debt service to be above 1.5 times. The
ratio at 28 September 2018 was 2.88 times.
At the end of September 2018, the Group had cash balances of
GBP70.2 million and the Group's GBP50.0 million revolving credit
facility was undrawn.
IFRS 15, Revenue from contracts with customers
Work continues to understand the impact of IFRS 15 on the
accounting for the Group's pre-need business. IFRS 15 does not
impact cash flows between the Group and the pre-need trusts.
Current analysis indicates that the change in accounting policy
could reduce reported operating profits in 2019 by approximately
GBP1.0 million. The Group will provide further guidance when it
releases its preliminary results in March 2019.
Acquisitions strategy
The Group has invested GBP5.4 million acquiring four funeral
locations in the year to date. After careful consideration, the
Board has concluded that the acquisition of small funeral
businesses is at present inconsistent with the Group's strategy and
plans for the future. The Group therefore does not anticipate
acquiring any further funeral locations in the foreseeable future.
Instead, it will concentrate its financial and corporate resources
on delivering the transformation plan.
Should opportunities of larger, more established businesses
become available, the Group will consider these on a case by case
basis. Furthermore, the Group continues to view new crematoria
developments as a good use of capital and will therefore continue
to develop such opportunities wherever possible.
CMA and HM Treasury
The Group has continued to provide supporting information to the
Competition and Markets Authority ('CMA') in relation to its market
study of funeral and crematoria services. Given the CMA's timeline
of reporting by the end of November, the Group expects it to
publish its preliminary findings and views as to whether or not a
more in-depth market investigation should be made imminently.
Timings for HM Treasury's consultation on the funeral plan
sector are less certain. The Group will continue to work closely
with both parties and make further announcements as
appropriate.
Major research released on funerals and crematoria
In mid August, the Group published the results of a major
research project into funerals. The findings show that nine in ten
people expect or assume that funeral directors are already
regulated and 80 per cent of participants supported regulation of
minimum professional standards. The Group has shared its findings
in a report entitled "Time to talk about quality and standards"
with the CMA, the Inspector of Funerals in Scotland and the NAFD.
This report forms the basis of discussions and debate that the
Group is seeking to stimulate on the best way to achieve regulation
and higher minimum standards.
The Group has also published the results of a report on UK
crematoria, gathered by leading research agency Trajectory,
entitled "Cost, Quality, Seclusion and Time; What do UK consumers
want from a cremation funeral?". The report findings show that 59
per cent of people felt that 30 minutes for a service was not long
enough, yet 13 per cent of crematoria have times of 30 minutes or
less and 30 per cent have times of less than 45 minutes. In the
report, the Group calls on all crematoria to commit to a minimum
time of 45 minutes. Approximately three quarters of Dignity
crematoria allocate one hour, with the remainder of locations
offering 45 minutes.
Simplicity Cremations
In October, the Group expanded its range of Simplicity Cremation
services, providing customers with greater choice in this expanding
segment of the market.
The new attended service will provide people with all the
practical and essential elements of a cremation, without the
obligation to pay for traditional ceremonial elements they may not
want. This service does not include a hearse or limousine; there is
no personal contact with Dignity staff and no viewing of the
deceased. However, clients do get the full time allocation at one
of Dignity's 46 crematoria at a time and date of their choosing.
The service is available online only at an all inclusive price from
GBP1,895. This is the first service of its type available across
the UK.
Appointment of new Chair
The Group continues to seek a new Chair and further
announcements will be made in due course.
Outlook
The Group continues to perform in line with current market
expectations for the year ended 28 December 2018.
Mike McCollum, Chief Executive of Dignity plc commented:
"We are pleased with how the Group has performed in the period
and following these results our expectations for the full year
remain unchanged. Our work on the transformation plan is critical
and we are encouraged by the progress that has been made in the
initial weeks. Alongside the expansion of our digital offerings, we
continue to provide a greater choice for consumers and our focus on
high standards and excellent client service remains central to our
plans for the future. The Group's significant research projects
highlight the need for minimum professional standards and support
calls for regulation that we have been making for some time."
For more information
Mike McCollum, Chief Executive
Steve Whittern, Finance Director
Dignity plc +44 (0)20 7466 5000
Richard Oldworth
Chris Lane
Catriona Flint
Buchanan +44 (0)20 7466 5000
www.buchanan.uk.com Dignity@buchanan.uk.com
Notes
A conference call for analysts and institutional investors will
be held at 9.30 this morning.
Conference UK Toll: 02034281542
call UK Toll Free: 08082370040
Participant PIN code: 35676586#
URL for international dial in numbers:
http://events.arkadin.com/ev/docs/FEL_Events_International_Access_List.pdf
A recording of this conference call will subsequently be
available at http://www.dignityfuneralsplc.co.uk.
Time to talk about quality and standards
Download the full report at
https://www.dignityfunerals.co.uk/media/3002/time-to-talk-about-quality-and-standards-v2.pdf
Cost, Quality, Seclusion and Time; What do UK consumers want
from a cremation funeral?
Download the full report at
https://www.dignityfunerals.co.uk/media/3111/cost-quality-seclusion-and-time-a-report-by-dignity-and-trajectory-200918.pdf
Non-GAAP alternative performance 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. Underlying measures are
those used in the day to day management of the business.
1. 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. Given the planned transformation of
the Group's funeral business will result in significant, directly
attributable non-recurring costs, these amounts will also be
excluded from the Group's underlying profit measures. Non-recurring
costs will include external advisers' fees, directly attributable
internal costs, including staff costs wholly related to the
transformation (such as the Transformation Director and project
management office) and direct costs relating to activities
terminated part way through the year. 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 and are collectively referred to as 'non-underlying
items'.
2. Underlying profit measures (including divisional measures)
are calculated as profit before non-underlying items.
3. Underlying earnings per share is calculated as profit on
ordinary activities after taxation, before non-underlying items
(net of tax), divided by the weighted average number of Ordinary
Shares in issue in the period.
4. Cash generated from operations excludes non-underlying items on a cash paid basis.
Forward-looking statements
This announcement 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 announcement or the
Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualified in their
entirety by the factors referred to 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 announcement or on the Dignity plc investor
website should be construed as a profit forecast or an invitation
to deal in the securities of the Company.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTEAPFNEFNPFFF
(END) Dow Jones Newswires
November 12, 2018 02:00 ET (07:00 GMT)
Dignity (LSE:DTY)
Historical Stock Chart
From Apr 2024 to May 2024
Dignity (LSE:DTY)
Historical Stock Chart
From May 2023 to May 2024