TIDMDTY
RNS Number : 7302Y
Dignity PLC
13 May 2019
For immediate release 13 May 2019
Dignity plc
First quarter trading update
Dignity plc (Dignity, the Company or the Group), the UK's only
listed provider of funeral related services, announces its trading
update for the first quarter of 2019.
13 week 13 week
period ended period
29 March ended 30 Decrease
2019 March 2018 (per cent)
Underlying revenue (GBPmillion) 81.1 95.1 15
Underlying operating profit (GBPmillion) 21.7 37.5 42
Number of deaths 159,000 181,000 12
Alternative performance measures
All measures marked as underlying in the table above and
throughout this announcement are alternative performance measures.
The reasons for the Group's use of alternative performance measures
are provided in the section on alternative performance measures at
the end of this announcement.
Financial summary
Operating performance in the first quarter was below the Board's
expectations as a result of the significantly lower than expected
number of deaths. Funeral market share and average income were in
line with the Board's expectations. Underlying operating profit by
division is summarised in the table below:
13 weeks 13 weeks
ended ended
29 March 30 March
2019 2018
Underlying operating profit GBPm GBPm
by division
Funeral division 18.4 27.9
Crematoria division 10.9 13.0
Pre-need division - 1.5
Central overheads (7.6) (4.9)
Underlying operating profit 21.7 37.5
Number of deaths
The absolute number of deaths decreased by approximately 12 per
cent to 159,000 from 181,000 in the comparative period last year,
continuing the low number reported by the Group in its preliminary
results presentation for the first nine weeks of 2019. Historical
data indicates that it is likely that this proportional decrease
will not continue throughout the remainder of the year and that the
full year will finish within approximately three per cent of the
previous year. A table showing this data is appended to this
statement and is also displayed in chart form on the Group's
investor website. Longer term expectations, based on the Office for
National Statistics ('ONS') forecasts, remain unchanged. The ONS
expects long-term increases in the number of deaths, reaching
approximately 700,000 per year by 2040.
Funeral operations
Key changes in the profitability of the Group's funeral business
are detailed in the table below:
Funeral operations GBPm
Underlying operating profit -
Q1 2018 27.9
Impact of:
Number of deaths (6.8)
Market share 0.8
Lower average incomes (4.0)
Reduction in costs 0.5
Underlying operating profit -
Q1 2019 18.4
Funeral market share
Funeral market share continued to show a positive response to
the Group's updated service offering and price points introduced in
2018. The Group performed 19,200 funerals in the first 13 weeks of
the year (Q1 2018: 21,400), representing a market share of 12.0 per
cent (Q1 2018: 11.7 per cent). On a comparable basis, excluding any
volumes from locations not contributing for the whole of 2018 and
2019 to date (and therefore excluding eight locations closed in
2018 and a further three locations closed in the first quarter of
2019), market share was 11.8 per cent compared to 11.6 per cent for
the same period in 2018.
Average income
As demonstrated in the table, average income per funeral was
approximately GBP190 lower than the same period in 2018, slightly
below the amount expected and previously guided by the Group. The
Group continues to expect average income for the remainder of the
year to be approximately GBP2,940 as it continues its trials and
plans to implement its tailored funeral nationally.
FY Q1 Q1
2018 2019 2018
Funeral type Actual Actual Actual
Average revenue (GBP) Full service 3,735 3,542 3,875
Simple and limited service 2,350 2,159 2,100
Pre-need 1,705 1,826 1,680
Other (including Simplicity) 570 773 580
Volume mix (%) Full service 48 52 55
Simple and limited service 19 14 12
Pre-need 27 27 28
Other (including Simplicity) 6 7 5
Weighted average (GBP) 2,734 2,691 2,883
Ancillary revenue (GBP) 239 213 212
Average revenue (GBP) 2,973 2,904 3,095
Crematoria operations
Key changes in the profitability of the Group's crematoria
business are detailed in the following table:
Crematoria operations GBPm
Underlying operating profit -
Q1 2018 13.0
Impact of:
Number of deaths (2.0)
Market share 1.0
Lower average incomes (0.5)
Cost base increases (0.6)
Underlying operating profit -
Q1 2019 10.9
Crematoria performed 18,000 cremations in the period (Q1 2018:
19,100), representing a market share of 11.3 per cent (Q1 2018:
10.6 per cent) for the first quarter of the year. This particularly
strong performance is mainly attributed to the increased popularity
of direct cremations.
Pre-need accounting
As previously announced, the Group reduced the level of
marketing allowances it claimed from the trusts when it made a plan
sale with effect from July 2018. As expected, the Group's pre-need
division reported no underlying operating profit in the first
quarter of 2019.
In addition, the adoption of IFRS 15 in 2019 has resulted in a
change to the Group's accounting policies for the sale of trust
based pre-arranged funeral plans. The adoption of this standard
does not affect the Group's underlying reporting measures. See the
section on alternative performance measures at the end of this
announcement for further details.
Marketing and digital activity
The Group's online Funeral Notices service is now fully rolled
out and is being used by clients across the country. In the first
quarter over half a million consumers have viewed a Funeral Notice
and more than GBP250,000 in charitable donations has been pledged
via the online donations facility. The Group has continued to
expand its online reach, providing more advice and guidance, which
has resulted in a near threefold increase in visits to the Group's
websites compared to the same prior year period.
Transformation Plan update
Activity has continued to accelerate with a focus on:
-- Following the finalisation of future efficient branch
networks, the commissioning of a development partner to co-ordinate
the property investment agenda;
-- Ongoing development and monitoring of trials of unbundled
services for bespoke funeral arrangements;
-- Continued enhancement for clients in the Group's online
digital offering including Funeral Notices and improved site
structure and ease of use;
-- Formalisation of projects addressing central capability
including initiatives focused on the Group's Client Service Centre,
purchase-to-pay cycle and procurement expertise;
-- Continued investment in central capabilities particularly Human Resources and Marketing;
-- Detailed engagement with front-line colleagues on specific
role design and ways of working ahead of testing the Group's future
network operating model; and
-- Recruitment of an IT Director to lead product selection and enhance the Group's development capabilities.
Competition and Markets Authority investigation
On 28 March 2019, the Competition and Markets Authority ('CMA')
confirmed its widely anticipated full market investigation into the
funeral and crematoria sector. Dignity welcomes the investigation
and is cooperating fully with the CMA's enquiries. In particular,
Dignity has established a strong working group of internal and
external resource and will seek to focus on these key areas:
-- Quality of service provided to meet customer needs;
-- Regulation of the industry to protect customers; and
-- Capital employed in the crematoria.
The Group will make further announcements as appropriate.
Outlook
The year has started below the Board's expectations primarily as
a result of the number of deaths so far in 2019. Achievement of
full year expectations will rely heavily on the number of deaths in
the remainder of the year compared to 2018. Historical data over
the last 20 years indicates that the final volume is likely to be
within three per cent of the previous year. If deaths were 580,000
(approximately three per cent lower), then all other matters being
equal, underlying operating profits for the full year could be
approximately GBP3 million to GBP4 million lower than originally
anticipated. Clearly, this would require a significant increase in
the number of deaths compared to last year in the second half of
the year and would result in the financial performance for the year
being more heavily weighted towards the second half of the
year.
Mike McCollum, Chief Executive of Dignity, commented:
"Our primary focus for 2019 remains the execution of our
transformation programme, which seeks to build a more coherent,
cohesive and technology-enabled business, geared to meeting the
changing needs of our customers, whilst remaining focused on
excellent client service. This will deliver our vision to lead the
funeral sector in terms of quality, standards and
value-for-money.
Whilst the number of deaths in 2019 may mean that our short-term
financial performance is lower than we originally anticipated, I am
confident that the changes we are making will allow us to generate
sustainable growth in the medium to long-term."
For further information please contact:
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
Conference call details
A conference call for analysts and institutional investors will
be held at 9.30am (BST) this morning.
UK Toll-Free: 08003589473
UK Toll: +44 3333000804
Participant PIN Code: 23562150#
URL for international dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
A recording of this conference call will subsequently be
available at http://www.dignityfuneralsplc.co.uk.
Historical number of deaths
Q1 FY
Q1 FY Increase/ Increase/
Number number (decrease) (decrease)
Year of deaths of deaths (per cent) (per cent)
1997 188,000 618,000 n/a n/a
1998 166,000 609,000 (11.7) (1.5)
1999 190,000 620,000 14.5 1.8
2000 182,000 597,000 (4.2) (3.7)
2001 163,000 585,000 (10.4) (2.0)
2002 166,000 590,000 1.8 0.9
2003 163,000 592,000 (1.8) 0.3
2004 158,000 563,000 (3.1) (4.9)
2005 161,000 564,000 1.9 0.2
2006 151,000 548,000 (6.2) (2.8)
2007 154,000 553,000 2.0 0.9
2008 149,000 553,000 (3.2) -
2009 159,000 545,000 6.7 (1.4)
2010 152,000 544,000 (4.4) (0.2)
2011 150,000 539,000 (1.3) (0.9)
2012 149,000 551,000 (0.7) 2.2
2013 159,000 560,000 6.7 1.6
2014 147,000 550,000 (7.5) (1.8)
2015 175,000 588,000 19.0 6.9
2016 156,000 578,000 (10.9) (1.7)
2017 167,000 590,000 7.1 2.1
2018 181,000 599,000 8.4 1.5
1998, 2004, 2010 and 2016 have been adjusted to allow for the
fact these were 53 week years.
This data is also displayed in chart form on the Group's
investor website:
https://www.dignityfunerals.co.uk/corporate/investors/results-and-reports/shareholders/2019/reports/
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 non-underlying
items which comprise certain non-recurring or non-trading
transactions.
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;
-- Transformation Plan costs (see below);
-- operating and competition review costs;
-- one-off costs in respect of the defined benefit pension obligations;
-- trade name write-off and impairments;
-- profit or loss of associates;
-- the impact of IFRS 15; 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
Given the on-going transformation of the Group's business will
result in significant, directly attributable non-recurring costs
over the period of the Transformation Plan, 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.
Calculation of underlying reporting measures
Underlying profit measures (including divisional measures) are
calculated as profit before non-underlying items.
Underlying earnings per share is calculated as profit after
taxation, before non-underlying items (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 on a cash paid basis.
Like-for-like annualised operating profit ('LFL annualised
operating profit')
The Group recognises that its current measure of underlying
operating profit and statutory measures of financial performance
will not provide a transparent view of financial performance whilst
the Group's Transformation Plan is being implemented. This is
because such existing measures will not give clarity of the
economic impact of changes made part way through the period (e.g.
new investments, location closures and staff changes). The Group
therefore plans to introduce an additional alternative performance
measure for the period of the Transformation Plan.
LFL annualised operating profit will adjust underlying operating
profit in such a way as to reflect a best estimate of the Group's
sustainable profitability into the following year. An explanation
of the changes to underlying operating profit in arriving at LFL
annualised operating profit will be provided in each reporting
period.
As there have not been any significant changes in locations or
staffing in 2018 or the first quarter of 2019, LFL annualised
operating profit is considered to be the same as underlying
operating profit for the periods reported.
Forward-looking statements
This announcement and the Dignity plc investor website may
contain certain 'forward-looking statements' with respect to
Dignity plc ("the Company") and the Group's financial condition,
results of its operations and business, and certain plans,
strategy, objectives, goals and expectations with respect to these
items and the economies and markets in which the Group
operates.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'will',
'would', 'expects', 'believes', 'intends', 'plans', 'targets',
'goal' or 'estimates' or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements
are not guarantees of future performance. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to
factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements. These
factors include, but are not limited to, changes in the economies
and markets in which the Group operates; changes in the legal,
regulatory and competition frameworks in which the Group operates;
changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of
accounting standards under IFRS, and changes in interest and
exchange rates.
Any forward-looking statements made in this announcement or the
Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualified in their
entirety by the factors referred to above. Each forward-looking
statement speaks only as of the date it is made. Except as required
by its legal or statutory obligations, the Company does not intend
to update any forward-looking statements.
Nothing in this announcement or on the Dignity plc investor
website should be construed as a profit forecast or an invitation
to deal in the securities of the Company.
Other information
Dignity (2002) Limited (the holding company of those companies
subject to the securitisation) has today issued reports to the
Rating Agencies (Fitch and Standard & Poor's), the Security
Trustee and the holders of the Secured Notes issued in October 2014
in connection with the securitisation.
Copies of these reports are available at
http://www.dignityfuneralsplc.co.uk.
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
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