Preliminary Results
Dignity PLC
22 March 2007
For Immediate Release 22 March 2007
Dignity plc
Preliminary results for the 52 week period ended 29 December 2006
Dignity plc, Britain's largest single provider of funeral-related services,
announces its preliminary results for the 52 week period ended 29 December 2006.
Financial highlights
Underlying earnings per Up 19% to 26.6p (2005: 22.4p)
share (note a)
Revenue Up 5% to £149.8 million (2005: £143.2 million)
Underlying operating profit Up 8% to £44.1 million (2005: 41.0 million)
(note b)
Underlying profit before Up 8% to £27.9 million (2005: £25.9 million)
tax (note b)
Cash generated from Up 4% to £51.7 million (2005: £49.5 million)
operations (note c)
Basic earnings per share Up 13% to 25.9p (2005: 22.9p)
Operating profit Up 4% to £43.4 million (2005: £41.6 million)
Profit before tax Up 3% to £27.2 million (2005: £26.5 million)
Dividend per share Interim dividend of 3.03p paid with a further 6.06p
final dividend proposed.
Return of value £80 million (£1 per share) returned to shareholders
in August 2006.
(a) Underlying earnings per share is calculated as profit on ordinary
activities before exceptional items and after taxation divided by the weighted
average number of Ordinary Shares in issue in the period.
(b) Before profit on sale of fixed assets and non-recurring costs
expensed relating to return of £1 per share in August 2006.
(c) Before lump sum payment in 2006 to final salary pension scheme of
£10 million in August 2006 and £0.7 million payment in respect of redemption of
B shares.
Highlights
Six new funeral home locations acquired in the period, as well
as a further six subsequent to the period end.
Total unfulfilled pre-arranged funeral plans increased to
188,800 (2005: 181,200).
Group operating margin continues to grow.
£85.8 million net proceeds from the issue of secured notes.
Final salary pension scheme now in actuarial surplus on an IAS
19 basis following £10 million lump sum contribution.
Peter Hindley, Chief Executive of Dignity plc:
'Underlying earnings per share increased 19 per cent to 26.6 pence per share.
This is testament to a strong operating performance combined with efficient use
of our balance sheet.
During the year, we raised £90 million of new long term debt, returned £80
million (£1 per share) to our shareholders and saw our final salary pension
scheme return to surplus following a £10 million cash injection by the Group.
The return of capital represents 43 per cent of our initial market
capitalisation at the IPO just three years ago.
Initial trading in 2007 has been positive and the Group remains well placed for
the year ahead.'
For more information
Peter Hindley, Chief Executive
Mike McCollum, Finance Director
Dignity plc +44(0) 20 7466 5000
Richard Oldworth
Suzanne Brocks
Nick Melson
Buchanan Communications +44 (0) 20 7466 5000
Chairman's statement
Introduction
Dignity is the single largest provider of funeral-related services, namely
funeral services, crematoria and pre-arranged funeral plans in Britain, and is
the only UK listed company in this area.
Results
The Group has performed well in the period. Underlying earnings per share (which
excludes profit on sale of fixed assets and costs of redeeming the B shares)
have increased 19 per cent to 26.6 pence per share (2005: 22.4 pence per share).
Underlying operating profit has increased 8 per cent to £44.1 million (2005:
£41.0 million).
Basic earnings per share has increased 13 per cent to 25.9 pence per share
(2005: 22.9 pence per share). Operating profit has increased by 4 per cent to
£43.4 million (2005: £41.6 million).
New secured notes and use of proceeds
During the period, the Group issued further secured notes, receiving £85.8
million net of fees and returned £80.0 million (£1 per share) to shareholders.
In addition, our pension scheme has been returned to surplus primarily through a
£10.0 million lump sum payment to the scheme.
Dividends
The Group paid an interim dividend of 3.03 pence per share.
The Board has declared a final dividend of 6.06 pence per share. This will be
paid on 29 June 2007 to shareholders on the register at 8 June 2007, provided
appropriate consent is received at the Annual General Meeting, which takes place
on 8 June 2007.
Our staff
Client service excellence continues to be fundamental in our strategy to grow
the business. This cannot be achieved without the dedication and loyalty of each
and every member of our staff.
I would like to thank our staff throughout the business for their support and
commitment throughout the period.
Changes in directors
Jim Wilkinson has recently left Dignity. I would like to take this opportunity
to thank Jim for his input into the business.
I am delighted that Richard Portman joined the Board as Corporate Services
Director following six years as Head of Finance. Richard will also continue to
serve as Company Secretary.
As in previous years, I am grateful to all my fellow directors for their support
and wise counsel.
Outlook for 2007
We continue to focus on the core elements of our strategy, developing the
business both organically and by acquisition.
Initial trading in 2007 has been positive and the Group remains well placed for
the year ahead.
Richard Connell
Chairman
21 March 2007
Business Review
Introduction
The Group is firmly established as Britain's largest single provider of
funeral-related services.
Fundamental to our success is the consistency of our strategy. It focuses on
client service excellence, improving revenues, cost control and selective
additions to our funeral locations, crematoria and pre-arranged funeral plan
partners.
The Group's operations are managed across three main areas, namely funeral
services, crematoria and pre-arranged funeral plans, which respectively
represent 80 per cent, 15 per cent and 5 per cent of the Group's revenues.
Funeral services revenues relate to the provision of funerals and ancillary
items such as memorials and floral tributes. Crematoria revenues arise from
cremation services and the sale of memorials and burial plots at the Group's
crematoria and cemeteries. Pre-arranged funeral plan income represents amounts
to cover the costs of marketing and administering the sale of plans.
Performance in the period
Total estimated deaths for the 52 week period to 29 December 2006 in Great
Britain were 548,100 compared to 563,800 in the comparative 52 week period in
2005, a reduction of 2.8 per cent and below government forecasts of 560,000
deaths. The historic number of deaths quoted is based on the initial Office of
National Statistics (ONS) estimates for each calendar year. These death rates
are revised by the ONS from time to time but to maintain consistency of
reporting, Dignity quotes the original reported numbers. Based on historical
evidence, Dignity estimates that final deaths reported might fluctuate by around
one per cent.
Funeral services
The Group operates a network of 521 (2005: 519) funeral homes throughout
Britain, trading under local established names. In 2006, the Group conducted
66,500 funerals (2005: 67,000), representing approximately 12.1 per cent (2005:
11.9 per cent) of estimated total deaths in Britain.
Revenue within funeral services was £120.0 million (2005: £113.8 million).
Underlying operating profits were £39.3 million (2005: £36.5 million), an
increase of 8 per cent. Reported operating profit was £39.3 million (2005: £37.1
million), an increase of 6 per cent.
The small increase in the portfolio reflects three distinct activities. Firstly,
we acquired six funeral locations, investing £7.3 million, funded from
internally generated cash flows. They are all long established, highly reputable
businesses.
Secondly, we have opened two funeral locations under existing trading names.
Finally, we have taken the opportunity, primarily where property leases expired,
to close six under performing funeral locations.
Crematoria
The Group operates 22 crematoria and carried out 38,500 cremations in 2006
(2005: 39,500) representing 7.0 per cent (2005: 7.0 per cent) of estimated total
deaths in Britain. The Group is the largest single operator of crematoria in
Britain.
Turnover within crematoria was £23.2 million (2005: £22.5 million). Operating
profits were £12.1 million (2005: £11.9 million).
The small reduction in operating margins has been caused by a combination of
lower cremation volumes and memorial sales, as well as significant increases in
certain costs such as utilities.
Pre-arranged funeral plans
The Group is the market leader in the provision of pre-arranged funeral plans.
Unfulfilled pre-arranged funeral plans increased to 188,800 from 181,200 during
the period. These unfulfilled pre-arranged funeral plans underpin the future
performance of the funeral division, as the Group expects to perform the
majority of these funerals.
The Group sells pre-arranged funeral plans through its network of funeral homes
and primarily through affinity partners, notably Age Concern, AXA, Royal London
and Liverpool Victoria.
Liverpool Victoria is a new relationship established in early 2006 following
some successful test mailings. This continued in the second half of 2006 with a
number of successful campaigns.
Client service
Client service excellence remains at the heart of our strategy, with families
continuing to recommend our services.
We have continued to concentrate on the 'Helping Our Clients Every Step of the
Way' programme and the results of the new survey questions that were both
introduced in 2005.
This programme has helped to focus employees on delivering consistently high
levels of client service and satisfaction.
As we continue to receive a high level of responses to our surveys, we are able
to use that feedback to identify elements of our services that are being
performed well or could be improved.
The combination of these approaches has resulted in levels of client service
satisfaction remaining at a very high level, with 89 per cent of families saying
they would definitely recommend our services, with a further 9 per cent saying
they would probably do so.
Our employees
Our employees continue to play a vital role in this business, whether they deal
with clients on a daily basis, or work in the support functions throughout the
business.
I am delighted that once again this year, we have been able to share the success
of the business with the staff. This was achieved through a bonus of £500 for
each permanent, full time member of staff. This recognises the significant part
they play in the Group's performance and I would like to thank them for their
hard work throughout the year.
The first 'Save As You Earn' share scheme will mature in May 2007. An employee
who has been saving the maximum £193 per month for the three year period will
receive shares worth approximately £21,000 based on a share price of £6.54.
Given the success of this scheme, we are currently investigating the possibility
of starting a new SAYE scheme in 2007.
Pensions
The Group operated two final salary pension schemes until 6 April 2006, when the
schemes were merged in order to achieve savings in administrative expenses.
Benefits offered were maintained and the scheme remains open to current and new
employees.
In addition, the Group made a one-off contribution to the scheme of £10.0
million in August 2006, demonstrating our commitment to existing and prospective
members of the scheme.
As a result, the scheme has an actuarial surplus on an IAS 19 basis of £0.6
million at 29 December 2006 and is well placed for the future.
Investment for the future
The period witnessed total capital expenditure of £8.0 million. This provided
the Group with 45 new Mercedes hearses and limousines, 33 new ambulances, 74
other new vehicles, 22 major refurbishments and helped to improve facilities at
a number of our funeral and crematoria locations.
We anticipate a similar amount of investment in 2007. In addition, we will be
setting aside further funds, which will be used to improve approximately 50
funeral locations.
The Group intends to continue to identify and acquire funeral locations that
compliment our existing portfolio. In the first three months of 2007, we have
invested £3 million in acquiring 2 funeral businesses, which has added 6 more
funeral locations to our portfolio.
In January 2007, the Group signed a new 10 year marketing agreement with Age
Concern, which secures what has historically been an important route to market.
As part of this arrangement, the Group paid £2 million to acquire the 25 per
cent held by Age Concern in Advance Planning Limited, one of the subsidiaries of
the Group.
The pre-arranged funeral plan division is also testing with a number of parties
including JD Williams, the Mirror Group, News International and Reader's Digest.
Peter Hindley
Chief Executive
21 March 2007
Financial Review
The market conditions in which the Group operates and its trading performance
during the 52 week period ended 29 December 2006 are described in the Chairman's
Statement and the Business Review.
Financial highlights
Underlying earnings per share have increased 19 per cent
to 26.6 pence per share (2005: 22.4 pence per share).
Revenue has increased 5 per cent to £149.8 million (2005:£143.2 million).
Underlying operating profit has increased 8 per cent to £44.1 million
(2005: £41.0 million).
Underlying profit before tax has increased 8 per cent to £27.9 million
(2005: £25.9 million).
Cash generated from operations has increased 4 per cent to £51.7 million
(2005: £49.5 million) before the £10 million lump sum payment to the Group's
pension scheme and £0.7 million payment in respect of the redemption
of the B shares.
Earnings per share has increased 13 per cent to 25.9 pence (2005: 22.9 pence).
Operating profit has increased 4 per cent to £43.4 million (2005: £41.6 million).
Profit before tax has increased 3 per cent to £27.2 million (2005: £26.5 million).
The Group has paid an interim dividend of 3.03 pence per share with a further
6.06 pence final dividend proposed.
The Group returned £80 million (£1 per share) to shareholders in August 2006.
Capital structure and financing
The Group's only material external debt financing is the Class A and B Secured
Notes, rated A and BBB respectively.
During the period, the Group issued a further £45.55 million Class A Secured
6.310 per cent Notes due 2023 and £32.50 million Class B Secured 8.151 per cent
Notes due 2030. To ensure that the new Class A Notes issued were identical with
those already in issue, Notes with a nominal value of £45.55 million were
issued. This, however, after deemed repayments equates to a nominal value
outstanding at the date of issue of £42.5 million. The Notes were issued at a
premium and raised a total of £85.8 million after fees and expenses.
The Board believes that this fund raising and the subsequent return of value to
shareholders is consistent with the strategy of maximising total shareholder
returns through an efficient balance sheet, which nevertheless leaves sufficient
flexibility to continue to grow the business.
The Board is of the opinion that the following provides additional indicative
information regarding the net debt position of the Group:
29 December 30 December
2006 2005
£m £m
Class A and B Secured Notes*
- issued April 2003 (199.7) (202.6)
- issued February 2006 (87.3) -
Loan Notes 2006 - (0.1)
Cash balances 41.4 37.3
Net Debt (245.6) (165.4)
* These amounts exclude any costs incurred in issuing the Secured Notes.
The Group's financial expense substantially consists of the interest on the
Class A and B Secured Notes and related ancillary instruments. The net finance
charge in the period relating to these instruments was £19.4 million (2005:
£15.7 million). This charge consisted of interest costs on the Secured Notes of
£19.9 million (2005: £14.8 million) and amortisation of debt issue costs of £1.2
million (2005: £0.9 million), offset by a release of premium of £0.9 million
(2005: £nil million) and the release of prepaid interest of £0.8 million (2005:
£nil million). The prepaid interest represents an element of the gross proceeds
received by the Group because interest was due to Noteholders on the new notes
from 1 January 2006, even though the notes were not issued until February 2006.
This will not recur.
Other ongoing finance costs incurred in the period amounted to £1.0 million
(2005: £1.3 million), representing the unwinding of discounts on the Group's
provisions, finance expense on retirement obligations and other loans.
Interest receivable in the period was £4.0 million (2005: £1.7 million). As a
result of the terms of the securitisation, the net proceeds of the Secured Notes
issued in February 2006 remained on deposit for five months before being used.
This resulted in approximately £1.8 million of interest receipts
Return of value and share consolidation
As planned, the Group returned £80.0 million to shareholders in August 2006
using the majority of the proceeds of the issue of the Secured Notes by issuing
and then redeeming 80 million £1 B Shares. In addition, following approval by
shareholders, the ordinary share capital of the Company was consolidated on a
seven for nine basis in order to maintain the comparability of financial
indicators such as share price. Combined with the return of value, the effect
was the same as buying back 17.8 million shares at a market price of £4.50.
Underlying profit after tax
The Board believes that whilst statutory reporting measures provide a useful
indication of the financial performance of the Group, additional insight is
obtained by excluding significant non-recurring transactions. Accordingly, the
following information is presented to aid understanding of the performance of
the Group:
____________________________________________________________________________________
52 week period 52 week period
ended 29 ended 30
December 2006 December 2005
£m £m
Operating profit for th eperiod as reported reported 43.4 41.6
Add/(deduct) the effects of:
Exceptional costs of redemption of B shares 0.7 -
Profit on sale of fixed assets - (0.6)
___________________________________________________________________________________
Underlying operating profit 44.1 41.0
____________________________________________________________________________________
Net finance costs (16.2) (15.1)
____________________________________________________________________________________
Underlying profit before tax 27.9 25.9
Tax charge on underlying profit before tax (8.6) (8.0)
____________________________________________________________________________________
Underlying profit after tax 19.3 17.9
____________________________________________________________________________________
Weighted average number of ordinary shares in
issue during the period (million) 72.6 80.0
Underlying EPS 26.6p 22.4p
% increase in underlying EPS 19%
____________________________________________________________________________________
Earnings per share
Following the return of value in August 2006, the Company had 62.2 million
Ordinary Shares in issue, compared to 80 million previously. Therefore, the
weighted average number of shares in issue during the period was 72.6 million
Ordinary Shares.
Underlying earnings per share increased 19 per cent to 26.6 pence per share
(2005: 22.4 pence per share). Basic earnings per share were 25.9 pence per share
(2005: 22.9 pence per share), an increase of 13 per cent.
Cash flow and cash balances
Cash generated from operations was £51.7 million in the period (2005: £49.5
million). This is before the £10.0 million lump sum payment to the Group's
defined benefit pension scheme and the £0.7 million payment in respect of costs
of redeeming the B shares. Expenditure on funeral home acquisitions amounted to
£7.3 million (2005: £6.7 million). A further £8.0 million (2005: £7.6 million)
was spent on capital expenditure, the majority of which was spent on replacing
or enhancing existing assets, principally the Group's vehicle fleet and its
property portfolio.
Cash balances at the end of the financial period amounted to £41.4 million
(2005: £37.3 million). £22 million of this amount has been set aside for
acquisitions, of which £5 million has since been spent, as described in the
Business Review. Of the remainder, £15 million has been set aside for tax and
dividend payments to be made in 2007. However, this amount could also be used
for acquisitions if suitable opportunities arose, with statutory payments being
funded out of future operating cash flows.
Taxation
The overall effective tax rate was approximately 31 per cent and is not expected
to vary significantly in the short term. This tax rate is marginally higher than
the standard UK tax rate of 30 per cent due to the impact of disallowable
trading expenses and expenditure on the Group's premises that does not attract
any deductions for tax purposes.
As a result of the quarterly accounting regime, corporation tax payments in any
financial year represent 50 per cent of the estimated corporate tax liability
for profits made in that same period and 50 per cent of the estimated corporate
tax liability in respect of profits made in the previous period. As a result of
the Group's ownership prior to flotation, no corporation tax was due on profits
made in 2004. For these reasons tax payments in 2006 are substantially higher
than in 2005.
Mike McCollum
Finance Director
21 March 2007
Consolidated income statement
For the 52 week period ended 29 December 2006
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
Note £m £m
Revenue 1 149.8 143.2
Cost of sales (73.2) (70.0)
Gross profit 76.6 73.2
Administrative expenses (34.4) (32.8)
Other operating income 1.2 1.2
-------------------------- ------ -------- ----------
Operating profit before exceptional
(charges) / income 44.1 41.0
Exceptional (charges) / income 2 (0.7) 0.6
-------------------------- ------ -------- ----------
Operating profit 1 43.4 41.6
Finance charges 3 (22.1) (17.0)
Finance income 3 5.9 1.9
--------------------------- ------ -------- ----------
Profit before tax 27.2 26.5
Taxation 4 (8.4) (8.2)
Profit for the period 18.8 18.3
Profit attributable to minority interest - -
Profit attributable to equity shareholders 18.8 18.3
18.8 18.3
Earnings per share for profit attributable
to equity shareholders (pence)
- Basic and diluted 5 25.9p 22.9p
The results have been derived wholly from continuing activities throughout the
period.
Consolidated statement of recognised income and expense
For the 52 week period ended 29 December 2006
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Profit for the period 18.8 18.3
Actuarial gains on retirement benefit
obligations 2.4 1.8
Deferred tax on actuarial gains on
retirement benefit obligations (0.7) (0.5)
Net income not recognised in income statement 1.7 1.3
Total recognised income for the period 20.5 19.6
Attributable to:
Minority interest - -
Equity shareholders of the parent 20.5 19.6
Consolidated balance sheet
As at 29 December 2006
29 December 30 December
2006 2005
Note £m £m
Assets
Non-current assets
Goodwill 111.3 109.1
Other intangible assets 12.1 9.0
Property, plant & equipment 89.1 86.3
Financial assets 5.6 5.5
Retirement benefit asset 0.6 -
218.7 209.9
Current assets
Inventories 3.0 3.3
Trade and other receivables 19.2 22.3
Assets held for sale - 0.2
Cash and cash equivalents 7 41.4 37.3
63.6 63.1
Total assets 282.3 273.0
Liabilities
Current liabilities
Financial liabilities 4.6 2.2
Trade and other payables 19.2 21.9
Current tax liabilities 2.7 2.4
Provisions for liabilities and charges 1.4 1.0
27.9 27.5
Non-current liabilities
Financial liabilities 271.0 191.9
Deferred tax liabilities 7.2 5.2
Retirement benefit obligation - 12.0
Other non-current liabilities 2.9 2.9
Provisions for liabilities and charges 1.6 2.1
282.7 214.1
Total liabilities 310.6 241.6
Shareholders' equity
Ordinary shares 5.6 5.6
Share premium account 31.6 111.6
Capital redemption reserve 80.0 -
Other reserves (9.5) (10.4)
Retained earnings (134.8) (74.2)
Equity attributable to shareholders (27.1) 32.6
Minority interest in equity (1.2) (1.2)
Total equity 8 (28.3) 31.4
Total equity and liabilities 282.3 273.0
Consolidated cash flow statement
For the 52 week period ended 29 December 2006
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
Note £m £m
Cash flows from operating activities
-------------------------------- ------ --------- ---------
Cash generated from operations before
exceptional payments 51.7 49.5
Exceptional costs in respect of
redemption of B shares (0.7)
Exceptional contribution to pension
scheme (10.0) -
-------------------------------- ------ --------- ---------
Cash generated from operations 9 41.0 49.5
Finance income received 4.2 1.8
Finance charges paid (20.8) (15.6)
Tax paid (6.1) (2.5)
Net cash generated from operating
activities 18.3 33.2
Cash flows from investing activities
Acquisition of subsidiaries and
businesses (7.3) (6.7)
Proceeds from sale of property, plant &
equipment 0.6 1.2
Purchase of property, plant & equipment (8.0) (7.6)
Net cash used in investing activities (14.7) (13.1)
Cash flows from financing activities
Proceeds from issue of secured notes 90.2 -
Issue costs in respect of secured notes (3.7) -
Repayment of borrowings (4.1) (2.5)
Dividends paid to shareholders (1.9) (5.2)
Redemption of B shares (80.0) -
Net cash used in financing activities 0.5 (7.7)
Net increase in cash and cash equivalents 4.1 12.4
Cash and cash equivalents at the
beginning of the period 36.1 23.7
Cash and cash equivalents at the end of
the period 7 40.2 36.1
1 Revenue and Segmental Analysis
Funeral Crematoria Pre-arranged Head office Group
services £m funeral plans £m £m
£m £m
52 week period ended 29
December 2006
Revenue 120.0 23.2 6.6 - 149.8
------ ------ ------ ------ ------
Segment result
before exceptional
charges 39.3 12.1 2.4 (9.7) 44.1
Exceptional
charges - - - (0.7) (0.7)
----------------------- ------ ------ ------ ------ ------
Segment result 39.3 12.1 2.4 (10.4) 43.4
Finance costs (22.1)
Finance income 5.9
Profit before tax 27.2
Taxation (8.4)
Profit for the
period 18.8
Attributable to:
Minority interest -
Equity shareholders of the parent 18.8
Funeral Pre-arranged
services Crematoria funeral plans Head office Group
52 week period ended £m £m £m £m £m
30 December 2005
Revenue 113.8 22.5 6.9 - 143.2
------ ------ ------ ------ ------
Segment result before
exceptional income 36.5 11.9 2.1 (9.5) 41.0
Exceptional income 0.6 - - - 0.6
---------------------- ------ ------ ------ ------ ------
Segment result 37.1 11.9 2.1 (9.5) 41.6
Finance costs (17.0)
Finance income 1.9
Profit before tax 26.5
Taxation (8.2)
Profit for the period 18.3
Attributable to:
Minority interest -
Equityshareholders of the parent 18.3
2 Exceptional Items
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Professional fees in relation to redemption
of B Shares 0.7 -
Profit on disposal of property, plant and
equipment - (0.6)
Total exceptional items 0.7 (0.6)
3 Net Finance Costs
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Finance costs
Class A and B secured notes - issued April
2003 14.6 14.8
Class A and B secured notes - issued
February 2006 5.3 -
Amortisation of issue costs - issued April
2003 0.9 0.9
Amortisation of issue costs - issued
February 2006 0.3 -
Other loans 0.1 0.1
Interest payable on finance leases 0.1 0.1
Net finance expense on retirement benefit
obligations - 0.4
Unwinding of discounts 0.8 0.7
Finance costs 22.1 17.0
Finance income
Bank deposits (4.0) (1.7)
Release of premium on secured notes - issued
February 2006 (0.9) -
Prepaid interest on issue of Class A and B
secured notes (0.8) -
Debenture loan (0.2) (0.2)
Finance income (5.9) (1.9)
Net finance costs 16.2 15.1
4 Taxation
Analysis of charge in the period
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Current tax - current period 6.6 4.9
Adjustment for prior period (0.2) (0.1)
6.4 4.8
Deferred tax - current period 1.8 3.9
Adjustment for prior period 0.2 (0.5)
2.0 3.4
Taxation 8.4 8.2
All tax relates to continuing operations.
Tax on items charged to equity
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Deferred tax charge on actuarial gains on
retirement benefit obligations 0.7 0.5
Deferred tax credit on employee share
options (1.0) (0.3)
(0.3) 0.2
Total tax charge
Total current tax charge 6.4 4.8
Total deferred tax charge 1.7 3.6
The taxation charge in the period is higher (2005: higher) than the standard
rate of corporation tax in the UK (30 per cent). The differences are explained
below:
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Profit before taxation 27.2 26.5
Profit before taxation multiplied by the
standard rate of corporation
tax in the UK of 30% (2005: 30%) 8.2 8.0
Effects of:
Adjustments in respect of prior period - (0.6)
Expenses not deductible for tax purposes 0.2 0.8
Total taxation 8.4 8.2
Under IFRS the tax rate is higher (2005: higher) than the standard UK tax rate
of 30 per cent due to the impact of disallowable trading expenses and
expenditure on the Group's premises that does not attract any deductions for tax
purposes.
5 Earnings Per Share
The calculation of basic earnings per Ordinary Share has been based on the
profit 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 all 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 issueable 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 had not been met and these contingently issueable
shares have been excluded from the diluted EPS calculations.
The Board believes that profit on ordinary activities before exceptional items
and after taxation is a useful indication of the Group's performance, as it
excludes significant non-recurring items. This reporting measure is defined as
'Underlying profit after taxation' in the financial review.
Accordingly, the Board believes that earnings per share calculated by reference
to this underlying profit after taxation, is also a useful indicator of
financial performance.
Reconciliations of the earnings and the weighted average number of shares used
in the calculations are set out below
Weighted
average
number of Per share
Earnings shares amount
£m millions pence
52 week period ended 29 December 2006
Profit attributable to shareholders - Basic and 18.8 72.6 25.9
diluted EPS
Add back: Exceptional items (net of taxation) 0.5
Underlying profit after taxation - Basic EPS 19.3 72.6 26.6
52 week period ended 30 December 2005
Profit attributable to shareholders - Basic and 18.3 80.0 22.9
diluted EPS
Deduct: Exceptional items (net of taxation) (0.4)
Underlying profit after taxation - Basic EPS 17.9 80.0 22.4
The potential issue of new shares pursuant to the Group's share option plans in
the period would affect the earnings per share by less than 0.1 pence per share
if exercised.
6 Dividends
52 week period 52 week period
ended ended
29 December 30 December
2006 2005
£m £m
Final dividend paid: nil p per ordinary
share (2005: 3.75p) - 3.0
Interim dividend paid: 3.03p (2005: 2.75p)
per ordinary share 1.9 2.2
Total dividends recognised in the period 1.9 5.2
A final dividend of 6.06 pence per share was approved by the Board on 21 March
2007.
7 Cash and Cash Equivalents
29 December 30 December
2006 2005
Note £m £m
Cash and cash equivalents 41.4 37.3
Represented by:
Operating cash 40.2 24.6
Cash for acquisitions (a) 1.2 4.9
Amounts set aside for intercompany loan (b) - 7.8
41.4 37.3
(a) Recoveries of £1.2 million (2005: £1.2 million), may not be used for one
year following receipt and hence do not meet the definition of cash and cash
equivalents in IAS 7, Cash Flow Statements. Under the terms of the Group's
secured borrowings, these amounts are required to be retained in a separate bank
account. This bank account may, in normal circumstances, only be used for
acquiring tangible fixed assets and businesses (either trade and assets or share
purchases).
(b) This amount has been used to pay the interest and principal due on a loan
between Dignity (2002) Limited and Dignity Mezzco Limited, both of whom are
wholly owned subsidiaries of the Company.
Movements in this amount were treated as cash equivalents in the cash flow
statement as they became available for the Group's use once the intercompany
payment was made on 31 January 2006. There were no amounts set aside at 29
December 2006 as the loan was repaid in full during the period.
8 statement of changes in shareholders' equity
Share capital Share premium Capital Other Retained Total Minority Total equity
account redemption reserves earnings interest
reserve
£m £m £m £m £m £m £m £m
Shareholders'
equity as at
31 December
2004 5.6 111.6 - (12.5) (87.3) 17.4 (1.2) 16.2
Profit for the
52 weeks ended
30 December
2005 - - - - 18.3 18.3 - 18.3
Actuarial
gains and
losses on
defined
benefit plans - - - 1.8 - 1.8 - 1.8
Deferred tax
on pensions - - - (0.5) - (0.5) - (0.5)
Effects of
employee share
options - - - 0.5 - 0.5 - 0.5
Deferred tax
on employee
share options - - - 0.3 - 0.3 - 0.3
Dividends - - - - (5.2) (5.2) - (5.2)
Shareholders'
equity as at
30 December
2005 5.6 111.6 - (10.4) (74.2) 32.6 (1.2) 31.4
Profit for the
52 weeks ended
29 December
2006 - - - - 18.8 18.8 - 18.8
Reclassification of
actuarial
gains and
loses on
defined
benefit plans
(net of
deferred tax)* - - - (0.8) 0.8 - - -
Actuarial
gains and
losses on
defined
benefit plans - - - - 2.4 2.4 - 2.4
Deferred tax
on pensions - - - - (0.7) (0.7) - (0.7)
Effects of
employee share
options - - - 0.7 - 0.7 - 0.7
Deferred tax
on employee
share options - - - 1.0 - 1.0 - 1.0
Issue of B
shares - (80.0) - - - (80.0) - (80.0)
Redemption of
B shares - - 80.0 - (80.0) - - -
Dividends - - - - (1.9) (1.9) - (1.9)
Shareholders'
equity as at
29 December
2006 5.6 31.6 80.0 (9.5) (134.8) (27.1) (1.2) (28.3)
* These amounts have been reclassified in accordance with IAS 19 (Revised).
9 Reconciliation of Cash Generated Grom Operations
2006 2005
£m £m
Net profit for the period 18.8 18.3
Adjustments for:
Taxation 8.4 8.2
Net finance costs 16.2 15.1
Profit on disposal of fixed assets - (0.6)
Depreciation charges 6.9 6.6
Amortisation of intangibles 0.6 0.6
Changes in working capital (excluding acquisitions) 0.1 0.8
Employee share options 0.7 0.5
Cash generated from operations before exceptional items 51.7 49.5
Exceptional costs in respect of redemption of B shares (0.7) -
Exceptional contribution to pension scheme (10.0) -
Cash generated from operations 41.0 49.5
10 Basis of Preparation
European law requires that the Group's financial statements for the 52 week
period ended 29 December 2006 are prepared in accordance with all applicable
International Financial Reporting Standards ('IFRS'), as adopted by the European
Union. These financial statements have been prepared in accordance with IFRS and
IFRIC interpretations (as issued by the International Accounting Standards
Board) and those parts of the Companies Act 1985 applicable to companies
reporting under IFRS.
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the periods ended 29 December 2006 or 30 December
2005, but is derived from them. Statutory accounts for the period ended 30
December 2005 have been filed with the Registrar of Companies and those for the
period ended 29 December 2006 will be filed following the Company's Annual
General Meeting. The auditors reported on these accounts; their reports were
unqualified and did not contain a statement under either Section 237 (2) or
Section 237 (3) of the Companies Act 1985.
11 Securitisation
In accordance with the terms of the securitisation carried our in April 2003 and
the subsequent further notes issue in February 2006, Dignity (2002) Limited (the
holding company of those companies subject to the securitisation) has today
issued reports to the Rating Agencies (Fitch Ratings and Standard & Poors), the
Security Trustee and the holders of the notes issued in connection with the
securitisation, confirming compliance with the covenants established under the
securitisation.
Copies of these reports are available at www.dignityfuneralsplc.co.uk
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