Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfuneralsplc.co.uk
Dignity plc Annual Report & Accounts 2014
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Continuing to deliver
a strong performance and
excellent client service
ifc
Dignity plc
Annual Report & Accounts 2014
Overview
About Dignity
We are here to help people at one of the most difficult times in their lives. We do this
with compassion, respect, openness and care. Our aim is to be the company everyone
knows they can trust in their time of need.
We are a FTSE 250 company listed on the London Stock Exchange, with over 2,800 employees
serving families and local communities across the United Kingdom for generations.
At 26 December 2014 Dignity owned 718 funeral locations and operated 39 crematoria
in the United Kingdom. We continue to have a strong market presence in pre-arranged
funeral plans, where people plan and pay for their funeral in advance.
Contents
Overview
Key financial highlights
01
02 Dignity at a glance
– A proud history
– Our business today
Building a sustainable business
03
04
05 Delivering excellent client service
Strategic Report
From the Chairman
Chief Executive’s overview
06
07
08 Market overview
10 Our strategy and business model
12 Our key performance indicators
14
– The client survey performance
15 Our summary performance in 2014
16 Operating review
Financial review
22
Principal risks and uncertainties
26
Corporate and social responsibility
29
Governance
Chairman’s introduction to governance
34
35 Our governance structure
36
Board of Directors
38 Directors’ statement on corporate governance
42
Audit Committee report
45 Nomination Committee report
46
59 Directors’ report
Report on Directors’ remuneration
Financial Statements
62
Group Accounts
Independent auditors’ report to the members
of Dignity plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
66
66
67
68
69
70 Notes to the financial statements
Company Accounts
106 Dignity plc Company balance sheet
107 Notes to the Dignity plc financial statements
110 Financial record
Other Information
112 Notice of Meeting
118 Shareholder information
119 Contact details and advisers
120 Financial calendar
Inside this report
Overview
Pages ifc to 05
Strategic report
Pages 06 to 33
Operating review
Pages 16 to 21
Financial review
Pages 22 to 25
Corporate responsibility
Pages 29 to 33
Governance
Pages 34 to 61
Stay informed
Dignity online:
To find out more about Dignity and to view and
download a pdf version of this Annual Report:
www.dignityfuneralsplc.co.uk
Links
Front cover:
Michelle Hales, Manager of Bentley Crematorium in Essex.
You will find link symbols throughout this Annual Report to
guide you to further reading or other relevant information.
Acknowledgements
Dignity would like to thank all those who participated in
producing this Annual Report, particularly the members
of staff for their contributions.
J H Kenyon® is a registered trademark of Kenyon International
Emergency Services and licensed from them.
Designed & produced by Bexon Woodhouse
Main photography by Bexon Woodhouse
www.bexonwoodhouse.com
Printed in the UK by CPI Colour, a certified CarbonNeutral® printing
company, using vegetable based inks and water based sealants.
The printer and paper manufacturing mill are both certified with
ISO 14001 Environmental Management systems standards and
both are Forest Stewardship Council® (FSC®) certified.
Key financial highlights
A year of continued strong
revenue and profit growth
Dignity plc
Annual Report & Accounts 2014
01
+5%
Revenue up 5%
to £268.9 million
+8%
+19%
Underlying operating profit
up 8% to £84.9 million
Underlying earnings per share up
19% to 85.8pence per share
Current period financial highlights 2014 2013 Increase
per cent
Revenue (£million) 268.9 256.7 5
Underlying operating profit(a) (£million) 84.9 78.4 8
Underlying profit before tax(a) (£million) 58.5 52.9 11
Underlying earnings per share(b) (pence) 85.8 72.1 19
Cash generated from operations(c) (£million) 104.4 94.2 11
Operating profit (£million) 82.9 75.1 10
(Loss)/profit before tax (d) (£million) (67.7) 49.6 n/a
Basic earnings per share (d) (pence) (104.0) 72.8 n/a
Interim dividend paid in the period(e,f) (pence) 6.49 – n/a
Final dividend paid in the period (g) (pence) 11.83 10.75 10
Return of Cash (£million) 64.4 61.9 4
(a) Underlying profit is calculated as profit (or loss) excluding profit (or loss) on sale of fixed assets, external transaction costs and exceptional items.
(b) Underlying earnings per share is calculated as profit (or loss) on ordinary activities after taxation, before profit (or loss) on sale of fixed assets and external transaction costs and
exceptional 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 and pension contributions made from the proceeds of debt issues.
(d) As previously announced, non-cash charges resulting from the refinancing during the period have led to a reported statutory loss.
(e) Interim dividend represents the interim dividend that was declared and paid in the period out of earnings generated in the same period.
(f) An interim dividend was not paid separately in 2013, but was instead included within the £1.08 Return of Cash per Ordinary Share paid in August 2013.
(g) The final dividend represents the final dividend that was declared and paid in the period relating to the earnings generated in the previous period.
Revenue (£m)
Underlying operating profit (£m)
Underlying earnings per share (pence)
256.7
268.9
229.6
199.1
210.1
61.0
64.5
69.4
84.9
78.4
90
80
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60
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40
30
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85.8
72.1
62.8
55.1
46.4
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2010
2011
2012
2013
2014
2010
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2013
2014
2010
2011
2012
2013
2014
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225
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175
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Links
Find out more about Our strategy and business model: p.10 and p.11
Find out more about our business operations, actions
and progress: p.16 to p.21
Find out more about our financial performance: p.22 to p.25
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Dignity plc
Annual Report & Accounts 2014
Overview
Dignity at a glance
Dignity is one of the leading providers of funeral related services in the UK.
As an industry leader, we strive to set the highest standards of service,
facilities and care, ensuring we are all well positioned to meet the needs
of our clients for generations to come.
A Proud History
We have a rich and proud heritage and many
of our businesses have been serving their local
communities for generations. Our oldest funeral
location was established in 1812 and our oldest
crematorium in 1903.
As the UK gathered to commemorate the centenary
of the start of World War One and remember those
who lost their lives, many people from across our
business held commemoration services at our
crematoria and took an active part in services at
local war memorials and cemeteries.
1812
George S Munn & Co, Glasgow
George S Munn & Co is Dignity’s oldest funeral
directors and was established in 1812.
1840
Francis Chappell & Sons, London
Francis Chappell & Sons opened their first funeral
location on Deptford High Street in 1840 and now
have branches supporting bereaved families across
southeast London and Kent.
1857
E Finch & Sons, Aldershot
Emmanuel Finch established his funeral business on
the High Street of Aldershot in 1857. During the 20th
Century the business built its reputation by conducting
military funerals and pioneering many new initiatives
such as owning the first motorised hearse in the area.
1880
J H Kenyon,® London
Established by James H Kenyon the business has
conducted funerals for the Royal Family, politicians and
other prominent figures. The J H Kenyon® branch in
Maida Vale was badly damaged in a Zeppelin raid during
World War One but continued to serve local families.
The business also conducted the funerals of repatriated
officers killed during the conflict.
1884
Frederick W Paine, London
Charles Paine opened his first funeral location in New
Malden in 1884 and 10 years later the business passed
to his son, Frederick W Paine. During World War One the
business conducted the funerals of soldiers who died in
London hospitals of wounds sustained on the battlefields.
1903
Birmingham Crematorium
The oldest crematorium operated by Dignity and when
it opened in 1903 was one of only nine such facilities
in the UK.
1920
W S Harrison & Son, Newcastle upon Tyne
After serving in World War One, William Samuel Harrison
established himself as a funeral director in the east end
of Newcastle. In 1928, he was joined by his son, Albert,
and they began to serve increasing numbers of families
throughout the 1930s. In 1980, David Harrison, great
grandson of William Samuel, joined the company and
continues to manage this business.
1950
T J Davies & Son, Newport
Thomas Davies, grandfather of Operations Director,
Andrew Davies, established his business in 1950.
1994
Dignity Caring Funeral Services
Dignity was created in 1994 through the merger
of Plantsbrook Group and Great Southern Group.
2008
Northern Ireland
Dignity acquired six funeral locations in
Northern Ireland.
2013
Yew Holdings Limited
Dignity acquired 40 funeral locations and two
crematoria from Yew Holdings Limited in 2013.
2014
Dignity Today
We maintain the rich heritage of each of these funeral
businesses, employing local people who understand
the traditions of their community and are committed
to providing the highest standards of service.
Dignity’s operations are focused and managed across three main areas,
namely funeral services, crematoria and pre-arranged funeral plans.
Our Business Today
Dignity plc
Annual Report & Accounts 2014
03
Links
Find out more about Our strategy
and business model: p.10 and p.11
Find out more about our business
operations, actions and progress:
p.16 to p.21
What we believe in
Funeral services
Crematoria
Pre-arranged funeral plans
What we are here to do:
• To help people at one of
the most difficult times in
their lives.
How we do this:
• With compassion, respect,
openness and care.
What we want to be:
• The company that everyone
knows they can trust in their
time of need.
We are a major provider
of funeral services in the
UK and we strive to set the
highest standards of service
and care.
Performance in 2014
At 26 December 2014, we
operated a network of 718
funeral locations throughout
the UK generally trading
under established local
trading names.
Funeral services revenues
relate to the provision of
funerals and ancillary items
such as memorials and
floral tributes. In 2014,
Dignity conducted 65,600
funerals which represented
approximately 11.7 per cent
of total estimated deaths
in Britain.
We are the largest single
operator of crematoria in
Britain with a growing portfolio
of well-established and state
of the art crematoria that
meet the needs of the local
communities we serve.
Performance in 2014
At 26 December 2014, we
operated 39 crematoria in
England and Scotland.
Crematoria revenues arise
from cremation services and
the sales of memorials and
burial plots at Dignity operated
crematoria and cemeteries.
In 2014,we carried out 53,400
cremations representing
9.7per cent of total estimated
deaths in Britain.
We are one of the UK’s leading
providers of pre-arranged
funeral plans and we continue
to strengthen our business in
this growing market.
Performance in 2014
At 26 December 2014, the
number of active funeral plans
increased to 348,000.
Pre-arranged funeral
plans income represents
amounts received to cover
the costs of marketing and
administering the sales of
plans. Pre-arranged funeral
plans allow people to plan
and pay for their funeral in
advance. Dignity works with
a number of reputable
affinity partners.
Revenue by area (£m)
Funeral services 184.4
Crematoria 55.2
Pre-arranged funeral
plans 29.3
£184.4m
2014 Revenue
£55.2m
2014 Revenue
718
39
£29.3m
2014 Revenue
640,000
Underlying operating profit by area* (£m)
Number of funeral locations
in the UK.
Number of crematoria
Dignity operates in England
and Scotland.
We have already helped more
than 640,000 people arrange
their funeral in advance.
Funeral services 66.3
Crematoria 29.1
Pre-arranged funeral
plans 7.4
*Excludes central overheads
of £17.9 million
65,600
53,400
348,000
Number of funerals
conducted during 2014.
Number of cremations
conducted during 2014.
Number of active funeral
plans as at26December 2014.
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Dignity plc
Annual Report & Accounts 2014
Overview
Building a sustainable business
Continuity is about conducting our business in a sustainable manner,
through our strong business foundations, consistent performance
and continuing to deliver value to all our stakeholders – our clients,
employees, shareholders and the local communities we serve.
Our Promise
Helping our clients
every step of the way
Reputation and Relationships
Managing our business
responsibly
Our Objectives
Delivering on our
key objectives
Our Consistent Strategy
Serving the people in our local communities at one of the most
difficult times in their lives remains at the heart of everything we do
and we are committed to providing the highest standards of service
and care. At every step of the way we are compassionate and caring;
we pay attention to detail; we spend as much time as a client needs;
we are open and straightforward and we keep in contact.
At Dignity, how we do business is integral to what we deliver. Our business is
built upon trust, respect, reputation and relationships and we demonstrate
our values and governing principles through our day to day behaviour and
conduct ourselves in a responsible and ethical manner.
Our ongoing strategic objectives define what is important to our business:
• Continue to prioritise excellent client service which we believe will lead
to organic growth.
• Control our costs without compromising the quality of our service.
• Expand our funeral and crematoria portfolios.
• Gain new clients through the sale of pre-arranged funeral plans.
• Increase our returns through efficient capital management.
Creating long-term value
and growth
Our clear and consistent strategy enables us to achieve our business
goal of growing and developing Dignity as a long-term, profitable and
sustainable business that delivers value to all our stakeholders.
Dignity plc
Annual Report & Accounts 2014
05
Delivering excellent client service
Continuity is also about maintaining a relentless focus on delivering
consistently high levels of client service at the heart of our business.
By continuing to develop and invest in our business and our people,
this enables us to both meet our clients’ needs and strive to exceed
their expectations.
Throughout this Annual Report you will see the actions and initiatives
we have undertaken during the year, how we are delivering against our
strategic objectives and where we see opportunities for future growth.
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We act with compassion,
respect, openness and care
We strive for results and
continuous improvement
We value and invest
in our people
We help to make
a difference
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
From the Chairman
The Group continues to go
from strength to strength
“
Underpinning this
performance is our
consistent strategy
for creating and
delivering long-term
sustainable growth.
+19%
Underlying earnings per
share up 19 per cent to
85.8 pence (2013:
72.1 pence).
13.01pence
Final dividend of 13.01 pence
proposed, continuing the
10 per cent annual growth
in the dividend per share.
Performance in 2014
• Underlying operating profit
up 8 per cent.
• Capital structure refinanced.
• £64.4 million returned to
shareholders.
Links
See Governance and structure:
p.34 and p.35
See Board of Directors:
p.36 and p.37
See Report on Directors’
remuneration: p.46 to p.58
Overview
The Group continues to go from strength
to strength. Continued improvement in our
financial performance has been possible
through a combination of exceptional client
service from our staff, supported by further
investment to ensure we have excellent
facilities, delivering growth from our core
operations. Our strong, consistent track record
and positive outlook for the business allowed
us to refinance our capital structure with 35
year investment grade debt.
The excellent financial performance is
quantified as an eight per cent growth in
underlying operating profit to £84.9 million
(2013: £78.4 million). Underlying earnings per
share increased 19 per cent to 85.8 pence per
Ordinary Share (2013: 72.1 pence per Ordinary
Share). During the period, we invested £24.7
million in acquisitions of funeral businesses.
This year’s Strategic and Governance Reports
seek to describe the year’s events in a concise,
understandable manner and build on the
reporting developed last year.
Dividends
This performance allows the Board to propose
a final dividend of 13.01 pence per Ordinary
Share; another increase of 10 per cent on
the previous year. If shareholders approve
this payment at the Annual General Meeting
(‘AGM’) on 11 June 2015, then it will be paid
on 26 June 2015 to members on the register
at close of business on 29 May 2015.
Refinancing
During the period and as previously announced,
the Group successfully refinanced its secured
debt structure, resetting the repayment period
to 35 years. This allowed a Return of Cash to
shareholders of £64.4 million, £1.20 per
Ordinary Share. The transaction is described
fully in the Financial Review. As previously
announced, the accounting treatment for the
transaction resulted in a statutory loss for
the period as a consequence of certain
non-cash charges.
Peter Hindley, Chairman
Delivering consistent increases
The business has performed consistently
over a long period. Underlying operating profit
has increased on average by eight per cent
per year since 2004, with the lowest annual
increase being six per cent. Underlying
earnings per share has increased on average
by 16 per cent per year since 2004, with the
lowest annual increase being six per cent.
This has been achieved by remaining focused
on a consistent strategy over that time.
The Board
There have been no changes to the Board in
the year. I am pleased to confirm that Alan
and Ishbel have renewed their contracts for
a further two years.
The Board continues to operate effectively
and I am grateful to my colleagues for their
continued support.
Our people
Our staff continue to deliver outstanding
service for our clients, recognising at all
times that they are here to help at a very
difficult time. My thanks for their support
and dedication extend to each individual,
irrespective of the role they perform.
Outlook for 2015
The Group remains committed to the strategy
set out in the ‘Strategy and business model’
section of the Annual Report. It has served the
Group well for 11 years as a public company
and the Board continues to believe it is an
appropriate strategy for the future.
Deaths in the first eight weeks of 2015 are
approximately 23 per cent higher than the
abnormally low number in the same period
last year. The Group’s first quarter 2015 result
should therefore be significantly higher than
the same period in the prior year. However,
as seen in previous years, this is likely to
normalise over the remainder of the year.
The Board’s expectations for 2015 therefore
remain positive and unchanged.
Performing strongly since IPO
Total monies returned to shareholders
on cumulative basis
Delivering consistent increases
Since flotation, the Group has managed the
business in a consistent way using the same
strategy. This has delivered stable growth in
operating profit and amounts returned to
shareholders.
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Chief Executive’s overview
Focused on our core business
and delivering on our key objectives
Dignity plc
Annual Report & Accounts 2014
07
Overview
2014 has been another eventful year for
the Group. Investment in funeral acquisitions
has continued apace and we have reset our
capital structure, releasing further cash to
shareholders and reducing the combined
annual cash cost of servicing the principal
and interest of our debt by approximately
£7 million. Alongside these corporate activities,
our core business has performed strongly
whilst maintaining outstanding levels of
client service.
Our performance in 2014
All three operating divisions have contributed
to the success of the business in the year.
We continue to follow our long standing
strategy and have seen revenues and operating
profit grow within our core business. Although
we do not separately disclose the operating
performance of the Yew Holdings Limited
acquisition made in 2013, it has performed
very strongly and exceeded our expectations.
Acquisitions
Whilst 2013 was a busy year because of
a single large acquisition, 2014 was a year
of many smaller acquisitions. A total net
investment of £24.7 million was made to
acquire 30 funeral locations. Each acquisition
met our strict criteria of being well established,
successful businesses in their own right prior
to acquisition and I am delighted that they
have joined the Group.
Continued investment across our
core business
We continue to invest significant amounts
of capital and resource in the core business.
In 2014, £5.4 million was invested in new
specialist vehicles, with a further £11.7 million
invested in our properties and infrastructure.
This helps to support our employees as they
strive to deliver the best service they can.
Mike McCollum, Chief Executive
People and values
Our staff continue to support the business
and the families we have the privilege of
caring for in whatever way their role requires.
Their performance helps to build the reputation
of the Group which in turn leads to its future
success and I remain grateful for their
commitment. I am delighted that once again
they have been able to share in the Group’s
success and have received a discretionary
bonus equivalent to £1,100 for each full
time member of staff. The total cost was
£2.7 million.
Outstanding service delivery remains at the
heart of our business and long-term focus
2014 was underpinned by another year of
outstanding client service results, the detail
of which is included later in the Annual Report.
We have committed staff who follow a simple,
consistent strategy. We run the business in
ways that make economic sense for all our
stakeholders in both the short-term and the
long-term, never losing sight of the fact that
a significant proportion of our business occurs
as a result of recommendation, reputation
and previous experience.
A positive outlook
The business remains well placed for the
future. Customer satisfaction remains very
high; our core portfolio is performing well
with costs under control; we are achieving good
pre-arranged funeral plan sales; our pipeline
of corporate development activity looks
strong; and our capital structure is once again
appropriately leveraged. Whilst the rate of
growth of operating profit will inevitably slow
as the Group continues to get bigger, we
continue to believe that a 10 per cent per
annum increase in EPS remains a suitable
target for the business over the medium-term.
“
Outstanding service
delivery remains at
the very heart of
our business and
long-term focus.
99.2%
99.2 per cent of families
said that Dignity met
or exceeded their
expectations.
Performance in 2014
• Strong revenue growth.
• Strong cost control.
• Core portfolio continues
to deliver growth.
• Acquisitions add
further value.
• Return of Cash to
shareholders.
Links
See Market overview: p.08 and p.09
See Our strategy and business
model: p.10 and p.11
See Operating review: p.16 to p.21
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Market overview
The UK funeral market today
“
Reputation and
recommendation
remain a key driver
in someone’s choice
of funeral director.
• The funeral director market
is very fragmented.
• Approximately 72 per cent
of crematoria are owned
by local authorities.
• Annual variations in the
number of deaths are
relatively small.
• There is not currently any
regulation pending that
would materially affect the
funeral industry.
Overview
The funeral market as a whole does not
change rapidly year on year, but the effect over
a number of years is noticeable, whether it is
the number of deaths per year, or the number
of funeral or crematoria locations within the
industry. The Group monitors and responds
to the environment it operates in, seeking to
understand the implications for the short,
medium and long-term.
Scale and structure
The funeral director market is very fragmented,
with approximately two thirds of funeral
directors being small owner managed
businesses.
There are approximately 270 crematoria in the
UK, with approximately 72 per cent owned by
local authorities. Approximately three quarters
of all funerals result in a cremation with the
remainder being burials.
Regulation
The provision of funeral services is not regulated.
Trade organisations such as the National
Association of Funeral Directors (‘NAFD’)
provide training and qualifications, although
they are not mandatory. Dignity would welcome
further regulation of the funeral industry setting
out minimum standards for core activities, such
as the care of the deceased.
Crematoria are subject to environmental
regulations, with emission levels being
monitored by environmental health officers.
Recent changes for the abatement of mercury
emissions have improved the environmental
position.
Pre-arranged funeral plans are exempt from the
provisions of the Finance Services and Markets
Act, provided certain conditions prescribed in
that Act are met.
Office for National Statistics data
Some of the Group’s key performance
indicators rely on the total number of estimated
deaths for each period. This information
is obtained from the Office for National
Statistics (‘ONS’).
The initial publication of recorded total
estimated deaths in Britain for the 52 weeks in
2014 was 550,000 compared to 560,000 for
2013. Historically, the ONS has updated these
estimates from time to time. As in previous
years, the Group does not restate any of its key
performance indicators when these figures are
restated in the following year.
Although annual deaths have declined
significantly since the early 1990s from
640,000 to a recent low of 539,000 in 2011,
the last five years have seen a more stable
number of reported deaths between 539,000
and 560,000 per annum.
Stable industry
The number of deaths in the UK is stable and
predictable. Annual variations are relatively
small. In the last 30 years, the year on year
variation has always been less than five per
cent, with most years below two per cent.
Competition
Whilst a precise list of all funeral directors is
not available, data from various sources suggest
that the number of funeral directors in the UK
has increased from approximately 4,300 in
1998 to around 5,500.
Although competition is increasing, the nature
of a service business is that the quality of
service being provided is not known in advance.
Consequently, reputation and recommendation
remain a key driver in someone’s choice of
funeral director.
With crematoria, amongst other things,
planning laws require there to be a need
for a new crematorium in a particular area.
This can be difficult to prove and can be an
emotive subject for local residents. This,
combined with availability of appropriate
land and the high capital cost of construction
has limited the growth in the number of
crematoria in the UK.
Pre-arranged funeral plans allow the Group the
opportunity to gain incremental funerals. Our
national network allows us to work with national
partners offering a funeral plan anywhere in
the UK.
Forward look
The ONS expects the number of deaths per
annum to start to increase at some point
before 2020.
In May 2015, the Coroners Reform Act
is expected to become law in Scotland.
This legislation changes the administrative
processes relating to the certification of the
deceased, replacing existing forms currently
required for cremation or burial. Similar
changes are proposed for the rest of the
United Kingdom, but no timescales have been
provided. This is not expected to materially
change the operation of the Group’s funeral
and crematoria businesses.
Market overview
Our business
Our funeral business relies on reputation,
recommendation and previous experience.
This is complemented by the sale of pre-arranged
funeral plans, which represent an increasing
source of incremental business for the Group.
Dignity plc
Annual Report & Accounts 2014
09
Source of business
20%
Source: Dignity surveys
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
84%
82%
80%
78%
76%
74%
72%
70%
68%
LTM
Dec 06
LTM
Dec 07
LTM
Dec 08
LTM
Dec 09
LTM
Dec 10
LTM
Dec 11
LTM
Dec 12
LTM
Dec 13
LTM
Dec 14
Reputation, recommendation
& previous experience
(right hand axis)
Pre-arranged
funeral plans
(left hand axis)
Closest location
(left hand axis)
Other
(left hand axis)
Maintaining our strong market leading positions within the industry
“
Excellent customer
service is critical to
the success of the
Group.
71%
Recommendations and our
reputation have generated
approximately 71 per cent
of our funeral business
on average over the last
five years.
Funeral services: Our strengths
Dignity has approximately 12 per cent of
the funeral market. This gives the Group
sufficient size to operate its locations
efficiently in a way that shares expensive
resources, such as mortuaries and specialist
vehicles, whilst providing very high levels of
service to each family it looks after.
This size still gives the Group good scope to
acquire owner managed businesses in areas
where it is not well represented.
11.7% (2013:11.9%)
Dignity’s funeral market share.
Challenges/Developments
2014 saw the Group expand its network of
funeral locations though the acquisition of
a number of established funeral businesses
operating a total of 30 locations.
The Group remains focused on acquiring
additional businesses and opening new
satellite locations.
Crematoria: Our strengths
With 39 crematoria, Dignity is the largest single
operator in the UK. The cremations performed
represent approximately 10 per cent of deaths
in Britain. There is still significant scope to
expand through acquisition or new builds
where possible.
Challenges/Developments
The Group continues to seek ways to increase
the number of crematoria it operates. However,
acquisition targets are scarce and planning
laws will continue to make it difficult to build
new locations.
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Dignity’s crematoria market share.
Pre-arranged funeral plans: Our strengths
Dignity’s national network of funeral
locations and strong relationships with many
different affinity partners has allowed it to sell
significant volumes of pre-arranged funerals
that should represent incremental activity
for the funeral division.
348,000 (2013:323,000)
Links
See Our strategy and business
model: p.10 and p.11
See Our KPIs: p.12 and p.13
See The client survey
performance: p.14
See Operating review: p.16 to p.21
The number of active pre-arranged funeral plans.
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Challenges/Developments
New affinity partners have helped the Group
develop its offerings. A number of additional
partners are currently being tested.
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Quality and consistency of service
Our clients continue to return and recommend
us because of the quality and consistency of
service we deliver.
Ongoing training and development of our
people and investments in our business help
us to improve, meet and exceed expectations.
Meeting and exceeding expectations (% of customers)
100%
65%
(12 Month rolling average)
99%
98%
97%
96%
95%
63%
61%
59%
57%
55%
Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14
Met and exceeded expectations
(left hand axis)
Exceeded expectations
(right hand axis)
10
Dignity plc
Annual Report & Accounts 2014
Strategic Report
Our strategy and business model
We continue to implement a clear and consistent strategy which
builds on and reinforces the competitive strengths in our business.
Our focus, scale and quality sets us apart and we are well positioned
to continue to create value and deliver long-term sustainable growth.
Our strategy
Our strategy in action
Key points
We plan to grow the profitability
of our business by:
• Operating in a traditional market
where people use our services
based on our reputation and
through recommendations,
where we believe our continued
commitment to excellent service
for our clients will generate
a high level of referral and
organic growth;
• Continuing to control our
operating costs;
• Developing or acquiring additional
funeral locations;
• Developing, managing or acquiring
additional crematoria;
• National marketing of pre-arranged
funeral plans, principally through
affinity partners; and
• Efficient use of our balance sheet
to enhance shareholder returns.
Ensuring the highest levels of client service:
• High levels of client service demonstrably affect
clients’ willingness to recommend our services.
Recommendations and our reputation have
generated approximately 71 per cent of our funeral
business on average over the last five years.
Recruiting, developing and retaining the
best people:
• Our employees are central to the success of the
business. We seek to recruit and retain the best
people through appropriate remuneration and
ongoing training.
Continued investment:
• We invest significantly in our existing business,
striving to ensure it is of the highest standard, both
in client facing areas and behind the scenes. We
also seek to invest in new businesses that will help
Dignity grow and create value for shareholders.
Controlling our costs:
• We seek to benefit from our size with national
contracts for utilities and similar services
where appropriate.
Growing our business responsibly:
• As an industry leader, we aim to be both successful
and good corporate citizens.
Link
Find out more about Our KPIs: p.12 to p.14
Sale of pre-arranged funeral plans:
• We remain a significant provider of plans and
continue to work with our established partners and
develop new partnerships to sell plans efficiently.
Delivering long-term shareholder returns:
• Our business is driven by relatively predictable
factors over long periods of time. This allows us
to operate and fund our business in a way that
generates value over the long-term.
98.1%
In the 2014 client survey
98.1 per cent of respondents
would recommend us.
See The client survey
performance: p.14
30%
The percentage of Dignity
employees who have over
10 years service.
See CSR: p.29 to p.33
£41.9m
£17.1 million invested in capital
expenditure on the core business
and a net investment of £24.8
million in acquiring new locations
and opening satellites.
See Operating review: p.16 to p.21
£84.9m
The Group’s underlying
operating profit increased
8 per cent to £84.9 million.
See Operating review: p.16 to p.21
FTSE4Good
Dignity is identified as a
company that meets globally
recognised standards of
corporate responsibility.
See CSR: p.29 to p.33
348,000
348,000 people have active
pre-arranged funeral plans.
See Operating review: p.16 to p.21
£335.2m
Since flotation, £335.2 million
in cash including dividends has
been returned to shareholders.
See Financial review: p.22 to p.25
Dignity plc
Annual Report & Accounts 2014
11
Follow our strategy throughout this report
How we align remuneration to strategy
Our strategic objectives underpin and integrate our activities and you
will see numerous references and examples of our strategy in action
throughout this report. Where we discuss a part of our strategic
objectives, we have referenced this with the specific number as
indicated below:
Our strategy is focused on delivering short and long-term financial
performance. EPS and total shareholder return are quantifiable
measures of performance and are used to incentivise Executive
Directors to deliver the Group’s strategy.
54321
Link
Find out more in the Report on Directors’ remuneration: p.46 to p.58
Developing and growing our business
Our ongoing strategic objectives
Our core business
Funeral services
Each year we invest in the refurbishment of our funeral
properties, the renewal of our fleet and staff training
initiatives enabling our people to provide the highest
standards of client service.
Crematoria
We continue to invest in our crematoria facilities to provide
peaceful gardens of remembrance and chapels for our clients.
Pre-arranged funeral plans
We continue to work closely with our affinity partners and
funeral locations for the sale of pre-arranged funeral plans.
1
2
Continue to prioritise excellent client service
which we believe will lead to organic growth.
Control our costs without compromising
the quality of our service.
3
Expand our funeral and crematoria portfolios.
4
5
Gain new clients through the sale of
pre-arranged funeral plans.
Increase our returns through efficient
capital management.
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Other growth opportunities
We also develop and grow our business through:
• the acquisition of well established and well respected
funeral businesses;
• the opening of new satellite funeral locations;
• the construction of new crematoria;
• management of local authority owned crematoria; and
• developing new affinity partner relationships for the sale
of pre-arranged funeral plans.
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Link
Find out more about our business
operations, actions and progress:
p.16 to p.21
12
Dignity plc
Annual Report & Accounts 2014
Strategic Report
Our key performance indicators
The Group uses the following key performance indicators
to both manage the business and ensure that the Group’s
strategy and objectives are being delivered. We monitor
our performance by measuring and tracking KPIs that
we believe are important to our longer-term success.
Group Performance
KPI
Total estimated number
of deaths in Britain
(number)
Link to strategic objective
KPI
Link to strategic objective
1
Crematoria
market share
(per cent)
31
550,000
5
6
0
,
0
0
0
5
5
1
,
0
0
0
5
5
0
,
0
0
0
Definition
This is as reported by the Office of
National Statistics.
Developments in 2014
The number of deaths was lower than the
previous year. Over the last three years, the
number of deaths has been broadly flat.
9.7%
9
.
9
%
9
.
7
%
9
.
2
%
2012
2013
2014
2012
2013
2014
Definition
This is the number of cremations performed
by the Group divided by the total estimated
number of deaths in Britain.
Developments in 2014
One of the Group’s crematoria was flooded
and not operational for approximately three
months of the period. It has since reopened
and any financial loss has been recovered
through insurance. These lost cremations
represent approximately 0.1 per cent of
total estimated deaths in the period.
Funeral market share
excluding Northern Ireland
(per cent)
31
Number of cremations
performed
(number)
31
11.7%
1
1
.
9
%
1
1
.
7
%
1
1
.
2
%
Definition
This is the number of funerals performed
by the Group in Britain divided by the total
estimated number of deaths in Britain.
Developments in 2014
Acquisition activity occurred later in the
year and the overall reduction in market
share was in line with the Board’s
expectations given continued increases
in competition.
53,400
5
5
,
5
0
0
5
3
,
4
0
0
5
0
,
5
0
0
Definition
This is the number of cremations
performed according to our
operational data.
Developments in 2014
Changes are a consequence of the total
number of deaths and the Group’s
market share.
2012
2013
2014
2012
2013
2014
Number of funerals
performed
(number)
65,600
6
8
,
0
0
0
6
5
,
6
0
0
6
3
,
2
0
0
31
Unfulfilled pre-arranged
funeral plans
(number)
4
Definition
This is the number of funerals performed
according to our operational data.
Developments in 2014
Changes are a consequence of the total
number of deaths and the Group’s
market share.
348,000
3
4
8
,
0
0
0
3
2
3
,
0
0
0
2
9
0
,
0
0
0
Definition
This is the number of pre-arranged funeral
plans where the Group has an obligation to
provide a funeral in the future.
Developments in 2014
This increase reflects continued strong sales
activity offset by the crystallisation of plans
sold in previous years.
2012
2013
2014
2012
2013
2014
Dignity plc
Annual Report & Accounts 2014
13
How we align KPIs and remuneration to strategy
Key and link to strategic objective
Each KPI reflects a quantifiable measure of different aspects of
the Group’s strategy. They act as headlines for the Board, allowing
them to use more detailed management information to consider
the Group’s strategy and financial performance in greater depth
where appropriate.
We monitor our performance by measuring and tracking KPIs that
we believe are important to our longer-term success. Long-term
sustainable performance of these KPIs is linked to the remuneration
arrangements of our Directors, whose remuneration packages are
heavily linked to EPS targets and total shareholder return measures.
Continue to prioritise excellent client service which we believe will
lead to organic growth.
Control our costs without compromising the quality of our service.
Expand our funeral and crematoria portfolios.
Gain new clients through the sale of pre-arranged funeral plans.
Increase our returns through efficient capital management.
1
2
3
4
5
Link to strategic objective
1
2
3
4 5
Definition
This is underlying profit after tax divided by
the weighted average number of Ordinary
Shares in issue in the period.
Developments in 2014
Strong growth following the increase in
operating profit.
1
2 3
4
Definition
This is the statutory operating profit (or loss)
of the Group excluding profit (or loss)
on sale of fixed assets and external
transaction costs.
Developments in 2014
Strong growth driven by the core business
as well as acquisition activity.
5
Links
Definition
This is the statutory cash generated from
operations excluding external transaction
costs and exceptional pension
contributions.
Developments in 2014
The Group continues to convert operating
profit into cash efficiently.
See Our strategy and business model: p.10 and p.11
See Principal risks and uncertainties: p.26 to p.28
See Report on Directors’ remuneration: p.46 to p.58
A summary of the Group’s financial record for the last
five years can be found on: p.110 and p.111
KPI
Underlying earnings
per share
(pence)
85.8p
8
5
.
8
p
7
2
.
1
p
6
2
.
8
p
2012
2013
2014
Underlying
operating profit
(£m)
£84.9m
£
8
4
.
9
m
£
7
8
.
4
m
£
6
9
.
4
m
2012
2013
2014
Cash generated
from operations
(£m)
£104.4m
£
1
0
4
.
4
m
£
9
4
.
2
m
£
8
3
.
3
m
2012
2013
2014
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Our key performance indicators continued
In addition to these key performance indicators, we also
closely monitor the results of our client surveys to ensure we
continue to maintain the highest levels of excellent client service.
In the last five years, we have received over 161,000 responses.
Key and link to strategic objective
1 Continue to prioritise excellent
client service which we believe
will lead to organic growth.
See Our strategy and business
model: p.10 and p.11
The Client Survey Performance
1
Why it is important
Ensuring the highest levels of client service
is one of our key strategic objectives and is
fundamental to our continued success.
How we performed in 2014
The results of the client survey clearly
demonstrate client service is at the heart
of everything we do and the quality of our
service remains at consistently high levels.
Customer satisfaction is key
We have seen consistently high levels
of satisfaction from our survey results.
Our continued commitment to high levels
of client service and customer satisfaction
continue to generate high levels of referrals.
Recommending our services (% of customers)
100%
99%
98%
97%
96%
95%
Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14
Percentage of customers willing to recommend Dignity’s services
(12 month rolling average)
Reputation and recommendation
High standards of facilities and fleet
99.2% (2013: 99.2%)
99.2 per cent of respondents said that we met or exceeded
their expectations.
99.8% (2013: 99.9%)
99.8 per cent thought our premises were clean and tidy.
98.1% (2013: 98.1%)
98.1 per cent of respondents would recommend us.
99.8% (2013: 99.8%)
99.8 per cent thought our vehicles were clean and
comfortable.
Quality of service and care
In the detail
99.9% (2013: 99.9%)
99.9 per cent thought our staff were respectful.
99.7% (2013: 99.7%)
99.7 per cent thought our staff listened to their needs
and wishes.
99.4% (2013: 99.2%)
99.4 per cent of clients agreed that our staff had fully explained
what would happen before and during the funeral.
99.0% (2013: 98.9%)
99.0 per cent said that the funeral service took place on time.
99.2% (2013: 99.2%)
98.7% (2013: 98.7%)
99.2 per cent agreed that our staff were compassionate
and caring.
98.7 per cent said that the final invoice matched the
estimate provided.
Dignity plc
Annual Report & Accounts 2014
15
Our summary performance in 2014
The Group has performed strongly in 2014. Revenue has increased five
per cent, underlying operating profit has increased eight per cent and
underlying earnings per share have increased 19 per cent. We continued
to make good progress across all our operations, with each division
performing in line with the Board’s expectations.
Operational and Financial Summary
Funeral services
Crematoria
Pre-arranged funeral plans
Group operating profit share (%)
Group operating profit share (%)
Group operating profit share (%)
7%
65%
28%
Funeral services
Crematoria
Pre-arranged funeral plans
+5%
Revenue up 5% to £184.4 million
+3%
Revenue up 3% to £55.2 million
348,000
Total active pre-arranged funeral plans
increased to 348,000
Revenue (£m)
Revenue (£m)
Total number of active plans
143.3
146.5
157.9
176.2
184.4
200
180
160
140
120
100
80
60
40
20
0
53.8
55.2
46.6
37.5
41.6
60
50
40
30
20
10
0
348,000
323,000
290,000
265,000
238,000
350,000
325,000
300,000
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
+9%
Underlying operating profit up 9%
to £66.3 million
+6%
Underlying operating profit up 6%
to £29.1 million
+10%
Underlying operating profit up 10%
to £7.4 million
Underlying operating profit (£m)
Underlying operating profit (£m)
Underlying operating profit (£m)
66.3
60.8
49.3
50.8
54.2
27.4
29.1
19.9
21.3
23.3
30
25
20
15
10
5
0
6.5
6.7
7.4
5.5
4.3
8
7
6
5
4
3
2
1
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
70
60
50
40
30
20
10
0
Links
See Operating review: p.16 to p.21
Find out more about our Group financial performance: p.22 to p.25
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Operating review
“
We continue to
make substantial
investments in
our business
and facilities.
Andrew Davies
Operations Director
£66.3m
The funeral division
contributed £66.3 million
of underlying operating
profit in the period.
718 locations
The Group’s national
coverage is achieved
through 718 locations.
Performance in 2014
• Strong operational efficiencies
and performance.
• Substantial investment in
core portfolio.
• Acquired locations integrated
into the business.
Strategic progress
• Prioritise client service.
• Continue to extend our
national footprint.
• Continue to add value through
new acquisitions.
Introduction
The Group’s operations are managed across
three distinct divisions: funerals, crematoria
and pre-arranged funeral plans, which
respectively represent 65 per cent, 28 per cent
and seven per cent of the Group’s underlying
operating profit (before central overheads).
Funeral services
Overview
Funeral services relate to the provision of
funerals and ancillary items, such as
memorials and floral tributes.
Performance
As at 26 December 2014, the Group operated
a network of 718 (2013: 690) funeral locations
throughout the United Kingdom, generally
trading under local established names.
During the period, the Group conducted
65,600 funerals.
Approximately two per cent of all funerals
were conducted in Northern Ireland. Excluding
Northern Ireland, these funerals represent
approximately 11.7 per cent (2013: 11.9 per
cent) of total estimated deaths in Britain.
Whilst funerals divided by estimated deaths
is a reasonable measure of our market share,
the Group does not have a complete national
presence and consequently, this calculation
can only ever be an estimate.
Underlying operating profit was £66.3 million
(2013: £60.8 million), an increase of nine
per cent.
This strong performance has been achieved
despite the reduction in the number of deaths
compared to the previous period, partly as
a result of the annual price rise being made
earlier in the year than was previously the
case. Cost control has remained good.
Average income per funeral increased and
remained robust.
Continued investment in
in our premises and
specialist vehicles
£11.5m
During the period Dignity
invested £11.5 million to
further improve the facilities
and service we offer our clients.
The collection of 78 satellite locations opened
in recent years contributed to the Group’s
profitability in the year in line with the Board’s
expectations. These locations are selected to
be close enough to existing business centres
to use their specialist vehicles and mortuary
equipment. In this way, the locations will
provide the same outstanding levels of client
service without the need for significant
capital investment.
Progress and Developments
Investment in the core portfolio
Significant cash resources continue to be used
to maintain the Group’s locations and fleet.
In 2014, £11.5 million was invested in
maintenance capital expenditure.
Funeral location portfolio
The Group acquired 12 funeral businesses
representing 30 funeral locations during the
period. In addition, four satellite locations were
opened and six locations were closed, principally
where it was considered commercially
appropriate not to renew leases.
Outlook
The funeral division has performed strongly
in the year and is well placed for the future.
Approximately 23 per cent of the funerals
performed in the year had previously been
pre-arranged. This compares to approximately
12 per cent in 2004. This proportion is
anticipated to continue to increase over time.
Whilst these funerals represent a substantially
lower average revenue per funeral, their
incremental nature means they are a positive
contributor to the Group’s performance.
1
We continue to be a major
provider of funeral services
in the UK.
Dignity plc
Annual Report & Accounts 2014
17
1. Funeral Director, Dean Newton
and Funeral Service Arranger,
Jodie Heaton, at Arthur B Baxter
in Bingley.
2. Funeral Service Arranger,
Sandra Barnes, at J H Kenyon®
in Kensington.
3. J H Kenyon® have been serving
bereaved families in Kensington
since 1880 and relocated to new
premises in 2014.
2
Actions
Focused on meeting
and exceeding
clients’ needs and
expectations
3
At Dignity we are focused on client
service because our clients do not
use us by chance. Almost three
quarters of our clients have used
our services before or choose us
because of recommendation and
reputation. They return and
recommend us because of the
quality and consistency of service
we provide.
We continue to prioritise service
and care. The results of our client
survey for 2014 continue to be
at exceptionally high levels with
99.2 per cent of respondents
saying that we met or exceeded
their expectations.
Opportunities
11.7%
The Group’s market share
is 11.7 per cent following
acquisitions in the period.
Acquisitions
By adding established,
successful businesses to
a strong core portfolio the
funeral division is well placed
for the future.
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Operating review
continued
“
We continue to invest
in and develop our
existing crematoria
and explore further
opportunities for
growth.
Steve Gant
General Manager – Crematoria
£29.1m
The crematoria division
generated £29.1 million of
underlying operating profit
from its 39 locations.
£3.4m
£3.4 million of capital
expenditure has been
invested in the portfolio
during the period.
Performance in 2014
• Six per cent increase in
underlying operating profit.
• Four planning applications
being progressed.
Strategic progress
• Continued to identify further
locations for new crematoria.
• Continued expansion.
Growth of our crematoria
portfolio
39 crematoria
In 2014, the Group operated
39 crematoria compared to
22 at the beginning of 2008.
Crematoria
Overview
Crematoria services relate to cremation
services and the sale of memorials and
burial plots at the Group’s crematoria and
cemeteries.
Performance
The Group remains the largest single operator
of crematoria in Britain, operating 39 (2013:
39) crematoria as at 26 December 2014. The
Group performed 53,400 cremations (2013:
55,500) in the period, representing 9.7 per
cent (2013: 9.9 per cent) of total estimated
deaths in Britain.
One of the Group’s crematoria was flooded and
not operational for approximately three months
of the period. It has since reopened and the
financial loss suffered has been recovered
through insurance. These lost cremations
represent approximately 0.1 per cent of total
estimated deaths in Britain during the period.
Underlying operating profit was £29.1 million
(2013: £27.4 million), an increase of six
per cent.
This operating performance is driven by
increasing average revenues per cremation,
which has offset the reduction in the number
of cremations performed in the year given
the lower number of deaths in the period.
Sales of memorials and other items have been
strong, equating to approximately £262 per
cremation compared to £254 in the previous
period.
Progress and Developments
Investment of £1.6 million has been made to
develop two locations that were acquired from
local authorities in 2012 and also to acquire
additional land for use as a cemetery at
another location. A further £0.8 million is
expected to be incurred in 2015 to complete
the local authority developments. The Group
has also invested £1.8 million maintaining its
locations in the period.
The Group is actively seeking planning
permission to develop crematoria at four
locations in the United Kingdom. The initial
planning application at one of these locations
has been denied and the Group is currently
considering its options. During the period,
the Group’s appeal on a further planning
application was denied and as a result, the
Group has ceased to pursue this location.
Whilst development of such locations is not
expected to be successful in all cases, they
represent a potential opportunity to create
new facilities in areas that will benefit the
local community, whilst representing a
potential opportunity to invest shareholder
money profitably.
Outlook
The Group continues to identify further
locations suitable for new crematoria and is
also continuing to seek partnerships with
local authorities. Progress on this is expected
to be slow, albeit this supports the relative
robustness and value of the Group’s
existing locations.
Pre-arranged funeral plans
Overview
Pre-arranged funeral plans represent the sale
of funerals in advance to customers wishing to
make their own funeral arrangements and the
marketing and administration costs associated
with making such sales. The Group continues
to have a strong market presence in this area.
These plans represent potential future
incremental business for the funeral division,
as the Group expects to perform the majority
of these funerals.
Performance
Underlying operating performance in the
period has been strong, with operating profit
of £7.4 million (2013: £6.7 million), an
increase of 10 per cent.
This improvement reflects very focused, cost
efficient marketing combined with a small
change in the relative sales volumes of each
affinity partner.
In overall terms, approximately 40,000
new plan sales were made and the number
of unfulfilled pre-arranged funeral plans
increased to 348,000 (2013: 323,000) as
at 26 December 2014.
1
We continue to be the largest
single operator of crematoria
in Britain.
Dignity plc
Annual Report & Accounts 2014
19
1. Lancaster & Morecambe
Crematorium has won three
horticultural awards in each
of the last two years.
2. The facilities at Weston Super Mare
Crematorium were substantially
improved in 2014.
3. Bethaney Welch, Memorial
Consultant at Mendip
Crematorium.
2
Actions
Investment,
improvements
and strong
memorial sales
3
At Dignity we continually invest
in our established crematoria
so that bereaved families and
funeral directors experience
the best service and facilities.
The continued investment in
crematoria grounds, the wide
range of memorials we offer and
the expertise of our gardeners
persuades an increasing number
of families to choose us as the
resting place for their loved one.
Sales of memorials and other
items have been strong in 2014
increasing by three per cent to
£262 per cremation.
Opportunities
Partnerships
We are seeking new
partnerships to manage local
authority owned crematoria.
New build
crematoria
We are continuing to identify
further locations suitable for
developing new crematoria.
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Operating review
continued
Rise in number of active pre-arranged
funeral plans over the past five years
Various partners, such as Age UK, trust us
enough to associate their brand and introduce
their customers to our products.
Total number of active plans
350,000
325,000
300,000
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
348,000
323,000
290,000
265,000
238,000
2010
2011
2012
2013
2014
“
We continue to
focus on increasing
the number of
pre-arranged
funeral plans.
Steve Wallis
General Manager – Pre-arrangement
348,000
More than 348,000 people
have an active pre-arranged
funeral plan.
40,000
Focused marketing activity
has resulted in approximately
40,000 new funeral plan
sales in the period.
Performance in 2014
• Strong operational
performance.
• Age UK remains a key
affinity partner.
Strategic progress
• Plans outstanding continue
to grow through direct sales
across our branch network.
• Continued development of
opportunities through existing
and potential affinity partners.
Whilst the contribution to this year’s operating
profit from the marketing activity is reported
at the time of sale, it is important to recognise
that the sales made represent significant
potential future revenues for the funeral
division. These amounts will be recognised
as and when the funerals are performed.
As with all the Group’s operating profit,
pre-arranged funeral plan profits convert
efficiently into cash.
Outlook
Opportunities for growth continue through the
development of existing relationships and the
creation of new ones.
The change in the Trust’s investment strategy
is expected to enhance investment returns in
the longer-term for a similar level of risk. The
strategy will however result in greater volatility
year on year in the reported value of the
Trust’s assets.
Progress and Developments
The increase in the number of unfulfilled plans
follows plans sold in the year.
The Group has continued to work hard at
developing its portfolio of affinity partners
and has formed a number of new partnerships
in the period with organisations in the retail
and financial services arena with further
trials expected in 2015.
For the third year running, the Group’s
customer service centre, based at its head
office in Sutton Coldfield, gained first prize
in the annual ‘Top 50 Call Centres for
Customer Service’ awards. This tremendous
achievement independently underlines the
Group’s commitment to providing excellent
client service.
The financial position of the independent trusts
holding members’ monies is crucial, given
the Group ultimately guarantees the promises
made to members. At the end of 2014, the
Trusts held over £700 million of assets. The
latest actuarial valuations of the pre-arranged
funeral plan trusts (at 26 September 2014)
showed them to have sufficient assets to pay
out all funerals at the current projected rates
anticipated by the actuary. The Trustees, the
majority of whom are independent of the
Group, have informed the Group that they
have now, with independent external advice,
completed a review of the Trust’s investment
strategy. This will result in the Trust’s assets
moving to a wider mix of investments,
including exposures overseas and in equities.
Central overheads
Overview
Central overheads relate to central services
that are not specifically attributed to a
particular operating division. These include
the provision of IT, finance, personnel and
Directors’ emoluments. In addition and
consistent with previous periods, the Group
records the costs of incentive bonus
arrangements, such as Long-Term Incentive
Plans (‘LTIPs’) and annual performance
bonuses, which are provided to over 100
managers working across the business.
Developments
Costs in the period were £17.9 million (2013:
£16.5 million), an increase of 8.5 per cent.
As predicted in last year’s Annual Report,
investment has continued in central support
functions (particularly IT and HR) to ensure
operational activity is appropriately supported
as the business grows. Incentive costs
including LTIP costs and cash bonuses have
increased from £4.8 million to £5.8 million.
Capital expenditure of £0.8 million has been
incurred on central projects predominantly
relating to IT that will help the business as
a whole operate more efficiently.
Outlook
Further investment in head office departments
is expected in 2015 as the business continues
to grow.
1
2
We continue to be one of
the UK’s leading providers
of pre-arranged funeral plans.
Dignity plc
Annual Report & Accounts 2014
21
1. Literature is available in branches
to help clients pre-arrange their
funeral.
2. Dignity’s Client Service Centre in
Sutton Coldfield has won the Best
Call Centre in the UK Award for
Customer Service for the third
successive year.
3. Client Service Advisor, Samantha
Owen.
4. Dignity’s pre-arrangement website
enables new clients to purchase
a funeral plan online.
3
Actions
Delivering consistently
high levels ofclient
service and reaching
new clients online
4
In 2014 Dignity outperformed
many high profile companies
and household names to be
acknowledged as the Best Call
Centre in the UK for the third
successive year. We strive to
provide the highest standards
of client service and each year
Dignity has won the award by
continually improving the service
we provide resulting in consistently
higher ratings in the Top 50 Call
Centre survey. The survey is
conducted by GfK Market Research
and compiled by mystery callers
and real customers with each
organisation receiving over 400
calls at varying times over a five
month period. The full results
of the survey were printed in a
special supplement of the
Sunday Telegraph.
Opportunities
640,000
We have already helped more
than 640,000 people arrange
their funeral in advance.
Marketing and
Affinity Partners
Carefully targeted marketing
and an increasing number of
affinity partners will allow us
to continue to grow this part
of our business.
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Financial review
We have delivered a strong
financial performance ahead
of consensus estimates
“
The Group continues
to maintain an
efficient capital
structure.
Performance in 2014
• Underlying earnings per
share have increased.
• Successful refinancing
of capital structure.
• Return of Cash to
shareholders.
Links
See Our strategy and business model:
p.10 and p.11
See Our KPIs: p.12 to p.14
See Principal risks and uncertainties:
p.26 to p.28
Introduction
These financial results have been prepared
in accordance with International Financial
Reporting Standards (‘IFRSs’).
Financial highlights
The Group’s financial performance is
summarised below:
52 week 52 week
period period
ended ended
26 Dec 27 Dec Increase
2014 2013 %
Revenue (£million) 268.9 256.7 5
Underlying operating profit (a) 84.9 78.4 8
(£million)
Underlying profit before tax (a) 58.5 52.9 11
(£million)
Underlying earnings per share(a) 85.8 72.1 19
(pence)
Cash generated from operations(b) 104.4 94.2 11
(£million)
Operating profit (£million) 82.9 75.1 10
(Loss)/profit before tax (£million) (67.7) 49.6 n/a
Basic (loss)/earnings per share (104.0) 72.8 n/a
(pence)
Dividends paid in the period:
Interim dividend (pence) 6.49 – n/a
Final dividend (pence) 11.83 10.75 10
Return of Cash (£million) 64.4 61.9 4
(a)Underlying amounts exclude profit (or loss) on sale of fixed
assets, external transaction costs and exceptional items,
net of tax where appropriate.
(b)Cash generated from operations excludes external
transaction costs and pension contributions made from
the proceeds of debt issues.
The Board has proposed a dividend of 13.01
pence per Ordinary Share as a final distribution
of profits relating to 2014 to be paid on 26 June
2015, subject to shareholder approval.
Terminology
During the period, the Group refinanced its
capital structure. Prior to 17 October 2014, the
Group had on various occasions issued Class A
Secured Notes due for final repayment in 2023
(‘Old Class A Notes’) and Class B Secured Notes
due for final repayment in 2031 (‘Old Class B
Notes’ and together with the Old Class A Notes,
the ‘Old Notes’). On 17 October 2014, the Group
issued £238,904,000 Class A Secured 3.5456%
Notes due 2034 (‘New Class A Notes’) and
£356,402,000 Class B Secured 4.6956% Notes
due 2049 (‘New Class B Notes’ and together
with the New Class A Notes, the ‘New Notes’).
Secured Notes refers to either the New Notes
or the Old Notes depending on the period.
Steve Whittern, Finance Director
Exceptional items and underlying
reporting measures
The market value of the Old Notes was
significantly in excess of their carrying value.
As previously announced, the refinancing during
the period resulted in an exceptional charge of
£124.2 million. The majority (£117.4 million)
of this charge was non-cash reflecting the mark
to market of the Old Notes and the write-off
of associated unamortised issue costs on the
Group’s balance sheet in respect of these
financial liabilities. As a result, the Group
reported a statutory loss for the year. This and
the associated costs of the transaction have,
because of their nature and amount, been
disclosed as exceptional and are excluded from
the Group’s underlying performance measure
in line with previous guidance. The refinancing
and associated transactions are described in
more detail later in this review and in the
accounting policies.
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. This
is particularly relevant in 2014 because of the
exceptional items described above. Accordingly,
the following information is presented to aid
understanding of the performance of the Group:
52 week 52 week
period period
ended ended
26 Dec 27 Dec
2014 2013
£m £m
Operating profit for the
period as reported 82.9 75.1
Add the effects of:
Loss on sale of fixed assets 0.3 0.1
External transaction costs 1.7 3.2
Underlying operating profit 84.9 78.4
Underlying net finance costs(c) (26.4) (25.5)
Underlying profit before tax 58.5 52.9
Tax charge on underlying profit
before tax (d) (13.1) (12.9)
Underlying profit after tax 45.4 40.0
Weighted average number
of Ordinary Shares in issue
during the period (million) 52.9 55.5
Underlying EPS (pence) 85.8p 72.1p
Increase in Underlying EPS (per cent) 19% 15%
(c)Excludes exceptional finance costs of £124.2 million
(2013: £nil).
(d)Excludes exceptional tax credit of £25.8 million
(2013: £3.5 million).
Dignity plc
Annual Report & Accounts 2014
23
£104.4m
Converting operating profit
efficiently into cash.
£14.1m
£14.1 million has been
invested in maintaining our
property and fleet portfolio.
£64.4m
£64.4 million returned to
shareholders.
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Cash generation (£m)
110
100
90
80
70
60
50
40
30
20
0
104.4
94.2
83.3
74.5
74.2
2010
2011
2012
2013
2014
Earnings per share
The Group’s statutory loss after tax was £55.0
million (2013: profit after tax of £40.4 million).
Basic earnings per share were a loss of 104.0
pence per share (2013: earnings per share of
72.8 pence per share). The Group’s measures
of underlying performance exclude the effect
(after tax) of the profit (or loss) on sale of
fixed assets, external transaction costs and
exceptional items. Consequently, underlying
profit after tax was £45.4 million (2013:
£40.0 million), giving underlying earnings per
share of 85.8 pence per share (2013: 72.1
pence per share), an increase of 19 per cent.
The growth rate for underlying EPS exceeded
the growth in underlying operating profit,
reflecting the leveraging effect of the Group’s
capital structure, a reduction in the number
of shares in issue as well as some benefit from
the reduction in headline Corporation Tax rates.
External transaction costs include amounts
paid to external parties for legal, tax and other
advice in respect of the Group’s acquisitions.
Cash flow and cash balances
Cash generated from operations was £104.4
million (2013: £94.2 million) before external
transaction costs of £1.1 million (2013: £1.6
million) and exceptional contribution to the
Group’s pension scheme of £1.0 million
(2013: £1.0 million). This reflects the Group’s
continued ability to convert profits into cash.
Capital expenditure on property, plant and
equipment was £17.2 million (2013:
£18.2 million).
This is analysed as:
The Group also paid dividends on Ordinary
Shares totalling £9.8 million (2013: £6.2
million) in the period. This is higher than the
prior year, as the Return of Cash in 2013
incorporated the interim dividend that would
have been paid in October that year.
Cash balances at the end of the period were
£86.5 million (2013: £142.3 million). The
Group had £9.6 million (2013: £20.3 million)
of cash that was, under the terms of the
Group’s securitisation, held in a separate
account and used to pay amounts falling due
on the Group’s Secured Notes on 31 December
2014 (2013: 31 December 2013). These
amounts do not therefore meet the definition
of cash for cash flow reporting purposes.
As a result of the issue of the New Notes, a
new Liquidity Facility was entered into. This did
not require any cash collateralisation by the
provider, the Royal Bank of Scotland (‘RBS’),
thereby reducing overall cash levels compared
to the previous period by £63 million.
Approximately £53 million of the remaining
cash balance was immediately available
for acquisitions and developments and
approximately £15 million was set aside for
future Corporation Tax and dividend payments.
Further details and analysis of the Group’s
cash balances are included in note 15 to the
consolidated financial statements.
Pensions
The balance sheet shows a deficit of £10.5
million before deferred tax (2013: deficit of
£1.0 million). This reflects reductions in the
period in the AA bond rate and thus the discount
rate used by the actuary.
26 Dec 27 Dec
2014 2013
£m £m
Vehicle replacement programme
and improvements to locations 14.1 14.2
Branch relocations 1.4 1.1
Satellite locations 0.1 0.3
Development of new crematoria 1.6 2.0
Mercury abatement project – 0.6
Taxation
The Group’s effective tax rate in the period
was 22.5 per cent (2013: 24.5 per cent
(excluding the exceptional rate change)).
Following the Government’s announcement
to reduce the rate of Corporation Tax in future
years, the Group expects its effective rate in
2015 to be approximately 21.5 per cent and
21 per cent thereafter.
Total property, plant and equipment 17.2 18.2
Partly funded by:
Disposal proceeds (0.5) (0.6)
Net capital expenditure 16.7 17.6
In addition, the Group spent a net £24.7 million
on the acquisition of 30 funeral locations.
The Group’s cash tax payments were £6.9
million (2013: £10.9 million) in the period.
As a consequence of the refinancing, the
Group does not anticipate having a Corporation
Tax liability in respect of 2014. As a result,
payments made on account in 2014 were
refunded. The Group therefore expects reduced
cash tax liabilities in 2015 and 2016.
24
Dignity plc
Annual Report & Accounts 2014
Strategic Report
Financial review continued
Capital structure and financing
Issue of New Notes
Transaction summary and rationale
Since its flotation in 2004, the Group had
periodically issued Old Notes, returning the
majority of the net proceeds on each occasion
to shareholders. The Board considers that
maintaining a leveraged balance sheet is
appropriate for the Group, given the stable
and predictable nature of its cash flows.
The Group believed that given the low interest
rate environment and the narrow spreads
implicit in the market value of the Old Notes,
there was an opportunity to extend the term
of the Group’s securitised debt and raise
new funds.
The Group therefore approached existing
noteholders, who approved a proposal to
redeem all existing Old Notes, receiving New
Notes in consideration. The transaction
successfully completed on 17 October 2014.
Crucially, the Group was able to replicate two
key aspects of the Old Notes in the structure
of the New Notes: firstly, that the principal
amounts outstanding would amortise and
be repaid over the life of the New Notes and
secondly, that the interest rate would be fixed,
thereby giving the debt a fixed annual debt
service obligation for the life of the New Notes,
akin to a 35 year fixed rate mortgage.
The key terms of the New Notes (which are
significantly different to the terms of the Old
Notes) are summarised in the table below:
New A Notes New B Notes
Total new issuance at par £238.9 million £356.4 million
Legal maturity 31 December 31 December
2034 2049
Coupon 3.5456% 4.6956%
Rating by Standard & Poor’s
and Fitch A BBB
The New Notes have an annual debt service
obligation (principal and interest) of circa
£33.2 million compared to circa £40 million
for the Old Notes.
Given the longer duration of the New Notes,
this structure is capable of being used to
periodically issue further New Notes when
deemed appropriate and subject to market
conditions. The majority of such proceeds have
historically been returned to shareholders.
Use of proceeds
The gross proceeds of the New Notes were
used as follows:
£m
Repay Old Notes 507.2
Repay swap 5.1
External transaction costs 6.8
Contribution to pension scheme 1.0
Cash returned to shareholders 64.4
Cash retained for corporate purposes 10.8
595.3
The Old Notes had a carrying value of £404.6
million but a significantly higher market value.
Consequently, the redemption at £507.2
million resulted in a non-cash charge to the
income statement of £102.6 million as a
finance cost.
Unamortised issue costs of £14.8 million
relating to the Old Notes were expensed as
a result of the redemption as a finance cost
taking the non-cash charge to £117.4 million.
The swap terminated with £5.1 million of the
proceeds had a carrying value on the Group’s
balance sheet of £4.1 million at termination,
resulting in a charge to the income statement
of £1.0 million as a finance cost. This has
resulted in the Group avoiding an ongoing
cash liability of £0.7 million per annum until
2017 and £0.3 million per annum thereafter
until 2028.
As required by international accounting
standards, £5.8 million of the external
transaction costs (estimated to relate to the
extinguishment of the Old Notes) has been
expensed immediately as a finance cost and
£0.3 million (estimated to relate to the Return
of Cash to shareholders) has been expensed
immediately as an operating cost. The
remaining £0.7 million will be carried against
the financial liability and will be expensed in
line with the anticipated annual interest costs
of the New Notes as a finance cost. Of the
£6.8 million total cost, £0.1 million was paid
after the period end.
£64.4 million was returned to shareholders.
Following this, the Ordinary Shares were
consolidated on an 11 for 12 basis,
maintaining the comparability of financial
indicators such as the Group’s share price.
On the balance sheet date, the Company
had 49.2 million Ordinary Shares in issue.
Dignity plc
Annual Report & Accounts 2014
25
Financial leverage enhances underlying earnings
per share (pence)
£335.2m
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50
40
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2011
2012
2013
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Net finance costs
The Group’s underlying finance costs
substantially consists of the interest on the
Old and New Notes and ancillary instruments.
The net finance cost in the period relating to
these instruments was £25.2 million (2013:
£23.6 million).
Finance costs of £0.6 million (2013: £0.6
million) were incurred in respect of the
Crematoria Acquisition Facility.
Other ongoing finance costs incurred in the
period amounted to £1.6 million (2013: £1.1
million), including the unwinding of discounts
on the Group’s provisions and other financial
liabilities.
Interest receivable on bank deposits was
£1.0 million (2013: £0.5 million).
In addition to the underlying net finance
cost, a total of £123.2 million of exceptional
finance costs relating to the extinguishment
of Old Notes have been recognised as
described earlier in the Financial Review.
A further £1 million of exceptional costs
were recognised following the termination
of a swap liability described earlier in the
Financial Review.
Forward-looking statements
Certain statements in this Annual Report are
forward-looking. Although the Board believes
that the expectations reflected in these forward-
looking statements are reasonable, it can give
no assurance that these expectations will
prove to have been correct. Because these
statements involve risks and uncertainties,
actual results may differ materially from those
expressed or implied by these forward-looking
statements.
Financial Covenant
The Group’s primary financial covenant under
the New Notes requires EBITDA to total debt
service to be above 1.5 times. The ratio at 26
December 2014 was 10.69 times (2013: 2.46
times). The high ratio reflects the timing of the
transaction, meaning that a full year’s EBITDA
is being compared against a partial year of
debt service. If the debt service was annualised
the ratio would have been 2.95 times.
Crematoria Acquisition Facility
The only other external source of debt
funding is the Group’s £15.8 million Crematoria
Acquisition Facility, which is fully drawn. The
facility is repayable in one amount in February
2018. Interest is fixed at approximately
3.3 per cent.
Net debt
The Group’s net debt is analysed as:
26 Dec 27 Dec
2014 2013
£m £m
Net amounts owing on Old Notes – (403.0)
Net amounts owing on New Notes (594.6) –
Add: unamortised issue costs (0.7) (16.3)
Gross amounts owing on
Secured Notes (595.3) (419.3)
Net amounts owing on Crematoria
Acquisition Facility (15.6) (15.6)
Add: unamortised issue costs on
Crematoria Acquisition Facility (0.2) (0.2)
Gross amounts owing (611.1) (435.1)
Accrued interest on
Secured Notes (5.7) (14.3)
Cash and cash equivalents (1) 86.5 79.3
Net debt (530.3) (370.1)
(1) Cash held as collateral for the Liquidity Facility in 2013 has
been excluded as it does not meet the definition of cash and cash
equivalents in IAS 7. See notes 16(f) and 21(d) for further details.
The Group’s gross debt outstanding was
£611.1 million (2013: £435.1 million). Net
debt was £530.3 million (2013: £370.1
million). The increase in gross debt reflects the
net new money raised from the issue of the
New Notes and that the New Notes effectively
replaced Old Notes with a carrying value
significantly lower than their market value.
Gross debt includes £4.0 million (2013: £5.7
million) that was repaid on 31 December 2014.
The market value of the New Notes at the
balance sheet date was £643.2 million.
Returning cash to shareholders
Periodically, the Group has
used its stable cash flows to
releverage its capital structure
and return cash to
shareholders.
Outlook
The Group does not have an
obligatory refinancing event
until 2018.
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See Financial statements:
p.62 to p.105
See Financial record:
p.110 and p.111
26
Dignity plc
Annual Report & Accounts 2014
Strategic Report
Principal risks and uncertainties
We are committed to effective risk
management which supports the
achievement of our strategic objectives
How we manage risk
This section highlights the
principal risks affecting the
Group, together with the key
mitigating activities in place
to manage those risks.
Our approach to risk management
The Board recognises it is responsible for the Group’s system
of internal control and risk management, which is designed
to manage rather than eliminate the risk of failure to achieve
business objectives and can provide only reasonable, and not
absolute, assurance against material misstatement or loss.
A formal ongoing process of identifying, evaluating and
managing the significant risks faced by the Group was in
place for the period and in place up to the date the Corporate
Governance report was signed and approved for the Annual
Report and Accounts 2014. This process was in place at the
date of approval of the Annual Report and is in accordance
with the Code.
The Group manages the operational and financial risks
described through a combination of regular Board reports
and also monthly and weekly management information that
is reviewed by the Executive Directors.
Risk process
Our risk process is designed to identify, evaluate and manage
both our operational and financial risks.
Risk Governance
The full risk register is considered and readopted every
six months by the Audit Committee.
IDENTIFY & ANALYSE
Risks and impact identified
• Risks mapped to controls currently in place
• Residual risks prioritised for mitigation
• Confirmed with the Board
t
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Risk management
process
• Remedial action plans implemented
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Controls identified
• Suggested action plans agreed
• Options for controls identified and costed
• Plans approved by the Board
Existing control enforced
and tested
• Remedial action plans implemented
• Board member accountable
Links
See Our strategy and business model: p.10 and p.11
See Our KPIs: p.12 to p.14
See Governance: p.34 to p.61
Strategic report
How we align risks to strategy
Our principal risks and uncertainties focus on
matters that could have a direct impact on our
key strategic objectives.
Key:
Risk exposure increased
Risk exposure decreased
No significant change
Operational risk management
Strategic
objective link
Risk and impact
Dignity plc
Annual Report & Accounts 2014
27
Key and link to strategic objective
1
2
3
4
5
Continue to prioritise excellent client service which we believe will
lead to organic growth.
Control our costs without compromising the quality of our service.
Expand our funeral and crematoria portfolios.
Gain new clients through the sale of pre-arranged funeral plans.
Increase our returns through efficient capital management.
Mitigating activities
2014 Commentary
Change
51
51
531
Significant reduction in the death rate
There is a risk that the number of deaths in
any year significantly reduces. This would have
a direct result on the financial performance of
both the funeral and crematoria divisions.
The profile of deaths has historically followed
a similar profile to that predicted by the ONS,
giving the Group the ability to plan its business
accordingly.
5431
Nationwide adverse publicity
Nationwide adverse publicity for Dignity could
result in a significant reduction in the number
of funerals or cremations performed in any
financial period. This would have a direct result
on the financial performance of that division.
This risk is addressed by ensuring appropriate
policies and procedures are in place, which
are designed to ensure excellent client service.
These policies and procedures retain flexibility
for the business to serve families in accordance
with local traditions.
Ability to increase average revenues
per funeral or cremation
Operating profit growth is in part attributable
to the Group’s ability to increase the average
revenue per funeral or cremation. There can be
no guarantee that future average revenues per
funeral or cremation will be maintained or
increased.
The Group believes that its focus on excellent
client service helps to mitigate this risk.
The number of deaths in 2014
is consistent with the ONS
medium term view.
See Market overview:
p.08 and p.09
There have been no such
events in the period.
See The client survey
performance: p.14
Average revenues were
increased in line with the
Board’s expectations.
See Operating review:
p.16 to p.21
Significant reduction in market share
It is possible that other external factors,
such as new competitors, could result in a
significant reduction in market share within
funeral or crematoria operations. This would
have a direct result on the financial
performance of those divisions.
The Group believes that this risk is mitigated
for funeral operations by reputation and
recommendation being a key driver to the
choice of funeral director being used and
for crematoria operations is mitigated by
difficulties associated with building new
crematoria.
Changes in market share were
in line with the Board’s
expectations.
See Operating review:
p.16 to p.21
531
Demographic shifts in population
There can be no assurance that demographic
shifts in population will not lead to a reduced
demand for funeral services in areas where
Dignity operates.
In such situations, Dignity would seek to
follow the population shift.
There are barriers to entry in the funerals
services market due to the importance
of established local reputation and in the
crematoria market due to the need to obtain
planning approval for new crematoria and
the cost of developing new crematoria.
There are a number of potential affinity
partners who could replace existing ones
or add to existing relationships. Evidence
suggests that such partnerships can and
are being developed.
5431
Competition
The UK funeral services market and crematoria
market is currently very fragmented.
There can be no assurance that there will not
be further consolidation in the industry or that
increased competition in the industry, whether
in the form of intensified price competition,
service competition, over capacity or otherwise,
would not lead to an erosion of the Group’s
market share, average revenues or costs and
consequently a reduction in its profitability.
The retention of affinity partners who sell the
Group’s pre-arranged funeral plans is essential
to the long-term development of the pre-
arranged funeral plan division. The loss of an
affinity partner could lead to a reduction in the
amount of profit recognised in that division at
the time of sale. Failure to replenish or increase
the bank of pre-arranged funeral plans could
affect market share of the funeral division in
the longer-term.
There have been no material
changes, with satellites being
opened and businesses
acquired in appropriate areas.
See Operating review:
p.16 to p.21
No major changes noted.
Denials of planning applications
for crematoria in the period
demonstrate the barriers
to entry.
See Operating review:
p.16 to p.21
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Principal risks and uncertainties continued
How the Group finances its operations
The Group finances its operations by a mixture of shareholders’
funds, Secured Notes and bank borrowings. This approach
seeks to minimise financing costs and generate optimum
shareholder value through efficient leveraging of the Group’s
balance sheet, which is made possible by the stable and
predictable cash–generative nature of the business.
It is not the Group’s policy to actively trade in derivatives.
Mitigating activities
2014 Commentary
Change
There are currently specific exemptions
under European legislation for the UK on
the VAT treatment of funerals. Any change
would apply to the industry as a whole and
not just the Group.
No significant changes noted
in the period.
Any changes would apply to the industry
as a whole and not just the Group.
No significant changes noted
in the period.
See Market overview:
p.08 and p.09
The latest actuarial valuation
of the pre-arranged funeral
plan trusts confirmed that
the Trusts continue to have
sufficient assets to meet
their liabilities.
See Note 29
There is considerable regulation around
insurance companies which is designed,
amongst other things, to ensure that the
insurance companies meet their obligations.
The Trusts hold assets with the objective of
achieving returns slightly in excess of inflation.
Historically, these assets have been heavily
weighted towards gilts and corporate bonds.
The Trustees, who operate independently of
the Group, have advised that they are
implementing a new investment strategy
covering a wider range of assets classes.
The new strategy is intended to enhance
investment returns for a similar level of risk,
albeit with greater volatility.
Mitigating activities
2014 Commentary
Change
The nature of the Group’s debt means
that the denominator is now fixed unless
further Secured Notes are issued in the
future. This means that the covenant
headroom will change proportionately
with changes in EBITDA.
The restructuring of the
Group’s debt obligations
provides greater headroom
against the financial covenant
as the annual debt service
obligation is approximately
15 per cent lower.
See Financial review:
p.22 to p.25
Operational risk management continued
Strategic
objective link
Risk and impact
51
54
4
5
Taxes
There can be no assurance that changes will
not be made to UK taxes, such as VAT. VAT is
not currently chargeable on the majority of the
Group’s services. The introduction of such a
tax could therefore significantly increase the
cost to clients of the Group’s services.
Regulation of pre-arranged funeral plans
Pre-arranged funeral plans are not a regulated
product, but are subject to a specific financial
services exemption. Changes to the basis of
any regulation could affect the Group’s
opportunity to sell pre-arranged funeral plans
in the future or could result in the Group not
being able to draw down the current level of
market allowances, which would have a direct
impact on the profitability of the pre-arranged
funeral plan division.
Changes in the funding of the pre-arranged
funeral plan business
The Group has given commitments to pre-
arranged funeral plan members to provide
certain funeral services in the future.
Funding for these plans is reliant on either
insurance companies paying the amounts
owed or the pre-arranged funeral plan trusts
having sufficient assets to meet their liabilities
in the future.
If this is not the case, then the Group may
receive a lower amount per funeral than
expected and thus generate lower profits.
Financial risk management
Strategic
objective link
Risk and impact
5
Financial Covenant under the Secured Notes
The Group’s Secured Notes requires EBITDA
to total debt service to be above 1.5 times.
If this financial covenant is not achieved, then
this may lead to an Event of Default under
the terms of the Secured Notes, which could
result in the Security Trustee taking control
of the securitisation group on behalf of the
Secured Noteholders.
In addition, the Group is required to achieve a
more stringent ratio of 1.85 times for the same
test in order to be permitted to transfer excess
cash from the securitisation group to Dignity
plc. If this stricter test is not achieved, then
the Group’s ability to pay dividends would
be impacted.
Corporate and social responsibility
Continuing to build a responsible
and sustainable business
Dignity plc
Annual Report & Accounts 2014
29
“
We recognise
that our corporate
responsibility
activities are an
important way for
us to deliver upon our
strategic objectives.
During 2014, the
Board reconfirmed its
commitment to the
four components of
our sustainability
programme and we
have continued to
make good progress
in these areas.
Our four CSR commitments:
People development
Health & safety
Environment
Community engagement
Links
See Our strategy and business
model: p.10 and p.11
See The client survey
performance: p.14
See Governance: p.34 to p.61
Sustainability and strategy
Dignity’s sustainability programme shapes
the way that we do business. Conducting our
business in a responsible way is one of our
fundamental values and a key element of
our business growth strategy. Behaving in an
ethical manner, working safely, reducing our
environmental impact, developing our people
and contributing to the communities we serve
enables us to create long-term value for
our stakeholders.
We define our reporting in terms of our
workplace, the environment and the
communities of which we play an important
part. We strive to improve the way that we
perform, manage and report on corporate
and social responsibility (‘CSR’) matters across
all aspects of our business. Within Dignity,
Corporate Services Director, Richard Portman,
is accountable for CSR and under this remit
identifies major issues and reports these to
his fellow Board members.
Governance
Accountability
The governing principles of Dignity are that
we are here to help people at one of the most
difficult times of their lives and we do this
with compassion, respect, openness and
care. Our objective is to be the company that
everyone knows they can trust in their time of
need. Our values, which are ensconced in our
governing principles, are a fundamental part
of our culture. By living these values, we ensure
that we operate in a responsible way and that
we deliver the excellent service upon which
our business depends.
Implementation
The flat management structure of Dignity
means that local management are empowered
to make decisions that provide quick and
effective solutions to the needs of their clients,
businesses and the communities they serve.
Only six per cent of our employees are based
at our head office where they perform such
Richard Portman, Corporate Services Director
necessary business tasks as Finance, IT, HR,
Marketing and Purchasing. This approach
demonstrates our commitment to providing
staff in locations where they can directly help
and support our clients.
Risk management
Our Code of Conduct ensures that all staff
are aware of the principles that govern how
we operate in the business environment and
explains the standards of behaviour that all
our employees are expected to adhere to.
Our Code of Conduct is reinforced by a staff
handbook, ‘Helping our clients every step of
the way’ which states that all clients should be
supported during the funeral arrangements,
at the service or when choosing a memorial or
funeral plan in a caring and sensitive manner.
We should be compassionate and caring; pay
attention to detail; spend as much time as the
client needs; be open and straightforward and
keep in regular contact with the client.
Business integrity and ethics
We make our clients feel confident in us so
that they are reassured they are being served
by responsible individuals working for a
responsible company.
Dignity has been identified by the FTSE Group
in its FTSE4Good initiative as a company that
is working towards environmental sustainability,
developing positive relationships with
stakeholders and upholding and supporting
universal human rights.
We build trust and respect with everyone
touched by our business operations – our
clients, our colleagues, our suppliers, trade
associations, local authorities and members of
the communities we serve. Everyone at Dignity
understands that at all times they are an
ambassador for the Group and that the future
success of the business depends on its
reputation.
See People development p.30 and p.31
See Health & Safety: p.32
See Environment: p.32
See Community engagement: p.33
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30
Dignity plc
Annual Report & Accounts 2014
Strategic Report
Corporate and social responsibility continued
In this section
In this section, we provide an overview of the importance and
our approach to CSR and our performance in 2014. Further
details and case studies can be found on Dignity’s website:
www.dignityfuneralsplc.co.uk
People development
Our commitment
What we focus on:
What we believe in
We value our people and
understand, respect and
value personal and cultural
differences. Dignity is
committed to high standards
of employment practice and
aims to encourage, retain and
develop successful employees.
For additional information:
www.dignityfuneralsplc.co.uk
• Learning and development;
• What we are here to do:
• Recognising achievement;
• Promoting diversity; and
• Employee engagement.
To help people at one of the most difficult times
in their lives.
• How we do this:
With compassion, respect, openness and care.
• What we want to be:
The company that everyone knows they can trust
in their time of need.
Our people, culture and values
Our people come from the towns and cities they serve or from
families that have been in the funeral profession for generations.
They are all dedicated to delivering excellent client service.
qualifications including the National Association of Funeral
Directors (NAFD) Diploma in Funeral Directing; the London
Association of Funeral Directors (LAFD) Certificate in Funeral
Arranging & Administration and Membership of the British
Institute of Embalming.
Our Code of Conduct is reinforced by our Staff Handbook
which is given to all new employees working in our funeral
locations and crematoria. This document has been reviewed
and updated to ensure that we embed all new employees into
the Dignity culture and to remind existing members of staff of
the standards of behaviour and attitudes that are expected of
them. The Code of Conduct is also published on the Dignity plc
investor website.
We adhere to the Bribery and Corruption Act of 2010 and have
policies and procedures to minimise the risk of bribery. This is
also published on our website.
Progress against our objectives in 2014
Learning and development
Whether it’s at the start of a career through our training
initiatives; a flexible job for working parents or carers; or a
second or third career for someone later in life; we offer job
opportunities and support for people to fulfil their potential.
Dignity’s investment in training enables our staff to provide
our clients with the highest standards of service and care
and to ensure that our rigorous procedures are followed in
all locations. In 2014, Dignity continued to provide its staff
with both relevant job training and tutoring for professional
Recognising achievement
In a competitive marketplace we recognise the importance of
financially rewarding employees appropriately for the value they
bring to the business. Dignity has rewarded its loyal staff with
long service awards totalling approximately £0.2 million in 2014.
Promoting diversity
In January 2014, Dignity was awarded the disability Two Ticks
Positive About Disability Symbol by Jobcentre Plus. The symbol
identifies those employers that have agreed to meet five
commitments regarding recruitment, employment, retention
and career development of disabled people.
Employee engagement
To achieve our business objectives we need engaged
employees dedicated to our vision and values. Dignity
publishes a quarterly in-house magazine, ‘Dignity Express’,
to enable the Company’s Directors, managers and employees
to communicate objectives, explain financial performance and
client satisfaction results in addition to sharing best practice
and news in a cost effective manner. ‘Dignity Express’ is
supplemented by monthly news bulletins to keep all employees
informed of what is happening within the organisation.
30%
30 per cent of Dignity staff
(852 employees) have over
10 years service.
6 years
The average length of service
for a Dignity employee is
six years.
Senior managers (% & number)
Employee ratio (% & number)
Employee service (% & number)
Male 79% (28 senior managers)
Male 50% (1,415 employees)
Female 21% (6 senior managers)
Female 50% (1,433 employees)
< 1 year: 13% (379 employees)
1–4 years: 33% (923 employees)
5–9 years: 24% (694 employees)
10–19 years: 21% (602 employees)
>20 years: 9% (250 employees)
Key and link to strategic objective
1
1 Continue to prioritise excellent
client service which we believe
will lead to organic growth.
See Our strategy and business
model: p.10 and p.11
Dignity plc
Annual Report & Accounts 2014
31
1. Client Service Advisors Ian Webster
and Chelsey Nall in the Client
Service Centre.
2. Fabio Dos Santos, Funeral Director
with J H Kenyon® in London.
3. Victoria Sennett, Funeral Service
Arranger at J H Kenyon® in
Westminster.
4. Sue Oakes, Head of Customer
Services at Dignity’s Client Service
Centre in Sutton Coldfield.
2
3
4
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Service remains central to
all we do and our people are
integral to our continued
success.
Committed to continuous
improvement
In 2014 Dignity retained
its place in the FTSE4Good
Index Series.
The ‘Two Ticks’ positive about
disability symbol is awarded by
Jobcentre Plus to employers who
have made commitments to
employ, retain and develop the
abilities of disabled employees.
Dignity received this award in
January 2014.
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Dignity plc
Annual Report & Accounts 2014
Strategic Report
Corporate and social responsibility continued
Link
See Directors’ report for more about carbon reporting: p.59 to p.61
Health & Safety
Environment
Our commitment
What we focus on:
Our commitment
What we focus on:
Our business is conducted
in such a way as to ensure as
far as is reasonably practical,
the health, safety and welfare
of all our employees and
all persons who may be
attending our premises.
For additional information:
www.dignityfuneralsplc.co.uk
• Ensuring safety;
• Proactive management;
• Employee welfare; and
• Occupational safety.
We are committed to
maintaining the quality of the
environment in which we all
live and we aim to reduce the
impact of our operations so that
we act in an environmentally
friendly manner.
For additional information:
www.dignityfuneralsplc.co.uk
• Reducing our carbon
footprint;
• Reducing energy
consumption;
• Promoting sustainable
development; and
• Minimising our
environmental impact.
Progress against our objectives in 2014
Dignity has a full-time Health and Safety Manager who is
supported by eight Health & Safety Officers. Dignity’s head
office, crematoria and coffin factory also have their own
managers with responsibility for Health and Safety. Over
the last five years the number of accidents has reduced
by 26 per cent.
Progress against our objectives in 2014
In 2014 our business continued to have a low environmental
impact and its activities are not expected to give rise to any
significant environmental risk over the next twelve months.
All waste generated is properly disposed of in accordance
with current legislation and steps are taken to recycle waste
wherever this is practical.
During the year, Dignity’s coffin manufacturing facility in
East Yorkshire gained OHSAS18001 accreditation officially
recognising the factory as a safe and healthy environment
in which to work. OHSAS18001 is a widely recognised
management system that is awarded to sites that have a
proven record of promoting health and safety by providing
a framework to identify and control risks and reduce the
potential for accidents.
Approximately 28,600 cremations at Dignity crematoria were
mercury abated during 2014, representing 54 per cent of
the total number of cremations.
Dignity’s coffin manufacturing facility has ISO14001
accreditation, an internationally accepted standard for an
effective Environmental management system that is designed
to address the balance between maintaining profitability and
reducing environmental impact. Our coffins are manufactured
using raw materials that are sourced from well-managed and
sustainable sources. 98 per cent of the coffins manufactured
by Dignity are from Forest Stewardship Council (‘FSC’)
accredited timber.
Dignity aims to reduce its future carbon footprint and in
2014 Dignity continued to submit its data to the Carbon
Disclosure Project. This is a not-for-profit organisation that
aims to improve the environment by measuring disclosures
from thousands of organisations across the world’s major
economies. Release of Greenhouse Gas emissions are
disclosed in the Directors’ report on page 60.
26%
Over the last five years the
number of accidents has
reduced by 26 per cent.
Health & safety training (number)
12
146
242
0
20
40
60
80
100
120
140
160
180
200
220
240
Employees with NEBOSH qualification: 12
Employees with IOSH qualification: 146
Employees with CIEH qualification: 242
58,000
Making in excess of 58,000
coffins per year, Dignity has
one of the most modern
and efficient manufacturing
facilities in the UK and a
distribution network that
covers from the North East
of Scotland to the South
West of England, Wales
and Northern Ireland.
1
Dignity plc
Annual Report & Accounts 2014
33
1. The Service of Remembrance to
commemorate those that lost their
lives during World War One at
Bentley Crematorium.
2. Dignity provided financial support
to Charlotte McAvoy and Helen
Waite, allowing them to study at the
University of Birmingham under the
Access to Birmingham Scheme.
3. Meaghan Annear, Senior Account
Manager at Marie Curie Cancer Care.
4. Funeral Director, Matthew James
with Helen Brown, a nurse at the
Marie Curie Hospice in Solihull.
2
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Community engagement
Our commitment
What we focus on:
We are committed to making
a difference to our clients and
improving the welfare of all
who live in the communities
we serve.
For additional information:
www.dignityfuneralsplc.co.uk
• Making a positive
contribution to the local
communities we serve;
• Building closer relationships
with local communities; and
• Developing a greater
understanding of our clients’
and communities’ needs.
Progress against our objectives in 2014
We continue to build strong links with the communities in
which we operate through local engagement and fundraising
for charities.
Local community engagement and charitable support
Our people support hundreds of local community initiatives
and charitable events each year. Dignity raised £90,000 during
2014 for its corporate charity, Marie Curie Cancer Care and has
raised £215,000 since January 2012. Fundraising initiatives
included charity car washes and taking part in sponsored
walks, sky dives and fun runs. Dignity also raised money for
Marie Curie Cancer Care by taking part in national campaigns
such as The Great Daffodil Appeal, where branches sold the
charity’s lapel badges and The Blooming Great Tea Party where
visitors could purchase hot drinks, snacks and homemade
cakes for a charitable donation.
To demonstrate our values and principles Dignity people
have also supported numerous hospices and care homes, a
restoration project at a historic church close to its head office
in Sutton Coldfield, provided financial support for local sports
clubs, musical groups and churches in addition to fundraising
for many other national and regional charities.
In September, Dignity provided financial support to three
mature students enabling them to study full-time at the
University of Birmingham under the Access to Birmingham
Scheme (A2B). The scheme provides local people from families
or communities with little experience of higher education the
opportunity to study at the University.
£215,000
Dignity continues to work
with Marie Curie Cancer Care
and over the last three years
our staff have helped to raise
more than £215,000 in
support of this vital charity.
“
Our partnership with
Dignity helps us to make
a big difference to the lives
of the people we care for.
Their efforts help to raise
awareness and generate
funding for the vital work
of our Marie Curie nurses.
Meaghan Annear, Senior Account
Manager, Marie Curie Cancer Care.
34
Dignity plc
Annual Report & Accounts 2014
Governance
Chairman’s introduction to governance
“
Our report is intended to provide shareholders
with a clear and comprehensive explanation
of what good governance means within Dignity.
Dear Shareholder,
I am pleased to present the Group’s Corporate Governance
Report for 2014 on behalf of our Board. Our report is
intended to provide shareholders with a clear and
comprehensive explanation of what good governance
means within Dignity and more particularly what it means
to us as the Board of Directors, how it is applied and
how it guides our decision making.
Good governance is crucial at all levels within the Group and
it is the responsibility of the Board both to lead by example
and set the tone. It means ensuring that an effective internal
framework of systems and controls exists which includes
clearly defined authorities and accountability which
promotes success, whilst allowing risks to be managed
to appropriate levels. To do this the Board must make
appropriate judgements whilst giving consideration to
the views of our shareholders and other stakeholders.
Our Report for 2014 explains Dignity’s approach to
Corporate Governance. As we did in 2013, separate reports
are included from each of the Board Committees as we feel
this gives a full and comprehensive view of their activities.
We are reporting in line with the UK Corporate Governance
Code (the ‘Code’) and I am pleased to advise that Dignity
has complied with all relevant provisions throughout the
period ending 26 December 2014. This is explained in
more detail in the following pages.
Peter Hindley
Chairman
4 March 2015
Code principles
Leadership
Continued close
focus on strategy
and its execution
Peter Hindley
Chairman
Compliance with the UK Corporate Governance Code
It is the Board’s opinion the Group has been fully compliant
with the Code throughout the 52 week period ending on
26 December 2014 and remained fully compliant at the
date the Annual Report for 2014 was published.
Directors’ Report
The Directors present their report for Dignity plc for the
period ending 26 December 2014.
Corporate Governance
The Group is committed to high standards of corporate
governance, details of which are given in this report and
the other reports from:
• The Audit Committee;
• The Nomination Committee; and
• The Remuneration Committee.
The various sections of this report contain summarised
information from Dignity plc’s Articles of Association
(the ‘Articles’) and the Companies Act 2006 which is the
applicable English law concerning companies. The relevant
provisions of the Articles or the Companies Act should be
consulted if more detailed information is needed.
Links
See Board of Directors: p.36 and p.37
See Directors’ statement on corporate governance: p.38 to p.41
See Audit Committee report: p.42 to p.44
See Nomination Committee report: p.45
See Report on Directors’ remuneration: p.46 to p.58
See Directors’ report: p.59 to p.61
Effectiveness
A strong, open and
effective Board
Accountability
Close scrutiny of
risks and controls
Remuneration
Prudent oversight
of executive
remuneration
Relations with
shareholders
Open engagement
with shareholders
Dignity plc
Annual Report & Accounts 2014
35
Our governance structure
The Dignity plc Board
(Chairman, Executive Directors and Independent Non–Executive Directors)
Board Level Committees
Audit Committee
(Independent Non–Executive Directors)
Remuneration Committee
(Independent Non–Executive Directors)
Nomination Committee
(Chairman and Independent
Non–Executive Directors)
Executive Management Team
The Board
The Board is responsible for the long-term success of the
Group which includes:
• Overall management of the Group;
• Setting and reviewing the strategy of the Group;
• Approval of major capital expenditure and acquisition projects, and
consideration of significant financial matters;
• Monitoring the exposure to key business risks;
• Approval of major financing and capital structure changes
to the Group;
• Setting annual budgets and reviewing progress towards
achievement of these budgets; and
• Proposing and making dividend payments to shareholders.
The Chairman
The Chairman is responsible for:
• The leadership of the Board;
• Ensuring the Board functions in all aspects of its role;
• Facilitating the effective contribution of the Non-Executive
Directors and ensuring constructive relations between Executive
and Non-Executive Directors;
• Making sure all Directors receive accurate, timely and clear
information;
• Setting the agenda so all relevant issues are discussed, ensuring
sufficient time is devoted to discussing issues particularly
strategic ones;
• Making sure there is effective communication with stakeholders
and acting as the public face of the Group; and
• The Chairman also acts as the Chairman of the Group’s defined
benefit pension scheme and also as Chairman of the various
pre-arranged funeral plan trusts.
Non-Executive Directors
The Non-Executive Directors scrutinise, measure and review the
performance of the management; constructively challenge and
assist in the development of strategy; review the Group’s financial
information and monitor the effectiveness of internal risk
management systems. There are four independent Non-Executive
Directors, the same number as the Executive Directors as prescribed
in the Code for listed companies included in the FTSE 250 Index.
The Chief Executive and Executive Directors
The Chief Executive and Executive Directors are responsible for:
• Operational management and control of the Group on a day to day
basis, local operational decisions are the responsibility of the
local managers, who are accountable to the Chief Executive and
the Executive Directors;
• Formulating and proposing strategy to the Board; and
• Implementing the strategy and policies adopted by the Board.
Senior Independent Director
The Senior Independent Director provides a sounding board for the
Chairman and acts as an intermediary for other Directors if needed
and is available to shareholders if required.
Committees of the Board
There are three standing committees of the Board: the Audit
Committee; the Remuneration Committee and the Nomination
Committee. The Terms of Reference of these Committees are set
by the Board and are available on the Dignity plc corporate website.
Membership is reserved for the Independent Non-Executive
Directors save for the Nomination Committee which is chaired
by the Non-Executive Chairman. The Board Committee Reports
are on pages 42 to 58.
Executive Management Team
The Executive Management team consist of the following
Executive Directors and Senior Managers:
• Chief Executive: Mike McCollum;
• Finance Director: Steve Whittern;
• Operations Director: Andrew Davies;
• Corporate Services Director: Richard Portman;
• General Manager – Crematoria: Steve Gant;
• General Manager – Pre-arrangement: Steve Wallis;
• Head of Corporate Development – Crematoria: Alan Lathbury; and
• Head of Corporate Development – Funerals and Head of
Internal Audit: Debbie Ginn.
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Dignity plc
Annual Report & Accounts 2014
Governance
Board of Directors
“
Our strong and experienced
Board is responsible for
the long-term success
of the Group.
Peter Hindley
Non–Executive Chairman
Mike McCollum
Chief Executive
Appointed to the Board: 2004
Appointed to the Board: 2004
Background and experience:
Peter has extensive experience of
the industry having been appointed
Chief Executive of Plantsbrook Group
plc in 1991. He subsequently led a
management buy out of Dignity in
2002. The Company was then floated
on the Stock Exchange in 2004.
Peter became Non-Executive
Chairman in January 2009. Before
entering the funeral service industry,
Peter held a number of senior
positions in retailing. Peter was
appointed Chairman of the Steering
Committee of the French funerals
group OGF, SA in January 2014.
Background and experience:
Mike joined Dignity’s former parent,
SCI, in 1995 from KPMG Corporate
Finance in London. As Finance
Director he was part of the
management team that guided the
Group through the leveraged buy out
in 2002 and IPO in 2004. He was
appointed Chief Executive in 2009.
He has a law degree from Birmingham
University, is a solicitor and also holds
an MBA from Warwick University.
External appointments:
Non-Executive Director of
CVS Group plc.
Steve Whittern
Finance Director
Andrew Davies
Operations Director
Richard Portman
Corporate Services Director
Appointed to the Board: 2009
Appointed to the Board: 2004
Appointed to the Board: 2006
Background and experience:
Steve joined the Group in 1999 from
KPMG. He was appointed Finance
Director at the beginning of 2009,
having spent the previous two years as
Financial Controller, being responsible
for the Group’s finance function. Steve
has led the three refinancings and
Returns of Cash since 2010, and the
debt and equity funding for the Yew
Acquisition in 2013. Steve is an FCA
and holds a mathematics degree from
Warwick University.
Background and experience:
Andrew joined his family owned
business in 1979 and worked
as a funeral director and embalmer
until the business was sold to Great
Southern Group in 1993. He then held
various management positions within
Great Southern Group and following
the acquisition by SCI in 1994, held
senior operational positions within SCI
(UK). He became Operations Director
in 2001 and was a member of the
management buy out team in 2002.
External appointments:
None.
External appointments:
None.
Background and experience:
Richard joined SCI from HSBC
as Chief Accountant in 1999.
Following the IPO, Richard was
appointed as Company Secretary
and became Corporate Services
Director in 2006. Richard is an FCA,
holds a geography degree from
Birmingham University, is a Fellow
of the Chartered Management
Institute and is a Member of the
Investor Relations Society.
External appointments:
None.
Alan McWalter
Senior Independent Director
Ishbel Macpherson
Non–Executive Director
Appointed to the Board: 2009
Appointed to the Board: 2009
Background and experience:
Alan is Non-Executive Chairman
of Churchill China plc, Belfield
Furnishings Ltd, Kornicis Ltd and
Senior Independent Director of
SDL PLC. Prior to these roles Alan was
Group Marketing Director of Marks
and Spencer plc and before that held
senior positions with Kingfisher plc
and Thomson Consumer Electronics.
Background and experience:
Ishbel is a Non-Executive Director
and Chairman of the Remuneration
Committee of Galliford Try plc, Senior
Independent Non-Executive Director
of Dechra Pharmaceuticals plc and
Senior Independent Non-Executive
Director and Chairman of the Audit
Committee of Bonmarche Holdings
plc. Prior to taking on non-executive
roles she held senior positions with
Barclays de Zoete Wedd, Hoare Govett
and Dresdner Kleinwort Wasserstein.
Jane Ashcroft CBE
Non–Executive Director
Martin Pexton
Non–Executive Director
Appointed to the Board: 2012
Appointed to the Board: 2012
Background and experience:
Jane is Chief Executive of Anchor, a
leading provider of services to older
people and has held a number of
senior positions since joining them
in 1999. She is also Non-Executive
Director of Care England, Treasurer
of The Silver Line and was previously
a Non-Executive Director of Stroud &
Swindon Building Society. A graduate
of Stirling University, she is a Fellow
of the Institute of Chartered
Secretaries & Administrators, a
Member of the Chartered Institute
of Personnel and Development,
a Trustee of Silver Line and was
created a CBE in the 2014 New
Years honours list.
Background and experience:
Martin was previously Managing
Director of LMS Capital plc and
prior to that an Executive Director of
London Merchant Securities plc and
Personnel Director of the law firm
Allen & Overy. He has also in the
past held a number of non-executive
positions including roles with Minerva
plc and Inflexion plc as well as a
number with private companies.
He has an MBA from the London
Business School.
Dignity plc
Annual Report & Accounts 2014
37
Board Committee Membership
as at 26 December 2014
Audit
Committee
Remuneration
Committee
Nomination
Committee
Peter
Hindley
Alan
McWalter
Ishbel
Macpherson
Jane
Ashcroft
Martin
Pexton
Chairman
Member
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See Audit Committee report: p.42 to p.44
See Nomination Committee report: p.45
See Report on Directors’ remuneration: p.46 to p.58
38
Dignity plc
Annual Report & Accounts 2014
Governance
Directors’ statement on corporate governance
How the Board Functions
The Group is controlled through the Board of Directors that meets regularly throughout the year. The Board has adopted a
formal Schedule of Matters Reserved to it which was reviewed, updated and readopted during 2014. The structure of the Board,
together with explanations of responsibilities is shown on page 35. Informal meetings are held between individual Directors
as required.
The management of the Group on a day to day basis is delegated, via the Executive Directors, to an experienced senior and
middle management team whose size and structure is commensurate with the complexity of the Group’s activities. Managers
have the necessary skills and knowledge relevant to their areas of responsibility. The remainder of the responsibilities rest with
the Board however, certain capital expenditures and acquisition projects are delegated under the formally adopted Schedule
of Matters Reserved for the Board and the Expenditure Authorisation Policy.
All Directors are provided with the necessary papers in advance of the meetings to permit them to make informed decisions at
those meetings. The Board also considers employee issues and key appointments, including the role of Company Secretary.
The Board comprises eight Directors and the Non-Executive Chairman. There are the same number of independent
Non-Executive Directors and Executive Directors which the Board consider to be an appropriate and effective combination
and also complies with the Code in respect of FTSE 250 listed companies. The Board also considers that four Executive
Directors are sufficient to manage a Company of this size and organisational structure.
The four independent Non-Executive Directors who served for the period were: Jane Ashcroft, Ishbel Macpherson, Alan McWalter
and Martin Pexton. Biographical details for the Non-Executive Directors appear on page 37. Their role is to challenge constructively
the management of the Group and help develop proposals on strategy. The Non-Executive Directors are chosen for their diversity
of skills and experience. Each Non-Executive Director is appointed for a fixed term of two years, subject to annual re-election by
shareholders. This term may then be renewed by mutual consent up to a maximum of nine years in accordance with the Code.
Appointments beyond six years are also subject to rigorous review prior to approval. The Non-Executive letters of appointment
are available from the Company Secretary.
Alan McWalter is the Senior Independent Director of the Group. His role is to provide a sounding board for the Chairman and act
as an intermediary for other Directors if needed and to be available to shareholders if so required.
The Chairman and the Non-Executive Directors are required to, and have, confirmed formally to the Board that, mindful of their
other commitments they have, and will have, sufficient time to devote to their responsibilities as Directors of the Company.
Jane Ashcroft, Ishbel Macpherson, Alan McWalter, and Martin Pexton are independent of management, as defined by the Code.
All Directors are able to take independent professional advice on the furtherance of their duties if necessary at the Group’s
expense. They also have access to the advice and services of the Company Secretary, who is also the Corporate Services Director
and, where it is considered appropriate and necessary, training is made available to Directors. All Directors receive annual
training and updates on the duties and responsibilities of being a Director of a listed company. This covers legal, accounting
and tax matters as required. In addition any newly appointed director receives appropriate induction training.
The Company maintains appropriate insurance cover in respect of any legal action against its Directors including in respect of
prospectuses issued in connection with the issue of additional Secured Notes and Returns of Value to Shareholders. The level
of cover is currently £70 million.
The Directors have, during the period, formally reminded themselves of their duties as Directors under the Companies Act 2006
(Section 171-177). These duties include the need to avoid conflicts of interest (Section 175). No such conflicts of interest exist.
In accordance with the Code, all Directors will submit themselves for re-election at the forthcoming Annual General Meeting.
Board Appraisal
In accordance with the requirements of the Code an external evaluation of the Board and its Committees was completed in
2013 by Independent Audit Ltd, a specialist company, entirely independent of the Group. The next external evaluation will be
completed in 2016, in accordance with the requirements of the Code that an external evaluation takes place on at least a
three yearly basis. An action plan was developed and implemented to address the points identified, which relate to minor
administrative matters.
During the period, the Board undertook a formal and rigorous evaluation of its own performance and that of its Committees
and Directors by way of the issue of a detailed questionnaire to all Directors. This was then followed by a detailed review of the
responses, by the Directors, and identification of any actions arising. The Non-Executive Directors, led by the Senior Independent
Director, are responsible for the performance evaluation of the Chairman taking in to account the views of the other Executive
Directors. The Board was satisfied that its performance and that of its Chairman, individual Directors and Committees was of
the appropriate standard.
Dignity plc
Annual Report & Accounts 2014
39
Board and Board Committee Attendance
Those attending and the frequency of Board and Committee meetings held during the year was as follows:
Audit Remuneration Nomination
Main Board(i) Committee Committee Committee
Number of meetings 8 4 4 3
Jane Ashcroft 8 4 4 3
Andrew Davies 8 4(ii) – –
Peter Hindley 8 4(ii) 4(ii) 3
Mike McCollum 8 4(ii) 3(ii) 2(ii)
Alan McWalter 8 4 4 3
Ishbel Macpherson 7(iv) 4 4 3
Martin Pexton 8 4 4 3
Richard Portman 7(iv) 4(iii) 3(iii) 2(iii)
Steve Whittern 8 4(ii) – –
(i) Only full Board meetings, of which there are seven per annum, have been included in the attendance analysis together with one further meeting that was convened to deal
with the Return of Value to shareholders. 17 further meetings were held with a quorum of Directors to approve announcements, documents or the issue of shares under the
LTIP and SAYE schemes and technical aspects of the Return of Value to shareholders.
(ii) In attendance by invitation of the respective Committee.
(iii) Richard Portman attended certain Committee meetings in his capacity as Company Secretary.
(iv) Richard Portman was unable to attend one Board meeting because of a long standing family commitment and Ishbel Macpherson was unable to attend one procedural
meeting relating to the issue of the New Notes and Return of Value called at short notice at a time when she had a previous commitment.
The Board has increased the number of regular full Board meetings by one to seven per annum spread broadly equally across
the year. After careful consideration it was decided that this is the appropriate number required to exercise effective governance
and control. Further meetings are arranged if required.
When Directors are unable to attend a meeting, they are advised of the matters to be discussed and given an opportunity to
make their views known to the Chairman prior to the meeting. A process exists whereby such views will be included in the
minutes of the meeting if necessary.
Three meetings between the Chairman and the Non-Executive Directors, without the Executive Directors being present were
held during 2014. These are usually scheduled to occur before full Board meetings.
The Company Secretary
The Company Secretary, Richard Portman, is responsible for overseeing the preparation and distribution of all agendas,
minutes and related Board and Committee papers. As Corporate Services Director, he attends the Board meetings in his
capacity as a Director of the Company but as Company Secretary provides corporate governance advice and ensures all
procedures are followed at those meetings, if required. The minutes of the meeting are taken by an experienced Administrator
from the Corporate Services function. Richard Portman also attends the Committee meetings when requested to do so by the
Chairman of that Committee to provide corporate governance advice as Company Secretary with the minutes being taken
by the Administrator.
The Board is happy that the role of Company Secretary is undertaken by the Corporate Service Director as, whilst traditionally it
might be considered more appropriate to have the roles separate, the Board believes in Dignity’s case it is the most cost effective
and sensible way of filling the role particularly given the skills and knowledge of the Corporate Services Director. The
appointment and removal of the Company Secretary is a matter for the Board as a whole.
Internal Control and Risk Management
The Board recognises it is responsible for the Group’s system of internal control and risk management, which is designed
to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable, and not
absolute, assurance against material misstatement or loss. A formal ongoing process of identifying, evaluating and managing
the significant risks faced by the Group was in place for the period and in place up to the date the Governance Report was signed
and approved for the Annual Report and Accounts 2014. This process was in place at the date of approval of the Annual Report
and is in accordance with the Code.
Internal controls are formally reviewed on an ongoing basis. Internal Audit completes a programme of work each year that
provides assurance that the internal controls have been tested and also proposes improvements where appropriate and
necessary. Coupled with this, the six monthly review of the Risk Register provides a further formal review mechanism for
considering and reviewing internal controls. All such work is reported to and monitored by the Audit Committee who
recommends approval to the full Board and is discussed in the Audit Committee Report on pages 42 to 44.
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Dignity plc
Annual Report & Accounts 2014
Governance
Directors’ statement on corporate governance continued
The Audit Committee on behalf of the Board has formally reviewed during the year and continues to keep under review the
effectiveness of the Group’s systems of internal controls, including financial, operational and compliance controls and risk
management systems. The Audit Committee reviews risk management annually and receives reports from executive management
regarding weaknesses in internal control, any losses arising out of weaknesses in internal control and progress in implementing
revised procedures to improve and enhance internal control. There have been no reports of system weaknesses that have
resulted or would have resulted in a material misstatement or loss.
The key procedures, which operated throughout the period, are as follows:
• Financial reporting – The Group has a comprehensive system of internal budgeting and forecasting. The Group’s monthly
actual results analysed by operating division are reported to the Board and significant variances to budget are investigated with
revised forecasts prepared as necessary. Operational management receives comprehensive management accounts covering
their areas of responsibility, which forms the basis for the consolidated accounts;
• Financial controls – The Executive Directors have defined appropriate and necessary financial controls and procedures to be
employed by operational management. Key controls over major business risks include reviews against budgets and forecasts,
review against key performance indicators and exception reporting;
• Quality and integrity of personnel – One of the Group’s core values is integrity. This is regarded as vital to the maintenance of
the Group’s system of internal financial control. The Directors have put in place an organisational structure appropriate to the
size and complexity of the Group with defined lines of responsibility and delegation of authority where the Board considers it
necessary and appropriate;
• Internal audit – The Group has a dedicated Internal Audit team, which reports to the Audit Committee and the Chief Executive.
It coordinates the completion of self-assessment reports by operational management that assists in highlighting areas of
control weakness or exposure. Internal audit reviews are completed on such areas, together with selected areas of the head
office function and any area where a Director or the Audit Committee requests such a review. During 2014, as in previous
years, there were quarterly meetings between the Head of Internal Audit and the Executive Directors to review formally and
discuss Internal Audit’s work programme and findings. There were also one to one meetings between the Chairman of the
Audit Committee and the Head of Internal Audit. In addition, regular meetings between Internal Audit and the external
auditors, PricewaterhouseCoopers LLP and subsequently Ernst & Young LLP, were held during the year to discuss and plan
audit work and to ensure a complementary approach. The Head of Internal Audit provides reports to the Audit Committee
at every meeting;
• Procedures – The Group has established and documented processes and procedures covering most parts of its operations,
both client facing and in support departments. These provide clear guidance on the correct or most appropriate course of
action in various circumstances. Procedures are supplemented by training, where needs have been identified. Both Internal
Audit and a comprehensive management structure monitor the adherence to such processes and procedures; and
• Risk assessment – Management has responsibility for the identification and evaluation of significant risks that might arise in
their area of responsibility, together with the design of suitable internal controls. This was in place throughout the accounting
period and at the date of approval of the Annual Report. The Executive Directors and the wider management team regularly
assess the risks. A Risk Register is maintained, which is formally presented to and reviewed by the Audit Committee twice
a year. The principal risks and uncertainties facing the Group, which are documented in the Risk Register, are discussed on
pages 27 and 28 of the Annual Report.
These procedures are designed to, amongst other things, help to provide assurance around the process of preparing
consolidated financial statements and the financial reporting system.
An explanation of how the Group aims to create and preserve value and the strategy for delivering its objectives is included
in the Operating review on pages 16 to 21.
Relationship with Shareholders
The Group encourages two-way communication with both its institutional and private shareholders and responds promptly
to any queries received.
The Chief Executive and Finance Director have regular meetings with institutional investors, fund managers and analysts to
discuss information made public by the Group. Where appropriate or if requested, such meetings could include either or both
the Chairman and the Senior Independent Director. The Chairman, Senior Independent Director and the Non-Executive Directors
are also available to meet separately with shareholders if necessary or requested to discuss any issues that they may have.
The Chairman is also available to discuss governance and strategy matters with the major shareholders.
Dignity plc
Annual Report & Accounts 2014
41
The Corporate Services Director, in his additional role as Company Secretary, generally deals with queries from private
shareholders. The Board is as interested in their concerns as it is of institutional and corporate shareholders. All shareholders
are free to attend and put questions to the Board at the AGM on 11 June 2015. At least 20 days’ notice will be given ahead of
that meeting. Questions asked in person at the AGM will receive an oral response whenever possible, otherwise a written response
will be provided as soon as practicable after the AGM. Questions raised at any other time will normally receive a written response.
Shareholders attending the AGM will also have the opportunity to meet informally with all the Directors after the meeting
has concluded.
The Directors consider that this Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s performance, business model, risks and strategy.
In order to assess whether the Annual Report and Accounts were fair balanced and understandable, the Board received an early
draft to enable time for review and comment. The Board then met to consider the criteria for a fair, balanced and understandable
Annual Report and to review the process underpinning the compilation and assurance of the report, in relation to financial and
non-financial management information. As part of that meeting the Board considered the Annual Report and Accounts as a whole
and discussed the tone, balance and language of the document, being mindful of the UK reporting requirements and consistency
between narrative sections and the financial statements. As part of this process the Board considered the Group’s reporting
governance framework and the views of the external auditor as reported to the Audit Committee. Pages 6 to 28 provide an
assessment of the Group’s affairs. The Annual Report and Accounts is made available to all shareholders at least 20 working
days before the AGM. Registered shareholders receive a Notice of Meeting and Form of Proxy, the latter document allowing a
shareholder to vote in favour, or against or indicate an abstention on each separate resolution tabled at the AGM. Particulars of
aggregate proxies lodged are also announced to the London Stock Exchange (‘LSE’) and placed on the Group’s investor website,
www.dignityfuneralsplc.co.uk, as soon as practicable after the conclusion of the AGM.
The Interim Report is no longer published as a paper document but is available on the Group’s investor website upon which users
can also access the latest financial and corporate news. All information reported to the market via regulatory information services
also appears as soon as practicable on that website.
The Group has and will arrange visits to its funeral locations and crematoria, if requested by a shareholder, where it will not
disrupt services we are providing to our clients.
Substantial shareholdings
The Group has been notified of the following interests of three per cent or more of the issued share capital of the Company:
As at 2 March 2015 As at 26 December 2014
Number of Percentage Number of Percentage
Ordinary of issued Ordinary of issued
Holder Shares share capital Shares share capital
BAM & Oppenheimer Funds 4,968,414 10.11% 4,968,414 10.11%
Kames Capital 2,954,272 6.00% 2,954,272 6.00%
Aberdeen Asset Management 2,621,094 5.33% 2,621,094 5.33%
Montanaro Group 2,528,125 5.14% 2,528,125 5.14%
Franklin Templeton Investment Management Limited 2,448,905 4.98% 2,448,905 4.98%
Blackrock Investment Management 1,963,148 3.99% 1,963,148 3.99%
Tiger Global Management LLC 1,934,756 3.94% 1,934,756 3.94%
By order of the Board
Richard Portman
Company Secretary
4 March 2015
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Dignity plc
Annual Report & Accounts 2014
Governance
Audit Committee report
“
During 2014, the Committee monitored the
integrity of the financial statements and other
information provided to shareholders.
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Audit Committee report for 2014.
Membership and Process
The following Directors served on the Audit Committee (the
‘Committee’) during 2014: me (as Chairman), Alan McWalter
(Senior Independent Director), Jane Ashcroft and Martin Pexton
each of whom are independent Non-Executive Directors.
The Board is satisfied that I, as Chairman of the Committee,
have recent and relevant financial experience. The Company
Secretary acts as Secretary to the Committee. I report the
Committee’s deliberations at the next Board meeting and the
minutes of each meeting are made available to all members
of the Board.
The Committee met four times during 2014; in March prior
to the release of the Preliminary Announcement for 2013; in
June 2014 to recommend the appointment of Ernst & Young
LLP (‘EY’) as external auditors following the resignation of
PricewaterhouseCoopers LLP (‘PwC’); prior to the release
of the Interim Announcement for 2014 in July; and again in
December 2014 immediately prior to the end of the financial
period. The attendance records of the members is shown
on page 39. The external auditors, PwC and latterly EY, the
Chairman, the Chief Executive, the Finance Director and the
Operations Director have attended meetings by invitation.
Role
The Committee works with the full Board to fulfil its oversight
responsibilities. Its primary functions are to:
• Monitor the integrity of the financial statements and other
information provided to shareholders to ensure they represent
a clear and accurate assessment of the Group’s position,
performance, strategy and prospects;
• Consider the financial statements and recommend to the
Board on whether the Annual Report and Accounts, taken
as a whole, is fair, balanced, and understandable;
• Review significant financial reporting issues and judgements
contained in the financial statements;
• Review the systems of accounting, internal control and
risk management;
• Monitor and review the significant risks identified by the
Group as well as the mitigation of those risks;
• Oversee and maintain an appropriate relationship with
the Group’s external auditors and review the effectiveness,
independence and objectivity of the external audit process;
Ishbel Macpherson
Chairman of the Audit Committee
• Monitor and review the effectiveness of the internal audit
function; review the internal audit plan; all internal audit
reports; review and monitor management’s responses to the
findings and recommendations of the internal audit function;
and maintain an effective relationship with the Head of
Internal Audit; and
• Monitor and review the arrangements by which employees
can, in confidence, raise concerns about any possible
improprieties in financial and other matters (such as
compliance with the Bribery Act).
The terms of reference are available on the Group’s corporate
website at www.dignityfuneralsplc.co.uk.
Activities in the year
The key activities of the Committee during the year were:
• It reviewed the financial statements in the 2014 Annual Report
and Accounts and the 2014 Interim Report. As part of this
review the Committee received reports from the external
auditors on their audit of that Annual Report and their review
of the interim results. It also reviewed the Preliminary and
Interim Announcements made to the London Stock Exchange;
• At all meetings, save for the one where EY were appointed
external auditors, it reviewed reports made by Internal Audit
which included the review of progress against the plan for the
period, the results of principal audits and other significant
findings, adequacy of management’s responses and the
timeliness of resolution of actions arising;
• Review and agreement of the 2014 External Audit Plan and
a three year rolling plan for Internal audit;
• A six month review and formal adoption of the Risk Register.
This is part of a formal ongoing process of identifying,
evaluating and managing the significant risks faced by the
Group. The principal risks facing the Group are considered
on pages 27 and 28 of the Annual Report;
• Selecting EY as external auditors following a rigorous tender
and evaluation process involving KPMG LLP, Deloitte LLP
as well as EY;
• Formally review the going concern assumptions adopted in
the preparation of the 2013 and 2014 accounts;
• Commissioning and reviewing an independent external
assessment of Internal Audit which was completed by
BDO LLP during the period; and
• Reviewing the terms of reference of the Committee to ensure
they meet both current and best practice. The revised terms of
reference were then adopted by the Board. They are available
on the Group’s corporate website at
www.dignityfuneralsplc.co.uk.
Dignity plc
Annual Report & Accounts 2014
43
Areas that have been discussed and considered by the
Committee in relation to the 2014 Annual Report are:
• Pensions – We examined the assumptions used in the
actuarial valuation for the defined benefit pension scheme
which include the discount rate, the inflation rate and
mortality. We considered the consistency of the basis of
calculation of the assumptions used with 2013, and agreed
with the judgements reached by management;
• Provision for doubtful trade receivables – We discussed the
risks relating to the trade receivables ledger and the adequacy
of provisions made against them. We considered the
consistency of the provisioning methodology to the prior year.
We agreed with the judgements reached by management; and
• Capital refinancing and Return of Value to shareholders –
The Committee considered the appropriateness of the
accounting treatment adopted for the capital refinancing and
Return of Value to shareholders in the year, including that
relating to professional fees. This consideration extended
to consider the appropriateness of extinguishment versus
modification accounting and was based on professional
advice received as part of the transaction.
The Committee discussed the annual external audit plan in
advance of the year end with the external auditors, which
addressed the planned audit approach to these key accounting
areas. The Committee discussed the auditor’s views on key
judgement areas and audit findings relating to key accounting
matters at the conclusion of the audit. As this was EY’s first
year as auditors they have considered various other judgements
made by the Group. The Committee also considered these in
greater detail than usual.
The Committee holds a private session with the Lead Partner
from our external auditors without management present at
least twice a year. In addition, I, as Chairman of the Audit
Committee, met with the Lead Partner three times through the
year to provide the opportunity for open communication and
the free flow of any concerns relating both to the openness,
transparency and general engagement of management with
the audit process as well as to understand EY’s assessment
of key judgements as they arise.
The Audit Committee’s role
The Audit Committee is responsible for the development,
implementation and monitoring of the Group’s policy on
external audit. This policy assigns responsibility for monitoring
objectivity, independence and compliance with ethical and
regulatory requirements to the Audit Committee with day to
day responsibility assigned to the Finance Director, Steve
Whittern. The Committee also retains responsibility for the
appointment and removal of the external auditors, who
are currently EY.
The Audit Committee, on an annual basis, normally formally
considers the performance and independence of the external
auditors. The Committee did not review the performance of the
external auditors in the period as EY were only appointed on
5 June and it was felt to be too early in their tenure to have a
meaningful review. The formal annual reviews will recommence
in 2015. The Committee was, however, satisfied with their
performance in 2014.
The Committee is confident that the objectivity and
independence of the external auditors is not compromised by
reason of non-audit work, not least because now such work will
generally be undertaken by other professional firms. A formal
statement of independence from EY has been received in
respect of 2014.
Audit Tender
As discussed in the 2013 Annual Report the Group decided to
tender the role of external auditor for Dignity plc as the ratio of
non-audit to audit services had continued to be high. PwC did
not take part in the tender process leaving them available to
provide the non-audit services from which the Group has
benefitted over recent years.
There are no contractual obligations restricting the choice
of external auditor save for under the terms of the Secured
Notes. Dignity (2002) Limited and certain of its subsidiaries
are only permitted to engage “a firm of accountants of repute
in the UK”. Consequentially the Group invited tenders from
EY, KPMG LLP and Deloitte LLP. The process consisted of
comprehensive presentations to the Chief Executive, the
Finance Director, myself and the Financial Controller of the
Group together with individual face to face meetings with
certain Directors. Following that process a recommendation
was made by myself, after discussions with the Chief Executive
and the Finance Director, to the Audit Committee to appoint EY.
This recommendation was accepted by the Committee and
recommended to the Board.
Policy on non-audit fees
With effect from 1 January 2014, the Group adopted a more
rigorous and comprehensive policy on the use of the external
auditors for non-audit work. The policy states that non-audit
fees are limited to no more than 50 per cent of the annual
audit fee unless there are exceptional circumstances, which
are defined as:
• The work necessitates the use of the auditor for regulatory
reasons; and
• Their use represents a material time/cost benefit to the Group
in conducting a transaction.
This policy also precludes the use of the external auditors for
certain types of work. All such work will be fully analysed in
the Annual Report between tax compliance and advisory, non
statutory acquisition related services and statutory services.
If non-audit fees to be incurred with the external auditor are
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Dignity plc
Annual Report & Accounts 2014
Governance
Audit Committee report continued
to be in excess of 20 per cent of the audit fee, Audit Committee
approval will be required prior to the work being commenced
and further disclosure of the works and the reasons for it being
performed by the external auditors will be included in the
following Annual Report. The Audit Committee do not envisage
that non-audit fees payable to the external auditors will exceed
50 per cent in the future, other than in exceptional
circumstances.
In the period, EY undertook no non-audit work on behalf of
the Group except for their review of the Interim Report for 2014
and completion of turnover certificates and financial covenants
compliance certificate. Total fees of £40,000 were charged
for the non-audit services, compared to £0.2 million of
audit services.
Audit partner rotation
Consistent with the Auditing Practices Board, EY audit
partners serve for a maximum of five years on listed clients.
This is the first year that Simon O’Neill is Dignity’s audit
partner as a consequence of the change of external auditors.
The Audit Committee considers that the relationship
with the auditors is working well and is satisfied with their
effectiveness. The Audit Committee has also kept under
review the independence of EY and has been satisfied at
all times that any threats arising to their independence have
been subject to appropriate safeguards.
Internal Audit
The Group has a dedicated Internal Audit team, which reports
to the Chief Executive and the Audit Committee. It coordinates
the completion of self-assessment reports by operational
management that assists in highlighting areas of control
weakness or exposure. Internal audit reviews are completed
on such areas together with selected areas of the head office
function and any area where a Director or the Audit Committee
requests a review.
During 2014 (as in 2013), there were quarterly meetings
between the Head of Internal Audit and the Executive
Directors formally to review and discuss Internal Audit’s
work programme and findings. In addition, regular meetings
between Internal Audit and the external auditors, PwC and
latterly EY, were held during the year to discuss and plan audit
work and to ensure a complementary approach. The Head
of Internal Audit provides reports to the Audit Committee at
every full meeting and met on a one to one basis with me,
as the Chairman of the Audit Committee on three occasions
in the period.
An external evaluation of the Internal Audit function was
completed by BDO LLP during the period. The Chartered
Institute of Internal Auditors requires under the International
Professional Practice Framework that ‘external assessments
must be conducted at least once every five years by a qualified,
independent assessor or assessment team from outside the
organisation’. The Committee decided that it was appropriate
to complete such an assessment. BDO LLP concluded that
Internal Audit was operating efficiently and effectively.
A number of suggestions for minor improvements were
made which will be implemented.
Whistleblowing
A formal process, established via the Committee, exists
by which employees of the Group may, in confidence, raise
concerns about possible improprieties in financial reporting or
other matters. This ensures arrangements are in place for the
proportionate and independent investigation of such matters
and appropriate follow-up action. Whistleblowing reports are
formally reviewed on an annual basis by the Committee or
more frequently should the need arise.
This Audit Committee report was reviewed and approved by
the Board on 4 March 2015.
Ishbel Macpherson
Chairman of the Audit Committee
4 March 2015
Nomination Committee report
The Terms of Reference of the Committee
were comprehensively reviewed in the period.
“
Dignity plc
Annual Report & Accounts 2014
45
Dear Shareholder,
On behalf of the Board, I am pleased to present the 2014
Nomination Committee report.
Throughout 2014 the Nomination Committee (the ‘Committee’)
consisted of me (as Chairman), Alan McWalter (Senior
Independent Director), Jane Ashcroft, Ishbel Macpherson and
Martin Pexton each of whom are independent Non-Executive
Directors. The Company Secretary, Richard Portman, acts as
Secretary to the Committee.
The principal duties of the Committee are as follows to:
• Keep under review the structure, size and composition of the
Board which includes ensuring that it has the necessary skills,
knowledge and experience;
• Regularly consider succession planning for the Directors and
senior managers;
• Be responsible for identifying and nominating for approval by
the full Board, candidates to fill Board vacancies as and when
they arise;
• Keep under review the leadership needs of the Group, both
executive and non-executive;
• Review annually the time required from the Non-Executive
Directors; and
• Review the results of the Board performance evaluation that
relate to the composition of the Board.
The terms of reference of the Committee were comprehensively
reviewed during 2014 to ensure they meet both current and
best practice. The revised terms of reference were then adopted
by the Board. They are available on the Group’s corporate
website at www.dignityfuneralsplc.co.uk.
The Committee met three times in 2014. At these meetings
the principal duties of the Committee were formally considered
and no issues or concerns were identified. The members of the
Committee’s attendance record is set out on page 39.
Peter Hindley
Chairman of the Nomination Committee
There were no changes to the composition of the Board
in 2014. At the meeting in January 2014 the Committee
recommended to the Board that Jane Ashcroft and Martin
Pexton be appointed for a further two year period having
already served for two years from 1 April 2012. At the meeting
in December 2014 the Committee recommended to the Board,
following a rigorous review of their performance, that Ishbel
Macpherson and Alan McWalter be appointed for a further two
years from 14 December 2014, having already served for six
years from 12 January 2009.
The Committee, and by extension the full Board, continue to
support the spirit of Lord Davies’ Report “Women on Boards”.
In 2011 we set a goal of 20 per cent of Board positions to be
filled by women by 2015. This objective was achieved in 2012.
We continue to remain mindful of the overall need to recruit the
very best candidates regardless of gender and will continue to
encourage similar diversity in senior management positions
and throughout the workforce.
I am also pleased to confirm that the Group will continue
to publish the details on corporate diversity suggested in
Recommendation 2 of the Davies Report, support the changes
to the UK Corporate Governance Code in Recommendation 3
and report on our compliance (Recommendation 4) and
appointment process (Recommendation 5) in our Annual Report.
During the period, the Board completed an internal performance
evaluation of itself and its Committees. The results of this are
discussed on page 38.
Finally, the Company’s Articles provide that all Directors retire
by rotation with one third being subject to re-election each
year. However we continue to adopt the provisions of the UK
Corporate Governance Code such that all Directors offer
themselves for re-election annually.
This Nomination Committee report was reviewed and approved
by the Board on 4 March 2015.
I report on the Committee’s proceedings at the next full Board
meeting and the minutes of those meetings are made available
to all members of the Board.
Peter Hindley
Chairman of the Nomination Committee
4 March 2015
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration
for the 52 week period ended 26 December 2014
“
With a clear and simple strategy and a motivated
executive team, we are well placed to strengthen
in each of the markets in which we operate and
continue to keep on delivering shareholder value.
As we seek to deliver our ambitious growth plans,
it is important that our executive remuneration
strategy is fit for purpose.
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Remuneration Committee's report on Directors' remuneration
for 2014.
Last year shareholders were given the opportunity to vote on
our first binding remuneration policy and I was delighted that
we received a 98.2 per cent vote in favour.
This year our remuneration policy remains unchanged and
remuneration in 2015 will be in accordance with the approved
policy. For ease of reference the substantive provisions of the
remuneration policy that was endorsed by shareholders last
year are repeated in this report.
The second part of this report, the Annual Report on
Remuneration, sets out the pay outcomes for 2014 and how
we intend to apply our policy for 2015. This section (and my
Annual Statement) will be subject to an advisory vote at the
forthcoming AGM.
Performance outcome for 2014
As highlighted in the Financial review, for the year ended
26 December 2014, the business continued to perform
strongly. Underlying profit before taxation was £58.5 million,
an increase of 11 per cent on the previous period. Underlying
earnings per share was 85.8 pence, an increase of 19 per cent.
Accordingly, the strong performance in EPS growth has
generated maximum annual bonus payments for Executive
Directors, being 100 per cent of individuals' base salaries.
Long-term incentive awards made in March 2012 under the
shareholder approved Long-Term Incentive Plan (‘LTIP’) are
subject to a relative total shareholder return (‘TSR’) measure.
These awards will vest on 29 March 2015 and based on
performance to 26 December 2014, Dignity returned 126.1 per
cent compared to the median of the TSR peer group of 45 per
cent. If this relative performance is maintained, the anticipated
level of vesting is 100 per cent of the award.
The Committee believes that this represents a fair link between
reward and performance for the year under review.
Business context and application of policy for 2015
Dignity plc has been a very strong and consistent performer
since coming to market in 2004. Shareholders have seen the
benefits of a stable and talented management team that came
together at the end of 2008. Since then, the Company has
significantly outperformed the FTSE 100 and 250 indices
over one, three and five year periods.
With a clear and simple strategy (as set out on pages 10
and 11) and a motivated executive team, we are well placed
to strengthen in each of the markets in which we operate and
continue to keep on delivering shareholder value. As we seek
to deliver our ambitious growth plans, it is important that
our executive remuneration strategy is fit for purpose. In this
regard, we are committed to ensuring that rewards for
Executives are closely aligned to the interests of shareholders
by having all our incentive arrangements linked to challenging
performance targets, focused on growing earnings and
generating market beating levels of shareholder return.
Alan McWalter
Chairman of the Remuneration Committee
Annual bonus and long-term incentive plan opportunities
remain unchanged from the year under review. The Committee
continues to believe that the current arrangements do not
inadvertently encourage undue risk taking given the clear long-
term focus in our policy. The operation of the LTIP, in addition
to operating clawback provisions in the short and long-term
plans and share ownership guidelines, ensure that executive
rewards are clearly aligned with the long-term objectives of
the Company and its shareholders.
A two per cent increase has been applied to the Chief
Executive's and Corporate Services Director's salary which is
in line with the general employee increase. However, following
consultation with our leading shareholders, more significant
rises have been awarded to the Finance Director and the
Operations Director.
Steve Whittern was promoted to Finance Director in 2009 on a
below market salary and in recent years we have taken steps to
move him gradually towards an appropriate rate. Reflecting his
continued strong performance in the role which this year was in
part demonstrated by the complex debt refinancing he led, the
Committee has decided to increase his salary by 13 per cent
to £300,000 per annum.
The Operations Director, Andrew Davies, has been instrumental
in delivering the Group's strategy, particularly in overseeing our
acquisition strategy. He has been responsible for delivering a
30 per cent increase in the number of funeral locations and the
above plan performance of our largest ever acquisition, Yew
Holdings Limited. The Committee has decided to award a
15 per cent increase in his salary to £310,000 per annum.
His previous increases have been a modest two per cent or
lower in each of the last five years.
The Committee considered the above salary increases carefully
and whilst the Committee is very conscious of the relationship
to workforce pay we are satisfied that the revised salaries reflect
the size, breadth and sophistication of the Group and the roles
and will assist in providing market competitive levels of pay
which better reflect the individuals' respective increased
experience and responsibilities. Further details are provided
in the Annual Report on Remuneration.
Shareholder feedback
The Remuneration Committee encourages dialogue with the
Company's shareholders. We consulted major shareholders
on the salary increases proposed for 2015 and will continue to
consult with major shareholders ahead of any significant future
changes to the remuneration policy.
We look forward to your continued support of our remuneration
policy at the 2015 Annual General Meeting.
Alan McWalter
Chairman of the Remuneration Committee
4 March 2015
Dignity plc
Annual Report & Accounts 2014
47
Introduction
At the AGM held on 5 June 2014, shareholders overwhelmingly approved a new Directors' Remuneration Policy for the
Company. This policy, which specifies the pay elements operated by the Company and summarises the approach that the
Committee will adopt in certain circumstances such as the recruitment of new directors and/or the making of any payments
for loss of office, became effective on approval of the Policy and was applied by the Committee during 2014. It will continue
to be operated in 2015.
Although not required by The Large and Medium-sized Companies and Groups Regulations 2008 as amended in 2013, the
substantive terms of the above Directors' Remuneration Policy are repeated for ease of reference. However, any details that
were specific to 2014 or earlier years (including, for example, any disclosures relating to named directors and the illustrative
remuneration scenarios set out on page 50 have been updated to reflect the current position. The policy as originally approved
by shareholders can be found on pages 54 to 67 of the Annual Report & Accounts 2013, a copy of which is available on the
Company's website www.dignityfunerals.co.uk/corporate.
REMUNERATION POLICY REPORT
The objective of the remuneration policy is to provide remuneration packages to each Executive Director that will:
• Align rewards with the interests of shareholders;
• Motivate and encourage superior performance;
• Allow the Group to retain the talent needed to execute its business strategy;
• Enable the Group to be competitive when recruiting appropriately skilled and experienced management; and
• Ensure that the overall package for each Director is linked to strategic objectives of the Group.
The Remuneration Committee is confident that this policy will retain and develop further the Group’s entrepreneurial culture,
whilst also focusing executive remuneration on performance which the Committee believes will best serve shareholders’ interests.
It is therefore the aim of the Remuneration Committee to encourage and reward superior performance by Executive Directors with
that performance being measured against robust financial performance and returns to shareholders. This is achieved by heavily
weighting the overall remuneration package towards variable pay.
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
The table below summarises the main components of Dignity's ongoing remuneration policy.
Element Purpose and link Operation Maximum Opportunity Framework used to
to strategy assess Performance
Base salary
Essential to recruit and
retain executives.
Reflects an individual's
experience, role and
performance.
Salaries are paid monthly. They are normally reviewed
annually and fixed for 12 months commencing
1 January.
In deciding appropriate levels, the Committee
takes into account:
• the role, experience, responsibility and performance
(individual and Group);
• increases applied to the broader workforce; and
• relevant market information for similar roles in
broadly similar UK listed companies and companies
of a similar size.
Benefits
Operate competitive
benefits to help recruit
and retain executives.
Pension
Provides a discrete
element of the package
to contribute to post
retirement lifestyle.
Annual
bonus
To motivate executives and
incentivise the achievement
of annual financial and/or
strategic business targets.
Benefits include provision of a company car (or cash
allowance in lieu), fuel, landline telephone at residence,
mobile phone, family private medical cover and a
pre–arranged funeral plan for the individual or spouse.
Relocation or other related expenses may be offered,
as required.
May participate in the all-employee HMRC approved
Save As You Earn (‘SAYE’) option scheme.
The Company operates a defined benefit plan, the
Dignity Pension and Assurance Scheme, under which
selected executives may accrue benefit. The defined
benefit plan is closed to new members.
The Company may contribute to selected individuals'
personal pension schemes or is able to make salary
supplements in lieu of pension contributions.
Details of the arrangements for the Directors are set
out in the Annual Report on Remuneration.
Bonus payment is determined by the Committee after
the year end, based on performance against targets
set prior to the start of the year. Targets are reviewed
annually.
The bonus is payable in cash following the audit of
the performance year.
Bonus payments can be clawed back in the event
of financial misstatement or miscalculation of
performance conditions.
Generally, annual
increases will be in line
with employee increases
but higher increases may
be awarded on occasion
where an individual is
promoted or has been
recruited on a below
market rate or where there
have been changes to
individual responsibilities
or in the size or complexity
of the business.
Salaries for 2015 are:
CEO: £486,000;
Operations Director:
£310,000;
Finance Director:
£300,000; and
Corporate Services
Director: £235,000.
Market competitive levels.
Relocation expenses
must be reasonable and
necessary.
HMRC individual SAYE
limit (currently £500
per month).
The accrual rate under
the defined benefit scheme
is one eightieth of final
salary for every completed
year of service.
The Company contribution
to defined contribution
plans or salary supplement
in lieu of pension may be
made up to the value
of 15% of salary.
The maximum award
under the annual bonus
scheme is 100%
of salary.
None.
None.
Not applicable.
The bonus may be based
on the achievement of
an appropriate mix of
challenging financial,
strategic or personal
targets.
Financial measures which
account for the majority,
if not all, of the bonus
opportunity may include
measures such as EPS
(or other measures of
profit) or cash flow taking
into account the strategic
objectives of the business
from time to time.
For financial metrics, a
range of targets is set by
the Committee, taking into
account factors such as
the business outlook for
the year.
• Nothing is payable
for performance below
a minimum level
of performance.
• Up to 70% is payable
for meeting a demanding
target and up to a further
30% is payable for
achieving a second, more
demanding target.
• Bonus is payable on a pro
rata basis for performance
between the first and
second targets.
See Note 1.
Dignity plc
Annual Report & Accounts 2014
49
Element Purpose and link Operation Maximum Opportunity Framework used to
to strategy assess Performance
Long–Term
Incentive
Plan
Incentivises selected
employees and Executive
Directors to achieve
demanding financial
and superior long-term
shareholder returns.
Provides long-term
retention.
Aligns the interests
of the Executives and
shareholders through the
requirement to build up a
substantial shareholding.
Awards are normally granted annually
in the form of nil cost options or a
combination of nil cost options.
Stretching performance conditions
measured over a period of three years
determine the extent to which awards vest.
Quantum is reviewed annually (subject to
the LTIP individual limit) taking into account
matters such as market practice, overall
remuneration, the performance of the
Company and the Executive being granted
the award.
Vested awards are subject to clawback
in the event of financial misstatement or
miscalculation of performance conditions.
The maximum
annual award to an
individual is 125%
of salary.
Awards under the LTIP vest at the end of
a three year performance period subject to
the satisfaction of challenging performance
measures. Two measures apply:
• A portion of awards will vest based on the
Company’s total shareholder return (‘TSR’)
performance over a three year performance
period compared to a comparator group set
on grant. 25% of this part of the award vests
at median, with 100% vesting for upper
quartile performance with straight line
vesting in between. For this part of the
award, no vesting can occur unless the
Committee considers that the underlying
financial performance of the Group has
been satisfactory.
• A portion of awards will be subject to a
sliding scale of underlying earnings per
share growth targets. 15% of this part of
the award vests for achieving a threshold
level of growth, with full vesting for stretch
performance or better. For performance
between these points, vesting is on a
straight line basis.
In determining the target range for any
financial measures that may apply, the
Committee ensures they are challenging by
taking into account current and anticipated
trading conditions, the long-term business
plan and external expectations.
TSR and EPS performance periods
commence from the start of the financial
year in which the award is made.
See Note 2.
Non–Executive
Chairman and
Directors’ fees
To attract and retain high
quality and experienced
Non–Executive Chairman
and Directors.
Share
ownership
guidelines
To align the interests
of management and
shareholders and promote
a long-term approach
to performance.
Current fees are
set out in the
Annual Report on
Remuneration.
Not applicable.
Not applicable.
Not applicable.
The Board determines the fees of the
Non–Executive Directors. They are based
upon recommendations from the Chairman
and Chief Executive (or, in the case of the
Chairman, based on recommendations
from the Remuneration Committee and
the Chief Executive).
The level of fees of the Non–Executive
Directors reflects the time commitment
and responsibility of their respective roles.
Their fees are reviewed annually against
broadly similar UK listed companies and
companies of a similar size.
In exceptional circumstances, additional
fees may be payable to reflect a substantial
increase in time commitment of the
Non–Executive Chairman and Directors.
Executive Directors are required to
accumulate a holding in the Company to
the value of 100 per cent of their salary as
at 1 March 2013. Until the guideline is met,
the executive is required to retain 50 per
cent of shares acquired under the
Company’s share plans (after allowing for
tax and national insurance liabilities).
Notes
1. In terms of annual performance targets, underlying EPS is used as the primary performance metric reflecting the Company's objective of increasing earnings and
shareholder value.
2. Total Shareholder Return is an important benchmark of the success of the business and provides a strong alignment with the returns received by shareholders.
The EPS measure ensures a focus on long-term profitability which the Committee believes is a driver of shareholder value.
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
Bonus Plan and LTIP discretions
The Committee will operate the annual bonus plan and LTIP according to their respective rules and in accordance with the
Listing Rules and HMRC rules where relevant. A copy of the LTIP rules is available on request from the Company Secretary.
The Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and
administration of these plans. These include (but are not limited to) the following (albeit with the level of award restricted
as set out in the policy table above):
• Who participates in the plans;
• The timing of grant of award and/or payment;
• The size of an award and/or a payment;
• Discretion relating to the measurement of performance in the event of a change of control or reconstruction;
• Determination of a good leaver (in addition to any specified categories) for incentive plan purposes based on the rules of each
plan and the appropriate treatment chosen;
• Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring, on a change of control and special
dividends); and
• The ability to adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose whilst
being no less stretching.
Legacy arrangements
For the avoidance of doubt, in approving the Policy Report, authority is given to the Company to honour any commitments
entered into with current or former directors that have been disclosed previously to shareholders.
Differences in remuneration policy for Executive Directors compared to other employees
The Committee is made aware of pay structures across the wider Group when setting the remuneration policy for Executive
Directors. The Committee considers the general basic salary increase for the broader employee population when determining the
annual salary review for the Executive Directors.
An annual bonus plan operates across all employees in the Group and all permanent employees are eligible to participate in the
SAYE scheme.
Overall, the remuneration policy for the Executive Directors is more heavily weighted towards variable pay than for other employees.
This ensures that there is a clear link between the value created for shareholders and the remuneration received by the Executive
Directors given it is the Executive Directors who are considered to have the greatest potential to influence Company value creation.
Remuneration scenarios for Executive Directors
The Company's policy results in a significant portion of remuneration received by Executive Directors being dependent on
Company performance. The graph below illustrates how the total pay opportunities for the Executive Directors for 2015 vary
under three performance scenarios: below target, on-target and maximum.
£’000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
LTIP
Annual Bonus
Fixed Pay
36%
29%
25%
28%
38%
30%
26%
29%
37%
30%
26%
29%
36%
29%
25%
27%
47%
35%
45%
32%
45%
33%
48%
48%
35%
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Chief Executive Officer
Finance Director
Operations Director
Corporate Services Director
Notes
• Below target comprises Fixed pay. Fixed pay is the sum of 2015 basic salary, the value of benefits in 2014 and 2015 pension provision. Fixed pay is constant across all three scenarios.
• For On-target; assumed 70 per cent of maximum bonus paid (which is also the start-to-earn point) and 50 per cent of LTIP vests.
• For Maximum; assumed full bonus payment and LTIP vests in full.
• No account has been taken of any changes in the Company's share price since the end of the period.
Dignity plc
Annual Report & Accounts 2014
51
Recruitment and Promotion policy
The remuneration package for a new director will be established in accordance with the Company's approved policy subject to
such modifications as are set out below.
Salary levels for Executive Directors will be set in accordance with the Company's remuneration policy, taking into account the
experience and calibre of the individual and their existing remuneration package. Where it is appropriate to offer a lower salary
initially, a series of increases to the desired salary positioning may be made over subsequent years subject to individual
performance and development in the role. Benefits will generally be provided in line with the approved policy, with relocation or
other expenses provided for if necessary. A pension contribution of up to 15 per cent of salary may be provided or continued
participation in the defined benefit pension scheme for a promoted employee who currently participates in the plan.
The structure of variable pay elements will be in accordance with the Company's approved policy detailed above. The maximum
aggregate variable pay opportunity is 225 per cent of base salary. Different performance measures may be set initially for the
annual bonus in the year of joining, taking into account the responsibilities of the individual, and the point in the financial year
that he or she joined the Board.
In the case of external recruitment, if it is necessary to buy out incentive pay or benefit arrangements (which would be forfeited
on leaving the previous employer), this may be provided, taking into account the form (cash or shares), timing and expected value
(i.e. likelihood of meeting any existing performance criteria) of the remuneration being forfeited. Replacement share awards, if
used, may be granted using the Company's existing share plans to the extent possible, although awards may also be granted
outside of these schemes if necessary and as permitted under the LSE Listing Rules.
In the case of an internal recruitment, any outstanding variable pay awarded in relation to the previous role will be allowed to pay
out according to its terms of grant or adjusted as considered desirable to reflect the new role.
Fees for a new chairman or non-executive director will be set in line with the approved policy.
Service contracts and payments for loss of office
The Company's policy is to have service contracts for Executive Directors that continue indefinitely unless determined by their
notice period. Under the Executive Directors' service contracts and in line with the policy for new appointments, 12 months' notice
of termination of employment is required by either party.
All Non-Executive Directors have letters of appointment with the Company for an initial period of two years, subject to annual re-
appointment at the AGM. Appointments may be terminated with three months' notice. The appointment letters for the Chairman
and Non-Executive Directors provide that no compensation is payable on termination, other than accrued fees and expenses.
In accordance with the terms of the UK Corporate Governance Code all Directors submit themselves for re-election at the Annual
General Meeting each year. Service contracts and letters of appointment are available for inspection at the Company's registered
office. Details of the service contracts with all Executive Directors and letters of appointment with Non-Executive Directors are
as follows:
Name
Mike McCollum
Andrew Davies
Richard Portman
Steve Whittern
Peter Hindley
Ishbel Macpherson
Alan McWalter
Jane Ashcroft
Martin Pexton
Contract date
Notice period
1 April 2004
1 April 2004
1 November 2006
1 January 2009
7 December 2013
1 January 2015
1 January 2015
1 April 2014
1 April 2014
12 months
12 months
12 months
12 months
3 months
3 months
3 months
3 months
3 months
Unexpired term of contract
or letter of appointment
at period end
Rolling Contract
Rolling Contract
Rolling Contract
Rolling Contract
24 months
24 months
24 months
15 months
15 months
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
For Executive Directors, the Company may in its absolute discretion at any time after notice is served by either party, terminate a
Directors' contract with immediate effect by paying an amount equal to base salary for the then unexpired period of notice plus
the fair value of contractual benefits subject to the deduction of tax.
An Executive Director's service contract may be terminated without notice for certain events such as gross misconduct or a
serious breach of contract. No payment or compensation beyond salary (and the value of holiday entitlement) accrued up to the
date of termination will be made if such an event occurs.
There are no special provisions relating to change of control. The policy on termination is that the Group does not make payments
beyond its contractual obligations and the Committee ensures that there are no unjustified payments for failure.
Any statutory payments required by law may be made.
The Group allows Executive Directors to hold a Non-Executive position with one other company or organisation, for which they can
retain the fees earned. Mike McCollum was appointed a non-executive director of CVS Group plc on 2 April 2013 and received
remuneration of £40,000 per annum (including an allowance for his role as Chairman of the Remuneration Committee).
Treatment of incentives
The treatment of share-based incentives previously granted to an Executive Director under the LTIP will be determined based on
the plan rules. The default treatment will be for outstanding awards to lapse on cessation of employment. However, an executive
will be treated as a 'good leaver' under certain circumstances such as death, illness, injury, disability, redundancy, retirement, his
employing company ceasing to be a Group Company or the undertaking business or division for which he or she works being sold
out of the Company's Group, or any other circumstances at the discretion of the Employee Benefits Trust trustee having obtained
the opinion of the Committee. If treated as a good leaver, awards will vest, as normal, three years after grant after an assessment
of the extent to which performance targets have been achieved. The number of awards that would vest will be reduced pro-rata to
reflect the proportion of the three year period actually served.
How shareholder views are taken into account
The Remuneration Committee considers shareholder feedback received in relation to the AGM each year and guidance from
shareholder representative bodies more generally. This feedback, plus any additional feedback received during any meetings from
time to time, is then considered as part of the Company's annual review of remuneration policy. In early 2015 the Committee
consulted our leading shareholders and certain institutional shareholder bodies/proxy agencies over proposed salary rises.
Consideration of employment conditions elsewhere in the Group
The Company, does not actively consult with employees on Directors' remuneration. However, when setting the remuneration policy
for Executive Directors, the Committee takes into account the pay and employment conditions of other employees in the Group.
ANNUAL REPORT ON REMUNERATION
This part of the report has been prepared in accordance with Part 3 of Schedule 8 to The Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013, and 9.8.6R of the Listing Rules. The Annual Report on
Remuneration set out below (and the Chairman's Annual Statement) will be put to an advisory shareholder vote at the 2015 AGM.
The information from the single total remunerations figures for Directors on page 54 to the end of page 56 has been audited.
The remainder is unaudited.
Implementation of Remuneration Policy in 2014
Salaries
Following the review of Executive Directors' base salaries during the last quarter of the financial period ending 26 December 2014,
and after considering the levels of anticipated salary increases across the Group as a whole, the Committee decided to increase the
Executive Directors' salaries as shown in the table below with effect from 1 January 2015.
2015 2014 Increase
Mike McCollum £486,000 £476,250 2%
Andrew Davies £310,000 £270,500 15%
Richard Portman £235,000 £230,000 2%
Steve Whittern £300,000 £265,000 13%
Over the last two years the Committee has moved to correct Steve Whittern’s below market base salary, to reflect his progress
in his role of Finance Director. In last year's report, we flagged that the Committee may continue this process by applying above
inflationary increases and the latest increase reflects Mr Whittern's continued strong performance in the role. A key example of this
in 2014 was the strong leadership he showed in the complex £600 million refinancing of the Group's debt obligations. The increase
for 2015 also reflects his overall increased experience and the Committee's staged approach to increases over a period of time.
The Committee is aware of the dangers of over-reliance on market data but, for information, the latest increase will position his
salary (and total target remuneration) below market levels by FTSE 250 standards.
Dignity plc
Annual Report & Accounts 2014
53
The Committee has increased Andrew Davies's salary by 15 per cent to reflect his increased responsibilities as Operations
Director and the importance of his role in delivering the Group's strategy. In making its decision, the Committee considered the
following factors:
• The number of funeral locations has increased from 544 to 718, a 32 per cent increase, since 2008;
• Acquisition activity for small businesses has increased significantly with Andrew Davies taking a vital role in overseeing each
deal undertaken. This includes the successful integration of Yew Holdings Limited which, under his guidance, is operating well
ahead of plan;
• Mr Davies is taking additional responsibility for vehicle procurement in 2015;
• Since an increase to his salary in 2008, his annual increases have been modest at two per cent or lower in each of the last
five years;
• It is imperative that Mr Davies is remunerated at a rate that is in line with market levels and that he is appropriately incentivised
and retained for the next stage in the Company's strategy; and
• Mr Davies's 2015 salary (and total target remuneration) will also be below FTSE 250 market levels.
The salaries for Mike McCollum and Richard Portman have increased by two per cent which is in line with the general employee
increase. The Committee is satisfied that the above salary changes reflect the size, breadth and sophistication of the Group and the
roles and will assist in providing market competitive salaries which better reflect the individuals' responsibilities and experience.
Chairman and Non–Executive Directors' fees
As set out in the Policy Report, the Company's approach to setting Non-Executive Directors' remuneration is with reference to
market levels in comparably sized FTSE companies, levels of responsibility and time commitments. An inflationary rise has been
applied to their fees for 2015. A summary of current fees is as follows:
2015 2014 Increase
Peter Hindley £166,600 £163,250 2%
Jane Ashcroft £45,000 £44,000 2%
Ishbel Macpherson £54,000 £52,900 2%
Alan McWalter £60,400 £59,000 2%
Martin Pexton £45,000 £44,000 2%
The base fees for Non-Executive Directors in 2015 were £45,000. The Senior Independent Director receives an additional fee of
£9,300 and the Chairs of the Audit and Remuneration Committees receive additional fees of £9,000 and £6,100 respectively.
The fees have been increased by two per cent from 2014.
Pension and Benefits
Mike McCollum receives a salary supplement in lieu of pension of 15 per cent of his basic salary. Richard Portman ceased to be
an active member of the Group's defined benefit plan on 31 March 2014 and receives a salary supplement in lieu of pension of
15 per cent of his basic salary. No contributions will be made for Andrew Davies or Steve Whittern in 2015.
Annual bonus
The annual bonus will operate on the same basis as for 2014 and consistent with the policy detailed in the Policy Report in terms
of the maximum bonus opportunity and clawback and malus provisions.
All of the bonus will be based on EPS targets with nothing payable for performance below a minimum level of performance,
70 per cent payable for achieving a demanding target and a further 30 per cent payable for achieving a second, more demanding,
target. Bonus is payable on a pro rata basis for performance between the first and second targets.
The EPS targets themselves are deemed to be commercially sensitive and have not been disclosed prospectively. However, full
retrospective disclosure of the targets and performance against them will be provided in next year's remuneration report.
Long–term incentives
The maximum normal annual award limit under the LTIP is 125 per cent of salary and it is intended that awards will be granted
in 2015 at this level to Executive Directors. Clawback and malus provisions will operate as set out in the Policy Report.
Consistent with the conditions applying to the 2014 awards, half of the 2015 awards will be subject to a relative TSR measure
measured against the constituents of the FTSE 350 as at 29 December 2014 and the other half subject to EPS growth targets.
The performance period for both tranches will be the three financial years, 2015-2017.
• TSR – No part of this award vests if performance is below median, 25 per cent vests for achieving median, with 100 per cent
vesting for upper quartile performance with straight line vesting in between. For this part of the award, no vesting can occur
unless the Committee considers that the underlying financial performance of the Group has been satisfactory.
• EPS – No part of this award vests if compound annual growth in underlying EPS above RPI is less than six per cent p.a., 15 per
cent vests for six per cent p.a. real growth, 50 per cent vests for nine per cent p.a. real growth with full vesting for 11 per cent
p.a. real growth or better. Vesting is on a straight line basis for performance in between these points.
The Committee believes the EPS targets are sufficiently challenging in light of internal and external forecasts.
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
Single total remuneration figure for Directors
The following table presents a single total remuneration figure for 2014 for the Executive and Non–Executive Directors.
Fixed Pay Pay for Performance
Annual Total
Salary Benefits(a) Pension(b) Bonus(c) LTIP(d) Other(e) Remuneration
£000’s £000’s £000’s £000’s £000’s £000’s £000’s
Executive Directors
Mike McCollum 476 19 72 476 1,223 – 2,266
2013 467 18 70 467 1,195 – 2,217
Andrew Davies 271 28 – 271 694 – 1,264
2013 265 29 – 265 679 – 1,238
Richard Portman 230 18 33 230 556 – 1,067
2013 212 18 34 212 543 9 1,028
Steve Whittern 265 19 – 265 556 – 1,105
2013 235 18 – 235 543 9 1,040
Non–Executive Directors
Peter Hindley 163 1 – – – – 164
2013 160 1 – – – – 161
Jane Ashcroft 44 – – – – – 44
2013 41 – – – – – 41
Ishbel Macpherson 53 – – – – – 53
2013 52 – – – – – 52
Alan McWalter 59 – – – – – 59
2013 58 – – – – – 58
Martin Pexton 44 – – – – – 44
2013 41 – – – – – 41
(a) Benefits include provision of a company car or allowance, fuel, family private medical cover, landline telephone at each Executive Director’s home residence and a mobile
telephone together with a pre-arranged funeral plan in accordance with any scheme established by the Group in respect of the funeral of the Executive Director or his spouse.
(b) Pension includes a cash contribution for Mike McCollum and the value of participation in the Group’s defined benefit pension scheme for Richard Portman to 31 March 2014
and a cash contribution thereafter.
(c) The bonus refers to performance in the 2014 financial year and is due to be paid in cash in March 2015.
(d) The LTIP value relates to the award that was granted on 28 March 2012. The performance period for this award ends on 28 March 2015. Our estimate of likely vesting is
based on performance to 26 December 2014 and using the average share price for the 28 day period to 26 December 2014. The comparative number is the 2011 LTIP that
vested in 2014 which has been updated for the final level of vesting of 100 per cent and for the share price at the date of vesting 1,471 pence. This represents the gain on
options exercised by the Executive Directors in 2014.
(e) The value of SAYE awards upon exercise.
Determination of 2014 annual bonus outcome
The targets for the 2014 annual bonus were based on the achievement of set earnings per share growth targets. 70 per cent of the
maximum bonus (being 100 per cent of salary for Executive Directors) was payable for achieving a first demanding underlying EPS
target of 81.9 pence per share and 100 per cent for a second, more demanding underlying EPS target of 84.4 pence per share.
Target (for Stretch (for Cash bonus
which 70% of which 100% of payable (out of
maximum maximum 100% of salary
Weighting payable) payable) 2014 achieved maximum)
Earnings per share
100%
81.9 pence
84.4pence
85.8 pence
100%
The strong growth in underlying EPS over the year of 19 per cent meant that the first and second EPS targets were met.
Accordingly, the Committee awarded Executive Directors full bonuses in respect of the 2014 financial year, being 100 per cent
of base salary. None of the annual bonus is deferred.
Determination of LTIP awards with performance periods ending in the year and SAYE vesting
The TSR performance period for the LTIP awards made 2012 will end on 28 March 2015. The estimated vesting for this award is
100 per cent for performance to 26 December 2014. This is based on Dignity's TSR of 126.1 per cent which places the Company
32 out of the remaining 338 listed companies in the Comparator Group.
Performance level TSR relative to FTSE 350 companies
Below threshold
Threshold
Stretch or above
Actual achieved
Performance required
Below median
Median
Upper quartile or above
Upper quartile or above
% vesting
0%
25%
100%
100%
Dignity plc
Annual Report & Accounts 2014
55
2011 LTIP award
In last year's report, an estimate for TSR vesting portion of the 2011 LTIP award of 99.4 per cent was provided based on
performance to 27 December 2013. Following the end of the performance period on 20 March 2014, the final calculation was
performed and Dignity’s actual TSR over the three year period was 121.6 per cent placing Dignity 52 out of the 334 companies
in the TSR peer group.
LTIP awards granted in the year
LTIP awards granted in the form of nil cost options to Executive Directors on 24 March 2014 were as follows:
Face/maximum value
Number of LTIP of awards % of award vesting at
Executive awards at grant date*£ threshold and maximum Performance period
Mike McCollum 43,999 595,313 • Threshold: 15% for EPS and 30.12.13 – 30.12.16
Andrew Davies 24,991 338,125 25% for TSR. 30.12.13 – 30.12.16
Richard Portman 21,249 287,500 30.12.13 – 30.12.16
Steve Whittern 24,483 331,250 • 100% for maximum vesting. 30.12.13 – 30.12.16
* Based on a face value grant of 125 per cent of salary and using a 28 day average share price to 31 December 2013 of 1,353 pence.
The 2014 LTIP awards will vest subject to achievement against two performance measures. Half of the awards will vest
depending on the Company’s TSR performance over a three year period commencing on 1 January 2014, with no opportunity to
retest. TSR will be compared to the constituents of the FTSE 350. No award will vest unless the Committee considers that the
Group’s underlying financial performance over the period has been satisfactory. None of the award shall vest if the Company's
ranking is below median. At median, 25 per cent of the award will vest and the award will vest in full if the Company is ranked in
the upper quartile. Awards will vest on a straight line basis for a ranking between median and upper quartile.
The other half of the awards will vest subject to a sliding scale of underlying EPS growth targets measured over three financial
years to 30 December 2016. 15 per cent of this part of the award vests for compound annual growth in underlying EPS above
RPI of six per cent p.a., 50 per cent vests for nine per cent p.a. real growth with full vesting for 11 per cent p.a. real growth or
better. For performance between these points, vesting is on a straight line basis.
Clawback and malus provisions apply.
Outstanding Long-Term Incentive Plan awards
Details of the nil cost option awards, not yet vested and exercised, made under the LTIP are disclosed in the table below:
Share price Granted Lapsed Vested and Earliest date Latest date
Award at grant As at during during exercised As at shares can be shares can be
Director grant date (pence) 27.12.13 year year during year 26.12.14 acquired acquired
Mike McCollum
Andrew Davies
Richard Portman
Steve Whittern
18.03.11(ii)
28.03.12(iii)
19.03.13(iv)
24.03.14(v)
18.03.11(ii)
28.03.12(iii)
19.03.13(iv)
24.03.14(v)
18.03.11(ii)
28.03.12(iii)
19.03.13(iv)
24.03.14(v)
18.03.11(ii)
28.03.12(iii)
19.03.13(iv)
24.03.14(v)
691p
815p
1,023p
1,353p
691p
815p
1,023p
1,353p
691p
815p
1,023p
1,353p
691p
815p
1,023p
1,353p
81,223
70,219
57,050
–
46,129
39,884
32,405
–
36,903
31,907
25,929
–
36,903
31,907
28,715
–
–
–
–
43,999
–
–
–
24,991
–
–
–
21,249
–
–
–
24,483
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81,223
–
–
–
46,129
–
–
–
36,903
–
–
–
36,903
–
–
–
–
70,219
57,050
43,999
–
39,884
32,405
24,991
–
31,907
25,929
21,249
–
31,907
28,715
24,483
21.03.14
29.03.15
20.03.16
25.03.17
21.03.14
29.03.15
20.03.16
25.03.17
21.03.14
29.03.15
20.03.16
25.03.17
21.03.14
29.03.15
20.03.16
25.03.17
17.03.15
27.03.22
18.03.23
24.03.24
17.03.15
27.03.22
18.03.23
24.03.24
17.03.15
27.03.22
18.03.23
24.03.24
17.03.15
27.03.22
18.03.23
24.03.24
(i) The awards under the LTIP up to and including those made in 2012 are subject to a comparative TSR performance condition against the constituents of the FTSE 350.
Awards will only be released if the Group’s comparative TSR performance is equal or greater than the median level of performance over the holding period at which point
25 per cent of the award will be released with full vesting occurring for an upper quartile performance. Vesting occurs on a straight line basis between these points. Half
of the awards made in 2013 and 2014 are subject to a relative TSR condition as described above with the other half based on EPS growth targets.
(ii) Number of options derived based on the average mid market share price for the previous 28 days to 17 March 2011.
(iii) Number of options derived based on the average mid market share price for the previous 28 days to 22 March 2012.
(iv) Number of options derived based on the average mid market share price for the previous 28 days to 31 December 2012.
(v) Number of options derived based on the average mid market share price for the previous 28 days to 31 December 2013.
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
Directors’ interest in shares
To align the interests of senior management with those of shareholders further, Executive Directors are subject to share
ownership guidelines. Executive Directors are required to accumulate a holding of Ordinary Shares in the Company to the value
of 100 per cent of their salary at 1 March 2013. Until the guideline is met the Executive is expected to retain 50 per cent of
shares acquired under the Company's share plans (after allowing for tax and national insurance liabilities).
The interests of the Directors in the share capital of Dignity plc at 26 December 2014 are set out below.
Number of Ordinary Shares
At 26 December 2014
Subject to
performance
At 27 December conditions under
Name 2013 Legally owned Subject to SAYE the LTIP
Mike McCollum 183,334 183,334 – 171,268
Andrew Davies 137,254 137,254 – 97,280
Richard Portman 93,630 93,630 612 79,085
Steve Whittern 19,586 19,586 – 85,105
Peter Hindley 160,696 160,696 – –
Ishbel Macpherson 4,847 4,847 – –
Alan McWalter 2,554 2,554 – –
Jane Ashcroft 917 917 – –
Martin Pexton 2,750 2,750 – –
There has been no change in the interests set out above between 26 December 2014 and 4 March 2015.
The shares held at 27 December 2013 have been restated to reflect the share consolidation that took place in November 2014.
The shareholding guideline for the Executive Directors is that they hold 100 per cent of their basic salary as shares based on their
salary at 1 March 2013 and the 28 day average share price to 28 February 2013 as adjusted for any subsequent share
consolidations. All Executive Directors meet that guideline.
Directors’ total pension entitlements
Pensionable
service at
26.12.14
(years)
Age at
26.12.14
Accrued
pension
27.12.13
Accrued
pension
26.12.14
Increase in
accrued
pension
(net of
inflation)
during
the year
Transfer
value of
increase
(net of
inflation and
employee
contributions)
Payment
in lieu of
retirement
benefits
i.e. pension
supplement
Value x 20
over year
(net of
inflation and
Directors'
contributions)
Total
pension
benefits
Normal
retirement
age
Value x 20
at start
of year
Value x 20
at end
of year
Mike McCollum
Richard Portman
47 15.667 104,822 107,652
42,971
53 14.583
42,318
–
653
–
5,053
71,438
25,875
– 71,438
7,310 33,185
65 2,096,440 2,153,040
859,420
65
846,360
(1) Throughout 2014 the above Directors were members of the Dignity Pension & Assurance Scheme, which is a defined benefit and tax approved scheme. Mike McCollum
ceased to be an active member of the Scheme on 31 March 2012 and Richard Portman ceased to be an active member on 31 March 2014. Instead they receive a pension
supplement of 15 per cent of base salary. The Group has also arranged permanent life cover equal to the benefit they would have received had they remained in the Scheme.
(2) Transfer values have been calculated in accordance with the transfer value basis set by the Trustees.
(3) Pension accruals shown are the amounts that would be paid annually on retirement based on service at the end of the current period. This equates to accrued entitlement.
Loss of office payments
No Director left in the year and no compensation for loss of office was paid.
Dignity plc
Annual Report & Accounts 2014
57
Relative importance of spend on pay
The following table sets out the percentage change in dividends and overall spend of employee pay in the 2014 financial year
compared with the prior year.
2014 2013
£m £m % change
Dividends* 9.8 6.2 58.1%
Return of Cash 64.4 61.9 4.0%
Total return to shareholders 74.2 68.1 9.0%
Employee remuneration costs 82.8 78.6 5.3%
*No interim dividend was paid to shareholders in 2013, but was instead included within the £1.08 Return of Cash per Ordinary Share paid in August 2013.
Percentage change in CEO pay
2014 2013 % change
Chief Executive (£000’s)
– Salary 476 467 2%
– Benefits 91 88 3%
– Bonus 1,699 1,662 2%
Full time equivalent average employee (£)(1)
– Salary 19,218 18,620 3%
– Benefits 588 576 2%
– Bonus 1,880 1,837 2%
The table above shows the percentage year on year change in the value of salary, benefits and annual bonus for the Chief Executive
between the current and previous year compared to that of the average employee on a full time equivalent basis.
(1) There are 2,848 employees at 26 December 2014 (27 December 2013: 2,727) , of which 677 (2013: 682) were part time.
Performance graph and single figure table
The following graph shows the Company's TSR performance over the last six financial years against the FTSE 350 index.
The FTSE 350 has been chosen as the Company is a member of that index.
6 Year Total Shareholder Return
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FTSE 350 Index
Source: Datastream (Thomson Reuters)
The table below shows the total remuneration figure for the CEO over the same six year period. The total remuneration figure
includes the annual bonus and LTIP awards with performance periods ending in or shortly after the relevant year ends.
2009 2010 2011 2012 2013 2014
CEO single total figure of remuneration (£000’s) 1,018 899 917 2,081 2,217 2,266
Annual bonus payout relative to maximum (%) 85% 100% 100% 100% 100% 100%
LTIP vesting (%) 63% – – 100% 100% 100%
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Dignity plc
Annual Report & Accounts 2014
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 26 December 2014
Membership of the Remuneration Committee
The Code requires that a Group of the size of Dignity plc has a Remuneration Committee comprising a minimum of three
non-executives. The Committee is chaired by Alan McWalter, Senior Independent Director. The Committee members comprise
all the other Non-Executive Directors: Jane Ashcroft, Ishbel Macpherson and Martin Pexton.
The Remuneration Committee members have no personal financial interest, other than as shareholders, in matters to be decided,
no potential conflicts of interests arising from cross directorships and no day to day involvement in running the business. The
Non-Executive Directors are not eligible for pensions and do not participate in the Group’s bonus or share schemes.
The Remuneration Committee determines and agrees with the Board, within formal terms of reference, the framework and policy
of Directors’ and senior management’s remuneration and its cost to the Group. The Committee considers the performance of the
Executive Directors as a prelude to recommending their annual remuneration, bonus awards and share awards to the Board for
final approval.
The Committee met four times during the year. At those meetings basic salaries of Executive Directors and senior managers
were reviewed, the targets and quantum of annual performance related bonuses for Directors were also agreed, as were awards
granted under the Group’s Long-Term Incentive Plan (‘LTIP’). The meetings also approved the payment of the 2013 performance
related bonus and dealt with the vesting of the shares awarded in 2011 under the LTIP scheme.
The Committee also receives advice from several sources, namely:
• The Chairman and the Chief Executive who attend the Remuneration Committee by invitation or when required and the
Company Secretary, who is also the Corporate Services Director, attends meetings when required as Secretary to the
Remuneration Committee. No Executive Director takes part in discussions relating to their own remuneration and benefits.
• New Bridge Street (a trading name of Aon Corporation) is the Committee's executive remuneration advisor and is a signatory
to the Remuneration Consultants Group's Code of Conduct. Aon Corporation does not provide any other services to the Group.
New Bridge Street was appointed by the Remuneration Committee in 2012 to act as remuneration consultants and the
Committee is satisfied that New Bridge Street's advice is objective and independent. During the year, New Bridge Street provided
a market update on remuneration and corporate governance developments, assistance with drafting the remuneration report in
light of the new reporting and voting regulations and benchmarking data for Executive Directors. Total fees charged in the period
were £16,373 + VAT and were charged on a time spent basis.
Statement of shareholder voting at the AGM (Unaudited)
At last year's AGM, the Directors' Remuneration Report (Directors' Remuneration Policy and Annual Report on Remuneration)
received the following votes from shareholders:
Remuneration Policy
Total number of votes % of votes cast
For 40,689,299 97.70%
Against 754,159 1.81%
Abstentions 202,608 0.49%
Total 41,646,066 100%
Annual Report on Remuneration
Total number of votes % of votes cast
For 41,214,008 98.96%
Against 419,178 1.01%
Abstentions 12,880 0.03%
Total 41,646,066 100%
On behalf of the Board
Alan McWalter
Chairman of the Remuneration Committee
4 March 2015
Dignity plc
Annual Report & Accounts 2014
59
Directors’ report
for the 52 week period ended 26 December 2014
The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
52 week period ended 26 December 2014.
Principal risks and uncertainties
Operational risks are considered on pages 27 and 28.
The company registration number of Dignity plc is 4569346.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report,
the Report on Directors’ Remuneration and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance
with International Financial Reporting Standards (‘IFRSs’) as
adopted by the European Union and the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law
the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and the Company and of the profit or
loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgements and accounting estimates that are
reasonable and prudent; and
An assessment of the Group’s exposure to financial risks and
a description of how these risks are managed are included in
note 2 to the consolidated financial statements.
Capital Reorganisation
On 17 October 2014 Dignity Finance PLC, a subsidiary of
the Group, issued the New Notes raising net proceeds of
£81.3 million.
The Company then returned £64.4 million (£1.20 per Ordinary
Share) to shareholders through the issue and redemption of
either a B or C Share for each existing Ordinary Share. This was
approved at an Extraordinary General Meeting on 30 October
2014. The Company also completed, in November 2014, a
consolidation of its share capital on the basis of 11 new
Ordinary Shares of 12 48/143 pence for every 12 existing
Ordinary Shares of 11 4/13 pence each. See note 22 for
further details.
Share capital
During the period, 281,430 Ordinary Shares of 11 4/13 pence
each were issued to satisfy Long-Term Incentive Plan share
awards vesting in the period and 14,896 Ordinary Shares
of 11 4/13 were issued to satisfy options exercised under
the 2010 Save As You Earn Scheme which ended in
December 2013.
• State whether IFRSs as adopted by the European Union
and applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the Group and parent Company financial statements
respectively.
Following the share consolidation referred to above, the issued
share capital of Dignity plc at 26 December 2014 consisted of
49,170,180 Ordinary Shares of 12 48/143 pence each. All the
Ordinary Shares carry the same rights and obligations. There
are no other class or type of share in issue.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group and
enable them to ensure that the financial statements and the
Report on Directors’ Remuneration comply with the Companies
Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Group’s websites and legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
page 36 and 37 of the Annual Report, confirm that, to the best
of their knowledge and belief:
• The Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit
of the Group; and
• The Strategic report on pages 6 to 33 of the Annual Report
includes a fair review of the development and performance
of the business and the position of the Group, together with
a description of the principal risks and uncertainties that
it faces.
A special resolution passed at the last AGM on 5 June 2014
gives Dignity plc the authority to purchase up to 5,363,461
Ordinary Shares of 11 4/13 pence each (which by an ordinary
resolution passed on 30 October 2014 the share capital of the
Company was consolidated into ordinary shares of 12 48/143
pence each) at not less than nominal value and not more than
five per cent above the average middle market quotation for
the preceding five business days. At the same meeting the
Company was also given authority to allot Ordinary Shares up
to an aggregate nominal value of £4,043,225 of which up to
£303,242 may be for cash. These authorities will expire at the
conclusion of the next AGM on 11 June 2015. It is the intention
of the Directors to seek renewal of these authorities at that
AGM. There are no restrictions at the period end on the
transfer of securities.
Results
The results for the period are set out in the Consolidated
Income Statement on page 66. The Group’s loss before tax
amounted to £67.7 million (2013: profit £49.6 million).
Dividends
An interim dividend of 6.49 pence per Ordinary Share was
paid to shareholders on 31 October 2014. The Board has
proposed a final dividend of 13.01 pence (2013: 11.83 pence)
per share, which, subject to approval at the AGM, will be paid
on 26 June 2015 to shareholders on the register at close of
business on 29 May 2015.
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Dignity plc
Annual Report & Accounts 2014
Governance
Directors’ report continued
for the 52 week period ended 26 December 2014
Employment policies
During the period, the Group has maintained its obligations
to effectively communicate and involve employees in its
affairs. Methods of communication used include an in-house
newsletter, an employee website, bulletins and management
briefings. This is discussed in more detail in the Corporate
and Social Responsibility report on pages 29 to 33.
Carbon Reporting
The Group reports its Greenhouse Gas to the Carbon Disclosure
Project on an annual basis in tonnes of carbon dioxide
equivalent resulting from the combustion of fuel (direct Scope
1 Emissions) and that resulting from the purchase of electricity
(indirect Scope 2 Emissions). The emissions for the last five
years are as follows:
Employment policies are designed to provide equal
opportunities irrespective of age, sexuality, colour, ethnic or
national origin, religion, nationality, sex or marital status. Full
consideration is given to the employment, training and career
development of disabled persons, subject only to their
aptitudes and abilities. The Group endeavours, as far as is
practicable, to treat disabled persons equally with others and
will also endeavour to help and accommodate persons who
become disabled whilst working for Dignity.
Directors and their interests
Details of the Directors of the Company who were in office
during the period and up to the date of signing the financial
statements are shown in the Report on Directors’ Remuneration
on pages 51 and 56. In accordance with the UK Corporate
Governance Code, at the AGM, all Directors will retire as
Directors of the Company and, being eligible, offer themselves
for re-election at the AGM on 11 June 2015. The Directors
have agreed, as in previous years, that they should all stand
for re-election rather than relying on the Articles of Association
of the Company that prescribe that one third of the Directors
offer themselves for re-election each year.
During the period, the Company maintained liability
insurance for its Directors and Officers to a value of £70
million. The Directors of each of the Company’s subsidiaries
have the benefit of an indemnity provision in the Company’s
Articles of Association. The indemnity provision, which is a
qualifying third party indemnity provision as defined by Section
234 of the Companies Act 2006, was in force throughout the
period and is currently in force.
Health and safety policy
The Group’s operations are designed at all times in such a way
as to ensure, so far as reasonably practicable, the health, safety
and welfare of all of our employees and all other persons who
may be attending our premises. This is discussed in the
Corporate and Social Responsibility report on page 32.
Corporate Social Responsibility
Maintaining the quality of the environment in which we all live
is an important concern for the Group. This is discussed in
the Corporate and Social Responsibility report on page 32
alongside other social and ethical considerations.
2014 2013 2012 2011 2010
Scope 1 14,437 15,077 15,097 15,202 16,798
Scope 2 7,389 7,151 7,861 7,388 6,938
Total 21,826 22,228 22,958 22,590 23,736
Per FTE Employee 8.5 9.0 10.0 10.2 10.9
The Greenhouse Gas emissions have been shown as a per
full time equivalent employee ratio. The rationale for the choice
of ratio is that it is the best measure available to the Group
given the diversity of the property portfolio, the three separate
divisions of the business and the absence of a similar business
to benchmark against.
Scope 1 and Scope 2 emissions information is derived from
accurate consumption information on utility bills, smart meter
readings and fuel card data. These are then multiplied by the
appropriate emission factor from Defra/DECC. Standard and
accepted methods of calculation have been used to derive
the emissions information.
The Group does not collect or report Scope 3 Emissions at
the moment principally because of the difficulty of collating
accurate information and the deemed value of that
information.
The Group qualifies for the Energy Savings Opportunity
Scheme (‘ESOS’) and will complete an ESOS assessment
during 2015 such that it can confirm compliance by the due
date of 5 December 2015.
Going concern
The Directors have conducted a rigorous and proportionate
assessment of the Group’s ability to continue in existence for
the foreseeable future. They receive and review regularly
management accounts, cash balances, forecasts and the
annual budget together with covenant reporting. After careful
consideration, and mindful of the current market conditions,
the Directors confirm they are satisfied that the Group has
adequate resources to continue operating for that foreseeable
future. For this reason, they continue to adopt the going
concern basis for preparing the financial statements. The
Directors formally considered this matter at the Board
meeting held on 27 February 2015.
Post balance sheet events
Please refer to note 32 of the Notes to the Consolidated
Financial Statements for further details.
Independent Auditors and disclosure
of information to Auditors
The Board appointed Ernst & Young LLP as auditors on 5 June
2014 upon the resignation of PricewaterhouseCoopers LLP. A
resolution for their appointment will be proposed at the
forthcoming AGM.
In the case of each of the persons who are Directors at the
time when the report is approved, the following applies:
• So far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
• The Directors have taken appropriate steps to make
themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of that
information.
The Takeover Directive
The Group has one class of voting share capital, Ordinary
Shares. All of the shares rank pari passu. There are no special
control rights in relation to the Group’s shares. The rules
governing the appointment and replacement of Board
members and changes to the Articles of Association accord
with usual English company law provisions. The Board has
authority to purchase its own shares and is seeking renewal of
that power at the forthcoming AGM within the limits set out in
the notice of that meeting. There are no significant agreements
to which the Group is party which take effect, alter or terminate
in the event of change of control of the Group.
Corporate Governance Statement
The information that fulfils the requirements of a corporate
governance statement in accordance with rule 7.2 of the
Disclosure and Transparency Rules can be found in this
Directors’ Report and in the Directors’ Statement on
Corporate Governance on pages 38 to 41, which is
incorporated by reference.
Strategic report
The Strategic report on pages 6 to 33 has been approved
by the Board.
By order of the Board
Richard Portman
Company Secretary
4 March 2015
Dignity plc
Annual Report & Accounts 2014
61
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62
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Independent auditors’ report to the members of Dignity plc
for the 52 week period ended 26 December 2014
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at
26 December 2014 and of the Group’s loss for the 52 week period then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
What we have audited
We have audited the financial statements of Dignity plc for the 52 week period ended 26 December 2014 which comprise the
Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the Parent Company Balance Sheet
and the related notes. The financial reporting framework that has been applied in the preparation of the Group financial statements
is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 59, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the
Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Our assessment of, and response to, the risk of material misstatement
We identified the following risks that have the greatest effect on the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the audit engagement team:
Dignity plc
Annual Report & Accounts 2014
63
Risk
Response
The accounting for the issue of New Secured Notes and Return of Cash
The accounting for the issue
of the New Secured Notes and
Return of Cash and specifically the
judgement made by management
that this is an extinguishment of
debt as opposed to a modification
of the debt as defined in IAS 39.
This judgement has an impact
on how existing and incremental
costs and debt premiums are
accounted for either as a charge
within the Consolidated Income
Statement or whether the costs are
deducted from the New Secured
Notes in the balance sheet.
(AC, AP, CAE)*
We obtained and checked the logic and mathematical accuracy of the 10 per cent test calculation (as set out in
IAS 39) prepared by management, which compares the net present values of the cashflows of the New Notes to
see if they are more than 10 per cent different to the present values of the cashflows of the Old Notes. This is an
indicator of whether the New Notes are substantially different to the Old Notes;
We critically reviewed and assessed managements’ qualitative comparison of the terms of the old and new debt
and assessed the reasonableness of the judgemental conclusion reached;
Where possible we have validated the factual accuracy of the components of managements’ qualitative
comparison to underlying documentation supporting their judgement that the transaction is a debt
extinguishment;
We reviewed the disclosures presented by the Group in the Annual Report to ensure that adequate explanation of
the nature and basis of the judgement involved are included; and
We have reviewed the transaction costs expensed to the income statement ensuring they are supported by
contracts and invoices and appropriately disclosed within the accounts.
The determination of the assumptions used to derive the obligations for the defined benefit pension scheme
The actuarial assumptions
used to value the defined benefit
pension scheme liabilities are
judgemental and sensitive. Due
to the significance of the value of
the pension obligation, a small
change in assumptions outside
of the requirements of IAS 19 (R)
may result in a material difference
to amounts reported. (AC, AP, CAE)*
We understood and challenged management’s input into the assumptions underpinning the liability;
Using external data we verified the appropriateness of the key actuarial assumptions used by management in
determining the pension obligation under IAS 19(R) to ensure their assumptions were appropriate, met the
requirements of IFRS and were in line with market practice;
This included a comparison of life expectancy with relevant mortality tables, benchmarking inflation and discount
rates against external market data, considering changes in historical assumptions and evaluating management’s
expert as required under auditing standards;
We used our pensions specialists to assist us with these procedures; and
We ensured that the financial statement disclosures were in accordance with accounting standards.
The risk of inappropriate revenue recognition
In particular risks around incorrect
revenue cut-off at year end, the
inappropriate recording of revenue
for services not delivered, and the
risk of inappropriate management
override of the amount of revenue
recorded. (AP)*
We carried out testing relating to controls over revenue recognition, including the timing of revenue recognition;
We performed detailed cut-off testing on the provision of funerals and cremations delivered around the period end;
We performed revenue transaction testing, which included ensuring that the services had been delivered and the
transaction has been appropriately recorded in the income statement;
We performed analytical procedures to compare revenue recognised with expectations from past experience,
management’s forecasts and, where possible, external market data;
We identified and obtained support for journals generated at head office impacting revenue;
We evaluated the controls in the IT systems that support the recording of revenue; and
We ensured that the financial statement disclosures were in accordance with accounting standards.
The risk of fraud and management override
We considered the risks inherent in
those areas where manual journals
are posted at head office as part
of the financial statement close
process.
We performed tailored procedures, including analytical procedures and obtaining support for any
unusual journals identified, sufficient to address the identified risk in respect of subjective areas which we
considered to be most susceptible to management override. These areas were considered to be the bad debt
provision, pre-need cancellation provision, dilapidations provision and cost accruals.
Non-consolidation of pre-need trusts and the judgement that trade names have indefinite lives
As this is our first year as auditors
of Dignity we have considered
the specific accounting for
following matters specifically
noted within the critical accounting
estimates set out in note 1,
Non-consolidation of pre-need
trusts and the judgement that
trade names have indefinite
lives. (AP, CAE)*
We obtained management’s analysis and supporting information in relation to both critical accounting judgements.
To consider these critical judgements:
• In respect of the non-consolidation of the pre-need trusts we confirmed that the provisions of law under which
the trusts operate require that the majority of the trustees of each of the trusts are required to be independent of
Dignity and that the trustees need to act in the best interest of the trust. We also confirmed that all monies flow
directly to the trusts which are separate to the Dignity group of companies.
• In respect of the judgement that trade names have indefinite lives we considered the nature of the funeral market
as set out in externally available information, the historical level of performance of trade names and we
corroborated the actions taken by the Group to monitor and maintain the trade names.
• We ensured that the financial statement disclosures were in accordance with the relevant accounting standards
and enable the user of the accounts to understand the trusts and their relationship with Dignity and the reasons
why management are satisfied the trade names have indefinite lives.
* These risks are discussed in other areas of the Annual Report as noted by the following key.
AC – See Audit Committee report: p.42 to p.44.
AP – See note 1 Accounting policies: p.70 to p.77.
CAE – See note 1 Critical accounting estimates: p.75 to p.76.
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64
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 26 December 2014
Our application of materiality
We quantify materiality in planning and executing the audit and in evaluating the materiality of misstatements on the financial
statements and the effect they have on our audit. In determining if the financial statements are free from material error, we define
materiality as the magnitude of an omission or misstatement that, individually or in the aggregate, in light of the surrounding
circumstances, could reasonably be expected to influence the economic decisions of the users of the financial statements.
The evaluation of materiality requires professional judgement and the consideration of both qualitative and quantitative factors.
We determined materiality for the Group to be £2.9 million, which is approximately five per cent pre-tax profit after adding back
the one-off costs related to the issuance of the New Secured Notes and Return of Cash. We used pre-tax profits excluding these
one-off costs as, in our view, this is the most relevant measure of the underlying financial performance of the Group. This provided
the basis for determining the nature, timing and extent of our audit procedures, and identifying and assessing the risk of material
misstatement.
We determined, based on our risk assessment and consideration of the Group’s overall control environment, that performance
materiality for the Group, as this is a first year audit, should be 50 per cent of planning materiality, namely £1.45 million.
Performance materiality is our audit tolerance for misstatement in an individual account or balance. Our objective in adopting
this approach was to obtain reasonable assurance that the total uncorrected and undetected audit differences did not exceed
our materiality of £2.9 million for the financial statements as a whole.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £145,000, as well
as differences below that threshold that, in our view warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the
light of other relevant qualitative considerations.
An overview of the scope of our audit
The Group operates from head office and has common financial systems, processes and centralised controls covering all of
its operations and individual locations. The audit of the Group is undertaken by one audit team and the Group audit has been
performed on the consolidated financial records to the materiality and performance materiality described above.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006;
• the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial
statements are prepared is consistent with the financial statements; and
• the information given in the Directors’ statement on corporate governance set out on pages 39 and 40 with respect to internal
control and risk management systems in relation to financial reporting processes and about share capital structures is consistent
with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course
of performing our audit; or
• is otherwise misleading.
Dignity plc
Annual Report & Accounts 2014
65
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during
the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the
annual report appropriately discloses those matters that we communicated to the audit committee which we consider should
have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Group; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance report has not been prepared by the Company.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 60, in relation to going concern; and
• the part of the Directors’ statement on corporate governance relating to the Company’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review.
Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
4 March 2015
Notes
1. The maintenance and integrity of the Dignity plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Consolidated income statement
for the 52 week period ended 26 December 2014
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Note £m £m
Revenue 3 268.9 256.7
Cost of sales (109.0) (105.4)
Gross profit 159.9 151.3
Administrative expenses (77.0) (76.2)
Operating profit 3 82.9 75.1
Analysed as:
Underlying operating profit 3 84.9 78.4
Loss on sale of fixed assets (0.3) (0.1)
External transaction costs 5 (1.7) (3.2)
Operating profit 3 82.9 75.1
Finance costs 4 (154.8) (28.9)
Analysed as:
Underlying finance costs (30.6) (28.9)
Loss on extinguishment of Old Notes – exceptional 5 (123.2) –
Elimination of swap – exceptional 5 (1.0) –
Finance costs (154.8) (28.9)
Finance income 4 4.2 3.4
(Loss)/profit before tax 5 (67.7) 49.6
Taxation – before exceptional items 6 (13.1) (12.7)
Taxation – exceptional 6 25.8 3.5
Taxation 6 12.7 (9.2)
(Loss)/profit for the period attributable to equity shareholders 3 (55.0) 40.4
Earnings per share for (loss)/profit attributable to equity shareholders
– Basic and diluted (pence) 8 (104.0p) 72.8p
Underlying Earnings per share (pence) 8 85.8p 72.1p
Consolidated statement of comprehensive income
for the 52 week period ended 26 December 2014
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Note £m £m
(Loss)/profit for the period (55.0) 40.4
Items that will not be reclassified to profit or loss
Remeasurement loss on retirement benefit obligations 28 (10.8) (2.0)
Tax on remeasurement loss on retirement benefit obligations 2.2 0.5
Other comprehensive loss (8.6) (1.5)
Total comprehensive (loss)/income for the period (63.6) 38.9
Attributable to:
Equity shareholders of the parent (63.6) 38.9
Financial statements
Consolidated balance sheet
as at 26 December 2014
Dignity plc
Annual Report & Accounts 2014
67
26 December 27 December
2014 2013
Note £m £m
Assets
Non-current assets
Goodwill 9 182.3 173.7
Intangible assets 9 94.2 76.7
Property, plant and equipment 10 192.3 183.6
Financial and other assets 11 10.4 12.7
479.2 446.7
Current assets
Inventories 13 6.5 6.6
Trade and other receivables 14 30.0 27.8
Cash and cash equivalents – excluding collateralisation of Liquidity Facility 15 86.5 79.3
Cash and cash equivalents – collateralisation of Liquidity Facility (1) 15 – 63.0
Cash and cash equivalents 15 86.5 142.3
123.0 176.7
Total assets 602.2 623.4
Liabilities
Current liabilities
Financial liabilities – excluding collateralisation of Liquidity Facility 16 8.0 20.8
Financial liabilities – collateralisation of Liquidity Facility (1) 16 – 63.0
Financial liabilities 16 8.0 83.8
Trade and other payables 17 51.2 52.0
Current tax liabilities – 6.7
Provisions for liabilities and charges 19 1.4 1.1
60.6 143.6
Non-current liabilities
Financial liabilities 16 602.9 403.1
Deferred tax liabilities 20 13.6 26.9
Other non–current liabilities 17 2.6 2.8
Provisions for liabilities and charges 19 4.5 3.8
Retirement benefit obligation 28 10.5 1.0
634.1 437.6
Total liabilities 694.7 581.2
Shareholders’ equity
Ordinary share capital 22 6.1 6.0
Share premium account 2.8 20.8
Capital redemption reserve 141.7 121.6
Other reserves (5.5) (6.4)
Retained earnings (237.6) (99.8)
Total equity (92.5) 42.2
Total equity and liabilities 602.2 623.4
The financial statements on pages 66 to 105 were approved by the Board of Directors on 4 March 2015 and were signed
on its behalf by:
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M K McCollum S L Whittern
Chief Executive Finance Director
(1)
In 2013, the Group forced the cash collateralisation of the Liquidity Facility, which supported the repayment of Secured Notes in the event of default. This followed the
downgrade of RBS by S&P. Following the Group’s refinancing in October 2014 this collateralisation is no longer required. Further information may be found in the
Financial Review and notes 16(f) and 21(d).
68
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Consolidated statement of changes in equity
for the 52 week period ended 26 December 2014
Ordinary Share Capital
share premium redemption Other Retained Total
capital account reserve reserves earnings equity
£m £m £m £m £m £m
Shareholders’ equity as at
28 December 2012 5.7 17.4 99.3 (7.2) (70.6) 44.6
Profit for the 52 weeks ended
27 December 2013 – – – – 40.4 40.4
Remeasurement loss on defined
benefit plans – – – – (2.0) (2.0)
Tax on pensions – – – – 0.5 0.5
Total comprehensive income – – – – 38.9 38.9
Effects of employee share options – – – 1.5 – 1.5
Tax on employee share options – – – 1.1 – 1.1
Proceeds from share issue(1) 0.3 26.6 – – – 26.9
Issue costs in respect of shares issued – (0.9) – – – (0.9)
Gift to Employee Benefit Trust – – – (1.7) – (1.7)
Adjustment for tax rate change 23% to 20% – – – (0.1) – (0.1)
Issue and redemption of B Shares in respect of
Capital Option (see note 7) – (22.3) 22.3 – (22.3) (22.3)
Dividend in respect of Special Dividend
Option (see note 7) – – – – (39.6) (39.6)
Dividends (see note 7) – – – – (6.2) (6.2)
Shareholders’ equity as at
27 December 2013 6.0 20.8 121.6 (6.4) (99.8) 42.2
Loss for the 52 weeks ended
26 December 2014 – – – – (55.0) (55.0)
Remeasurement loss on defined
benefit plans – – – – (10.8) (10.8)
Tax on pensions – – – – 2.2 2.2
Total comprehensive income – – – – (63.6) (63.6)
Effects of employee share options – – – 2.0 – 2.0
Tax on employee share options – – – 0.9 – 0.9
Proceeds from share issue(2) 0.1 2.1 – – – 2.2
Gift to Employee Benefit Trust – – – (2.0) – (2.0)
Issue and redemption of B Shares in respect of
Capital Option (see note 7) – (20.1) 20.1 – (20.1) (20.1)
Dividend in respect of Special Dividend
Option (see note 7) – – – – (44.3) (44.3)
Dividends (see note 7) – – – – (9.8) (9.8)
Shareholders’ equity as at 26 December 2014 6.1 2.8 141.7 (5.5) (237.6) (92.5)
(1) Relating to issue of 253,844 shares under 2010 LTIP scheme, 2,283,019 shares issued as an equity placing in January 2013 and 141,981 shares under
2010 SAYE scheme.
(2) Relating to issue of 281,430 shares under 2011 LTIP scheme and 14,896 shares under 2010 SAYE scheme.
The above amounts relate to transactions with owners of the Company except for the items reported within total
comprehensive income.
Capital redemption reserve
The capital redemption reserve represents £80,002,465 B Shares that were issued on 2 August 2006 and redeemed for cash
on the same day, £19,274,610 B Shares that were issued on 10 October 2010 and redeemed for cash on 11 October 2010,
and £22,263,112 B Shares that were issued on 12 August 2013 and redeemed for cash on 20 August 2013 and
£20,154,070 B Shares that were issued and redeemed for cash in November 2014.
Other reserves
Other reserves includes movements relating to the Group’s SAYE and LTIP schemes and associated deferred tax, together
with a £12.3 million merger reserve.
£9.6 million (2013: £7.6 million) in other reserves relates to investments in own shares.
Financial statements
Consolidated statement of cash flows
for the 52 week period ended 26 December 2014
Dignity plc
Annual Report & Accounts 2014
69
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Note £m £m
Cash flows from operating activities
Cash generated from operations before external transaction costs and
exceptional pension contributions 25 104.4 94.2
Exceptional contribution to pension scheme (1.0) (1.0)
External transaction costs in respect of acquisitions (1.1) (1.6)
Cash generated from operations 102.3 91.6
Finance income received 0.6 0.6
Finance costs paid (38.0) (25.0)
Transfer from restricted bank accounts for finance costs 14.6 11.9
Payments to restricted bank accounts for finance costs 15 (5.6) (14.6)
Total payments in respect of finance costs (29.0) (27.7)
Tax paid (6.9) (10.9)
Transfers from restricted bank accounts – 1.5
Net cash generated from operating activities 67.0 55.1
Cash flows from investing activities
Acquisition of subsidiaries and businesses (net of cash acquired) 26 (24.7) (60.7)
Proceeds from sale of property, plant and equipment 0.5 0.6
Vehicle replacement programme and improvements to locations (14.1) (14.2)
Branch relocations (1.4) (1.1)
Satellite locations (0.1) (0.3)
Development of new crematoria and cemeteries (1.6) (2.0)
Mercury abatement project – (0.6)
Purchase of property, plant and equipment (17.2) (18.2)
Net cash used in investing activities (41.4) (78.3)
Cash flows from financing activities
Proceeds from issue of New Notes 94.0 –
Cash settlement of Old Notes (5.9) –
External transaction costs relating to extinguishment of Old Notes (5.8) –
Net proceeds from issue of New Notes 82.3 –
Proceeds from issue of Old Notes – 97.7
Proceeds from borrowings – 39.8
Issue costs in respect of borrowings and Secured Notes (0.9) (5.4)
Proceeds from share issue 0.1 25.2
Issue costs in respect of shares issued – (0.9)
Repayment of swaps (5.1) –
Repayment of borrowings (11.6) (42.6)
Transfer from restricted bank accounts for repayment of borrowings 5.7 4.2
Payments to restricted bank accounts for repayment of borrowings 15 (4.0) (5.7)
Total payments in respect of borrowings (9.9) (44.1)
Dividends paid to shareholders on Ordinary Shares 7 (9.8) (6.2)
Redemption of B Shares in respect of Capital Option 7 (20.1) (22.3)
Redemption of C Shares in respect of Special Dividend Option 7 (44.3) (39.6)
Net cash (used)/generated in financing activities (7.7) 44.2
Net increase in cash and cash equivalents 17.9 21.0
Cash and cash equivalents at the beginning of the period 59.0 38.0
Cash and cash equivalents at the end of the period 15 76.9 59.0
Restricted cash 15 9.6 20.3
Collateralisation of Liquidity Facility (restricted) 15 – 63.0
Cash and cash equivalents at the end of the period as reported in the
consolidated balance sheet 15 86.5 142.3
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements
for the 52 week period ended 26 December 2014
1 Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
European law requires that the Group’s consolidated financial statements for the 52 week period ended 26 December 2014
are prepared in accordance with all applicable International Financial Reporting Standards (‘IFRSs’), as adopted by the
European Union. These financial statements have been prepared in accordance with IFRS, International Financial Reporting
Interpretations Committee (‘IFRIC’) interpretations (as issued by the International Accounting Standards Board) and those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements are prepared on a going concern basis and have been prepared under the historical
cost convention, as modified by financial assets and liabilities at fair value through the income statement.
Preparation of financial statements
The preparation of financial statements in conformity with International Financial Reporting Standards requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities. This will also affect the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reported period. Actual results may differ from those estimates.
Basis of consolidation
The financial statements are presented in the form of Group financial statements. The Group financial statements consolidate
the accounts of the Company and the entities controlled by the Company (including all of its subsidiary entities) after
eliminating internal transactions. Control is achieved where the Company has the power to govern the financial and operating
policies of an investee entity so as to obtain economic benefits from its activities.
Results of subsidiary undertakings acquired during the period are included from the effective date of control using the
acquisition method of accounting. The separable net assets, both tangible and intangible, of newly acquired subsidiary
undertakings are incorporated into the financial statements on the basis of the fair value to the Group as at the effective date
of control.
Exceptional items and underlying profit
Exceptional items are of a non–recurring nature to the results for the period and are therefore presented separately. In 2013
the exceptional items relate to an exceptional credit due to the change to the headline rate of corporation tax. In 2014 the
exceptional costs relate to the loss on extinguishment of the Old Notes, the repayment of the swap and the tax associated
with those items.
In arriving at underlying profit exceptional items are added back together with external transaction costs and the profit or loss
on sale of fixed assets. See the Financial Review for further details.
External transaction costs
External transaction costs are of a non–recurring nature to the results for the period and are therefore presented separately.
They relate wholly to external costs incurred by the Group.
Pre-arranged funeral plan trusts
The five pre-arranged funeral plan trusts are not consolidated during the period as they are not controlled by the Group.
Specifically, Article 60 of the Financial Services and Markets Act 2000 (‘Regulated Activities’) Order 2001 (‘RAO’) requires a
majority of the managing trustees to be independent of the Group. Furthermore, the Group does not direct their financial or
operating policies, nor does it have substantially all of the risks and rewards of their ownership.
Revenue
Revenue from funeral operations comprises the amount recoverable from customers for the provision of funerals, income
from crematoria and other services, to the extent that those services have been performed or the goods supplied.
Revenues include amounts receivable from the pre–arranged funeral plan trusts for funerals performed by the Group for
pre-arranged funeral plan members.
Income from memorial sales is recognised at the point of sale, to the extent that the goods have been supplied. Costs of
maintaining memorials are recognised as incurred.
The Group pays certain disbursements (such as crematoria fees, burial plots, ministers’ fees and doctors’ fees) on behalf of
its clients. These amounts are recovered as part of the invoicing process. However, these amounts are not included within net
revenues as they are simply passed on to the customer at cost.
Dignity plc
Annual Report & Accounts 2014
71
1 Accounting policies (continued)
The accounting policies for recognising turnover for pre–arranged funeral plans are stated below.
The Group views the United Kingdom as one geographical segment, given each local business exhibits similar long–term
characteristics.
All amounts are exclusive of VAT.
Pre-arranged funeral plans
Trust plans
The Group markets and sells pre–arranged funeral plans, with monies received from selling funeral plans being held and
controlled by independent pre–arranged funeral plan trusts (the ‘Trusts’). The responsibility for the ultimate performance of
funerals is allocated to funeral directors, who are selected by the beneficiary of the plan, some of whom are not owned by
the Group.
The Group receives monies from the Trusts in respect of the following transactions:
• A marketing and administration allowance in respect of each plan sold. The marketing element is only refundable in the
event that the plan is subsequently cancelled. A provision is made for cancellations based on historical experiences, where
material, to cover the estimated marketing element refundable to the Trusts. Marketing and administration allowances are
included in Group revenue when the related plan is sold less the provision for refunds arising on cancellations; and
• Further contributions are also received from the Trusts in return for the provision of general ongoing administrative services
supplied to the Trusts. These contributions are included in Group revenue for the period to which they relate.
All costs in respect of the marketing and administration of the pre–arranged funeral plans are expensed in the Group income
statement as incurred.
From time to time, the Group receives monies from certain of the Trusts, in line with the relevant Trust’s deed, which have
been assessed by the trustees as not required to ensure the Trust has sufficient assets to meet its future liabilities in respect
of current members (‘Recoveries’). All Recoveries are recognised as other income in the period in which the trustees approve
their payment.
The Group makes payments on behalf of the Trusts relating to the ongoing overheads of the Trusts, refunds to members of
the Trusts in event of cancellation, and the payments made to third party funeral directors when the funeral is ultimately
performed. All such payments are reimbursed in full by the Trusts on demand, in accordance with the terms of the relevant
Trust’s deed.
Neither the sales value of plans nor the costs of providing funerals are recognised in the financial statements of the Group
when a pre–arranged funeral plan is sold.
Each Dignity marketing company contractually guarantees with the customer of a pre–arranged funeral plan that (i) if the
customer chooses to cancel their selected funeral plan, a full refund will be made to the customer of all monies paid in
respect thereof (less in certain cases an administration fee payable to the relevant Dignity marketing company); (ii) the
funeral director’s services (as selected by the customer) will be provided regardless of price rises in the future; and (iii) for the
majority of plans sold, specific disbursements (such as crematoria fees, ministers’ fees and doctors’ fees) will be provided
regardless of price rises in the future.
Insurance plans
The Group is the named beneficiary on a number of life assurance products sold by third party insurance companies, in
consideration for which the Group has committed to performing the funeral (including some disbursements) of the plan
holder at no further charge.
A commission is paid to the insurers when the policy is initially charged to the Group. As this commission is fully refundable if
the Group does not perform the funeral for any reason, it is carried as a receivable and expensed when the funeral is
performed.
In the event of the death of the policyholder, if the Group performs the funeral, it receives an agreed amount from the
insurers which is recognised as revenue within the funeral division. On occasions a third party will perform the funeral and the
Group will pass on all monies received to that party.
Share–based payments
The Group issues equity settled share–based payments to certain employees. A fair value for the equity settled share awards
is measured at the date of grant. Management measures the fair value using the valuation technique that they consider to be
the most appropriate to value each class of award, which include Black–Scholes calculations and Monte Carlo simulations.
The valuations take into account factors such as non–transferability, exercise restrictions and behavioural considerations.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
1 Accounting policies (continued)
An expense is recognised to spread the fair value of each award over the vesting period on a straight line basis, after allowing
for an estimate of the share awards that will eventually vest. The estimate of the level of vesting is reviewed at least annually,
with any impact on the cumulative charge being recognised immediately. When the options are exercised the Company issues
new shares.
Earnings per Ordinary Share
Basic Earnings per Ordinary Share (‘EPS’) is calculated by dividing the profit on ordinary activities after taxation by the
weighted average number of shares in issue during the period. Diluted EPS is calculated by dividing profit on ordinary
activities after taxation by the weighted average number of shares in issue during the period increased by the effects of all
dilutive potential Ordinary Shares (primarily share options). Underlying Earnings per Ordinary Share is calculated by dividing
the underlying profit after tax by the weighted average number of shares in issue during the period.
Fair value measurement
The Group measures financial instruments at fair value at each balance sheet date. Fair value related disclosures are
summarised in the following notes.
Disclosure item Related note
Trade payables and trade receivables 14,17
Goodwill and intangibles 9
Disclosures for valuation methods, significant estimates and assumptions 26
Quantitative disclosures of fair value measurement hierarchy 21
Financial instruments (including those carried at amortised cost) 21
Fair value is the price that would be received to sell an asset or paid to transfer a liability measured using the assumptions
that market participants would use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Intangible assets – goodwill
Goodwill, which represents the excess of the fair value of the consideration for subsidiaries and other businesses over the fair
values of the net assets acquired and liabilities assumed, is capitalised and stated at historical cost less provisions for
impairment.
Goodwill is allocated to cash–generating units for the purpose of impairment testing. The business and subsidiaries acquired
are generally combined with existing operations in the year of acquisition, or the year thereafter and are therefore only
considered to be separate cash–generating units during this time.
Intangible assets – trade names
Intangible trade names are recognised as assets at the estimated fair value of the consideration paid to acquire them and are
carried at historical cost less provisions for amortisation and impairment. When acquired as part of a business combination
the fair value is calculated by reference to the estimated incremental cash flows expected to arise by virtue of the trade name
being well–established.
Amortisation is provided from the date of acquisition so as to write–off the asset on a straight line basis over the term of its
useful life. Where there are indicators that a trade name has an indefinite life then these assets are not amortised but are
subject to annual impairment reviews. The factors that indicate an indefinite life of trade names acquired include the fact that
the Group is a significant operator in a well–established market with inelastic demand, where reputation, recommendation
and previous experience acts as a barrier to entry for new trade names, and the Group’s track record for actively monitoring
and relocating trade names to combat shifting demographics. In addition, when allocating a useful life to acquired trade
names, the following matters are considered:
• The strength of the trade name in its local environment which is assessed by reference to relative market share and
anticipated profitability;
• The likelihood that market based factors could truncate a trade name’s life such as competition and shifting demographics
and the Group’s ability to combat these;
• The length of time, prior to acquisition, for which trade has been conducted under the name acquired; and
• The likely support the Group will give to the name in its local environment through marketing and promotion, maintaining
community awareness etc.
The useful lives of all capitalised trade names are considered to be indefinite and are reviewed on an annual basis.
Dignity plc
Annual Report & Accounts 2014
73
1 Accounting policies (continued)
Intangible assets – non–compete contracts
Non–compete contracts arising from business combinations are capitalised at their fair value, which is calculated as the
present value of any consideration paid discounted at the Group’s cost of capital.
All costs are amortised over the term of the relevant agreement on a straight line basis.
Intangible assets – software
Where computer software is not an integral part of a related item of computer hardware, the software is treated as an
intangible asset. Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring into
use the specific software.
An internally generated intangible asset arising from the Group’s development of computer systems (including websites) is
recognised if, and only if, the costs are directly associated with the production of identifiable and unique software products,
controlled by the Group and it is probable that future economic benefits will flow to the Group.
Costs recognised as assets are amortised over their estimated useful lives (three to eight years) using the straight line method.
Intangible assets – use of third party brand name
The Group has a marketing agreement with Age UK Enterprises Limited, giving rights to market pre–arranged funeral plans
under the Age UK brand. The value of this right has been recognised as a separate intangible asset.
This asset is being amortised over twenty years on a straight line basis, recognising that each year’s additional marketing
activity generates incremental revenues and profits to the Group for at least the following twenty years.
Property, plant and equipment
Assets are recorded in the balance sheet at cost less accumulated depreciation and any recognised impairment loss. Cost
includes, where appropriate, directly attributable costs incurred in bringing each asset to its present location and condition.
Depreciation is charged so as to write–off the cost of assets to their residual value (excluding freehold land and assets in the
course of construction), over their expected useful lives using the straight line method. The bases and annual depreciation
rates in use for the various classes of assets are as follows:
Freehold and long leasehold buildings 2% – 10%
Short leasehold buildings Over term of lease
Motor vehicles 11% – 20%
Computers 20%
Other plant and equipment 5% – 33%
Fixtures and fittings 15%
Freehold land is not depreciated on the basis that land has an indefinite life. Where the historical cost of land and buildings
cannot be split, the Directors have estimated that the historical cost attributable to land is one third (based on historical data)
of the original cost of acquiring the land and buildings. This estimate is regularly reviewed.
Major renovations of the Group’s trading premises and cremator re–linings are depreciated over the remaining life of the
related asset or to the estimated date of the next major renovation or cremator re–lining, whichever is sooner. Asset lives and
residual values for each class of asset are reviewed annually and adjusted if appropriate at each balance sheet date.
Assets in the course of construction are shown as work in progress at a value equal to costs incurred to date. Once
completed, they are reclassified and depreciated using the Group’s depreciation policy above.
Borrowing costs
If the construction phase of property, plant or equipment extends over a long period, the interest incurred on borrowed
capital up to the date of completion is capitalised as part of cost of construction as permitted by IAS 23 (Borrowing Costs).
Repairs and renewals
All repairs and renewals are charged to the income statement unless they represent an enhancement to the original asset.
Property, plant and equipment held under leases
When assets are financed by leasing agreements, where the risks and rewards are substantially transferred to the Group,
the assets are treated as if they had been purchased outright and the corresponding liability to the lessor is included as an
obligation under finance leases. Depreciation on leased assets is charged to the income statement on the same basis as
owned assets. Leasing payments are treated as consisting of capital and interest elements such that the interest element is
charged to the income statement so as to achieve a constant rate on the outstanding lease obligation.
All other leases are ‘operating leases’ and the relevant annual rentals are charged to the income statement on a straight
line basis.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
1 Accounting policies (continued)
Profit (or loss) on sale of fixed assets
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised
within profit (or loss) on sale of fixed assets in the income statement.
Impairment of assets
The carrying values of intangible assets and property, plant and equipment are reviewed for impairment in periods where
events or changes in circumstances indicate that the carrying value may not be recoverable. Assets that have an indefinite
useful life (e.g. goodwill) which are not subject to amortisation and are tested annually for impairment.
Where an asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable
amount of the cash–generating unit to which the asset belongs. For goodwill this is considered at a business segment level as
that is the level at which the return on assets acquired is monitored. For other intangibles (principally trade names) this is
considered at a regional level for each business segment as this is the level where cash inflows are largely independent.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future discounted cash flows of the cash–generating unit are estimated, based on latest management expectations for the
following year and an annual growth rate in subsequent years. These cash flows are discounted at rates that management
estimate to be the risk affected average cost of capital for the particular segment and compared to the carrying value of the
relevant asset. Any impairment in the value of an asset below its carrying value is charged to the income statement within
operating profit. A reversal of an impairment loss is recognised in the income statement to the extent that the original loss
was recognised.
Inventories
Inventories, which comprise funeral supplies and monumental masonry, are stated at the lower of cost and net realisable
value. Cost includes all directly attributable costs incurred in bringing each product to its present location and condition.
Net realisable value is based on estimated selling price less any further costs expected to be incurred in completion and sale.
Taxation
The tax charge for the period includes the charge for tax currently payable and deferred tax. The current tax charge represents
the estimated amount due that arises from the operations of the Group in the period and after making adjustments to
estimates in respect of prior years.
Deferred tax is recognised in respect of all differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, except where the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are
offset to generate a net asset or liability if the conditions of IAS 12 are met.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence,
it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the
deductible temporary difference can be utilised.
Deferred tax is measured at the tax rates that are expected to apply in the periods in which the timing differences are
expected to reverse, based on tax rates and laws that have been enacted or substantively enacted, by the balance sheet date.
Pensions
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is
calculated annually by independent actuaries.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high quality corporate bonds that have terms to maturity approximating to the terms of the related pension
obligation.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in the period in which they arise.
Past service costs are recognised immediately in income.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it
is probable that a transfer of economic benefits will be required to settle the obligation and where a reliable estimate can be
made of the amount of the obligation.
Provisions (other than deferred tax) are discounted where the present value of the provision is materially different to the
undiscounted value. The unwinding of discounts is included within finance costs.
Dignity plc
Annual Report & Accounts 2014
75
1 Accounting policies (continued)
Employee share trust
The assets of the employee share trust are held by a separate limited company, of which the Directors consider that Dignity
plc has de facto control. At the balance sheet date, the trust’s assets and liabilities recognised in the Group’s balance sheet
within share capital and reserves were nil (2013: nil).
Dividends
Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the period
in which they are approved by the Company’s shareholders. Interim dividends are recorded in the financial statements
when paid.
Financial instruments
Borrowings
All borrowings are stated at the fair value of consideration received after deduction of transaction costs and subsequently at
amortised costs. The transaction costs, interest payable and premium on debt finance are charged/credited to the income
statement, as finance costs/income, on a constant–yield basis over the term of the borrowings, or over a shorter period where
it is more likely than not that the lender will require earlier repayment using the effective interest method.
Early termination costs on borrowings
Premiums and discounts arising on the early repayment of borrowings are written–off to the income statement as incurred.
Early settlement of Old Notes
As discussed in the Group’s critical accounting estimates and judgements, the early settlement of the Old Notes was
considered to be an extinguishment. Where refinanced borrowings are accounted for as an extinguishment of the original
financial liability, costs or fees incurred are recognised as part of the gain or loss on extinguishment and written off through
exceptional finance costs.
Interest rate swaps
The Group currently uses several types of financial instruments as part of an overall interest rate risk management strategy.
It does not enter into financial instruments for trading purposes. Interest rate risk associated with net debt is managed by
using a combination of fixed and floating rate borrowings and financial liabilities. The cash flows from, and losses arising on
terminations of, these contracts are recognised as cash flows from operating activities. See note 16(d) for further information.
Trade receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost. A provision for
impairment is established based on historical experience. When a trade receivable is not collectable it is written–off against
the allowance account. Subsequent recovery of amounts previously written–off are credited against administrative expenses
in the income statement.
Trade payables
Trade payables are not interest bearing and are initially recognised at fair value and subsequently measured at
amortised cost.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct transaction costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits and amounts included in accounts restricted for
specific uses.
Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS requires management to make estimates, assumptions and
judgements in certain circumstances that affect reported amounts. The most sensitive estimates affecting the financial
statements are detailed below:
Early settlement of Old Notes
Consideration was given as to whether the exchange of the Old Notes for New Notes constituted a modification of their terms
or an early settlement (‘extinguishment’). The Directors considered there to be a substantial change to the terms of the
Secured Notes, since:
– The maturity of the Class A and B Notes was being increased by 11 and 18 years respectively;
– The interest rate on the Class A and B notes was being reduced by circa 2.8 per cent and circa 3.5 per cent respectively;
– The nominal value of the Class A and B Notes was being increased by circa £28 million and circa £105 million respectively;
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
1 Accounting policies (continued)
– The investment rating of the Class A notes was reducing to A by Fitch from A+; and
– Investors not willing to accept the exchange of notes were able to have their notes redeemed for cash at par multiplied by
the exchange offer price, plus accrued interest.
The repayment of the Old Notes were therefore viewed as being extinguished early rather than having their terms modified.
Provision for doubtful trade receivables
Provision is made against accounts that in the estimation of management may be impaired. Within each division,
assessment is made of the recoverability of trade receivables based on a range of factors including the age of the receivable
and the type of services provided. The provision is assessed monthly against actual experience of irrecoverable accounts and
adjusted if appropriate.
Pensions
The Group operates a defined benefit pension scheme that is accounted for using methods that rely on actuarial assumptions
to estimate costs and liabilities for inclusion in the financial statements. These actuarial assumptions include discount rates,
assumed rates of return, salary increases and mortality rates.
While management believes that the actuarial assumptions are appropriate, any significant changes to those used would
affect the consolidated balance sheet, consolidated income statement and consolidated statement of comprehensive income.
The Group considers that the most significant assumptions are the discount rate and the inflation rate. See note 28 for
further details.
Goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in note 1 “Impairment of assets”. The recoverable amounts of cash–generating units have been determined based on
value–in–use calculations however, acquisitions in the period have been determined using fair value less cost to sell. The use
of this method requires the estimation of future cash flows and the choice of a suitable discount rate in order to calculate
the present value of these cash flows. Actual outcomes could vary from those calculated. See note 9 for further details.
Other intangible assets
The decision process to ascertain whether trade names will have an indefinite life are detailed in note 1 “Intangible assets –
trade names”. These assets with an indefinite life are reviewed for impairment on an annual basis. When a review for
impairment is conducted, the recoverable amount is determined based on value–in–use calculations prepared on the basis
of management’s assumptions and estimates. See note 9 for further details.
Acquisition of companies
In accounting for business combinations, the identifiable assets, liabilities and contingent liabilities acquired have to be
measured at their fair values. In particular, some judgement is required in estimating the split between intangible assets and
goodwill and determining the fair value of properties. Details concerning acquisitions of companies are outlined in note 26.
Non consolidation of pre–need trusts
The Group markets and sells pre–arranged funeral plans, with monies received from selling funeral plans being held by
independent pre–arranged funeral plan trusts. These trusts are not consolidated by the Group, on the basis they do not
control them. The principle of non–consolidation was established many years ago, and therefore the Directors consider
annually whether there have been any changes to terms and conditions, or accounting standards that would change
this determination.
For new trusts acquired in the period, the Directors consider the terms and conditions to determine whether
non–consolidation is appropriate.
Adoption of new standards
As a result of the Group’s 2013 balance sheet date being 27 December 2013, any new accounting standards, amendments
and interpretations applicable for accounting periods starting on or after 1 January 2014 are not mandatory until the
accounting period ending 25 December 2015. The Group has elected not to early adopt any such standards.
Standards, amendments and interpretations effective in 2014
IAS 1, Financial statement presentation, regarding other comprehensive income. This amendment requires entities to group
items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss
subsequently (reclassification adjustments).
IAS 19, Employee benefits was amended in June 2011. The main impact on the Group was as follows: to immediately
recognise all past service costs and to replace interest costs and interest income on plan assets with a net interest
amount that is calculated by applying the discount rate to the net defined benefit asset. See note 28 for the impact on
the financial statements.
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Annual Report & Accounts 2014
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1 Accounting policies (continued)
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after
1 January 2014 that would be expected to have a material impact on the Group.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted
The following standards, amendments and interpretations to existing standards have been published that are mandatory for
accounting periods beginning on or after 1 January 2014 or later periods but which the Group has not early adopted:
IAS 19 (amendment), Defined benefit plans: Employee contributions, effective 1 July 2014. This amendment clarifies that, if
the amount of the employees contribution is independent of the number of years service, an entity is permitted to recognise
such contributions as a reduction in the service cost in the period in which the service is rendered, rather than allocating the
employee contributions to the period of service. The impact of this standard is currently being assessed.
IAS 32 (amendment), Financial instruments: Presentation and IFRS 7, Financial instruments disclosure on asset and liability
offsetting, effective 1 January 2014. These amendments are to the application guidance in IAS 32 and clarify some of the
requirements for offsetting financial assets and financial liabilities on the balance sheet. This is not expected to have any
impact on the Group.
IAS 36 (amendment), Impairment of assets: on the recoverable amount disclosures for non–financial assets, effective
1 January 2014. This amendment removes certain disclosures of the recoverable amount of CGUs which has been included
in IAS 36 by the issue of IFRS 13. This is not expected to have any impact on the Group.
IFRS 9, Financial instruments (to replace) IAS 39, Financial instruments: Recognition and measurement. This standard
introduces new requirements for classifying and measuring financial assets and is likely to affect the Group’s accounting
for financial assets. The standard is not applicable until 1 January 2018. The impact of this standard is currently being
assessed.
IFRS 10, Consolidated financial statements, effective 1 January 2014, builds on existing principals by identifying the
concept on control as the determining factor in whether an entity should be included within the consolidated financial statements
of the parent company. The Group has specifically considered IFRS 10 in light of the Groups non consolidation of its
pre–arranged funeral plan trusts. The Group does not believe that, given the following conditions required for consolidation
in the new standard, a change in accounting policy will be required when IFRS 10 is adopted.
IFRS 10 consideration
Power over the investee. Power arises when the investor
has existing rights that gives ability to direct the
relevant activities.
Exposure, or rights, to variable returns from its involvement
with the investee.
The ability to use its power over the investee to affect
the amount of the investor’s returns.
Analysis
Dignity has no voting rights over the trusts or any rights to
direct the activities of the trust. Whilst Dignity has the power
to appoint the trustees, the RAO requires a majority of them to
be independent.
Dignity has no rights to variable returns, Dignity received a fee
for the marketing of the plans and for the performance of the
funeral. From time to time Dignity may receive a surplus from
the trust however, Dignity has no right to this and it has to be
approved by the trustees.
Dignity has no control over the trust’s investment strategy.
IFRS 11, Joint arrangements, effective 1 January 2014, focuses on the rights and obligations of the parties to the
arrangement rather than its legal form. The Group has no joint arrangements so there is no impact on the Group.
IFRS 12, Disclosure of interests in other entities, effective 1 January 2014. This standard includes disclosure requirements
for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off
balance sheet vehicles. The Group is yet to assess the full impact of this standard but it is not expected to have a significant
impact on the Group.
IFRS 15, Revenue from contracts with customers, effective 1 January 2017. This standard establishes a new five step model
that will apply to revenue arising from contracts with customers. The principals in IFRS 15 provide a more structured
approach to measure and recognise revenue. The impact of this standard is currently being assessed.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact
on the Group.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
2 Financial risk management
The Group finances its operations by a mixture of shareholders’ funds, Secured Notes and bank borrowings. This approach
seeks to minimise financing costs and generate optimum shareholder value through efficient leveraging of the Group’s
balance sheet, which is made possible by the stable and predictable cash–generative nature of the business.
It is not the Group’s policy to actively trade in derivatives.
Market risk
Interest rate risk and other price risk
The Group’s main borrowings consist of New Notes, which are at fixed interest rates, resulting in a predetermined repayment
profile. The fair value of these financial instruments is based on underlying gilt prices and yield spreads based on the
market’s current view of the risk profile of the Secured Notes. Consequently, the fair value of these instruments will fluctuate.
Fair values are not relevant to the Group unless it was to change its funding strategy and repay the Secured Notes early.
The Group is also fully drawn on a £15.8 million Crematoria Acquisition Facility. The principal on the facility is repayable in
one amount in February 2018 and interest is fixed at approximately 3.3 per cent. All interest is payable in cash on a quarterly
basis. Consequently, the Group carries limited risk to increases in LIBOR on this facility.
The Group has significant cash balances that are held by institutions rated at least F1 by Fitch. These balances earn interest
by reference to the Bank of England base rate. If interest rates reduced by one per cent at the beginning of 2014 then the
Group would receive £0.1 million less interest income on an annualised basis for each £10.0 million held.
None of the Group’s other financial liabilities or financial assets carry any significant interest rate risk.
Credit risk
Trade receivables are the main source of credit risk to the Group. However, this risk is minimised as much as possible
through well–established credit control procedures. Quantitative disclosures regarding the ageing of these receivables are
included in note 21(c).
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient cash reserves, committed undrawn borrowing facilities and
regular monitoring and forecasting of cash balances. In addition, the Group is required under the terms of its secured
borrowings to maintain a precisely defined EBITDA to total debt service ratio of at least 1.5 times. This ratio was determined
when raising the debt as being sufficient to ensure all borrowings could be repaid. This covenant test has been satisfied on
each quarterly testing date in the period. At 26 December 2014 the actual ratio was 10.69 times (2013: 2.46 times). The
New Notes were issued on 17 October 2014. Consequently, Senior Interest only accrues from this date for the Relevant
Period. Debt Service, assuming a full year Senior Interest would have been approximately £33.7 million. On this basis, the
EBITDA DSCR would have been 2.95 times and the Free Cashflow DSCR would have been 2.47 times.
Capital risk management
The Group’s objective under managing capital is to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and repay holders of Secured Notes. It also aims to reduce its cost of capital by maintaining
an optimal capital structure. The Group’s capital comprises equity and net debt as set out in note 24. The Group’s principal
source of long–term debt financing is the New Notes, rated A and BBB respectively by Standards & Poor’s and Fitch.
The Group monitors its capital structure based on gross debt, as summarised in note 24, to underlying earnings before
interest, taxation, depreciation and amortisation.
In order to achieve these objectives, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or issue further Class A and B Secured Notes.
During the period, the Group achieved its covenants for the New Notes under the terms of the Group’s secured borrowings
(see ‘Liquidity risk’ above).
Dignity plc
Annual Report & Accounts 2014
79
3 Revenue and segmental analysis
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision
maker who is responsible for allocating resources and assessing performance of the operating segments. The chief operating
decision maker of the Group has been identified as the four Executive Directors. The Group has three reporting segments,
funeral services, crematoria and pre–arranged funeral plans. The Group also reports central overheads, which comprise
unallocated central expenses.
Funeral services relate to the provision of funerals and ancillary items, such as memorials and floral tributes.
Crematoria services relate to cremation services and the sale of memorials and burial plots at the Dignity operated
crematoria and cemeteries.
Pre–arranged funeral plans represent the sale of funerals in advance to customers wishing to make their own funeral
arrangements and the marketing and administration costs associated with making such sales.
Substantially all Group revenue is derived from, and substantially all of the Group’s net assets are located in, the United
Kingdom and Channel Islands and relates to services provided. Overseas transactions are not material.
Underlying profit is stated before profit or loss on sale of fixed assets, external transaction costs and exceptional items.
Underlying operating profit is included as it is felt that adjusting operating profit/(loss) for these items provides a useful
indication of the Group’s performance.
The revenue and operating profit/(loss), by segment, was as follows:
Loss on sale of
fixed assets,
Underlying external
operating profit/ transaction
(loss) before Depreciation Underlying costs and
depreciation and and operating profit/ exceptional Operating
Revenue amortisation amortisation (loss) items profit/(loss)
52 week period ended 26 December 2014 £m £m £m £m £m £m
Funeral services 184.4 75.9 (9.6) 66.3 (1.5) 64.8
Crematoria 55.2 32.3 (3.2) 29.1 (0.2) 28.9
Pre–arranged funeral plans 29.3 7.6 (0.2) 7.4 – 7.4
Central overheads – (17.4) (0.5) (17.9) (0.3) (18.2)
Group 268.9 98.4 (13.5) 84.9 (2.0) 82.9
Finance costs (30.6) (124.2) (154.8)
Finance income 4.2 – 4.2
(Loss)/profit before tax 58.5 (126.2) (67.7)
Taxation – continuing activities (13.1) – (13.1)
Taxation – exceptional – 25.8 25.8
Taxation (13.1) 25.8 12.7
Underlying earnings for the period 45.4
Total other items (100.4)
Loss after taxation (55.0)
Earnings per share for (loss)/profit attributable to equity shareholders
– Basic and diluted (pence) 85.8p (104.0)p
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
3 Revenue and segmental analysis (continued)
The segment assets and liabilities were as follows:
Funeral Pre–arranged Central
services Crematoria funeral plans overheads Group
As at 26 December 2014 £m £m £m £m £m
Segment assets 350.8 141.3 19.5 3.1 514.7
Unallocated assets:
Cash and cash equivalents 86.5
Corporation tax 1.0
Total assets 602.2
Segment liabilities (39.7) (7.8) (8.1) (9.6) (65.2)
Unallocated liabilities:
Borrowings – excluding finance leases (610.2)
Accrued interest (5.7)
Deferred tax (13.6)
Total liabilities (694.7)
Other segment items:
Additions to non–current assets (other than financial
instruments and deferred tax) 40.5 3.4 – 1.3 45.2
Depreciation (note 10) 9.6 3.2 – 0.5 13.3
Amortisation (note 9) – – 0.2 – 0.2
Impairment of trade receivables (note 21 (c)) 1.6 – – – 1.6
Other non–cash expenses (note 23) – – – 2.0 2.0
Loss on sale of fixed assets (0.3) – – – (0.3)
The revenue and operating profit, by segment, was as follows:
Loss on sale of
fixed assets,
Underlying external
operating profit transaction
before Depreciation Underlying costs and
depreciation and and operating profit/ exceptional Operating
Revenue amortisation amortisation (loss) items profit/(loss)
52 week period ended 27 December 2013 £m £m £m £m £m £m
Funeral services – existing 166.3 66.0 (8.3) 57.7 (0.1) 57.6
Funeral services – acquisitions 9.9 3.7 (0.6) 3.1 (1.7) 1.4
Funeral services 176.2 69.7 (8.9) 60.8 (1.8) 59.0
Crematoria – existing 52.1 29.4 (3.0) 26.4 – 26.4
Crematoria – acquisitions 1.7 1.0 – 1.0 – 1.0
Crematoria 53.8 30.4 (3.0) 27.4 – 27.4
Pre–arranged funeral plans 26.7 6.8 (0.1) 6.7 – 6.7
Central overheads – (16.0) (0.5) (16.5) (1.5) (18.0)
Group 256.7 90.9 (12.5) 78.4 (3.3) 75.1
Finance costs (28.9) – (28.9)
Finance income 3.4 – 3.4
Profit before tax 52.9 (3.3) 49.6
Taxation – continuing activities (12.9) 0.2 (12.7)
Taxation – exceptional – 3.5 3.5
Taxation (12.9) 3.7 (9.2)
Underlying earnings for the period 40.0
Total other items 0.4
Profit after taxation 40.4
Earnings per share for profit attributable to equity shareholders
– Basic and diluted (pence) 72.1p 72.8p
Dignity plc
Annual Report & Accounts 2014
81
3 Revenue and segmental analysis (continued)
The segment assets and liabilities were as follows:
Funeral Pre-arranged Central
services Crematoria funeral plans overheads Group
As at 27 December 2013 £m £m £m £m £m
Segment assets 329.5 130.6 18.2 2.8 481.1
Unallocated assets:
Cash and cash equivalents – excluding collateralisation of
Liquidity Facility 79.3
Cash and cash equivalents – collateralisation of
Liquidity Facility 63.0
Cash and cash equivalents 142.3
Total assets 623.4
Segment liabilities (27.7) (6.5) (6.3) (6.6) (47.1)
Unallocated liabilities:
Borrowings – excluding finance leases (423.2)
Collateralisation of Liquidity Facility (63.0)
Accrued interest (14.3)
Corporation tax (6.7)
Deferred tax (26.9)
Total liabilities (581.2)
Other segment items:
Additions to non–current assets (other than financial
instruments and deferred tax) 72.8 4.4 – 1.5 78.7
Depreciation (note 10) 8.9 3.0 – 0.4 12.3
Amortisation (note 9) – – 0.1 0.1 0.2
Impairment of trade receivables (note 21(c)) 2.1 0.1 – – 2.2
Other non–cash expenses (note 23) – – – 1.5 1.5
Loss on sale of fixed assets (0.1) – – – (0.1)
Cash generated from operations, at a divisional level, is considered to be broadly similar to the amount of underlying
operating profit by each division.
4 Net finance costs
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
Finance costs
Old Notes 21.8 24.7
New Notes 5.1 –
Amortisation of issue costs 1.5 1.8
Crematoria Acquisition Facility 0.6 0.6
Term loan – 0.7
Other loans 1.3 0.6
Interest payable on finance leases – 0.1
Unwinding of discounts 0.3 0.4
Underlying finance costs 30.6 28.9
Extinguishment of Old Notes – exceptional 123.2 –
Elimination of swap – exceptional 1.0 –
Finance costs 154.8 28.9
Finance income
Bank deposits (1.0) (0.5)
Amortisation of premium on Old Notes (3.2) (2.9)
Finance income (4.2) (3.4)
Net finance costs 150.6 25.5
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
5 (Loss)/profit before tax
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Analysis by nature £m £m
The following items have been included in arriving at (loss)/profit before tax:
Staff costs (note 27) 82.8 78.6
Cost of inventories recognised as an expense (included in cost of sales) 14.7 14.6
Depreciation of property, plant and equipment – owned assets (note 10) 13.3 12.3
Amortisation of intangible assets (included in administrative expenses) (note 9) 0.2 0.2
Operating lease rentals – property 8.7 8.3
External transaction costs 1.7 3.2
Loss on extinguishment of Old Notes – exceptional 123.2 –
Elimination of swap – exceptional 1.0 –
Trade receivables impairment (included in administrative expenses) (note 21(c)) 1.6 2.2
Services provided by the Group’s auditors and its associates:
Fees payable to the Company’s auditors for the audit of parent company and consolidated
financial statements 0.1 0.1
Fees payable to the Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries 0.1 0.1
– Tax advisory services – 0.1
– Other advisory services – 0.6
0.2 0.9
External transaction costs
The current period relates to £1.4 million of other external acquisition expense and £0.3 million external costs relating to the
Return of Cash. There is no impact on taxation.
The prior period consists of £1.1 million in respect of the Yew Acquisition, £1.6 million in respect of the issue of the Secured
Notes and Return of Cash and £0.5 million of other external acquisition expenses. The impact on taxation on these is a credit
of £0.2 million.
Loss on extinguishment of Old Notes – exceptional
During the period, the Group exchanged Old Notes with a book value of £404.6 million, stated before deduction of net
unamortised issue costs of £14.8 million, for New Notes with a value of £501.3 million and cash of £5.9 million. The Group
incurred incremental costs of £5.8 million in respect of this exchange. As explained in note 1, this exchange was assessed as
being an extinguishment of the Old Notes and the issue of New Notes, such that a loss on extinguishment of £123.2 million
arose. The impact on taxation on this is a credit of £25.6 million.
Elimination of swap – exceptional
The swap terminated in the period had a fair value of £5.1 million and a carrying value of £4.1 million, resulting in an
exceptional finance cost of £1.0 million. The impact on taxation on this is a credit of £0.2 million.
Following the change of auditors in 2014, the Group paid £40,000 of fees to the Group’s auditor in connection with the other
non–audit services. See the Audit Committee report for further details.
Dignity plc
Annual Report & Accounts 2014
83
6 Taxation
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Analysis of charge in the period £m £m
Current tax – current period 0.6 13.3
Adjustments for prior period (0.7) (0.2)
Total corporation tax (0.1) 13.1
Deferred tax – current period (1.2) (0.6)
Non trade deficit recognised in the period (11.6) –
Adjustments for prior period 0.2 0.2
Exceptional adjustment for rate change in 2013 23% to 20% – (3.5)
Total deferred tax (12.6) (3.9)
Taxation (12.7) 9.2
--
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
Tax on items credited to other comprehensive income or equity £m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (2.2) (0.2)
Deferred tax credit relating to maturity of option schemes (0.3) (0.4)
Total credited to other comprehensive income (2.5) (0.6)
Corporation tax credit on remeasurement losses on retirement benefit obligations – (0.3)
Corporation tax credit relating to maturity of option schemes (0.6) (0.7)
Adjustment for rate change in 2013 23% to 20% – 0.1
Total credited to equity (0.6) (0.9)
The taxation charge in the period is higher (2013: lower) than the standard rate of corporation tax in the UK of 21.5 per cent
(2013: 23.25 per cent). The differences are explained below:
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
(Loss)/profit before taxation (67.7) 49.6
(Loss)/profit before taxation multiplied by the standard rate of corporation
tax in the UK of 21.5% (2013: 23.25%) (14.6) 11.5
Effects of:
Adjustments in respect of prior period (0.5) –
Exceptional adjustment in respect of closing deferred tax rate change in 2013 23% to 20% – (3.5)
Expenses not deductible for tax purposes 2.4 1.2
Total taxation (12.7) 9.2
Under IFRS the tax rate is lower (2013: lower) than the standard UK tax rate of 21.5 per cent (2013: 23.25 per cent) due to a
combination of the impact of disallowable trading expenses and expenditure on the Group’s premises that does not attract
any deductions for tax purposes (2013: principally due to the exceptional adjustments). The standard rate of corporation tax
in the UK changed from 23 per cent to 21 per cent with effect from 1 April 2014. Accordingly the Group’s profits for this
accounting period are taxed at an effective rate of 22.5 per cent (2013: 24.5 per cent).
Legislation to reduce the main rate of corporation tax to 20 per cent from 1 April 2015 was substantively enacted in 2013
and as such the deferred tax balance at 27 December 2013 was calculated at 20 per cent. As a result, the Group recognised
exceptional tax income, in the prior period, of £3.5 million through its income statement which reflected the one off
reduction in the period of the Group’s deferred tax position.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
7 Dividends
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
Final dividend paid: 11.83p per Ordinary Share (2013: 10.75p) 6.3 6.2
Interim dividend paid: 6.49p per Ordinary Share (2013: nil) 3.5 –
Dividend on Ordinary Shares 9.8 6.2
2014 Return of Cash
On 7 November 2014, the Group returned a total of £64.4 million to ordinary shareholders equating to £1.20 for each
Ordinary Share held following the issue of the New Notes. Ordinary shareholders were able to elect to receive this Return of
Cash as either:
(a) A return of capital (the ‘Capital Option’).
(b) A special dividend (the ‘Special Dividend Option’).
Ordinary shareholders elected to receive £20.1 million as a return of capital and £44.3 million as a special dividend.
2013 Return of Cash
On 9 August 2013, the Group returned a total of £61.9 million to ordinary shareholders equating to £1.08 for each Ordinary
Share held following the issue of Old Notes. Ordinary shareholders were able to elect to receive this Return of Cash as either:
(c) A return of capital (the ‘Capital Option’).
(d) A special dividend (the ‘Special Dividend Option’).
Ordinary shareholders elected to receive £22.3 million as a return of capital and £39.6 million as a special dividend.
The interim dividend represents the interim dividend that was approved and paid in the period out of earnings generated in
the same period. No interim dividend was paid in 2013 as it was included within the Return of Cash.
The final dividend represents the final dividend that was approved and paid in the period relating to the earnings generated in
the previous period.
Consequently, total dividends recognised in the period were £74.2 million, 138.32 pence per share (2013: £68.1 million,
118.75 pence per share).
A final dividend of 13.01 pence per share, in respect of 2014, has been proposed by the Board. Based on the number of
shares in issue at the date of signing this report the total dividend payment is approximately £6.4 million. This will be paid on
26 June 2015 provided that approval is gained from shareholders at the Annual General Meeting on 11 June 2015 and will be
paid to shareholders on the register at close of business on 29 May 2015.
8 Earnings per share
The calculation of basic earnings per Ordinary Share has been based on the profit or loss attributable to equity shareholders
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 any 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 issuable 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 are assessed, as required by IAS 33, and to the
extent that the performance criteria have been met those contingently issuable shares are included within the diluted EPS
calculations. In prior periods, the potential issue of new shares pursuant to the Group’s share option plans had no impact on
the calculation of earnings per share.
For the period ended 26 December 2014, any potential ordinary shares to be included when considering diluted earnings per share
were anti–dilutive. As a result there was no difference between basic earnings per share and basic diluted earnings per share.
Dignity plc
Annual Report & Accounts 2014
85
8 Earnings per share (continued)
The Board believes that profit on ordinary activities before profit (or loss) on sale of fixed assets, external transaction costs,
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’.
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.
In 2013 and 2014, shareholders approved a share capital consolidation together with a Special Dividend of £1.08 and
£1.20 per Ordinary Share respectively. The overall effect of these transactions was that of a share repurchase at fair value.
The reduction in the number of Ordinary Shares is the result of a corresponding reduction in resources and therefore no
adjustment has been made to the earnings per share calculation.
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 26 December 2014
Underlying profit after taxation and EPS 45.4 52.9 85.8
Add: Exceptional items, loss on sale of fixed assets and external transaction
costs (net of taxation of £25.8 million) (100.4)
Loss attributable to shareholders – Basic and dilutive EPS (55.0) 52.9 (104.0)
52 week period ended 27 December 2013
Underlying profit after taxation and EPS 40.0 55.5 72.1
Add: Exceptional items, loss on sale of fixed assets and external transaction
costs (net of taxation of £0.2 million) 0.4
Profit attributable to shareholders – Basic and dilutive EPS 40.4 55.5 72.8
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
9 Goodwill and other intangible assets
Use of third Non–
Trade party brand compete
names name Software agreements Sub–total Goodwill Total
£m £m £m £m £m £m £m
Cost
At 28 December 2012 51.0 3.2 4.0 0.2 58.4 151.1 209.5
Acquisition of subsidiaries and other
businesses 23.5 – – – 23.5 22.6 46.1
At 27 December 2013 74.5 3.2 4.0 0.2 81.9 173.7 255.6
Acquisition of subsidiaries and
other businesses (note 26(a)) 17.7 – – – 17.7 8.6 26.3
At 26 December 2014 92.2 3.2 4.0 0.2 99.6 182.3 281.9
Accumulated amortisation
At 28 December 2012 – (0.9) (3.9) (0.2) (5.0) – (5.0)
Amortisation charge – (0.1) (0.1) – (0.2) – (0.2)
At 27 December 2013 – (1.0) (4.0) (0.2) (5.2) – (5.2)
Amortisation charge – (0.2) – – (0.2) – (0.2)
At 26 December 2014 – (1.2) (4.0) (0.2) (5.4) – (5.4)
Net book amount at
26 December 2014 92.2 2.0 – – 94.2 182.3 276.5
Net book amount at
27 December 2013 74.5 2.2 – – 76.7 173.7 250.4
Net book amount at
28 December 2012 51.0 2.3 0.1 – 53.4 151.1 204.5
Impairment tests for goodwill and other intangible assets
As described in note 1, goodwill and other intangible assets with an indefinite life are subject to annual impairment tests in
accordance with IAS 36, Impairment of Assets.
For the purpose of impairment testing:
(i) Goodwill (excluding goodwill acquired in the period) is tested at a business segment level.
(ii) Other intangible assets are allocated to the Group’s cash–generating units (CGUs) which are considered to be on a
regional basis.
The segmental allocation is shown below:
Intangible
assets Goodwill Total
At 26 December 2014 £m £m £m
Funeral services 92.2 130.7 222.9
Crematoria – 46.9 46.9
Pre–arranged funeral plans 2.0 4.7 6.7
94.2 182.3 276.5
At 27 December 2013
Funeral services 74.5 122.1 196.6
Crematoria – 46.9 46.9
Pre–arranged funeral plans 2.2 4.7 6.9
76.7 173.7 250.4
Dignity plc
Annual Report & Accounts 2014
87
9 Goodwill and other intangible assets (continued)
The recoverable amount of a CGU is based on a value–in–use calculation for goodwill and intangible assets existing at the start
of the period.
The value–in–use calculations use cash flow projections based on the latest management expectations. Key assumptions
used to produce the annual budget are the estimated UK death rates (based on historical death rates supplied by ONS),
anticipated market share (based on actual experience) and anticipated price increases (based on actual experience). Cash
flows beyond the initial 12 month period are extrapolated using a growth rate of 2.25 per cent (2013: 2.25 per cent), being
a prudent estimate of long–term growth rates for impairment review purposes only. The cash flows are discounted at a pre–tax
rate of 10.2 per cent (2013: 10.2 per cent). This rate is used for each CGU because they all have similar risk profiles. Based
on these calculations, the discount rate would have to increase to at least 18 per cent (2013: 19 per cent), or the growth rate
would have to reduce to at least minus 6.1 per cent (2013: minus 8 per cent) to result in any impairment of goodwill,
intangible assets, property, plant and equipment and working capital.
For acquisitions made in the period, the recoverable amount of cash–generating units has been determined on the basis of
fair value less costs to sell. The consideration paid in each case supports the valuation of goodwill which is subject to an
annual impairment review.
On the basis of the above, the review indicated that no impairment arose in any segment (2013: £nil).
10 Property, plant and equipment
Freehold Plant, machinery,
land and Leasehold fixtures and Motor Work
buildings buildings fittings vehicles in progress Total
£m £m £m £m £m £m
Cost
At 28 December 2012 92.8 37.9 35.4 49.9 7.8 223.8
Additions 3.0 1.3 4.3 7.5 2.2 18.3
Acquisition of subsidiaries and other businesses 17.5 1.9 – 1.8 – 21.2
Disposals – – (0.2) (2.9) – (3.1)
Reclassification 1.2 1.6 3.2 – (6.0) –
At 27 December 2013 114.5 42.7 42.7 56.3 4.0 260.2
Additions 0.9 2.6 1.7 7.4 6.8 19.4
Acquisition of subsidiaries and other
businesses (note 26(a)) 1.8 0.1 – 1.7 – 3.6
Disposals – (0.3) (3.8) (4.7) (0.1) (8.9)
Reclassification 1.0 2.9 2.1 0.1 (6.1) –
At 26 December 2014 118.2 48.0 42.7 60.8 4.6 274.3
Accumulated depreciation
At 28 December 2012 (15.4) (11.2) (16.8) (23.3) – (66.7)
Depreciation charge (2.8) (1.7) (3.6) (4.2) – (12.3)
Disposals – – 0.2 2.2 – 2.4
Reclassification (0.1) 0.1 – – – –
At 27 December 2013 (18.3) (12.8) (20.2) (25.3) – (76.6)
Depreciation charge (2.8) (1.9) (4.0) (4.6) – (13.3)
Disposals – 0.2 3.8 3.9 – 7.9
At 26 December 2014 (21.1) (14.5) (20.4) (26.0) – (82.0)
Net book amount at 26 December 2014 97.1 33.5 22.3 34.8 4.6 192.3
Net book amount at 27 December 2013 96.2 29.9 22.5 31.0 4.0 183.6
Net book amount at 28 December 2012 77.4 26.7 18.6 26.6 7.8 157.1
Depreciation expense of £4.6 million (2013: £4.2 million) is included within cost of sales and £8.7 million (2013:
£8.1 million) is included within administrative expenses.
Details of any securities over assets are disclosed in note 30.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
10 Property, plant and equipment (continued)
Additional headings have been included in the Consolidated Statement of Cash Flows for property, plant and equipment in
order to provide additional information on the different types of expenditure that the Group has incurred during the year.
Assets held under finance leases, which relate solely to leasehold land and buildings, have the following net book amount:
26 December 27 December
2014 2013
£m £m
Cost 1.0 1.0
Accumulated depreciation (0.3) (0.3)
Net book amount 0.7 0.7
The Group had capital expenditure authorised by the Board and contracted for at the balance sheet date of £2.0 million
(2013: £2.7 million).
11 Non–current financial and other assets
26 December 27 December
2014 2013
Note £m £m
Prepayments (a) 7.6 10.0
Deferred commissions (b) 2.8 2.7
10.4 12.7
(a) Prepayments
This balance represents the amounts paid to acquire the long leasehold interest in land at certain of the Group’s properties.
Management consider that leases greater than 50 years at inception are long leases. The balance is expensed on a straight
line basis over the term of the relevant lease. The leases expire at various times over the next 30 to 125 years.
(b) Deferred commissions
The Group is the named beneficiary on a number of life assurance products sold by third party insurance companies, in
consideration for which the Group has committed to performing the funeral (including some disbursements) of the plan
holder at no further charge.
A commission is paid to the insurers when the policy is initially charged to the Group. As this commission is fully refundable
if the Group does not perform the funeral for any reason, it is carried as a receivable and expensed when the funeral
is performed.
12 Investments
A list of the trading entities included within the financial information are included in note C2 to the Company’s financial
statements.
13 Inventories
26 December 27 December
2014 2013
£m £m
Materials 0.2 0.2
Finished goods 6.3 6.4
6.5 6.6
There were no inventory write–downs in either period.
Dignity plc
Annual Report & Accounts 2014
89
14 Trade and other receivables
26 December 27 December
2014 2013
£m £m
Trade receivables 20.6 19.5
Less: provision for impairment (note 21(c)) (4.9) (4.5)
Net trade receivables 15.7 15.0
Receivables due from pre–arranged funeral plans trusts (note 29) 5.5 3.1
Receivables due from pre–arranged funeral plans trusts due after more
than one year (note 29) 3.7 3.6
Prepayments and accrued income 2.7 4.8
Other receivables 1.4 1.3
Corporation taxation 1.0 –
30.0 27.8
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base being large and
unrelated. Due to this, management believes there is no further credit risk provision required in excess of normal provision for
doubtful recoverables. For further details of the trade receivables past due and impaired refer to note 21(c).
Due to the short–term nature of these balances, the carrying value is considered to be their fair value.
15 Cash and cash equivalents
26 December 27 December
2014 2013
Note £m £m
Operating cash as reported in the consolidated statement of cash flows as cash and
cash equivalents 76.9 59.0
Amounts set aside for debt service payments (a) 9.6 20.3
Collateralisation of Liquidity Facility (b) – 63.0
Cash and cash equivalents as reported in the balance sheet 86.5 142.3
(a) This amount was transferred to restricted bank accounts which could only be used for the payment of the interest and
principal on the Secured Notes, the repayment of liabilities due on the Group’s interest rate swaps (see note 16(d)) and
commitment fees due on its undrawn borrowing facilities (see note 21(d)) and for no other purpose. Consequently, this
amount does not meet the definition of cash and cash equivalents in IAS 7, Statement of Cash Flows. This amount was
used to pay these respective parties on 31 December 2014. Of this amount, £5.6 million (2013: £14.6 million) is shown
within the Statement of Cash Flows as ‘Payments to restricted bank accounts for finance costs’ and £4.0 million (2013:
£5.7 million) is shown within ‘Financing activities’ as ‘Payments to restricted bank accounts for repayment of borrowings’.
(b) This amount represents the cash collateralisation of the Liquidity Facility, which does not meet the definition of cash and
cash equivalents in IAS 7. See notes 16(f) and 21(d) for further information.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
16 Financial liabilities
26 December 27 December
2014 2013
Note £m £m
Current
Old A Notes (a) – 15.8
New A Notes (b) 8.0 –
Premium on Old Notes (a) – 4.0
Other current financial liabilities (d) – 1.0
Collateralisation of Liquidity Facility (f) – 63.0
(g) 8.0 83.8
Non–current
Old Notes (a) – 347.7
New Notes (b) 586.6 –
Premium on Old Notes (a) – 35.5
Finance lease obligations (c) 0.7 0.7
Other non–current financial liabilities (d) – 3.6
Crematoria Acquisition Facility (e) 15.6 15.6
602.9 403.1
(a) Old Notes
All Old Notes were repaid during the period. See the 2013 Annual Report for details of the Old Notes.
(b) New Notes
On 17 October 2014, Dignity Finance PLC issued the New Notes, as described in the Financial Review. Interest is payable on
the New Notes on 30 June and 31 December of each year.
Transaction costs of £0.3 million and £0.4 million were incurred directly relating to the issue of the New A Notes and the
New B Notes respectively. At 26 December 2014, £0.3 million (2013: £nil) and £0.4 million (2013: £nil) of the transaction
costs in respect of the New A Notes and the New B Notes respectively remain unamortised.
For further details of security over the New Notes see note 30(a).
The amortisation profile of the New Notes is as follows:
New A Notes
June
December
Total
2014
£m
–
4.0
4.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
£m £m £m £m £m £m £m £m £m £m
4.1 4.2 4.4 4.6 4.7 4.9 5.1 5.2 5.4 5.6
4.1 4.3 4.4 4.6 4.8 4.9 5.1 5.3 5.5 5.7
8.2 8.5 8.8 9.2 9.5 9.8 10.2 10.5 10.9 11.3
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Total
£m £m £m £m £m £m £m £m £m £m £m
June 5.8 6.0 6.2 6.4 6.7 6.9 7.2 7.4 7.7 8.0 116.5
December 5.9 6.1 6.4 6.6 6.8 7.1 7.3 7.6 7.8 8.1 122.4
Total 11.7 12.1 12.6 13.0 13.5 14.0 14.5 15.0 15.5 16.1 238.9
Dignity plc
Annual Report & Accounts 2014
91
16 Financial liabilities (continued)
New B Notes
June
December
2035
£m
8.4
8.5
2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
£m £m £m £m £m £m £m £m £m £m
8.7 9.1 9.6 10.0 10.5 11.0 11.5 12.1 12.6 13.2
9.0 9.4 9.8 10.3 10.8 11.3 11.8 12.3 12.9 13.5
Total
16.9
17.7 18.5 19.4 20.3 21.3 22.3 23.3 24.4 25.5 26.7
June
December
Total
2046
£m
13.8
14.2
28.0
2047
£m
14.5
14.8
29.3
2048
£m
15.2
15.5
30.7
2049
£m
15.9
16.2
32.1
Total
£m
176.1
180.3
356.4
(c) Obligations under finance leases
26 December 27 December
2014 2013
£m £m
Obligations under finance leases and hire purchase payable:
Within one year – –
Between one and two years – –
Between two and five years 0.2 0.2
After five years 0.5 0.5
0.7 0.7
The finance leases and hire purchase liabilities are secured on the related assets.
(d) Other financial liabilities
As part of the refinancing described in the Financial Review, this financial liability was repaid in the period. See the 2013
Annual Report for further details of the financial liability.
(e) Crematoria Acquisition Facility
The Group is fully drawn on a £15.8 million Crematoria Acquisition Facility. The principal on the facility is repayable in one
amount in February 2018 and interest is fixed at approximately 3.3 per cent. All interest is payable in cash on a quarterly
basis. Consequently, the Group carries limited risk to increases in LIBOR on this facility.
The transaction costs incurred on the Crematoria Acquisition Facility were £0.2 million. The principal outstanding on the
Crematoria Acquisition Facility and related issue costs have been presented on a net basis in the table on page 90.
At 26 December 2014, £15.8 million (2013: £15.8 million) of the principal was outstanding. At 26 December 2014,
£0.2 million (2013: £0.2 million) of the transaction costs remained unamortised.
For further details of security over the Crematoria Acquisition Facility see note 30(b).
(f) Collateralisation of Liquidity Facility
In November 2013 the Group enforced its right to require the Royal Bank of Scotland (‘RBS’) to cash collateralise the Group’s
Liquidity Facility, following the downgrade of RBS by Standard & Poor’s. This collateralisation could have been reversed at
RBS’s option once their short–term rating is at least A–1. At 27 December 2013 this facility was effectively undrawn on a net
basis and the cash could only be used in the same circumstances before the cash collateralisation was enforced. As part of
the refinancing described in the Financial Review the terms of the Liquidity Facility were amended. As a result the Group
benefits from a £55 million Liquidity Facility which is not required to be cash collateralised by RBS at this time.
(g) Current financial liabilities
The current financial liabilities represent the amounts falling due within one year of the Group’s balance sheet date.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
17 Trade and other payables
26 December 27 December
2014 2013
Current £m £m
Trade payables 5.3 5.9
Tax and social security 1.5 1.4
Other current liabilities 2.1 1.9
Accruals 38.4 39.6
Deferred income 3.9 3.2
51.2 52.0
Non–current
Deferred income 1.1 1.1
Deferred consideration for acquisitions 0.1 –
Other non–current liabilities 1.4 1.7
2.6 2.8
18 Obligations under finance leases and operating leases
For minimum lease payments obligations under finance leases refer to note 21(d)(ii).
26 December 27 December
2014 2013
£m £m
The minimum lease payments under non–cancellable operating leases fall due as follows:
Not later than one year 9.8 8.4
Later than one year but not more than five years 27.5 25.3
More than five years 131.3 125.5
168.6 159.2
The non–cancellable operating leases principally relate to leasehold land and buildings.
Of the total operating lease payments charged to trading expenses, £nil million (2013: £nil million) are in respect of
contingent rentals. The contingent rentals are based on the revenues generated at the specific locations.
Sublease payments received in the year amount to £0.5 million (2013: £0.4 million). Total future sublease payments
receivable relating to operating leases amount to £0.7 million (2013: £0.6 million).
In addition, the Group has operating lease commitments with rentals determined in relation to revenues. No operating lease
commitment disclosures are required for these arrangements, as future lease payments represent contingent rental
payments.
19 Provisions for liabilities and charges
Onerous Cancellation
Dilapidations contracts provision
£m £m £m Total
(a) (b) (c) £m
At beginning of period 3.6 0.1 1.2 4.9
Charged to income statement 0.9 0.1 0.1 1.1
Arising on acquisitions 0.3 – – 0.3
Released to income statement (0.2) (0.1) – (0.3)
Utilised in period (0.2) – – (0.2)
Amortisation of discount 0.1 – – 0.1
At end of period 4.5 0.1 1.3 5.9
Provisions have been analysed between current and non–current as follows:
26 December 27 December
2014 2013
£m £m
Current 1.4 1.1
Non–current 4.5 3.8
5.9 4.9
Dignity plc
Annual Report & Accounts 2014
93
19 Provisions for liabilities and charges (continued)
(a) Dilapidations
The provision for dilapidations covers the costs of repair to leased premises occupied by the Group in respect of which a
dilapidations notification has been received, and properties where a dilapidation obligation exists but for which no notification
has been received.
It is anticipated that the element of provision relating to dilapidation notices served, £1.1 million (2013: £0.6 million), will be
incurred in the following financial year, and the element relating to dilapidation obligations where no notice has been served
will be utilised over the terms of the relevant property leases, the majority of which is expected to be by 31 December 2023.
(b) Onerous contracts
The Group has provided for the discounted future costs of certain contracts to which the Group is legally bound. These
contracts relate to vacant leasehold properties and other contracts from which no economic benefit is derived. The provision
will be utilised over the term of the contracts and it is anticipated that it will be fully utilised by 2034.
Included within the provision is an amount of £nil million (2013: £nil million) relating to the expected costs of ongoing rent
reviews, the outcomes of which have been based on recent experience of similar reviews on other properties.
(c) Cancellation provision
As described in note 1, the Group receives monies from certain pre–arranged funeral plan Trusts in respect of the marketing
of pre–arranged funeral plans, which are refundable to the Trust in the event of cancellation.
The provision covers the expected cost of such cancellations anticipated to occur in future years relating to plans sold before
the balance sheet date and is anticipated to be utilised over the next five years.
20 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20 per cent
(2013: 20 per cent).
The movement on the deferred tax account is as shown below:
26 December 27 December
2014 2013
£m £m
At beginning of period 26.9 24.2
Credited to income statement (note 6) (12.6) (0.4)
Adjustment for rate change in 2013 23% to 20% – (3.4)
Taken to equity (note 6) (2.5) (0.6)
Arising on acquisitions (note 26(a)) 1.8 7.1
At end of period 13.6 26.9
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as
permitted by IAS 12) during the period are shown below:
Deferred tax liabilities
Accelerated tax
depreciation Other Total
£m £m £m
At beginning of period 15.7 13.0 28.7
Credited to income statement (note 6) (0.5) (0.6) (1.1)
Taken to equity (note 6) – – –
Arising on acquisitions 0.3 1.5 1.8
At end of period 15.5 13.9 29.4
Deferred tax assets
Non trade
deficits Pensions Other Total
£m £m £m £m
At beginning of period – (0.2) (1.6) (1.8)
(Credited)/charged to income statement (note 6) (11.6) 0.3 (0.2) (11.5)
Taken to equity – (2.2) (0.3) (2.5)
At end of period (11.6) (2.1) (2.1) (15.8)
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
20 Deferred tax (continued)
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax provision
at 26 December 2014 was £13.6 million (2013: £26.9 million).
Other deferred tax liabilities includes trade names and capital gains rolled forward, other deferred tax assets includes option
schemes £1.6 million (2013: £1.0 million) and long service awards £0.2 million (2013: £0.2 million).
Elements of these deferred tax balances may be payable/recoverable within one year. However, the Directors consider that it
is not possible to quantify the amount because the level of uncertainty in the timing of events and have therefore classified
the whole balance as due after more than one year.
The deferred income tax credited to other comprehensive income or charged to equity during the period was as follows:
52 week 52 week
period ended period ended
26 December 27 December
2014 2013
£m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (2.2) (0.2)
Deferred tax credit relating to maturity of option schemes (0.3) (0.4)
Total credited to other comprehensive income (2.5) (0.6)
Adjustment for rate change in 2013 23% to 20% – 0.1
Total charged to equity – 0.1
21 Financial instruments
Fair values of non–derivative financial assets and financial liabilities
Where market values are not available, fair values of financial assets and financial liabilities have been calculated by
discounting expected future cash flows at relevant interest rates.
Trade receivables are held net of impairment.
Fair value estimation
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
All assets and liabilities are held at amortised cost other than interest rate swaps (in the prior period) which are held at fair
value. These swaps are level 2.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(a) Fair value of current and non–current financial assets and liabilities
26 December 27 December
2014 2013
£m £m
Long–term borrowings (excluding finance lease obligations and including swaps) (note 16) (649.6) (494.9)
Finance lease obligations (note 16) (0.7) (0.7)
(650.3) (495.6)
Fair values of other financial assets and financial liabilities
Primary financial instruments held or issued to finance the Group’s operations:
Short–term borrowings (excluding finance lease obligations and collateralised Liquidity Facility
and including swaps) (note 16) (8.3) (23.6)
Collateralisation of Liquidity Facility – (63.0)
Trade and other payables (excluding statutory liabilities) (note 17) (49.7) (50.6)
Trade and other receivables (excluding prepayments) (note 14) 26.3 23.0
Collateralisation of Liquidity Facility – 63.0
Cash and cash equivalents – excluding collateralised Liquidity Facility (note 15) 86.5 79.3
Other non–current financial liabilities (note 17) (2.6) (2.8)
Dignity plc
Annual Report & Accounts 2014
95
21 Financial instruments (continued)
With the exception of long–term and short–term borrowings (excluding finance lease obligations and including swaps) the fair
value and the book value are the same. Long–term borrowings (excluding finance lease obligations and including swaps) has a
book value of £602.2 million (2013: £402.4 million) and short–term borrowings (excluding finance lease obligations and
including swaps) has a book value of £8.0 million (2013: £20.8 million).
(b) Maturity of financial liabilities
The tables below analyse the Group’s financial liabilities, which will be settled on a net basis into relevant maturity groupings
based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the
tables are the contractual undiscounted cash flows, including interest costs yet to be incurred.
26 December 2014
In more than In more than In more than
one year but two years but three years but
In less than not more than not more than not more than In more than
one year two years three years five years five years Total
£m £m £m £m £m £m
Cash liabilities
New Notes (gross) 8.1 8.3 8.7 18.3 551.9 595.3
Interest payable on New Notes 17.7 24.8 24.5 48.2 463.7 578.9
Crematoria Acquisition Facility – – – 15.8 – 15.8
Interest payable on Crematoria
Acquisition Facility 0.5 0.5 0.5 0.1 – 1.6
Finance leases – 0.1 0.1 0.1 2.7 3.0
Debt repayments 26.3 33.7 33.8 82.5 1,018.3 1,194.6
Other financial liabilities 45.9 0.4 0.3 0.7 0.7 48.0
72.2 34.1 34.1 83.2 1,019.0 1,242.6
27 December 2013
In more than In more than In more than
one year but two years but three years but
In less than not more than not more than not more than In more than
one year two years three years five years five years Total
£m £m £m £m £m £m
Cash liabilities
Old Notes (gross) 17.7 13.0 14.0 31.3 303.8 379.8
Interest payable on Old Notes 41.1 26.4 25.6 48.5 167.3 308.9
Swaps 1.0 0.7 0.7 1.2 2.8 6.4
Crematoria Acquisition Facility – – – 15.8 – 15.8
Interest payable on Crematoria
Acquisition Facility 0.5 0.5 0.5 0.6 – 2.1
Collateralisation of Liquidity Facility 63.0 – – – – 63.0
Finance leases – 0.1 0.1 0.1 2.7 3.0
Debt repayments 123.3 40.7 40.9 97.5 476.6 779.0
Other financial liabilities 37.9 0.3 0.3 0.4 0.9 39.8
161.2 41.0 41.2 97.9 477.5 818.8
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
21 Financial instruments (continued)
The amounts disclosed in the tables below represent the anticipated amortisation profile for the issue costs relating to the
Group’s financial liabilities.
26 December 2014
In more than In more than In more than
one year but two years but three years but
In less than not more than not more than not more than In more than
one year two years three years five years five years Total
£m £m £m £m £m £m
Non–cash liabilities
Issue costs on New Notes – – – – 0.7 0.7
Issue costs on Crematoria
Acquisition Facility – 0.1 0.1 – – 0.2
– 0.1 0.1 – 0.7 0.9
27 December 2013
In more than In more than In more than
one year but two years but three years but
In less than not more than not more than not more than In more than
one year two years three years five years five years Total
£m £m £m £m £m £m
Non–cash liabilities
Issue costs on Old Notes 1.8 1.7 1.7 3.0 8.1 16.3
Premium on Old Notes (3.9) (3.8) (3.7) (6.8) (21.3) (39.5)
Issue costs on Crematoria
Acquisition Facility – 0.1 – 0.1 – 0.2
(2.1) (2.0) (2.0) (3.7) (13.2) (23.0)
(c) Trade receivables
As at 26 December 2014, £8.6 million of the individual gross trade receivables (2013: £8.7 million) were past due and
partially impaired. A provision for impairment is established based on historical experience. The amount of the provision, as
at 26 December 2014, was £4.9 million (2013: £4.5 million). The individually impaired receivables principally relate to
monies owing for funerals performed by the funeral services division. The ageing of these receivables is as follows:
26 December 27 December
2014 2013
£m £m
One to six months 4.6 4.9
Over six months 4.0 3.8
8.6 8.7
The amount of gross trade receivables past due that were not impaired was not significant.
Movements on the Group’s provision for impairment of trade receivables are as follows:
26 December 27 December
2014 2013
£m £m
At beginning of period (4.5) (3.4)
Charged to income statement (1.6) (2.2)
Utilised in period 1.2 1.1
At end of period (4.9) (4.5)
Dignity plc
Annual Report & Accounts 2014
97
21 Financial instruments (continued)
(d) Borrowing facilities
(i) The Group has the following undrawn committed borrowing facilities available at 26 December 2014, all of which were at
floating interest rates, in respect of which all conditions precedent had been met at that date:
26 December 27 December
2014 2013
£m £m
Expiring within one year – –
Expiring between one and two years – –
Expiring in more than two years 60.0 5.0
60.0 5.0
During the period, £55 million was undrawn (2013: £63.0 million drawn) of the Liquidity Facility relating to the New Notes
(2013: Old Notes). This facility may only be used to repay interest and principal on the New Notes in the event of insufficient
cash to service these instruments. The facility is subject to annual renewal. However, if the bank providing the facility does not
renew it, then the provider is required to place £55 million (2013: £63.0 million) in a bank account, which the Group may
access as if it represented a borrowing facility on the same terms. The facility is available on these terms until the New Notes
have been repaid in full. This facility ceased being cash in the period. See note 16(f) for further information.
The remaining £5.0 million facility expires in October 2019. Both these facilities incur commitment fees at market rates.
(ii) The minimum lease payments under finance leases fall due as follows:
26 December 27 December
2014 2013
£m £m
Not later than one year 0.1 0.1
Later than one year but not more than five years 0.2 0.2
More than five years 2.7 2.7
3.0 3.0
Future finance costs on finance leases (2.3) (2.3)
Present value of finance lease liabilities 0.7 0.7
22 Ordinary share capital
26 December 27 December
2014 2013
£m £m
Allotted and fully paid Equity shares
49,170,180 (2013: 53,343,871) Ordinary Shares of 12 48/143 pence (2013: 11 4/13 pence) each 6.1 6.0
Each Ordinary Share carries equal voting rights and there are no restrictions on any share.
During the period, the Group received £nil consideration in relation to the 281,430 shares issued under the 2011 LTIP
scheme, £nil million (2013: £1 million) consideration in relation to the 14,896 (2013: 141,981) shares issued under the
2010 SAYE scheme.
Changes in issued share capital – 2014
On 31 October 2014, the Ordinary Share Capital of the Company was consolidated such that shareholders received 11
Ordinary Shares of 12 48/143 pence each in exchange for every 12 Ordinary Shares of 11 4/13 pence each held at close of
business on 31 October 2014.
As a result of the Return of Cash undertaken in the year, bonus shares of 16,795,058 B Shares with a nominal value of
£1.20 per share and 36,845,858 C Shares were issued. The B Shares were issued and redeemed for cash at par in November
2014. The C Shares were issued in November 2014 and converted to Deferred Shares on the same day. The deferred shares
were subsequently repurchased for nominal consideration.
Changes in issued share capital – 2013
On 12 August 2013, the Ordinary Share Capital of the Company was consolidated such that shareholders received 13
Ordinary Shares of 11 4/13 pence each in exchange for every 14 Ordinary Shares of £0.105 each held at close of business
on 9 August 2013.
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98
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
22 Ordinary share capital (continued)
As a result of the Return of Cash undertaken in the year, bonus shares of 20,613,992 B Shares with a nominal value of
£1.08 per share and 36,680,352 C Shares were issued. The B Shares were issued on 12 August 2013 and redeemed for cash
at par on 20 August 2013. The C Shares were issued on 12 August 2013 and converted to Deferred Shares on the same day.
The deferred shares were subsequently repurchased for nominal consideration.
Potential issues of Ordinary Shares
Certain employees hold options to subscribe for shares in the Company under an approved Save As You Earn (‘SAYE’)
Scheme started in 2013. In addition, Executive Directors and senior management hold options to subscribe for shares in the
Company under Long–Term Incentive Plans (‘LTIPs’) awarded in 2012, 2013 and 2014.
The total number of outstanding shares subject to options (excluding lapses), the periods in which they were granted and the
periods in which they may be exercised are given below:
Exercise price 2014 2013 2012
Year of grant (pence) Exercise period Number Number Number
2013 – SAYE
2012 – LTIP
2013 – LTIP
2014 – LTIP
23 Share–based payments
1,469.00
–
–
–
1 December 2016
to 31 May 2017
29 March 2015
to 27 March 2022
20 March 2016
to 18 March 2023
25 March 2017
to 24 March 2024
130,364
149,318
n/a
251,836
251,836
251,836
217,270
217,270
186,780
n/a
n/a
n/a
In respect of share–based payment arrangements, total charges to the income statement were £2.0 million
(2013: £1.5 million). The Directors consider that these amounts are not material and hence further detailed disclosures
have been omitted.
24 Net debt
26 December 27 December
2014 2013
£m £m
Net amounts owing on Old Notes – (403.0)
Net amounts owing on New Notes (594.6) –
Add: unamortised issue costs – issued 2014 (note 16(b)) (0.7) (16.3)
Gross amounts owing on Secured Notes per financial statements (595.3) (419.3)
Net amounts owing on Crematoria Acquisition Facility per financial statements (15.6) (15.6)
Add: unamortised issue costs on Crematoria Acquisition Facility (note 16(e)) (0.2) (0.2)
Gross amounts owing (611.1) (435.1)
Accrued interest on Secured Notes (5.7) (14.3)
Cash and cash equivalents(a) (note 15) 86.5 79.3
Net debt (530.3) (370.1)
(a) In 2013, cash held as collateral for the Liquidity Facility was excluded as it did not meet the definition of cash and cash equivalents in IAS 7. See notes 16(f)
and 21(d) for further details.
In addition to the above, the consolidated balance sheet also includes finance lease obligations and other financial liabilities
which totalled £0.7 million (2013: £5.3 million). These amounts do not represent sources of funding for the Group and are
therefore excluded from the calculation of net debt.
The Group’s primary financial covenant in respect of the New Notes requires EBITDA to total debt service to be at least
1.5 times. At 26 December 2014, the actual ratio was 10.69 times (2013: 2.46 times). The New Notes were issued on
17 October 2014. Consequently, Senior Interest only accrues from this date for the Relevant Period. Debt Service, assuming a
full year Senior Interest would have been approximately £33.7 million. On this basis, the EBITDA DSCR would have been
2.95 times and the Free Cashflow DSCR would have been 2.47 times.
These ratios are calculated for EBITDA and total debt service on a 12 month rolling basis and reported quarterly. In addition,
both terms are specifically defined in the legal agreement relating to the Secured Notes. As such, they cannot be accurately
calculated from the contents of this report.
Dignity plc
Annual Report & Accounts 2014
99
25 Reconciliation of cash generated from operations
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
Net (loss)/profit for the period (55.0) 40.4
Adjustments for:
Taxation (12.7) 9.2
Net finance costs 26.4 25.5
Loss on disposal of fixed assets 0.3 0.1
Depreciation charges 13.3 12.3
Amortisation of intangibles 0.2 0.2
Movement in inventories 0.2 –
Movement in trade receivables 0.3 2.0
Movement in trade payables (0.6) (1.4)
External transaction costs 1.7 3.2
Loss on extinguishment of Old Notes – exceptional 123.2 –
Elimination of swap – exceptional 1.0 –
Changes in other working capital (excluding acquisitions) 4.1 1.2
Employee share option charges (note 23) 2.0 1.5
Cash generated from operations before external transaction costs and
exceptional pension contributions 104.4 94.2
Other non–cash transactions
During the period, as described in note 5, the Group exchanged Old Notes with a book value of £404.6 million for New Notes
with a value of £501.3 million and cash of £5.9 million.
Non–cash charges also comprise amortisation of deferred debt issue costs, as discussed in note 16(b).
26 Acquisitions
(a) Acquisition of subsidiary and other businesses
Provisional
fair value
£m
Property, plant and equipment 3.6
Intangible assets: trade names 17.7
Cash acquired 4.3
Receivables 0.7
Provisions (note 19) (0.3)
Other working capital (0.3)
Deferred taxation (note 20) (1.8)
Net assets acquired 23.9
Goodwill arising 8.6
32.5
Satisfied by:
Cash paid on completion (funded from internally generated cash flows) 29.0
Deferred consideration 3.5
Total consideration 32.5
All intangible assets were recognised at their provisional respective fair values. The residual excess of the consideration paid
over the net assets acquired is recognised as goodwill, of which £4.1 million is tax deductable. This goodwill represents future
benefits to the Group in terms of revenue, market share and delivering the Group’s strategy.
The fair value adjustments contain provisional amounts, which will be finalised in 2015. These adjustments reflect the
recognition of trade names and associated deferred taxation, and adjustments to reflect the fair value of other working
capital movements such as receivables, inventories and accruals which are immaterial.
All acquisitions have been accounted for under the acquisition method. None were individually material and consequently
have been aggregated. The aggregated impact of the acquisitions on the Income Statement for the period is not material.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
26 Acquisitions (continued)
(b) Reconciliation to cash flow statement
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
Cash paid on completion 29.0 61.7
Cash paid in respect of deferred consideration obligations – 0.1
Cash acquired on acquisition (4.3) (1.1)
Acquisition of subsidiaries and businesses as reported in the cash flow statement 24.7 60.7
27 Employees and Directors
52 week period 52 week period
ended ended
26 December 27 December
2014 2013
£m £m
Wages and salaries 73.4 70.1
Social security costs 5.2 5.1
Other pension costs (note 28) 2.2 1.9
Share option charges (note 23) 2.0 1.5
82.8 78.6
Key management are considered to be the Board of Directors only. Total key management remuneration in the period was
£4.3 million (2013: £3.9 million), including £1.3 million (2013: £1.0 million) of share option charges. The monthly average
number of people, including Directors, employed by the Group during the period was as follows:
2014 2013
Number Number
Management and administration 159 148
Funeral services staff 2,229 2,194
Crematoria staff 324 316
Pre–arranged funeral plan staff 76 69
2,788 2,727
Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 52 to 58 which form part
of these consolidated financial statements.
28 Pension commitments
Defined contribution plans
The Group contributes to certain individuals’ personal pension schemes. These contributions are accounted for as defined
contribution schemes.
Auto enrolment
A defined contribution scheme is used to address the Group’s obligations for auto enrolment. Both the employee and the
Group contribute four per cent of pensionable pay.
The pension costs for defined contribution schemes are as follows:
2014 2013
£m £m
Defined contribution schemes 0.9 0.3
Annual Report & Accounts 2014 101
Dignity plc
28 Pension commitments (continued)
Defined benefit plan
The Group operates a defined benefit scheme the Dignity Pension and Assurance Scheme. A full actuarial valuation was
carried out as at 6 April 2014 and updated to 26 December 2014 by a qualified independent Actuary.
After consultation with members of the defined benefit plan, the Group closed the scheme to new entrants on 1 October
2013 and employee contributions were increased to 10 per cent (from 7 per cent) of pensionable salaries, with the Group
contributing the same amount (an increase from 9.2 per cent). The total monetary contribution paid by the employer for
2014 was £1.6 million (2013: £1.5 million). In addition special contributions of £1.0 million (2013: £1.0 million) have been
paid to make the total contribution for the year £2.6 million (2013: £2.5 million).
The principal actuarial assumptions at the balance sheet date (expressed as weighted averages) were:
2014 2013
Assumptions % %
Discount rate 3.7 4.7
Rate of increase in salaries 2.1 2.5
Rate of increase in payment of post April 1997 pensionable service 3.05 3.4
Rate of increase in payment of post April 2005 pensionable service 2.15 2.3
RPI price inflation assumption 3.1 3.5
CPI price inflation assumption 2.1 2.5
The demographic assumptions used include rates for mortality which, for example, lead to an average projected life
expectancy of 20.7 (2013: 20.6) years for male members and 26.0 (2013: 26.0) years for female members currently aged
65 and of 21.9 (2013: 21.9) years from age 65 for male members and 27.5 (2013: 27.6) years from age 65 for female
members currently aged 50.
Pensions and other post–retirement obligations
The amounts recognised in the balance sheet are determined as follows:
2014 2013
£m £m
Fair value of plan assets 95.0 91.2
Present value of funded obligations (105.5) (92.2)
Net obligation recognised in the balance sheet (10.5) (1.0)
Analysis of amount charged to income statement in respect of defined benefit schemes
2014 2013
£m £m
Current service cost included within cost of sales (staff costs) 1.3 1.6
Expected contributions to the Group’s pension scheme for the 52 week period ended 25 December 2015 are approximately
£1.5 million.
Analysis of fair value of plan assets 2014 2013
£m % £m %
Equity and diversified growth funds 60.7 63.9 50.7 55.6
Debt 25.4 26.7 32.7 35.9
Cash 8.9 9.4 7.8 8.5
Fair value of plan assets 95.0 100.0 91.2 100.0
At 26 December 2014 and 27 December 2013 the Pension Trustees did not hold, on behalf of the scheme, any direct
investments in the Group, nor did the Group occupy any property or other assets included with the fair value of plan assets.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
28 Pension commitments (continued)
Changes in the present value of the defined benefit obligation are as follows:
2014 2013
£m £m
Present value of obligation at beginning of period (92.2) (86.9)
Current service cost (1.3) (1.6)
Interest cost (4.2) (4.0)
Benefits paid 3.7 3.5
Contributions by participants (1.5) (1.2)
Remeasurement losses – financial (12.4) (2.3)
Remeasurement gains – demographic 1.0 –
Remeasurement gains – experience 1.4 0.3
Present value of obligation at end of period (105.5) (92.2)
Changes in the fair value of plan assets are as follows:
2014 2013
£m £m
Fair value of plan assets at beginning of period 91.2 87.0
Interest income on plan assets 4.2 4.0
Contributions by Group 2.6 2.5
Contributions by participants 1.5 1.2
Benefits paid (3.7) (3.5)
Remeasurement losses (0.8) –
Fair value of plan assets at end of period 95.0 91.2
Analysis of the movement in the balance sheet obligation
2014 2013
£m £m
At beginning of period (1.0) 0.1
Total expense as above charged to the income statement (1.3) (1.6)
Remeasurement losses charged to other comprehensive income (10.8) (2.0)
Contributions by Group 2.6 2.5
At end of period (10.5) (1.0)
The actual return on plan assets was £3.5 million (2013: £4.0 million).
History of experience gains and losses
2014 2013
Experience adjustments arising on scheme liabilities:
Amount (£m) 1.4 0.2
Percentage of the present value of the scheme’s liabilities 1.3% 0.2%
Present value of scheme liabilities (£m) (105.5) (92.2)
Fair value of scheme assets (£m) 95.0 91.2
Deficit (£m) (10.5) (1.0)
Increase/
(decrease) in
Liabilities Assets Deficit surplus
Change in assumptions £m £m £m £m
No change (105.5) 95.0 (10.5) –
0.25% rise in discount rate (101.1) 95.0 (6.1) 4.4
0.25% fall in discount rate (110.1) 95.0 (15.1) (4.6)
0.25% rise in inflation (108.2) 95.0 (13.2) (2.7)
0.25% fall in inflation (102.4) 95.0 (7.4) 3.1
The above sensitivity analysis has been determined by applying the results of a fully accurate sensitivity analysis as at
6 April 2014 to the value placed on the Scheme liabilities as at 26 December 2014, assuming that the proportionate impact
of the change in assumptions would be the same. It does not, therefore, allow for the impact of membership movements
since 6 April 2014, although these would not be material. The same methodology was used for the sensitivity analysis
undertaken for the year ending 27 December 2013.
Annual Report & Accounts 2014 103
Dignity plc
28 Pension commitments (continued)
Analysis of present value of scheme liabilities
2014 2013
Active members 36% 36%
Deferred pensioners 26% 25%
Current pensioners 38% 39%
Average duration of liabilities 18 years 18 years
Scheme characteristic
The scheme is a final salary defined benefits scheme which was closed to new entrants on 1 October 2013. It is administered
by trustees in accordance with its Trust Deed & Rules and relevant legislation. Member contributions are fixed with the
employer meeting the balance of the costs of providing scheme benefits. The contribution payable by the employer are set
by the trustees after consulting the employer and in accordance with the funding requirements of the Pensions Act 2004.
Funding arrangements
The Trustees use Projected Unit funding method. The last full triennial actuarial valuation was undertaken as at 6 April 2014.
Currently both the Employer and Scheme members pay contributions at the rate of 10 per cent of pensionable pay. The
employer contributions include allowances for expenses of administering the scheme.
Funding Risks
Investment return risk
If the assets underperform the returns assumed in setting the funding targets then additional contributions may be required
at subsequent valuations.
Investment match risk
The scheme invests significantly in equities, whereas the funding targets are closely related to the returns on bonds.
If equities fall in value relative to the matching asset of bonds, additional contributions may be required.
Longevity risk
If future improvements in longevity exceed the assumptions made for scheme funding then additional contributions may
be required.
29 Pre–arranged funeral plans
(a) Contingent liabilities and commitments
Dignity Pre–arrangement Limited, Dignity Securities Limited and Advance Planning Limited are fellow members of the Dignity
Group in the United Kingdom. These companies have sold pre–arranged funeral plans to their clients in the past. All monies
from these sales are held and controlled by three independent Trusts, being the National Funeral Trust, the Dignity Limited
Trust Fund and the Trust for Age UK Funeral Plans respectively (the ‘Principal Trusts’). Further details of the transactions can
be found in the financial statements of these companies, which are available from 4 King Edwards Court, King Edwards
Square, Sutton Coldfield, West Midlands, B73 6AP.
The Group has given commitments to these clients to perform their funeral. The agreed amounts payable to either the Group
or to third party funeral directors will be paid out of the funds held in the Trusts.
Similar commitments have arisen following acquisitions of businesses since 2013, which had sold pre–arranged funeral plans
through a similar trust based structure (the ‘Recent Trusts’). The Recent Trusts hold assets of approximately £24 million.
Only the National Funeral Trust and the Trust for Age UK Funeral Plans receive funds relating to the sale of new plans (the
‘Active Trusts’).
It is the view of the Directors that none of the commitments given to these clients are onerous to the Group.
(b) Pre–arranged funeral plan trust assets
The trustees have advised that the market value of the assets of the pre–arranged funeral plan trusts was £678.0 million
at 26 December 2014 (2013: £578.9 million) in respect of 275,000 (2013: 257,000) unfulfilled pre–arranged funeral plans.
The remaining 73,000 (2013: 66,000) unfulfilled pre–arranged funeral plans related to those backed by Insurance Plans, as
described in note 1 to the consolidated financial statements.
The majority of the trustees of each of the pre–arranged funeral plan trusts are unconnected to the Group, as required by
current UK legislation.
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Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 26 December 2014
29 Pre–arranged funeral plans (continued)
The trustees of the Principal Trusts are required to have the Trusts’ liabilities actuarially valued once a year (once every three
years in the case of the Recent Trusts). The trustees have advised that the latest actuarial valuations of the Principal Trusts
were performed as at 26 September 2014 (2013: 27 September 2013) using assumptions determined by the trustees. These
valuations showed the Trusts to have liabilities in respect of the pre–arranged funeral plan trusts of £612.9 million as at
26 September 2014 (2013: £528.2 million). The corresponding market value of the assets of the pre–arranged funeral plan
trusts was £630.6 million (2013: £544.8 million) as at the same date. Consequently the actuarial valuations recorded total
surpluses of £17.7 million at 26 September 2014 (2013: £16.6 million).
The trustees have advised that the Recent Trusts have approximately £24 million of assets as at the balance sheet date and
no material surplus or deficit.
Transactions with the Group
During the period, the Group entered into transactions with the Principal Trusts and the Recent Trusts (the ‘Trusts’)
associated with the pre–arranged funeral plan businesses. The nature of the relationship with the Trusts is set out in the
accounting policies. Amounts may only be paid out of the Trusts in accordance with the relevant Trust Deeds.
Transactions principally comprise:
• The recovery of marketing and administration allowances in relation to plans sold net of cancellations; and
• Receipts from the Trusts in respect of funerals provided.
Transactions also include:
• Receipts from the Trusts in respect of cancellations by existing members;
• Reimbursement by the Trusts of expenses paid by the Group on behalf of the respective Trusts; and
• The payment of realised surpluses generated by the Trust funds as and when the trustees sanction such payments.
Transactions are summarised below:
Amounts due to the
Transactions during the period Group at the period end
2014 2013 2014 2013
£m £m £m £m
Dignity Limited Trust Fund 0.3 0.3 – –
National Funeral Trust 34.8 31.1 2.4 1.5
Trust for Age UK Funeral Plans 35.1 34.0 2.8 1.5
Peace of Mind Trusts 1.5 1.2 0.3 0.1
A further £3.7 million (2013: £3.6 million) is due from the Trusts after more than one year.
Average transaction amounts
The Trusts hold assets of approximately £2,400 (2013: £2,200) per active plan at the balance sheet date. On average the
Group received £2,300 (2013: £2,200) for the performance of each funeral (including amounts to cover disbursements such
as crematoria fees, ministers’ fees and doctors’ fees).
30 Contingent liabilities
(a) Securitisation
As a result of the issue of New Notes, BNY Mellon Corporate Trustee Services Limited in its capacity as Security Trustee of
the New Notes has the following guarantees and charges:
• The Dignity (2002) Group have granted the Security Trustee fixed and floating charges over the assets and undertakings of
the Dignity (2002) Group;(i)
• Dignity plc has granted the Security Trustee, with full title guarantee a first fixed charge over the shares (and any monies
receivable in respect of the shares) which it holds in Dignity (2004) Limited, Dignity (2008) Limited, Dignity (2011) Limited
and Dignity Holdings No.3 Limited;
• Dignity (2004) Limited has granted the Security Trustee, with full title guarantee a first fixed charge over the shares (and any
monies receivable in respect of the shares) which it holds in Dignity Holdings No. 2 Limited and Dignity (2002) Limited;
• Dignity Holdings No. 2 Limited has granted the Security Trustee, with full title guarantee a first fixed charge over the shares
(and any monies receivable in respect of the shares) which it holds in Dignity Holdings Limited;
• Dignity Holdings Limited has granted the Security Trustee, with full title guarantee a first fixed charge over the shares (and
any monies receivable in respect of the shares) which it holds in Dignity Mezzco Limited;
Annual Report & Accounts 2014 105
Dignity plc
30 Contingent liabilities (continued)
• Dignity Holdings Limited has also assigned to the Security Trustee by way of security with full title guarantee, its right title
and interest in the loans (both interest and non interest bearing) to Dignity (2002) Limited;
• Dignity Mezzco Limited has also assigned to the Security Trustee by way of security with full title guarantee, its right title
and interest in the loan to Dignity (2002) Limited;
• Dignity (2004) Limited has granted the Security Trustee, with full title guarantee a floating charge over the assets now or in
the future owned by Dignity (2004) Limited (other than those assets validly and effectively charged by way of fixed security);
• Dignity plc, Dignity Holdings No.2 Limited, Dignity Holdings Limited and Dignity Mezzco Limited has granted the Security
Trustee, with full title guarantee a floating charge over the assets now or in the future owned by each of Dignity plc, Dignity
Holdings No.2 Limited, Dignity Holdings Limited and Dignity Mezzco Limited (other than those assets validly and effectively
charged by way of fixed security);
• The Guarantors(ii) each irrevocably and unconditionally jointly and severally guarantees to the Security Trustee punctual
performance by each other Obligor of that Obligor's obligations and agrees as a primary obligation to indemnify the
Security Trustee immediately on demand against any cost, loss or liability suffered by it if any obligation guaranteed by the
Guarantors is or becomes unenforceable, invalid or illegal;
• Dignity Funerals Limited and Derriman & Haynes Funeral Services Limited has granted the Security Trustee with full title
guarantee, a first legal mortgage over each of its rights, title and interest from time to time in properties situated in
England and Wales;
• Dignity Funerals Limited has granted the Security Trustee with full title guarantee(iii), a first legal mortgage over its rights,
title and interest from time to time in properties situated in Northern Ireland;
• Dignity Finance PLC has granted BNY Mellon Corporate Trustee Services Limited (in its capacity as Note Trustee) with full
title guarantee, an assignment by way of security of its benefit in each Issuer Transaction Document (other than the Trust
Documents), the Security Trust Deed and each Obligor Security Document and charges by way of first fixed charge the
benefit of its accounts; and
• Dignity Funerals Limited has, in respect of any Scottish property which is capable of being so charged, granted 'standard
securities' in favour of the Security Trustee(iv).
(i) Means Dignity (2002) Limited and its subsidiaries.
(ii) Means the Obligors (other than Dignity (2002) Limited (as Borrower)), Dignity (2004) Limited, Dignity plc, Dignity Holdings No.2 Limited, Dignity Holdings
Limited and Dignity Mezzco Limited.
(iii) This mortgage is governed by the laws of Northern Ireland.
(iv) The standard securities are governed by Scots Law.
At 26 December 2014, the amount outstanding in relation to these borrowings was £595.3 million (2013: £419.3 million).
(b) Crematoria Acquisition Facility
As a consequence of the legal structure of the £15.8 million Crematoria Acquisition Facility:
• Dignity (2008) Limited has granted Nat West, with full title guarantee a first fixed charge over the shares (and any monies
receivable in respect of the shares) which it holds in Dignity Crematoria Limited and Dignity Crematoria No.2 Limited;
• Dignity (2008) Limited, Dignity Crematoria Limited and Dignity Crematoria No.2 Limited have granted Nat West fixed and
floating charges over the assets and undertakings of each of Dignity (2008) Limited, Dignity Crematoria Limited and
Dignity Crematoria No.2 Limited; and
• Dignity plc have acted as guarantor in the event that Dignity (2008) Limited fails to pay interest due on the facility.
In the opinion of the Directors no liability is likely to crystallise in respect of these guarantees.
At 26 December 2014, the amount outstanding in relation to these borrowings was £15.8 million (2013: £15.8 million).
31 Related party transactions
There are no related party transactions for either period.
32 Post balance sheet events
The Group has acquired six funeral locations since the balance sheet date for a total consideration of £3.2 million.
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106
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Dignity plc Company balance sheet
as at 26 December 2014
26 December 27 December
2014 2013
Note £m £m
Fixed assets
Investments C2 141.0 139.0
Current assets
Debtors C3 160.7 156.6
Cash at bank and in hand 32.4 16.7
Total current assets 193.1 173.3
Creditors: amounts falling due within one year C4 (12.7) (13.6)
Net current assets 180.4 159.7
Total assets less current liabilities 321.4 298.7
Net assets 321.4 298.7
Capital and reserves
Called up share capital C5 6.1 6.0
Share premium account C5 2.8 20.8
Capital redemption reserve C5 141.7 121.6
Other reserves C5 3.2 3.2
Profit and loss account C5 167.6 147.1
Total shareholders’ funds C6 321.4 298.7
The financial statements on pages 106 to 109 were approved by the Board of Directors on 4 March 2015 and were
signed on its behalf by:
M K McCollum
Chief Executive
S L Whittern
Finance Director
Annual Report & Accounts 2014 107
Dignity plc
Notes to the Dignity plc financial statements
for the 52 week period ended 26 December 2014
C1 Principal accounting policies
Basis of preparation
These financial statements are prepared on a going concern basis under the historical cost convention and in accordance
with the Companies Act 2006 and applicable United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice). A summary of the principal accounting policies, which have been consistently applied, is set out below.
In accordance with the concession granted under Section 408 of the Companies Act 2006, the profit and loss account of the
Company has not been separately presented in the financial statements.
In the current period, the Company’s financial statements have been prepared for the 52 week period ended 26 December
2014. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
27 December 2013.
Furthermore, the Company has taken advantage of the exemption provided within FRS 29, Financial Instruments and
Disclosures, not to disclose details of any financial instruments held.
Fixed asset investments
Fixed asset investments are stated at historical cost, less any provision for impairment.
Impairment of fixed assets
The carrying values of fixed assets are reviewed for impairment in periods where events or changes in circumstances indicate
that the carrying value may not be recoverable or at the end of the first full financial year following the recognition. Any
impairment in the value of fixed assets below depreciated historical cost is charged to the profit and loss account within
operating profit. A reversal of an impairment loss is recognised in the profit and loss account to the extent that the original
loss was recognised.
Employee share schemes
The Company operates two employee share schemes: The Save As You Earn Scheme (‘SAYE’) and Long–Term Incentive Plan
Scheme (‘LTIP’).
The Company applies UITF 44 in respect of share option schemes resulting in the charge for such schemes being recognised
in a subsidiary of the Company. The Company’s financial statements reflect the cost of the scheme as an increase in the cost
of investment in the subsidiary with the corresponding credit included within other reserves.
Employee share trust
The assets of the employee share trust are held by a separate limited company, of which the Directors consider that Dignity
plc has de facto control. In accordance with UITF 38, Accounting for ESOP Trusts and the substance of the transaction, the
trust’s assets and liabilities are recognised in the Company’s balance sheet within share capital and reserves.
Dividends
Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the period
in which they are approved by the Company’s shareholders. Interim dividends are recorded in the financial statements
when paid.
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108
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Notes to the Dignity plc financial statements continued
for the 52 week period ended 26 December 2014
C2 Investments in subsidiary undertakings
Cost and net book amount £m
At beginning of period 139.0
Additions in respect of share–based payments 2.0
At end of period 141.0
Principal subsidiaries
Number of shares at Percentage
Company name Principal activity 26 December 2014 held
Dignity Funerals Limited
Dignity Funerals No. 2 Limited
Dignity Funerals No. 3 Limited
Pitcher & Le Quesne Limited
Dignity Pre–arrangement Limited
Dignity Securities Limited
Funeral services
Funeral services
(ceased trading in 2013)
Funeral services
Funeral services
Pre–arranged funeral plans
Pre–arranged funeral plans
Advance Planning Limited
Pre–arranged funeral plans
Dignity Finance PLC
Dignity (2002) Limited
Dignity Crematoria No.2 Limited
Dignity Crematoria Limited
Finance company
Intermediate holding company
Leasing of crematoria
Construction and leasing of
crematoria
577,376,905 Ordinary at 0.1p each
1 Ordinary at £1 each
1 Ordinary at £1 each
100 Ordinary at £1 each
5,001,001 Ordinary at £1 each
19,801 Ordinary at £1 each
750,000 8 pence Redeemable
Preference Shares at £1 each
7,500 A Ordinary at £1 each
2,500 B Ordinary at £1 each
3,863,291 0.0000001 pence
Redeemable Preference Shares
at 1p each
50,000 Ordinary at £1 each
220,000,004 Ordinary at 0.01p each
2 Ordinary shares at £1 each
10,000 A Ordinary at £1 each
10,000 B Ordinary at £1 each
10,000 C Ordinary at £1 each
10,000 D Ordinary at £1 each
10,000 E Ordinary at £1 each
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All of the subsidiaries are incorporated in the United Kingdom except for Pitcher & Le Quesne Limited which is incorporated
in Jersey and is controlled by the Group. All of the above shareholdings are held indirectly, with the exception of Dignity
(2004) Limited.
Additions in the period reflect the effect of capital contributions to subsidiaries as a result of share–based payment schemes
operated in those company’s over the shares of Dignity plc.
The Directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive
length, as the Company has in excess of 250 dormant subsidiaries and a number of intermediate holding companies.
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
C3 Debtors
26 December 27 December
2014 2013
£m £m
Amounts falling due within one year:
Amounts owed by group undertakings 160.4 156.6
Other debtors 0.1 –
Corporation tax 0.2 –
160.7 156.6
C4 Creditors: amounts falling due within one year
26 December 27 December
2014 2013
£m £m
Amounts owed to subsidiary undertakings 12.4 12.4
Accruals 0.3 0.4
Corporation Tax – 0.8
12.7 13.6
Annual Report & Accounts 2014 109
Dignity plc
C5 Called up share capital and reserves
26 December 27 December
2014 2013
£m £m
Allotted and fully paid Equity shares
49,170,180 (2013: 53,343,871) Ordinary Shares of 12 48/143 pence (2013: 11 4/13 pence) each 6.1 6.0
Each Ordinary Share carries equal voting rights and there are no restrictions on any share.
See note 22 of the Group’s consolidated accounts for further details.
Share Capital
premium redemption Other Profit and
account reserve reserves loss account Total
Reserves and share premium account £m £m £m £m £m
At beginning of period 20.8 121.6 3.2 147.1 292.7
Profit for the period – – – 94.7 94.7
Effects of employee share options – – 2.0 – 2.0
Proceeds from share issue 2.1 – – – 2.1
Gift to Employee Benefit Trust – – (2.0) – (2.0)
Issue and redemption of B Shares in respect of
Capital Option (20.1) 20.1 – (20.1) (20.1)
Dividend in respect of Special Dividend Option – – – (44.3) (44.3)
Dividends paid on Ordinary Shares – – – (9.8) (9.8)
At end of period 2.8 141.7 3.2 167.6 315.3
The capital redemption reserve represents £80,002,465 B Shares that were issued on 2 August 2006 and redeemed for cash
on the same day, £19,274,610 B Shares that were issued on 10 October 2010 and redeemed for cash on 11 October 2010,
£22,263,112 B Shares that were issued on 12 August 2013 and redeemed for cash on 20 August 2013 and £20,154,070
B Shares that were issued and redeemed for cash in November 2014.
£9.6 million (2013: £7.6 million) in other reserves relates to investments in own shares and therefore reduces profit available
for distribution.
C6 Reconciliation of movements in shareholders’ funds
26 December 27 December
2014 2013
£m £m
Profit for the period 94.7 66.8
Effects of employee share options 2.0 1.5
Issue costs in respect of shares issued – (0.9)
Proceeds from share issue 2.2 26.9
Gift to Employee Benefit Trust (2.0) (1.7)
Issue and redemption of B Shares in respect of Capital Option (20.1) (22.3)
Dividend in respect of Special Dividend Option (44.3) (39.6)
Dividends paid on Ordinary Shares (9.8) (6.2)
Net additions to shareholders’ funds 22.7 24.5
Opening shareholders’ funds 298.7 274.2
Closing shareholders’ funds 321.4 298.7
Amounts payable to the Group’s auditors relating to the Company are included in note 5 of the Group financial statements
and are not material to disclose separately.
C7 Staff costs
Directors’ remuneration
The Directors are directors of the ultimate parent company, Dignity plc and details of their emoluments are included in
pages 52 to 58. They received no emoluments in respect of their services to the Company (2013: nil).
C8 Related party transactions
The Company has taken advantage of the exemption provided within FRS 8, Related Party Disclosures, not to disclose
transactions with wholly owned subsidiary undertakings, whose voting rights are controlled within the Dignity plc group.
There are no other related party transactions for either period requiring disclosure.
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110
Dignity plc
Annual Report & Accounts 2014
Financial Statements
Financial record*
Summarised consolidated income statement
2014 2013 2012 2011 2010
£m £m £m £m £m
Revenue
Funeral services 184.4 176.2 157.9 146.5 143.3
Crematoria 55.2 53.8 46.6 41.6 37.5
Pre–arranged funeral plans 29.3 26.7 25.1 22.0 18.3
268.9 256.7 229.6 210.1 199.1
Underlying operating profit
Funeral services 66.3 60.8 54.2 50.8 49.3
Crematoria 29.1 27.4 23.3 21.3 19.9
Pre–arranged funeral plans 7.4 6.7 6.5 5.5 4.3
Central overheads (17.9) (16.5) (14.6) (13.1) (12.5)
84.9 78.4 69.4 64.5 61.0
Underlying finance costs (30.6) (28.9) (25.8) (25.9) (22.5)
Finance income 4.2 3.4 2.5 3.0 1.9
Underlying profit before tax 58.5 52.9 46.1 41.6 40.4
Taxation (13.1) (12.9) (11.7) (11.4) (11.7)
Underlying profit after tax 45.4 40.0 34.4 30.2 28.7
Underlying earnings per share (pence) 85.8p 72.1p 62.8p 55.1p 46.4p
Operating profit 82.9 75.1 68.7 63.2 60.4
(Loss)/profit after tax (55.0) 40.4 35.7 34.3 29.0
Basic earnings per share (pence) (104.0p) 72.8p 65.1p 62.6p 46.9p
Key performance indicators
2014 2013 2012 2011 2010
Total estimated number of deaths in Britain (number) 550,000 560,000 551,000 539,000 557,000
Number of funerals performed (number) 65,600 68,000 63,200 62,300 64,500
Funeral market share** (per cent) 11.7% 11.9% 11.2% 11.3% 11.4%
Number of cremations performed (number) 53,400 55,500 50,500 47,600 45,200
Crematoria market share (per cent) 9.7% 9.9% 9.2% 8.8% 8.1%
Unfulfilled pre–arranged funeral plans (number) 348,000 323,000 290,000 265,000 238,000
Cash generated from operations (£million) 104.4 94.2 83.3 74.2 74.5
Net debt
2014 2013 2012 2011 2010
£m £m £m £m £m
Net amounts owing on Old Notes per
financial statements – (403.0) (318.9) (323.3) (331.3)
Net amounts owing on New Notes per
financial statements (594.6) – – – –
Add: unamortised issue costs – Old Notes – (16.3) (14.6) (16.2) (17.8)
Add: unamortised issue costs – New Notes (0.7) – – – –
Gross amounts owing on Secured Notes per
financial statements (595.3) (419.3) (333.5) (339.5) (349.1)
Net amounts owing on Crematoria Acquisition Facility
per financial statements (15.6) (15.6) (10.0) (9.9) (9.9)
Add: unamortised issue costs on Crematoria
Acquisition Facility (0.2) (0.2) – (0.1) (0.1)
Gross amounts owing (611.1) (435.1) (343.5) (349.5) (359.1)
Accrued interest on Old Notes – (14.3) (11.6) – –
Accrued interest on New Notes (5.7) – – – –
Accrued interest on Crematoria Acquisition Facility – – (0.1) (0.1) (0.1)
Cash and cash equivalents 86.5 79.3 55.6 36.9 48.1
Net debt (530.3) (370.1) (299.6) (312.7) (311.1)
Annual Report & Accounts 2014 111
Dignity plc
Summarised consolidated balance sheet
2014 2013 2012 2011 2010
£m £m £m £m £m
Non–current assets
Goodwill and intangible assets 276.5 250.4 204.5 194.3 182.4
Property, plant and equipment 192.3 183.6 157.1 147.6 133.6
Financial and other assets 10.4 12.7 12.6 12.6 12.0
Retirement benefit asset – – 0.1 1.3 8.5
479.2 446.7 374.3 355.8 336.5
Current assets
Cash and cash equivalents – excluding collateralisation of
Liquidity Facility 86.5 79.3 55.6 36.9 48.1
Cash and cash equivalents – collateralisation of Liquidity
Facility – 63.0 – – –
Cash and cash equivalents 86.5 142.3 55.6 36.9 48.1
Other current assets 36.5 34.4 32.1 30.5 29.2
123.0 176.7 87.7 67.4 77.3
Total assets 602.2 623.4 462.0 423.2 413.8
Current liabilities 60.6 143.6 76.9 45.6 47.0
Non–current liabilities 634.1 437.6 340.5 360.4 371.6
Total liabilities 694.7 581.2 417.4 406.0 418.6
Equity attributable to shareholders (92.5) 42.2 44.6 17.2 (4.8)
Total equity and liabilities 602.2 623.4 462.0 423.2 413.8
NOTES
*
This information has been extracted from the current and previous Annual Reports and accordingly does not constitute audited information.
** Market share excluding funerals performed in Northern Ireland.
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112
Dignity plc
Annual Report & Accounts 2014
Other Information
Notice of Meeting
Notice is hereby given that the 2015 Annual General Meeting of Dignity plc (‘the Company’) will be held at DLA Piper UK LLP,
Victoria Square House, Victoria Square, Birmingham, West Midlands, B2 4DL on Thursday 11 June 2015 at 11.00am for the
following purposes:
Ordinary Resolutions
To propose the following as ordinary resolutions:
1. To receive and consider the Group’s financial statements, the strategic report, and the reports of the Directors and auditors
thereon for the 52 week period ended 26 December 2014.
2. To approve the Report on Directors’ remuneration (other than the part that contains the Directors’ remuneration policy) for the
52 week period ended 26 December 2014 as set out on pages 46 to 58 of the Annual Report 2014.
The Chairman confirms that, following a formal evaluation, the Directors nominated for re-appointment in resolutions
3 to 11 (inclusive) below continue to be effective and demonstrate a commitment to the role. Full biographical details
are on pages 36 and 37.
3. To re-appoint Peter Hindley, as a Director of the Company.
4. To re-appoint Mike McCollum, as a Director of the Company.
5. To re-appoint Andrew Davies, as a Director of the Company.
6. To re-appoint Richard Portman, as a Director of the Company.
7. To re-appoint Steve Whittern, as a Director of the Company.
8. To re-appoint Ishbel Macpherson, as a Director of the Company.
9. To re-appoint Alan McWalter, as a Director of the Company.
10. To re-appoint Jane Ashcroft, as a Director of the Company.
11. To re-appoint Martin Pexton, as a Director of the Company.
12. To appoint Ernst & Young LLP as auditors of the Company to hold office from conclusion of the meeting to the conclusion of
the next meeting at which accounts are laid before the Company.
13. To authorise the Directors to fix the remuneration of the auditors.
14. To declare the final dividend of 13.01 pence per Ordinary Share to be paid on 26 June 2015 to shareholders on the register of
members at the close of business on 29 May 2015.
15. That the Directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act
2006 (‘the Act’), to exercise all powers of the Company to allot Relevant Securities:
a) comprising equity securities (as defined in section 560(1) of the Act) up to an aggregate nominal amount of £4,043,673
(such amount to be reduced by the aggregate nominal amount of Relevant Securities allotted pursuant to paragraph (b) of
this resolution) in connection with a rights issue:
(i) to holders of Ordinary Shares in the capital of the Company in proportion (as nearly as practicable) to the respective
numbers of Ordinary Shares held by them; and
(ii) to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject
to such rights, as the directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to
treasury shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or
the requirements of any regulatory body or stock exchange; and
b) otherwise than pursuant to paragraph (a) of this resolution, up to an aggregate nominal amount of £2,021,836 (such
amount to be reduced by the aggregate nominal amount of Relevant Securities allotted pursuant to paragraph (a) of this
resolution in excess of £2,021,836),
provided that (unless previously revoked, varied or renewed) these authorities shall expire at the conclusion of the next annual
general meeting of the Company after the passing of this resolution or on 11 September 2016 (whichever is the earlier), save
that, in each case, the Company may make an offer or agreement before the authority expires which would or might require
Relevant Securities to be allotted after the authority expires and the Directors may allot Relevant Securities pursuant to any
such offer or agreement as if the authority had not expired.
Annual Report & Accounts 2014 113
Dignity plc
In this resolution, (‘Relevant Securities’) means shares in the Company or rights to subscribe for or to convert any security into
shares in the Company; a reference to the allotment of Relevant Securities includes the grant of such a right; and a reference to the
nominal amount of a Relevant Security which is a right to subscribe for or to convert any security into shares in the Company is to
the nominal amount of the shares which may be allotted pursuant to that right.
These authorities are in substitution for all existing authorities under section 551 of the Act (which, to the extent unused at the date
of this resolution, are revoked with immediate effect).
Special Resolutions
To propose the following as special resolutions:
16. That, subject to the passing of resolution 15 and pursuant to section 570 of the Act, the directors be and are generally
empowered to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authorities
granted by resolution 15 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall
be limited to:
a) the allotment of equity securities in connection with an offer of equity securities (whether by way of a rights issue, open
offer or otherwise, but, in the case of an allotment pursuant to the authority granted by paragraph (a) of resolution 15, such
power shall be limited to the allotment of equity securities in connection with a rights issue):
(i) to holders of Ordinary Shares in the capital of the Company in proportion (as nearly as practicable) to the respective
numbers of Ordinary Shares held by them; and
(ii) to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject
to such rights, as the directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the
requirements of any regulatory body or stock exchange; and
b) the allotment of equity securities pursuant to the authority granted by paragraph (b) of resolution 15 (otherwise than
pursuant to paragraph (a) of this resolution) up to an aggregate nominal amount of £303,275,
and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of the next annual general meeting
of the Company after the passing of this resolution or on 11 September 2016 (whichever is the earlier), save that the Company
may make an offer or agreement before this power expires which would or might require equity securities to be allotted for
cash after this power expires and the directors may allot equity securities for cash pursuant to any such offer or agreement as
if this power had not expired.
This power is in substitution for all existing powers under section 570 of the Act (which, to the extent unused at the date of this
resolution, are revoked with immediate effect).
17. That the Company be and is hereby generally and unconditionally authorised for the purposes of Section 701 of the Act to
make market purchases (as defined in Section 693(4) of the Act) of Ordinary Shares, subject as follows:
a) the maximum aggregate number of Ordinary Shares which may be purchased is 4,900,000;
b) the minimum price (including expenses) to be paid for each Ordinary Share shall be the nominal value of the
Ordinary Share;
c) The maximum price to be paid for an Ordinary Share is the higher of:
(i) an amount equal to 105 per cent of the average of the middle market quotations for the Company’s Ordinary Shares as
derived from the Daily Official List of the London Stock Exchange plc for the five business days immediately prior to the
day on which the purchase is made; and
(ii) an amount equal to the higher of the price of the last independent trade of an Ordinary Share and the highest current
independent bid for an Ordinary Share on the trading venue where the purchase is carried out.
Unless previously revoked, varied or renewed the authority conferred by this resolution shall expire at the conclusion of the next
Annual General Meeting of the Company after the passing of this resolution or on 11 September 2016 (whichever is earlier),
except in relation to the purchase of shares the contract for which was entered into before the expiry of such authority and
such purchase will or may be executed or completed wholly or partly after such expiry and accordingly the Company may
make a purchase of Ordinary Shares pursuant to any such contract as if this authority had not expired.
18. That a general meeting (other than an annual general meeting) may be called on not less than 14 clear days' notice with such
authority to be used only when merited.
Registered office:
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
By order of the Board
Richard Portman
Company Secretary
10 April 2015
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Other Information
Notice of Meeting continued
Notes:
1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in
the register of members of the Company as at 6.00pm on 9 June 2015 (or, if the meeting is adjourned 6.00pm on the date
which is two days before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of
the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall
be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the
meeting.
2. A member of the Company entitled to attend and to vote may appoint, one or more proxies to attend and vote instead. A proxy
need not be a member of the Company. A proxy form is enclosed. Completed proxy forms must be received by the Company’s
Registrar, Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, no later than 11.00am on 9 June 2015 or
in the event the meeting is adjourned, no later than 48 hours (excluding any part of the day that is not a working day) before
the time of any adjourned meeting. A shareholder may appoint more than one proxy in relation to the meeting, provided that
each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Failure to specify
the number of shares each proxy appointment relates to or specifying a number which when taken together with the numbers
of shares set out in the other proxy appointments is in excess of the number of shares held by the shareholder may result in
the proxy appointment being invalid. When appointing more then one proxy, complete a separate proxy form in relation to each
appointment. Additional proxy forms may be obtained by contacting the Company's Registrar on 0871 384 2674* if calling
from within the UK, or +44 (0) 121 415 7047 if calling from outside the UK or you may photocopy the proxy form. You will
need to state clearly on each proxy form the number of shares in relation to which the proxy is appointed. You can only appoint
a proxy using the procedures set out in these notes and the notes to the proxy form. The right of a member under Section 324
of the Companies Act 2006 (‘the Act’) to appoint a proxy does not apply to a person nominated to enjoy information rights
under Section 146 of the Act.
*At the time of publication, calls to this number were charged at eight pence per minute plus network extras. Lines are open
from 8.30am to 5.30pm Monday to Friday.
3. The appointment of a proxy will not preclude a member of the Company from attending, speaking and voting in person at the
meeting if he or she so wishes.
4. The following are available for inspection at the Company’s registered office during normal business hours from the date
of this notice until the time of the meeting. They will be available for at least 15 minutes prior to, and during, the Annual
General Meeting:
• the register of Directors’ interests and those of their immediate families in the share capital of the Company;
• copies of the Directors’ service contracts and letters of appointment; and
• a copy of the Company’s memorandum and articles of association.
5. Biographical details of those Directors who are offering themselves for re-election at the meeting are set out on pages
36 and 37 of the Annual Report 2014.
6. Total Voting Rights: As at 27 March 2015 (being the last practicable date before the publication of this notice), the Company's
issued share capital consists of 49,170,510 Ordinary Shares of 12 48/143 pence, (carrying one vote each). The Company
does not hold any Ordinary Shares in Treasury.
7. Shareholders have the right to ask questions at the meeting relating to the business being dealt with at the meeting in
accordance with Section 319A of the Act. The Company must answer any such question unless:
(a) to do so would interfere unduly with the preparation for the meeting or would involve the disclosure of
confidential information;
(b) the answer has already been given on a website in the form of an answer to a question; or
(c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
8. The information required by Section 311A of the Act to be published in advance of the meeting, which includes
the matters set out in this notice and information relating to the voting rights of shareholders, is available at
www.dignityfunerals.co.uk/corporate.
Annual Report & Accounts 2014 115
Dignity plc
9. Members can appoint proxies electronically by logging on to the website www.sharevote.co.uk. You will need your voting
reference numbers (the voting ID, Task ID and shareholder reference number shown on your form of proxy). Alternatively, if
you have registered for a Shareview portfolio, please access the Equiniti shareview website at www.shareview.co.uk, by entering
your portfolio identification particulars and click on the link ‘vote’ under your Dignity plc holding details. For an electronic
proxy appointment to be valid, the appointment must be received by no later than 11.00am on 9 June 2015 (or if the meeting
is adjourned no later than 48 hours (excluding any part of the day that is not a working day) before the time of the
adjourned meeting).
10. CREST members who wish to appoint a proxy or proxies for the meeting (or any adjournment of it) through the CREST
electronic proxy appointment service may do so by using the procedures described in the CREST Manual (available at
www.euroclear.com). CREST personal members or other CREST sponsored members and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able
to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
specifications and must contain the information required for such instructions, as described in the CREST Manual. The
message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a
previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA 19) by
no later than 11.00am on 9 June 2015 (or if the meeting is adjourned, no later than 48 hours (excluding any part of a day that
is not a working day) before the time of any adjourned meeting). No such message received through the CREST network after
this time will be accepted. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which the registrars are able to retrieve the message by enquiry
to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear
UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has
appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
11. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under Section
146 of the Act (‘Nominee’):
(a) the Nominee may have a right under an agreement between the Nominee and the member by whom he was nominated,
to be appointed, or to have someone else appointed, as a proxy for the meeting; or
(b) if the Nominee does not have any such right or does not wish to exercise such right, the Nominee may have a right under
any such agreement to give instructions to the member as to the exercise of voting rights.
The statement of the rights of the shareholders in relation to the appointment of proxies in notes 2, 3, 9 and 10 does not
apply to a Nominee. The rights in such notes can only be exercised by shareholders of the Company.
12. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each
such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were
an individual shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show
of hands) they do not do so in relation to the same shares.
13. A shareholder or shareholders meeting the qualification criteria set out in note 16 below may require the Company to give
shareholders notice of a resolution which may properly be proposed and is intended to be proposed at the meeting in
accordance with Section 338 of the Act.
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Other Information
Notice of Meeting continued
A resolution may properly be proposed unless (i) it would, if passed, be ineffective (whether by reason of inconsistency with
any enactment or the Company's constitution or otherwise), (ii) it is defamatory of any person, or (iii) it is frivolous or vexatious.
The business which may be dealt with at the meeting includes a resolution circulated pursuant to this right.
Any such request must:
(a) identify the resolution of which notice is to be given, by either setting out the resolution in full or, if supporting a resolution
requested by another shareholder, clearly identifying the resolution which is being supported;
(b) comply with the requirements set out in note 17 below; and
(c) be received by the Company no later than six weeks before the meeting.
14. A shareholder or shareholders meeting the qualification criteria set out in note 16 below may require the Company to include
in the business to be dealt with at the meeting any matter (other than a proposed resolution) which may properly be included
in the business in accordance with Section 338A of the 2006 Act.
A matter may properly be included unless (i) it is defamatory of any person, or (ii) it is frivolous or vexatious.
Any such request must:
(a) identify the matter to be included in the business, by either setting out the matter in full or, if supporting a matter
requested by another shareholder, clearly identifying the matter which is being supported;
(b) set out the grounds for the request;
(c) comply with the requirements set out in note 17 below; and
(d) be received by the Company no later than six weeks before the meeting.
15. A shareholder or shareholders who meet the qualification criteria set out in note 16 below may require the Company to publish
on its website a statement setting out any matter that such shareholders propose to raise at the meeting relating to either the
audit of the Company's accounts (including the auditors' report and the conduct of the audit) that are to be laid before the
meeting or any circumstances connected with an auditor of the Company ceasing to hold office since the last annual general
meeting of the Company in accordance with Section 527 of the Act.
Any such request must:
(a) identify the statement to which it relates, by either setting out the statement in full or, if supporting a statement requested
by another shareholder, clearly identifying the statement which is being supported;
(b) comply with the requirements set out in note 17 below; and
(c) be received by the Company at least one week before the meeting.
Where the Company is required to publish such a statement on its website:
(i) it may not require the shareholders making the request to pay any expenses incurred by the Company in complying with
the request;
(ii) it must forward the statement to the Company's auditors no later than the time when it makes the statement available on
the website; and
(iii) the statement may be dealt with as part of the business of the meeting.
16. In order to require the Company (i) to circulate a resolution to be proposed at the meeting as set out in note 13, (ii) to include a
matter in the business to be dealt with at the meeting as set out in note 14, or (iii) to publish audit concerns as set out in note
15, the relevant request must be made by:
(a) a shareholder or shareholders having a right to vote at the meeting and each holding at least five per cent of the total voting
rights of the Company; or
(b) at least 100 shareholders having a right to vote at the meeting and holding, on average, at least £100 of paid up
share capital.
For information on voting rights, including the total voting rights of the Company, see note 6 above and the website referred
to in note 8 above.
Annual Report & Accounts 2014 117
Dignity plc
17. Any request by a shareholder or shareholders to require the Company (i) to circulate a resolution to be proposed at the
meeting as set out in note 13, (ii) to include a matter in the business to be dealt with at the meeting as set out in note 14, or
(iii) to publish audit concerns as set out in note 15:
(a) may be made either:
(i) in hard copy, by sending it to Dignity plc, 4 King Edwards Court, King Edwards Square, Sutton Coldfield, B73 6AP; or
(ii) in electronic form, by faxing it to +44 (0) 121 321 5644, marked for the attention of the Company Secretary or by e-mail
to CompanySecretary@dignityuk.co.uk (please state "Dignity plc: AGM" in the subject line of the email);
(b) must state the full name(s) and address(es) of the shareholder(s); and
(c) (where the request is made in hard copy form) must be signed by the shareholder(s).
18. Except as provided above, shareholders who wish to communicate with the Company in relation to the meeting should do so
using the following means:
(a) calling our shareholder helpline on +44 (0) 871 384 2674; or
(b) by post, by sending it to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA.
19. You may not use any electronic address provided in either this Notice of General Meeting or any related documents (including
the proxy form) to communicate with the Company for any purpose other than those expressly stated.
20. No other methods of communication will be accepted. Any electronic communication sent by a shareholder to the Company or
Equiniti which is found to contain a virus will not be accepted by the Company.
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Other Information
Shareholder information
General enquiries may be addressed to the Company Secretary, Richard Portman, at the Company’s registered office.
Other useful information is as follows:
General information
The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the
United Kingdom.
Company Registrars
Enquiries concerning shareholdings, change of address or other particulars, should be directed in the first instance to the
Company’s Registrars, Equiniti. They also provide a range of online shareholder information services at www.shareview.co.uk where
shareholders can check their holdings and find practical help on transferring shares and updating personal details. Alternatively
they can be contacted by telephone on 0871 384 2674* if calling from within the UK, or +44 (0) 121 415 7047 if calling from
outside the UK, or by fax on 0871 384 2100* if faxing from within the UK, or +44 (0) 190 383 3113 if faxing from outside the UK.
*At the time of publication, calls to these numbers cost eight pence per minute plus network extras. Lines are open from
8.30am to 5.30pm Monday to Friday.
Shareholder communications
Shareholder documents are only sent in paper format to shareholders who have elected to receive documents in this way.
This approach enables the Company to reduce printing and distribution costs and its impact on the environment. Shareholders
who have not elected to receive paper copies are sent a notification whenever shareholder documents are published to advise
them how to access the documents via the Group website at www.dignityfuneralsplc.co.uk. Shareholders may also choose to
receive this notification via e-mail with a link to the relevant page on the website.
Shareholders who wish to receive e-mail notification should register online at www.shareview.co.uk click on ‘Register’ under
the ‘Portfolio’ section. You will require your Shareholder Reference Number, which is given on your share certificate or dividend
tax voucher. Choosing e-mail notification will result in you joining the Equiniti Shareview Service in accordance with its terms
and conditions.
Share price information
The latest Dignity plc share price can be obtained via the Company’s investor website www.dignityfuneralsplc.co.uk.
Unsolicited mail
The Company is obliged by law to make its share register available upon request to the public and to other organisations which may
use it as a mailing list resulting in shareholders receiving unsolicited mail. Shareholders wishing to limit the receipt of such mail
should register to do so with the Mailing Preference Service at www.mpsonline.org.uk.
Annual General Meeting
The Company’s Annual General Meeting will be held on 11 June 2015, at 11.00am at DLA Piper UK LLP, Victoria Square House,
Victoria Square, Birmingham, West Midlands, B2 4DL.
Contact details and advisers
Registered Office:
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
Tel: +44 (0) 121 354 1557
Fax: +44 (0) 121 321 5644
E-mail: enquiries@dignityuk.co.uk
www.dignityfuneralsplc.co.uk
Company Secretary:
Richard Portman FCA
Registered Number:
4569346
Registrars:
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: +44 (0) 871 384 2674
Fax: +44 (0) 871 384 2100
www.shareview.co.uk
Auditors:
Ernst & Young LLP
No.1 Colmore Square
Birmingham B4 6HQ
Joint Brokers:
Panmure Gordon & Co
One New Change
London EC4M 9AF
Investec
A division of Investec Bank plc
2 Gresham Street
London EC2V 7QP
Principal Bankers:
Royal Bank of Scotland plc
West Midlands Corporate Office
2 St Philips Place
Birmingham B3 2RB
Legal Adviser:
DLA Piper UK LLP
Victoria Square House
Victoria Square
Birmingham B2 4DL
Annual Report & Accounts 2014 119
Dignity plc
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Other Information
Financial calendar
4 March 2015
11 June 2015
26 June 2015
Preliminary announcement of 2014 results
Annual General Meeting
2015 financial half year end
26 June 2015 (subject to shareholder approval)
Payment of 2014 final dividend
29 July 2015 (provisional)
Announcement of interim results
30 October 2015 (provisional)
Payment of 2015 interim dividend
25 December 2015
Financial period end
ifc
Dignity plc
Annual Report & Accounts 2014
Overview
About Dignity
We are here to help people at one of the most difficult times in their lives. We do this
with compassion, respect, openness and care. Our aim is to be the company everyone
knows they can trust in their time of need.
We are a FTSE 250 company listed on the London Stock Exchange, with over 2,800 employees
serving families and local communities across the United Kingdom for generations.
At 26 December 2014 Dignity owned 718 funeral locations and operated 39 crematoria
in the United Kingdom. We continue to have a strong market presence in pre-arranged
funeral plans, where people plan and pay for their funeral in advance.
Contents
Overview
Key financial highlights
01
02 Dignity at a glance
– A proud history
– Our business today
Building a sustainable business
03
04
05 Delivering excellent client service
Strategic Report
From the Chairman
Chief Executive’s overview
06
07
08 Market overview
10 Our strategy and business model
12 Our key performance indicators
14
– The client survey performance
15 Our summary performance in 2014
16 Operating review
Financial review
22
Principal risks and uncertainties
26
Corporate and social responsibility
29
Governance
Chairman’s introduction to governance
34
35 Our governance structure
36
Board of Directors
38 Directors’ statement on corporate governance
42
Audit Committee report
45 Nomination Committee report
46
59 Directors’ report
Report on Directors’ remuneration
Financial Statements
62
Group Accounts
Independent auditors’ report to the members
of Dignity plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
66
66
67
68
69
70 Notes to the financial statements
Company Accounts
106 Dignity plc Company balance sheet
107 Notes to the Dignity plc financial statements
110 Financial record
Other Information
112 Notice of Meeting
118 Shareholder information
119 Contact details and advisers
120 Financial calendar
Inside this report
Overview
Pages ifc to 05
Strategic report
Pages 06 to 33
Operating review
Pages 16 to 21
Financial review
Pages 22 to 25
Corporate responsibility
Pages 29 to 33
Governance
Pages 34 to 61
Stay informed
Dignity online:
To find out more about Dignity and to view and
download a pdf version of this Annual Report:
www.dignityfuneralsplc.co.uk
Links
Front cover:
Michelle Hales, Manager of Bentley Crematorium in Essex.
You will find link symbols throughout this Annual Report to
guide you to further reading or other relevant information.
Acknowledgements
Dignity would like to thank all those who participated in
producing this Annual Report, particularly the members
of staff for their contributions.
J H Kenyon® is a registered trademark of Kenyon International
Emergency Services and licensed from them.
Designed & produced by Bexon Woodhouse
Main photography by Bexon Woodhouse
www.bexonwoodhouse.com
Printed in the UK by CPI Colour, a certified CarbonNeutral® printing
company, using vegetable based inks and water based sealants.
The printer and paper manufacturing mill are both certified with
ISO 14001 Environmental Management systems standards and
both are Forest Stewardship Council® (FSC®) certified.
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfuneralsplc.co.uk
Dignity plc Annual Report & Accounts 2014
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Continuing to deliver
a strong performance and
excellent client service