Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfuneralsplc.co.uk
Dignity plc Annual Report & Accounts 2015
D
i
g
n
i
t
y
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
5
Delivering a strong and
consistent performance
Dignity plc
Annual Report & Accounts 2015
ifc
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 3,000 employees
serving families and local communities across the United Kingdom for generations.
At 25 December 2015 Dignity owned 767 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
01
02
03
Key financial highlights
A proud history
A strong core business
Strategic Report
04
05
From the Chairman
Chief Executive’s overview
06 Market overview
Inside this report
Financial Statements
Group Accounts
Independent auditors’ report to the members
of Dignity plc
Consolidated income statement
Consolidated statement of comprehensive income
Overview
Pages ifc to 03
65
69
69
70
71
72
73
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
08
12
14
16
17
18
24
28
32
A strong and sustainable business
A consistent strategy and business model
Our key performance indicators
The client survey performance
Our summary performance in 2015
Operating review
Financial review
Principal risks and uncertainties
Corporate and social responsibility
Governance
Company Accounts
109 Dignity plc Company balance sheet
110 Notes to the Dignity plc financial statements
116 Financial record
Other Information
118 Shareholder information
119 Contact details and advisers
120 Financial calendar
38
39
40
42
46
49
50
63
Chairman’s introduction to governance
Our governance structure
Board of Directors
Directors’ statement on corporate governance
Guide to icons
Audit Committee report
Nomination Committee report
Report on Directors’ remuneration
Directors’ report
We have used icons throughout this Annual Report
to guide you to further reading, links to other relevant
information or to find out more online.
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
Strategic report
Pages 04 to 37
Operating review
Pages 18 to 23
Financial review
Pages 24 to 27
Corporate responsibility
Pages 32 to 37
Governance
Pages 38 to 64
Front cover:
Jo Tolley, Funeral Manager at
A V Band Funeral Directors
in Worcester.
Acknowledgements
Dignity would like to thank all those who participated in
producing this Annual Report, particularly the members
of staff for their contributions.
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 strong and consistent
financial performance.
Dignity plc
Annual Report & Accounts 2015
01
+14%
Revenue up 14%
to £305.3 million
+16%
Underlying operating profit
up 16% to £98.7 million
+34%
Underlying earnings per share up
34% to 114.8 pence per share
Current period financial highlights 2015 2014 Increase
per cent
Revenue (£million) 305.3 268.9 14
Underlying operating profit(a) (£million) 98.7 84.9 16
Underlying profit before tax(a) (£million) 72.2 58.5 23
Underlying earnings per share(b) (pence) 114.8 85.8 34
Cash generated from operations(c) (£million) 125.2 104.4 20
Operating profit (£million) 95.5 82.9 15
Profit/(loss) before tax (d) (£million) 69.0 (67.7) n/a
Basic earnings per share(d) (pence) 115.2 (104.0) n/a
Interim dividend paid in the period(e) (pence) 7.14 6.49 10
Final dividend paid in the period (f) (pence) 13.01 11.83 10
Return of Cash (£million) – 64.4 n/a
Deaths 588,000 550,000 7
(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 (in 2014) pension contributions made from the proceeds of debt issues.
(d) Non-cash charges resulting from the refinancing in 2014 led to a reported statutory loss in the comparative period.
(e) Interim dividend represents the interim dividend that was declared and paid in the period out of earnings generated in the same period.
(f) 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)
305.3
256.7
268.9
229.6
210.1
98.7
78.4
84.9
64.5
69.4
100
90
80
70
60
50
40
30
20
10
0
114.8
85.8
72.1
62.8
55.1
120
110
100
90
80
70
60
50
40
30
20
10
0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
325
300
275
250
225
200
175
150
125
100
75
50
25
0
Links
Find out more about our strategy and business model: p.12 and p.13
Find out more about our business operations, actions
and progress: p.18 to p.23
Find out more about our financial performance: p.24 to p.27
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
02
Overview
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.
1812
1950
George S Munn & Co, Glasgow
George S Munn & Co is Dignity’s oldest funeral directors and was established in 1812.
T J Davies & Son, Newport
Thomas Davies, grandfather of Operations Director, Andrew Davies, established
his business in 1950.
1840
Francis Chappell & Sons, London
Francis Chappell & Sons commemorated their 175th anniversary in 2015 having
opened their first funeral location on Deptford High Street in 1840. The business
now has branches across south east London and Kent.
1870
Relph Funeral Service, Middlesbrough
In 1870, Joseph Relph established Middlesbrough’s oldest funeral business. It has
been entrusted with the funeral arrangements of many prominent local figures and
no less than four Roman Catholic Bishops.
1880
J H Kenyon,® London
Established by James H Kenyon the business has conducted funerals for the
Royal Family, politicians and other prominent figures.
1884
Frederick W Paine, London
Charles Paine opened his first funeral location in New Malden in 1884 and ten years
later the business passed to his son, Frederick W Paine.
1890
A V Band, Worcester
A V Band was established in 1890 but relocated to the first purpose-built funeral
location in Worcestershire in 1938.
Seaford & Newhaven Funeral Service, East Sussex
C Morling Ltd, a building company whose carpenters had made coffins for over
100 years, opened an office in Seaford as its funeral business. Seaford Funeral Service
was developed by the Goacher family and Lee Goacher is Dignity’s Regional Manager
for the South East.
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.
2015
Laurel Funerals
Dignity acquired 36 funeral locations from Laurel Funerals.
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.
Dignity today
We maintain the 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 plc
Annual Report & Accounts 2015
03
A strong core business
Today, Dignity is one of the leading providers of funeral
related services in the UK with strong business foundations.
As an industry leader, we strive to set the highest standards
of service, facilities and care, ensuring we are well positioned
to meet the needs of our clients for generations to come.
Dignity’s operations are focused and managed across
three main areas, namely Funeral services, Crematoria
and Pre-arranged funeral plans.
Links
Find out more about our strategy and business
model: p.12 and p.13
Find out more about our business operations, actions
and progress: p.18 to p.23
Funeral services
Crematoria
Pre-arranged funeral plans
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 2015
At 25 December 2015, we operated
a network of 767 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
2015, Dignity conducted 73,500 funerals
which represented approximately 12.3 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 2015
At 25 December 2015, 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 2015, we carried out
57,700 cremations representing 9.8 per
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 2015
At 25 December 2015, the number of active
funeral plans increased to 374,000.
Pre-arranged funeral plans income
represents allowances received for the sale
and administration 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.
Read more about our performance in the
Operating review: p.18 and p.19
Read more about our performance in the
Operating review: p.20 and p.21
Read more about our performance in the
Operating review: p.20, p.22 and p.23
£212.6m
Revenue
£76.8m
Underlying
operating profit*
£63.1m
Revenue
£34.6m
Underlying
operating profit*
£29.6m
Revenue
£7.8m
Underlying
operating profit*
767
Number of funeral locations in the UK.
39
Number of crematoria Dignity operates
in England and Scotland.
684,000
We have already helped more than 684,000
people arrange their funeral in advance.
73,500
Number of funerals conducted during 2015.
57,700
Number of cremations conducted
during 2015.
374,000
Number of active funeral plans as at
25December 2015.
* Excludes central overheads of £20.5 million.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
04
Strategic Report
From the Chairman
“
The high number of deaths
in 2015 to some extent
masks the fact that it was
another good and consistent
performance by
the Group.
Peter Hindley, Chairman
34%
Underlying earnings per
share up 34 per cent to
114.8 pence (2014: 85.8
pence).
14.31pence
Final dividend of 14.31 pence
proposed, continuing the
10 per cent annual growth in
the dividend per share.
Our governance principles
LEADERSHIP
Continued close focus on delivering
on our strategy.
EFFECTIVENESS
A strong, open and effective Board
with the independence of our
Non-Executive Directors.
ACCOUNTABILITY
Close scrutiny and management
of risks and controls.
REMUNERATION
Prudent oversight of executive
remuneration.
ENGAGEMENT
Maintaining a strong and open
relationship with shareholders.
Links
See Governance and structure:
p.38 and p.39
See Board of Directors:
p.40 and p.41
See Report on Directors’
remuneration: p.50 to p.62
Overview
This has been an extraordinary year, with the
number of deaths changing in percentage
terms by a greater amount than any year since
1952. As a result, the Group’s funeral and
cremation volumes were much higher than
originally expected. However, I am delighted
that across the country our standards did not
falter and that we continued to give families
we had the privilege of helping, the excellent
client service for which we are known.
In financial terms, this has resulted in
underlying operating profit increasing 16 per
cent to £98.7 million (2014: £84.9 million) and
underlying earnings per share increasing 34
per cent to 114.8 pence (2014: 85.8 pence).
Dividends
The Board is proposing a final dividend of
14.31 pence per Ordinary Share, bringing
the total dividend for the year to 21.45 pence;
another increase of 10 per cent on the
previous year. If shareholders approve this
payment at the Annual General Meeting
(‘AGM’) on 9 June 2016, then it will be paid on
24 June 2016 to members on the register at
close of business on 20 May 2016.
Delivering a consistent performance
The high number of deaths in 2015 to some
extent masks the fact that it was another good
and consistent performance by the Group: client
service remained high; costs continued to be
controlled; cash continued to be invested in
corporate activity, including the larger than
normal acquisition of 36 locations from Laurel
Funerals; crematoria opportunities have been
developed; sales of pre-arranged funeral plans
continued; and profits continued to be converted
efficiently into cash to fund these activities.
As such, the investment case for shareholders
of Dignity being a stable, predictable, cash
generative business continues.
Board priorities and changes
During the period, Ishbel Macpherson left the
Board and was replaced by David Blackwood.
Ishbel has supported the Group since 2009
when I became Chairman. I am grateful for
her contribution over that time, both on the
Board and as chair of the Group’s Audit
Committee since 2012.
Summary
• Greatest change in the number
of deaths for over 60 years.
• Underlying operating profit up
16 per cent.
• Dividend per share increased by
10 per cent again.
David joined us following his retirement as
Chief Financial Officer of Synthomer plc, a
FTSE 250 group. Given his recent experience,
David has been appointed Chair of the Audit
Committee and will also sit on both the
Remuneration and Nomination Committees.
I am sure he will make a valuable contribution
in the coming years.
My thanks extend to the entire Board for its
support and assistance in keeping the Group
focused on its strategic objectives.
Our people
This year has been significantly busier for our
staff than anyone could have imagined a year
ago. Despite this, client service has remained
very high. Each member of staff has ensured
that, in their own way, nothing was too much
trouble for each family we looked after at one
of the most difficult times in their lives. Thank
you to each and every member of staff for
your hard work.
Outlook for 2016
The Group stated several times during 2015
that, based on long-term historical data, there
is a strong possibility the number of deaths
in 2016 may be significantly lower than 2015.
The first two months of the new financial year
have not changed this view and therefore the
Group’s financial expectations for 2016 and
beyond continue to remain unchanged. As a
result, current market expectations are that
profit before tax in 2016 will be slightly lower
than that reported in 2015.
Nevertheless, the Group notes that achievement
of current market expectations in 2016 would
mean earnings per share would have increased
by approximately 30 per cent over the period
2014 to 2016, well ahead of the Group’s
continuing medium-term target of increasing
earnings per share by 10 per cent per year.
Chief Executive’s overview
We remain focused on
the value generated by
our core business.
“
Dignity plc
Annual Report & Accounts 2015
05
Performance in 2015
• Strong revenue growth.
• Strong cost control.
• Core portfolio continues
to deliver growth.
• 36 locations acquired from
Laurel Funerals successfully
integrated.
• Acquisitions add further value.
Mike McCollum, Chief Executive
99.2%
99.2 per cent of families
said that Dignity met
or exceeded their
expectations.
A strong platform to
drive growth and deliver
long-term value
FOCUS
Continue to focus
on leveraging our
competitive strengths
and consistently
delivering excellent
client service.
MAINTAIN
Continue to maintain
our strong position in
a stable industry with
opportunities to acquire
market share.
DELIVER
Continue to manage
the business to deliver
strong EPS growth,
cash flow and return
on capital.
Overview
It is impossible to talk about the Group’s
performance in 2015 without discussing the
almost unprecedented percentage increase in
the number of deaths compared to 2014. As
the chart below shows, a change of more than
five per cent has not been seen for over 40
years. Dignity’s role is not to speculate on why
this has happened, but rather to ensure our
business can respond to the resulting increase
in need for our services, without impacting the
quality of service we provide. I am delighted to
say that we achieved this. In 2015, 98.0 per
cent of clients stated they would recommend
our services, compared to 98.1 per cent in
2014. Similarly, 99.2 per cent of clients said
that we met or exceeded their expectations
which is unchanged from the previous year.
Corporate activity
The business invested £50 million in
acquisitions in the period, including £38.1
million to acquire 36 locations from Laurel
Funerals (‘Laurel’) in July 2015. These
acquisitions were all funded from the Group’s
cash reserves, as a result of the strong financial
performance and cash generation in the year.
These acquisitions are performing in line with
our expectations and contributed £2.3 million
of operating profit in the period, with £1.4
million of this being generated by the Laurel
acquisition. All these acquisitions represent
excellent investments for the business and
shareholders alike.
I am pleased that we also now have planning
permission for two crematoria. Whilst these are
both in the early stages of development and
will not open until mid-2017 or early 2018,
Year on year change in the number of deaths
they represent a good long-term use of capital.
As we have seen with the other crematoria
opened in recent years, these locations will
probably take at least five to seven years to fully
develop their market share.
Maintaining investment and development
momentum in our core business
Whilst a lot of time has been invested in
corporate activity in the year, we remain focused
on the value generated by our core business.
Investment in these locations has continued,
with a total of £15.6 million invested in the
period to ensure our properties and specialised
fleet are able to support the excellent service
we provide to the families we care for.
People and values
Our staff have performed tremendously this
year, responding positively to the sudden
increase in demands required to care for so
many families this year. We have chosen to share
the resulting financial success of the Group
by paying a bonus of £1,800 for each full time
member of staff, a 64 per cent increase on the
amount paid per full time employee last year.
The total cost of the bonus is approximately
£5 million (2014: £2.7 million).
Quality and consistency of service delivery
remains our long-term focus
The business has yet again demonstrated its
robustness and is well placed for the future.
We hope to achieve our medium-term target
of 10 per cent per annum increases in earnings
per share by staying focused on excellent
service, operating efficiently, selling pre-arranged
funeral plans, acquiring and developing quality
businesses where possible and keeping our
capital structure appropriately leveraged.
Links
See Market overview:
p.06 and p.07
See Strategy and business model:
p.12 and p.13
See Operating review:
p.18 to p.23
8.0%
6.0%
4.0%
2.0%
– %
(2.0)%
(4.0)%
(6.0)%
(8.0)%
(10.0)%
2015
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Change
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
06
Strategic Report
Market overview
The UK funeral market today.
“
Reputation and
recommendation
remain a key driver
in someone’s choice
of funeral director.
Industry at a glance
• The funeral director market
is very fragmented.
• Approximately 70 per cent
of crematoria are owned
by local authorities.
• Annual variations in the
number of deaths are
normally relatively small.
• There is not currently any
regulation pending that
would materially affect the
funeral industry.
Industry trends
• Economic lifestyle and
demographic influences.
High barriers to entry
Funeral services
• 92 per cent of people
approach just one funeral
director.
• Over 72 per cent of
people choose a funeral
arranger based on
personal experience or
recommendation.
Crematoria
• Criteria for new crematoria
are very demanding.
Pre-arranged funerals
• Nationwide presence is key.
Overview
The funeral market as a whole does not
normally 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 280 crematoria in the
UK, with approximately 70 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.
The Coroners Reform Act became law in
Scotland in the period. It has not materially
changed the operation of the Group’s funeral
and crematoria businesses.
There is currently an ongoing Select Committee
enquiry in Westminster into bereavement
benefits and funeral poverty. The Scottish
Government also commissioned a report on
funeral poverty and the level of allowance paid
to funeral directors, which has not changed
since 2003.
In response to conclusions from the same
group that made recommendations that
resulted in the Coroners Reform Act, as well
as recommendations from a commission
appointed to review infant cremations, the
Scottish Government is also seeking to enact
new legislation. Amongst other things, this
could lead to the licensing of funeral directors
in Scotland and the appointment of a Scottish
Inspector of funerals.
Crematoria are subject to environmental
regulations in accordance with “The Secretary
of States Guidance for Crematoria”, with
emission levels being monitored by Local
Authority Environmental Health Officers. The
abatement of mercury emissions has 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.
Dignity would welcome further regulation
of the funeral industry setting out minimum
standards for core activities, such as the care of
the deceased, minimum standards of facilities
and also operating procedures in crematoria.
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
2015 was 588,000 compared to 550,000 for
2014. 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 four years have seen deaths above that level.
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 today.
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. Over the last five years,
approximately 70 per cent of our clients say
they have chosen us for these reasons.
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.
Outlook
The ONS expects the number of deaths per
annum to start to increase at some point
before 2020.
Market overview
Maintaining our strong market
leading positions.
A strong core business that is well placed for the future
Dignity’s funeral market share
12.3% (2014:11.7%)
Funeral services: Our strengths
Dignity has approximately 12.3 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.
Developments in the year
2015 saw the Group expand its network
of funeral locations through the
acquisition of a number of established
funeral businesses operating a total of
48 locations.
Outlook and opportunities
The Group remains focused on acquiring
additional businesses and opening new
satellite locations.
Dignity’s crematoria market share
9.8% (2014:9.7%)
Crematoria: Our strengths
With 39 crematoria, Dignity is the largest
single operator in the UK. The cremations
performed represent approximately 9.8 per
cent of deaths in Britain. There is still
significant scope to expand through
acquisition or new builds where possible.
Developments in the year
Planning permission has been obtained
on two crematoria, which should open
mid-2017 or early 2018.
Outlook and opportunities
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.
Number of active pre-arranged
funeral plans
374,000 (2014:348,000)
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 in the future.
Developments in the year
New affinity partners have helped the
Group develop its offerings. A number
of additional partners are currently
being tested.
Outlook and opportunities
Further relationships with new affinity
partners will be developed, with a focus
on ensuring each plan makes economic
sense for the customer and the Group.
Dignity plc
Annual Report & Accounts 2015
07
Links
See Strategy and business model: p.12 and p.13
See Our KPIs: p.14 and p.15
See The Client Survey performance: p.16
See Operating review: p.18 to p.23
Excellent client service is critical to
the success of the Group.
“
70%
Recommendations and our reputation have
generated approximately 70 per cent of our funeral
business on average over the last five years.
Committed to both quality of service
and business success
The vast majority of our funeral business relies on
reputation, recommendation and previous experience.
This reliance will decline as the percentage of our
business resulting from our pre-arranged funeral
plan business increases.
Source of business
Source: Dignity surveys
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
84%
82%
80%
78%
76%
74%
72%
70%
68%
66%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Reputation,recommendation
& previous experience
(right hand axis)
Pre-arranged
funeral plans
(left hand axis)
Closest location
(left hand axis)
Other
(left hand axis)
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 clients)
100%
(12 Month rolling average)
99%
98%
97%
96%
95%
Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Met and exceeded expectations
(left hand axis)
Exceeded expectations
(right hand axis)
65%
63%
61%
59%
57%
55%
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
08
Strategic Report
A strong and sustainable business
The way that we operate and manage our business through our
consistent strategy and business model continues to underpin our
performance and supports our goal of growing and developing Dignity
as a long-term, profitable and sustainable business. This enables us
to deliver value to all our stakeholders – our clients, employees,
shareholders and the local communities we serve.
This report demonstrates how our strategy, governance, people and
consistent performance combine to create and sustain value.
What we believe in
• 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.
Our clear and consistent strategy and business
model provides a robust platform for delivering
long-term sustainable growth and value.
Read more about our strategy and
business model: p.12 and p.13
Our competitive advantage is sustained by investing
in the best people, our locations and services to
ensure we continue to meet our clients’ needs and
those of the local communities we serve.
Read more about our operational performance
in the Operating review: p.18 to p.23
Strong management and development of
our core portfolio enables us to maintain our
market-leading position and capture future
growth opportunities.
Read more about our industry and our strong
position in Market overview: p.06 and p.07
“
Our vision and values
continue to provide the
foundation for our business.
We are committed to building relationships through
the consistent delivery ofexcellent client service;
informed investors; dedicated employees; and well
supported communities.
Read more about commitment to building strong relationships
in our strategy and business model: p.12 and p.13
Dignity plc
Annual Report & Accounts 2015
09
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Continuing focus on excellent
client service
At Dignity, we focus on people – those that work for us,
partner with us, invest in our strategy and the local
communities we serve, but above all, those who
depend on the services we provide everyday.
High standards of service and care
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.
Our clients continue to return and recommend us
because of the quality and consistency of service
we deliver.
Our people
Our continued focus on outstanding service remains
central to our business success and our dedicated
employees are integral to the delivery of our strategic
objectives. We value, support and engage with them to
ensure that we continue to have the right people with
the right skills and experience to deliver the best
possible service for our clients.
Read more about Our people
in CSR: p.32 to p.37
Read more about our consistent
performance in The Client Survey: p.16
Focus
Dignity plc
Annual Report & Accounts 2015
10
Strategic Report
Maintain
Maintaining investment and
development in our core
business
A strong core business
Our focus, scale and quality sets us apart and we
continue to build on and reinforce the competitive
strengths in our business. 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 a better service.
We continue to invest in our crematoria facilities to
provide peaceful gardens of remembrance and
facilities for our clients.
We continue to work closely with our affinity partners
and funeral locations for the sale of pre-arranged
funeral plans.
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 or acquisition of new crematoria;
• management of local authority owned crematoria; and
• developing new affinity partner relationships for the
sale of pre-arranged funeral plans.
Read more about our performance in the
Operating review: p.18 to p.23
Dignity plc
Annual Report & Accounts 2015
11
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Delivering long-term value
and sustainable growth
Our ongoing commitment
We are committed to both quality of service and
business success and 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 principals through our day-to-day
behaviour and conduct ourselves in a responsible
and ethical manner.
We remain committed to delivering excellent client
service and to our clear and consistent strategy which
continues to provide a robust platform for delivering
long-term value and sustainable growth to all our
stakeholders.
Deliver
Read more about our consistent strategy
and business model: p.12 and p.13
Dignity plc
Annual Report & Accounts 2015
12
Strategic Report
A consistent strategy and business model
We continue to implement a clear
and consistent strategy.
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 70 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.
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.
98.0%
In the 2015 client survey 98.0
per cent of respondents said
they would recommend us.
See The Client Survey
performance: p.16
29%
The percentage of Dignity
employees who have over
10 years service.
See CSR: p.32 to p.37
£66.0m
£15.6 million invested in capital
expenditure on the core business
and a net investment of £50.4
million in acquiring new locations
and opening satellites.
See Operating review: p.18 to p.23
£98.7m
The Group’s underlying
operating profit increased
16 per cent to £98.7 million.
See Operating review: p.18 to p.23
FTSE4Good
Dignity is identified as a
company that meets globally
recognised standards of
corporate responsibility.
See CSR: p.32 to p.37
374,000
374,000 people have active
pre-arranged funeral plans.
See Operating review: p.18 to p.23
£345.2m
Since flotation, £345.2 million
in cash including dividends has
been returned to shareholders.
See Financial review: p.24 to p.27
Dignity plc
Annual Report & Accounts 2015
13
Our goal is simple:
To continue developing Dignity as a long-term
sustainable business that consistently performs
and delivers value to all our stakeholders.
Key to our ongoing strategic objectives
Our ongoing 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:
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.
Links
Find out more about Our KPIs and how we measure performance: p.14 and p.15
Find out more about how we manage and mitigate risk: p.28 to p.31
Find out about our governance framework within which
we conduct our business and deliver our strategic objectives: p.38 and p.39
Find out more about our CSR commitments: p.32 to p.37
Creating long-term and sustainable value
Delivering excellent service lies at the heart of
what we do. It shapes our strategy and is how
we focus our efforts on creating value.
Generating profitable growth:
Our consistent track record in strong cash generation and financial
discipline enables us to reinvest and grow the business both
organically and through strategic acquisition. We generate revenues
from new and returning clients and by carefully acquiring businesses
that complement our network of locations, extend our geographic
reach and represent a reasonable return on our capital.
Controlling and measuring growth:
We do this by making well informed decisions, supported by careful
risk management and good governance.
Operating responsibly:
We do this through embedded policies and robust initiatives,
appropriate to the distinct needs of our stakeholders, alongside
reducing our impact on the environment and making a positive
social impact.
Maintaining performance across our operations:
We strive to provide our clients with the highest standards of facilities,
service and care. We achieve this by our commitment to continuous
improvement and investment in our portfolio and consistently
delivering excellent client service.
Building strong relationships:
• Our clients are the foundation of our business and their trust is
earned through our actions both individually and as a company.
• Our people are our most important asset and we value and invest in
them as they are integral to the delivery of our strategic objectives.
• For shareholders, our priority is to manage, maintain and deliver
strong EPS growth and return on capital.
• We play an important part in and are valued by the local
communities we serve and we are committed to making
a difference.
How we align remuneration to strategy
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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
14
Strategic Report
Our key performance indicators
We continue to monitor our performance by
measuring and tracking KPIs that we believe
are important to our longer-term success.
Non-financial KPIs
KPI
Total estimated number
of deaths in Britain
(number)
588,000
5
5
1
,
0
0
0
5
3
9
,
0
0
0
5
6
0
,
0
0
0
5
5
0
,
0
0
0
5
8
8
,
0
0
0
Link to strategic objective
KPI
Link to strategic objective
1
Crematoria
market share
(per cent)
31
Definition
This is as reported by the Office of
National Statistics.
Developments in 2015
The number of deaths was significantly
higher than the previous year. The Group
expects this increase to reverse in 2016.
9.8%
9
.
2
%
8
.
8
%
9
.
9
%
9
.
7
%
9
.
8
%
Definition
This is the number of cremations
performed by the Group divided by
the total estimated number of deaths
in Britain.
Developments in 2015
Market share has remained broadly
flat, reflecting the stable market position
of the Group’s locations.
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Funeral market share
excluding Northern Ireland
(per cent)
12.3%
1
1
.
9
%
1
1
.
7
%
1
2
.
3
%
1
1
.
3
%
1
1
.
2
%
31
Number of cremations
performed
(number)
31
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 2015
Market share has increased,
principally reflecting the effect of
recent acquisitions.
57,700
5
7
,
7
0
0
5
5
,
5
0
0
5
3
,
4
0
0
5
0
,
5
0
0
4
7
,
6
0
0
Definition
This is the number of cremations
performed according to our
operational data.
Developments in 2015
Changes are a consequence of the total
number of deaths and the Group’s
market share.
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Number of funerals
performed
(number)
31
Active pre-arranged
funeral plans
(number)
4
73,500
7
3
,
5
0
0
6
8
,
0
0
0
6
5
,
6
0
0
6
3
,
2
0
0
6
2
,
3
0
0
Definition
This is the number of funerals performed
according to our operational data.
Developments in 2015
Changes are a consequence of the total
number of deaths and the Group’s
market share.
374,000
3
7
4
,
0
0
0
3
4
8
,
0
0
0
3
2
3
,
0
0
0
2
9
0
,
0
0
0
2
6
5
,
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 2015
This increase reflects continued strong
sales activity offset by the crystallisation
of plans sold in previous years.
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Dignity plc
Annual Report & Accounts 2015
15
Key and link to strategic objectives measured by KPIs
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.
Link to strategic objective
1
2
3
4 5
How we measure performance
The Group uses these non-financial and financial 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.
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.
Our KPIs and goals are set to measure our progress in
improving our financial performance and in embedding
sustainable long-term growth. They are consistent over the
last five years enabling clarity and transparency in both
reporting and management.
Our five year performance
Each of the Group’s KPIs over the five year period
demonstrate the robustness of its operating and financial
performance. They also highlight the Group’s relatively stable
and predictable nature compared to many businesses in
other sectors.
Financial KPIs
KPI
Underlying earnings
per share
(pence)
114.8p
8
5
.
8
p
7
2
.
1
p
6
2
.
8
p
5
5
.
1
p
Definition
This is underlying profit after tax divided
by the weighted average number of
Ordinary Shares in issue in the period.
1
1
4
.
8
p
Developments in 2015
Strong growth following the increase in
operating profit.
2011 2012 2013 2014 2015
Underlying
operating profit
(£m)
£98.7m
£
8
4
.
9
m
£
7
8
.
4
m
£
6
9
.
4
m
£
6
4
.
5
m
1
2 3
4
£
9
8
.
7
m
Definition
This is the statutory operating profit
of the Group excluding profit (or loss)
on sale of fixed assets and external
transaction costs.
Developments in 2015
Strong growth driven by the core
business as well as acquisition activity.
2011 2012 2013 2014 2015
Cash generated
from operations
(£m)
£125.2m
£
1
0
4
.
4
m
£
9
4
.
2
m
£
8
3
.
3
m
£
7
4
.
2
m
5
Links
£
1
2
5
.
2
m
Definition
This is the statutory cash generated
from operations excluding external
transaction costs and exceptional
pension contributions.
Developments in 2015
The Group continues to convert
operating profit into cash efficiently.
See Strategy and business model: p.12 and p.13
See Principal risks and uncertainties: p.28 to p.31
See Report on Directors’ remuneration: p.50 to p.62
A summary of the Group’s financial record for the last
five years can be found on: p.116 and p.117
2011 2012 2013 2014 2015
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
16
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 maintain the highest levels of client service.
Key and link to strategic objective
1 Continue to prioritise excellent
client service which we believe
will lead to organic growth.
See Strategy and business
model: p.12 and p.13
KPI – Excellent client service
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.
We closely monitor the results of our client
surveys to achieve this. In the last five years,
we have received over 161,000 responses.
How we performed in 2015
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.
Maintaining client satisfaction
We have seen consistently high levels
of satisfaction from our survey results.
Our ongoing commitment to high levels
of client satisfaction continues to generate
high levels of referrals.
Link to strategic objective
1
Recommending our services (% of clients)
100%
99%
98%
97%
96%
95%
Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Percentage of clients willing to recommend Dignity’s services
(12 month rolling average)
The Dignity Client Survey 2015
Reputation and recommendation
High standards of facilities and fleet
99.2% (2014: 99.2%)
99.2 per cent of respondents said that
we met or exceeded their expectations.
99.8% (2014: 99.8%)
99.8 per cent thought our premises
were clean and tidy.
98.0%(2014: 98.1%)
98.0 per cent of respondents said they
would recommend us.
99.8% (2014: 99.8%)
99.8 per cent thought our vehicles were
clean and comfortable.
Quality of service and care
In the detail
99.9% (2014: 99.9%)
99.9 per cent thought our staff were
respectful.
99.3% (2014: 99.4%)
99.3 per cent of clients agreed that our
staff had fully explained what would
happen before and during the funeral.
99.7% (2014: 99.7%)
99.7 per cent thought our staff listened
to their needs and wishes.
99.3% (2014: 99.2%)
99.3 per cent agreed that our staff were
compassionate and caring.
99.1% (2014: 99.0%)
99.1 per cent said that the funeral
service took place on time.
98.6% (2014: 98.7%)
98.6 per cent said that the final invoice
matched the estimate provided.
Dignity plc
Annual Report & Accounts 2015
17
Our summary performance in 2015
The Group has continued to perform strongly in 2015. Revenue has increased
14 per cent, underlying operating profit has increased 16 per cent and
underlying earnings per share have increased 34 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 underlying operating profit share (%)
Group underlying operating profit share (%)
Group underlying operating profit share (%)
64%
64%
29%
29%
7%
7%
Revenue (£m)
Revenue (£m)
Total number of active plans
+15%
Revenue up 15% to £212.6 million
+14%
Revenue up 14% to £63.1 million
374,000
Total active pre-arranged funeral plans
increased to 374,000
212.6
176.2
184.4
157.9
146.5
220
200
180
160
140
120
100
80
60
40
20
0
70
60
50
40
30
20
10
0
63.1
53.8
55.2
46.6
41.6
374,000
348,000
323,000
290,000
265,000
375,000
350,000
325,000
300,000
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Underlying operating profit (£m)
Underlying operating profit (£m)
Underlying operating profit (£m)
+16%
Underlying operating profit up 16%
to £76.8 million
+19%
Underlying operating profit up 19%
to £34.6 million
+5%
Underlying operating profit up 5%
to £7.8 million
76.8
60.8
66.3
50.8
54.2
34.6
29.1
27.4
23.3
21.3
35
30
25
20
15
10
5
0
8
7
6
5
4
3
2
1
0
7.8
7.4
6.5
6.7
5.5
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
80
70
60
50
40
30
20
10
0
Links
See Operating review: p.18 to p.23
Find out more about our Group financial performance: p.24 to p.27
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
18
Strategic Report
Operating review
Our strong core business continues
to perform well with a focus on
quality and service.
Acquisition of 36 locations from
Laurel Funerals
The acquisition of these locations in the period has
helped to increase the Group’s presence across the
Midlands and southern parts of England. With the
help of the dedicated staff acquired as part of the
acquisition, these locations have already integrated
well into the business.
Funeral services relate
to the provision of
funerals and ancillary
items, such as
memorials and
floral tributes.
Performance in 2015
• Strong operational efficiencies
and performance.
• Substantial investment in
core portfolio.
• Acquired locations integrated
into the business.
Strategic focus
• Prioritise client service.
• Continue to extend our
national footprint.
• Continue to add value through
new acquisitions.
Overview
The Group’s operations are managed across
three distinct divisions: funerals, crematoria
and pre-arranged funeral plans, which
respectively represent 64 per cent, 29 per cent
and seven per cent of the Group’s underlying
operating profit (before central overheads).
Funeral services
Performance
As at 25 December 2015, the Group operated
a network of 767 (2014: 718) funeral locations
throughout the United Kingdom, generally
trading under local established names.
During the period, the Group conducted
73,500 funerals.
Approximately two per cent of all funerals
were conducted in Northern Ireland. Excluding
Northern Ireland, these funerals represent
approximately 12.3 per cent (2014: 11.7 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 £76.8 million
(2014: £66.3 million), an increase of 16 per cent.
Progress and Developments
Investment in the core portfolio
Significant cash resources continue to be used
to maintain the Group’s locations and fleet.
In 2015, £12.1 million was invested in
maintenance capital expenditure.
Funeral location portfolio
The Group acquired nine funeral businesses
representing 48 funeral locations during
the period. In addition, three satellite locations
were opened and two 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 24 per cent of the funerals
performed in the year (2014: 23 per cent) had
previously been pre-arranged. This proportion
is anticipated to continue to increase over time.
Whilst these funerals represent substantially
lower average revenue per funeral, their
incremental nature means they are a positive
contributor to the Group’s performance.
“
Our people are
passionate about what
they do and are proud
of our reputation as a
market leader of the
funeral industry.
Ongoing training and
development and
investments in our
funeral business help
us to improve, and
exceed expectations.
Andrew Davies
Operations Director
This strong performance has been achieved
as a consequence of the higher number of
funerals being performed at a higher average
revenue per funeral. In addition, costs
remained well controlled and acquisition
activity in the period contributed £2.3 million
of underlying operating profit.
The collection of 81 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.
Integrating acquisitions
The Group has an established,
proven overall approach to
integrating acquisitions that
also gives local managers the
flexibility to adapt to the unique
circumstances of each
transaction.
Continued investment
in our locations and services
Our established locations receive
regular investment to try to
ensure each location is a suitable
location for helping our clients.
Investment is made behind the
scenes as well as on public
facing areas.
1
Dignity plc
Annual Report & Accounts 2015
19
1. In 2015, Christine Hardy,
Funeral Manager in Newcastle,
celebrated 40 years service with
W S Harrison & Son.
2. Burton on Trent & District
Funeral Directors, Staffordshire.
3. W S Trenhaile in Cheltenham,
Gloucestershire.
4. Dignity has continued to invest in
new fleet such as the Mercedes
vehicles in Gloucestershire.
Acting with compassion, care, openness and respect
“
We take great care in providing our clients with the
very best possible service when it matters most.
Christine Hardy, Funeral Manager, Newcastle
2
3
4
Operating profit
£76.8m
The funeral division contributed
£76.8 million of underlying
operating profit in the period.
Locations
767
The Group’s national coverage is
achieved through 767 locations.
Market share
12.3%
The Group’s market share
is 12.3 per cent following
acquisitions in the period.
Investment
£15.6m
During the period Dignity invested
£15.6 million to further improve
the facilities and service we offer
our clients.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
20
Strategic Report
Operating review
continued
Crematoria services
relate to cremation
services and the sale
of memorials and
burial plots at the
Group’s crematoria
and cemeteries.
Performance in 2015
• 19 per cent increase in
underlying operating profit.
• Two planning applications
now approved.
• Two further planning
applications being progressed.
Strategic focus
• Continue to identify further
locations for new crematoria.
• Continued expansion and
development of existing
crematoria.
“
Continued development
and investment in our
existing crematoria
portfolio helps us
to deliver service
enhancements to the
families we serve.
Steve Gant
General Manager – Crematoria
Growth of our crematoria portfolio
39 crematoria
In 2015, the Group operated 39 crematoria
compared to 22 at the beginning of 2008.
Crematoria
Performance
The Group remains the largest single operator
of crematoria in Britain, operating 39 (2014:
39) crematoria as at 25 December 2015. The
Group performed 57,700 cremations (2014:
53,400) in the period, representing 9.8 per
cent (2014: 9.7 per cent) of total estimated
deaths in Britain.
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
Underlying operating profit was £34.6 million
(2014: £29.1million), an increase of 19 per cent.
This operating performance is driven by
increasing average revenues per cremation,
which has been assisted by the increase in the
number of cremations performed in the year.
Performance
The Group continues to have a strong market
presence in pre-arranged funeral plans. These
plans represent potential future incremental
business for the funeral division, as the Group
expects to perform the majority of these
funerals.
Sales of memorials and other items have been
strong, equating to approximately £276 per
cremation compared to £262 in the previous
period.
Underlying operating performance in the
period has been solid, with operating profit of
£7.8 million (2014: £7.4 million), an increase
of five per cent.
Progress and Developments
Investment of £0.1 million has been made to
develop a location that was acquired from a
local authority in 2012. A further £0.8 million
is expected to be incurred in 2016 to complete
the local authority development. The Group
has also invested £2.5 million maintaining
its locations in the period.
The Group has been successful in two planning
applications for new crematoria. Building work
will commence later in 2016, with the locations
due to open mid-2017 or early 2018. These
locations will take at least five to seven years
to reach maturity, performing 800 to 1,000
cremations per year. The total capital cost
of these developments will be approximately
£6.5 million.
A further two applications are in the process of
appeal, with decisions expected later in 2016.
As highlighted in previous years, the Group
does not expect to be successful in all
applications but believes each location
represents 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.
In overall terms, approximately 38,000 (2014:
40,000) new plan sales were made and the
number of active pre-arranged funeral plans
increased to 374,000 (2014: 348,000) as at
25 December 2015.
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 divisions, pre-arranged
funeral plan profits broadly reflect the cash
generated by that activity.
Progress and Developments
The increase in the number of active 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 2016.
Delivering enhancements
at our existing grounds
and facilities
The Group continues to seek to
develop new ways to help families
remember their loved ones in our
peaceful locations.
New build crematoria
developments
The Group has successfully
obtained planning permission
for two crematoria which should
open mid-2017 or early 2018.
1
Dignity plc
Annual Report & Accounts 2015
21
1. Ciaran Nolan, Commercial
Development Manager (right) and
Phil Howl of Howl Associates Ltd
discussing plans for the new
crematorium in Derbyshire. Howl
Associates also designed Wyre
Forest Crematorium.
2. The Chapel at Mendip Crematorium
in Somerset.
3. Kate Davidson, Regional Manager, in the
grounds of Wyre Forest Crematorium.
4. Nicola Arnold, Memorial Development
Manager, trialling the technology that
can help clients to choose a memorial.
Meeting local community needs
“
New build crematoria represent an opportunity to
develop and invest in new facilities in areas that will
benefit the local community.
Alan Lathbury, Head of Business Development – Crematoria
2
3
4
Operating profit
£34.6m
The crematoria division
generated £34.6 million of
underlying operating profit
from its 39 locations.
Crematoria
39
The Group is the largest
operator of crematoria in the
UK, operating 39 locations.
Investment
£2.5m
£2.5 million of capital
expenditure has been invested in
the portfolio during the period.
Enhancing client service
through technology
The Group has been installing
technology to allow a vast
selection of music to be played
on demand and for services to
be broadcast via the internet.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
22
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 brands and introduce their
customers to our services.
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 2015, the Trusts held over £736 million
of assets. The latest actuarial valuations
of the pre-arranged funeral plan trusts
(at 25 September 2015) showed them to have
sufficient assets to pay out all funerals at the
current projected rates payable to the Group
anticipated by the actuary. The Trustees, the
majority of whom are (and who are required
by law to be) independent of the Group, have
informed the Group that they have now,
following independent external advice,
completed a restructuring of the Trust’s
investments following a review of the
Trust’s investment strategy.
The Trustees have informed the Group that
their strategy envisages holding investments
in the following approximate profile:
Pre-arranged funeral
plans represent the
sale of funerals to
customers wishing to
make their own funeral
arrangements in
advance.
Performance in 2015
• Strong operational
performance.
• Age UK remains a key
affinity partner.
Strategic focus
• Continued growth in direct
sales of plans across our
branch network.
• Continued development of
opportunities through existing
and potential affinity partners.
Equities
Alternative investments
Developed credit and cash
Target (%)
22
13
65
“
Opportunities for
growth continue
through our network of
funeral locations and
the development of
affinity partnerships.
Steve Wallis
General Manager – Pre-arrangement
Equities will in the main be invested in
developed markets, but will contain an
exposure to emerging markets. Alternative
investments relate to investments in markets
such as reinsurance, emerging market debt
and property funds.
This 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 probably result in
greater volatility year on year in the value of
the Trust’s assets.
Outlook
Opportunities for growth continue through
the development of existing relationships and
the creation of new ones.
The Trustees have indicated that they will
continue to work with their advisers to keep the
investment strategy under review and amend
it where appropriate.
Total number of active plans
374,000
348,000
323,000
290,000
265,000
375,000
350,000
325,000
300,000
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
2011
2012
2013
2014
2015
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 £20.5 million (2014:
£17.9 million), an increase of 14.5 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 £5.8 million to £6.3 million.
Excluding these bonus costs, central overheads
represent 4.7 per cent (2014: 4.5 per cent)
of revenues.
Capital expenditure of £1 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 2016 as the business continues
to grow.
The Group plans to update its accounting
software in 2016. This is expected to generate
a one-off capital cost of up to £3 million
(including VAT, which represents a cost to
the Group on such projects).
Affinity partnership
developments
Working with established
businesses with trusted brands
allows the Group to expand
the opportunities for selling
pre-arranged funeral plans.
1
Dignity plc
Annual Report & Accounts 2015
23
1. Performance Managers, Katie Pryce
and Mark Porter in the Client
Service Centre.
2. We continue to reach new clients
through reputable affinity partners
and established funeral locations.
3. Literature is available in branches to
help clients pre-arrange their funeral.
4. Mark Hull (centre), Head of Marketing,
with Campaign Managers, Andrew
Griffin and Rebecca Long.
Providing peace of mind
“We have already helped more than 684,000 people
arrange their funeral in advance and today more
people have made provision for their funeral costs
with Dignity than with any other provider.
Steve Wallis, General Manager – Pre-arrangement
2
3
4
Operating profit
£7.8m
The pre-arrangement division
generated £7.8 million of
underlying operating profit.
Active funeral plans
374,000
374,000 people have active
pre-arranged funeral plans.
Focused marketing
38,000
Focused marketing activity
has resulted in approximately
38,000 new funeral plan sales
in the period.
Direct sales of plans across
our branch network
Our funeral locations also sell
plans, giving customers the
opportunity to pre-arrange their
precise requirements.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
24
Strategic Report
Financial review
The 2015 results demonstrate we
are consistently delivering a strong
performance.
“
As a result of the
strong year, the Group
was able to fund all of
its corporate activity
from its cash reserves.
Performance in 2015
• Underlying earnings per share
increased 34 per cent.
• £52.7 million of cash available
for future corporate activity.
£305.3m
Revenue up 14 per cent
to £305.3 million (2014:
£268.9 million).
£98.7m
Underlying operating profit up
16 per cent to £98.7 million
(2014: £84.9 million).
20%
Cash generated from operations
up 20 per cent to £125.2 million
(2014: £104.4 million).
Steve Whittern, Finance Director
Introduction
These financial results have been prepared
in accordance with International Financial
Reporting Standards (‘IFRS’) as adopted
in the EU.
Financial highlights
The Group’s financial performance is
summarised below:
52 week 52 week
period period
ended ended
25 Dec 26 Dec Increase
2015 2014 %
Revenue (£million) 305.3 268.9 14
Underlying operating profit (a) 98.7 84.9 16
(£million)
Underlying profit before tax (a) 72.2 58.5 23
(£million)
Underlying earnings per share(a) 114.8 85.8 34
(pence)
Cash generated from operations(b) 125.2 104.4 20
(£million)
Operating profit (£million) 95.5 82.9 15
Profit/(loss) before tax (£million) 69.0 (67.7) n/a
Basic earnings/(loss) per share 115.2 (104.0) n/a
(pence)
Dividends paid in the period:
Interim dividend (pence) 7.14 6.49 10
Final dividend (pence) 13.01 11.83 10
Return of Cash (£million) – 64.4 n/a
(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 the £1 million pension contribution
made in 2014.
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.
The market value of the Old Notes was
significantly in excess of their carrying value.
The refinancing in 2014 resulted in an
exceptional charge of £124.2 million. As a result,
the Group reported a statutory loss for the year.
This and the associated costs of the transaction
were, because of their nature and amount,
disclosed as exceptional and excluded from
the Group’s underlying performance measure.
Further details on the refinancing can be found
in the 2014 Annual Report.
Exceptional items and underlying
reporting measures
The Board believes that whilst statutory
reporting measures provide a useful indication
of the financial performance of the Group,
additional insight is gained by excluding certain
non-recurring or non-trading transactions.
Accordingly, the following information is
presented to aid understanding of the
performance of the Group:
52 week 52 week
period period
ended ended
25 Dec 26 Dec
2015 2014
£m £m
Operating profit for the
period as reported 95.5 82.9
Add the effects of:
Loss on sale of fixed assets – 0.3
External transaction costs 3.2 1.7
Underlying operating profit 98.7 84.9
Underlying net finance costs(c) (26.5) (26.4)
The Board has proposed a dividend of 14.31
pence per Ordinary Share as a final distribution
of profits relating to 2015 to be paid on 24 June
2016, subject to shareholder approval.
Underlying profit before tax 72.2 58.5
Tax charge on underlying profit
before tax(d) (15.5) (13.1)
Underlying profit after tax 56.7 45.4
Terminology – 2014 refinancing
In 2014, 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
Weighted average number
of Ordinary Shares in issue
during the period (million) 49.4 52.9
Underlying EPS (pence) 114.8p 85.8p
Increase in Underlying EPS (per cent) 34% 19%
(c)Excludes exceptional finance costs of £nil
(2014: £124.2 million).
(d)Excludes exceptional tax credit of £3.4 million
(2014: £25.8 million).
Cash generation (£m)
130
120
110
100
90
80
70
60
50
40
30
20
0
125.2
104.4
94.2
83.3
74.2
2011
2012
2013
2014
2015
Earnings per share
The Group’s statutory profit after tax was £56.9
million (2014: loss after tax of £55.0 million).
Basic earnings per share were 115.2 pence
per share (2014: loss of earnings per share of
104.0 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 £56.7 million (2014: £45.4
million), giving underlying earnings per share
of 114.8 pence per share (2014: 85.8 pence
per share), an increase of 34 per cent.
Capital spend on branch relocations includes
the purchase of the freehold interest of one
of the Group’s main service centres in London,
which became available during the period.
This secures a key support facility for the local
businesses in the area, where suitable
alternative premises were scarce.
As a result of the strong year, the Group was
able to fund all of its corporate activity from
its cash reserves, spending a net £50.0 million
on the acquisition of 48 funeral locations and
balancing payments in respect of 2014
acquisitions.
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 balances at the end of the period were
£98.8 million (2014: £86.5 million). The Group
had £16.9 million (2014: £9.6 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 2015 (2014:
31 December 2014). These amounts do not
therefore meet the definition of cash for cash
flow reporting purposes.
Cash flow and cash balances
Cash generated from operations was £125.2
million (2014: £104.4 million) stated before
external transaction costs of £3.2 million (2014:
£1.1 million), 2014’s amount also included an
exceptional contribution to the Group’s pension
scheme of £1.0 million. This has increased
faster than the increase in operating profit as
a result of positive working capital movements.
As a principle, the Group continues to convert
its accounting profits into cash broadly pound
for pound.
Capital expenditure on property, plant
and equipment was £19.9 million (2014:
£17.2 million).
This is analysed as:
25 Dec 26 Dec
2015 2014
£m £m
Vehicle replacement programme
and improvements to locations 15.6 14.1
Branch relocations 3.9 1.4
Satellite locations 0.3 0.1
Development of new crematoria
and cemeteries 0.1 1.6
Total property, plant and equipment 19.9 17.2
Partly funded by:
Disposal proceeds (0.8) (0.5)
Net capital expenditure 19.1 16.7
Approximately £52.7 million of the remaining
cash balance was immediately available
for acquisitions and developments and
approximately £19.8 million was set aside for
future corporation tax and dividend payments
(although this could be used for corporate
activity if the Group saw fit).
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 £12.5
million before deferred tax (2014: deficit of
£10.5 million). The size of the deficit remains
manageable and the Group will continue to
consider options for mitigating its liabilities.
Taxation
The Group’s effective tax rate on underlying
profits in the period was 21.5 per cent (2014:
22.5 per cent) (excluding the exceptional rate
change). Changes to the UK corporation tax
rates were substantively enacted as part of
Finance Bill 2015. This will mean headline
corporation tax rates will reduce to 19 per cent
from 1 April 2017 and 18 per cent from 1 April
2020. The Group has therefore recognised an
exceptional credit in the income statement of
£3.4 million in order to restate its deferred tax
balances to the new long-term rate.
Dignity plc
Annual Report & Accounts 2015
25
£125.2m
Converting operating profit
efficiently into cash.
£15.6m
£15.6 million has been invested
in maintaining our property and
fleet portfolio.
£50m
£50 million has been invested
in acquisitions from existing
cash reserves.
Links
See Strategy and business model:
p.12 and p.13
See Our KPIs: p.14 and p.15
See Principal risks and uncertainties:
p.28 to p.31
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
26
Strategic Report
Financial review
continued
Performing strongly since IPO
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.
Total monies returned to shareholders
on cumulative basis
(Dividend and return of value)
n
r
u
t
e
R
e
v
i
t
a
u
m
u
C
l
)
e
c
n
e
p
(
e
r
a
h
s
r
e
p
500
400
300
200
100
0
2004 2005 2006 2007
2008 2009
2010 2011 2012 2013 2014 2015
Given the 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.
This has the benefit of enhancing shareholder
returns, whilst leaving sufficient free cash to
invest in the growth of the business.
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 25
December 2015 was 3.35 times (2014: 10.69
times). The year on year reduction in the ratio
reflects the timing of the issue of the New
Notes in 2014, meaning that in the period to
December 2014, a full year’s EBITDA is being
compared against a partial year of debt
service. If the debt service was annualised the
ratio for the comparative period would have
been 2.95 times.
Crematoria Acquisition Facility
The other external drawn source of debt
funding is the Group’s £15.8 million Crematoria
Acquisition Facility, which is fully utilised. The
facility is repayable in one amount in February
2018. Interest is fixed at approximately
3.3 per cent.
Funeral Acquisition Facility
During the period, the Group obtained a
Funeral Acquisition Facility of £26.25 million
which was originally created to help fund the
acquisition of Laurel Funerals. However, given
the strong trading in the period leading up to
the acquisition, the level of cash held by the
Group meant that this facility was not required.
The facility remains undrawn, attracting a non
utilisation fee of approximately £150,000 per
annum. If drawn, the facility will charge interest
at a rate between 125 and 165 basis points per
annum above LIBOR (depending on the ratio of
EBITDA to gross debt). The facility is currently
available until mid June 2016. However, the
Group expects to extend its availability until
the end of 2016 in order to maintain an
efficient and flexible source of additional
funding if required.
The Group continues to expect its effective tax
rate to be approximately one per cent above
the headline rate of corporation tax. This
translates to an effective rate for 2016, 2017
and 2018 of 21.0 per cent, 20.5 per cent
and 20.0 per cent respectively.
The Group’s net cash tax payments were
£3.7 million (2014: £6.9 million) in the period
as a consequence of the 2014 refinancing.
The Group expects corporation tax payments
to increase in 2016 and 2017. Legislative
changes requiring an acceleration of quarterly
payments on account of corporation tax will
result in the Group paying 18 months of cash
tax in 2018. This will then revert to 12 months
of cash tax in 2019 and beyond at a level
approximately the same as the charge in
the income statement.
Capital structure and financing
Secured Notes
The Group’s principal source of long-term
debt financing is the New Class A Notes and
the New Class B Notes. They are rated A and
BBB respectively by Fitch and Standard and
Poor’s (S&P).
The Board considers that maintaining a
leveraged balance sheet is appropriate for the
Group, given the stable and predictable nature
of its cash flows. This predictability is matched
in the New Notes. The principal is repaid
completely over the life of the New Notes and
is therefore scheduled to be repaid by 2049.
The interest rate is fixed for the life of the
New Notes and interest is calculated on
the principal.
The key terms of the New 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.
114.8
Financial leverage enhances underlying earnings
per share (pence)
120
110
100
90
80
70
60
50
40
30
20
10
0
85.8
72.1
62.8
55.1
2011
2012
2013
2014
2015
New accounting standard on leases
In January 2016, IFRS 16, Leases was issued.
This is effective for accounting periods
beginning on or after 1 January 2019 and will
therefore impact the Group’s 2020 financial
results. Approximately 50 per cent of the
Group’s properties are on lease terms that are
currently accounted for as an operating lease.
As the notes to the consolidated accounts
demonstrate, the Group has total minimum
lease payments under non-cancellable
operating leases of approximately £175
million. Whilst the net present value of these
commitments will be less than this amount,
the grossing up of the Group’s balance sheet
that will be required to reflect this new standard
will be material and will have some impact on
the Group’s reported profit after tax. The Group
will be assessing this in due course but notes
that the accounting standard does not affect
the cash flows or underlying economics of
the business.
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.
Net debt
The Group’s net debt is analysed as:
25 Dec 26 Dec
2015 2014
£m £m
Net amounts owing on New Notes (586.5) (594.6)
Add: unamortised issue costs (0.7) (0.7)
Gross amounts owing on
Secured Notes (587.2) (595.3)
Net amounts owing on Crematoria
Acquisition Facility (15.7) (15.6)
Add: unamortised issue costs on
Crematoria Acquisition Facility (0.1) (0.2)
Gross amounts owing (603.0) (611.1)
Accrued interest on Secured Notes (12.8) (5.7)
Accrued interest on Crematoria
Acquisition Facility (0.1) –
Cash and cash equivalents 98.8 86.5
Net debt (517.1) (530.3)
The Group’s gross debt outstanding was
£603.0 million (2014: £611.1 million).
Net debt was £517.1 million (2014: £530.3
million). Gross debt includes £4.1 million
(2014: £4.0 million) that was repaid on
31 December 2015.
The market value of the New Notes at the
balance sheet date was £615.5 million
(2014: £643.2 million).
Net finance costs
The Group’s underlying finance costs
substantially consist of the interest on
the New Notes and ancillary instruments.
The net finance cost in the period relating to
these instruments was £25.6 million (2014:
£25.2 million).
Finance costs of £0.6 million (2014: £0.6
million) were incurred in respect of the
Crematoria Acquisition Facility.
Other ongoing finance costs incurred in the
period amounted to £0.8 million (2014: £1.6
million), including the unwinding of discounts
on the Group’s provisions and other financial
liabilities.
Interest receivable on bank deposits was
£0.5 million (2014: £1.0 million).
Dignity plc
Annual Report & Accounts 2015
27
£10.0m
The Group has continued to
increase dividends per share
by 10 per cent and has paid
£10 million to shareholders in
normal dividends in the period.
Outlook
The Group’s strong balance sheet
gives it the ability to respond
quickly to business needs and
corporate development
opportunities.
Links
See Financial statements:
p.65 to p.108
See Financial record:
p.116 and p.117
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
28
Strategic Report
Principal risks and uncertainties
Committed to managing risk
effectively and robustly.
Our principal Group risks
Outlined here is our
assessment of the principal
risks facing the Group. In
assessing which risks should
be classified as principal, we
assess the probability of the
risk materialising and the
financial or strategic impact
of the risk.
Our approach to risk management
The Group has a well established governance structure with
internal control and risk management systems. The risk
management process:
• Provides a framework to identify, assess and manage risks,
both positive and negative, to the Groups overall strategy
and the contribution of its individual operations.
• Allows the Board to fulfil its governance responsibilities by
making a balanced and understandable assessment of the
operation of the risk management process and inputs.
Responsibilities and actions
The Board
The Board is responsible for monitoring the Group’s risk and
their mitigants.
Risk process
Every six months the Audit Committee considers the risk register
and approves it for adoption by the Board.
Risk assessment
Executive Directors and senior management are responsible
for identifying and assessing business risks.
Identify
Risks are identified through discussion with senior management
and incorporated in the risk register as appropriate.
Assess
The potential impact and likelihood of occurrence of each
risk is considered.
Mitigating activities
Mitigants are identified against each risk where possible.
Review and internal audit
The link between each risk and the Group’s policies and
procedures is identified. Where relevant, appropriate work is
performed by the Group’s internal audit function to assist in
ensuring the related procedures and policies are appropriately
understood and operated where they serve to mitigate risks.
Risk management process
IDENTIFY & ANALYSE
Risks and impact identified
• Risks mapped to controls currently in place
• Residual risks prioritised for mitigation
• Confirmed with the Board
t
S
r a t e g ic objectives
Risk management
process
• Remedial action plans
implemented
• Board member
accountable
S
s
S
t
r
a
te
gic objective
s
e
v
i
t
c
e
j
b
o
c
i
g
e
t
a
tr
ACTION
Controls identified
• Suggested action plans agreed
• Options for controls identified
and costed
• Plans approved by the Board
IMPLEMENT
Existing control enforced
and tested
• Remedial action plans implemented
• Board member accountable
Links
See Strategy and business model: p.12 and p.13
See Our KPIs: p.14 and p.15
See Governance: p.38 to p.64
Risks in the context of our strategic objectives
Key and link to strategic objective
As set out in page 13, we have clear strategic objectives against
which we measure our performance. In the same way that we
measure our performance against these objectives, we also
consider our risks and their potential impact on these objectives
as well as our approach to mitigating those risks.
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.
Dignity plc
Annual Report & Accounts 2015
29
Operational risk management
Strategic
objective link
531
5431
51
51
Risk and impact
Mitigating activities
2015 Commentary
Change
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.
The number of deaths was
unusually high. However, there
is a reasonable chance that
2016 may see a significant
reduction, offsetting the high
number of deaths in 2015.
See Market overview:
p.06 and p.07
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. For pre-arranged funeral plans,
adverse publicity for the Group or one of its
partners could result in a reduction in the
number of plans sold or an increase in the
number of plans cancelled. This would have
a direct and significant impact on the financial
performance of that division and the Group
as a whole.
Ability to increase average revenues
per funeral or cremation
Operating profit growth is in part attributable
to increases in 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.
This risk is addressed by ensuring appropriate
policies and procedures are in place, which
are designed to ensure excellent client service
and careful selection of reputable partners.
There have been no such
events in the period.
See The Client Survey
performance: p.16
The Group believes that its focus on excellent
client service helps to mitigate this risk.
Average revenues increased
in line with the Board’s
expectations.
See Operating review:
p.18 to p.23
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. For
crematoria operations this 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.18 to p.23
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.
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 are barriers to entry in the funeral
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.
There have been no material
changes, with satellites being
opened and businesses
acquired in appropriate areas.
See Operating review:
p.18 to p.23
No major changes noted.
Denials of planning
applications for crematoria in
the period demonstrate the
barriers to entry.
See Operating review:
p.18 to p.23
Key: Change in the year
Risk exposure increased
Risk exposure decreased
No significant change
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
30
Strategic Report
Principal risks and uncertainties
continued
Operational risk management continued
Strategic
objective link
Risk and impact
51
54
5321
54
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
marketing allowances, which would have a
direct impact on the profitability of the pre-
arranged funeral plan division.
Regulation of the funeral industry
The Scottish and Westminster parliaments
have set up an inquiry to consider issues
surrounding funeral poverty.
The Scottish Government is seeking to enact
new legislation. Amongst other things, this
could lead to the licensing of funeral directors
in Scotland and the appointment of a Scottish
Inspector of funerals.
Regulation would most likely result in increased
compliance costs for the industry as a whole.
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.
Mitigating activities
2015 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.06 and p.07
Whilst regulation has always
been considered a risk, the
increased rhetoric has led the
Group to highlight the matter
in its summary of principal
risks. The Group would
welcome the introduction of
regulation requiring minimum
standards of care.
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.
The Group already operates at a very high
standard, using facilities appropriate for the
dignified care of the deceased.
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 have implemented 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.
Dignity plc
Annual Report & Accounts 2015
31
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
2015 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 generated by the
securitised subgroup.
No significant changes noted
in the period.
See Financial review:
p.24 to p.27
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 (which is applicable
to the securitised subgroup of Dignity) 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.
Viability statement
The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they
fall due, for the subsequent three years to December 2018.
The key consideration of viability is the Group’s ability to service its A and B Notes as and when those obligations fall due, twice
a year. The Directors have fully considered severe but reasonable scenarios, and the effectiveness of any mitigating actions, on
the Group’s ability to generate funds to meet those obligations. Three years has been selected as the appropriate period as the
Directors strategic reviews look three years ahead.
In making this statement the Directors have reviewed the overall resilience of the Group and have specifically considered:
• the Group’s current position and trading prospects;
• the current and ongoing strategy;
• the Board’s appetite for risk; and
• a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity, and how they are managed, as explained in this Strategic Report (pages 28 to 31).
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
32
Strategic Report
Corporate and social responsibility
Operating sustainably and responsibly
is fundamental to delivering on our
strategic objectives.
Richard Portman, Corporate Services Director
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.
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.
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 seven per cent of our employees are based
at our head office where they perform such
necessary business tasks as Finance, IT, HR,
Our Code of Conduct (which is available on our
corporate website www.dignityfuneralsplc.co.uk)
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 continues to be 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 Dignity and that the future
success of the business depends on its
reputation.
“
To achieve our
business goals we
need to look after the
communities, people
and environment
which support our
operations, so we can
continue delivering
value to all our
stakeholders.
Performance in 2015
• 29 per cent of Dignity staff have
over 10 years service;
• In the last five years the number
of accidents has reduced by
25 per cent;
• Dignity’s CDP (formerly Carbon
Disclosure Project) submission
was shortlisted for the “Best
Year on Year Change in
Performance” category amongst
FTSE 350 companies; and
• Dignity raised £59,000 for its
corporate charity, Marie Curie.
In this section
In this section, we provide an
overview of the importance and
our approach to CSR and our
performance in 2015. Further
details and case studies can be
found on Dignity’s website:
www.dignityfuneralsplc.co.uk/
responsibility
Links
See Strategy and business model:
p.12 and p.13
See The Client Survey
performance: p.16
See Governance: p.38 to p.64
Our four CSR commitments:
People development: p.33 and p.34
Health & Safety: p.35
Environment: p.36
Community: p.37
Dignity plc
Annual Report & Accounts 2015
33
Managing and supporting our people
Dignity is a people business – with over 3,000 employees working
across our operations from a wide range of backgrounds. Our success
rests on having the right people, with the right skills and experience to
deliver high quality services consistently.
Our business principles, Code of Conduct and core company values
have helped us to create a distinctive Dignity culture.
Key and link to strategic objective
1 Continue to prioritise excellent client service which we believe will
lead to organic growth.
See Strategy and business model: p.12 and p.13
Our People
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/
responsibility
• Learning and development;
• Recognising achievement;
• Promoting diversity; and
• What we are here to do:
To help people at one of the most difficult
times in their lives.
• Employee engagement.
• 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.
Our Code of Conduct is reinforced by our Staff Handbook
which is given to all new employees working in our business.
This document ensures that we embed all new employees into
the Dignity culture and reminds existing members of staff of
the standards of behaviour and attitudes that are expected of
them. The Code of Conduct is also published on our corporate
website. During 2015 our HR policies have been reviewed,
updated and developed in a format where they can be easily
accessed by managers and employees on our intranet.
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 corporate website and we have advised
our suppliers that our Bribery Policy is available on that website.
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 branches. In 2015, Dignity continued to provide its staff
with both relevant job training and tutoring for professional
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.
Reward and recognition
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 2015.
Promoting diversity
Dignity was awarded the Two Ticks Positive About Disability
Symbol by Jobcentre Plus in 2014 and has continued to
employ, retain and develop the abilities of disabled people.
Dignity joined the Business Disability Forum in 2015, a
not-for-profit organisation that encourages the fair treatment
of disabled people in the workplace and their community.
Employee engagement
To achieve our business objectives we need engaged employees
dedicated to our vision and values. Dignity has continued to
publish a quarterly in-house magazine, ‘Dignity Express’, to
enable the Company’s Directors, managers and employees to
communicate objectives and client satisfaction results, explain
developments in the funeral sector and to share best practice
and news in a cost effective manner. ‘Dignity Express’ is
supplemented by monthly bulletins to keep all employees
informed of what is happening within the organisation.
Employee diversity
Senior managers (% & number)
Total employees/ratio (% & number)
Employee service (% & number)
Positive about disability
3,038
Male 77% (23 senior managers)
Female 23% (7 senior managers)
Male 49% (1,498 employees)
Female 51% (1,540 employees)
< 1 year: 16% (474 employees)
1–4 years: 32% (965 employees)
5–9 years: 23% (706 employees)
10–19 years: 20% (622 employees)
>20 years: 9% (271 employees)
Dignity remains committed to
employing, retaining and developing
the abilities of disabled employees.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
34
Strategic Report
Corporate and social responsibility
continued
Our People continued
1
Expanding our HR team
During 2015, Dignity’s HR
team has expanded to meet
the requirements of a growing
company. The team is
responsible for the integration
of new staff and the
development and welfare
of people across the Group.
1. Ella Rhodes, Head of HR (middle,
left) with HR Business Partners,
Maria Glenholmes, Steve Williams
and Richard Preston.
2. Shirley Roberts, Regional
Manager – Memorial Sales, has
been with Dignity for 20 years and
her experience and knowledge
ensures Dignity crematoria offer
a variety of memorial options.
3. Dignity Express, the company’s staff
magazine, was redesigned in 2015.
4. Angela Eames, Financial Controller,
has performed various financial
roles and has been involved with
numerous significant projects
in her 26 years with Dignity.
2
We value and invest in our people
“
To achieve our business objectives we need dedicated
employees who share our vision and values. Our
people continue to be our most important asset.
Mike McCollum, Chief Executive
2
3
4
Attracting and retaining
the best people
We want to attract and retain
loyal employees who add value
to what we do and recognising
and rewarding performance
and long service plays a key
part in this.
Long service
29%
29 per cent of Dignity staff
(893 employees) have over
10 years service.
Career development
We believe in nurturing talent,
providing experience and formal
qualifications, enabling our
people to excel and create senior
managers of the future.
Gender diversity
23%
23 per cent of Dignity’s senior
managers are female.
–
Dignity plc
Annual Report & Accounts 2015
35
Health & Safety
Our commitment
What we focus on:
• Ensuring safety;
• Proactive management;
• Employee welfare; and
• Occupational safety.
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/
responsibility
Effective health & safety management in the workplace
Dignity has a full-time Health and Safety Manager who is
supported by eight Health & Safety Officers. Dignity’s head
office, crematoria and coffin manufacturing facility also have
their own managers with responsibility for Health and Safety.
In the last five years the number of accidents has reduced
by 25 per cent.
Changes in personnel within the Health and Safety Department
have created the opportunity to broaden the collective
experience of the team thus increasing the level of support
available within Dignity.
The current department is now one in which funeral experience
is blended with knowledge gained in the armed forces and both
local authority and private business sectors.
Whilst maintaining the annual trend of accident reduction,
the department has focussed on preparation for the launch
of a health and safety management resource in early 2016.
This software, which includes a library of resources accessible
to every employee, will enable managers to monitor compliance
in real-time and proactively identify areas requiring action with
the intention of further risk reduction across Dignity.
Health & safety training (number)
12
154
286
Enhancing health & safety
procedures
Dignity monitors health and
safety proactively through
quarterly analysis, premises
inspections, surveillance and
regular reports to the Board
and monitors reactively by
investigating accidents and
analysing statistics.
0
25
50
75
100
125
150
175
200
225
250
275
300
Reduction in reportable accidents
Employees with NEBOSH qualification: 12
Employees with IOSH qualification: 154
Employees with CIEH qualification: 286
25%
In the last five years the number of accidents has
reduced by 25 per cent.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
36
Strategic Report
Corporate and social responsibility
continued
Environment
Our commitment
What we focus on:
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/
responsibility
• Reducing our carbon
footprint;
• Reducing energy
consumption;
• Promoting sustainable
development; and
• Minimising our
environmental impact.
Award-winning crematorium
In May 2015, Dignity’s Wyre Forest
Crematorium in Worcestershire was
honoured at the Stourport Civic Society
Awards. The annual awards encourage
and recognise projects that contribute
to the quality of the environment in
the town.
The crematorium and cemetery
opened in December 2011 and is a
state of the art facility set in 23 acres
of superbly maintained grounds and is
a great example of how an inspirational
new building can transform an area
and provide a high level of comfort
to the local communities it serves.
Managing our environmental impact
In 2015 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.
Approximately 31,000 cremations at Dignity crematoria were
mercury abated during 2015, 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. 97per
cent of the coffins manufactured by Dignity are from Forest
Stewardship Council (FSC) accredited timber.
CDP
As part of the Group’s ongoing commitment to reducing its carbon
footprint and environmental impacts, Dignity has been reporting
to the CDP (formerly Carbon Disclosure Project) since 2008. The
CDP is a not-for-profit organisation that aims to reduce impacts
on the environment by measuring disclosures from thousands
of organisations across the world’s major economies. CDP
encourages best practice in reporting and reducing environmental
impact though a scoring process. Scoring is based on a number
of criteria designed to assess our Energy Management practices
and Environmental Strategy, specifically around Performance
and Reporting, Risk Management, and Business Strategy in
relation to Climate Change.
Dignity’s 2015 submission represented a significant improvement
in our reporting practices and environmental policy and as a
result Dignity was shortlisted for the “Best Year on Year Change
in Performance” category amongst FTSE 350 companies.
ESOS compliance
Dignity qualifies for the Energy Savings Opportunity
Scheme (‘ESOS’) and completed an ESOS assessment during
2015 confirming compliance by the revised due date of
29 January 2016.
Smart energy management
We had fitted 1,011 electric
smart meters by the end of
the period with a further 88
remaining to be fitted in 2016.
This represents 92 per cent of
the estate where such meters
may be fitted.
We have fitted 249 gas loggers
so far, 50 per cent of the total
estate of 502 sites where such
loggers can be fitted. A further
84 have been installed since the
period end so a further 165
remain to be fitted.
Improving efficiency through
investment
A new conveyor system
was introduced at the coffin
manufacturing facility. This
reduces noise, material wastage
and manual handling.
Investment
£0.2m
The new conveyor system
required investment of
£0.2 million.
Greenhouse gas emissions reporting for 2015
Dignity reports its greenhouse gas to CDP 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:
2015 2014 2013 2012 2011
Scope 1 14,988 14,437 15,077 15,097 15,202
Scope 2 7,455 7,389 7,151 7,861 7,388
Total 22,443 21,826 22,228 22,958 22,590
Per FTE Employee 8.2 8.5 9.0 10.0 10.2
Methodology
Our greenhouse gas emissions have been calculated on a per full time
equivalent employee ratio. This intensity metric 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.
We have calculated our scope 1 and scope 2 GHG emissions since 2010
and have recently engaged with Ecometrica Ltd to assist with the carbon
emissions reporting, which supports greater transparency and accuracy
of data. Emissions have derived from accurate consumption information
on utility bills, smart meter readings and fuel card data.
GHG emissions have been calculated in accordance with the GHG Protocol
Corporate Accounting and Reporting Standard (revised edition), using
the location based scope 2 calculation method, together with the latest
emission factors from recognised public sources, principally Defra/DECC.
Dignity’s carbon emissions disclosure has been undertaken in accordance
with the Companies Act 2006.
The Group is starting to collate Scope 3 data with a view, if possible and
feasible, to reporting it in the future.
At the heart of local communities.
Community
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/
responsibility
• 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.
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 every year.
In 2015, Dignity raised £59,000 for its corporate charity,
Marie Curie and has raised £274,000 since January 2012.
Fundraising initiatives included charity car washes and taking
part in sponsored walks, skydives and fun runs. Dignity also
raised money for Marie Curie 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
and homemade cakes for a charitable donation.
To demonstrate our principles and values we have provided
financial support for local sports clubs, hospices, nursing
homes and churches in addition to fundraising for many other
national and regional charities. Dignity has also continued to
support a restoration project at a historic church close to its
head office in Sutton Coldfield.
The Big Hoot
During the summer of 2015, Dignity sponsored a decorative
owl statue for The Big Hoot, a public art project that took
place across Birmingham. The initiative aimed to attract
tourists and inspire residents to explore areas of the city they
may not have visited before. In October, the 90 owl statues
were sold at auction and raised over £500,000 for
Birmingham Children’s Hospital.
1
Dignity plc
Annual Report & Accounts 2015
37
1. During 2015, Dignity sponsored
a decorative owl statue for The
Big Hoot to help raise funds for
Birmingham Children’s Hospital and
increase tourism across the city.
(Photograph courtesy of Kris Askey).
2. Dignity has continued to support
Marie Curie’s Great Daffodil Appeal
in 2015 by selling lapel badges at
our premises.
3. Dignity employees have continued
to enthusiastically support our
corporate charity.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
2
3
Marie Curie Cancer Care
£274,000
Dignity continues to work with Marie Curie Cancer Care and
over the last four years our staff have helped to raise more
than £274,000 in support of this vital charity.
Dignity plc
Annual Report & Accounts 2015
38
Governance
Chairman’s introduction
to governance
Good governance is taken seriously at
all levels within the Group and it is the
responsibility of the Board to both lead
by example and set the tone.
Dear Shareholder,
On behalf of the Board I am pleased to present the
Group’s Corporate Governance Report for 2015. 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.
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 25 December 2015. How we have achieved this is
explained in more detail in this section of our Annual Report
covering Governance.
Our Report for 2015 explains Dignity’s approach to Corporate
Governance. Separate reports are included from each of the
Board Committees; we feel this gives the most
comprehensive view of their activities.
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.
I would encourage you to attend our Annual General Meeting
on 9 June 2016 and take the opportunity to meet the
management team at this important event.
Peter Hindley, Chairman
2 March 2016
“
Our approach to good governance continues
to be robust and effective. Clear Board roles
and governance processes offer balance
and experience to our strong executive team,
helping to drive strategic and performance
progress.
Our governance principles
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
25 December 2015 and remained fully compliant at the
date the Annual Report for 2015 was published.
Directors’ Report
The Directors present their report for Dignity plc for the
period ending 25 December 2015.
Corporate Governance
The Group is committed to high standards of corporate
governance, details of which are given in this report and
the separate 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.40 and p.41
See Directors’ statement on corporate governance: p.42 to p.45
See Audit Committee report: p.46 to p.48
See Nomination Committee report: p.49
See Report on Directors’ remuneration: p.50 to p.62
See Directors’ report: p.63 and p.64
LEADERSHIP
Continued close focus on
delivering on our strategy.
EFFECTIVENESS
A strong, open and
effective Board with the
independence of our
Non-Executive Directors.
ACCOUNTABILITY
Close scrutiny and
management of risks
and controls.
REMUNERATION
Prudent oversight of
executive remuneration.
ENGAGEMENT
Maintaining a strong and
open relationship with
shareholders.
Dignity plc
Annual Report & Accounts 2015
39
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.
Non-Executive Directors
The Non-Executive Directors scrutinise, measure and review the
performance of 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.
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 meet and liaise with 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 46 to 62.
The Chairman
The Chairman is responsible for:
• The leadership of the Board;
• Ensuring the Board functions effectively in all aspects of its role;
• Facilitating the effective contribution of the Non-Executive Directors
and ensuring a constructive working relationship exists between
Executive and Non-Executive Directors;
• Making sure all Directors receive accurate, timely and clear
information;
• Setting the agenda so all important issues are discussed, ensuring
sufficient time is devoted to discussing such 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.
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.
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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
40
Governance
Board of Directors
“
The Board’s overarching
objective is to provide effective
leadership to the Group and is
responsible for its long-term
success.
Peter Hindley
Non–Executive Chairman
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 a
Fellow of the Institute of Chartered
Accountants in England and Wales
and holds a mathematics degree
from Warwick University.
External appointments:
None.
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.
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 a Fellow of the Institute of
Chartered Accountants in England and
Wales, holds a geography degree from
Birmingham University, is a Fellow of
the Chartered Management Institute
and is a Member of the Investor
Relations Society. He is also one of the
Trustees of the Dignity Welfare Trust.
External appointments:
None.
Alan McWalter
Senior Independent Director
David Blackwood
Non–Executive Director
Appointed to the Board: 2009
Appointed to the Board: 2015
Background and experience:
Alan is Non-Executive Chairman
of Churchill China plc, Belfield
Furnishings 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:
David was previously Chief Financial
Officer of Synthomer plc, a global
specialty chemicals business. Prior to
that he spent twenty years with ICI plc,
where he held a number of senior
finance roles. He has previously served
on the Audit and Risk committee of
the Cabinet Office, and as a member
of the FRC’s Board for Actuarial
Standards. He is a Chartered
Accountant (ICAEW) and a Fellow
of the Association of Corporate
Treasurers (FCT).
Dignity plc
Annual Report & Accounts 2015
41
Board Committee Membership
as at 25 December 2015
Audit
Committee
Remuneration
Committee
Nomination
Committee
Peter
Hindley
Alan
McWalter
David
Blackwood
Jane
Ashcroft
Martin
Pexton
Chairman
Member
Composition of the Board
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
considers to be an appropriate and effective
combination and also complies with the Code
in respect of FTSE 250 listed companies.
Jane Ashcroft CBE
Non–Executive Director
Martin Pexton
Non–Executive Director
Executive and
Non-Executive Directors
Non-Executive Tenure
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, Vice Chair of
the associated Retirement Community
Operators and was previously a Non-
Executive Chair 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.
4
4
1
Executive Directors
Non-Executive Directors
Non-Executive Chairman
3
1
0 – 3 years
3 – 6 years
Links
See Audit Committee report: p.46 to p.48
See Nomination Committee report: p.49
See Report on Directors’ remuneration: p.50 to p.62
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
42
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 structure of the Board,
together with explanations of responsibilities is shown on page 39. 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 and generally
long serving 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
a 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 management 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, complexity and organisational structure.
The five independent Non-Executive Directors who served for the period were: Jane Ashcroft, Ishbel Macpherson, Alan McWalter,
Martin Pexton and David Blackwood who replaced Ishbel Macpherson when she resigned from the Board on 30 September
2015. Biographical details for the serving Non-Executive Directors appear on pages 40 and 41. 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, David Blackwood, 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. David Blackwood
received such training when he was appointed.
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 £90 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, again by Independent Audit Ltd to ensure a consistent approach and provide comparability to the evaluation
in 2013.This meets the requirements of the Code that an external evaluation takes place on at least a three yearly basis.
During 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 2015
43
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 7 3 4 2
Jane Ashcroft 7 3 4 2
David Blackwood 1(iv) 1 1 1
Andrew Davies 7 3(ii) – –
Peter Hindley 7 3(ii) 4(ii) 2
Mike McCollum 7 3(ii) 1(ii) 2(ii)
Alan McWalter 7 3 4 2
Ishbel Macpherson 6(iv) 2 3 1
Martin Pexton 7 3 4 2
Richard Portman 7 3(iii) 2(iii) 1(iii)
Steve Whittern 7 3(ii) – –
(i) Only full Board meetings, of which there are seven per annum, have been included in the attendance analysis. Eight further meetings were held with a quorum of
Directors to approve announcements, documents or the issue of shares under the LTIP and SAYE schemes.
(ii) In attendance by invitation of the respective Committee.
(iii) Richard Portman attended certain Committee meetings in his capacity as Company Secretary.
(iv) Ishbel Macpherson resigned from the Board of Directors on 30 September 2015 and was replaced by David Blackwood. She attended all Board and Committee meetings
prior to her leaving and David Blackwood all meetings following his appointment.
The Board has seven full Board meetings 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 2015. 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 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 also being taken by the Administrator.
The Board is happy that the role of Company Secretary is undertaken by the Corporate Services 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 has responsibility 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 and 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 2015.
The Executive Directors and the wider executive management group are responsible for designing, implementing, maintaining
and evaluating the necessary systems of internal controls. Such controls are reviewed on an ongoing basis and formally reviewed
on an annual basis in accordance with the requirements of the Code. This annual review confirmed that the Group’s risk
management and internal control systems were appropriate and suitable for a Group of this size and complexity.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
44
Governance
Directors’ statement on corporate governance continued
Internal Audit completes a programme of work each year that provides assurance that the internal controls have been operated
as designed and also proposes improvements where appropriate and necessary. Coupled with this, the formal six monthly review
of the Risk Register provides a further 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 46 to 48.
The Audit Committee on behalf of the Board, as part of an ongoing process, formally reviews and continues to keep under
review the effectiveness of the Group’s systems of internal control, including financial, operational and compliance controls
and risk management systems. The Audit Committee reviews risk management annually and receives reports from Executive
Management and Internal Audit 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. It also identifies the
significant controls upon which reliance will be placed. Any significant control weaknesses would be reported to the full Board
at their next meeting. There have been no reports of weaknesses that have resulted or would have resulted in a material
misstatement or loss in the period, nor in the period up to the date this Annual Report was published.
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;
• 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 organisation 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. There is also a Code of Conduct applicable to all employees of the Group as well as specific
policies such as Anti Bribery and Corruption and Money Laundering;
• Internal Audit – The Group has a dedicated Internal Audit team, which reports to the Chief Executive and the Audit Committee.
The latter reviews and approves the annual work plan of the Internal Audit function which tests the effectiveness of many
controls. Any significant weaknesses are reported to management and the Audit Committee on a timely basis. 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 an Executive Director requests a review.
During 2015 (as in 2014), there were quarterly meetings between the Head of Internal Audit and the Executive Directors to
formally review and discuss Internal Audit’s work programme and findings. In addition, regular meetings between the Head
of Internal Audit and the external auditors, 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 formally reports to the Audit Committee at every meeting and
also held three private meetings with the Chairman of the Audit Committee during 2015;
• 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 the comprehensive management structure monitor the adherence to such processes and procedures; and
• Risk assessment – The Executive Directors and the wider executive management group have responsibility for the identification
and evaluation of significant risks that might arise in their areas 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. They also
regularly assess the risks facing the Group. A Risk Register is maintained which is presented to and reviewed by the Audit
Committee twice a year and then formally adopted by the Board of Dignity plc. Risks and any changes to those risks are
discussed at every Board meeting. The principal risks and uncertainties facing the Group, which are documented in the Risk
Register, are discussed on pages 29 to 31 of the Annual Report. These risks have also been formally considered when the
Directors prepared their Viability Statement on page 31 of this Annual Report in accordance with provision C2.2 of the Code.
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 18 to 23.
Dignity plc
Annual Report & Accounts 2015
45
Relationship with Shareholders
The Group recognises the importance of clear communication with shareholders.
Regular contact with institutional investors, fund managers and analysts is maintained by the Chief Executive and the Finance
Director to discuss information made public by the Group. The Board receives reports of these meetings and any significant
issues raised are discussed by the Board. 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. The Corporate Services
Director, in his additional role as Company Secretary deals with queries or enquiries from private shareholders. The Board is
as interested in their concerns as it is of institutional and corporate shareholders.
The AGM provides an opportunity to meet the Board and senior management group. All shareholders are free to attend and put
questions to any Director and in particular the chairmen of each of the Board Committees at the AGM on 9 June 2016. 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 Audit Committee 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. At that meeting they 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 4 to 31 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 is happy to 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 29 February 2016 As at 25 December 2015
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 10.05% 4,968,414 10.05%
Kames Capital 2,460,352 4.98% 2,460,352 4.98%
Aberdeen Asset Management 2,435,491 4.93% 2,435,491 4.93%
Montanaro Group 2,390,816 4.84% 2,390,816 4.84%
Franklin Templeton Investment Management Limited 2,448,905 4.96% 2,448,905 4.96%
Blackrock Investment Management 2,472,586 5.00% 2,472,586 5.00%
MFS Investment Management 2,491,500 5.04% 2,491,500 5.04%
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
By order of the Board
Richard Portman
Company Secretary
2 March 2016
Dignity plc
Annual Report & Accounts 2015
46
Governance
Audit Committee report
The Committee works with the full Board
to fulfil its oversight responsibilities.
Dear Shareholder,
On behalf of the Board, I am pleased to present my first report
as the new Chairman of the Audit Committee.
Membership and Process
The following Directors served on the Audit Committee
(the ‘Committee’) during 2015 and through to the date of
this report: me (as Chairman from 1 October 2015), Ishbel
Macpherson (as Chairman until she resigned from the Board
on 30 September 2015), Alan McWalter (Senior Independent
Director), Jane Ashcroft and Martin Pexton each of whom
are independent Non-Executive Directors.
The Board is satisfied that I have, as Chairman of the
Committee (and my predecessor Ishbel Macpherson had),
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 three times during 2015; in February prior
to the release of the Preliminary Announcement for 2014; prior
to the release of the Interim Announcement for 2015 in July;
and again in December 2015 immediately prior to the end of
the financial period. The Committee also met in February 2016
prior to the release of the Preliminary Announcement for 2015.
The attendance records of the members is shown on page 43.
The external auditors, Ernst & Young LLP (‘EY’), the Chairman,
the Chief Executive, the Finance Director, Operations Director,
the Head of Internal Audit and the Financial Controller have
attended meetings by invitation.
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 and my predecessor Ishbel Macpherson, met with
the Lead Partner a total of 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.
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;
David Blackwood, Chairman of the Audit Committee
• Consider the financial statements and recommend to the
Board on whether the Annual Report and Accounts, taken
as a whole, is fair, balanced, understandable and provides
information necessary for shareholders to assess the
performance, business model and strategy of the Group;
• 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 management and 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;
• 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 period
The key activities of the Committee during the period were:
• It reviewed the financial statements in the 2014 and 2015
Annual Report and Accounts and the 2015 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 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 three year rolling plan for
Internal audit;
Dignity plc
Annual Report & Accounts 2015
47
• A six month review and recommendation of formal adoption
to the full Board 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 29 to 31 of the
Annual Report;
• Formally review the going concern assumptions adopted in
the preparation of the 2014 and 2015 accounts;
• Completion of a comprehensive review of Dignity’s risk
control framework and its linkage to the Risk Register and
Viability Statement included in the Strategic Report on
page 31;
• 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; and
• 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.
Areas that have been discussed and considered by the
Committee in relation to the 2015 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 2014, and
agreed with the judgements reached by management.
• Acquisition of 36 locations from Laurel Funerals –
We considered the appropriateness of the accounting
treatment of the acquisition, including the allocation of
goodwill and intangible trade names.
• Pre-arranged funeral plans trusts – The Committee considered
the on-going treatment of the trusts following the adoption
of IFRS 10 along with the additional disclosure requirements
of IFRS 12.
External audit
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, formally considers
the performance and independence of the external auditors.
The formal annual review has been completed in the first
quarter of 2016. The Committee was, based on that review,
fully satisfied with EY’s performance in 2015.
EY were appointed in 2014 following a tender process and a
resolution to re-appoint them as external auditors will be tabled
at the AGM on 9 June 2016.
Policy on non-audit fees
The Group has a 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.
The 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 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 does 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
2015 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
for audit services.
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 such work will
generally be undertaken by other professional firms. A formal
statement of independence from EY has been received in
respect of 2015.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
48
Governance
Audit Committee report continued
Audit partner rotation
Consistent with the Auditing Practices Board requirements,
EY audit partners serve for a maximum of five years on listed
clients. This is the second year that Simon O’Neill is Dignity’s
audit partner.
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 2015 (as in 2014), 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, 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 or
my predecessor Ishbel Macpherson on three occasions in
the period.
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. The Whistleblowing
Policy was reviewed and updated during the period and was
presented to and formally adopted by the full Board of Dignity.
This Audit Committee report was reviewed and approved by the
Board on 2 March 2016.
David Blackwood
Chairman of the Audit Committee
2 March 2016
Nomination Committee report
The Committee successfully recruited
a new Non-Executive Director to chair our
Audit Committee.
Dear Shareholder,
On behalf of the Board, I am pleased to present the 2015
Nomination Committee report.
During 2015 the Nomination Committee (the ‘Committee’)
consisted of me (as Chairman), Alan McWalter (Senior
Independent Director), Jane Ashcroft, Martin Pexton,
Ishbel Macpherson until she resigned from the Board on
30 September 2015 and thereafter David Blackwood each of
whom are independent Non-Executive Directors. The Company
Secretary, Richard Portman, acted as Secretary to the
Committee when requested by me to do so. All members
are considered to be independent by the Group having no
day to day involvement with the Group.
During the year the Committee carried out the following tasks.
• Kept under review the structure, size and composition of
the Board including ensuring that it has the necessary skills,
knowledge and experience;
• Considered succession planning for the Directors and senior
managers;
• Identified and nominated for approval by the full Board
a suitable candidate to fill the vacancy arising upon the
retirement from the Board of Ishbel Macpherson;
• Kept under review the leadership needs of the Group, both
executive and non-executive;
• Reviewed the time required from the Non-Executive Directors;
and
• Reviewed the results of the Board performance evaluation
that relate to the composition of the Board.
The terms of reference of the Committee are available on the
Group’s corporate website at www.dignityfuneralsplc.co.uk.
The Committee met twice in 2015. 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 43.
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.
Subsequent to my letter in the 2014 Annual Report Ishbel
Macpherson indicated that she intended to step down from
the Board during 2015. The Nomination Committee retained
the executive search agency Buchanan Harvey to provide a
list of both male and female high calibre candidates with
the appropriate skills and experience to not only be a
Dignity plc
Annual Report & Accounts 2015
49
Peter Hindley, Chairman of the Nomination Committee
Non-Executive Director of Dignity but also act as Chairman of
the Audit Committee. I am pleased to advise that at the end of
a rigorous recruitment process we appointed David Blackwood,
his biographical details are on page 41 of this Annual Report.
All the Non-Executive Directors were reappointed for new
two year terms during 2014 as I advised in my letter to
shareholders last year. Martin Pexton and Jane Ashcroft have
served on the Board since 1 April 2012, Alan McWalter since
12 January 2009 and David Blackwood since 1 October 2015.
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.
However, following the resignation of Ishbel Macpherson and
the appointment of David Blackwood that percentage has fallen
to 11 per cent. I remain fully committed to increasing the
proportion of women serving on the Board of Dignity back to
20 per cent or higher but continue to remain mindful of the
overall need to recruit the very best candidates regardless of
gender. The Group 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 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 42.
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 2 March 2016.
Peter Hindley
Chairman of the Nomination Committee
2 March 2016
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
50
Governance
Report on Directors’ remuneration
for the 52 week period ended 25 December 2015
We have carried out a comprehensive review
of all of the Executive Directors' remuneration
packages.
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Remuneration Committee's Report on Directors'
Remuneration for 2015.
the duration of the policy are expected to be around those
awarded to the wider workforce (subject to good personal
and company performance) except where there are material
revisions to current roles and responsibilities;
Alan McWalter, Chairman of the Remuneration Committee
Last year, we made some changes to the way we implemented
our shareholder approved policy and I was pleased that we
received a 97.7 per cent vote in favour of our Annual Report
on Remuneration at the June 2015 AGM. Since then we have
carried out a comprehensive review of all of the Executive
Directors' remuneration packages and will be putting a new
Remuneration Policy to a binding vote at the 2016 AGM.
In addition, there will be an advisory vote on the Annual Report
on Remuneration and there will also be a separate specific
resolution to amend the rules of the Long Term Incentive Plan
to enable the proposed awards to be made under the Plan.
The following report is divided into three sections. This letter
summarises performance against incentive plan targets and
provides an overview of changes to our Remuneration Policy,
due to come into effect from the approval of the policy at the
AGM. Our proposed Remuneration Policy follows on pages 51
to 56. The Annual Report on Remuneration sets out the pay
outcomes for 2015 and how we intend to apply our policy
for 2016.
Background to the Review
Since IPO, Dignity's performance has been strong and as a
result shareholder returns have been significantly above those
of the FTSE 100 and 250 indices over one, three, five and ten
year periods. Over that period, Dignity's market capitalisation
has grown from £184 million at IPO in 2004 to £1.2 billion
now and its enterprise value has increased from £419 million
in 2004 to approximately £1.8 billion now. Dignity has also
increased revenues from £136 million in 2004 to £176 million
in 2008 and £305 million in 2015 and increased EPS from 19
pence in 2004 to 38 pence in 2008 and 115 pence in 2015.
During this time, the Group has benefitted from a very stable
executive team. Both the Chief Executive and Operations
Director have been on the Board since IPO and the four
Executive Directors have all been on the Board since the
beginning of 2009.
Given how instrumental the Directors have been in the
Company's success since IPO, the Remuneration Committee
believes that motivating and retaining this proven team is
critical to the Company's future success and it is important
that the remuneration arrangements are competitive, but not
excessive, by market standards, with an appropriate balance
between fixed and variable pay.
A detailed explanation of the various changes is set out on
pages 51 and 62, but in summary:
• Base salaries have been increased by five per cent, resulting
in salaries being positioned up to eight per cent below median
of the FTSE 250 and around 25 per cent below median for
the Corporate Services Director. Future salary increases for
• A pension allowance of 15 per cent of salary p.a. will be
payable to the Finance Director and Operations Director,
to align them with the benefits received by the other
Executive Directors;
• The bonus maximum will be increased from 100 per cent
of salary to 135 per cent for the Chief Executive and 125 per
cent for the other Directors. The CEO’s 135 per cent bonus
opportunity is below the median opportunity for CEOs in the
FTSE 250 and 125 per cent is around mid-market, albeit in all
cases being driven off below market base salaries. The payout
at on-target performance will remain at 70 per cent of salary
and there will continue to be zero payout for below on-target
performance. For 2016, bonus will be based on stretching
operating profit (rather than EPS) targets since the Committee
believes that operating profit is a better measure of trading
performance. In future any bonus earned above 100 per cent
of salary will be deferred in shares for two years; and
• The normal LTIP award will be increased from 125 per cent
of salary to 150 per cent and the Company will introduce a
post-vesting holding period of two years. Vesting for the 2016
award will continue to be based 50 per cent on TSR and 50
per cent on EPS with 25 per cent of the TSR component
and 15 per cent of the EPS component vesting at threshold.
The Company will continue to set challenging EPS targets,
further details of which are set out on page 57.
• The Committee encourages Directors to build up significant
shareholdings in the Company and to reinforce this message,
the share ownership guideline will be increased from 100
per cent of salary to 200 per cent.
These changes reflect the Company's strong performance, its
increased size and complexity and the criticality of the current
management team to Dignity's future success. In setting the
revised packages, the Committee took account of pay levels in
the FTSE 250. As a result of these changes, total target pay will
be around 15 to 20 per cent below the median for the Chief
Executive, Finance Director and Corporate Services Director
against similar roles in the FTSE 250 and around four per cent
below median for the Operations Director.
The Committee has carefully considered these proposals and
is well aware that they are significant increases. However, the
Committee considers that they are necessary and that, when
considered in the context of the addition of several best
practice features, such as bonus deferral and a post-vesting
holding period, they are fair and reasonable.
Dignity plc
Annual Report & Accounts 2015
51
Performance and reward in 2015
As highlighted in the Strategic Report, 2015 was a year of
continued strong performance and delivering shareholder
returns. Underlying operating profit increased by 16 per cent to
£98.7 million and underlying earnings per share by 34 per cent
to 114.8 pence per share. This is reflected in the level of
incentive pay vesting in 2015.
Annual Bonus
EPS for 2015 was 114.8 pence, 34 per cent above 2014,
and above the maximum target of 99.2 pence. Accordingly,
a maximum bonus of 100 per cent of salary was payable.
Long-Term Incentive Plan
The LTIP award made in 2013 will vest in March 2016, based
on performance over the three years to 31 December 2015.
50 per cent of the award is based on TSR against the FTSE
350 and 50 per cent on EPS. The Company's TSR of 139.6 per
cent was ranked above upper quartile, so 100 per cent of this
part of the award will vest. EPS growth was 83 per cent over
the three year period, which is higher than the EPS maximum
target of RPI plus 11 per cent per annum. As a result, this
part of the award will also vest at 100 per cent.
Shareholder feedback
The Remuneration Committee actively seeks and welcomes
feedback from the Company's shareholders. Following our
Policy Review, we consulted with our major shareholders and
shareholder bodies.
On behalf of the Committee, I commend this report to you and
ask for your support at the forthcoming Annual General Meeting.
Alan McWalter
Chairman of the Remuneration Committee
2 March 2016
REMUNERATION POLICY REPORT
This section of the Directors' Remuneration Report has been prepared in accordance with The Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendments) Regulations 2013. During the year, the Committee completed
a review of executive remuneration and the Committee proposes to make a number of changes to the Policy, which was
approved by shareholders at the 2014 AGM.
This Remuneration Policy will be put forward for shareholder approval at the AGM on 9 June 2016 and if the revised Policy is
approved, it will take effect from the date of the AGM. There will also be a separate resolution at the AGM to approve a new
Long Term Incentive Plan.
Details of how the Company will implement the Policy are provided in the Annual Report on Remuneration section starting
on page 56.
Overview of Remuneration Policy
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.
As a result of the 2015 remuneration review, the key policy changes being proposed to our remuneration policy for
Executive Directors are:
• Pension – While there is no change to the previous policy, going forward, the intention is to provide the Finance Director and
the Operations Director with a pension contribution of 15 per cent of salary which is in line with the other Executive Directors,
backdated to 1 January 2016;
• Annual bonus – To provide an opportunity closer in line with market levels, it is proposed that the bonus maximum is
increased to 135 per cent for the Chief Executive and 125 per cent for other Directors. Whilst the maximum is being increased,
the current bonus target of 70 per cent of salary will remain and, therefore, the higher bonus potential will only be payable
for above target performance and nothing is payable for achieving less than the target. Any bonus in excess of 100 per cent of
salary must be deferred in shares for 2 years. Bonuses will continue to be subject to recovery and withholding provisions and
will now be based on demanding EBIT rather than EPS targets; and
• Long-Term Incentive Plan – It is proposed to increase the individual limit award from 125 per cent to 150 per cent of salary
to ensure that there is appropriate incentivisation and sufficient shareholder alignment through equity ownership. Awards will
continue to be subject to recovery and withholding provisions.
• The share ownership guideline will be increased from 100 per cent to 200 per cent of salary.
Holding periods – A two year holding period will apply for Executive Directors' vested LTIP awards for the 2016 award and
thereafter. The Remuneration Committee is confident that this revised policy will appropriately incentivise and retain the
Dignity management team and that the increased focus on variable pay will provide greater alignment between executives’
interests and those of shareholders.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
52
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
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 of a
high calibre.
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
To provide competitive
benefits to help recruit
and retain executives.
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.
Executive Directors are also eligible to participate in the all-
employee HMRC approved share schemes on the same basis as
other employees.
Any expenses incurred in carrying out an executive’s duties which
are deemed to be taxable will be reimbursed by the Company
together with any personal tax due.
The Committee reviews
the salaries of Executive
Directors each year taking
due account of all the
factors described in how
the salary policy operates.
Not applicable.
There is no prescribed
maximum.
Generally, the Committee is
guided by average increases
across the workforce. However,
higher increases may be
awarded on occasion, for
example, where an individual is
promoted or has been recruited
on a below market rate, where
there have been changes to
individual responsibilities
or in the size or complexity
of the business or where salaries
have fallen significantly below
mid-market levels.
Salaries for 2016 are:
CEO: £510,300;
Operations Director: £325,500;
Finance Director: £315,000;
and
Corporate Services Director:
£246,750.
There is no prescribed maximum
as costs may vary in accordance
with market conditions.
Relocation expenses must be
reasonable and necessary.
HMRC tax-approved limits will
apply to all employee share
schemes.
Pension
To provide retirement
benefits in line with the
overall Company policy.
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.
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 per cent of salary.
Not applicable.
Annual
bonus
To motivate executives
and incentivise the
achievement of annual
financial and/or
strategic business
targets. To ensure
further alignment with
shareholders through
the retention of
deferred equity.
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.
Bonuses up to 100 per cent of salary will be payable in cash.
Any bonus earned in excess of 100 per cent of salary will be
deferred in shares. Deferred shares vest after two years subject
to continued employment but no further performance targets.
A dividend equivalent provision allows the Committee to pay
dividend equivalents on vested deferred shares (in cash or
shares). This may assume the reinvestment of dividends on
a cumulative basis.
Bonus payments, including deferred bonus awards, are subject
to recovery and withholding provisions in the event of financial
misstatement or miscalculation of performance conditions.
See Note 1.
The maximum award under the
annual bonus scheme is 135
per cent of salary for the Chief
Executive and 125 per cent of
salary for the other Directors.
Performance metrics are
selected annually based on
the Company's strategic
objectives. The bonus may
be based on the achievement
of an appropriate mix of
challenging financial, strategic
or personal targets. Measures
and weightings may change
each year to reflect any year-
on-year changes to business
priorities.
Financial measures which
account for the majority, if not
all, of the bonus may include
measures such as EBIT
(or other measures of profit)
or cash flow.
For financial metrics, a range
of targets may be 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 EBIT.
• Up to 70 per cent of salary
(or an equivalent proportion
of the financial element)
is payable for meeting a
demanding target with
maximum bonus 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 2.
Dignity plc
Annual Report & Accounts 2015
53
Element Purpose and link Operation Maximum Opportunity Framework used to
to strategy assess Performance
The maximum annual
award that can be
made to an individual
in any given financial
year is 150 per cent
of salary.
Awards under the LTIP vest subject to the
satisfaction of challenging performance
measures as set from time to time by the
Remuneration Committee. Performance
conditions may include a measure of profitability
such as EPS, and another measure of long-term
success, such as TSR.
Performance below the threshold target will
result in zero vesting for each performance
measure. 25 per cent of the award may vest
for threshold performance.
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.
Performance periods will normally start from
the beginning of the financial year in which the
award is made.
See Note 3.
Neither the Non-Executive Chairman nor the
Non-Executive Directors are eligible for any
performance related remuneration.
There is no prescribed
maximum, however,
any increase to fees
will be considered in
light of the expected
time commitment in
performing the roles,
increases received by
the wider workforce
and market rates in
comparable
companies.
Not applicable.
Not applicable.
Long–Term
Incentive
Plan
Incentivises selected
employees and
Executive Directors
to achieve successful
execution of business
strategy over the
longer term.
Provides long-term
retention.
Aligns the interests
of the Executives and
shareholders through
the requirement to
build up a substantial
shareholding.
Non–Executive
Chairman and
Directors’ fees
To attract and retain a
high quality Chairman
and experienced
Non-Executive
Directors.
Share
ownership
guidelines
To align the interests
of management and
shareholders and
promote a long-term
approach to
performance.
Awards are normally granted annually in the form
of nil cost options or conditional share awards.
Participation and individual award levels will be
reviewed annually (subject to the individual limit)
taking into account matters such as market practice,
overall remuneration,the performance of the Company
and the Executive being granted the award.
Awards normally vest after three years subject to the
achievement of stretching performance conditions
and continued employment.
Awards are subject to recovery and withholding
provisions in the event of financial misstatement
or miscalculation.
Following vesting, Executive Directors will be required
to retain their net of tax vested shares for two years.
A dividend equivalent provision allows the Committee
to pay dividend equivalents, at the Committee's
discretion, on vested shares (in cash or shares) at the
time of vesting and may assume the reinvestment of
dividends on a cumulative basis.
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).
Both the Chairman and the Non-Executive Directors
are paid annual fees and do not participate in any
incentive plans or receive pension or other benefits.
The Chairman receives a single fee covering all his
duties. The Non-Executive Directors receive a basic
fee and additional fees payable for chairing the Audit
and Remuneration Committees and for performing
the Senior Independent Director role.
The Chairman and Non-Executive Directors shall be
entitled to have reimbursed all expenses that they
reasonably incur in the performance of their duties,
including those expenses that have been deemed
to be taxable benefits by HMRC. This includes any
personal tax that may become due.
The level of fees of the Non-Executive Directors
reflects the time commitment and responsibility of
their respective roles. Their fees are reviewed from
time to time 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 build and
maintain a holding of shares to the value of at
least 200 per cent of base salary. This will be
achieved by setting a specific number of shares
required to be held by each Executive Director based
on their 2016 salary and the 28 day average share
price to 25 February 2016. This results in the
following required holdings or Ordinary Shares:
• Mike McCollum 43,709 Ordinary Shares.
• Andrew Davies 27,880 Ordinary Shares.
• Richard Portman 21,135 Ordinary Shares.
• Steve Whittern 26,981 Ordinary Shares.
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. Recovery and withholding provisions apply to variable pay, to enable the company to recover amounts paid under the annual bonus and LTIP in the event of a restatement of the
accounts or an error in calculation leading to an over-payment. Payments may be recovered for up to two years after payment/vesting or two external audit cycles. The amount to be
recovered would generally be the excess payment over the amount which would otherwise be paid, and recovery may be satisfied in a variety of ways, including through the reduction
of outstanding deferred awards, reduction of the next bonus or LTIP vesting and seeking a cash repayment.
2. Annual bonus metrics will be determined at the start of each year, based on the Company's priorities for the coming year. Measures may include profit (such as operating profit,
PBT or EPS) which is one of the key financial measures of growth.
3. LTIP performance metrics will be determined at the time of grant and based on the Company's long-term strategy. 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.
4. 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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
54
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
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 on page 53):
• 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.
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 2016 vary
under three performance scenarios: minimum, on-target and maximum.
£’000
2,000
1,500
1,000
500
0
Fixed Pay
Annual Bonus
LTIP
37%
33%
28%
27%
38%
32%
28%
27%
38%
31%
28%
26%
38%
31%
28%
26%
100%
45%
30%
100%
45%
30%
100%
46%
31%
100%
46%
48%
31%
m
u
m
n
M
i
i
t
e
g
r
a
t
-
n
O
m
u
m
i
x
a
M
m
u
m
n
M
i
i
t
e
g
r
a
t
-
n
O
m
u
m
i
x
a
M
m
u
m
n
M
i
i
t
e
g
r
a
t
-
n
O
m
u
m
i
x
a
M
m
u
m
n
M
i
i
t
e
g
r
a
t
-
n
O
m
u
m
i
x
a
M
Chief Executive Officer
Finance Director
Operations Director
Corporate Services Director
Notes
• Minimum comprises fixed pay, which includes 2016 basic salary, the value of benefits in 2015 and a 15 per cent company pension contribution.
• On-target comprises fixed pay and assumes a bonus of 70 per cent of salary is paid and 50 per cent of the LTIP vests.
• Maximum comprises fixed pay and assumes full bonus payment and LTIP vesting.
• No account has been taken of any changes in the Company's share price since the end of the period.
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 or cash in lieu 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.
Dignity plc
Annual Report & Accounts 2015
55
The structure of variable pay elements will be in accordance with the Company's approved policy detailed above. The maximum
variable pay opportunity will be as set out in the remuneration policy table, being 150 per cent of salary under the annual bonus
plan and awards with a face value of 150 per cent of salary under the LTIP. 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. The aim of any such award would be to
ensure that as far as possible, the expected value and structure of the award will be no more generous than the amount forfeited.
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. Service contracts are available for inspection at the Company's
registered office.
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
David Blackwood
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 October 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
12 months
21 months
12 months
3 months
3 months
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 £43,000 per annum (including an allowance for his role as Chairman of the Remuneration Committee).
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
56
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
Treatment of incentives
At the discretion of the Committee, for certain good leaver circumstances (such as death, illness, injury, disability, redundancy,
retirement, their 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 Committee), a pro rata
bonus may become payable at the normal payment date for the period of employment and based on full year performance.
Should the Committee decide to make a payment in such circumstances, the rationale would be fully disclosed in the Annual
Report on Remuneration.
The treatment of share-based incentives previously granted to an Executive Director 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, their 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 Committee. Under the Deferred Share Bonus Plan,
if treated as a good leaver, awards will normally vest on the original vesting date and will not normally be subject to a pro rata
reduction (unless the Committee determines otherwise). Under the LTIP, if treated as a good leaver, awards will vest at the normal
vesting date subject to the extent to which performance targets have been achieved. The number of LTIP 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 is committed to ensuring an open dialogue with our shareholders and therefore, where changes
are being made to the remuneration policy or where there is a material change in which we operate our policy, we will consult with
major shareholders in advance. The Remuneration Committee adopted such an approach in putting together this revised policy
by consulting the Company's largest shareholders and shareholder advisory bodies beforehand.
In addition, the Committee considers shareholder feedback received in relation to the AGM each year and guidance from
shareholder representative bodies more generally.
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
The Annual Report on Remuneration set out below (and the Chairman's Annual Statement) will be put to a single advisory
shareholder vote at the 2016 AGM. The information below includes how we intend to operate our revised policy in 2016 and the
pay outcomes in respect of the 2015 financial year. The information from the single total remunerations figures for Directors on
page 58 to the end of the section on loss of office payments on page 61 has been audited. The remainder is unaudited.
Implementation of Remuneration Policy in 2015
The Committee carried out a comprehensive review of executive remuneration in the last quarter of 2015. Reflecting the strong
performance of the Company and its increased size and complexity, the Committee has decided to make a number of changes
to the Directors' remuneration policy to ensure executive directors are appropriately incentivised and rewarded. The Committee is
satisfied that the Directors' revised packages are commensurate with their present roles, experience and pay levels more generally
in the FTSE 250. Subject to shareholders' approving our remuneration policy, details of how we will operate our policy in 2016 are
provided below.
Salaries
Following the review of Executive Directors' base salaries during the last quarter of the financial period ending 25 December 2015,
the Committee decided to increase the Executive Directors' salaries as shown in the table below with effect from 1 January 2016.
The proposed salaries as at 1 January 2016 are:
2016 2015 Increase
Mike McCollum £510,300 £486,000 5%
Andrew Davies £325,500 £310,000 5%
Richard Portman £246,750 £235,000 5%
Steve Whittern £315,000 £300,000 5%
Reflecting the strong performance of the Company, its increased size and complexity and the Committee’s desire to retain and
motivate this proven management team, the Committee decided to increase the Executive Directors’ salaries by five per cent.
The Committee is conscious of shareholders’ calls for pay restraint and took into account the views of its largest shareholders and
shareholder bodies when determining the 2016 increase. The Committee is aware of the dangers of over-reliance on market data
but it believes the above increases are appropriate in light of each individual's performance and responsibility alongside Company
performance. For information, the resulting salaries will be positioned up to eight per cent below the median of the FTSE 250 and
around 25 per cent below median for the Corporate Services Director.
Future salary increases for the duration of the policy are expected to be around those awarded to the wider workforce (subject to
good personal and company performance) except where there are material revisions to the current roles and responsibilities.
Dignity plc
Annual Report & Accounts 2015
57
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. The fees for 2016 are as
detailed below:
2016 2015 Increase
Peter Hindley £169,950 £166,600 2%
Jane Ashcroft £45,900 £45,000 2%
David Blackwood £55,100 £54,000 2%
Alan McWalter £61,600 £60,400 2%
Martin Pexton £45,900 £45,000 2%
The base fees for Non-Executive Directors in 2016 are £45,900. The Senior Independent Director receives an additional fee of
£9,500 and the Chairs of the Audit and Remuneration Committees receive additional fees of £9,200 and £6,200 respectively.
The fees have been increased by 2 per cent from 2015. David Blackwood was appointed to the Board on 1 October 2015.
His fees for 2015 are shown on an annualised basis to allow comparison with 2016.
Pension and Benefits
In order to ensure a fair and consistent pension policy, from 2016 all Executive Directors receive a salary supplement in lieu of
pension of 15 per cent of their basic salary. Benefits will be provided in line with the approved remuneration policy. If the new
remuneration policy is approved, the Finance and Operations Directors will receive contributions of 15 per cent of salary per
annum for the period from 1 January 2016.
Annual bonus
The annual bonus will operate as detailed in the Policy Report.
For 2016, the annual bonus will be solely based on stretching underlying EBIT targets instead of EPS. The Committee believes
that EBIT is a better measure of trading performance and it provides a good balance with EPS and TSR which continue to be
used in the LTIP.
As in previous years, nothing will be payable for performance below a target level of performance, up to 70 per cent of salary
is payable for achieving the target and full bonus (135 per cent of salary for the CEO and 125 per cent of salary for the other
Executive Directors) for achieving a second, more demanding, target. The bonus is payable on a pro rata basis for performance
between the first and second targets.
The EBIT 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.
In accordance with the new policy, any bonus payable in excess of 100 per cent of salary will be deferred in shares. The deferred
shares will vest after two years subject to continued employment.
Long–term incentives
The intention is to make awards under the LTIP to Executive Directors with a face value of up to 150 per cent of salary.
Half of the 2016 awards will be subject to a relative TSR measure which will be measured against the constituents of the FTSE
350 as at 29 December 2015 and the other half subject to EPS growth targets. The performance period for both tranches will
be the three financial years, 2016-2018.
• 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 underlying EPS in 2018 is lower than 128.1p, 15 per cent vests for EPS of 128.1p, 50 per
cent vests for EPS of 134.8p with 100 per cent vesting for EPS of 144.9p. Straight line calculations are made to calculate the
vesting percentage between each point.
As set out in the Chief Executive’s overview, 2015 was an exceptional year following unusually high death rates in the UK.
While the Committee generally intends to set financial targets based on the 10 per cent medium term target and market earnings
expectations where appropriate, the 2016 EPS target recognises the high 2015 EPS performance however, it is considered
challenging in the circumstances. It should be noted that the above target range produces a 50 per cent vesting for achieving
134.8p which represents current consensus for that year. In future years the Committee will set targets annually having regards
to market expectations at the time of grant and the 10 per cent medium term EPS growth target.
Unlike previous years, the Committee wishes to add a requirement for Executive Directors to be subject to a post-vesting holding
period of two years on this award and all awards thereafter. This requires Executive Directors to hold on to the net of tax number of
vested shares for a period of two years following vesting.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
58
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
Single total remuneration figure for Directors
The following table presents a single total remuneration figure for 2015 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
Andrew Davies
Richard Portman
Steve Whittern
Non–Executive Directors
Peter Hindley
Jane Ashcroft
David Blackwood (e)
Alan McWalter
Martin Pexton
Ishbel Macpherson (e)
2015 486 19 73 486 1,389 – 2,453
2014 476 19 72 476 1,383 – 2,426
2015 310 26 – 310 789 – 1,435
2014 271 28 – 271 972 – 1,542
2015 235 17 35 235 631 – 1,153
2014 230 18 33 230 778 – 1,289
2015 300 19 – 300 699 – 1,318
2014 265 19 – 265 629 – 1,178
2015 167 1 – – – – 168
2014 163 1 – – – – 164
2015 45 – – – – – 45
2014 44 – – – – – 44
2015 14 – – – – – 14
2014 – – – – – – –
2015 60 – – – – – 60
2014 59 – – – – – 59
2015 45 – – – – – 45
2014 44 – – – – – 44
2015 41 – – – – – 41
2014 53 – – – – – 53
(a) Taxable benefits for the year included: 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 for the remainder of 2014 and all of 2015.
(c) The bonus refers to performance in the 2015 financial year and is due to be paid in cash in March 2016.
(d) The LTIP value relates to the award that was granted 19 March 2013. The performance period for this award ends on 29 December 2015. The value shown is calculated by
reference to the 28 day average share price on 25 December 2015. The comparative number is the 2012 LTIP that was exercised in 2015. The gain shown is based on the
price each Director sold his shares.
(e) Ishbel Macpherson resigned from the Board on 30 September 2015 and David Blackwood was appointed to the Board on 1 October 2015.
Determination of 2015 annual bonus outcome
The targets for the 2015 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 96.3 pence per share and 100 per cent for a second, more demanding underlying EPS target of 99.2 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) 2015 achieved maximum)
Earnings per share
100%
96.3pence
99.2pence
114.8 pence
100%
The strong growth in underlying EPS over the year of 34 per cent meant that the first and second EPS targets were met.
Accordingly, the Committee awarded Executive Directors full bonuses in respect of the 2015 financial year, being 100 per cent
of base salary. None of the annual bonus is deferred.
Dignity plc
Annual Report & Accounts 2015
59
Determination of LTIP awards with performance periods ending in the year
Half of the LTIP awards made 2013 were subject to a relative TSR condition and half subject to EPS, both measured over the
three year period which ended on 31 December 2015.
TSR condition TSR relative to FTSE 350 companies
Below threshold
Threshold
Stretch or above
Actual achieved
Performance required
Below median
Median
Upper quartile or above
Above upper quartile
EPS condition
Below threshold
Threshold
Stretch
Maximum or above
Actual achieved
Performance required
Less than RPI +6% p.a.
RPI +6% p.a.
RPI +9% p.a.
RPI +11% p.a. or higher
RPI +11% p.a. or higher
% vesting
0%
25%
100%
100%
% vesting
0%
15%
50%
100%
100%
Based on the above performance, the 2013 LTIP will vest in full on 21 March 2016.
2012 LTIP award
In last year's report, an estimate for TSR of 100 per cent was provided based on performance to 26 December 2014. Following the
end of the performance period on 28 March 2015, the final calculation was performed and Dignity’s actual TSR over the three year
period was 137.4 per cent placing Dignity 40 out of the 337 companies in the TSR peer group. Therefore the 100 per cent
assumption was correct.
LTIP awards granted in the year
LTIP awards granted in the form of nil cost options to Executive Directors on 5 March 2015 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 34,874 607,505 • Threshold: 15% for EPS and 6.3.2015 – 5.3.2018
Andrew Davies 22,245 387,500 25% for TSR. 6.3.2015 – 5.3.2018
Richard Portman 16,863 293,750 6.3.2015 – 5.3.2018
Steve Whittern 21,527 375,000 • 100% for maximum vesting. 6.3.2015 – 5.3.2018
* Based on a face value grant of 125 per cent of salary and using a 28 day average share price to 26 December 2014 of 1,742 pence.
Half of the 2015 award will vest 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 measured
over 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.
Clawback and malus provisions apply.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
60
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
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) 26.12.14 year year during year 25.12.15 acquired acquired
Mike McCollum
Andrew Davies
Richard Portman
Steve Whittern
28.03.12(ii)
19.03.13(iii)
24.03.14(iv)
05.03.15(v)
28.03.12(ii)
19.03.13(iii)
24.03.14(iv)
05.03.15(v)
28.03.12(ii)
19.03.13(iii)
24.03.14(iv)
05.03.15(v)
28.03.12(ii)
19.03.13(iii)
24.03.14(iv)
05.03.15(v)
815p
1,023p
1,353p
1,742p
815p
1,023p
1,353p
1,742p
815p
1,023p
1,353p
1,742p
815p
1,023p
1,353p
1,742p
70,219
57,050
43,999
–
39,884
32,405
24,991
–
31,907
25,929
21,249
–
31,907
28,715
24,483
–
–
–
–
34,874
–
–
–
22,245
–
–
–
16,863
–
–
–
21,527
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70,219
–
–
–
39,884
–
–
–
31,907
–
–
–
31,907
–
–
–
–
57,050
43,999
34,874
–
32,405
24,991
22,245
–
25,929
21,249
16,863
–
28,715
24,483
21,527
29.03.15
20.03.16
25.03.17
06.03.18
29.03.15
20.03.16
25.03.17
06.03.18
29.03.15
20.03.16
25.03.17
06.03.18
29.03.15
20.03.16
25.03.17
06.03.18
27.03.22
18.03.23
24.03.24
05.03.25
27.03.22
18.03.23
24.03.24
05.03.25
27.03.22
18.03.23
24.03.24
05.03.25
27.03.22
18.03.23
24.03.24
05.03.25
(i) The awards under the LTIP 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 performance 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, 2014 and 2015 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 22 March 2012.
(iii) Number of options derived based on the average mid-market share price for the previous 28 days to 31 December 2012.
(iv) Number of options derived based on the average mid-market share price for the previous 28 days to 31 December 2013.
(v) Number of options derived based on the average mid-market share price for the previous 28 days to 26 December 2014.
Directors’ interest in shares
The interests of the Directors in the share capital of Dignity plc at 25 December 2015 are set out below.
Number of Ordinary Shares
At 25 December 2015
Subject to
performance
At 26 December conditions under
Name 2014 Legally owned Subject to SAYE the LTIP
Mike McCollum 183,334 183,334 – 135,923
Andrew Davies 137,254 137,254 – 79,641
Richard Portman 93,630 93,630 612 64,041
Steve Whittern 19,586 19,586 – 74,725
Peter Hindley 160,696 160,696 – –
David Blackwood (1) – 2,189 – –
Alan McWalter 2,554 2,552 – –
Jane Ashcroft 917 917 – –
Martin Pexton 2,750 2,750 – –
Ishbel Macpherson 4,847 4,847 – –
(1) At the date of his appointment, David Blackwood did not own any shares in the Company.
There has been no change in the interests set out above between 25 December 2015 and 2 March 2016.
The shareholding guideline for the Executive Directors is that they hold 200 per cent of their basic salary as shares based on their
salary at 26 February 2016 and the 28 day average share price to 25 February 2016 as adjusted for any subsequent share
consolidations. All Executive Directors with the current exception of Steve Whittern meet that guideline.
Dignity plc
Annual Report & Accounts 2015
61
Directors’ total pension entitlements
Pensionable
service at
25.12.15
(years)
Age at
25.12.15
Accrued
pension
26.12.14
Accrued
pension
25.12.15
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
48 15.667 107,652 108,944
43,487
54 14.583
42,971
–
–
–
–
72,900
35,250
– 72,900
– 35,250
65 2,153,040 2,178,880
869,740
65
859,420
(1) Throughout 2015 the above Directors were deferred 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.
(4) Mike McCollum ceased to be a member of the Dignity Pension and Assurance Scheme in January 2016.
Loss of office payments
No Director left in the year and no compensation for loss of office was paid.
Relative importance of spend on pay
The following table sets out the percentage change in dividends and overall spend on employee pay in the 2015 financial year
compared with the prior year.
2015 2014
£m £m % change
Dividends 10.0 9.8 2.0%
Return of Cash nil 64.4 n/a
Total return to shareholders 10.0 74.2 – 86.5%
Employee remuneration costs 94.7 82.8 14.4%
Percentage change in CEO pay
The table below 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.
2015 2014 % change
Chief Executive (£000’s)
– Salary 486 476 2%
– Benefits 92 91 1%
– Bonus 1,875 1,859 1%
Full time equivalent average employee (£)(1)
– Salary 20,322 19,218 5.7%
– Benefits 590 588 0.3%
– Bonus 2,141 1,880 13.9%
(1) There are 3,038 employees at 25 December 2015 (26 December 2014: 2,848), of which 736 (2014: 677) were part time.
Performance graph and single figure table
The following graph shows the Company's TSR performance over the last seven financial years against the FTSE 350 index.
The FTSE 350 has been chosen as the Company is a member of that index.
7 Year Total Shareholder Return
7 Year Total Shareholder Return
)
d
e
s
a
b
e
R
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
500
400
300
200
100
0
8
0
c
e
D
9
0
c
e
D
0
1
c
e
D
1
1
c
e
D
2
1
c
e
D
3
1
c
e
D
4
1
c
e
D
5
1
c
e
D
Dignity plc
FTSE 350 Index
Source: Datastream (Thomson Reuters)
This graph shows the value, by 25 December 2015, of £100 invested in Dignity on 26 December 2008 compared with the value
of £100 invested in the FTSE 350 Index.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
62
Governance
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2015
The table below shows the total remuneration figure for the CEO over the same seven 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 2015
CEO single total figure of remuneration (£000’s) 1,018 899 917 2,081 2,217 2,426 2,453
Annual bonus pay-out relative to maximum (%) 85% 100% 100% 100% 100% 100% 100%
LTIP vesting (%) 63% – – 100% 100% 100% 100%
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 comprised
all the other Non-Executive Directors: Jane Ashcroft, David Blackwood from his appointment to the Board on 1 October 2015,
Ishbel Macpherson until her resignation from Board on 30 September 2015 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 2014 performance
related bonus and dealt with the vesting of the shares awarded in 2012 under the LTIP scheme. In the last quarter of 2015, the
Committee carried out extensive work in forming a new remuneration policy for approval by shareholders at the AGM in 2016.
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
assistance in our policy review, 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 £53,822+ 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:
Annual Report on Remuneration
Total number of votes % of votes cast
For 37,556,247 95.98%
Against 870,042 2.22%
Abstentions 705,034 1.80%
Total 39,131,323 100%
On behalf of the Board
Alan McWalter
Chairman of the Remuneration Committee
2 March 2016
Directors’ report
for the 52 week period ended 25 December 2015
The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
52 week period ended 25 December 2015.
Principal risks and uncertainties
Operational risks are considered on pages 29 and 30.
Dignity plc
Annual Report & Accounts 2015
63
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
• 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.
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 40 and 41 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 4 to 37 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.
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.
Share capital
During the period, 249,067 Ordinary Shares of 12 48/143
pence each were issued to satisfy Long-Term Incentive Plan
share awards vesting in the period and 1,044 Ordinary Shares
of 12 48/143 were issued to satisfy options exercised by
retirees under the 2013 Save As You Earn Scheme.
The issued share capital of Dignity plc at 25 December 2015
consisted of 49,420,291 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.
A special resolution passed at the last AGM on 11 June 2015
gives Dignity plc the authority to purchase up to 4,900,000
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 £4,043,673 of which up to £303,275 may
be for cash. These authorities will expire at the conclusion
of the next AGM on 9 June 2016. 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 69. The Group’s profit before tax
amounted to £69.0 million (2014: loss £67.7 million).
Dividends
An interim dividend of 7.14 pence per Ordinary Share was
paid in to shareholders on 30 October 2015. The Board has
proposed a final dividend of 14.31 pence (2014: 13.01 pence)
per share, which, subject to approval at the AGM, will be paid
on 24 June 2016 to shareholders on the register at close of
business on 20 May 2016.
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, team talks, bulletins and management briefings.
This is discussed in more detail in the Corporate and Social
Responsibility Report on pages 32 to 37.
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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
64
Governance
Directors’ report continued
for the 52 week period ended 25 December 2015
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 55 and 60. 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 9 June 2016. 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 £90 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 35.
Independent Auditors and disclosure
of information to Auditors
A resolution for the re appointment of Ernst & Young LLP
as auditors 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 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 36
alongside other social and ethical considerations.
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 26 February 2016.
Post balance sheet events
Please refer to note 32 of the Notes to the Consolidated
Financial Statements for further details.
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 42 to 45, which is
incorporated by reference.
Strategic report
The Strategic report on pages 4 to 37 has been approved
by the Board.
By order of the Board
Richard Portman
Company Secretary
2 March 2016
Financial Statements
Independent auditors’ report to the members of Dignity plc
for the 52 week period ended 25 December 2015
Dignity plc
Annual Report & Accounts 2015
65
Opinion on financial statements
In our opinion:
• Dignity plc’s Group financial statements and parent company financial statements (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 25 December 2015 and of the Group’s profit 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 General Accepted
Accounting Practice (UK GAAP); 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
Dignity plc’s financial statements comprise:
Group
Parent company
• Consolidated balance sheet as at 25 December 2015
• Consolidated income statement for the 52 week period then ended
• Consolidated statement of comprehensive income for the 52 week
period then ended
• Consolidated statement of changes in equity for the 52 week
period then ended
• Consolidated cash flow statement for the 52 week period then ended
• Related notes to the financial statements
• Company balance sheet as at 25 December 2015
• Related notes to the financial statements
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 (UK GAAP).
Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy,
the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have
performed the procedures below which were designed in the context of the financial statements as a whole and, consequently,
we do not express any opinion on these individual areas.
Risk
Our response to the risk
The risk of inappropriate revenue recognition
Our audit has identified,
and addressed, specific
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.
(AC, AP, CAE)*
• We carried out testing relating to controls over revenue recognition, including the
timing of revenue recognition;
• We evaluated the controls in the IT systems that support the recording of revenue;
• 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 and obtained corroborative evidence to support divergences
from our expectations;
• We identified and obtained support for journals generated at head office
impacting revenue; and
• We ensured that the financial statement disclosures were in accordance with
accounting standards.
The risk of fraud and management override
What we concluded to the
Audit Committee
That based on the results of the
procedures performed, we identified
no differences greater than our
reporting threshold to report to the
Audit Committee.
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.
Based on the results of the
procedures performed, including
journal entry testing, we have not
identified any anomalies.
* These risks are discussed in other areas of the Annual Report as noted by the following key.
AC – See Audit Committee report: p.46 to p.48.
AP – See note 1 Accounting policies: p.73 to p.80.
CAE – See note 1 Critical accounting estimates: p.78 and p.79.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
66
Financial Statements
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 25 December 2015
In the prior year, our auditor’s report included further risks of material misstatement as noted below.
In the current year we do not consider these items as having the greatest effect on our overall audit strategy, the allocation
of resources in the audit and the direction of the efforts of the audit team for the following reasons:
• Accounting for the issue of New Secured Notes and Return of Cash – this was completed in the prior year, as such we do not
consider this to represent a significant risk within our current year audit strategy.
• Determination of the assumptions used to derive the obligations for the defined benefit pension scheme – we downgraded this
risk for the current year’s audit based on experience the prior year audit and in the 2015 interim review where we found the
assumptions to be within an acceptable range.
• Non consolidation of pre-need trusts and the judgement that trade names have indefinite lives – we considered the non-
consolidation of pre-need trusts and the judgement regarding the non-amortisation of trade names in detail in the prior year,
our first year as auditors, and concluded both were appropriate. The analysis in respect of pre-need trusts was updated at
the Interim Review to encompass the requirements of IFRS 10 without any change to our conclusions. In the absence of any
significant change in the market place, the business or in the related disclosures in the Annual Report we do not consider
these matters need to remain areas of particular focus.
The scope of our audit
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial
statements. 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 below.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements
on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of
our audit procedures.
We determined materiality for the Group to be £3.4 million (2014: £2.9 million), which is 5 per cent of pre-tax income (2014:
5 per cent of pre-tax income after adding back the one-off costs related to the issuance of the New Secured Notes and Return
of Cash). We believe that pre-tax income is the most relevant measure of the underlying financial performance of the Group.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 75 per cent (2014: 50 per cent) of our planning materiality, namely £2.58 million (2014:
£1.45 million). We have increased our assessment of performance materiality from 50 per cent to 75 per cent as we used 50 per
cent in the prior year given that it was an initial audit for the firm and in light of our experience and the limited number of
differences identified we concluded that it was appropriate to use 75 per cent for the current year audit.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.17 million
(2014: £0.15 million), which is set at 5 per cent of planning materiality, 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 light
of other relevant qualitative considerations in forming our opinion.
Dignity plc
Annual Report & Accounts 2015
67
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 & Accounts 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.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 63, 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.
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.
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; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
ISAs (UK and Ireland) reporting
We are required to report to you if, in our opinion, financial and non-financial 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
We have no exceptions
to report.
in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to report whether we have identified any inconsistencies between our knowledge
acquired in the course of performing the audit and the directors’ statement that they consider the annual report
and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the entity’s performance, business model and strategy; and whether the annual report
appropriately addresses those matters that we communicated to the audit committee that we consider should
have been disclosed.
Companies Act 2006 reporting
We are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
We have no exceptions
to report.
not been received from branches not visited by us; 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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
68
Financial Statements
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 25 December 2015
Listing Rules review requirements
We are required to review:
• the directors’ statement, set out on page 64, in relation to going concern and longer term viability, set out
We have no exceptions
to report.
on page 31; and
• the part of the Corporate Governance Statement relating to the company’s compliance with the provisions
of the UK Corporate Governance Code specified for our review.
Statement on the Directors’ Assessment of the Principal Risks that Would
Threaten the Solvency or Liquidity of the Entity
ISAs (UK and Ireland) reporting
We are required to give a statement as to whether we have anything material to add or to draw attention to in
relation to:
• the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal
risks facing the entity, including those that would threaten its business model, future performance, solvency
or liquidity;
• the disclosures in the annual report that describe those risks and explain how they are being managed or
mitigated;
• the directors’ statement in the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the
entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the
financial statements; and
• the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We have nothing material to
add or to draw attention to.
Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
2 March 2016
Notes
1. The maintenance and integrity of the Dignity plc website 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 website.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Dignity plc
Annual Report & Accounts 2015
69
Consolidated income statement
for the 52 week period ended 25 December 2015
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Note £m £m
Revenue 3 305.3 268.9
Cost of sales (123.3) (109.0)
Gross profit 182.0 159.9
Administrative expenses (86.5) (77.0)
Operating profit 3 95.5 82.9
Analysed as:
Underlying operating profit 3 98.7 84.9
Loss on sale of fixed assets – (0.3)
External transaction costs 5 (3.2) (1.7)
Operating profit 3 95.5 82.9
Finance costs 4 (27.0) (154.8)
Analysed as:
Underlying finance costs (27.0) (30.6)
Loss on extinguishment of Old Notes – exceptional 5 – (123.2)
Elimination of swap – exceptional 5 – (1.0)
Finance costs (27.0) (154.8)
Finance income 4 0.5 4.2
Profit/(loss) before tax 5 69.0 (67.7)
Taxation – before exceptional items (15.5) (13.1)
Taxation – exceptional 3.4 25.8
Taxation 6 (12.1) 12.7
Profit/(loss) for the period attributable to equity shareholders 3 56.9 (55.0)
Earnings per share for profit/(loss) attributable to equity shareholders
– Basic (pence) 8 115.2p (104.0)p
– Diluted (pence) 8 114.5p (104.0)p
Underlying Earnings per share (pence) 8 114.8p 85.8p
Consolidated statement of comprehensive income
for the 52 week period ended 25 December 2015
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Note £m £m
Profit/(loss) for the period 56.9 (55.0)
Items that will not be reclassified to profit or loss
Remeasurement loss on retirement benefit obligations 28 (1.4) (10.8)
Tax on remeasurement loss on retirement benefit obligations 0.3 2.2
Restatement of deferred tax for the change in UK tax rate (0.2) –
Other comprehensive loss (1.3) (8.6)
Total comprehensive income/(loss) for the period 55.6 (63.6)
Attributable to:
Equity shareholders of the parent 55.6 (63.6)
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
70
Financial Statements
Consolidated balance sheet
as at 25 December 2015
25 December 26 December
2015 2014
Note £m £m
Assets
Non-current assets
Goodwill 9 201.5 182.3
Intangible assets 9 126.7 94.2
Property, plant and equipment 10 200.6 192.3
Financial and other assets 11 10.3 10.4
539.1 479.2
Current assets
Inventories 13 6.4 6.5
Trade and other receivables 14 31.9 30.0
Cash and cash equivalents 15 98.8 86.5
137.1 123.0
Total assets 676.2 602.2
Liabilities
Current liabilities
Financial liabilities 16 8.3 8.0
Trade and other payables 17 67.5 51.2
Current tax liabilities 5.4 –
Provisions for liabilities 19 1.5 1.4
82.7 60.6
Non-current liabilities
Financial liabilities 16 594.6 602.9
Deferred tax liabilities 20 21.7 13.6
Other non–current liabilities 17 2.3 2.6
Provisions for liabilities 19 6.3 4.5
Retirement benefit obligation 28 12.5 10.5
637.4 634.1
Total liabilities 720.1 694.7
Shareholders’ equity
Ordinary share capital 22 6.1 6.1
Share premium account 4.8 2.8
Capital redemption reserve 141.7 141.7
Other reserves (4.5) (5.5)
Retained earnings (192.0) (237.6)
Total equity (43.9) (92.5)
Total equity and liabilities 676.2 602.2
The financial statements on pages 69 to 108 were approved by the Board of Directors on 2 March 2016 and were signed
on its behalf by:
M K McCollum S L Whittern
Chief Executive Finance Director
Dignity plc
Annual Report & Accounts 2015
71
Consolidated statement of changes in equity
for the 52 week period ended 25 December 2015
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
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 obligations – – – – (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(1) 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)
Profit for the 52 weeks ended
25 December 2015 – – – – 56.9 56.9
Remeasurement loss on defined
benefit obligations – – – – (1.4) (1.4)
Tax on pensions – – – – 0.3 0.3
Restatement of deferred tax for
the change in UK tax rate – – – – (0.2) (0.2)
Total comprehensive income – – – – 55.6 55.6
Effects of employee share options – – – 2.4 – 2.4
Tax on employee share options – – – 0.7 – 0.7
Restatement of deferred tax for
the change in UK tax rate – – – (0.1) – (0.1)
Proceeds from share issue(2) – 2.0 – – – 2.0
Gift to Employee Benefit Trust – – – (2.0) – (2.0)
Dividends (see note 7) – – – – (10.0) (10.0)
Shareholders’ equity as at 25 December 2015 6.1 4.8 141.7 (4.5) (192.0) (43.9)
(1) Relating to issue of 281,430 shares under 2011 LTIP scheme and 14,896 shares under 2010 SAYE scheme.
(2) Relating to issue of 249,067 shares under 2012 LTIP scheme and 1,044 shares under 2013 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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
72
Financial Statements
Consolidated statement of cash flows
for the 52 week period ended 25 December 2015
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Note £m £m
Cash flows from operating activities
Cash generated from operations before external transaction costs and
exceptional pension contributions 25 125.2 104.4
Exceptional contribution to pension scheme – (1.0)
External transaction costs in respect of acquisitions (3.2) (1.1)
Cash generated from operations 122.0 102.3
Finance income received 0.6 0.6
Finance costs paid (19.1) (38.0)
Transfer from restricted bank accounts for finance costs 5.6 14.6
Payments to restricted bank accounts for finance costs 15 (12.8) (5.6)
Total payments in respect of finance costs (26.3) (29.0)
Tax paid (3.7) (6.9)
Net cash generated from operating activities 92.6 67.0
Cash flows from investing activities
Acquisition of subsidiaries and businesses (net of cash acquired) 26 (50.0) (24.7)
Proceeds from sale of property, plant and equipment 0.8 0.5
Vehicle replacement programme and improvements to locations (15.6) (14.1)
Branch relocations (3.9) (1.4)
Satellite locations (0.3) (0.1)
Development of new crematoria and cemeteries (0.1) (1.6)
Purchase of property, plant and equipment (19.9) (17.2)
Net cash used in investing activities (69.1) (41.4)
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
Issue costs in respect of borrowings and Secured Notes (0.1) (0.9)
Issue costs in respect of debt facility (0.2) –
Proceeds from share issue – 0.1
Repayment of swaps – (5.1)
Repayment of borrowings (8.1) (11.6)
Transfer from restricted bank accounts for repayment of borrowings 4.0 5.7
Payments to restricted bank accounts for repayment of borrowings 15 (4.1) (4.0)
Total payments in respect of borrowings (8.2) (9.9)
Dividends paid to shareholders on Ordinary Shares 7 (10.0) (9.8)
Redemption of B Shares in respect of Capital Option 7 – (20.1)
Redemption of C Shares in respect of Special Dividend Option 7 – (44.3)
Net cash used in financing activities (18.5) (7.7)
Net increase in cash and cash equivalents 5.0 17.9
Cash and cash equivalents at the beginning of the period 76.9 59.0
Cash and cash equivalents at the end of the period 15 81.9 76.9
Restricted cash 15 16.9 9.6
Cash and cash equivalents at the end of the period as reported in the
consolidated balance sheet 15 98.8 86.5
Dignity plc
Annual Report & Accounts 2015
73
Notes to the financial statements
for the 52 week period ended 25 December 2015
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 25 December 2015
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.
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 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 2015 the exceptional credit is due to the changes to the headline rate of corporation tax used to evaluate
deferred tax.
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, associated with acquisitions, refinancing or return of value to shareholders, are excluded from
underlying profit as they are unconnected with the trading performance in the period and are therefore presented separately.
They relate wholly to external costs incurred by the Group.
Pre-arranged funeral plan trusts
The 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. Further information can be found in the non consolidation
of pre–need trusts note within critical accounting estimates and judgements below.
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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
74
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
1 Accounting policies (continued)
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.
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. Where 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.
Dignity plc
Annual Report & Accounts 2015
75
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
Other than in respect of items measured at fair value on acquisition of businesses and in respect of share–based payments,
the Group has no assets or liabilities measured and recognised at fair value. The Group discloses fair values for financial
assets and liabilities at each balance sheet date.
Fair value related disclosures are set out in note 26 in respect of fair values on acquisition of businesses and in note 21 in
respect of financial instruments.
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 is 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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
76
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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.
Dignity plc
Annual Report & Accounts 2015
77
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 the income statement.
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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
78
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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 (2014: 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 in the prior
period 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.
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:
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. IFRS 10, consolidated financial statements, has been considered by the Group in 2015 with specific reference
to the non–consolidation of the pre–need trust, for further details please see the IFRS 10 note below.
For new trusts acquired in the period, the Directors consider the terms and conditions to determine whether
non–consolidation is appropriate.
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.
Dignity plc
Annual Report & Accounts 2015
79
1 Accounting policies (continued)
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.
Early settlement of Old Notes
In the prior period, 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’). Further details can be found in the Group’s 2014 annual report.
Standards, amendments and interpretations effective in 2015
The Group has applied IFRS 10, Consolidated financial statements, in preparing these consolidated financial statements.
IFRS 10 builds on existing principles by identifying the concept of control as the determining factor on whether an entity
should be included within the consolidated financial statements of the parent company. In order to have control, IFRS 10
requires a parent company to have power over the investee, an exposure to variable returns because of its involvement in
the investee and the ability to use its power over the investee to affect the amount of the variable returns. The Group has
specifically considered IFRS 10 in light of the Group’s non consolidation of its pre–arranged funeral plan trusts.
IFRS 10 consideration
Power over the investee. Power arises when the investor
has existing rights that gives them the ability to direct the
relevant activities of the investee, being those activities
which influence the returns achieved by the investee.
Analysis
Dignity has no voting rights over the Trusts or any rights to
direct the activities of the Trusts. Whilst Dignity has the power
to appoint or remove trustees, legislation requires the majority
of trustees to be independent of Dignity.
The investor is exposed, or has rights, to variable returns
from its involvement with the investee.
The investor has the ability to use its power over the
investee to affect the amount of the investor’s returns.
Whilst Dignity controls the charge levied to the Trusts for the
provision of funeral services, it does not have the power to
direct the investment decisions of the Trusts.
Dignity receives an allowance for the marketing of the plans
and for the performance of a funeral. From time to time
Dignity may receive a surplus from the Trusts.
Ultimately Dignity’s return is wholly dependent on the
investment performance of the Trusts.
A majority of the Trustees are required, by legislation, to be
independent of Dignity and therefore Dignity does not, and
cannot, control the actions of the Trustees.
The investment strategy is set, implemented and monitored by
the Trustees. Consequently, Dignity does not have the power to
affect the amount of its returns.
The Group does not believe that, given the above conditions required for consolidation in the new standard, a change in
accounting policy is required.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
80
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
1 Accounting policies (continued)
The Group has applied IFRS 12, Disclosure of interests in other entities, in preparing these consolidated financial statements.
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 has reviewed the disclosures relating to
its pre–arranged funeral plan trusts and amended where required.
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after
1 January 2015 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 2015 or later periods but which the Group has not early adopted:
IAS 1, Presentation of financial statements (amendment), effective 1 January 2016. The amendments clarify, rather than
significantly change, existing IAS 1 requirements. The Group has reviewed this amendment and it may result in the
elimination of certain disclosures that are not material.
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 15, Revenue from contracts with customers, effective 1 January 2018. 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.
IFRS 16 – Leases. This standard is effective for accounting periods beginning on or after 1 January 2019 and will therefore
impact the Group’s 2020 financial results. Under the standard a lessee is required to recognise a right–of–use asset
representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease
payments. Approximately 50 per cent of the Group’s properties are on lease terms that are currently accounted for as an
operating lease but which will result in the recognition of both an asset and a liability under the new standard. As the notes
to the consolidated accounts demonstrate, the Group has total minimum future lease payments under non–cancellable
operating leases of approximately £175 million. Whilst the net present value of this commitment will be less than this
amount, the grossing up of the Group’s balance sheet that will be required to reflect this new standard will be material and
will also impact on the Group’s reported profit after tax. The Group will be assessing this in due course, but notes that the
accounting standard does not affect the cash flows or underlying economics of the business.
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.
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.
Dignity plc
Annual Report & Accounts 2015
81
2 Financial risk management (continued)
The Group has significant cash balances that are held by institutions with a long–term rating of at least BBB by Standard
& Poor’s and BBB+ 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 2016 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 25 December 2015 the actual ratio was 3.35 times (2014: 10.69 times). The
New Notes were issued on 17 October 2014. Consequently, Senior Interest only accrues from this date for the Relevant
Period. Debt Service in 2014, 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 Standard & 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).
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
82
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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 and liabilities 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:
Profit 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 25 December 2015 £m £m £m £m £m £m
Funeral services – existing 206.2 85.0 (10.5) 74.5 – 74.5
Funeral services – acquisitions(1) 6.4 2.4 (0.1) 2.3 (3.2) (0.9)
Funeral services 212.6 87.4 (10.6) 76.8 (3.2) 73.6
Crematoria 63.1 37.8 (3.2) 34.6 – 34.6
Pre–arranged funeral plans 29.6 8.0 (0.2) 7.8 – 7.8
Central overheards – (19.9) (0.6) (20.5) – (20.5)
Group 305.3 113.3 (14.6) 98.7 (3.2) 95.5
Finance costs (27.0) – (27.0)
Finance income 0.5 – 0.5
Profit before tax 72.2 (3.2) 69.0
Taxation – continuing activities (15.5) – (15.5)
Taxation – exceptional – 3.4 3.4
Taxation (15.5) 3.4 (12.1)
Underlying earnings for the period 56.7
Total other items 0.2
Profit after taxation 56.9
Earnings per share for profit attributable to equity shareholders
– Basic (pence) 114.8p 115.2p
– Diluted (pence) 114.1p 114.5p
(1) Included within acquisitions is revenue of £4.3 million and underlying operating profit of £1.4 million in respect of the Laurel Funerals acquisition.
Dignity plc
Annual Report & Accounts 2015
83
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 25 December 2015 £m £m £m £m £m
Segment assets 412.9 140.8 19.6 4.1 577.4
Unallocated assets:
Cash and cash equivalents 98.8
Total assets 676.2
Segment liabilities (48.2) (8.7) (8.3) (12.7) (77.9)
Unallocated liabilities:
Borrowings – excluding finance leases (602.2)
Accrued interest (12.9)
Corporation tax (5.4)
Deferred tax (21.7)
Total liabilities (720.1)
Other segment items:
Additions to non–current assets (other than financial
instruments and deferred tax) 64.7 2.6 – 1.5 68.8
Depreciation (note 10) 10.6 3.2 – 0.7 14.5
Amortisation (note 9) – – 0.1 – 0.1
Impairment of trade receivables (note 21 (c)) 2.0 0.2 – – 2.2
Other non–cash expenses (note 23) – – – 2.4 2.4
The revenue and operating profit, by segment, was as follows:
Loss on sale of
Underlying fixed assets,
operating external
profit/(loss) transaction
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
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
84
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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)
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
25 December 26 December
2015 2014
£m £m
Finance costs
Old Notes – 21.8
New Notes 25.0 5.1
Amortisation of issue costs – 1.5
Crematoria Acquisition Facility 0.6 0.6
Other loans 0.9 1.3
Net finance cost on retirement benefit obligations (note 28) 0.3 –
Unwinding of discounts 0.2 0.3
Underlying finance costs 27.0 30.6
Extinguishment of Old Notes – exceptional – 123.2
Elimination of swap – exceptional – 1.0
Finance costs 27.0 154.8
Finance income
Bank deposits (0.5) (1.0)
Amortisation of premium on Old Notes – (3.2)
Finance income (0.5) (4.2)
Net finance costs 26.5 150.6
Dignity plc
Annual Report & Accounts 2015
85
5 Profit/(loss) before tax
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Analysis by nature £m £m
The following items have been included in arriving at profit/(loss) before tax:
Staff costs (note 27) 94.7 82.8
Cost of inventories recognised as an expense (included in cost of sales) 16.2 14.7
Depreciation of property, plant and equipment – owned assets (note 10) 14.5 13.3
Amortisation of intangible assets (included in administrative expenses) (note 9) 0.1 0.2
Operating lease rentals – property 9.6 8.7
External transaction costs 3.2 1.7
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)) 2.2 1.6
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 0.2 0.1
– Tax advisory services – –
– Other advisory services – –
0.3 0.2
External transaction costs
The current period relates to acquisition expenses which are not deductible for tax purposes.
The prior period related to £1.4 million of other external acquisition expense and £0.3 million external costs relating to the
Return of Cash. There was no impact on taxation.
During 2015, 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.
2014 Items
Loss on extinguishment of Old Notes – exceptional
In 2014, 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 2014 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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
86
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
6 Taxation
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Analysis of charge in the period £m £m
Current tax – current period 10.4 0.6
Adjustments for prior period – (0.7)
Total corporation tax 10.4 (0.1)
Deferred tax – current period 5.1 (1.2)
Non trade deficit recognised in the period – (11.6)
Adjustments for prior period – 0.2
Restatement of deferred tax for the change in UK tax rate (3.4) –
Total deferred tax 1.7 (12.6)
Taxation 12.1 (12.7)
--
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
Tax on items credited to other comprehensive income or equity £m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (0.3) (2.2)
Deferred tax credit relating to maturity of option schemes (0.1) (0.3)
Restatement of deferred tax for the change in UK tax rate 0.3 –
Total deferred tax credited to other comprehensive income or equity (0.1) (2.5)
Corporation tax credit relating to maturity of option schemes (0.7) (0.6)
Total corporation tax credited to equity (0.7) (0.6)
The taxation charge in the period is lower (2014: higher) than the standard rate of corporation tax in the UK of
20.25 per cent (2014: 21.5 per cent). The differences are explained below:
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
£m £m
Profit/(loss) before taxation 69.0 (67.7)
Profit/(loss) before taxation multiplied by the standard rate of corporation
tax in the UK of 20.25% (2014: 21.5%) 14.0 (14.6)
Effects of:
Adjustments in respect of prior period – (0.5)
Exceptional adjustment in respect of closing deferred tax rate change in 2015 (3.4) –
Expenses not deductible for tax purposes 1.5 2.4
Total taxation 12.1 (12.7)
Under IFRS the tax rate is lower (2014: lower) than the standard UK tax rate of 20.25 per cent (2014: 21.5 per cent)
principally due to the exceptional adjustment (2014: combination of the impact of disallowable trading expenses and
expenditure on the Group’s premises that does not attract any deductions for tax purposes). The standard rate of corporation
tax in the UK changed from 21 per cent to 20 per cent with effect from 1 April 2015. Accordingly the Group’s underlying
profits for this accounting period are taxed at an effective rate of 21.5 per cent (2014: 22.5 per cent). The Group does not
have any provisions for uncertain tax positions.
Legislation to reduce the main rate of corporation tax from 20 per cent to 19 per cent from 1 April 2017 and then to
18 per cent from 1 April 2020 were substantively enacted at the balance sheet date and so the deferred tax balance has been
calculated at the rates at which it is expected to be incurred. As a result, the Group recognised exceptional tax credit of
£3.4 million through its income statement, a debit of £0.2 million through other comprehensive income and a debit of
£0.1 million through equity to reflect the one off reduction in the period of the Group’s deferred tax position.
Dignity plc
Annual Report & Accounts 2015
87
7 Dividends
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
£m £m
Final dividend paid: 13.01p per Ordinary Share (2014: 11.83p) 6.5 6.3
Interim dividend paid: 7.14p per Ordinary Share (2014: 6.49p) 3.5 3.5
Dividend on Ordinary Shares 10.0 9.8
The interim dividend represents the interim dividend that was approved and paid in the period out of earnings generated in
the same period.
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 £10.0 million, 20.15 pence per share (2014: £74.2 million,
138.32 pence per share).
A final dividend of 14.31 pence per share, in respect of 2015, has been proposed by the Board. Based on the number of
shares in issue at the date of signing this report the total final dividend payment is approximately £7.1 million. This will be
paid on 24 June 2016 provided that approval is gained from shareholders at the Annual General Meeting on 9 June 2016 and
will be paid to shareholders on the register at close of business on 20 May 2016.
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.
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.
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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
88
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
8 Earnings per share (continued)
In 2014, shareholders approved a share capital consolidation together with a Special Dividend of £1.08 per Ordinary Share.
The overall effect of this transaction 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 25 December 2015
Underlying profit after taxation and EPS 56.7 49.4 114.8
Add: Exceptional items, loss on sale of fixed assets and external transaction
costs (net of taxation of £nil million) 0.2
Profit attributable to shareholders – Basic EPS 56.9 49.4 115.2
Profit attributable to shareholders – Diluted EPS 56.9 49.7 114.5
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 diluted EPS (55.0) 52.9 (104.0)
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 27 December 2013 74.5 3.2 4.0 0.2 81.9 173.7 255.6
Acquisition of subsidiaries and
other businesses 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
Acquisition of subsidiaries and
other businesses (note 26(a)) 32.6 – – – 32.6 19.2 51.8
At 25 December 2015 124.8 3.2 4.0 0.2 132.2 201.5 333.7
Accumulated amortisation
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)
Amortisation charge – (0.1) – – (0.1) – (0.1)
At 25 December 2015 – (1.3) (4.0) (0.2) (5.5) – (5.5)
Net book amount at
25 December 2015 124.8 1.9 – – 126.7 201.5 328.2
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
Dignity plc
Annual Report & Accounts 2015
89
9 Goodwill and other intangible assets (continued)
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 25 December 2015 £m £m £m
Funeral services 124.8 149.9 274.7
Crematoria – 46.9 46.9
Pre–arranged funeral plans 1.9 4.7 6.6
126.7 201.5 328.2
At 26 December 2014
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
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 (2014: 2.25 per cent), being
an estimate of long–term growth rates for impairment review purposes only. The cash flows are discounted at a pre–tax rate of
8.1 per cent (2014: 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 18.1 per cent (2014: 18 per cent), or the growth rate would
have to reduce to at least minus 9.2 per cent (2014: minus 6.1 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 (2014: £nil).
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
90
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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 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 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
Additions 0.8 1.0 1.6 8.0 8.6 20.0
Acquisition of subsidiaries and other
businesses (note 26(a)) 2.3 – – 1.2 – 3.5
Disposals (0.4) (0.1) (0.1) (1.7) – (2.3)
Reclassification 4.5 1.0 1.1 – (6.6) –
At 25 December 2015 125.4 49.9 45.3 68.3 6.6 295.5
Accumulated depreciation
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)
Depreciation charge (3.0) (2.0) (4.2) (5.3) – (14.5)
Disposals 0.1 0.1 0.1 1.3 – 1.6
Reclassification – – – – – –
At 25 December 2015 (24.0) (16.4) (24.5) (30.0) – (94.9)
Net book amount at 25 December 2015 101.4 33.5 20.8 38.3 6.6 200.6
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
Depreciation expense of £5.4 million (2014: £4.6 million) is included within cost of sales and £9.1 million
(2014: £8.7 million) is included within administrative expenses.
Details of any securities over assets are disclosed in note 30.
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:
25 December 26 December
2015 2014
£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 £7.7 million
(2014: £2.0 million).
Dignity plc
Annual Report & Accounts 2015
91
11 Non–current financial and other assets
25 December 26 December
2015 2014
Note £m £m
Prepayments (a) 7.5 7.6
Deferred commissions (b) 2.8 2.8
10.3 10.4
(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 all entities included within the financial information are included in note C9 to the Company’s financial statements.
13 Inventories
25 December 26 December
2015 2014
£m £m
Materials 0.2 0.2
Finished goods 6.2 6.3
6.4 6.5
There were no inventory write–downs in either period.
14 Trade and other receivables
25 December 26 December
2015 2014
£m £m
Trade receivables 24.0 20.6
Less: provision for impairment (note 21(c)) (5.7) (4.9)
Net trade receivables 18.3 15.7
Receivables due from pre–arranged funeral plans trusts (note 29)(1) 9.7 9.2
Prepayments and accrued income 2.3 2.7
Other receivables 1.6 1.4
Corporation tax – 1.0
31.9 30.0
(1) Included in this amount is approximately £1.2 million (2014: £0.5 million) falling due after more than one year.
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.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
92
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
15 Cash and cash equivalents
25 December 26 December
2015 2014
£m £m
Operating cash as reported in the consolidated statement of cash flows as cash and
cash equivalents 81.9 76.9
Amounts set aside for debt service payments 16.9 9.6
Cash and cash equivalents as reported in the balance sheet 98.8 86.5
Amounts set aside for debt service payments
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 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 2015. Of this amount, £12.8 million
(2014: £5.6 million) is shown within the Statement of Cash Flows as ‘Payments to restricted bank accounts for finance costs’
and £4.1 million (2014: £4.0 million) is shown within ‘Financing activities’ as ‘Payments to restricted bank accounts for
repayment of borrowings’.
16 Financial liabilities
25 December 26 December
2015 2014
Note £m £m
Current
New A Notes (a) 8.3 8.0
(d) 8.3 8.0
Non–current
New Notes (a) 578.2 586.6
Finance lease obligations (b) 0.7 0.7
Crematoria Acquisition Facility (c) 15.7 15.6
594.6 602.9
(a) New Notes
On 17 October 2014, Dignity Finance PLC issued the New Notes. 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 25 December 2015, £0.3 million (2014: £0.3 million) and £0.4 million (2014: £0.4 million) 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
2015
£m
4.1
4.1
8.2
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
£m £m £m £m £m £m £m £m £m £m
4.2 4.4 4.6 4.7 4.9 5.1 5.2 5.4 5.6 5.8
4.3 4.4 4.6 4.8 4.9 5.1 5.3 5.5 5.7 5.9
8.5 8.8 9.2 9.5 9.8 10.2 10.5 10.9 11.3 11.7
2026 2027 2028 2029 2030 2031 2032 2033 2034 Total
£m £m £m £m £m £m £m £m £m £m
June 6.0 6.2 6.4 6.7 6.9 7.2 7.4 7.7 8.0 116.5
December 6.1 6.4 6.6 6.8 7.1 7.3 7.6 7.8 8.1 118.4
Total 12.1 12.6 13.0 13.5 14.0 14.5 15.0 15.5 16.1 234.9
Dignity plc
Annual Report & Accounts 2015
93
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
(b) Obligations under finance leases
25 December 26 December
2015 2014
£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.
(c) 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 92.
At 25 December 2015, £15.8 million (2014: £15.8 million) of the principal was outstanding. At 25 December 2015,
£0.1 million (2014: £0.2 million) of the transaction costs remained unamortised.
For further details of security over the Crematoria Acquisition Facility see note 30(b).
(d) Current financial liabilities
The current financial liabilities represent the amounts falling due within one year of the Group’s balance sheet date.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
94
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
17 Trade and other payables
25 December 26 December
2015 2014
Current £m £m
Trade payables 7.5 5.3
Tax and social security 1.7 1.5
Other current liabilities 2.2 2.1
Accruals 50.3 38.4
Deferred income 5.8 3.9
67.5 51.2
Non–current
Deferred income 1.0 1.1
Deferred consideration for acquisitions 0.1 0.1
Other non–current liabilities 1.2 1.4
2.3 2.6
18 Obligations under finance leases and operating leases
For minimum lease payments obligations under finance leases refer to note 21(d)(ii).
25 December 26 December
2015 2014
£m £m
The minimum lease payments under non–cancellable operating leases fall due as follows:
Not later than one year 10.3 9.8
Later than one year but not more than five years 28.5 27.5
More than five years 135.6 131.3
174.4 168.6
The non–cancellable operating leases principally relate to leasehold land and buildings.
Of the total operating lease payments charged to trading expenses, £nil million (2014: £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 (2014: £0.5 million). Total future sublease payments
receivable relating to operating leases amount to £0.7 million (2014: £0.7 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
Onerous Cancellation
Dilapidations contracts provision
£m £m £m Total
(a) (b) (c) £m
At beginning of period 4.5 0.1 1.3 5.9
Charged to income statement 1.6 – 0.1 1.7
Arising on acquisitions 0.8 – – 0.8
Released to income statement (0.3) – – (0.3)
Utilised in period (0.4) – – (0.4)
Amortisation of discount 0.1 – – 0.1
At end of period 6.3 0.1 1.4 7.8
Provisions have been analysed between current and non–current as follows:
25 December 26 December
2015 2014
£m £m
Current 1.5 1.4
Non–current 6.3 4.5
7.8 5.9
Dignity plc
Annual Report & Accounts 2015
95
19 Provisions for liabilities (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, £1.0 million (2014: £1.1 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 2024.
(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 (2014: £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 between 18 and
20 per cent (2014: 20 per cent).
The movement on the deferred tax account is as shown below:
25 December 26 December
2015 2014
£m £m
At beginning of period 13.6 26.9
Charged/(credited) to income statement (note 6) 5.1 (12.6)
Restatement of deferred tax for the change in UK tax rate (3.1) –
Taken to other comprehensive income (note 6) (0.3) (2.2)
Taken to equity (note 6) (0.1) (0.3)
Arising on acquisitions (note 26(a)) 6.5 1.8
At end of period 21.7 13.6
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 15.5 13.9 29.4
Charged/(credited) to income statement (note 6) 0.7 (0.1) 0.6
Restatement of deferred tax for the change in UK tax rate taken to the income statement (1.7) (2.0) (3.7)
Arising on acquisitions 0.4 6.1 6.5
At end of period 14.9 17.9 32.8
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
96
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
20 Deferred tax (continued)
Deferred tax assets
Non trade
deficits Pensions Other Total
£m £m £m £m
At beginning of period (11.6) (2.1) (2.1) (15.8)
Charged/(credited) to income statement (note 6) 4.8 (0.1) (0.2) 4.5
Restatement of deferred tax for the change in UK tax rate taken to
other comprehensive income – 0.2 – 0.2
Restatement of deferred tax for the change in UK tax rate taken to equity – – 0.1 0.1
Restatement of deferred tax for the change in UK tax rate taken to
the income statement 0.1 – 0.2 0.3
Taken to other comprehensive income – (0.3) – (0.3)
Taken to equity – – (0.1) (0.1)
At end of period (6.7) (2.3) (2.1) (11.1)
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax provision
at 25 December 2015 was £21.7 million (2014: £13.6 million).
Other deferred tax liabilities includes trade names and capital gains rolled forward, other deferred tax assets includes option
schemes £1.7 million (2014: £1.6 million) and long service awards £0.2 million (2014: £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
25 December 26 December
2015 2014
£m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (0.3) (2.2)
Restatement of deferred tax for the change in UK tax rate 0.2 –
Total credited to other comprehensive income (0.1) (2.2)
Deferred tax charge relating to maturity of option schemes (0.1) (0.3)
Restatement of deferred tax for the change in UK tax rate 0.1 –
Total credited to equity – (0.3)
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 provision for 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.
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.
Dignity plc
Annual Report & Accounts 2015
97
21 Financial instruments (continued)
(a) Fair value of current and non–current financial assets and liabilities
25 December 2015
26 December 2014
Nominal value Book value Fair value Nominal value Book value Fair value
£m £m £m £m £m £m
New A Notes – 3.5456%
maturing 31 December 2034 230.8 230.5 238.7 238.9 238.6 248.5
New B Notes – 4.6956%
maturing 31 December 2049 356.4 356.0 376.8 356.4 356.0 394.7
Crematoria Acquisition Facility 15.8 15.7 15.8 15.8 15.6 15.8
Finance leases 0.7 0.7 0.7 0.7 0.7 0.7
Total 603.7 602.9 632.0 611.8 610.9 659.7
The Crematoria Acquisition Facility and New A and New B Notes are held at amortised cost. Finance lease payables represent
the present value of future minimum lease payments. Other categories of financial instruments include trade receivables and
trade payables, however there is no difference between the book value and fair value of these items.
The fair values of the New A and New B Notes are their market value at the balance sheet date and are considered to be
level 1.
The fair value of the Crematoria Acquisition Facility is considered to be nominal value, given the nature of the loan and the
source of the cash flows support its repayment and is considered to be level 3.
(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.
25 December 2015
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) 8.3 8.7 9.0 19.0 542.2 587.2
Interest payable on New Notes 24.8 24.5 24.2 47.5 440.2 561.2
Crematoria Acquisition Facility – – 15.8 – – 15.8
Interest payable on Crematoria
Acquisition Facility 0.5 0.5 0.1 – – 1.1
Finance leases 0.1 0.1 0.1 – 2.6 2.9
Debt repayments 33.7 33.8 49.2 66.5 985.0 1,168.2
Other financial liabilities 54.9 0.3 0.3 0.7 0.8 57.0
88.6 34.1 49.5 67.2 985.8 1,225.2
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
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
98
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
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.
25 December 2015
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
– 0.1 – – 0.7 0.8
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
(c) Trade receivables
As at 25 December 2015, £11.4 million of the individual gross trade receivables (2014: £8.6 million) were past due and
partially impaired. A provision for impairment is established based on historical experience. The amount of the provision,
as at 25 December 2015, was £5.7 million (2014: £4.9 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:
25 December 26 December
2015 2014
£m £m
One to six months 7.0 4.6
Over six months 4.4 4.0
11.4 8.6
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:
25 December 26 December
2015 2014
£m £m
At beginning of period (4.9) (4.5)
Charged to income statement (2.2) (1.6)
Utilised in period 1.4 1.2
At end of period (5.7) (4.9)
(d) Borrowing facilities
(i) The Group has the following undrawn committed borrowing facilities available at 25 December 2015, all of which were at
floating interest rates, in respect of which all conditions precedent had been met at that date:
25 December 26 December
2015 2014
£m £m
Expiring within one year 26.2 –
Expiring between one and two years – –
Expiring in more than two years 60.0 60.0
86.2 60.0
Dignity plc
Annual Report & Accounts 2015
99
21 Financial instruments (continued)
£55.0 million (2014: £55.0 million) of the undrawn facilities available to the Group is a liquidity facility relating to the Class A
and B Secured Notes. This facility may only be used to repay interest and principal on the Secured 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 £55.0 million (2014: £55.0 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 Secured Notes have been repaid in full.
£26.2 million relates to an acquisition facility provided by the Royal Bank of Scotland. It is a committed facility, capable
of being drawn until June 2016. If drawn, the facility is repayable in June 2019. Further details may be found in the
Financial Review.
The remaining £5.0 million facility expires in October 2019. These facilities incur commitment fees at market rates.
(ii) The minimum lease payments under finance leases fall due as follows:
25 December 26 December
2015 2014
£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 2.6 2.7
2.9 3.0
Future finance costs on finance leases (2.2) (2.3)
Present value of finance lease liabilities 0.7 0.7
22 Ordinary share capital
25 December 26 December
2015 2014
£m £m
Allotted and fully paid Equity shares
49,420,291 (2014: 49,170,180) Ordinary Shares of 12 48/143 pence (2014: 12 48/143 pence) each 6.1 6.1
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 249,067 shares issued under the 2012 LTIP
scheme, £nil million (2014: £nil million) consideration in relation to the 1,044 (2014: 14,896) shares issued under the 2013
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.
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 2013, 2014 and 2015.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
100
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
22 Ordinary share capital (continued)
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 2015 2014 2013
Year of grant (pence) Exercise period Number Number Number
2013 – SAYE
2013 – LTIP
2014 – LTIP
2015 – LTIP
23 Share–based payments
1,469.00
–
–
–
1 December 2016
to 31 May 2017
20 March 2016
to 18 March 2023
25 March 2017
to 24 March 2024
6 March 2017
to 5 March 2025
119,810
130,364
149,318
215,270
217,270
217,270
184,780
186,780
155,540
n/a
n/a
n/a
In respect of share–based payment arrangements, total charges to the income statement were £2.4 million
(2014: £2.0 million). The Directors consider that these amounts are not material and hence further detailed disclosures
have been omitted.
24 Net debt
25 December 26 December
2015 2014
£m £m
Net amounts owing on New Notes (586.5) (594.6)
Add: unamortised issue costs (note 16(a)) (0.7) (0.7)
Gross amounts owing on Secured Notes per financial statements (587.2) (595.3)
Net amounts owing on Crematoria Acquisition Facility per financial statements (15.7) (15.6)
Add: unamortised issue costs on Crematoria Acquisition Facility (note 16(c)) (0.1) (0.2)
Gross amounts owing (603.0) (611.1)
Accrued interest on Secured Notes (12.8) (5.7)
Accrued interest on Crematoria Acquisition Facility (0.1) –
Cash and cash equivalents (note 15) 98.8 86.5
Net debt (517.1) (530.3)
In addition to the above, the consolidated balance sheet also includes finance lease obligations and other financial liabilities
which totalled £0.7 million (2014: £0.7 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 25 December 2015, the actual ratio was 3.35 times (2014: 10.69 times). The New Notes were issued on
17 October 2014. Consequently, Senior Interest only accrues from this date for the Relevant Period. Debt Service in 2014,
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.
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.
See note 5 and the Group’s 2014 Annual Report for further details of the replacement of the Old Notes.
Annual Report & Accounts 2015 101
Dignity plc
25 Reconciliation of cash generated from operations
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
£m £m
Net profit/(loss) for the period 56.9 (55.0)
Adjustments for:
Taxation 12.1 (12.7)
Net finance costs 26.5 26.4
Loss on disposal of fixed assets – 0.3
Depreciation charges 14.5 13.3
Amortisation of intangibles 0.1 0.2
Movement in inventories 0.1 0.2
Movement in trade receivables (1.6) 0.3
Movement in trade payables 3.2 (0.6)
External transaction costs 3.2 1.7
Loss on extinguishment of Old Notes – exceptional – 123.2
Elimination of swap – exceptional – 1.0
Changes in other working capital (excluding acquisitions) 7.8 4.1
Employee share option charges (note 23) 2.4 2.0
Cash generated from operations before external transaction costs and
exceptional pension contributions 125.2 104.4
Other non-cash transactions
In 2014, 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(a).
26 Acquisitions
(a) Acquisition of subsidiary and other businesses
Other
Laurel Funerals acquisitions Total
provisional provisional provisional
fair value fair value fair value
£m £m £m
Property, plant and equipment 2.1 1.4 3.5
Intangible assets: trade names 26.6 6.0 32.6
Cash acquired 0.4 0.9 1.3
Receivables 0.5 0.5 1.0
Provisions (note 19) (0.6) (0.2) (0.8)
Other working capital (1.0) (0.9) (1.9)
Deferred taxation (note 20) (5.6) (0.9) (6.5)
Net assets acquired 22.4 6.8 29.2
Goodwill arising 16.1 3.1 19.2
38.5 9.9 48.4
Satisfied by:
Cash paid on completion (funded from internally generated cash flows) 48.6
Accrued consideration 0.5
Reduction in consideration payable for 2014 acquisitions(1) (0.7)
Total consideration 48.4
(1) Consideration payable for two acquisitions made in 2014 was reduced following the finalisation of completion accounts in accordance with the sale and purchase
agreements of these acquisitions.
The residual excess of the consideration paid over the net assets acquired is recognised as goodwill, of which £0.8 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 values ascribed reflect provisional amounts, which will be finalised in 2016 once acquisition working capital balances have
been converted into cash. These fair values reflect the recognition of trade names and associated deferred taxation, and adjustments
to reflect the fair value of other working capital items such as receivables, inventories and accruals which are immaterial.
Each acquisition made followed the Group’s strategy to acquire such locations that will help the Group grow and create value
for shareholders.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
102
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
26 Acquisitions (continued)
It is also not possible to quantify the results of these businesses prior to acquisition as it represents confidential information
relating to the vendors, which the Directors do not have authority to disclose.
Post acquisition operating performance of these acquisitions is disclosed in note 3 to the Annual Report.
Laurel Funerals
On 13 July 2015, the Group acquired the entire issued share capital of LMF Equityco Limited (‘Laurel Funerals’) for a
consideration of £38.1 million net of £0.4 million cash acquired. Laurel Funerals owns and operates 36 funeral locations.
If the Group had owned Laurel Funerals for the entire period, then the estimated revenue for the Laurel Funerals would be
£10.4 million and the estimated operating profit would be £4.1 million. These estimates assume an extrapolation of the
Laurel Funerals operating performance post acquisition. No material changes resulted from aligning the Laurel Funerals
accounting policies to those of the Group.
No tax deductions are expected in relation to the goodwill recognised.
This acquisition has been accounted for under the acquisition method and disclosed separately.
Other acquisitions
During 2015, the Group also acquired the operational interest of 12 funeral locations. These transactions were either
acquisitions of trade and assets or acquisitions of the entire issued share capital of a limited company.
All other acquisitions have been accounted for under the acquisition method. None were individually material and
consequently have been aggregated.
(b) Reconciliation to cash flow statement
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
£m £m
Cash paid on completion 48.6 29.0
Cash paid in respect of prior year acquisitions 2.7 –
Cash acquired on acquisition (1.3) (4.3)
Acquisition of subsidiaries and businesses as reported in the cash flow statement 50.0 24.7
27 Employees and Directors
52 week period 52 week period
ended ended
25 December 26 December
2015 2014
£m £m
Wages and salaries 83.6 73.4
Social security costs 5.9 5.2
Other pension costs (note 28) 2.8 2.2
Share option charges (note 23) 2.4 2.0
94.7 82.8
Key management are considered to be the Board of Directors only. Total key management remuneration in the period was
£4.6 million (2014: £4.3 million), including £1.4 million (2014: £1.3 million) of share option charges. The monthly average
number of people, including Directors, employed by the Group during the period was as follows:
2015 2014
Number Number
Management and administration 173 159
Funeral services staff 2,373 2,229
Crematoria staff 327 324
Pre–arranged funeral plan staff 92 76
2,965 2,788
Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 56 to 62 which form part
of these consolidated financial statements.
Annual Report & Accounts 2015 103
Dignity plc
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:
2015 2014
£m £m
Defined contribution schemes 1.1 0.9
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 25 December 2015 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
2015 was £1.4 million (2014: £1.6 million). In addition special contributions of £nil million (2014: £1.0 million) have been
paid to make the total contribution for the year £1.4 million (2014: £2.6 million).
The principal actuarial assumptions at the balance sheet date (expressed as weighted averages) were:
2015 2014
Assumptions % %
Discount rate 3.8 3.7
Rate of increase in salaries 2.1 2.1
Rate of increase in payment of post April 1997 pensionable service 3.05 3.05
Rate of increase in payment of post April 2005 pensionable service 2.15 2.15
RPI price inflation assumption 3.1 3.1
CPI price inflation assumption 2.1 2.1
The demographic assumptions used include rates for mortality which, for example, lead to an average projected life
expectancy of 20.7 (2014: 20.7) years for male members and 26.1 (2014: 26.0) years for female members currently aged
65 and of 22.0 (2014: 21.9) years from age 65 for male members and 27.6 (2014: 27.5) 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:
2015 2014
£m £m
Fair value of plan assets 94.4 95.0
Present value of funded obligations (106.9) (105.5)
Net obligation recognised in the balance sheet (12.5) (10.5)
Analysis of amount charged to income statement in respect of defined benefit schemes
2015 2014
£m £m
Current service cost included within cost of sales (staff costs) 1.7 1.3
Interest costs less interest income included within net finance cost 0.3 –
Expected contributions to the Group’s pension scheme for the 53 week period ended 30 December 2016 are approximately
£1.5 million.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
104
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
28 Pensions (continued)
Analysis of fair value of plan assets
2015 2014
£m % £m %
Equity and diversified growth funds 43.0 45.5 60.7 63.9
Debt 28.0 29.7 25.4 26.7
Cash 23.4 24.8 8.9 9.4
Fair value of plan assets 94.4 100.0 95.0 100.0
At 25 December 2015 and 26 December 2014 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.
Changes in the present value of the defined benefit obligation are as follows:
2015 2014
£m £m
Present value of obligation at beginning of period (105.5) (92.2)
Current service cost (1.7) (1.3)
Interest cost (3.8) (4.2)
Benefits paid 4.2 3.7
Contributions by participants (1.5) (1.5)
Remeasurement gains/(losses) – financial 1.9 (12.4)
Remeasurement gains – demographic – 1.0
Remeasurement (losses)/gains – experience (0.5) 1.4
Present value of obligation at end of period (106.9) (105.5)
Changes in the fair value of plan assets are as follows:
2015 2014
£m £m
Fair value of plan assets at beginning of period 95.0 91.2
Interest income on plan assets 3.5 4.2
Contributions by Group 1.4 2.6
Contributions by participants 1.5 1.5
Benefits paid (4.2) (3.7)
Remeasurement losses (2.8) (0.8)
Fair value of plan assets at end of period 94.4 95.0
Analysis of the movement in the balance sheet obligation
2015 2014
£m £m
At beginning of period (10.5) (1.0)
Total expense as above charged to the income statement (2.0) (1.3)
Remeasurement losses charged to other comprehensive income (1.4) (10.8)
Contributions by Group 1.4 2.6
At end of period (12.5) (10.5)
The actual return on plan assets was £0.7 million (2014: £3.5 million).
History of experience gains and losses
2015 2014
Experience adjustments arising on scheme liabilities:
Amount (£m) (0.5) 1.4
Percentage of the present value of the scheme’s liabilities 0.5% 1.3%
Present value of scheme liabilities (£m) (106.9) (105.5)
Fair value of scheme assets (£m) 94.4 95.0
Deficit (£m) (12.5) (10.5)
Annual Report & Accounts 2015 105
Dignity plc
28 Pensions (continued)
Increase/
(decrease) in
Liabilities Assets Deficit surplus
Change in assumptions £m £m £m £m
No change (106.9) 94.4 (12.5) –
0.25% rise in discount rate (102.5) 94.4 (8.1) 4.4
0.25% fall in discount rate (111.7) 94.4 (17.3) (4.8)
0.25% rise in inflation (109.7) 94.4 (15.3) (2.8)
0.25% fall in inflation (103.9) 94.4 (9.5) 3.0
The above sensitivity analysis has been determined by applying the results of a fully accurate sensitivity analysis as at
6 April 2015 to the value placed on the Scheme liabilities as at 25 December 2015, 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 2015, although these would not be material. The same methodology was used for the sensitivity analysis
undertaken for the year ending 26 December 2014.
Analysis of present value of scheme liabilities
2015 2014
Active members 38% 36%
Deferred pensioners 27% 26%
Current pensioners 35% 38%
Average duration of liabilities 17 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. 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. The investment strategy
is set, implemented and monitored by the Trustees.
It is the view of the Directors that none of the commitments given to these clients, which are explained further below, are
onerous to the Group. However ultimately, the Group is obligated to perform these funerals in exchange for the assets of the
Trust, whatever they may be.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
106
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
29 Pre–arranged funeral plans (continued)
Similar commitments have arisen following acquisitions of businesses, since 2013, which have sold pre–arranged funeral
plans through similar trust based structures (the ‘Recent Trusts’). 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’).
(b) Pre–arranged funeral plan trust assets
As noted above, the Group has given commitments to perform the funerals covered by the pre–arranged plans, regardless of
whether or not the Trusts have available assets to fund the funeral. The Group, therefore, has a potential exposure in the
form of a reduced fee should the Trusts investment strategy, over which it has no control, fail to deliver an appropriate
return or result in a fall in underlying asset values, or if the cost of delivery for a funeral increase at rates in excess of
investment returns.
The Trustees have informed the Group that they have, following independent external advice, completed a restructuring of the
Trust’s investments following a review of the Trust’s investment strategy.
Under their revised strategy the Trustees intend holding investments in the following approximate profile:
Target (%)
Equities 22
Alternative investments 13
Developed credit and cash 65
Equities will in the main be invested in developed markets, but will contain an exposure to emerging markets. Alternative
investments relate to investments in markets such as reinsurance, emerging market debt and property funds.
This 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, potentially result in greater volatility year on year in the reported value of the Trust’s assets.
The trustees have advised that the market value of the assets of the pre–arranged funeral plan trusts was £736.0 million
at 25 December 2015 (2014: £678.0 million) in respect of 290,000 (2014: 275,000) active pre–arranged funeral plans.
49,000 (2014: 46,000) of the remaining active pre–arranged funeral plans related to those backed by Insurance Plans, as
described in note 1 to the consolidated financial statements, with the balance of 35,000 (2014: 27,000) being plans arising
from acquisitions.
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). This actuarial valuation is of liabilities of the Trusts to secure funerals through Dignity
and other third party funeral directors and does not, in respect of those funerals delivered by the Group represent the cost of
delivery of the funeral. It is only in the event that there are insufficient funds within the Trusts to cover the cost of delivery to
Dignity that the commitment would become onerous to Dignity as described in (a) above.
The trustees have advised that the latest actuarial valuations of the Principal Trusts were performed as at 25 September
2015 (2014: 26 September 2014) using assumptions determined by the trustees. These valuations showed the Trusts
to have liabilities in respect of the pre–arranged funeral plan trusts of £692.1 million as at 25 September 2015
(2014: £612.9 million). The corresponding market value of the assets of the pre–arranged funeral plan trusts was
£696.9 million (2014: £630.6 million) as at the same date. Consequently the actuarial valuations recorded total surpluses
of £4.8 million at 25 September 2015 (2014: £17.7 million).
The trustees have advised that the Recent Trusts have approximately £22 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 above and
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 (which are recognised
by the Group as revenue within the pre–arranged funeral plan division at the time of the sale); and
• Receipts from the Trusts in respect of funerals provided (which are recognised by the Group as revenue within the funeral
division when the funeral is performed).
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.
Annual Report & Accounts 2015 107
Dignity plc
29 Pre–arranged funeral plans (continued)
Transactions are summarised below:
Amounts due to the
Transactions during the period Group at the period end
2015 2014 2015 2014
£m £m £m £m
Dignity Limited Trust Fund 0.3 0.3 – –
National Funeral Trust 41.5 34.8 4.7 3.6
Trust for Age UK Funeral Plans 38.5 35.1 4.6 5.3
Recent Trusts 2.0 1.5 0.4 0.3
Total 82.3 71.7 9.7 9.2
Amounts due to the Group from the Trusts are included in Trade and other receivables.
The above transactions were included within revenue under the following captions:
Transactions during the period
2015 2014
£m £m
Funeral services revenue 40.0 32.1
Pre–arranged funeral plans revenue 29.0 28.0
In addition to the transactions recognised within revenue in the table above, there were £13.3 million (2014: £11.6 million) of
transactions between the Group and the Trusts which represented amounts paid to the Group to reimburse them for trust
expenses, monies repaid to members on cancellation and monies paid to third parties for the performance of some funeral
services; all of which have no impact on the income statement.
Average transaction amounts
The trustees have advised that the Trusts hold assets of approximately £2,500 (2014: £2,400) per active plan at the balance
sheet date. On average the Group received approximately £2,450 (2014: £2,300) in the period 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
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;
• 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;
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
108
Financial Statements
Notes to the financial statements continued
for the 52 week period ended 25 December 2015
30 Contingent liabilities (continued)
• 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 25 December 2015, the amount outstanding in relation to these borrowings was £587.2 million (2014: £595.3 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 NatWest, 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 NatWest 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 25 December 2015, the amount outstanding in relation to these borrowings was £15.8 million (2014: £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 one funeral location since the balance sheet date.
Annual Report & Accounts 2015 109
Dignity plc
Dignity plc Company balance sheet
as at 25 December 2015
25 December 26 December
2015 2014
Note £m £m
Fixed assets
Investments C2 143.4 141.0
Current assets
Debtors C3 207.9 160.7
Cash at bank and in hand 46.3 32.4
Total current assets 254.2 193.1
Creditors: amounts falling due within one year C4 (13.9) (12.7)
Net current assets 240.3 180.4
Total assets less current liabilities 383.7 321.4
Net assets 383.7 321.4
Capital and reserves
Called up share capital C5 6.1 6.1
Share premium account C5 4.8 2.8
Capital redemption reserve C5 141.7 141.7
Other reserves C5 3.6 3.2
Profit and loss account C5 227.5 167.6
Total shareholders’ funds C6 383.7 321.4
The financial statements on pages 109 to 115 were approved by the Board of Directors on 2 March 2016 and were signed on
its behalf by:
M K McCollum
Chief Executive
S L Whittern
Finance Director
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
110
Financial Statements
Notes to the Dignity plc financial statements
for the 52 week period ended 25 December 2015
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 25 December
2015. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
26 December 2014.
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.
Annual Report & Accounts 2015 111
Dignity plc
C2 Investments in subsidiary undertakings
Cost and net book amount £m
At beginning of period 141.0
Additions in respect of share–based payments 2.4
At end of period 143.4
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.
A detailed listing of all subsidiary undertakings is included in note C9 below.
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
C3 Debtors
25 December 26 December
2015 2014
£m £m
Amounts falling due within one year:
Amounts owed by group undertakings 207.2 160.4
Other debtors 0.1 0.1
Corporation tax 0.6 0.2
207.9 160.7
C4 Creditors: amounts falling due within one year
25 December 26 December
2015 2014
£m £m
Amounts owed to subsidiary undertakings 13.4 12.4
Accruals 0.5 0.3
13.9 12.7
C5 Called up share capital and reserves
25 December 26 December
2015 2014
£m £m
Allotted and fully paid Equity shares
49,420,291 (2014: 49,170,180) Ordinary Shares of 12 48/143 pence (2014: 12 48/143 pence) each 6.1 6.1
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 2.8 141.7 3.2 167.6 315.3
Profit for the period – – – 69.9 69.9
Effects of employee share options – – 2.4 – 2.4
Proceeds from share issue 2.0 – – – 2.0
Gift to Employee Benefit Trust – – (2.0) – (2.0)
Dividends paid on Ordinary Shares – – – (10.0) (10.0)
At end of period 4.8 141.7 3.6 227.5 377.6
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.
Other reserves
Other reserves includes movements relating to the Group’s SAYE and LTIP schemes.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
112
Financial Statements
Notes to the Dignity plc financial statements continued
for the 52 week period ended 25 December 2015
C6 Reconciliation of movements in shareholders’ funds
25 December 26 December
2015 2014
£m £m
Profit for the period 69.9 94.7
Effects of employee share options 2.4 2.0
Proceeds from share issue 2.0 2.2
Gift to Employee Benefit Trust (2.0) (2.0)
Issue and redemption of B Shares in respect of Capital Option – (20.1)
Dividend in respect of Special Dividend Option – (44.3)
Dividends paid on Ordinary Shares (10.0) (9.8)
Net additions to shareholders’ funds 62.3 22.7
Opening shareholders’ funds 321.4 298.7
Closing shareholders’ funds 383.7 321.4
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 56 to 62. They received no emoluments in respect of their services to the Company (2014: 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.
C9 Subsidiary undertakings
Principal subsidiaries
Company name
Advance Planning Limited
Dignity (2002) Limited
Dignity Crematoria Limited
Dignity Crematoria No.2 Limited
Dignity Finance PLC
Dignity Funerals Limited
Dignity Funerals No.3 Limited
Dignity Pre Arrangement Limited
Dignity Securities Limited
Pitcher & Le Quesne Limited
Other subsidiaries
Company name
Birkbeck Securities Limited
Dignity (2004) Limited
Dignity (2008) Limited
Dignity (2011) Limited
Dignity (2014) Limited
Dignity Finance Holdings Limited
Dignity Holdings Limited
Dignity Holdings No.2 Limited
Dignity Holdings No.3 Limited
Dignity Mezzco Limited
Dignity Services
Principal activity
Pre-arranged funeral plans
Intermediate holding company
Construction and leasing of crematoria
Construction and leasing of crematoria
Finance company
Funeral services
Funeral services
Pre-arranged funeral plans
Pre-arranged funeral plans
Funeral services
Principal activity
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Finance company
Intermediate holding company
Recent acquisition companies – dormant from 2016
Company name
Principal activity
Astley Funerals Limited
Dewi Reynolds & Sons Limited
Dignity Funerals No.4 Limited
F. J. Gibb Limited
Graham Sullivan Funeral Directors Limited
H Johnson & Sons Limited
Mahony & Ward Limited
T J Brown & Sons Limited
Arthur J. Nash Limited
F. Jennings & Sons Limited
F. M. & J. Wait & Co Limited
K. Y. Green Limited
W H Scott & Son Limited
Funeral services
Funeral services
Funeral services
Funeral services
Funeral services
Funeral services
Funeral services
Funeral services
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Annual Report & Accounts 2015 113
Dignity plc
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
114
Financial Statements
Notes to the Dignity plc financial statements continued
for the 52 week period ended 25 December 2015
C9 Subsidiary undertakings (continued)
Dormant companies
A & N Duckworth Limited
A Ashton & Sons Limited
A Bennett & Sons Limited
A F Townsend (Funeral Directors) Limited
A Hazel & Sons Limited
A Shepherd & Sons Limited
A T Genders Limited
A V Band Limited
A. Haxby & Sons (Filey) Limited
Abbey Funeral Service Limited
Adela Funeral Homes Limited
Anglian Funeral Service Limited
Armitage (Funeral Directors) Limited
Arthur Denyer Limited
Arthur G Whitehead (Westminster) Limited
Ashton & Ebbutt Limited
Ashton Ebbutt Holdings Limited
Ashton Memorials Limited
Ashtons (Brighton) Limited
Associated Funeral Services Limited
B & B Funeral Directors Limited
B. Bernard & Sons Limited
Baguley Bros. Limited
Banks Funeral Service Limited
Birmingham Crematorium (1973) Limited
Boyce Anderson Motors Limited
Bracher Brothers Limited
Brighton Stonemasons Limited
Broadwater Limousines Limited
Broomco (2013) Limited
C Powell Funeral Service Limited
Caledonian Funeral Services Limited
Carrwood Funeral Supplies Limited
Castle Court Funeral & Limousine Services
Limited
Chichester Crematorium Limited
Chosen Heritage (Scotland) Limited
Chosen Heritage Limited
Chosen Heritage Services Limited
Clegg Humphreys Limited
Cooksey & Son Limited
Cooksley & Son Limited
Coombes & Sons (Bovey Tracey) Limited
Counties Crematorium Limited
Coyne Brothers Limited
Cumbernauld Funeral Services Ltd
Cyril H. Lovegrove Limited
D J Thomas (Funeral Directors) Limited
D. J. Evans Forse & Co Limited
D. Walsh & Son Limited
Daly & Company Limited
David B Hendry Limited
David Silvey & Son Limited
Davis McMullan Funeral Directors Limited
Derriman & Haynes Funeral Services Limited
Dignity (2009) Limited
Dignity Caring Funeral Services Limited
Dignity Funerals No.2 Limited
Dignity In Destiny Limited
Dignity Legal Services Limited
Dignity Manufacturing Limited
Dillistone Funeral Service Limited
Docklands Funeral Services Limited
Dottridge Brothers Limited
Downer & White Limited
Downs Crematorium Limited
Dowsett & Jenkins Limited
Dundee Crematorium Limited
Dunning (Undertaking) Limited
Dyson Richards Limited
E Hurton & Son Limited
E M Lander Limited
E Seymour & Son Limited
E. Brigham Funeral Directors Limited
E. F. Edwards Limited
E. Finch & Sons Limited
Earl Of Plymouth Limited
Eden Park Estate Limited
Edmund & Lewis Limited
Edward Lewis Wicks & Sons Limited
Ely Funeral Service Limited
Ever 1324 Limited
Ever 1326 Limited
Ever 1327 Limited
Exeter & Devon Crematorium Limited
F L Mildred & Sons (Funeral Directors) Limited
F. Kneeshaw & Sons (Funeral Directors) Limited
F. E. J. Green & Sons Limited
F. G. Pymm (Funeral Directors) Limited
F. Harrison & Son (Funeral Directors) Limited
F. Smith & Son (Staines) Limited
Family Funeral Services Limited
Farebrother Funeral Services Limited
Fisher & Townsend (Funeral Directors) Limited
Flowers By Design Limited
Ford Ennals Funeral Services Limited
Forethought Limited
Francis Chappel & Sons Limited
Frank Stephenson & Son (Funeral Directors)
Limited
Frederick W Chitty & Co Limited
Fredk. W. Paine Limited
Funeral Debt Collection Limited
Funeral Services London Limited
G. M. Charlesworth & Son Limited
G. F. Cook (Funerals) Limited
G. F. Hunt (Bath) Limited
G. Gamble & Son Limited
G. Smith (Wooburn) Limited
George Hall & Son Funeral Directors Limited
George S. Munn & Company, Limited
George Stanton (1935) Limited
Gerald Martin Funeral Directors Limited
Ginns & Gutteridge Limited
Gornalls Funeral Services Limited
Grave Design Limited
Great Southern Group Limited
Grimmett & Timms Limited
H & G Wilde Funeral Directors Limited
H A Harrold & Son Limited
H J Dawson Limited
H J Phillips & Son (Funeral Directors) Limited
H Leslie Humphreys Limited
H Tonkin Limited
H. J. Whalley & Sons Limited
H. Towell Ltd
H. Copeland & Son Limited
H. Dorricott & J. Bent Limited
H. G. Brown & Sanders Limited
H. Hill Funeral Service Limited
H. R. H. Holdings Limited
Hambrook & Johns Limited
Hanningtons (Funeral Directors) Limited
Hardacres Funeral Directors Limited
Harry Williams & Sons (Cambridge) Limited
Heighton & Son Limited
Hemley Funeral Service Limited
Henry Naylor (Funeral Directors) Limited
Henry Paul Limited
Henry Smith (Wandsworth) Limited
Highfield Funeral Service Limited
Hindu Funeral Service Limited
Hodgson Holdings (Scotland) Limited
Hodgson Holdings Limited
Holdfast (Funerals) Limited
Howard Jenkins (Edge Hill) Limited
Hunters Funeral Directors Limited
Ian Clarke Funeral Service Limited
Ingall Services Limited
Invicta Memorials Limited
J H Kenyon Limited
J H Raven Limited
J Kynaston Limited
J Steadman & Sons Limited
J. W. Tate & Son (Holdings) Limited
J. W. Tate & Son Limited
Jack Lee & Sons Limited
James Allen & Son (Disley) Limited
James Crook Limited
John & William Shering Limited
John Bardgett & Sons Limited
John G Ashton & Co (Funeral Directors) Limited
Johnson Funeral Supplies Limited
Johnson-Sears Limited
Jonathan Harvey Limited
Joseph Swift (Funeral Director) Limited
Joseph Tomlinson & Sons Limited
Joslin Memorials (1974) Limited
Kellaways (Funeral Service) Limited
Ken Gregory & Sons Limited
Kent Funeral Supplies Limited
Kenyon Air Transportation Limited
Kenyon Emergency Services Limited
Kenyon Repatriation Limited
Kenyon Securities Limited
Kenyons Funeral Directors Limited
Kirkwoods (Funeral Directors) Limited
L Fulcher Limited
L J Clegg Limited
Lambeth & Brixton Community Funeral
Services Limited
Lambeth Funeral Services Limited
Lea Valley Funeral Services Limited
Leeds Limousines Limited
Leehope Services Limited
London Necropolis Company Limited
Longhurst (Undertakers) Limited
Lowden Wells Limited
Annual Report & Accounts 2015 115
Dignity plc
U. F. D. Limited
UK Funerals Limited
UKF Limited
W G Dixon Limited
W G Rathbone Funeral Directors Limited
W S Bond Limited
W S Harrison & Son Limited
W Thorp & Sons (Leigh-on-Sea) Limited
W. E. Turner (Funeral Furnishers) Limited
W. Garstin & Sons Limited
Walmsley Hammond (Rayleigh) Limited
Warburton Funerals Limited
Wetton Funeral Services Limited
White Lady Funerals Limited
Whyte Funeral Services Limited
William Pearce & Son Limited
Wilmshurst & Dickson Limited
Woodfield Park Funeral Home Limited
Yew Holdings Limited
C9 Subsidiary undertakings (continued)
Dormant companies continued
MacIntosh & Steven Limited
Malcolm J Presland Limited
Mannerings Limited
Mathias's of Putney Limited
Maxwell Bros. Limited
Meadow Pool Limited
Mews & Yeatmans Limited
Mid Sussex Funeral Services Limited
Middleton & Wood (1919) Limited
Monumental Masons Limited
Moodys Funeral Directors Limited
Moray Crematorium Holdings Limited
Moray Crematorium Limited
Morecambe & Heysham Funeral
Service Limited
N A Medd Limited
National Funeral Trust Limited
Newport Hire (I.W.) Limited
Newsome's Funeral Service (Royston) Limited
Norfolk Crematorium Limited
Northampton Crematorium Limited
Norwich Crematorium Holdings Limited
Norwich Crematorium Limited
Oxford Crematorium Limited
Patrick Stonemasons Limited
Personal Choice Funeral Plan Limited
PFG Hodgson Kenyon (Services) Limited
PFG Hodgson Kenyon (UK) Limited
PFG Hodgson Kenyon Limited
Philip Ford & Son (Funeral Directors) Limited
Phillips Funeral Plans Limited
Phillips Funeral Services Limited
Phillips Holdings (Hertfordshire) Limited
Phillips Supplies Limited
Piccioni (Masonry) Limited
Plantsbrook Group Limited
Plantsbrook Limited
Preston Ireland Bowker Limited
Priestley & Cockett Limited
R Butler & Sons Limited
R C Holden & Son Limited
R Garner Son & Wood Limited
R. Davies & Son Limited
R. S. Johnson & Sons Limited
R. S. Scott (Funerals) Limited
Ravenhill Funeral Services Limited
Remembrance Limited
Robemanor Limited
Roberts & Brain Limited
Romney Marsh Funeral Services Limited
Rosspark Limited
S A Bates & Sons Limited
S Wellens & Sons Limited
Saftway Limited
Salenew Limited
Sanders Goodale & Co. Limited
SCI Pre Arrangement Limited
Seaford Funeral Service Limited
Seddons of Southport Limited
Selim Smith & Co. Limited
Serenity Limited
Shankill Funeral Services Limited
Silver Lady Funeral Service Limited
Simplicity Funerals Limited
Simpsons (Undertakers Requisites) Limited
Stanway & Garnett Funeral Service Limited
Swift & Mildred Limited
T & R O'Brien Limited
T H Fenton Limited
T S Annison & Sons Limited
T. S. Horlock & Son Limited
T. H. Sanders & Higgs Limited
T. H. Sanders & Sons Limited
T. J. Davies & Sons (Funeral Directors) Limited
Taylors Funerals (Wirral) Limited
The Crematorium Company Limited
The Dignity Plan Limited
The East Riding Crematorium
Company Limited
The Haltemprice Crematorium Limited
The Lawrence Funeral Service Limited
The Leverton Funeral Service (Dartford) Limited
The South London & Southern Counties
Cremation Society Limited
The South London Crematorium Co Limited
The Titford Funeral Service Limited
Thomas Brothers (Wellington and Taunton)
Limited
Thompsons (Busbys) Limited
Thompsons (Funeral Furnishers) Limited
Thompsons (Maguires) Limited
Thompsons (Rimmers) Limited
Tovey & Morris Limited
All of the subsidiaries are incorporated in the United Kingdom except for Pitcher & Le Quesne Limited which is
incorporated in Jersey. All subsidiaries are controlled by the Group.
All of the above shareholdings are held indirectly, with the exception of Dignity (2004) Limited, Dignity (2008) Limited,
Dignity (2011) Limited and Dignity Holdings No.3 Limited.
Dignity plc owns, either directly or indirectly, 100 per cent of the equity interest of all the subsidiaries noted except for
Pitcher & Le Quesne Limited where 99 per cent is owned.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
116
Financial Statements
Financial record*
Summarised consolidated income statement
2015 2014 2013 2012 2011
£m £m £m £m £m
Revenue
Funeral services 212.6 184.4 176.2 157.9 146.5
Crematoria 63.1 55.2 53.8 46.6 41.6
Pre–arranged funeral plans 29.6 29.3 26.7 25.1 22.0
305.3 268.9 256.7 229.6 210.1
Underlying operating profit
Funeral services 76.8 66.3 60.8 54.2 50.8
Crematoria 34.6 29.1 27.4 23.3 21.3
Pre–arranged funeral plans 7.8 7.4 6.7 6.5 5.5
Central overheads (20.5) (17.9) (16.5) (14.6) (13.1)
98.7 84.9 78.4 69.4 64.5
Underlying finance costs (27.0) (30.6) (28.9) (25.8) (25.9)
Finance income 0.5 4.2 3.4 2.5 3.0
Underlying profit before tax 72.2 58.5 52.9 46.1 41.6
Taxation (15.5) (13.1) (12.9) (11.7) (11.4)
Underlying profit after tax 56.7 45.4 40.0 34.4 30.2
Underlying earnings per share (pence) 114.8p 85.8p 72.1p 62.8p 55.1p
Operating profit 95.5 82.9 75.1 68.7 63.2
Profit/(loss) after tax 56.9 (55.0) 40.4 35.7 34.3
Basic earnings per share (pence) 115.2p (104.0p) 72.8p 65.1p 62.6p
Key performance indicators
2015 2014 2013 2012 2011
Total estimated number of deaths in Britain (number) 588,000 550,000 560,000 551,000 539,000
Number of funerals performed (number) 73,500 65,600 68,000 63,200 62,300
Funeral market share** (per cent) 12.3% 11.7% 11.9% 11.2% 11.3%
Number of cremations performed (number) 57,700 53,400 55,500 50,500 47,600
Crematoria market share (per cent) 9.8% 9.7% 9.9% 9.2% 8.8%
Active pre–arranged funeral plans (number) 374,000 348,000 323,000 290,000 265,000
Cash generated from operations (£million) 125.2 104.4 94.2 83.3 74.2
Net debt
2015 2014 2013 2012 2011
£m £m £m £m £m
Net amounts owing on Old Notes per
financial statements – – (403.0) (318.9) (323.3)
Net amounts owing on New Notes per
financial statements (586.5) (594.6) – – –
Add: unamortised issue costs – Old Notes – – (16.3) (14.6) (16.2)
Add: unamortised issue costs – New Notes (0.7) (0.7) – – –
Gross amounts owing on Secured Notes per
financial statements (587.2) (595.3) (419.3) (333.5) (339.5)
Net amounts owing on Crematoria Acquisition Facility per
financial statements (15.7) (15.6) (15.6) (10.0) (9.9)
Add: unamortised issue costs on Crematoria
Acquisition Facility (0.1) (0.2) (0.2) – (0.1)
Gross amounts owing (603.0) (611.1) (435.1) (343.5) (349.5)
Accrued interest on Old Notes – – (14.3) (11.6) –
Accrued interest on New Notes (12.8) (5.7) – – –
Accrued interest on Crematoria Acquisition Facility (0.1) – – (0.1) (0.1)
Cash and cash equivalents 98.8 86.5 79.3 55.6 36.9
Net debt (517.1) (530.3) (370.1) (299.6) (312.7)
Annual Report & Accounts 2015 117
Dignity plc
Summarised consolidated balance sheet
2015 2014 2013 2012 2011
£m £m £m £m £m
Non-current assets
Goodwill and intangible assets 328.2 276.5 250.4 204.5 194.3
Property, plant and equipment 200.6 192.3 183.6 157.1 147.6
Financial and other assets 10.3 10.4 12.7 12.6 12.6
Retirement benefit asset – – – 0.1 1.3
539.1 479.2 446.7 374.3 355.8
Current assets
Cash and cash equivalents – excluding collateralisation of
Liquidity Facility 98.8 86.5 79.3 55.6 36.9
Cash and cash equivalents – collateralisation of Liquidity
Facility – – 63.0 – –
Cash and cash equivalents 98.8 86.5 142.3 55.6 36.9
Other current assets 38.3 36.5 34.4 32.1 30.5
137.1 123.0 176.7 87.7 67.4
Total assets 676.2 602.2 623.4 462.0 423.2
Current liabilities 82.7 60.6 143.6 76.9 45.6
Non–current liabilities 637.4 634.1 437.6 340.5 360.4
Total liabilities 720.1 694.7 581.2 417.4 406.0
Equity attributable to shareholders (43.9) (92.5) 42.2 44.6 17.2
Total equity and liabilities 676.2 602.2 623.4 462.0 423.2
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.
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
O
O
t
t
h
h
e
e
r
r
I
I
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Dignity plc
Annual Report & Accounts 2015
118
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 0371 384 2674 if calling from within the UK, or +44 (0) 121 415 7047 if calling from
outside the UK, or by fax on 0371 384 2100 if faxing from within the UK, or +44 (0) 190 383 3113 if faxing from outside the UK.
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 9 June 2016, at 11.00am at DLA Piper UK LLP, Victoria Square House,
Victoria Square, Birmingham, West Midlands, B2 4DL.
Contact details and advisers
Annual Report & Accounts 2015 119
Dignity plc
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) 371 384 2674
Fax: +44 (0) 371 384 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 Advisers:
DLA Piper UK LLP
Victoria Square House
Victoria Square
Birmingham B2 4DL
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Dignity plc
Annual Report & Accounts 2015
120
Other Information
Financial calendar
2 March 2016
9 June 2016
24 June 2016
Preliminary announcement of 2015 results
Annual General Meeting
2016 financial half year end
24 June 2016 (subject to shareholder approval)
Payment of 2015 final dividend
27 July 2016 (provisional)
Announcement of interim results
28 October 2016 (provisional)
Payment of 2016 interim dividend
30 December 2016
Financial period end
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 3,000 employees
serving families and local communities across the United Kingdom for generations.
At 25 December 2015 Dignity owned 767 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.
Dignity plc
Annual Report & Accounts 2015
ifc
Overview
About Dignity
Contents
Overview
Key financial highlights
A proud history
A strong core business
Strategic Report
From the Chairman
Chief Executive’s overview
06 Market overview
Financial Statements
Group Accounts
of Dignity plc
65
69
69
70
71
72
73
109
110
118
119
A strong and sustainable business
A consistent strategy and business model
Our key performance indicators
The client survey performance
Our summary performance in 2015
Operating review
Financial review
Principal risks and uncertainties
Corporate and social responsibility
Company Accounts
116 Financial record
Other Information
Governance
120 Financial calendar
Directors’ statement on corporate governance
Guide to icons
Chairman’s introduction to governance
Our governance structure
Board of Directors
Audit Committee report
Nomination Committee report
Report on Directors’ remuneration
Directors’ report
01
02
03
04
05
08
12
14
16
17
18
24
28
32
38
39
40
42
46
49
50
63
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
Acknowledgements
Dignity would like to thank all those who participated in
producing this Annual Report, particularly the members
of staff for their contributions.
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 2015
D
i
g
n
i
t
y
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
5
Delivering a strong and
consistent performance