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Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfuneralsplc.co.uk
Dignity plc Annual Report & Accounts 2016
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Funeral services
Crematoria
Pre-arranged
funeral plans
Delivering excellent
client service and
creating long-term
sustainable value
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Dignity plc
Annual Report & Accounts 2016
ifc
Overview
A strong and sustainable business
Delivering excellent client service
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.
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 30
December 2016 Dignity owned 792 funeral locations and operated 44 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.
This report demonstrates how our clear and consistent strategy, strong governance,
dedicated people and financial performance combine to create and sustain value for all our
stakeholders – our clients, employees, shareholders and the local communities we serve.
Contents
Overview
01
02
03
Key financial highlights
Our history and purpose
A strong core business
Strategic Report
04
05
From the Chairman
Chief Executive’s overview
06 Market overview
08
10
13
14
16
23
27
32
Strategy and business model
Our key performance indicators
The Dignity client survey 2016
Our summary performance in 2016
Operating review
Financial review
Principal risks and uncertainties
Corporate and social responsibility
Governance
Chairman’s introduction to governance
Our governance structure
Board of Directors
38
39
40
42
46
49
50
64
Financial Statements
Group Accounts
66
70
70
71
72
73
74
Independent auditors’ report to the members
of Dignity plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Company Accounts
107 Dignity plc Company balance sheet
108 Dignity plc Company statement
of changes in equity
109 Notes to the Dignity plc financial statements
116 Financial record
Other Information
118 Shareholder information
119 Contact details and advisers
120 Financial calendar
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
Find out more about Dignity and
the latest financial information,
results, presentations, reports and
shareholder services or to view
and download a pdf version of the
2016 Annual Report:
www.dignityfuneralsplc.co.uk
Download
2016 Annual
Report.
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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.
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Dignity plc
Annual Report & Accounts 2016
01
Key financial highlights
Generating consistent returns
We have delivered a strong performance in 2016 along with consistent returns
and sustained growth since flotation. Our continued success can also be
measured by our high levels of client satisfaction and a continued commitment
to excellent client service.
Strong cash generation
Progressive dividend
Return ofcash
Our disciplined approach to cash, cost
and capital has strengthened our balance
sheet and allowed us to invest in the
business both organically and
through acquisitions.
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Final dividend of 15.74 pence proposed,
continuing the 10 per cent annual
growth in the dividend per share.
£356.2 million returned to
shareholders since flotation.
Current period financial highlights
This summary booklet
demonstrates how we are
2016
Revenue (£million) 313.6
Creating long-term
sustainable value
Underlying profit before tax(a) (£million)
Underlying operating profit(a) (£million) 101.7
75.2
Underlying earnings per share(b) (pence)
Cash generated from operations(c) (£million)
Operating profit (£million)
Profit before tax (£million)
Basic earnings per share (pence)
H
H
H
H
Interim dividend paid in the period(d) (pence)
T
T
T
T
W
W
W
W
O
O
O
O
Final dividend paid in the period(e) (pence)
R
R
R
R
G
G
G
G
Deaths
.
.
.
.
119.8
121.1
97.7
71.2
115.3
14.31
590,000
Revenue (£m)
3
256.7
268.9
229.6
98.7
Increase/
(decrease)
per cent
A CONSISTENT TRACK RECORD
2015
Our consistent track record in strong cash generation and
305.3
financial discipline enables us to reinvest and grow the
business both organically and by strategic acquisition.
325
300
275
250
225
200
175
150
125
We generate revenues from new and returning clients and by
100
carefully acquiring businesses that complement our network
75
of locations, extend our geographic reach and represent a
50
25
reasonable return on our capital.
0
2014
125.2
We control and measure growth by making well informed
decisions, supported by careful risk management and
good governance.
114.8
72.2
95.5
(3)
2012
2013
2
3
4
4
Revenue up 3%
to £313.6 million
305.3
313.6
2015
2016
h
+3%
69.0
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.
Underlying operating profit (£m)
115.2
3
–
7.85
7.14
13.01
10
110
£356.2m
100
90
10
Since flotation, £356.2 million in cash including dividends
78.4
has been returned to shareholders.
588,000
–
84.9
80
70
69.4
60
98.7
101.7
50
40
30
20
10
0
2012
2013
2014
2015
2016
Underlying earnings per share (pence)
A STRONG CORE BUSINESS
EXCELLENT CLIENT SERVICE
DEDICATED PEOPLE
Underlying operating profit
up 3% to £101.7 million
At Dignity we focus on people – those that work for us,
Our objective is to lead the funeral sector in professional
Our employees are a key asset and our ability to attract, develop
standards of service. We achieve this through the quality of
and retain staff is important in maintaining the long-term
partner with us, invest in our strategy and the local
communities we serve, but above all, those who depend
our operations and our people together with our established
sustainability of the Group. We value and invest in them as they
on the services we provide every day.
strong market positions. This ensures we keep at the forefront
are integral to the delivery of our strategic objectives.
of the funeral industry.
120
We have over 3,000 dedicated employees working across
Our clients are the foundation of our business and their
110
We strive to maintain this position through continuous
our operations from a diverse range of backgrounds and many
trust is earned through our actions both individually and
100
improvement and investment in our portfolio and by working
with long service. At Dignity diversity means understanding and
90
as a group. Our priorities and our success are determined
80
closely with our affinity partners and our funeral locations to
reflecting the communities in which we operate and building
by our impact on them.
70
widen recognition of our products and services and increase
loyalty with clients.
60
62.8
the sale of pre-arranged funeral plans.
We have built a strong reputation for consistently delivering
50
By having the right people, with the right skills and experience
excellent client service, enabling us to build long-term
40
we continue to deliver the consistent service upon which our
30
relationships and a well respected brand. We know that
business depends.
20
our clients value this which is why they continue to return
10
and recommend us.
0
In 2016, £19.6 million was invested in capital expenditure
2012
on the core business and net investment of £56.3 million
in acquiring new locations and opening satellites.
The percentage of Dignity employees who have
over 10 years service.
98.8 per cent of families in the 2016 funeral services client
survey said that Dignity met or exceeded their expectations.
£56.3m
22%
98.8%
Underlying earnings per share
up 4% to119.8 pence per share
2015
2014
2013
72.1
85.8
114.8
h
+3%
119.8
2016
h
+4%
.
.
.
.
Y
Y
Y
Y
T
T
T
T
I
I
I
I
L
L
L
L
I
I
I
I
B
B
B
B
A
A
A
A
T
T
T
T
S
S
S
S
H
H
H
H
T
T
T
T
G
G
G
G
N
N
N
N
E
E
E
E
R
R
R
R
T
T
T
T
S
S
S
S
Non-GAAP 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. These measures are defined as follows:
(a) Underlying profit is calculated as profit excluding profit (or loss) on sale of fixed assets and external
transaction costs.
(b) Underlying earnings per share is calculated as profit 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.
Other notes
(d) Interim dividend represents the interim dividend that was declared and paid in the period out of earnings
generated in the same period.
(e) The final dividend represents the final dividend that was declared and paid in the period relating to the
earnings generated in the previous period.
Links
Find out more about our strategy and business model: p.08 and p.09
Find out more about our business operations, actions and progress: p.16 to p.22
Find out more about our financial performance: p.23 to p.26
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PDF Page: 4pp Booklet 195x182.p4.pdf
PDF Page: 4pp Booklet 195x182.p2.pdf
PDF Page: 4pp Booklet 195x182.p3.pdf
PDF Page: 1-49 Dignity.p1.pdf
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Dignity plc
Annual Report & Accounts 2016
02
Overview
Our history and purpose
Dignity is one of the leading providers of funeral related
services in the UK with strong business foundations.
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.
Although the local communities we serve have evolved
throughout our history, our core purpose has remained
the same.
As an industry leader working at the heart of local communities,
we are well positioned to meet the needs of our clients for
generations to come.
OUR 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.
AT
THE
HEART
OF LOCAL
COMMUNITIES
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.
George S Munn
& Co, Glasgow
George S Munn & Co
is Dignity’s oldest
funeral directors
and was established
in 1812.
T H Sanders & Sons,
Surrey
Apprentice undertaker,
Thomas Sanders,
opened his own
business in Richmond
in 1869. There are now
eight branches with
the Sanders name
across West London
and Surrey.
Birmingham
Crematorium
The oldest crematorium
operated by Dignity and
when it opened in 1903
was one of only nine such
facilities in the UK.
Coyne Bros, Liverpool
After serving in World War
Two, the four Coyne
brothers opened a taxi
business prior to becoming
one of Liverpool’s busiest
funeral directors. The
business was developed
by the Coyne family and
Jerome, the son of Jerry –
one of the founders, is
Dignity’s Regional Manager
for the North West.
Dignity Pre-arranged
Funeral Plans
Dignity launched the
first funeral plan in
the UK.
Northern Ireland
Dignity acquired six
funeral locations in
Northern Ireland.
1812
1848
1869
1880
1903
1928
1946
1947
1985
1994
2008
2016
Jennings,
Wolverhampton
George Jennings
arranged his first funeral
to help a close friend
before establishing an
undertakers with his
wife. The business
was developed by
five generations of his
family and acquired by
Dignity in 2015.
J H Kenyon,® London
Established by James
H Kenyon,the business
has conducted funerals
for the Royal Family,
politicians and other
prominent figures.
Moody’s Funeral
Directors, Dorset
The Moody family were
originally boat builders who
began producing coffins.
They started conducting
funerals in 1928.
T J Davies & Sons,
Newport
Thomas Davies,
grandfather of Operations
Director, Andrew Davies,
established his business
in 1947.
Dignity Caring
Funeral Services
Dignity was created
in 1994 through the
merger of Plantsbrook
Group and Great
Southern Group.
Funeral Services Limited
During the period, Dignity
invested £44 million
(including external
transaction costs) in
acquiring five Crematoria
from Funeral Services
Limited (trading as Co-op
Funeralcare).
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A strong core business
3,000+
Our people come from the
towns and cities they serve or
families that have been in the
funeral profession for
generations.
792 Locations
We operate a network of 792
funeral locations throughout
the UK, generally trading under
established local names.
Our operations are focused and managed across three
main areas, namely Funeral services, Crematoria and
Pre-arranged funeral plans.
Dignity plc
Annual Report & Accounts 2016
03
44 Crematoria
We operate 44 crematoria in
England and Scotland.
743,000
We have already helped more
than 743,000 people plan for
their funeral in advance.
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 2016
At 30 December 2016, we operated
a network of 792 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
2016, Dignity conducted 70,700 funerals
which represented approximately 11.8 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 2016
At 30 December 2016, we operated 44
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 2016, we carried out
59,500 cremations representing 10.1 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 2016
At 30 December 2016, the number of active
funeral plans increased to 404,000.
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.16 and p.17
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 to p.22
£217.8m
Revenue
£79.0m
Underlying
operating profit
£67.5m
Revenue
£37.6m
Underlying
operating profit
£28.3m
Revenue
£8.5m
Underlying
operating profit
70,700
Number of funerals conducted during 2016.
59,500
Number of cremations conducted
during 2016.
404,000
Number of active funeral plans as at
30 December 2016.
Dignity continues to make excellent progress in growing and
strengthening our business in line with our strategic objectives.
Links
Find out more about our strategy and business
model: p.08 and p.09
Find out more about our business operations,
actions and progress: p.16 to p.22
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Dignity plc
Annual Report & Accounts 2016
04
Strategic Report
From the Chairman
Dignity’s continued success is
testament to our consistent focus
and the dedication of our people.
Peter Hindley, Chairman
Summary
• Consistent performance; a stable,
predictable, cash generative business.
• Underlying operating profit up three
per cent.
• Dividend per share increased by
10 per cent again.
+4%
h
Underlying earnings
per share up 4% to
119.8 pence (2015:
114.8 pence).
h
15.74p
Final dividend
of 15.74 pence,
continuing the 10%
annual growth in the
dividend per share.
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.63
Overview
2016 has been another successful
year for the Group, with good financial
performance and continued development
of our network of locations.
In the last couple of years, Dignity
has witnessed some notable changes.
Firstly, the number of deaths increased
significantly in 2015 and then continued
to remain much higher than anticipated
in 2016, helping us deliver stronger than
expected financial performance in the
last two years. Secondly, competition
has continued to increase, particularly in
funerals and pre-arranged funeral plans.
These industries are unregulated which
has encouraged new entrants. We are also
seeing a number of businesses offering
digital services in the funeral market.
We are tackling these changes head on.
We continue to seek regulation of our
markets, arguing that minimum standards
of care should apply in funeral locations
and for better regulation of pre-arranged
plans. We are also seeking to develop
our web presence in ways to help market
our services, but also to help the level
of service we provide our clients. Finally,
we are introducing new, more affordable
services that will appeal to customers we
would not normally expect to be able to
help. These efforts are the start of a multi
year journey for us and we will update our
stakeholders on how these efforts have
helped the business, as all of these areas
represent opportunities for us given our
scale and existing standard of facilities.
Dividends
The Board is proposing a final dividend of
15.74 pence per Ordinary Share, bringing
the total dividend for the year to 23.59
pence; another increase of 10 per cent
on the previous year.
If shareholders approve this payment
at the Annual General Meeting (‘AGM’)
on 8 June 2017, then it will be paid on
30 June 2017 to members on the register
at close of business on 19 May 2017.
Governance and the Board
As a board, we are committed to
maintaining our high standards of
corporate governance. The Board continues
to focus not only on what we deliver as a
business, but also how we deliver. Ensuring
that there is a high level of cultural integrity
embedded within the way we operate is a
key part of what we deliver as a business
and how we deliver, as is our ability to drive
sustainable performance and meaningful
stakeholder value.
The composition of the Board has been
stable, with one planned change to address
succession planning. As already announced,
Martin Pexton has left the Board and been
replaced by Mary McNamara. I would like
to thank Martin for his contribution to the
Group and I am delighted to welcome
Mary to the Board.
Creating value responsibly
“
Ensuring that there is a high level
of cultural integrity embedded
within the way we operate is a
key part of what we deliver as a
business and how we deliver, as
is our ability to drive sustainable
performance and meaningful
stakeholder value.
Acting with integrity to make
a difference
• Helping families at a very difficult time
remains our core purpose. We also aim
to support the communities in which
we operate and we are proud of the
positive role that our operations and
people play in society every day,
whether this is through job creation
and promoting good business practice,
or supporting local charities and
community organisations.
Our people
As in previous years we have made a
discretionary bonus payment to our
employees, this year equating to £1,200
per full time employee. We have also
decided to embed this amount in all
employees’ future pay rather than continue
to treat it as a discretionary bonus.
Therefore all employees have received
a flat £1,200 pay increase (pro rated for
part time employees) in January 2017.
All other things being equal, the Group
does not as a consequence anticipate
making a discretionary bonus payment
to staff in respect of 2017’s performance.
This salary increase applied across the
business, including managers and
Executive Directors alike.
Outlook for 2017 and beyond
The number of deaths has been higher in
2016 than the Group originally anticipated
following a significant increase in the
number of deaths in 2015. Historical data
would suggest that deaths in 2017 could
be significantly lower than 2015 and 2016.
Trading in the first few weeks of 2017
has however continued to be strong. As a
result, the Board’s financial expectations
are unchanged for the year ahead.
The Board remains positive about the
future prospects for the Group. However,
given the increased size of the Group
and increasing competition in each of
our markets the Board has revised its
medium-term target underlying EPS
growth rate to eight per cent per annum
from the current 10 per cent. As with the
previous target, this objective includes
the benefit of the reinvestment of cash
generated by the business and the Group’s
ability to releverage its balance sheet either
to fund acquisitions or return capital
to shareholders.
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Chief Executive’s overview
A strong platform to drive growth
and deliver long-term value.
Dignity plc
Annual Report & Accounts 2016
05
Mike McCollum, Chief Executive
Performance in 2016
• Strong cost control.
• Core portfolio continues to deliver growth.
• Invested in the business where
appropriate.
• Acquisitions add further value.
98.8%
98.8 per cent of families said that
Dignity met or exceeded their
expectations.
Links
See Market overview:
p.06 and p.07
See Strategy and business model:
p.08 and p.09
See Operating review:
p.16 to p.22
Overview
A year ago, we described an extraordinary
period in 2015, with the number of deaths
increasing by seven per cent to 588,000.
We noted that it was likely this sharp
increase would normalise in 2016, but this
has not been the case. Reported deaths
were slightly higher than 2015 at 590,000.
Allowing for the fact that 2016 represents
a 53 week period for the Group, means
that even on a 52 week comparable basis,
deaths were only approximately two per
cent lower in the period. This has enabled
us to grow profits year on year and
outperform expectations despite some
headwinds experienced by the business.
The performance reflects a larger market
share loss in our core business than seen
before, combined with additional costs
incurred to support the business. The
market share decline follows stronger
market share than expected in 2015.
2017 has started well but we continue
to keep this under review.
We expect 2017 to be a year where we
develop the business further in response
to the changing environment in which we
operate. For example, we have engaged
with the reviews into funeral services by
the Scottish and Westminster parliaments,
arguing for regulation of funeral services
and pre-arranged funeral plans. We are also
working hard on introducing new digital
services. The first such example is
the launch of Simplicity Cremations,
a nationally available, online, affordable
direct cremation service (where there is
no traditional funeral service, simply the
collection and unwitnessed cremation
of the deceased and then return of the
ashes). This does not replace the full
service, traditional funeral that we provide,
but rather provides families with a lower
cost simple option. The market for this
service is currently small but given our
significant national networks of funeral
locations and crematoria we are able to
offer this service in a more comprehensive
and cost effective way than other operators.
Corporate activity
The business invested £56.3 million
on acquisitions in the period, including
£41.1 million (excluding external
transaction costs) to acquire five
crematoria locations from Funeral Services
Limited (trading as Co-op Funeralcare)
(the ‘Crematoria Acquisition’). This was an
unexpected opportunity for the Group and
one we were able to quickly respond to
thanks to our strong balance sheet and
detailed understanding of the market.
The Crematoria Acquisition generated
£1.0 million of operating profit in the
period, in line with expectations.
We have also seen further developments
in our plan to build new crematoria.
An update on this is described in the
Operating Review.
Maintaining investment and development
momentum in our core business
We continue to set aside resources to
invest in our existing funeral and crematoria
locations. We have increased the staffing
of our property team in the year to manage
our estate and associated capital
expenditure more efficiently and to create
additional recourse for finding funeral
satellite locations and crematorium sites.
This should help to free local management
time so that they can further focus on
delivering excellent client service.
Long-term focus drives strong
performance
The business has yet again demonstrated
its robustness and is well placed for the
future. We hope to achieve our revised
medium-term target of eight 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.
We will also need to ensure the high
standards Dignity operates at are properly
understood by all stakeholders; particularly
given continued political and media interest
in the sector and our ongoing support for
better regulation of the industries in which
we operate.
Driving sustainable performance
“
Our objective is to lead the funeral
sector in professional standards
and service. I believe we do this
and that we continue to improve.
Our clients value this which is why
they return to us and recommend
us, allowing us to report strong
financial results.
Differentiating through service quality
and consistency
• The results of our funeral service surveys
continue to demonstrate the strength and
quality of our people and operations.
• High levels of client satisfaction help us
to build trust and maintain loyalty to our
brand and services and develop strong
relationships with both returning and
new clients.
• Strategic and effective management of
our resources and relationships is vital in
ensuring the sustainability of our business.
Sustainability and continuity
• Our clear and consistent strategy remains
focused on the principle that by operating
with the best people and practices, we will
continue to deliver outstanding service to
our clients and generate sustained value
for all our stakeholders.
• Our strong capital management underpins
our ability to enhance our operations and
services through: continuous improvement;
investment in steady organic and acquired
growth; and further strategic development.
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Dignity plc
Annual Report & Accounts 2016
06
Strategic Report
Market overview
The UK funeral market and our
strong position within it.
The funeral sector
• 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.
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 of the market and
key trends shaping the sector
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 circa 70 per cent owned by
local authorities. It is estimated that three
quarters of all funerals result in a cremation
with the remainder being burials.
Regulation and licencing
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.
Legislative changes by the Scottish
Government were enacted in 2016. This
provides them with the powers to regulate
the funeral industry and they are currently
recruiting an Inspector of Funerals. Dignity
welcomes this progress and has been party
to initial discussions about the pending
regulations. Dignity anticipates making
further contributions to the discussion on
the service standards required within the
regulations to be introduced.
Crematoria are subject to environmental
regulations in accordance with “The
Secretary of States Guidance Notes for
Crematoria–PG5/2(12)”, with emission
levels being monitored by Environmental
Health Officers in England and Wales and
Scottish Environment Protection Agency
in Scotland. The abatement of mercury
emissions has improved the environmental
position with Dignity exceeding the current
legislation of 50 per cent abatement.
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.
Dignity also welcomes proposed changes
to the Funeral Planning Authority (‘FPA’),
who act as a self regulatory body for the
sale of pre-arranged funeral plans. As we
understand them the changes will remove
provider representation from the Board of
the FPA and make them independent of
those selling plans. Assuming the changes
are implemented, registration with the FPA
and compliance with its requirements will
help to provide further comfort to customers
as to the quality of the plan they are buying.
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 53 weeks in 2016
was 590,000 compared to 588,000 for
the 52 week period in 2015. 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 low of 539,000 in 2011,
the last five years have seen deaths above
that level.
Competitive environment
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.
Whilst we believe 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 long-term increases
in the number of deaths, reaching
approximately 700,000 by 2040. Deaths
have been elevated in the last few years.
Whether this marks the start of this
longer-term trend or a temporary anomaly
is too early to conclude.
Our strategic response to factors influencing the funeral sector
Funeral affordability
We understand the needs and challenges our
clients face such as price, affordability and
choice balanced with quality of standards
of service and care. We address this by being
professional, open and transparent in how we
act and by providing options and services that
meet them effectively.
Government and regulatory policy change
Dignity would welcome further regulation of the
funeral industry setting out minimum standards
for core activities, such as the care of the
deceased, facilities and also operating
procedures in crematoria.
The Group already operates at a very high
standard using facilities appropriate for the
dignified care of the deceased.
Our position and why our clients
choose us
Our professional advice to the communities
we serve remains to choose a funeral
director on standards, service and facilities
as well as cost. Every day we provide our
clients with industry leading services they
rely on. We constantly focus on building
and enhancing our reputation through
continuous improvement to deliver services
that our clients value.
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Dignity plc
Annual Report & Accounts 2016
07
Market overview
Delivering on
our promises
Developing
full potential
Doing the
right thing
As an industry leader:
• We set the highest standards;
• We listen, understand and respond; and
• We strive for continuous improvement to
meet and exceed expectations.
• We invest in our people;
• We embrace diversity and inclusion; and
• We manage the business for the long-term.
• We put safety first;
• We act ethically and with integrity; and
• We care about our communities.
Links
See Strategy and business model: p.08 and p.09
See Our KPIs: p.10 to p.12
See The Client Survey performance: p.13
See Operating review: p.16 to p.22
Focused on services that make a difference to our clients and maintain our strong market position
MEETING OUR
CLIENTS’ NEEDS
How are we doing this:
• In today’s digitally enabled and data rich
world it is essential that we equip our
people with the latest technology and
tools to support their activities and the
services we provide to our clients.
• Enabled by technology, we are evolving
our presence online, providing clients
with on demand information when and
how they need it.
How are we doing this:
• Our facilities continue to offer respectful
ways to memorialise loved ones in
peaceful settings.
• We use technology to enhance music
choices available at services, given
increasingly varied choices by families.
How are we doing this:
• We continue to review the plans offered
to customers to ensure they are
appropriate to their needs.
OUR STRENGTHS
Dignity’s funeral market share
11.8% (2015:12.3%)
Funeral services:
Dignity has approximately 11.8 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.
Dignity’s crematoria market share
10.1% (2015:9.8%)
Crematoria:
With 44 crematoria, Dignity is the largest
single operator in Britain. The cremations
performed represent approximately 10.1
per cent of deaths in Britain. There is
still significant scope to expand through
acquisition or new builds where possible.
Number of active pre-arranged
funeral plans
404,000 (2015:374,000)
Pre-arranged funeral plans:
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.
The ways we connect with
our clients
We are in an era that is increasingly
defined by digital technology, but one in
which personal face-to-face service will
continue to be of critical importance.
The impact of digital technology has now
become a mainstream factor in every day
life and clients interact with us in multiple
ways, using various channels and it is a
key part of our development to recognise
and respond to these trends.
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Market trends and client insights
One of our key strengths is that we focus solely on
the funeral sector. This enables us to continually
monitor evolving market trends to ensure we
continue to improve and meet our clients’ needs
and preferences and helps us to anticipate and
respond to developments and opportunities.
84%
Reputation, recommendation and previous
experience, together with pre-arranged funerals
represent 84 per cent of the Group’s business.
This has been broadly constant for the last
10 years.
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 2016
Reputation,recommendation
& previous experience
(right hand axis)
Pre-arranged
funeral plans
(left hand axis)
Closest location
(left hand axis)
Other
(left hand axis)
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Dignity plc
Annual Report & Accounts 2016
08
Strategic Report
Strategy and business model
Delivering excellent service lies at the
heart of what we do. It shapes our
strategy and is how we focus our efforts
on continuing to create value.
A consistent strategy and focus
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.
Our objective is to lead the funeral sector
in professional standards and service;
acting responsibly in all our relationships
and playing a positive role in the local
communities we serve.
Corporate responsibility is integral to our
business as it supports the delivery of
our strategy and aligns with our values.
EXCELLENT CLIENT SERVICE
A STRONG CORE PORTFOLIO
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.
Continued focus:
• Quality and consistency of service delivery
remains our focus. Building strong
relationships with our clients and aligning
strategically with their needs is critical to
broadening and deepening the level of
value we provide and supporting our
growth ambitions.
PEOPLE AND EXPERTISE
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 focus:
• The high number of long service
employees is testament to the strength
of our unique Dignity culture.
Funeral services
• We are a major provider of funeral services
in the UK and we strive to set the highest
standards of care.
Crematoria
• 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.
Pre-arranged funeral plans
• 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.
Continued focus:
• We invest significantly in our existing
business, striving to ensure it is one of
the highest standard, both in client facing
areas and behind the scenes. We also
seek to invest in new business that will
help Dignity grow and create value.
• We remain a significant provider of pre-
arranged funeral plans and continue to
work with our established partners and
develop new partnerships to sell plans
efficiently.
STRONG CAPITAL MANAGEMENT
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.
Continued focus:
• We remain cash generative which, together
with our continued focus on costs, places
us in a strong position to invest for further
growth and enhance shareholder value.
A STRONG PLATFORM DRIVING GROWTH AND DELIVERING LONG-TERM VALUE
STRENGTH
STABILITY
GROWTH
Staying focused on leveraging our
competitive strengths and consistently
delivering excellent client service.
h
Maintaining our strong position in a
stable industry with opportunities
to acquire market share.
h
Managing the business to deliver
strong EPS growth, cash flow and
return on capital.
h
Drives enduring demand
for our products and services.
Supports our long-term
growth objectives.
Delivers long-term
sustainable value.
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The consistent returns we generate
for our shareholders creates value
and benefits all our stakeholders.
Dignity plc
Annual Report & Accounts 2016
09
Links
Find out more about our KPIs and how we measure
performance: p.10 to p.12
Find out more about how we manage and mitigate risk:
p.27 to p.31
Find out more about our CSR commitments:
p.32 to p.36
Find out about our governance framework within which
we conduct our business and deliver our strategic
objectives: p.38 and p.39
A robust and sustainable business model
Creating and delivering value
h
h
h
h
h
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:
OUR CLIENTS
• Our objective is to be the
company that everyone knows
they can trust in their time of
need. We achieve this through
continuous improvement and
delivering products and services
to our clients.
• We do this by making well informed decisions, supported by careful
risk management and good governance.
OUR PEOPLE
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 group.
• 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.
• We believe that the quality of
our people is a strong enabler
of business growth. We value our
people and they are a great asset.
We support them by recognising
and rewarding performance and
long service plays a key part
in this.
OUR SHAREHOLDERS
• We aim to deliver the best
possible operational performance
from the business to deliver
maximum returns to our
shareholders over the long-term.
The financial performance that
results is based on growth that
is consistent and profitable.
COMMUNITIES
• Contributing to the communities
in which we operate benefits
both local people and our
business. It enhances our profile
and reputation, promotes
employee engagement and
helps to attract new employees.
Governance
Risk
KPIs
Remuneration
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 drive
strategic and performance
progress.
Dignity has a well established
risk management process which
is embedded within its business
to support the identification and
effective management of risks
across the business.
The Group uses both non-
financial and financial KPIs to
both manage the business and
ensure the Group’s strategy and
objectives are being delivered.
Our strategy is focused on
delivering short and long-term
financial performance. EPS and
TSR are quantifiable measures
of performance and are used to
incentivise Executive Directors
to deliver the Group’s strategy.
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Dignity plc
Annual Report & Accounts 2016
10
Strategic Report
Our key performance indicators
We track our performance against
a number of consistent KPIs which
are aligned to our strategic vision.
OUR ONGOING STRATEGIC
OBJECTIVES
Our ongoing strategic
objectives underpin and
integrate our activities. We use
non-financial and financial KPIs
to both manage the business
and ensure that the Group’s
strategy and objectives are
being delivered.
1
Continue to prioritise
excellent client service
which we believe will lead
to organic growth.
2
Control our costs
without compromising
the quality of our
service.
3
Expand our funeral
and crematoria
portfolios.
4
Gain new clients
through the sale of
pre-arranged funeral
plans.
5
Increase our returns
through efficient capital
management.
HOW WE MEASURE PERFORMANCE
• 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.
Non-financial KPIs
KPI
Link to strategic objective
Total estimated number
of deaths in Britain
(number)
590,000
5
6
0
,
0
0
0
5
5
0
,
0
0
0
5
5
1
,
0
0
0
5
8
8
,
0
0
0
h
5
9
0
,
0
0
0
1
Definition
This is as reported by
the Office of National
Statistics.
Developments in 2016
Deaths were higher than
anticipated in the period.
Historical data would
suggest that deaths
in 2017 could be
significantly lower than
2015 and 2016.
2012 2013 2014 2015 2016
Funeral market share
excluding Northern Ireland
(per cent)
31
4
11.8%
1
2
.
3
%
1
1
.
7
%
1
1
.
9
%1
1
.
2
%
h
1
1
.
8
%
2012 2013 2014 2015 2016
Number of funerals
performed
(number)
70,700
6
8
,
0
0
0
6
5
,
6
0
0
6
3
,
2
0
0
h
7
0
,
7
0
0
7
3
,
5
0
0
2012 2013 2014 2015 2016
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 2016
The reduction in market
share is more than
anticipated. The Board
is keeping this under
review.
31
4
Definition
This is the number
of funerals performed
according to our
operational data.
Developments in 2016
Changes are a
consequence of the
total number of deaths
and the Group’s
market share.
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Dignity plc
Annual Report & Accounts 2016
11
Links
See Strategy and business model: p.08 and p.09
See Principal risks and uncertainties: p.27 to p.31
See Report on Directors’ remuneration: p.50 to p.63
A summary of the Group’s financial record for the last
five years can be found on: p.116 and p.117
Financial KPIs
KPI
Link to strategic objective
KPI
Link to strategic objective
Crematoria
market share
(per cent)
10.1%
9
.
9
%
9
.
8
%
9
.
7
%
9
.
2
%
31
Underlying earnings
per share
(pence)
1
2
3
4
5
h
1
0
.
1
%
Definition
This is the number of
cremations performed
by the Group divided
by the total estimated
number of deaths
in Britain.
Developments in 2016
Market share has
increased, principally
reflecting the effect of
recent acquisitions.
119.8p
1
1
4
.
8
p
8
5
.
8
p
7
2
.
1
p
6
2
.
8
p
h
1
1
9
.
8
p
Definition
This is underlying
profit after tax divided
by the weighted average
number of Ordinary
Shares in issue in
the period.
Developments in 2016
This growth follows the
increase in operating
profit.
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
Number of cremations
performed
(number)
59,500
5
7
,
7
0
0
5
5
,
5
0
0
5
3
,
4
0
0
5
0
,
5
0
0
h
5
9
,
5
0
0
31
Underlying
operating profit
(£m)
Definition
This is the number of
cremations performed
according to our
operational data.
Developments in 2016
Changes are a
consequence of the
total number of deaths
and the Group’s
market share.
£101.7m
£
9
8
.
7
m
£
8
4
.
9
m
£
7
8
.
4
m
£
6
9
.
4
m
h
£
1
0
1
.
7
m
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
Active pre-arranged
funeral plans
(number)
404,000
3
7
4
,
0
0
0
3
4
8
,
0
0
0
3
2
3
,
0
0
0
2
9
0
,
0
0
0
h
4
0
4
,
0
0
0
4
Cash generated
from operations
(£m)
£121.1m
£
1
2
5
.
2
m
£
1
0
4
.
4
m
£
9
4
.
2
m
£
8
3
.
3
m
h
£
1
2
1
.
1
m
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 2016
This increase reflects
continued sales
activity offset by the
crystallisation of plans
sold in previous periods.
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
1
2 3
4
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 2016
Good growth driven
by higher than expected
deaths as well as
acquisition activity.
5
Definition
This is the statutory
cash generated from
operations excluding
external transaction costs
and (in 2013 and 2014)
exceptional pension
contributions.
Developments in 2016
The Group continues to
convert operating profit
into cash efficiently.
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OUR FIVE YEAR
PERFORMANCE
• Our KPIs have remained
consistent over the last five
years, enabling clarity and
transparency in both
reporting and management.
• Each of the Group’s KPIs
over this 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.
• The Board continues
to monitor the Group’s
progress and to assess the
performance and continued
delivery of our strategy.
O
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o
v
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a
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–
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F
i
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a
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c
i
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t
a
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Dignity_AR_FrontEnd_Master_2016 p1-49 Q9 tp_Layout 1 30/03/2017 14:30 Page 15
Dignity plc
Annual Report & Accounts 2016
12
Strategic Report
Our key performance indicators continued
The vast majority of our funeral business relies
on reputation, recommendation and previous
experience and we strive to maintain and improve
client satisfaction across our business.
ENSURING EXCELLENT CLIENT SERVICE
KPI
Link to strategic objective
What does this mean?
We are committed to delivering the highest
standards of service and care, whether
helping people arrange a funeral, choosing
a memorial or arranging a funeral plan.
Why is this important?
Our objective is to lead the funeral sector
in professional standards and service. Our
priorities and our success are determined
by our impact on our clients.
How are we different?
Our success rests on having the right
people, with the right skills and experience
to deliver high quality services consistently
and we strive for continuous improvement
in the service and facilities we provide.
Our clients value this which is why they
return to us and recommend us.
Our approach
We are committed to both quality of service
and business success and how we operate
is integral to what we deliver.
Our business is built upon trust, respect,
reputation and relationships and we
demonstrate our values through our
day-to-day behaviour and conduct ourselves
in a responsible and ethical manner.
Our culture
Our people come from the towns and cities
they serve or are from families that have been
in the funeral profession for generations.
Our business principles, Code of Conduct
and core Group values have helped us
to create a distinctive and diverse Dignity
culture. This is essential to ensure we remain
consistent in the standards of behaviour all
our employees adhere to when supporting
our clients and that we deliver the excellent
service upon which our business depends.
The way we work
Our Code of Conduct ensures that all staff
are aware of the principles that govern how
we operate in the business environment and
explains the standards of behaviour that all
our employees are expected to adhere to.
Our Code of Conduct is reinforced by a staff
handbook, ‘Helping our clients every step of
the way’ which states that all clients should be
supported during the funeral arrangements,
at the service or when choosing a memorial or
funeral plan in a caring and sensitive manner.
We should be compassionate and caring; pay
attention to detail; spend as much time as the
client needs; be open and straightforward and
keep in regular contact with the client.
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.
Our vision and values
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.
CLIENT SATISFACTION
IN OUR FUNERAL SERVICES
1
Objective
Ensuring the highest levels of client service
is one of our key strategic objectives and is
fundamental to our continued success.
Definition
We closely monitor the results of our client
surveys which are conducted by our Funeral
Services division. In the last five years, we
have received approximately 160,000
responses. This is our measure of how these
services meet or exceed client expectations.
REPUTATION AND
RECOMMENDATION
IN THE
DETAIL
QUALITY OF
SERVICE AND
CARE
HIGH STANDARDS OF
FACILITIES AND FLEET
Maintaining client satisfaction
Our consistently high satisfaction scores
reflect the strength of our relationships with
our clients and the stability and quality of
our core business. We listen to our clients
and also use our survey responses to focus
on areas in which we can improve and
add value.
Our ongoing commitment to high levels of
client satisfaction continues to generate high
levels of referrals as demonstrated in the
graph below.
Recommending our services (% of clients)
100%
(12 Month rolling average)
99%
98%
97%
96%
95%
Dec 06 Dec 07 Dec 08 Dec 09 Dec10 Dec11 Dec 12 Dec13 Dec 14 Dec 15 Dec 16
Percentage of clients willing to recommend Dignity’s services
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Dignity plc
Annual Report & Accounts 2016
13
The Dignity Client Survey 2016
Our funeral service survey results continue
to demonstrate the outstanding work
being consistently done by our staff.
They remain focused on performing their
roles to the best of their ability, allowing
the Group to help many families at
a difficult time.
O
v
e
r
v
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–
0
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S
t
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a
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e
p
o
r
t
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4
–
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6
G
o
v
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a
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c
e
3
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–
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F
i
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a
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c
i
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S
t
a
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m
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s
6
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–
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1
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O
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f
o
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m
a
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i
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n
1
1
8
–
1
2
0
WHAT WE FOCUS ON
WHAT OUR CLIENTS SAY
Ensuring the highest levels
of client service
Recommendations and our reputation
have generated approximately 70 per cent
of our funeral business on average in the
last five years.
Reputation and recommendation
High standards of facilities and fleet
98.8% (2015: 99.2%)
99.8% (2015: 99.8%)
98.8 per cent of respondents said that we
met or exceeded their expectations.
99.8 per cent thought our premises were
clean and tidy.
97.7%(2015: 98.0%)
97.7 per cent of respondents would
recommend us.
99.8% (2015: 99.8%)
99.8 per cent thought our vehicles were
clean and comfortable.
Recruiting, developing and
retaining the best people
We seek to recruit and retain the best
people through appropriate remuneration
and ongoing training. Over 22 per cent
of Dignity employees have over 10 years
service.
Quality of service and care
99.9% (2015: 99.9%)
99.9 per cent thought our staff were
respectful.
Continued investment
In 2016, we invested £19.6 million in
capital expenditure on the core business
to ensure that both our client-facing areas
and behind the scenes facilities are
maintained to the highest standards.
See Financial Review for further details.
99.7% (2015: 99.7%)
99.7 per cent thought our staff listened to
their needs and wishes.
99.1% (2015: 99.3%)
99.1 per cent agreed that our staff were
compassionate and caring.
Meeting and exceeding expectations (% of clients)
100%
(12 Month rolling average)
Listening to ourclients; providing
clear advice and guidance
We act with compassion and care, pay
attention to detail, spend as much time
as the client needs, we are open and
straightforward and keep in regular
contact with the client.
99%
98%
97%
96%
95%
Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
In the detail
99.2% (2015: 99.3%)
99.2 per cent of clients agreed that our staff
had fully explained what would happen
before and during the funeral.
99.1% (2015: 99.1%)
99.1 per cent said that the funeral service
took place on time.
98.5% (2015: 98.6%)
98.5 per cent said that the final invoice
matched the estimate provided.
65%
63%
61%
59%
57%
Met and exceeded expectations
(left hand axis)
Exceeded expectations
(right hand axis)
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Dignity plc
Annual Report & Accounts 2016
14
Strategic Report
Our summary performance in 2016
The Group has continued to perform
strongly in 2016.
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 (%)
63%
30%
7%
Funeral services
Crematoria
Pre-arranged funeral plans
Revenue (£m)
Revenue (£m)
Total number of active plans
h
+2%
h
+7%
Revenue up 2% to £217.8 million
Revenue up 7% to £67.5 million
404,000
Total active pre-arranged funeral plans
increased to 404,000
212.6
217.8
176.2
184.4
157.9
220
200
180
160
140
120
100
80
60
40
20
0
67.5
63.1
53.8
55.2
46.6
70
60
50
40
30
20
10
0
404,000
374,000
348,000
323,000
290,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Underlying operating profit (£m)
Underlying operating profit (£m)
Underlying operating profit (£m)
h
+3%
h
+9%
h
+9%
Underlying operating profit up 3%
to £79.0 million
Underlying operating profit up 9%
to £37.6 million
Underlying operating profit up 9%
to £8.5 million
76.8
79.0
66.3
60.8
54.2
80
70
60
50
40
30
20
10
0
37.6
34.6
27.4
29.1
23.3
40
35
30
25
20
15
10
5
0
9
8
7
6
5
4
3
2
1
0
6.5
6.7
7.4
8.5
7.8
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
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Dignity plc
Annual Report & Accounts 2016
15
We made good progress across all our operations,
with each division performing in line with the
Board’s expectations.
Links
See Operating review: p.16 to p.22
Find out more about our Group financial performance: p.23 to p.26
Find out more about our CSR performance: p.32 to p.36
Funeral services
Crematoria
Performance in 2016
• Strong operational efficiencies
and performance.
• Substantial investment in
core portfolio.
• Acquired locations integrated
into the business.
Pre-arranged funeral plans
Performance in 2016
• Nine per cent increase in
underlying operating profit.
• Five crematoria acquired.
• Three crematoria approved
for construction.
• One further planning application
being processed.
Corporate and social responsibility
Delivering excellent service
continues to provide our
strategic focus and drives our
operational performance.
Performance in 2016
• Strong operational performance.
• Age UK remains a key
affinity partner.
A responsible business
• At the heart of our business is a
commitment to doing the right thing;
behaving ethically, working safely,
reducing our environmental impact,
recruiting, developing and retaining
the best people and making a real
difference to the communities
we serve.
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0
Acquisition and satellite locations
£15.5m
During 2016, Dignity invested £15.5 million
in the acquisition of 11 established funeral
businesses and the development of our
satellite location programme. These enable
us to increase the Group’s national presence
and to serve more families.
CLIENT SERVICE
Reputation and
recommendation remain a key
driver in someone’s choice of
funeral director. Many of our
clients continue to return and
recommend us because of the
consistent quality of service
we deliver.
Dignity_AR_FrontEnd_Master_2016 p1-49 Q9 tp_Layout 1 04/04/2017 10:53 Page 19
Dignity plc
Annual Report & Accounts 2016
16
Strategic Report
Operating review
1
Our strengths
Dignity has the size, experience and financial
flexibility to implement value-enhancing
investments in our established locations to
support service improvements, drive organic
growth and fund longer-term strategic
development of our business.
“
2
Local expertise and service delivery
Many of our staff come from the local
communities they serve, have long service
experience or come from families who have
been serving the funeral profession for
generations. We recognise the value this brings
to our business and together with our ongoing
investment enables our staff to meet the
ongoing needs of our clients.
Pre-arranged funerals continue to be
a source of incremental funerals, with
approximately 25 per cent of all funerals
performed in the year (2015: 24 per cent)
having 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.
Case study
Enhancing existing or acquired locations
Northern Ireland
Ravenhill Funerals in Belfast was completely
refurbished during the period to give the
premises a modern and light atmosphere
whilst retaining the facilities that recognise
the importance of local traditions.
In 2016, Dignity also acquired and
converted a former Quaker Meeting House
in Lisburn into a funeral branch with a service
chapel for Kirkwood Funeral Directors, a
well-established business with premises
in Newtownards and Belfast.
Above: Ravenhill Funerals
in Belfast.
Funeral services relate to
the provision offunerals and
ancillary items, such as
memorials and floral tributes.
This financial performance reflects the
lower number of funerals performed.
Market share was lower than expected,
offsetting a better than expected
performance in 2015. The Group
continues to keep this under review.
FUNERAL SERVICES
Progress and Developments
Performance
As at 30 December 2016, the Group
operated a network of 792 (2015: 767)
funeral locations throughout the United
Kingdom, generally trading under local
established names.
During the period, the Group conducted
70,700 funerals compared to 73,500
in 2015.
Approximately one per cent of all
funerals were conducted in Northern
Ireland. Excluding Northern Ireland,
these funerals represent approximately
11.8 per cent (2015: 12.3 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
£79.0 million (2015: £76.8 million),
an increase of three per cent.
Investment in the core portfolio
Significant cash resources continue to be
used to maintain the Group’s locations and
fleet. In 2016, £13.6 million was invested
in maintenance capital expenditure.
Funeral location portfolio
The Group acquired 16 funeral locations
for a total investment of £14.7 million.
These acquisitions performed in line
with expectations. £0.8 million was
also invested in our satellite location
programme, with 11 opening in the period.
Two locations were closed, principally
where it was considered commercially
appropriate not to renew leases.
Outlook
The funeral division has performed well
and is well placed for the future. Satellite
locations opened in recent years continue
to be profitable and the Group continues
to see this as an opportunity to help
grow the business. Consequently, the
Group anticipates opening approximately
20 satellites per year at a capital cost
of approximately £1 million.
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Left: 1. Marvo Samuel, Funeral Service Arranger at
W S Bond, Ealing. 2. We work closely with our clients
to ensure that we arrange the funeral they want for their
loved ones. Main picture: Burton on Trent & District
Funeral Directors, Staffordshire.
Dignity plc
Annual Report & Accounts 2016
17
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STRATEGIC FOCUS
Continued investment
£13.6m
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 continuous
service improvements. During the period,
Dignity invested £13.6 million to further
improve the facilities and services we
offer our clients.
792 Locations
The Group’s coverage is achieved
through our 792 funeral locations and
we continue to seek opportunities
for further growth.
Our competitive
advantage is sustained
by investing in the best
people, our locations
and services.
QUALITY AND CONSISTENCY
Every day our staff deliver high standards of service and care,
supporting our clients and helping our business to achieve our
objective of differentiating through quality and consistency. We will
continue to achieve this by investing in the best people, our locations
and services, enabling us to deliver the excellent client service upon
which our business depends.
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Dignity plc
Annual Report & Accounts 2016
18
Strategic Report
Operating review continued
Our strengths
“
Our focus, scale and experience sets us
apart and we continue to build on and
reinforce the competitive strengths in our
business by developing, managing and
acquiring crematoria.
We also seek to add value and differentiate
through strong partnerships with local
authorities and through the construction
of new-build crematoria which represent
an opportunity to develop and invest in
new facilities in areas that will benefit the
local community.
44 Crematoria
Dignity currently operates 44 crematoria
and remains the largest single operator
in Britain. The combination of acquisition
activity and our organic investment enables
us to create and sustain further value.
CLIENT SERVICE
We focus on enhancing our
existing crematoria buildings
and grounds by investing in
added-value services and
facilities that connect with and
make a difference to the
families who visit them and the
local communities in which
they are located.
1
Local initiatives and commitment
Our local crematoria are tended by a team
of experts from our gardeners who continue
to maintain and sensitively landscape our
gardens of remembrance to enable families
to enjoy the peaceful surroundings, to our
memorial consultants who provide advice
and guidance on choice of memorials and
ways to commemorate loved ones.
Crematoria services relate to
cremation services and the sale
of memorials and burial plots
at the Group’s crematoria
and cemeteries.
Progress and Developments
£1.0 million of the operating profit
in the period was generated by the
Crematoria Acquisition. This acquisition
has performed in line with expectations
and is consistent with the Group’s
guidance at acquisition of anticipated
EBITDA of £2.9 million in 2017.
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.
CREMATORIA
Performance
The Group remains the largest single
operator of crematoria in Britain,
operating 44 (2015: 39) crematoria
as at 30 December 2016. The Group
performed 59,500 cremations (2015:
57,700) in the period, representing
10.1 per cent (2015: 9.8 per cent)
of total estimated deaths in Britain.
Underlying operating profit was £37.6
million (2015: £34.6 million), an increase
of nine 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. Acquisition of
crematoria has also assisted operating
profit growth.
Sales of memorials and other items have
been stable, equating to approximately
£273 per cremation compared to £276
in the previous period.
The Group has also invested £3.7 million
maintaining its locations in the period.
Case study
The Group now has planning permission
on three locations for new crematoria,
with the third receiving planning
permission in December 2016. Finalisation
of building plans and addressing local
planning requirements means that these
locations are expected to open in 2018
and 2019. The total capital commitment
for these locations is expected to be
approximately £13 million to £14 million.
Each of the locations with planning
permission will take five to seven years to
reach maturity, performing 800 to 1,000
cremations per year.
The Group also has one live planning
application for which it is awaiting a
decision and has options over a number
of other pieces of land where no capital
commitment will arise unless planning
permission for a new crematorium is
obtained in due course.
Enhancing existing crematoria
Surrey & Sussex Crematorium
We continue to develop and invest in our existing
crematoria portfolio, helping us to deliver
enhanced facilities to the families we serve.
During 2016, all public areas at Surrey & Sussex
Crematorium, including both chapels, were
extensively refurbished and the audio visual
system upgraded to help those attending
services with large congregations.
Above: One of the refurbished chapels
at Surrey & Sussex Crematorium.
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Left: 1. David Smith, Groundsperson at Grenoside Crematorium, Sheffield.
Main picture: Lichfield & District Crematorium is one of five facilities
acquired during the period. The crematorium is situated in 10 acres of
land in Staffordshire and the chapel has seating for up to 80 people.
The Gardens of Remembrance are being further developed to provide
a place of beauty and tranquillity for bereaved families to visit.
Dignity plc
Annual Report & Accounts 2016
19
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STRATEGIC FOCUS
Acquisition of five crematoria
from Funeral Services Limited
£44m
In 2016, Dignity completed the acquisition
of five crematoria from Funeral Services
Limited (trading as Co-op Funeralcare)
for £44 million (including external
transaction costs); Craigton Crematorium,
Glasgow; Emstrey Crematorium and
Cemetery, Shrewsbury; Grenoside
Crematorium, Sheffield; Stockport
Crematorium and Cemetery and Lichfield
& District Crematorium, Staffordshire.
We recognise the potential growth
opportunities these locations provide
as they enable us to extend our services
into new geographic areas, represent
a good investment for Dignity and
support our continued growth.
Maintaining our
market-leading position
and developing growth
opportunities.
EXPERTISE AND COMMITMENT
We leverage our scale, expertise and commitment combined with
strong management and development of our core portfolio to enable
us to maintain our market-leading position and capture future growth
opportunities. In the last twelve years we have successfully acquired,
developed and integrated several crematoria into our growing network.
This ongoing commitment supports both our objective of meeting
local needs and our growth ambitions.
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Dignity plc
Annual Report & Accounts 2016
20
Strategic Report
Operating review continued
Left: 1. Dignity’s Pre-arrangement website is
continually developed with new tools and content that
help clients choose the right Funeral Plan for them.
Below: 2. Literature is available in branches to help
clients pre-arrange their funeral. Main picture right:
Senior Branch Development Manager, Graham Rogers
and Funeral Service Arranger, Alpa Parmar organise
a Funeral Plan Open Day at J A Massey & Sons
in Harrow.
CLIENT SERVICE
We continue to have a strong
market presence in pre-arranged
funeral plans and through our
strong customer relationships,
affinity partnerships and our
established branch network, we
continue to help more people
plan ahead.
1
Our strengths
We continue to build on our reputation as one
of the UK’s leading providers of pre-arranged
funeral plans. We have already helped more
than 743,000 people plan and pay for their
funeral in advance. This is testament to the
strength of our brand and that our client
proposition is both recognised and valued.
“
2
Pre-arranged funeral plans
represent the sale of funerals
to customers wishing to make
their own funeral arrangements
in advance.
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.
PRE-ARRANGED FUNERAL PLANS
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.
Underlying operating performance in
the period has been solid, with operating
profit of £8.5 million (2015: £7.8
million), an increase of nine per cent.
In overall terms, approximately
49,000 (2015: 38,000) new plan sales
were made and the number of active
pre-arranged funeral plans increased
to 404,000 (2015: 374,000) as at 30
December 2016. 20,000 (2015: 4,000)
of the sales represent plans linked to life
assurance plans with third parties rather
than trust based plan sales.
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
Progress and Developments
The increase in the number of active
plans follows plans sold in the year.
The market has been particularly
competitive, with the internet and ‘cold
calling’ featuring extensively in activity
by competitors. Dignity has remained
focused on selling high quality business,
with low cancellation rates, selling in
ways that support the strong reputation
of the Group.
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 2017.
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 2016, the
Trusts held over £860 million of assets.
Average assets per plan are greater
than the amount currently received for
performing a funeral. However, the latest
actuarial valuations of the pre-arranged
Affinity partnership developments
We believe that it is important to develop
strong relationships not only with our clients
but also with other organisations where we
see an opportunity to deliver mutual benefit.
Working with established businesses with
trusted brands allows the Group to expand
the opportunities for selling pre-arranged
funeral plans and is essential to the long-term
development of the division.
funeral plan trusts (at 23 September
2016) showed them to have a small
actuarial deficit, driven by the volatility
in the markets and low gilt yields.
Crucially, each plan sold creates
additional headroom, since the funds
paid in are more at the point of sale
than those received by the Group if the
member died immediately.
The Trustees continue to take external
advice on their investment strategy, with
the overall objective of achieving a real
return over time.
The Trustees have informed the Group
that they continue to take independent
advice regarding the Trust’s investment
strategy. As a result, it is anticipated that
the investment allocation by class will
develop further during 2017 and beyond,
gradually resulting in a portfolio in the
following profile:
Example
investment Target
types (%)
Defensive
investments
Illiquid
investments
Core growth
investments
Index linked 22
gilts and
corporate
bonds
Private 16
investments
Equities 22
Growth fixed income
and alternative
investments
Property funds 40
and emerging
market debt
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Dignity plc
Annual Report & Accounts 2016
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STRATEGIC FOCUS
Funeral plan open days
Active funeral plans continue to
represent future potential incremental
business for the funeral division as the
Group expects to perform the majority
of these funerals. Our funeral plan
open days which are held in our local
branches provide the opportunity for
us to demonstrate the expertise of our
people and services, to engage with the
local community, reach potential new
clients and increase awareness of the
benefits of a Dignity funeral plan.
Active funeral plans
404,000
404,000 people have active
funeral plans with Dignity.
We are committed to
building relationships
through the consistent
delivery of excellent
client service.
REPUTATION AND RELATIONSHIPS
We connect with our customers locally in our branches, online
and through our affinity partners. We use our strong reputation for
trust, quality and service to win both new customers and develop
existing relationships. We continue to build and develop our strategic
partnerships and strengthen the unique positioning of our brand to
ensure that the demand for our products and services is sustained.
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Dignity plc
Annual Report & Accounts 2016
22
Strategic Report
Operating review continued
These developments in the Trust’s
investment strategy are expected to
enhance investment returns in the
longer-term for a broadly similar level of
risk as that currently taken. The strategy
will however, potentially result in greater
volatility year on year in the reported
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
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
404,000
374,000
348,000
323,000
290,000
2012
2013
2014
2015
2016
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 centrally.
Developments
Costs in the period were £23.4 million
(2015: £20.5 million), an increase
of 14.1 per cent.
Investment in central overheads
continues in order to respond to the
activities of the Group. Incentive costs,
including LTIP costs and cash bonuses,
have increased from £6.3 million
to £8.3 million. Excluding these bonus
costs, central overheads represent
4.8 per cent (2015: 4.7 per cent)
of revenues.
Capital expenditure of £2.3 million
has been incurred on central projects
predominantly relating to IT that will help
the business as a whole operate more
efficiently. This includes £1.3 million
incurred to date on the update of the
£23.4m
Costs in the period were £23.4 million.
Central support functions continue to grow
to ensure operational activity is appropriately
supported as the business grows.
Left: Adam Dunleavy, Senior Accounts
Administrator; Jayne Ackrill, Group Management
Accountant and Jason Barnes, Ledger Manager in
the Finance Department at Dignity’s Head Office.
Group’s accounting software described
last year. This new system went live in
early 2017 as originally anticipated. The
remainder of the anticipated £3 million
commitment is therefore expected to be
incurred in 2017.
In addition, given the increase in
headcount in central overheads (and
pre-need operations, which are based
at the Group’s Head Office), the Group
has taken additional leased office space
in Sutton Coldfield to support operations.
This resulted in capital spend of £0.2
million in the period, with a further
£0.9 million to be spent in 2017 prior
to it being able to be used in early 2017.
Outlook
The Group will continue to respond to
the needs of the business, providing
additional central resource where
necessary to help growth or manage
compliance with appropriate laws
and regulations.
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Financial review
Our financial performance has been
strong and we have made further
progress in developing the Group.
Dignity plc
Annual Report & Accounts 2016
23
Steve Whittern, Finance Director
Performance in 2016
“
We remain cash
generative with strong
profit growth, which
together with our
continued focus on
service delivery
improvements and
cost control, ensures
we are well positioned
to invest for further
growth and to enhance
shareholder value.
£313.6m
h
Revenue up 3% to £313.6
million (2015: £305.3 million).
£101.7m
h
Underlying operating profit up
3% to £101.7 million (2015:
£98.7 million).
119.8p
h
Underlying earnings per share
increased 4% to 119.8 pence
(2015: 114.8 pence).
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:
53 week 52 week
period period
ended ended Increase/
30 Dec 25 Dec (decrease)
2016 2015 %
Revenue (£million) 313.6 305.3 3
Underlying operating profit (a) 101.7 98.7 3
(£million)
Underlying profit before tax (a) 75.2 72.2 4
(£million)
Underlying earnings per share(a) 119.8 114.8 4
(pence)
Cash generated from operations(b) 121.1 125.2 (3)
(£million)
Operating profit (£million) 97.7 95.5 2
Profit before tax (£million) 71.2 69.0 3
Basic earnings per share 115.3 115.2 –
(pence)
Dividends paid in the period:
Interim dividend (pence) 7.85 7.14 10
Final dividend (pence) 14.31 13.01 10
(a)Underlying amounts exclude profit 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.
The Board has proposed a dividend of
15.74 pence per Ordinary Share as a final
distribution of profits relating to 2016 to be
paid on 30 June 2017, subject to shareholder
approval.
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:
53 week 52 week
period period
ended ended
30 Dec 25 Dec
2016 2015
£m £m
Operating profit for the
period as reported 97.7 95.5
Add/(deduct) the effects of:
Profit on sale of fixed assets (0.1) –
External transaction costs 4.1 3.2
Underlying operating profit 101.7 98.7
Net finance costs (26.5) (26.5)
Underlying profit before tax 75.2 72.2
Tax charge on underlying profit
before tax (c) (15.8) (15.5)
Underlying profit after tax 59.4 56.7
Weighted average number
of Ordinary Shares in issue
during the period (million) 49.6 49.4
Underlying EPS (pence) 119.8p 114.8p
Increase in Underlying EPS (per cent) 4% 34%
(c)Excludes exceptional tax credit of £1.8 million
(2015: £3.4 million).
Earnings per share
The Group’s statutory profit after tax was
£57.2 million (2015: £56.9 million). Basic
earnings per share were 115.3 pence per share
(2015: 115.2 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 £59.4 million (2015: £56.7
million), giving underlying earnings per share of
119.8 pence per share (2015: 114.8 pence per
share), an increase of four per cent.
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Dignity plc
Annual Report & Accounts 2016
24
Strategic Report
Financial review
continued
Value drivers
Capital management
Financial returns
Revenue growth
Cost control
Managed investment
Cash generation
EPS
growth
Dividend
growth
T R E NGT
H
S
h
Efficient balance sheet
h
S
T
A
B
I
L
I
T
Y
H
T
W
O
G R
Cash returns to
shareholders
Cash for
reinvestment
Delivering long-term
shareholder returns
The Group has performed
strongly since IPO delivering
sustained returns for
shareholders 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.
The growth rate for underlying EPS exceeded
the growth in underlying operating profit,
reflecting the leveraging effect of the Group’s
capital structure.
External transaction costs reflects 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 £67.1 million (2015: £98.8 million).
The remainder of the Group’s cash reserves
are essentially free for use as it sees fit.
However, in its planning, the Group sets
aside approximately £23.8 million for future
corporation tax and dividend payments
expected to be spent in 2017.
Capital expenditure on property, plant and
equipment and intangible assets was
£22.8 million (2015: £19.9 million).
Further details and analysis of the Group’s
cash balances are included in note 15 to the
consolidated financial statements.
This is analysed as:
30 Dec 25 Dec
2016 2015
£m £m
Maintenance capital expenditure:
Funeral services 13.6 12.1
Crematoria 3.7 2.5
Other 2.3 1.0
Total maintenance
capital expenditure (a) 19.6 15.6
Branch relocations 1.6 3.9
Satellite locations 0.8 0.3
Development of new crematoria
and cemeteries 0.8 0.1
Total property, plant and equipment 22.8 19.9
Partly funded by:
Disposal proceeds (1.0) (0.8)
Net capital expenditure 21.8 19.1
(a) Maintenance capital expenditure includes vehicle
replacement programme, improvements to locations and
purchases of other tangible and intangible assets.
Cash flow and cash balances
Cash generated from operations was
£121.1 million (2015: £125.2 million)
stated before external transaction costs
of £3.9 million (2015: £3.2 million). The
reduction year on year despite an increase
in operating profit reflects timing differences
of working capital items year on year. The
longer-term expectation of profits converting
efficiently to cash is unchanged.
As a result of the strong year, the Group was
able to fund all of its corporate activity from
its cash reserves, spending £56.3 million
(net of cash acquired and excluding external
transaction costs) on the acquisition of 16
funeral locations and five crematoria locations
and balancing payments in respect of prior
year acquisitions.
Pensions
The balance sheet shows a deficit of
£25.9 million before deferred tax (2015:
deficit of £12.5 million). The Group concluded
a consultation with employees in February
2017. Following this consultation, the Group
decided to close its defined benefit pension
to any further accrual. Affected employees will
instead be able to contribute between four and
10 per cent of salary into a defined contribution
scheme, which will be matched by the Group.
The Group does not expect the actuarial
position of the scheme to change significantly
prior to its triennial valuation in April 2017.
Consequently, a schedule of contributions
is expected to have to be agreed with the
Trustees of the scheme during 2017.
Taxation
The Group’s effective tax rate on underlying
profits in the period was 21.0 per cent (2015:
21.5 per cent) excluding the exceptional rate
change. Changes to the UK corporation tax
rates were substantively enacted as part of
Finance Bill 2016. This will mean headline
corporation tax rates will reduce to 19 per cent
from 1 April 2017 and 17 per cent from 1 April
2020. The Group has therefore recognised an
exceptional credit in the income statement
of £1.8 million in order to state its deferred
tax balances at the new long-term rate.
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 2017, 2018
and 2019 of 20.0 per cent.
£22.8m
£22.8 million has been invested
in maintaining our property and
fleet portfolio.
£56.3m
£56.3 million has been invested
in acquisitions from existing
cash reserves.
£356.2m
Since flotation, £356.2 million in
cash including dividends has been
returned to shareholders.
Links
See Strategy and business model:
p.08 and p.09
See Our KPIs: p.10 to p.12
See Principal risks and uncertainties:
p.27 to p.31
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Dignity plc
Annual Report & Accounts 2016
25
Maintenance capital expenditure (£m)
Underlying operating profit (£m)
Underlying earnings per share (pence)
h
19.6
14.2
14.1
15.6
11.8
20
18
16
14
12
10
8
6
4
2
0
h
101.7
98.7
84.9
78.4
69.4
110
100
90
80
70
60
50
40
30
20
10
0
h
114.8
119.8
85.8
72.1
62.8
120
110
100
90
80
70
60
50
40
30
20
10
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Leverage
Our objective is to run an
efficient balance sheet. Our
priority is to invest to drive
organic growth and make
acquisitions in line with our
strategic objectives. We aim
to balance this investment
for further growth whilst
generating attractive returns
for shareholders.
£11m
The Group has continued to
increase dividends per share by 10
per cent and has paid £11 million
to shareholders in normal dividends
in the period.
The Group’s net cash tax payments were
£10.6 million (2015: £3.7 million) in the
period. The Group expects corporation tax
payments to increase in 2017 and over time
for cash taxes to be broadly equivalent to its
income statement charge. Legislative changes
requiring an acceleration of quarterly
payments on account have been delayed and
will not now impact the Group until 2020 when
the Group will pay 18 months of cash tax,
reverting to 12 months in each year thereafter.
Capital structure and financing
Secured Notes
The Group’s principal source of long-term
debt financing is the Secured A Notes and the
Secured B Notes. They are rated A and BBB
respectively by Fitch and Standard & Poor’s.
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 Secured Notes. The principal is repaid
completely over the life of the Secured Notes
and is therefore scheduled to be repaid by
2049. The interest rate is fixed for the life of
the Secured Notes and interest is calculated
on the principal.
The key terms of the Secured Notes are
summarised in the table below:
Secured A Notes Secured 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 Fitch and
Standard & Poor’s A BBB
The Secured Notes have an annual debt service
obligation (principal and interest) of circa
£33.2 million.
Given the duration of the Secured Notes,
this structure is capable of being used to
periodically issue further Secured 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 Secured Notes requires EBITDA to total
debt service to be above 1.5 times. The ratio
at 30 December 2016 was 3.37 times (2015:
3.35 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 had an undrawn
Funeral Acquisition Facility of £26.25 million
which was originally created to help fund the
acquisition of a business in 2015. 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 availability of this facility has been
extended until the end of March 2017.
Discussions are currently underway with a view
to replacing both facilities with a new revolving
credit facility for a similar level of debt to give
the Group more certainty in the medium term
over a line of credit, should it be required.
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Dignity plc
Annual Report & Accounts 2016
26
Strategic Report
Financial review continued
Outlook
The Group’s strong balance sheet
gives it the ability to respond
quickly to business needs and
corporate development
opportunities and we remain
focused on:
• Strong capital management.
• Continued investment
underpinned by strong
investment disciplines.
• A progressive dividend policy.
• Returning cash generated
to shareholders.
We are well positioned and aim
to invest in opportunities that
create value for the Group by
maximising the efficient use of
capital while carefully managing
cash and Group liquidity. Our
balance sheet is strong, allowing
us to fund growth opportunities
to generate enhanced
shareholder returns.
Net debt
The Group’s net debt is analysed as:
30 Dec 25 Dec
2016 2015
£m £m
Other ongoing finance costs incurred in the
period amounted to £0.9 million (2015:
£0.8 million), including the unwinding of
discounts on the Group’s provisions and
other financial liabilities.
Net amounts owing on Secured Notes (573.9) (586.5)
Add: unamortised issue costs (0.7) (0.7)
Interest receivable on bank deposits was
£0.4 million (2015: £0.5 million).
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.
Gross amounts owing on
Secured Notes (574.6) (587.2)
Net amounts owing on Crematoria
Acquisition Facility (15.7) (15.7)
Add: unamortised issue costs on
Crematoria Acquisition Facility (0.1) (0.1)
Gross amounts owing (590.4) (603.0)
Accrued interest on Secured Notes (0.3) (12.8)
Accrued interest on Crematoria
Acquisition Facility (0.1) (0.1)
Cash and cash equivalents 67.1 98.8
Net debt (523.7) (517.1)
The Group’s gross debt outstanding was
£590.4 million (2015: £603.0 million).
Net debt was £523.7 million (2015:
£517.1 million).
The market value of the Secured Notes at
the balance sheet date was £678.0 million
(2015: £615.5 million).
Net finance costs
The Group’s underlying finance costs
substantially consist of the interest on
the Secured Notes and ancillary instruments.
The net finance cost in the period relating
to these instruments was £25.4 million
(2015: £25.6 million).
Finance costs of £0.6 million (2015:
£0.6 million) were incurred in respect
of the Crematoria Acquisition Facility.
Links
See Financial statements:
p.66 to p.106
See Financial record:
p.116 and p.117
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Principal risks and uncertainties
The effective assessment and
management of risk is key to the
delivery of the Group’s strategy.
Dignity plc
Annual Report & Accounts 2016
27
Risk governance
The Board has overall
responsibility for the Group’s
internal control systems and
for reviewing their effectiveness.
This has been designed to
assist the Board in making
more risk-informed, strategic
decisions with a view to
creating and protecting
shareholder value.
Risk management is embedded throughout the business
with all employees aware of the role they play.
The risk management framework
Risk appetite
Our risk appetite remains broadly unchanged in 2016.
Risk appetite is the level of risk the Group is willing to take
to achieve its strategic objectives and is set by the Board.
The Board looks at the Group’s appetite to risk across a
number of areas including market, financing, operations,
strategy and execution, developments, cybersecurity and
technology and brand.
The Group’s risk appetite is set in the context of our focus on
one sector – funeral services. As experts in this sector we are
able to mitigate the risk involved in growing the business by
acquisition, development and our active asset management
strategy. This focus on our core strengths is balanced by
a more cautious approach to risk in other areas.
Our approach to risk management
The Group has a well established governance structure with
internal control and risk management systems. The risk
management process:
Governance
Accountability and
ownership
Communication
IDENTIFY & ANALYSE
Risks and impact identified
• Risks mapped to controls currently in place
• Residual risks prioritised for mitigation
• Confirmed with the Board
A
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RISK ASSESSMENT
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• Provides a framework to identify, assess and manage risks,
both positive and negative, to the Group’s 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.
Existing control
enforced and tested
• Remedial action plans
implemented
• Board member
accountable
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ACTION
Controls identified
• Suggested action plans agreed
• Options for controls identified
and costed
• Plans approved by
the Board
Review
Assess
Report
Respond
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 formally 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.
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Dignity plc
Annual Report & Accounts 2016
28
Strategic Report
Principal risks and uncertainties continued
Risk status summary and new risks
The ongoing review of the Group’s principal risks focuses on
how these risks may evolve. Since the publication of last year’s
Annual Report, we consider the following key principal risks to
have an increased risk exposure.
Increasing and emerging risk trends
The focus of both the government and the media on the cost of
funerals has increased which may affect the ability to increase
average revenues per funeral or cremation. In addition, there
appears to be increased competition in both the funeral and
pre-arranged funeral plan markets.
Regulation
The increased focus on the whole sector may increase the
likelihood of regulation of funerals in the UK as a whole and not
just in Scotland. In addition, this could lead to regulation of the
funeral plan sector with the Funeral Planning Authorities being
re-constituted to be more of a regulatory body.
Reliance on technology/Data governance
The increasing prevalence of cyber attack across the world,
means that along with all large corporates, our business
systems are under increasing level of attack. Over the last
two years we have invested significantly in this area both in
upgrading all aspects of our systems and our internal
resources and also using external consultants to perform
regular external and internal penetration tests and using the
results to drive a continuous improvement programme.
Our principal risks and uncertainties
Outlined here are 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.
Operational risk management
• Significant reduction in the death rate
• Nationwide adverse publicity
• Ability to increase average revenues per funeral
or cremation
• Significant reduction in market share
• Demographic shifts in population
• Competition
• Taxes
• Regulation of pre-arranged funeral plans
• Regulation of the funeral industry
• Changes in the funding of the pre-arranged funeral
plan business
Financial risk management
• Financial Covenant under the Secured Notes
The principal risks we have identified
We maintain a detailed register of principal risks and
uncertainties covering strategic, operational, financial and
compliance risks. We rate them according to likelihood of
occurrence and their potential impact.
In the tables on pages 29 to 31 we provide a summary
of each risk, a description of the potential impact and a
summary of mitigating actions.
Key: Risk trend measures
Risk exposure increased
Risk exposure decreased
No significant change
Links
See Strategy and business model: p.08 and p.09
See Our KPIs: p.10 to p.12
See Governance: p.37 to p.65
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Risks in the context of our strategic objectives
Key and link to strategic objective
The Group has a proactive approach to measuring performance
and considers risk as an integral part of decision-making, both
about current and future performance, with the Board being
responsible for the level of risk that the Group is willing to
accept. The Board manages this by linking risk appetite to its
strategic objectives, being mapped against defined impact and
likelihood scales, in order to define where the level of risk sits.
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 2016
29
Operational risk management
Risk description and impact
Mitigating activities
2016 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 risk is mitigated
by the geographical spread of locations, the
ability to control costs and the ability to
acquire funerals.
The number of deaths in 2016
was higher than expected.
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.13
The Group believes that its focus on excellent
client service helps to mitigate this risk.
Strategic
objective link
531
5431
51
51
Average revenues increased
in line with the Board’s
expectations.
See Operating review:
p.16 to p.22
Market share was slightly lower
than the Board’s expectations.
However, this offsets 2015,
where the closing position was
slightly higher than expected.
See Operating review:
p.16 to p.22
There have been no material
changes, with satellites being
opened and businesses
acquired in appropriate areas.
See Operating review:
p.16 to p.22
No major changes noted.
Denials of planning
applications for crematoria
demonstrate the barriers
to entry.
See Operating review:
p.16 to p.22
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.
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. This is mitigated by the
geographical spread of locations coupled with
the ability to acquire funeral locations in areas
of higher demand.
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.
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Dignity plc
Annual Report & Accounts 2016
30
Strategic Report
Principal risks and uncertainties continued
Operational risk management continued
Strategic
objective link
51
54
5321
54
Risk description and impact
Mitigating activities
2016 Commentary
Change
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
Legislative changes by the Scottish
Government were enacted in 2016. This
provides them with the powers to regulate
the funeral industry and they are currently
recruiting an Inspector of Funerals. Dignity
welcomes this progress.
Regulation could 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.
If this is not the case, then the Group may
receive a lower amount per funeral than
expected and thus generate lower profits.
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. This risk is
also mitigated through the high standards
of selling and administration of pre-arranged
funeral plans operated by the Group.
No significant changes noted
in the period.
See Market overview:
p.06 and p.07
The Group already operates at a very high
standard, using facilities appropriate for the
dignified care of the deceased.
We continue to seek regulation
of our markets.
See Market overview:
p.06 and p.07
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.
The latest actuarial valuation
of the pre-arranged funeral
plan trusts demonstrates a
small actuarial deficit.
However the average assets
per plan are still robust.
See Note 29.
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Dignity plc
Annual Report & Accounts 2016
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.
Financial risk management
Strategic
objective link
5
Risk description and impact
Mitigating activities
2016 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.23 to p.26
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 2019.
The key consideration of viability is the Group’s ability to service its Secured 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 27 to 31).
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Dignity plc
Annual Report & Accounts 2016
32
Strategic Report
Corporate and social responsibility
Operating sustainably
and responsibly.
Richard Portman, Corporate Services Director
Introduction
We believe that operating sustainably and responsibly is
fundamental to creating long-term value. At the heart of our
business is a commitment to doing the right thing: behaving
ethically, working safely, reducing our environmental impact,
attracting and developing our people and having a positive
social impact in our communities.
To support the delivery of our strategic objectives we have
four key areas of responsible and sustainable focus
Our objective is not only to provide and enhance the reputation of
Dignity but also to promote and embed a culture of responsibility
and performance that adds value to our clients, our people, our
shareholders and the local communities we serve.
Our corporate responsibility activities are an important way for us
to deliver upon our strategic objectives. We believe that the best
way to build a sustainable business is to act in the long-term
interests of all our stakeholders, in addition to making a positive
contribution to the communities in which we operate.
Business integrity and ethics
Health, Safety and Environmental performance
Our commitment to high and ethical standards strengthens
our reputation with clients and other stakeholders. 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.
Priorities
• Ensure we operate with integrity.
• Adhere to our Code of Conduct and high standard practices.
• Maintain legal and regulatory compliance and ethical
decision-making.
Outcome for the business
• Maintain our reputation for integrity.
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.
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.
Priorities
• Ensure the health and safety of our people at work.
• Reducing energy consumption and our environmental
footprint.
• Proactive management, accountability and transparency
with regards to our environmental footprint.
Outcome for the business
• Supports our sustainable development by working safely
and reducing our environmental impact.
Our people
Building strong relationships and community impact
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.
Priorities
We are committed to building strong relationships with
all our stakeholders, making a difference to the clients we
serve and positively contributing to the local communities
in which we operate.
Priorities
• Promote equal opportunities and diversity.
• Provide career development opportunities.
• Provide training and development.
• Operate with due regard for human rights.
• Reward and recognition.
Outcome for the business
• Attract and retain the best people.
• Build closer relationships locally, developing a greater
understanding of community and clients’ needs.
• Recruit, train and develop local people.
• Participate in activities that make a difference.
• Act in the long-term interests of all our stakeholders.
Outcome for the business
• Enhances business reputation, sustains longevity and
contributes to local communities.
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Why CSR is important to Dignity
Promoting a culture of responsibility, working to the highest standards
and practices, developing our people and delivering operational
efficiencies form key elements of our values and business strategy.
Conducting our business responsibly enables us to meet our
obligations to our stakeholders and delivers real business benefits by
helping us create long-term value.
We define our reporting in terms of our workplace, the environment
and communities in which we play an important part. We strive to
improve the way we perform, manage and report on corporate social
responsibility (CSR) matters across all aspects of our business.
Dignity plc
Annual Report & Accounts 2016
33
Reward and recognition
In a competitive marketplace we recognise the importance
of financially rewarding employees appropriately for the value
they bring to the business. Managing and differentiating
performance is critical to ensuring our staff fulfil their
potential and the delivery of our objectives. Dignity has
rewarded its loyal staff with Long Service Awards totalling
£0.2 million in 2016.
THE STRENGTH AND QUALITY OF OUR PEOPLE
Governance, strategy and objectives
The Board places a high priority on attracting and retaining
the right people as an integral part of our strategic objective of
continuing to prioritise excellent client service which we believe
will lead to organic growth. The Board is supported by a strong
HR team who are dedicated to meeting the requirements of a
growing Group. This team is responsible for the integration of
new staff and the development and welfare of people across
the business.
Learning and development
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 2016, 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.
Our Code of Conduct is reinforced by our Staff Handbook.
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 www.dignityfuneralsplc.co.uk.
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.
Culture, engagement and communication
Communication, engagement and inclusion are at the heart
of our culture. To achieve our business objectives we need
engaged employees dedicated to our vision and values. We aim
to provide an inclusive and collaborative culture that values
every individual and provides the tools and opportunities to
fulfil their potential and add value to the business.
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 and a number
of communications specific to certain parts of the business
to keep all employees informed of what is happening within
the organisation.
Below: 1. Polly O’Brien, Client Service Advisor, Sutton Coldfield.
2. Vivien Russell, Administrator, Ravenhill Funerals, Belfast. 3. Stephen Knox,
Trainee Funeral Director, Ravenhill Funerals, Belfast.
Personal development, planning and identification of training
needs form a key part of our performance review process.
We continue to provide a variety of learning and development
opportunities, ranging from workshops and mentoring to online
resources and internal and external training courses.
Leadership and capabilities
Our focus on leadership development has delivered enhanced
capability in our talent pipeline, through a more rigorous and
consistent approach to assessing and developing talent and a
greater focus on development plans. We consistently challenge
ourselves to have the right skills and competencies to support
our growth ambitions. We believe that this is best achieved
through a balance of recruiting the very best external candidates
to bring fresh approaches and perspectives, whilst also
developing our existing employees. We continue to focus on
building new relationships with universities and opportunities
for apprentice programmes while continuing to expand our
internal learning offerings and other development opportunities.
Diversity and inclusion
With operations across the UK we have a diverse and engaged
workforce that reflects our geographic footprint and their local
knowledge. 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 continues to be a member of Business Disability
Forum, a not-for-profit organisation that encourages the fair
treatment of disabled people in the workplace and their
community.
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Dignity plc
Annual Report & Accounts 2016
34
Strategic Report
Corporate and social responsibility
continued
Our people support our growth ambitions
Building a strong and diverse business that attracts, retains,
develops, engages and inspires the right people with the
right skills is central to supporting both our core purpose of
delivering excellent client service and our growth ambitions.
We believe that the quality of our people is a strong enabler of
business growth and we develop our employees’ capabilities
so that they can fulfil their potential and help us reach ours.
THE STRENGTH AND QUALITY OFOUR PEOPLE CONTINUED
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
22%
22 per cent of Dignity staff
have over 10 years service.
Career development
We believe in nurturing talent,
providing experience and formal
qualifications, enabling our
people to excel and create the
middle and senior managers
of the future.
Gender diversity
24%
24 per cent of Dignity’s senior
managers are female.
33%
33 per cent of Dignity’s senior
and middle managers are female.
Employee diversity
Senior managers (% & number)
Total employees/ratio (% & number)
3,154
Male 76% (25 senior managers)
Female 24% (8 senior managers)
Male 49% (1,551 employees)
Female 51% (1,603 employees)
WORKING SAFELY IN THE WORKPLACE
Dignity is committed to protecting, as far as reasonably
practicable, the health and safety of its employees and visitors
to its premises. Our employees recognise this commitment and
that workplace safety remains a key priority. Working in a safe
environment allows our people to focus on delivering excellent
service to our clients. Protecting our people also supports
employee engagement and retention.
Governance and management
Dignity has a full-time Head of Health and Safety who is supported
by eight Health & Safety Officers with a broad collective experience
from differing organisational backgrounds. Dignity’s Head Office,
crematoria and coffin manufacturing factory also have their own
managers with responsibility for Health and Safety. In the last
eight years the number of accidents has reduced by 27 per cent.
Dignity continues to proactively monitor health and safety through
quarterly analysis, inspection of premises, surveillance and regular
reports to the Board and monitors reactively by investigating
accidents and analysing statistics.
Dignity’s coffin manufacturing facility in East Yorkshire has
OHSAS 18001 accreditation officially recognising the factory
as a safe and healthy environment in which to work.
Heath and safety performance
Our Health & Safety team have worked diligently to reduce
incidents and have focused on improving our safety culture,
behaviours and risk reduction. We continue to implement and
build on these activities, monitor compliance and proactively
identify areas requiring action with the intention of further risk
reduction across the business.
Driving continuous improvement
We have a strong culture of safety and operational excellence
and through continuous improvement we focus on delivering
excellent client service. Our aim is to continue providing
excellent leadership in the pursuit of safe and environmentally
responsible workplaces.
Employee service (% & number)
Positive about disability
Health & safety training (number)
Reduction in reportable
accidents
27%
In the last eight years the number
of accidents has reduced by
27 per cent.
12
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125
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Employees with NEBOSH qualification: 12
Employees with IOSH qualification: 92
Employees with CIEH qualification: 274
Modern Slavery Act
Dignity is compliant with the Modern Slavery Act of 2015 and we are
committed to ensuring that there is no modern slavery or human
trafficking in our supply chains or in any part of our business.
To ensure that we are complaint we complete house audits; conduct
spot checks and use labour monitoring and payroll systems. A revised
version of our Chief Executive’s statement on the Modern Slavery Act
can be found on our corporate website www.dignityfuneralsplc.co.uk.
Less than 1 year: 18% (580 employees)
1–4 years: 38% (1,187 employees)
5–9 years: 21% (677 employees)
10–19 years: 16% (493 employees)
Over 20 years: 7% (217 employees)
Dignity remains committed to
employing, retaining and developing
the abilities of disabled employees.
Integrity, ethics and human rights
FTSE4Good
At Dignity we are committed to our Code of Conduct and Ethics Policy
which reflects the way we operate. All staff within Dignity are expected
to act with integrity and treat people fairly, with courtesy and respect,
be responsible, respect diversity and communicate openly.
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 supporting universal human rights.
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Reducing our carbon footprint and environmental impact
• As part of the Group’s ongoing commitment to reducing its carbon
footprint and environmental impacts, Dignity has been reporting
to the CDP since 2008.
Raw materials and sustainable sourcing
• Our coffins are manufactured using raw materials that are sourced
from well managed and sustainable sources.
ISO 14001 accreditation
• Dignity’s coffin manufacturing facility has ISO 14001 accreditation
which demonstrates our commitment to environmental management.
MANAGING OUR ENVIRONMENTAL IMPACT
In 2016, 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 32,500 cremations at Dignity crematoria were
mercury abated during 2016, representing 55 per cent of
the total number of cremations.
Dignity’s coffin manufacturing facility has ISO 14001
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. 96 per cent of the coffins manufactured
by Dignity are from Forest Stewardship Council (‘FSC’)
accredited timber.
CDP
As part of Dignity’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 through 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 2016 submission achieved a ‘B’ rating, our best ever
result. During the period, Dignity also reported on water and waste
management for the first time under the scope 3 requirements.
ESOS compliance
Dignity qualifies for the Energy Savings Opportunity Scheme
(‘ESOS’). Having completed an ESOS assessment during 2015
we are not required to submit another report until 2019.
Waste reduction initiatives
Unwanted materials are divided
into categories; general waste
and cardboard. Waste at
approximately 200 Dignity
premises is now collected by
the same contractor allowing
us to measure usage with
greater accuracy and reduce
the amount of waste deposited
in landfill sites.
Smart energy management
93%
We had fitted 1,055 electric
smart meters by the end of
the period with a further 79
remaining to be fitted in 2017.
This represents 93 per cent of
the estate where such meters
may be fitted.
In addition, we had fitted 517
gas loggers by the end of the
period with a further 56
remaining to be fitted in 2017.
This represents 90 per cent
of the estate.
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Annual Report & Accounts 2016
35
External recognition of our
sustainability performance
Greenhouse gas emissions reporting for 2016
The Group 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:
2016 2015 2014 2013 2012
Scope 1 15,616 14,988 14,437 15,077 15,097
Scope 2 7,106 7,455 7,389 7,151 7,861
Total 22,722 22,443 21,826 22,228 22,958
Per FTE Employee 8.0 8.2 8.5 9.0 10.0
Our energy consumption figures over the same periods are:
2016 2015 2014 2013 2012
MWh 91,413 87,730 86,738 91,315 88,573
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 on 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.
Percentage index graph scope 1 & 2
7 Year Total Shareholder Return
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Services perfomed
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Revenue (£m)
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Dignity plc
Annual Report & Accounts 2016
36
Strategic Report
Corporate and social responsibility
continued
AT THE HEART OF OUR LOCAL COMMUNITIES
Helping people at one of the most difficult times in their lives is
our core social purpose and contributing to the communities in
which we operate benefits both local people and our business.
It helps to promote awareness of our brand and values,
enhances our reputation, promotes employee engagement
and attracts new clients to our business. Making a meaningful
difference to the local communities we serve remains a key
quality of our business.
Our operations are located across many UK towns and cities
and as such we have an important role in supporting our
communities. 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 community relationships and charitable programmes are
primarily managed at a local level to allow our businesses to
focus on the needs of their local communities.
Our people support many local community initiatives and
charitable events every year.
Find out more
Further details on our CSR
activities, performance and case
studies can be found on Dignity’s
website:
www.dignityfuneralsplc.co.uk/
responsibility
2
2
“
As the ultimate people business, our employees
are keen to support their local communities and
charities in any way they can help to make a
difference. This effort is operated on local and
national levels to great effect through volunteering,
fundraising activities and donations.
1
2
Supporting Marie Curie since 2012
In 2016, Dignity raised £40,000 for its corporate charity, Marie Curie,
and over the last five years our staff have helped to raise over
£300,000 in support of this vital charity. There are nine Marie Curie
hospices located in Belfast, Bradford, Edinburgh, Glasgow, Hampstead,
London, Liverpool, Penarth and Solihull. Each Dignity branch and
crematoria was linked with their local Marie Curie fundraising
office so that the money that is raised will care for local patients
in their community.
Fundraising initiatives included charity car washes, second-hand book
sales, a pop music concert featuring Elvis and Abba tribute acts and
Christmas memorial trees. 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.
Dignity’s new corporate charity 2017
British Heart Foundation’s mission is to win the fight against
cardiovascular disease and their vision is a world in which people
do not die prematurely or suffer from cardiovascular disease.
Heart disease touches us all, including staff and clients. From raising
money, to raising awareness, corporate partnerships are vital to
helping beat heart disease.
Working in partnership with The British Heart Foundation will bring
benefits to our business whilst helping to raise vital funds to fight
heart disease. The new partnership will enable Dignity to:
• Motivate staff and encourage team building;
• Meet our Corporate Social Responsibility objectives;
• Help beat heart disease in the communities in which we operate by
training staff in CPR techniques and installing defibrillators at some
of our buildings;
Above: 1. Oliver Coote, Funeral Director, L Fulcher Funeral Directors,
Bury St Edmunds. Right: 2. Sandra Whiteside, Funeral Manager,
Ravenhill Funerals, Belfast.
• Reach new audiences; and
• Build brand profile.
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Governance
Governance section
How the Dignity Board sets strategic direction
and provides oversight and control.
Dignity plc
Annual Report & Accounts 2015
37
In this section
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Chairman’s introduction to governance
Our governance structure
Board of Directors
Directors’ statement on corporate governance
Audit Committee report
Nomination Committee report
Report on Directors’ remuneration
Directors’ report
Financial Statements
Statement of Code Compliance
Dignity plc is subject to the UK Corporate Governance
Code (the ‘Code’) issued by the Financial Reporting Council
(available at frc.org.uk), which was published in September
2014. As a listed company, Dignity is required to report on
how it has applied the principles of the Code and this is set
out in the following pages. The Board is pleased to report that
Dignity has complied with all of the provisions of the Code
throughout the period ended 30 December 2016 and to the
date of this document, with the exception of a short period
between Martin Pexton having stepped down from the
Board on 3 February 2017 until the appointment of Mary
McNamara on 1 March 2017 where the Group did not fully
comply with provision B.1.2 of the Code which requires
that least half the board, excluding the chairman, should
comprise non-executive directors.
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
Continued close scrutiny and management of risk coupled with the
implementation and monitoring of effective controls.
REMUNERATION
Prudent oversight of Executive remuneration.
ENGAGEMENT
Maintaining a strong and open and two way relationship
with shareholders.
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Dignity plc
Annual Report & Accounts 2016
38
Governance
Chairman’s introduction
to governance
Good governance is fundamental to the
ongoing success of the Group. It is the
responsibility of the Board to lead
by example.
Peter Hindley, Chairman
Dear Shareholder,
On behalf of the Board I am pleased to present the Group’s
Corporate Governance Report for 2016. Our report is
intended to provide shareholders with a clear and
comprehensive explanation of what good governance means
within Dignity, 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 30 December 2016. How we have achieved
this is covered in this section of our Annual Report and
comprehensively explains our approach to and the
application of good 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 8 June 2017 and take the opportunity to meet the
management team at this important event. We will take both
formal questions at that meeting and be available for more
informal conversation and questions afterwards.
Peter Hindley, Chairman
8 March 2017
“
Dignity is committed to maintaining the
highest standards in corporate governance
and ensuring values and behaviours are
consistent across the business.
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Compliance with the UK Corporate Governance Code
It is the Board’s opinion the Group has been fully compliant
with the Code throughout the 53 week period ending on
30 December 2016 and remained fully compliant at the date
the Annual Report for 2016 was published, with the exception
of a short period between Martin Pexton having stepped
down from the Board on 3 February 2017 until the
appointment of Mary McNamara on 1 March 2017 where
the Group did not fully comply with provision B.1.2 of the
Code which requires that least half the board, excluding the
chairman, should comprise non-executive directors.
Directors’ Report
The Directors present their report for Dignity plc for the
period ending 30 December 2016.
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 Chairman of:
• 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.63
See Directors’ report: p.64 and p.65
Dignity_AR_FrontEnd_Master_2016 Q9 tp_Layout 1 30/03/2017 13:16 Page 42
Our governance structure
The Board is responsible for good stewardship;
it sets the strategic direction and risk appetite within
which the Executive management generate and drive
value, underpinned by an effective governance framework.
Dignity plc
Annual Report & Accounts 2016
39
The Dignity plc Board
(Chairman, Executive Directors and Independent Non–Executive Directors)
Board Level Committees
Audit Committee
(Independent Non–Executive Directors)
See pages: 46 to 48
Remuneration Committee
(Independent Non–Executive Directors)
See pages: 50 to 63
Nomination Committee
(Chairman and Independent Non–Executive Directors)
See page: 49
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 63.
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;
• Crematorium Director: Steve Gant;
• Commercial Director: Steve Wallis;
• Head of Corporate Development – Crematoria: Alan Lathbury; and
• Head of Corporate Development – Funerals and Head of
Internal Audit: Debbie Ginn.
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Dignity plc
Annual Report & Accounts 2016
40
Governance
Board of Directors
A strong and
experienced Board.
“
The composition of the Board
is balanced to align with our
strategic objectives and
corporate responsibilities.
Our Board members combine
to provide a strong and
complementary mix of skills
and experience and together
are committed to building
the long-term success of
the Group.
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 Companion 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.
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Dignity plc
Annual Report & Accounts 2016
41
Board Committee Membership
as at 30 December 2016
Audit
Committee
Remuneration
Committee
Nomination
Committee
Peter
Hindley
Alan
McWalter
David
Blackwood
Jane
Ashcroft
Martin Pexton
(resigned 3 February
2017)
Chairman
Member
Board composition, balance and tenure
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.
Executive and
Non-Executive Directors
Non-Executive Tenure
4
4
1
2
1
1
Executive Directors
Non-Executive Directors
Non-Executive Chairman
0 – 3 years
3 – 6 years
6 – 9 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.63
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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 is a Non-Executive Director, and
Audit Chair of Scapa Group plc, and has
previously served as a member of the
Cabinet Office Audit and Risk Committee
and the Board for Actuarial Standards.
He was Chief Financial Officer of
Synthomer plc for seven years, stepping
down in 2015, prior to which he held a
number of senior roles with ICI plc. He is
a Chartered Accountant (ICAEW) and a
Fellow of the Association of Corporate
Treasurers (FCT).
Jane Ashcroft CBE
Non–Executive Director
Mary McNamara
Non–Executive Director
Appointed to the Board: 2012
Appointed to the Board: 2017
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 and of the National Housing
Federation, 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:
Mary McNamara is a Non-Executive
Director and Chairman of the
Remuneration Committee of One Savings
Bank plc. She is also Senior Independent
Director and Chairman of the
Remuneration Committee for Motorpoint
Group plc. Previously she was the Chief
Executive of the Commercial Division for
Close Brothers Bank. Prior to this Mary
worked for GE for 17 years with leadership
roles across the Consumer and
Commercial Finance business.
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Dignity plc
Annual Report & Accounts 2016
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 Group of this size, complexity and organisational structure.
The four independent Non-Executive Directors who served for the period were: Jane Ashcroft, Alan McWalter, Martin Pexton and
David Blackwood. Martin Pexton resigned from the Board on 3 February 2017 and after a comprehensive and rigorous search
conducted by an external recruitment agency Mary McNamara was appointed as Non-Executive Director on 1 March 2017.
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, upon request, 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 Mary McNamara 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,
security and tax matters as required or as requested by any director. In addition any newly appointed director receives
appropriate induction training. Mary McNamara is receiving such training following her appointment.
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 £100 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 again completed
in 2016, following the one in 2013, by Independent Audit Ltd, a specialist company, entirely independent of the Group. This
meets the requirements of the Code that an external evaluation takes place on at least a three yearly basis.
The evaluation included the circulation of a questionnaire to each Director to stimulate thinking prior to a face to face interview
with the external assessor. The performance of individual directors was also considered as part of this process.
The results of the evaluation were then collated, discussed with the Chairman, a detailed report sent to all Directors followed by
a presentation to the full Board by Independent Audit Ltd at their meeting in September 2016. The evaluation concluded that the
Board and its three Sub-Committees operate very effectively and there were no significant areas of concern. Subsequent to that
presentation the Directors had a full comprehensive discussion regarding the performance of the Board and its Committees and
agreed any action points arising.
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Dignity plc
Annual Report & Accounts 2016
43
Board and Board Committee Attendance
Those attending and the frequency of Board and Committee meetings held during the period was as follows:
Audit Remuneration Nomination
Main Board(i) Committee Committee Committee
Number of meetings 7 3 6 2
Jane Ashcroft 7 3 5 1
David Blackwood 7 3 6 2
Andrew Davies 7 3(ii) – –
Peter Hindley 7 3(ii) 6(ii) 2
Mike McCollum 7 3(ii) 4(ii) 1(ii)
Alan McWalter 7 3 6 2
Martin Pexton 7 3 6 2
Richard Portman 7 3(ii) 4(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. Twelve 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) Martin Pexton resigned from the Board of Directors on 3 February 2017 and was replaced by Mary McNamara. He attended all Board and Committee meetings prior
to his departure.
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 2016. 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 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 throughout the period and in place up to the date the Governance Report was
signed and approved for the Annual Report and Accounts 2016.
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.
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.
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Dignity plc
Annual Report & Accounts 2016
44
Governance
Directors’ statement on corporate governance continued
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 formally 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 2016 (as in 2015), 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 two private meetings with the Chairman of the Audit Committee during 2016;
• 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 16 to 22.
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Dignity plc
Annual Report & Accounts 2016
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 generally 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 8 June 2017. 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 3 March 2017 As at 30 December 2016
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 9.99% 4,968,414 9.99%
Kames Capital 1,965,357 3.95% 2,460,352 4.95%
Aberdeen Asset Management 2,486,851 5.00% 2,486,851 5.00%
Montanaro Group 1,973,316 3.97% 1,973,316 3.97%
Franklin Templeton Investment Management Limited 2,448,905 4.92% 2,448,905 4.92%
Blackrock Investment Management 2,472,586 4.97% 2,472,586 4.97%
MFS Investment Management 2,460,953 5.04% 2,460,953 5.04%
Aviva 1,522,323 3.06% 1,986,475 3.99%
By order of the Board
Richard Portman
Company Secretary
8 March 2017
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Dignity plc
Annual Report & Accounts 2016
46
Governance
Audit Committee report
The Committee works with the full Board
to fulfil its oversight responsibilities.
David Blackwood, Chairman of the Audit Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present my second
report as the Chairman of the Audit Committee.
Membership and Process
The following Directors served on the Audit Committee
(the ‘Committee’) during 2016: me as Chairman, Alan
McWalter (Senior Independent Director), Jane Ashcroft and
Martin Pexton each of whom are independent Non-Executive
Directors. Martin Pexton resigned from the Board and this
Committee on 3 February 2017 and was replaced by Mary
McNamara who was appointed to the Board and this
Committee on 1 March 2017. All other Committee members
served through to the date of this report.
The Board is satisfied that I have, as Chairman of the
Committee, 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 2016; in February prior
to the release of the Preliminary Announcement for 2015; prior
to the release of the Interim Announcement for 2016 in July;
and again in December 2016 immediately prior to the end of
the financial period. The Committee also met in March 2017
prior to the release of the Preliminary Announcement for 2016.
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 Corporate Services 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, met with the Lead Partner a total of two 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;
• 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 2015 and 2016
Annual Report and Accounts and the 2016 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;
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Dignity plc
Annual Report & Accounts 2016
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 2015 and 2016 financial statements;
• 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 period end with the external auditors, which
addressed the planned audit approach to 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 2016 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 2015, and agreed
with the judgements reached by management and confirmed
we had fully complied with IAS19.
• Acquisition of five crematoria from Funeral Services Limited.
We considered the appropriateness of the accounting
treatment of the acquisition, including the fair value of assets
acquired and the consequential allocation of goodwill.
• Pre-arranged funeral plans trusts – The Committee considered
the on-going treatment of the Trusts under 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 2017. The Committee was, based on that review,
fully satisfied with EY’s performance in 2016 and a resolution
to re-appoint them as external auditors will be tabled at the
AGM on 8 June 2017.
The Committee confirms that during the year the Group has
complied with the provisions of the Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014, as published by the UK
Competition and Markets Authority.
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.
Audit Committee approval is 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
2016, completion of turnover certificates, a financial covenants
compliance certificate and certifications required as part of the
Group’s membership renewal of the FPA. Total fees of £42,000
were charged for the non-audit services compared to £288,000
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 2016.
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Dignity plc
Annual Report & Accounts 2016
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 third 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 2016 (as in 2015), 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 on
two 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.
This Audit Committee report was reviewed and approved by
the Board on 8 March 2017.
David Blackwood
Chairman of the Audit Committee
8 March 2017
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Nomination Committee report
The Committee successfully recruited
a new Non-Executive Director.
Dignity plc
Annual Report & Accounts 2016
49
Peter Hindley, Chairman of the Nomination Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present the 2016
Nomination Committee report.
During 2016 the Nomination Committee (the ‘Committee’)
consisted of me (as Chairman), Alan McWalter (Senior
Independent Director), Jane Ashcroft, David Blackwood and
Martin Pexton who subsequently resigned from the Board on
3 February 2017 and was replaced by Mary McNamara who
joined on 1 March 2017. 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 in respect of all the Directors
and senior managers;
• Identified and nominated for approval by the full Board a
suitable candidate to fill the vacancy arising upon the
resignation from the Board of Martin Pexton;
• 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 2016. 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 2015 Annual Report Martin
Pexton indicated that he intended to step down from the
Board in early 2017. The Nomination Committee therefore
retained the executive search agency Norman Broadbent to
provide a list of both male and female high calibre candidates
with the appropriate skills and experience to not only be a
Non-Executive Director of Dignity but also have the ability to
be Chairman of the Remuneration Committee in the future.
I am pleased to advise that at the end of a rigorous recruitment
process we appointed Mary McNamara, her biographical
details are on page 41 of this Annual Report.
All the Non-Executive Directors are appointed for two year
terms which may then be renewed up to maximum of nine
years service in accordance with the independence guidelines
in the UK Corporate Governance Code.
Tenure
Length of tenure at 30 December 2016 (years)
Name 1 2 3 4 5 6 7 8
David Blackwood
Alan McWalter
Jane Ashcroft
Mary McNamara
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 in
2015 and the appointment of David Blackwood that percentage
fell to 11 per cent. However we remained fully committed to
increasing the proportion of women serving on the Board
of Dignity back to 20 per cent or higher whilst continuing to
remain mindful of the overall need to recruit the very best
candidates regardless of gender. With the appointment of
Mary McNamara I am pleased to advise that percentage is
once again 22 per cent. The Group will continue to encourage
similar diversity in senior management positions and
throughout the workforce. Diversity is outlined in more detail
in the Corporate and Social Responsibility Report on pages
33 and 34.
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 external 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 8 March 2017.
Peter Hindley
Chairman of the Nomination Committee
8 March 2017
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Dignity plc
Annual Report & Accounts 2016
50
Governance
Report on Directors’ remuneration
for the 53 week period ended 30 December 2016
We remain committed to ensuring the
remuneration of Executive Directors
remains closely aligned to the interests
of shareholders.
Alan McWalter, Chairman of the Remuneration Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present this Directors’
Remuneration Report for the year ended 30 December 2016.
Last year, at the 2016 AGM, we renewed our Remuneration
Policy and were pleased to receive more than 96 per cent of
votes in favour of both the binding Remuneration Policy vote
and the advisory Remuneration Report vote. On behalf of the
Remuneration Committee, I would like to thank shareholders
for their continued support. Since no changes are proposed
to the remuneration policy, this year there will only be a single
advisory vote on this statement and the Annual Report
on Remuneration.
Performance and reward in 2016
Dignity delivered a strong financial performance in 2016 with
underlying earnings before taxation increasing by four per cent
to £75.2 million. Underlying after tax earnings were £59.4
million in the period, an increase of five per cent on 2015.
Underlying earnings per share in the period were 119.8 pence
per share compared to 114.8 pence per share in 2015, an
increase of four per cent.
2016 annual bonus outcome
As highlighted above, 2016 was a year of continued growth
building on an exceptional prior year. The annual bonus in 2016
was measured against stretching earnings before interest and
tax (‘EBIT’) targets, our key short-term financial performance
indicator. EBIT of £101.7 million was three per cent above
2015 EBIT and above both the target and stretch levels set by
the Committee. As a result, full bonuses have been awarded.
The portion of bonus above 100 per cent of salary will be
deferred in shares for two years in line with the approved
remuneration policy.
The LTIP award granted in 2014 was subject to performance
against two equally weighted measures, relative total
shareholder return (‘TSR’) and earnings per share growth
(‘EPS’). Following the three year performance period ending
30 December 2016, Dignity’s TSR ranked above the upper
quartile and actual EPS had grown by more than the target
set in 2014. As a result, the 2014 LTIP award will vest in full.
The Committee believes the bonus and LTIP outcomes are
fully warranted and reflect the very strong recent performance
of the Group.
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Remuneration in 2017
The Group is pleased to announce that a bonus of £1,200
was awarded to all employees not included in any other bonus
scheme based on the strong financial performance in 2016
with the amount pro-rated for part time staff or those who
joined during the year.
The Remuneration Committee has made the following decisions
for the year ahead:
• Base salary increases received by the Executive Directors
shall mirror those received by the wider workforce in monetary
terms. This followed a recommendation from the Chief
Executive. With the exception of promotion or exceptional
circumstances, all full time employees including Executive
Directors shall receive an increase of £1,200. As the same
monetary increase is being provided, in percentage of salary
terms, the Executive Directors’ increases are lower than the
typical employee increase.
• The annual maximum bonus will remain at 135 per cent of
base salary for the Chief Executive and 125 per cent for the
other Executive Directors. The structure is unchanged with
the bonus being measured against stretching underlying
EBIT targets and deferral into options applying for bonuses
in excess of 100 per cent of salary.
• It is expected that LTIP awards will be granted in 2017 and
these shall be in line with last year’s awards based on a 150
per cent of base salary grant for all Executive Directors. The
awards will vest subject to performance measured over three
financial years, 2017-2019, against EPS and relative TSR
targets. Any award that vests will be subject to a two year
holding period.
Finally, we the Committee would like to thank Martin Pexton,
who stepped down in February 2017, for his hard work and
his contributions to both the Committee and to the Board.
We wish him all the success in the future. I would also like
to welcome Mary McNamara who joined the Committee on
1 March 2017 upon her appointment to the Board of Dignity.
The Remuneration Committee actively seeks and welcomes
feedback from the Company’s shareholders. On behalf of the
Committee, I welcome your feedback and ask for your support
at the forthcoming Annual General Meeting.
Alan McWalter
Chairman of the Remuneration Committee
8 March 2017
Dignity_Remco_Section_2016 Q9 tp_RF66100_Q8_P02 30/03/2017 13:35 Page 2
Dignity plc
Annual Report & Accounts 2016
51
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) (Amendment) Regulations 2013.
The full Directors' Remuneration Policy, approved for three years from the 2016 AGM held on 9 June 2016, is shown on pages
52 to 56 for ease of reference. Please note that the information shown has been updated to take account of the fact that the
policy is now approved and enacted rather than proposed.
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.
The table on pages 52 and 53 summarises the main components of Dignity's ongoing remuneration policy. Details of how the
Committee will implement the policy are provided in the Annual Report on Remuneration on page 56.
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Dignity plc
Annual Report & Accounts 2016
52
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
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.
Pension
To provide retirement
benefits in line with the
overall Company policy.
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.
Benefits include provision of a company car (or cash allowance
in lieu), fuel, landline telephone and broadband at each Executive
Director’s home 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 Company operates a defined benefit plan, the Dignity
Pension and Assurance Scheme, under which selected
executives may accrue benefit. The defined benefit plan is
closed to new members.
The Company may contribute to selected individuals' personal
pension schemes or is able to make salary supplements in
lieu of pension contributions.
Details of the arrangements for the Directors are set out in the
Annual Report on Remuneration.
Bonus payment is determined by the Committee after the year
end, based on performance against targets set prior to the start
of the year. Targets are reviewed annually.
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.
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 2017 are:
CEO: £511,500;
Operations Director: £326,700;
Finance Director: £316,200; and
Corporate Services Director:
£247,950.
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.
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.
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.
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.
Not applicable.
Performance metrics are
selected annually based
on the Group'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.
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Annual Report & Accounts 2016
53
Element Purpose and link Operation Maximum opportunity Framework used to
to strategy assess performance
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.
The maximum annual
award that can be
made to an individual
in any given financial
year is 150 per cent
of salary.
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 Group
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.
See Note 1.
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 resulted 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 Group'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 Group'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 Group value creation.
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Dignity plc
Annual Report & Accounts 2016
54
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
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 was 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 2017 vary
under three performance scenarios: minimum, on-target and maximum.
Remuneration £’000
2,500
2,000
1,500
1,000
500
0
£2,065
37%
33%
£1,349
28%
27%
£607
£1,252
38%
32%
£841
28%
27%
£383
£1,297
38%
31%
£872
28%
26%
£399
£984
38%
31%
£662
28%
26%
£302
100%
45%
30%
100%
45%
30%
100%
46%
31%
100%
46%
48%
31%
Fixed Pay
Annual Bonus
LTIP
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Chief Executive Officer
Finance Director
Operations Director
Corporate Services Director
Notes
• Minimum comprises fixed pay, which includes 2017 basic salary, the value of benefits in 2016 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.
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Annual Report & Accounts 2016
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
Mary McNamara
Contract date
Notice period
1 April 2004
1 April 2004
1 November 2006
1 January 2009
7 December 2016
1 October 2015
1 January 2015
1 April 2016
1 March 2017
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
36 months
12 months
12 months
15 months
n/a
Martin Pexton served on the Board throughout 2016 and resigned on 3 February 2017.
For Executive Directors, the Company may in its absolute discretion at any time after notice is served by either party, terminate
a Director’s 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).
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Dignity plc
Annual Report & Accounts 2016
56
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
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 2017 AGM. The information below includes how we intend to operate our policy in 2017 and the pay
outcomes in respect of the 2016 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 2017
Salaries
Following a Group-wide review of base salaries it was determined that all full-time employees shall receive an increase of £1,200
in 2017. Part time employees will receive a pro rata increase. The Committee decided, following a recommendation from the
Chief Executive, that the Executive Directors shall receive the same increase as all other employees.
Therefore, the proposed salaries as at 1 January 2017 are:
2017 2016 Increase
£ £ %
Mike McCollum £511,500 £510,300 0.2
Andrew Davies £326,700 £325,500 0.4
Richard Portman £247,950 £246,750 0.5
Steve Whittern £316,200 £315,000 0.4
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Annual Report & Accounts 2016
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 2017 are as
detailed below and have been increased by two per cent from those in 2016:
2017 2016 Increase
£ £ %
Peter Hindley £173,350 £169,950 2
Jane Ashcroft £46,850 £45,900 2
David Blackwood £56,200 £55,100 2
Alan McWalter £62,850 £61,600 2
Mary McNamara* £39,042 – –
*Mary McNamara was appointed on the 1 March 2017.
The base fees for Non-Executive Directors in 2017 are £46,850. The Senior Independent Director receives an additional fee of
£9,700 and the Chairs of the Audit and Remuneration Committees receive additional fees of £9,350 and £6,300 respectively.
Pension and Benefits
All Executive Directors will 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.
Annual bonus
For 2017, the maximum bonus potential shall be 135 per cent for the Chief Executive and 125 per cent for the remaining
Executive Directors.
The annual bonus will continue to be solely based on stretching underlying EBIT targets which the Committee believes provides
a sound measure of trading performance and a good balance with EPS and TSR which are 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.
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 2017 awards will be subject to a relative TSR measure measured against the constituents of the FTSE 350 and the
other half subject to challenging EPS growth targets. The performance period for both tranches will be the three financial years,
2016-2018.
Threshold Target Maximun
Performance conditions Weighting vesting Threshold vesting Target vesting Maximum
Relative TSR 50% 25% Median – – 100% Upper quartile
or higher
EPS 50% 15% 136.8p 50% 144.0p 100% 154.8p or higher
No vesting may occur under the relative TSR measure unless the Committee considers that the underlying financial performance
of the Group has been satisfactory.
Under the EPS measure, vesting for performance between threshold and target and between target and maximum is determined
on a straight line basis. Under the TSR measure vesting between threshold and maximum is determined on a straight line basis.
Awards will be subject to a post-vesting holding period of two years. This requires Executive Directors to hold on to the net of tax
number of vested shares for a period of two years following vesting.
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Annual Report & Accounts 2016
58
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
Single total remuneration figure for Directors
The following table presents a single total remuneration figure for 2016 for the Executive and Non-Executive Directors.
Fixed Pay Pay for Performance
Annual Total
Salary Benefits(a) Pension(b) Bonus(c) LTIP(d) Other (f) Remuneration
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive Directors
Mike McCollum
Andrew Davies
Richard Portman
Steve Whittern
Non–Executive Directors
Peter Hindley
Jane Ashcroft
David Blackwood (e)
Alan McWalter
Martin Pexton
2016 510 19 77 689 1,138 – 2,433
2015 486 19 73 486 1,376 – 2,440
2016 326 23 49 407 646 – 1,451
2015 310 26 – 310 782 – 1,428
2016 247 17 37 308 550 6 1,165
2015 235 17 35 235 626 – 1,148
2016 315 19 47 394 633 – 1,408
2015 300 19 – 300 692 – 1,311
2016 170 1 – – – – 171
2015 167 1 – – – – 168
2016 46 – – – – – 46
2015 45 – – – – – 45
2016 55 – – – – – 55
2015 14 – – – – – 14
2016 62 – – – – – 62
2015 60 – – – – – 60
2016 46 – – – – – 46
2015 45 – – – – – 45
(a) Taxable benefits for the year included: provision of a company car or allowance, fuel, family private medical cover, landline telephone and broadband 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) The pension benefit is set at 15 per cent of basic salary. In 2015 only Mike McCollum and Richard Portman received this benefit. Under the revised remuneration policy
approved by shareholders at the 2016 AGM it now applies to all Executive Directors.
(c) The bonus refers to performance in the 2015 and 2016 financial years. The cash element, being 100 per cent of basic salary, of the bonus awarded for performance relating
to 2016 is due to be paid at the end of March 2017. The remainder of the bonus; 35 per cent of basic salary in respect of Mike McCollum and 25 per cent of basic salary
for the remaining Executive Directors is deferred shares which have to be held for two years.
(d) The LTIP value relates to the award that was granted 24 March 2014. The performance period for this award ends on 30 December 2016. The value shown is calculated by
reference to the average share price in the last quarter of the 2016 financial year. The comparative number is the value of the 2013 LTIP that vested in 2016.
(e) David Blackwood was appointed to the Board on 1 October 2015.
(f) The other remuneration represents the gain on exercise and disposal of SAYE options granted in 2013.
Determination of 2016 annual bonus outcome
The targets for the 2016 annual bonus were based on the achievement of an underlying EBIT target:
Target Stretch
(for which 70% of (for which 100% of Bonus payable
Weighting maximum payable) maximum payable) 2016 achieved (out of maximum)
% £m £m £m %
EBIT
100
96.7
99.1
101.7
100
The strong performance of the Group during 2016 meant that the EBIT target of £96.7 million was exceeded by £5 million
(5.2 per cent). As a consequence both the target and stretch targets for EBIT were met. Accordingly, the Committee awarded
Executive Directors full bonuses in respect of the 2016 financial year, being 135 per cent of base salary for the Chief Executive
and 125 per cent of base salary for the other Executive Directors.
Bonus EPS Bonus Cash Deferred
maximum achievement awarded bonus bonus
Director % of base salary % of award £’000 £’000 £’000
Mike McCollum 135 100 689 510 179
Andrew Davies 125 100 407 326 81
Richard Portman 125 100 308 246 62
Steve Whittern 125 100 394 315 79
Bonus in excess of 100 per cent of base salary will be deferred in shares for a period of two years.
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Annual Report & Accounts 2016
59
Determination of LTIP awards with performance periods ending in the year
Half of the LTIP awards made in 2014 were subject to a relative TSR condition and half subject to EPS, both measured over the
three year period which ended on 30 December 2016.
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%
Dignity’s TSR over the three year measurement period was 83.6 per cent ranking Dignity in 30th place out of the 325 companies
in the TSR peer group. Underlying EPS increased from 72.1 pence to 119.8 pence, a compound increase of 18.4 per cent.
Consequently 100 per cent of the 2014 awards will vest, subject to formal ratification by the Remuneration Committee at the
appropriate time.
Average share price
2014 PSP EPS TSR (1 October – Estimated
award vesting vesting 30 December 2016) award value
Director number of shares % of target % of target £ £’000
Mike McCollum 43,999 100 100 25.87 1,138
Andrew Davies 24,991 100 100 25.87 646
Richard Portman 21,249 100 100 25.87 550
Steve Whittern 24,483 100 100 25.87 633
The estimated value of the award is based on the average share price over the last quarter of the financial year. The actual value
will be the value at the vesting date.
LTIP awards granted in the year
LTIP awards granted in the form of nil cost options to Executive Directors on 15 June 2016 were as follows:
Face/maximum
Number of LTIP value of awards % of award vesting at
Executive awards at grant date*£ threshold and maximum Performance period
Mike McCollum 31,435 765,450 • Threshold: 15% for EPS and 28.12.15 – 28.12.18
Andrew Davies 20,051 488,250 25% for TSR. 28.12.15 – 28.12.18
Richard Portman 15,200 370,125 28.12.15 – 28.12.18
Steve Whittern 19,405 472,500 • 100% for maximum vesting. 28.12.15 – 28.12.18
* Based on a face value grant of 150 per cent of salary and using a 28 day average share price to 25 December 2015 of 2,435 pence.
Half of the 2016 award vest subject to a relative TSR measure measured against the constituents of the FTSE 350 as at 28
December 2015 and the other half subject to EPS growth targets. The performance period for both tranches is measured over
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 128.1 pence, 15 per cent vests for EPS of 128.1 pence,
50 per cent vests for EPS of 134.8 pence with 100 per cent vesting for EPS of 144.9 pence. Vesting is on a straight line basis for
performance in between these points.
Clawback and malus provisions apply.
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Annual Report & Accounts 2016
60
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
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) 25.12.15 year year during year 30.12.16 acquired acquired
Mike McCollum
Andrew Davies
Richard Portman
Steve Whittern
19.03.13(ii)
24.03.14(iii)
05.03.15(iv)
15.06.16(v)
19.03.13(ii)
24.03.14(iii)
05.03.15(iv)
15.06.16(v)
19.03.13(ii)
24.03.14(iii)
05.03.15(iv)
15.06.16(v)
19.03.13(ii)
24.03.14(iii)
05.03.15(iv)
15.06.16(v)
1,023
1,353
1,742
2,435
1,023
1,353
1,742
2,435
1,023
1,353
1,742
2,435
1,023
1,353
1,742
2,435
57,050
43,999
34,874
–
32,405
24,991
22,245
–
25,929
21,249
16,863
–
28,715
24,483
21,527
–
–
–
–
31,435
–
–
–
20,051
–
–
–
15,200
–
–
–
19,405
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,050
–
–
–
32,405
–
–
–
25,929
–
–
–
28,715
–
–
–
–
43,999
34,874
31,435
–
24,991
22,245
20,051
–
21,249
16,863
15,200
–
24,483
21,527
19,405
20.03.16
25.03.17
06.03.18
15.06.19
20.03.16
25.03.17
06.03.18
15.06.19
20.03.16
25.03.17
06.03.18
15.06.19
20.03.16
25.03.17
06.03.18
15.06.19
18.03.23
24.03.24
05.03.25
15.06.26
18.03.23
24.03.24
05.03.25
15.06.26
18.03.23
24.03.24
05.03.25
15.06.26
18.03.23
24.03.24
05.03.25
15.06.26
(i) Half of the share awards under the LTIP 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. The other half of the awards are
based on EPS growth targets.
(ii) Number of options derived based on the average mid-market share price for the previous 28 days to 31 December 2012.
(iii) Number of options derived based on the average mid-market share price for the previous 28 days to 31 December 2013.
(iv) Number of options derived based on the average mid-market share price for the previous 28 days to 26 December 2014.
(v) Number of options derived based on the average mid-market share price for the previous 28 days to 25 December 2015.
The aggregate gain on the exercise of options, both Long-Term Incentive Plan and Save As You Earn, by Directors in the period
was £3.6 million (2015: £3.8 million).
Directors’ interest in shares
The interests of the Directors in the share capital of Dignity plc at 30 December 2016 are set out below:
Number of Ordinary Shares
At 30 December 2016
Subject to
performance
At 25 December conditions under
2015 Legally owned Subject to SAYE the LTIP
Mike McCollum 183,334 183,334 – 110,308
Andrew Davies 137,254 137,254 – 67,287
Richard Portman 93,630 92,280 332 53,312
Steve Whittern 19,586 27,000 – 65,415
Peter Hindley 160,696 160,696 – –
David Blackwood 2,189 2,189 – –
Alan McWalter 2,552 2,552 – –
Jane Ashcroft 917 917 – –
Martin Pexton 2,750 2,750 – –
Mary McNamara(1) – – – –
(1) At the date of her appointment, Mary McNamara did not own any shares in the Company.
There has been no change in the interests set out above between 30 December 2016 and 8 March 2017.
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 26 February 2016 as adjusted for any subsequent share
consolidations. All Executive Directors meet that guideline.
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Dignity plc
Annual Report & Accounts 2016
61
Directors’ total pension entitlements
Age at
30.12.16
Pensionable
service at
30.12.16
Years
Accrued
pension
25.12.15
£
Mike McCollum
Richard Portman
Andrew Davies
Steve Whittern
49 15.667 108,944
43,487
55 14.583
–
–
55
–
–
42
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
£
76,545
37,013
48,825
47,250
Accrued
pension
30.12.16
£
–
43,487
–
–
Value x 20
over year
(net of
inflation and
Directors'
contributions)
£
Total
pension
benefits
£
Normal
retirement
age
Value x 20
at start
of year
£
– 76,545
– 37,013
– 48,825
– 47,250
65 2,178,880
869,740
65
–
65
–
65
Value x 20
at end
of year
£
–
869,740
–
–
(1) Mike McCollum and Richard Portman 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.
Mike McCollum transferred his benefits out of the Scheme in January 2016. Richard Portman continues to be entitled to a deferred pension under the Scheme.
(2) Andrew Davies and Steve Whittern now receive a pension supplement equal to 15 per cent of base salary which commenced at the start of the period.
(3) Transfer values have been calculated in accordance with the transfer value basis set by the Trustee.
(4) Pension accruals shown are the amounts that would be paid annually on retirement based on service at the end of the current period. This equates to accrued entitlement.
Loss of office payments
No Director left in the year and no compensation for loss of office was paid.
Relative importance of spend on pay
The following table sets out the percentage change in dividends and overall spend on employee pay in the 2016 financial year
compared with the prior year.
2016 2015 Change
£m £m %
Dividends 11.0 10.0 10
Employee remuneration costs 99.7 94.7 5
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.
2016 2015 Change
£’000 £’000 %
Chief Executive (£’000)
– Salary 510 486 5
– Benefits 96 92 4
– Bonus 1,827 1,862 (2)
Change
£ £ %
Full time equivalent average employee (£)(1)
– Salary 24,487 24,054 2
– Benefits 1,697 1,620 5
– Bonus 4,036 4,718 (14)
(1) There are 3,154 employees at 30 December 2016 (25 December 2015: 3,038), of which 810 (2015: 736) were part time.
The comparative numbers for 2015 have been restated as the method of calculation was comprehensively reviewed in the period.
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Dignity plc
Annual Report & Accounts 2016
62
Governance
Report on Directors’ remuneration continued
for the 53 week period ended 30 December 2016
Performance graph and single figure table
The following graph shows the Company's TSR performance over the last eight financial years against the FTSE 350 index.
The FTSE 350 has been chosen as the Company is a member of that index.
8 Year Total Shareholder Return
)
d
e
s
a
b
e
r
(
£
e
u
a
V
l
500
450
400
350
300
250
200
150
100
50
0
8
0
c
e
D
9
0
c
e
D
0
1
c
e
D
1
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e
D
Dignity plc
FTSE 350 Index
Source: Datastream (Thomson Reuters)
This graph shows the value, by 30 December 2016, of £100 invested in Dignity plc on 26 December 2008, compared with the
value of £100 invested in the FTSE 350 Index on the same date.
The table below shows the total remuneration figure for the CEO over the same eight 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 2016
CEO single total figure of
remuneration (£’000) 1,018 899 917 2,081 2,217 2,426 2,440 2,433
Annual bonus pay-out relative
to maximum (%) 85 100 100 100 100 100 100 100
LTIP vesting (%) 63 – – 100 100 100 100 100
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 in 2016
comprised all the other Non-Executive Directors: Jane Ashcroft, David Blackwood and Martin Pexton. Martin Pexton resigned from
the Board of Dignity plc on 3 February 2017 and was replaced by Mary McNamara on 1 March 2017 who was also appointed
to serve on the Remuneration Committee.
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 seven 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 approved the payment of the 2015 performance
related bonus, dealt with the vesting of the shares awarded in 2013 under the LTIP scheme and approved the amendments to
the Rules of the LTIP and the Rules of the new Deferred Annual Bonus Scheme.
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Annual Report & Accounts 2016
63
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 £35,754 + VAT and were charged on a time spent basis.
Statement of shareholder voting at the AGM (Unaudited)
Votes cast by proxy and at the Annual General Meeting held on 9 June 2016 in respect of the Remuneration Report and Policy
are as shown below:
Remuneration Report Remuneration Policy
Total number Percentage of Total number Percentage of
of votes votes cast of votes votes cast
For 38,273,742 96.9 38,061,712 96.3
Against 440,335 1.1 790,561 2.0
Abstentions 802,328 2.0 664,132 1.7
Total 39,516,405 100 39,516,405 100
On behalf of the Board
Alan McWalter
Chairman of the Remuneration Committee
8 March 2017
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Annual Report & Accounts 2016
64
Governance
Directors’ report
for the 53 week period ended 30 December 2016
The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
53 week period ended 30 December 2016.
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 including Financial
Reporting Standard 101, Reduced Disclosure Framework (‘FRS
101’) (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:
• The Strategic Report on pages 4 to 36 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.
Principal risks and uncertainties
Operational risks are considered on pages 29 and 30.
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, 213,851 Ordinary Shares of 12 48/143
pence each were issued to satisfy Long-Term Incentive Plan
share awards vesting in the period and 104,008 Ordinary
Shares of 12 48/143 pence each were issued to satisfy options
exercised under the 2013 Save As You Earn Scheme which
matured on 1 December 2016. Of that total 1,541 were issued
to retirees prior to the maturity of the scheme.
The issued share capital of Dignity plc at 30 December 2016
consisted of 49,738,150 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.
• 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 pages 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
A special resolution passed at the last AGM on 9 June 2016
gives Dignity plc the authority to purchase up to 4,963,440
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 £4,081,822 of which up to £612,273 may
be for cash. These authorities will expire at the conclusion
of the next AGM on 8 June 2017. 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 70. The Group’s profit before
tax amounted to £71.2 million (2016: £69.0 million).
Dividends
An interim dividend of 7.85 pence per Ordinary Share was paid
to shareholders on 28 October 2016. The Board has proposed
a final dividend of 15.74 pence (2015: 14.31 pence) per share,
which, subject to approval at the AGM, will be paid on 30 June
2017 to shareholders on the register at close of business on
19 May 2017.
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 magazine,
team talks, regular bulletins, both national and regional and
management briefings. This is discussed in more detail in the
Corporate and Social Responsibility Report on pages 32 to 36.
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Annual Report & Accounts 2016
65
Post balance sheet events
Please refer to note 32 of the Notes to the Consolidated
Financial Statements for further details.
Independent Auditors and disclosure of information
to Auditors
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 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 36 has been approved
by the Board.
By order of the Board
Richard Portman
Company Secretary
8 March 2017
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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.
The Directors will be publishing gender pay data on the
corporate website www.dignityfuneralsplc.co.uk during 2017
in accordance with the Equality Act 2010 (Gender Pay Gap)
Regulations 2017 that came into force on 1 October 2016.
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 8 June 2017. 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 £100 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 34.
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 35
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 3 March 2017.
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66
Financial Statements
Independent auditors’ report to the members of Dignity plc
for the 53 week period ended 30 December 2016
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 30 December 2016 and of the group’s profit for the
53 week period then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice including FRS 101 “Reduced Disclosure Framework”; 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 30 December 2016
• Consolidated income statement for the 53 week period then ended
• Consolidated statement of comprehensive income for the 53 week
• Company balance sheet as at 30 December 2016
• Statement of changes in equity for the 53 week period then ended
• Related notes to the financial statements
period then ended
• Consolidated statement of changes in equity for the 53 week
period then ended
• Consolidated cash flow statement for the 53 week period then ended
• 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
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has
been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 “Reduced Disclosure Framework”.
Overview of our audit approach
Risks of material
misstatement that had
the greatest effect on our
overall audit strategy and
the allocation of resources
in the audit
• The risk of inappropriate revenue recognition. Specifically 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.
• The risk of fraud and management override. Specifically risks inherent in those areas where manual journals are posted
at head office as part of the financial statement close process.
Audit scope
• We performed an audit on the consolidated financial records of the Group to the materiality and performance
materiality described below.
Materiality
• Overall Group materiality was £3.7 million which represents 5% of profit before tax.
Our assessment of risk of material misstatement
We identified the risks of material misstatement described opposite 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.
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What we concluded to the
Audit Committee
Based upon the procedures
performed we are satisfied that
revenue, as presented in the Annual
Report & Accounts, is not materially
misstated.
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.
Refer to the Accounting
policies (pages74 to 81); and
Note 3 of the Consolidated
Financial Statements
(pages 82 to 84).
• 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 detailed cut-off testing on the marketing allowances arising on
pre-arranged funeral plans issued around the period end;
• We performed analytical procedures to compare revenue recognised with
expectations from past experience, management’s forecasts and, where possible,
external market data in respect of the numbers of deaths in the period and
obtained corroborative evidence to support divergences from our expectations;
• We reconciled the aggregate revenue amounts extracted from the front end sales
systems to revenue recorded in the general ledger and audited material
reconciling items that arose therefrom; and
• We identified and obtained support for journals generated at head office
impacting revenue.
The risk of fraud and management override
• We performed data analytics to identify journal entries that we believed to be
potentially unusual. We obtained supporting evidence for each of those journals
identified; and
• We have performed audit procedures in respect of each of the estimates listed
to identity evidence of management bias.
Based on the results of the
procedures performed, including
journal entry testing, we have not
identified any anomalies.
We considered the risks
inherent in those areas
where manual journals
are posted at head office
as part of the financial
statement close process
and in particular 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.
The scope of our audit
Our assessment of audit risk, our evaluation of materiality and performance materiality determines our audit scope. Taken
together, this enables us to form an opinion on the consolidated financial statements. The group finance function 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 £3.7 million (2015: £3.4 million), which is 5% (2015: 5%) of profit before tax.
We believe that profit before tax 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% (2015: 75%) of our planning materiality, namely £2.8 million (2015: £2.6 million).
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 £0.2 million
(2015: £0.2 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
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Financial Statements
Independent auditors’ report to the members of Dignity plc continued
for the 53 week period ended 30 December 2016
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.
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 64, 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.
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Listing Rules review requirements
We are required to review:
• the directors’ statement in relation to going concern, set out on page 65, and longer-term viability, set out on
We have no exceptions
to report.
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
8 March 2017
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.
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Financial Statements
Consolidated income statement
for the 53 week period ended 30 December 2016
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Note £m £m
Revenue 3 313.6 305.3
Cost of sales (128.1) (123.3)
Gross profit 185.5 182.0
Administrative expenses (87.8) (86.5)
Operating profit 3 97.7 95.5
Analysed as:
Underlying operating profit 3 101.7 98.7
Profit on sale of fixed assets 0.1 –
External transaction costs 5 (4.1) (3.2)
Operating profit 3 97.7 95.5
Finance costs 4 (26.9) (27.0)
Finance income 4 0.4 0.5
Profit before tax 5 71.2 69.0
Taxation – before exceptional items (15.8) (15.5)
Taxation – exceptional 1.8 3.4
Taxation 6 (14.0) (12.1)
Profit for the period attributable to equity shareholders 3 57.2 56.9
Earnings per share for profit attributable to equity shareholders
– Basic (pence) 8 115.3p 115.2p
– Diluted (pence) 8 114.6p 114.5p
Consolidated statement of comprehensive income
for the 53 week period ended 30 December 2016
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Note £m £m
Profit for the period 57.2 56.9
Items that will not be reclassified to profit or loss
Remeasurement loss on retirement benefit obligations 28 (12.5) (1.4)
Tax credit on remeasurement on retirement benefit obligations 2.3 0.3
Restatement of deferred tax for the change in UK tax rate (0.3) (0.2)
Other comprehensive loss (10.5) (1.3)
Comprehensive income for the period 46.7 55.6
Attributable to:
Equity shareholders of the parent 46.7 55.6
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Consolidated balance sheet
as at 30 December 2016
30 December 25 December
2016 2015
Note £m £m
Assets
Non-current assets
Goodwill 9 215.9 201.5
Intangible assets 9 142.2 126.7
Property, plant and equipment 10 235.4 200.6
Financial and other assets 11 11.3 10.3
604.8 539.1
Current assets
Inventories 13 6.1 6.4
Trade and other receivables 14 37.0 31.9
Cash and cash equivalents 15 67.1 98.8
110.2 137.1
Total assets 715.0 676.2
Liabilities
Current liabilities
Financial liabilities 16 8.8 8.3
Trade and other payables 17 59.3 67.5
Current tax liabilities 5.4 5.4
Provisions for liabilities 19 1.6 1.5
75.1 82.7
Non-current liabilities
Financial liabilities 16 581.5 594.6
Deferred tax liabilities 20 25.7 21.7
Other non–current liabilities 17 2.8 2.3
Provisions for liabilities 19 7.5 6.3
Retirement benefit obligation 28 25.9 12.5
643.4 637.4
Total liabilities 718.5 720.1
Shareholders’ equity
Ordinary share capital 22 6.1 6.1
Share premium account 8.5 4.8
Capital redemption reserve 141.7 141.7
Other reserves (3.5) (4.5)
Retained earnings (156.3) (192.0)
Total equity (3.5) (43.9)
Total equity and liabilities 715.0 676.2
The financial statements on pages 70 to 106 were approved by the Board of Directors on 8 March 2017 and were signed
on its behalf by:
M K McCollum S L Whittern
Chief Executive Finance Director
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Financial Statements
Consolidated statement of changes in equity
for the 53 week period ended 30 December 2016
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
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(1) – 2.0 – – – 2.0
Gift to Employee Benefit Trust – – – (2.0) – (2.0)
Dividends (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)
Profit for the 53 weeks ended
30 December 2016 – – – – 57.2 57.2
Remeasurement loss on defined
benefit obligations – – – – (12.5) (12.5)
Tax on pensions – – – – 2.3 2.3
Restatement of deferred tax for the
change in UK tax rate – – – – (0.3) (0.3)
Total comprehensive income – – – – 46.7 46.7
Effects of employee share options – – – 3.0 – 3.0
Tax on employee share options – – – 0.2 – 0.2
Proceeds from share issue(2) – 3.7 – – – 3.7
Gift to Employee Benefit Trust – – – (2.2) – (2.2)
Dividends (note 7) – – – – (11.0) (11.0)
Shareholders’ equity as at 30 December 2016 6.1 8.5 141.7 (3.5) (156.3) (3.5)
(1) Relating to issue of 249,067 shares under 2012 LTIP scheme and 1,044 shares under 2013 SAYE scheme.
(2) Relating to issue of 213,851 shares under 2013 LTIP scheme and 104,008 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 tax, together with a
£12.3 million merger reserve.
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Consolidated statement of cash flows
for the 53 week period ended 30 December 2016
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Note £m £m
Cash flows from operating activities
Cash generated from operations before external transaction costs 25 121.1 125.2
External transaction costs paid in respect of acquisitions (3.9) (3.2)
Cash generated from operations 117.2 122.0
Finance income received 0.5 0.6
Finance costs paid (38.5) (19.1)
Transfer from restricted bank accounts for finance costs 12.8 5.6
Payments to restricted bank accounts for finance costs 15 (0.3) (12.8)
Total payments in respect of finance costs (26.0) (26.3)
Tax paid (10.6) (3.7)
Net cash generated from operating activities 81.1 92.6
Cash flows from investing activities
Acquisition of subsidiaries and businesses (net of cash acquired) 26 (56.3) (50.0)
Proceeds from sale of property, plant and equipment 1.0 0.8
Maintenance capital expenditure(1) (19.6) (15.6)
Branch relocations (1.6) (3.9)
Satellite locations (0.8) (0.3)
Development of new crematoria and cemeteries (0.8) (0.1)
Purchase of property, plant and equipment and intangible assets (22.8) (19.9)
Net cash used in investing activities (78.1) (69.1)
Cash flows from financing activities
Issue costs in respect of borrowings and Secured Notes – (0.1)
Issue costs in respect of debt facility (0.1) (0.2)
Proceeds from share issue 1.5 –
Repayment of borrowings (12.6) (8.1)
Transfer from restricted bank accounts for repayment of borrowings 4.1 4.0
Payments to restricted bank accounts for repayment of borrowings 15 – (4.1)
Total payments in respect of borrowings (8.5) (8.2)
Dividends paid to shareholders on Ordinary Shares 7 (11.0) (10.0)
Net cash used in financing activities (18.1) (18.5)
Net (decrease)/increase in cash and cash equivalents (15.1) 5.0
Cash and cash equivalents at the beginning of the period 81.9 76.9
Cash and cash equivalents at the end of the period 15 66.8 81.9
Restricted cash 15 0.3 16.9
Cash and cash equivalents at the end of the period as reported in the
consolidated balance sheet 15 67.1 98.8
(1) Maintenance capital expenditure includes vehicle replacement programme, improvements to locations and purchases of other tangible and intangible assets.
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74
Financial Statements
Notes to the financial statements
for the 53 week period ended 30 December 2016
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 53 week period ended 30 December 2016
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.
In the current period, the Group’s consolidated financial statements have been prepared for the 53 week period ended
30 December 2016. For the comparative period, the Group’s consolidated financial statements have been prepared for the
52 week period ended 25 December 2015.
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 both
periods, 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.
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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 has not sought any Recoveries from the Trusts since 2012.
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 a discount to its rates prevailing at the time of death.
A commission is paid to the insurers when the policy is initially charged to the Group. These costs are carried as a
prepayment and charged to the income statement as a funeral is performed, with the cost per funeral estimated based on
the total costs incurred and the expected level of policies where the Group will be involved in the fulfilment of the funeral.
This expectation is reviewed annually.
In the event of the death of the policyholder, if the Group performs the funeral, it receives an agreed amount from the
insurers which is recognised as revenue within the funeral division. On occasions a third party will perform the funeral and
the Group will pass on all monies received to that party.
Share–based payments
The Group issues equity settled share–based payments to certain employees. A fair value for the equity settled share awards
is measured at the date of grant. Management measures the fair value using the valuation technique that they consider to be
the most appropriate to value each class of award, which include Black–Scholes calculations and Monte Carlo simulations.
The valuations take into account factors such as non–transferability, exercise restrictions and behavioural considerations.
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
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 not 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 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 paid 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 businesses 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.
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.
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1 Accounting policies (continued)
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 20 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 20 years.
Intangible assets – other
As part of the Crematoria Acquisition, the Group acquired interests in two crematoria subject to finite periods of operation
(by way of lease and/or service concession). The fair value of these interests has been identified and recognised as a
separate intangible asset. The value of each interest will be amortised over the remaining period of operation.
Property, plant and equipment
Assets are recorded in the balance sheet at cost less accumulated depreciation and any recognised impairment loss. Cost
includes, where appropriate, directly attributable costs incurred in bringing each asset to its present location and condition.
Depreciation is charged so as to write–off the cost of assets to their residual value (excluding freehold land and assets in the
course of construction), over their expected useful lives using the straight line method. The bases and annual depreciation
rates in use for the various classes of assets are as follows:
Freehold and long leasehold buildings 2% – 10%
Short leasehold buildings Over term of lease
Motor vehicles 11% – 20%
Computers 20%
Other plant and equipment 5% – 33%
Fixtures and fittings 15%
Freehold land is not depreciated on the basis that land has an indefinite life. Where the historical cost of land and buildings
cannot be split, the Directors have estimated that the historical cost attributable to land is one third (based on historical data)
of the original cost of acquiring the land and buildings. This estimate is regularly reviewed.
Major renovations of the Group’s trading premises and cremator re–linings are depreciated over the remaining life of the
related asset or to the estimated date of the next major renovation or cremator re–lining, whichever is sooner. Asset lives and
residual values for each class of asset are reviewed annually and adjusted if appropriate at each balance sheet date.
Assets in the course of construction are shown as work in progress at a value equal to costs incurred to date. Once
completed, they are reclassified and depreciated using the Group’s depreciation policy above.
Borrowing costs
If the construction phase of property, plant or equipment extends over a long period, the interest incurred on borrowed
capital up to the date of completion is capitalised as part of cost of construction as permitted by IAS 23 (Borrowing Costs).
Repairs and renewals
All repairs and renewals are charged to the income statement unless they represent an enhancement to the original asset.
Property, plant and equipment held under leases
When assets are financed by leasing agreements, where the risks and rewards are substantially transferred to the Group,
the assets are treated as if they had been purchased outright and the corresponding liability to the lessor is included as an
obligation under finance leases. Depreciation on leased assets is charged to the income statement on the same basis as
owned assets. Leasing payments are treated as consisting of capital and interest elements such that the interest element
is charged to the income statement so as to achieve a constant rate on the outstanding lease obligation.
All other leases are ‘operating leases’ and the relevant annual rentals are charged to the income statement on a straight
line basis.
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Annual Report & Accounts 2016
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
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 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 temporary 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 retained earnings in other comprehensive income in the period in which they arise.
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.
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Annual Report & Accounts 2016
79
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 (2015: 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 cost. 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.
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 key judgements and 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, was considered by the Group in 2015 with specific reference
to the non–consolidation of the pre–need trust.
IFRS 10 built 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.
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80
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
1 Accounting policies (continued)
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.
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.
The investor is exposed, or has rights, to
variable returns from its involvement with the
investee.
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.
The investor has the ability to use its power
over the investee to affect the amount of the
investor’s returns.
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.
Ultimately Dignity’s return is wholly dependent on the
investment performance of the Trusts.
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.
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.
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.
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.
Standards, amendments and interpretations effective in 2016
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year that 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 2016 or later periods but which the Group has not early adopted:
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1 Accounting policies (continued)
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 15, Revenue from contracts with customers, effective 1 January 2018 and will therefore impact the Group’s 2019
financial results. 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 however, from the work performed to date it is not expected to have a material
impact on the Group.
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 £205 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 Secured Notes, which are at fixed interest rates, resulting in a predetermined
repayment profile. The fair value of these financial instruments is based on underlying gilt prices and yield spreads based
on the market’s current view of the risk profile of the Secured Notes. Consequently, the fair value of these instruments will
fluctuate. Fair values are not relevant to the Group unless it was to change its funding strategy and repay the Secured
Notes early.
The Group is also fully drawn on a £15.8 million Crematoria Acquisition Facility. The principal on the facility is repayable in
one amount in February 2018 and interest is fixed at approximately 3.3 per cent. All interest is payable in cash on a quarterly
basis. Consequently, the Group carries limited risk to increases in LIBOR on this facility.
The Group has significant cash balances that are held by institutions 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 2017 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 in respect of the
securitisation group. 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 30 December 2016 the actual
ratio was 3.37 times (2015: 3.35 times).
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
2 Financial risk management (continued)
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 Secured Notes, rated A and BBB respectively by Fitch and Standard & Poor’s.
The Group monitors its capital structure based on the ratio of 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 Secured Notes under the terms of the Group’s secured
borrowings (see ‘Liquidity risk’ above).
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 operating 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 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)
53 week period ended 30 December 2016 £m £m £m £m £m £m
Funeral services 217.8 90.6 (11.6) 79.0 (0.9) 78.1
Crematoria – existing 65.1 40.0 (3.4) 36.6 0.1 36.7
Crematoria – acquisitions 2.4 1.1 (0.1) 1.0 (3.0) (2.0)
Crematoria 67.5 41.1 (3.5) 37.6 (2.9) 34.7
Pre–arranged funeral plans 28.3 8.7 (0.2) 8.5 – 8.5
Central overheads – (22.6) (0.8) (23.4) (0.2) (23.6)
Group 313.6 117.8 (16.1) 101.7 (4.0) 97.7
Finance costs (26.9) – (26.9)
Finance income 0.4 – 0.4
Profit before tax 75.2 (4.0) 71.2
Taxation – continuing activities (15.8) – (15.8)
Taxation – exceptional – 1.8 1.8
Taxation (15.8) 1.8 (14.0)
Underlying earnings for the period 59.4
Total other items (2.2)
Profit after taxation 57.2
Earnings per share for profit attributable to equity shareholders
– Basic (pence) 119.8p 115.3p
– Diluted (pence) 119.0p 114.6p
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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 30 December 2016 £m £m £m £m £m
Segment assets 433.5 185.1 22.6 6.7 647.9
Unallocated assets:
Cash and cash equivalents 67.1
Total assets 715.0
Segment liabilities (60.8) (11.1) (8.5) (16.9) (97.3)
Unallocated liabilities:
Borrowings – excluding finance leases (589.6)
Accrued interest (0.5)
Corporation tax (5.4)
Deferred tax (25.7)
Total liabilities (718.5)
Other segment items:
Additions to non–current assets (other than financial
instruments and deferred tax) 29.5 45.5 – 3.8 78.8
Depreciation (note 10) 11.6 3.5 – 0.8 15.9
Amortisation (note 9) – – 0.1 0.1 0.2
Impairment of trade receivables (note 21 (c)) 1.6 0.1 – – 1.7
Other non–cash expenses (note 23) – – – 3.6 3.6
Profit on sale of fixed assets 0.1 – – – 0.1
The revenue and operating profit/(loss), by segment, was as follows:
Profit on sale of
Underlying fixed assets,
operating profit/ external
(loss) before Underlying transaction costs
depreciation and Depreciation and operating profit/ and 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 overheads – (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.
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
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
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
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Finance costs
Secured Notes 24.7 25.0
Crematoria Acquisition Facility 0.6 0.6
Other loans 1.0 0.9
Net finance cost on retirement benefit obligations (note 28) 0.4 0.3
Unwinding of discounts 0.2 0.2
Finance costs 26.9 27.0
Finance income
Bank deposits (0.4) (0.5)
Finance income (0.4) (0.5)
Net finance costs 26.5 26.5
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5 Profit before tax
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Analysis by nature £m £m
The following items have been included in arriving at profit/(loss) before tax:
Staff costs (note 27) 99.7 94.7
Cost of inventories recognised as an expense (included in cost of sales) 16.7 16.2
Depreciation of property, plant and equipment – owned assets (note 10) 15.9 14.5
Amortisation of intangible assets (included in administrative expenses) (note 9) 0.2 0.1
Operating lease rentals – property 10.9 9.6
External transaction costs 4.1 3.2
Trade receivables impairment (included in administrative expenses) (note 21(c)) 1.7 2.2
Services provided by the Group’s auditors and its associates:
Fees payable to the Company’s auditors for the audit of parent company and consolidated
financial statements 0.1 0.1
Fees payable to the Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries 0.2 0.2
– Tax advisory services – –
– Other advisory services – –
0.3 0.3
External transaction costs
The current period relates to acquisition expenses which are not deductible for tax purposes.
During 2016, the Group paid £42,000 of fees to the Group’s auditor in connection with the other non–audit services.
See the Audit Committee report for further details.
6 Taxation
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Analysis of charge in the period £m £m
Current tax – current period 11.0 10.4
Adjustments for prior period 0.1 –
Total corporation tax 11.1 10.4
Deferred tax – current period 4.9 5.1
Adjustments for prior period (0.2) –
Restatement of deferred tax for the change in UK tax rate (1.8) (3.4)
Total deferred tax 2.9 1.7
Taxation 14.0 12.1
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
Tax on items credited to other comprehensive income or equity £m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (2.4) (0.3)
Deferred tax charge/(credit) relating to maturity of option schemes 0.5 (0.1)
Restatement of deferred tax for the change in UK tax rate 0.3 0.3
Total deferred tax credited to other comprehensive income or equity (1.6) (0.1)
Corporation tax charge relating to retirement benefit obligations 0.1 –
Corporation tax credit relating to maturity of option schemes (0.7) (0.7)
Total corporation tax credited to other comprehensive income or equity (0.6) (0.7)
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Dignity plc
Annual Report & Accounts 2016
86
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
6 Taxation (continued)
The taxation charge in the period is lower (2015: lower) than the standard rate of corporation tax in the UK of 20.0 per cent (2015:
20.25 per cent). The differences are explained below:
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Profit before taxation 71.2 69.0
Profit before taxation multiplied by the standard rate of corporation
tax in the UK of 20.0% (2015: 20.25%) 14.2 14.0
Effects of:
Adjustments in respect of prior period (0.1) –
Exceptional adjustment in respect of closing deferred tax rate change (1.8) (3.4)
Expenses not deductible for tax purposes 1.7 1.5
Total taxation 14.0 12.1
Under IFRS the tax rate is lower (2015: lower) than the standard UK tax rate of 20.0 per cent (2015: 20.25 per cent)
principally due to the exceptional adjustment (2015: exceptional adjustment). The standard rate of corporation tax in the UK
changed from 21 per cent to 20 per cent with effect from 1 April 2015. The Group’s underlying profits for this accounting
period are taxed at an effective rate of 21.0 per cent (2015: 21.5 per cent). 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 2017,
2018 and 2019 of 20.0 per cent. The Group does not have any provisions for uncertain tax positions.
Legislation to reduce the main rate of corporation tax from 18 per cent to 17 per cent from 1 April 2020 was 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 £1.8 million through its income statement, a debit of
£0.3 million through other comprehensive income to reflect the one off reduction in the period of the Group’s deferred
tax position.
7 Dividends
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Final dividend paid: 14.31p per Ordinary Share (2015: 13.01p) 7.1 6.5
Interim dividend paid: 7.85p per Ordinary Share (2015: 7.14p) 3.9 3.5
Dividend on Ordinary Shares 11.0 10.0
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 £11.0 million, 22.16 pence per share (2015: £10.0 million,
20.15 pence per share).
A final dividend of 15.74 pence per share, in respect of 2016, 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 £7.9 million. This will be
paid on 30 June 2017 provided that approval is gained from shareholders at the Annual General Meeting on 8 June 2017
and will be paid to shareholders on the register at close of business on 19 May 2017.
8 Earnings per share
The calculation of basic earnings per Ordinary Share has been based on the profit 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.
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87
8 Earnings per share (continued)
The Board believes that profit on ordinary activities before profit (or loss) on sale of fixed assets, external transaction costs,
exceptional items and after taxation is a useful indication of the Group’s performance, as it excludes significant non–recurring
items. This reporting measure is defined as ‘Underlying profit after taxation’.
Accordingly, the Board believes that earnings per share calculated by reference to this underlying profit after taxation is also a
useful indicator of financial performance.
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
53 week period ended 30 December 2016
Underlying profit after taxation and EPS 59.4 49.6 119.8
Add: Exceptional items, loss on sale of fixed assets and external
transaction costs (net of taxation of £nil million) (2.2)
Profit attributable to shareholders – Basic EPS 57.2 49.6 115.3
Profit attributable to shareholders – Diluted EPS 57.2 49.9 114.6
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
9 Goodwill and other intangible assets
Use of third Non-
Trade party brand compete
names name Other Software agreements Sub-total Goodwill Total
£m £m £m £m £m £m £m £m
Cost
At 26 December 2014 92.2 3.2 – 4.0 0.2 99.6 182.3 281.9
Acquisition of subsidiaries
and other businesses 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
Acquisition of subsidiaries
and other businesses (note 26(a)) 9.7 – 4.7 – – 14.4 14.4 28.8
– – – 1.3 – 1.3 – 1.3
– – – (0.7) – (0.7) – (0.7)
Additions
Disposal
At 30 December 2016 134.5 3.2 4.7 4.6 0.2 147.2 215.9 363.1
Accumulated amortisation
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)
Amortisation charge – (0.1) – (0.1) – (0.2) – (0.2)
– – – 0.7 – 0.7 – 0.7
Disposal
At 30 December 2016 – (1.4) – (3.4) (0.2) (5.0) – (5.0)
Net book amount at
30 December 2016 134.5 1.8 4.7 1.2 – 142.2 215.9 358.1
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
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Annual Report & Accounts 2016
88
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
9 Goodwill and other intangible assets (continued)
Impairment tests for goodwill and trade names
As described in note 1, goodwill and trade names 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:
Trade names Goodwill Total
At 30 December 2016 £m £m £m
Funeral services 134.5 155.4 289.9
Crematoria – 55.8 55.8
Pre–arranged funeral plans – 4.7 4.7
134.5 215.9 350.4
At 25 December 2015
Funeral services 124.8 149.9 274.7
Crematoria – 46.9 46.9
Pre–arranged funeral plans – 4.7 4.7
124.8 201.5 326.3
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 (2015: 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 6.0 per cent (2015: 8.1 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 17.4 per cent (2015: 18.1 per cent), or the
growth rate would have to reduce to at least minus 10.3 per cent (2015: minus 9.2 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 (2015: £nil).
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89
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 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 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
Additions 3.4 1.2 1.0 8.3 7.5 21.4
Acquisition of subsidiaries and other
businesses (note 26(a)) 28.7 – 0.8 0.5 – 30.0
Disposals (1.4) (1.8) (4.8) (3.0) – (11.0)
Reclassification 1.5 1.3 1.8 0.5 (5.1) –
At 30 December 2016 157.6 50.6 44.1 74.6 9.0 335.9
Accumulated depreciation
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
At 25 December 2015 (24.0) (16.4) (24.5) (30.0) – (94.9)
Depreciation charge (3.6) (2.1) (4.2) (6.0) – (15.9)
Disposals 1.2 1.7 4.8 2.6 – 10.3
At 30 December 2016 (26.4) (16.8) (23.9) (33.4) – (100.5)
Net book amount at 30 December 2016 131.2 33.8 20.2 41.2 9.0 235.4
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
Depreciation expense of £6.0 million (2015: £5.4 million) is included within cost of sales and £9.9 million
(2015: £9.1 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:
30 December 25 December
2016 2015
£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 £8.6 million
(2015: £7.7 million) in respect of property, plant and equipment and intangible assets.
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Annual Report & Accounts 2016
90
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
11 Non–current financial and other assets
30 December 25 December
2016 2015
Note £m £m
Prepayments (a) 7.4 7.5
Deferred commissions (b) 3.9 2.8
11.3 10.3
(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 a discount to its rates prevailing at the time of death.
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
30 December 25 December
2016 2015
£m £m
Materials 0.2 0.2
Finished goods 5.9 6.2
6.1 6.4
There were no inventory write–downs in either period.
14 Trade and other receivables
30 December 25 December
2016 2015
£m £m
Trade receivables 25.6 24.0
Less: provision for impairment (note 21(c)) (6.2) (5.7)
Net trade receivables 19.4 18.3
Receivables due from pre–arranged funeral plans trusts (note 29)(1) 11.2 9.7
Prepayments and accrued income 4.4 2.3
Other receivables 2.0 1.6
37.0 31.9
(1) Included in this amount is approximately £2.2 million (2015: £1.2 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.
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15 Cash and cash equivalents
30 December 25 December
2016 2015
£m £m
Operating cash as reported in the consolidated statement of cash flows as cash and
cash equivalents 66.8 81.9
Amounts set aside for debt service payments 0.3 16.9
Cash and cash equivalents as reported in the balance sheet 67.1 98.8
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, the repayment of liabilities due on the Group’s commitment fees due on its undrawn
borrowing facilities (see note 21(d)) and for no other purpose. Consequently, this amount did 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 3 January
2017. Of this amount, £0.3 million (2015: £12.8 million) is shown within the Statement of Cash Flows as ‘Payments to
restricted bank accounts for finance costs’ and £nil million (2015: £4.1 million) is shown within ‘Financing activities’ as
‘Payments to restricted bank accounts for repayment of borrowings’.
16 Financial liabilities
30 December 25 December
2016 2015
Note £m £m
Current
Secured A Notes (a) 8.8 8.3
(d) 8.8 8.3
Non–current
Secured Notes (a) 565.1 578.2
Finance lease obligations (b) 0.7 0.7
Crematoria Acquisition Facility (c) 15.7 15.7
581.5 594.6
(a) Secured Notes
On 17 October 2014, Dignity Finance PLC issued the Secured Notes. Interest is payable on the Secured 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 Secured A Notes and the
Secured B Notes respectively. At 30 December 2016, £0.3 million (2015: £0.3 million) and £0.4 million (2015: £0.4 million)
of the transaction costs in respect of the Secured A Notes and the Secured B Notes respectively remain unamortised.
For further details of security over the Secured Notes see note 30(a).
The amortisation profile of the Secured Notes is as follows:
Secured A Notes
June
December
Total
2017
£m
4.4
4.4
8.8
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
£m £m £m £m £m £m £m £m £m £m
4.6 4.7 4.9 5.1 5.2 5.4 5.6 5.8 6.0 6.2
4.6 4.8 4.9 5.1 5.3 5.5 5.7 5.9 6.1 6.4
9.2 9.5 9.8 10.2 10.5 10.9 11.3 11.7 12.1 12.6
2028 2029 2030 2031 2032 2033 2034 Total
£m £m £m £m £m £m £m £m
June 6.4 6.7 6.9 7.2 7.4 7.7 8.0 108.2
December 6.6 6.8 7.1 7.3 7.6 7.8 8.1 110.0
Total 13.0 13.5 14.0 14.5 15.0 15.5 16.1 218.2
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
16 Financial liabilities (continued)
Secured 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
30 December 25 December
2016 2015
£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 91.
At 30 December 2016, £15.8 million (2015: £15.8 million) of the principal was outstanding. At 30 December 2016,
£0.1 million (2015: £0.1 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.
17 Trade and other payables
30 December 25 December
2016 2015
Current £m £m
Trade payables 7.4 7.5
Tax and social security 2.6 1.7
Other current liabilities 2.2 2.2
Accruals 39.9 50.3
Deferred income 7.2 5.8
59.3 67.5
Non–current
Deferred income 0.9 1.0
Deferred consideration for acquisitions 0.2 0.1
Other non–current liabilities 1.7 1.2
2.8 2.3
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18 Obligations under finance leases and operating leases
For minimum lease payments obligations under finance leases refer to note 21(d)(ii).
The minimum lease payments under non–cancellable operating leases fall due as follows:
30 December 25 December
2016 2015
£m £m
Not later than one year 11.8 10.3
Later than one year but not more than five years 35.4 28.5
More than five years 157.8 135.6
205.0 174.4
The non–cancellable operating leases principally relate to leasehold land and buildings.
Sublease payments received in the year amount to £0.6 million (2015: £0.5 million). Total future sublease payments
receivable relating to operating leases amount to £0.6 million (2015: £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 6.3 0.1 1.4 7.8
Charged to income statement 1.4 – – 1.4
Arising on acquisitions 0.2 – – 0.2
Released to income statement (0.2) – (0.1) (0.3)
Utilised in period (0.2) – – (0.2)
Amortisation of discount 0.2 – – 0.2
At end of period 7.7 0.1 1.3 9.1
Provisions have been analysed between current and non–current as follows:
30 December 25 December
2016 2015
£m £m
Current 1.6 1.5
Non–current 7.5 6.3
9.1 7.8
(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, £1.2 million (2015: £1.0 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 2025.
(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.
(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.
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
20 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of either 17 or
19 per cent (2015: between 18 and 20 per cent).
The movement on the deferred tax account is as shown below:
30 December 25 December
2016 2015
£m £m
At beginning of period 21.7 13.6
Charged to income statement (note 6) 4.7 5.1
Restatement of deferred tax for the change in UK tax rate (1.5) (3.1)
Taken to other comprehensive income (note 6) (2.4) (0.3)
Taken to equity (note 6) 0.5 (0.1)
Arising on acquisitions (note 26(a)) 2.7 6.5
At end of period 25.7 21.7
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 14.9 17.9 32.8
Charged to income statement (note 6) – 0.1 0.1
Restatement of deferred tax for the change in
UK tax rate taken to the income statement (0.8) (1.1) (1.9)
Arising on acquisitions (note 26(a)) 0.1 2.6 2.7
At end of period 14.2 19.5 33.7
Deferred tax assets
Non trade
deficits Pensions Other Total
£m £m £m £m
At beginning of period (6.7) (2.3) (2.1) (11.1)
Charged/(credited) to income statement (note 6) 4.7 – (0.1) 4.6
Restatement of deferred tax for the change in
UK tax rate taken to other comprehensive income – 0.3 – 0.3
Restatement of deferred tax for the change in
UK tax rate taken to the income statement – – 0.1 0.1
Taken to other comprehensive income – (2.4) – (2.4)
Taken to equity – – 0.5 0.5
At end of period (2.0) (4.4) (1.6) (8.0)
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax provision
at 30 December 2016 was £25.7million (2015: £21.7 million).
Other deferred tax liabilities includes trade names and capital gains rolled forward, other deferred tax assets includes option
schemes £1.3 million (2015: £1.7 million) and long service awards £0.2 million (2015: £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.
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20 Deferred tax (continued)
The deferred income tax credited to other comprehensive income or charged to equity during the period was as follows:
53 week 52 week
period ended period ended
30 December 25 December
2016 2015
£m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (2.4) (0.3)
Restatement of deferred tax for the change in UK tax rate 0.3 0.2
Total credited to other comprehensive income (2.1) (0.1)
Deferred tax charge/(credit) relating to maturity of option schemes 0.5 (0.1)
Restatement of deferred tax for the change in UK tax rate – 0.1
Total charged to equity 0.5 –
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.
(a) Fair value of current and non–current financial assets and liabilities
30 December 2016 25 December 2015
Nominal value Book value Fair value Nominal value Book value Fair value
£m £m £m £m £m £m
Secured A Notes – 3.5456%
maturing 31 December 2034 218.2 217.9 241.8 230.8 230.5 238.7
Secured B Notes – 4.6956%
maturing 31 December 2049 356.4 356.0 436.2 356.4 356.0 376.8
Crematoria Acquisition Facility 15.8 15.7 15.8 15.8 15.7 15.8
Finance leases 0.7 0.7 0.7 0.7 0.7 0.7
Total 591.1 590.3 694.5 603.7 602.9 632.0
The Crematoria Acquisition Facility and Secured 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 Secured 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.
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96
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
21 Financial instruments (continued)
(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.
30 December 2016
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
Secured Notes (gross) 8.8 9.2 9.5 20.0 527.1 574.6
Interest payable on Secured Notes 24.4 24.0 23.7 46.5 405.4 524.0
Crematoria Acquisition Facility – 15.8 – – – 15.8
Interest payable on Crematoria
Acquisition Facility 0.5 0.1 – – – 0.6
Finance leases 0.1 0.1 0.1 – 2.5 2.8
Debt repayments 33.8 49.2 33.3 66.5 935.0 1,117.8
Other financial liabilities 59.3 0.3 0.4 0.7 0.6 61.3
93.1 49.5 33.7 67.2 935.6 1,179.1
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
Secured Notes (gross) 8.3 8.7 9.0 19.0 542.2 587.2
Interest payable on Secured 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
The amounts disclosed in the tables below represent the anticipated amortisation profile for the issue costs relating to the
Group’s financial liabilities.
30 December 2016
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 Secured Notes – – – – 0.7 0.7
Issue costs on Crematoria
Acquisition Facility – 0.1 – – – 0.1
– 0.1 – – 0.7 0.8
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 Secured Notes – – – – 0.7 0.7
Issue costs on Crematoria
Acquisition Facility – 0.1 – – – 0.1
– 0.1 – – 0.7 0.8
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21 Financial instruments (continued)
(c) Trade receivables
As at 30 December 2016, £12.7 million of the individual gross trade receivables (2015: £11.4 million) were past due and
partially impaired. A provision for impairment is established based on historical experience. The amount of the provision,
as at 30 December 2016, was £6.2 million (2015: £5.7 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:
30 December 25 December
2016 2015
£m £m
One to six months 6.4 7.0
Over six months 6.3 4.4
12.7 11.4
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:
30 December 25 December
2016 2015
£m £m
At beginning of period (5.7) (4.9)
Charged to income statement (1.7) (2.2)
Utilised in period 1.2 1.4
At end of period (6.2) (5.7)
(d) Borrowing facilities
(i) The Group has the following undrawn committed borrowing facilities available at 30 December 2016, all of which were at
floating interest rates, in respect of which all conditions precedent had been met at that date:
30 December 25 December
2016 2015
£m £m
Expiring within one year 26.2 26.2
Expiring between one and two years – –
Expiring in more than two years 60.0 60.0
86.2 86.2
£55.0 million (2015: £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 (2015: £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 March 2017. 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:
30 December 25 December
2016 2015
£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 2.5 2.6
2.8 2.9
Future finance costs on finance leases (2.1) (2.2)
Present value of finance lease liabilities 0.7 0.7
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
22 Ordinary share capital
30 December 25 December
2016 2015
£m £m
Allotted and fully paid Equity shares
49,738,150 (2015: 49,420,291) Ordinary Shares of 12 48/143 pence (2015: 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 213,851 shares issued under the 2013 LTIP
scheme and £1.5 million (2015: £nil million) consideration in relation to the 104,008 (2015: 1,044) shares issued under the
2013 SAYE scheme.
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 2016. In addition, Executive Directors and senior management hold options to subscribe for shares in the
Company under Long–Term Incentive Plans (‘LTIPs’) awarded in 2014, 2015 and 2016.
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 2016 2015 2014
Year of grant (pence) Exercise period Number Number Number
2013 – SAYE
2016 – SAYE
2014 – LTIP
2015 – LTIP
2016 – LTIP
23 Share–based payments
1,469.00
2,706.00
–
–
–
1 December 2016
to 31 May 2017
1 December 2019
to 31 May 2020
25 March 2017
to 24 March 2024
6 March 2018
to 5 March 2025
15 June 2019
to 15 June 2026
13,533
119,810
130,364
137,563
n/a
n/a
184,780
184,780
186,780
155,540
155,540
131,082
n/a
n/a
n/a
In respect of share–based payment arrangements, total charges to the income statement were £3.6 million
(2015: £2.4 million). The Directors consider that these amounts are not material and hence further detailed disclosures have
been omitted.
24 Net debt
30 December 25 December
2016 2015
£m £m
Net amounts owing on Secured Notes per financial statements (573.9) (586.5)
Add: unamortised issue costs (note 16(a)) (0.7) (0.7)
Gross amounts owing on Secured Notes (574.6) (587.2)
Net amounts owing on Crematoria Acquisition Facility per financial statements (15.7) (15.7)
Add: unamortised issue costs on Crematoria Acquisition Facility (note 16(c)) (0.1) (0.1)
Gross amounts owing (590.4) (603.0)
Accrued interest on Secured Notes (0.3) (12.8)
Accrued interest on Crematoria Acquisition Facility (0.1) (0.1)
Cash and cash equivalents (note 15) 67.1 98.8
Net debt (523.7) (517.1)
In addition to the above, the consolidated balance sheet also includes finance lease obligations and other financial liabilities
which totalled £0.7 million (2015: £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 Secured Notes requires EBITDA to total debt service (‘EBITDA DSCR’), in
the securitisation group, to be at least 1.5 times. At 30 December 2016, the actual ratio was 3.37 times (2015: 3.35 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.
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25 Reconciliation of cash generated from operations
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Net profit for the period 57.2 56.9
Adjustments for:
Taxation 14.0 12.1
Net finance costs 26.5 26.5
Profit on disposal of fixed assets (0.1) –
Depreciation charges 15.9 14.5
Amortisation of intangibles 0.2 0.1
Movement in inventories 0.4 0.1
Movement in trade receivables (0.6) (1.6)
Movement in trade payables 1.3 3.2
External transaction costs 4.1 3.2
Changes in other working capital (excluding acquisitions) (1.4) 7.8
Employee share option charges (note 23) 3.6 2.4
Cash generated from operations before external transaction costs 121.1 125.2
Other non–cash transactions
Non–cash charges comprise of amortisation of deferred debt issue costs, as discussed in note 16(a).
26 Acquisitions
(a) Acquisition of subsidiary and other businesses
Crematoria Other
Acquisition acquisitions Total
provisional provisional provisional
fair value fair value fair value
£m £m £m
Property, plant and equipment 28.1 1.9 30.0
Intangible assets: trade names – 9.7 9.7
Intangible assets: other 4.7 – 4.7
Cash acquired – 1.2 1.2
Receivables 0.2 0.4 0.6
Provisions (note 19) – (0.2) (0.2)
Other working capital – (0.2) (0.2)
Deferred taxation (note 20) (0.8) (1.9) (2.7)
Net assets acquired 32.2 10.9 43.1
Goodwill arising 8.9 5.5 14.4
41.1 16.4 57.5
Satisfied by:
Cash paid on completion (funded from internally generated cash flows) 57.0
Accrued consideration 0.5
Total consideration 57.5
The residual excess of the consideration paid over the net assets acquired is recognised as goodwill, none of which is tax deductible.
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 2017 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.
Post acquisition operating performance of the Crematoria Acquisition is disclosed in note 3 to the Annual Report.
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Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
26 Acquisitions (continued)
Crematoria Acquisition
On 31 May 2016, the Group announced that it had signed a conditional sale and purchase agreement to acquire five
crematoria operated by Funeral Services Limited (trading as Co–op Funeralcare) (‘FSL’).
On 27 June 2016, the Group acquired three freehold locations from FSL. On 22 July a leasehold location was also acquired
from FSL with the remaining leasehold location acquired in October. The consideration payable for all five locations was
£41.1 million excluding external transaction costs.
If the Group had owned the Crematoria Acquisition for the entire period, then the estimated revenue for the period would be
£6.3 million and the estimated operating profit before transaction costs would be £2.4 million. These estimates assume an
extrapolation of the Crematoria Acquisition operating performance post acquisition.
The provisional fair value includes £4.7 million relating to other intangible assets. See note 1 for further details.
This acquisition has been accounted for under the acquisition method and disclosed separately.
Other acquisitions
During 2016, the Group also acquired the operational interest of 16 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
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Cash paid on completion 57.0 48.6
Cash paid in respect of prior year acquisitions 0.5 2.7
Cash acquired on acquisition (1.2) (1.3)
Acquisition of subsidiaries and businesses as reported in the cash flow statement 56.3 50.0
27 Employees and Directors
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Wages and salaries 86.2 83.6
Social security costs 6.5 5.9
Other pension costs (note 28) 3.4 2.8
Share option charges (note 23) 3.6 2.4
99.7 94.7
Key management are considered to be the Board of Directors only. Total key management remuneration in the period was
£6.0 million (2015: £4.6 million), including £2.1 million (2015: £1.4 million) of share option charges. The monthly average
number of people, including Directors, employed by the Group during the period was as follows:
2016 2015
Number Number
Management and administration 176 173
Funeral services staff 2,488 2,373
Crematoria staff 346 327
Pre–arranged funeral plan staff 113 92
3,123 2,965
Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 56 to 63 which form part of
these consolidated financial statements.
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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:
2016 2015
£m £m
Defined contribution schemes 1.5 1.1
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 30 December 2016 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
2016 was £1.4 million (2015: £1.4 million).
The principal actuarial assumptions at the balance sheet date were:
2016 2015
Assumptions % %
Discount rate 2.7 3.8
Rate of increase in salaries 2.4 2.1
Rate of increase in payment of post April 1997 pensionable service 3.3 3.05
Rate of increase in payment of post April 2005 pensionable service 2.25 2.15
RPI price inflation assumption 3.4 3.1
CPI price inflation assumption 2.4 2.1
The demographic assumptions used include rates for mortality which, for example, lead to an average projected life
expectancy of 20.8 (2015: 20.7) years for male members and 26.2 (2015: 26.1) years for female members currently aged
65 and of 22.1 (2015: 22.0) years from age 65 for male members and 27.7 (2015: 27.6) years from age 65 for female
members currently aged 50.
Pensions and other post-retirement obligations
The amounts recognised in the balance sheet are determined as follows:
2016 2015
£m £m
Fair value of plan assets 107.9 94.4
Present value of funded obligations (133.8) (106.9)
Net obligation recognised in the balance sheet (25.9) (12.5)
Analysis of amount charged to income statement in respect of defined benefit schemes(a)
2016 2015
£m £m
Current service cost included within cost of sales (staff costs) 1.3 1.3
Administration expenses paid by the scheme 0.6 0.4
Interest costs less interest income included within net finance cost 0.4 0.3
Expected contributions to the Group’s pension scheme for the 52 week period ended 29 December 2017 are approximately
£0.2 million as a result of the matters disclosed in note 32, post balance sheet events.
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102
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
28 Pension commitments (continued)
Analysis of fair value of plan assets
2016 2015
£m % £m %
Equity and diversified growth funds 70.2 65.0 43.0 45.5
Debt 37.4 34.7 28.0 29.7
Cash 0.3 0.3 23.4 24.8
Fair value of plan assets 107.9 100.0 94.4 100.0
At 30 December 2016 and 25 December 2015 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(a):
2016 2015
£m £m
Present value of obligation at beginning of period (106.9) (105.5)
Current service cost (1.3) (1.3)
Interest cost (4.0) (3.8)
Benefits paid 5.6 3.6
Contributions by participants (1.4) (1.5)
Remeasurement (losses)/gains – financial (26.3) 1.9
Remeasurement gains/(losses) – experience 0.5 (0.3)
Present value of obligation at end of period (133.8) (106.9)
Changes in the fair value of plan assets are as follows(a):
2016 2015
£m £m
Fair value of plan assets at beginning of period 94.4 95.0
Interest income on plan assets 3.6 3.5
Contributions by Group 1.4 1.4
Contributions by participants 1.4 1.5
Benefits paid (5.6) (3.6)
Administration expenses paid by the scheme(b) (0.8) (0.6)
Remeasurement gains/(losses) 13.5 (2.8)
Fair value of plan assets at end of period 107.9 94.4
(a) The prior period has been restated to disclose separately the costs incurred by the scheme for administrative expenses.
(b) Administration expenses paid by the scheme includes £0.2 million (2015: £0.2 million) charged to other comprehensive income.
Analysis of the movement in the balance sheet obligation
2016 2015
£m £m
At beginning of period (12.5) (10.5)
Total expense as above charged to the income statement (2.3) (2.0)
Remeasurement losses and administration expenses charged to other
comprehensive income (12.5) (1.4)
Contributions by Group 1.4 1.4
At end of period (25.9) (12.5)
The actual return on plan assets was £17.1 million (2015: £0.7 million).
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Dignity plc
28 Pension commitments (continued)
(Increase)/
decrease in
Liabilities Assets Deficit deficit
Change in assumptions £m £m £m £m
No change (133.8) 107.9 (25.9) –
0.25% rise in discount rate (128.4) 107.9 (20.5) 5.4
0.25% fall in discount rate (139.8) 107.9 (31.9) (6.0)
0.25% rise in inflation (137.3) 107.9 (29.4) (3.5)
0.25% fall in inflation (130.0) 107.9 (22.1) 3.8
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 30 December 2016, 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 period ending 25 December 2015.
Analysis of present value of scheme liabilities
2016 2015
Active members 36% 38%
Deferred pensioners 27% 27%
Current pensioners 37% 35%
Average duration of liabilities 17 years 17 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 contributions 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 the 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.
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104
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
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 increases at rates in excess of investment returns.
The Trustees have informed the Group that they continue to take independent advice regarding the Trust’s investment
strategy. As a result, it is anticipated that the investment allocation by class will develop further during 2017 and beyond,
gradually resulting in a portfolio in the following profile:
Example investment types Target (%)
Defensive investments Index linked gilts and corporate bonds 22
Illiquid investments Private investments 16
Core growth investments Equities 22
Growth fixed income and alternative investments Property funds and emerging market debt 40
These developments in the Trust’s investment strategy are expected to enhance investment returns in the longer–term for a
broadly similar level of risk as that currently taken. 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 £863.9 million at
30 December 2016 (2015: £736.0 million) in respect of 299,000 (2015: 290,000) active pre–arranged funeral plans. 68,000
(2015: 49,000) 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 37,000 (2015: 35,000) 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 23 September 2016
(2015: 25 September 2015) using assumptions determined by the Trustees. Given the significant reduction in bond yields, the
actuarial valuation of the liabilities in respect of the pre–arranged funeral plan trusts have increased to £839.7 million as at
23 September 2016 (2015: £692.1 million). The corresponding market value of the assets of the pre–arranged funeral plan
trusts was £831.5 million (2015: £696.9 million) as at the same date. Consequently the actuarial valuations recorded a total
deficit of £8.2 million at 23 September 2016 (2015: surplus of £4.8 million).
Nonetheless, the Trustees have advised that the Trusts hold assets of approximately £2,900 (2015: £2,500) per active plan
at the balance sheet date. On average the Group received approximately £2,500 (2015: £2,450) in the period for the
performance of each funeral (including amounts to cover disbursements such as crematoria fees, ministers’ fees and
doctors’ fees).
The Trustees have advised that the Recent Trusts have approximately £19 million of assets as at the balance sheet date and
no material actuarial surplus or deficit.
Transactions with the Group
During the period, the Group entered into transactions with the National Funeral Trust, the Trust for Age UK Funeral Plans
and the Dignity Limited Trust Fund (the ‘Principal Trusts’) and the Trusts related to businesses acquired since 2013 (‘Recent
Trusts’) (and collectively, 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).
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Dignity plc
29 Pre-arranged funeral plans (continued)
Transactions also include:
• Receipts from the Trusts in respect of cancellations by existing members;
• Reimbursement by the Trusts of expenses paid by the Group on behalf of the respective Trusts; and
• The payment of realised surpluses generated by the Trust funds as and when the Trustees sanction such payments.
Transactions are summarised below:
Amounts due to the
Transactions during the period Group at the period end
2016 2015 2016 2015
£m £m £m £m
Dignity Limited Trust Fund 0.3 0.3 – –
National Funeral Trust 44.4 41.5 6.8 4.7
Trust for Age UK Funeral Plans 36.5 38.5 4.2 4.6
Recent Trusts 2.1 2.0 0.2 0.4
Total 83.3 82.3 11.2 9.7
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
2016 2015
£m £m
Funeral services revenue 42.6 40.0
Pre–arranged funeral plans revenue 27.3 29.0
In addition to the transactions recognised within revenue in the table above, there were £13.4 million (2015: £13.3 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.
30 Contingent liabilities
(a) Securitisation
BNY Mellon Corporate Trustee Services Limited in its capacity as Security Trustee of the Secured 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);
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Annual Report & Accounts 2016
106
Financial Statements
Notes to the financial statements continued
for the 53 week period ended 30 December 2016
30 Contingent liabilities (continued)
• The Guarantors(ii) each irrevocably and unconditionally jointly and severally guarantees to the Security Trustee punctual
performance by each other Obligor of that Obligor's obligations and agrees as a primary obligation to indemnify the
Security Trustee immediately on demand against any cost, loss or liability suffered by it if any obligation guaranteed
by the Guarantors is or becomes unenforceable, invalid or illegal;
• Dignity Funerals Limited and Derriman & Haynes Funeral Services Limited has granted the Security Trustee with full title
guarantee, a first legal mortgage over each of its rights, title and interest from time to time in properties situated in
England and Wales;
• Dignity Funerals Limited has granted the Security Trustee with full title guarantee(iii), a first legal mortgage over its rights,
title and interest from time to time in properties situated in Northern Ireland;
• Dignity Finance PLC has granted BNY Mellon Corporate Trustee Services Limited (in its capacity as Note Trustee) with full
title guarantee, an assignment by way of security of its benefit in each Issuer Transaction Document (other than the Trust
Documents), the Security Trust Deed and each Obligor Security Document and charges by way of first fixed charge the
benefit of its accounts; and
• Dignity Funerals Limited has, in respect of any Scottish property which is capable of being so charged, granted 'standard
securities' in favour of the Security Trustee(iv).
(i) Means Dignity (2002) Limited and its subsidiaries.
(ii) Means the Obligors (other than Dignity (2002) Limited (as Borrower)), Dignity (2004) Limited, Dignity plc, Dignity Holdings No.2 Limited, Dignity Holdings Limited and
Dignity Mezzco Limited.
(iii) This mortgage is governed by the laws of Northern Ireland.
(iv) The standard securities are governed by Scots Law.
At 30 December 2016, the amount outstanding in relation to these borrowings was £574.6 million (2015: £587.2 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 30 December 2016, the amount outstanding in relation to these borrowings was £15.8 million (2015: £15.8 million).
31 Related party transactions
There are no related party transactions for either period.
32 Post balance sheet events
Acquisition activity
The Group has acquired three funeral locations and one small crematorium since the balance sheet date.
Defined benefit pension scheme
The Group concluded a consultation with employees in February 2017. Following this consultation, the Group decided to
close its defined benefit pension to any further accrual. Affected employees will instead be able to contribute between four
and 10 per cent of salary into a defined contribution scheme, which will be matched by the Group. The resulting curtailment
charge is expected to be no more than £0.2 million.
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Annual Report & Accounts 2016 107
Dignity plc
Dignity plc Company balance sheet
as at 30 December 2016
30 December 25 December
2016 2015
Note £m £m
Fixed assets
Investments C2 147.0 143.4
Current assets
Trade and other receivables C3 264.3 207.9
Cash 46.6 46.3
Total current assets 310.9 254.2
Creditors: amounts falling due within one year C4 (15.7) (13.9)
Net current assets 295.2 240.3
Total assets less current liabilities 442.2 383.7
Net assets 442.2 383.7
Capital and reserves
Called up share capital C5 6.1 6.1
Share premium account 8.5 4.8
Capital redemption reserve 141.7 141.7
Other reserves 4.4 3.6
Retained earnings 281.5 227.5
Total equity 442.2 383.7
The financial statements on pages 107 to 115 were approved by the Board of Directors on 8 March 2017 and were signed on
its behalf by:
M K McCollum S L Whittern
Chief Executive Finance Director
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108
Financial Statements
Dignity plc Company statement of changes in equity
for the 53 week period ended 30 December 2016
Ordinary Share Capital
share premium redemption Other Retained
capital account reserve reserves earnings Total
£m £m £m £m £m £m
Shareholders’ equity as at
26 December 2014 6.1 2.8 141.7 3.2 167.6 321.4
Profit for the period – – – – 69.9 69.9
Other comprehensive income for the period
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)
Total transactions with owners, recognised
directly in equity – 2.0 – 0.4 (10.0) (7.6)
Shareholders’ equity as at
25 December 2015 6.1 4.8 141.7 3.6 227.5 383.7
Profit for the period – – – – 65.0 65.0
Other comprehensive income for the period
Effects of employee share options – – – 3.0 – 3.0
Proceeds from share issue – 3.7 – – – 3.7
Gift to Employee Benefit Trust – – – (2.2) – (2.2)
Dividends paid on Ordinary Shares – – – – (11.0) (11.0)
Total transactions with owners, recognised
directly in equity – 3.7 – 0.8 (11.0) (6.5)
Shareholders’ equity as at 30 December 2016 6.1 8.5 141.7 4.4 281.5 442.2
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,
£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.
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Annual Report & Accounts 2016 109
Dignity plc
Notes to the Dignity plc financial statements
for the 53 week period ended 30 December 2016
C1 Principal accounting policies
Basis of preparation
The financial statements of the Company for the period ended 30 December 2016 were authorised for issue by the Board of
Directors and the balance sheet was signed on the Board’s behalf by Mr M K McCollum and Mr S L Whittern. The Company is
incorporated and domiciled in England and Wales. The Company’s registered address is 4 King Edwards Court, King Edwards
Square, Sutton Coldfield, West Midlands, B73 6AP.
The financial statements of the Company have been prepared in accordance with the Companies Act 2006, as applicable to
companies using Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’). The financial statements
have been prepared on a going concern basis under the historical cost convention. The principal accounting policies are set
out below and have been applied consistently throughout the year.
The Company’s financial statements are presented in Sterling and all values are stated in pound million rounded to one
decimal place (£m) except where otherwise indicated.
In accordance with the concession granted under Section 408 of the Companies Act 2006, the income statement 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 53 week period ended 30 December
2016. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
25 December 2015.
Transition to FRS 101
The Company has applied Financial Reporting Standard 101, Reduced Disclosure Framework (‘FRS 101’), for the first time in
these financial statements. The transition date from the previous UK GAAP was 27 December 2014.
In preparing these financial statements, the Company has started from an opening balance sheet as at 27 December 2014,
the Company’s date of transition to FRS 101, and made those changes in accounting policies and other restatements
required for the first–time adoption of FRS 101. Adopting FRS 101 has not resulted in a change to the entity’s financial
position or financial performance in the current or previous year.
On transition to FRS 101, the Company has applied the requirements of paragraphs 6 – 33 of IFRS 1 “First time adoption of
International Financial Reporting Standards”, except for paragraphs 6 and 21 in respect of the requirement to present an
opening statement of financial position at the date of transition.
Exemptions:
The following exemptions from the requirements of International Financial Reporting Standards (“IFRS”) have been applied in
the preparation of these financial statements:
• The following paragraphs of IAS 1, ‘Presentation of financial statements’:
– 10(d) (statement of cash flows);
– 10(f) (statement of financial position as at the beginning of the preceding period);
– 16 (statement of compliance with all IFRS);
– 38A (requirement for minimum of two primary statements, including cash flow statements);
– 38B–D (additional comparative information);
– 40A–D (requirements for a third statement of financial position);
– 111 (cash flow statement information); and
– 134–136 (capital management disclosures).
• Paragraph 38 of IAS 1 ‘Presentation of financial statements’ comparative information requirements in respect of:
Paragraph 79 (a) (iv) of IAS 1 ‘Presentation of financial statements’.
• IAS 7, ‘Statement of cash flows’.
• Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the
disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective).
• IFRS 7, ‘Financial instruments: Disclosures’.
• Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation).
• The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or
more members of a group.
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Dignity plc
Annual Report & Accounts 2016
110
Financial Statements
Notes to the Dignity plc financial statements continued
for the 53 week period ended 30 December 2016
C1 Principal accounting policies (continued)
The Company is eligible to apply the above exemptions as it is included in the consolidated financial statements of Dignity plc
who prepare financial statements under IFRS and include the above disclosures. The shareholders of the Company did not
object to the application of these exemptions when notified during the financial year.
The consolidated financial statements of Dignity plc are available from 4 King Edwards Court, King Edwards Square, Sutton
Coldfield, West Midlands, B73 6AP.
New standards, amendments and IFRIC interpretations
No new accounting standards, or amendments to accounting standards, or IFRIC interpretations that are effective for the year
ended 30 December 2016, have had a material impact on the Company.
Critical accounting estimates and assumptions
The preparation of the financial statements in conformity with FRS 101 requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. Management has not made any judgements, estimates or assumptions in preparing these financial statements that
materially affects the application of policies or the reported amounts of assets, liabilities, income or expenses of the Company.
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 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.
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 IFRS 2 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 IFRS, Accounting for ESOP Trusts and the substance of the transaction,
the trust’s assets and liabilities are recognised in the Company’s balance sheet.
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 initially recognised at fair value and subsequently measured at amortised cost in relation to amounts owed
to group undertakings.
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 at bank and in hand
Cash at bank and in hand includes demand deposits and amounts included in accounts restricted for specific uses.
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Annual Report & Accounts 2016 111
Dignity plc
C2 Investments in subsidiary undertakings
Cost and net book amount £m
At beginning of period 143.4
Additions in respect of share–based payments 3.6
At end of period 147.0
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 Trade and other receivables: amounts falling due within one year
30 December 25 December
2016 2015
£m £m
Amounts owed by group undertakings 263.3 207.2
Other debtors – 0.1
Corporation tax 1.0 0.6
264.3 207.9
C4 Creditors: amounts falling due within one year
30 December 25 December
2016 2015
£m £m
Amounts owed to subsidiary undertakings 14.5 13.4
Accruals 1.2 0.5
15.7 13.9
C5 Called up share capital and reserves
30 December 25 December
2016 2015
£m £m
Allotted and fully paid Equity shares
49,738,150 (2015: 49,420,291) Ordinary Shares of 12 48/143 pence (2015: 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.
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Dignity plc
Annual Report & Accounts 2016
112
Financial Statements
Notes to the Dignity plc financial statements continued
for the 53 week period ended 30 December 2016
C6 Dividends
53 week period 52 week period
ended ended
30 December 25 December
2016 2015
£m £m
Final dividend paid: 14.31p per Ordinary Share (2015: 13.01p) 7.1 6.5
Interim dividend paid: 7.85p per Ordinary Share (2015: 7.14p) 3.9 3.5
Dividend on Ordinary Shares 11.0 10.0
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 £11.0 million, 22.16 pence per share (2015: £10.0 million,
20.15 pence per share).
A final dividend of 15.74 pence per share, in respect of 2016, 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 £7.9 million. This will be
paid on 30 June 2017 provided that approval is gained from shareholders at the Annual General Meeting on 8 June 2017
and will be paid to shareholders on the register at close of business on 19 May 2017.
C7 Staff costs
Directors’ remuneration
Details of the Directors’ emoluments are included in pages 56 to 63. They received no emoluments in respect of their
services to the Company (2015: nil).
C8 Related party transactions
There are no related party transactions for either period requiring disclosure.
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Annual Report & Accounts 2016 113
Dignity plc
C9 Subsidiary undertakings
Principal subsidiaries
Company name
Principal activity
Pre-arranged funeral plans
Advance Planning Limited
Dignity (2002) Limited Intermediate holding company
Dignity Crematoria Limited Construction and leasing of crematoria
Dignity Crematoria No.2 Limited Construction and leasing of crematoria
Dignity Finance PLC Finance company
Dignity Funerals Limited Funeral services
Dignity Funerals No.3 Limited Funeral services
Dignity Pre Arrangement Limited Pre–arranged funeral plans
Dignity Securities Limited Pre–arranged funeral plans
Pitcher & Le Quesne Limited Funeral services
Other subsidiaries
Company name
Principal activity
Birkbeck Securities Limited Intermediate holding company
Dignity (2004) Limited Intermediate holding company
Dignity (2008) Limited Intermediate holding company
Dignity (2011) Limited Intermediate holding company
Dignity (2014) Limited Intermediate holding company
Dignity Finance Holdings Limited Intermediate holding company
Dignity Holdings Limited Intermediate holding company
Dignity Holdings No.2 Limited Intermediate holding company
Dignity Holdings No.3 Limited Intermediate holding company
Dignity Mezzco Limited Finance company
Dignity Services Intermediate holding company
Recent acquisition companies – dormant from 2017
Company name
Principal activity
Dignity Funerals No.4 Limited Funeral services
Arthur J. Nash Limited Intermediate holding company
F. Jennings & Sons Limited Intermediate holding company
F.M. & J. Wait & Co Limited Intermediate holding company
K. Y. Green Limited Intermediate holding company
W H Scott & Son Limited Intermediate holding company
Funeral Arrangements Online Limited Funeral services
H Eaton & Sons Holdings Limited Intermediate holding company
H.Eaton & Sons Limited Funeral services
Inverclyde Funeral Directors Limited Funeral services
Jonathan Walker Funeral Directors Limited Funeral services
Newco (Crematoria) Limited Funeral services
Newco (Crematoria) 2 Limited Funeral services
Newco (Crematoria) 3 Limited Funeral services
Spotland Bridge Funeral Services Limited Funeral services
WM. Jordan & Son (Funeral Directors) Limited Funeral services
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Dignity plc
Annual Report & Accounts 2016
114
Financial Statements
Notes to the Dignity plc financial statements continued
for the 53 week period ended 30 December 2016
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
Astley Funerals 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
Dewi Reynolds & Sons 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. J. Gibb 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
Graham Sullivan Funeral Directors 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 Johnson & Sons 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
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Annual Report & Accounts 2016 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
RFI_66300_P05(Rev)_AR_BackEnd_2016 Q9 tp_RFI_66300 30/03/2017 13:04 Page 115
C9 Subsidiary undertakings (continued)
Dormant companies continued
MacIntosh & Steven Limited
Mahony & Ward 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 Brown & 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.
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Dignity plc
Annual Report & Accounts 2016
116
Financial Statements
Financial record*
Summarised consolidated income statement
2016 2015 2014 2013 2012
£m £m £m £m £m
Revenue
Funeral services 217.8 212.6 184.4 176.2 157.9
Crematoria 67.5 63.1 55.2 53.8 46.6
Pre–arranged funeral plans 28.3 29.6 29.3 26.7 25.1
313.6 305.3 268.9 256.7 229.6
Underlying operating profit
Funeral services 79.0 76.8 66.3 60.8 54.2
Crematoria 37.6 34.6 29.1 27.4 23.3
Pre–arranged funeral plans 8.5 7.8 7.4 6.7 6.5
Central overheads (23.4) (20.5) (17.9) (16.5) (14.6)
101.7 98.7 84.9 78.4 69.4
Underlying finance costs (26.9) (27.0) (30.6) (28.9) (25.8)
Finance income 0.4 0.5 4.2 3.4 2.5
Underlying profit before tax 75.2 72.2 58.5 52.9 46.1
Taxation (15.8) (15.5) (13.1) (12.9) (11.7)
Underlying profit after tax 59.4 56.7 45.4 40.0 34.4
Underlying earnings per share (pence) 119.8p 114.8p 85.8p 72.1p 62.8p
Operating profit 97.7 95.5 82.9 75.1 68.7
Profit/(loss) after tax 57.2 56.9 (55.0) 40.4 35.7
Basic earnings per share (pence) 115.3p 115.2p (104.0p) 72.8p 65.1p
Key performance indicators
2016 2015 2014 2013 2012
Total estimated number of deaths in Britain (number) 590,000 588,000 550,000 560,000 551,000
Number of funerals performed (number) 70,700 73,500 65,600 68,000 63,200
Funeral market share** (per cent) 11.8% 12.3% 11.7% 11.9% 11.2%
Number of cremations performed (number) 59,500 57,700 53,400 55,500 50,500
Crematoria market share (per cent) 10.1% 9.8% 9.7% 9.9% 9.2%
Active pre–arranged funeral plans (number) 404,000 374,000 348,000 323,000 290,000
Cash generated from operations (£million) 121.1 125.2 104.4 94.2 83.3
Net debt
2016 2015 2014 2013 2012
£m £m £m £m £m
Net amounts owing on Secured Notes per
financial statements (573.9) (586.5) (594.6) (403.0) (318.9)
Add: unamortised issue costs on Secured Notes (0.7) (0.7) (0.7) (16.3) (14.6)
Gross amounts owing on Secured Notes per
financial statements (574.6) (587.2) (595.3) (419.3) (333.5)
Net amounts owing on Crematoria Acquisition Facility per
financial statements (15.7) (15.7) (15.6) (15.6) (10.0)
Add: unamortised issue costs on Crematoria
Acquisition Facility (0.1) (0.1) (0.2) (0.2) –
Gross amounts owing (590.4) (603.0) (611.1) (435.1) (343.5)
Accrued interest on Secured Notes (0.3) (12.8) (5.7) (14.3) (11.6)
Accrued interest on Crematoria Acquisition Facility (0.1) (0.1) – – (0.1)
Cash and cash equivalents 67.1 98.8 86.5 79.3 55.6
Net debt (523.7) (517.1) (530.3) (370.1) (299.6)
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Annual Report & Accounts 2016 117
Dignity plc
Summarised consolidated balance sheet
2016 2015 2014 2013 2012
£m £m £m £m £m
Non–current assets
Goodwill and intangible assets 358.1 328.2 276.5 250.4 204.5
Property, plant and equipment 235.4 200.6 192.3 183.6 157.1
Financial and other assets 11.3 10.3 10.4 12.7 12.6
Retirement benefit asset – – – – 0.1
604.8 539.1 479.2 446.7 374.3
Current assets
Cash and cash equivalents – excluding collateralisation of
Liquidity Facility 67.1 98.8 86.5 79.3 55.6
Cash and cash equivalents – collateralisation of
Liquidity Facility – – – 63.0 –
Cash and cash equivalents 67.1 98.8 86.5 142.3 55.6
Other current assets 43.1 38.3 36.5 34.4 32.1
110.2 137.1 123.0 176.7 87.7
Total assets 715.0 676.2 602.2 623.4 462.0
Current liabilities 75.1 82.7 60.6 143.6 76.9
Non–current liabilities 643.4 637.4 634.1 437.6 340.5
Total liabilities 718.5 720.1 694.7 581.2 417.4
Equity attributable to shareholders (3.5) (43.9) (92.5) 42.2 44.6
Total equity and liabilities 715.0 676.2 602.2 623.4 462.0
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.
*** 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 with the New Class A Notes, the ‘New Notes’). For the purpose of the financial record, the various classes of these notes are
referred to as the Secured Notes. Elsewhere in this Annual Report, Secured Notes and associated references refers to the New Notes, as these were the only notes in issue
in 2015 and 2016.
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Dignity plc
Annual Report & Accounts 2016
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 8 June 2017, at 11:00am at DLA Piper UK LLP, Victoria Square House,
Victoria Square, Birmingham, West Midlands, B2 4DL.
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Contact details and advisers
Annual Report & Accounts 2016 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
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Dignity plc
Annual Report & Accounts 2016
120
Other Information
Financial calendar
8 March 2017
8 June 2017
30 June 2017
Preliminary announcement of 2016 results
Annual General Meeting
2017 financial half year end
30 June 2017 (subject to shareholder approval)
Payment of 2016 final dividend
2 August 2017 (provisional)
Announcement of interim results
27 October 2017 (provisional)
Payment of 2017 interim dividend
29 December 2017
Financial period end
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Dignity plc
Annual Report & Accounts 2016
ifc
Overview
A strong and sustainable business
Delivering excellent client service
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.
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 30
December 2016 Dignity owned 792 funeral locations and operated 44 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.
This report demonstrates how our clear and consistent strategy, strong governance,
dedicated people and financial performance combine to create and sustain value for all our
stakeholders – our clients, employees, shareholders and the local communities we serve.
Contents
Overview
01
02
03
Key financial highlights
Our history and purpose
A strong core business
Strategic Report
04
05
From the Chairman
Chief Executive’s overview
06 Market overview
08
10
13
14
16
23
27
32
Strategy and business model
Our key performance indicators
The Dignity client survey 2016
Our summary performance in 2016
Operating review
Financial review
Principal risks and uncertainties
Corporate and social responsibility
Governance
Chairman’s introduction to governance
Our governance structure
Board of Directors
38
39
40
42
46
49
50
64
Financial Statements
Group Accounts
66
70
70
71
72
73
74
Independent auditors’ report to the members
of Dignity plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Company Accounts
107 Dignity plc Company balance sheet
108 Dignity plc Company statement
of changes in equity
109 Notes to the Dignity plc financial statements
116 Financial record
Other Information
118 Shareholder information
119 Contact details and advisers
120 Financial calendar
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
Find out more about Dignity and
the latest financial information,
results, presentations, reports and
shareholder services or to view
and download a pdf version of the
2016 Annual Report:
www.dignityfuneralsplc.co.uk
Download
2016 Annual
Report.
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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_AR_2016_Cover_AWK Q9 tp_Layout 1 30/03/2017 13:43 Page 1
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfuneralsplc.co.uk
Dignity plc Annual Report & Accounts 2016
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Funeral services
Crematoria
Pre-arranged
funeral plans
Delivering excellent
client service and
creating long-term
sustainable value
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