Dignity Annual Report 2018

FY2018 Annual Report · Dignity
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Annual Report

Dignity plc Annual Report & Accounts 2018

Serving
a changing 
marketplace

Building
stronger national 
brands

Enhancing
our digital 
services

Leading
on quality and
standards

We are committed to serving
changing customer needs

IFC  | Dignity plc Annual Report & Accounts 2018 

Our purpose and vision

Our purpose
Our customers are at the heart of what we do. We are here to help 
them at one of the most diﬃcult times in their lives and we are 
honoured to serve the communities we are part of.
Listening to our customers and understanding their changing attitudes 
and lifestyles must drive what we do as a business.  
Our brands, products, services and technology must reﬂect those changes 
and are the reason why we now offer enhanced choice and value-for-money.  
The high-quality of our offering, competitively priced, is how we will differentiate
ourselves from the competition, both nationally and locally.
Every day we want to meet and exceed our customers’ expectations.  
We aim to do this by delivering excellent client service through the 
continued dedication of our people and by serving our customers with 
expertise, compassion and commitment.

Our vision
Our vision is to lead the funeral sector in terms of quality, standards 
and value-for-money. To achieve this we are building a more coherent,
cohesive and technology-enabled business, one geared to meet the
changing needs of our customers.
In addition, we have always taken our role as a responsible corporate citizen
extremely seriously and recognised that our broader role in society goes
beyond just creating value for our shareholders. We will therefore continue 
to be a responsible and sustainable business, determined to meet both our
social responsibilities and the expectations of all our stakeholders. 

Contents

Strategic Report

01 A long-term commitment and sustainable focus
10 Summary performance in 2018
12 About Dignity
14 Chairman’s statement
16 Chief Executive’s review
32 Strategy and business model
34 Key performance indicators
38 Operating review
45 Financial review
50 Principal risks and uncertainties
54 Non-ﬁnancial information statement 
55 Corporate and social responsibility

Governance

60 Chairman’s introduction to governance
61 Governance structure
62 Board of Directors
64 Executive Management Team
65 Directors’ statement on corporate governance
70 Audit Committee report
73 Nomination Committee report
74 Report on Directors’ remuneration
90 Directors’ report

Financial Statements

Group Accounts

93 Independent auditors’ report to the members of Dignity plc
100 Consolidated income statement
100 Consolidated statement of comprehensive income 
101 Consolidated balance sheet
102 Consolidated statement of changes in equity
103 Consolidated statement of cash ﬂows
104 Notes to the ﬁnancial statements

Company Accounts 

141 Dignity plc Company balance sheet
142 Dignity plc Company statement of changes in equity
143 Notes to the Dignity plc ﬁnancial statements
149 Financial record

Other Information

151 Alternative performance measures
154 Shareholder information
155 Contact details and advisers 
156 Financial calendar

Dignity plc Annual Report & Accounts 2018  | 01

A long-term commitment
and sustainable focus

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Forward momentum against 
a backdrop of change

Serving a changing 
marketplace
Meeting evolving customer needs 
with a new service and price model 
p.2 and p.3

Enhancing our 
digital services
Increasing online support and
digital services p.4 and p.5

Building stronger 
national brands
Promoting greater choice and ﬂexibility
p.6 and p.7

Leading on quality
and standards
Improving the customer experience
and leading standards of best practice  
p.8 and p.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
02  | Dignity plc Annual Report & Accounts 2018  

Customer focus/
Providing customers with 
services they need and value

Serving a changing marketplace 
In a time of increasing competition and ongoing change
in the funeral sector, with heightened focus on price
competition masking differentiation based on quality,
we must ensure that the service we offer customers is
compelling and competitive and keeps pace with their
changing needs and expectations. We have already
made signiﬁcant changes to our pricing and extended
our range of Simplicity services, but this is only the
beginning and there is more to be done.  

We will achieve this by continuing to listen to our
customers and by our clear determination to continue
to provide unrivalled levels of quality and service.

Dignity plc Annual Report & Accounts 2018  | 03

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“ When choosing a funeral
director the care of my loved
one matters to me most.“

Market and consumer insights
Our customers are at the heart of what we do.
Understanding them is essential which is why
we invest heavily in our own research to gain
the crucial insights which mean we can
develop the services they want and need.

73%73 per cent of people said care of the deceased 

was very important.
Source: Time to Talk About Quality and Standards report

A more client-centric service model
adapted to better suit evolving 
client needs
In 2018 we began to test a variety of diﬀerent
services and prices, recognising that consumer
choice is increasingly essential and not an
option for the funeral industry. That process
will continue through 2019.

Launched new product and 
pricing structure
We have adopted a new tiered proposition,
speciﬁcally targeting different parts of the
market and types of consumer, designed 
to meet a range of needs.

We are unbundling our prices and services 
to introduce greater ﬂexibility so that customers
can create the right funeral for their loved one.
We will be competitive on price, while
maintaining Dignity’s exceptional levels 
of service.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
04  | Dignity plc Annual Report & Accounts 2018  

Customer focus/
Creating a compelling multi-channel 
service offering

“I am looking for advice, support
and information on pricing that
is clear and easy to ﬁnd.“

Enhancing our digital services
We are at the forefront of digital development in our
sector with the potential to transform the services we
deliver and the experience customers receive.

The way that we connect with our customers is changing.
Going online is now increasingly the norm for people
looking for information and this is now impacting our
industry. 38 per cent of our clients now ﬁnd us online 
and over 60 per cent of our website traﬃc comes from
mobile devices. We are developing our online support
services and promotional initiatives to meet customer
expectations. In short, we are building a leading 
digital presence.

Dignity plc Annual Report & Accounts 2018 | 05

Technology is changing expectations and
increasing opportunities

+76%

Further developments on mobile friendly
architecture and website optimisation have
seen us retain our position as the funeral
website with the highest domain authority 
in the UK. 

The Group’s websites are performing well, with
over 1.8 million visits in 2018 on a year-to-date
basis, up 76 per cent on the prior period.

Our Funeral Notices digital service has been
successfully trialled and will be available in 
all of our locations by the end of March 
2019. This service is already attracting 
more than 100,000 views per month.

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National TV Campaigns
• In 2018 our ﬁrst ever television advertisement

for our funeral plans was broadcast on daytime
television.

• We also launched our Simplicity Cremations

television advertising campaign. 

The internet is changing the nature 
of competition
Building a well known digital offer that 
allows us to leverage our national scale is an
important part of our strategy to modernise
our business and give us a commercial
advantage in the digital age.

The vast majority of our branches are now
trained to offer our Funeral Notices digital
service which is proving popular with clients.
This provides customers with a convenient
way to share details of funeral arrangements
through social media and the internet. It also
allows friends and family to arrange ﬂowers
and make donations.

£6m
annual marketing
investment

The Group anticipates annual marketing
investment of £6 million. A signiﬁcant
proportion of this will be allocated to Pay Per
Click promotional activities. Investment is also
being directed at building a powerful internal
digital marketing unit supported by leading
external experts.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
06  | Dignity plc Annual Report & Accounts 2018  

Customer focus/
Providing families with greater
choice and ﬂexibility

Building stronger national brands
We have a long history of providing high standards of care,
quality and service. These attributes underpin our brands
which are also competitively priced and supported by our
national network of funeral locations and crematoria. 

As lifestyles change, along with attitudes to arranging
funerals, we will build on these core brand strengths.  
We will ensure that our distinctive Dignity and Simplicity
brands provide families with greater choice and ﬂexibility,
whether they are looking for a traditional value-for-money
service or a simple affordable alternative. In 2018, we gave
Simplicity a new brand identity and have branded our
Crematoria division ‘The Crematorium and Memorial
Group’. In 2019, we will relaunch our Dignity brand.

Dignity plc Annual Report & Accounts 2018  | 07

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“I’m looking for a simple, less
traditional and affordable
alternative funeral service. “

Building brand awareness, supporting and
enhancing our strong local positions 

Dignity With Distinction
Dignity will remain our core funeral brand and will grow
in clients’ awareness in the coming years.

Simplicity Cremations 
We are developing the Simplicity brand and widening
our range of low-cost services with the aim of building
the leading low-cost funeral business in the UK.

The Crematorium and Memorial Group
Our crematoria business supports funeral directors 
and clients across the country. The Dignity brand in the
future will only be identiﬁed with our funeral business
and so our crematoria business has been given its own
distinct brand. 

+535%
rise in Simplicity 
site visits

Simplicity Cremations continues to grow
online with visits in 2018 to its website up 
535 per cent compared to 2017. We have also
seen more than twice the number of people
choose to buy our direct cremation service
than the year before. 
The Group has expanded its range of
Simplicity Cremations services, providing
customers with greater choice in this
expanding segment of the market. 
The new attended service will provide
customers with all the practical and essential
elements of a cremation without the obligation
to pay for traditional elements they do 
not want. The service is available online 
only and is the ﬁrst of its type nationally
available in the UK.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
08  | Dignity plc Annual Report & Accounts 2018  

Customer focus/
Ensuring customers receive the highest
standards in facilities, service and care

Leading on quality and standards
We are committed to improving our customers’
experience and to leading the way in setting standards
of best practice. We continue to call for a regulated
market that will be good for clients and society. It is a
thread which has run through our business from the
beginning and we are determined to maintain this focus.

By improving standards, bringing greater transparency
and building trust, we have the opportunity to ensure
our approach to upholding quality continues to meet
the needs and expectations of our customers.

Dignity plc Annual Report & Accounts 2018  | 09

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Major research on funerals and
crematoria 
In 2018, Dignity commissioned research into 
the funeral sector. The report is the most
comprehensive study of funeral directors ever
published in the UK, exploring how families
perceive the funeral sector and expect funeral
directors to operate.

As one of the leading funeral providers in 
the UK, we believe it is important for people to
have a better understanding of what good looks
like so that they can make informed choices.
The report forms the basis of discussions and
debate that the Group wants to stimulate on
the best way to protect consumers and achieve
appropriate quality standards.

The Group also published the results of 
a report on UK crematoria entitled: ‘Cost,
Quality, Seclusion and Time’. Our research
shows that while price is important, customers
consider time or the length of a service as 
often more valuable.

92%
of people did not know
that funeral directors
were not regulated.

• 80% supported regulation to ensure

minimum standards.

Source: Time to Talk About Quality and Standards report

“99% of respondents said that
Dignity met or exceeded their
expectations.“

Source: Dignity Client Survey 2018

“72% of Dignity’s own
crematoria offer 60 minutes 
for a standard cremation. 
The remainder have a
minimum of 45 minutes.”

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10  | Dignity plc Annual Report & Accounts 2018 

Summary performance in 2018

Our performance in 2018 was ahead of market expectations and following the signiﬁcant decline 
in funeral market share witnessed in 2016 and 2017, our comparable funeral market share increased
slightly in 2018. However, underlying operating proﬁt decreased by 23 per cent to £80.2 million and
average income per funeral reduced from £3,222 to £2,973 reﬂecting the radical change we have
embarked on. The funeral mix continues to evolve in the light of new service oﬀers and ongoing 
pricing trials and we have made good progress in identifying the best balance between price 
and service oﬀer.

We have embarked on a wide-ranging Transformation Plan, backed by a major investment programme 
which is making good progress. This three year plan will create a funeral business that remains focused 
on quality, while being able to adapt to, and lead, a changing marketplace.

Our strategic objectives

Our overall strategic approach

Our strategic objectives and overall strategic approach
were updated last year and remain as follows (more
information is available on page 32):

• Protect market share and reposition the 

Group for growth.
  Strategic highlight: In 2018 we grew our comparable
market share slightly. This was a good start, but further
work needs to be done to consolidate this position.

• Establish new market positioning. We establish
ourselves as the best value service provider in 
the market.
  Strategic highlight: We have piloted a number of price
and service oﬀerings and will continue to do so into
2019 and also aﬃrmed Simplicity’s position as the
lowest priced nationally available service of its kind.

• Re-base the business model and market

expectations. Find the optimum relationship between
price, service and demand for our funeral businesses.
  Strategic highlight: We have made good progress
towards re-basing the business model and have worked
diligently to keep the market informed of our progress.
Having tested a number of pricing and product
alternatives we are moving towards an unbundled
approach to our full service oﬀering. 

Our three year Transformation Plan is underway

Our strategic objectives and the means of delivering them
are based on the following four key elements:

        Continue to build on the strong fundamentals 
1
of the business and use these as a platform 
for change.

2
        Be more distinctive in the marketplace.

        Embrace technology in developing and delivering 
3

our services for customers.

4
        Continue to be a good corporate citizen.

See Chief Executive’s review on pages 16 to 31

See Strategy and business model on pages 32 and 33

Decisive decision by 
Board for change
Begin operating review 

Execution of Plan begins
Transformation 
projects start 

2020

2021

2018

2019

Board agrees focus of Plan
Transformation Team assembled, 
detailed work on plan begins

Realise the 
Transformation Plan

The core components
• Modernise the client proposition
• Invest in and simplify the 

operating model

• Streamline central support and 

invest in technology to centralise and
automate administrative processes

Forward-looking statements
This Annual Report and the Dignity plc investor website may contain certain ‘forward-looking statements’ with respect to Dignity plc (“Company”) and the Group’s ﬁnancial condition, results 
of its operations and business, and certain plans, strategy, objectives, goals and expectations with respect to these items and the economies and markets in which the Group operates.
Forward-looking statements are sometimes, but not always, identiﬁed by their use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘should’, ‘will’, ‘would’, ‘expects’,
‘believes’, ‘intends’, ‘plans’, ‘targets’, ‘goal’ or ‘estimates’ or, in each case, their negative or other variations or comparable terminology. Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group’s ability to control or estimate precisely. There are a
number of such factors that could cause actual results and developments to diﬀer materially from those expressed or implied by these forward-looking statements. These factors include, but
are not limited to, changes in the economies and markets in which the Group operates; changes in the legal, regulatory and competition frameworks in which the Group operates; changes in 
the markets from which the Group raises ﬁnance; the impact of legal or other proceedings against or which aﬀect the Group; changes in accounting practices and interpretation of accounting
standards under IFRS, and changes in interest and exchange rates.

Dignity plc Annual Report & Accounts 2018  | 11

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Financial highlights

Revenue

Operating proﬁt

Underlying operating proﬁt

£315.6m

(2017: £324.0m)

£66.3m

(2017: £98.0m)

£80.2m

(2017: £104.6m)

Dividends paid in the period

Basic earnings per share

Underlying earnings per share

24.38p

(2017: 24.38p)

Number of deaths

599,000

(2017: 590,000)

By division

Funeral services

Revenue
£214.9m
(2017: £221.8m)

63.0p

(2017: 115.8p)

85.8p

(2017: 128.3p)

Cash generated from
operations

£94.9m

(2017: £112.5m)

Underlying cash generated
from operations

£101.9m

(2017: £115.4m)

Group operating proﬁt share
(before central overheads) (%)

56%

Group underlying operating proﬁt 
share (before central overheads) (%) 59%

Operating proﬁt
£54.8m
(2017: £77.0m)

Underlying operating proﬁt
£62.2m
(2017: £79.5m)

Crematoria

Group operating proﬁt share
(before central overheads) (%)

41%

Group underlying operating proﬁt 
share (before central overheads) (%) 38%

Revenue
£78.0m
(2017: £74.0m)

Operating proﬁt
£39.6m
(2017: £38.2m)

Underlying operating proﬁt
£40.3m
(2017: £40.0m)

Pre-arranged funeral plans

Group operating proﬁt share
(before central overheads) (%)

3%

Group underlying operating proﬁt 
share (before central overheads) (%)

3%

Revenue
£22.7m
(2017: £28.2m)

Central overheads

Operating proﬁt
£2.6m
(2017: £7.8m)

Costs
£30.7m
(2017: £25.0m)

Underlying operating proﬁt
£2.8m
(2017: £8.0m)

Underlying costs
£25.1m
(2017: £22.9m)

See Financial review on
pages 45 to 49

Any forward-looking statements made in this Annual Report or the Dignity plc investor website, or made subsequently, which are attributable to the Company or any other member of the
Group, or persons acting on their behalf, are expressly qualiﬁed in their entirety by the factors referred to in this statement. Each forward-looking statement speaks only as of the date it is made.
Except as required by its legal or statutory obligations, the Company does not intend to update any forward-looking statements. Nothing in this Annual Report or on the Dignity plc investor
website should be construed as a proﬁt forecast or an invitation to deal in the securities of the Company. 
Alternative performance measures
The Board believes that whilst statutory reporting measures provide a useful indication of the ﬁnancial performance of the Group, additional insight is gained by excluding certain non-recurring, 
non-trading and exceptional transactions. All measures marked as underlying above and throughout this Annual Report are alternative performance measures. Further detail may be found 
on pages 151 to 153.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12  | Dignity plc Annual Report & Accounts 2018 

About Dignity

Our services are focused on the 
evolving needs of our clients

Funeral services

We are a major provider of funeral services in the 
UK and we strive to set the highest standards 
of service and care.

Services we provide
Dignity With Distinction
provides clients with access 
to our national network of
funeral locations where 
they can arrange a funeral
personal to their needs.

Simplicity Cremations 
allows clients to organise 
a less traditional funeral,
taking advantage of Dignity’s
national network of crematoria.

72,300 (2017: 68,800)

831(2017: 826)

Number of funerals
conducted during 2018.

Number of funeral locations
we operate in the UK.

Read more about our performance in the
Operating review: p.38 and p.39

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.

Services we provide
Our crematoria provide a
range of cremation services,
from basic unattended
cremations to traditional 
full services.

Our extensive, peaceful
grounds allow clients to
remember their loved ones 
in a very personal way.

Read more about our performance in the
Operating review: p.40 and p.41

486,000 (2017: 450,000)

Number of active funeral plans as at
28 December 2018.

65,200 (2017: 63,400)

46 (2017: 45)

Number of cremations
conducted during 2018.

Number of crematoria 
we operate in England 
and Scotland.

Pre-arranged funeral plans

We are one of the UK’s largest providers of 
pre-arranged funeral plans and we continue to
strengthen our business in this growing market.

Services we provide
Our pre-need business
allows clients to pre-arrange
their funeral through our
national network of funeral
locations and established
relationships with many
aﬃnity partners. 

Read more about our performance in the
Operating review: p.42 and p.43

Dignity plc Annual Report & Accounts 2018  | 13

38%

38 per cent of our customers now
ﬁnd us online, with over 60 per cent
of our website traﬃc coming from 
c coming from
mobile devices.

Lo
Low-cost
cre
cremation service
In 2018 Simplicity Cremations
In 20
launched a national low-cost
launc
attended cremation service. 
attttt en
This is the ﬁrst such nationally
This
available service.
availa

National
network
We are the only operator with
a national network of funeral
locations and crematoria.

60 minutes

72 per cent of Dignity’s own
crematoria offer 60 minutes 
for a standard cremation. The
remainder have a minimum 
of 45 minutes.

1.8 million
visits to our websites
Dignity receives more than 
1.8 million visits to our websites
annually.

99%
reputation &
recommendation
99 per cent of respondents said
that we met or exceeded their
expectations.
Source: Dignity Client Survey 2018

910,000
pre-paid plans
We have already helped more
than 910,000 people plan for
their funerals in advance of which
486,000 remain outstanding.

Dignity Today

Dignity is the only publicly listed company operating in the
funeral sector. The high-quality of our oﬀering, competitively
priced, is how we will diﬀerentiate ourselves both nationally
and locally.

Alongside the expansion of our digital oﬀerings we continue
to oﬀer a greater choice for consumers and our focus on
high standards and excellent client service remains central
to our plans for the future.

We are a leader in the provision of quality 
funerals and after-life care:

• Standards: Industry leading standards and facilities 

for care of the deceased.

• Service: We offer customers a caring personal service; 

98 per cent would recommend us.

• People: Experienced professional employees with 

a commitment to delivering quality funerals.

• Innovation: Expanded Simplicity Cremations service
options, the only truly nationally available low-cost
cremation service.

• Coverage: Able to serve 90 per cent of the UK 

population and still growing.

Our role in society

We are here to help people at one of the most 
diﬃcult times in their lives and we are honoured 
to serve the communities we are part of. We take 
this role extremely seriously and understand that 
integrity and high standards are vital if we are 
to play our role discreetly and well in society.

We are focused on enhancing our
customer proposition, our service and
pricing model and will continue to adapt
to serve evolving client needs while
preserving Dignity’s unrivalled levels 
of service and quality.

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14  | Dignity plc Annual Report & Accounts 2018  

Chairman’s statement

A resilient performance in a 
challenging and transitional year

Overview 
In 2018 we delivered a resilient performance, ahead 
of market expectations in what was a challenging and
transitional year. Against a backdrop of continued change
in the funeral market we began the transformation of 
our business while remaining focused and committed 
to our customers, shareholders and wider stakeholders. 

The Group is undergoing radical change. We have 
built momentum and our plan is on track. The Board is
conﬁdent that we will achieve our goal of transforming 
the Group as planned over the next three years. 

Along with change has come opportunity and a renewed
vision and ambition for the Group. Quite simply, the
Board’s vision is to lead the funeral sector in terms 
of quality, standards and value-for-money. To achieve 
this we are building a more coherent, cohesive and
technology-enabled business, one geared to meet 
the changing needs of our customers.  

Our ambition is to fully reposition Dignity in the funeral
market and ensure a sustainable and successful long-term
future. Oﬀering customers an enhanced and very
competitive range of services and price options is at 
the core of this change.

Industry regulation
More broadly, we have continued to advocate that the
funeral industry must also change. Regulation is needed and
we support moves to bring this about. Customers must be
treated fairly and be assured of minimum acceptable
standards whichever funeral director they choose.

We therefore noted with great interest the Competition
and Markets Authority’s (‘CMA’) proposal in November 
2018 to launch a full investigation into the funeral market
as part of its interim report into the industry. At the 
time of writing, that full investigation has not yet been
conﬁrmed. We have made public our support for such an
investigation if it happens and believe it could help improve
standards across the sector and deliver better outcomes
for customers. We are also keen to work closely with the
CMA and help them understand the challenges of
providing a quality funeral service.

In addition, we have made the following points to the CMA:

On competition: the funerals market is already competitive,
however, more can be done to improve the ability of
customers to exercise the choice that exists, especially
through greater pricing transparency.  

On improvements in the sector: we hope that the CMA 
will take more account of the lower prices and greater
transparency that already exists in the sector, including
Dignity’s own pricing structure which has already changed
signiﬁcantly over the past year. We believe it is essential
that the CMA clearly acknowledges the variation in quality
among diﬀerent funeral providers. 

Peter Hindley, Chairman

The Group is undergoing radical change, 
we have built momentum and our plan is 
on track. The Board is conﬁdent that we will
achieve our goal of transforming the Group
over the next three years while remaining
committed to our customers, shareholders
and wider stakeholders.

People &
Culture

CREATING
SHAREHOLDER
vALUE

MAINTAINING
ExCELLENT CLIENT
SERvICE

Technology

Customer
Proposition and
Experience

Brands

POSITIONING 
FOR LONG-TERM
SUSTAINABLE 
GROWTH

Financial
Strength

LEADING ON
QUALITy AND
STANDARDS 

Underlying earnings per share

Interim dividend

85.8p

(2017: 128.3p)

8.64p

(2017: 8.64p)

Final dividend

15.74p

(2017: 15.74p)

Dignity plc Annual Report & Accounts 2018  | 15

Outlook for 2019 and beyond
The Board’s expectations for the year ahead are
unchanged from the most recent guidance. 2019 is likely 
to see underlying proﬁtability lower than 2018 but in line
with market expectations. In the medium-term the Board
believes that targeting solid single digit increases in
underlying EPS is appropriate and achievable.

Governance during a time of change
The Company continues to pride itself on the strength
and eﬀectiveness of its governance. It is of particular
importance during a time of change within the Company
and when there is increasing scrutiny of the industry 
as a whole. 

Good governance is the basis on which we as a 
business build an environment of trust, transparency
and accountability. As such it provides assurance and
conﬁdence to our customers and fosters long-term
investment, ﬁnancial stability and business integrity. 
As a Board we are therefore committed to maintaining
our high standards of corporate governance and
ensuring there is a high level of cultural integrity
embedded within the way we operate.

Board priorities
The Board provides strategic leadership to the Group
within a framework of robust corporate governance 
and internal control, setting values and standards that
are embedded throughout the business to deliver 
long-term sustainable growth for the beneﬁt of our
shareholders and other stakeholders.

Compliance
Our governance framework, which is shaped by the 
UK Corporate Governance Code, the Companies Act
2006 and secondary legislation and Financial Conduct
Authority rules and guidance, sets out standards of
good practice in relation to Board leadership and
eﬀectiveness, remuneration, accountability and 
relations with shareholders.

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On vulnerable consumers: we are especially keen to work
with the CMA to improve the experience of all customers
organising a funeral, and ensure they are given the
appropriate support to take informed decisions.

On regulation: research indicates that 92 per cent of
consumers believe the industry is already regulated, and
many are surprised that it is not. We hope that the CMA
investigation will examine how regulation can improve
standards and transparency in the sector.

In short, we want to continue to play a leading role as a
responsible and progressive corporate citizen in the funeral
industry as it undergoes long overdue change.

Dividends
The Board is proposing a ﬁnal dividend of 15.74 pence
(2017: 15.74 pence) per share, which, subject to approval at
the AGM, will be paid on 28 June 2019 to shareholders on
the register at close of business on 17 May 2019. This will
bring the total dividend for the year to 24.38 pence (2017:
24.38 pence) per share.

Company Secretary change
During the period, Richard Portman relinquished his role 
as Company Secretary while continuing as Corporate
Services Director. He was replaced as Company Secretary
by Tim George, who joined the Group in 2018.

My role as Chairman
The Board has been seeking my successor following the
announcement of my intention to retire in 2019. The Board
is in the process of conducting an extensive search and will
announce my successor in due course.

Our people and resources
I want to thank our people for continuing to deliver
outstanding customer service in what has been an
uncertain and challenging year. This speaks volumes for
their professionalism and commitment to our customers.
Their continued loyalty and commitment will be essential 
if we are to deliver our Transformation Plan.

Executive performance and remuneration
A new Remuneration Policy will be presented to the annual
general meeting for approval. This follows a period of
consultation with our signiﬁcant shareholders and
institutional voting services.

Planned change of name
Given the increasing focus on our brands across our entire
business, the Company will, as permitted by its Articles of
Association, change its name. The Company will conﬁrm 
its new name later in the year. 

This change will help to remove confusion between our
trading brands and our corporate proﬁle.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review

Delivering excellent client service 
during a time of change

Overview
In 2018 we exceeded market expectations and following
the signiﬁcant decline in funeral market share seen in the
previous two years, our comparable funeral market share
increased slightly in 2018. This was a key objective of the
year and I am delighted with the progression we made in
2018. Encouragingly, comparable market share increased
to 11.2 per cent from 11.1 per cent in the previous year.
However, as anticipated, underlying operating proﬁt
decreased by 23 per cent (to £80.2 million) and average
income per funeral reduced to £2,973 from £3,222 in the
previous year, reﬂecting the 25 per cent reduction in our
simple funeral price and the full service price reductions 
we have made so far. The funeral mix continues to evolve
in the light of new service oﬀers and ongoing pricing trials
and we have made good progress in identifying the best
balance between price and service oﬀer. 

As the Chairman has said in his statement we are on 
track with our Transformation Plan; we have built good
momentum and the Board is conﬁdent of achieving its
goals. The fundamentals of our business remain compelling
and strong. We are conﬁdent we have the platform, focus
and ambition to get ahead of the competitive curve and to
continue to provide sustainable growth while maintaining
the highest possible standards of client service. However,
we recognise that we are still in the early stages of a three
year journey and the Board does not underestimate the
scale of the challenge the Group faces.

In his statement the Chairman also discussed the CMA’s
consultation on a full investigation into the funeral market,
following its market study. On pages 19 and 20 we publish
extracts from our responses to the CMA over the past few
months. In them we have made clear our support for 
such an investigation in the interest of helping to create 
a properly regulated industry while highlighting a number
of important issues.  

What is also clear is that such an investigation (if it takes
place) will most likely last 18 months to two years and, if
other market investigations are a guide, will generate much
interest and comment, some of it hostile towards major
industry players like ourselves. We will remain focussed on
the ﬁnal outcome and ﬁndings of the investigation, not the
inevitable twists, turns and comments that such a process
will trigger. We will remain calm and helpful throughout
what could be a high proﬁle and testing period, ensuring
that the CMA sees all sides of any issues. 

Mike McCollum, Chief Executive

The fundamentals of our business remain
compelling and strong. We are conﬁdent 
we have the platform, focus and ambition 
to get ahead of the competitive curve and 
to continue to provide sustainable growth
while maintaining the highest possible
standards of client service.

A strong platform

• Core strengths in quality and excellent standards 

of service delivery.

• Developing client-centric brands and price

competitiveness.

• Building a leading digital presence.

• Strong cash generation funding transformational

investment.

• A determined Board and strong senior 

management team.

Where we are now

Radical transformation
In 2018 we began a period of radical transformation for 
the Group. During and after this change we will remain a
caring business with core values built around quality and
providing excellent customer service. We have a long-term
commitment to the customer and we are shaping our
services around their evolving needs; we are committed 
to change and are responding to change.

A major opportunity
This change presents a major opportunity for the Group to
become the pre-eminent modern funeral services business
in the UK once the Transformation Plan is complete. We will
build on our existing strong market positions, quality, and
scale and the Board is determined to seize this opportunity.

How people remember their loved ones is changing which
means funerals are changing. Dignity is responding by
oﬀering greater ﬂexibility and choice and taking alternative
types of funerals into the mainstream. For example, in
2018 the Group launched a Tv campaign for its low-cost
cremation service Simplicity.

Updates
We have made good progress in 2018 and built the
momentum necessary to begin executing our
Transformation Plan:

• Our market share stabilised following our price changes;

• Our websites continue to improve, with increasing

numbers of people selecting our websites from searches
they make;

• We have updated our Simplicity brand, relaunching it 

with modern marketing, including a Tv campaign;

• We have made great progress on our Dignity brand and
expect to report signiﬁcant developments on this during
2019; and

• Our Transformation Plan has an excellent base. As of 
the end of 2018, there was a team of 17 experienced
individuals in the business to support our ambitious 
plans and this number is expected to grow.

Dignity plc Annual Report & Accounts 2018  | 17

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Our Transformation Plan
The core components of our Transformation Plan are:

• Modernise the client proposition;
• Invest in and simplify the operating model; and
• Streamline central support and invest in technology to

centralise and automate administrative processes.

Transformation Plan summary update
So far our focus has been in the following areas:

• Engaging the senior leadership team within Funeral
Operations including creating a new national role to
focus on service delivery;

• Completing a thorough review of the current IT
applications and support model for the funeral
business against the requirements of the Transformation
Plan and agreeing the IT architecture for the future;

• Monitoring and developing trials of the Group’s funeral
services leading to the unbundling of services oﬀered
within bespoke funeral arrangements;

• Managing the ongoing development of the brand
identity for the Group’s Simplicity oﬀering; and

• Finalising the number and structure of eﬃcient 

branch networks in advance of the testing of our new
operating model.

In 2019, we began to execute the broader plan following
this detailed work.

Financial objectives
As we set out in August 2018, we expect to invest £50
million (partly funded by £17 million of surplus property
disposals) in our business and achieve annualised net
cost savings of £8 million per year by the end of 2021,
increasing to £13 million per year by the end of 2028.

Our Transformation Journey

Year 3

Realise the
Transformation
Plan

Year 2

Executing 
the Plan

Year 1

Preparation
and building
momentum

2018

2019

2020

2021

Read more about our Transformation Plan, progress and 
developments against it on: p.22 to p.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review continued

Our purpose – to serve our customers
Our customers are at the heart of what we do. We are here to
help them at one of the most diﬃcult times in their lives and
we are honoured to serve the communities we are part of.

Listening to our customers and understanding their changing
attitudes and lifestyles must drive what we do as a business.

Our brands, products, services and technology must 
reﬂect those changes and are the reason why we now oﬀer
enhanced choice and value-for-money. The high-quality 
of our oﬀering, competitively priced, is how we will
diﬀerentiate ourselves from the competition, both
nationally and locally.

Every day we want to meet and exceed our customers’
expectations. We aim to do this by delivering excellent client
service through the continued dedication of our people 
and by serving our customers with expertise, compassion 
and commitment.

Our customer insights and research mean we are in a strong
position to develop the services they want and become an
informed and valuable commentator on emerging societal
trends with regard to death and funerals.

This year we have introduced the following services and
price points: 

• Simplicity extended its oﬀering beyond unattended direct
cremation to allow options for a small gathering at the
point of cremation and for a full cremation service. With 
all Simplicity oﬀerings, traditional elements, such as the
use of a hearse or procession into the crematorium, are
not provided. Simplicity is available from £995 and is 
also available as a pre-arranged funeral plan.

• Dignity has been trialling a tailored funeral, where 
clients can choose to pay for additional services to
personalise their requirements, rather than paying 
a single package price. 

• In January 2018, our Simple funeral was reduced to £1,995
(plus disbursements) in England and Wales and to £1,695
(plus disbursements) in Scotland. 

• With eﬀect from January 2019, all of our locations oﬀer 

a full service funeral for no more than £3,545 plus
disbursements.

Our vision
Our vision is to lead the funeral sector in terms of quality,
standards and value-for-money. As the Chairman said 
in his statement, to achieve this we are building a more
coherent, cohesive and technology-enabled business, one
geared to meet the changing needs of our customers.  

In addition, we have always taken our role as a responsible
corporate citizen extremely seriously and recognised that
our broader role in society goes beyond just creating value
for our shareholders. We will therefore continue to be a
responsible and sustainable business, determined to meet
both our social responsibilities and the expectations of all
our stakeholders.

Quality of care for the deceased is a critical aspect of
funeral provision. The need for proper facilities is more
important today than ever. The biggest factor missing from
conversations around the funeral sector is quality when 
it comes to caring for the deceased.   

Our vision for the funeral industry is for it to be properly
regulated. There is a misconception that the funeral sector
is already regulated or operates to a minimum standard. It
does not. We therefore continue to lead the call for change
as we seek a regulated market that will be good for clients
and society.  

Dignity is working collaboratively with industry partners and
other stakeholders to improve standards across the sector.
At the end of 2018 we initiated a round table discussion and
invited the CMA and other representatives from the funeral
sector, co-operating together to try and ﬁnd a solution. The
Chairman has commented on the CMA and its proposed
full market investigation into the funeral industry and there
is more background on page 14 of this review.

Major research on funerals and crematoria
In 2018 we commissioned and published two pieces of
research, one on funerals and the other on crematoria.
The ﬁrst, ‘Time to talk about quality and standards’, is the
most comprehensive study of funeral directors ever in the
UK, exploring how families perceive the funeral sector and
expect funeral directors to operate. The report forms the
basis of discussions and debate that the Group wants 
to stimulate on the best way to protect consumers and
achieve appropriate quality standards.

We also published the results of a report on UK crematoria
entitled, ’Cost, Quality, Seclusion and Time.’ Our research
shows that while price is important, customers consider
time or the length of a service as often more valuable. 

As one of the leading funeral providers in the UK, we
believe it is important to understand what consumers think
and to raise issues that are of concern to them and need
addressing by policy makers and politicians beyond the
funeral industry.

People and culture
We have always been a people business, helping families 
at an extremely diﬃcult time in their lives. Our plans to
transform the business mean that we are setting the bar
even higher and asking more of our staﬀ. I am pleased with
how positively employees have responded so far and thank
them for their support during this time of change.

Dignity plc Annual Report & Accounts 2018  | 19

Leading the call for regulation and higher standards
Dignity has led calls for greater regulation of both at 
need and pre-paid funeral sectors for some time, while
continuing to set the standard for what constitutes best
practice in the industry.

The CMA’s work in the sector provides a signiﬁcant
opportunity to improve standards and protect consumers.
The Group welcomes the CMA’s initial focus on this area,
and would encourage them to explore this further.

UK consumers assume all funeral directors are the same,
that their market is already regulated and each of them is
operating to a consistent set of professional standards,
when in fact none of these statements are true. Dignity’s
research showed that 92 per cent of consumers did not
know that funeral directors were not regulated in the UK,
but once aware 80 per cent supported regulation to 
ensure minimum standards.

Dignity believes the funeral industry will beneﬁt
signiﬁcantly from proper regulation to ensure that clients
can assume minimum standards, and eﬀectively assess
and compare what a funeral service includes. The Group
would welcome regulation which sets out minimum
standards for core activities such as the care of the
deceased, minimum standards of facilities and also
operating procedures in crematoria.

The Group has shared its research and supporting
information with the CMA and will continue to make the
case for agreed minimum higher standards. As part of this
the Group is leading a cross-industry initiative, bringing
together industry, consumer bodies and policymakers, to
develop collaborative long-term solutions to improve
standards and transparency across the sector.

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The CMA report into 
the funeral market 

The Competition and Markets Authority is the UK’s 
primary competition authority. It is an independent, 
non-ministerial government department with responsibility
for carrying out investigations into mergers, markets and
the regulated industries and enforcing competition and
consumer law. In June 2018 the CMA announced a market
study into the funeral industry “to review how well the
market works and whether consumers are getting a good
deal.” In November 2018 it published its interim report 
and consultation, part of which proposed that the funerals
market should be referred to a CMA Group for a full
market investigation. Such an investigation has not yet
been conﬁrmed but a decision must be reached by the 
end of May 2019. 

As a leading player in the funeral industry and a long-
standing campaigner for its regulation, Dignity welcomed
the CMA’s interest in the funeral sector and has made two
public statements in response. The ﬁrst, in November 2018
was an immediate response on the day of the release of
the CMA’s interim report. The second, in January 2019, was
in response to an invitation by the CMA for views from
interested parties on the issues raised in its report.

CMA funeral market study interim report: 
Dignity’s response

November 2018 statement
These are some of the key points from Dignity’s 
November 2018 CMA statement:

Dignity plc, the UK's only listed provider of funeral-related
services, acknowledges today’s announcement from 
the Competition and Markets Authority regarding 
the provisional ﬁndings of its study into the funerals 
market and notes its proposal to carry out a full market
investigation. Dignity is considering the recommendations
in detail and notes the key ﬁndings. Dignity has engaged
constructively with the CMA since the market study was
announced in June 2018 and strongly supports the
opportunity to improve standards within the sector 
and meet the expectations of consumers.

Greater choice for consumers
Dignity welcomes the focus in the report on transparency
and competition.

Dignity believes there is a need for greater transparency on
pricing, more consumer choice and high levels of quality
across the sector. The Group has acknowledged that there
is rising consumer demand for lower-cost funeral options
and has already been making considerable steps to
provide a wider range of choice for its customers.

In January 2018, in advance of the CMA market study
being announced, the Group implemented a new pricing
policy and continues to test and consider a range of 
new price points and services for its customers, while
preserving Dignity’s unrivalled levels of service and quality.
Delivering excellent client service remains a key strategic
priority and means that the Group can oﬀer the best-
quality service at each price point and market segment 
in which it chooses to operate.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review continued
The CMA report into the funeral market continued

These are some of the key points from Dignity’s letter 
in January 2019 to the CMA:
Given the concerns that the CMA has identiﬁed, Dignity
supports a market investigation which will enable the 
CMA to undertake a thorough analysis of the market. 
We recognise that there are speciﬁc challenges relating to
vulnerable customers, particularly those who are ﬁnancially
vulnerable and would welcome thoughts about how 
to ensure the market works better for them.

A competitive market that works for customers
In many respects the funeral market is highly competitive:
there are many competitors; no single provider has a
market share greater than approximately 16 per cent; and
the number of funeral directors has increased signiﬁcantly
in recent years. There is also growing evidence that
customers have started to more actively ‘shop around’,
driven in part by an increase in online searches for 
funeral directors.

In our view, a key issue the CMA should address is how 
best to improve the ability of customers to exercise the
choice that already exists, providing them with clear and
relevant information on prices, the range of diﬀerent
products available, and quality, in a way that will make
comparisons easy for customers, allowing them to make
informed choices.

Price lists are available in our locations and over the phone.
We have already posted our crematoria prices online and
have basic pricing available online for all funeral services. 

Central to transparency and greater information for
customers must be a recognition that there is signiﬁcant
variation in the quality of funeral services, and quality
diﬀerentials are not always visible to customers. Funeral
services are not a homogenous commodity. We would
encourage the CMA to explore ways to allow customers 
to compare the diﬀerent service providers and their
respective facilities and services.

Resulting in better outcomes for customers 
for the long-term
We note that there is a signiﬁcant focus on historic pricing 
in their interim report. Price is hugely important for our
customers, and we are committed to oﬀering fairness and
transparency in our pricing structure. While we understand
the CMA has some concerns in this area, we believe there
are some key points that warrant further consideration 
and clariﬁcation in a market investigation.

First, we have taken steps to reduce prices and change our
pricing structure both on simple and full funeral services.
Structural factors that contributed to historic price rises 
in the sector are now changing. We therefore envisage 
a sustained, long-term change of approach to pricing 
and have communicated this to our investors.

Second, we believe that many of our customers are price
aware and actively exercise informed choice. In many cases
where death is anticipated, the decision process can 
begin earlier.

Third, we believe it is important to take into account quality
in any analysis of how competition works in this market.
Many aspects of quality are not observable to the customer
in advance, and it may be the case that customers use
pricing as a guide to quality in addition to recommendations
from others. We would encourage the CMA to think about
how best to measure customers’ preferences for quality 
and to understand the costs of quality in terms of operating
costs, capital expenditure on maintenance and investment
in both front of house and back of house facilities.

We consider that their interim report does not suﬃciently
consider these issues and see the full investigation as an
opportunity to undertake a more thorough analysis.

Supporting ﬁnancially vulnerable customers
We recognise that some customers face particular
challenges in relation to funeral aﬀordability.

We already have processes in place to support these
customers, including aﬀordability checks and signposting 
to more aﬀordable options where appropriate. We have 
a longstanding policy of providing child funerals for free
across both our funeral and crematoria businesses, with
around 1,000 child funerals performed at no cost each
year. We have introduced a number of new low-cost,
aﬀordable options which increase choice for customers
and in October 2018 introduced the lowest price, 
nationally available, attended cremation service through 
our Simplicity proposition.

HM Treasury’s consultation on the funeral 
plan sector

HM Treasury is continuing its consultation into the 
pre-paid funeral plan market, which it announced in
June 2018. Dignity has led calls in recent years for
regulation and its research, published together with
Fairer Finance, has highlighted the poor sales practices
and ﬁnancial management risks that certain providers
engage in. An update from HM Treasury is expected in
the ﬁrst half of 2019 and Dignity hopes HM Treasury
acts swiftly to regulate the market and minimise
further consumer detriment.

Dignity plc Annual Report & Accounts 2018 | 21

Serving an evolving market

The UK funeral market
The UK funeral market is getting more complex. The
internet continues to change everything, and consumer
behaviour is evolving rapidly. Until 2015, the death rate
slowly decreased while the number of funeral directors 
has increased rapidly. 

Scale and structure of the market
The funeral director market remains very fragmented, 
with approximately two thirds of funeral directors being
small owner-manager businesses. There are approximately
290 crematoria in the UK, with around 66 per cent owned
by local authorities. It is estimated that three quarters of 
all funerals result in a cremation with the remainder 
being burials.

In 2018 the initial publication of recorded total estimated
deaths in Britain for 52 weeks was 599,000, a small
increase on 2017. Some of the Group’s key performance
indicators rely on the total number of estimated deaths 
for each period and this information is obtained from 
the Oﬃce for National Statistics (ONS). The ONS expects
long-term increases in the number of deaths, reaching
approximately 700,000 per year by 2040.

Increasing competition
The funeral market is already extremely competitive,
however, more can be done to improve the ability of
customers to exercise the choice that exists, especially
through greater pricing transparency.

The pre-paid funeral plan market environment
The UK pre-paid funeral plan market declined in 2018.
New plan sale volumes for providers registered with 
the Funeral Planning Authority, which represents more
than 90 per cent of the market, were 177,000 in 2018, 
a reduction of 15 per cent against the 207,700 plans 
sold in 2017.

Consumers have become wary of the market following
heightened negative press surrounding poor industry
practices and HM Treasury announcing a consultation
considering formal FCA regulation of the market.  

Price competition intensiﬁed in 2018, with many of the
leading providers cutting their prices. The majority of plans
continue to be sold directly through funeral directors, but
signiﬁcant plan volumes are still being written by online
lead generators and outbound call centre operations.

The evolving trends and dynamics shaping the funeral
sector, how we operate and serve our customers.

Increasing
competition

Connecting 
digitally

77%
The proportion of funerals involving a cremation
has grown in the past 60 years, from 35 per cent 
in 1960 to 77 per cent in 2018.
Source: Cremation Society Statistics 

Changing attitudes
and behaviours

Price and
affordability

Flexibility and 
choice

Deaths in Great Britain
Long-term expectations are for the number of deaths to 
reach 700,000 by 2040.

Number of locations

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Source: Oﬃce For National Statistics

5,000

4,000

3,000

2,000

1,000

0

Co-Op

Dignity

Funeral
Partners

Independent
small groups

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22  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review continued

The Transformation Plan
Funeral services

Our Transformation Plan
Our Transformation Plan has been developed following 
a major strategic review in 2018. The Board has appointed 
a Transformation Director who is driving change with full
project management support. Execution of the Transformation
Plan is scheduled to be complete by the end of 2021.

Consumers are becoming more demanding and
sophisticated. values are changing, there is increased
secularism and a growing demand for personalised, lower-
cost services, supported with online resources. There are
fewer visits to the High Street and more online research
and shopping around.

The need for change
The combination of increased price competition and more
demanding consumers requires a new approach, namely, a
radical transformation of our business and business model.  

The landscape in our industry has changed, with a growth in
lower-quality providers, lower-cost funeral alternatives and
with online channels driving increased price transparency. 

Market opportunity
While this degree of change could be seen as unnerving, 
we chose to see it as an opportunity. Our response will be
to build a lower-cost model and build recognisable national
brands associated with quality in support of competitive
prices. Speciﬁcally, we will grow our presence in the low-
cost cremation market. 

We will embrace online and build a leading digital presence;
unbundling our full service funeral pricing to create a more
compelling proposition and greater ﬂexibility for clients; and
further develop our low-cost Simplicity Cremations service.

Strategic review
The strategic review took place over the ﬁrst half of 2018. 
It involved focus groups and quantitative surveys with
clients, consumers and other stakeholders from across 
the market. The company analysed data spanning the last
10 years on clients, transactions, ﬂeet, property and people.
It involved a review of our branch network footprint and
service delivery model. And we engaged, naturally, with
staﬀ to gather their insights and perspectives.

Increasing 
price
competition

Changes in landscape

• Growth in lower-quality providers.

• Growth in lower-cost funeral alternatives.

• Online channels driving increased price

transparency.

Our strategic response

• Build a lower-cost model.

• Build recognisable national brands associated 
with quality to support the pricing proposition.

• Promote adoption of enhanced professional

standards across the industry.

• Grow presence in low-cost cremation market.

More
demanding,
sophisticated
consumers

• Changing values e.g. increased secularism.

• Embrace online and build leading digital presence.

• Growing demand for personalised, lower-cost

services, supported with online resources.

• Fewer visits to the High Street with more 
online research and shopping around.

• Unbundle full service funeral pricing to create 
a more compelling proposition and greater 
ﬂexibility for clients. 

• Align arrangement process to evolving client
requirements (with increasing mobility for 
client-facing roles).

• Further develop the low-cost Simplicity proposition.

Dignity plc Annual Report & Accounts 2018  | 23

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Components of the Transformation Plan

Modernise the client
proposition

1

Invest in and simplify the 
operating model

2

3

Streamline central support
and invest in technology to
centralise and automate
administrative processes

• Implement more client-centric 

service model

• Separate front and back 

of house

• Simpliﬁed, focused

management structure

• Launch new product and 

pricing structure

• Right-sized branch 

network

• Invest in support capabilities 

and IT systems

• Build national brands 
(Dignity and Simplicity)

• Scale operating networks

Our Transformation Journey
In 2018 we embarked on a wide-ranging Transformation 
Plan backed by a major investment programme. This three
year plan will create a funeral business that remains focused 
on quality, while being able to adapt to, and lead, a changing
marketplace.

Continuing to provide a consistently high level of service to
our clients is vital during and after this time of change along
with building the infrastructure to deliver a future-ready
proposition.

We are making good progress in planning and preparation
and have built the strong momentum necessary to deliver
our plan.

Financial implications

Strong cash generation will support planned
investments and costs which form part of the Plan.
Overall expected cost remains at £50 million. 

A three year transformation timeframe

Activity

2018

2019

2020

2021

Modernise the client
proposition

Invest in and simplify the
operating model

• Roll out proposition nationally 

in 2019

• National brand building alongside existing

trade names to take to end of 2021

• Detailed planning and solution 

testing complete

• Reconﬁgure operating networks and

roll out new operating model

Streamline central support
and invest in technology to
centralise and automate
administrative processes 

• Invest in capability gaps for transition

and support functions. This has started
and will be complete by mid 2020

• Develop IT strategy and specify

solutions

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review continued
The Transformation Plan continued

1. Modernise the 

client proposition

Simplicity

• Affordable and digniﬁed low-cost

cremation.

Simple

• Simple funeral in line with market

standards.

• Range of services expanding.

• Address growing demand for 

value-only services.

• Currently online only.

• Some, but few, options to tailor service.

• Competitive entry price point for 

full funeral.

Tailored 
service

• Flexible offer allowing client to fully
customise a funeral to their needs.

• Lower entry price but still commensurate
with high levels of service to the client.

• Provides fully unbundled pricing for

online research and shopping around.

What our customers are telling us

• They want choice, ﬂexibility and high

levels of service.

• Willing to use technology to arrange 

or modify funerals.

Adapting our service model to better suit evolving
client needs and to improve eﬃciency
We will provide client-facing staﬀ with better tools to
improve service levels and eﬃciency. This will include
having vehicles and mobile devices to support
arrangements at a location of the client’s choice.

We will reward the delivery of key objectives such as
exceptional client service and will drive increased front line
productivity through more ﬂexible ways of working.

A new tiered proposition providing greater ﬂexibility 
to meet individual client needs
We will implement across our business a structure of
services that gives clients the most appropriate range of
choices. This will be achieved through ongoing testing of
diﬀerent propositions to ensure their appropriateness.

Building our national brands leverages our scale and
addresses the needs of increasingly digital clients
We will build known, national brands to leverage our 
scale advantage in the digital age. We will market our
commitment to high standards of care, quality of service
delivery and competitive entry prices.  

In our full service oﬀer we will increase the prominence 
of the national brand over local brands while retaining
strong local names. In the low-cost market we will grow
Simplicity into the leading national provider of low-cost
cremations.

Dignity plc Annual Report & Accounts 2018  | 25

Areas of focus in 2019

Building on the successes of 2018, the focus 
will be on: 

• Implementing trials of new technologies in
simpliﬁed forms to test client responses;

• Further trials of diﬀerent service propositions;

• Relaunch the Dignity brand; and

• Further support and marketing of the 

Simplicity brand.

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26  | Dignity plc Annual Report & Accounts 2018  

Chief Executive’s review continued
The Transformation Plan continued

2. Invest in and simplify 
the operating model

Enabling specialisation and eﬃciency gains by
separating front and back of house activities

Front of house
This will increase the focus on client service and community
engagement, will establish a ﬂexible arrangement model 
to meet changing consumer needs as these migrate from
local to digital, and will enable us to move to more
appropriately-sized locations.

Back of house
This will increase the focus on operational eﬃciency, 
create a superior operational platform for future growth
and leverage organisational scale to realise operational
eﬃciency beneﬁts.

The existing network will be right-sized and enhanced 
and greater eﬃciency in funeral delivery will be achieved 
by leveraging scale and better allocating resources.

We expect to reduce the number of branch networks 
we operate from more than 120 to approximately 75. 
The average number of funeral locations per network will
increase and we plan to move from a mix of distributed
and centralised operations to centralised operations 
where appropriate.

Optimise
network
footprint

• We will rationalise locations with low
performance or highly overlapping
catchments. 

• There will also be targeted satellite
expansions to extend geographic 
coverage.

Mobile 
client-facing
staff

• We will introduce mobile staff to extend

coverage to areas where traditional
branches are not economic.

Branch 
formats

• The Group will operate different 

formats to suit the focus of particular
locations.

Maintain 
facility quality

• We will ensure all facilities continue to

set the industry standard for the quality
of care provided for the deceased.

Dignity plc Annual Report & Accounts 2018  | 27

3. Streamline central support and invest 

in technology to centralise and automate 
administrative processes

Areas of focus in 2019

In order to support eﬃcient operational activity, it is
essential that central processes are streamlined.
Focus will therefore be on:

• Introduction of consistent management roles

nationwide;

• Finalisation of the overall IT strategy and selection 

of relevant IT partners to support change;

• Modernisation of business intelligence reporting 

to support operational activities; and

• Implementation of a modern purchase-to-pay

solution for all procurement activities.

Consistency and focus in management roles 
We will introduce consistent management roles nationwide
in support of the strategy. There will be operational focus
with managers unencumbered by non-management tasks.
We will create specialised front and back of house roles to
support process excellence and introduce clearly deﬁned
KPIs to assist management. We will also provide greater
recognition of strong performance and reduce overall costs.

Central investment will enable improved support
function eﬀectiveness
Finance will automate and centralise supplier/client
payments and produce standardised reporting. The
marketing function will produce centrally created marketing
materials and improve the targeting of digital spend. There
will be centralised HR capabilities to reduce management
time spent on non-core activities. We will also realise
savings in key procurement activities such as mortuary
equipment and stationery.

New IT capabilities to improve operational eﬃciency
and enable delivery of plan
Our CRM System will enable consistent and informed
communication and support for clients along the full
journey from initial contact to ﬁnal follow up, potential
referrals or returning clients.

Our tablet based arrangement software will capture
funeral arrangement data digitally to maximise accuracy
and eﬃciency (versus the existing paper based process)
and provide rich, relevant visual content e.g. choice of
ﬂowers. A workﬂow management tool will implement 
a new end-to-end workﬂow system to optimise funeral
arrangements and the delivery process. Resource
management will optimise the scheduling of limousines
and hearses to maximise usage and also optimise the
rostering of funeral director and support staﬀ.

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IT roadmap established

As so much of our Transformation Journey will rely 
on having the right IT solutions we have laid out 
a clear IT roadmap.

This addresses:

• A full maturity assessment of our IT systems and

services today;

• The plan of where we will invest in our IT capabilities

to support the delivery of our strategy;

• Review of alternative overarching architecture options;

• Prioritisation and selection of individual applications

to enable the strategy; and

• Selection of partners to work with on our

implementation plans.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28  | Dignity plc Annual Report & Accounts 2018 

Chief Executive’s review continued

People are central to realising 
our Transformation

Our people
Our people will be central to the success of our
Transformation. Perhaps the most crucial group will be
those who have direct contact with our customers. It is
essential that our service levels, of which we are justly
proud, do not falter. 

Managers across the business also have a major
responsibility during this time of change to keep close 
to their teams. To encourage and to lead by example. 
The same is true of the Board. We have a duty to make 
the best decisions we can but also to make sure that we
communicate well and lead by example. This may well be
the biggest test that we have faced in the last 20 years.  

A strong management team
The Board acted decisively at the beginning of 2018,
recognising that the business had to change radically.
Since that decision was taken the senior management
team across the Group has responded swiftly and well in
supporting this decision. I am conﬁdent that we are on 
the front foot as we face what will be a challenging and
testing time.

An enhanced communications strategy
One of the consequences of the decisions taken last year
has been to review the way we communicate and explain
ourselves. While we have always done this with investors,
we are now increasingly reaching out to other groups;
policy makers, regulators and the general public, to cite 
just three. Above all, we are looking to improve the quality
of our dialogue internally.

Why culture matters
The culture of a company matters, no more so than in 
one which is in contact with people at one of the most
diﬃcult times of their lives. We already have a strong and
caring culture. It is essential that this culture remains rooted
and strong as the Group transforms. The transformation 
is about the type of service and value-for-money that we
oﬀer customers. We have demonstrated signiﬁcant
ﬂexibility with our prices over the past year and this will
continue. What is not negotiable is the care and attention
we give our customers. That compassionate culture has
grown and strengthened over many years and is the
cornerstone of who we are.  

Engaging with and managing the expectations 
of wider stakeholders
While our employees are crucial to the success of our 
plan we are also mindful of our wider stakeholders. 
These include shareholders, customers, industry bodies
and politicians and as industry scrutiny grows, this last
group will become increasingly important. Explaining
ourselves and the industry, while also continuing to 
call for regulation, will remain an important strand to 
our communications.

Engage 
We need to do more than communicate. We need to
engage fully with our staﬀ. This is an essential element
in the work of the Transformation Team and good
progress is being made. 

Empower
Having engaged, we will work to ensure that they are
empowered, able to take responsibility and action.

Enable
Having empowered our employees, the ﬁnal piece of
the jigsaw for our managers and the Group is to make
sure they have the tools to do the job.

We are truly a people business focused on delivering
excellent client service. This is in our DNA and shapes
interactions with all our stakeholders.

Investors

Industry 
and policy
makers

Employees

Culture

Community

Customers

Dignity plc Annual Report & Accounts 2018  | 29

Engaging with our
employees
The Board and senior
management team knows
that it needs to improve the
quality of its communication
and engagement with
employees. We know that
this has to be a two-way
process: megaphone
communications will not
and cannot work in the
modern age.

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E N G A G I N G

R E S P O N D I N G

C H A N G I N G

E v O L v I N G

A D J U S T I N G

T R A N S F O R M I N G

I M P R O v I N G

P R O G R E S S I N G

A D v A N C I N G

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30  | Dignity plc Annual Report & Accounts 2018 

Chief Executive’s review continued

Shaping the future

Leadership

Our focus at present is on
transforming the Group and
securing a sustainable and
successful future. But we also
want to help shape the future
beyond the four walls of our
Group. We see the bigger picture
of a changing industry, one in
need of minimum standards
and regulation.  

Standards, quality and
regulation
We are proud of the stand 
we have taken with regard to
campaigning and arguing for
minimum standards, quality 
and regulation in our industry. 
But we will not be content until 
this becomes a reality.

As an industry leader 
We are one of the largest
companies in the funeral sector
and as such have a responsibility
as a good corporate citizen to lead.
This means listening to customers
and ﬁnding out what they want,
along with making their and our
case to the powers that be.

Our broader societal purpose
As a leader we have to take
account of broader issues than
just our own performance as a
business. Of course it is essential
that we deliver value to our
shareholders. But it is also
important that we provide value 
to our customers and make a
positive contribution to society at
large. As a funeral company, we
are involved in a fundamental and
timeless human ritual and we are
mindful of the responsibility this
places on us.

Research and insight

Societal trends over the next ten years

Our recent research projects mean that we have a good understanding of
trends in society with regard to funerals. One might assume that in the next
ten years almost universal digitisation and individualisation of funerals is
inevitable and becomes the norm. One might predict a rapid increase in
“green” funerals. But we might be wrong on at least one of those counts,
which means we will continue to research and test our assumptions and
remain alert to the unexpected.  

In 2018 we published two signiﬁcant research projects which helped us
understand the big picture as well as crucial smaller details. For example,
our major research project into funerals revealed that 92 per cent of 
people were unaware that funeral directors are not already regulated and
80 per cent of participants supported regulation of minimum professional
standards. At a more granular level, our crematoria research revealed that
59 per cent of people felt that 30 minutes for a service was not long enough.
13 per cent of all crematoria have times of 30 minutes or less and 30 per cent
have times of less than 45 minutes. Approximately 72 per cent of Dignity’s
own crematoria allocate 60 minutes, with the remainder of locations
oﬀering 45 minutes for a standard service.

Dignity plc Annual Report & Accounts 2018  | 31

Our future, our vision

Q. Do you fear a full market
investigation by the CMA?
A. No. We know that these types of

Q. How likely is the Transformation

Plan to go as expected?

A. We are conﬁdent in achieving 

investigation, while they are running
their course, can create a bumpy
ride for major players like ourselves.
However, what matters is the
outcome and the ﬁnal report and
what we want the outcome to be 
is for customers to make more
informed choices and an industry
which is on the road to being
properly regulated. It goes without
saying, of course, that we will
defend ourselves robustly from
unfair and malicious criticism from
those who may seek commercial 
or other advantages from the
heightened proﬁle that such an
investigation creates.

Q. Are you part of the industry’s
problem or the solution given
some of the negative comments
made by the CMA in their 
interim report?

A. We have taken issue with a number
of points made in the CMA’s interim
report  and published our response
on pages 19 and 20 of this Report
and Accounts. More generally, we
think we are an important part of
the solution because as a Group 
we know what “good” looks like 
in terms of quality and standards. 
For many years we have operated
and behaved in a way that is
consistent with what we believe
would be expected if the industry
were regulated. We would welcome
clear communications of standards
and an industry where the consumer
could be conﬁdent that minimum
standards are being universally met. 

the desired outcome, namely, a
stronger business, ﬁt to face the
future with conﬁdence. Having said
that, over the next three years 
there will almost inevitably be the
challenge of the unexpected, often
events and circumstances largely
beyond our control. This is where
managers and Directors prove 
their worth and we as a Board fully
expect to have to prove ours in that
time. The task we face is not easy,
we are under no illusions about that
but we are conﬁdent we will deliver.

Q. Do you regret the prices you were

charging as recently as 2017?
A. No. We delivered high-quality at 

a fair price and with 99 per cent of
clients saying we met or exceeded
their expectations and 85 per cent
saying the price they paid was 
what they expected. Since then 
the market has changed, price
competition has intensiﬁed and
consumers have become more
price-conscious (but not less 
quality-conscious).

Q. How many jobs will be lost in
delivering the Transformation
Plan?

A. Whilst regrettable, we anticipate
about 300 over the three years 
of the Transformation Plan, but
further careful consideration will 
be necessary before we conclude.
We hope the vast majority of any
such changes will come from
natural staﬀ turnover.  

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Beyond Transformation

Our focus is rightly on the
transformational challenge we 
face and achieving our goals will 
be tough. However, sizing up this
challenge has re-energised the
Group because we recognise that
with change comes opportunity.

We are excited about the future.
Excited about the possibilities that
will open up for the business and
excited about the role we can play 
in helping to raise standards in the
industry. We have a renewed vision
and a clear purpose. 

We therefore look to the future 
with conﬁdence and anticipation.

Q&A

Outlook Q&A
with Mike McCollum, Chief Executive

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32  | Dignity plc Annual Report & Accounts 2018 

Strategy and business model

A strategy and business model
built on long-term relationships

In last year’s Annual Report, the Board took decisive
action and announced a change in strategy in the light
of increasing competition and market share erosion. 

Our strategic objectives

Our overall strategic approach

Protect market share and reposition the 
Group for growth

Our strategic objectives and the means of delivering them
are based on the following four key elements:

           Continue to build on the strong fundamentals 
1

of the business and use these as a platform 
for change

These strengths, which derive from our well-established
and highly regarded local businesses, our proven ability 
to deliver exceptional service and strong corporate
governance, allows us to remain robust and ﬂexible 
in the face of change.

           Be more distinctive in the marketplace
2
Deﬁne clear market positions and build on our positive
reputation, and business, by delivering a high-quality 
and value-for-money service.

delivering our services for customers

           Embrace technology in developing and 
3
Eﬃcient use of appropriate technology will help to 
create signiﬁcant improvements in how the Group
operates, understands its business and delivers
outstanding service to its clients.

           Continue to be a good corporate citizen
4
Corporate responsibility is integral to our business 
as it supports the delivery of our strategy and aligns 
with our values.

Our key strategic objective and priority continues to be to
protect market share and reposition the Group for growth. 

How:

• By oﬀering a wide choice of new price points and 

services to our clients while preserving our unrivalled
levels of service.  

• By continuing to prioritise excellent client service

regardless of market segment which we believe will 
lead to organic growth.

• Through the launch of our Transformation Plan, following
a rigorous review of our funeral operations, they will be
organised to run more eﬃciently and eﬀectively. 

Establish new market positioning  

We establish ourselves as the best value service provider 
in the market.

How:

• By combining our unrivalled service levels based on

historic, long-term investment, with a new, competitively
priced range of service and product options for clients.

• Through our comprehensive digital strategy be the

leading online presence in the funeral sector.

• Build our brands to stand out in an increasingly

commoditised and competitive market.

Re-base the business model and market expectations

Find the optimum relationship between price, service and
demand for our funeral business going forward.

How:

• By building on the trials started in 2018 to gauge the
market response to various pricing scenarios while
maintaining our high levels of professional service 
and care.

• Segmented approach to the market, borne out by 

the developments of the Simplicity business.

Dignity plc Annual Report & Accounts 2018  | 33

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How we operate

Creating and delivering value

Operating proﬁtably and eﬃciently:

• Our consistent track record in strong cash generation and financial 

discipline enables us to reinvest and grow the business. We generate
revenues from new and returning clients. This discipline means that we
expect to fund the Transformation Plan from existing resources. 

Controlling and measuring performance:

• We do this by making well informed decisions, supported by careful 

risk management and good governance.

Operating responsibly:

• We do this through embedded policies and robust initiatives, appropriate 
to the distinct needs of our stakeholders, alongside reducing our impact 
on the environment and making a positive social impact.

Maintaining performance across our operations:

• We strive to provide our clients with the highest standards of facilities,
service and care. We achieve this by our commitment to continuous
improvement and investment in our portfolio and consistently 
delivering excellent client service.

Building strong relationships:

• Our clients are the foundation of our business and their trust is 
earned through our actions both individually and as a 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 reposition the Group for 

long-term success.

• We play an important part in, and are valued by, the local communities 
we serve and we are committed to making a difference.

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.

Our people

• 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.

Communities

• Contributing to the communities 
in which we operate beneﬁts both
local people and our business. 
It enhances our proﬁle and
reputation and promotes
employee engagement.

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 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.
Earnings targets, share price
return and the achievement
of strategic objectives are
measures of performance
used to incentivise Executive
Directors to deliver the
Group’s strategy.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34  | Dignity plc Annual Report & Accounts 2018  

Key performance indicators

Measuring performance

Financial

Delivering
Excellent
Client 
Service

Strategic &
Operational

The link between our
strategy and our KPIs

Financial KPIs

Historical KPIs remain
relevant

The Group has had a
consistent set of KPIs used
to monitor the performance
of the business against its
strategy for many years.
These KPIs have continued
to remain relevant during
the changes in the last year.

New KPIs for 2018

The average income per
funeral will be a key driver
of operating performance
and will therefore be
formally reported as a 
KPI with eﬀect from this
Annual Report.

Transformation Plan KPIs

As each element of the
Transformation Plan is
executed, measures of
success will be deﬁned.
Where relevant and not
commercially sensitive,
these will be viewed as
Group KPIs and reported
accordingly in future trading
announcements.

Alongside this, further
detail, such as summaries
of investments made, and
average income by funeral
type, will be provided.

Underlying earnings
per share
(pence)

85.8p

Underlying cash generated
from operations
(£m)

£101.9m

128.3p

85.8p

Deﬁnition
This is underlying proﬁt after
tax divided by the weighted
average number of Ordinary
Shares in issue in the period.

Developments in 2018
The reduction follows the
decrease in underlying
operating proﬁt.

£115.4m

£101.9m

Deﬁnition
This is the statutory cash
generated from operations
excluding non-underlying
items.

Developments in 2018
The Group continues to
convert operating proﬁt into
cash eﬃciently.

2017

2018

2017

2018

Underlying
operating proﬁt
(£m)

£80.2m

Average income 
per funeral
(£)

£2,973

£104.6m

£80.2m

Deﬁnition
This is the statutory operating
proﬁt of the Group excluding
non-underlying items.

Developments in 2018
Underlying operating proﬁt
declined year-on-year, but
was ahead of market
expectations.

£3,222

£2,973

Deﬁnition
Net funeral revenue divided
by the number of funerals
performed in the relevant
period.

Developments in 2018
This reduced year-on-year in
line with the Group’s strategic
price changes.

2017

2018

2017

2018

Dignity plc Annual Report & Accounts 2018  | 35

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.

Our KPIs are aligned with 
our strategic objectives
All KPIs are focused on
ensuring that the Group
delivers the strategy set at 
the beginning of 2018. No
particular KPI is solely relevant
to one aspect of the Group’s
strategy.

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Non-ﬁnancial KPIs

Total estimated number 
ofdeaths in Britain
(number)

599,000

Crematoria 
market share
(per cent)

10.9%

590,000

599,000

Deﬁnition
This is as reported by the
Oﬃce for National Statistics.

Developments in 2018
Deaths were higher than
originally anticipated in 
the period. 

10.7%

10.9%

2017

2018

2017

2018

Deﬁnition
This is the number of
cremations performed by 
the Group divided by the 
total estimated number 
of deaths in Britain.

Developments in 2018
Market share has increased,
reﬂecting the effect of
increases in the number of
locations combined with an
increase in the number of
Simplicity and other direct
cremations being performed.

Funeral market share
excluding Northern Ireland
(per cent)

11.9%

Number of cremations
performed
(number)

65,200

11.5%

11.9%

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 2018
Growth in market share
reﬂects acquisition activity
and the stabilisation of
comparable funeral market
share driven by price and
service changes.

63,400

65,200

Deﬁnition
This is the number of
cremations performed
according to our 
operational data.

Developments in 2018
Changes are a consequence
of the total number of 
deaths and the Group’s
market share.

2017

2018

2017

2018

Number of funerals
performed
(number)

72,300

Active pre-arranged 
funeral plans
(number)

486,000

72,300

68,800

Deﬁnition
This is the number of funerals
performed according to our
operational data.

Developments in 2018
Changes are a consequence
of the total number of 
deaths and the Group’s
market share.

486,000

450,000

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 2018
This increase reﬂects
continued sales activity offset
by the crystallisation of plans
sold in previous periods.

2017

2018

2017

2018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial

Delivering
Excellent
Client 
Service

Strategic &
Operational

36  | Dignity plc Annual Report & Accounts 2018  

Key performance indicators continued

Our objective is to lead the funeral sector in 
professional standards and services. Our priorities 
and our success are determined by our impact 
on our clients.

Delivering excellent client service
Our business has been built with a focus on high-quality service
delivery and we closely monitor the results of our client surveys
to ensure we continue to maintain the highest levels of
excellent client service and standards of care.

Customer perception on quality 
and value-for-money
Although many things are changing within the industry,
it is still the case that reputation, recommendation and
previous experience are key to protecting our market
share. To achieve this, we need to ensure our clients
perceive us positively and consider us to provide value-
for-money, irrespective of the type of service we have
performed for them. Our survey data helps us
understand this.

Broader client choice
Clients’ needs are changing: not everyone wants a
traditional funeral; some may want more personalised
choices as part of a traditional funeral service. Dignity
already provides these choices and uses the survey data
to understand how clients have responded to that
choice. Alongside this information, meaningful
information on website and telephone activity is
analysed to reﬁne the choices we provide.

Brands and customer experience
Awareness of our brands and a positive customer
experience will help protect and ultimately grow market
share. Our surveys provide some information and we
support this through broader activities to understand
how aware people are of our brands.

Meeting and exceeding expectations (% of clients)

Recommending our services (% of clients)

(12 month rolling average)

100%

99%

98%

97%

96%

95%

66%

64%

62%

60%

58%

56%

54%

100%

99%

98%

97%

96%

95%

Dec6 Dec7 Dec8 Dec9 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18

Dec6 Dec7 Dec8 Dec9 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18

Met and exceeded
expectations (left hand axis)

Exceeded expectations
(right hand axis)

Percentage of clients willing to recommend Dignity’s services 

Dignity plc Annual Report & Accounts 2018  | 37

Alongside the expansion of our digital oﬀerings,
we continue to provide a greater choice for consumers
and our focus on high standards and excellent client
service remains central to our plans for the future.

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Maintaining consistently high-quality 
and standards
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.

Our consistently high satisfaction scores reﬂect the strength 
of our relationships with our clients. We listen to our clients 
and use our survey responses to focus on areas in which we
can improve and add value.

The Dignity Client Survey 2018

Reputation and
recommendation
98.9% (2017: 99.0%)

98.9 per cent of respondents 
said that we met or exceeded
their expectations.

High standards of facilities 
and ﬂeet
99.8% (2017: 99.8%)

99.8 per cent thought our
premises were clean and tidy.

97.7% (2017: 97.7%)

97.7 per cent of respondents 
would recommend us.

99.7% (2017: 99.8%)

99.7 per cent thought our
vehicles were clean and
comfortable.

Quality of service and care
99.9% (2017: 99.9%)

99.9 per cent thought our staff 
were respectful.

In the detail
99.2% (2017: 99.3%)

99.2 per cent of clients agreed
that our staff had fully explained
what would happen before 
and during the funeral.

99.6% (2017: 99.7%)

99.6 per cent thought our 
staff listened to their needs 
and wishes.

99.1% (2017: 99.0%)

99.1 per cent said that the
funeral service took place 
on time.

99.1% (2017: 99.1%)

99.1 per cent agreed that 
our staff were compassionate
and caring.

98.4% (2017: 98.0%)

98.4 per cent said that the 
ﬁnal invoice matched the
estimate provided.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38  | Dignity plc Annual Report & Accounts 2018  

Operating review

Funeral services

Funeral services relate to
the provision of funerals
and ancillary items, such
as memorials and ﬂoral
tributes.

Performance
As at 28 December 2018, the Group
operated a network of 831 (2017: 826)
funeral locations throughout the United
Kingdom, generally trading under local
established names. 

During the period, the Group conducted
72,300 funerals compared to 68,800 
in 2017.

Underlying operating proﬁt was £62.2
million (2017: £79.5 million), reﬂecting
lower average incomes from the Group’s
strategic changes in January 2018.

Non-underlying items of £7.4 million
(2017: £2.5 million) excluded from
underlying operating proﬁt resulted in
statutory operating proﬁt of £54.8 million
(2017: £77.0 million).

Progress and Developments

Market share
Approximately one per cent of all
funerals were conducted in Northern
Ireland. Excluding Northern Ireland, these
funerals represented approximately 
11.9 per cent (2017: 11.5 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.

Consumer research and insight 
Dignity commissioned research to gain
insight into how grieving families perceive
the funeral sector and to understand their
views on quality and standards.
views on qualitytyt and standards.

Funeral mix and average income

                                                                                                                                                                                       Fy 2018                                                                     
                                                                                                                                                                                   Fy             Board’s                 H1               Q4               Fy      
                                                                                                                                                                              2017             original            2018           2018           2018      
                                                          Funeral type                                                                                   Actual     expectation          Actual        Actual        Actual      

Average revenue (£)     Full service                                                                      3,800           3,800       3,800      3,590     3,735
                                                Simple and limited service                                        2,700           1,965       2,240      2,435     2,350     
                                                Pre-need                                                                          1,650           1,650       1,680      1,750     1,705     
                                                Other (including Simplicity)                                           500               500          560         610         570

Volume mix (%)              Full service                                                                            60                 44             52            43           48
                                                Simple and limited service                                                 7                  20             15            24           19     
                                                Pre-need                                                                                27                 30             27            27           27     
                                                Other (including Simplicity)                                                6                    6                6              6              6

Weighted average (£)                                                                                                   2,945           2,590       2,799      2,637     2,734
Ancillary revenue (£)                                                                                                        277               280          224         260         239

Average revenue (£)                                                                                                  3,222           2,870       3,023      2,897     2,973     

On a comparable basis, excluding any
funerals from locations not contributing
to the whole of 2017 and 2018, market
share was 11.2 per cent, compared to
11.1 per cent in 2017. Given market
share has reduced in previous periods,
this shows a very positive response to
the Group’s introduction of a broader
range of funeral choices, combined 
with lower prices. It demonstrates
signiﬁcant progress in a key objective 
of the year: to understand the changing
relationship between price, choice and
consumer demand.  

Funeral mix
The trial in part of the country of 
a limited funeral in 2018 resulted in 
a smaller proportion of full service
funerals than expected. Given the
introduction of the Group’s Tailored
funeral, which provides even greater
choice to customers and which will be
introduced to all locations during 2019,
the limited service funeral is no longer
necessary and trials of this type of
service have ceased.

Average income
In the ﬁnal quarter of 2018, average
income per funeral reduced to £2,897,
slightly ahead of the Board’s expectations
at the start of the year. Higher than
anticipated average incomes throughout
the year resulted in a full year
performance approximately £100 per
funeral higher than originally anticipated.

Investment
Signiﬁcant cash resources continue 
to be used to maintain the Group’s
locations and ﬂeet. In 2018, £10.4 million
was invested in maintenance capital
expenditure.

The Group also acquired four funeral
locations for consideration of £5.4
million. There were a total of nine other
openings and eight closures in the year.

In November 2018, the Group announced
that acquisitions of small funeral
businesses were inconsistent with the
Group’s strategy and current plans for
the future. Should opportunities of
larger, more established businesses
become available, the Group will
consider these on a case by case basis.

Transparency 
The Group is very supportive of
improving transparency across the
industry to ensure consumers can
properly understand differences in
facilities, standards of care, service and
price. Since the year end, the Group’s
website publishes prices for the various
types of services offered. 

Outlook
The Group plans to continue trialling
various changes to its service offerings
during 2019. As part of this, it anticipates
continuing to roll out its Tailored funeral
offering, where customers can select
relevant services for their needs with
support from the Group’s outstanding
funeral arranging staff. The Group
anticipates overall average income per
funeral to be approximately £2,940. 

“ We have made signiﬁcant
progress in understanding
the changing relationship
between price, choice and
consumer demand.”

Transforming & improving

Technology and training
A range of digital learning modules has 
been developed so that our people can
learn via their PC at a time convenient 
to them. All modules were created so that
they can learn at their own pace or refresh
their learning without asking for help.

Improving standards and facilities
Client-facing and back of house activities 
are to be separated. This will enable
specialisation and an increased focus on
client service and community engagement
while leveraging organisational scale to
realise eﬃciency gains.

Dignity plc Annual Report & Accounts 2018  | 39

Flexible arranging 
A key part of the Transformation Plan 
is to use technology to give clients a greater
choice and ﬂexibility about when and where
they arrange the funeral.

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Expanding

Nationwide low-cost 
cremation service
Under the Simplicity Cremations brand,
families have access to aﬀordable direct
cremation options. These services provide 
all the practical and essential elements of 
a funeral without the obligation to pay for 
a ceremony or other features of a traditional
service they may not want.

Launch of new TV campaign
In December, Simplicity Cremations launched
a Tv advertising campaign to raise awareness
of how we are ‘Making funerals less of an
undertaking’.

Launching

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40  | Dignity plc Annual Report & Accounts 2018  

Operating review continued

Crematoria

Crematoria services 
relate to cremation services
and the sale of memorials
and burial plots at the
Group’s crematoria and
cemeteries.

Performance
The Group remains the largest single
operator of crematoria in Britain, operating
46 (2017:45) crematoria as at 28 December
2018. The Group performed 65,200
cremations (2017: 63,400) in the period,
representing 10.9 per cent (2017: 10.7 per
cent) of total estimated deaths in Britain.

The Group did not increase its cremation
fees during the year. 

Sales of memorials and other items have
been robust, equating to approximately
£276 per cremation compared to £270 
in the previous period. 

These factors, combined with costs
increasing in line with the Group’s
expectations resulted in underlying
operating proﬁt of £40.3 million (2017:
£40.0 million), broadly ﬂat year-on-year.

Non-underlying items of £0.7 million
(2017: £1.8 million) excluded from
underlying operating proﬁt resulted in
statutory operating proﬁt of £39.6 million
(2017: £38.2 million).

Progress and Developments
The Group has invested £4.5 million
maintaining its locations in the period. 

The Group’s 46th crematorium opened 
in July 2018, representing a total
investment of £5.2 million.

in late 2019 and the third is expected to
be operational in 2020. The total capital
commitment for these three projects is
expected to be approximately £20 million
to £21 million, with £4.3 million of this
amount having already been invested.
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 has two locations where it 
is appealing the planning decisions and
another two that are currently in the
planning process.

During the period, the Group re-branded
its crematoria business as ‘The
Crematorium and Memorial Group’.

Outlook
We remain conﬁdent about the future 
of our crematoria business. The
continued growth of the Group’s
Simplicity Cremations business should
generate further opportunity to help
more families in a way that suits them.

The capital invested in new crematoria
developments is expected to generate 
an after tax return of approximately 
13 per cent. Developments will take 
ﬁve to seven years to reach maturity.

The Group now has planning permission
for three new crematoria, following the
acquisition of a third location in 2018.
Two of these locations are due to open 

“The Group did not
increase its cremation fees
during the year.”

Consumer research and insight 
Dignity published the UK’s most
authoritative study ever into people’s
views on crematoria revealing that they
value quality, time and seclusion over cost.

Enﬁeld Crematorium and Cemetery
visitor experience  
A large area of the grounds at Enﬁeld
Crematorium has now been developed to
include a lake, fountain, viewing point and
four seasonal gardens to provide a place 
of beauty and quiet reﬂection for visitors.

Dignity plc Annual Report & Accounts 2018  | 41

Completed & opened

Trent Valley Crematorium  
Trent valley Crematorium opened in July 2018.
The latest cremator technology and audio-
visual tribute systems have been installed and
there is a facility to live-stream the service 
over the internet. The development includes
landscaped memorial gardens, a wild ﬂower
meadow and an avenue of new trees.

Rotherham Crematorium
improvements 
An investment of £250,000 at Rotherham
Crematorium has doubled the capacity 
of the Chapel and modernised facilities 
for mourners. As the building could not 
be extended, this complex project included 
the removal of the existing organ loft 
replacing it with a mezzanine structure 
for additional seating. 

Planning & developing

Weston-super-Mare Cemetery
extension
£2.5 million is being invested to extend the
existing cemetery at Weston-super-Mare
Crematorium to provide burial space for 
the next 50 years. 

Investing & enhancing

Castle Eden Crematorium
Development work has begun on a new
crematorium near Castle Eden in County
Durham. Plans include a low level, grass-
roofed sandstone building so that the
crematorium blends into the local
environment.

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42  | Dignity plc Annual Report & Accounts 2018  

Operating review continued

Pre-arranged funeral plans

Pre-arranged funeral 
plans represent the sale 
of funerals to customers
wishing to make their 
own funeral arrangements
in advance.

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 proﬁt was £2.8
million compared to £8.0 million in the
previous year. As previously announced,
this reﬂects the Group’s conclusion that 
it should reduce the level of marketing
allowance it seeks to claim from the 
trusts when it makes a plan sale, thereby
leaving a greater proportion of the plan’s
sales value in the trust available for when
the plan holder dies and the plan is used.
The Group believes that it has long led
the industry in best practice and given its
calls for higher levels of capital solvency
to protect consumers, feels this is the
appropriate course of action.

Non-underlying items of £0.2 million
(2017: £0.2 million) excluded from
underlying operating proﬁt resulted in
statutory operating proﬁt of £2.6 million
(2017: £7.8 million).

In overall terms, approximately 58,000
(2017: 69,000) new plan sales were made
and the number of active pre-arranged
funeral plans increased to 486,000 

Consumer research and insight 
Research commissioned by Dignity showed
that whilst improvements have been made,
there remains signiﬁcant high-pressure
and misleading sales practices in the
Funeral Plan market. 
Funeral Plan market.

(2017: 450,000) as at 28 December 2018.
Trust based sales in the year were 24,000
(2017: 34,000).  

Of the sales in the period 34,000 (2017:
35,000) represent plans linked to life
assurance plans with third parties rather
than trust based plan sales and 134,000
(2017: 102,000) active insurance plans 
are in place at 28 December 2018. Not all 
of these insurance backed plans include
an obligation to provide a guaranteed
funeral and we anticipate the cancellation
experience to be signiﬁcantly higher than
is witnessed on trust based sales.

The latest actuarial valuations of the 
pre-arranged funeral plan trusts (at 28
September 2018) showed them to have 
a surplus of £33.0 million, based on
prudent assumptions. If the discount 
rate used had equalled the long-term
investment target of the trust funds, then
the trusts would have reported aggregate
surpluses of approximately £160 million.

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. 

Whilst the contribution to this year’s
operating proﬁt from the marketing
activity is reported at the time of sale, 
it is important to recognise that the sales
made represent signiﬁcant potential
future revenues for the funeral division. 

Outlook
The Group’s approach to lower marketing
allowances will continue for the foreseeable
future, meaning the Group’s trust based
pre-need marketing activity is expected to
be cash ﬂow neutral in 2019 and beyond.

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. This will change
in 2019 when the Group adopts IFRS 15. 

The adoption of IFRS 15 will change 
the Group’s accounting policy for the 
pre-need business, impacting statutory
and non-statutory measures of ﬁnancial
performance and is discussed elsewhere
in the Annual Report.

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, 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 2019.

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 2018, the Trusts held approximately
£928 million of assets in respect of
308,000 trust based funeral plans.
Average assets per plan are greater 
than the amount currently received 
for performing a funeral.

As detailed elsewhere, the consultation
and likely regulation of the pre-need
division is likely to develop in 2019 and 
the Group will actively participate in 
that process.

The Trusts’ investment strategies are
expected to provide returns in excess 
of inﬂation in the longer-term but will,
however, potentially result in greater
volatility year-on-year in the reported
value of the Trusts’ assets. The current
allocation that is subject to annual review
by the independent Trustees with
support from their investment advisers, 
is summarised below.

                                                                 Example 
                                                                 investment                       Target
                                                                 types                                         (%)

Defensive                                 Index linked                  18
investments                            gilts and 
                                                    corporate
                                                    bonds                                  

Illiquid                                       Private                           16
investments                            investments 

Core growth                            Equities                          23
investments

Growth ﬁxed income           Property funds            43
and alternative                       and emerging 
investments                            market debt 

Pre-arranged funerals represent a stable
source of incremental funerals for the
Group, providing high-levels of certainty
of cash ﬂows as existing plans mature. 

The Group intends to continue to 
sell as many plans as is commercially
possible and economically sensible. 

Dignity plc Annual Report & Accounts 2018  | 43

“Dignity has remained focused 
on selling high-quality business,
with low cancellation rates, selling
in ways that support the strong
reputation of the Group.”

Trusted

Feefo – a Gold Trusted Service  
The Feefo Gold Service Award is an
independent seal of excellence that
recognises businesses for delivering
exceptional experiences as rated by
real customers. Feefo has allowed
Dignity to engage with customers 
and gain true insight into their
experience so we can continue to
enhance it further.

National TV campaign
In 2018 our ﬁrst ever television
advertisement for our funeral plans was
broadcast on daytime television.

Engaging

Simplicity Cremations pre-paid
funeral plans
During the year we reﬁned our Simplicity
pre-paid oﬀer and now oﬀer three
leading low-cost options, with plan prices
starting at £1,495.

Online is our key route to market and
sales grew strongly during the fourth
quarter as consumers responded well 
to our innovative Simplicity advertising
campaign.

Developing

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44  | Dignity plc Annual Report & Accounts 2018  

Operating review continued

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.

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
centrally the costs of incentive bonus
arrangements, such as Long-Term
Incentive Plans (‘LTIPs’) and annual
performance bonuses, which are
provided to over 100 managers 
working across the business.

Developments 
Underlying costs in the period were 
£25.1 million (2017: £22.9 million). 

Non-underlying items of £5.6 million
(2017: £2.1 million) excluded from
underlying costs resulted in costs of 
£30.7 million (2017: £25.0 million).

On-going marketing activity represented
an increased cost of approximately 
£3 million year-on-year. This investment
will continue to increase.

Investment in central overheads continues
in order to respond to the activities of 
the Group. Additional staﬀ costs of
approximately £1.5 million were incurred
to support ongoing activities. Other costs,
including depreciation and general
administrative costs were approximately
£1 million higher year-on-year. Oﬀsetting
this, incentive costs, including LTIP costs
and cash bonuses, were £1.7 million
(2017: £5.2 million). The current period
includes a release of £1.7 million in
respect of Executive Directors’ bonuses
earned in 2017 but waived in 2018.

Maintenance capital expenditure of 
£1.2 million has been incurred on central
projects predominantly relating to IT that
will help the business as a whole operate
more eﬃciently.

Outlook
The Group will continue to invest in
central functions and marketing activity 
to support the Group’s plans, through 
the recruitment of more employees and
increased marketing online and in other
media. Underlying central overheads 
are therefore anticipated to increase 
by 25 to 30 per cent in 2019.

Financial review

A resilient ﬁnancial performance 
ahead of market expectations

Dignity plc Annual Report & Accounts 2018  | 45

Steve Whittern, Finance Director

The ﬁnancial performance reﬂects 
a challenging year as we prepared for 
a targeted investment funded by our
strong capital base.

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Introduction
These results have been prepared in accordance with
International Financial Reporting Standards (‘IFRS’) as
adopted in the EU.

Financial highlights
The Group’s ﬁnancial performance is summarised below:

                                                                                                      52 week             52 week                            
                                                                                                           period               period                            
                                                                                                           ended                ended                             
                                                                                                           28 Dec               29 Dec           Decrease
                                                                                                               2018                   2017                         %

Revenue (£million)                                                315.6           324.0                    3

Underlying operating proﬁt (a) (£million)                80.2            104.6                  23
Underlying proﬁt before tax (a) (£million)               54.4              77.8                  30
Underlying earnings per share (a)  (pence)              85.8            128.3                  33

Underlying cash generated 
from operations (a)  (£million)                                    101.9            115.4                  12

Operating proﬁt (£million)                                        66.3              98.0                  32
Proﬁt before tax (£million)                                        40.5              71.2                  43
Basic earnings per share (pence)                            63.0            115.8                  46
Cash generated from operations (£million)          94.9            112.5                  16

Dividends paid in the period:
Interim dividend (pence)                                           8.64              8.64                     –
Final dividend (pence)                                             15.74            15.74                     –

(a) Further details of alternative performance measures can be found on 

pages 151 to 153.

The Board has proposed a dividend of 15.74 pence per
Ordinary Share as a ﬁnal distribution of proﬁts relating to 2018
to be paid on 28 June 2019, subject to shareholder approval.

Alternative performance measures
The Group’s alternative performance measures exclude 
non-underlying items. These items have been adjusted for 
in determining underlying measures of proﬁtability as these
underlying measures are those used in the day-to-day
management of the business and allow for greater comparability
across periods. Detailed information on non-underlying items
is set out on pages 151 to 153.

Performance in 2018

Revenue

£315.6m

Revenue was £315.6 million
(2017: £324.0 million).

Underlying operating proﬁt

£80.2m

Underlying operating 
proﬁt was £80.2 million 
(2017: £104.6 million).

Underlying earnings per share

Transformation investment

85.8p

Underlying earnings per
share were 85.8 pence
(2017: 128.3 pence).

£2.7m

We invested £2.7 million in
the Group’s Transformation
in the period.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46  | Dignity plc Annual Report & Accounts 2018  

Financial review continued

Accordingly, the following information is presented to aid
understanding of the performance of the Group:

                                                                                                                    52 week                  52 week
                                                                                                                    period ended        period ended 
                                                                                                                      28 Dec 2018          29 Dec 2017
                                                                                                                           £m                         £m

Operating profit for the period as reported                    66.3                   98.0
Add the effects of:
Loss on sale of fixed assets                                                          0.3                     0.1
External transaction costs in respect of 
completed and aborted transactions                                        0.8                     4.7
Acquisition related amortisation                                                 4.9                     1.8
Transformation Plan costs                                                            2.7                         –
Operating and competition review costs                                  2.7                         –
GMP past service cost                                                                    1.4                         –
Trade name write-off                                                                     1.1                         –

Underlying operating profit (a)                                                80.2                 104.6
Net ﬁnance costs                                                                       (25.8)                 (26.8)

Underlying proﬁt before tax(a)                                              54.4                   77.8
Tax charge on underlying proﬁt before tax (a)                      (11.5)                 (13.8)

Underlying proﬁt after tax (a)                                                  42.9                   64.0

Weighted average number of Ordinary
Shares in issue during the period (million)                             50.0                   49.9
Underlying EPS (pence)(a)                                                            85.8                 128.3
(Decrease)/increase in underlying EPS (per cent)                  (33)                         7

(a)Further details of alternative performance measures can be found on 

pages 151 to 153. 

Earnings per share
The Group’s statutory proﬁt after tax was £31.5 million 
(2017: £57.8 million). Basic earnings per share were 63.0 pence
per share (2017: 115.8 pence per share). Underlying proﬁt after
tax was £42.9 million (2017: £64.0 million), giving underlying
earnings per share of 85.8 pence per share (2017: 128.3 pence
per share), a reduction of 33 per cent.

Key changes in the proﬁtability of the Group’s funeral business
Underlying operating proﬁt was £62.2 million (2017: £79.5
million), a reduction of 22 per cent. In broad terms, this can 
be explained by the following factors: 

Transformation Plan

Costs incurred in 2018
The Group incurred signiﬁcant costs in 2018 to support the
revisions to its strategy and to start the Transformation Plan.
They can be summarised as follows: 

                                                                                                                                                          28 Dec 2018
                                                                                                                                                                           £m

External advisers’ fees                                                                                               1.1
Brand development and marketing costs                                                            1.1
Costs of additional staff to support the Transformation                                  0.5

Total costs incurred                                                                                                 2.7

The overall cost and beneﬁt of the Transformation Plan
The Group’s view of the overall cost of the Plan remain unchanged
from that detailed in its 2018 interim results:

Costs
The Group anticipates a total investment of £50 million by the
end of 2021 to deliver the Transformation Plan: 

                                                                                                                                                                         Total
                                                                                                                                                                            £m

IT systems                                                                                                                        6
Property and equipment                                                                                           35
Other costs to implement plan                                                                                   9

                                                                                                                                         50

£35 million of this investment is expected to be capital in
nature. Approximately £17 million of this investment will be
funded from surplus property disposals.

In addition to these non-recurring amounts, the Group
anticipates £7 million per year of incremental costs:

                                                                                                           Short-term (2021)     Long-term (2028)
                                                                                                                                      £m                               £m

Extending coverage (branch and service 

delivery network)                                                                           2                           1

Investment in marketing and demand 

generation (central support)                                                       5                           6

                                                                                                              7                           7

                                                                                                                                 H1               H2       Full year
This is analysed as:                                                                                    £m              £m                 £m

Underlying operating proﬁt – 2017                                   45.1        34.4          79.5
Impact of:
Number of deaths                                                                   5.5        (3.0)             2.5
Market share                                                                           (1.5)           3.0             1.5
Lower average incomes                                                       (5.5)      (11.5)        (17.0)
Cost base increases                                                               (3.5)        (3.8)          (7.3)
Acquisition activity                                                                   2.0           1.0             3.0

Beneﬁts
The Transformation Plan is expected to realise the following 
net operating proﬁt beneﬁts:

                                                                                                           Short-term (2021)     Long-term (2028)
                                                                                                                                      £m                               £m

Branch and service delivery network                                          7                         12
Streamlined management and administration                        5                           5
Investments in central support and IT                                      (4)                         (4)

Underlying operating proﬁt – 2018                               42.1        20.1          62.2

                                                                                                              8                         13

Maintenance capital expenditure (£m)

Underlying operating proﬁt (£m)

Underlying earnings per share (pence)

£20.2m

£16.1m

20

15

10

5

0

£104.6m

£80.2m

120

100

80

60

40

20

0

128.3p

85.8p

125

100

75

50

25

0

2017

2018

2017

2018

2017

2018

Maintaining
highest
standards of
client service

New low-cost
model and
competitive 
pricing associated
with quality

Strong cash
generation
supporting
investment

A future-ready
proposition

Positioning
Dignity for 
long-term
sustainable
growth

Dignity plc Annual Report & Accounts 2018  | 47

Other items excluded from underlying operating proﬁt
Amortisation of acquisition related intangibles
Amortisation of acquisition related intangibles reﬂects the 
write-off of acquired intangibles over the term of its useful life. 

External transaction costs
External transaction costs reﬂects amounts paid to external
parties for legal, tax and other advice in respect of the Group’s
acquisitions.

Operating and competition review costs
In the ﬁrst half of 2018 the Group incurred costs with external
advisors to aid its operational review. Costs were also incurred
with external advisors to support the Group’s response to the
CMA’s funeral market study and HM Treasury‘s consultation 
on the funeral plan sector.

GMP past service cost
This represents the estimate for the impact of the
implementation of Guaranteed Minimum Pension (‘GMP’)
equalisation.

Trade name write-off
During the period, the Group closed the last location trading
under a particular trading name. As this trading name had
speciﬁc intangible assets related to it, they were required to 
be written-off.

Loss on sale of ﬁxed assets
Losses from the sale of ﬁxed assets are excluded as they are
unconnected with the trading performance in the period.

Capital expenditure
Capital expenditure on property, plant and equipment and
intangible assets was £25.0 million (2017: £27.0 million).

                                                                                                                         28 Dec                  29 Dec
                                                                                                                                       2018                      2017
This is analysed as:                                                                                              £m                         £m

Maintenance capital expenditure:                                                     
Funeral services                                                                              10.4                 12.7
Crematoria                                                                                         4.5                   4.6
Other                                                                                                   1.2                   2.9
Total maintenance capital expenditure (a)                                16.1                 20.2
Branch relocations                                                                           0.8                   2.2
Satellite locations                                                                              1.4                   1.1
Development of new crematoria and cemeteries                    6.7                   3.5

Total property, plant and equipment                                        25.0                 27.0
Partly funded by:                                                                                    
Disposal proceeds                                                                         (0.4)                 (0.6)

Net capital expenditure                                                                24.6                 26.4

(a) Maintenance capital expenditure includes vehicle replacement 

programme, improvements to locations and purchases of other tangible 
and intangible assets.

The Group will continue to invest in the maintenance of its
existing portfolio of vehicles and funeral and crematoria
locations. The Group’s Transformation Plan will capture 
the majority of planned capital expenditure on its funeral
business. Consequently capital maintenance expenditure 
in 2019 is expected to be lower than 2018.

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Cash ﬂow and cash balances
Underlying cash generated from operations was £101.9 million
(2017: £115.4 million).

During the period, the Group invested £6.5 million in the
acquisition of established funeral businesses. £5 million was
invested in acquiring a further equity stake in Funeral Zone
Limited which is a UK online funeral resource for funeral
directors and clients. This brought the Group’s total equity
interest in Funeral Zone Limited to 23.8 per cent. Consequently,
this investment is accounted for as an associate. 

Other working capital changes were consistent with the
Group’s experience of converting proﬁts into cash. These
changes ﬂuctuate year-on-year as a result of timings of the
Group’s year end and the level of bonuses paid.

Cash balances at the end of the period were £66.9 million
(2017: £49.3 million). In its planning, the Group sets aside
approximately £22.2 million for future corporation tax and
dividend payments expected to be spent in 2019.

Further details and analysis of the Group’s cash balances are
included in note 15 to the consolidated ﬁnancial statements.  

Pensions
The balance sheet shows a deﬁcit of £25.2 million before
deferred tax (2017: deﬁcit of £24.0 million). As previously
announced, during the period, the Group agreed a schedule 
of contributions with the pension scheme trustees following
completion of the triennial valuation to April 2017. This has
resulted in an annual cash obligation of £2.2 million with 
effect from 2018.

Following the Lloyds GMP equalisation case in October 2018,
which ruled that treatment of men and women be brought 
in line for schemes with a guaranteed minimum pension, 
the Group has been required to recalculate member beneﬁts. 
This has resulted in the Group recognising a past service 
cost of £1.4 million in the current year income statement,
representing approximately 1.1 per cent of the Group’s 
deﬁned beneﬁt pension liability.

Taxation
The Group’s effective tax rate on underlying proﬁts in the
period was 21.2 per cent (2017: 17.7 per cent). 

The current period underlying effective tax rate is higher due to
the effects of prior year items, option schemes and permanent
disallowables, with a tax impact totalling £1.4 million.

In 2019, the Group expects its underlying effective tax rate 
to be approximately one and a half to two per cent above 
the headline rate of corporation tax. This translates to an
underlying effective rate of between 20.5 per cent and 
21.0 per cent.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48  | Dignity plc Annual Report & Accounts 2018  

Financial review continued

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. 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 2034        31 December 2049

Coupon                                                                     3.5456%                           4.6956%
Rating by Fitch                                                                      A                                  BBB-
Rating by Standard & Poor’s                                             A                                      BB

The Secured Notes have an annual debt service obligation
(principal and interest) of circa £33.2 million.

It is not currently possible to issue further Secured Notes, as
such an issue would require the rating of the Secured B Notes 
to raise to BBB by both rating agencies. In any event, the Group
does not have any requirement to issue any further Secured
Notes for the foreseeable future. This position will be reassessed
following the completion of the Group’s Transformation Plan.

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 28 December 2018 was 2.55 times 
(2017: 3.24 times). This  covenant calculation uses a prescribed
deﬁnition of EBITDA detailed in the loan documentation and
only represents the proﬁt of a sub group of the Group which 
is party to the loans (the ‘securitisation group’). EBITDA for 
this calculation can be reconciled to the Group’s statutory
operating proﬁt as follows:

                                                                                                                                                        28 Dec
                                                                                                                                                                       2018
                                                                                                                                                                          £m  

EBITDA per covenant calculation – Securitisation Group                                86.8
Add: EBITDA of entities outside Securitisation Group                                     13.9
Add: Non cash items (a)                                                                                            (1.5)

Underlying operating proﬁt before depreciation 
and amortisation – Group                                                                                      99.2
Underlying depreciation and amortisation                                                     (19.0)
Non-underlying items                                                                                           (13.9)

Operating proﬁt                                                                                                        66.3

(a) The terms of the securitisation require certain items (such as pensions) 

to be adjusted from an accounting basis to a cash basis.

Revolving Credit Facility
The Group has the beneﬁt of a £50 million Revolving Credit
Facility (‘RCF’), provided by the Royal Bank of Scotland, which is
secured against certain trade and assets held by legal entities
outside of the Group’s securitisation structure. The RCF can be
drawn down subject to a set of ﬁnancial tests applied to these
legal entities.

The facility is available until July 2021, with the option to renew,
subject to the bank’s consent at the time, by a further year. 
The margin on the facility ranges from 150 to 225 basis points
depending on the resulting gross leverage.

This provides the Group ongoing ﬂexibility in a cost effective
manner, as if undrawn, the facility represents an annual cost 
of approximately £0.3 million. Given the Group’s healthy cash
balances, the RCF is undrawn at the time of the release of this
announcement and as at the year end.

Net debt
The Group’s net debt is analysed as:

                                                                                                                               28 Dec             29 Dec
                                                                                                                                             2018                 2017
                                                                                                                                                £m                    £m  

Net amounts owing on Secured Notes                                    (560.6)         (565.1)
Add: unamortised issue costs                                                         (0.6)              (0.6)

Gross amounts owing                                                                  (561.2)         (565.7)

Accrued interest on Secured Notes                                             (12.3)              (0.3)
Accrued interest on Crematoria
    Acquisition Facility and Revolving Credit Facility                     (0.2)              (0.2)
Cash and cash equivalents                                                                                                              66.9              49.3

Net debt                                                                                           (506.8)         (516.9)

The Group’s gross debt outstanding was £561.2 million 
(2017: £565.7 million). Net debt was £506.8 million (2017:
£516.9 million).

The market value of the Secured Notes at the balance sheet
date was £531.6 million (2017: £686.5 million).

Whilst the Group has no plans to do so, should it wish to repay
all amounts due under the Secured Notes, the cost to do so at
the year end would have been approximately £751.6 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 £24.8 million (2017: £25.1 million). 

Finance costs of £nil million (2017: £0.4 million) were incurred
in respect of the Crematoria Acquisition Facility.

Other ongoing ﬁnance costs incurred in the period 
amounted to £1.2 million (2017: £1.4 million), including the
unwinding of discounts on the Group’s provisions and other
ﬁnancial liabilities.

Interest receivable on bank deposits was £0.2 million 
(2017: £0.1 million). 

Dignity plc Annual Report & Accounts 2018  | 49

                                                 Financial outlook

IFRS 15, Revenue from contracts with customers  
The Group has completed its assessment of this accounting
standard, which is effective for its 2019 accounting period. 
The standard will result in a change to the Group’s accounting
policies for the sale of trust based pre-arranged funeral plans. 

The Group plans to apply the modiﬁed retrospective
application approach, meaning that comparative periods will
not be restated according to IFRS 15. Instead, the cumulative
effect of the application of the standard will be recognised in
the opening balance sheet reserves for 2019.

Further details are included in the Group’s accounting policies
on pages 110 and 111.

The Group intends as a consequence of these changes to
update its deﬁnition of underlying operating proﬁt. This is set
out in the section on alternative performance measures on
page 152 and details the revised underlying operating proﬁt
that will be used by the Group for comparative purposes when
it announces its 2019 results, beginning with the ﬁrst quarter
trading update in May 2019.  

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Q&AQ&A with Steve Whittern, Finance Director

We are committed to delivering our Transformation
Plan and to creating and sustaining long-term value
In 2018, we delivered a resilient ﬁnancial performance
ahead of market expectations. The fundamentals of our
business remain compelling and strong and we have
continued our relentless commitment to quality, value-
for-money and service levels. 

Outlook

Through the delivery of our Transformation Plan we have a
major opportunity to provide sustainable long-term value
and lead the industry in terms of standards and value-for-
money. Strong cash generation will enable us to continue to
invest in our business in line with our strategic objectives.

Q. When will you have a proper understanding of 
the options that diﬀerent funeral price/service
conﬁgurations will give you with regard to average
funeral prices?

A. Our understanding will evolve during 2019 as we 

continue our trials.

Q. Do you have an achievable average funeral price in 

mind at present?

A. We anticipate average income per funeral in 2019 to 

be approximately £2,940.

Q. Will you put your prices up the moment that attention
from the likes of the CMA investigation goes away?

A. Our pricing strategy is driven by changing market conditions
and a need to meet customer needs for quality at a lower
price. It was introduced well before the CMA announced 
a possible full investigation into the funeral industry.

Q. How much investment do you plan to make in support 

of the Transformation Plan in total?

A. The Group anticipates a total investment required of 

£50 million, of which £35 million will be capital in nature.
This is anticipated to be partly funded by £17 million of
property disposals, being properties no longer required 
for the future eﬃcient operation of the business.

Q. When do you think you will return to making

acquisitions?

A. When it makes sense for us as a business to do so.  

For the foreseeable future, while we are implementing our
Transformation Plan, it would make no sense and would 
be operationally extremely diﬃcult to buy and integrate 
a business into what is a changing operational landscape
within the Group.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50  | Dignity plc Annual Report & Accounts 2018  

Principal risks and uncertainties 

Risk management is embedded throughout the business with 
all employees aware of the role they play.

Risk governance

Risk appetite
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.

There has been no change to the Group’s risk appetite in 
the period.

Our approach to risk management
The Group has a well-established governance structure with
internal control and risk management systems. The risk
management process:

• Provides a framework to identify, assess and manage risks, 
both positive and negative, to the 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.

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.

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.

The risk management framework

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

R

   S T

T E G I C OBJECTIV

E

S      
h

h

S
E
V

I
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C

E

J

B

O

RISK ASSESSMENT 
PROCESS

C

I

G

E

T

A

               STR
h

E

S

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G

IC O
BJECTIV

IMPLEMENT

Existing control 
enforced and tested
• Remedial action plans 
implemented

• Board member 
accountable

ACTION

Controls identiﬁed
• Suggested action 
plans agreed 

• Options for controls 
identiﬁed and costed

• Plans approved 
by the Board

Review

Assess

Report

Respond

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
          
Risk status summary and new risks
The ongoing review of the Group’s principal risks focuses on how
these risks may evolve. 

Increasing risk trends
The impact of the Group’s decisive response in January 2018 to
changes in the competitive landscape highlight increased risk
from its ability to maintain average incomes.

Regulation could also result from both the CMA investigation 
and HM Treasury’s review of pre-arranged funeral plans. Whilst
the Group believes that regulation would be beneﬁcial, there
remains a risk that regulation could be imposed that may result
in a signiﬁcant cost burden to the Group.

New risks
2018 marked the start of a period of change for the Group
following changes in the markets in which it operates. This has
therefore resulted in the following new risks being identiﬁed:

• The implementation of the Transformation Plan;

• Direct cremations; and

• The CMA investigation into the funeral market.

Cyber risk
The increasing prevalence of cyber attacks across the world,
means that along with all large corporates, our business systems
are under increasing level of attack. Over the last few 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. 

Dignity plc Annual Report & Accounts 2018  | 51

Links

See Strategy and business model: p.32 and p.33

See KPIs: p.34 to p.37

See Governance: p.60 to p.92

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
• Fall in average revenues per funeral or cremation
• Disruptive new business models leading to a signiﬁcant

reduction in market share

• Demographic shifts in population
• Competition
• Regulation of pre-arranged funeral plans
• Regulation of the funeral industry
• Changes in the funding of the pre-arranged funeral 

plan business

• Implementation of the Transformation Plan
• Direct cremations
• CMA investigation into the funerals market

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 52 and 53 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  

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52  | Dignity plc Annual Report & Accounts 2018  

Principal risks and uncertainties continued

Operational risk management

Risk description and impact

Mitigating activities and 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.

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.

Fall in average revenues per funeral or cremation 
Operating proﬁt growth has in part historically been attributable
to increases in the average revenue per funeral or cremation.
There has been increasing price competition in the funeral
market, resulting in material price reductions by the Group in
2018. It is highly likely that pricing pressure will remain for the
foreseeable future and it may not therefore be possible to
maintain average incomes per funeral or cremations at the
current level.

Disruptive new business models leading 
to a signiﬁcant reduction in market share  
It is possible that external factors such as new competitors and
the increased impact of the internet on the sector, could result 
in a signiﬁcant reduction in market share within funeral and
crematoria operations. This would have a direct result on the
ﬁnancial performance of those divisions.

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.

Competition  
The UK funeral services, crematoria and pre-need markets are
currently fragmented.  

There could be further consolidation or increased competition in
the industry, whether in the form of intensiﬁed price competition,
service competition, over capacity facilitated by the internet or
otherwise, which could lead to an erosion of the Group’s market
share, average revenues or costs and consequently a reduction 
in its proﬁtability.

Failure to replenish or increase the bank of pre-arranged funeral
plans could affect market share of the funeral division in the
longer term.

The proﬁle of deaths has historically seen intra year changes of +/- 1 per cent giving the Group the
ability to plan its business accordingly. The ONS long term projection is for deaths to increase. 

The risk is mitigated by the ability to control costs and the price structure and the ability to acquire
funerals and crematoria, although this would not mitigate a short term signiﬁcant reduction in the
number of deaths.

The number of deaths in 2018 was higher than originally anticipated.

See Chief Executive’s review: p.16 to p.31

This risk is addressed by the strategic decision made as part of the Transformation Plan to support
development of strong national brands via the Group’s websites, Tv and radio advertising and prominent
signage at our funeral locations leading to increased awareness of the Group and its services.

With signiﬁcant investment committed already and planned for subsequent years, we are building and
positioning a strong brand that will be more resilient to adverse publicity should that arise.

See The Client Survey performance: p.37

The Group’s Transformation Plan will result in a more eﬃcient business that can accommodate
more competitive pricing, but which continues to provide clients with a greater range of choice,
underpinned by excellent client service. This will be supported by strong reputational management
together with signiﬁcant investment in both marketing and the Group’s online proﬁle and presence. 

The Group will continue to adapt to serve evolving client needs.

See Operating review: p.38 to p.44

The Group believes that this risk is mitigated by its reputation as a high quality provider and with
recommendation being a key driver to the choice of funeral director being used.  In addition, the
Group’s actions in January 2018 on pricing and promotion sought to protect the Group’s funeral
market share by offering more affordable options. This focus on affordability has allowed our
market share to start to recover.

For crematoria operations this is mitigated by the Group’s experience and ability in managing the
development of new crematoria. 

Additionally, the combination of the development of strong national brands and signiﬁcant
investment in digital capability together with a range of product and price offerings to clients will
strengthen the Group’s competitiveness.

See Operating review: p.38 to p.44

In such situations, Dignity would seek to follow the population shift by rebalancing the funeral
location network together with meeting the developing cultural requirements.

See Operating review: p.38 to p.44

Under the Transformation Plan, the funeral service model will be adapted to better suit evolving
client needs and to improve eﬃciency. We will provide customers with a more tailored service,
allowing them to choose how they wish to interact with Dignity in arranging a funeral through 
more mobile staff and improved digital capabilities.
We have developed a new tiered funeral pricing proposition, speciﬁcally targeting different market
segments that will provide greater ﬂexibility to meet individual client needs. 
By unbundling our prices and services to provide our customers with greater ﬂexibility to create 
the right funeral, we will be able to provide greater consistency and competitiveness on price, 
while reﬂecting Dignity's premium service levels.
Building national brands with a signiﬁcant online presence and visibility leverages our scale and
addresses the needs of increasingly digitally focused clients. Through the Dignity and Simplicity names,
we plan to build known, national brands to leverage scale advantages in the digital age. We will
develop our marketing proposition to promote the Group's commitment to high standards of care,
quality of service delivery and competitive entry prices. We also recognise that our established local
funeral trading names continue to have signiﬁcant value in the communities they serve. 
Through better allocation of our resources, the resultant eﬃciencies will allow us to reduce the
number of funeral operating networks and their associated cost. Support functions are being
centralised where appropriate to ensure a cost effective and consistent high standard of service.
There are challenges to opening new crematoria due to the need to obtain planning approval and
the costs of development. Dignity has extensive experience in managing the development of new
crematoria and continues to be very active in that market.
The Group offers a market leading pre-need product, the marketing of which will beneﬁt from the
current and future signiﬁcant investment in marketing and enhanced digital presence.

See Chief Executive’s review: p.16 to p.31

Regulation of pre-arranged funeral plans 
Pre-arranged funeral plans are not currently a regulated product
although this is being reviewed by HM Treasury.  

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.

Any changes would apply to the industry as a whole and not just the Group. Regulation could
materially change the business model and would likely increase costs.

The risk is mitigated through the high standards of selling and administration of market leading 
pre-arranged funeral plans operated by the Group which will beneﬁt from the signiﬁcant investment
in marketing and an enhanced digital presence.

We continue to seek appropriate regulation of our markets and welcome the consultation 
by HM Treasury, in which we are actively engaged.

See Chief Executive’s review: p.16 to p.31

Regulation of the funeral industry 
Regulation could result in increased compliance costs for the
industry as a whole or other unforeseen consequences.

The Group already operates at a very high standard, using facilities appropriate for the digniﬁed 
care of the deceased.

Dignity plc Annual Report & Accounts 2018  | 53

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Operational risk management (continued)

Risk description and impact

Mitigating activities and commentary

Change

Changes in the funding of the pre-arranged funeral 
plan business
In the current regulatory environment, 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.

Implementation of the Transformation Plan 
In 2018, Dignity conducted an operational review which resulted 
in the development of a Transformation Plan. 

The core components of the Transformation Plan are: 

• Modernise the client proposition; 
• Invest in and simplify the operating model; and 
• Streamline central support and invest in technology to centralise

and automate administrative processes.

A risk exists that the Plan is either not implemented correctly or
proves to be materially disruptive to the funeral business.

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 an actuarial
surplus. This is supported by robust average assets per plan.

See Note 29.

This risk has been and will be mitigated by executive leadership in the business supported by the
Transformation Director who was appointed in August 2018 and who reports to the Chief Executive.

New 
risk

The Transformation Team has made substantial progress within a clearly deﬁned and accountable
project framework.

See Chief Executive’s review: p.16 to p.31

Direct cremations 
Growth in the direct cremation market could reduce average
income in the funeral business and adversely affect the business
mix in the crematoria business.

The Group has addressed this with Simplicity Cremations which offers low cost direct cremations
without any initial funeral service that are both respectful and digniﬁed. They are an affordable
alternative to a full funeral or for those who wish to have a simple cremation. The Group also now
offers a Simplicity pre-arranged funeral plan option.

New 
risk

Simplicity Cremations is being promoted via a strong online presence together with television
advertising. Other media advertising is also planned.

See Chief Executive’s review: p.16 to p.31

Competition and Markets Authority (CMA) investigation
into the Funerals Market  
The CMA investigation into the funeral market will examine
whether the information provided by funeral directors on prices
and services is clear enough for people to be able to choose the
best option for them.

It will also look at how prices have changed over time and the
factors that affect them.

Cremation fees will be considered as part of the review.

The initial CMA report indicates possible remedies including
pricing controls, which, if implemented, could have a signiﬁcantly
detrimental impact on the Group.

Dignity has pro-actively been making changes to its business for some time in response to 
changing customer demand and will continue to review its operations to ensure that the CMA’s
concerns are addressed. 

New 
risk

The Group is focused on enhancing the customer proposition, its service and pricing model and 
will continue to adapt to serve evolving client needs.

Price is a factor when making a decision, but quality is also a vital component and ultimately 
ensures that consumers are happy with services provided. Whilst Dignity's Simplicity service is 
the lowest price, nationally available, attended funeral service, our research demonstrates that
consumers consider the smooth running of the funeral and proper care of the deceased more 
than cost. Our business has been built with a focus on high quality service delivery and we closely
monitor the results of our client surveys to ensure we continue to maintain the highest levels 
of excellent client service and standards of care.

See Chief Executive’s review: p.16 to p.31

Financial risk management

Risk description and impact

Mitigating activities and commentary

Change

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 Note holders.

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.  

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.  

Current trading continues to support the Group’s ﬁnancial obligations, however lower reported
proﬁtability increases the risk of breaching covenants.

See Financial review: p.45 to p.49

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 2021.

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. Consistent with the prior period, three years has been selected as the appropriate period of review. 

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 50 to 53).

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54  | Dignity plc Annual Report & Accounts 2018  

Non-ﬁnancial information statement

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.

Our objective is not only to provide and enhance the reputation of our Group 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 support 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.

The following table summarises the non-financial information provided in the Annual Report and demonstrates how it is linked
to the new reporting requirements of sections 414CA and 414CB of the Companies Act 2006.

Reporting requirement

Impacts

Employees

Environment

Social

Human Rights

We are truly a people business because we help people at an extremely diﬃcult 
time in their lives. Meeting their needs means that our employees must be caring,
thoughtful and truly engaged with those they serve. Dignity staﬀ show clients care
and commitment demonstrating what we call ‘The Dignity Way’. This describes a
special culture and way of working that means delivering the highest standards 
of service and going the extra mile. 

We believe that the quality of our people is a strong enabler of business growth. 
We value our people as they are a great asset. We support them by recognising 
and rewarding performance and long service plays a key part in this. 

We aim to provide a safe working environment, encourage personal development,
responsibility and respect, and attract a diverse and inclusive workforce.

Relevant sections of Annual Report 
and related policies

• Strategy and business model – page 32
• Corporate and Social Responsibility – page 55
• Directors’ Report – page 90
• Code of Conduct (1)
• Equality and Diversity Policy(1)
• Health and Safety Policy
• Our CSR commitments(1)

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.

• Corporate and Social Responsibility – page 55
• Our CSR commitments(1)

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.

• Corporate and Social Responsibility – page 55
• Our CSR commitments(1)  and Our Corporate Charity(1) 

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. Our stated commitment is to act
ethically and with integrity in all our business relationships and to implement and
enforce eﬀective systems and controls to ensure slavery and human traﬃcking is 
not taking place anywhere in our supply chains or in any part of the business.

• Modern Slavery Act Statement (1)
• Our CSR commitments(1)

Anti-corruption and 
anti-bribery

We are committed to conducting our operations in a fair and ethical manner and 
will not tolerate any form of bribery or corruption from employees, suppliers 
or other parties. 

• Anti-bribery and Corruption Policy (1)
• Money Laundering Policy
• Code of Conduct(1)
• Ethics and Conﬂicts of Interest Policy

Due diligence processes
implemented in the
pursuit of policies

We have induction, training and e-learning programmes to ensure that our 
policies and processes are understood and implemented by our employees. 
Our policies and processes promote and embed a culture of responsibility and
performance that adds value to all of our stakeholders. In 2018, an Annual
Compliance Declaration was completed by each member of the Executive and
Senior Management Teams for the individual to conﬁrm compliance with all
applicable rules, regulations and policies.

• For our strategy and business model, relationships and

services, see page 32

• Our non-ﬁnancial key performance indicators are shown

on page 35

• For our principal risks and uncertainties and how they

are mitigated, see page 50

(1) These can be found on the Group’s website

www.dignityfunerals.co.uk/corporate. 

Corporate and social responsibility

Dignity plc Annual Report & Accounts 2018  | 55

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A long-standing commitment
We are proud of our long-standing and demonstrable
commitment to CSR and good corporate citizenship. It matters
particularly to us because, more than many businesses, we 
are truly a people business. As we have often said, we touch
people on an extremely personal and often vulnerable level,
usually at a time of great and painful loss. To meet their needs
means that our employees have to be of the highest calibre.
They must be caring, thoughtful and truly engaged with the
people they serve.

From our core values of decency, integrity and trust we have
developed a special culture and way of working that we call
‘The Dignity Way’. In last year’s Annual Report, the Chairman
described it as, “a way of working that means delivering 
the highest standards of service and going the extra mile.” 
It encourages responsibility and stimulates high performance,
adding value to our customers, communities and all our
stakeholders.

This culture is the means by which we have succeeded as a
business over the years and continue to be a good corporate
citizen. We are committed to doing the right thing by everyone
we work with, respecting each other in the workplace, working
safely, behaving ethically and being a positive force in the
communities we serve. We also work hard to minimise 
our environmental impact.  

Underpinned by this culture we have developed three areas 
of focus: Our People (Expertise and culture); Relationships
(Building strong relationships and community impact); and
Resources (Health, Safety and Environmental Performance).
Further detail on these three areas is provided later in this
report. All are now being reviewed, along with our culture and
policies, in the light of the changes about to take place in the
business and our stated ambition to become the pre-eminent
modern funeral services business in the UK.

Some of the areas we are considering
As the review unfolds, we are extremely mindful of our
Transformation Plan and its requirement for effective two-way
employee engagement at this time of major change.  

We are thinking carefully about the general public and 
are drawing on the insights we continue to gain from our
ongoing programme of research. For example, we are thinking
across the generations and reflecting that attitudes in the 
40+ generation are different from the older generations.  
We are considering the types of services we offer and, most
importantly, the broader context within which our approach 
to CSR needs to sit.

This is a time of change for the industry and not just Dignity,
and one which the review is taking full account of.

Our CSR Policies

Our CSR Policies are the means by which we make tangible 
our desire to be a good corporate citizen. We have three 
areas of focus: 

Our People 
• Expertise and

culture

Resources
• Health, Safety and 
Environmental
performance

Relationships
• Building strong

relationships and
community impact

Richard Portman, Corporate Services Director

A review of our CSR strategy
The Group is embarking on an
unprecedented period of change, one
that will fully test our people and culture.
Employee engagement and support 
are essential if we are to be successful.
Reviewing and developing our approach
to Corporate Social Responsibility (CSR),
which naturally contains a strong
employee engagement component, 
is therefore relevant and opportune.
The review started in early 2019 and 
its recommendations will be published
in next year’s Annual Report.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56  | Dignity plc Annual Report & Accounts 2018  

Corporate and social responsibility continued

Our people and culture

Engaging, supporting
and developing 
our people.

Key facts

Diversity at Dignity

Long service

30%

30 per cent of Dignity staff 
have over 10 years service.

Employee diversity

Senior managers (% & number)

Male: 84% (31 employees)
Female: 16% (6 employees) 

Senior and middle managers (% & number)

Male: 66% (120 employees)
Female: 34% (62 employees) 

Total employees/ratio (% & number)

3,261

Male: 48% (1,564 employees)
Female: 52% (1,697 employees)  

Employee service (% & number)

Less than 1 year: 14% (439 employees)
1–4 years: 36% (1,183 employees)
5–9 years: 20% (648 employees) 
10 –19 years: 19% (622 employees)
Over 20 years: 11% (369 employees)

Case study

Engagement and communication

With funeral premises and crematoria
across the UK, we have a diverse and
engaged workforce that reﬂects our
geographic footprint and their local
knowledge. At this time of change 
for our business we are committed 
to keeping operational staﬀ as fully
informed about the Transformation
Plan, how it may impact them or their
role and what opportunities it will bring.

On 1 August, Chief Executive, Mike
McCollum met with all senior and
middle managers to present our new
business strategy and explain the
need for change. An electronic bulletin
communicated this announcement 
to operational colleagues and was
supported by line manager brieﬁngs.

Monthly ‘Town Hall’ events and regular
newsletters are being delivered to
keep staﬀ updated and to answer any
questions they may have. Operational
managers will also be checking with
staﬀ regularly to assess how they feel.
Digital communications such as micro-
websites, intranet, mobile phone apps,
Tv-in-a-card are all being considered
as alternative methods for reaching
our internal audience in the right 
way for them.

The Executive team has identiﬁed a
need for an eﬀective communication
process between colleagues and the
Board, including the right to comment

on Directors’ remuneration as part 
of the Corporate Governance Code,
which becomes eﬀective in January
2019. As the Transformation gains
momentum and colleagues see the
pace of change pick up, we need to
formally ensure there is dialogue
between employees in the form of
professional business meetings that
helps achieve business objectives. An
Employee Forum has been launched
to encourage dialogue, to create a
culture where everyone believes they
can speak up and be heard and to
provide a communication format to
consult with employees on matters
that impact on their working lives.

Case study

Employee wellbeing

Information, guidance and support
continue to be available to all Dignity
people from a free and conﬁdential
Employee Assistance Programme. 
This provides easy access to help with
ﬁnancial matters, health or consumer
advice and help to tackle family issues
such as gambling, alcohol or drugs.

During 2018, Dignity has worked 
with Neyber Financial Wellbeing to
provide a new beneﬁt to employees.
This includes expert advice on how
individuals can better manage their
ﬁnances, reduce their money worries
and maximise their savings. It also
provides access to services such as
debt-consolidation with repayments
direct from salary.

Dignity plc Annual Report & Accounts 2018  | 57

Charity activity and 
community initiatives

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 people continue to build strong links through engagement with local
initiatives and fundraising for charities and support many events every year.

Case study

Gender Pay Gap 

Case study

Case study

British Heart Foundation 

Scottish War Poets Memorial 

In November, Dignity donated a
memorial dedicated to Scottish War
Poets that is now located outside the
Writers Museum in Edinburgh. It is 
the ﬁrst free standing dedication that
honours those Scots that served in
World War 1 and were driven to put
into words their thoughts and feelings
about the horrors they experienced.
The memorial design is based an
original idea by Dignity and developed
with staﬀ from Edinburgh and
Aberdeen Universities and the Scottish
Poets Library. It takes its theme from
the well-known phrase ‘the pen is
mightier than the sword’ and carries
the inscription: ‘Their words touched
us more than conﬂict could hurt us’. 

In April 2018, Dignity published
information in accordance with the
Equality Act 2010 (Gender Pay Gap
Information) Regulations 2017. Gender
Pay Gap is a measure of the diﬀerence
in the average pay of men and women
– regardless of the role they perform
or their responsibilities – across an
entire organisation, business sector,
industry or the economy as a whole.

Dignity is committed to the principle 
of equal opportunities and equal
treatment for all employees regardless
of any protected characteristics
including sex. Although gender pay
gaps have been identiﬁed within the
organisation, these are driven by
having a higher proportion of men
than women in senior high paid roles,
rather than men and women being
paid diﬀerently for the same or
equivalent work. Our industry is
historically male dominated and 
this is reﬂected by the ﬁgures in 
our 2018 report which can be 
found on our corporate website
www.dignityfunerals.co.uk/corporate.
However, we are committed to reducing
these gaps by building a more diverse
and inclusive workforce.

In 2018, Dignity raised £218,000 for 
its corporate charity, the British Heart
Foundation, and has raised £448,000
since January 2017. Fundraising
initiatives include sponsored walks,
marathons and skydives; selling lapel
badges; football events, raﬄes, carol
services and numerous cake sales and
coﬀee mornings. Dignity also gave
clients the option to make a charitable
donation when adding a message 
of remembrance to our Memorial
Christmas Trees.

Case study

Remembering a local war hero

Staﬀ at Sankey & Monks in Leigh,
Greater Manchester, restored the grave
of local war hero, Alfred Wilkinson on
the 100th anniversary of him receiving
the victoria Cross. During World War1,
Alfred Wilkinson, volunteered to deliver
a message from his battalion to allies 
in another trench 600 yards away
despite having previously witnessed
four soldiers killed by heavy machine
gun ﬁre attempting this mission. Our
funeral director also gave a series of
presentations to school children to
raise awareness of his bravery and
explain why we should remember 
him and others that gave their lives
serving our country.

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58  | Dignity plc Annual Report & Accounts 2018  

Corporate and social responsibility continued

Health, Safety and 
Environmental performance

Working safely 
and reducing our
environmental impact.

Health and safety performance

Reduction in reportable accidents

34%

In the last 10 years the number of
accidents has reduced by 34 per cent.

Health & safety training (number)

12 

105 

274 

0 

25 

50 

75 

100 

125 

150 

175 

200 

225 

250 

275 

Employees with NEBOSH qualiﬁcation: 12 
Employees with IOSH qualiﬁcation: 105 
Employees with CIEH qualiﬁcation: 274 

Working safely in the workplace
Dignity is committed to protecting, 
as far as reasonably practicable, the
health and safety of those who work at
and visit its premises. Our employees
recognise this commitment and safety
in the workplace remains a key priority.
Working in a safe environment allows
our employees to focus 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 nine
Health and 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 10 years
the number of accidents has reduced
by 34 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.

Health and safety performance
Our Health and Safety team has
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.

Managing our environmental impact
Our business continues 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 34,000 cremations 
at Dignity crematoria were mercury
abated during 2018, representing 
52 per cent of the total number 
of cremations.

Dignity’s coﬃn manufacturing 
facility has ISO14001 accreditation, 
an internationally accepted standard 
for an eﬀective environmental
management system that is designed
to address the balance between
maintaining proﬁtability and reducing
environmental impact. Our coﬃns 
are manufactured using raw materials
that are sourced from well-managed
and sustainable sources. 96 per cent 
of the coﬃns manufactured by Dignity
are from Forest Stewardship Council
(FSC) accredited timber.

  
  
  
  
  
  
  
  
  
  
  
  
 
Dignity plc Annual Report & Accounts 2018  | 59

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Environmental performance

Greenhouse gas emissions reporting for 2018

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:

                                                                                                                       2018                  2017                   2016                   2015                2014

Scope 1                                                                16,028        15,535         15,616        14,988       14,437
Scope 2                                                                     174              423           7,106           7,455         7,389

Total                                                                     16,202        15,958        22,722        22,443       21,826

Per FTE Employee                                                    5.3               4.8               8.0               8.2             8.5

Our energy consumption ﬁgures over the same periods are:

                                                                                                                2018                  2017                   2016                   2015                2014

MWh                                                                    95,147        92,121        91,413        87,730       86,738

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 Only (Base year 2009)

t
n
e
c
r
e
P

170

150

130

110

90

70

50

30

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Total C02  (Market Based) 
FTE Employees 
Services Performed  
Operating Proﬁt (in £m) 
Revenue (in £m)  
Energy MWh  

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 2018 submission achieved 
a ‘B’ rating, with ‘A’ being the highest
rating and ‘E’ being the lowest rating.
Dignity also reported on water and
waste management for the third year
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.

 
 
 
 
   
   
 
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60  | Dignity plc Annual Report & Accounts 2018  

Chairman’s introduction to governance

The Board is committed to best in class 
governance as it is an essential constituent 
of the way we do business based on trust, 
transparency and accountability.

Dear Shareholder,
On behalf of the Board I am pleased to present the Group’s
Corporate Governance Report for 2018. 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 (April 2016) (the ‘Code’) and I am pleased to advise that
Dignity has complied with all relevant provisions throughout
the period ending 28 December 2018, save for the exception
noted later. 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.

The Company is addressing the requirements of the UK
Corporate Governance Code issued in July 2018 which applies
to accounting periods on or after the 1 January 2019. 

Good governance is crucial at all levels within the Group and it
is the responsibility of the Board both to lead by example and
to set the tone from the top. It means ensuring that an effective
internal framework of systems and controls exists which
includes clearly deﬁned authorities and accountability which
promote success, whilst allowing risks to be managed to
appropriate levels. To do this the Board must make sound
judgements whilst giving consideration to the views of our
shareholders and other stakeholders.

I would encourage you to attend our Annual General Meeting
on 13 June 2019 and take the opportunity to meet the Board.
We will take both formal questions at that meeting and be
available for more informal conversation afterwards. 

Peter Hindley
Chairman

13 March 2019

Our governance principles

Leadership

Continued focus 
on delivering our
strategy. 

Peter Hindley, Chairman 

Compliance with the UK Corporate Governance Code
Dignity plc is subject to the UK Corporate Governance Code
(the ‘Code’) issued by the Financial Reporting Council (available
at frc.org.uk). 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,
other than as detailed in the paragraph below, Dignity has
complied with all of the provisions of the Code throughout the
period ended 28 December 2018 and remained compliant 
at the date this 2018 Annual Report was published. 

In 2008, Peter Hindley relinquished the role of Chief Executive
and became Chairman of the Board. This was contrary to 
the Code as he was not independent on appointment as
Chairman. However, in accordance with the Code, that
appointment was only made after consultation with the major
shareholders of the Group at that time acknowledging the
importance of retaining Mr Hindley’s skills and knowledge 
of the funeral sector. 

In May 2018, the Board announced that Mr Hindley, in
accordance with his wishes, would retire from the Board in
2019. The Board is in the process of conducting an extensive
search and will announce his successor in due course.

Directors’ Report
The Directors present their report for Dignity plc for the period
ending 28 December 2018.

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.

Effectiveness

Accountability

Remuneration

Engagement

A strong, open and
effective Board with 
the challenge of our
Non-Executive
Directors.

Continued close
scrutiny and
management of 
risk coupled with the
implementation 
and monitoring of
effective controls.

Prudent oversight 
of Executive
remuneration. 

Maintaining a strong,
open and two way
relationship with
shareholders.

Dignity plc Annual Report & Accounts 2018  | 61

Governance structure

Links

The Board provides strategic leadership 
to the Group within a framework of sound
corporate governance and internal control.

See Board ofDirectors: p.62 and p.63

See Directors’ statement on corporate governance: p.65 to p.69

See Audit Committee report: p.70 to p.72

See Nomination Committee report: p.73

See Report on Directors’ remuneration: p.74 to p.89

See Directors’ report: p.90 to p.92

The Dignity plc Board
(Chairman, Executive Directors and Independent Non–Executive Directors)

Board Level Committees

Audit Committee
(Independent Non–Executive Directors)

Remuneration Committee
(Independent Non–Executive Directors)

Nomination Committee
(Chairman and Independent Non–Executive Directors)

Executive Management Team

The Board
The Board is responsible for the long-term success of the 
Group which includes:

• Overall management of the Group;
• Setting and reviewing the strategy of the Group;
• Approval of major capital expenditure and acquisition projects, and

consideration of signiﬁcant ﬁnancial matters;
• Monitoring the exposure to key business risks;
• Approval of major ﬁnancing and capital structure changes 

to the Group;

• Setting annual budgets and reviewing progress towards achievement

of these budgets; and

• Proposing and making dividend payments to shareholders.

The Chairman
The Chairman is responsible for:

• The leadership of the Board;
• Ensuring the Board functions effectively in all aspects of its role;
• Facilitating the effective contribution of the Non-Executive Directors
and ensuring a constructive working relationship 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.

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 three independent Non-Executive Directors.

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 as required.

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.

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 70 to 89.

Executive Management Team
The Executive Management Team consist of the following Executive
Directors and Senior Managers:

• Chief Executive: Mike McCollum;
• Finance Director: Steve Whittern;
• Corporate Services Director: Richard Portman;
• Crematoria Director: Steve Gant;
• Director of Funeral Operations: Andrew Judd;
• Business Development Director: Alan Lathbury;
• Transformation Director: Paul Turner; and
• Commercial Director: Steve Wallis. 

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62  | Dignity plc Annual Report & Accounts 2018  

Board of Directors

A strong, balanced and 
experienced Board.

Our Board members
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

N

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 leveraged 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 is a solicitor and also
holds an MBA from Warwick University.

External appointments:
Non-Executive Director of CvS Group plc.

Steve Whittern
Finance Director

Richard Portman
Corporate Services Director

Appointed to the Board: 2009

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:
Senior Non-Executive Director of Medica
Group PLC.

Background and experience:
Richard joined SCI from HSBC to be 
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 the University of Birmingham, 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.

Dignity plc Annual Report & Accounts 2018  | 63

Jane Ashcroft CBE
Non–Executive Director

A N R

David Blackwood
A N R
Senior Independent Non–Executive Director

Tim George
Company Secretary

Appointed to the Board: 2012

Appointed to the Board: 2015

Background and experience:
Jane is Chief Executive of Anchor Hanover,
England’s largest provider of housing and
care for older people and held a number of
senior positions since joining them in 1999
before appointment to her current role in
2010. She is a Board member and vice-
Chair of the National Housing Federation,
and a founding member and vice-Chair 
of the Associated Retirement Community
Operators. 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 The Silver Line
charity and was awarded a CBE in the 2014
New year’s honours list.

Background and experience:
David is a Non-Executive Director and Audit
Chair of Scapa Group plc and a Non-Executive
Director of Stobart Group Limited 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 member of the Institute 
of Chartered Accountants in England and
Wales and a Fellow of the Association of
Corporate Treasurers. David became Senior
Independent Non-Executive Director of
Dignity on 31 January 2018.

Tim was appointed Company Secretary 
in December 2018 and is a Fellow of the
Institute of Chartered Secretaries &
Administrators.

Board composition, balance 
and tenure
The Board now comprises six 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.

Executive and 
Non-Executive
Directors

Non-Executive
Tenure

3

3

1

1

3

Executive Directors

Non-Executive Directors 
Non-Executive Chairman 

0 – 3 years

3+ years

A N

R

Key to Committee membership

Mary McNamara
Non–Executive Director

Appointed to the Board: 2017

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 
of 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.

A

Audit Committee

N

Nomination Committee

R

Remuneration Committee

Green background denotes
Committee Chairman.

Links

See Audit Committee report: 
p.70 to p.72

See Nomination Committee report: p.73 

See Report on Directors’ remuneration: 
p.74 to p.89

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64  | Dignity plc Annual Report & Accounts 2018  

Executive Management Team

The Executive Management Team 
consists of the Executive Directors 
and Senior Managers.

The role of the
Executive
Management
Team

The Executive Management
Team is responsible for
managing the detailed 
day-to-day tasks required 
to implement the strategy 
set by the Board.

Mike McCollum
Chief Executive

Steve Whittern
Finance Director

Richard Portman
Corporate Services Director

Full biography on page 62

Full biography on page 62

Full biography on page 62

Alan Lathbury
Business Development
Director

Alan joined what is now
Dignity in 1999. He is a
Fellow of the Chartered
Institute of Management
Accountants and holds 
an MBA in Business and
Finance. His principle
areas of responsibility are
Business Development 
of Crematoria, through
acquisition of existing
crematoria, building of
new greenﬁeld location
crematoria and through
partnerships with local
authorities to manage
existing bereavement
services.

Steve Gant
Crematoria Director

Steve joined what is now
Dignity in 1988. His key
area of responsibility is
The Crematorium and
Memorial Group. He
began his career in the
crematoria industry in
1983 and assumed
management of the
Crematoria division in
2003. Steve currently sits
on the Executive for the
Federation of Burial and
Cremation Authorities and
is part of the National
Cremation Working Group
for the Ministry of Justice,
consulting on the revision
and update of the
Cremation Acts.

Andrew Judd
Director of Funeral
Operations

Andrew joined what is
now Dignity in 1996. He is
responsible for all aspects
of the Group’s day-to-day
provision of funeral services
through a nationwide
network of employees,
funeral locations and
associated facilities.     

Andrew has progressed
through a variety of 
roles within both the 
Co-operative Group and
independent sectors. 
He holds a degree from
Wolverhampton University
in Economics and Business
and holds additional
professional qualiﬁcations
in both Funeral Service
Management and Funeral
Directing. He has held
oﬃce in both the British
Institute of Funeral
Directors and National
Association of Funeral
Directors. He is President
of the National Association
of Funeral Directors,
Western Counties Area
Federation.

Paul Turner
Transformation Director

Steve Wallis 
Commercial Director

Steve joined what is now
Dignity in 1996. His key
areas of responsibility
include Group digital,
pricing and proposition,
marketing and external
aﬀairs. Steve is also
responsible for the Group’s
pre-need business and
contact centre operations.
Steve is a Fellow of the
Institute of Direct and
Digital Marketing.

Paul joined Dignity in 
2018. He is responsible 
for delivering the
Transformation Plan which
involves understanding 
the relationship between
price, service and volume
to develop a broader
proposition for customers
across a number of market
segments, developing a
streamlined network and
central operating model
that can consistently deliver
eﬃciently at lower-cost.

Paul has led major change
projects in a number 
of branch-based service
industries including pubs,
restaurants and builders
merchants, and is also
responsible for IT within
Dignity. Paul graduated
from the University of
Stirling in Accounting and
French Language, and is a
Chartered Management
Accountant.

Directors’ statement on corporate governance

Dignity plc Annual Report & Accounts 2018  | 65

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 61. Informal meetings are held between individual Directors 
as required.

The day-to-day management of the Group is delegated to the Executive Directors and the wider Executive Management Team
(see page 64) supported by an experienced and generally long serving senior and middle management team, the size and
structure of which 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 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 now comprises six Directors and the Non-Executive Chairman. During the period the total number of directors 
who served was nine plus the Non-Executive Chairman however, Andrew Davies, the former Operations Director, retired from
the Board on 5 January 2018 and Alan McWalter retired from the Board on 31 January 2018. There are the same number of
independent Non-Executive Directors and Executive Directors which the Board consider to be an appropriate and effective
combination. The Board also considers that three Executive Directors, supported by the wider Executive Management Team,
details of which are on page 64, are sufficient to manage a Group of this size, complexity and organisational structure.

There were four independent Non-Executive Directors who served for the period or part of it: Jane Ashcroft, Alan McWalter,
David Blackwood and Mary McNamara. Alan McWalter retired from the Board on 31 January 2018 after completing the
maximum nine years service as an Independent Non-Executive Director. Alan McWalter continued to support the Board 
as a consultant until 31 July 2018.

Biographical details for the serving Non-Executive Directors appear on page 63. Their role is to challenge constructively the
management of the Group and to assist in the development of 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.

David Blackwood is the Senior Independent Non-Executive 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 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 as necessary at the Group’s
expense. They also have access to the advice and services of the Company Secretary 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.

The Company maintains appropriate insurance cover in respect of any legal action against its Directors. 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 as appropriate at the forthcoming Annual
General Meeting.

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66  | Dignity plc Annual Report & Accounts 2018  

Directors’ statement on corporate governance continued

Board Appraisal
In accordance with the requirements of the Code, an external evaluation of the Board and its Committees was completed 
in 2016. The evaluation was conducted 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 and a further
external evaluation will be undertaken in 2019.

During the period, the Board undertook a formal and rigorous evaluation of its own performance and that of its Committees
and Directors by way of the issue of a detailed questionnaire to all Directors. This was followed by a detailed review by the
Board of the responses and identification of any actions arising. The Non-Executive Directors, led by the Senior Independent
Director, are responsible for the performance evaluation of the Chairman taking in to account the views of the other Executive
Directors. The Board was satisfied that its performance and that of its Chairman, individual Directors and Committees was 
of the appropriate standard.

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(ii)                Committee

Number of meetings                                                                                                                   8                         3                        3                     2
Jane Ashcroft                                                                                                                                    8                         3                        3                     2
David Blackwood                                                                                                                            8                         3                        3                     2
Peter Hindley                                                                                                                                   8                         3(iii)                      3(iii)                   2
Mike McCollum                                                                                                                               8                         3(iii)                      3(iii)                   2(iii)
Alan McWalter                                                                                                                                 5(iv)                      2(iii)                      1(iii)                   1(iii)
Mary McNamara                                                                                                                             8                         3                        3                     2
Richard Portman                                                                                                                             8                         3(iii)                      –                     –
Steve Whittern                                                                                                                                 8                         3(iii)                      –                     –

(i)     Only scheduled Board meetings, of which there were eight in the period, have been included in the attendance analysis. A further 12 meetings were held to consider

announcements, documents or the issue of shares under the LTIP.

(ii)    The scheduled meetings of the remuneration committee of which there were three in the period, have been included in the attendance analysis. A further three meetings

were held in the period to discuss, amongst other matters, LTIP vesting and awards and 2019 remuneration policy.

(iii)   In attendance by invitation of the respective Committee. 
(iv)   Mr McWalter retired from the Board on 31 January 2018. Four of the Board meetings he attended were as a consultant.

The Board had eight full Board meetings spread broadly equally across the year. The Board considers that eight is the
appropriate number required to exercise effective governance and control although this is kept under review. Further meetings
are arranged as required.

If 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. Such views will be included in the minutes of the meeting if necessary.

The Chairman and the Non-Executive Directors met during 2018 without the Executive Directors present. These are usually
scheduled to occur before full Board meetings. The Non-Executive Directors also met during 2018 without the Chairman present.

The Company Secretary
The Company Secretary, Tim George, is responsible for overseeing the preparation and distribution of all agendas, minutes and
related Board and Committee papers. He attends the Board meetings in his capacity as Company Secretary and provides
corporate governance advice if required. 

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 2018.

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. 

Dignity plc Annual Report & Accounts 2018  | 67

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 mechanism for considering and reviewing internal controls. All such work
is reported to and monitored by the Audit Committee which recommends approval to the full Board and is discussed in the
Audit Committee Report on pages 70 to 72.

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 also 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, Slavery and Human Trafficking and Money Laundering;

• Internal Audit – The Group has a dedicated Internal Audit team, which reports to the Corporate Services Director 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 2018 (as in previous years), 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 (‘Ey’), 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 private meetings with the Chairman of the Audit Committee during 2018;

• 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 50 to 53 of the Annual Report. These risks have also been formally considered
when the Directors prepared their viability Statement on page 53 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 regarding 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 38 to 44.

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68  | Dignity plc Annual Report & Accounts 2018  

Directors’ statement on corporate governance continued

Relationship with Shareholders
The Group recognises the importance of clear communication with shareholders. 

Regular contact with institutional investors, fund managers and analysts is undertaken 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 to discuss any issues that they may have. The Chairman 
is also available to discuss governance and strategy matters with the major shareholders. The Company Secretary deals with
queries or enquiries from private shareholders. The Board is interested in the views and concerns of all shareholders whether
private, institutional or corporate. 

The AGM provides an opportunity to meet the Board and the Executive Management Team. All shareholders are free to attend
and put questions to any Director and the Chairman of each of the Board Committees at the AGM on 13 June 2019. At least 20
days’ notice will be given ahead of that meeting. Questions asked in person at the AGM will receive a verbal 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 and the Executive Management Team 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 1 to 53
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.dignityfunerals.co.uk/corporate, 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, at a time suitable 
to all parties.

Our approach to diversity
The Board is committed to and takes responsibility for equality and diversity throughout the Dignity Group.

It is the policy of the Company that there shall be no discrimination or less favourable treatment of employees or job applicants
in respect of age, race, religion or belief, gender, sex, sexual orientation, pregnancy, disability or marital status. The Company 
is fully committed to ensuring there is no unfair and unlawful discrimination in relation to employees, job applicants, clients,
suppliers and members of the public. It is Company policy to engage, promote and train employees on the basis of their
capabilities, qualifications and experience, without discrimination, and all employees will receive equal opportunity to progress
within the Company. 

In order to put this policy into practice in the day-to-day management and operations of the Company, we: 

• Monitor decisions on recruitment, selection, training and promotion to ensure they are based solely on objective and job

related criteria; 

• Provide training for Managers to ensure that they understand the nature of discrimination and are fully aware of their

responsibilities in implementing our Equality and Diversity policy; 

• Provide awareness for employees to ensure that they have a greater understanding of equality and diversity in the workplace; 

• Provide information and advice on the implications of the relevant legislation and on assistance available to help in the

employment of people with disabilities; 

Dignity plc Annual Report & Accounts 2018  | 69

• Ensure that all policies are applied thoroughly and fairly particularly those relating to any complaint involving discrimination 

or harassment; 

• Communicate this policy to employees, suppliers and third parties, where applicable, through induction, training and

communications; and

• Encourage our suppliers and third parties to adopt policies and working practices, which reflect our own views and values on

equality and diversity and that of our clients.

All employees are also responsible for the promotion and advancement of this policy and the Group supports its implementation
and communication through its Equality and Diversity Programme of Action which covers a number of matters including
induction, learning and development.

For further details on Employee diversity, see page 56 of the Corporate and Social Responsibility report.

Substantial shareholdings 
The Group has been formally notified (In accordance with Chapter 5 of the Disclosure and Transparency Rules) of the following
interests of three per cent or more in the issued share capital of the Company:

                                                                                                                                                                                                                                         As at 8 March 2019                                       As at 28 December 2018

                                                                                                                                                                                                                            Number of                   Percentage                   Number of                   Percentage
                                                                                                                                                                                                                                Ordinary                        of issued                       Ordinary                       of issued
   Holder                                                                                                                                                                                                                     Shares                 share capital                           Shares                share capital

  Phoenix Asset Management Limited                                                                         9,542,824                 19.08        8,038,962                16.08
  John Stewart Jakes                                                                                                          3,669,612                   7.34        3,669,612                   7.34
  Prudential plc group of companies                                                                            2,634,650                   5.26        2,632,308                   5.25
  Klarus Capital Limited                                                                                                    2,606,669                   5.22        2,606,669                   5.22
  Standard Life Aberdeen plc                                                                                          2,335,990                   4.67        2,335,990                   4.67
  Montanaro Asset Management Limited                                                                   1,615,000                   3.23        2,483,950                   4.97
  Harris Associates L.P.                                                                                                     2,483,419                   4.97        2,483,419                   4.97
  Pictet Asset Management Limited                                                                              2,394,069                   4.78                        –                         –

It should be noted that these holdings may have changed since the Company was notified.

By order of the Board

Tim George
Company Secretary

13 March 2019

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70  | Dignity plc Annual Report & Accounts 2018  

Audit Committee report

The Audit Committee continues to 
address its key responsibilities and to 
effectively respond to changes in the 
Group’s business environment. 

Dear Shareholder,
On behalf of the Board, I am pleased to present my fourth report
as the Chairman of the Audit Committee.

Key Responsibilities
The Committee works with the Board to fulﬁl its oversight
responsibilities. Its primary functions are to:

David Blackwood, Chairman of the Audit Committee

Membership and Process
The following Directors served on the Audit Committee (the
‘Committee’) during 2018: myself as Chairman, Jane Ashcroft 
and Mary McNamara. All of us are independent Non-Executive
Directors and served through to the date of this report.

The Board is satisﬁed that, as Chairman of the Committee, I have
recent and relevant ﬁnancial experience together with competence
in accounting and auditing that can be appropriately and
successfully applied at Dignity. In addition, the Committee is
satisﬁed that it has a broad range of experience across a number
of sectors that are relevant to Dignity. 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 2018; in March prior 
to the release of the Preliminary Announcement for 2017; prior 
to the release of the Interim Announcement for 2018 in August; 
and again in December 2018 immediately prior to the end of the
ﬁnancial period. The Committee also met in March 2019 prior 
to the release of the Preliminary Announcement for 2018. The
attendance records of the members are shown on page 66. 
The external auditors, Ey, the Chairman, the Chief Executive, the
Finance Director, the Operations Director, the Corporate Services
Director, the Head of Internal Audit and the Financial Controller
have all attended meetings by invitation.

The Committee holds a private session with the Lead Partner
from our external auditors, Ey, without management present 
at least once a year. In addition, as Chairman of the Audit
Committee, I met with the Lead Partner three times in 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. 

Member                                  Since        Experience

David Blackwood                2015       Previously CFO of Synthomer plc,   
                                                                Chartered Accountant and Fellow   
                                                                of the Association of Corporate       
                                                                Treasurers.

Jane Ashcroft                        2012       Currently CEO of Anchor Hanover, 
                                                                Fellow of the Institute of Chartered
                                                                Secretaries and Administrators       
                                                                and Member of the Chartered         
                                                                Institute of Personnel and                 
                                                                Development.

Mary McNamara                 2017       Previously CEO of the Commercial 
                                                                Division of Close Brothers Bank,      
                                                                and held a number of leadership    
                                                                roles within GE.

• 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 as to whether the Annual Report and Accounts, taken 
as a whole, are fair, balanced, understandable and provide
information necessary for shareholders to assess the
performance, business model and strategy of the Group,
recognising the changes to the strategy of the business;

• 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 and all internal audit
reports; review and monitor management’s responses to the
ﬁndings and recommendations of the Internal Audit function;
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 of the Committee are available on 
the Group’s corporate website at
www.dignityfunerals.co.uk/corporate.

Activities in the period
The key activities of the Committee during the period were:

• A comprehensive review of the 2017 and 2018 Annual Report
and Accounts and the 2018 Interim Report. This review was to
ensure that the Committee were completely satisﬁed that the
information was fair, balanced and understandable. As part of
this review the Committee received reports from the external
auditors on their audit of that Annual Report and Accounts and
their review of the interim results. The Committee also reviewed
the Preliminary and Interim Announcements to be made to the
London Stock Exchange;

• At all meetings, the review of reports including the review of

Internal Audit progress against the Internal Audit plan for the
period, the results of principal audits and other signiﬁcant
ﬁndings, adequacy of management’s responses and the
timeliness of the resolution of actions arising; 

• Review and agreement of the three year rolling plan for 

Internal Audit;

Dignity plc Annual Report & Accounts 2018  | 71

• A six monthly review of the Group’s Risk Register and

recommendation of formal adoption by the Board. This is 
part of a formal ongoing process of identifying, evaluating and
managing the signiﬁcant risks faced by the Group. An additional
review of the Risk Register was also completed in March 2019.
The principal risks facing the Group are considered on pages 
50 to 53 of this Annual Report;

• 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 53; 

• The formal review of the going concern assumptions adopted 
in the preparation of the 2017 and 2018 ﬁnancial statements;

• In advance of the ﬁnancial period end, the review with the

external auditors, Ey, of the annual external audit plan, which
addressed the planned audit approach to key audit matters;  

• Consideration of the external auditor’s views on key judgement
areas and audit ﬁndings relating to key accounting matters at
the conclusion of the audit; 

• A review of the Committee’s terms of reference to ensure best

practice; and

• We have reviewed the Financial and Reporting Council letter 
for Audit Committee Chairs and Finance Directors to consider
the applicability of the matters raised for the Group’s 
ﬁnancial statements.

Areas that have been discussed and considered by the Committee
in relation to the 2018 Annual Report and Accounts are:

• Impairment – we considered the results of the impairment 
test performed, ensuring that the assessment made and
conclusions reached were consistent with the analysis and
reﬂected the changes in the funeral business;

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 current 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 was completed in the ﬁrst quarter 
of 2019. This review took the form of a detailed questionnaire
that was sent to all Committee members and attendees at the
Committee meetings. The respondents were asked to grade all
aspects of the service provided. The Committee was, based on
that review which indicated a strong level of conﬁdence in the
external auditors, fully satisﬁed with Ey’s performance in 2018
and a resolution to re-appoint them as external auditors will 
be tabled at the AGM on 13 June 2019.

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:

• Pensions – we examined the assumptions used in the actuarial
valuation for the deﬁned beneﬁt pension scheme considering
the consistency of approach with the prior year and compliance
with the requirements of IAS 19;

• 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.

• Risk – a comprehensive review of the principal risks and

uncertainties disclosed in the 2018 Annual Report based 
on the changing competitive environment in which the 
Group operates;

• 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;

• A comprehensive review and ratiﬁcation of the viability

Statement; and

• IFRS 15 is not applicable for the Group until next year end. 

The Audit Committee considered the impact of adopting the
standard, particularly on pre-need revenue, to satisfy itself that
appropriate disclosure of the impact of adopting the standard
has been given in the 2018 Annual Report.

The policy also precludes the use of the external auditors for
certain types of work. All such work is 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 disclosed
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 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 2018,
completion of turnover certiﬁcates, a ﬁnancial covenants
compliance certiﬁcate and certiﬁcations required as part of the
Group’s membership renewal of the Funeral Planning Authority.
Total fees of £45,000 were charged for the non-audit services
compared to £342,000 for audit services.

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Whistleblowing 
A formal policy and procedure, 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 13 March 2019.

I will be available to answer any questions about the work of the
Committee at the AGM on 13 June 2019.

David Blackwood
Chairman of the Audit Committee

13 March 2019

72  | Dignity plc Annual Report & Accounts 2018  

Audit Committee report continued

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 2018.

Audit partner rotation
Consistent with the requirements of the Financial Reporting
Council’s Ethical Standard, Ey audit partners serve for a
maximum of ﬁve years on listed clients. This will therefore be 
the last year that Simon O’Neill will act as Dignity’s audit partner,
as he led the tender that resulted in Ey’s appointment ﬁve years
ago. As successor, Adrian Roberts, has been identiﬁed as the
person who will lead the 2019 audit. The Committee extends its
thanks to Mr O’Neill for the support and challenge he has
provided during his tenure.

The Audit Committee considers that the relationship with the
auditors is working well and is satisﬁed with their effectiveness
and there are no current plans to put the external audit out 
to tender although the Committee remains mindful of the 
UK Competition and Markets Authority’s requirement 
regarding tendering.

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 Corporate Services Director 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 2018 (as in previous years), 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 three occasions in the period. This process allows the
Committee to monitor the effectiveness of the Internal 
Audit function as the Head of Internal Audit is available at 
all Committee meetings and all reports and their conclusions 
are comprehensively reviewed.

Dignity plc Annual Report & Accounts 2018  | 73

Nomination Committee report

The Nomination Committee has the key role 
of ensuring we have the right blend of skills 
on the Board to deliver our strategy and 
successfully manage our business.

Dear Shareholder,
On behalf of the Board, I am pleased to present the 2018
Nomination Committee report.

The terms of reference of the Committee are available on the
Group’s corporate website at
www.dignityfunerals.co.uk/corporate.

Peter Hindley, Chairman of the Nomination Committee

The Committee and the Board continue to support the spirit 
of Lord Davies’ Report “Women on Boards”. Currently two of 
the seven Board members are women (29 per cent). While the
Committee will continue to pursue a policy of ensuring that the
best people are appointed for the relevant roles, the beneﬁts 
of greater diversity are recognised and will continue to be taken
into account when considering a particular appointment. 

Similarly, we will continue to encourage diversity in our senior
management positions throughout the workforce. 

I am also pleased to conﬁrm that the Group will continue 
to publish the details on corporate diversity suggested in
Recommendation 2 of Lord Davies’ Report and report on our
compliance and appointment process in this Annual Report.

During the period, the Board completed performance evaluation
of itself and its Committees. The results of this are discussed on
page 66. 

Finally, all Directors offer themselves for re-election at the AGM
on 13 June 2019. I will not seek re-election if my successor is
appointed before the AGM. 

I will be available at the AGM to answer questions on the work 
of the Committee.

This Nomination Committee report was reviewed and approved
by the Board on 13 March 2019.

Peter Hindley
Chairman of the Nomination Committee

13 March 2019

During 2018, the membership of the Nomination Committee
(the ‘Committee’) comprised Jane Ashcroft, David Blackwood,
Mary McNamara and myself as Chairman. All members, apart
from myself, are independent Non-Executive Directors. The 
Chief Executive attends Committee meetings by invitation.

The Company Secretary is Secretary to the Committee. 

During the year the Committee undertook the following:

• The review of the structure, size, composition, balance of skills,

knowledge, independence, diversity and experience of the
Board in order to recommend to the Board any changes
deemed desirable. The Committee considered that current
composition of the Board was appropriate for the Group’s 
size and complexity;

• Succession planning to ensure processes and plans are in place

with regard to both Board and senior appointments;

• Review of the leadership needs of the Group, both executive

and non-executive;

• Reviewed the time commitment required from the Non-

Executive Directors; and

• Reviewed its terms of reference to ensure they continue to

reﬂect best practice.

The Board has been seeking my successor following the
announcement of my intention to retire in 2019. The Board is in
the process of conducting an extensive search and will announce
my successor in due course.

The Committee met twice in 2018. 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 66. I report 
the Committee’s proceedings at the next Board meeting and 
the Committee’s minutes are made available to all members 
of the Board.

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 28 December 2018 (years)

Name                                                      1               2               3               4               5               6               7              8

David Blackwood                                                       

Jane Ashcroft                                                               

Mary McNamara                                                        

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74  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration
for the 52 week period ended 28 December 2018

The Remuneration Committee has reviewed 
the remuneration policy to ensure that it remains 
aligned to the business strategy and that 
management is incentivised to deliver 
signiﬁcant shareholder returns.

Mary McNamara, Chairman of the Remuneration Committee

Dear Shareholder,
On behalf of the Board, I am pleased to present this 
Directors’ Remuneration Report for the period ended 
28 December 2018.

On this basis the Committee determined that the full 
30 per cent available for this part of the bonus should be
payable. The total bonus payable therefore was 58 per 
cent of maximum.  

As the 2019 AGM will be the third anniversary of shareholders
approving our remuneration policy, we are required to seek
shareholder approval by a binding vote for a new policy for the
next three year period. The new Directors’ Remuneration Policy
is set out on pages 76 to 81, together with a summary of the
changes, compared to our existing policy, we propose to 
make. The Annual Report on Remuneration (set out on pages
81 to 89) describes how the current policy was implemented 
in 2018 and how the new policy will be implemented in 2019.
The Annual Report on Remuneration, together with this
Statement, will be subject to a separate, advisory vote. 
Finally, our Long-Term Incentive Plan (LTIP) has reached 
the end of its life and we are required to seek shareholder
approval for a new plan at our AGM. The terms of the new 
LTIP are summarised in the separate Notice of AGM.

Changes to our remuneration policy and new Long-Term
Incentive Plan
The Committee has reviewed the market levels of the current
remuneration arrangements and considered alternative
incentive models and has concluded that the remuneration
levels and the structure of the current remuneration policy
should be unchanged, subject to careful consideration of 
the latest (July 2018) UK Corporate Governance Code
requirements and investor guidance. Accordingly there are
some modest changes to the structure of the annual bonus
and shareholding requirements in particular. Full details 
of the changes are given in the Policy section. 

Our new Long-Term Incentive Plan provides for share awards
to be granted, subject to achieving long-term performance
targets based on improvements in ﬁnancial performance 
and shareholder value. This is an important element of our
remuneration policy, as it provides a strong alignment of
interest between executives and shareholders. The new LTIP 
is similar to the current LTIP, but has been modernised in line
with latest UK Corporate Governance Code and investor
guideline requirements.

Performance in 2018 and annual bonus and 2016-18 
LTIP outcome
The 2018 annual bonus was measured 70 per cent against
stretching underlying operating proﬁt targets, our key short-
term ﬁnancial performance indicator. Underlying operating
proﬁt in 2018 of £80.2 million was signiﬁcantly ahead of our
2018 business plan and market consensus at the start of 
the year and while it was signiﬁcantly below the prior year
underlying operating proﬁt, the Board was pleased with this
very robust ﬁnancial performance in the circumstances. A very
stretching sliding scale of performance was set at the start of
the year and the bonus pay out against this element was 28
per cent of the overall maximum. The remaining 30 per cent of
the bonus was based on the achievement of three key strategic
initiatives, being the establishment of the Transformation Plan,
optimising the future acquisition strategy and developing
pricing and marketing plans for identiﬁed customer segments, 
particularly at the lower pricing point of our offering. All three
of the goals were achieved and exceeded as Management 
has begun to implement the new strategic initiatives early. 

The LTIP award granted in 2016 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 
28 December 2018 Dignity's TSR performance and our EPS 
of 85.8 pence were both below the minimum performance
threshold. As a result, the LTIP award lapsed with no 
shares vesting.

The Committee considers that there has been an appropriate
link between reward and performance and that there has 
been no need to use discretion to change the formula driven
outcome from the 2018 incentive plans.

How we will apply the new policy in 2019
• No base salary increases have been awarded to the Executive
Directors for the second year running. The average increase
to the wider workforce was broadly two per cent. 

• The maximum annual bonus will remain at 135 per cent of
base salary for the Chief Executive and 125 per cent for the
other Executive Directors. 70 per cent of the bonus will be
based on stretching underlying operating proﬁt targets and
30 per cent on three well-deﬁned strategic objectives which
underpin our strategy as set out on page 32.

Taking into account the further recent short-term weakness 
in our share price after the publication of the CMA report
ﬁndings, the Committee has again used discretion to
determine that LTIP grant levels should be scaled back from
the usual level under the remuneration policy. On this basis 
the grant level will be reduced from 150 per cent of salary to
100 per cent of salary. The Committee has considered carefully
the performance metrics that should apply and recognises 
that it remains very diﬃcult to set accurate long-term ﬁnancial
performance conditions until the relationship between volume
and margin becomes clearer following the decision to change
our pricing strategy. Therefore, for this year's awards, 
vesting will be subject to a relative total shareholder return
performance condition against the companies comprising 
the FTSE Small Cap Index. The base for calculating TSR for all
companies will be the average share price over the 30 days
prior to 8 March 2019 (being the date the Committee ﬁnalised
the policy). We believe that a focus on improving our stock
market performance at the current time will provide a strong
alignment of interest between executives and shareholders.
As a second performance condition, the Committee will review
the underlying ﬁnancial performance of the Company over 
the performance period and the progress in implementing 
our strategic priorities, including growth in market share, to
determine whether the level of vesting indicated by the relative
TSR performance is appropriate and the Committee will scale
back the level of vesting if it considers that this is not the case.
Any award that vests will be subject to a two-year holding
period. Clawback and malus provisions, enhanced in line 
with the new policy, will apply.

New UK Corporate Governance Code and 
shareholder engagement
The Committee has considered the recommendations 
in the recently updated UK Corporate Governance Code
insofar as they relate to remuneration. In most respects the
new remuneration policy and its application complies with 
the new Code. Currently the only exception is in relation to
pension provision, where the Code states that the Executive
Directors’ pension contribution should be aligned to that of the
workforce. Our pension contribution of 15 per cent of salary 
is broadly in line with the market rate for an Executive Director,
but it is higher than the general workforce pension provision.
Under the new policy, pension contribution for future recruits
will be aligned to that of the workforce and on this basis, 
over time the pension contribution rate will be aligned 
across the workforce.

Last year, at the 2018 AGM, we were pleased to receive 
90.5 per cent of votes in favour of the advisory Remuneration
Report vote. On behalf of the Remuneration Committee, 
I would like to thank shareholders for their ongoing support.

The Remuneration Committee has engaged shareholders as
part of the process to review our remuneration policy and how
this should be applied in 2019. We thank shareholders for their
time on this exercise and welcome their feedback. On behalf 
of the Committee, I look forward to shareholders’ support at
the forthcoming Annual General Meeting.

Mary McNamara
Chairman of the Remuneration Committee

13 March 2019

Dignity plc Annual Report & Accounts 2018  | 75

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76  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

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 and sets out the remuneration policy which shareholders will
be asked to approve at the AGM on 13 June 2019. The policy will take formal effect from the date of approval and is intended to
apply until the 2021 AGM. 

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.

Following a detailed review of the existing policy we propose to make the following changes, which are reflected in the new policy
set out below:

• Currently for the annual bonus there is payment of an amount equivalent to 70 per cent of salary for achieving the business 
plan number, with nothing payable below this. Such a “cliff edge” could lead to a high difference in bonus level for a small
difference in performance. Therefore, in line with the market norm we are introducing a threshold payment level of 20 per cent 
of maximum. We are also amending the target level of vesting from 70 per cent of salary to an amount up to 60 per cent of
maximum. This approach provides all of the Executive Directors (who currently have different maximum bonus opportunities)
with the same threshold and target opportunity as a percentage of maximum, thus making the bonus simpler. 

• The annual bonus deferral mechanism is being made tougher to ensure there is always an element of bonus deferral. Currently,

only bonus earned in excess of 100 per cent of salary is deferred in shares. Under our new policy 20 per cent of any annual bonus
earned will be deferred in shares for two years. 

• Pension is currently capped at 15 per cent of salary. This level will continue in the new policy and our Executive Directors’

contributions are at this level. However, for new appointments, the Committee will provide a pension contribution in line with 
that applying to the majority of the workforce.

• We will change how we calculate achievement of our executive share ownership requirements. We will value shareholdings using
the value of beneficially owned shares plus the net of tax value of deferred bonus shares and vested unexercised LTIP awards.
The calculation of the shareholding level will be based on the average price for the last month of the financial year and the salary
at the end of the financial year. The current policy uses the share price and salary at the time the requirements were introduced 
in 2016, which the Committee considers is now historic and not in line with market practice. 

• A post cessation of employment shareholding requirement will be introduced. This will require a shareholding to be retained
worth 50 per cent of the in-service requirement, for one year applicable for share awards granted from 2019. Annual bonus
deferral and LTIP post vesting holding periods continue post cessation.

• The current discretion for the Committee to adjust variable pay and vesting levels will be broadened, so that it is in line with the

revised Corporate Governance Code and enables adjustment where the formulaic outcome does not reflect underlying corporate
performance, the investor experience or employee reward outcome.   

• The clawback and malus trigger events have been broadened to include corporate failure and serious reputational damage. 

• As part of the Company’s policy on cessation of employment we are including the ability to pay outplacement, legal and other
reasonable relevant costs associated with termination and to settle any claim or potential claim relating to the termination.

The table on pages 77 and 78 summarises the main components of Dignity's remuneration policy that will be brought to
shareholders for approval at the AGM on 13 June 2019. Details of how the Committee will implement the policy are provided 
in the Annual Report on Remuneration on page 81.

Dignity plc Annual Report & Accounts 2018  | 77

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.
To provide a fair 
ﬁxed level of pay
commensurate for the
role, ensuring no over
reliance on variable pay.

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

companies of a similar size.

Beneﬁts

To provide competitive
beneﬁts to help recruit
and retain executives
and to ensure the well-
being of the executives. 

Pension

To provide retirement
beneﬁts in line with the
overall Company policy.

Beneﬁts include but are not limited to 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 business 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. 

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.

20 per cent of any annual bonus earned will be deferred in shares,
with the remainder being payable in cash. 
Deferred shares vest after two years subject to continued
employment but no further performance targets. The vesting
period continues post cessation of employment.
A dividend equivalent provision allows the Committee to pay an
additional amount equal to the value of the dividends that would
have been payable on the vested deferred shares over the vesting
period (normally in shares but may be in cash in exceptional
circumstances). This may assume the reinvestment of dividends
on a cumulative basis.  
Bonus payments, including deferred bonus awards, are subject 
to recovery and withholding provisions as set out in 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.

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 was 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 Committee will provide a
pension provision for new
Executive Directors’ in line with
that of the workforce.

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 with
ﬁnancial measures accounting
for the majority of the bonus.
Measures and weightings may
change each year to reﬂect 
any year-on-year changes 
to business priorities.
• For ﬁnancial metrics, a range
of targets may be set by the
Committee, taking into
account the business outlook
for the year. For ﬁnancial
metrics up to 20 per cent 
of the maximum potential
bonus is payable for threshold
performance and up to 
60 per cent of maximum
potential bonus is payable 
for target performance.

• In relation to strategic targets
the structure of the target will
vary based on the nature of
the target set and it will not
always be practicable to set
targets using a graduated
scale. vesting may therefore
take place in full if speciﬁc
criteria are met in full.

The Committee may adjust 
the bonus that is payable 
if it considers the formulaic
outcome is not representative
of the underlying performance
of the Company, investor
experience or employee
reward outcome.
See Note 2.

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78  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

Element                            Purpose and link                        Operation                                                                                                        Maximum opportunity            Framework used to 
                                              to strategy                                                                                                                                                                                                                                assess performance

150 per cent of salary.

Awards under the LTIP vest subject to the
satisfaction of challenging performance targets
set at the time of award. 
25 per cent of the award vests for threshold
performance.
Performance periods will normally start from the
beginning of the ﬁnancial year in which the award
is made.
The Committee may scale back the LTIP vesting
amount if it considers the formulaic outcome is
not representative of the underlying performance
of the Company, investor experience or employee
reward outcome.
See Note 2 for additional detail.

Neither the Non-Executive Chairman nor the
Non-Executive Directors are eligible for any
performance related remuneration.

There is no prescribed
maximum, however,
any increase to fees
will be considered in
light of the expected
time commitment 
in performing the 
role, scope and
responsibility,
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
requirement

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.
Following vesting, the net of tax vested shares must be
retained for two years. The post vesting holding period
continues post cessation of employment.
Awards are subject to recovery and withholding
provisions as set out in Note 1.
A dividend equivalent provision allows the Committee
to pay an additional amount equal to the value of the
dividends that would have been payable on the vested
shares over the vesting period (normally in shares but
may be in cash in exceptional circumstances) and 
may assume the reinvestment of dividends on a
cumulative basis.

The Board determines the fees of the Non-Executive
Directors. They are based upon recommendations
from the Chairman and Chief Executive (or, in the case
of the Chairman, based on recommendations from
the Remuneration Committee and the Chief Executive). 
Both the Chairman and the Non-Executive Directors
are paid annual fees and do not participate in any
incentive plans or receive pension or other beneﬁts. 
The Chairman receives a single fee covering all his
duties. The Non-Executive Directors receive a basic 
fee and additional fees payable for chairing the Audit
and Remuneration Committees and for performing
the Senior Independent Director role. Supplemental
fees may be paid for additional responsibilities and
activities and additional fees for chairing new board
committees or for other additional roles requiring
additional time commitment.
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. We will value shareholdings using the
value of beneﬁcially owned shares plus the net of tax
value of deferred bonus shares and vested but
unexercised LTIP awards.  The calculation of the
shareholding level will be based on the average price
for the last month of the ﬁnancial year and the salary
at the end of the ﬁnancial year. 
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).
In addition, a shareholding requirement of 50 per cent
of the 200 per cent of salary in-service requirement (i.e.
100 per cent of salary) is required to be held for one
year post cessation of employment applying to share
awards granted from 2019.

Notes 
1. Recovery and withholding provisions apply to variable pay, to enable the Company to recover amounts paid under the annual bonus, deferred annual bonus share plan and LTIP in the event of a

restatement of the accounts, an error in calculation leading to an over-payment, corporate failure or failure in risk management or if the participant has been guilty of gross misconduct or has brought the
Company or any member of the Group into disrepute. 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 annual bonus awards,
reduction of the next bonus or LTIP vesting and seeking a cash repayment. 

2. The Committee assesses annually at the beginning of the relevant performance period which performance measures, or combination and weighting of performance measures, are most appropriate 

for both annual bonus and any LTIP awarded to reflect the Company’s strategic initiatives for the performance period. The Committee has the discretion to change the performance measures for awards
granted in future years based upon the strategic plans of the Company. 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, budget, the long-term business plan and external expectations.  

3. As part of the Directors’ Remuneration Policy review process the Committee has reviewed with management the pay structures across the wider Group and certain changes have been made to the wider
Group policy as a result of the review to ensure an appropriate and clear cascade of the Executive Directors’ policy to the wider group. The Committee considers the general basic salary increase for the
broader employee population when determining the annual salary review for the Executive Directors. The performance measures and targets for annual bonus and LTIP awards for Executive and Senior
Managers are aligned to those of the Executive Directors to ensure that everyone is focusing and working together on the same critical measures of performance. All permanent employees are invited to
participate in the SAyE scheme which provides a mechanism for everyone to share in the overall success of the Group through sustained longer-term share price growth. Overall, the remuneration policy for
the Executive Directors and more senior management is more heavily weighted towards variable pay than for other employees. This ensures that there is a clear link between the performance and value
created for shareholders and the remuneration received by those individuals who are considered to have the greatest potential to influence Group performance and value creation.

Dignity plc Annual Report & Accounts 2018  | 79

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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 78):

• 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
Any commitments entered into with current or former Directors that have been disclosed previously to shareholders will be honoured.

Remuneration scenarios for Executive Directors
The Company's policy results in a significant proportion 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 2019 vary under
three performance scenarios: minimum, target and maximum.

Fixed Pay
Annual Bonus
LTIP
LTIP with 50% Share Price Growth

R
Remuneration (£000s)

2,500

2,000

1,500

1,000

500

0

£2,066

28%

38%

£1,810

£1,278

20%

32%

£608

£1,253

29%

36%

£1,095

£779
20%

31%

£384

£985

29%

36%

£861

£613
20%

30%

£303

100%

48%

34%

100%

49%

35%

100%

50%

35%

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Chief Executive Oﬃcer

Finance Director

Corporate Services Director

Notes 
• Below target comprises fixed pay, which comprises 2019 basic salary, the value of benefits in 2018 and a 15 per cent company pension contribution.
• Target comprises fixed pay and assumes a bonus of 60 per cent of maximum is paid and 50 per cent of the LTIP award vests.
• Maximum comprises fixed pay and assumes full bonus payment of 135 per cent of salary for the Chief Executive and 125 per cent for other Executive Directors and full LTIP vesting 

of 100 per cent of salary for all Executive Directors. A 50 per cent increase in the value of the LTIP is also to show the impact of the share price growth. The 50 per cent increase is calculated
using the maximum LTIP value.

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. For any new appointments, the pension contribution will be in line with that applying to the majority 
of the workforce.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
80  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

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. 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, with the new awards taking into account the form (cash or shares), timing left
to vesting, the extent to which performance conditions apply 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. 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 Service contracts for Executive Directors will continue indefinitely unless determined by their notice period. Under the Executive
Directors' service contracts and in line with the policy for new appointments, 12 months' notice of termination of employment is
required by either party. 

All Non-Executive Directors have letters of appointment with the Company for an initial period of two years, subject to annual re-
appointment at the AGM. Appointments may be terminated with three months' notice. The appointment letters for the Chairman
and Non-Executive Directors provide that no compensation is payable on termination, other than accrued fees and expenses.

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. 

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. All payments would discontinue or reduce to the extent that
alternative employment is obtained.

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 Company may also pay outplacement, legal and other reasonable
relevant costs associated with termination and may settle any claim or potential claim relating to the termination.

Treatment of outstanding incentive awards
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. 

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. 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 normally be reduced pro-rata to reflect the proportion of the three year period actually served. A post vest holding period
would continue to apply.

Dignity plc Annual Report & Accounts 2018  | 81

External directorships
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.

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 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
As part of the Committee’s wider remit under the new Code and as part of the Directors’ Remuneration Policy review process the
Committee reviewed with management the pay structures across the wider Group and certain changes were made to the wider
Group policy as a result of the review to ensure an appropriate and clear cascade of the Executive Directors’ policy to the wider
Group. The Committee will continue within its updated Terms of Reference to monitor pay policies and practices within the wider
group and to provide input and challenge in respect of current policies and practices as well as any proposed future review and
changes to ensure that they are appropriate, fair, aligned to the Executive Directors’ Remuneration Policy and support the culture 
and growth of the business.

As set out in the Corporate Governance Report work is being undertaken to establish an Employee Forum and as part of this 
the Committee will consider the most appropriate way to engage with the wider workforce to explain the alignment of the 
Directors’ Remuneration Policy to the wider Group and in respect of which we will report more fully in next year’s Annual Report 
on Remuneration.

ANNUAL REPORT ON REMUNERATION

The Annual Report on Remuneration set out below (together with the Remuneration Committee Chairman's Annual Statement) 
will be put to an advisory shareholder vote at the 2019 AGM. The information below includes how we intend to operate our policy 
in 2019 (in accordance with the new policy, being separately approved by shareholders) and the pay outcomes in respect of the 2018
financial year. The information from the single total remuneration figures for Directors on page 83 to the end of the section on loss 
of office payments on page 87 has been audited. The remainder is unaudited.

Implementation of Remuneration Policy in 2019

Salaries
The Committee has determined that the Executive Directors will not receive a base salary increase for 2019. Therefore, the salaries 
as at 1 January 2019 are:
                                                                                                                                                                                                                                                      2019                                 2018                          Increase
                                                                                                                                                                                                                                                            £                                        £                                       %

Mike McCollum                                                                                                                                                           511,500             511,500                          –
Richard Portman                                                                                                                                                        247,950             247,950                          –
Steve Whittern                                                                                                                                                             316,200             316,200                          –

Chairman and Non-Executive Directors' fees
The fees for other Non-Executive Directors, are as detailed below. There is no increase in fee levels for 2019:

                                                                                                                                                                                                                                                      2019                                 2018                          Increase
                                                                                                                                                                                                                                                            £                                        £                                       %

Chairman                                                                                                                                                                      173,350             173,350                          –
Basic fee for Non-Executive Directors                                                                                                                    46,850               46,850                          –
Supplementary Senior Independent Director fee                                                                                                9,700                 9,700                          –
Supplementary Audit Committee Chairman fee                                                                                                  9,350                 9,350                          –
Supplementary Remuneration Committee Chairman fee                                                                                6,300                 6,300                          –

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82  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

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.

Pension contribution for new Executive Directors will be in line with the pension plan for the majority of the workforce, which is
currently four per cent of base salary.

Annual bonus
The maximum bonus potential will be unchanged, at 135 per cent of salary for the Chief Executive and 125 per cent of salary for the
other Executive Directors.

70 per cent of the bonus will continue to be based on underlying operating profit targets and 30 per cent on strategic objectives, 
which are common to all Directors.

For the underlying operating profit element 20 per cent of the maximum will become payable for achieving a threshold level of
performance, rising incrementally so that 60 per cent of the maximum will be payable for achieving a target level of performance, 
with full pay out for significant over-achievement of target. The target level of performance has been determined at 60 per cent,
recognising the high level of stretch in the budget number and the range generally. The strategic objectives support the Group's
strategy and business model as set out on page 32 of the Annual Report. The achievement of the strategic objectives will be
determined on a similar basis, using numeric ranges where possible and are set out below.

• Increasing funeral market share, with a sliding scale of performance;  

• Customer satisfaction based on a “definitely recommend” result, with a sliding scale of performance; and 

• Achieving key objectives from our Transformation Plan. This will be assessed by the Committee at the year end and differentiating
between delivery of most aspects of the Plan, delivery of all aspects of the Plan and over-delivery of the Plan, for differing levels 
of bonus to be payable.

There will be Committee discretion to adjust the formula driven outturn to ensure that the bonus payments also reflect performance
more broadly and the experience of other stakeholders in the business. 

The underlying profit element target range and the strategic objective targets 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. 

20 per cent of any annual bonus earned will be deferred in shares. The deferred shares will vest after two years subject to 
continued employment.

Long-Term Incentive Plan
Taking into account the further recent short-term weakness in our share price after the publication of the CMA report findings, the
Committee has again determined that award levels should be scaled back from the usual policy level under our Long-Term Incentive
Plan. On this basis the grant level will be reduced from 150 per cent of salary to 100 per cent of salary. The Committee has considered
carefully the most appropriate measure of performance for the 2019 LTIP award and has decided to reintroduce a more conventional
relative TSR performance condition (comparing Dignity’s TSR to that of the constituents of the FTSE Small Cap Index) for 100 per cent
of the award. The start point for the TSR performance condition will be based on the average share price of Dignity over the 30 days
prior to 8 March. We believe that a focus on improving our stock market performance at the current time will provide a strong
alignment of interest between executives and shareholders. In light of continued market and regulatory uncertainty, the Committee
has concluded that it is not possible to base part of the award on specified earnings per share growth targets, given the difficulty of
setting EPS targets against a very uncertain and volatile three-year outlook. As a second performance condition, to underpin the 
TSR condition, the Committee will review the underlying financial performance of the Company over the performance period and 
the progress in implementing our strategic priorities, including growth in market share, to determine whether the level of vesting
indicated by the relative TSR performance is appropriate and the Committee will scale back the level of vesting if it considers that 
this is not the case. 

The target range will be as follows:
                                                                                                                                                                                                                                                                                        TSR relative to FTSE SmallCap                                                 
TSR condition                                                                                                                                                                                                                                                    companies                                                 

                                                                                                                                                                                        Performance required                % vesting
Below threshold                                                                                                                                                                     Below median                               –
Threshold                                                                                                                                                                                              Median                            25
Stretch or above                                                                                                                                                  Upper quartile or above                          100

vesting between threshold and maximum is determined on a straight line basis. 

Executive Directors will be required to hold the net of tax vested shares for two years following vesting.

Dignity plc Annual Report & Accounts 2018  | 83

Total remuneration payable to Directors in 2018
                                                                                                                                  Fixed Pay                                                                                                                        Pay for Performance

                                                                                                                                                                                                                                                   Annual                                                                                                                        Total
                                                                                                                     Salary                        Benefits(a)                        Pension(b)                            Bonus(c)                                LTIP(d)                               Other               Remuneration
                                                                                                                       £000                                 £000                                 £000                                 £000                                 £000                                 £000                                 £000

Executive Directors
Mike McCollum

Andrew Davies(e)

Richard Portman

Steve Whittern

Non–Executive Directors
Peter Hindley

Jane Ashcroft

David Blackwood

Alan McWalter(e)

Mary McNamara

2018
2017

2018
2017

2018
2017

2018
2017

2018
2017

2018
2017

2018
2017

2018
2017

2018
2017

512                        20                        77                     401                           –                          –                  1,010
512                        20                        77                          –                      150                          –                      759

4                          2                          1                           –                           –                          –                          7
327                        25                        49                          –                        96                          –                      497

248                        18                        37                     180                           –                          –                     483
248                        18                        37                          –                        73                          –                      376

316                        21                        47                     229                           –                          –                     613
316                        20                        47                          –                        93                          –                      476

173                          1                          –                          –                           –                          –                     174
173                          1                           –                           –                           –                          –                      174

47                          –                          –                          –                           –                          –                        47
47                           –                           –                           –                           –                          –                        47

67                          –                          –                          –                           –                          –                        67
56                           –                           –                           –                           –                          –                        56

5                          –                          –                          –                           –                          –                          5
63                           –                           –                           –                           –                          –                        63

54                          –                          –                          –                           –                          –                        54
39                           –                           –                           –                           –                          –                        39

(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. 
(c) The bonus relates to performance in the 2018 financial year.  Whilst the performance criteria for the 2017 bonus were fully achieved, the current Executive Directors decided to

voluntary waive their entitlement, in full, in light of the significant reduction in funeral expectations for 2018 following the trading update in January 2018.

(d) The LTIP award granted on 15 June 2016 has lapsed as the performance targets were not met. The comparative number is the value of the 2015 LTIP that vested in 2017 restated

to reflect the share price on the date of vesting which is now known.

(e) Andrew Davies retired from the Board on 5 January 2018 and ceased to be an employee on 27 April 2018. Alan McWalter retired from the Board on 31 January 2018.

Determination of 2018 annual bonus  
The 2018 annual bonus was based on the achievement of underlying operating profit targets (70 per cent) and strategic targets 
(30 per cent).

For the underlying operating profit element, a target range was set, which was ahead of the market outlook, as at the start of the
year, in its entirety. The target range was made more challenging than usual so that 20 per cent of the maximum was payable at
target, rather than applying the usual policy of 70 per cent of salary being payable at target performance and the top end of the
range represented a significantly higher stretch than usual, being 45 per cent higher than target. Bonus payment against the
underlying operating profit range is set out below:

                                                                                                                                                                                                                      Target                                        Stretch                                                                                                            
                                                                                                                                                                                               (for which 20% of                  (for which 100% of                                                                              Bonus payable
                                                                                                                                                        Weighting                maximum payable)                maximum payable)                               2018 actual                  (out of maximum)
                                                                                                                                                                        %                                               £m                                               £m                                               £m                                                  %

Underlying operating profit

Strategic measures

70

30

72

104.7

80.2

Maximum
performance

40.1

100

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84  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

Strategic objectives were set based on the three most critical business priorities for the year. 

The strategic objectives and the Committee’s assessment of their achievement is summarised below:

1. Establish the Transformation Plan

Detail of objective
• visible and clearly articulated plan to be created to deliver the Transformation Plan, containing clear budgets, measurable

deliverables and timelines over short and longer-term, to be approved by the Board.

Committee assessment
• The Committee recognised the extremely timely delivery of the Plan and the fact that the implementation of plan had commenced

ahead of schedule.

Outcome
• 10 per cent (out of 10 per cent).

2. Provide a basis for optimisation of future acquisitions

Detail of objective
• Review and update acquisition evaluation model.

Committee assessment
• Detailed plan presented for Board consideration of current market dynamics, historic and prospective performance of recent

acquisitions, review of characteristics of high and low performing locations.

• Comparison of old and new evaluation model. 

• Clearly articulated plan for assessing future acquisitions.

• Timely delivery. 

• Assessment of acquisitions on new basis embedded and actively used to develop strategy going forward.

Outcome
• 10 per cent (out of 10 per cent).

3. Planning growth of specific customer segments 

Detail of objective
• Identify customer segments for focus and growth.

Committee assessment
• Developed pricing and marketing plans for identified customer segments.

• Provided clear profitability targets. 

• Plans brought into early operation and developed as critical part of ongoing strategy.

Outcome
• 10 per cent (out of 10 per cent).

The Committee reviewed the exceptional performance and focus of the Executive Directors in not only preparing the strategic plans
required but commencing execution within a critical timeframe and agreed that the over delivery on each measure warranted full
payment of this element of the bonus. 

Therefore, overall for 2018, payment of 40.1 per cent of the underlying operating profit element (accounting for 70 per cent of the
bonus) and 100 per cent of the strategic objectives (accounting for the remaining 30 per cent) resulted in an overall bonus of 58 per
cent of maximum being payable. 

                                                                                                                                                                                                                                                                           Bonus maximum                           Pay-out            Bonus outcome
Director                                                                                                                                                                                                                                                            (% of base salary)          (% of maximum)                                      (£)

Mike McCollum                                                                                                                                                                   135                       58             400,800
Richard Portman                                                                                                                                                                125                       58             179,896
Steve Whittern                                                                                                                                                                     125                       58             229,414

Bonuses in excess of 100 per cent of salary are deferred in shares. Accordingly, as bonus is below 100 per cent of salary there is no
deferral of bonuses based on 2018 performance. 

Dignity plc Annual Report & Accounts 2018  | 85

Determination of LTIP awards with performance periods ending in the year 
Half of the LTIP awards made in 2016 were subject to a relative TSR condition and half subject to EPS growth targets, both measured
over the three year period which ended on 28 December 2018. These awards lapsed in full, as shown below.

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
305 out of 313 companies

EPS condition                                                                                                                                                                                                                                                                      

Below threshold
Threshold
Stretch
Maximum or above
Actual achieved

Performance required
Less than 128.1p
128.1p
134.8p
144.9p
85.8p

% vesting
–
25
100
–

% vesting
–
15
50
100
–

                                                                                                                                                                                                                                           2016 LTIP                                    EPS                                       TSR                       Estimated
                                                                                                                                                                                                                                               award                             vesting                                 vesting                   award value
Director                                                                                                                                                                                                           number of shares                      % of target                          % of target                                 £000

Mike McCollum                                                                                                                              31,435                          –                             –                          –
Andrew Davies                                                                                                                               15,583(1)                        –                             –                          –
Richard Portman                                                                                                                           15,200                          –                             –                          –
Steve Whittern                                                                                                                               19,405                          –                             –                          –

(1)   Number of shares have been pro-rated to the date Andrew Davies ceased employment with Dignity plc. 

LTIP awards granted in the year 
LTIP awards granted in the form of nil cost options to Executive Directors on 23 March 2018 were as follows. The grants were made
over the same number of shares as the prior year’s award:

                                                                                                                                                                                                     Face/maximum                                                             
                                                                                                                                                  Number of LTIP                    value of awards                     % of award vesting at
Executive                                                                                                                                                 awards                     at grant date*£                                           threshold                                           Performance period

Mike McCollum                                                                            31,253                  278,152                                    25                  30.12.17 – 25.12.20
Richard Portman                                                                         15,150                  134,835                                    25                  30.12.17 – 25.12.20
Steve Whittern                                                                             19,320                  171,948                                    25                  30.12.17 – 25.12.20

*  Based on a share price on the date of grant on 23 March 2018 of 890 pence. 

The 2018 award will vest subject to a range of absolute share price performance. The vesting of this award is dependent on 
the following:

                                                                                                                                                                                                                                                           Share price target(1)                                                                   vesting

Below threshold
Threshold
Maximum

Less than 1,500p
1,500p
1,950p or higher

–
25%
100%

(1)   The assessment of the share price targets will be based on an averaging period over the last three months of the 2020 financial year. The share prices that must be attained in

the table above will be reduced by an amount equal to the value of dividends that are paid over the three years from grant.

In addition to the share price targets above, the Remuneration Committee must be satisfied that the underlying financial performance
of the Company over the three financial years commencing with the year of grant has been satisfactory.

Clawback and malus provisions apply and there is a holding period requiring the net of tax value of shares to be held for two years
after the awards vest.

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86  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

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:

                                                                                                                                                                                   Granted                     Lapsed           vested and                                              Earliest date                Latest date
                                                                            Award                 Share price                       As at                      during                      during               exercised                       As at           shares can be           shares can be
Director                                                      grant date                        (pence)                29.12.17                           year                          year           during year                 28.12.18                    acquired                    acquired

Mike McCollum

Andrew Davies(ii)

Richard Portman

Steve Whittern

05.03.15(iii)
15.06.16(iv)
16.03.17(v)
23.03.18(vi)
05.03.15(iii)
15.06.16(iv)
16.03.17(v)
05.03.15(iii)
15.06.16(iv)
16.03.17(v)
23.03.18(vi)
05.03.15(iii)
15.06.16(iv)
16.03.17(v)
23.03.18(vi)

1,742
2,435
2,455
890

1,742
2,435
2,455

1,742
2,435
2,455
890

1,742
2,435
2,455
890

34,874
31,435
31,253
–

22,245
20,051
19,961

16,863
15,200
15,150
–

21,527
19,405
19,320
–

–
–
–
31,253

–
–
–

–
–
–
15,150

–
–
–
19,320

17,437
–
–
–

11,123
4,468
11,175

8,432
–
–
–

10,764
–
–
–

–
–
–
–

11,122
–
–

–
–
–
–

–
–
–
–

17,437
31,435
31,253
31,253

–
15,583
8,786

8,431
15,200
15,150
15,150

10,763
19,405
19,320
19,320

06.03.18
15.06.19
16.03.20
23.03.21

06.03.18
15.06.19
16.03.20

06.03.18
15.06.19
16.03.20
23.03.21

06.03.18
15.06.19
16.03.20
23.03.21

05.03.25
15.06.26
16.03.27
23.03.28

05.03.25
15.06.26
16.03.27

05.03.25
15.06.26
16.03.27
23.03.28

05.03.25
15.06.26
16.03.27
23.03.28

(i)    With regard to the LTIP awards in 2015, 2016 and 2017, 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. The 2018 awards will vest based on absolute TSR. Full vesting will require performance broadly equivalent
to returning the share price to the level it was prior to the 19 January 2018 pricing announcement.

(ii)   Andrew Davies retired from the Board on 5 January 2018. His 2015 LTIP award was exercised post retirement. His LTIP options outstanding are prorated from the

commencement of the relevant performance period to the date he ceased to be a qualifying employee. 

(iii)  Number of options derived based on the average mid-market share price for the previous 28 days to 26 December 2014. The performance condition for the 2015 LTIP award

was met to the extent that 50 per cent of the award vested with the balancing lapsing.

(iv)  Number of options derived based on the average mid-market share price for the previous 28 working days to 25 December 2015.

(v)   Number of options derived based on the average mid-market share price for the previous 28 working days to 30 December 2016.

(vi)  Number of options derived based on the same number of shares as the prior year’s awards. The share price of 890 pence in the table above is at the grant date.

The aggregate gain on the exercise of Long-Term Incentive Plan options by the continuing Directors in the period was £nil 
(2017: £2.8 million).

Directors’ interest in shares
The interests of the Directors in the share capital of Dignity plc at 28 December 2018 are set out below:

                                                                                                                                                               Number of Ordinary Shares

                                                                                                                                                                                                                                               At 28 December 2018

                                                                                                                                                                                                                                                                                                               value of shares                                     
                                                                                                                                                                                                                                                Subject to                                        counting towards                                     
                                                                                                  At 29 December                                                                              Deferred          performance             vested but                     proposed           Percentage of 
                                                                                                                       2017                 Legally                   Subject      Annual Bonus               conditions           unexercised               shareholding           salary held as
                                                                                                      Legally owned                 owned                  to SAyE                  Options       under the LTIP      under the LTIP                   guideline(3)                      shares(3)

Mike McCollum                                                  91,667      126,845                     –             7,092            93,941           17,437          £974,303                   190   
Andrew Davies(1)                                                41,754        41,754                     –             3,231            24,369                      –                           –                         –   
Richard Portman                                               50,000        50,000                332             2,449            45,500             8,431          £388,525                   157   
Steve Whittern                                                   27,000        38,076                     –             3,127            58,045           10,763          £316,564                   100   
Peter Hindley                                                      80,696      106,873                     –                      –                       –                      –                           –                         –   
David Blackwood                                                 2,189          7,154                     –                      –                       –                      –                           –                         –   
Alan McWalter(2)                                                   2,552          2,552                     –                      –                       –                      –                           –                         –   
Jane Ashcroft                                                            917          1,917                     –                      –                       –                      –                           –                         –   
Mary McNamara                                                 1,000          5,500                     –                      –                       –                      –                           –                         –   

(1)     Andrew Davies retired from the Board on 5 January 2018.

(2)     As at date of retirement of 31 January 2018.

(3)     Based on the average share price of the last financial month of the year of 696.7 pence and includes legally owned shares plus the net of tax value (i.e. tax and national

insurance at 47 per cent) of deferred bonus options and vested but unexercised LTIP awards.

There has been no change in the interests set out above between 28 December 2018 and 13 March 2019.

Dignity plc Annual Report & Accounts 2018  | 87

Current shareholding guideline 
The current shareholding guideline for the Executive Directors was met. 

Proposed shareholding guideline
Under the proposed remuneration policy changes, the new shareholding guideline proposed for the Executive Directors is that they
hold 200 per cent of their basic salary valued using the average share price for the last month of the financial year, (December 2018)
and using the salary at the end of the financial year. On this basis, the Executive Directors are below the required shareholding level
and so would be required to retain at least 50 per cent of the net of tax value of shares at such time as future awards vest.

Loss of office payments and payments to past Directors  
Except as disclosed below in respect of Andrew Davies, no Executive Director left in the year and no compensation for loss of office
was paid and no payments were made to any past Directors. 

Last year’s report contains details of the retirement arrangements for Andrew Davies who retired from the Board on 5 January 2018
and who ceased to be an employee on 27 April 2018. No compensation or termination payment was made or will be made to
Andrew Davies. As advised in the Group’s Stock Exchange announcement, released on 13 December 2017, Andrew Davies is now a
consultant to the Group assisting with the funeral business development and is paid a fixed fee for this work of £100,000 per annum.

Alan McWalter retired from the Board as a Non-Executive Director on 31 January 2018 and was paid Non-Executive Director fees to
the date of retirement. Alan McWalter was retained as a consultant to the Board for the six months from 1st February to 31st July 2018
during which period he was paid fees of £31,500.

Relative importance of spend on pay between employee pay and distributions to shareholders
The following table sets out the percentage change in dividends and overall spend on employee pay in the 2018 financial year
compared with the prior year.
                                                                                                                                                                                                                                                                                       2018                                  2017                             Change 
                                                                                                                                                                                                                                                                                                                    £m                                     £m                                         % 

Dividends                                                                                                                                                                     12.2                   12.2                         –

Employee remuneration costs                                                                                                                             107.2                 102.7                     4.4

Legacy pension arrangements
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 and Richard Portman transferred his benefits out of the
Scheme in January 2018.

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.

                                                                                                                                                                                                                                                                                       2018                               2017                           Change
                                                                                                                                                                                                                                                                                                                 £000                                  £000                                         % 

Chief Executive
–   Salary                                                                                                                                                                        512                    512                         –
–   Benefits                                                                                                                                                                      97                      97                         –
–   Annual bonus                                                                                                                                                         401                         –                    100

                                                                                                                                                                                                                                                                                                                                                                   Change
                                                                                                                                                                                                                                                                                                                         £                                          £                                         % 

Full time equivalent average employee (1)
–   Salary                                                                                                                                                                  26,777              25,685                     4.3
–   Benefits                                                                                                                                                                 1,791                 1,714                      4.5
–   Performance related pay                                                                                                                                 1,083                 1,728                  (37.3)

(1)     There are 3,261 employees at 28 December 2018 (29 December 2017: 3,331), of which 752 (2017: 841) were part time.

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88  | Dignity plc Annual Report & Accounts 2018  

Report on Directors’ remuneration continued
for the 52 week period ended 28 December 2018

Long-Term Total Shareholder Return Performance and CEO pay over this period
The following graph shows the Company's TSR performance over the last ten financial years against the FTSE 350 index and the 
FTSE SmallCap. The FTSE 350 has been chosen as the Company has been a member of that index until recently and the FTSE
SmallCap has been chosen as it is now a member of that index.

Ten year Total Shareholder Return

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Dignity plc  

FTSE 350 Index   

FTSE SmallCap Index   

Source: Datastream (Thomson Reuters)

This graph shows the value, by 28 December 2018, of £100 invested in Dignity plc on 26 December 2008, compared with the value 
of £100 invested in the FTSE 350 Index and FTSE SmallCap Index on the same date.

The table below shows the total remuneration figure for the CEO over the same ten year period.

                                                                                             2009                      2010                      2011                      2012                      2013                      2014                      2015                      2016                      2017                2018

CEO single total figure of
remuneration (£000)                    1,018               899               917           2,081           2,217           2,426           2,440           2,372               966       1,010

Annual bonus pay-out 
relative to maximum (%)                  85               100               100               100               100               100               100               100                    –             58

LTIP vesting (%)                                    63                    –                    –               100               100               100               100               100                 50               –

Details of Directors' service contracts and letters of appointment
Details of the service contracts of the Executive Directors and letters of appointment of the Non-Executive Directors are as follows:

Name

Mike McCollum 
Richard Portman
Steve Whittern
Peter Hindley
David Blackwood
Jane Ashcroft
Mary McNamara

Contract date

1 April 2004
1 November 2006
1 January 2009
7 December 2016
1 October 2017
1 April 2016
1 March 2017

Notice period

12 months
12 months
12 months
3 months
3 months
3 months
3 months

External directorships
Mike McCollum was appointed a Non-Executive Director of CvS Group plc in April 2013 and received fees of £46,000 in the year to 
31 December 2018. Steve Whittern was appointed a Non-Executive Director of Medica Group plc in March 2017 and received fees of
£60,000 in the year to 31 December 2018. The Committee and the Board have considered these appointments and have concluded
that for both Directors that they have sufficient time to be able to commit to their Dignity roles and that these directorships do not
impede their ability to fully discharge their responsibilities. In both cases fees earned are retained by the Directors. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dignity plc Annual Report & Accounts 2018  | 89

Membership of the Remuneration Committee
The Remuneration Committee comprises three independent Non-Executive Directors. During 2018, the Committee was chaired 
by Mary McNamara and the Committee members in 2018 comprised Mary together with Jane Ashcroft and David Blackwood.

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 Remuneration Committee determines and agrees with the Board, within formal terms of reference, the framework and policy 
of Directors’ and senior management’s remuneration. The Committee met six times (three scheduled) during the year. At the start 
of the year the Committee determined the incentive payments for 2017 and the application of the policy for 2018, making a number
of changes recognising the significant deterioration to the performance outlook for 2018. From the middle of the year the Committee
conducted a tender process for its independent adviser, reviewed the remuneration policy and its application for 2019, including 
a consultation with major shareholders and consideration of the new UK Corporate Governance Code.

The Committee receives advice from several sources, namely:

• The Chairman and the Chief Executive, Finance Director and Corporate Services Director, who attend the Remuneration Committee

by invitation, and the Company Secretary, who attends meetings as Secretary to the Committee.  No individual takes part in
discussions relating to their own remuneration and benefits.  

• Korn Ferry, who were appointed by the Committee as its independent advisors on 3 August 2018 following a tendering process.

Until Korn Ferry’s appointment the Committee received advice from its previous advisers, New Bridge Street (NBS) (a trading name
of Aon plc). Both Korn Ferry and NBS reported directly to the Committee Chairman and are signatories of the Code of Conduct for
Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com). Korn Ferry provides other consulting
services on leadership development, but this is an entirely separate team independent from the team advising the Committee 
and the advice to the Committee is therefore considered independent. During 2018, total fees charged in the period by NBS were
£23,460 + vAT (2017: £18,133+vAT) and were charged on a time spent basis. Korn Ferry’s fees were based on time and materials
and (excluding vAT and expenses) totalled £55,796.

Statement of shareholder voting at the AGM (Unaudited)  
votes cast by proxy at the Annual General Meeting held on 7 June 2018 in respect of the Remuneration Report and at Annual General
Meeting held on 9 June 2016, in respect of the binding three year policy vote, are as shown below:

2018 AGM                                                                                                                                                                                                                                                                                                                     Remuneration Report

                                                                                                                                                                                                                                                                                                                            Total number                 Percentage of
                                                                                                                                                                                                                                                                                                                                       of votes                        votes cast

For                                                                                                                                                                                                         29,170,599                  90.53
Against                                                                                                                                                                                                    3,051,429                    9.47
Total votes cast                                                                                                                                                                               32,222,028                     100

Abstentions                                                                                                                                                                                                   2,034                      n/a

2016 AGM                                                                                                                                                                                                                                                                                                                      Remuneration Policy

                                                                                                                                                                                                                                                                                                                            Total number                 Percentage of
                                                                                                                                                                                                                                                                                                                                       of votes                        votes cast

For                                                                                                                                                                                                         38,061,712                  97.97
Against                                                                                                                                                                                                       790,561                    2.03
Total votes cast                                                                                                                                                                               38,852,273                     100

Abstentions                                                                                                                                                                                              664,132                      n/a

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On behalf of the Board

Mary McNamara
Chairman of the Remuneration Committee

13 March 2019

        
        
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90  | Dignity plc Annual Report & Accounts 2018  

Directors’ report
for the 52 week period ended 28 December 2018

The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
52 week period ended 28 December 2018.

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 (‘EU’) 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:

• 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. 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 62 and 63 of this Annual Report, confirm that, to the
best of their knowledge and belief:

• The Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit 
of the Group; and

• The Strategic Report on pages 1 to 59 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. 

Responsibility statement of the Directors in respect 
of the Annual Report

The Directors confirm that to the best of their knowledge:

• The consolidated financial statements prepared in accordance
with IFRSs as adopted by the European Union give a true and
fair view of the assets, liabilities, financial position and profit of
the Company and undertakings included in the consolidation
as a whole; 

• This Annual Report, including the Strategic Report, includes 
a fair review of the development and performance of the
business and the position of the Company and undertakings
included in the consolidation as a whole, together with a
description of the principal risks and uncertainties that they
face; and

• Having taken into account all matters considered by the 

Board and brought to the attention of the Board during the
year, the Directors consider that the Annual Report, taken as 
a whole, is fair, balanced and understandable. The Directors
believe that the disclosures set out in this Annual Report
provide the information necessary for shareholders to assess
the Company’s performance, business model and strategy.

        
Dignity plc Annual Report & Accounts 2018  | 91

Principal risks and uncertainties 
Operational risks are considered on pages 52 and 53.

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, 77,038 Ordinary Shares of 12 48/143 pence
each were issued to satisfy Long-Term Incentive Plan share
awards vesting in the period. 

The issued share capital of Dignity plc at 28 December 2018
consisted of 50,008,939 Ordinary Shares of 12 48/143 pence
each. All the Ordinary Shares carry the same rights and
obligations. There are no other class or type of share in issue.

A special resolution passed at the last AGM on 7 June 2018 
gives Dignity plc the authority to purchase up to 5,000,894
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 £4,112,623 of which up to £308,447 may be
for cash. These authorities will expire at the conclusion of the
next AGM on 13 June 2019. 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 100. The Group’s profit before tax
amounted to £40.5 million (2017: £71.2 million).

Dividends
An interim dividend of 8.64 pence per Ordinary Share was paid
to shareholders on 26 October 2018. The Board has proposed 
a final dividend of 15.74 pence (2017: 15.74 pence) per share,
which, subject to approval at the AGM, will be paid on 28 June
2019 to shareholders on the register at close of business on 
17 May 2019.

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 55 to 59.

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 publish gender pay data on the corporate
website www.dignityfunerals.co.uk/corporate during 2019 
in accordance with the Equality Act 2010 (Gender Pay Gap)
Regulations 2017.

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 86 to 88. 

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 
13 June 2019. 

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 attend our premises. This is discussed in the Corporate
and Social Responsibility Report on page 58.

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 pages 58 
and 59 alongside other social and ethical considerations. 

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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 65 to 69, which is incorporated 
by reference.

Strategic Report
The Strategic Report on pages 1 to 59 has been approved 
by the Board.

By order of the Board 

Tim George  
Company Secretary

13 March 2019

92  | Dignity plc Annual Report & Accounts 2018  

Directors’ report continued
for the 52 week period ended 28 December 2018

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 the
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 8 March 2019.

Post balance sheet events
There were no post balance sheet events.

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.

Independent auditors’ report to the members of Dignity plc
for the 52 week period ended 28 December 2018

Dignity plc Annual Report & Accounts 2018  | 93

Opinion

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 28 December 2018 and of the group’s proﬁt for
the 52 week period then ended;

• the group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company ﬁnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

• the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards

the group ﬁnancial statements, Article 4 of the IAS Regulation.

We have audited the ﬁnancial statements of Dignity plc which comprise:

Group

Parent company

• Consolidated income statement for the 52 week period ended 

28 December 2018

• Balance sheet as at 28 December 2018
• Statement of changes in equity for the 52 week period ended 

• Consolidated statement of comprehensive income for the 52 week 

28 December 2018

period ended 28 December 2018

• Consolidated balance sheet as at 28 December 2018
• Consolidated statement of changes in equity for the 52 week period 

ended 28 December 2018

• Consolidated statement of cash ﬂows for the 52 week period 

ended 28 December 2018

• Related notes 1 to 33 to the ﬁnancial statements, including a summary 

of signiﬁcant accounting policies

• Related notes C1 to C9 to the ﬁnancial statements including 

a summary of signiﬁcant accounting policies

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, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).

Basis for opinion 
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁnancial
statements section of our report below. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the ﬁnancial statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement

We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs(UK) require
us to report to you whether we have anything material to add or draw attention to:

• the disclosures in the annual report set out on pages 50 to 53 that describe the principal risks and explain how they are being

managed or mitigated;

• the directors’ conﬁrmation set out on page 53 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 directors’ statement set out on page 92 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;

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94  | Dignity plc Annual Report & Accounts 2018  

Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 28 December 2018

• whether the directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing 

Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or 

• the directors’ explanation set out on page 53 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.

Overview of our audit approach

Key audit matters

• The risk of inappropriate revenue recognition, speciﬁcally the risk of inappropriate management override of the

amount of revenue recorded. 

• Management Override of Internal Controls inherent in those areas where manual journals are posted at head

oﬃce as part of the ﬁnancial statement close process. 

• Assessment of the carrying value of goodwill, other intangible assets and property, plant and equipment.

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 of £2.0 million which represents 5% of proﬁt before tax.

Key audit matters 
Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in our audit of the ﬁnancial
statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud)
that we identiﬁed. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnancial
statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Dignity plc Annual Report & Accounts 2018  | 95

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Key observations
communicated to the 
Audit Committee

Based on our procedures 
we have not identiﬁed any
evidence of management
override through
inappropriate journal 
entries in respect of the
amount of revenue 
recorded in the period.

Risk

Our response to the risk

The risk of inappropriate revenue
recognition (Revenue 2018: £315.6
million, 2017: £324.0 million)
Given investor focus on the group’s
revenue performance we consider 
there to be a risk in relation to the
manipulation by central management 
of the amount of revenue recorded.
Management reward and incentive
schemes based on achieving proﬁt
targets may also place pressure 
on management to manipulate 
revenue recognition.
Therefore, there is a risk that central
management may override controls 
to intentionally misstate revenue
transactions through inappropriate
manual journal entries.
Refer to the Accounting policies (pages 104
and 105); and Note 3 of the Consolidated
Financial Statements (pages 112 and 113).

• We understood the group’s revenue recognition policies and how they are

applied, including the relevant controls;

• We evaluated the controls in the IT systems that support the recording 

of revenue;

• We reconciled the aggregate revenue amounts extracted from the sales

invoicing systems to revenue recorded in the general ledger and have traced
material reconciling items that arose therefrom to supporting documentation; 
• In respect of the funerals and crematoria segments, which together form 93%
of the group’s revenue, we performed data analysis over the entire revenue
process from revenue recognition through to invoice settlement. Where the
postings did not follow our expectation, we investigated outliers and tested
these entries to assess their validity by agreeing the transactions back to
source documentation;

• We tested journal entries posted to revenue accounts, applying parameters

designed to identify entries that were not in accordance with our expectations. 
This included analysing and selecting journals for testing which appeared
unusual in nature either due to size, preparer or being manually posted. We
veriﬁed the journals to originating documentation to conﬁrm that the entries
were valid; and 

• We performed analytical procedures to compare revenue recognised with

expectations based on 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 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 veriﬁed the journals to originating
documentation to conﬁrm that the entries were valid; 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 evidence 
of management override
through inappropriate 
journal entries.

We concluded that no
impairments are required at
the period end based on the
results of our work. 

• We understood the methodology applied by management in performing its
impairment tests for the funeral segment goodwill CGU and the Trade Name
CGUs within the funeral segment; 

• We have calculated the degree to which the key inputs and assumptions

would need to ﬂuctuate before an impairment was triggered and considered
the likelihood of this occurring. We performed our own sensitivities on the
group’s forecasts and determined whether adequate headroom remained;

• We performed detailed testing to critically assess and corroborate the key

inputs to the valuations, including:
  – analysing the historical accuracy of budgets to actual results to determine

whether forecast cash ﬂows are reliable based on past experience;

  – corroborating the discount rate used by benchmarking it against market
data and comparable organisations, involving Ey internal specialists to 
assist us with this assessment; and

  – validating the growth rates have been appropriately adjusted to reﬂect 
the changes in the group’s strategy and the changes experienced in the
funeral market.

• We assessed the disclosures in note 9 against the requirements of IAS 36

Impairment of Assets.

The risk of fraud and management
override
We considered the risks inherent 
in those areas where manual journals 
are posted at head oﬃce as part of the
ﬁnancial statement close process and 
in particular in respect of subjective 
areas which we considered to be most
susceptible to management override 
due to the degree of estimation involved.

These areas were considered to be 
the bad debt provision, dilapidations
provision and uninvoiced cost accruals.

Assessment of the carrying value of
goodwill, other intangible assets and
property, plant and equipment (2018:
£639.0 million, 2017: £633.5 million)
The group has a signiﬁcant value 
of goodwill, other intangible assets,
including Trade Names, and property
plant and equipment recognised on the
balance sheet. 
As outlined in the group’s strategic
report the group has faced a challenging
and transitional year arising from
continued changes in the funeral
market, the Competition and Markets
Authority funeral market review
announcement and having begun 
the transformation of the business. 
The group has experienced an 
overall decline in underlying proﬁt
before tax from £77.8 million in 2017 
to £54.4 million. 
There is therefore a risk that the Group’s
cash generating units (‘CGUs’), and in
particular the funeral segment and 
the Trade Name CGUs within the 
funeral segment, may not achieve the
anticipated business performance to
support their respective carrying value.
Judgement is required in forecasting 
the future cash ﬂows of each CGU,
determination of the long-term growth
rates applied to these cash ﬂows,
together with the rate at which they 
are discounted. 
Refer to the Accounting policies (pages 106
and 107); and Note 9 of the Consolidated
Financial Statements (pages 117 and 118).

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
96  | Dignity plc Annual Report & Accounts 2018  

Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 28 December 2018

An overview of the scope of our audit 

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and performance materiality determine 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 there are common ﬁnancial systems, processes and centralised controls covering all of its operations and
individual operating 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 £2.0 million (2017: £3.6 million), which is 5% (2017: 5%) of proﬁt before tax. 
We believe that proﬁt before tax is the most appropriate measure of the ﬁnancial performance of the group on which to base
audit materiality.

We determined materiality for our audit of the standalone parent company ﬁnancial statements to be £4.8 million (2017: £4.6
million), which is 1% (2017: 1%) of equity. The materiality determined for the standalone parent company ﬁnancial statements
exceeds the group materiality as it is determined on a different basis given the nature of the operations. For the purposes of the
audit of the group ﬁnancial statements, our procedures, including those on balances in the parent company, are undertaken
with reference to the group materiality and performance materiality set out in this report.

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 and parent company’s overall control
environment, our judgement was that performance materiality was 75% (2017: 75%) of our planning materiality, namely 
£1.5 million (2017: £2.7 million) for the group and £3.6 million (2017: £3.5 million) for the parent company.

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 £0.1 million
(2017: £0.2 million) for both the group and the parent company, which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report set out on pages 1 to 92 and 151 to 156,
including the Strategic Report set out on pages 1 to 59, Governance set out pages 60 to 92 and Other Information set out 
on pages 151 to 156, other than the ﬁnancial statements and our auditor’s report thereon. The directors are responsible for 
the other information.

Our opinion on the ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon.

Dignity plc Annual Report & Accounts 2018  | 97

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In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in 
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the ﬁnancial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to speciﬁcally address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that those
items meet the following conditions:

• Fair, balanced and understandable set out on page 90 – the statement given by the directors that they consider the annual
report and ﬁnancial statements taken as a whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or 

• Audit committee reporting set out on pages 70 to 72 – the section describing the work of the audit committee does not

appropriately address matters communicated by us to the audit committee; or

• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 60 – the parts of the

directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance
Code containing provisions speciﬁed for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinions 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.

In our opinion, based on the work undertaken in the course of the audit:

• 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; and 

• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identiﬁed material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 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.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 90, the directors are responsible for the
preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the ﬁnancial statements, the directors are responsible for assessing the group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98  | Dignity plc Annual Report & Accounts 2018  

Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 28 December 2018

Auditor’s responsibilities for the audit of the ﬁnancial statements

Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance 
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually 
or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these
ﬁnancial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the ﬁnancial
statements due to fraud; to obtain suﬃcient appropriate audit evidence regarding the assessed risks of material misstatement
due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected
fraud identiﬁed during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the entity and management.

Our approach was as follows:

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that
the most signiﬁcant frameworks which are directly relevant to speciﬁc assertions in the ﬁnancial statements are those that
relate to the reporting framework (IFRS, FRS 101, the Companies Act 2006 and UK Corporate Governance Code) and the
relevant tax compliance regulations in the UK. In addition, we concluded that there are certain signiﬁcant laws and regulations
which may have an effect on the determination of the amounts and disclosures in the ﬁnancial statements being the Listing
Rules of the UK Listing Authority, and those laws and regulations relating to occupational health and safety and data protection.

• We understood how the group is complying with those frameworks by making enquiries of management, internal audit and

those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes,
papers provided to the Audit Committee and any correspondence received from regulatory bodies.

• We assessed the susceptibility of the group’s ﬁnancial statements to material misstatement, including how fraud might 

occur by meeting with management to understand where it considered there was susceptibility to fraud. We also considered
performance targets and their inﬂuence on efforts made by management to manage earnings or inﬂuence the perceptions 
of analysts. We considered the programs and controls that the group has established to address risks identiﬁed, or that
otherwise prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the 
risk was considered to be higher, we performed audit procedures to address each identiﬁed fraud risk. These procedures
included testing manual journals and were designed to provide reasonable assurance that the ﬁnancial statements were 
free from fraud or error.

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations
identiﬁed in the paragraphs above. Our procedures involved: journal entry testing, with a focus on manual journals and
journals indicating large or unusual transactions based on our understanding of the business; enquiries of group management,
internal audit; and focused testing, as referred to in the key audit matters section above.

A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Dignity plc Annual Report & Accounts 2018  | 99

Other matters we are required to address 

• We were appointed by the company on 7 June 2018 to audit the ﬁnancial statements for the 52 week period ending 

28 December 2018 and subsequent ﬁnancial periods. 

• The period of total uninterrupted engagement including previous renewals and reappointments is ﬁve years, covering the

periods ending 26 December 2014 to 28 December 2018.

• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and 

we remain independent of the group and the parent company in conducting the audit. 

• The audit opinion is consistent with the additional report to the audit committee.

Use of our report
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.

Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & young LLP, Statutory Auditor
Birmingham

13 March 2019

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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100 | Dignity plc Annual Report & Accounts 2018  

Consolidated income statement
for the 52 week period ended 28 December 2018

                                                                                                                                                                                                                                                                                                   52 week period         52 week period
                                                                                                                                                                                                                                                                                                                     ended                         ended
                                                                                                                                                                                                                                                                                                       28 December            29 December
                                                                                                                                                                                                                                                                                                                        2018                            2017
                                                                                                                                                                                                                                                                                Note                                  £m                                  £m

Revenue                                                                                                                                                                         3                315.6                324.0
Cost of sales                                                                                                                                                                                   (135.0)              (130.6)

Gross profit                                                                                                                                                                                    180.6                193.4
Administrative expenses                                                                                                                                                             (114.3)                (95.4)

Operating profit                                                                                                                                                          3                  66.3                   98.0
Finance costs                                                                                                                                                                 4                 (26.0)                (26.9)
Finance income                                                                                                                                                             4                     0.2                     0.1

Profit before tax                                                                                                                                                         5                  40.5                   71.2
Taxation                                                                                                                                                                           6                   (9.0)                (13.4)

Profit for the period attributable to equity shareholders                                                                          3                  31.5                   57.8

Earnings per share for profit attributable to equity shareholders 
– Basic (pence)                                                                                                                                                               8                63.0p              115.8p
– Diluted (pence)                                                                                                                                                           8                63.0p              115.6p

Consolidated statement of comprehensive income 
for the 52 week period ended 28 December 2018
                                                                                                                                                                                                                                                                                                   52 week period           52 week period 
                                                                                                                                                                                                                                                                                                                     ended                            ended 
                                                                                                                                                                                                                                                                                                       28 December               29 December
                                                                                                                                                                                                                                                                                                                        2018                               2017
                                                                                                                                                                                                                                                                                Note                                  £m                                  £m

Profit for the period                                                                                                                                                                      31.5                   57.8
Items that will not be reclassified to profit or loss                                                                                                                    
Remeasurement (loss)/gain on retirement benefit obligations                                                                      28                   (0.6)                    3.2
Tax credit/(charge) on remeasurement on retirement benefit obligations                                                                          0.1                    (0.5)

Other comprehensive (loss)/income                                                                                                                                       (0.5)                    2.7

Comprehensive income for the period                                                                                                                                  31.0                   60.5

Attributable to: 
Equity shareholders of the parent                                                                                                                                               31.0                   60.5

Consolidated balance sheet
as at 28 December 2018

Dignity plc Annual Report & Accounts 2018  | 101

                                                                                                                                                                                                                                                                                                       28 December               29 December
                                                                                                                                                                                                                                                                                                                        2018                               2017
                                                                                                                                                                                                                                                                                Note                                 £m                                  £m

Assets
Non-current assets
Goodwill                                                                                                                                                                          9                232.6                226.1
Intangible assets                                                                                                                                                           9                152.3                159.4
Property, plant and equipment                                                                                                                               10                254.1                248.0
Investments in associated undertakings                                                                                                              11                    6.0                         –
Financial and other assets                                                                                                                                        12                  15.7                   14.3

                                                                                                                                                                                                            660.7                647.8

Current assets
Inventories                                                                                                                                                                    13                     8.5                     7.3
Trade and other receivables                                                                                                                                     14                  32.9                   38.3
Cash and cash equivalents                                                                                                                                       15                  66.9                   49.3

                                                                                                                                                                                                            108.3                   94.9

Total assets                                                                                                                                                                                    769.0                742.7

Liabilities
Current liabilities
Financial liabilities                                                                                                                                                       16                     9.3                     4.5
Trade and other payables                                                                                                                                         17                  68.9                   57.8
Current tax liabilities                                                                                                                                                                          4.8                     6.2
Provisions for liabilities                                                                                                                                              19                     1.7                     1.5

                                                                                                                                                                                                              84.7                   70.0

Non-current liabilities
Financial liabilities                                                                                                                                                       16                551.9                561.2
Deferred tax liabilities                                                                                                                                                20                  29.2                   30.3
Other non–current liabilities                                                                                                                                     17                     2.1                     2.3
Provisions for liabilities                                                                                                                                              19                     9.9                     8.5
Retirement benefit obligation                                                                                                                                  28                  25.2                   24.0

                                                                                                                                                                                                            618.3                626.3

Total liabilities                                                                                                                                                                               703.0                696.3

Shareholders’ equity
Ordinary share capital                                                                                                                                               22                     6.2                     6.2
Share premium account                                                                                                                                                                 12.4                   11.1
Capital redemption reserve                                                                                                                                                         141.7                141.7
Other reserves                                                                                                                                                                                   (5.1)                   (4.6)
Retained earnings                                                                                                                                                                           (89.2)              (108.0)

Total equity                                                                                                                                                                                      66.0                   46.4

Total equity and liabilities                                                                                                                                                        769.0                742.7

The financial statements on pages 100 to 140 were approved by the Board of Directors on 13 March 2019 and were signed on its
behalf by:

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M K McCollum                         S L Whittern
Chief Executive                         Finance Director

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
102 | Dignity plc Annual Report & Accounts 2018  

Consolidated statement of changes in equity
for the 52 week period ended 28 December 2018

                                                                                                                                              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 

30 December 2016                                                              6.1                     8.5                141.7                    (3.5)              (156.3)                   (3.5)

Profit for the 52 weeks ended 

29 December 2017                                                                 –                         –                         –                         –                  57.8                   57.8

Remeasurement gain on defined 

benefit obligations                                                                  –                         –                         –                         –                     3.2                     3.2
Tax on pensions                                                                           –                         –                         –                         –                    (0.5)                   (0.5)

Total comprehensive income                                                   –                         –                         –                         –                  60.5                   60.5
Effects of employee share options                                          –                         –                         –                     1.3                        –                     1.3
Tax on employee share options                                               –                         –                         –                     0.1                        –                     0.1
Proceeds from share issue(1)                                                 0.1                     2.6                         –                         –                        –                     2.7
Gift to Employee Benefit Trust                                                 –                         –                         –                    (2.5)                       –                    (2.5)
Dividends (note 7)                                                                       –                         –                         –                         –                 (12.2)                (12.2)

Shareholders’ equity as at 

29 December 2017                                                              6.2                   11.1                141.7                    (4.6)              (108.0)                  46.4

Profit for the 52 weeks ended

28 December 2018                                                                –                         –                         –                         –                  31.5                   31.5

Remeasurement loss on 

retirement benefit options                                                   –                         –                         –                         –                    (0.6)                   (0.6)
Tax on pensions                                                                           –                         –                         –                         –                     0.1                     0.1

Total comprehensive income                                                   –                         –                         –                         –                  31.0                   31.0
Effects of employee share options                                          –                         –                         –                     0.8                        –                     0.8
Proceeds from share issue(2)                                                     –                     1.3                         –                         –                        –                     1.3
Gift to Employee Benefit Trust                                                 –                         –                         –                    (1.3)                       –                    (1.3)
Dividends (note 7)                                                                       –                         –                         –                         –                 (12.2)                (12.2)

Shareholders’ equity as at 28 December 2018           6.2                   12.4                141.7                    (5.1)                (89.2)                 66.0

(1)     Relating to issue of 184,672 shares under 2014 LTIP scheme and 9,079 shares under 2013 SAYE scheme. 

(2)     Relating to issue of 77,038 shares under 2015 LTIP 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.

Consolidated statement of cash flows
for the 52 week period ended 28 December 2018

Dignity plc Annual Report & Accounts 2018  | 103

                                                                                                                                                                                                                                                                                                   52 week period           52 week period
                                                                                                                                                                                                                                                                                                                     ended                            ended 
                                                                                                                                                                                                                                                                                                       28 December               29 December
                                                                                                                                                                                                                                                                                                                        2018                               2017
                                                                                                                                                                                                                                                                                Note                                 £m                                  £m

Cash flows from operating activities
Cash generated from operations                                                                                                                            25                  94.9                112.5
Finance income received                                                                                                                                                                  0.2                     0.1

Finance costs paid                                                                                                                                                                           (13.1)                (25.7)
Transfer from restricted bank accounts for finance costs                                                                                                        0.3                     0.3
Payments to restricted bank accounts for finance costs                                                                                  15                 (12.3)                   (0.3)

Total payments in respect of finance costs                                                                                                                               (25.1)                (25.7)
Tax paid                                                                                                                                                                                              (11.6)                (11.9)

Net cash generated from operating activities                                                                                                                    58.4                   75.0

Cash flows from investing activities                                                               
Investment in financial asset and associated undertakings                                                                                                   (5.0)                   (1.0)
Acquisition of subsidiaries and businesses (net of cash acquired)                                                                 26                   (6.5)                (28.3)
Proceeds from sale of property, plant and equipment                                                                                                             0.4                     0.6
Maintenance capital expenditure(1)                                                                                                                                             (16.1)                (20.2)
Branch relocations                                                                                                                                                                            (0.8)                   (2.2)
Satellite locations                                                                                                                                                                               (1.4)                   (1.1)
Development of new crematoria and cemeteries                                                                                                                     (6.7)                   (3.5)

Purchase of property, plant and equipment and intangible assets                                                                                   (25.0)                (27.0)

Net cash used in investing activities                                                                                                                                     (36.1)                (55.7)

Cash flows from financing activities
Issue costs in respect of debt facility                                                                                                                                                 –                    (0.4)
Proceeds from share issue                                                                                                                                                                   –                     0.1

Repayment of Crematoria Acquisition Facility                                                                                                                                –                  (15.8)
Payments due under Secured Notes                                                                                                                                            (4.5)                   (8.8)
Payments to restricted bank accounts for repayment of borrowings                                                           15                   (4.6)                       –

Total payments in respect of borrowings                                                                                                                                    (9.1)                (24.6)
Dividends paid to shareholders on Ordinary Shares                                                                                          7                 (12.2)                (12.2)

Net cash used in financing activities                                                                                                                                     (21.3)                (37.1)

Net increase/(decrease) in cash and cash equivalents                                                                                                      1.0                  (17.8)

Cash and cash equivalents at the beginning of the period                                                                                                    49.0                   66.8

Cash and cash equivalents at the end of the period                                                                                   15                  50.0                   49.0
Restricted cash                                                                                                                                                            15                  16.9                     0.3

Cash and cash equivalents at the end of the period as reported in the 

consolidated balance sheet                                                                                                                              15                  66.9                   49.3

(1)     Maintenance capital expenditure includes vehicle replacement programme, improvements to locations and purchases of other tangible and intangible assets. 

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104 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements
for the 52 week period ended 28 December 2018

1 Accounting policies 

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all periods presented, unless otherwise stated.

Basis of preparation
European law requires that the Group’s consolidated financial statements for the 52 week period ended 28 December 2018 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 52 week period ended
28 December 2018. For the comparative period, the Group’s consolidated financial statements have been prepared for the
52 week period ended 29 December 2017.

The Group’s 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 when the Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee. 

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.

Investment in associated undertakings
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but it is not control or joint control over those policies. 

The Group’s investment in an associate is accounted for using the equity method. The investment is initially recorded at cost and
the carrying amount is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition
date. Goodwill relating to the associate is included in the carrying amount of the investment. The consolidated income statement
reflects the Group’s share of the results of the associate. 

The financial statements of the associate are prepared for the same reporting period as the Group. The Group aligns accounting
policies and makes adjustments where necessary prior to recognising their share in the financial statements.

At each reporting date the Group reviews whether there is any evidence that the investments in associated undertakings is
impaired. Any impairment is recognised within “Share of profit of an associate” in the consolidated income statement. 

Alternative performance measures
The Board believes that whilst statutory reporting measures provide a useful indication of the financial performance of the Group,
additional insight is gained by excluding non-underlying items which comprise certain non-recurring or non-trading transactions.
See financial review on page 45 and alternative performance measures on pages 151 to 153 for further information. 

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.

Dignity plc Annual Report & Accounts 2018  | 105

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1 Accounting policies (continued)

Income from memorial sales is recognised at the point of sale, to the extent that the goods have been supplied. Costs of
maintaining memorials are recognised as incurred.

The Group pays certain disbursements (such as crematoria fees, burial plots, ministers’ fees and doctors’ fees) on behalf of its
clients. These amounts are recovered as part of the invoicing process. However, these amounts are not included within net
revenues as they are simply passed on to the customer at cost.

The accounting policies for recognising turnover for pre-arranged funeral plans are stated below.

The Group views the UK and Channel Islands 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, allowing for cancellations, where the Group will be involved in the fulfilment of the
funeral. This expectation is reviewed annually. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

1 Accounting policies (continued)

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 services 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.

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 after taxation by the weighted average number of
shares in issue during the period. Diluted EPS is calculated by dividing profit after taxation by the weighted average number of
shares in issue during the period increased by the effects of all dilutive potential Ordinary Shares (primarily share options).
Underlying Earnings per Ordinary Share is calculated by dividing the underlying profit after tax by the weighted average number
of shares in issue during the period.

Fair value measurement
The Group 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 amortisation and provisions for 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.

Intangible assets – non-compete contracts
Non-compete contracts arising from business combinations are capitalised at their fair value, which is calculated as the present
value of any consideration paid discounted at the Group’s cost of capital.

All costs are amortised over the term of the relevant agreement on a straight line basis.

Intangible assets – software
Where computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible
asset. Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring into use the
specific software.

Dignity plc Annual Report & Accounts 2018  | 107

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1 Accounting policies (continued)

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 in 2016, 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 is being amortised over the remaining period of operation.

Investment in financial assets
Investments in financial assets are initially recognised at fair value and subsequently measured at fair value with movements
recognised through other comprehensive income unless there is objective evidence of impairment in which case the movement
will be recognised through the income statement.

On derecognition of an investment in financial asset any changes in fair value previously recognised are reversed through equity
reserves to bring the asset back to its original cost.

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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

1 Accounting policies (continued)

All other leases are ‘operating leases’ and the relevant annual rentals, net of any incentives received from the lessor, are charged
to the income statement on a straight line basis over the period of the lease. 

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. 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, net of the amortisation or depreciation that would have
been charged. Any impairment loss recognised for goodwill will not be reversed. 

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.

Changes in the present value of the defined benefit obligation resulting from plan amendments, curtailments or one off
adjustments such as GMP equalisation are recognised immediately in the consolidated income statement as a past service cost. 

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.

Dignity plc Annual Report & Accounts 2018  | 109

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1 Accounting policies (continued)

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.

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 (2017: 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 
The preparation of financial statements in accordance with IFRS requires management to make estimates, assumptions and
judgements in certain circumstances that affect reported amounts. The most sensitive estimates affecting the financial
statements are detailed below:

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. See note 21(c) for further details.

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 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.

Funeral services goodwill impairment assessment
Performing the annual impairment assessment for goodwill requires an estimation of the value-in-use of the cash generating
units to which the goodwill has been allocated. The value-in-use calculation requires the use of estimates including those in
respect of future cash flows, growth rates and an appropriate discount rate. See note 9 for further details.

Recoverable value of investments in associated undertakings
The ability to recover the carrying value of the investment in associated undertakings is subject to uncertainty due to the
investment being in its formative stages. Whilst the Group considers the potential value of the investment exceeds the carrying
value, there a number of potential outcomes over the next 12 months which the Group can influence but not control, which
could result in partial or full provision being required against the investment. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

1 Accounting policies (continued)

Critical accounting 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 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. 

IFRS 10 consideration                                                                Analysis
Power over the investee. Power arises when                         Dignity has no voting rights over the Trusts or any rights to direct the
the investor has existing rights that gives them                    activities of the Trusts. Whilst Dignity has the power to appoint or
the ability to direct the relevant activities of the                    remove trustees, legislation requires the majority of trustees to be
investee, being those activities which influence                    independent of Dignity.
the returns achieved by the investee.           
                                                                                                           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                Dignity receives an allowance for the marketing of the plans and for the 
returns from its involvement with the investee.                    performance of a funeral. From time to time Dignity may receive a

surplus from the Trusts. 

                                                                                                           Ultimately Dignity’s return is wholly dependent on the investment

performance of the Trusts. 

The investor has the ability to use its power                          A majority of the Trustees are required, by legislation, to be independent
over the investee to affect the amount of the                        of Dignity and therefore Dignity does not, and cannot, control the actions
investor’s returns.                                                                          of the Trustees.

                                                                                                           The investment strategy is set, implemented and monitored by the

Trustees. Consequently, Dignity does not have the power to affect the
amount of its returns.

In the event that new trusts are acquired as part of business combinations in the period, the Directors consider the terms and
conditions to determine whether non-consolidation is appropriate.

Standards, amendments and interpretations effective in 2018
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 2018 or later periods but which the Group has not early adopted:

IFRS 15, Revenue from Contracts with Customers
In its 2019 financial statements, the Group will adopt IFRS 15, issued by the International Accounting Standards Board. IFRS 15
establishes principles for reporting the nature, amount and timing of revenue arising from contracts with customers and
replaces IAS 18, Revenue Recognition. The Group’s intention is to apply the modified retrospective approach upon adoption of
the standard. This approach will mean that the Group will not restate comparative periods but will record a cumulative transition
adjustment to equity within opening reserves on 29 December 2018. The Group has performed a detailed analysis in order to
establish the impact of IFRS 15 on the Group’s accounting policy for revenue recognition and to quantify this impact. 

Dignity plc Annual Report & Accounts 2018  | 111

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1 Accounting policies (continued)

Adoption of IFRS 15 will result in a change in accounting policy in respect of income received related to pre-arranged funeral
plans (“pre-need”). The Group will no longer separately recognise revenue for pre-need marketing activities at the inception of a
pre-need plan and for the performance of the funeral on the utilisation of the plan. Under IFRS 15 all pre-need activities are
deemed to relate to a single performance obligation, being the delivery of a funeral, with all revenue associated with the plan
being recognised on the performance of the funeral. 

As a result, marketing allowances received at the inception of a pre-need plan will be held as deferred income in the
consolidated balance sheet up to the time the funeral is performed. Having deferred all the marketing allowances received, 
it is no longer necessary to maintain a separate cancellation provision in this respect. This represents a change from the current
approach applied under IAS 18, where marketing allowances are recognised as revenue at the inception of a pre-need plan.
IFRS 15 also requires that the directly attributable costs associated with the inception of a pre-need plan, in the form of
commissions payable either to employees or third parties, are also held as deferred costs in the consolidated balance sheet up
to the time the associated funeral is performed. Once the funeral is performed both deferred marketing allowance revenues and
deferred commission costs will be released and recognised in the income statement. 

The timing of revenue recognised by the Group from the Trusts for the ongoing administration services performed on behalf 
of the Trusts is unaffected by IFRS 15, with revenue continuing to be recognised in the period to which it relates.  

The Group’s initial assessment of the expected impact of IFRS 15 to be recorded as a cumulative transition adjustment to 
equity on 29 December 2018 will be a net reduction of £81.8 million to retained earnings, which reflects the recognition of
£201.2 million of deferred revenue in respect of marketing allowances, the derecognition of the £0.8 million cancellation
provision and £101.8 million of deferred costs in respect of commissions paid and a deferred tax adjustment of £16.8 million. 

There are no further adjustments required on the adoption of IFRS 15.

The Group will present its revised accounting policy, updated for the application of IFRS 15, in its interim results report for the
26 week period ended 28 June 2019.

IFRS 9, Financial Instruments
This standard is effective for accounting periods beginning on or after 1 January 2018 and will therefore impact the Group’s 2019
financial results. The impact of this standard is currently being assessed however, it will not have a material impact on the Group
due to the nature of the Group’s financial instruments. 

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 £220 million at the
end of 2018. 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. Guidance on the corporation tax legislation was enacted on 12 February 2019 and therefore the tax impact of
IFRS 16 on the financial statements is currently being considered. The Group is also collating all the necessary historical data for
each lease to complete its analysis. The Group has also identified appropriate software to support its implementation of IFRS 16. 

Other
IAS 12, Income taxes. Amendments to IAS 12, effective 1 January 2019 and will therefore impact on the Group’s 2020 Annual
Report. The amendment clarifies that the income tax consequences of dividends on financial instruments classified as equity
should be recognised according to where the past transactions or events that generated distributable profits were recognised.
This is not expected to have a material impact on the Group. 

IAS 19, Employee benefits. Amendments to IAS 19, effective 1 January 2019 and will therefore impact on the Group’s 2020
Annual Report. The amendment addresses the accounting when a plan amendment, curtailment or settlement occurs during 
a reporting period. This amendment is not expected to have a material impact on the Group. 

IAS 23, Borrowing costs. Amendments to IAS 23, effective 1 January 2019 and will therefore impact on the Group’s 2020 Annual
Report. The amendment clarifies that if a specific borrowing remains outstanding after the related qualifying asset is ready for its
intended use or sale, it becomes part of general borrowings. This is not expected to have a material impact on the Group. 

The Group’s securitisation documents contemplate accounting policy changes and provide a mechanism that ensure covenant
calculations are not materially impacted to the detriment of either the Group or Noteholders.

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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
112 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

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 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 2019 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 28 December 2018 the actual ratio was 2.55 times
(2017: 3.24 times). 

Capital risk management 
The Group’s objective under managing capital is to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and repay holders of Secured Notes. It also aims to reduce its cost of capital by maintaining an
optimal capital structure. The Group’s capital comprises equity and net debt as set out in note 24. The Group’s principal source of
long-term debt financing are the Secured A Notes, rated A by both Fitch and Standard & Poor’s and the Secured B Notes rated
BBB- and BB 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 three 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.

Dignity plc Annual Report & Accounts 2018  | 113

3 Revenue and segmental analysis (continued)

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 non-underlying items as defined on page 151. 

The revenue and operating profit/(loss), by segment, was as follows: 

                                                                                                                                                                Underlying                                    
                                                                                                                                                     operating profit/               Underlying
                                                                                                                                                              (loss) before            depreciation                Underlying                                    
                                                                                                                                                     depreciation and                             and     operating profit/      Non-underlying                 Operating
                                                                                                                                Revenue           amortisation           amortisation                           (loss)                         items              profit/(loss)
52 week period ended 28 December 2018                          £m                               £m                               £m                               £m                              £m                               £m

Funeral services                                                                   214.9                   75.0                 (12.8)                  62.2                   (7.4)                 54.8
Crematoria                                                                              78.0                   44.9                    (4.6)                  40.3                   (0.7)                 39.6
Pre-arranged funeral plans                                                 22.7                     2.8                         –                     2.8                   (0.2)                    2.6
Central overheads                                                                       –                 (23.5)                  (1.6)                (25.1)                  (5.6)                (30.7)

Group                                                                                     315.6                   99.2                 (19.0)                  80.2                 (13.9)                 66.3
Finance costs                                                                                                                                                         (26.0)                       –                 (26.0)
Finance income                                                                                                                                                         0.2                        –                     0.2

Profit before tax                                                                                                                                                      54.4                 (13.9)                 40.5
Taxation                                                                                                                                                                   (11.5)                   2.5                    (9.0)

Underlying earnings for the period                                                                                                                   42.9                                                     
Non-underlying items                                                                                                                                                                    (11.4)                         

Profit after taxation                                                                                                                                                                                                     31.5

Earnings per share for profit attributable to equity shareholders
– Basic (pence)                                                                                                                                                      85.8p                                           63.0p
– Diluted (pence)                                                                                                                                                                                                       63.0p

                                                                                                                                                                  Underlying                                    
                                                                                                                                                        operating profit/                 Underlying
                                                                                                                                                               (loss) before              depreciation                 Underlying                                    
                                                                                                                                                       depreciation and                              and       operating profit/        Non-underlying                   Operating
                                                                                                                                  Revenue              amortisation              amortisation                            (loss)                          items                profit/(loss)
52 week period ended 29 December 2017                               £m                               £m                               £m                               £m                              £m                               £m

Funeral services                                                                   221.8                   91.7                  (12.2)                  79.5                    (2.5)                  77.0
Crematoria                                                                              74.0                   43.9                    (3.9)                  40.0                    (1.8)                  38.2
Pre-arranged funeral plans                                                 28.2                     8.0                         –                     8.0                    (0.2)                    7.8
Central overheads                                                                       –                  (21.9)                   (1.0)                 (22.9)                   (2.1)                (25.0)

Group                                                                                     324.0                121.7                  (17.1)               104.6                    (6.6)                  98.0
Finance costs                                                                                                                                                          (26.9)                       –                  (26.9)
Finance income                                                                                                                                                         0.1                        –                     0.1

Profit before tax                                                                                                                                                      77.8                    (6.6)                  71.2
Taxation                                                                                                                                                                   (13.8)                    0.4                  (13.4)

Underlying earnings for the period                                                                                                                   64.0                                                     
Non-underlying items                                                                                                                                                                       (6.2)                          

Profit after taxation                                                                                                                                                                                                     57.8

Earnings per share for profit attributable to equity shareholders                                                                     
– Basic (pence)                                                                                                                                                    128.3p                                        115.8p
– Diluted (pence)                                                                                                                                                                                                     115.6p

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114 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

4 Net finance costs 

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Finance costs                                                                                
Secured Notes                                                                                                                                                                                   24.1                   24.4
Amortisation of issue costs                                                                                                                                                                  –                     0.1
Crematoria Acquisition Facility                                                                                                                                                            –                     0.4
Other loans                                                                                                                                                                                           1.2                     1.3
Net finance cost on retirement benefit obligations (note 28)                                                                                                  0.6                     0.6
Unwinding of discounts                                                                                                                                                                    0.1                     0.1

Finance costs                                                                                                                                                                                   26.0                   26.9

Finance income                                                                            
Bank deposits                                                                                                                                                                                     (0.2)                   (0.1)

Finance income                                                                                                                                                                                (0.2)                   (0.1)

Net finance costs                                                                                                                                                                           25.8                   26.8

5 Profit before tax 

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
Analysis by nature                                                                                                                                                                                                                                           £m                               £m

The following items have been included in arriving at profit before tax:                              
Staff costs (note 27)                                                                                                                                                                       107.2                102.7
Cost of inventories recognised as an expense (included in cost of sales)                                                                          17.5                   16.7
Depreciation of property, plant and equipment – owned assets (note 10)                                                                       18.7                   17.0
Amortisation of intangible assets (included in administrative expenses) (note 9)                                                             5.1                     1.9
Operating lease rentals – property                                                                                                                                               12.5                   12.0
Trade receivables impairment (included in administrative expenses) (note 21(c))                                                            2.7                     1.4
Transformation Plan costs(1)                                                                                                                                                             2.7                         –
External transaction costs (included in administrative expenses)(1)                                                                                       0.8                     4.7
Operational review and competition review costs(1)                                                                                                                   2.7                         –
GMP past service cost (note 28)(1)                                                                                                                                                   1.4                         –
Trade name write-off (note 9)(1)                                                                                                                                                       1.1                         –
Loss on sale of fixed assets(1)                                                                                                                                                            0.3                     0.1

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

(1)     Please see the Alternative performance measures on pages 151 to 153 for further details.

During 2018, the Group paid £45,000 of fees to the Group’s auditor, in addition to the amounts given above, in connection with
non-audit services, which are specifically audit related assurance services. See the Audit Committee Report for further details. 

Dignity plc Annual Report & Accounts 2018  | 115

6 Taxation  

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
Analysis of charge in the period                                                                                                                                                                                                       £m                               £m

Current tax – current period                                                                                                                                                            9.6                   13.3
Adjustments for prior period                                                                                                                                                           0.3                    (0.7)

Total corporation tax                                                                                                                                                                          9.9                   12.6

Deferred tax – current period                                                                                                                                                         (0.8)                    2.1
Adjustments for prior period                                                                                                                                                          (0.1)                   (1.3)

Total deferred tax                                                                                                                                                                              (0.9)                    0.8

Taxation                                                                                                                                                                                                 9.0                   13.4

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
Tax on items (credited)/charged to other comprehensive income or equity                                                                                   £m                               £m

Deferred tax (credit)/charge on remeasurement losses on retirement benefit obligations                                           (0.1)                    0.3
Deferred tax charge relating to maturity of option schemes                                                                                                      –                     0.4

Total deferred tax (credited)/charged to other comprehensive income or equity                                                            (0.1)                    0.7

Corporation tax charge relating to retirement benefit obligations                                                                                            –                     0.2
Corporation tax credit relating to maturity of option schemes                                                                                                  –                    (0.5)

Total corporation tax credited to other comprehensive income or equity                                                                              –                    (0.3)

The taxation charge in the period is higher (2017: lower) than the standard rate of corporation tax in the UK of 19.00 per cent
(2017: 19.25 per cent). The differences are explained below:

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Profit before taxation                                                                                                                                                                      40.5                   71.2

Profit before taxation multiplied by the standard rate of corporation

tax in the UK of 19.00% (2017: 19.25%)                                                                                                                                     7.7                   13.7

Effects of:                                                                                         
Adjustments in respect of prior period                                                                                                                                         0.2                    (2.0)
Expenses not deductible for tax purposes                                                                                                                                   1.1                     1.7

Total taxation                                                                                                                                                                                       9.0                   13.4

Under IFRS the tax rate is higher (2017: lower) than the standard UK tax rate of 19.0 per cent (2017: 19.25 per cent) principally
due to the non-deductible expenses and prior period adjustments (2017: adjustments in respect of the prior period offset by
non-deductible expenses). See Financial Review for further details. The Group’s effective tax rate on underlying profits in the
period was 21.2 per cent (2017: 17.7 per cent). The current period underlying effective tax rate is higher due to the effects of
prior year items, option schemes and permanent disallowables, with a tax impact totalling £1.4 million. The Group expects its
future effective tax rate to be approximately one and a half to two per cent above the headline rate of corporation tax. This
translates to an underlying effective rate for 2019 of between 20.5 per cent and 21.0 per cent, between 19.0 per cent and
19.5 per cent in 2020 and between 18.5 per cent and 19.0 per cent in 2021. The Group does not have any provisions for
uncertain tax positions.

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116 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

7 Dividends 

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Final dividend paid: 15.74p per Ordinary Share (2017: 15.74p)                                                                                              7.9                     7.9
Interim dividend paid: 8.64p per Ordinary Share (2017: 8.64p)                                                                                              4.3                     4.3

Dividend on Ordinary Shares                                                                                                                                                    12.2                   12.2

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 £12.2 million, 24.38 pence per share (2017: £12.2 million,
24.38 pence per share).

A final dividend of 15.74 pence per share, in respect of 2018, 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 28 June
2019 provided that approval is gained from shareholders at the Annual General Meeting on 13 June 2019 and will be paid to
shareholders on the register at close of business on 17 May 2019. 

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, including any deferred annual bonus, 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. 

The Group’s underlying measures of profitability exclude non-underlying items as set out on page 151. These items have been
adjusted for in determining underlying measures of profitability as these underlying measures are those used in the day-to-day
management of the business and allow for greater comparability across periods. 

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.

Dignity plc Annual Report & Accounts 2018  | 117

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8 Earnings per share  (continued)

Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below:

                                                                                                                                                                                                                                                                                                              Weighted                                        
                                                                                                                                                                                                                                                                                                                 average                                        
                                                                                                                                                                                                                                                                                                           number of                     Per share
                                                                                                                                                                                                                                                                        Earnings                          shares                        amount
                                                                                                                                                                                                                                                                                   £m                        millions                            pence

52 week period ended 28 December 2018
Underlying profit after taxation and EPS                                                                                                   42.9                  50.0                   85.8

Add: Non-underlying items (net of taxation of £2.5 million)                                                                      (11.4)                                                    

Profit attributable to shareholders – Basic EPS                                                                                       31.5                  50.0                   63.0

Profit attributable to shareholders – Diluted EPS                                                                                   31.5                  50.0                   63.0

52 week period ended 29 December 2017
Underlying profit after taxation and EPS                                                                                                          64.0                  49.9                128.3
Add: Non-underlying items (net of taxation of £0.4 million)                                                                        (6.2)                                                    

Profit attributable to shareholders – Basic EPS                                                                                              57.8                  49.9                115.8

Profit attributable to shareholders – Diluted EPS                                                                                          57.8                  50.0                115.6

9 Goodwill and other intangible assets

                                                                                                                                              Use of third                                                                                 Non-                                                                                           
                                                                                                                                           Trade      party brand                                                                         compete                                                                                           
                                                                                                                                       names(1)                  name                Other(2)           Software      agreements            Sub-total            Goodwill                    Total
                                                                                                                                                £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m

Cost

At 30 December 2016                                                 134.5              3.2              4.7              4.6              0.2          147.2          215.9          363.1
Acquisition of subsidiaries and other

businesses                                                                    17.9                  –                  –                  –                  –            17.9            10.2            28.1
Additions                                                                                 –                  –                  –              1.2                  –              1.2                  –              1.2
Disposal                                                                                  –                  –                  –             (3.3)                 –             (3.3)                 –             (3.3)

At 29 December 2017                                                 152.4              3.2              4.7              2.5              0.2          163.0          226.1          389.1

Acquisition of subsidiaries and other

businesses (note 26(a))                                                2.8                  –                  –                  –                  –              2.8              3.4              6.2
Adjustment to 2017 acquisitions (note 26(a))           (3.7)                 –                  –                  –                  –             (3.7)             3.1             (0.6)
Additions                                                                                 –                  –                  –                  –                  –                  –                  –                  –
Trade name write-off(3)                                                    (1.1)                 –                  –                  –                  –             (1.1)                 –             (1.1)

At 28 December 2018                                                150.4              3.2              4.7              2.5              0.2          161.0          232.6          393.6

Accumulated amortisation

At 30 December 2016                                                          –             (1.4)                 –             (3.4)            (0.2)            (5.0)                 –             (5.0)
Amortisation charge                                                       (1.1)            (0.2)            (0.5)            (0.1)                 –             (1.9)                 –             (1.9)
Disposal                                                                                  –                  –                  –              3.3                  –              3.3                  –              3.3

At 29 December 2017                                                     (1.1)            (1.6)            (0.5)            (0.2)            (0.2)            (3.6)                 –             (3.6)
Amortisation charge                                                       (4.3)            (0.1)            (0.4)            (0.3)                 –             (5.1)                 –             (5.1)

At 28 December 2018                                                   (5.4)            (1.7)            (0.9)            (0.5)            (0.2)            (8.7)                 –             (8.7)

Net book amount at 28 December 2018           145.0              1.5              3.8              2.0                  –          152.3          232.6          384.9

Net book amount at 29 December 2017               151.3              1.6              4.2              2.3                  –          159.4          226.1          385.5

Net book amount at 30 December 2016               134.5              1.8              4.7              1.2                  –          142.2          215.9          358.1

(1)     Trade names arise on the acquisitions of funeral businesses and their fair value is calculated by reference to the estimated incremental cash flows expected to arise by virtue

of the trade name being well-established. There are no individually material trade names that amount to 5 per cent or more of the total net book value.

(2)     As part of the Crematoria Acquisition in 2016, 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.

(3)     During the period, the Group closed the last location trading under a particular trading name. As this trading name had specific intangible assets related to it, they were

required to be written-off.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
118 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

9 Goodwill and other intangible assets (continued)

Impairment tests for goodwill and trade names
As described in note 1, goodwill is subject to an annual impairment test in accordance with IAS 36, Impairment of Assets. For the
purpose of this impairment test goodwill is tested at a business segment level as this is the level at which the return on assets
acquired, including goodwill, is monitored.

The segmental allocation of goodwill is shown below:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Funeral services                                                                                                                                                                              172.1                165.6
Crematoria                                                                                                                                                                                         55.8                   55.8
Pre-arranged funeral plans                                                                                                                                                              4.7                     4.7

                                                                                                                                                                                                            232.6                226.1

The recoverable amount of each segment is based on a value-in-use calculation. 

The value-in-use calculations use cash flow projections based upon the latest annual budget approved by the Board. 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, mix and pricing. Cash flows for all segments beyond the initial 12 month period are extrapolated
using a growth rate of 2.25 per cent (2017: 2.25 per cent), being an estimate of long-term growth rates for impairment review
purposes only, which reflects the expectations of long-term inflation and death rates. The cash flows for each segment are
discounted at a pre-tax rate of 10.25 per cent (2017: 8.5 per cent).

In respect of goodwill other than in respect of the funeral services division the Directors do not consider that a reasonably
possible change in the assumptions used to calculate the value-in-use of the segment would result in any impairment of
goodwill. The headroom for the funeral services division impairment test under the current assumptions used is £136.5 million
(2017: £123.0 million). The discount rate would need to rise to 12.8 per cent (2017: 10.3 per cent), or the long-term growth rate
would need to fall to (0.3) per cent (2017: 0.4 per cent) for the impairment test to result in £nil headroom for this segment. 

On the basis of the above, the review indicated that no impairment arose in any segment (2017: £nil). 

In addition to the Group’s annual goodwill impairment test, given the changes in the funeral market and an increase in the
discount rate to be applied in determining value-in-use, an impairment test was performed in respect of the Group’s trade name
intangibles assets in accordance with the requirements of IAS 36. The performance of this impairment test, which was based on
the same cash flow projections and key assumptions as the goodwill impairment test set out above, indicated that no
impairment arose in respect of any of the Group’s trade name intangible assets.

Dignity plc Annual Report & Accounts 2018  | 119

10 Property, plant and equipment

                                                                                                                                                                                                                                     Plant,
                                                                                                                                               Freehold                                                          machinery,                                                                                
                                                                                                                                               land and                    Leasehold                fixtures and                            Motor                             Work
                                                                                                                                              buildings                      buildings                          fittings                        vehicles                  in progress                              Total
                                                                                                                                                          £m                                  £m                                  £m                                  £m                                 £m                                  £m

Cost                                                                                                                                                                                   

At 30 December 2016                                                        157.6                   50.6                   44.1                   74.6                     9.0                335.9
Additions                                                                                    3.7                     1.2                     3.4                     7.0                  10.9                   26.2
Acquisition of subsidiaries and other businesses           3.1                         –                     0.2                     0.8                        –                     4.1
Disposals                                                                                       –                         –                    (3.0)                   (3.4)                       –                    (6.4)
Reclassification                                                                         4.0                     4.0                     3.4                     0.5                 (11.9)                        –

At 29 December 2017                                                        168.4                   55.8                   48.1                   79.5                     8.0                359.8

Additions                                                                                    4.9                     0.9                     2.1                     6.1                  11.4                   25.4
Acquisition of subsidiaries and other 

businesses (note 26(a))                                                            –                         –                         –                     0.2                        –                     0.2
Disposals                                                                                  (3.1)                   (3.1)                        –                    (4.3)                       –                  (10.5)
Reclassification                                                                         8.5                     4.3                     3.6                     0.1                 (16.5)                        –

At 28 December 2018                                                      178.7                   57.9                   53.8                   81.6                     2.9                374.9

Accumulated depreciation 

At 30 December 2016                                                         (26.4)                (16.8)                (23.9)                 (33.4)                       –               (100.5)
Depreciation charge                                                              (4.0)                   (2.4)                   (4.2)                   (6.4)                       –                  (17.0)
Disposals                                                                                       –                         –                     3.0                     2.7                        –                     5.7

At 29 December 2017                                                         (30.4)                (19.2)                (25.1)                 (37.1)                       –               (111.8)

Depreciation charge                                                              (4.9)                   (2.8)                   (4.3)                   (6.7)                       –                  (18.7)
Disposals                                                                                    3.1                     3.1                         –                     3.5                        –                     9.7

At 28 December 2018                                                       (32.2)                (18.9)                (29.4)                (40.3)                       –               (120.8)

Net book amount at 28 December 2018                  146.5                   39.0                   24.4                   41.3                     2.9                254.1

Net book amount at 29 December 2017                      138.0                   36.6                   23.0                   42.4                     8.0                248.0

Net book amount at 30 December 2016                      131.2                   33.8                   20.2                   41.2                     9.0                235.4

Depreciation expense of £7.8 million (2017: £6.4 million) is included within cost of sales and £10.9 million (2017: £10.6 million) is
included within administrative expenses.

Details of any security 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:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £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 £17.3 million (2017:
£11.7 million) in respect of property, plant and equipment and intangible assets.

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120 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

11 Investments in associated undertakings

In August 2018 and December 2018, the Group increased its investment in Funeral Zone Limited. As a result of the last investment,
the Group has a 23.8 per cent investment. Funeral Zone Limited is a UK online funeral resource for funeral directors and clients and
has been invested in for its intellectual property opportunities. Funeral Zone Limited is a private entity that is not listed on any
public exchange. The registered office of Funeral Zone Limited is 5 Providence Court, Pynes Hill, Exeter, Devon, EX2 5JL. 

The Group holds less than 2 per cent of the voting rights of Funeral Zone Limited but is deemed to have significant influence
principally due to holding a right to appoint a board member who would hold a 25 per cent representation on the Board of
Directors and therefore has the power to participate in the financial and operating policy decisions. The Group also hold a call
option over a further 44.4 per cent of shares. These potential voting rights are not currently taken into consideration when
assessing control as the call option is not considered to be substantive in nature at this time, due to the exercise price of the
option. The option is considered to have a £nil million fair value at 28 December 2018 for the same reason. 

The following table illustrates the summarised financial information of the Group’s investment in Funeral Zone Limited. No
comparative information is provided as the investment was previously classified as an investment in financial asset. See note 12c. 

                                                                                                                                                                                                                                                                                                               28 December
                                                                                                                                                                                                                                                                                                                              2018
                                                                                                                                                                                                                                                                                                                                 £m

Current assets                                                                                                                                                                                                                4.9
Non-current assets                                                                                                                                                                                                        0.1
Current liabilities                                                                                                                                                                                                           (0.2)

Equity                                                                                                                                                                                                                               4.8

Group’s share in equity – 23.8%                                                                                                                                                                                 1.1
Goodwill                                                                                                                                                                                                                           4.9

Group’s carrying amount of investment                                                                                                                                                            6.0

An adjustment of £0.1 million has been included in the above reconciliation reflecting differences in accounting policies. 

Funeral Zone Limited had revenue of £3,000 and a total loss for the period since acquisition of £177,000. The Group’s share of
loss for the period therefore amounted to £42,000 which has not been shown on the face of the Group’s consolidated income
statement.

The Group has considered whether there are any triggers for impairment on the carrying value of the investment as at
28 December 2018 and none have been noted. See note 1 on critical accounting estimates for more information. 

The associate had no contingent liabilities or capital commitments as at 28 December 2018.

12 Non-current financial and other assets 

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                      Note                              £m                               £m

Prepayments                                                                                                                                                                 (a)                    7.3                     7.3
Deferred commissions                                                                                                                                               (b)                    8.4                     6.0
Investment in financial asset                                                                                                                                     (c)                        –                     1.0

                                                                                                                                                                                                              15.7                   14.3

(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. 

(c) Investment in financial asset
At the end of the period, the Group held an investment of £nil million (2017: £1.0 million) in a non-controlling interest in a
business. An additional investment of £0.5 million was made in August 2018 and the fair value was deemed to be cost. Following
a further investment of £4.5 million in December 2018 it was concluded that the Group had significant influence over the
investment and this has now been accounted for and reclassified as investments in associated undertakings. See note 11.

Dignity plc Annual Report & Accounts 2018  | 121

13 Inventories 

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                         2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Materials                                                                                                                                                                                               0.5                     0.3
Finished goods                                                                                                                                                                                    8.0                     7.0

                                                                                                                                                                                                                8.5                     7.3

There were no inventory write-downs in either period. 

14 Trade and other receivables 

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Trade receivables                                                                                                                                                                              21.6                   26.1
Less: provision for impairment (note 21(c))                                                                                                                                (6.9)                   (6.2)

Net trade receivables                                                                                                                                                                       14.7                   19.9
Receivables due from pre-arranged funeral plan trusts (note 29) (1)                                                                                    11.9                   12.1
Prepayments and accrued income                                                                                                                                                5.0                     4.5
Other receivables                                                                                                                                                                                1.3                     1.8

                                                                                                                                                                                                              32.9                   38.3

(1)     Included in this amount is approximately £3.4 million (2017: £2.8 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.

15 Cash and cash equivalents 

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                         2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Operating cash as reported in the consolidated statement of 

cash flows as cash and cash equivalents                                                                                                                          50.0                   49.0
Amounts set aside for debt service payments                                                                                                                          16.9                     0.3

Cash and cash equivalents as reported in the balance sheet                                                                                       66.9                   49.3

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 31 December 2018. Of this amount,
£12.3 million (2017: £0.3 million) is shown within the Statement of Cash Flows as ‘Payments to restricted bank accounts for
finance costs’ and £4.6 million (2017: £nil million) is shown within ‘Financing activities’ as ‘Payments to restricted bank accounts
for repayment of borrowings’.

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122 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

16 Financial liabilities

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                      Note                              £m                               £m

Current                                                                                                                      
Secured A Notes                                                                                                                                                           (a)                    9.3                     4.5

                                                                                                                                                                                         (c)                    9.3                     4.5

Non-current                                                                                                             
Secured Notes                                                                                                                                                              (a)               551.3                560.6
Finance lease obligations                                                                                                                                           (b)                    0.6                     0.6

                                                                                                                                                                                                            551.9                561.2

(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 28 December 2018, £0.2 million (2017: £0.2 million) and £0.4 million (2017: £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 

                                                  2019                     2020                     2021                     2022                     2023                     2024                     2025                     2026                     2027                     2028                     2029
                                                     £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m

June                          4.7              4.9              5.1              5.2              5.4              5.6              5.8              6.0              6.2              6.4              6.7
December               4.8              4.9              5.1              5.3              5.5              5.7              5.9              6.1              6.4              6.6              6.8

Total                         9.5              9.8            10.2            10.5           10.9           11.3            11.7          12.1            12.6            13.0            13.5

                                                                                                                                                                                                         2030                     2031                     2032                    2033                     2034                    Total
                                                                                                                                                                                                            £m                        £m                        £m                        £m                        £m                        £m

June                                                                                                                               6.9              7.2              7.4              7.7              7.9            99.1
December                                                                                                                   7.1              7.3              7.6              7.8              8.1          101.0

Total                                                                                                                            14.0            14.5            15.0            15.5            16.0          200.1

Secured B Notes

                                                  2035                     2036                     2037                     2038                     2039                     2040                     2041                     2042                     2043                     2044                     2045
                                                     £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m                        £m

June                          8.4              8.7              9.1              9.6            10.0            10.5            11.0            11.5            12.1            12.6            13.2
December               8.5              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

                                                                                                                                                                                                                                        2046                     2047                     2048                     2049                    Total
                                                                                                                                                                                                                                          £m                        £m                        £m                        £m                        £m

June                                                                                                                                                 13.8            14.5            15.2            15.9          176.1
December                                                                                                                                     14.2            14.8            15.5            16.2          180.3

Total                                                                                                                                                28.0            29.3            30.7            32.1          356.4

Dignity plc Annual Report & Accounts 2018  | 123

16 Financial liabilities (continued)

(b) Obligations under finance leases
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £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                                                                                                                                                                                     0.4                     0.4

                                                                                                                                                                                                                0.6                     0.6

The finance leases and hire purchase liabilities are secured on the related assets.

(c) Current financial liabilities
The current financial liabilities represent the amounts falling due within one year of the Group’s balance sheet date. 

(d) Changes in liabilities arising from financing activities

                                                                                                                                                                                                  29 December                                                                                       28 December
                                                                                                                                                                                                                 2017                   Cash flow                            Other                               2018
                                                                                                                                                                                                                    £m                               £m                                 £m                                  £m

Current
Secured Notes                                                                                                                                4.5                         –                     4.8                     9.3

Non-current
Secured Notes                                                                                                                           560.6                    (4.5)                  (4.8)               551.3
Finance lease obligations                                                                                                            0.6                         –                        –                     0.6

Total liabilities from financing activities                                                                       565.7                    (4.5)                       –                561.2

                                                                                                                                                                                                  30 December                                                                                     29 December
                                                                                                                                                                                                                 2016                    Cash flow                          Other                            2017
                                                                                                                                                                                                                    £m                               £m                              £m                               £m

Current
Secured Notes                                                                                                                                8.8                         –                    (4.3)                    4.5

Non-current
Secured Notes                                                                                                                           565.1                    (8.8)                    4.3                560.6
Finance lease obligations                                                                                                            0.6                         –                        –                     0.6
Crematoria Acquisition Facility                                                                                                15.8                  (15.8)                       –                         –

Total liabilities from financing activities                                                                       590.3                  (24.6)                       –                565.7

The ‘other’ column includes the effect of reclassification of the non-current portion of Secured Notes and finance lease
obligations to current due to the passage of time and the effect of not yet paid interest on the secured notes. The Group
classifies interest paid as cash flows from operating activities. 

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124 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

17 Trade and other payables 

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
Current                                                                                                                                                                                                                                                                        £m                               £m

Trade payables                                                                                                                                                                                    8.3                     7.6
Tax and social security                                                                                                                                                                       3.1                     2.7
Other current liabilities                                                                                                                                                                      2.1                     1.9
Accruals                                                                                                                                                                                               48.9                   37.5
Deferred income                                                                                                                                                                                 6.5                     8.1

                                                                                                                                                                                                              68.9                   57.8

Non-current

Deferred income                                                                                                                                                                                 0.7                     0.8
Deferred consideration for acquisitions                                                                                                                                       0.1                     0.1
Other non-current liabilities                                                                                                                                                             1.3                     1.4

                                                                                                                                                                                                                2.1                     2.3

Accruals includes interest, payroll and trade accruals. 

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:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Not later than one year                                                                                                                                                                   13.6                   12.7
Later than one year but not more than five years                                                                                                                   41.8                   38.5
More than five years                                                                                                                                                                      164.0                161.8

                                                                                                                                                                                                            219.4                213.0

The non-cancellable operating leases principally relate to leasehold land and buildings.

Sublease payments received in the period amount to £0.4 million (2017: £0.5 million). Total future sublease payments receivable
relating to operating leases amount to £0.5 million (2017: £0.5 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.
The rental expense in respect of contingent rentals was £1.3 million (2017: £1.3 million). 

Dignity plc Annual Report & Accounts 2018  | 125

19 Provisions for liabilities 

                                                                                                                                                                                                                                                                        Onerous              Cancellation
                                                                                                                                                                                                                      Dilapidations                      contracts                     provision
                                                                                                                                                                                                                                          £m                                  £m                                 £m                              Total
                                                                                                                                                                                                                                            (a)                                   (b)                                   (c)                                  £m

At beginning of period                                                                                                                 8.9                     0.1                     1.0                   10.0
Charged to income statement                                                                                                   2.0                         –                     0.2                     2.2
Arising on acquisitions (note 26(a))                                                                                           0.1                         –                        –                     0.1
Released to income statement                                                                                                 (0.1)                        –                        –                    (0.1)
Utilised in period                                                                                                                          (0.3)                        –                    (0.4)                   (0.7)
Amortisation of discount                                                                                                             0.1                         –                        –                     0.1

At end of period                                                                                                                        10.7                     0.1                     0.8                   11.6

Provisions have been analysed between current and non-current as follows:

                                                                                                                                                                                                                                                                                28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Current                                                                                                                                                                                                  1.7                     1.5
Non-current                                                                                                                                                                                          9.9                     8.5

                                                                                                                                                                                                              11.6                   10.0

(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, £1.4 million (2017: £1.2 million), will be
utilised 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 2028.

(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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126 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

20 Deferred tax 

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17 per cent 
(2017: 17 per cent).

The movement on the deferred tax account is as shown below:

                                                                                                                                                                                                                                                                         28 December            29 December 
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

At beginning of period                                                                                                                                                                     30.3                   25.7
(Credited)/charged to income statement (note 6)                                                                                                                     (0.9)                    0.8
Taken to other comprehensive income (note 6)                                                                                                                        (0.1)                    0.3
Taken to equity (note 6)                                                                                                                                                                         –                     0.4
Arising on acquisitions                                                                                                                                                                     (0.1)                    3.1

At end of period                                                                                                                                                                              29.2                   30.3

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               Trade names                            Other                              Total
                                                                                                                                                                                                                                          £m                                  £m                                 £m                                  £m

At beginning of period                                                                                                               13.0                   19.3                     2.8                   35.1
Credited to income statement (note 6)                                                                                  (0.3)                   (0.5)                  (0.1)                   (0.9)
Arising on acquisitions                                                                                                                     –                    (0.1)                       –                    (0.1)

At end of period                                                                                                                        12.7                   18.7                     2.7                   34.1

Deferred tax assets
                                                                                                                                                                                                                                                                       Pensions                            Other                              Total
                                                                                                                                                                                                                                                                                   £m                                 £m                                  £m

At beginning of period                                                                                                                                           (4.1)                   (0.7)                   (4.8)
Charged/(credited) to income statement (note 6)                                                                                           (0.3)                    0.3                         –
Taken to other comprehensive income                                                                                                             (0.1)                       –                    (0.1)
Taken to equity                                                                                                                                                             –                        –                         –

At end of period                                                                                                                                                    (4.5)                  (0.4)                  (4.9)

All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax provision at
28 December 2018 was £29.2 million (2017: £30.3 million).

Other deferred tax liabilities includes capital gains rolled forward and deferred tax on software and leasehold land. Other
deferred tax assets includes option schemes, long service awards and finance leases.

Elements of these deferred tax balances may be payable or 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. 

Dignity plc Annual Report & Accounts 2018  | 127

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20 Deferred tax (continued)

The deferred income tax (credited)/charged to other comprehensive income or charged to equity during the period was as
follows:

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Deferred tax (credit)/charge on remeasurement losses on retirement benefit obligations                                           (0.1)                    0.3

Total (credited)/charged to other comprehensive income                                                                                                      (0.1)                    0.3

Deferred tax charge relating to maturity of option schemes                                                                                                      –                     0.4

Total charged to equity                                                                                                                                                                          –                     0.4

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

                                                                                                                                                                   28 December 2018                                                                                     29 December 2017                                        

                                                                                                                                   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                                       204.8                204.6                214.8                 209.3                209.1                234.9

Secured B Notes – 4.6956%

maturing 31 December 2049                                       356.4                356.0                316.8                 356.4                356.0                451.6

Total                                                                                        561.2                560.6                531.6                 565.7                565.1                686.5

The Secured Notes are held at amortised cost. 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. 

In addition to the above:

(a)  Financial liabilities include finance lease payables of £0.6 million (2017: £0.6 million), which represent the present value of
future minimum lease payments. At 28 December 2018 there is no difference between the nominal value, book value and
fair value of this liability; and

(b)  Financial assets include £nil (2017: £1.0 million) in respect of assets held at fair value. The underlying investment was
accounted for as an asset available for sale in accordance with IAS 39 and was initially measured at the fair value of
consideration paid with subsequent measurement based upon a level 3 fair value estimate. At 29 December 2017 there 
was no difference between the nominal value, book value and fair value of this asset.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
128 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

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.

28 December 2018

                                                                                                                                                                              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)                                                             9.3                     9.6                   15.1                   21.5                505.7                561.2
Interest payable on Secured Notes                                  23.9                   23.5                   34.7                   45.0                360.4                487.5
Finance leases                                                                          0.1                         –                         –                     0.1                     2.4                     2.6

Debt repayments                                                                33.3                   33.1                   49.8                   66.6                868.5             1,051.3
Other financial liabilities                                                      68.8                     0.4                     0.4                     0.7                     0.4                   70.7

                                                                                                102.1                   33.5                   50.2                   67.3                868.9             1,122.0

29 December 2017

                                                                                                                                                                                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)                                                             4.5                     9.3                     9.6                   25.7                516.6                565.7
Interest payable on Secured Notes                                  12.1                   23.9                   23.5                   57.4                382.7                499.6
Finance leases                                                                              –                     0.1                         –                     0.1                     2.5                     2.7

Debt repayments                                                                16.6                   33.3                   33.1                   83.2                901.8             1,068.0
Other financial liabilities                                                      57.7                     0.4                     0.4                     0.8                     0.4                   59.7

                                                                                                   74.3                   33.7                   33.5                   84.0                902.2             1,127.7

The amounts disclosed in the following tables represent the anticipated amortisation profile for the issue costs relating to the
Group’s financial liabilities.

            
            
Dignity plc Annual Report & Accounts 2018  | 129

21 Financial instruments (continued)

                                                                                                                                                                              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                                                  –                         –                         –                         –                     0.6                     0.6

                                                                                                         –                         –                         –                         –                     0.6                     0.6

28 December 2018

                                                                                                                                                                                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                                                  –                         –                         –                         –                     0.6                     0.6

                                                                                                         –                         –                         –                         –                     0.6                     0.6

29 December 2017

(c) Trade receivables 
As at 28 December 2018, £11.2 million of the individual gross trade receivables (2017: £13.0 million) were past due and partially
impaired. A provision for impairment is established based on historical experience. The amount of the provision, as at 
28 December 2018, was £6.9 million (2017: £6.2 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:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

One to six months                                                                                                                                                                              5.0                     6.3
Over six months                                                                                                                                                                                  6.2                     6.7

                                                                                                                                                                                                              11.2                   13.0

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:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

At beginning of period                                                                                                                                                                      (6.2)                   (6.2)
Charged to income statement                                                                                                                                                       (2.7)                   (1.4)
Utilised in period                                                                                                                                                                                 2.0                     1.4

At end of period                                                                                                                                                                                 (6.9)                   (6.2)

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130 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

21 Financial instruments (continued)

(d) Borrowing facilities 
(i)   The Group has the following undrawn committed borrowing facilities available at 28 December 2018, all of which were at

floating interest rates, in respect of which all conditions precedent had been met at that date:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                         2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Expiring within one year                                                                                                                                                                    5.0                         –
Expiring between one and two years                                                                                                                                                –                     5.0
Expiring in more than two years                                                                                                                                                105.0                105.0

                                                                                                                                                                                                            110.0                110.0

£55.0 million (2017: £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 (2017: £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. 

The Group has a £50 million Revolving Credit Facility (‘RCF’), provided by the Royal Bank of Scotland, which is secured against
certain trade and assets held by legal entities outside of the Group’s securitisation structure. 

The facility is available until July 2021, with the option to renew, subject to the bank’s consent at the time, by a further year. The
margin on the facility ranges from 150 to 225 basis points over LIBOR depending on the resulting gross leverage. This facility
remains undrawn at the balance sheet date. 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:

                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Not later than one year                                                                                                                                                                     0.1                         –
Later than one year but not more than five years                                                                                                                      0.1                     0.2
More than five years                                                                                                                                                                          2.4                     2.5

                                                                                                                                                                                                                2.6                     2.7
Future finance costs on finance leases                                                                                                                                        (2.0)                   (2.1)

Present value of finance lease liabilities                                                                                                                                        0.6                     0.6

22 Ordinary share capital
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Allotted and fully paid Equity shares        
50,008,939 (2017: 49,931,901) Ordinary Shares of 12 48/143 pence (2017: 12 48/143 pence) each                             6.2                     6.2

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 77,038 shares issued under the 2015 LTIP scheme and
£nil million (2017: £0.1 million) consideration in relation to the nil (2017: 9,079) 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’), including deferred annual bonus, awarded in 2016, 2017 and 2018. 

Dignity plc Annual Report & Accounts 2018  | 131

22 Ordinary share capital (continued)

The total number of outstanding shares subject to options (excluding lapses), the periods in which they were granted and the
periods in which they may be exercised are given below:

                                                                                                                           Exercise price                                                                                                                          2018                           2017                            2016
Year of grant                                                                                                              (pence)                                                  Exercise period                                  Number                     Number                      Number

                                                                                                                        1 December 2019                                                            
2016 – SAYE                                                              2,706.00                         to 31 May 2020                     79,708            113,221            137,563

                                                                                                                                 15 June 2019                                                            
2016 – LTIP                                                                             –                        to 15 June 2026                  123,614            128,082            131,082

                                                                                                                              16 March 2020                                                            
2017 – LTIP                                                                             –                     to 16 March 2027                  122,767            133,942                     n/a

                                                                                                                              23 March 2021                                                            
2018 – LTIP                                                                             –                     to 23 March 2028                  146,157                    n/a                     n/a

23 Share-based payments 

In respect of share-based payment arrangements, total charges to the income statement were £0.9 million (2017: £1.2 million).
The Directors consider that these amounts are not material and hence further detailed disclosures have been omitted.

24 Net debt 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Net amounts owing on Secured Notes per financial statements                                                                                     (560.6)              (565.1)
Add: unamortised issue costs (note 16(a))                                                                                                                                  (0.6)                   (0.6)

Gross amounts owing                                                                                                                                                                  (561.2)              (565.7)

Accrued interest on Secured Notes                                                                                                                                            (12.3)                   (0.3)
Accrued interest on Crematoria Acquisition Facility and Revolving Credit Facility                                                            (0.2)                   (0.2)
Cash and cash equivalents (note 15)                                                                                                                                           66.9                   49.3

Net debt                                                                                                                                                                                          (506.8)              (516.9)

In addition to the above, the consolidated balance sheet also includes finance lease obligations which totalled £0.6 million
(2017: £0.6 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 28 December 2018, the actual ratio was 2.55 times (2017: 3.24 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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132 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

25 Reconciliation of cash generated from operations 
                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Net profit for the period                                                                                                                                                                 31.5                   57.8
Adjustments for:                                                                            
Taxation                                                                                                                                                                                                 9.0                   13.4
Net finance costs                                                                                                                                                                              25.8                   26.8
Loss on sale of fixed assets                                                                                                                                                              0.3                     0.1
Depreciation charges                                                                                                                                                                       18.7                   17.0
Amortisation of intangibles                                                                                                                                                              5.1                     1.9
Movement in inventories                                                                                                                                                                (1.2)                   (1.2)
Movement in trade receivables                                                                                                                                                       5.5                    (0.1)
Movement in trade payables                                                                                                                                                          (1.0)                    0.9
Net pension charges less contribution                                                                                                                                          0.6                     1.2
Trade name write-off                                                                                                                                                                         1.1                         –
Changes in other working capital (excluding acquisitions)                                                                                                     (1.4)                   (6.5)
Employee share option charges (note 23)                                                                                                                                    0.9                     1.2

Cash flows from operating activities                                                                                                                                      94.9                112.5

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 
                                                                                                                                                                                                                                                                                                                              Total 
                                                                                                                                                                                                                                                                                                                                                   provisional 
                                                                                                                                                                                                                                                                                                                                                       fair value
                                                                                                                                                                                                                                                                                                                                                                   £m

Property, plant and equipment                                                                                                                                                                                  0.2
Intangible assets: trade names                                                                                                                                                                                  2.8
Cash acquired                                                                                                                                                                                                                 0.1
Receivables                                                                                                                                                                                                                      0.4
Provisions (note 19)                                                                                                                                                                                                     (0.1)
Other working capital                                                                                                                                                                                                  (0.4)
Deferred taxation                                                                                                                                                                                                         (0.5)

Net assets acquired                                                                                                                                                                                                    2.5
Goodwill arising                                                                                                                                                                                                              3.4

                                                                                                                                                                                                                                           5.9

Satisfied by:                                                                                                              
Cash paid on completion (funded from internally generated cash flows)                                                                                                      5.3
Accrued consideration                                                                                                                                                                                                 0.1
Adjustment to prior year consideration                                                                                                                                                                   0.5

Total consideration                                                                                                                                                                                                     5.9

The Group acquired four funeral locations, all of which occurred in the first half of 2018. 

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 2019. 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.

During 2018, the fair values ascribed to trade names that were acquired as part of 2017 acquisitions were revisited as permitted
under IFRS 3. This has resulted in a reduction in the fair value ascribed to 2017 acquired trade names of £3.7 million, with a
corresponding reduction in related deferred tax liabilities of £0.6 million and an increase in goodwill of £3.1 million.

Each acquisition made followed the Group’s strategy in place at the time of acquisition to acquire such locations that will help the
Group grow and create value for shareholders. Any share transaction acquires 100 per cent of the equity of the entities acquired. 

All acquisitions have been accounted for under the acquisition method. None were individually material and consequently have
been aggregated. The aggregated impact of the acquisitions on the Income Statement for the period is not material. 

Dignity plc Annual Report & Accounts 2018  | 133

26 Acquisitions (continued)

(b) Reconciliation to cash flow statement
                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Cash paid on completion                                                                                                                                                                  5.3                   31.0
Cash paid in respect of prior year acquisitions                                                                                                                           1.2                     0.4
Cash acquired on acquisition                                                                                                                                                         (0.1)                   (3.2)
Cash paid in respect of deferred consideration                                                                                                                          0.1                     0.1

Acquisition of subsidiaries and businesses as reported in the cash flow statement                                                         6.5                   28.3

27 Employees and Directors

                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Wages and salaries                                                                                                                                                                          92.5                   90.0
Social security costs                                                                                                                                                                            8.2                     7.6
Other pension costs (note 28)                                                                                                                                                         5.5                     3.9
Share option charges (note 23)                                                                                                                                                       1.0                     1.2

                                                                                                                                                                                                            107.2                102.7

Key management are considered to be the Board of Directors only. Total key management remuneration in the period was
£3.0 million (2017: £4.2 million), including £0.5 million (2017: £0.5 million) of share option charges. The monthly average number
of people, including Directors, employed by the Group during the period was as follows:

                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                   Number                      Number

Management and administration                                                                                                                                                 221                    200
Funeral services staff                                                                                                                                                                     2,542                 2,574
Crematoria staff                                                                                                                                                                                 380                    378
Pre-arranged funeral plan staff                                                                                                                                                      163                    147

                                                                                                                                                                                                            3,306                 3,299

Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 81 to 89 which form part of
these consolidated financial statements.

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134 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

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:
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Defined contribution schemes                                                                                                                                                        3.4                     3.0

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 2017 and has been updated to 28 December 2018 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 plan closed to future accrual on 28 February 2017, except for members 
of the LGPS sections who continue to accrue benefits. No curtailment charge arose on the scheme closure. Contributions for
ongoing service paid by the employer for 2018 were £0.1 million (2017: £0.3 million of contributions). In addition special
contributions of £2.0 million (2017: £nil million) have been paid to make total contributions for the year £2.1 million
(2017: £0.3 million). 

Following the Lloyds GMP equalisation case in October 2018, which ruled that treatment of men and women be bought in line
for schemes with a guaranteed minimum pension, the Group has been required to recalculate member benefits. This has
resulted in the Group recognising a past service cost of £1.4 million in the current year income statement, representing
approximately 1.1 per cent of the Group’s defined benefit pension liability.  

The principal actuarial assumptions at the balance sheet date were:

                                                                                                                                                                                                                                                                                          2018                           2017
Assumptions                                                                                                                                                                                                                                                                       %                                 %

Discount rate                                                                                                                                                                                     2.80                   2.50
Rate of increase in salaries                                                                                                                                                             2.45                   2.35
Rate of increase in payment of post April 1997 pensionable service                                                                                  3.30                   3.25
Rate of increase in payment of post April 2005 pensionable service                                                                                  2.25                   2.25
RPI price inflation assumption                                                                                                                                                      3.45                   3.35
CPI price inflation assumption                                                                                                                                                      2.45                   2.35

The demographic assumptions used include rates for mortality which, for example, lead to an average projected life expectancy 
of 20.3 (2017: 20.4) years for male members and 25.6 (2017: 25.6) years for female members currently aged 65 and of 21.2
(2017: 21.4) years from age 65 for male members and 26.8 (2017: 26.8) 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:

                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Fair value of plan assets                                                                                                                                                               103.5                111.9
Present value of funded obligations                                                                                                                                        (128.7)              (135.9)

Net obligation recognised in the balance sheet                                                                                                               (25.2)                (24.0)

Dignity plc Annual Report & Accounts 2018  | 135

28 Pension commitments (continued)

Analysis of amount charged to income statement in respect of defined benefit schemes
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Current service cost included within cost of sales (staff costs)                                                                                      0.2                     0.4

Administration expenses paid by the scheme                                                                                                                      0.5                     0.5

Interest costs less interest income included within net finance cost                                                                          0.6                     0.6

Past service costs                                                                                                                                                                             1.4                         –

Analysis of fair value of plan assets
                                                                                                                                                                                                                                  2018                                                                 2017 

                                                                                                                                                                                                                    £m                                     %                              £m                                 %

Equity and diversified growth funds                                                                                      56.2                   54.3                  61.5                   55.0
Debt                                                                                                                                                46.5                   44.9                  48.5                   43.3
Cash                                                                                                                                                  0.8                     0.8                     1.9                     1.7

Fair value of plan assets                                                                                                      103.5                 100.0                111.9                100.0

At 28 December 2018 and 29 December 2017 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:
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Present value of obligation at beginning of period                                                                                                              (135.9)              (133.8)
Current service cost                                                                                                                                                                          (0.2)                   (0.4)
Past service cost – GMP equalisation                                                                                                                                           (1.4)                       –
Interest cost                                                                                                                                                                                        (3.3)                   (3.5)
Benefits paid                                                                                                                                                                                        6.7                     4.5
Contributions by participants                                                                                                                                                              –                    (0.2)
Remeasurement gains/(losses) – financial                                                                                                                                   6.1                    (4.5)
Remeasurement gains – demographics                                                                                                                                       0.8                     3.2
Remeasurement losses – experience                                                                                                                                           (1.5)                   (1.2)

Present value of obligation at end of period                                                                                                                   (128.7)              (135.9)

Changes in the fair value of plan assets are as follows:
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Fair value of plan assets at beginning of period                                                                                                                     111.9                107.9
Interest income on plan assets                                                                                                                                                       2.7                     2.9
Contributions by Group                                                                                                                                                                    2.1                     0.3
Contributions by participants                                                                                                                                                              –                     0.2
Benefits paid                                                                                                                                                                                       (6.7)                   (4.5)
Administration expenses paid by the scheme(a)                                                                                                                         (0.3)                   (0.6)
Remeasurement (losses)/gains                                                                                                                                                      (6.2)                    5.7

Fair value of plan assets at end of period                                                                                                                           103.5                111.9

(a)     Administration expenses paid by the scheme includes £0.2 million credited (2017: £0.1 million charged) to other comprehensive income.

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136 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

28 Pension commitments (continued)

Analysis of the movement in the balance sheet obligation
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

At beginning of period                                                                                                                                                                   (24.0)                (25.9)
Total expense as above charged to the income statement                                                                                                    (2.7)                   (1.6)
Remeasurement (losses)/ gains and administration expenses (charged)/credited 

to other comprehensive income                                                                                                                                               (0.6)                    3.2
Contributions by Group                                                                                                                                                                    2.1                     0.3

At end of period                                                                                                                                                                             (25.2)                (24.0)

The actual return on plan assets was £(3.5) million (2017: £8.6 million).
                                                                                                                                                                                                                                                                                                                          (Increase)/  
                                                                                                                                                                                                                                                                                                                                                   decrease in 
                                                                                                                                                                                                                             Liabilities                            Assets                          Deficit                           deficit
Change in assumptions                                                                                                                                                     £m                                  £m                                 £m                                  £m

No change                                                                                                                                 (128.7)               103.5                 (25.2)                       –
0.25% rise in discount rate                                                                                                    (122.7)               103.5                 (19.2)                    6.0
0.25% fall in discount rate                                                                                                     (135.3)               103.5                 (31.8)                  (6.6)
0.25% rise in inflation                                                                                                             (132.5)               103.5                 (29.0)                  (3.8)
0.25% fall in inflation                                                                                                              (124.8)               103.5                 (21.3)                    3.9

The above sensitivity analysis has been determined by applying the results of a fully accurate sensitivity analysis as at 6 April 2017
to the value placed on the Scheme liabilities as at 28 December 2018, assuming that the proportionate impact of the change in
assumptions would be the same. It is therefore approximate as it does not allow for the impact of plan experience since 
6 April 2017. The same approach was used for the sensitivity analysis undertaken for the period ending 29 December 2017. 

Analysis of present value of scheme liabilities                                                                                                                                                              2018                            2017
Active members(a)                                                                                                                                                                             36%                   37%
Deferred pensioners                                                                                                                                                                       24%                   25%
Current pensioners                                                                                                                                                                          40%                   38%
Average duration of liabilities                                                                                                                                            18.5 years        18.5 years

(a)     Active members are members of the Scheme who are still employed by the Group. 

Scheme characteristic
The scheme is a final salary defined benefit scheme which was closed to new entrants on 1 October 2013 and ceased future
accrual to all members except those in the LGPS sections on 28 February 2017. 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 2017.

The annual commitment for deficit contributions is £1,700,000 per annum. These annual contributions are expected to meet the
deficit on the funding basis by 31 March 2024 based on an assumption of investment returns of 4.5 per cent per annum.

In addition, the employees of the LGPS Section currently contribute to the plan in line with the rates set out in the Plan Rules and
the expected employer contributions for the 52 week period ended 27 December 2019 are £45,720 in order to fund future
service accrual. 

The expenses of administering the plan and levies required by the Pensions Protection Fund and the Pensions Regulator are
currently met by the Scheme. The Group contributes an additional £450,000 per annum in order to fund these expenses.

Dignity plc Annual Report & Accounts 2018  | 137

28 Pension commitments (continued)

Funding Risks
The assets quoted are comprised as follows:

                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Assets held by investment managers                                                                                                                                       102.7                110.7
Balance of the Trustees’ bank account                                                                                                                                          0.8                     1.2

Total                                                                                                                                                                                                  103.5                111.9

The scheme’s investment strategy is to de-risk the assets relative to the liabilities over time using a dynamic trigger based 
de-risking framework. The approach taken relates the asset allocation to the Scheme’s funding position on a low-risk 
“self-sufficiency” basis. The principles are to target to achieve full funding on the self-sufficiency basis by 2036; to reduce funding
level volatility by reducing un-hedged exposures (including the use of liability driven investments); and to monitor the progress in
the funding level and to capture improvements by opportunistically de-risking when circumstances permit. The latter is achieved
by switching investments from growth assets to matching assets as the funding level improves. It is recognised that although
investing partly in growth assets is necessary to meet the return expectations in pursuit of funding level improvements, this
increases the risk of a shortfall in returns relative to that required to cover the scheme’s liabilities.

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. 

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.

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138 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

29 Pre-arranged funeral plans (continued)

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 2019 and beyond, gradually
resulting in a portfolio in the following profile:

                                                                                                                                                                                                         Example investment types                                                                                       Target (%)

Defensive investments                                                                                           Index linked gilts and corporate bonds                               18
Illiquid investments                                                                                                  Private investments                                                                 16
Core growth investments                                                                                       Equities                                                                                        23
Growth fixed income and alternative investments                                          Property funds and emerging market debt                       43

The Trusts’ investment strategies are expected to provide returns in excess of inflation in the longer-term but will, however,
potentially result in greater volatility year-on-year in the reported value of the Trusts’ assets. 

The Trustees have advised that the market value of the assets of the pre-arranged funeral plan trusts were approximately
£928 million at 28 December 2018 (2017: approximately £940 million) in respect of 308,000 (2017: 306,000) active pre-arranged
funeral plans. 134,000 (2017: 102,000) 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 44,000 (2017: 42,000) 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 28 September 2018
(2017: 29 September) using assumptions determined by the Trustees. Actuarial liabilities in respect of the pre-arranged funeral
plan trusts have increased to £899.9 million as at 28 September 2018 (2017: £877.2 million). The corresponding market value of
the assets of the pre-arranged funeral plan trusts was £932.9 million (2017: £904.5 million) as at the same date. Consequently
the actuarial valuations recorded a total surplus of £33.0 million at 28 September 2018 (2017: surplus of £27.3 million). The
Group considers these to be prudent assumptions. If the valuation had been performed using a discount rate equal to the 
long-term investment strategy target of the Trustees, then the valuations would have reported an aggregate surplus of
approximately £160 million (2017: £160 million).

Nonetheless, the Trustees have advised that the Trusts hold assets of approximately £3,000 (2017: £3,100) per active plan at the
balance sheet date. On average the Group received approximately £2,700 (2017: £2,600) 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 £15 million (2017: £17 million) of net 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). 

Transactions also include: 
•  Receipts from the Trusts in respect of cancellations by existing members; and

•  Reimbursement by the Trusts of expenses paid by the Group on behalf of the respective Trusts.

Dignity plc Annual Report & Accounts 2018  | 139

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29 Pre-arranged funeral plans (continued)

Transactions are summarised below:

                                                                                                                                                                                                                                                                                                                                 Amounts due to the 
                                                                                                                                                                                                                            Transactions during the period                                Group at the period end

                                                                                                                                                                                                                 2018                            2017                            2018                            2017
                                                                                                                                                                                                                    £m                               £m                              £m                               £m

Dignity Limited Trust Fund                                                                                                          0.2                     0.3                        –                         –
National Funeral Trust                                                                                                               49.3                   49.0                     8.5                     8.2
Trust for Age UK Funeral Plans                                                                                                33.7                   35.0                     3.4                     3.9
Recent Trusts                                                                                                                                  1.3                     3.7                        –                         –

Total                                                                                                                                                84.5                   88.0                  11.9                   12.1

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

                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Funeral services revenue                                                                                                                                                                48.4                   45.6
Pre-arranged funeral plans revenue                                                                                                                                            21.7                   26.7

In addition to the transactions recognised within revenue in the table above, there were £14.4 million (2017: £15.7 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 all 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); 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
140 | Dignity plc Annual Report & Accounts 2018  

Notes to the financial statements continued
for the 52 week period ended 28 December 2018

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 28 December 2018, the amount outstanding in relation to these borrowings was £561.2 million (2017: £565.7 million).

(b) £50,000,000 Revolving Credit Facility
As a consequence of the legal structure of the £50 million Revolving Credit Facility:

•  Dignity Funerals No. 3 Limited, Dignity Holdings No. 3 Limited, Dignity (2008) Limited, Dignity Crematoria Limited and Dignity

Crematoria No.2 Limited have each granted NatWest (acting through its agent, the Royal Bank of Scotland plc (‘NatWest’)) fixed
and floating charges over its assets and undertakings; 

•  Dignity Funerals No. 3 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 Arthur J Nash Limited, T J Brown & Sons Limited and Aberdeen
Funeral Directors Limited;

•  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;

•  Dignity Holdings No. 3 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 Funerals No. 3 Limited; and

•  Dignity Crematoria 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 No.2 Limited. 

31 Related party transactions 
There are no related party transactions for either period.

32 Investments 
A list of all entities included within the financial information are included in note C9 to the Company’s financial statements.

33 Post balance sheet events 
There were no post balance sheet events. 

Dignity plc Company balance sheet
as at 28 December 2018

Dignity plc Annual Report & Accounts 2018  | 141

                                                                                                                                                                                                                                                                         28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                      Note                              £m                               £m

Fixed assets
Investments                                                                                                                                                                  C2                149.1                148.2

Current assets
Trade and other receivables                                                                                                                                    C3                304.7                301.4
Cash                                                                                                                                                                                                     40.6                   26.9

Total current assets                                                                                                                                                                    345.3                328.3

Creditors: amounts falling due within one year                                                                                           C4                 (14.7)                (17.5)

Net current assets                                                                                                                                                                       330.6                310.8

Total assets less current liabilities                                                                                                                                        479.7                459.0

Net assets                                                                                                                                                                                       479.7                459.0

Capital and reserves
Called up share capital                                                                                                                                              C5                     6.2                     6.2
Share premium account                                                                                                                                                                 12.4                   11.1
Capital redemption reserve                                                                                                                                                         141.7                141.7
Other reserves                                                                                                                                                                                     2.7                     3.2
Retained earnings                                                                                                                                                                          316.7                296.8

Total equity                                                                                                                                                                                    479.7                459.0

The Company has taken advantage of the exemption permitted by section 408 of the Companies Act 2006 not to publish its
individual profit and loss account and related notes. The Company made a profit attributable to the equity shareholders of
£32.1 million in the period (2017: £27.5 million). 

The financial statements on pages 141 to 148 were approved by the Board of Directors on 13 March 2019 and were signed on its
behalf by:

M K McCollum                         S L Whittern
Chief Executive                          Finance Director

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142 | Dignity plc Annual Report & Accounts 2018  

Dignity plc Company statement of changes in equity
for the 52 week period ended 28 December 2018

                                                                                                                                              Ordinary                             Share                          Capital
                                                                                                                                                     share                     premium                redemption                             Other                      Retained                                        
                                                                                                                                                   capital                        account                         reserve                        reserves                      earnings                              Total
                                                                                                                                                          £m                                  £m                                  £m                                  £m                                 £m                                  £m

Shareholders’ equity as at 30 December 2016                6.1                     8.5                141.7                     4.4                281.5                442.2
Profit for the period                                                                    –                         –                         –                         –                  27.5                   27.5
Effects of employee share options                                          –                         –                         –                     1.3                        –                     1.3
Proceeds from share issue                                                    0.1                     2.6                         –                         –                        –                     2.7
Gift to Employee Benefit Trust                                                 –                         –                         –                    (2.5)                       –                    (2.5)
Dividends paid on Ordinary Shares                                        –                         –                         –                         –                 (12.2)                (12.2)

Total transactions with owners, recognised 

directly in equity                                                                   0.1                     2.6                         –                    (1.2)                (12.2)                (10.7)

Shareholders’ equity as at 29 December 2017                6.2                   11.1                141.7                     3.2                296.8                459.0
Profit for the period                                                                    –                         –                         –                         –                  32.1                   32.1
Effects of employee share options                                          –                         –                         –                     0.8                        –                     0.8
Proceeds from share issue                                                       –                     1.3                         –                         –                        –                     1.3
Gift to Employee Benefit Trust                                                 –                         –                         –                    (1.3)                       –                    (1.3)
Dividends paid on Ordinary Shares                                        –                         –                         –                         –                 (12.2)                (12.2)

Total transactions with owners, recognised

directly in equity                                                                      –                     1.3                         –                    (0.5)                (12.2)                (11.4)

Shareholders’ equity as at 28 December 2018           6.2                   12.4                141.7                     2.7                316.7                479.7

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.

Notes to the Dignity plc financial statements
for the 52 week period ended 28 December 2018

Dignity plc Annual Report & Accounts 2018  | 143

C1 Principal accounting policies 

Basis of preparation
The financial statements of the Company for the period ended 28 December 2018 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 52 week period ended 28 December
2018. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
29 December 2017.

Exemptions: 
As permitted by FRS 101 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); 

   – 16 (statement of compliance with all IFRS);

   – 38A (requirement for minimum of two primary statements, including cash flow statements);

   – 38B-D (additional comparative information);

   – 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.

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. 

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 28 December 2018, 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.

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144 | Dignity plc Annual Report & Accounts 2018  

Notes to the Dignity plc financial statements continued
for the 52 week period ended 28 December 2018

C1 Principal accounting policies (continued)

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.

C2 Investments in subsidiary undertakings 

Cost and net book amount                                                                                                                                                                                                                                                     £m

At beginning of period                                                                                                                                                                                             148.2
Additions in respect of share-based payments                                                                                                                                                      0.9

At end of period                                                                                                                                                                                                      149.1

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
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Amounts owed by group undertakings                                                                                                                                    304.7                301.4

Dignity plc Annual Report & Accounts 2018  | 145

C4 Creditors: amounts falling due within one year 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Amounts owed to subsidiary undertakings                                                                                                                               12.4                   14.8
Accruals                                                                                                                                                                                                 1.1                     2.2
Corporation tax                                                                                                                                                                                   1.2                     0.5

                                                                                                                                                                                                              14.7                   17.5

C5 Called up share capital and reserves 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Allotted and fully paid Equity shares
50,008,939 (2017: 49,931,901) Ordinary Shares of 12 48/143p (2017: 12 48/143p) each                                                 6.2                     6.2

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.

C6 Dividends 
                                                                                                                                                                                                                                                                       52 week period         52 week period
                                                                                                                                                                                                                                                                                       ended                         ended 
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

Final dividend paid: 15.74p per Ordinary Share (2017: 15.74p)                                                                                              7.9                     7.9
Interim dividend paid: 8.64p per Ordinary Share (2017: 8.64p)                                                                                              4.3                     4.3

Dividend on Ordinary Shares                                                                                                                                                     12.2                   12.2

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 £12.2 million, 24.38 pence per share (2017: £12.2 million,
24.38 pence per share).

A final dividend of 15.74 pence per share, in respect of 2018, 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 28 June
2019 provided that approval is gained from shareholders at the Annual General Meeting on 13 June 2019 and will be paid to
shareholders on the register at close of business on 17 May 2019. 

C7 Staff costs

Directors’ remuneration
Details of the Directors’ emoluments are included in pages 81 to 89. They received no emoluments in respect of their services to
the Company (2017: nil).

C8 Related party transactions
There are no related party transactions for either period requiring disclosure.

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146 | Dignity plc Annual Report & Accounts 2018  

Notes to the Dignity plc financial statements continued
for the 52 week period ended 28 December 2018

C9 Subsidiary undertakings 

Principal subsidiaries

Company name

Principal activity

Advance Planning Limited                                            Pre-arranged funeral plans
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 2019

Company name

Principal activity

Bayley Brothers Hereford Limited                              Funeral services
G & L Evans Ltd                                                               Funeral services
Graeme Buckle Funeral Services Limited                 Funeral services
Newport & Telford Funeral Service Ltd                     Funeral services
Nicholls Memorials Limited                                          Funeral services
Robert Nicholls Funeral Directors Limited                Funeral services
Wrekin Funeral Service Limited                                   Funeral services

Dignity plc Annual Report & Accounts 2018  | 147

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C9 Subsidiary undertakings (continued)

Dormant companies

A & N Duckworth Limited
A. & G. Huteson Ltd
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
Aberdeen Funeral Directors 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
Arthur J. Nash 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

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 Funerals No.4 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.M. & J. Wait & Co Limited
F. Jennings & Sons 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 Arrangements Online 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
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 Eaton & Sons Holdings Limited
H.Eaton & Sons 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
Inverclyde Funeral Directors Limited*
Invicta Memorials Limited

J H Kenyon Limited
J H Raven Limited
J Hylton & Sons 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*
Jonathan Walker Funeral Directors Limited
Joseph Swift (Funeral Director) Limited
Joseph Tomlinson & Sons Limited
Joslin Memorials (1974) Limited

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
148 | Dignity plc Annual Report & Accounts 2018  

Notes to the Dignity plc financial statements continued
for the 52 week period ended 28 December 2018

C9 Subsidiary undertakings (continued)

Dormant companies (continued)

K.Y. Green 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

MacIntosh & Steven Limited*
Mahony & Ward Limited
Malcolm J Presland Limited
Mannerings Limited
Mason Funeral Service 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
Newco (Crematoria) Limited
Newco (Crematoria) 2 Limited
Newco (Crematoria) 3 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
Nubian Funeral Directors Limited

Oxford Crematorium Limited

Patrick Stonemasons Limited
Personal Choice Funeral Plan Limited
Peter Johnson Funerals Ltd.
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
Spotland Bridge Funeral Services 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

U.F.D. Limited
UK Funerals Limited
UKF Limited

W G Dixon Limited
W G Rathbone Funeral Directors Limited
W H Scott & Son 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
Walkers Funeral Directors 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
WM. Jordan & Son (Funeral Directors) Limited*
Woodfield Park Funeral Home Limited

Yew Holdings Limited

Registered office
*           The registered office for these subsidiaries is 280 Kinfauns Drive, Glasgow, G15 7AR
**        The registered office for these subsidiaries is 14 Scotch Quarter, Carrickfergus, County Antrim, BT38 7DP
***      The registered office for this subsidiary is 59 Kensington Place, St Heller, JE2 3PA, Jersey

All other subsidiary undertakings are registered at 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands, B73 6AP.

Other information
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. 

Financial record*

Dignity plc Annual Report & Accounts 2018  | 149

Summarised consolidated income statement  
                                                                                                                                                                             2018                            2017                            2016                           2015                            2014
                                                                                                                                                                               £m                               £m                               £m                              £m                               £m

Revenue

Funeral services                                                                                             214.9                221.8                 217.8                212.6                184.4
Crematoria                                                                                                         78.0                   74.0                   67.5                  63.1                   55.2
Pre-arranged funeral plans                                                                            22.7                   28.2                   28.3                  29.6                   29.3
                                                                                                                           315.6                324.0                 313.6                305.3                268.9
Underlying operating profit

Funeral services                                                                                                62.2                   79.5                   79.0                  76.8                   66.3
Crematoria                                                                                                         40.3                   40.0                   37.6                  34.6                   29.1
Pre-arranged funeral plans                                                                              2.8                     8.0                     8.5                     7.8                     7.4
Central overheads                                                                                          (25.1)                (22.9)                 (23.4)                (20.5)                (17.9)
                                                                                                                             80.2                104.6                 101.7                  98.7                   84.9

Underlying finance costs                                                                               (26.0)                (26.9)                 (26.9)                (27.0)                (30.6)
Finance income                                                                                                   0.2                     0.1                     0.4                     0.5                     4.2

Underlying profit before tax                                                                          54.4                   77.8                   75.2                  72.2                   58.5
Taxation                                                                                                             (11.5)                (13.8)                 (15.8)                (15.5)                (13.1)
Underlying profit after tax                                                                             42.9                   64.0                   59.4                  56.7                   45.4
Underlying earnings per share (pence)                                                    85.8p              128.3p              119.8p              114.8p                85.8p
Operating profit                                                                                                66.3                   98.0                   97.7                  95.5                   82.9
Profit/(loss) after tax                                                                                        31.5                   57.8                   57.2                  56.9                  (55.0)
Basic earnings/(loss) per share (pence)                                                   63.0p              115.8p              115.3p              115.2p             (104.0p)

Key performance indicators
                                                                                                                                                                             2018                            2017                            2016                           2015                            2014

Total estimated number of deaths in Britain (number)                   599,000            590,000            590,000           588,000            550,000
Number of funerals performed (number)                                            72,300              68,800              70,700              73,500              65,600
Funeral market share** (per cent)                                                           11.9%               11.5%                11.8%               12.3%               11.7%
Number of cremations performed (number)                                      65,200              63,400              59,500              57,700              53,400
Crematoria market share (per cent)                                                        10.9%               10.7%                10.1%                 9.8%                  9.7%
Active pre-arranged funeral plans (number)                                      486,000            450,000            404,000           374,000            348,000
Underlying cash generated from operations (£million)                       101.9                115.4                 121.1                125.2                104.4

Net debt 
                                                                                                                                                                             2018                            2017                            2016                           2015                            2014
                                                                                                                                                                               £m                               £m                               £m                              £m                               £m

Net amounts owing on Secured Notes per 

financial statements                                                                                (560.6)              (565.1)              (573.9)              (586.5)              (594.6)
Add: unamortised issue costs on Secured Notes                                     (0.6)                   (0.6)                   (0.7)                  (0.7)                   (0.7)

Gross amounts owing on Secured Notes per

financial statements                                                                                (561.2)              (565.7)              (574.6)              (587.2)              (595.3)

Net amounts owing on Crematoria Acquisition Facility per 

financial statements                                                                                          –                         –                  (15.7)                (15.7)                (15.6)
Add: unamortised issue costs on Crematoria Acquisition Facility             –                         –                    (0.1)                  (0.1)                   (0.2)

Gross amounts owing                                                                                 (561.2)              (565.7)              (590.4)              (603.0)              (611.1)

Accrued interest on Secured Notes                                                           (12.3)                   (0.3)                   (0.3)                (12.8)                   (5.7)
Accrued interest on Crematoria Acquisition Facility and 

Revolving Credit Facility                                                                               (0.2)                   (0.2)                   (0.1)                  (0.1)                        –
Cash and cash equivalents                                                                            66.9                   49.3                   67.1                  98.8                   86.5

Net debt                                                                                                          (506.8)              (516.9)              (523.7)              (517.1)              (530.3)

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150 | Dignity plc Annual Report & Accounts 2018  

Financial record* continued

Summarised consolidated balance sheet
                                                                                                                                                                             2018                            2017                            2016                           2015                            2014
                                                                                                                                                                               £m                               £m                               £m                              £m                               £m

Non-current assets                                                                                                                                                     
Goodwill and intangible assets                                                                  384.9                385.5                 358.1                328.2                276.5
Property, plant and equipment                                                                  254.1                248.0                 235.4                200.6                192.3
Investment in associated undertakings                                                        6.0                         –                         –                        –                         –
Financial and other assets                                                                             15.7                   14.3                   11.3                  10.3                   10.4

                                                                                                                           660.7                647.8                 604.8                539.1                479.2

Current assets                                                                                                                                                               
Cash and cash equivalents                                                                            66.9                   49.3                   67.1                  98.8                   86.5
Other current assets                                                                                       41.4                   45.6                   43.1                  38.3                   36.5

                                                                                                                           108.3                   94.9                 110.2                137.1                123.0

Total assets                                                                                                    769.0                742.7                 715.0                676.2                602.2

Current liabilities                                                                                              84.7                   70.0                   75.1                  82.7                   60.6
Non-current liabilities                                                                                   618.3                626.3                 643.4                637.4                634.1

Total liabilities                                                                                              703.0                696.3                 718.5                720.1                694.7

Equity attributable to shareholders                                                            66.0                   46.4                    (3.5)                (43.9)                (92.5)

Total equity and liabilities                                                                        769.0                742.7                 715.0                676.2                602.2

NOTES

*       This information has been extracted from the current and previous Annual Reports and accordingly does not constitute audited information.

**     Market share excluding funerals performed in Northern Ireland.

***   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, 2016,
2017 and 2018.

                                                                                                                                                                
                                                                                                                                                                
Alternative performance measures

Dignity plc Annual Report & Accounts 2018  | 151

Non-GAAP measures 

(a) Alternative performance measures
The Board believes that whilst statutory reporting measures provide a useful indication of the financial performance of the
Group, additional insight is gained by excluding non-underlying items which comprise certain non-recurring or non-trading
transactions. 

Non-underlying items
The Group’s underlying measures of profitability exclude:
•  amortisation of acquisition related intangibles;

•  external transaction costs;

•  profit or loss on sale of fixed assets;

•  Transformation Plan costs (see below);

•  operating and competition review costs;

•  one-off costs in respect of the defined benefit pension obligations; 

•  trade name write-off and impairments; and

•  the taxation impact of the above items together with the impact of taxation rate changes.

Non-underlying items have been adjusted for in determining underlying measures of profitability as these underlying measures
are those used in the day-to-day management of the business and allow for greater comparability across periods.

Transformation Plan costs
Given the on-going transformation of the Group’s business will result in significant, directly attributable non-recurring costs over
the period of the Transformation Plan, these amounts are excluded from the Group’s underlying profit measures and treated as
a non-underlying item.

These costs will include, but are not limited to:
•  external advisers’ fees;

•  directly attributable internal costs, including staff costs wholly related to the Transformation (such as the Transformation

Director and project management office); 

•  costs relating to any property openings, closures or relocations;

•  rebranding costs;

•  speculative marketing costs; and

•  redundancy costs.

Calculation of underlying reporting measures
Underlying profit measures (including divisional measures) are calculated as profit before non-underlying items.

Underlying earnings per share is calculated as profit after taxation, before non-underlying items (net of tax), divided by the
weighted average number of Ordinary Shares in issue in the period. 

Underlying cash generated from operations excludes non-underlying items on a cash paid basis. 

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152 | Dignity plc Annual Report & Accounts 2018  

Alternative performance measures continued

Non-GAAP measures (continued)

(b) Non-underlying items 

                                                                                                                                                                                        Funeral                                                      Pre-arranged                         Central                                        
                                                                                                                                                                                        services                 Crematoria              funeral plans                  overheads                            Group
52 week period ended 28 December 2018                                                £m                       £m                       £m                      £m                       £m

Non-trading
Amortisation of acquisition related intangibles                                          4.4                     0.4                     0.1                        –                     4.9
External transaction costs                                                                                0.6                         –                         –                     0.2                     0.8
Loss on sale of fixed assets                                                                              0.3                         –                         –                        –                     0.3
Non-recurring
Transformation Plan costs                                                                                   –                         –                         –                     2.7                     2.7
Operating and competition review costs                                                         –                         –                         –                     2.7                     2.7
GMP past service cost                                                                                       1.0                     0.3                     0.1                        –                     1.4
Trade name write-off                                                                                         1.1                         –                         –                        –                     1.1

                                                                                                                                7.4                     0.7                     0.2                     5.6                   13.9
Taxation                                                                                                                                                                                                                          (2.5)

                                                                                                                                                                                                                                         11.4

52 week period ended 29 December 2017

Amortisation of acquisition related intangibles                                          1.1                     0.5                     0.2                        –                     1.8
External transaction costs                                                                                1.3                     1.3                         –                     2.1                     4.7
Loss on sale of fixed assets                                                                              0.1                         –                         –                        –                     0.1

                                                                                                                                2.5                     1.8                     0.2                     2.1                     6.6
Taxation                                                                                                                                                                                                                           (0.4)

                                                                                                                                                                                                                                           6.2

(c) Non-underlying cash flow items
                                                                                                                                                                                                                                                                          28 December            29 December
                                                                                                                                                                                                                                                                                          2018                            2017
                                                                                                                                                                                                                                                                                             £m                               £m

External transaction costs                                                                                                                                                                 1.7                     2.9
Transformation Plan costs                                                                                                                                                                2.6                         –
Operating and competition review costs                                                                                                                                      2.7                         –

                                                                                                                                                                                                                7.0                     2.9

(d) 2019 alternative performance measures
In 2019, the Group will change its alternative performance measures in two ways:

Adjustment to the definition of underlying operating profit
Non-underlying items in 2019 will also include the Group’s share of profit or loss of associates following the first such investment
by the Group in Funeral Zone Limited in 2018. Given the nature of the investment, as described in note 11, the results of the
investment are not considered by the Directors to be part of their day-to-day management of the business.

The impact of adopting IFRS 15
On adoption of IFRS 15 the Group will no longer separately recognise revenue for pre-need marketing activities, as for revenue
recognition purposes, all pre-need activities are deemed to relate to a single performance obligation, being the performance of a
funeral. All revenues will therefore be recorded within the funeral segment. 

To aid a user of the financial statements, for the foreseeable future, the Group will amend its definition of underlying operating
profit so that the effects of adopting IFRS 15 are removed. 

        
Dignity plc Annual Report & Accounts 2018  | 153

Non-GAAP measures (continued)

Like-for-like annualised operating profit (‘LFL annualised operating profit’)
The Group recognises that its current measure of underlying operating profit and statutory measures of financial performance
will not provide a transparent view of financial performance whilst the Group’s Transformation Plan is being implemented. This
is because such existing measures will not give clarity of the economic impact of changes made part way through the period
(e.g. new investments, location closures and staff changes). The Group therefore plans to introduce an additional alternative
performance measure for the period of the Transformation Plan.

LFL annualised operating profit  will adjust underlying operating profit in such a way as to reflect a best estimate of the Group’s
sustainable profitability into the following year. An explanation of the changes to underlying operating profit in arriving at LFL
annualised operating profit will be provided in each reporting period.

As there have not been any changes in locations or staffing in 2018, LFL annualised operating profit is considered to be the
same as underlying operating profit for 2018.

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154  | Dignity plc Annual Report & Accounts 2018  

Shareholder information 

General enquiries may be addressed to the Company Secretary, Tim George, at the Company’s registered oﬃce. 

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 (textphone for shareholders with hearing diﬃculties 
0371 384 2255) if calling from within the UK, or +44 (0) 121 415 7047 if calling from outside the UK. 

Shareholder communications
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.dignityfunerals.co.uk/corporate.
Shareholders may also choose to receive this notiﬁcation via e-mail with a link to the relevant page on the website. This
approach enables the Company to reduce printing and distribution costs and its impact on the environment. Shareholder
documents are only sent in paper format to shareholders who have elected to receive documents in this way.

Shareholders who wish to receive e-mail notiﬁcation should register online at www.shareview.co.uk click on ‘Open a Portfolio
Account’ 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.dignityfunerals.co.uk/corporate. 

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 13 June 2019, at 11:00am at DLA Piper UK LLP, victoria Square House,
victoria Square, Birmingham, West Midlands, B2 4DL.

Dividends
Dividends are normally paid twice a year. The proposed ﬁnal dividend in respect of the period to 28 December 2018 will be
payable on 28 June 2019 to those shareholders on the register on 17 May 2019.

A dividend reinvestment plan (DRIP) will also be offered.

For those shareholders who prefer not to participate in the DRIP, arrangements can be made to pay your dividends
automatically into your bank or building society. This service has a number of beneﬁts:

• It eliminates chances of your dividend cheque being lost in the post;

• The dividend payment is paid directly into your account on the payment date without the need to wait for a cheque 

to clear; and

• you will help Dignity in reducing its environmental footprint and improve its eﬃciency by reducing printing costs.

If you wish to register for this service, please call Equiniti on 0371 384 2674 to request a dividend mandate form.

Contact details and advisers

Dignity plc Annual Report & Accounts 2018  | 155

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.dignityfunerals.co.uk/corporate

Company Secretary:
Tim George FCIS

Registered Number:
4569346

Registrars:
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA

Tel: +44 (0) 371 384 2674

       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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156  | Dignity plc Annual Report & Accounts 2018  

Financial calendar

13 March 2019

13 June 2019

28 June 2019

Preliminary announcement of 2018 results

Annual General Meeting

2019 financial half year end

28 June 2019 (subject to shareholder approval)

Payment of 2018 final dividend

31 July 2019

25 October 2019

27 December 2019

Announcement of 2019 interim results

Payment of 2019 interim dividend

Financial period end

Any forward-looking statements made in this Annual Report or 
the Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualiﬁed in their entirety
by the factors referred to in this statement. Each forward-looking
statement speaks only as of the date it is made. Except as required 
by its legal or statutory obligations, the Company does not intend to
update any forward-looking statements.

Nothing in this Annual Report or on the Dignity plc investor website
should be construed as a proﬁt forecast or an invitation to deal in the
securities of the Company.

Forward-looking statements
This Annual Report and the Dignity plc investor website may 
contain certain ‘forward-looking statements’ with respect to Dignity
plc (the “Company”) and the Group’s ﬁnancial condition, results of 
its operations and business, and certain plans, strategy, objectives,
goals and expectations with respect to these items and the
economies and markets in which the Group operates.

Forward-looking statements are sometimes, but not always, 
identiﬁed by their use of a date in the future or such words as
‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘should’, ‘will’, ‘would’, ‘expects’,
‘believes’, ‘intends’, ‘plans’, ‘targets’, ‘goal’ or ‘estimates’ or, in each 
case, their negative or other variations or comparable terminology.
Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and uncertainty
because they relate to events and depend on circumstances that 
will occur in the future. Many of these assumptions, risks and
uncertainties relate to factors that are beyond the Group’s ability 
to control or estimate precisely. There are a number of such factors
that could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, changes in
the economies and markets in which the Group operates; changes 
in the legal, regulatory and competition frameworks in which the
Group operates; changes in the markets from which the Group raises
ﬁnance; the impact of legal or other proceedings against or which
affect the Group; changes in accounting practices and interpretation
of accounting standards under IFRS, and changes in interest and
exchange rates.

        
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Dignity plc

4 King Edwards Court
King Edwards Square
Sutton Coldﬁeld
West Midlands B73 6AP

www.dignityfunerals.co.uk/corporate