Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfunerals.co.uk/corporate
Annual Report 2019
Dignity plc Annual Report & Accounts
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Delivering
excellent client
service and
leading through
change
IFC | Dignity plc Annual Report & Accounts 2019
Welcome
to the 2019
Annual Report
Contents
Strategic Report
02 Leading through change
10 Our summary performance in 2019
12 Chairman’s statement
16 Chief Executive’s review
28 Strategy and business model
30 Key performance indicators
34 Operating review
41 Financial review
46 Principal risks and uncertainties
52 Non-financial information statement
53 Corporate and social responsibility
Governance
61 Chairman’s introduction to governance
63 Governance structure
64 Board of Directors
66 Executive Management Team
67 Directors’ statement on corporate governance
72 Audit Committee report
75 Nomination Committee report
77 Report on Directors’ remuneration
92 Directors’ report
Financial Statements
Group Accounts
95 Independent auditors’ report to the members of Dignity plc
104 Consolidated income statement
104 Consolidated statement of comprehensive income
105 Consolidated balance sheet
106 Consolidated statement of changes in equity
107 Consolidated statement of cash flows
108 Notes to the financial statements
Company Accounts
155 Dignity plc Company balance sheet
156 Dignity plc Company statement of changes in equity
157 Notes to the Dignity plc financial statements
165 Financial record
Other Information
167 Alternative performance measures
169 Shareholder information
170 Contact details and advisers
171 Financial calendar
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In this Strategic Report
Dignity plc Annual Report & Accounts 2019 | 01
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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
Our Purpose
• We are committed to meeting our customers’
changing needs and exceeding their
expectations.
See p.18
In a changing and increasingly
competitive funeral sector
Market Context
• We are adapting to change and responding to
market challenges and opportunities.
See p.20
We have clear strategic objectives
Strategy and Business Model
• We are continuing to build on the strong
fundamentals of the business and use these
as a platform for change.
• Being more distinctive in the marketplace.
• Embracing technology in developing and
delivering our services for customers.
• Continuing to be a good corporate citizen.
Our Transformation Plan is
evolving to changing circumstances
and on track
The Core Components
• We are modernising the client proposition.
• Investing in and simplifying the operating model.
• Streamlining central support and investing
in technology to centralise and automate
administrative processes.
See p.28
See p.21
We have a strong culture and
shared values
We are focused on sustainable
growth
People and Culture
• We are passionate
about delivering
excellent client
service.
Values
• We serve our
customers with
expertise, compassion
and commitment.
Key performance
indicators
• Measuring progress
and performance.
Group summary
performance
• Delivering in line with
expectations, after
allowing for lower than
anticipated deaths.
See p.18
See p.30
See p.10
We have strong leadership and act
responsibly and sustainably
To achieve our ambition and meet
our stakeholder expectations
Non-financial
performance
• We are helping to
make a difference as
a responsible and
sustainable business.
Governance
• We have a strong
Board committed
to robust corporate
governance.
Our Vision
• To lead the funeral sector in terms of quality,
standards and value-for-money.
• Creating and preserving value for all our
stakeholders.
See p.52
See p.14
See p.18
02 | Dignity plc Annual Report & Accounts 2019
Leading through change/
We are a strong but
changing business
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, lifestyles and expectations must continue to drive
what we do as a business.
Technology
Services & Brands
Our brands, products, services and technology must reflect
those changing customer preferences and are the reason
why we now offer enhanced choice and provide even greater
value-for-money. The high-quality of our offering, competitively
priced, is how we will differentiate ourselves from the
competition, both nationally and locally.
Our
People & Culture
Every day we want to meet and exceed our customers’
expectations. We aim to do this 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.
Dignity plc Annual Report & Accounts 2019 | 03
Our
Transformation
Journey
In 2018 we began a period of radical
transformation and we are making good
progress on our journey to deliver our
objectives. During and after this change
we will continue to be a caring business
with core values built around quality,
providing excellent customer service
and high standards of care.
In a rapidly changing and competitive
funeral industry, we are alert to the
challenges we face and are determined
to seize the opportunity to create a
business that is clearly differentiated
from the competition and gives
customers a clear choice.
Leading through
quality, standards
& value-for-money
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04 | Dignity plc Annual Report & Accounts 2019
Leading through change/
We are building a distinctive
and powerful market offer
What
We stand
for
• It’s the promise we make to
our customers;
• It’s the quality of our products
and services; and
• It’s the expectations of our customer
service standards.
Creating a differentiated
customer experience
Dignity plc Annual Report & Accounts 2019 | 05
Engaging
with more customers through digital and
promotional channels.
The way that we connect with our customers
continues to change. Going online is now
increasingly the preferred route for people looking
for information and our industry is no exception.
45 per cent (compared to 38 per cent a year ago)
of our clients now find us online and over 67 per
cent of our website traffic comes from mobile
devices. We continue to develop our online
support services and promotional initiatives to
meet customer expectations. We are building
a leading digital presence and a compelling
multi-channel service offering.
Empowering
customers to choose and arrange the funeral
that’s right for them and their family.
We are determined to 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.
We will achieve this without losing the heritage
embedded in our local trading names. In addition,
our Online Funeral Notices service 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.
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Enabling
customers to interact with us when and
how they want.
We are developing a more customer-centric
service model adapted to better suit evolving
client needs. Our enhanced digital offering is
part of this with the Group’s websites registering
approximately 5.6 million visits on a year to date
basis, up 211 per cent on the comparable prior
year period. We are starting to change the way
we work at branch level too and have started
to pilot home visits to customers by our staff
as part of a radical overhaul of how we serve
our customers.
Evolving
our customer proposition and the way
we work to support change.
The changing way in which people are choosing
to arrange a funeral and what they value drives
how we evolve and modernise our services to
support them better and meet their priorities
and expectations.
We have commenced one of the most radical,
complicated and challenging elements of our
Transformation Plan in terms of transforming
our branches. This involves working in materially
different ways, revising our processes and
changing the way we arrange funerals for
our customers.
06 | Dignity plc Annual Report & Accounts 2019
Leading through change/
We are determined to meet
our stakeholder expectations
Society
Changes in societal expectations and attitudes towards
arranging a funeral, the role of technology in our daily
lives and increased customer choice is transforming
the way we need to serve our customers today and
in the future. We must use this opportunity to stay
connected, relevant and responsive to change through
our customer propositions.
& Sustainability
Sustainability is about the actions we take to fulfil our
purpose against the backdrop of an ever changing world
and we remain committed to driving a sustainable business
that is both socially and environmentally responsible
and commercially successful.
A responsible and sustainable
business with a broader societal
purpose
We are involved in a fundamental and
timeless human ritual and are mindful of the
responsibility this places on us.
We have always taken and will continue to
take our role as a responsible corporate citizen
extremely seriously and recognise 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.
As a leader we must 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 as a whole.
Dignity plc Annual Report & Accounts 2019 | 07
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Beyond Transformation
Our continued focus is rightly on meeting
the transformational challenges we face
and achieving our goals. However, sizing up
this challenge has re-energised the Group
because we recognise that with change
comes opportunity.
We are confident about the future and about
the possibilities that will open up for the
business and the role we continue to play in
helping to raise standards in the industry.
Engaging with stakeholders
We engage with our stakeholders to gain
insights into their needs and identify the material
issues they have. This feedback forms part of
our decision making and helps us continually
improve and progress towards our vision.
• Our Customers
• Our People
• Investors
• Industry & Policymakers
• Communities & Society
08 | Dignity plc Annual Report & Accounts 2019
Leading through change/
We remain focused on delivering
excellent client service
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 provides customers with access to
our national network of funeral locations
where they can arrange a funeral personal
to their needs.
Simplicity Cremations allows
customers to organise a less traditional
funeral, taking advantage of Dignity’s
national network of mortuaries and
crematoria.
Crematoria
69,400 (2018: 72,300)
Number of funerals conducted
during 2019.
820 (2018: 831)
Number of funeral locations
we operate in the UK.
We are the largest single operator
of crematoria in Britain with a
significant portfolio of well-established
and state-of-the-art crematoria
that meet the needs of the local
communities we serve.
64,800 (2018: 65,200)
Number of cremations
conducted during 2019.
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.
46 (2018: 46)
Number of crematoria
we operate in England
and Scotland.
Pre-arranged funeral plans
523,000 (2018: 486,000)
Number of active funeral
plans as at 27 December 2019.
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.
We have a long-term
commitment to the
customer and we are
shaping our services
around their
evolving needs.
Dignity plc Annual Report & Accounts 2019 | 09
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.
A strong and caring business
We are proud to be one of the UK’s leading funeral service providers. We are a
strong and caring business and our reputation, experience and dedicated people
are our most valuable assets. By striving for the highest standards and through
the quality of our products and services we provide across our business, we build
trust with society and the families and communities we serve.
Alongside the expansion of our digital offerings we continue to offer a wide choice
for consumers and our focus on high standards and excellent client service remains
central to our plans for the future.
£ £
45%
Approximately 45 per cent
(compared to 38 per cent in 2018)
of our customers now find us online,
with over 67 per cent of our website
traffic coming from mobile devices.
Low-cost
cremation service
As part of our commitment to
providing simple and affordable
alternatives we were the first
funeral company to provide a
nationwide low-cost attended
cremation service without
a funeral director.
National
network
We are the only operator with
a national network of funeral
locations and crematoria.
30%
Over 30 per cent of Dignity staff
have over 10 years long service.
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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.
5.6 million
visits to our websites
Dignity receives approximately
5.6 million visits to our websites
annually. This compares to
1.8 million visits in 2018.
99%
reputation &
recommendation
99 per cent of respondents said
that we met or exceeded their
expectations.
Source: Dignity Client Survey 2019
997,000
pre-arranged plans
We have already helped more
than 997,000 people plan for
their funerals in advance, of which
523,000 remain outstanding.
We are privileged to provide services that mean so much to our customers
Taking the
greatest care
Being trusted with something
as important as a persons final
wishes is an honour and
a privilege that we never
take lightly.
DIGNITY
Simple, low-cost
funerals
We offer families greater
choice and flexibility in how they
remember their loved ones whilst
we focus on providing the essential
care and practical elements
of the cremation.
We know that
families value quality,
seclusion and time
We serve at the heart of our local
communities and take great care
to create a peaceful and tranquil
environment for people to
visit and reflect.
SIMPLICITY
CREMATIONS
THE CREMATORIUM
AND MEMORIAL GROUP
We’re helping
more people
plan ahead
We are one of the UK’s most
trusted providers of pre-arranged
funeral plans, providing peace
of mind to you and your family.
FUNERAL PLANS
10 | Dignity plc Annual Report & Accounts 2019
Our Summary
Performance 2019
Our performance in 2019 was consistent with market expectations. However, underlying
operating profit decreased by 21 per cent to £63.3 million and average income per funeral
reduced from £2,973 to £2,930 reflecting the impact of a changing competitive landscape.
On a statutory basis, operating profit was £44.8 million, a decrease of 41 per cent.
We are engaged in a wide-ranging Transformation Plan, alongside a major investment programme
which continues to make good progress. This Plan will create a funeral business that remains
focused on quality, whilst evolving to adapt to, and lead, a changing marketplace.
The Group has changed its accounting policy in respect of certain pre-arranged funeral plan trusts
and the adoption of IFRS 15. This has resulted in the consolidation of the Group’s primary pre-arranged
funeral plan trusts. This has been applied retrospectively and therefore certain statutory amounts
have been restated. See the Financial review and accounting policies note for further details.
• Funeral market share
showing positive response
to changes in proposition
compared to 2016 and 2017.
• Simplicity Cremations
continues to grow strongly.
• Transformation Plan
progressed as planned and
key pilot initiatives underway.
• Strong market share
performance by crematoria
business.
• Group fully engaged with the
• The Group welcomes proposed
CMA market investigation.
regulation of pre-arranged
funerals HM Treasury
announced in June 2019.
The progression of our Transformation Plan
1/
• Modernise the client
proposition
2/
• Invest in and simplify the
operating model
3/
• Streamline central support and invest in
technology to centralise and automate
administrative processes
Timing will change
The Group is adapting aspects
of the Plan pending the outcome
of the CMA investigation.
Phase 2
Executing
the Plan
Phase 1
Preparation
and building
momentum
Phase 3
Realise the
Transformation
Plan
2018
2019
2020
2021
2022
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.
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.
Dignity plc Annual Report & Accounts 2019 | 11
Financial highlights
Revenue(1)
£338.9m
(2018: £353.7m)
Dividends paid in the period
15.74p
(2018: 24.38p)
Number of deaths
584,000
(2018: 599,000)
By division
Funeral services
Underlying revenue(1)
£203.3m
(2018: £214.9m)
Crematoria
Underlying revenue(1)
£76.8m
(2018: £78.0m)
Pre-arranged funeral plans
Underlying revenue(1)
£21.2m
(2018: £22.7m)
Central overheads
Costs
£47.1m
(2018: £30.7m)
Operating profit
£44.8m
(2018: £75.9m)
Basic earnings per share
69.8p
(2018: Loss of 34.0p)
Underlying operating profit
£63.3m
(2018: £80.2m)
Underlying earnings per share
60.6p
(2018: 85.8p)
Cash generated from operations
Underlying cash generated from operations
£64.6m
(2018: £104.2m)
£71.8m
(2018: £101.9m)
Group operating profit share (before central
overheads) (%)
60%
Group underlying operating profit share
(before central overheads) (%)
59%
Operating profit
£54.7m
(2018: £67.0m)
Underlying operating profit
£56.3m
(2018: £62.2m)
Group operating profit share (before central
overheads) (%)
40%
Group underlying operating profit share
(before central overheads) (%)
41%
Operating profit
£37.2m
(2018: £39.6m)
Underlying operating profit
£38.4m
(2018: £40.3m)
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Underlying operating profit
£nil
(2018: £2.8m)
Underlying costs
£31.4m
(2018: £25.1m)
(1) Total underlying revenue was £301.3 million (2018: £315.6 million). On a statutory basis the Group recognised Funeral services revenue of £262.1 million (2018: £275.7 million) and Crematoria
revenue of £76.8 million (2018: £78.0 million). Pre-arranged funeral plans are not a separate division in statutory terms.
Prior year adjustments
The Group has changed its accounting policy in respect of certain pre-arranged funeral plan trusts and the adoption of IFRS 15. This has been applied retrospectively and therefore certain statutory
amounts have been restated. See accounting policies note for further details.
Alternative performance measures (APMs)
The Board believes that whilst statutory reporting measures provide financial performance of the Group under GAAP, APMs are necessary to enable users of the financial statements to fully
understand the trading performance and financial position of the business. The APMs provided are aligned with those used in the day-to-day management of the business and allow for greater
comparability across periods. For this reason, the APMs provided exclude the impact of consolidating the Trusts and the changes which relate to the adoption of IFRS 15, both of which are
considered to mask the underlying trading performance of the Group, as well as non-underlying items comprising certain non-recurring and non-trading transactions. Further detail may be
found on pages 167 and 168.
12 | Dignity plc Annual Report & Accounts 2019
Chairman’s statement
We are seeking to build a responsive,
resilient business capable of adapting
to a backdrop of change
Introduction and overview
At the outset I would like to thank my
predecessor, Peter Hindley, who led the
IPO in 2004 before serving as Chairman for
a decade leading up to his retirement from
the Board in June 2019. I am delighted to
have been invited to become Chairman of
Dignity and it is a privilege to be involved
in determining the future direction of the
UK’s leading funeral services provider.
The funeral industry is experiencing a
period of unprecedented change and
I join as the Group enters the formative
stages of a radical overhaul, being delivered
through its Transformation Plan. Given
my previous experience of change
management I will bring a fresh perspective
and encouragement to the Board and the
many individuals involved in delivering
what is a major corporate undertaking.
In essence the complete re-engineering
of a national, 800 plus branch network
across the full bandwidth of the business.
Whilst the backdrop of falling underlying
operating profit and the suspension of
the dividend is obviously disappointing
for shareholders, the senior management
team deserve credit for their foresight in
commencing these radical changes at the
beginning of 2018. This strategic focus
and determination developed with their
advisers and project team, has enabled
the Transformation Plan to run alongside
business as usual activities ensuring that
the Group continues to deliver day in day
out for its customers. It is easy to forget
that these decisions were taken before the
Competition and Markets Authority (‘CMA’)
launched its market study on 1 June 2018.
Overall 2019 has been a productive year,
with significant work undertaken to improve
our client proposition, develop our digital
presence and build our central capabilities.
I strongly endorse the leadership role
the Group has taken in calling for proper
regulation, both for the at-need sector
and pre-arranged sector of the funeral
industry. The lack of regulation in the
industry will continue to shock members
of the public when press stories appear
highlighting poor or scandalous care of
a family’s loved one. I know that Dignity
upholds the highest professional standards.
I also now know that some others do not.
Clive Whiley, Non-Executive Chairman
“At the moment we are navigating our way
through a period of unprecedented industry
and Group change, driven by a rapidly
changing yet still unregulated marketplace.
However, I share the Board’s vision for
stronger regulation of our industry, one in
which high-quality providers like Dignity can
thrive, offering the customer competitively
priced and excellent services.”
Dignity plc Annual Report & Accounts 2019 | 13
Addressing the challenges
our business and the
funeral industry faces
The funeral industry must change.
This means regulation 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.
This need for regulation applies
also to pre-arranged funeral plans
and we have played our part in
highlighting the questionable
practices of some providers and
have welcomed the opinion from
HM Treasury on regulation.
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That is why the Group welcomed the
CMA investigation (which was launched in
March 2019, shortly after the release of the
Group’s 2018 preliminary results), even
though it creates further uncertainty in the
short-term. This investigation, along with
HM Treasury’s determination to regulate
pre-arranged funerals, means that the next
year or so will be even more challenging.
Therefore it is undoubtedly true to say
that at the moment we are navigating our
way through a period of unprecedented
industry and Group change, driven by
a rapidly changing and still unregulated
marketplace. However, I share the Board’s
vision for a regulated industry, one in which
strong and high-quality providers like
Dignity can thrive, offering the customer
competitively priced and excellent services.
That is the goal that we as a Board are
working towards. We are determined and
confident that we can get ahead of the
curve and land in a strong, leadership
position. This will benefit our customers,
shareholders and all stakeholders and help
usher in a new era for the funeral industry.
Strategy
In order to achieve our vision and meet
the challenges we face it is essential that
our strategy and the plans to support it are
periodically reviewed to ensure they are still
fit for purpose. Therefore, as the incoming
Chairman my priority is to review the
strategy with the Board, as highlighted
in our Third Quarter trading update in
November 2019.
That review cannot conclude prior to
the outcome of the CMA’s investigation
which has the potential to require
significant change of the industry beyond
that originally contemplated by our
Transformation Plan. Hence we are focused
on how our plans might need to change
to cover all eventualities and we will report
further once the CMA position becomes
clearer. In the meantime, we have paused
or adapted certain aspects of our plans
pending the outcome of our review and
the CMA’s work. Although these plans are
commercially sensitive, it is unlikely that
the Group will begin to realise any material
savings from the transformation until 2021
(a year later than planned). However, our
overall expected annualised savings of
£8 million (increasing to £13 million in
the longer-term) and investment cost of
£33 million (net of £17 million disposal
proceeds) is unchanged.
Even with this backdrop, several issues and
priorities requiring focus remain and these
are as follows:
Pricing
There is inescapably downward pressure
on average incomes. They need to reduce
to stabilise and ultimately grow market
share. They will also naturally reduce as
more and more people select simpler, less
traditional options such as direct cremation.
Our proposition and associated pricing
remain key priorities for 2020 and the
years ahead.
Transformation Plan priorities
The pilot initiatives launched recently are
providing us with invaluable insight on the
likely success of new ways of working and
job roles for operational staff. However,
the challenge of affecting major change
to working practices while continuing to
run a business day-to-day cannot be
underestimated. This, coupled with the
scale of the change: 800 plus branches
and associated new mortuary care centres,
and deliberate changes to our timing plans
for the reasons described earlier strongly
suggest caution with regard to the original
target date for completion at the end
of 2021.
Given this information and the importance
of getting the customer interface right, we
as a Board judged it appropriate to signal
a 12 month extension to ensure a full and
effective roll out. Change at branch and
customer level must be permanent and
entrenched. We will not, and cannot,
cut corners.
14 | Dignity plc Annual Report & Accounts 2019
Chairman’s statement continued
A strong business
Despite the challenges outlined above, the
2019 performance described in this Annual
Report clearly demonstrates the underlying
strength of the business. I am confident
also that the shifts of emphasis on strategy
and the Transformation Plan outlined above
will ensure we remain successful in the
long-term.
It is clear that we are changing and we have
momentum. We have a strategy and a plan
and we are confident we will achieve our
goal of transforming the Group.
Our vision is to lead the industry in terms
of quality, standards and value-for-money
and to become the pre-eminent funeral
services business in the UK. We now offer
customers an unprecedented and extremely
competitive range of services and price
options. This is a sign of our future intent.
Engaging with the CMA
We welcomed the CMA’s full market
investigation into the funeral and
crematoria sector when it was announced
in March 2019 and we are cooperating fully.
Since then we have attended a hearing of
the CMA panel, facilitated site visits and
responded to detailed questions necessary
for a proper analysis of the industry. We
want to play a leading role as a responsible
and progressive corporate citizen in the
funeral industry as it undergoes long
overdue change.
The CMA’s work in the sector provides
an unparalleled opportunity to improve
standards and protect consumers. UK
consumers assume all funeral directors are
the same, that their market is 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 has shown that 92 per
cent of consumers did not know that
funeral directors were not regulated in the
UK, but once they were aware 80 per cent
supported regulation to ensure minimum
standards. The Group would welcome
regulation which sets out minimum
standards for core activities such as the
care of the deceased and minimum
standards of storage facilities.
Board changes
I am pleased to announce today that
Dean Moore has joined the Group as a
Non-Executive Director. Given Dean’s
experience, he will succeed David
Blackwood as Chair of the Audit Committee
from the conclusion of the Annual General
Meeting on 11 June 2020.
David Blackwood will not seek re-election
at the AGM and I would like to thank him
for his involvement in the Group over the
last five years, in particular for his efforts as
Interim Chairman prior to my appointment
on 26 September 2019.
We continue to seek a further non-executive
director who can act as Remuneration
Committee Chair and will make a further
announcement in due course.
Governance and Corporate
Social Responsibility
Dignity has a strong record of good
corporate governance and this will continue
under my chairmanship.
Regarding corporate responsibility, the Group
has always operated to high standards of
corporate behaviour and sought to be a
responsible corporate citizen. It has valued
its people and sought to engage in society
at large, something that comes naturally
in a business such as ours. We have also
sought to minimise our impact on the
environment. We have recognised,
however, that the major changes afoot
within the business present an opportunity
to review our role and performance as a
good corporate citizen. We provide further
information on that in our CSR section.
Our people, culture and values
Dignity’s strong reputation for customer
service rests with the diligence and care of
its front line staff. This culture of caring has
once again been evident during the work
the Transformation Team has done on the
initial branch pilots. Genuine admiration for
the lengths to which Dignity staff routinely
go to serve customers has been a constant
refrain from within the Team.
Strong governance, leadership
and purpose
The Board is fully committed to ensuring that high
standards of good governance are in place and consistently
applied in the boardroom and throughout the organisation.
It will embrace the new UK Corporate Governance Code
2018, which applies to the Group from next year.
This pronounces that a positive relationship between
companies, shareholders and other stakeholders, including
the workforce is a driver of long-term sustainable growth
and having a strong workplace culture aligned with the
Company’s purpose, business strategy and values is an
essential underpin to any successful business. At Dignity,
many of these fundamentals already exist, and we
will continue to look at ways in which we can further
strengthen and extend our current position in response
to the new Code.
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Dignity plc Annual Report & Accounts 2019 | 15
impact our plans; our Transformation
Plan is strong however timing needs to
be amended pending the outcome of
the CMA investigation, thereby delaying
anticipated savings.
The impact of these challenges is currently
unclear. For example, the draft report from
the CMA is not anticipated until April or
May 2020, with their final report currently
due by the end of September 2020. The
Board anticipates making further comment
on the Group’s outlook following the
release of the Provisional Decision Report.
Clive Whiley, Non-Executive Chairman
11 March 2020
Summary outlook
• The outcome of the CMA’s
investigation could materially
impact the industry and the
Group.
• To manage this change we are
adapting and pausing certain
aspects of our Transformation Plan.
• Realisation of cost savings is
expected to be delayed.
• There is downward pressure
on average income per funeral
and cremation.
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During the year, the percentage of clients
who would definitely recommend our
services increased to 91 per cent (from 90
per cent), so notwithstanding the changes
facing the business, client service has not
been sacrificed in any way.
This professionalism, pride and empathy
clearly extends across the whole workforce
given the outstanding client service
research results that the Group publishes
year after year. As the incoming Chairman
I can only add my voice and thanks to all of
you who make the Dignity promise come
alive, especially during these challenging
times. For us as a Board it is essential that
in a bid to make the business more efficient
and effective we do not lose that which
makes us special: the commitment of
our people.
Dividends
As previously announced, although the
Group has significant cash resources at
hand and continues to be cash generative,
in order to maintain maximum flexibility
and liquidity during the transformation,
the Board has concluded that it is prudent
to temporarily cease dividend payments.
The Group has an established track
record of returning cash to shareholders
at appropriate times over many years
and once the uncertain competitive
environment becomes clearer, it anticipates
resuming dividend payments or returning
excess cash to shareholders.
Looking ahead
We have a strong business that is ready
and willing to adapt to the challenges
ahead. However, the challenges are
significant. Average income per funeral
and cremation are likely to reduce further;
the CMA investigation could materially
16 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review
We are adapting and
responding to change
Mike McCollum, Chief Executive
“We are pleased with progress against our set
objectives and with our Transformation Plan.
At the end of the year we began our first
branch pilot, testing new ways of working at
three networks in the Midlands. These pilots
have yielded invaluable insights and very
significant encouragement about the
potential to enhance our level of service
to the customer.
Our digital presence has grown strongly,
and alongside significant work on our pricing
and proposition, we are seeing market share
responding in a more positive way than two
years ago. Central capabilities have been
developed. All this work has also been
achieved whilst improving the service
provided to our clients.”
Overview and performance
In 2019 we posted another resilient
performance amid unprecedented change
in the funeral industry. We met market
expectations and delivered an operating
performance in line with the Board’s
expectations, allowing for the significantly
lower number of deaths particularly in
the first half of the year. Our market
share remained robust, demonstrating a
continued positive response to the Group’s
updated service offer and price points
introduced since January 2018. Lower
deaths and the expected reduction in
average funeral income meant that
underlying operating profit decreased
by 21 per cent (to £63.3 million). Average
income per funeral was down from £2,973
to £2,930. The funeral mix continues to
evolve in the light of new service offers
and ongoing pricing trials and we continue
to make good progress in identifying the
best balance between price and service
offer. Our crematoria and pre-arranged
funeral plan businesses also performed
well. Average income per cremation was
£1,186 (2018: £1,197), reflecting the
evolving mix of our locations and
service offerings.
We are pleased with progress against our
set objectives and with our Transformation
Plan which we set out in detail in last year’s
Annual Report. In 2019, activity has been
focused on all aspects of the Plan. We
commenced one of the most radical,
complicated and challenging elements
of our Transformation Plan, transforming
our branches, working in materially
different ways and changing our processes
and the way we arrange funerals for
our customers. These branch pilots have
yielded invaluable insights and very
significant encouragement about the
potential to enhance our level of service to
the customer. Further pilots will build on
the lessons learned from earlier ones.
As our new Chairman, Clive Whiley,
indicated in his statement, given the
profound impact the CMA investigation
could have on the size and shape of our
business we have decided to delay the
roll-out of key aspects of our Transformation
Plan. Expected savings will therefore be
realised later than originally anticipated.
The arrival of Clive in September has
provided fresh focus and additional
perspective and under his leadership the
Board is reviewing the Group’s strategy
and Transformation Plan.
Dignity plc Annual Report & Accounts 2019 | 17
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The Board recognises that there is still
a lot of work to do but we are confident
of achieving our goals. 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 customer service. The fundamentals
of our business remain compelling and
strong in an industry experiencing
unprecedented change and scrutiny.
Much of this scrutiny has come from the
CMA and HM Treasury. On 28 March 2019
the CMA confirmed its widely anticipated
full market investigation into the funeral
and crematoria sector. We 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. In last year’s
Annual Report we published extracts from
our response to the CMA and since then
we have established a strong working
group of internal and external colleagues.
The Group has continued to engage with
the CMA to provide it with detailed
information on the Group’s at-need
and crematoria markets and its wider
observations on these markets generally.
The CMA has started to release its working
papers and is expected to issue its
Provisional Decision Report in April or May.
At this point it is worth restating what
I said in last year’s Annual Report. A CMA
investigation will last many months and,
if other market investigations are a guide,
will generate much interest and comment,
some of it hostile towards major industry
players like ourselves. However, it is
important for our stakeholders and
interested parties to remember that what
matters is the outcome and findings of
the investigation, not the inevitable twists,
turns and commentary.
Meanwhile, in a separate development,
the Group continues to anticipate Financial
Conduct Authority (‘FCA’) regulation of
pre-arranged funerals and is preparing
accordingly. In June 2019 HM Treasury
confirmed consumer detriment is present
in the funeral plan market, and that the
government has maintained its position
that bringing funeral plan providers within
the remit of the FCA would be the most
effective policy response for strengthening
the regulation of the market. The Group
welcomed this decision as, for a long time,
it has led the industry in best practice and
called for regulation of the pre-arranged
funeral sector to protect customers.
Dignity’s research, published together with
Fairer Finance, has highlighted the poor
sales practices and financial management
risks that certain providers engage in.
The Group currently anticipates regulation
in approximately two years time and
is planning accordingly.
Where we are now
The Transformation Plan is helping us
to build a distinctive and powerful market
offer. We are delivering a differentiated
customer experience and we remain
determined to meet stakeholder
expectations. One of the key objectives of
the Transformation Plan is to mobilise our
funeral arrangers. We have concluded an
initial branch pilot and the response from
The right strategy
for change and delivering
our Transformation Plan
We have acted with speed and purpose
in the light of unprecedented changes to
our industry. Our focus is on delivering
our Transformation Plan while at the
same time continuing to deliver day in
day out for our customers.
The Group is adapting aspects of the
Plan pending the outcome of the CMA
investigation.
Our opportunity is clear
We have a clear opportunity to ensure
the business is fit for the future, whatever
that may bring. The uncertainty of the
CMA investigation means that we do
however need to plan carefully to ensure
we can respond to any outcome without
wasting resources in the meantime.
Our Strategic priorities
1/ Identify the appropriate
propositions and price points
to stabilise and then grow
market share.
2/ Modernise the ways of working
with appropriate technology to
enhance client service.
3/ Adapt our plans as necessary to
respond to the CMA investigation.
4/ Balance keeping the
momentum of the
transformation, without
wasting time or capital on
aspects that may need
adjustment before
implementation.
5/ Ensure decisions support
excellent client service.
The progression of our Transformation Plan
Phase 2
Executing
the Plan
Phase 1
Preparation
and building
momentum
Phase 3
Realise the
Transformation
Plan
2018
2019
2020
2021
2022
18 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review continued
customers and staff has been very
positive. We are confident that the
significant work put into the design of
the pilots is paying off.
For example approximately 50 per cent
of funeral arrangements are now being
made in the client’s home in the pilot area.
However, no pilot is perfect, and we are
currently understanding how things
should be refined to address areas for
improvement.
We have made further good progress on
identifying the optimum price/service mix.
We have not however completely stabilised
our funeral market share which saw a
small like-for-like decline in 2019. Work
continues to develop and launch various
trials to gain additional understanding.
However we do expect a further reduction
in average funeral income will be necessary
to stabilise and then grow market share.
Whilst we have described a conscious
pausing of aspects of the transformation,
our overall expectations of realising net
annualised savings of £8 million, growing
to £13 million in due course, from a net
investment of £33 million, remain
unchanged at this time.
I am also pleased with our progress in
marketing and the digital arena. Customers
are changing the way they make their
decisions and it is important we are visible,
transparent and have an attractive
proposition that represents good value.
Finally, our pre-need and crematoria
businesses continue to perform well relative
to their markets. However, we are mindful
of the pressure possible on average income
per cremation as customers make
alternative choices.
Purpose and vision
We have a clear purpose. 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. Listening to our customers and
understanding their changing attitudes
and lifestyles drives what we do as a
business. 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 is to lead the funeral industry
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 meeting
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.
People and culture
Our people will be central to whether our
transformation succeeds. 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. We help
people at an extremely vulnerable time in
their lives which means that we are a truly
people business. This means that our
employees must be caring, thoughtful and
truly engaged with our customers. Their
continued care and commitment is the
bedrock on which this Group and its
culture are based, something that has
been described as ‘The Dignity Way’.
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.
CMA investigation into
the funeral industry
Introduction and overview
A lot has happened since we announced
a reduction to our pricing in January
2018. The CMA is the UK’s 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 it 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 an 18-month market
investigation should be conducted by the
CMA to consider how the market could
be made to work better.
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 industry
and 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. Details
of these responses can be found in
last year’s Annual Report or on the
Group’s website.
Dignity plc Annual Report & Accounts 2019 | 19
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HM Treasury – Opinion
on statutory regulation
of pre-arranged funerals
through the Financial
Conduct Authority
In June 2019, HM Treasury announced
its opinion that it would be appropriate
to introduce statutory regulation of
pre-arranged funerals through the
Financial Conduct Authority. Dignity’s
recent research, published together
with Fairer Finance, has highlighted
the poor sales practices and financial
management risks that certain
providers engage in. The Group
welcomes this opinion from HM
Treasury as, for a long time, it has led
the industry in best practice and called
for regulation of the pre-arranged
funeral sector to protect consumers.
The Group continues to anticipate
regulation of pre-arranged funerals
in approximately two years and is
preparing accordingly.
“The Group welcomes this
opinion from HM Treasury as,
for a long time, it has led the
industry in best practice and
called for regulation of the
pre-arranged funeral sector
to protect consumers.”
Update and Dignity’s response
Since then, in March 2019, the CMA
confirmed its widely anticipated market
investigation into the funeral and
crematoria markets. Dignity welcomed
the investigation and is cooperating
fully with the CMA. In particular, it has
established a strong working group of
internal and external resource and will
seek to focus on these key areas:
• Quality of service provided to
meet customer needs;
• Regulation of the industry to protect
customers; and
• Capital employed in the crematoria.
2019
1/ Dignity has received and is
responding to several working
papers on the qualitative aspects
of funeral and crematoria provision.
Dignity believes that improving the
qualitative aspects of the funeral
industry is an important part of
delivering customer value.
2/ Further, Dignity has received
and is responding to a number
of working papers relating to
regulation remedies and increased
price transparency of the funeral
market. Dignity has repeatedly called
for regulation of the funeral sector
and will continue to work with the
CMA to assist in the development of
an appropriate regulatory standard.
3/ Dignity continues to highlight the
capital intensive nature of building
new crematoria and continues to
work with the CMA in its analysis
of this area.
Where we are now
Dignity has attended a hearing of the
CMA’s panel, facilitated site visits and
has responded to detailed questions
necessary for a proper analysis of
the industry.
2018
CMA announced
a market study
into the funeral
industry.
November 2018
CMA issued funeral
market study
interim report and
consultation.
In April 2019 CMA’s
issue statement
published.
2021
2018
Dignity’s response
to interim report.
2019
Dignity letter issued
in January 2019.
2020
Dignity awaiting
CMA’s announcement
and conclusions.
Next steps and timeline
The CMA has published a number
of working papers as it gathers and
analyses evidence. Dignity is responding
to these papers where appropriate.
The papers are expected to form the
basis of the Provisional Decision Report
which is due to be released in April or
May 2020. A period of consultation will
follow, culminating in the release of the
Final Report, which – according to the
CMA’s current published timetable –
must be issued by 27 September 2020.
The CMA may propose remedies or
regulation to improve how the market
works for consumers.
The CMA can seek an extension of six
months to this timeline, if they consider
it necessary.
“We hope that through its investigation, the CMA is able to
create a framework that ensures that customers are supported,
feel respected and are able to exercise the choices available
to them in an informed way.”
20 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review continued
The funeral market is
significantly changing
Market context
The UK funeral market
The UK funeral market is getting more
dynamic. The internet continues to change
everything, and consumer behaviour is
evolving rapidly. The death rate has slowly
decreased while the number of funeral
directors has increased rapidly. There are
around 30 per cent fewer deaths per funeral
director in the UK compared to 25 years ago.
Scale and structure of the market
The funeral director market remains
very fragmented, with approximately two
thirds of funeral directors being small
owner managed businesses. There are
approximately 300 crematoria in the
UK, with circa 64 per cent owned by local
authorities. It is estimated that three
quarters of all funerals result in a cremation
with the remainder being burials.
Changes in the competitive
dynamics of the sector
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. In addition
we have a growing and ageing population.
In short, the changing way in which people
are choosing to arrange a funeral and
what they value drives how we evolve
and modernise our services to support
them better and meet their priorities
and expectations.
Deaths in Great Britain
In 2019 the initial publication of recorded
total estimated deaths in Britain for 52
weeks was 584,000, two and a half percent
lower than the 52 weeks in 2018. 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). Although annual deaths
A Changing Funeral Market
Updated data from ONS
Latest ONS expectations increase
the anticipated number of deaths
from 2020 onwards.
Increasing competition
The UK market is already very competitive
and increasingly dynamic. The number of
funeral directors has increased rapidly, the
internet continues to change everything and
consumer behaviour is evolving quickly.
have declined significantly since the early
1990s from 640,000 to a low of 539,000 in
2011, the last five years have seen deaths
above that level. The ONS expects long-
term increases in the number of deaths.
These estimates were updated by ONS
in October 2019, increasing expectations
by approximately 20,000 per year. They
anticipate approximately 600,000 deaths
in 2020, increasing to approximately
740,000 in 2040.
78%
The proportion of funerals
involving a cremation has
grown in the past 60 years,
from 35 per cent in 1960 to
78 per cent in 2019.
Source: Cremation Society Statistics
Increase
In low-cost and
alternative funeral
arrangements.
Deaths in Great Britain
Long-term expectations are for the number of deaths to
reach 740,000 by 2040.
Changing Expectations
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
• Regulation & Standards
• Flexibility & Choice
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
• Connecting Digitally
Source: Office For National Statistics
£ £
• Price & Affordability
We are progressing our
Transformation Plan
Dignity plc Annual Report & Accounts 2019 | 21
Our Transformation Journey – where
we are now
Strategic priorities and areas
of focus
Good progress has been made in understanding the changing
relationship between prices and our market share. This has been
supported by tremendous work to develop our online presence
and new customer literature. Alongside this, successful tests of
new ways of working and positive responses to our new branding,
provide a good position to progress further changes.
We have to be mindful of our priorities given the outcome of
the CMA investigation is unknown. That said, our priorities are:
• understanding the most appropriate price and service offer
for the future;
• continuing to roll out new ways of working supported by
appropriate technology; and
• continuing to build a leading digital presence.
Components of the Transformation Plan
1/
Modernise the client
proposition
2/
Invest in and simplify the
operating model
• Implement more client-centric
• Separate front and back of house.
service model.
• Launch new product and
pricing structure.
• Build national brands
(Dignity and Simplicity Cremations).
• Right-sized branch network.
• Scale operating networks.
3/
Streamline central support
and invest in technology to
centralise and automate
administrative processes
• Simplified, focused management
structure.
• Invest in support capabilities
and IT systems.
The progression of our Transformation Plan
Phase 2
Executing
the Plan
Phase 1
Preparation
and building
momentum
Phase 3
Realise the
Transformation
Plan
2018
2019
2020
2021
2022
Financial implications
We continue to anticipate a net investment of £33 million
to deliver £8 million of annualised savings in the near
term, increasing to £13 million over time. As detailed
earlier, this will take a little longer to realise.
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22 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review continued
We are progressing our Transformation Plan continued
New advertising campaigns for
Simplicity Cremations launched
2019 saw further trials of Simplicity
campaigns and their success is
encouraging. At-need Simplicity
volumes have increased 117 per cent
year-on-year in aggregate.
1/
2/ 3/
Modernise the client
proposition
Our initiatives cover four
core areas:
• Implementing new technologies
to support the arrangement
process.
• Trialling of different service
propositions.
• Continued marketing and
development of the Simplicity
Cremations brand and
proposition.
• Build a national Dignity brand.
Pilot networks
We are trialling and testing response to
new technologies and different service
propositions
The Group continues to trial various propositions at different
price points. At its core is a move away from a packaged service
offering to an unbundled approach, where customers can
personalise their own requirements.
Initial launch and testing response
Initial launch and testing response
to our new Dignity brand
to our new Dignity brand
In 2019, we began to introduce new
In 2019, we began to introduce new
signage on our locations, supported
signage on our locations, supported
by new marketing literature using the
by new marketing literature using the
new brand identity.
new brand identity.
Dignity plc Annual Report & Accounts 2019 | 23
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Increasing our focus on client
service and community
engagement
By providing staff with roles focusing
on their strengths either in the front
or back of house, those tasked with
arranging funerals can spend more
time focusing on client service and
getting involved in their local
communities.
1/
2/
3/
Invest in and simplify
the operating model
Our initiatives cover three
core areas:
• Separation of front of house and
back of house activities.
• Focus on operational efficiency
through the use of technology.
• Right size the operational
network.
Front of house
We are trialling mobile technology
We are trialling mobile technology
for client facing arrangers
We have launched trials of new ways of working and
We have launched trials of new ways of working and
operational management in three pilot networks and
operational management in three pilot networks and
we are mobilising our funeral managers to enable them
we are mobilising our funeral managers to enable them
to respond more proactively to clients’ needs.
Back of house
New resource management tool
New resource management tool
A new resource management tool is in place. This initial
A new resource management tool is in place. This initial
version provides the basic functionality to manage
version provides the basic functionality to manage
staff and vehicle resources more efficiently. It will be
ciently. It will be
enhanced over time with greater functionality.
enhanced over time with greater functionality.
24 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review continued
We are progressing our Transformation Plan continued
Modern telephone system
implemented in our Client
Service Centre
A new telephone system has been
implemented at our Client Service
Centre in Sutton Coldfield to help
enhance our business resilience and
to use the latest technology to improve
the way we interact with our clients.
1/
2/ 3/
Streamline central
support and invest
in technology to
centralise and automate
administrative processes
Our initiatives cover four
core areas:
• Introduction of consistent
management roles.
• Use of technology to enhance
customer service and improve
operational efficiency.
• Evolving operational and
business reporting for the new
ways of working and changing
competitive environment.
• Implementation of a modern
source-to-pay solution to support
efficient procurement.
We have an IT strategy in place
to support change
Technology is central to our transformation plans and
selecting appropriate solutions for each task is critical
to their success.
Modern source-to-pay solution for
procurement activities
This system will give staff a more efficient way of
ordering items they need and to process the purchase
efficiently. It will also help to ensure we can realise
synergies from our size by ensuring the correct
suppliers are used.
Tablet-based arrangement
software
The pilot networks are trialling a new
tablet-based software to help the client
understand the funeral arrangements
they are making.
We are transforming through
continued collaboration
Dignity plc Annual Report & Accounts 2019 | 25
Our people and culture matter during
and beyond Transformation
A strong culture and shared values across
our business
Everyone at Dignity recognises the important part they
play in helping clients at one of the most difficult times
in their lives. The transformation is about enhancing
the service we provide. It is not about compromising
on standards. To achieve this, it is vital that our staff
understand our plans at the appropriate times; receive
the correct training to perform their roles to the best
of their ability; and receive constructive feedback on
how they have performed.
It is inevitably an uncertain time for staff. Sadly, a small
number of people did choose to take redundancy
as part of the implementation of our pilot networks.
However, others also saw their roles changed for the
better, received promotions and are now enjoying new
challenges in the business.
“During and after this change we will continue to
be a caring business with core values built around
quality, providing excellent customer service and
high standards of care.”
Mike McCollum, Chief Executive
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We are a caring business
What we are here to do:
To help people at one of the most difficult times
in their lives.
How we do this:
By helping to create unique and personal funerals,
done with care, compassion, respect, knowledge and
professionalism.
What we want to be:
The company that everyone knows they can trust in
their time of need.
What we stand for
• It’s the promise we make to our customers;
• It’s the purpose we have as a business, why we exist;
• It’s the values we stand for that guide our behaviour;
• It’s the quality of the products we sell and services
we deliver;
• It’s the expectations of our customer service
standards;
• It’s the experiences we create;
• It’s the way we communicate;
• It’s the way we work with suppliers;
• It’s the way we treat the environment; and
• It’s the way we treat each other.
From Good to Great
Good to Great is how we describe our Transformation
Plan internally. We do a good job (and actually provide
excellent client service), but we can do better: we can
provide an even better service; we can enhance our
facilities where needed; we can avoid some of the
small things that sometimes go wrong by paying
even greater attention to detail.
Putting this all together, we can go from Good to Great.
26 | Dignity plc Annual Report & Accounts 2019
Chief Executive’s review continued
Leading the way in increasing
choice for consumers
Reflecting
a changing
society
Playing a leading role in the funeral industry
A research report by Trajectory and Simplicity Cremations
As one of the leading funeral services providers in the UK, we are committed to
increasing choice for consumers and ensuring there is a wide range of options
available to them at different price points.
Our study, ‘Low-cost and alternative funeral solutions’, adds to the range of research
we have undertaken in recent years, with the intention of creating a robust evidence
base grounded in consumer insight that allows us to better understand what people
want and need from the funeral sector.
The report comes at a time when
policymakers are considering their
approach to the funeral industry.
The CMA is expected to publish its
recommendations for the funeral market
later this year, the Department for Work
and Pensions (DWP) is currently exploring
options for improving the Social Fund
Funeral Expenses Payment, and the
Scottish Government is undertaking
significant work on funeral costs and
standards. The recent decision by DWP
to increase the value of the Social Fund
Funeral Expenses Payment reflects the
willingness of policymakers to act in this
area, and the wider collaboration of agents
operating in the funeral market whether
parliamentarians, funeral directors,
crematoria, faith groups, celebrants
and importantly consumer groups.
We hope that this research will prove
useful as policymakers consider the
changes currently taking place in the
sector, and the policy changes that are
required to ensure consumers get the best
possible outcomes. At the same time we
will continue to facilitate and encourage
greater collaboration across the industry
and with others who have an interest
in the sector.
Our report considers consumer
awareness of, and attitudes towards, a
range of low-cost and alternative funeral
solutions, including direct cremation,
natural burial, DIY funerals, state support
and even donating to medical science.
Findings highlight the discomfort some
people feel in selecting low-cost and
alternative funerals. Many hold back due
to a lack of awareness, explicit instruction
or because they feel judged if they deviate
from a traditional funeral and go against
perceived societal and cultural norms.
In our conclusion we set out a series
of recommendations directed at both
policymakers and the industry for how
we believe less traditional solutions can
be normalised, creating an environment
where people can freely select the funeral
they and their loved ones want.
In most cases a traditional funeral probably
will remain the option that most closely fits
a person’s needs, but it should not be their
only option. There is no one reason why
consumers may want to explore low-cost
or alternative options: for some it is about
need, others what they want, and finally for
others what they can afford. Whatever the
reason, people should have a choice.
At Dignity we have led the way in increasing
choice for consumers. We were the first
funeral director to offer a national direct
cremation service and have built on this
by developing our Simplicity Cremations
brand which offers a range of lower cost
and alternative funeral services.
But we also recognise that some
consumers who choose a more traditional
funeral will also need help with funeral
costs. That is why we have been working
closely with both the DWP and the Scottish
Government to ensure the state benefit
system works for those arranging a funeral.
We have offered to look at aligning our
processes where possible to make the
application process smoother and have
reduced our prices significantly with
more to come.
“We will continue to facilitate and
encourage greater collaboration
across the industry and with
others who have an interest
in the sector.”
Leading through change
Dignity plc Annual Report & Accounts 2019 | 27
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Q&A with
Mike McCollum,
Chief Executive
Q/A
Q/ Are the pilots proving more
Q/ How have staff reacted?
problematic than first
anticipated?
No. On the contrary, our first branch
pilots have been exciting and encouraging.
Approximately 50 per cent of funeral
arrangements are now being made
in the clients’ home in the pilot area,
a key objective of the Transformation Plan
being to mobilise our funeral arrangers.
However, you cannot underestimate the
challenge of implementing major changes
to working practices while continuing to
run an 800 branch business. Given that we
are determined to embed real change we
have made the right decision to extend
the timescale. We will not, and must not,
cut corners on this crucial aspect of our
business, the customer interface.
Q/ What findings from the pilots have
really surprised you?
What has really surprised and impressed
members of the Transformation Team
working with branch colleagues has been
the levels of commitment and willingness
to go the extra mile for customers. This
has not been a surprise to me as the Board
has long known that it is our people who
provide our ‘X factor’. However, I have been
pleased, and perhaps a little surprised, by
their enthusiasm for radical and challenging
change. We are asking people to work in
materially different ways, changing processes
and the way we arrange funerals for our
customers. In addition to that, there have
been a myriad of insights, many small, but
all contributing to a growing confidence
that the offer to our customers will be
significantly enhanced when the
Transformation Plan is completed.
As I have mentioned previously, it appears
that staff so far have reacted very positively
but we cannot be complacent. Improved
employee engagement has been a major
priority this year and we have taken
significant steps to improve it through
initiatives such as our Employee Forum.
We have worked hard to ensure we can
deliver the necessary changes at branch
level and that employees can provide
feedback and are properly informed and
trained. In addition we have created a much
larger Human Resources function with a
wider range of additional skill sets to ensure
it properly fits the needs of our employees
and the business during, and following,
this period of change.
Q/ How disappointed are you by the
one year delay in completing the
Group's transformation?
The most important thing is getting the
transformation of our business implemented
properly and sustainably. A cosmetic exercise
would not take us very far into the future
and from the outset we were determined
to make fundamental changes, however far
reaching the impact. I believe our investors
and stakeholders understand that we are in
this for the long haul and that in the greater
scheme of things, a year’s delay is a price
well worth paying if it means we get it right.
Q/ When will you have full clarity on
the best price/service offer mix?
Our funeral mix continues to evolve in the
light of new service offers and ongoing
pricing trials and we continue to make good
progress in identifying the best balance
between our price and service offer. We
have not however completely stabilised our
funeral market share which saw a small
like-for-like decline in 2019. Work continues
to gain additional understanding. However,
we are not yet in a position to provide full
clarity on the best price/service offer mix.
Vision
Our vision is to lead the funeral industry
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 meeting the changing needs
of our customers. In addition, we have
always taken our role as a responsible
corporate citizen extremely seriously
and have recognised that our broader
role in society goes beyond just
creating value for our shareholders.
We will continue to be a responsible
and sustainable business, determined
to meet both our social responsibilities
and the expectations of all our
stakeholders.
Mike McCollum, Chief Executive
11 March 2020
28 | Dignity plc Annual Report & Accounts 2019
Strategy and business model
Evolving our strategy to create
and deliver sustainable value
2018 marked the start of a new strategy for the
Group in response to a quickly changing competitive
landscape and this approach was maintained in 2019.
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:
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.
• Our Transformation Plan will result in our funeral
operations being 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 continuing to gauge market response to various
pricing and service scenarios while maintaining our
high levels of professional service and care.
• Segmented approach to the market, borne out by the
developments of the Simplicity Cremations business.
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.
Dignity plc Annual Report & Accounts 2019 | 29
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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 customers. 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.
See p.61
See p.46
See p.30
See p.77
30 | Dignity plc Annual Report & Accounts 2019
Key performance indicators
Measuring our
performance
The link between our
strategy and our 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.
Financial KPIs are measured
by reference to underlying
operating performance and
are therefore unaffected
by the accounting policy
changes made in the period.
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.
Financial
Delivering
Excellent
Client
Service
Strategic &
Operational
Financial KPIs
Underlying earnings
per share
(pence)
60.6p
Underlying cash generated
from operations
(£m)
£71.8m
85.8p
60.6p
Definition
This is underlying profit after
tax divided by the weighted
average number of Ordinary
Shares in issue in the period.
Developments in 2019
The reduction follows the
decrease in underlying
operating profit.
£101.9m
£71.8m
2018
2019
2018
2019
Definition
This is the statutory cash
generated from operations
excluding non-underlying
items and the impact of the
change in pre-need trust
accounting and IFRS 15.
Developments in 2019
The Group continues to
convert operating profit into
cash efficiently, subject to
timing differences and cash
incurred in respect of
commission payments.
Underlying
operating profit
(£m)
£63.3m
Average income
per funeral
(£)
£2,930
£80.2m
£63.3m
2018
2019
Definition
This is the statutory operating
profit of the Group excluding
non-underlying items and the
impact of the change in pre-
need trust accounting and
IFRS 15.
Developments in 2019
Underlying operating profit
declined year-on-year,
primarily driven by lower
deaths, lower average
incomes and ongoing
cost inflation.
£2,973
£2,930
Definition
Net underlying funeral
revenue divided by the
number of funerals
performed in the
relevant period.
Developments in 2019
This reduction year-on-year
is consistent with the Group’s
strategic price changes.
2018
2019
Dignity plc Annual Report & Accounts 2019 | 31
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Non-financial KPIs
Total estimated number
of deaths in Britain
(number)
584,000
Crematoria
market share
(per cent)
11.1%
599,000
584,000
Definition
This is as reported by the
Office for National Statistics.
Developments in 2019
Deaths were lower than
originally anticipated at the
beginning of the year.
10.9%
11.1%
2018
2019
2018
2019
Definition
This is the number of
cremations performed by
the Group divided by the
total estimated number
of deaths in Britain.
Developments in 2019
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)
11.7%
Number of cremations
performed
(number)
64,800
11.9%
11.7%
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 2019
Whilst market share is lower
than 2018, it continues to
show a positive response
from changes in proposition
and pricing.
65,200
64,800
Definition
This is the number of
cremations performed
according to our
operational data.
Developments in 2019
Changes are a consequence
of the total number of
deaths and the Group’s
market share.
2018
2019
2018
2019
Number of funerals
performed
(number)
69,400
Active pre-arranged
funeral plans
(number)
523,000
72,300
69,400
Definition
This is the number of
funerals performed by the
Group according to our
operational data.
Developments in 2019
Changes are a consequence
of the total number of
deaths and the Group’s
market share.
523,000
486,000
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 2019
This increase reflects
continued sales activity offset
by the crystallisation of plans
sold in previous periods.
2018
2019
2018
2019
Financial
Delivering
Excellent
Client
Service
Strategic &
Operational
32 | Dignity plc Annual Report & Accounts 2019
Key performance indicators continued
Our objective is to lead the funeral industry in
professional standards and services. Our priorities
and our success are determined by our impact
on our clients.
Non-financial KPIs continued
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 Dec19
Dec6 Dec7 Dec8 Dec9 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19
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 2019 | 33
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 2019
Reputation and
recommendation
99.2% (2018: 98.9%)
99.2 per cent of respondents
said that we met or exceeded
their expectations.
98.0% (2018: 97.7%)
98.0 per cent of respondents
would recommend us.
High standards of facilities
and fleet
99.8% (2018: 99.8%)
99.8 per cent thought our
premises were clean and tidy.
99.7% (2018: 99.7%)
99.7 per cent thought our
vehicles were clean and
comfortable.
Quality of service and care
In the detail
99.9% (2018: 99.9%)
99.9 per cent thought our staff
were respectful.
99.7% (2018: 99.6%)
99.7 per cent thought our
staff listened to their needs
and wishes.
99.1% (2018: 99.1%)
99.1 per cent agreed that
our staff were compassionate
and caring.
99.2% (2018: 99.2%)
99.2 per cent of clients agreed
that our staff had fully explained
what would happen before
and during the funeral.
99.0% (2018: 99.1%)
99.0 per cent said that the
funeral service took place
on time.
98.3% (2018: 98.4%)
98.3 per cent said that the
final invoice matched the
estimate provided.
34 | Dignity plc Annual Report & Accounts 2019
Operating review
Funeral services
Funeral services relate to
the provision of funerals
and ancillary items, such
as memorials and floral
tributes.
Performance
As at 27 December 2019, the Group
operated a network of 820 (2018: 831)
funeral locations throughout the United
Kingdom, generally trading under local
established names.
During the period, the Group conducted
69,400 funerals compared to 72,300
in 2018.
Underlying operating profit was £56.3
million (2018: £62.2 million), a reduction
of nine per cent. In broad terms, this can
be explained by the following factors:
H1 H2 FY
£m £m £m
Underlying operating
profit – 2018 42.1 20.1 62.2
Impact of:
Number of deaths (7.0) 3.6 (3.4)
Market share (2.0) (1.7) (3.7)
Average incomes (4.4) 0.9 (3.5)
Cost base decreases 1.6 2.9 4.5
Acquisition activity 0.2 – 0.2
Underlying operating
profit – 2019 30.5 25.8 56.3
Items totalling £1.6 million (2018:
£(4.8) million) excluded from underlying
operating profit resulted in statutory
operating profit of £54.7 million (2018:
£67.0 million). These items are discussed
in the Financial review, but relate to
non-underlying items and the impact
of accounting policy changes required
for the Group’s statutory reporting.
Progress and Developments
Market share
Approximately one per cent of all
funerals were conducted in Northern
Ireland. Excluding Northern Ireland,
these funerals represented approximately
11.7 per cent (2018: 11.9 per cent) of
total estimated deaths in Britain. Whilst
funerals divided by estimated deaths
is a reasonable measure of our market
share, the Group does not have a
complete national presence and
consequently, this calculation can
only ever be an estimate.
Funeral mix and average income
Q1 Q2 H1 Q3 Q4 H2 FY
2019 2019 2019 2019 2019 2019 2019
Funeral type Actual Actual Actual Actual Actual Actual Actual
Average underlying Full service 3,542 3,585 3,558 3,608 3,613 3,605 3,578
income (£) Simple and limited service 2,159 2,000 2,089 2,000 1,995 1,996 2,047
Pre-need 1,826 1,789 1,806 1,879 1,899 1,890 1,846
Other (including Simplicity) 773 734 756 772 780 774 770
Volume mix (%) Full service 52 53 52 52 52 52 52
Simple and limited service 14 13 14 14 13 13 14
Pre-need 27 28 28 27 28 28 27
Other (including Simplicity) 7 6 6 7 7 7 7
Weighted average (£) 2,691 2,705 2,694 2,717 2,724 2,717 2,699
Ancillary underlying
income (£) 213 233 225 227 214 224 231
Average income per funeral (£) 2,904 2,938 2,919 2,944 2,938 2,941 2,930
Funeral mix and average income
Q4 Q1 Q2 H1 Q3 Q4 H2 FY
2017 2018 2018 2018 2018 2018 2018 2018
Funeral type Actual Actual Actual Actual Actual Actual Actual Actual
Average underlying Full service 3,910 3,875 3,700 3,800 3,695 3,590 3,639 3,735
income (£) Simple and limited service 2,659 2,100 2,340 2,240 2,420 2,435 2,429 2,350
Pre-need 1,707 1,680 1,680 1,680 1,720 1,750 1,737 1,705
Other (including Simplicity) 537 580 535 560 550 610 514 570
Volume mix (%) Full service 59 55 48 52 44 43 43 48
Simple and limited service 8 12 20 15 24 24 25 19
Pre-need 27 28 26 27 26 27 26 27
Other (including Simplicity) 6 5 6 6 6 6 6 6
Weighted average (£) 3,024 2,883 2,713 2,799 2,688 2,637 2,654 2,734
Ancillary underlying
income (£) 250 212 225 224 233 260 256 239
Average income per funeral (£) 3,274 3,095 2,938 3,023 2,921 2,897 2,910 2,973
On a comparable basis, excluding any
funerals from locations not contributing
to the whole of 2018 and 2019, market
share was 11.6 per cent, compared to
11.8 per cent in 2018. Whilst this is a
significant improvement on the dramatic
market share declines witnessed in 2016
and 2017, it demonstrates that further
trials are necessary to complete the
Group’s understanding of the changing
relationship between price and
market share.
Funeral mix
Trials of limited service funerals ceased
at the beginning of 2019.
Average income
Average income has been in line with
the Group’s expectations of £2,940.
This average will however decline as
the Group implements further trials.
Investment
Investment in the Group’s locations
and fleet have continued. In 2019,
£5.4 million was invested in maintenance
capital expenditure. Expenditure was
lower in 2019 than in previous years as
the Group focused on priorities around
the Transformation Plan. The Group
anticipates higher spend in 2020.
There was one opening and 12
closures in the year in line with the
Group’s Transformation Plan.
Outlook
The Group plans to continue trialling
various changes to its service offerings
during 2020. As part of this, it continues
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. Approximately one third
of our regions now have the Tailored
funeral and the final roll out is expected
to be completed in 2020.
“Average income per funeral
has been in line with the
Group’s expectations
of £2,940.”
We are a leading provider of funeral
services in the UK and we strive to set the
highest standards of service and care.
Dignity plc Annual Report & Accounts 2019 | 35
98%
A caring personal service
We offer customers a caring
personal service; 98 per cent would
recommend us.
“I experienced a compassionate,
patient and really professional
service. They took great care of me
and my loved one at what was
a difficult time.”
Service and innovation
We have always been proud of the
quality of service we provide for
customers but the root and branch
review taking place within our business
at the moment provides an opportunity
for change and innovation. We are
currently running pilot schemes where
approximately 50 per cent of funeral
arrangements are now being made in
the clients’ home. Another example of
our determination to put the customer
at the heart of everything we do.
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36 | Dignity plc Annual Report & Accounts 2019
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 (2018: 46) crematoria
as at 27 December 2019. The Group
performed 64,800 cremations (2018:
65,200) in the period, representing
11.1 per cent (2018: 10.9 per cent)
of total estimated deaths in Britain.
Non-underlying items of £1.2 million
(2018: £0.7 million) excluded from
underlying operating profit resulted in
statutory operating profit of £37.2 million
(2018: £39.6 million).
Progress and Developments
The Group has invested £3.3 million
maintaining its locations in the period.
Underlying operating profit was
£38.4 million (2018: £40.3 million), a
decrease of five per cent. This reduction
in profitability is driven by the number
of deaths and lower average incomes
from the increased use of direct cremation,
partially off-set by an improvement in
market share. This is explained in the
table below:
As previously announced in November
2019, whilst the Group has three locations
with planning permission, it is delaying
construction wherever possible pending
the outcome of the CMA investigation, as
it is unclear whether these developments
will achieve returns consistent with
previous new builds of approximately
13 per cent.
H1 H2 FY
£m £m £m
Underlying operating
profit – 2018 23.4 16.9 40.3
Impact of:
Number of deaths (2.4) 1.1 (1.3)
Market share 0.8 (0.3) 0.5
Average incomes (0.6) 0.2 (0.4)
Cost base increases (0.5) (0.5) (1.0)
Acquisition activity 0.1 0.2 0.3
Underlying operating
profit – 2019 20.8 17.6 38.4
Sales of memorials and other items have
been consistent, equating to approximately
£275 per cremation compared to £276
in the previous period.
Outlook
Crematoria remains a stable and cash
generative aspect of the Group’s
operations.
“Dignity is the largest single
operator of crematoria
in Britain, operating
46 crematoria as at
27 December 2019.
The company performed
64,800 cremations last year,
representing 11.1 per cent
of total estimated deaths
in Britain.”
Dignity plc Annual Report & Accounts 2019 | 37
72%
Service times
Approximately 72 per cent of
Dignity’s own crematoria allocate
60 minutes for a service, with the
remainder of locations offering
45 minutes for a standard service.
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We are the largest single operator of crematoria in
Britain with a significant portfolio of well-established
and state-of-the-art crematoria that meet the needs
of the local communities we serve.
Service and visitor
experience
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.
Our research tells us that many
customers greatly value an unhurried
experience when attending a
cremation service. As a result 72 per
cent of Dignity’s own crematoria offer
60 minutes for a standard cremation.
The remainder have a minimum
of 45 minutes.
Branding roll-out
Our Crematorium and Memorial Group
brand is being rolled out across our
crematoria network. 10 locations have
yet to be rebranded and these will be
completed in the first half of 2020.
“I greatly value a peaceful
place to visit and remember
my loved one.”
38 | Dignity plc Annual Report & Accounts 2019
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.
Statutory presentation
For statutory purposes the Group now
has two reporting segments, Funeral
services and Crematoria. This follows the
adoption of IFRS 15, as a result of which
the Group has concluded that only a
single performance obligation exists
when a pre-arranged funeral plan is sold,
being the performance of a funeral.
Underlying performance
For the purpose of alternative
performance measures the Group has
three reporting segments, Funeral
services, Crematoria and Pre-arranged
funeral plans as the chief operating
decision maker reviews segmental
performance before applying the
effect of IFRS 15 and the consolidation
of the Trusts.
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 £nil
compared to £2.8 million in the previous
year, reflecting lower levels of marketing
allowances being received at the point
of sale. On a statutory basis, pre-need
is not considered to be a separate
operating division.
In overall terms, approximately 58,000
(2018: 58,000) new plan sales were made
and the number of active pre-arranged
funeral plans increased to 523,000 (2018:
486,000) as at 27 December 2019. Trust
based sales in the year were 26,000
(2018: 24,000). All plan sales are stated
net of cancellations.
Of the sales in the period 32,000 (2018:
34,000) represent plans linked to life
assurance plans with third parties rather
than trust based plan sales and 164,000
(2018: 134,000) active insurance plans
are in place at 27 December 2019. 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.
These amounts will be recognised as and
when the funerals are performed. As with
all the Group’s divisions, pre-arranged
funeral plan underlying profits broadly
reflect the cash generated by that activity.
Outlook
The Group will continue to engage with
relevant parties as appropriate regarding
regulation whilst maintaining focus on
selling high-quality, competitive products
to customers.
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 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.
“Working with Fairer Finance,
Dignity has called for more
consumer protection in the
funeral plan market.”
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 financial position of the Trusts
holding members’ monies is crucial,
given the Group ultimately guarantees
the promises made to members. At the
end of 2019, the Trusts had average
assets per plan of £3,300 (2018: £3,000)
in respect of 311,000 trust based funeral
plans. Average assets per plan are
greater than the amount currently
received by the Trading Group for
performing a funeral.
The latest actuarial valuations of the
Trusts (at 27 September 2019) showed
them to have a surplus of £17 million,
based on prudent assumptions. This
valuation is based on the amounts the
Trusts are expected to pay when a funeral
is performed rather than the actual cost
of performance (being a lower amount)
to the Group. If the discount rate used
had equalled the long-term investment
target of the Trust’s funds, then according
to the actuarial valuations, the Trusts
would have reported aggregate surpluses
of approximately £156 million.
Crucially, each plan sold creates
additional headroom in the trust, since
the funds paid in are more at the point
of sale than those received by the Group
if the member died immediately.
We are one of the UK’s largest providers of pre-arranged
funeral plans and we continue to strengthen our presence
in this growing market.
Dignity plc Annual Report & Accounts 2019 | 39
997,000
Pre-arranged plans
We have already helped more than
997,000 people plan for their funerals
in advance of which 523,000 remain
outstanding.
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“The choices were clear and
simple and I have planned
for the future to help my
family and give me
peace of mind.”
Service, quality
and trust
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. This is
a real testament, we believe, to our
reputation for high levels of service,
quality and trustworthiness.
Regulation
Dignity’s recent research, published
together with Fairer Finance, has
highlighted the poor sales practices
and financial management risks that
certain providers engage in. The
Group welcomes the opinion from
HM Treasury to introduce statutory
regulation of pre-arranged funerals
through the Financial Conduct
Authority. We continue to anticipate
regulation of pre-arranged funerals
in approximately two years and we
are preparing accordingly.
40 | Dignity plc Annual Report & Accounts 2019
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.
Non-underlying items of £15.7 million
(2018: £5.6 million) excluded from
underlying costs resulted in costs of
£47.1 million (2018: £30.7 million).
Maintenance capital expenditure of
£1.1 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. Building core functions is
a necessary precursor to field based
administrative functions being
centralised.
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
£31.4 million (2018: £25.1 million).
As anticipated, this reflects continued
investment in digital activities and
central capabilities, consistent with the
Transformation Plan. The table below
summarises the key movements:
H1 H2 FY
£m £m £m
Central overheads – 2018 11.9 13.2 25.1
Impact of:
Digital activities 1.5 0.5 2.0
Salaries – central
support functions 0.7 2.0 2.7
Other costs – 0.7 0.7
IT support fees 0.3 0.3 0.6
Depreciation 0.2 0.1 0.3
Central overheads – 2019 14.6 16.8 31.4
Dignity plc Annual Report & Accounts 2019 | 41
Financial review
We have delivered a resilient
performance in line with
expectations
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Introduction
These results have been prepared in accordance with
International Financial Reporting Standards (‘IFRS’) as adopted
in the EU.
In 2019, the Group has adopted IFRS 15 and has also changed its
accounting policy in respect of its two principal pre-need trusts
being the Trust for Age UK Plans (‘Age UK’) and the National
Funeral Trust (‘NFT’), together the ‘Trusts’. For accounting
purposes, the Trusts are now considered to be controlled by
the Group and are incorporated in the Group’s consolidated
financial statements. The Trading Group refers to Dignity and
its subsidiaries, excluding the Trusts. Further details can be
found in the Group’s accounting policy disclosures.
The Board believes that whilst statutory reporting measures
provide financial performance of the Group under GAAP,
alternative performance measures are necessary to enable
users of the financial statements to fully understand the
trading performance and financial position of the business.
The alternative performance measures provided are aligned
with those used in the day-to-day management of the business
and allow for greater comparability across periods.
For this reason, the alternative performance measures provided
exclude the impact of consolidating the Trusts and the changes
which relate to the adoption of IFRS 15, both of which are
considered to mask the underlying trading performance of
the Group, as well as non-underlying items comprising certain
non-recurring and non-trading transactions.
Financial highlights
The Group’s financial performance is summarised below:
52 week 52 week
period ended period ended
27 Dec 2019 28 Dec 2018 Decrease
restated %
Underlying revenue(a) (£million) 301.3 315.6 5
Underlying operating profit (a) (£million) 63.3 80.2 21
Underlying profit before tax (a) (£million) 37.7 54.4 31
Underlying earnings per share (a) (pence) 60.6 85.8 29
Underlying cash generated
from operations (a) (£million) 71.8 101.9 30
Revenue (£million) 338.9 353.7 4
Operating profit (£million) 44.8 75.9 41
Profit/(loss) before tax (£million) 44.1 (18.0)
Basic earnings/(loss) per share (pence) 69.8 (34.0)
Cash generated from operations (£million) 64.6 104.2 38
Dividends paid in the period:
Interim dividend (pence) – 8.64 n/a
Final dividend (pence) 15.74 15.74 –
(a) Further details of alternative performance measures can be found on pages 167 and 168.
Underlying revenue
£301.3m
(2018: £315.6m)
Underlying cash generated
from operations
£71.8m
(2018: £101.9m)
Underlying operating profit
Transformation Plan costs
£63.3m
(2018: £80.2m)
£12.1m
(2018: £2.7m)
Steve Whittern, Finance Director
“Our performance in 2019 was resilient and
in line with market expectations. However,
underlying operating profit decreased by
21 per cent to £63.3 million and average
income per funeral reduced from £2,973 to
£2,930 reflecting the impact of a changing
competitive landscape.
Against this, our funeral market share
showed a positive response to changes in
our market proposition compared to 2016
and 2017 (which saw significant funeral
market share reductions), there was a
strong market share performance by our
crematoria business and our Transformation
Plan progressed as planned with key branch
pilots underway. Strong cash generation
will enable us to continue to invest in our
business in line with our strategic objectives.
The fundamentals of our business remain
compelling and strong and we have
continued our relentless commitment to
quality, value-for-money and service levels.”
42 | Dignity plc Annual Report & Accounts 2019
Financial review continued
As announced in the Group’s 2019 interim results, although
the Group has significant cash resources at hand and continues
to be cash generative, in order to maintain maximum flexibility
and liquidity during the transformation, the Board has concluded
that it is prudent to temporarily cease dividend payments.
The Group has an established track record of returning cash
to shareholders at appropriate times over many years and
once the current uncertain competitive environment becomes
clearer, it anticipates resuming dividend payments or returning
excess cash to shareholders.
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.
In particular, as the Group’s change of accounting policy in
respect of the Trusts has not impacted the way it operates or
considers the economics of this operating activity, underlying
measures have not had to be restated as a consequence of
the accounting policy change.
Detailed information on non-underlying items is set out on
page 167 and a reconciliation of statutory revenue to underlying
revenue is detailed in note 3.
Accordingly, the following information is presented to aid
understanding of the performance of the Group:
52 week 52 week
period ended period ended
27 Dec 2019 28 Dec 2018
restated
£m £m
Operating profit for the period as reported 44.8 75.9
Add the effects of:
Transformation Plan costs 12.1 2.7
(Profit)/loss on sale of fixed assets (1.0) 0.3
External transaction costs in respect of
completed and aborted transactions 0.9 0.8
Acquisition related amortisation 4.8 4.9
Operating and competition review costs 3.5 2.7
GMP past service cost – 1.4
Trade name impairment/write-off 6.8 1.1
Impact of Trust consolidation and IFRS 15 (8.6) (9.6)
Underlying operating profit (a) 63.3 80.2
Underlying net finance costs (25.6) (25.8)
Underlying profit before tax (a) 37.7 54.4
Tax charge on underlying profit before tax (7.4) (11.5)
Underlying profit after tax (a) 30.3 42.9
Weighted average number of Ordinary
Shares in issue during the period (million) 50.0 50.0
Underlying EPS (pence)(a) 60.6 85.8
Decrease in underlying EPS (per cent) 29 33
(a)Further details of alternative performance measures can be found on
pages 167 and 168.
Earnings per share
The Group’s statutory profit after tax was £34.9 million (2018:
Loss of £17.0 million). Basic earnings per share were 69.8 pence
per share (2018: Loss of 34.0 pence per share). Underlying
profit after tax was £30.3 million (2018: £42.9 million), giving
underlying earnings per share of 60.6 pence per share (2018:
85.8 pence per share), a reduction of 29 per cent.
Transformation Plan
Costs incurred in 2019
The Group continued to invest significantly in 2019 to
support the Transformation Plan. Costs incurred to date are
summarised as follows:
Total 2019 2018
£m £m £m
External advisers’ fees 1.7 0.6 1.1
Brand development and marketing costs 5.4 4.3 1.1
Costs of additional staff to support
the Transformation 5.2 4.7 0.5
Dilapidation costs 0.5 0.5 –
Irrecoverable VAT 1.6 1.6 –
Other 0.4 0.4 –
Total costs incurred 14.8 12.1 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 results:
Costs
The Group anticipates a total investment of £50 million 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.
Benefits
The Transformation Plan is expected to realise the following
net operating profit benefits:
Short-term (2022) 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)
8 13
Dignity plc Annual Report & Accounts 2019 | 43
Other items excluded from underlying operating profit
Profit on sale of fixed assets
Profits arising from the sale of fixed assets are excluded as they
are unconnected with the trading performance in the period.
External transaction costs
External transaction costs primarily reflect amounts paid to
external parties for legal, tax and other advice in respect of the
Group’s acquisitions and unsuccessful crematoria planning
developments.
Amortisation of acquisition related intangibles
Amortisation of acquisition related intangibles reflects the
write-off of acquired intangibles over the term of their useful life.
Operating and competition review costs
The Group has incurred costs with external advisers to support
the Group’s response to the CMA’s funeral market study and
HM Treasury‘s consultation on the funeral plan sector. Costs
were also incurred in 2018 with external advisers to support its
operational review.
GMP past service cost
In 2018, the Group was required to recognise an estimate of the
impact of the implementation of Guaranteed Minimum Pension
(‘GMP’) equalisation.
Trade name impairment
In 2019, the Group assessed the carrying value of its trade names.
In light of the lower level of profitability and lower anticipated
average income per funeral, an impairment of £6.8 million has
been recognised.
Trade name write-off
During 2018, 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.
Pre-need accounting policy/IFRS 15
As described elsewhere in this report, the Group changed its
accounting policy in respect of the Trusts and in respect of IFRS 15.
This adjustment reverses the impact of these policy changes in
order to maintain underlying performance measures with those
used in the day-to-day management of the business.
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Capital expenditure
Capital expenditure on property, plant and equipment and
intangible assets was £18.3 million (2018: £25.0 million).
27 Dec 28 Dec
2019 2018
This is analysed as: £m £m
Maintenance capital expenditure:
Funeral services 5.4 10.4
Crematoria 3.3 4.5
Other 1.1 1.2
Total maintenance capital expenditure (a) 9.8 16.1
Branch relocations 1.1 0.8
Transformation capital expenditure 1.7 –
Satellite locations 0.3 1.4
Development of new crematoria and cemeteries 5.4 6.7
Total property, plant and equipment 18.3 25.0
Partly funded by:
Disposal proceeds – vehicles (0.2) (0.4)
Disposal proceeds – properties (b) (1.9) –
Net capital expenditure 16.2 24.6
(a) Maintenance capital expenditure includes vehicle replacement
programme, improvements to locations and purchases of other tangible
and intangible assets.
(b) Property disposals are the result of the Transformation Plan.
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.
Impairment of investment in associated undertaking
The Group has previously invested in Funeral Zone Limited
(‘Funeral Zone’). In October 2019, Funeral Zone filed statutory
accounts recognising the inherent going concern risks it faced.
The Group has reviewed and assessed the performance
outlook of Funeral Zone and concluded that its investment
is fully impaired.
Cash flow and cash balances for the Trading Group
Underlying cash generated from operations was £71.8 million
(2018: £101.9 million).
Other working capital changes were consistent with the Group’s
experience of converting profits into cash, subject to timing
differences and cash incurred in respect of commission payments.
Cash balances at the end of the period were £57.9 million
(2018: £66.9 million). Further details and analysis of the Group’s
cash balances are included in note 16 to the consolidated
financial statements.
Maintenance capital expenditure (£m)
Underlying operating profit (£m)
Underlying earnings per share (pence)
£16.1m
£9.8m
18
16
14
12
10
8
6
4
2
0
£80.2m
£63.3m
100
80
60
40
20
0
85.8p
60.6p
100
80
60
40
20
0
2018
2019
2018
2019
2018
2019
44 | Dignity plc Annual Report & Accounts 2019
Financial review continued
Pensions
The balance sheet shows a deficit of £26.0 million before
deferred tax (2018: deficit of £25.2 million). The scheme currently
represents an annual cash obligation of £2.2 million. However,
the scheme is due its next triennial valuation as at April 2020, the
outcome of which will determine future annual cash obligations,
most likely from 2021 onwards.
Taxation
The Group’s effective tax rate on underlying profits in the period
was 19.5 per cent (2018: 21.2 per cent).
The current period underlying effective tax rate is lower than
originally anticipated due to the effects of prior year items with
a tax impact totalling £0.5 million.
In 2020, 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 19.0 per cent and 19.5 per cent.
Capital structure and financing for the Trading Group
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- BB+
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 27 December 2019 was 2.13 times (2018: 2.55 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’). Furthermore, the calculations are
unaffected by the changes in accounting policy described
elsewhere, as the Group was able to elect to disregard those
changes when making the calculations.
EBITDA for this calculation can be reconciled to the Group’s
statutory operating profit as follows:
27 Dec
2019
£m
EBITDA per covenant calculation – Securitisation Group 72.3
Add: EBITDA of entities outside Securitisation Group 11.6
Add: Non cash items (a) (1.3)
Underlying operating profit before depreciation
and amortisation – Group 82.6
Underlying depreciation and amortisation (19.3)
Non-underlying items (27.1)
Impact of Trust consolidation and IFRS 15 8.6
Operating profit 44.8
(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 was not drawn at any point in the year.
Net debt
The Group had net debt of £506.2 million (2018: £506.8 million)
at the balance sheet date. See note 26 for further details.
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 £791.9 million,
(Class A Notes: £231.4 million; Class B Notes: £560.5 million).
Net finance costs
The Group’s underlying finance costs substantially consist of
the interest on the Secured Notes and ancillary instruments.
The net finance cost in the period relating to these instruments
was £24.4 million (2018: £24.8 million).
Other ongoing underlying finance costs incurred in the period
amounted to £1.4 million (2018: £1.2 million), including the
unwinding of discounts on the Group’s provisions and other
financial liabilities.
Interest receivable on bank deposits was £0.2 million (2018:
£0.2 million).
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 2019 | 45
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Shareholders’ deficit
Consolidating the Trusts and adopting IFRS 15, has a significant
impact on our reported results. The recognition of contract
liabilities (the majority of which are expected to fall due after
one year) in excess of the Trusts’ financial assets has caused
the Group’s balance sheet to show an overall deficit in
shareholders’ funds.
This deficit, which only arises on consolidation, has no impact
on the Group’s future ability to pay dividends to shareholders,
which relies on the reserves in the Company and not the Group.
Trust balances
At the balance sheet date, the Trusts had £947.5 million (2018:
£862.4 million) of financial assets and £15.5 million (2018: £13.8
million) of cash, which was recognised in the consolidated balance
sheet. The movement in financial assets is primarily attributable
to remeasurement gains recognised in the consolidated income
statement of £79.5 million (2018: loss of £24.0 million), reflecting
changes in asset values and net purchases of financial assets
of £9.5 million (2018: £20.7 million).
Aggregated contract liabilities totalled £1,304.6 million (2018:
£1,256.1 million) with the primary movements being sales of
new plans of £91.2 million (2018: £92.7 million), increases due
to significant financing of £54.1 million (2018: £53.3 million)
and releases due to death or cancellation totalling £96.8 million
(2018: £95.5 million).
Accounting policy changes
As described elsewhere, the Group has changed its accounting
policy in respect of the Trusts. As a consequence, the Group has
also decided not to apply IFRS 15 on a modified retrospective
approach, but rather to apply it fully retrospectively. The impact
of these changes are detailed in note 35.
The impact of IFRS 16 – Leases
As the Group‘s balance sheet date is the nearest Friday to
31 December, it is not required to and will not adopt IFRS 16
until its 2020 results. In broad terms, this standard requires the
Group to recognise an asset and liability on its balance sheet
for operating leases that are currently held off balance sheet.
As approximately half of the Group’s funeral properties and
some of its crematoria are leased, this will have a material
impact in the Group’s statutory results. The Group currently
anticipates recognising an initial asset of approximately
£94.9 million and an initial liability of approximately £93.8 million.
The difference of £1.1 million which relates to opening amounts
relating to prepaid lease payments which will be reflected
through the statement of changes in equity on 28 December
2019 as required under the transition approach being followed
where the comparative results disclosed in the 2020 annual
report are not restated. Operating costs of approximately
£11.9 million will be replaced by a depreciation charge of
approximately £9.1 million and a finance cost of approximately
£4.6 million. As such statutory operating profit will increase
by approximately £2.8 million in each of the next few years,
assuming no change in the Group’s property portfolio.
These changes will not impact the Group’s securitisation
covenants, as the Group has the ability to elect to disregard
new accounting standards in order to maintain consistency
of measurement.
Q&A with
Steve Whittern,
Finance Director
Q/A
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.
Q/ What impact will the slowing down of your plans
have on the Group’s overall finances?
We continue to have strong cash balances and the ability to
support our plans, even if they take a little longer. Pausing
dividends and crematoria developments helps us maintain
maximum flexibility.
Q/ What are the cost implications of extending the
Transformation Plan by one year?
We continue to believe we can execute the Plan on the
original economics we have described.
Q/ How much further do you expect average funeral
prices to fall?
At this stage, we cannot say. The market remains competitive
and the CMA’s final conclusions will not be known until later
in the year.
Q/ What impact will the delay in some cost
savings have?
We do not anticipate realising any savings in 2020. However,
we still expect to achieve £8 million of annualised savings
by the end of the Plan, which should then increase further
to £13 million per year.
Q/ Is a return to a dividend payment a possibility
for next year?
2020 will be focused on investing in the business and
maintaining economic flexibility.
46 | Dignity plc Annual Report & Accounts 2019
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 mitigating factors.
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
Mitigating factors 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
T E G I C OBJECTIV
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BJECTIV
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T
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G
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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
Dignity plc Annual Report & Accounts 2019 | 47
Links
See Strategy and business model: p.28 and p.29
See KPIs: p.30 to p.33
See Governance: p.60 to p.94
Risk status summary
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 operational regulation would be
beneficial, there remains a risk that regulation could be imposed
that may result in a significant cost burden to the Group or prices
being capped in such a way that the Group’s profitability
deteriorates significantly.
Pre-arranged funeral plans
As the Group now consolidates certain pre-need trusts, any
related risks in respect of them are required to be considered.
However, the Group considers that these have already been
disclosed, as ultimately the risk surrounds the level of funding
for pre-arranged funeral plans.
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.
COVID –19
The potential risks of COVID –19 to the Group are being assessed
regularly in light of the developing guidance and commentary
from the Government.
The Group has business continuity and pandemic plans that are
being assessed and adapted as necessary in case of need.
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 income per funeral or cremation either
resulting from market changes or the CMA capping prices
• 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 funeral industry
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 48 to 51 we provide a summary
of each risk, a description of the potential impact and
a summary of mitigating actions.
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Key: Risk trend measures
Risk exposure increased
Risk exposure decreased
No significant change
48 | Dignity plc Annual Report & Accounts 2019
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 the Group.
The risk is increased as the Dignity brand is marketed
more widely.
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 2019 was 584,000 which was three per cent below the prior
year and lower than the Group’s original expectation.
See Chief Executive’s review: p.16 to p.27
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.33
Fall in average income per funeral or cremation
either resulting from market changes or the CMA
capping prices
There has been increasing price competition in the
funeral market, resulting in material price reductions by
the Group in recent years. 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.
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. This will be through
investment in digital capabilities including an enhanced reporting capability of business
intelligence and management information which will enable risks and trends to be
identified promptly and accurately.
See Operating review: p.34 to p.40
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.
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 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 begin to stabilise.
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.34 to p.40
Demographic shifts in population
There can be no assurance that demographic shifts in
population will not lead to a reduced demand for funeral
services in areas where Dignity operates.
In such situations, Dignity would seek to follow the population shift by rebalancing the
funeral location network together with meeting the developing cultural requirements.
See Operating review: p.34 to p.40
Dignity plc Annual Report & Accounts 2019 | 49
Operational risk management (continued)
Risk description and impact
Mitigating activities and commentary
Change
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 incomes 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.
Competition continues to intensify, with additional
funeral directors opening at varying price points,
alongside an increase in the popularity of direct
cremations.
Regulation of pre-arranged funeral plans
HM Treasury has said “Responses to the call for evidence
have confirmed that consumer detriment is present in
the market and that there is a need for compulsory
regulation of the sector.
In the light of the responses to the call for evidence, the
government has maintained its position that bringing
funeral plan providers within the remit of the FCA would
be the most effective policy response for strengthening
the regulation of the market.”
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.
Regulation of the funeral industry
Regulation could result in increased compliance costs
for the industry as a whole or other unforeseen
consequences including capping of funeral and
cremation prices.
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 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.
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.27
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.27
The Group already operates at a very high standard, compared to the majority of
our competitors, using facilities appropriate for the dignified care of the deceased.
The impact of price caps is impossible to quantify at this stage.
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50 | Dignity plc Annual Report & Accounts 2019
Principal risks and uncertainties continued
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.
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 with the possible result of cost
escalation or failure to realise benefits.
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 30.
This risk has been and will be mitigated by executive leadership in the business
supported by the Transformation Director who reports to the Chief Executive.
The Transformation Team has made substantial progress within a clearly defined and
accountable project framework. Delivery in 2019 has been in line with expectations.
See Chief Executive’s review: p.16 to p.27
Direct cremations
Growth in the direct cremation market could reduce
average income in the funeral business and adversely
affect the volume mix and average income 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.
CMA investigation into the funeral industry
The CMA full market investigation into the funeral
market examines 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 is also looking at how prices have changed over time
and the factors that affect them.
Cremation fees are being considered as part of the review.
The initial CMA working papers indicate possible
remedies including the introduction of a quality
regulation regime, measures to promote greater
information transparency, price controls and local
authority procurement of funeral directors services.
Pricing controls, if implemented, could have a
significantly detrimental impact on the Group.
Simplicity Cremations is being promoted via a strong online presence together with
TV advertising. Other media advertising is also planned.
See Chief Executive’s review: p.16 to p.27
Dignity has engaged constructively with the CMA and strongly supports the
opportunity to improve standards within the sector and meet the expectations
of consumers.
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.
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.
However, until potential price caps are actually realised, it is impossible to quantify
the impact or potential mitigation.
See Chief Executive’s review: p.16 to p.27
Dignity plc Annual Report & Accounts 2019 | 51
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.
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.41 to p.45
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 2022.
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 46 to 51).
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52 | Dignity plc Annual Report & Accounts 2019
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 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.
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.
The following table summarises the non-financial information
provided in the Annual Report and demonstrates how it is linked
to the reporting requirements of sections 414CA and 414CB of the
Companies Act 2006.
Reporting requirement
Impacts
Employees
Environment
Waste disposal
Crematoria emissions
Ethical Sourcing
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 28
• Corporate and Social Responsibility – page 53
• Directors’ Report – page 92
• 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 53
• Our CSR commitments(1)
Dignity produces waste that is hazardous. Specifically this is items such as gloves
used for handling the deceased, waste arising from embalming and mercury from
cremator abatement, which are placed in dedicated containers and are collected by
contractors and incinerated. All sites where this happens have been registered as
required under the legislation. All other waste is disposed of in accordance with local
authority regulations. The Regional Health and Safety Managers also monitor this
area. A waste disposal mission statement has been issued to all sites.
Crematoria are subject to emission controls from the local authority areas in which
they are sited. They are licensed on an annual basis with quarterly emissions testing
information being submitted to the local authority. All cremators are subject to
rigorous maintenance schedules completed by an external contractor.
Air Pollution Control is a risk for all crematoria. The Company’s nominated service
provider completes a planned test programme on all cremators which includes
emissions testing. This mitigates the risk of any air pollution control issues.
There is a risk that Dignity could use a supplier that manufactures or purchases
goods that are made using slave, forced or child labour.
This risk is mitigated firstly by purchasing via a reputable agent and secondly by
ethical audits. Factories that supply Dignity are inspected by the General Manager of
Dignity Manufacturing on a three yearly cycle and ethical questionnaires completed
in conjunction with the owners of those factories. An E-Learning Module addressing
the Modern Slavery Act is rolled out to managers.
• Health, Safety and Environmental Performance – page 58
• Safe Handling and Use of Substances Policy
• Waste Disposal Mission Statement
• Health, Safety and Environmental Performance – page 58
• Our CSR commitments(1)
• Modern Slavery Act Statement(1)
• E-Learning Module
• Our CSR commitments(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
• Annual declarations of compliance with both the
Ethics and Conflicts of Interest Policy and other
relevant policies and laws.
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 2019, 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 28
• Our non-financial key performance indicators are
shown on page 31
• For our principal risks and uncertainties and how they
are mitigated, see page 46
(1) These can be found on the Group’s website
www.dignityfunerals.co.uk/corporate.
Corporate and social responsibility
Dignity plc Annual Report & Accounts 2019 | 53
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Areas of focus
We started the review by looking again at how our operations –
what we do as a business day-to-day – intersect with CSR issues,
in particular, employee engagement, our communities and the
environment. These three areas of focus have been the bedrock
of our CSR thinking over the years from which we have developed
three specific CSR pillars:
Our People (Expertise and Culture); Relationships (Building
strong relationships and community impact); and Resources
(Health, Safety and Environmental Performance).
Employee engagement (‘Our People’) is essential if we are
to successfully deliver the Transformation Plan. As a result,
improved employee engagement has been a major priority this
year and we have looked carefully at this crucial area and taken
significant steps to improve it through initiatives such as our
Employee Forum. We have worked hard to ensure we can
deliver the necessary changes at branch level and that employees
can provide feedback and are properly informed and trained.
One consequence of this activity has been the creation of a
much larger Human Resources function with a wider range of
additional skill sets to ensure it properly fits the needs of our
employees and the business. At the same time, great care is
being taken to ensure that our strong, caring culture is preserved
in the midst of widespread change. Achieving this balance is of
prime importance. As part of our Transformation Plan we will
evaluate our CSR pillar, ‘Our People (Expertise and Culture)’,
ensuring it is aligned to the business strategy, to industry Best
Practice and the expectations of both our internal and external
stakeholders. A full definition of what we mean and what is
required by managers and employees will be developed when
the Transformation Plan is closer to completion.
Regarding the environment, part of our ‘Resources (Health,
Safety and Environmental Performance)’ CSR pillar, we will
monitor whether changes to working practices as a result of the
Transformation Plan may impact our carbon footprint. The likely
impact cannot yet be fully assessed given that we are in the early
stages of piloting these changes. We will have a better picture
at the end of 2020. However, at present, our carbon footprint
remains low – we continue to report to the CDP (formerly
Carbon Disclosure Project) on an annual basis and have
retained our B score.
Regarding communities, part of our ‘Relationships (Building
strong relationships and community impact)’ pillar, the work of
our Transformation Plan team at branch level has demonstrated
the high-quality of many of our branches’ relationships with their
communities and the type of outreach that takes place. We want
to capture and share good examples across the whole Group
and encourage wider adoption in order to further enhance our
reputation as a positive contributor within the communities we
so proudly serve.
Looking at the changing needs of clients, we recognise the
future requirement to provide ‘sustainable’ funerals. What that
might mean in practice will require definition but the demand
for non-traditional and ‘sustainable’ alternatives is likely to grow.
Over time we will evaluate what ‘good’ looks like in the market
and assess what standards can be developed in order to offer
a genuine alternative that our clients have confidence in and
which will withstand rigorous stakeholder scrutiny.
Richard Portman, Corporate Services Director
Our CSR Strategy Review
“In last year’s Annual Report I announced
a review of our CSR strategy. This was in
the context of the unprecedented change
taking place in the business through our
Transformation Plan. Because the Plan
involves a root and branch appraisal of
our business and operations it provides
a valuable opportunity to review all
aspects of our role and behaviour as
a corporate citizen.”
54 | Dignity plc Annual Report & Accounts 2019
Corporate and social responsibility continued
Celebrating experience
and promoting diversity
Employee diversity
Senior managers
(% & number)
Senior and middle managers
(% & number)
Male: 80% (24 employees)
Female: 20% (6 employees)
Male: 62% (113 employees)
Female: 38% (68 employees)
As well as looking at what we do we have reviewed what Best
Practice in CSR looks like amongst a number of similar and
also dissimilar businesses. We have also taken account of both
current and developing thinking around sustainability and ESG
(Environmental, Social and Governance). What is clear is that
the interest in sustainability and ESG matters is now a dominant
theme and many companies are explicitly aligning CSR policies
and practices with their corporate strategy.
As a Board we have long placed strong corporate governance
at the heart of the way we run the business on behalf of all
our stakeholders. We recognise also that the support of our
employees in such a caring profession is fundamental. The
role of our branches in their communities is becoming more
visible through the work of the Transformation Plan team.
Members of that team have been greatly impressed by the level
of staff commitment. This is borne out by the high customer
satisfaction scores that we return, year after year. We can make
a strong case that we are a force for good in our communities.
However, we cannot be complacent. There is a need now, more
than ever, to not only update our sustainability policies and set
appropriate goals and KPIs but also to ensure that our policies
are aligned to the overall corporate strategy. We also recognise
that we can explain our CSR strategy, policy and practices better
within the business. Those practices, which are changing and
evolving as a result of the Transformation Plan, in particular
employee engagement, need to be embedded in the
management culture. Other, existing good practices, must
be articulated better, shared and properly understood and
owned by employees.
A revised CSR Strategy
Recommendations
The recommendations of the review are as follows:
As the Transformation Plan reaches
its conclusion, the Group will publish
a revised CSR strategy. We will
strengthen our existing approach by
taking account of emerging trends and
priorities in CSR which are relevant to
our business. If necessary we must be
prepared to go beyond the ‘People’,
‘Relationships’ and ‘Resources’
framework currently in place.
1/ The Group will prepare and publish
a refreshed CSR Strategy document
which is clearly aligned and designed
for employees and other stakeholders.
It will make clear what the Group
regards as best practice and the
requirements on management and
employees. It will be used to help drive
and sustain the changes being made in
the business by the Transformation.
2/ We will consider whether to extend the
CSR framework, currently comprising:
Our People (Expertise and Culture);
Relationships (Building strong
relationships and community impact);
and Resources (Health, Safety and
Environmental Performance).
3/ We will ensure that our revised
strategy is in line with any potential
upcoming social and environmental
legislation e.g. carbon reduction
targets and waste management,
as well as industry best practice.
4/ We will ensure that our strategy
includes both internal and external
targets that are transparent and will
keep stakeholders up to date with
our progress and challenges.
“The revised CSR Strategy will ideally be produced and published
during 2021 following further work with the Transformation Plan
team on areas including employee engagement and
environmental impact.”
Our people
Expertise and culture
Total employees/ratio
(% & number)
Employee service
(% & number)
Long service
30%
30 per cent of our people
have worked at Dignity for
more than 10 years.
3,304
Male: 48% (1,574 employees)
Female: 52% (1,730 employees)
Less than 1 year: 16% (520 employees)
1–4 years: 35% (1,150 employees)
5–9 years: 19% (645 employees)
10–19 years: 20% (655 employees)
Over 20 years: 10% (334 employees)
Dignity plc Annual Report & Accounts 2019 | 55
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Building engagement
For a business that prides itself on
communicating sensitively with clients,
we have to ensure the same care and
consideration is shown towards our
own people too. That means regular
dialogue which is accessible through
a variety of channels, with the
opportunity for colleagues to interact
and easily share their feedback.
With a continued focus on the
Transformation Plan, it is clear that
employees will also want to know
how changes affect them and their
particular roles.
Adopting a multi-channel approach
has seen us develop digital
communications solutions
that sit alongside our established
company newsletter. Good to Great
is a dedicated website housing news,
blogs, FAQs, diary dates, occasional
competitions and opinion polls.
Users can comment on site content
and enter into related discussions
with their colleagues.
We will soon be adding a secure section
for managers to facilitate information
sharing and promoting best practice
through toolkits.
Other initiatives include a fortnightly
email bulletin charting the progress
of the Transformation Plan, monthly
managers’ calls, Town Hall
presentations for head office
colleagues and regular engagement
surveys. This summer we will run
the second of our Good to Great
Live management conferences with
keynote speakers and detailed
business updates.
56 | Dignity plc Annual Report & Accounts 2019
Corporate and social responsibility continued
Supporting each other
Giving our people a voice
More frequent and accessible communication is
complemented by an increase in the face to face support
available to colleagues, particularly those in operational
roles across funerals, crematoria and manufacturing.
During the last year we successfully established a new
Employee Forum to facilitate regular and constructive
engagement between colleagues and senior management,
including the Board.
Our HR department has expanded to include a team of
nine regional Business Partners. The role is very much a
consultative one, so rather than focus solely on reactive and
administrative issues, the Partners provide guidance in areas
such as recruitment, learning and development and
improving business results.
Across the organisation, we have been looking carefully
at people support and specifically the area of reward and
recognition. We are exploring opportunities for additional
benefits that enhance our position as a desirable and
appealing place to work.
We care deeply about the wellbeing of our people and
continue to offer access to an Employee Assistance
Programme. This free and confidential advice service is
available 24/7 and enables colleagues to discuss any issues
that may be causing them concern, be they related to work,
home life, or their physical and mental health.
Hundreds applied for the opportunity to represent their
colleagues and business area through the Forum and the
successful 17 candidates were chosen following a staff vote.
The purpose of the Employee Forum is to share information
on a broad range of topics, everything from business
performance and operational initiatives to future strategy
and vision. It also creates a platform for relaying colleagues’
opinions, feelings and ideas, helping to ensure that the
business decisions we make are fully informed with insight
from all major stakeholders.
Three meetings have been held to date, each attended by
Chief Executive Mike McCollum, and the outputs shared
through communications tools such as our internal newsletter.
“More frequent and
accessible communication is
complemented by an increase
in the face to face support
available to colleagues.”
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Relationships
Building strong
relationships and
community impact
Dignity plc Annual Report & Accounts 2019 | 57
“In our desire to become more
digitally enabled and offer
greater choice to customers,
we have taken our knowledge
to create an innovative online
tool that guides people
through the essential steps
they need to follow when
someone dies.”
Reaching out to our local communities
Supporting a variety of charities
From the clients and families we care for, to the communities
we serve, building and maintaining strong external
relationships plays a key role in the overall success of
our business.
Dignity is proud to work with a number of charitable partners,
sometimes through fundraising activities or sponsorship, or
alternatively by giving up our time and offering assistance to
local projects near our branches and crematoria.
In the case of our clients, relationships frequently extend
beyond the funeral itself – after all, the grieving process is never
so straightforward and will affect different people in different
ways over different timespans.
A popular and welcome initiative has been the communal
memorial services coordinated by our colleagues in the build
up to Christmas. We organise hundreds across the country,
both for clients we have helped, as well as wider members of
the community who also wish to participate.
The services are a chance to remember and celebrate loved
ones, whose names are read out as a mark of respect, before
family members are invited to light a candle. Poignant,
emotional, but also comforting, it is a chance for Funeral
Directors and Funeral Arrangers to speak with families and
offer further support if required.
Guidance just a click away
In our desire to become more digitally enabled and offer
greater choice to customers, we have taken our knowledge
to create an innovative online tool that guides people through
the essential steps they need to follow when someone dies.
An extension of our website, the tool is mobile friendly, easy
to navigate and produces a bespoke checklist for the user
based on the answers they provide to a series of questions
related to the circumstances of their loss.
Location tracking recommends external organisations that
can help and, if required, also signposts a selection of our
nearest funeral directors. The service is not reserved for
Dignity customers and can help anyone in need of guidance
when trying to cope with the sometimes complex procedures
associated with registering a death.
We have enjoyed a longstanding partnership with the British
Heart Foundation and in the past year presented the charity
with a donation of approximately £234,000.
Among the related projects we have supported is the
installation of defibrillation equipment into all Dignity
operated crematoria throughout England and Scotland, while
colleagues have been learning valuable CPR techniques that
could also help to save a life in the event of an emergency.
As the partnership continues, we will be looking at carrying
out similar installations on the exteriors of our funeral
branches and office premises in busy locations where there
are currently no defibrillators nearby.
Alongside such large scale national partnerships, we also
recognise the importance of responding to more localised
causes where many of our funeral branches and crematoria
have proud connections to their respective communities that
span generations.
In short, one size does not fit all and we encourage colleagues
to identify the particular charities and community groups they
want to support, often following requests from a client. We
are also considering the feasibility of topping up localised
fundraising through a centrally administered grants scheme.
We have enjoyed a longstanding
partnership with the British
Heart Foundation.
58 | Dignity plc Annual Report & Accounts 2019
Corporate and social responsibility continued
Health, Safety and
Environmental performance
Working safely
and reducing our
environmental impact
Reduction in reportable accidents
17%
Since 2009 the number of accidents has
reduced by 17 per cent.
Mercury abated cremations
35,000
A total of 35,000 cremations at our crematoria
during 2019 were mercury abated, exceeding
the required industry standard.
Waste management partnership
We have entered into a
new partnership with Veolia
to handle our general and
mixed recyclable waste
on a national basis.
Reducing our carbon footprint and
environmental impacts
We have calculated our Scope 1 and Scope 2
GHG emissions since 2010 and work alongside
Ecometrica Ltd to assist with our carbon emissions
reporting. This supports greater transparency
and accuracy of data. We also reported on water
and waste management under the Scope 3
requirements.
Keeping people safe
Safety in the workplace remains a priority, helping to protect the
people who work at, and visit, our premises. Working in a safe
environment allows us to focus on delivering excellent service
to our clients, while also supporting employee engagement
and retention.
Dignity has a full-time Head of Health and Safety and a team
of eight regional Health and Safety Officers providing support
services to our branches, crematoria, manufacturing site and
head office locations.
The team works hard to minimise incidents and improve our
safety culture and behaviours. We monitor health and safety
through quarterly analysis, inspection of premises, surveillance
and regular reports to the Board.
We also proactively identify areas requiring action with the
intention of further risk reduction across the business.
Health & safety training (number)
12
68
274
0
25
50
75
100
125
150
175
200
225
250
275
Employees with NEBOSH qualification: 12
Employees with IOSH qualification: 68
Employees with CIEH qualification: 274
Dignity plc Annual Report & Accounts 2019 | 59
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Managing our environmental impact
Environmental performance
Our business has a well-established culture of safety and
operational excellence and aims to provide strong leadership
in the pursuit of safe and environmentally responsible
workplaces. We are mindful of the importance of minimising
the impact our business activities have on the environment
and the need to mitigate future risks wherever possible.
A total of 35,000 cremations at our crematoria during 2019
were mercury abated. This represents 54 per cent of all the
cremations carried out, which exceeds the required industry
standard set by the Department for Environment, Food and
Rural Affairs.
We are aware that new technology is in development that
will help to reduce nitrogen oxide emissions at crematoria
and are supporting the exclusive testing of such equipment
in partnership with the manufacturer at one of our sites in
Northampton. In addition, we are investigating the potential
benefits of alternative fuels and energy recovery as ways of
lowering consumption levels. We hope to be able to report
positive progress in these areas over the next 12 months.
Dignity’s coffin manufacturing facility has ISO14001
accreditation, an internationally recognised standard for an
effective environmental management system that is designed
to address the balance between reducing environmental
impact and maintaining profitability.
Our coffins are manufactured using raw materials that
originate from well-managed and sustainable sources. For
example, 98 per cent of the coffins we produced last year were
manufactured using timber certified by the Forest Stewardship
Council (FSC).
Waste management services
After carrying out a detailed review of our supplier agreements
for waste management we have entered into a new
partnership with Veolia to handle our general and mixed
recyclable waste on a national basis.
Working with a single provider rather than managing multiple
contracts makes the process more streamlined and brings cost
savings as well. We track where waste is going once collected
and with Veolia’s support our objective over the course of the
contract is to ensure nothing is sent to landfill.
Environmental reporting
As part of our ongoing commitment to reduce our carbon
footprint and environmental impacts, Dignity has reported
to CDP (formerly the Carbon Disclosure Project) since 2008.
CDP is a not-for-profit organisation that measures disclosures
from thousands of companies and cities across the world.
It encourages best practice in reporting and reducing
environmental impact through a scoring process.
Scoring is based on a number of criteria designed to
assess Energy Management practices and Environmental
Strategy, specifically around Performance and Reporting,
Risk Management and Business Strategy in relation to
climate change.
Dignity’s 2019 submission achieved a ‘B’ rating, with ‘A’ being
the highest rating and ‘E’ being the lowest. We also reported
on water and waste management under the Scope 3
requirements.
Greenhouse gas emissions reporting for 2019
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:
2019 2018 2017 2016 2015
Scope 1 15,844 16,028 15,535 15,616 14,988
Scope 2 59 174 423 7,106 7,455
Total 15,903 16,202 15,958 22,722 22,443
Per FTE Employee 5.2 5.3 4.8 8.0 8.2
Our energy consumption figures over the same periods are:
2019 2018 2017 2016 2015
MWh 94,067 95,147 92,121 91,413 87,730
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 work alongside Ecometrica Ltd to assist with
our carbon emissions reporting. This 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 the Scope 2
calculation method together with the latest emission factors
from recognised public sources, principally Defra/DECC.
In addition, 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)
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2010
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2016
2017
2018
2019
Total C02 (Market Based)
FTE Employees
Services Performed
Operating Profit (in £m)
Revenue (in £m)
Energy MWh
60 | Dignity plc Annual Report & Accounts 2019
Governance
In this section
61 Chairman’s introduction to governance
63 Governance structure
64 Board of Directors
66 Executive Management Team
67 Directors’ statement on corporate governance
72 Audit Committee report
75 Nomination Committee report
77 Report on Directors’ remuneration
92 Directors’ report
Chairman’s introduction to governance
The Board is committed to a strong governance
framework based on openness, accountability and trust.
It is an essential part of the way we do business.
Dear Shareholder,
Following my appointment as the Chairman of your Company
in September 2019, I am delighted to present on behalf of the
Board the Group’s Corporate Governance Report for 2019.
This 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’). Save for the exceptions noted
later, Dignity has complied with all relevant provisions
throughout the period ending 27 December 2019. 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 Financial Reporting Council released a new version of the
Code in July 2018 which applies to reporting periods beginning
on or after 1 January 2019. This 2018 Code will therefore apply
during the course of the year ending 25 December 2020. As a
business we are adopting early much of the 2018 Code and
changes will be reflected in next year’s report.
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.
Clive Whiley
Chairman
11 March 2020
Dignity plc Annual Report & Accounts 2019 | 61
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Clive Whiley, Chairman
Compliance with the UK Corporate Governance Code
In the 2019 reporting period, Dignity plc was subject to the April
2016 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 paragraphs below, Dignity has complied with
all of the provisions of the Code throughout the period ended
27 December 2019 and remained compliant at the date this
2019 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 Peter Hindley’s skills and knowledge
of the funeral sector.
In May 2018, the Board announced that Peter Hindley, in
accordance with his wishes, would retire from the Board
in 2019 and he did so on 13 June 2019. I was appointed
independent Non-Executive Chairman on 26 September 2019.
In the period between Peter retiring and my appointment,
David Blackwood, our Senior Independent Director, was
appointed Interim Chairman. During this interim period and
indeed prior to this when James Wilson was appointed on
1 May 2019, the Company was not compliant with Code
Provision B.1.2 which requires at least half of the board
excluding the chairman, to comprise of independent
non-executive directors.
Board Changes
James Wilson was appointed to the Board on 1 May 2019.
James is a partner at Phoenix Asset Management Partners
Limited which manages 26.7 per cent of the Company’s shares.
James has no involvement in how the shares in the Company
are voted.
When Peter Hindley stood down from the Board in June 2019,
the Board comprised three Executive and four Non-Executive
Directors, three of whom were independent.
Mary McNamara, Chair of the Remuneration Committee, stood
down from the Board at year end, 27 December 2019, due to
a substantial increase in commitments with her other Board
appointments.
Following Mary McNamara’s retirement from the Board at
year end, the Board reduced to three Executive and three
Non-Executive Directors.
Dean Moore was appointed to the Board as an independent
Non-Executive Director on 11 March 2020.
At the current time and in addition to the Chairman, the Board
comprises three Executive and four Non-Executive Directors,
three of whom are independent.
62 | Dignity plc Annual Report & Accounts 2019
Chairman’s introduction to governance continued
Board induction
Following appointment, an induction programme is provided
to new directors so that he or she becomes as effective as
possible in their role within the shortest practicable time.
The induction programme includes:
• Briefings with directors, senior managers and advisers;
• A briefing on the role a director and the framework in which
the Board operates;
• Provision of Board and Committee papers and governance
documents such as the Schedule of Matters Reserved for
the Board;
• Provision of corporate policies; and
• Analysts’ reports.
The Code requirement is for at least half the Board, excluding
the Chairman, to be Non-Executive Directors determined by
the Board to be independent. Jane Ashcroft, David Blackwood
and Dean Moore are considered independent.
Directors’ Report
The Directors present their report for Dignity plc for the period
ending 27 December 2019.
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.
Governance structure
The Board provides strategic leadership to the Group
within a framework of sound corporate governance
and internal control.
Dignity plc Annual Report & Accounts 2019 | 63
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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;
• Delivery of the Transformation Plan;
• 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 strategic and other important issues are
discussed, ensuring sufficient time is devoted to discussing such
issues; and
• Making sure there is effective communication with stakeholders
and acting as the public face of the Group.
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 (who was Interim Chairman
from June 2019 until Clive Whiley’s appointment in September 2019)
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.
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 72 to 91.
The Chief Executive and Executive Directors
The Chief Executive and Executive Directors are responsible for:
• Operational management and control of the Group on a day-to-day
basis. Local operational decisions are the responsibility of the local
managers, who are accountable to the Chief Executive and the
Executive Directors;
• Formulating and proposing strategy to the Board; and
• Implementing the strategy and policies adopted by the Board.
Executive Management Team
The Executive Management Team consist of the following Executive
Directors and Senior Managers:
• Chief Executive: Mike McCollum;
• Finance Director: Steve Whittern;
• Corporate Services Director: Richard Portman;
• Crematoria Director: Steve Gant;
• Marketing Director: Mark Hull;
• Director of Funeral Operations: Andrew Judd;
• Business Development Director: Alan Lathbury;
• Director of Pre Arrangement: Paul Toghill; and
• Transformation Director: Paul Turner.
64 | Dignity plc Annual Report & Accounts 2019
Board of Directors
A strong, balanced and
experienced Board
“Our Board members
provide a strong and
complementary mix
of skills and experience.
Together they are
committed to building
the long-term success
of the Group.”
Clive Whiley
Non-Executive Chairman
Clive Whiley
Non–Executive Chairman
N
Mike McCollum
Chief Executive
Appointed to the Board: 2019
Appointed to the Board: 2004
Background and experience:
Clive has over thirty five years’ experience in
regulated strategic management positions
since becoming a Member of the London
Stock Exchange. He has extensive main board
executive director experience across a broad
range of financial services, engineering,
manufacturing, distribution, retail and leisure
businesses encompassing the UK, Europe,
North America, Australasia, the Middle East
and China. He is Chairman of Mothercare plc
and a Non-Executive Director of Grand
Harbour Marina plc and Camper &
Nicholsons Marina Investments Limited and
Chairman of China Venture Capital
Management Limited, First China Venture
Capital Limited and Y-LEE Limited.
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. He is also one of
the Trustees of the Dignity Welfare Trust.
External appointments:
None.
Dignity plc Annual Report & Accounts 2019 | 65
Jane Ashcroft CBE
Independent 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
Committee 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. He was Interim
Chairman from June to September 2019
and is currently Acting Chairman of the
Remuneration Committee.
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 comprises seven Directors and
the Non-Executive Chairman. There are
three independent Non-Executive Directors
and three Executive Directors.
Executive and
Non-Executive
Directors
Non-Executive
Tenure
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2
0 – 3 years
3+ years
James Wilson
Non–Executive Director
Appointed to the Board: 2019
N
3
4
1
Background and experience:
James joined the Board as a Non-Executive
Director on 1 May 2019. James is a partner
at Phoenix Asset Management Partners
Limited and manages The Huginn Fund.
James joined Phoenix in 2013. Prior to this,
James spent three years at Aviva Investors in
the Pan-European equity team. James holds
a masters degree in Civil Engineering from
the University of Durham and is a Chartered
Financial Analyst. James is a Non-Executive
Director of Hornby Plc.
Executive Directors
Non-Executive Directors
Non-Executive Chairman
Key to Committee membership
A
N
R
Audit Committee
Nomination Committee
Remuneration Committee
Green background denotes
Committee Chairman.
The Board records its thanks to Peter Hindley who stood down from the Board
on 13 June 2019 after 28 years of service to the Company and the outstanding
contribution he made to Dignity over those years. Also to Mary McNamara who stood
down at year end, for her wise counsel and support through a challenging period.
Links
See Audit Committee report: p.72 to p.74
See Nomination Committee report: p.75 and p.76
See Report on Directors’ remuneration: p.77 to p.91
Dean Moore
Independent Non–Executive Director
A N
R
Appointed to the Board: 2020
Background and experience:
Dean is a chartered accountant with
extensive public company experience
having previously been Chief Financial Officer
at Cineworld plc, N Brown Group plc, T&S
Stores plc and Graham Group plc and
formerly non-executive Chairman of Tuxedo
Money Solutions Limited. He is currently
an independent non-executive director
and Chairman of the Audit Committee
at Cineworld plc and Audit Committee
Chairman and Senior Independent
Director of Volex plc.
Dean will become Chairman of the Audit
Committee in succession to David Blackwood.
66 | Dignity plc Annual Report & Accounts 2019
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
Full biography on page 64
Steve Whittern
Finance Director
Full biography on page 64
Richard Portman
Corporate Services Director
Full biography on page 64
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.
Mark Hull
Marketing Director
Mark joined Dignity in 2013 as Head of
Marketing for funeral plans and has since
progressed and established the marketing
function for the Group, which he now leads.
Responsibilities cover Brand, Promotion,
Digital Marketing and Experience, Proposition
and Communications.
Mark is a Chartered Marketer and Member
of the Chartered Institute of Marketing and is
also a Chartered Manager and Fellow of the
Chartered Management Institute. He holds
a Marketing degree from the University of
Hertfordshire, a postgraduate diploma in
Marketing from London Guildhall and an
MBA from Cranfield University.
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 currently sitting on the Executive
Committee for Professional Standards and
Cross Industry Steering Committee for the
Funeral Service Consumer Standards Review.
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. Currently Alan is
managing the Company’s response to the
Competition and Market Authority’s
investigation into the funeral industry.
Paul Toghill
Director of Pre Arrangement
Paul joined Dignity in 2006. His key area of
responsibility is the running of Dignity Pre
Arrangement, which includes Proposition,
Distribution, Marketing and Operations.
Paul has worked in the life insurance and
pre-arranged funeral plan markets for over
25 years, with a particular focus on funeral
propositions, distribution and the strategic
development of affinity partnerships including
within FCA regulated markets.
Paul is a Member of the Institute of Direct
and Digital Marketing, and holds a Diploma
in Interactive and Direct Marketing.
Paul Turner
Transformation Director
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 2019 | 67
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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 63. 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 66) 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 seven Directors and the Non-Executive Chairman. During the period the total number of directors
who served was nine. Peter Hindley, former Non-Executive Chairman, retired from the Board on 13 June 2019 and Mary
McNamara, former Chair of the Remuneration Committee retired from the Board on 27 December 2019. There are currently
three independent Non-Executive Directors and three Executive Directors.
The Board considers that three Executive Directors, supported by the wider Executive Management Team, details of which are
on page 66, are sufficient to manage a Group of this size, complexity and organisational structure.
There were three independent Non-Executive Directors who served for the period: Jane Ashcroft, David Blackwood and Mary
McNamara. Mary McNamara retired from the Board on 27 December 2019 due to a substantial increase in commitments with
her other Board appointments.
Biographical details for the serving Non-Executive Directors appear on page 65. 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 Dean Moore (appointed post year end) are independent of management as defined by the
Code. Mary McNamara who retired from the Board at year end was also an independent Non-Executive Director.
David Blackwood was interim Chairman of the Company from the retirement of Peter Hindley on 12 June 2019 until Clive Whiley
was appointed Chairman on 26 September 2019. This interim position did not compromise David Blackwood’s independence as
defined in the April 2016 UK Corporate Governance 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 election or re-election as appropriate at the 2020 Annual
General Meeting.
68 | Dignity plc Annual Report & Accounts 2019
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
2019. The evaluation was conducted by Lintstock Limited a corporate advisory firm, 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. A further external
evaluation will be undertaken in 2022.
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 online questionnaire to all Directors. This was followed by a detailed review by
Lintstock Limited and the Board of the responses and identification of any actions arising.
Specific matters reviewed by the Board were:
• Board composition;
• Stakeholder oversight;
• Board dynamics;
• Board support;
• Management and focus of meetings;
• Case study: CMA funerals market investigation;
• Strategic oversight;
• Risk Management and internal control;
• Succession planning and human resource management; and
• Priorities for change.
Issues arising from the evaluation are reviewed and addressed.
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 2(iv) 1(iii) 2(iii) –
Mike McCollum 8 3(iii) 3(iii) 2(iii)
Mary McNamara 8 3 3 2
Richard Portman 8 3(iii) – –
Clive Whiley 3(iv) 1(iii) 1(iii) 1
Steve Whittern 8 3(iii) 1(iii) –
James Wilson 6(iv) 2(iii) – 1
(i) Only scheduled Board meetings, of which there were eight in the period, have been included in the attendance analysis. A further eight meetings were held to consider
announcements, documents or the grant of LTIP awards.
(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 meeting was held
in the period to discuss, amongst other matters, LTIP vesting and awards.
(iii) In attendance by invitation of the respective Committee.
(iv) Peter Hindley retired from the Board on 13 June 2019. James Wilson was appointed to the Board on 1 May 2019 and Clive Whiley on 26 September 2019.
Dean Moore was appointed to the Board on 11 March 2020.
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 2019 without the Executive Directors present. These are usually
scheduled to occur following full Board meetings. The Non-Executive Directors also met during 2019 without the Chairman present.
Dignity plc Annual Report & Accounts 2019 | 69
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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 2019.
The Executive Directors and the wider executive management group are responsible for designing, implementing, maintaining
and evaluating the necessary systems of internal controls. Such controls are reviewed on an ongoing basis and formally
reviewed on an annual basis in accordance with the requirements of the Code. This annual review confirmed that the Group’s
risk management and internal control systems were appropriate and suitable for a Group of this size and complexity.
Internal Audit completes a programme of work each year that provides assurance that the internal controls have been
operated as designed and also proposes improvements where appropriate and necessary. Coupled with this, the formal six
monthly review of the Risk Register provides a further 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 72 to 74.
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 2019 (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 2019;
• 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
70 | Dignity plc Annual Report & Accounts 2019
Directors’ statement on corporate governance continued
• 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 46 to 51 of the Annual Report. These risks have also been formally considered when the
Directors prepared their Viability Statement on page 51 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 34 to 40.
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 11 June 2020. 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.
On 14 June 2019, the Company announced that at the Annual General Meeting held on 13 June 2019 more than 20 per cent of
the votes cast on Resolution 15 (“To authorise the Board to make political donations or incur political expenditure”) were against
the resolution.
As stated in the AGM Notice and in common with many companies, it is not the Company's policy to make donations to political
parties, or to make other political donations within the normal meaning of that expression, and the Directors have no intention
of changing that policy. The purpose of Resolution 15 was to avoid the inadvertent infringement of provisions within the
Companies Act 2006.
Following discussions with one of our major shareholders which has a general policy not to support this resolution, we believe
this shareholder now has a better understanding of the purpose behind the resolution.
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 51
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.
Dignity plc Annual Report & Accounts 2019 | 71
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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;
• 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 pages 54 and 55 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 6 March 2020 As at 27 December 2019
Number of Percentage Number of Percentage
Ordinary of issued Ordinary of issued
Holder Shares share capital Shares share capital
Phoenix Asset Management Limited 13,357,471 26.71 13,357,471 26.71
John Stewart Jakes 3,669,612 7.34 3,669,612 7.34
Klarus Capital Limited 2,606,669 5.21 2,606,669 5.21
Artemis Investment Management LLP 2,505,451 5.01 2,505,451 5.01
Harris Associates L.P. 2,483,419 4.97 2,483,419 4.97
Prudential plc group of companies 2,469,210 4.94 2,469,210 4.94
Pictet Asset Management Limited 2,394,069 4.79 2,394,069 4.79
Standard Life Aberdeen plc 2,335,990 4.67 2,335,990 4.67
Granular Capital Limited 1,549,139 3.10 – –
It should be noted that these holdings may have changed since the Company was notified.
By order of the Board
Tim George
Company Secretary
11 March 2020
72 | Dignity plc Annual Report & Accounts 2019
Audit Committee report
The Audit Committee continues to monitor
the integrity of financial statements, the
effectiveness of risk management and internal
controls and the implementation of new
accounting standards.
Dear Shareholder,
On behalf of the Board, I am pleased to present my fifth report
as the Chairman of the Audit Committee.
Membership and Process
The following Directors served on the Audit Committee (the
‘Committee’) during 2019: myself as Chairman, Jane Ashcroft
and Mary McNamara. All of us are independent Non-Executive
Directors and, other than Mary who stood down as a Non-
Executive Director on 27 December 2019, served through
to the date of this report.
I was interim Chairman of the Company from the retirement of
Peter Hindley on 12 June 2019 until Clive Whiley was appointed
Chairman on 26 September 2019. This interim position did not
compromise my independence as defined in the April 2016
UK Corporate Governance Code.
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.
Dean Moore was appointed to the Board and this Committee
on 11 March 2020.
Dean is a chartered accountant with extensive public company
experience and is currently an independent non-executive
director and Chairman of the Audit Committee at Cineworld plc
and Audit Committee Chairman and Senior Independent
Director of Volex plc.
Dean will become Chairman of the Audit Committee in
succession to me following the AGM on 11 June 2020.
The Committee met three times during 2019; in March prior
to the release of the Preliminary Announcement for 2018; prior
to the release of the Interim Announcement for 2019 in August;
and again in December 2019 immediately prior to the end of
the financial period. The Committee also met in March 2020
prior to the release of the Preliminary Announcement for 2019.
The attendance records of the members are shown on page 68.
All Committee members were present at all meetings. The
external auditors, EY, the Chairman, the Chief Executive, the
Finance 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 had a discussion with the Lead Partner on four
occasions plus additional interactions in the year which 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.
David Blackwood, Chairman of the Audit Committee
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
(retired 27 December Division of Close Brothers Bank,
2019) and held a number of leadership
roles within GE.
Dean Moore 2020 Currently Chairman of the Audit
Committees at Cineworld plc and
Volex plc.
Key Responsibilities
The Committee works with the Board to fulfil its oversight
responsibilities. Its primary functions are to:
• Monitor the integrity of the financial statements and other
information provided to shareholders to ensure they represent
a clear and accurate assessment of the Group’s position,
performance, strategy and prospects;
• Consider the financial statements and recommend to the
Board 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; approve the internal audit plan and review 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.
Dignity plc Annual Report & Accounts 2019 | 73
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Activities in the period
The key activities of the Committee during the period were:
• A comprehensive review of the 2018 and 2019 Annual Report
and Accounts and the 2019 Interim Report. This review was to
ensure that the Committee was 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 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 2020 Internal Audit Plan and
budget;
• A six monthly review of the Group’s Principal Risks 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. A review
of the Risk Register was also completed in March 2020. The
principal risks facing the Group are considered on pages 46
to 51 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 51;
• The formal review of the going concern assumptions adopted
in the preparation of the 2018 and 2019 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 IFRS 10 ‘Consolidated Financial Statements’ and
pre-need trust accounting in response to the Financial
Reporting Council’s question as to whether the Trusts should
be consolidated in the Group’s accounts;
• An assessment of the effectiveness of the external auditors; and
• We 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 2019 Annual Report and Accounts are:
• Impairment – we considered the results of the impairment
tests performed, ensuring that the assessment made and
conclusions reached were consistent with the analysis and
reflected the changes in the funeral and crematoria industries
which include increased consumer price awareness and
competition, digitalisation and the uncertainty surrounding the
conclusions that will be drawn by the CMA industry review;
• Pre-arranged funeral plans trusts – the Committee agreed it
was appropriate for the Group to revise its overall conclusions
on control of the two main trusts as discussed in note 1 to the
accounts. Accordingly the Committee concluded that the
change in accounting policy to consolidate these trusts was
appropriate and concluded the accounting in accordance with
IFRS 10 was fairly stated and that appropriate disclosures had
been made;
• Revenue – the Committee considered and approved the
accounting policy changes necessary to comply with the new
standard, IFRS 15 ‘Revenue from Contracts with Customers’;
• Pensions – the Committee 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 and concluded
they were appropriate;
• Risk – the Committee performed a comprehensive review of the
principal risks and uncertainties disclosed in the 2019 Annual
Report based on the changing and competitive environment
in which the Group operates;
• Viability – the Committee performed an assessment and
ratification of the Viability Statement, including giving due
consideration to severe but plausible downside risks; and
• Leases – the Committee considered the disclosure provided
in respect of the impact of IFRS 16 ‘Lease Accounting’ will have
in future accounting policies and concluded it was appropriate.
See note 1 to the financial statements for further details.
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 2020.
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 2019
and a resolution to re-appoint them as external auditors will
be tabled at the AGM on 11 June 2020.
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.
74 | Dignity plc Annual Report & Accounts 2019
Audit Committee report continued
Policy on non-audit fees
The Group has a rigorous and comprehensive policy on the use
of the external auditors for non-audit work. The policy states that
non-audit fees are limited to no more than 50 per cent of the
annual audit fee unless there are exceptional circumstances,
which are defined as:
• The work necessitates the use of the auditor for regulatory
reasons; and
• Their use represents a material time/cost benefit to the Group
in conducting a transaction.
The policy also precludes the use of the external auditors
for certain types of work. All such work 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 2019,
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 £65,000 were charged for the non-audit services
compared to £640,000 for audit services.
The Committee is confident that the objectivity and
independence of the external auditors is not compromised
by reason of non-audit work, not least because such work will
generally be undertaken by other professional firms. A formal
statement of independence from EY has been received in
respect of 2019.
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. Adrian Roberts is Dignity’s audit
partner having been appointed to the role in 2019.
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.
The Head of Internal Audit coordinates a risk-assessed
programme of work across all departments and operations
of the Company with the aim of ensuring full coverage over
a three-year cycle. Where appropriate, Internal Audit utilise
support from professional services firms to provide subject
matter expertise on specialist areas.
During 2019 (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. In addition, a private meeting is held
annually between the Audit Committee members and the Head
of Internal Audit, without any Executive Directors present. This
process allows the Committee to have appropriate discussion
and debate with the Head of Internal Audit as well as to monitor
the effectiveness of the Internal Audit function, including
comprehensive review of all reports and their conclusions.
Whistleblowing
A formal policy and procedure 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. A whistleblowing report is formally reviewed
on an annual basis by the Committee or more frequently
should the need arise.
Annual Evaluation
During the period, the Board completed performance
evaluations of itself and its Committees. The results of this
are discussed on page 68. Specific matters reviewed by the
Committee were:
• Time management and composition;
• Committee processes and support;
• The relationship with the Finance Director, External Audit
Partner and the Head of Internal Audit;
• The effectiveness of the Committee in reviewing the Group’s
financial reporting, the system of internal controls and
monitoring the management of risk; and
• Priorities for change.
Issues arising from the evaluation are reviewed and addressed.
This Audit Committee report was reviewed and approved by the
Board on 11 March 2020.
David Blackwood
Chairman of the Audit Committee
11 March 2020
Nomination Committee report
The Committee has overseen the appointment
of both a new Chairman and Non-Executive
Director. The Committee ensures we have the
right blend of skills and experience on the
Board to deliver our strategy.
Dignity plc Annual Report & Accounts 2019 | 75
Clive Whiley, Chairman of the Nomination Committee
Dear Shareholder,
On behalf of the Board, it is my pleasure to present the 2019
Nomination Committee report, my first as both Chairman of the
Company and the Nomination Committee.
During 2019, the membership of the Nomination Committee
(the ‘Committee’) comprised Jane Ashcroft, David Blackwood,
Mary McNamara and Peter Hindley as Chairman until he stood
down from the Board on 13 June 2019. James Wilson became
a member of the Committee on his appointment to the Board
on 1 May 2019.
I was appointed to the Board as Chairman on 26 September
2019 and also became Chairman on the Nomination Committee
at this time.
Mary McNamara retired from the Board on 27 December 2019
due to a substantial increase in commitments with her other
directorships.
The principal duties of the Committee in 2019 were overseeing
the appointment of a successor to Peter Hindley, the former
Chairman, and the appointment of James Wilson who is a
partner at Phoenix Asset Management Limited which currently
manages 26.7 per cent of the Company’s shares. The Committee
also continued the monitoring and oversight of succession
planning processes. The Committee received at both meetings
in 2019 updates on ongoing succession planning and talent
mapping at various levels within the Group, identifying
individuals and any development requirements necessary
to ensure effective succession.
The Committee is committed to embedding inclusion and
diversity at Board and executive level and throughout the Group.
The Company provides a balanced, supportive and flexible
culture and environment with working practices to accommodate
peoples’ needs. In so doing, it aims to continue to attract and
retain the best candidates and ensure the development of all
Group employees.
David Blackwood is currently Acting Chairman of the
Remuneration Committee.
Succession planning, development and leadership requirements
will continue to be reviewed in 2020.
Dean Moore was appointed to the Board and this Committee
on 11 March 2020.
All members, apart from James Wilson, are independent
Non-Executive Directors. The Chief Executive attends Committee
meetings by invitation. The Company Secretary is Secretary to
the Committee.
Currently the Committee is looking to appoint an independent
Non-Executive Director who will chair the Remuneration
Committee.
The authorities delegated to the Committee by the Board
comprise, among other matters:
The members of the Committee’s attendance record is set out
on page 68. The Committee’s proceedings are reported 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
2016 UK Corporate Governance Code.
Tenure
Length of tenure at 27 December 2019 (years)
Name 1 2 3 4 5 6 7 8
David Blackwood
• The review of the structure, size, and composition of the Board;
Jane Ashcroft
• The evaluation of the balance of skills, knowledge,
independence, diversity and experience of the Board including
the impact of new appointments;
• Overseeing and recommending the recruitment of new
directors;
• Ensuring appointments are made against objective criteria; and
• Succession planning to ensure processes and plans are in place
with regard to both Board and senior appointments; Keeping
under review the leadership needs of the Group; and ensuring
that the Non-Executive Directors can meet the time
requirements of the role.
Mary McNamara
(retired 27
December 2019)
James Wilson
Clive Whiley
At 27 December 2019, James Wilson had been on the Board for
eight months and Clive Whiley three months.
The terms of reference of the Committee are available on the
Group’s corporate website at
www.dignityfunerals.co.uk/corporate.
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76 | Dignity plc Annual Report & Accounts 2019
Nomination Committee report continued
The Committee and the Board continue to support the objectives
of Lord Davies’ Report ‘Women on Boards’. Following Mary
McNamara’s retirement from the Board, Jane Ashcroft is
currently the only woman on a Board of eight Directors (12.5 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.
I am also pleased to confirm that the Group will continue to
publish the details on corporate diversity as per Lord Davies’
Report and report on our compliance and appointment process
in this Annual Report.
During the period, the Board completed performance
evaluations of itself and its Committees. The results of this
are discussed on page 68. Specific matters reviewed by the
Committee were:
• Time management and composition;
• Committee processes and support;
• Performance in reviewing the composition of the Board;
• The process by which Board appointments are made; and
• Priorities for change.
Issues arising from the evaluation are reviewed and addressed.
Finally, all Directors offer themselves for election or re-election at
the AGM on 11 June 2020 and 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 11 March 2020.
Clive Whiley
Chairman of the Nomination Committee
11 March 2020
Dignity plc Annual Report & Accounts 2019 | 77
Report on Directors’ remuneration
for the 52 week period ended 27 December 2019
The Remuneration Committee has continued to monitor
and review developments in corporate governance and
focused robustly on the implementation of the 2019-2021
remuneration policy to ensure that it is aligned to the
business strategy, purpose and values and that management
is incentivised to deliver to stakeholders.
David Blackwood, Acting Chairman of the Remuneration Committee
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Dear Shareholder,
On behalf of the Board, I am pleased to present this Directors’
Remuneration Report for the period ended 27 December 2019.
I am writing this report in my capacity as Acting Chairman
of the Remuneration Committee following Mary McNamara
retiring from the Board on 27 December. I am grateful to
Mary for her effective leadership of the Committee through
a challenging period for the business and her smooth
handover to me.
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 2019 incentive plans.
How we will apply the new policy in 2020
No base salary increases have been awarded to the Executive
Directors for the third year running. The average increase to
the wider workforce was broadly two per cent.
The recruitment of a new independent Non-Executive
Director to chair the Remuneration Committee is currently
being undertaken.
Last year, following a detailed review of our remuneration
policy and investor consultation, we received AGM approval
with 92.6 per cent of shareholders voting in favour of the
policy. We are grateful to our major investors for their
feedback during the consultation process for the new policy
and for all shareholders giving their support. We have reviewed
the policy and the Committee is comfortable that this still
supports the long-term business strategy and so we are
proposing no changes to the policy for FY2020.
Performance in 2019 and annual bonus and 2017-19
LTIP outcome
The 2019 annual bonus was measured 70 per cent against
stretching underlying operating profit targets, our key
short-term financial performance indicator. Underlying
operating profit in 2019 was £63.3 million, which was below
the minimum threshold for any bonus payment and so no
bonus was payable under this element. The remaining 30 per
cent of the bonus was based on the achievement of three key
strategic initiatives, being the delivery of the annual objectives
under the Transformation Plan, Customer Service and Funeral
Market Share. For the 10 per cent element based on the
Transformation Plan, 57 of the 59 deliverables were completed
and a further 13 additional deliverables were achieved
resulting in a bonus of 8 per cent. For the 10 per cent element
based on Funeral Market Share, the threshold target 11.94 per
cent was not met so no bonus was payable in respect of this
objective. For the 10 per cent element based on Customer
Recommendation, at 90.88 per cent the maximum target was
exceeded by 0.81 per cent resulting in a bonus of 10 per cent.
The Committee is comfortable that the progress against these
strategic KPIs will generate sustainable shareholder value
and on this basis is comfortable that 18 per cent out of the
maximum 30 per cent available for this part of the bonus
should be payable. The total bonus payable therefore was
18 per cent of maximum.
The LTIP award granted in 2017 was subject to performance
against two equally weighted measures, relative total
shareholder return (‘TSR’) compared to the FTSE 350 and
earnings per share growth (‘EPS’). Following the three year
performance period ending 27 December 2019 Dignity's TSR
performance and our underlying EPS of 60.6 pence were both
below the minimum performance threshold. As a result, the
LTIP award lapsed with no shares vesting.
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 86.
In relation to the FY20 LTIP award the Committee has
considered carefully the grant level and the performance
metrics that should apply and recognises that it remains
very difficult to set accurate long-term financial performance
conditions until the findings of the CMA report are published.
Accordingly, the Committee has decided that the FY20 LTIP
awards should be delayed until after the CMA interim report
is published, which we anticipate will be around April or
May 2020. There will be full disclosure of the grant level
and the performance conditions contained in the RNS
announcement for the award and again in next year’s
Directors’ Remuneration Report.
New Company Chairman
On 26 September 2019, Clive Whiley was appointed as
Company Chairman on an annual fee of £175,000.
James Wilson who was appointed to the Board on 1 May 2019
has elected not to receive a Non-Executive Director’s fee.
Dean Moore was appointed a Non-Executive Director on
11 March 2020 and will serve on this Committee. Dean will
receive a fee of £46,850 per annum which will increase by
£9,350 per annum when he becomes Chairman of the
Audit Committee.
Concluding remarks
On behalf of the Remuneration Committee, I would like
to thank shareholders for their ongoing support and I look
forward to this continuing at the forthcoming Annual
General Meeting.
David Blackwood
Acting Chairman of the Remuneration Committee
11 March 2020
78 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
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 approved at the AGM on 13 June 2019. The policy took formal effect from the date of approval and is intended
to apply until the 2022 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.
The table on pages 79 and 80 summarises the main components of Dignity's remuneration policy. Details of how the Committee
will implement the policy are provided in the Annual Report on Remuneration on page 83.
Dignity plc Annual Report & Accounts 2019 | 79
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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80 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
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.
James Wilson has elected not to receive a fee.
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. 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 2019 | 81
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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 80):
• 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 2020 vary under
three performance scenarios: minimum, target and maximum. For the purpose of these scenarios this assumes that the LTIP award
level remains at the same level as FY19. However, as noted elsewhere in this report the grant level and performance conditions for
FY20 have not yet been determined.
Fixed Pay
Annual Bonus
LTIP
LTIP with 50% Share Price Growth
Remuneration (£000s)
£2,500
£2,000
£1,500
£1,000
£500
£-
£2,066
28%
38%
£1,810
£1,209
21%
29%
£608
£1,253
29%
36%
£1,095
£739
21%
27%
£384
£985
29%
36%
£861
£582
21%
27%
£303
100%
50%
34%
100%
52%
35%
100%
52%
35%
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Chief Executive Officer
Finance Director
Corporate Services Director
Notes
• Below target comprises fixed pay, which comprises 2020 basic salary, the value of benefits in 2019 and a 15 per cent of salary, company pension contribution.
• Target comprises fixed pay and assumes a bonus of 50 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 expected 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.
82 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
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 election or 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 2019 | 83
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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 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 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.
An Employee Forum was established in 2019 following an election of Employee Representatives. The Forum provides the opportunity
for the appointed Employee Representatives to discuss business objectives, facilitate change and continuous improvement through
a pro-active dialogue. It’s also a place in where they can share suggestions, ideas and feedback from the colleagues they represent, to
help shape the Transformation Plan and our future. The Company Secretary has engaged with the Forum to explain the alignment
of the Directors’ Remuneration Policy to the wider Group pay policy.
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 2020 AGM. The information below includes how we intend to operate our policy
in 2020 and the pay outcomes in respect of the 2019 financial year. The information from the single total remuneration figures for
Directors on page 85 to the end of the section on loss of office payments on page 88 has been audited. The remainder is unaudited.
Implementation of Remuneration Policy in 2020
Salaries
The Committee has determined that the Executive Directors will not receive a base salary increase for 2020. Therefore, the salaries as
at 1 January 2020 are:
2020 2019 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 2020 other than the minor
rounding up of the fee for the new Chairman, Clive Whiley:
2020 2019 Increase
£ £ %
Chairman 175,000 173,350 1
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 –
84 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
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 target level of
performance, rising incrementally so that there will be a full pay out for significant over-achievement of target. There will be no
threshold level of payment for performance below target. The strategic objectives support the Group's strategy and business model
as set out on page 86 of the Annual Report. As we are in the second year of the Transformation Plan the Objectives are the same as for
FY19, but with updated target ranges. 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 ongoing weakness in our share price relating to the CMA report findings, the Committee will determine the
LTIP grant levels and performance conditions after the CMA Provisional Decision Report is published, later in 2020. There will be
full disclosure of the grant level and the performance conditions in the RNS announcement for the award and again in next year’s
Directors’ Remuneration Report.
Executive Directors will be required to hold the net of tax vested shares for two years following vesting.
Dignity plc Annual Report & Accounts 2019 | 85
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Total remuneration payable to Directors in 2019
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
Richard Portman
Steve Whittern
Non–Executive Directors
Clive Whiley
Peter Hindley
Jane Ashcroft
David Blackwood
Mary McNamara
James Wilson
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
512 20 77 124 – – 733
512 20 77 401 – – 1,010
248 18 37 56 – – 359
248 18 37 180 – – 483
316 20 47 71 – – 454
316 21 47 229 – – 613
46 – – – – – 46
n/a n/a n/a n/a n/a n/a n/a
78 3 – – – – 81
173 1 – – – – 174
47 – – – – – 47
47 – – – – – 47
2019 110 – – – – – 110
67 – – – – – 67
2018
2019
2018
2019
2018
54 – – – – – 54
54 – – – – – 54
– – – – – – –
n/a n/a n/a n/a n/a n/a n/a
(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 2019 financial year.
(d) The LTIP award granted on 16 June 2017 has lapsed as the performance targets were not met.
(e) Peter Hindley retired from the Board on 13 June 2019. Clive Whiley joined the Board on 26 September 2019. David Blackwood was Interim Chairman in the period between
Peter Hindley’s retirement and Clive Whiley’s appointment during which period he received an increased fee (based pro-rata on the Chairman’s annual fee) to reflect
additional responsibilities.
(f) James Wilson has elected not to receive a Non-Executive Director’s fee.
(g) Dean Moore was appointed to the Board on 11 March 2020 and is, therefore, not included in the table above. Dean Moore will receive an annual fee of £46,850 which will
increase by £9,350 when he becomes Chairman of the Audit Committee.
Determination of 2019 annual bonus
The 2019 annual bonus was based on the achievement of underlying operating profit targets (70 per cent) and strategic targets
(30 per cent).
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) 2019 actual (out of maximum)
% £m £m £m %
Underlying operating profit
Strategic measures
70
30
64
80.2
63.3
60 per cent
–
18
Strategic objectives were set based on the three most critical business priorities for the year each equally weighted at 10 per cent.
86 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
The strategic objectives and the Committee’s assessment of their achievement is summarised below:
Detail of objective
1. Funeral Market Share (10 per cent out of the 30 per cent Strategic Objectives element) is the number of funerals performed
by the Company's group in Great Britain (excluding Northern Ireland) in the 2019 financial year as a proportion of the total estimated
number of deaths in that region during the period (as estimated and calculated by the Company).
The target range required the Company's Funeral Market Share to be between 11.94 per cent, at which point 20 per cent of this
element of the bonus would be payable, and 12.08 per cent (or greater) at which point 100 per cent of this element of the bonus
would be payable.
Committee assessment
With a funeral market share of 11.7 per cent the threshold target was not met.
Outcome
0 per cent out of 10 per cent payable.
Detail of objective
2. Customer Recommendation (10 per cent out of the 30 per cent Strategic Objectives element) means the percentage
of customer survey respondents for funerals conducted in the 2019 financial year who confirmed that they would definitely
recommend Dignity, measured by reference to the total number of surveys received for the current financial year by the end
of February 2020.
The target range required the Customer Recommendation to be between 89.92 per cent, at which point 20 per cent of this
element of the bonus would be payable, and 90.07 per cent (or greater) at which point 100 per cent of this element of the bonus
would be payable.
Committee assessment
The Company's Customer Recommendation score was 90.88 per cent, resulting in the maximum target being exceeded.
Outcome
10 per cent out of 10 per cent payable.
Detail of objective
3. Transformation Plan (10 per cent out of the 30 per cent Strategic Objectives element) relates to the progress made in the
2019 financial year in implementing the Transformation Plan.
The Committee took account of whether exceptional performance has been demonstrated in the delivery of the Transformation
Plan in FY19.
Committee assessment
57 of 59 deliverables were completed and an additional 13 deliverables added in the year were also achieved.
Outcome
The Committee determined that in light of the good progress during the year in relation to the Transformation Plan, with significant
over-delivery of the additional objectives, 8 per cent out of 10 per cent of the bonus should be payable.
Summary of performance achievement and bonus payments
Therefore, overall for 2019, payment of 0 per cent of the underlying operating profit element (accounting for 70 per cent of the
bonus) and 18 per cent of the strategic objectives (accounting for the remaining 30 per cent) resulted in an overall bonus of 18 per
cent of maximum being payable.
Bonus maximum Pay-out Bonus outcome
Director (% of base salary) (% of maximum) (£)
Mike McCollum 135 18 124,294
Richard Portman 125 18 55,789
Steve Whittern 125 18 71,145
20 per cent of any bonus earned is deferred in shares, for 2 years.
The Committee is comfortable that this bonus outcome is appropriate in the context of the broader company performance and that
discretion has not needed to be used to adjust the formula driven outcome.
Dignity plc Annual Report & Accounts 2019 | 87
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Determination of LTIP awards with performance periods ending in the year
Half of the LTIP awards made in 2017 were subject to a relative TSR condition and half subject to underlying EPS growth targets, both
measured over the three year period which ended on 27 December 2019. These awards lapsed in full, as shown below:
TSR relative to FTSE 350 companies
TSR condition (excluding investment trusts)
Below threshold
Threshold
Stretch or above
Actual achieved
Performance required
Below median
Median
Upper quartile or above
301 out of 312 companies
EPS condition
Below threshold
Threshold
Maximum or above
Actual achieved
Performance required
Less than 136.8p
136.8p
144p
60.6p
% vesting
–
25
100
–
% vesting
–
15
100
–
2017 LTIP award EPS vesting TSR vesting Award value
Director number of shares % of target % of target £000
Mike McCollum 31,435 – – –
Richard Portman 15,200 – – –
Steve Whittern 19,405 – – –
LTIP awards granted in the year
LTIP awards granted in the form of nil cost options to Executive Directors on 13 June 2019 were as follows:
Face/maximum
Number of LTIP value of awards % of award vesting at
Executive awards at grant date*£ threshold Performance period
Mike McCollum 80,741 511,494 25 01.01.19 – 31.12.21
Richard Portman 39,139 247,946 25 01.01.19 – 31.12.21
Steve Whittern 49,913 316,199 25 01.01.19 – 31.12.21
* Based on a share price on the date of grant on 13 June 2019 of 633.5 pence.
The 2019 award will vest subject to a range of relative total shareholder return performance against the companies comprising the
FTSE SmallCap Index (excluding investment trusts). The vesting of this award is dependent on the following:
TSR relative to FTSE SmallCap companies(1)
Below threshold
Threshold
Stretch or above
Performance required
Below median
Median
Upper quartile or above
% vesting
–
25
100
(1) The baseline for the TSR calculation for Dignity will reflect the average share price over the 30 days prior to 8 March 2019, (being the date that the Company concluded the
policy and its application for FY19) which is higher than the share price at the start of the performance period. The baseline for all of the other companies in the comparator
group is the average TSR over the final three months of the 2019 financial year. The closing TSR will be based on the TSR over the final three months of the performance period,
for all companies.
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.
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.
88 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
Outstanding Long-Term Incentive Plan awards
Details of the nil cost option awards, not yet vested and exercised, made under the LTIP are disclosed in the table below:
Share price Granted Lapsed Vested and Earliest date Latest date
Award at date of grant As at during during exercised As at shares can be shares can be
Director grant date (pence) 28.12.18 year year during year 27.12.19 acquired acquired
Mike McCollum
Richard Portman
Steve Whittern
15.06.16(i)
16.03.17(ii)
23.03.18(iii)
13.06.19(iv)
15.06.16(i)
16.03.17(ii)
23.03.18(iii)
13.06.19(iv)
15.06.16(i)
16.03.17(ii)
23.03.18(iii)
13.06.19(iv)
2,435
2,455
890
633.5
2,435
2,455
890
633.5
2,435
2,455
890
633.5
31,435
31,253
31,253
–
15,200
15,150
15,150
–
19,405
19,320
19,320
–
–
–
–
80,741
–
–
–
39,139
–
–
–
49,913
31,435
–
–
–
15,200
–
–
–
19,405
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31,253
31,253
80,741
–
15,150
15,150
39,139
–
19,320
19,320
49,913
15.06.19
16.03.20
23.03.21
13.06.22
15.06.19
16.03.20
23.03.21
13.06.22
15.06.19
16.03.20
23.03.21
13.06.22
15.06.26
16.03.27
23.03.28
13.06.29
15.06.26
16.03.27
23.03.28
13.06.29
15.06.26
16.03.27
23.03.28
13.06.29
(i) Number of options derived based on the average mid-market share price for the previous 28 working days to 25 December 2015.
(ii) Number of options derived based on the average mid-market share price for the previous 28 working days to 30 December 2016. 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.
(iii) 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. Awards
subject to a range of share price targets, from 1,500p to 1,950p for 25 per cent to 100 per cent vesting and a financial performance underpin. 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.
(iv) Number of awards scaled back from usual policy of 150 per cent of salary, to 100 per cent of salary. The 2019 award is based on relative TSR compared to the FTSE SmallCap
Index with a separate financial and strategic performance condition.
The aggregate gain on the exercise of Long-Term Incentive Plan options by the continuing Directors in the period was £nil (2018: £nil).
Directors’ interest in shares
The interests of the Directors in the share capital of Dignity plc at 27 December 2019 are set out below:
Number of Ordinary Shares
At 27 December 2019
Value of shares
At 27 December Subject to counting towards
At 28 December 2019 Deferred performance Vested but proposed Percentage of
2018 Legally Subject Annual Bonus conditions unexercised shareholding salary held as
Legally owned owned to SAYE Options under the LTIP under the LTIP guideline(1) shares(1)
Mike McCollum 126,845 126,845 – 7,092 143,247 17,437 £826,486 162
Richard Portman 50,000 50,000 332 2,449 69,439 8,431 £329,579 133
Steve Whittern 38,076 38,076 – 3,127 88,553 10,763 £268,537 85
Peter Hindley(2) 106,873 – – – – – – –
Clive Whiley(3) 3,000 3,000 – – – – – –
David Blackwood 7,154 7,154 – – – – – –
Jane Ashcroft 1,917 1,917 – – – – – –
Mary McNamara 5,500 5,500 – – – – – –
James Wilson 1,000 1,000 – – – – – –
(1) Based on the average share price of the last financial month of the year of 591 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.
(2) Peter Hindley retired from the Board on 13 June 2019.
(3) Clive Whiley was appointed to the Board on 26 September 2019. Clive Whiley has a beneficial interest via Zodiac Executive Pension Scheme, of which he is the sole beneficiary,
in 3,000 Dignity plc shares.
Dean Moore was appointed to the Board on 11 March 2020 and has no interest in Dignity plc shares.
There has been no change in the interests set out above between 27 December 2019 and 11 March 2020.
Shareholding guideline
The current shareholding guideline for the Executive Directors was not met and, accordingly, the Executive Directors are below the
required shareholding level and will be required to retain at least 50 per cent of the net of tax value of shares at such time as future
awards vest until the required guideline of 200 per cent of salary is achieved.
Loss of office payments and payments to past Directors
There were no loss of office payments during the year.
Dignity plc Annual Report & Accounts 2019 | 89
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 2019 financial year
compared with the prior year.
2019 2018 Change
£m £m %
Dividends 7.9 12.2 (35)
Employee remuneration costs 107.4 107.2 –
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.
2019 2018 Change
£000 £000 %
Chief Executive
– Salary 512 512 –
– Benefits 97 97 –
– Annual bonus 124 401 (69)
Change
£ £ %
Full time equivalent average employee (1)
– Salary 26,478 26,777 (1)
– Benefits 1,834 1,791 2
– Performance related pay 574 1,083 (47)
(1) There are 3,304 employees at 27 December 2019 (28 December 2018: 3,261), of which 791 (2018: 752) were part time.
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 Index. The FTSE 350 Index has been chosen as the Company has been a member of that Index until recently and the
FTSE SmallCap Index has been chosen as it is now a member of that Index.
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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 27 December 2019, of £100 invested in Dignity plc on 25 December 2009, compared with the value
of £100 invested in the FTSE 350 Index and FTSE SmallCap Index on the same date.
90 | Dignity plc Annual Report & Accounts 2019
Report on Directors’ remuneration continued
for the 52 week period ended 27 December 2019
The table below shows the total remuneration figure for the CEO over the same ten year period.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CEO single total figure of
remuneration (£000) 899 917 2,081 2,217 2,426 2,440 2,372 966 1,010 733
Annual bonus pay-out
relative to maximum (%) 100 100 100 100 100 100 100 – 58 18
LTIP vesting (%) – – 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
Clive Whiley
David Blackwood
Jane Ashcroft
James Wilson
Dean Moore
Contract date
1 April 2004
1 November 2006
1 January 2009
26 September 2019
1 October 2015
1 April 2016
1 May 2019
11 March 2020
Notice period
12 months
12 months
12 months
3 months
3 months
3 months
3 months
3 months
External directorships
Mike McCollum is a Non-Executive Director of CVS Group plc and received fees of £46,000 in the year to 31 December 2019.
Steve Whittern is a Senior Non-Executive Director of Medica Group plc and received fees of £60,000 in the year to 31 December 2019.
The Committee and the Board have considered these appointments and have concluded that for both Directors there is a benefit
to Dignity in the executives serving as a Non-Executive Director on a different company Board and 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.
Membership of the Remuneration Committee
The Remuneration Committee comprises three independent Non-Executive Directors. During 2019, the Committee was chaired
by Mary McNamara and the Committee members in 2019 comprised Mary McNamara (until 27 December 2019) together with
Jane Ashcroft and David Blackwood (who assumed the role of Acting Committee Chairman from that date).
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 four times during the year. At the start of the year the
Committee determined the incentive payments for 2018 and the new remuneration policy for 2019-21, including continuing (from
FY18) a consultation with major shareholders.
The Committee receives advice from several sources, namely:
• The Chairman, 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 advisers on 3 August 2018 following a tendering process.
Korn Ferry report 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 2019, total fees charged in the period by Korn Ferry in relation to advice
to the committee were £74,751 +VAT (2018: £55,796 +VAT) and were charged on a time spent basis.
Dignity plc Annual Report & Accounts 2019 | 91
Annual Evaluation
During the period, the Board completed performance evaluations of itself and its Committees. The results of this are discussed
on page 68. Specific matters reviewed by the Committee were:
• Time management and composition;
• Committee processes and support;
• Understanding of the regulatory environment with regard to remuneration matters;
• The alignment of management incentives with strategic aims;
• Engagement with and challenge of the external remuneration consultants; and
• Priorities for change.
Issues arising from the evaluation are reviewed and addressed.
Statement of shareholder voting at the AGM (Unaudited)
Votes cast by proxy at the Annual General Meeting held on 13 June 2019 in respect of the Remuneration Report and in respect of the
binding three year policy vote, are as shown below:
2019 AGM Remuneration Report
Total number Percentage of
of votes votes cast
For 16,790,774 92.6
Against 1,339,744 7.4
Total votes cast 18,130,518 100
Abstentions 13,583,903 n/a
2019 AGM Remuneration Policy
Total number Percentage of
of votes votes cast
For 17,956,750 98.14
Against 340,926 1.86
Total votes cast 18,297,676 100
Abstentions 13,416,745 n/a
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On behalf of the Board
David Blackwood
Acting Chairman of the Remuneration Committee
11 March 2020
92 | Dignity plc Annual Report & Accounts 2019
Directors’ report
for the 52 week period ended 27 December 2019
The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
52 week period ended 27 December 2019.
Each of the Directors, whose names and functions are listed
on pages 64 and 65 of this Annual Report, confirm that, to the
best of their knowledge and belief:
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 EU 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.
• 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 EU 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.
Principal risks and uncertainties
Operational risks are considered on pages 48 to 50.
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, 3,455 Ordinary Shares of 12 48/143 pence
each were issued to satisfy a Deferred Bonus Plan award which
vested in the period.
The issued share capital of Dignity plc at 27 December 2019
consisted of 50,012,394 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.
Dignity plc Annual Report & Accounts 2019 | 93
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A special resolution passed at the last AGM on 13 June 2019
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 11 June 2020. 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 104. The Group’s profit before tax
amounted to £44.1 million (2018: restated loss of £18.0 million).
Dividends
A 2018 final dividend of 15.74 pence per Ordinary Share was
paid to shareholders on 28 June 2019.
Although the Group has significant cash resources at hand and
continues to be cash generative, in order to maintain maximum
flexibility and liquidity during the transformation, the Board
has concluded that it is prudent to temporarily cease dividend
payments. The Group has an established track record of
returning cash to shareholders at appropriate times over many
years and once the current uncertain competitive environment
becomes clearer, it anticipates resuming dividend payments or
returning excess cash to shareholders.
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 Employee
Forum, an in-house magazine, team talks, regular bulletins
both national and regional, regular town hall briefings on
the progress of the Transformation Plan, and management
briefings. This is discussed in more detail in the Corporate
and Social Responsibility Report on pages 53 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 published 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 88 to 90.
In accordance with the April 2016 UK Corporate Governance
Code, at the AGM, all Directors will retire as Directors of the
Company and, being eligible, offer themselves for election or
re-election at the AGM on 11 June 2020.
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.
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 6 March 2020.
94 | Dignity plc Annual Report & Accounts 2019
Directors’ report continued
for the 52 week period ended 27 December 2019
Post balance sheet events
Subsequent to the year end, there has been a general
downturn in financial markets which will have impacted the
value of the financial assets held by the Trusts. This impact will
change daily and has not been quantified at the time of this
Annual Report. Given the diversified portfolio of assets held,
which includes other investments such as property, the impact
across the whole portfolio of assets held cannot be readily
estimated. See note 30 for the most recent actuarial position
of the Trust based on long-term growth assumptions.
Independent Auditors and disclosure of information
to Auditors
A resolution for the re-appointment of Ernst & Young LLP
as auditors will be proposed at the forthcoming AGM.
In the case of each of the persons who are Directors at the
time when the report is approved, the following applies:
• So far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
• The Directors have taken appropriate steps to make
themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of
that information.
The Takeover Directive
The Group has one class of voting share capital, Ordinary
Shares. All of the shares rank pari passu. There are no special
control rights in relation to the Group’s shares. The rules
governing the appointment and replacement of Board members
and changes to the Articles of Association accord with usual
English company law provisions. The Board has authority to
purchase its own shares and is seeking renewal of that power
at the forthcoming AGM within the limits set out in the notice
of that meeting. There are no significant agreements to which
the Group is party which take effect, alter or terminate
in the event of change of control of the Group.
Corporate Governance Statement
The information that fulfils the requirements of a corporate
governance statement in accordance with rule 7.2 of the
Disclosure and Transparency Rules can be found in this
Directors’ Report and in the Directors’ Statement on Corporate
Governance on pages 67 to 71, 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
11 March 2020
Independent auditors’ report to the members of Dignity plc
for the 52 week period ended 27 December 2019
Dignity plc Annual Report & Accounts 2019 | 95
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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 27 December 2019 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
27 December 2019
• Balance sheet as at 27 December 2019
• Statement of changes in equity for the 52 week period ended
• Consolidated statement of comprehensive income for the 52 week period
27 December 2019
ended 27 December 2019
• Consolidated balance sheet as at 27 December 2019
• Consolidated statement of changes in equity for the 52 week period
ended 27 December 2019
• Consolidated statement of cash flows for the 52 week period ended
27 December 2019
• Related notes 1 to 35 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 46 to 51 that describe the principal risks and explain how they are being
managed or mitigated;
• the directors’ confirmation set out on page 51 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 93 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;
96 | Dignity plc Annual Report & Accounts 2019
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 27 December 2019
• 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 51 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
Group
• Revenue recognition – risk of management override.
• Carrying value of goodwill, other intangible assets and property, plant and equipment.
• Consolidation of and accounting for pre-need trusts.
Company
• Carrying value of subsidiary investments.
Audit scope
Materiality
• We performed an audit on the consolidated financial records of the group to the materiality and performance
materiality described below.
• Overall group materiality of £1.5 million which represents 4.6% of underlying profit before tax (IFRS profit before
tax, adding back net non-underlying costs (excluding the add back for amortisation of acquisition related
intangibles)).
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 2019 | 97
Key observations
communicated to the
Audit Committee
The judgement to change
the accounting policy is
appropriate and has been
applied and recorded in
the financial statements in
accordance with IFRS, notably
in respect of the requirements
of IFRS 10 Consolidated
Financial Statements, IFRS 15
Revenue from Contracts with
Customers, IFRS 9 Financial
Instruments and IAS 8
Accounting Policies, Changes
in Accounting Estimates
and Errors.
The carrying value of the
Trust assets is fairly stated.
The deferred revenue
liability is fairly stated and
the judgements applied by
management in determining
this are appropriate, as is
the sensitivity applied and
disclosed in respect of
the opening balance
sheet position as at 29
December 2017.
The disclosures presented in
respect of the consolidation
of the Trusts are in accordance
with IFRS, except for the
omission of certain IFRS 13
disclosures on level 2 and level
3 assets as this information
was not available to
management (as explained
in Note 23).
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Risk
Our response to the risk
Consolidation of and accounting for
pre-need trusts
Management revised its judgement in
the period regarding the extent of its
power over the pre-need trusts, which
has resulted in the consolidation of the
two principal pre-need trusts, being the
Trust for Age UK Plans (‘Age UK’) and the
National Funeral Trust (‘NFT’), together
the ‘Trusts’. The revised judgement is as
explained in Note 1 to the Consolidated
Financial Statements.
This change in accounting policy
resulted in significant additional
complexity to the financial statements,
specifically:
i) The Trusts hold investments in level 2
and level 3 assets. The carrying values
(£million) were as follows:
Level 2 Level 3 Total
27 December 2019 708.1 239.4 947.5
28 December 2018 609.7 252.7 862.4
29 December 2017 625.0 240.6 865.6
Given the inherent valuation complexity,
there is a risk of over/under statement
of level 2 and level 3 assets. Where no
active market prices exist, this risk is
increased.
ii) Amounts received from funeral plan
holders are deferred on the balance
sheet within contract liabilities until
the related funeral is performed or
the plan cancelled. The deferred
revenue balance as of 27 December
2019 was £1,289.0 million (2018:
£1,240.3 million, 2017: £1,188.9
million). The group is required to
evaluate a significant financing
component rate for each cash flow
deferred, being each customer
payment related to a plan, as
required by IFRS 15. These rates are
applied to accrete cash flows from
the date of customer payment to
the satisfaction of the performance
obligation when the funeral of the
plan member is conducted. The
incremental borrowing rate (‘IBR’)
of the group (including the Trusts)
has been evaluated by management
as the appropriate rate to apply to
deferred revenue as the significant
financing component. The rate
applied to each cash flow over time
remains fixed until the revenue is
recognised. There is judgement in
determining the historic IBRs which
vary over time and changes in the
assessment of the IBRs initially
applied to each cash flow could
materially impact the deferred
revenue balance held (and subsequent
recognition of revenue); and
iii) The presentation and disclosure
changes arising as a result of the
consolidation of the Trusts, to include
the primary statements and
supporting notes.
Refer to the Accounting policies, Note 1,
and Notes 13, 19, 23 and 35 of the
Consolidated Financial Statements
and the Audit Committee report
(pages 72 to 74).
• We evaluated the judgement of the change in accounting policy by reviewing
management’s assessment and comparing their evaluation to the underlying
terms of the agreements with the Trusts and the requirements of IFRS 10,
Consolidated Financial Statements. Specifically, we reviewed and considered
management’s re-assessment of their judgement in respect of the following
key areas:
• An increased level of emphasis being placed on the group’s ability to remove
and appoint trustee’s; and
• A reduced level of emphasis being placed on the legal requirement that a
majority of trustees are unconnected with the group.
Trust assets
Existence
• For all investments held at each balance sheet date we validated the existence
of these assets by directly obtaining confirmation from the custodians of the
number of units held. We reconciled these to the statements that we obtained
directly from respective fund managers.
Valuation
• To test valuation of the index linked gilts and corporate bonds, equities, growth
fixed income funds, property funds and emerging market debt investments
at each balance sheet date, we traced the price per unit to publicly available
information.
• For the growth fixed income fund classified as a level 3 asset, £133.0 million
as at 27 December 2019 (2018 £160.8 million, 2017 £163.2 million), we also
obtained and reviewed the ISAE 3402 SOC-1 Type II report for the third party
investment management services for each of the three years to 31 December
2019. These reports concluded on the suitability of the design and operating
effectiveness of controls over the valuation of assets held by the fund. Controls
over valuation were assessed as effective. We also, with the help of our
valuation specialist, obtained the pricing source information direct from the
investment adviser and confirmed this observable data to be authentic.
• For the property fund level 3 asset (£65.9 million as of 27 December 2019, 2018
£63.0 million, 2017 £58.5 million) we also compared the unit price to net asset
value per unit as per the most recent audited financial statements (to 30 June
of each year) and redemption certificates close to the year end to validate any
significant variances from the carrying value (when multiplied by the number
of units held). We also obtained and reviewed the ISAE 3402 SOC-1 Type II report
for the third party investment management services for years to 31 December
2017 and 2018. These reports concluded on the suitability of the design and
operating effectiveness of controls over the valuation of assets held by the fund.
Controls over valuation were assessed as effective.
• For the assets held in respect of the private (illiquid) investment fund, there is
no active market price for this investment. For the opening balance sheet
valuation as at 29 December 2017 (£16.5 million) and the comparative position
as at 28 December 2018 (£27.9 million), these were tested by agreeing details to
the fund’s audited financial statements. As at 27 December 2019 (carrying value
£40.1 million), as audited financial statements for the private (illiquid) investment
fund were not yet available, we obtained and reviewed the ISAE 3402 SOC-1
Type II report for the third party investment management services for the year
to 30 September 2019 with a bridging letter to 31 December 2019. This report
concluded on the suitability of the design and operating effectiveness of controls
over the valuation of assets held by the fund. Controls over valuation were
assessed as effective. We also independently built an expectation of the
valuation as at 27 December 2019 having considered the fund monthly
management accounts (directly obtained from the fund manager) for December
each year (2017, 2018 and 2019) and the level of investment units held by the
Trusts as obtained directly from the asset custodian;
Trust deferred revenue liabilities
• We, with the support of our Treasury specialists, evaluated management’s
assessment and judgement in respect of determining the IBR of the group
(to include the Trusts), specifically, we:
– Assessed the credit rating of the group (including the Trusts) by considering
Dignity plc’s rating by confirming to third party market sources and the
impact of the strong asset position of the Trusts; and
– Compared the rates applied by management for the IBRs computed to
comparable market data.
• In respect of management’s model for the deferred revenue calculations we:
– Tested the arithmetical accuracy of the model;
– Agreed, for a sample of funeral plan transactions, the inputs to the model
(including plan start date and cash flow amounts) to supporting
documentation;
– Agreed a sample of funeral plans utilised in the period to third party evidence
in order to ensure it was appropriate for revenue to be recognised in the
Income Statement in respect of these plans;
– Evaluated the IBR sensitivity disclosure (as explained in Note 1) on the
opening balance sheet as at 29 December 2017, by recomputing the
amounts in management’s model.
• We compared the journals posted by management on consolidation to
account for the Trusts in the group financial statements by comparing the
amounts posted to the outputs from the procedures performed above; and
• We performed a review of the presentation and disclosure of the consolidation
of the Trusts in comparison to the requirements of IFRS.
98 | Dignity plc Annual Report & Accounts 2019
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 27 December 2019
Key observations
communicated to the
Audit Committee
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
Revenue recognition – risk of
management override (Revenue 2019:
£338.9 million, restated 2018:
£353.7 million)
Given investor focus on the group’s
underlying revenue (2019: £301.3
million, 2018: £315.6 million) 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, including those
arising from consolidation of the Trusts
and adoption of IFRS 15, Revenue from
Contracts with Customers.
Refer to the Accounting policies, Note 1,
and Notes 3 and 35 of the Consolidated
Financial Statements and the Audit
Committee report (pages 72 to 74).
• We understood the group’s revenue recognition policies and how they are
applied, including the relevant controls, and performed a walkthrough to
validate our understanding;
• In respect of the funerals and crematoria segments, which together form
93% of the group’s underlying revenue, we analysed the whole population of
transactions from revenue recognition through to invoice settlement. Where
the postings did not follow our expectation, we investigated and understood
the characteristics of these entries and tested a sample to assess their validity
by agreeing the transactions back to source documentation;
• We reconciled the aggregate underlying revenue amounts extracted from the
sales invoicing systems to revenue recorded in the general ledger and traced
material reconciling items to supporting 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. To
assess their validity, we verified the journals to originating documentation;
• We performed detailed testing over the adjustments to revenue made as
a result of the consolidation of the Trusts and the IFRS 15 adjustment to
recognise revenue in respect of pre-need disbursements and those services
performed by non-Dignity funeral directors in the period, where the group is
acting as principal in the arrangement. This testing compared the outputs of
management’s deferred income liability model to the journals posted; 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, assessed any contrary information and obtained corroborative
evidence to support divergences from our expectations.
We consider the group’s
conclusions in respect of
impairment of intangible
and tangible assets are
appropriate, and that the
£6.8 million impairment of
trade names is fairly stated.
The impairment disclosures
are in accordance with IAS 36.
• We examined management’s methodology together with their models for
assessing the valuation of goodwill, other intangible assets and property, plant
and equipment balances to understand the composition of management’s
future cash flow forecasts and the process undertaken to prepare them.
This included confirming the underlying cash flows were derived from the
Board approved budgets and assessing the identified CGUs for completeness.
We also re-performed the calculations in the model to test the mathematical
integrity;
• In comparison to the requirements of IAS 36 on impairment and giving
due consideration to management’s business model, we understood the
methodology applied by management in performing its impairment tests
of goodwill and trade names for the funeral segment;
• We tested the key inputs to management’s impairment model by:
– analysing the historical accuracy of budgets to actual results to determine
whether forecast cash flows are reliable based on past experience;
– assessing the discount rate used by obtaining the underlying data used
in the calculation and benchmarking it against an EY range derived from
comparable organisations and market data, involving EY internal specialists
to assist us with this assessment; and
– challenging whether the forecast growth rates have been appropriately
adjusted to reflect the changes in the group’s strategy and the changes
experienced in the funeral market, together with comparing them to
observable market data.
• We 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; and
• We audited the related disclosures with reference to the requirements of IAS
36 and confirmed their consistency with the audited impairment models.
Carrying value of goodwill, other
intangible assets and property, plant
and equipment (2019: £624.4 million,
2018: £639.0 million), net of a £6.8
million (2018: nil) impairment of
trade names
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 strategic report the
group has faced a challenging year
arising from continued changes in
the funeral market and a lower than
anticipated number of deaths.
The group has experienced an overall
decline in underlying operating profit
from £80.2 million in 2018 to £63.3
million in 2019.
Therefore, there is a risk that goodwill
and the group’s cash generating units
(‘CGUs’), in particular the funeral services
segment and the related trade name
CGUs, may not achieve the anticipated
business performance to support their
respective carrying values.
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, Note 1,
and Note 9 of the Consolidated Financial
Statements and the Audit Committee
report (pages 72 to 74).
Dignity plc Annual Report & Accounts 2019 | 99
Key observations
communicated to the
Audit Committee
Based on our procedures,
we have not identified any
impairment in the carrying
value of investments.
Risk
Our response to the risk
• Management tested the parent company investment in subsidiaries
for potential impairment using a model which adjusts the value in use
established as part of the goodwill impairment assessment (see analysis
on goodwill above) for net debt, pensions and cashflows and assets
associated with the Trusts;
• We tested the mathematical integrity of the calculation performed; and
• We examined management’s methodology and model for assessing the
valuation of investments to understand the composition of management’s
future cash flow forecasts and the process undertaken to prepare them. In
addition to the steps noted above in respect of the value in use established
for goodwill impairment assessment purposes, we vouched each of the
adjustments made to amounts recorded elsewhere in the financial
statements or underlying accounting records.
• We audited the related disclosures with reference to the requirements
of IAS 36.
Carrying value of subsidiary
investments (2019: £149.9 million,
2018: £149.1 million)
The parent company holds investments
in subsidiaries with a significant
carrying value.
As at 27 December 2019, the market
capitalisation of Dignity plc is lower than
the net assets of the company, this is
an indicator of impairment.
Further, as explained above, the group
has faced a challenging year arising
from continued changes in the funeral
market and a lower than anticipated
number of deaths, thereby reducing
underlying performance and
profitability.
There is therefore a risk that the
subsidiaries may not achieve the
anticipated business performance to
support their respective carrying values.
Judgement is required in forecasting
the future cash flows of the subsidiary
investments and the Trusts,
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, Note C1
and Note C2 of the Parent Company
Financial Statements and the Audit
Committee report (pages 72 to 74).
In the prior year, our auditor’s report included a key audit matter in relation to the risk of fraud and management override. In the
current year, we updated our identified risk, keeping unchanged the risk of management override related to revenue recognition
(as included above), but removed this risk from being associated directly with the bad debt provision, dilapidations provision and
uninvoiced cost accruals. These estimates are based upon clear and structured ‘mechanical’ calculations that have been applied
consistently for many years with the opportunity for management to materially override these calculations being limited.
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100 | Dignity plc Annual Report & Accounts 2019
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 27 December 2019
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 £1.5 million (2018: £2.0 million), which is 4.6% of underlying profit before tax
(IFRS profit before tax, adding back net non-underlying costs (excluding the add back for amortisation of acquisition related
intangibles)) (2018: 5% of profit before tax).
We believe that this measure of underlying profit before tax is the most appropriate measure of the financial performance of
the group on which to base audit materiality. In evaluating management’s adjustment to derive underlying operating profit, we
exclude the add back of the £4.8 million amortisation of acquisition related intangibles as this is a recurring item. Further, we
have excluded from our materiality calculation the additional net profit of £36.6 million achieved by the group as a result of the
consolidation of the pre-need trusts. This is on the basis that 2019 represents the first year in which consolidated results include
these trusts and therefore we set materiality on a basis that is comparable with that determined in previous years and in line
with how the trading business is operated. The exclusion of the impact of the consolidation of the Trusts is consistent with how
management prepare their underlying results and communicate financial performance to investors.
Starting basis
• Profit before tax as reported in the financial statements – £41.1m
Adjustments
• Adjustment for non-underlying items (excluding acquisition related amortisation of £4.8 million) – £28.3 million
• Exclude the profit impact of consolidation of the Trusts - £(36.6) million
Materiality
• Underlying profit before tax – £32.8 million
• Materiality calculated at 4.6% – £1.5 million
We determined materiality for our audit of the standalone parent company financial statements to be £4.6 million (2018: £4.8
million), which is 1% (2018: 1%) of equity. Equity is the most appropriate measure given the parent company is an investment
holding company with no revenue. 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 50% (2018: 75%) of our planning materiality, namely
£0.8 million (2018: £1.5 million) for the group and £2.3 million (2018: £3.6 million) for the parent company. We reduced the
percentage applied in determining performance materiality in light of the number and quantum of immaterial uncorrected
and corrected misstatements arising in the 2018 audit.
Dignity plc Annual Report & Accounts 2019 | 101
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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
(2018: £0.1 million) for both the group and the parent company, which is set at 5% (rounded to nearest £0.1 million) 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 94 and 167 to 171,
including the Strategic Report set out on pages 1 to 59, Governance set out on pages 60 to 94 and Other Information set out
on pages 167 to 171, 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.
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 92 – 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 page 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 61 – 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.
102 | Dignity plc Annual Report & Accounts 2019
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 27 December 2019
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 92, 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.
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 2016) 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.
Dignity plc Annual Report & Accounts 2019 | 103
• 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.
Other matters we are required to address
• We were appointed by the company on 13 June 2019 to audit the financial statements for the 52 week period ending
27 December 2019 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is six years, covering the
periods ending 26 December 2014 to 27 December 2019.
• 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.
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Adrian Roberts (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
11 March 2020
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.
104 | Dignity plc Annual Report & Accounts 2019
Consolidated income statement
for the 52 week period ended 27 December 2019
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
Note £m £m
Revenue 3 338.9 353.7
Cost of sales (161.7) (158.9)
Gross profit 177.2 194.8
Administrative expenses (132.4) (118.9)
Operating profit 3 44.8 75.9
Finance costs 4 (25.8) (26.0)
Finance income 4 0.2 0.2
Share of loss and impairment in respect of associated undertakings 11 (6.0) –
Deferred revenue significant financing 4 (54.1) (53.3)
Remeasurement of financial assets held by the Trusts and related income 4 85.0 (14.8)
Profit/(loss) before tax 5 44.1 (18.0)
Taxation 6 (9.2) 1.0
Profit/(loss) for the period attributable to equity shareholders 3 34.9 (17.0)
Earnings/(loss) per share for profit attributable to equity shareholders
– Basic (pence) 8 69.8p (34.0)p
– Diluted (pence) 8 69.8p (34.0)p
Prior year comparatives have been restated due to the impact of the adoption of IFRS 15, Revenue from Contracts with
Customers, in addition to the impact of the change in accounting policy in respect of the consolidation of the Trusts. See note 1
for further details.
The alternative performance measures included within the Annual Report present information on a comparable basis with
that presented in prior periods.
Consolidated statement of comprehensive income
for the 52 week period ended 27 December 2019
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
Note £m £m
Profit/(loss) for the period 34.9 (17.0)
Items that will not be reclassified to profit or loss
Remeasurement loss on retirement benefit obligations 29 (1.8) (0.6)
Tax credit on remeasurement on retirement benefit obligations 0.3 0.1
Other comprehensive loss (1.5) (0.5)
Comprehensive income/(loss) for the period 33.4 (17.5)
Attributable to:
Equity shareholders of the parent 33.4 (17.5)
Prior year comparatives have been restated due to the impact of the adoption of IFRS 15, Revenue from Contracts with
Customers, in addition to the impact of the change in accounting policy in respect of the consolidation of the Trusts. See note 1
for further details.
Consolidated balance sheet
as at 27 December 2019
Dignity plc Annual Report & Accounts 2019 | 105
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27 December 28 December
2019 2018
restated
Note £m £m
Assets
Non-current assets
Goodwill 9 232.6 232.6
Intangible assets 9 140.5 152.3
Property, plant and equipment 10 251.3 254.1
Investments in associated undertakings 11 – 6.0
Financial and other assets 12 18.2 15.7
Financial assets held by the Trusts 13 947.5 862.4
Deferred commissions 19 96.8 94.5
Deferred tax asset 22 14.0 17.9
1,700.9 1,635.5
Current assets
Inventories 14 7.9 8.5
Trade and other receivables 15 32.4 31.3
Deferred commissions 19 7.3 7.1
Cash and cash equivalents – Trading Group 57.9 66.9
Cash and cash equivalents – held by the Trusts 15.5 13.8
Cash and cash equivalents 16 73.4 80.7
121.0 127.6
Total assets 1,821.9 1,763.1
Liabilities
Current liabilities
Financial liabilities 17 9.6 9.3
Trade and other payables 18 61.6 66.8
Current tax liabilities 1.7 4.8
Contract liabilities 19 95.5 91.5
Provisions for liabilities 21 2.0 1.4
170.4 173.8
Non-current liabilities
Financial liabilities 17 542.3 551.9
Other non-current liabilities 18 2.0 2.1
Contract liabilities 19 1,209.1 1,164.6
Provisions for liabilities 21 9.3 9.4
Retirement benefit obligation 29 26.0 25.2
1,788.7 1,753.2
Total liabilities 1,959.1 1,927.0
Shareholders’ deficit
Ordinary share capital 24 6.2 6.2
Share premium account 12.5 12.4
Capital redemption reserve 141.7 141.7
Other reserves (4.0) (5.1)
Retained earnings (293.6) (319.1)
Total deficit (137.2) (163.9)
Total deficit and liabilities 1,821.9 1,763.1
Prior year comparatives have been restated due to the impact of the adoption of IFRS 15, Revenue from Contracts with
Customers, in addition to the impact of the change in accounting policy in respect of the consolidation of the Trusts. See note 1
for further details.
The alternative performance measures included within the Group’s consolidated financial statements present information on
a comparable basis.
The financial statements on pages 104 to 154 were approved by the Board of Directors on 11 March 2020 and were signed on its
behalf by:
M K McCollum S L Whittern
Chief Executive Finance Director
106 | Dignity plc Annual Report & Accounts 2019
Consolidated statement of changes in equity
for the 52 week period ended 27 December 2019
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 29 December 2017 –
as originally presented 6.2 11.1 141.7 (4.6) (108.0) 46.4
Adjustment on change in accounting
policy and adoption of IFRS 15 (note 35) – – – – (181.4) (181.4)
Shareholders’ equity as at
29 December 2017 – restated 6.2 11.1 141.7 (4.6) (289.4) (135.0)
Loss for the 52 weeks ended
28 December 2018 – restated – – – – (17.0) (17.0)
Remeasurement loss on defined
benefit obligations – – – – (0.6) (0.6)
Tax on retirement benefit obligations – – – – 0.1 0.1
Total comprehensive loss – restated – – – – (17.5) (17.5)
Effects of employee share options – – – 0.8 – 0.8
Proceeds from share issue(1) – 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 – restated 6.2 12.4 141.7 (5.1) (319.1) (163.9)
Profit for the 52 weeks ended
27 December 2019 – – – – 34.9 34.9
Remeasurement loss on retirement
benefit obligations – – – – (1.8) (1.8)
Tax on retirement benefit obligations – – – – 0.3 0.3
Total comprehensive income – – – – 33.4 33.4
Effects of employee share options – – – 1.1 – 1.1
Tax on employee share options – – – 0.1 – 0.1
Proceeds from share issue(2) – 0.1 – – – 0.1
Gift to Employee Benefit Trust – – – (0.1) – (0.1)
Dividends (note 7) – – – – (7.9) (7.9)
Shareholders’ equity as at 27 December 2019 6.2 12.5 141.7 (4.0) (293.6) (137.2)
(1) Relating to issue of 77,038 shares under 2015 LTIP scheme.
(2) Relating to issue of 3,455 shares under 2016 DAB scheme.
Prior year comparatives have been restated due to the impact of the adoption of IFRS 15, Revenue from Contracts with
Customers, in addition to the impact of the change in accounting policy in respect of the consolidation of the Trusts. See note 1
for further details.
The above amounts relate to transactions with owners of the Company except for the items reported within total
comprehensive income.
Capital redemption reserve
The capital redemption reserve represents £80,002,465 B Shares that were issued on 2 August 2006 and redeemed for cash
on the same day, £19,274,610 B Shares that were issued on 10 October 2010 and redeemed for cash on 11 October 2010, and
£22,263,112 B Shares that were issued on 12 August 2013 and redeemed for cash on 20 August 2013 and £20,154,070 B Shares
that were issued and redeemed for cash in November 2014.
Other reserves
Other reserves includes movements relating to the Group’s SAYE and LTIP schemes and associated deferred tax, together with
a £12.3 million merger reserve.
Consolidated statement of cash flows
for the 52 week period ended 27 December 2019
Dignity plc Annual Report & Accounts 2019 | 107
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52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
Note £m £m
Cash flows from operating activities
Cash generated from operations 27 64.6 104.2
Finance income received 0.3 0.2
Finance costs paid (25.0) (13.1)
Transfer from restricted bank accounts for finance costs 12.3 0.3
Payments to restricted bank accounts for finance costs 16 (12.1) (12.3)
Total payments in respect of finance costs (24.8) (25.1)
Tax paid (7.9) (11.6)
Net cash generated from operating activities 32.2 67.7
Cash flows from investing activities
Investment in associated undertakings – (5.0)
Acquisition of subsidiaries and businesses (net of cash acquired) – (6.5)
Proceeds from sale of property, plant and equipment 2.1 0.4
Maintenance capital expenditure(1) (9.8) (16.1)
Branch relocations (1.1) (0.8)
Transformation capital expenditure (1.7) –
Satellite locations (0.3) (1.4)
Development of new crematoria and cemeteries (5.4) (6.7)
Purchase of property, plant and equipment and intangible assets (18.3) (25.0)
Purchase of financial assets (by the Trusts) 13 (736.1) (625.5)
Disposals of financial assets (by the Trusts) 13 726.6 604.8
Realised return on financial assets 3.6 3.4
Net cash used in investing activities (22.1) (53.4)
Cash flows from financing activities
Payments due under Secured Notes (9.3) (4.5)
Transfer from restricted bank accounts for repayment of borrowings 4.6 –
Payments to restricted bank accounts for repayment of borrowings 16 (4.8) (4.6)
Total payments in respect of borrowings (9.5) (9.1)
Dividends paid to shareholders on Ordinary Shares 7 (7.9) (12.2)
Net cash used in financing activities (17.4) (21.3)
Net decrease in cash and cash equivalents (7.3) (7.0)
Cash and cash equivalents at the beginning of the period 63.8 70.8
Cash and cash equivalents at the end of the period 16 56.5 63.8
Restricted cash 16 16.9 16.9
Cash and cash equivalents at the end of the period as reported in the
consolidated balance sheet 16 73.4 80.7
(1) Maintenance capital expenditure includes vehicle replacement programme, improvements to locations and purchases of other tangible and intangible assets.
Prior year comparatives have been restated due to the impact of the adoption of IFRS 15, Revenue from Contracts with
Customers, in addition to the impact of the change in accounting policy in respect of the consolidation of the Trusts. See note 1
for further details.
108 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements
for the 52 week period ended 27 December 2019
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 27 December 2019
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 27
December 2019. For the comparative period, the Group’s consolidated financial statements have been prepared for the 52 week
period ended 28 December 2018.
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.
Terminology:
Trusts refers to The National Funeral Trust and the Trust for Age UK Funeral Plans considered for accounting purposes to be
controlled and therefore included in the consolidated financial statements of Dignity plc.
Trading Group refers to Dignity plc and its subsidiaries excluding the Trusts. Trading Group therefore represents what would have
been described as the ‘Dignity plc Group’ or ‘Group’ in previous annual reports.
Group or Dignity plc Group refers to Dignity plc, including its subsidiaries and the Trusts.
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 a 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.
Change in accounting policy
As explained further below, the Group has revisited the judgement regarding the extent of its control over the Trusts and as
a result has revised its accounting policy to reflect the consolidation of the two principal pre-need trusts.
As a result of consolidating the Trusts, the Group has applied new accounting policies in respect of the recognition and
measurement of the financial assets held by the Trusts and extended its revenue recognition policies to consider deferred
revenue received from plan holders, refund liabilities and income received from plan holders under payment plans. The
application of IFRS 15 to the Group as enlarged by the consolidation of the Trusts has also resulted in a change in the presentation
of revenue and costs related to disbursements associated with pre-need plans and pre-need plans ultimately performed by
non-Dignity funeral directors from an agent basis to a principal basis. This revision reflects the fact that, under IFRS 15, the
Group controls the delivery of pre-need plans, including disbursements, and those plans where the funeral service is delivered
by third parties.
Prior period comparatives have been restated to reflect the above change in accounting policy and the impact of IFRS 15.
A reconciliation from the reported prior period comparatives has been provided in note 35 together with the third balance
sheet required to be disclosed in support of the prior year adjustment.
Investments 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.
Dignity plc Annual Report & Accounts 2019 | 109
1 Accounting policies (continued)
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 performs a review to assess whether there is any objective evidence that the investment in
the associate is impaired. Where such evidence exists the recoverable amount of the investment is determined by calculating
its value in use. This recoverable amount is compared to the carrying amount of the investment and to the extent that the
recoverable amount exceeds the carrying value of the investment, an impairment is recognised accordingly. Any impairment is
recognised within ‘Share of loss and impairment in respect of associated undertakings’ in the consolidated income statement.
Alternative performance measures (APMs)
The Board believes that whilst statutory reporting measures provide financial performance of the Group under GAAP, APMs
are necessary to enable users of the financial statements to fully understand the trading performance and financial position of
the Group. The APMs provided are aligned with those used in the day-to-day management of the Group and allow for greater
comparability across periods. For this reason, the APMs provided exclude the impact of consolidating the Trusts and the changes
which relate to the adoption of IFRS 15, both of which are considered to mask the underlying trading performance of the Group,
as well as non-underlying items comprising certain non-recurring and non-trading transactions. See financial review on page 43
and alternative performance measures on page 167 for further information.
Revenue
At-need funerals and cremations
Revenue from funeral operations related to at-need funerals comprises the amount recoverable from customers for the provision
of funerals, income from crematoria and other services, once those services have been performed or the goods supplied.
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 (plan holder) at cost and not controlled by Dignity.
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All amounts are exclusive of VAT.
Pre-arranged funeral plans
Trust for Age UK Plans and National Funeral Trust
The Group markets and sells pre-arranged funeral plans, with monies received from selling funeral plans being held, invested
and controlled by 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 sale of a pre-arranged plan is
considered to have a single performance obligation, fulfilled by the delivery of the funeral service.
Amounts received from plan holders are deferred on the balance sheet within contract liabilities until the related funeral is
performed or the plan cancelled. Where, based on historic experience, the Group expects that a proportion of plans will be
cancelled, the deferral takes the form of a refund liability which, under the terms of the plan, is held based on the fixed amount
received on inception of the plan. For the majority of plans where the service as per the funeral plan is expected to be
performed, the deferred amount is subject to adjustment to reflect a significant financing component.
This significant financing component, which has been calculated based on the expected discount rate that would be reflected
in a separate financing transaction between the Group and the plan holder at contract inception, is charged to the income
statement as a finance cost each period until the performance obligation is satisfied. The discount rate applied is fixed at
inception of each plan and is based on the estimated incremental borrowing rate of the Group at the time of each cash flow.
See also critical accounting judgements on page 116 for the approach taken on initial application to consolidate the Trusts.
The amount deferred on the balance sheet includes amounts paid by the plan holder, which, in addition to the plan consideration
includes amounts in respect of disbursements (such as crematoria fees, burial plots, ministers’ fees and doctors’ fees). When the
service prescribed by the plan is delivered, revenue is recognised equal to the deferred revenue balance related to the specific
plan. When a plan is cancelled, revenue is recognised equal to the deferred revenue balance related to the specific plan, less the
fixed refund due to the plan holder.
110 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
1 Accounting policies (continued)
Trust for Age UK Plans and National Funeral Trust (continued)
All directly attributable costs in respect of the marketing of the pre-arranged funeral plans are held as deferred commissions in
the consolidated balance sheet and recognised in the Group’s consolidated income statement, within administration expenses,
on the performance of a funeral (single performance obligation) or cancellation of the plan (if not refunded).
Contract liabilities and deferred commissions balances are split between current and non-current based on historical experience.
All costs in respect of the administration of the pre-arranged funeral plans are expensed in the Group’s consolidated income
statement as incurred, within the funeral services segment.
Dignity, through its marketing subsidiary companies, contractually guarantees with the holder of a pre-arranged funeral plan
that (i) if the plan holder chooses to cancel their selected funeral plan, a full refund will be made to them 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 plan holder) 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.
Other trust plans
Revenue in respect of funeral services subject to pre-need plan arrangements associated with the other trusts is recognised
on delivery of the underlying service at the amount paid from the other trust to the Group.
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.
Where a commission is paid to the insurers, these costs are carried as a prepayment and charged to the consolidated income
statement as a funeral is performed.
Where a commission is payable only on delivery of the funeral no amounts are recorded until the funeral is performed.
In the event of the death of the policyholder, if the Group performs the funeral, it receives an agreed amount from the insurers
which is recognised as revenue within the funeral services division. On occasions a third party will perform the funeral and the
Group will pass on all monies received to that party and in this situation the Group is deemed to be acting as an agent and
revenue is treated as pass through revenue and not grossed up within the consolidated income statement.
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 measures financial assets held by the Trusts at fair value and discloses fair values for all other financial assets and
liabilities at each balance sheet date which are held at amortised cost.
Fair value related disclosures are set out in note 23 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 where required the use of unobservable inputs.
Dignity plc Annual Report & Accounts 2019 | 111
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1 Accounting policies (continued)
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. The useful life for trade names is 35 years.
Intangible assets – software
Where computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible
asset. Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring into use the
specific software.
An internally generated intangible asset arising from the Group’s development of computer systems (including websites) is
recognised if, and only if, the costs are directly associated with the production of identifiable and unique software products,
controlled by the Group and it is probable that future economic benefits will flow to the Group.
Costs recognised as assets are amortised over their estimated useful lives (three to eight years) using the straight line method.
Intangible assets – use of third party brand name
The Group has a marketing agreement with Age UK Enterprises Limited, giving rights to market pre-arranged funeral plans
under the Age UK brand. The value of this right has been recognised as a separate intangible asset.
This asset is being amortised over 20 years on a straight line basis, recognising that each year’s additional marketing activity
generates incremental revenues and profits to the Group for at least the following 20 years.
Intangible assets – other
The Group previously 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.
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 7% – 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.
112 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
1 Accounting policies (continued)
Assets in the course of construction are shown as work in progress at a value equal to costs incurred to date. Once completed,
they are reclassified and depreciated using the Group’s depreciation policy above.
Borrowing costs
If the construction phase of property, plant or equipment extends over a long period, the interest incurred on borrowed capital
up to the date of completion is capitalised as part of cost of construction as permitted by IAS 23 (Borrowing Costs).
Repairs and renewals
All repairs and renewals are charged to the income statement unless they represent an enhancement to the original asset.
Property, plant and equipment held under leases
When assets are financed by leasing agreements, where the risks and rewards are substantially transferred to the Group, the
assets are treated as if they had been purchased outright and the corresponding liability to the lessor is included as an obligation
under finance leases. Depreciation on leased assets is charged to the income statement on the same basis as owned assets.
Leasing payments are treated as consisting of capital and interest elements such that the interest element is charged to the
income statement so as to achieve a constant rate on the outstanding lease obligation.
All other leases are ‘operating leases’ and the relevant annual rentals, 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.
Dignity plc Annual Report & Accounts 2019 | 113
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1 Accounting policies (continued)
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.
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 (2018: 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:
Financial liabilities
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 consolidated
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 payables
Trade payables are not interest bearing and are initially recognised at fair value and subsequently measured at amortised cost.
Financial assets
Financial assets are classified at initial recognition, and subsequently measured at, amortised cost, at fair value through other
comprehensive income or fair value through profit and loss.
Initial Recognition & Measurement
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics
and the Group’s business model for managing them.
All investments held by the Trusts are held at fair value with movements reflected through profit and loss to ensure clarity for
a user of the financial statements. This is because the Trusts objective of holding these investments is not to collect contractual
cash flows or to sell financial assets but to focus on the fair value information to assess performance and make investment
decisions.
All other financial assets (including trade receivables) are held at amortised cost as these assets give rise to cash flows that are
solely payments of principal and, where applicable, interest on the principal amount and it is the Group’s business model to
collect the contractual cash flows.
The majority of the Group’s trade receivables do not contain a significant financing component and are measured at the
transaction price determined under IFRS 15.
114 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
1 Accounting policies (continued)
Subsequent Measurement
Financial assets held at fair value through profit and loss are carried in the consolidated balance sheet at fair value with net
changes in fair value recognised in the income statement.
Financial assets held at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject
to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired or the Group has transferred
its rights to receive cash flows from the asset and has either transferred substantially all the risks and rewards of the asset or
has neither transferred nor retained substantially all the risk and rewards of the asset but has transferred control of the asset.
Impairment
The Group recognises an allowance for expected credit losses (‘ECLs’) for all debt instruments not held at fair value through profit
or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the
cash flows that the Group expects to receive.
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes
in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established
a provision matrix that is based on its historical credit loss experience, adjusted for identifiable forward-looking factors specific
to the debtors and the economic environment.
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. Cash and cash equivalents have an original maturity of three months or less, are subject to insignificant changes
in value and are readily convertible into known amounts.
Trade receivables – accounting policy applied on and before 28 December 2018
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.
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.
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:
Consolidation of pre-need trusts
The Group markets and sells pre-arranged funeral plans, with monies received from selling funeral plans being held
and invested by pre-arranged funeral plan trusts. These financial statements reflect the consolidation of the two principal
pre-arranged funeral plan trusts being the Trust for Age UK Plans and the National Funeral Trust (together the ‘Trusts’).
The previous principle of non-consolidation, which was established many years ago, was reconsidered in 2015 following the
introduction of IFRS 10 and is reconsidered annually to determine if there are any circumstances which would change the
previous determination.
IFRS 10 built on existing principles by identifying the concept of control as the determining factor on whether an entity should
be included in the consolidated financial statements of the parent company. In order to have control, IFRS 10 requires a parent
company to have power over the investee, an exposure to variable returns because of its involvement in the investee and the
ability to use its power over the investee to affect the amount of the variable returns.
The decision as to whether to consolidate these trusts is a matter of significant judgement in respect of which the Group
believes that informed individuals could reach alternative conclusions. Notably, during the period prior to the preparation of
these financial statements, the Group has been in discussion with the Financial Reporting Council (‘FRC’), regarding the matter
and the extent to which the Group is able to affect its variable returns through power over the trustees, principally through its
power to appoint and remove trustees.
Dignity plc Annual Report & Accounts 2019 | 115
1 Accounting policies (continued)
The Group previously concluded that the legislative requirement for a majority of trustees to be unconnected with Dignity
meant that Dignity did not, and could not, control the actions of the trustees. Combined with the judgement that ultimately
Dignity’s return from the Trusts was wholly dependent on the investment performance of the Trusts and that the investment
strategy of the Trusts was set, implemented and monitored by the trustees, Dignity previously concluded that it did not have
the power to affect the amounts of its returns, that it did not control the Trusts and therefore that the Trusts should not
be consolidated.
Upon re-examination of the factors that influence that decision, following the latest discussions with the FRC, the Group has
concluded as part of its current year consideration of the recurring judgement that more weight should be attributed to its ability
to appoint and remove trustees and less to the legislative requirement for a majority of trustees to be unconnected with Dignity.
As a result, the Group has reached a revised judgement, the basis of which is summarised below, that it does have control as
defined by IFRS 10 and should consolidate those pre-arranged funeral plan trusts where it has the ability to appoint and
remove trustees.
Therefore, the Group has made a change in accounting policy, which has been reflected in these financial statements as a prior
period restatement, full details of which are given in note 35.
Whether to consolidate the Trusts or not remains a key judgement and the basis of this judgement reflected in these financial
statements is summarised in the table below. The table relates solely to the two principal trusts which are consolidated and for
the purpose of the table, ‘Dignity’ refers to the Group excluding the Trusts.
IFRS 10 consideration Analysis
Power over the investee. Power arises when the
investor has existing rights that give them the ability
to direct the relevant activities of the investee, being
those activities which influence the returns achieved
by the investee.
Whilst Dignity has no voting rights over the Trusts or any rights to
direct the activities of the Trusts, it does have the power to appoint and
remove a majority of trustees. Whilst legislation requires the majority
of trustees to be unconnected with Dignity this right does not prevent
Dignity removing a majority of the trustees from office such that on
balance it is considered that Dignity is able to control the actions of the
Trustees who in turn control the investment decisions of the Trusts
and negotiate with Dignity the marketing allowance paid to Dignity on
behalf of the Trust. Also, Dignity controls the charge levied to the Trusts
for the provision of funeral services (‘funeral cover’).
The investor is exposed, or has rights, to variable
returns from its involvement with the investee.
Dignity receives an allowance for the marketing of the plans and for the
performance of a funeral. From time to time Dignity may receive a
surplus from the Trusts.
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The investor has the ability to use its power over the
investee to affect the amount of the investor’s
returns.
The extent of the marketing allowance establishes the amount to be
held in Trust on which investment returns can be made.
Ultimately Dignity’s return is wholly dependent on the amounts held for
investment in the Trusts and the investment performance of the Trusts.
Dignity establishes the level of funeral cover and negotiates the level
of marketing allowance with the Trustees on an annual basis.
The investment strategy is set, implemented and monitored by the
Trustees. Consequently, as Dignity is on balance considered to control
the actions of the Trustees, Dignity has the power to affect the amount
of its returns.
For other, smaller trusts from which Dignity receives funeral cover in the event that they deliver a funeral service, the judgement
is that the Group has no power over the actions of the investee as Dignity does not have the ability to appoint or remove
trustees. Further, as these trusts do not accept new plans and the level of funeral cover paid by these trusts is derived based on
the value of trust assets and the number of remaining open funeral plans alone, Dignity has no wider ability to affect its variable
returns from these trusts. Consequently, Dignity is unable to use its power to influence its variable returns, such that the Group
is not considered to control these trusts and therefore these trusts are not consolidated.
The FRC has confirmed that the matter is now closed. The FRC’s question was originally contained in a letter issued in respect
of our 2017 Annual Report & Accounts. The FRC’s role is to consider compliance with reporting standards and is not to verify the
information provided to them. Therefore, given the scope and inherent limitations of their review, which does not benefit from
any detailed knowledge of the Group, it would not be appropriate to infer any assurance from their review that our 2017 Annual
Report and Accounts was correct in all material respects.
116 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
1 Accounting policies (continued)
Critical accounting judgements (continued)
Deferred revenue and associated significant financing
The significant financing component is based on estimates made in respect of the enlarged Group’s (to include the Trusts)
incremental borrowing rate at the time of inception of each funeral plan. Once established the rate applied to a plan is fixed for
the duration of the plan. Open plans date back a little over 30 years requiring rates to be estimated by assessing the historical
corporate bond yields for a ten year bond with an equivalent credit rating to that of the Group (to include the Trusts), being the
average approximation of time between the inception of the plan and the related performance obligation, over an extended
period of time. A difference in these rates can have a material difference in the resulting deferred revenue balance. As at
28 December 2017, being the opening balance sheet date of these financial statements (see note 35), if all rates applied to
each funeral plan cash flow at inception decreased/increased by 50 basis points, then the deferred revenue balance would
reduce/increase by £43.3 million/£46.0 million, respectively, compared to the deferred revenue balance recognised of £1,188.9
million. Given the rates are fixed at inception, there is no further estimation uncertainty on these cash flows, and therefore
no further sensitivity disclosures are applied as for more recent cash flows in respect of 2018 and 2019, the estimate of the
Group’s (including the Trusts) incremental borrowing rate contains less estimation uncertainty.
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:
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 29 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.
Trade name intangible assets impairment assessment
An impairment assessment has been required on trade name intangible assets given the changes in the funeral market and the
increase in the discount rate to be applied in determining their value-in-use. The value-in-use calculation also requires the use
of other estimates including those in respect of future cash flows and growth rates. See note 9 for further details.
Recoverable value of investments in associated undertakings
The Group records its investment in Funeral Zone Limited (‘Funeral Zone’) as an associated undertaking. The ability to recover
the carrying value of this investment is subject to uncertainty due to Funeral Zone being in its formative stages. Given ongoing
losses recorded by Funeral Zone coupled with the going concern risk of the business, as noted in their most recent financial
statements, the Group has fully provided against its investment. There are a number of potential outcomes over the next 12
months which the Group can influence but not control, which could result in a reversal or part reversal of the provision against
the investment.
Fair value of financial assets
As set out in note 23 some of the Group’s financial assets held by the Trusts are valued using inputs that are not based on
observable data and therefore contain some estimates. This fair value information is provided by the investment manager
engaged by the Trusts. The Group has no input to, or influence over, the valuation methodologies applied by the investment
manager. See also note 23 on market risk.
Contract liabilities
Deferred revenue is split between current and non-current to reflect the expected number of plans to be utilised within the
next 12 months. This is based on historical experience. Actual experience may differ due to factors such as death rate.
The refund liability is split between current and non-current based on historical experience to reflect the expected number
of plans to be cancelled within the next 12 months. Actual cancellation rates may differ.
Dignity plc Annual Report & Accounts 2019 | 117
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1 Accounting policies (continued)
Standards, amendments and interpretations effective in 2019
The Group has applied IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments for the first time in
the preparation of the Group’s consolidated financial statements.
IFRS 15, Revenue from Contracts with Customers
A description of the nature and effect of transition to this standard is presented in note 35.
IFRS 9, Financial Instruments – impact of adoption
Due to the nature of the Group’s financial instruments there has been no material impact on the Group’s consolidated financial
statements on the adoption of IFRS 9.
Under IFRS 9 all financial assets and liabilities are measured at fair value on initial recognition, with the exception of certain trade
receivables. Trade receivables that do not have a significant financing component are measured at their transaction price, being
the invoice amount excluding sales tax. The Group has applied the practical expedient within the standard, as trade receivables
(including at-need and pre-need) are expected to be settled in less than one year it can presume that all trade receivables do not
contain a significant financing component. This represents a change in accounting policy. However, as the transaction price is not
materially different to the fair value, this change in accounting policy has not had a material impact.
IFRS 9 subsequently measures financial assets and liabilities at amortised cost, fair value through other comprehensive income
(‘FVOCI’) or fair value through profit and loss (‘FVTPL’). As all assets and liabilities with the exception of trust financial assets were
measured at amortised cost under IAS 39 there is no change in accounting policy on adoption of IFRS 9.
IFRS 9 establishes a new model for recognition and measurement of impairments for loans and receivables that are measured
at amortised cost called the ‘expected credit losses’ model which replaces the IAS 39 incurred loss model. The Group has applied
the expected credit loss model to its provisioning for at-need trade receivable balances using the simplified approach within the
standard. This approach tracks trade receivable balances over an historic rolling 12 month period to create a provision matrix to
be applied. This has not had a material impact and no transition adjustment has been recorded.
Trade receivables in respect of the Trusts represent plan instalments receivable from pre-need plan members to the extent
that these are due at the balance sheet date but not yet received. No impairment provision is held against these receivables on
the basis that a separate refund liability is recorded for expected plan cancellations. All amounts outstanding to be paid under
a member’s pre-need plan must be paid in full prior to the performance of the services under the plan.
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 2019 or later periods but which the Group has not early adopted:
IFRS 16, Leases
In its 2020 financial statements, the Group will adopt the requirements of IFRS 16, Leases, for the first time. The adoption of the
standard will have a material impact on the Group’s primary financial statements, including impacts on operating profit, profit
before tax, total assets and total liabilities.
IFRS 16 is applicable for accounting periods beginning on or after 1 January 2019. Due to the fact that the Group’s 2019 reporting
period begins on 29 December 2018 the group will adopt IFRS 16 retrospectively for its 2020 reporting period beginning on
28 December 2019. Comparatives for the 2019 reporting period will not be restated as permitted under the specific transition
provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules will therefore be
recognised in the opening balance sheet on 28 December 2019.
Lessee accounting
Approximately 50 per cent of the Group’s properties are on lease terms that are currently accounted for as an operating lease
under the principles of IAS 17, Leases. The minimum undiscounted lease commitment on these leases is disclosed in note 20
and is approximately £228 million at the end of 2019.
On adoption of IFRS 16, the Group will recognise lease liabilities in relation to leases which had previously been classified as
‘operating leases’. These liabilities will be measured at the present value of the remaining lease payments, discounted using
the Trading Group’s incremental borrowing rate (‘IBR’) as at 28 December 2019. The weighted average lessee’s IBR that will be
applied to the lease liabilities on 28 December 2019 is 4.9 per cent, with a minimum rate of 3.6 per cent and a maximum rate
of 6.8 per cent.
118 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
1 Accounting policies (continued)
IFRS 16, Leases (continued)
The IBRs have been determined as follows:
a) We have derived rates based on corporate bond yields to maturity reflecting the Group’s indicative credit rating. In order to
assess the Group’s IBRs we have considered yield curves at 28 December 2019 for similarly rated listed corporate bonds for
durations aligned with the adjusted unexpired lease durations at 28 December 2019.
b) An asset/lease specific adjustment would then be applied, if needed, to reflect the nature of the lease collateral. Such an
adjustment has not been required on transition and we have performed a high level cross check against other indicators
of lease pricing to confirm this. Given the specialised nature of Group’s properties there are no direct property market
benchmarks and therefore we have looked at retail, industrial and long income sub-sectors to obtain indicative
references points.
On adoption of IFRS 16, the Group will recognise a right-of-use asset representing its right to use the underlying leased asset
and a corresponding lease liability for future lease payables for each operating lease in which the Group is a lessee on its
consolidated balance sheet.
Right-of-use assets will be measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognised in the balance sheet as at 28 December 2019. Furthermore, assets relating to
finance leases held on the balance sheet at 27 December 2019 will be transferred into the right-of-use asset.
The right-of-use asset will be depreciated on a straight-line basis over the life of the lease. Interest will be recognised on the
lease liability, resulting in a higher interest expense in the earlier years of the lease term. The total expense recognised in the
consolidated income statement over the life of the lease will be unaffected by the new standard, however, IFRS 16 will result in
the timing of lease expense recognition being accelerated for leases which would be currently accounted for as operating leases.
The lease term comprises the non-cancellable lease term, in addition to optional periods when the Group is reasonably certain
to exercise an option to extend or not to terminate a lease.
Impact of the new standard
In order to estimate the impact on the Group’s opening consolidated balance sheet for the period ending 25 December 2020,
the lease portfolio at transition date has been used, which would result in the recognition of right-of-use assets in the region
of £95.0 million, with corresponding lease liabilities in the region of £94.0 million.
Assuming no changes in the Group’s property portfolio, operating profit will increase by approximately £2.8 million and profit
before tax will decrease by approximately £1.8 million for the period ending 25 December 2020 as the pre-IFRS 16 estimated
rental charge is replaced by a higher depreciation and interest charge. The Group’s 2020 current tax charge will also reduce.
However, there will be no impact on profit before tax or the Group’s current tax charge over the life of the lease portfolio.
The cash flow statement will also change as finance costs paid will increase, tax paid will decrease and finance lease payments
under financing activities will be incorporated. However, there will be no impact on the way the Group runs its business, and
on a cash basis the group will pay out less cash due to the reduction in corporation tax.
Deferred tax
Due to the modified retrospective transition method being applied there will be negligible deferred tax implications on transition
as the right-of-use asset equals the lease liability being recognised.
Practical expedients applied
In applying IFRS 16 for the first time, the Group will use the following practical expedients permitted by the standard:
• applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
• accounting for operating leases with a remaining lease term of less than 12 months from the date of initial application; and
• using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
In addition, the Group has applied the low-value asset exemption on transition for existing lease contracts previously classified
as operating leases for which the underlying asset rental is below £1,000 per annum.
The above exemptions in relation to lease terms less than 12 months and low-value assets will also be applied on an ongoing basis.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and Interpretation
4 Determining whether an Arrangement contains a Lease.
Dignity plc Annual Report & Accounts 2019 | 119
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1 Accounting policies (continued)
Other
IFRS 17, Insurance Contracts. The standard is expected to be effective 1 January 2021 and will therefore impact on the Group’s
2022 Annual Report. The new standard establishes principles for the recognition, measurement, presentation and disclosure
of insurance contracts within the scope of the standard. The Group is in the early stages of assessing whether the standard
will have an impact in relating to its pre-need funeral plans.
All other new accounting standards and interpretations that have been published are not effective for 27 December 2019 and
have not been early adopted by the Group. These standards are not expected to have a material impact on the Group in the
current or future reporting periods or on foreseeable future transactions.
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.
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 2020 then the Group would receive £0.1 million less interest income on an annualised basis for each
£10.0 million held.
The Trusts have trustees, the majority of whom are required by law to be unconnected to the Trading Group. The Trusts have
separate professional advisers, meet regularly and operate an investment policy by reference to a statement of investment
principles. The Trustees target a return of 1.5 to 2 per cent above RPI, subject to defined acceptable levels of absolute loss and
risk of loss to the actuarial valuation.
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 23(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, excluding
the pre-need trusts. 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 27 December 2019 the actual ratio was
2.13 times (2018: 2.55 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 26. 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 BB+ and BB- respectively by Fitch and Standard & Poor’s.
120 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
2 Financial risk management (continued)
The Group monitors its capital structure based on the ratio of the Trading Group gross debt, as summarised in note 26, 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. For statutory purposes the Group now has two
reporting segments, funeral services and crematoria. This follows the adoption of IFRS 15, as a result of which the Group has
concluded that only a single performance obligation exists when a pre-arranged funeral plan is sold, being the performance
of a funeral. The Group also reports central overheads, which comprise unallocated central expenses.
Revenue
Funeral services relate to two primary sources of revenue, reflecting the adoption of IFRS 15 and the Group’s decision to change
its accounting policy in respect of its pre-arranged funeral plan trusts:
Funerals arranged and funded by the customer at the time of need, in addition to ancillary items, such as memorials and floral
tributes; and
Funerals arranged and funded by a pre-arranged Trust funeral plan, for which amounts recognised as revenue arise from the
de-recognition of deferred revenue on completion of the related performance obligation.
Crematoria services relate to cremation services and the sale of memorials and burial plots at the Dignity operated crematoria
and cemeteries.
Underlying revenue
For the purpose of alternative performance measures the Group has three reporting segments, funeral services, crematoria
and pre-arranged funeral plans as the chief operating decision maker reviews segmental performance before applying the
effect of IFRS 15.
Funeral services relate to the provision of funerals and ancillary items, such as memorials and floral tributes.
Crematoria services relate to cremation services and the sale of memorials and burial plots at the Dignity operated crematoria
and cemeteries.
Pre-arranged funeral plans represent the sale of funerals in advance to customers wishing to make their own funeral
arrangements and the marketing and administration costs associated with making such sales.
Substantially all Group revenue is derived from, and substantially all of the Group’s net assets and liabilities are located in,
the United Kingdom and Channel Islands and relates to services provided. Overseas transactions are not material.
Underlying revenue and underlying operating profit are stated before non-underlying items and the effect of consolidation
of the Trusts and IFRS 15 as defined on page 167.
Reconciliations to statutory amounts
Non-underlying items represent certain non-recurring or non-trading transactions. See alternative performance measures
on page 167 for further details.
Other adjustments reflect the impact of consolidating the Trusts and adopting IFRS 15. Underlying revenue substitutes revenue
arising from the de-recognition of deferred revenue on completion of the related performance obligation, which includes the
impact of significant financing as outlined in note 1, with the payments received from the Trusts on the death of a plan member,
and recognises marketing allowances at the inception of a plan, net of an allowance for cancellations. Underlying revenue also
excludes amounts relating to disbursements and external payments made when the performance of the plan funeral is
delivered by third parties.
Dignity plc Annual Report & Accounts 2019 | 121
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3 Revenue and segmental analysis (continued)
Disaggregated revenue
The disaggregated revenue and operating profit/(loss), by segment, is shown in the following tables.
Underlying Other
Revenue adjustments(1) Revenue
52 week period ended 27 December 2019 £m £m £m
Funeral services 203.3 58.8 262.1
Crematoria 76.8 – 76.8
Pre-arranged funeral plans 21.2 (21.2) –
Group 301.3 37.6 338.9
(1) Other adjustments related to the consolidation of the Trusts.
Within funeral services revenue £91.7 million (2018: £92.5 million) relates to deferred revenue arising on the completion
of performance obligations under pre-need trust plans.
In addition to the adjustments noted above relating to revenue, in arriving at underlying operating profit further ‘other
adjustments’, reflecting the impact of consolidating the Trusts and adopting IFRS 15, have been recorded. This includes
corresponding entries relating to the exclusion of disbursements and external payments made when the performance of the
funeral is delivered by third parties, adjustments are also made to exclude the Trusts administration costs and to recognise
commissions payable at the inception of a plan rather than on delivery of the funeral or cancellation.
Underlying
operating profit/ Underlying
(loss) before depreciation Underlying
depreciation and and Operating profit/ Non-underlying Other Operating
amortisation amortisation (loss) items adjustments profit/(loss)
52 week period ended 27 December 2019 £m £m £m £m £m £m
Funeral services 68.6 (12.3) 56.3 (10.0) 8.4 54.7
Crematoria 43.6 (5.2) 38.4 (1.2) – 37.2
Pre-arranged funeral plans – – – (0.2) 0.2 –
Central overheads (29.6) (1.8) (31.4) (15.7) – (47.1)
Group 82.6 (19.3) 63.3 (27.1) 8.6 44.8
Finance costs (25.8) (25.8)
Finance income 0.2 0.2
Deferred revenue significant financing (54.1) (54.1)
Remeasurement of financial assets held
by the Trusts and related income 85.0 85.0
Share of loss in associated undertakings (0.6) (0.6)
Impairment of investments in associated
undertakings (5.4) (5.4)
Profit before tax 37.7 (33.1) 39.5 44.1
Taxation (7.4) 4.9 (6.7) (9.2)
Underlying earnings for the period 30.3
Non-underlying items (28.2)
Other adjustments 32.8
Profit after taxation 34.9
Earnings per share for profit attributable to equity shareholders
– Basic (pence) 60.6p 69.8p
– Diluted (pence) 69.8p
122 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
3 Revenue and segmental analysis (continued)
Underlying Other
Revenue adjustments(1) Revenue
52 week period ended 28 December 2018 – restated £m £m £m
Funeral services 214.9 60.8 275.7
Crematoria 78.0 – 78.0
Pre-arranged funeral plans 22.7 (22.7) –
Group 315.6 38.1 353.7
(1) Other adjustments relate to the consolidation of the Trusts.
Underlying
operating Underlying
profit/(loss) before depreciation Underlying
depreciation and and Operating Non-underlying Other Operating
amortisation amortisation profit/(loss) items adjustments profit/(loss)
52 week period ended 28 December 2018 – restated £m £m £m £m £m £m
Funeral services 75.0 (12.8) 62.2 (7.4) 12.2 67.0
Crematoria 44.9 (4.6) 40.3 (0.7) – 39.6
Pre-arranged funeral plans 2.8 – 2.8 (0.2) (2.6) –
Central overheads (23.5) (1.6) (25.1) (5.6) – (30.7)
Group 99.2 (19.0) 80.2 (13.9) 9.6 75.9
Finance costs (26.0) (26.0)
Finance income 0.2 0.2
Deferred revenue significant financing (53.3) (53.3)
Remeasurement of financial assets held
by the Trusts and related income (14.8) (14.8)
Profit/(loss) before tax 54.4 (13.9) (58.5) (18.0)
Taxation (11.5) 2.5 10.0 1.0
Underlying earnings for the period 42.9
Non-underlying items (11.4)
Accounting adjustments (48.5)
Loss after taxation (17.0)
Earnings/(loss) per share for profit attributable to equity shareholders
– Basic (pence) 85.8p (34.0)p
– Diluted (pence) (34.0)p
Dignity plc Annual Report & Accounts 2019 | 123
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4 Net finance (income)/costs
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
£m £m
Finance costs
Secured Notes 23.7 24.1
Other loans 1.3 1.2
Net finance cost on retirement benefit obligations (note 29) 0.7 0.6
Unwinding of discounts 0.1 0.1
Finance costs 25.8 26.0
Finance income
Bank deposits (0.2) (0.2)
Finance income (0.2) (0.2)
Underlying net finance costs 25.6 25.8
Deferred revenue significant financing (note 19) 54.1 53.3
Realised investment income (note 13) (5.5) (9.2)
Changes in fair value of financial assets held by the Trusts (note 13) (79.5) 24.0
Remeasurement of financial assets held by the Trusts and related income (85.0) 14.8
Net finance (income)/costs (5.3) 93.9
5 Profit before tax
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
Analysis by nature £m £m
The following items have been included in arriving at profit before tax:
Staff costs (note 28) 107.4 107.2
Cost of inventories recognised as an expense (included in cost of sales) 17.3 17.5
Depreciation of property, plant and equipment – owned assets (note 10) 19.1 18.7
Amortisation of intangible assets (included in administrative expenses) (note 9) 5.0 5.1
Operating lease rentals – property 15.0 12.5
Trade receivables impairment (included in administrative expenses) (note 23(c)) 1.1 2.7
Transformation Plan costs (1) 12.1 2.7
External transaction costs (included in administrative expenses)(1) 0.9 0.8
Operational review and competition review costs(1) 3.5 2.7
GMP past service cost (note 29) (1) – 1.4
Trade name impairment/write-off (note 9) (1) 6.8 1.1
Share of loss of associated undertakings (1) 0.6 –
Impairment of investments in associated undertakings (1) 5.4 –
(Profit)/loss on sale of fixed assets(1) (1.0) 0.3
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 0.4 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 – –
0.6 0.3
(1) Items are excluded in arriving at underlying performance measures. Please see the Alternative performance measures on page 167 for further details.
During 2019, the Group paid £65,000 (2018: £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.
124 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
6 Taxation
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
Analysis of charge/(credit) in the period £m £m
Current tax – current period 4.8 9.6
Adjustments for prior period 0.1 0.3
Total corporation tax 4.9 9.9
Deferred tax – current period 4.9 (10.8)
Adjustments for prior period (0.6) (0.1)
Total deferred tax 4.3 (10.9)
Taxation 9.2 (1.0)
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
Tax on items credited to other comprehensive income or equity £m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (0.3) (0.1)
Deferred tax credit relating to maturity of option schemes (0.1) –
Total deferred tax credited to other comprehensive income or equity (0.4) (0.1)
The taxation charge in the period is higher (2018: higher) than the standard rate of corporation tax in the UK of 19.0 per cent
(2018: 19.0 per cent). The differences are explained below:
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
£m £m
Profit/(loss) before taxation 44.1 (18.0)
Profit/(loss) before taxation multiplied by the standard rate of corporation
tax in the UK of 19.0% (2018: 19.0%) 8.4 (3.4)
Effects of:
Adjustments in respect of prior period (0.5) 0.2
Expenses not deductible for tax purposes 1.3 2.2
Total taxation charge/(credit) 9.2 (1.0)
Under IFRS the tax rate is higher (2018: higher) than the standard UK tax rate of 19.0 per cent (2018: 19.0 per cent) principally
due to the non-deductible expenses and prior period adjustments (2018: non deductible expenses and prior period adjustments).
See Financial Review for further details. The Group’s effective tax rate on underlying profits in the period was 19.5 per cent (2018:
21.2 per cent). The current period underlying effective tax rate is higher due to the effects of permanent disallowables and
pensions, partially offset by adjustments in respect of the prior period, with a tax impact totalling £0.2 million (2018: £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 2020 of between 19.0 per cent and 19.5 per cent, between
18.5 per cent and 19.0 per cent in 2021 and thereafter. The Group does not have any provisions for uncertain tax positions.
Dignity plc Annual Report & Accounts 2019 | 125
7 Dividends
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
£m £m
Final dividend paid: 15.74p per Ordinary Share (2018: 15.74p) 7.9 7.9
Interim dividend paid: nil per Ordinary Share (2018: 8.64p) – 4.3
Dividend on Ordinary Shares 7.9 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. No interim dividend was approved in 2019.
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 £7.9 million, 15.74 pence per share (2018: £12.2 million, 24.38 pence
per share).
On 28 June 2019, the Group paid a final dividend, in respect of 2018, of 15.74 pence per share (2018: 15.74 pence per share)
totalling £7.9 million (2018: £7.9 million). The Group is not proposing any dividend for the period ended 27 December 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, the effects of IFRS 15 and consolidation of the
Trusts as set out on page 167. 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 performance measure helps
users of the financial statements to fully understand the trading performance and financial position of the Group.
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126 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
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 27 December 2019
Underlying profit after taxation and EPS 30.3 50.0 60.6
Add: Non-underlying items (net of taxation credit of £4.9 million) (28.2)
Add: Other adjustments (net of taxation charge of £6.7 million) (1) 32.8
Profit attributable to shareholders – Basic EPS 34.9 50.0 69.8
Profit attributable to shareholders – Diluted EPS 34.9 50.0 69.8
52 week period ended 28 December 2018 – restated
Underlying profit after taxation and EPS 42.9 50.0 85.8
Add: Non-underlying items (net of taxation credit of £2.5 million) (11.4)
Add: Other adjustments (net of taxation credit of £10.0 million) (1) (48.5)
Loss attributable to shareholders – Basic EPS (17.0) 50.0 (34.0)
Loss attributable to shareholders – Diluted EPS (17.0) 50.0 (34.0)
(1) See note 3 for further details.
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 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 2.8 – – – – 2.8 3.4 6.2
Adjustment of 2017 acquisitions (3.7) – – – – (3.7) 3.1 (0.6)
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
At 27 December 2019 150.4 3.2 4.7 2.5 0.2 161.0 232.6 393.6
Accumulated amortisation and impairment
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)
Amortisation charge (4.2) (0.1) (0.5) (0.2) – (5.0) – (5.0)
Trade name impairment (6.8) – – – – (6.8) – (6.8)
At 27 December 2019 (16.4) (1.8) (1.4) (0.7) (0.2) (20.5) – (20.5)
Net book amount at 27 December 2019 134.0 1.4 3.3 1.8 – 140.5 232.6 373.1
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
(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) The Group previously 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 previous 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.
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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:
27 December 28 December
2019 2018
restated
£m £m
Funeral services 176.8 176.8
Crematoria 55.8 55.8
232.6 232.6
Recoverable amounts within the segmental allocation have been restated following the change in accounting policy in respect
of the Trusts. All amounts previously allocated to the pre-arranged funeral plan segment are now allocated to the funeral
services segment.
The recoverable amount of each segment is based on a value-in-use calculation.
The value-in-use calculations use cash flow projections derived from the latest annual budget. 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 (2018: 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 12.0 per
cent (2018: 10.25 per cent).
The headroom for the funeral services division impairment test under the current assumptions used is £29.3 million (2018:
£136.5 million). The discount rate would need to rise to 12.7 per cent (2018: 12.8 per cent), or the long-term growth rate would
need to fall to 1.58 per cent (2018: fall to (0.3) 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 (2018: £nil).
If the value-in-use calculations used a discount rate of 13 per cent instead of 12 per cent, then an impairment of £11.7 million
would need to be recognised. If the value-in-use calculations used a growth rate of 1.75 per cent instead of 2.25 per cent, then
headroom will reduce by £22.5 million. If the value-in-use calculations used an initial cash flow assumption of £5 million less
than that forecast, then an impairment of £25.0 million would need to be recognised.
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. A value-in-use calculation has been performed against each
recognisable trade name. 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 an impairment within the funerals segment of £6.8
million (2018: £nil) arose and has been provided accordingly. This is due to lower levels of profitability and lower anticipated
average income per funeral.
If the value-in-use calculations used a discount rate of 13 per cent instead of 12 per cent, then an impairment of £8.5 million
would need to be recognised. If the value-in-use calculations used a growth rate of 1.75 per cent instead of 2.25 per cent, then
an impairment of £7.7 million would need to be recognised. If the value-in-use calculations used an initial cash flow assumption
of £5 million less than that forecast, then an impairment of £8.9 million would need to be recognised.
128 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
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 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 – – – 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
Additions 2.0 1.3 2.3 1.3 10.5 17.4
Disposals (0.5) (0.2) (0.4) (3.1) – (4.2)
Reclassification 1.8 5.2 2.6 – (9.6) –
At 27 December 2019 182.0 64.2 58.3 79.8 3.8 388.1
Accumulated depreciation
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)
Depreciation charge (5.3) (3.2) (4.6) (6.0) – (19.1)
Disposals 0.2 0.1 0.3 2.5 – 3.1
At 27 December 2019 (37.3) (22.0) (33.7) (43.8) – (136.8)
Net book amount at 27 December 2019 144.7 42.2 24.6 36.0 3.8 251.3
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
Depreciation expense of £8.5 million (2018: £7.8 million) is included within cost of sales and £10.6 million (2018: £10.9 million)
is included within administrative expenses.
During the period the Group has reviewed the residual values and expected useful lives of its motor vehicles and made
appropriate adjustments. Under IAS 8 these amendments have been applied prospectively and have not had a material impact.
Details of any security over assets are disclosed in note 31.
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:
27 December 28 December
2019 2018
£m £m
Cost 1.0 1.0
Accumulated depreciation (0.3) (0.3)
Net book amount 0.7 0.7
The Group had capital expenditure authorised by the Board and contracted for at the balance sheet date of £7.9 million
(2018: £17.3 million) in respect of property, plant and equipment and intangible assets.
Dignity plc Annual Report & Accounts 2019 | 129
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11 Investments in associated undertakings
In August 2018 and December 2018, the Group increased its investment in Funeral Zone. At 28 December 2018 and 27 December
2019 the Group has a 23.8 per cent investment. Funeral Zone is a UK online funeral resource for funeral directors and clients and
has been invested in for its intellectual property opportunities. Funeral Zone is a private entity that is not listed on any public
exchange. The registered office of Funeral Zone is Centenary House, Peninsula Park, Rydon Lane, Exeter, EX2 7XE.
The Group holds less than 2 per cent of the voting rights of Funeral Zone but is deemed to have significant influence principally
due to holding a right to appoint a board member who would represent 25 per cent of the Board of Directors and therefore
have the power to participate in the financial and operating policy decisions. The Group also holds 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 fair value at 27 December 2019 for the same reason.
The following table illustrates the summarised financial information of the Group’s investment in Funeral Zone.
27 December 28 December
2019 2018
£m £m
Current assets 1.4 4.9
Non-current assets 1.6 0.1
Current liabilities (0.4) (0.2)
Equity 2.6 4.8
Group’s share in equity – 23.8% 0.6 1.1
Goodwill 4.8 4.9
Impairment (5.4) –
Group’s carrying amount of investment – 6.0
The summarised financial information is based on November 2019 management accounts as these are the most recent
available. An adjustment of £0.3 million (2018: £0.1 million) has been included in the above reconciliation reflecting differences
in accounting policies.
During the period the fair values ascribed to reflect 2018 provisional amounts were finalised and goodwill has been reduced
by £0.1 million with a corresponding increase in the share of the carrying value of non-current assets. This reflects adjustments
made in finalising the individual 2018 financial statements of Funeral Zone.
Funeral Zone had revenue to 30 November 2019 of £187,000 (December 2018: £3,000) and a loss for the period to 30 November
2019 of £2,312,000 (December 2018: loss of £177,000). The Group’s share of the loss for the period to 27 December 2019,
estimated using the November 2019 management accounts, amounted to £621,000 (2018: £42,000).
The Group has performed a review to assess whether there is objective evidence that the carrying value of the investment is
impaired. Given ongoing losses recorded by Funeral Zone coupled with the going concern risk of the business, as noted in their
most recent financial statements, the Group has fully provided against its investment.
12 Financial and other assets
27 December 28 December
2019 2018
Note £m £m
Non-current
Prepayments (a) 7.2 7.3
Deferred insurance commissions (b) 11.0 8.4
18.2 15.7
130 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
12 Financial and other assets (continued)
(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 insurance 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.
13 Financial assets – held by the Trusts
27 December 28 December
2019 2018
£m £m
Financial assets – held by the Trusts 947.5 862.4
The Trusts continue to take independent advice regarding the investment strategy. As a result, it is anticipated that the investment
allocation by class will develop further during 2020 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 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 Group’s assets. See Operating review for further details.
Analysis of the movements in financial assets held by the Trusts:
27 December 28 December
2019 2018
£m £m
Fair value at the start of the period 862.4 865.6
Remeasurement recognised in the consolidated income statement 79.5 (24.0)
Investment income 1.9 5.8
Purchases 736.1 625.5
Disposals (726.6) (604.8)
Investment administrative expenses deducted at source (5.8) (5.7)
Fair value at the end of the period 947.5 862.4
Interest and dividend income received is included within remeasurements recognised in the consolidated income statement.
14 Inventories
27 December 28 December
2019 2018
£m £m
Materials 0.5 0.5
Finished goods 7.4 8.0
7.9 8.5
There were no inventory write-downs in either period.
Dignity plc Annual Report & Accounts 2019 | 131
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15 Trade and other receivables
27 December 28 December
2019 2018
£m restated
£m
Trade receivables: Trusts 11.4 10.3
Trade receivables: at-need 21.8 21.6
Less: provision for impairment (note 23(c)) (6.7) (6.9)
Net trade receivables 26.5 25.0
Prepayments and accrued income 4.2 5.0
Other receivables 1.7 1.3
32.4 31.3
Trust trade receivables represent amounts due to the Group’s Trusts in respect of plans sold, where the Group’s performance
obligation has yet to be satisfied. Instalments due to the Trusts after the balance sheet date are excluded as they are not
contractually due.
At-need trade receivables represent all other trade receivables due to the Group.
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 receivables. For further details of the trade receivables past due and impaired refer to note 23(c).
Due to the short-term nature of these balances, the carrying value is considered to be their fair value.
16 Cash and cash equivalents
27 December 28 December
2019 2018
£m restated
Note £m
Trading Group 41.0 50.0
Trusts (a) 15.5 13.8
Operating cash as reported in the consolidated statement of cash flows as cash
and cash equivalents 56.5 63.8
Amounts set aside for debt service payments (b) 16.9 16.9
Cash and cash equivalents as reported in the balance sheet 73.4 80.7
(a) Trusts cash balances
All assets of the Trusts can, by definition, only be used for certain prescribed purposes such as, but not limited to, the payment
for a funeral or a refund on cancellation of a plan. They cannot be used for day-to-day operational activities of the wider Trading
Group and could not, for example, be used to fund a capital expenditure project. The cash is held in Trust bank accounts but is
accessible without restriction and can be used within the Trusts for any allowable purpose, such as payment following the
performance of a funeral. As Dignity is considered to control the activities of the Trusts, this cash balance meets the
requirements to be included in cash and cash equivalents for the purposes of IAS 7.
(b) 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 23(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 2019. Of this amount,
£12.1 million (2018: £12.3 million) is shown within the Statement of Cash Flows as ‘Payments to restricted bank accounts for
finance costs’ and £4.8 million (2018: £4.6 million) is shown within ‘Financing activities’ as ‘Payments to restricted bank accounts
for repayment of borrowings’.
132 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
17 Financial liabilities
27 December 28 December
2019 2018
Note £m £m
Current
Secured A Notes (a) 9.6 9.3
(b) 9.6 9.3
Non-current
Secured Notes (a) 541.7 551.3
Finance lease obligations (c) 0.6 0.6
542.3 551.9
(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 27 December 2019, £0.2 million (2018: £0.2 million) and £0.4 million (2018: £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 31(a).
The amortisation profile of the Secured Notes is as follows:
Secured A Notes
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
£m £m £m £m £m £m £m £m £m £m £m
June 4.9 5.1 5.2 5.4 5.6 5.8 6.0 6.2 6.4 6.7 6.9
December 4.9 5.1 5.3 5.5 5.7 5.9 6.1 6.4 6.6 6.8 7.1
Total 9.8 10.2 10.5 10.9 11.3 11.7 12.1 12.6 13.0 13.5 14.0
2031 2032 2033 2034 Total
£m £m £m £m £m
June 7.2 7.4 7.7 7.9 94.4
December 7.3 7.6 7.8 8.1 96.2
Total 14.5 15.0 15.5 16.0 190.6
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 2019 | 133
17 Financial liabilities (continued)
(b) Current financial liabilities
The current financial liabilities represent the amounts falling due within one year of the Group’s balance sheet date.
(c) Obligations under finance leases
27 December 28 December
2019 2018
£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.
(d) Changes in liabilities arising from financing activities
28 December 27 December
2018 Cash flow Other 2019
£m £m £m £m
Current
Secured Notes 9.3 – 0.3 9.6
Non-current
Secured Notes 551.3 (9.3) (0.3) 541.7
Finance lease obligations 0.6 – – 0.6
Total liabilities from financing activities 561.2 (9.3) – 551.9
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
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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134 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
18 Trade and other payables
27 December 28 December
2019 2018
restated
£m £m
Current
Trade payables 7.5 8.3
Tax and social security 2.8 3.1
Other current liabilities 2.3 2.1
Accruals 44.9 49.3
Deferred income relating to at-need deposits 4.1 4.0
61.6 66.8
Non-current
Other non-current liabilities 1.4 1.3
Deferred income relating to at-need deposits 0.5 0.7
Deferred consideration for acquisitions 0.1 0.1
2.0 2.1
Accruals includes interest, payroll and trade accruals.
Deferred income relating to at-need deposits represents cash amounts received in advance for services such as a funeral
arranged at the time of need.
19 Deferred commissions and contract liabilities
Deferred commissions
27 December 28 December
2019 2018
£m £m
Deferred commissions – current 7.3 7.1
Deferred commissions – non-current 96.8 94.5
Deferred commissions represent directly attributable costs in respect of the marketing of the pre-arranged funeral plans where
the plan has yet to be used or cancelled. An amount of £6.4 million (2018: £6.3 million) has been amortised to the consolidated
income statement within administrative expenses.
Contract liabilities
27 December 28 December
2019 2018
Note £m £m
Current
Contract liabilities – deferred revenue (a) 94.4 90.4
Contract liabilities – refund liability (b) 1.1 1.1
95.5 91.5
Non-current
Contract liabilities – deferred revenue (a) 1,194.6 1,149.9
Contract liabilities – refund liability (b) 14.5 14.7
1,209.1 1,164.6
Movement in total contract liabilities
27 December 28 December
2019 2018
£m £m
Balance at the beginning of the year 1,256.1 1,205.6
Sale of new Trust plans 91.2 92.7
Increase due to significant financing 54.1 53.3
Recognition of revenue following delivery or cancellation of a Trust plan (96.8) (95.5)
Balance at the end of the year 1,304.6 1,256.1
Dignity plc Annual Report & Accounts 2019 | 135
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19 Deferred commissions and contract liabilities (continued)
(a) Contract liabilities – deferred revenue
Deferred revenue represents amounts received from pre-arranged funeral plan holders adjusted to reflect a significant financing
component, and for which the Group has not completed its performance obligations at the balance sheet date. The balance is
split between current and non-current based on historical experience to reflect the expected number of plans to be utilised
within the next 12 months.
(b) Contract liabilities – refund liability
Refund liabilities represent amounts received from pre-arranged funeral plan holders for which it is expected that the respective
plans will be cancelled based on historical experience. The balance is split between current and non-current based on historical
experience to reflect the expected number of plans to be cancelled within the next 12 months.
20 Obligations under finance leases and operating leases
For minimum lease payments obligations under finance leases refer to note 23(d)(ii).
The minimum lease payments under non-cancellable operating leases fall due as follows:
27 December 28 December
2019 2018
restated
£m £m
Not later than one year 13.8 13.3
Later than one year but not more than five years 43.0 41.0
More than five years 171.1 157.5
227.9 211.8
In preparing for the future adoption of IFRS 16, it was identified that lease commitment disclosures presented as at 28 December
2018 included £7.6 million of finance lease obligations in error. The 2018 comparatives have been restated to correct this.
The non-cancellable operating leases principally relate to leasehold land and buildings.
Sublease payments received in the period amount to £0.3 million (2018: £0.4 million). Total future sublease payments receivable
relating to operating leases amount to £0.4 million (2018: £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 £1.5 million (2018: £1.3 million).
21 Provisions for liabilities
Onerous
Dilapidations contracts Total
£m £m restated
(a) (b) £m
At beginning of period – restated 10.7 0.1 10.8
Charged to income statement 1.7 – 1.7
Released to income statement (1.1) – (1.1)
Utilised in period (0.4) – (0.4)
Amortisation of discount 0.3 – 0.3
At end of period 11.2 0.1 11.3
Provisions have been analysed between current and non-current as follows:
27 December 28 December
2019 2018
restated
£m £m
Current 2.0 1.4
Non-current 9.3 9.4
11.3 10.8
Prior year comparatives have been restated to exclude the previously established cancellation provision due to the impact of the
change in accounting policy in respect of the consolidation of the Trusts. See note 35 for further details.
136 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
for the 52 week period ended 27 December 2019
21 Provisions for liabilities (continued)
(a) Dilapidations
The provision for dilapidations covers the costs of repair to leased premises occupied by the Group in respect of which a
dilapidations notification has been received, and properties where a dilapidation obligation exists but for which no notification
has been received.
It is anticipated that the element of provision relating to dilapidation notices served, £2.0 million (2018: £1.4 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 2029.
(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.
22 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17 per cent
(2018: 17 per cent).
The movement on the deferred tax account is as shown below:
27 December 28 December
2019 2018
restated
£m £m
At beginning of period (17.9) (6.8)
Charged/(credited) to income statement (note 6) 4.3 (10.9)
Taken to other comprehensive income (note 6) (0.3) (0.1)
Taken to equity (note 6) (0.1) –
Arising on acquisitions – (0.1)
At end of period (14.0) (17.9)
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted
by IAS 12) during the period are shown below:
Deferred tax liabilities
Deferred
commissions
Accelerated tax and Trust
depreciation Trade names assets Other Total
£m £m £m £m £m
At beginning of period - restated 12.7 18.7 168.5 2.7 202.6
(Credited)/charged to income statement (note 6) (0.9) (1.6) 15.4 – 12.9
At end of period 11.8 17.1 183.9 2.7 215.5
Deferred tax assets
Contract
Pensions liabilities Other Total
£m £m £m £m
At beginning of period - restated (4.5) (215.6) (0.4) (220.5)
Charged/(credited) to income statement (note 6) 0.3 (8.7) (0.2) (8.6)
Taken to other comprehensive income/to equity (0.3) – (0.1) (0.4)
At end of period (4.5) (224.3) (0.7) (229.5)
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax asset at
27 December 2019 was £14.0 million (2018: £17.9 million). The Group has recognised the net deferred tax asset as this is
expected to be recovered against future taxable profits.
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.
Dignity plc Annual Report & Accounts 2019 | 137
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22 Deferred tax (continued)
The deferred tax associated with deferred commissions, Trust assets and contract liabilities have arisen due to the impact of
the adoption of IFRS 15, Revenue from Contracts with Customers, in addition to the impact of the change in accounting policy
in respect of the consolidation of the Trusts. The deferred tax asset is calculated on the deferred revenue and refund liability
and the deferred tax liability is calculated on the financial assets and deferred commissions. As the accounting policy change
required a prior period adjustment, the prior period has also been restated.
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.
The deferred income tax credited to other comprehensive income or credited to equity during the period was as follows:
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
£m £m
Deferred tax credit on remeasurement losses on retirement benefit obligations (0.3) (0.1)
Total credited to other comprehensive income (0.3) (0.1)
Deferred tax credit relating to maturity of option schemes (0.1) –
Total credited to equity (0.1) –
23 Financial instruments
Fair values of non-derivative financial assets and financial liabilities
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).
Financial assets held by the Trusts are held at fair value. All other financial 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 Trust financial assets
27 December 28 December
2019 2018
£m £m
Financial assets at fair value through consolidated income statement
Defensive investments – Index linked gilts and corporate bonds 170.3 164.7
Core growth investments – Equities 268.5 224.2
Growth fixed income and alternative investments – Property funds and emerging market debt 468.6 445.6
Illiquid investments – Private investments 40.1 27.9
Total financial assets at fair value 947.5 862.4
All other financial assets are held at amortised cost and there is no difference between the book value and the fair value of these
assets, due to the short-term maturities of these instruments.
138 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
23 Financial instruments (continued)
The following table provides the fair value measurement hierarchy of the Trusts’ financial assets.
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
27 December 2019 £m £m £m £m
Defensive investments – Index linked gilts and corporate bonds 170.3 – 170.3 –
Core growth investments – Equities 268.5 – 268.5 –
Growth fixed income and alternative investments –
Property funds and emerging market debt 468.6 – 269.3 199.3
Illiquid investments – Private investments 40.1 – – 40.1
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
28 December 2018 £m £m £m £m
Defensive investments – Index linked gilts and corporate bonds 164.7 – 164.7 –
Core growth investments – Equities 224.2 – 224.2 –
Growth fixed income and alternative investments –
property funds and emerging market debt 445.6 – 220.8 224.8
Illiquid investments – Private investments 27.9 – – 27.9
There were no transfers between level 1, level 2 or level 3 during 2019 or 2018.
The following methods and assumptions were used to estimate the fair values:
Defensive investments – level 2
The fair values of index linked gilts and corporate bonds are based on active market prices or price quotations at the reporting
date. Whilst these assets have a quoted price on a recognised exchange adjustments are required in respect of related inflation
factors, thereby making these measurements level 2 rather than level 1.
Core growth investments & Growth fixed income and alternative investments – level 2
These represent pooled investment funds that do not have a quoted price on a recognised exchange. The underlying assets
of the pooled fund have been valued using active market prices or price quotations at the balance sheet date.
Growth fixed income and alternative investments & Illiquid investments – level 3
These investments hold some underlying investment that rely on significant unobservable inputs to price or a premium
or discount may apply on exit.
In all cases, fair value information is provided by the investment manager engaged by the Trusts. The Group has no input to,
or influence over the valuation methodologies applied by the investment manager.
Within the above reconciliation of financial assets through the consolidated income statement the following movements relate
to level 3 assets:
27 December 28 December
2019 2018
£m £m
Fair value at the start of the period 252.7 249.2
Remeasurement recognised in the consolidated income statement 8.3 (1.3)
Purchases 11.3 15.3
Sales (30.3) (8.2)
Investment administrative expenses (2.6) (2.3)
Fair value at the end of the period 239.4 252.7
Dignity plc Annual Report & Accounts 2019 | 139
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23 Financial instruments (continued)
At 27 December 2019, the Trust financial assets (all level 2 or 3, fair value of £947.5 million (2018: £862.4 million)) are exposed to
market sensitivity and changes in valuation over time due to factors including currency, interest rate, property and commodity
prices. As the fair value information is provided by the investment manager who has not been able to provide sensitivity analysis
on the inputs to the fair values, the Group is unable to disclose this information. However, a 5 per cent movement in the fair
value of these assets would result in a £47.4 million (2018: £43.1 million) increase/decrease to the carrying value, with a
corresponding movement in an unrealised gain/loss in the income statement. A 10 per cent movement would increase this
movement to £94.8 million (2018: £86.2 million).
(b) Fair value of current and non-current financial liabilities
27 December 2019 28 December 2018
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 195.5 195.3 209.7 204.8 204.6 214.8
Secured B Notes – 4.6956% maturing
31 December 2049 356.4 356.0 290.0 356.4 356.0 316.8
Total 551.9 551.3 499.7 561.2 560.6 531.6
The Secured Notes are held at amortised cost. Other categories of financial liabilities include trade payables and contract
liabilities, 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 financial liabilities include finance lease payables of £0.6 million (2018: £0.6 million), which represent the
present value of future minimum lease payments. At 27 December 2019 there is no difference between the nominal value, book
value and fair value of this liability.
(c) Trade receivables
Credit risk
Credit risk is the risk that the counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Group is exposed to credit risk from its operating activities (at-need trade receivables).
Trade receivables
Due to the nature of the Group’s customer base credit risk is managed by obtaining cash payments and/or deposits upfront
where possible, setting up direct debt instalment payments from pre-need plan sales, together with staff training and internal
control procedures to understand the customers’ ability to pay for services. Outstanding trade receivables are regularly
monitored with an established credit control policy in place.
At-need trade receivables are held net of provision for impairment. As at 27 December 2019, £10.7 million of the individual gross
at-need trade receivables (2018: £11.2 million) were past due and partially impaired. Receivables are written off to the income
statement when credit control procedures have been enforced. An impairment analysis is performed at each reporting date
using a provision matrix to measure expected credit losses. The provision rates are based on past experience together with any
expected changes. The amount of the provision, as at 27 December 2019, was £6.7 million (2018: £6.9 million). The individually
impaired receivables principally relate to monies owing for funerals performed by the funeral services division. The ageing of at-
need receivables is as follows:
27 December 28 December
2019 2018
£m £m
One to six months 5.0 5.0
Over six months 5.7 6.2
10.7 11.2
The amount of gross at-need trade receivables past due that were not impaired was not significant.
140 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
23 Financial instruments (continued)
There is no expected credit loss on trade receivables held by the Trusts on the basis that a separate refund liability is recorded for
expected plan cancellations. All amounts outstanding to be paid under a member’s pre-need plan must be paid in full prior to the
performance of the services under the plan. In the event of default any write-off would be offset by an equivalent or greater
release of the related refund liability. See note 19.
Movements on the Group’s loss allowance for trade receivables are as follows:
27 December 28 December
2019 2018
£m £m
At beginning of period (6.9) (6.2)
Charged to income statement (1.1) (2.7)
Utilised in period 1.3 2.0
At end of period (6.7) (6.9)
The maximum exposure to credit risk is the carrying value of each class of financial assets. The Group does not hold collateral
as security.
Set out below is the information about credit risk exposure on at-need trade receivables using a provision matrix. £11.4 million
(2018: £10.3 million) is excluded from the analysis as it relates to trade receivables held by the Trust.
27 December 2019 Days past due
Current 30-60 days 61-90 days 91 – 180 days >181 days Total
Expected credit loss rate 3.0% 11.0% 25.1% 43.4% 90.9%
Estimated total gross carrying amount at default 11.1 2.7 0.9 1.4 5.7 21.8
Expected credit loss 0.3 0.3 0.2 0.6 5.3 6.7
Comparative information is not provided on the basis that IFRS 9, Financial Instruments is effective for the Group for the first
time in the current period. The prior period provision was calculated using similar assumptions such that the transition to IFRS 9
had no material impact.
(d) Borrowing facilities
(i) The Group has the following undrawn committed borrowing facilities available at 27 December 2019, all of which were at
floating interest rates, in respect of which all conditions precedent had been met at that date:
27 December 28 December
2019 2018
£m £m
Expiring within one year 5.0 5.0
Expiring between one and two years – –
Expiring in more than two years 105.0 105.0
110.0 110.0
£55.0 million (2018: £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 (2018: £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 has been extended for a further 12 months and expires in October 2020. These facilities incur
commitment fees at market rates.
Dignity plc Annual Report & Accounts 2019 | 141
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23 Financial instruments (continued)
(ii) The minimum lease payments under finance leases fall due as follows:
27 December 28 December
2019 2018
£m £m
Not later than one year 0.1 0.1
Later than one year but not more than five years 0.1 0.1
More than five years 2.4 2.4
2.6 2.6
Future finance costs on finance leases (2.0) (2.0)
Present value of finance lease liabilities 0.6 0.6
(e) 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. The amounts disclosed for contract
liabilities relate solely to the refund liability component which is considered to be a financial liability based on the expectation
that cash will be returned to the plan holder on the cancellation of the plan. The deferred revenue component of contract
liabilities is not considered to be a financial liability as there is no expected obligation to deliver cash. The maturity profile of
the refund liability represents the Group’s assessment of the likely timing of such cash flows and the contractual undiscounted
cash flow which would occur at that time.
27 December 2019
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) 9.6 15.1 10.6 22.2 494.4 551.9
Interest payable on Secured Notes 23.5 34.7 22.7 44.3 338.4 463.6
Finance leases 0.1 – – 0.1 2.4 2.6
Debt repayments 33.2 49.8 33.3 66.6 835.2 1,018.1
Other financial liabilities 64.1 0.4 0.5 0.6 0.2 65.8
97.3 50.2 33.8 67.2 835.4 1,083.9
Refund liability 1.1 1.1 1.1 2.2 10.1 15.6
Total liabilities 98.4 51.3 34.9 69.4 845.5 1,099.5
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
Refund liability 1.1 1.1 1.1 2.2 10.3 15.8
Total liabilities 103.2 34.6 51.3 69.5 879.2 1,137.8
An administrative fee may be payable by the customer in the event of cancellation and therefore the refund liability may be
lower than the total amount detailed above for refund liabilities. The administrative fee payable is dependent upon when the
pre-need plan is cancelled and the type of pre-need plan originally sold.
142 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
23 Financial instruments (continued)
The amounts disclosed in the following tables represent the anticipated amortisation profile for the issue costs relating to the
Group’s financial liabilities.
27 December 2019
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
24 Ordinary share capital
27 December 28 December
2019 2018
£m £m
Allotted and fully paid Equity shares
50,012,394 (2018: 50,008,939) Ordinary Shares of 12 48/143 pence (2018: 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 3,455 shares issued under the 2016 DAB 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.
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 2017, 2018 and 2019.
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 Exercise 2019 2018 2017
Year of grant (pence) period Number Number Number
2016 – SAYE 2,706.00 1 December 2019 50,690 79,708 113,221
to 31 May 2020
2019 – SAYE 383.52 1 December 2022 498,164 n/a n/a
to 31 May 2023
2017 – LTIP – 16 March 2020 133,942 133,942 133,942
to 16 March 2027
2018 – LTIP – 23 March 2021 146,157 146,157 n/a
to 23 March 2028
2019 – LTIP – 12 June 2022 388,719 n/a n/a
to 12 June 2029
Dignity plc Annual Report & Accounts 2019 | 143
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25 Share-based payments
In respect of share-based payment arrangements, total charges to the income statement were £0.8 million (2018: £0.9 million).
The Directors consider that these amounts are not material and hence further detailed disclosures have been omitted.
26 Net debt
27 December 28 December
2019 2018
£m £m
Net amounts owing on Secured Notes per financial statements (551.3) (560.6)
Add: unamortised issue costs (note 17(a)) (0.6) (0.6)
Gross amounts owing (551.9) (561.2)
Accrued interest on Secured Notes (12.2) (12.3)
Accrued interest on Revolving Credit Facility – (0.2)
Cash and cash equivalents – Trading Group (note 16) 57.9 66.9
Net debt (506.2) (506.8)
Net debt is an alternative performance measure calculated as shown in the table.
In addition to the above, the consolidated balance sheet also includes finance lease obligations which totalled £0.6 million (2018:
£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 27 December 2019, the actual ratio was 2.13 times (2018: 2.55 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.
27 Reconciliation of cash generated from operations
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
restated
£m £m
Net profit/(loss) for the period 34.9 (17.0)
Adjustments for:
Taxation 9.2 (1.0)
Net finance (income)/costs (5.3) 93.9
(Profit)/loss on sale of fixed assets (1.0) 0.3
Depreciation charges 19.1 18.7
Amortisation of intangibles 5.0 5.1
Movement in inventories 0.6 (1.2)
Movement in trade receivables (1.5) 4.4
Movement in trade payables (0.8) 0.6
Movement in contract liabilities (5.6) (2.8)
Net pension charges less contributions (1.7) –
Trade name impairment/write-off (note 9) 6.8 1.1
Share of loss and impairment in respect of associated undertakings 6.0 –
Changes in other working capital (excluding acquisitions) (1.9) 1.2
Employee share option charges (note 25) 0.8 0.9
Cash flows from operating activities 64.6 104.2
Other non-cash transactions
Non-cash charges comprise of amortisation of deferred debt issue costs, as discussed in note 17(a).
144 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
28 Employees and Directors
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
£m £m
Wages and salaries 94.1 92.5
Social security costs 8.5 8.2
Other pension costs (note 29) 4.0 5.5
Share option charges (note 25) 0.8 1.0
107.4 107.2
Key management are considered to be the Board of Directors only. Total key management remuneration in the period was
£2.2 million (2018: £3.0 million), including £0.3 million (2018: £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:
2019 2018
Number Number
Management and administration 266 221
Funeral services staff 2,548 2,542
Crematoria staff 420 380
Pre-arranged funeral plan staff 180 163
3,414 3,306
Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 83 to 91 which form part of
these consolidated financial statements.
29 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:
2019 2018
£m £m
Defined contribution schemes 3.5 3.4
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 subsequent reviews were completed at 6 April 2018 and 6 April 2019. This latest view has been
updated to 27 December 2019 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 2019 were £0.1 million (2018: £0.1 million of contributions). In addition special
contributions of £2.1 million (2018: £2.0 million) have been paid to make total contributions for the year of £2.2 million (2018:
£2.1 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 was required in 2018 to recalculate member benefits. This resulted
in the Group recognising a past service cost of £1.4 million in the prior period income statement, representing approximately
1.1 per cent of the Group’s defined benefit pension liability at the time. No further revisions have been made to this estimate
during the period, therefore no amendments have been made to the allowance included within the scheme liabilities as at
27 December 2019.
Dignity plc Annual Report & Accounts 2019 | 145
29 Pension commitments (continued)
The principal actuarial assumptions at the balance sheet date were:
2019 2018
Assumptions % %
Discount rate 1.95 2.80
Rate of increase in salaries 2.20 2.45
Rate of increase in payment of post April 1997 pensionable service 3.10 3.30
Rate of increase in payment of post April 2005 pensionable service 2.20 2.25
RPI price inflation assumption 3.20 3.45
CPI price inflation assumption 2.20 2.45
The demographic assumptions used include rates for mortality which, for example, lead to an average projected life expectancy
of 19.8 (2018: 20.3) years for male members and 25.1 (2018: 25.6) years for female members currently aged 65 and of 20.7 (2018:
21.2) years from age 65 for male members and 26.3 (2018: 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:
2019 2018
£m £m
Fair value of plan assets 114.5 103.5
Present value of funded obligations (140.5) (128.7)
Net obligation recognised in the balance sheet (26.0) (25.2)
Analysis of amount charged to income statement in respect of defined benefit schemes
2019 2018
£m £m
Current service cost included within cost of sales (staff costs) 0.1 0.2
Administration expenses paid by the scheme 0.4 0.5
Interest costs less interest income included within net finance cost 0.7 0.6
Past service costs – 1.4
Analysis of fair value of plan assets
2019 2018
£m % £m %
Equity and diversified growth funds 60.6 52.9 56.2 54.3
Debt 53.4 46.6 46.5 44.9
Cash 0.5 0.5 0.8 0.8
Fair value of plan assets 114.5 100.0 103.5 100.0
At 27 December 2019 and 28 December 2018 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 within the fair value of plan assets.
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146 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
for the 52 week period ended 27 December 2019
29 Pension commitments (continued)
Changes in the present value of the defined benefit obligation are as follows:
2019 2018
£m £m
Present value of obligation at beginning of period (128.7) (135.9)
Current service cost (0.1) (0.2)
Past service cost – GMP equalisation – (1.4)
Interest cost (3.5) (3.3)
Benefits paid 5.2 6.7
Remeasurement (losses)/gains – financial (16.6) 6.1
Remeasurement gains – demographics 2.5 0.8
Remeasurement gains/(losses) – experience 0.7 (1.5)
Present value of obligation at end of period (140.5) (128.7)
Changes in the fair value of plan assets are as follows:
2019 2018
£m £m
Fair value of plan assets at beginning of period 103.5 111.9
Interest income on plan assets 2.8 2.7
Contributions by Group 2.2 2.1
Benefits paid (5.2) (6.7)
Administration expenses paid by the scheme (a) (0.6) (0.3)
Remeasurement gains/(losses) 11.8 (6.2)
Fair value of plan assets at end of period 114.5 103.5
(a) Administration expenses paid by the scheme includes £0.2 million charged (2018: £0.2 million credited) to other comprehensive income.
Analysis of the movement in the balance sheet obligation
2019 2018
£m £m
At beginning of period (25.2) (24.0)
Total expense as above charged to the income statement (1.2) (2.7)
Remeasurement losses and administration expenses charged to other comprehensive income (1.8) (0.6)
Contributions by Group 2.2 2.1
At end of period (26.0) (25.2)
The actual return on plan assets was £14.7 million (2018: £(3.5) million).
(Increase)/
decrease in
Liabilities Assets Deficit deficit
Change in assumptions £m £m £m £m
No change (140.5) 114.5 (26.0) –
0.25% rise in discount rate (134.0) 114.5 (19.5) 6.5
0.25% fall in discount rate (147.4) 114.5 (32.9) (6.9)
0.25% rise in inflation (144.5) 114.5 (30.0) (4.0)
0.25% fall in inflation (136.2) 114.5 (21.7) 4.3
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 27 December 2019, 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 28 December 2018.
Analysis of present value of scheme liabilities 2019 2018
Active members (a) 33% 36%
Deferred pensioners 26% 24%
Current pensioners 41% 40%
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.
Dignity plc Annual Report & Accounts 2019 | 147
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29 Pension commitments (continued)
Scheme characteristic
The Company currently operates a defined benefits plan, the Dignity Pension & Assurance Scheme. This scheme was closed
to new members in 2013. The benefits provided by the plan are final salary defined benefit benefits with the contributions
paid by the Employer on a balance of cost basis. The plan is run by the Trustees of the plan who ensure that the plan is run in
accordance with the Trust Deed & Rules and complies with legislation. The Trustees are required by law to fund the plan on
prudent funding assumptions under the Trust Deed & Rules of the plan. The contributions payable by the Employer to fund
the plan are set by the Trustees after consulting the Employer.
The assets of the plan are invested in managed funds with Mercer. The managed funds are diversified by fund and by
investment strategy.
The plan closed to future accrual on 28 February 2017, except for members of the LGPS Sections who continue to
accrue benefits.
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 25 December 2020 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.
Funding Risks
The assets quoted are comprised as follows:
2019 2018
£m £m
Assets held by investment managers 114.0 102.7
Balance of the Trustees’ bank account 0.5 0.8
Total 114.5 103.5
The following list is not exhaustive but covers the main risks for the plan. Some of the risks can be reduced by adjusting the
funding strategy with the help of the Trustees, for example investment matching risk. Other risks cannot easily be removed,
for example longevity risk, and Employer must be aware of these risks and ask the Trustees to monitor them closely.
Investment return risk
If the assets under-perform the returns assumed in setting the funding targets then additional contributions may be required
at subsequent valuations.
Investment matching risk
The plan invests significantly in equity type assets, whereas the solvency target is closely related to the return on bonds.
If equities type assets have fallen in value relative to the matching asset of bonds additional contributions may be required.
Longevity risk
If future improvements in mortality exceed the assumptions made then additional contributions may be required.
Legislative risk
The Government may introduce over riding legislation which leads to an increase in the value of Plan benefits.
Solvency risk
As the funding target is not a solvency target, and the investment strategy does not follow that required for a solvency target,
the assets of the plan may not be sufficient to provide all members with the full value of their benefits on a plan wind-up.
148 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
30 Pre-arranged funeral plans
(a) Commitments
The Trading Group has sold pre-arranged funeral plans to clients in the past, giving commitments to these clients to perform
their funeral. All monies from the sale of these funeral plans are paid into and controlled by a number of trusts. These include
the Trusts consolidated within the Group’s financial statements in addition to a number of other trusts (the ‘Small Trusts’).
The Small Trusts are not consolidated in the Group’s results as the Group does not control these trusts.
The Group is obligated to perform these funerals in exchange for the assets of the respective trusts, whatever they may be.
It is the view of the Directors that none of the commitments given to these clients are onerous to the Group. However ultimately,
the Group is obligated to perform these funerals in exchange for the assets of the respective trusts, whatever they may be.
The Small Trusts had approximately £17.5 million (2018: £18.0 million) of net assets as at the balance sheet date.
Only the Trusts consolidated within the Group’s financial statements receive funds relating to the sale of new plans.
(b) Actuarial valuation
The Trustees of the Trusts are required to have the Trusts’ liabilities actuarially valued once a year. 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. Assets of the Trusts include instalment amounts
due in the future from clients, as these amounts are payable on death and are therefore relevant to the actuarial valuation.
However, this means that assets detailed in the actuarial valuations will not agree on a particular day to the assets recognised
in the Group’s consolidated balance sheet.
The Trustees have advised that the latest actuarial valuations of the Trusts were performed as at 27 September 2019 (2018: 28
September) using assumptions determined by the Trustees. Actuarial liabilities in respect of the Trusts have increased to £987
million as at 27 September 2019 (2018: £896 million). The corresponding market value of the assets of the Trusts was £1,004
million (2018: £930 million) as at the same date. Consequently the actuarial valuations recorded a total surplus of £17 million at
27 September 2019 (2018: surplus of £34 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 £156 million (2018: £160 million).
(c) Active members and assets per plan
27 December 28 December
2019 2018
Number Number
Supported by:
The Trusts 311,000 306,000
The Small Trusts 48,000 46,000
Insurance Plans 164,000 134,000
523,000 486,000
The Trusts have approximately £3,300 (2018: £3,000) per active plan. On average the Trading Group received approximately
£2,900 (2018: £2,700) in the period for the performance of each funeral (including amounts to cover disbursements such as
crematoria fees, ministers’ fees and doctors’ fees).
Insurance Plans are those plans for which the Group is the named beneficiary on life assurance products sold by third party
insurance companies.
Dignity plc Annual Report & Accounts 2019 | 149
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30 Pre-arranged funeral plans (continued)
(d) Transactions with the Group
During the period, the Group entered into transactions with the Small Trusts. Amounts may only be paid out of the Trusts in
accordance with the relevant Trust Deeds. Transactions (which were recognised as revenue in the funeral division) amounted
to £1.1 million (2018: £0.9 million) in the period and principally comprised receipts from the Small Trusts in respect of funerals
provided. No amounts were due to the Group on either balance sheet date.
31 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);
• 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 27 December 2019, the amount outstanding in relation to these borrowings was £551.9 million (2018: £561.2 million).
150 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
31 Contingent liabilities (continued)
(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.
32 Related party transactions
There are no related party transactions for either period.
33 Investments
A list of all entities included within the financial information are included in note C9 to the Company’s financial statements.
34 Post balance sheet events
Subsequent to the year end, there has been a general downturn in financial markets which will have impacted the value of the
financial assets held by the Trusts. This impact will change daily and has not been quantified at the time of this Annual Report.
Given the diversified portfolio of assets held, which includes other investments such as property, the impact across the whole
portfolio of assets held cannot be readily estimated. See note 30 for the most recent actuarial position of the Trust based on
long-term growth assumptions.
35 Consolidation of the Trusts and adoption of IFRS 15
Change in accounting policy – Consolidation of the Trusts
As discussed in note 1, the Group previously concluded that the legislative requirement for a majority of trustees to be
unconnected with Dignity meant that Dignity did not, and could not, control the actions of the trustees. Combined with the
judgement that ultimately Dignity’s return from the Trusts was wholly dependent on the investment performance of the
Trusts and that the investment strategy of the Trusts was set, implemented and monitored by the trustees, Dignity previously
concluded that it did not have the power to affect the amounts of its returns, that it did not control the Trusts and therefore
that the Trusts should not be consolidated.
Upon re-examination of the factors that influence that decision, following the latest discussions with the FRC, the Group has
concluded as part of its current year consideration of the recurring judgement that more weight should be attributed to its ability
to appoint and remove trustees and less to the legislative requirement for a majority of trustees to be unconnected with Dignity.
As a result, the Group has reached a revised judgement, the basis of which is summarised in note 1, that it does have control
as defined by IFRS 10 and should consolidate those pre-arranged funeral plan trusts where it has the ability to appoint and
remove trustees.
Therefore, the Group has made a change in accounting policy, which has been reflected in these financial statements as a prior
period restatement.
Dignity plc Annual Report & Accounts 2019 | 151
35 Consolidation of the Trusts and adoption of IFRS 15 (continued)
Adoption of IFRS 15 – Revenue from Contracts with Customers
In addition, as disclosed in the Interim Report, the Group has adopted IFRS 15 during the period. In order to present financial
information on a consistent basis, having consolidated the Trusts, the Group has revised its transition election under IFRS 15 to
reflect the full retrospective adoption of that standard. The transition adjustments arising as a result of the adoption of IFRS 15
relate to the change to recognise the disbursement element of pre-need plans and the pre-need plan funeral services delivered
by third party funeral directors on a principal basis. Furthermore, 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 now held as deferred commissions
in the consolidated balance sheet up to the time the associated funeral is performed or cancelled. Once the funeral is performed
the deferred commission costs are recognised in the consolidated income statement. Deferred commission balances are split
between current and non-current based on historical experience.
Any other adjustments arising as a result of the consolidation of the Trusts would have been the same under IAS 18 as
under IFRS 15.
Following the consolidation of the Trusts and on transition to IFRS 15 adjustments have been made to the consolidated
balance sheet as at 28 December 2018 and 29 December 2017 and the consolidated income statement for the 52 week period
to 28 December 2018.
The impact of consolidation on the balance sheet in both periods has been to recognise the assets and liabilities held by the
Trusts, net of any adjustments to eliminate intra-group balances between the Trusts and the Trading Group. Contract liabilities
in the form of deferred revenue have been recognised in respect of pre-need plans for which the Group has not completed its
performance obligations by the period end. A refund liability has also been recognised for the proportion of plans not expected
to be performed. In addition the Group has, in accordance with IFRS 15, recognised assets for deferred commissions for directly
attributable marketing costs. Deferred tax has been provided, as necessary, on the adjustments recorded. Note 1 details the
accounting polices in respect of these balances.
In respect of the income statement for the 52 week period to 28 December 2018 adjustments have been recorded to
eliminate intra-group transactions between the Trusts and the Trading Group, primarily in respect of funeral payments and
marketing allowance payments. Revenue is also adjusted for the deferred revenue balances on satisfaction of the related
performance obligation. As outlined within note 1, an additional impact to revenue on consolidation of the Trusts is that the
Group is considered to be principal in respect of all pre-need plans delivered. As a result, a corresponding adjustment to cost
of sales has been recorded in respect of disbursements paid and for amounts paid to third parties when the performance of
funerals have been sub-contracted in accordance with IFRS 15. A significant financing cost has been recognised on deferred
revenue in accordance with the policy outlined in note 1. Deferred commissions have been amortised to the income statement
in respect of plans which have been used or cancelled during the period. The administrative costs of the Trusts together with
the remeasurement in the period of financial assets held by the Trusts and related income have also been recognised.
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152 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
35 Consolidation of the Trusts and adoption of IFRS 15 (continued)
28 December 2018 consolidated balance sheet (selected lines only):
Consolidation of the Trusts IFRS 15
Recognition Recognition Recognition
Recognition of contract Derecognition of contract of deferred
28 Dec 2018 of trust liabilities – of liabilities – Deferred costs in Deferred 28 Dec
as originally assets and deferred cancellation refund tax Consolidation respect of tax 2018
presented liabilities revenue provision liability impact adjustments commissions impact restated
£m £m £m £m £m £m £m £m £m £m
Non-current assets
Financial assets – held by
the Trusts – 862.4 862.4
Deferred commissions – 94.5 94.5
Deferred tax asset – 35.2 (17.3) 17.9
Current assets
Trade and other receivables 32.9 10.3 (11.9) 31.3
Deferred commissions – 7.1 7.1
Cash 66.9 13.8 80.7
Current liabilities
Financial liabilities 9.3 9.3
Trade and other payables 68.9 12.3 (2.5) (11.9) 66.8
Contract liabilities – 90.4 1.1 91.5
Provisions for liabilities 1.7 (0.3) 1.4
Non-current liabilities
Deferred tax liabilities 29.2 (29.2) –
Contract liabilities – 1,149.9 14.7 1,164.6
Provisions for liabilities 9.9 (0.5) 9.4
Retained earnings (89.2) 874.2 (1,237.8) 0.8 (15.8) 64.4 – 101.6 (17.3) (319.1)
Dignity plc Annual Report & Accounts 2019 | 153
35 Consolidation of the Trusts and adoption of IFRS 15 (continued)
28 December 2018 consolidated income statement (selected lines only):
Consolidation of the Trusts IFRS 15
Recognition
Release of Removal of significant Remeasurement Amounts Recognition of Net release
deferred of payments Derecognise financing of Trust paid disbursement of deferred
28 Dec 2018 revenue on received from Payments pre-need Recognition component assets and on element of costs in 28 Dec
as originally death or the Trusts on segment of the on deferred related subcontracted pre-need respect of Tax 2018
presented cancellation on death cancellation income Trust costs revenue income funerals plans commissions credit restated
£m £m £m £m £m £m £m £m £m £m £m £m £m
Revenue 315.6 95.5 (47.6) (3.0) (22.7) 15.9 353.7
Cost of sales (135.0) (8.0) (15.9) (158.9)
Gross profit 180.6 95.5 (47.6) (3.0) (22.7) (8.0) – 194.8
Administrative
expenses (114.3) (6.8) 2.2 (118.9)
Operating profit 66.3 95.5 (47.6) (3.0) (22.7) (6.8) (8.0) – 2.2 75.9
Finance costs (26.0) (26.0)
Finance income 0.2 0.2
Deferred revenue
significant financing – (53.3) (53.3)
Remeasurement
of Trust assets and
related income – (14.8) (14.8)
Profit/(loss)
before tax 40.5 95.5 (47.6) (3.0) (22.7) (6.8) (53.3) (14.8) (8.0) – 2.2 (18.0)
Taxation (9.0) 10.0 1.0
Profit/(loss) for the
period attributable to
equity shareholders 31.5 95.5 (47.6) (3.0) (22.7) (6.8) (53.3) (14.8) (8.0) – 2.2 10.0 (17.0)
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154 | Dignity plc Annual Report & Accounts 2019
Notes to the financial statements continued
for the 52 week period ended 27 December 2019
35 Consolidation of the Trusts and adoption of IFRS 15 (continued)
29 December 2017 consolidated balance sheet:
Consolidation of the Trusts IFRS 15
Recognition Recognition
Recognition of contract Recognition of deferred
29 Dec 2017 of trust liabilities – Derecognition of contract costs in Deferred
as originally assets and deferred of cancellation liabilities – Deferred Consolidation respect of tax 29 Dec 2017
presented liabilities revenue provision refund liability tax impact adjustments commissions impact restated
£m £m £m £m £m £m £m £m £m £m
Assets
Non-current assets
Goodwill 226.1 226.1
Intangible assets 159.4 159.4
Property, plant and equipment 248.0 248.0
Financial assets 14.3 14.3
Financial assets – held by the Trusts – 865.6 865.6
Deferred commissions – 92.4 92.4
Deferred tax asset – 23.7 (16.9) 6.8
647.8 1,612.6
Current assets
Inventories 7.3 7.3
Trade and other receivables 38.3 9.1 (12.1) 35.3
Deferred commissions – 7.0 7.0
Cash 49.3 21.8 71.1
94.9 120.7
Total assets 742.7 1,733.3
Liabilities
Current liabilities
Financial liabilities 4.5 4.5
Trade and other payables 57.8 12.6 (2.9) (12.1) 55.4
Current tax liabilities 6.2 6.2
Contract liabilities – 87.1 1.2 88.3
Provisions for liabilities 1.5 (0.3) 1.2
70.0 155.6
Non-current liabilities
Financial liabilities 561.2 561.2
Deferred tax liabilities 30.3 (30.3) –
Other non-current liabilities 2.3 2.3
Contract liabilities – 1,101.8 15.5 1,117.3
Provisions for liabilities 8.5 (0.6) 7.9
Retirement benefit obligation 24.0 24.0
626.3 1,712.7
Total liabilities 696.3 1,868.3
Shareholders’ equity/(deficit)
Ordinary share capital 6.2 6.2
Share premium account 11.1 11.1
Capital redemption reserve 141.7 141.7
Other reserves (4.6) (4.6)
Retained earnings (108.0) 883.9 (1,186.0) 0.9 (16.7) 54.0 – 99.4 (16.9) (289.4)
Total equity/(deficit) 46.4 (135.0)
742.7 1,733.3
Dignity plc Company balance sheet
as at 27 December 2019
Dignity plc Annual Report & Accounts 2019 | 155
27 December 28 December
2019 2018
Note £m £m
Fixed assets
Investments C2 149.9 149.1
Current assets
Trade and other receivables C3 295.3 304.7
Cash 29.8 40.6
Total current assets 325.1 345.3
Creditors: amounts falling due within one year C4 (15.0) (14.7)
Net current assets 310.1 330.6
Total assets less current liabilities 460.0 479.7
Net assets 460.0 479.7
Capital and reserves
Called up share capital C5 6.2 6.2
Share premium account 12.5 12.4
Capital redemption reserve 141.7 141.7
Other reserves 3.7 2.7
Retained earnings 295.9 316.7
Total equity 460.0 479.7
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 loss attributable to the equity shareholders of
£12.6 million in the period (2018: profit of £32.1 million).
The financial statements on pages 155 to 164 were approved by the Board of Directors on 11 March 2020 and were signed on
its behalf by:
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M K McCollum
Chief Executive
S L Whittern
Finance Director
156 | Dignity plc Annual Report & Accounts 2019
Dignity plc Company statement of changes in equity
for the 52 week period ended 27 December 2019
Ordinary Share Capital
share premium redemption Other Retained
capital account reserve reserves earnings Total
£m £m £m £m £m £m
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
Adjustment on initial application of IFRS 9 – – – – (0.3) (0.3)
Shareholders’ equity as at 29 December 2018
– adjusted 6.2 12.4 141.7 2.7 316.4 479.4
Loss for the period – – – – (12.6) (12.6)
Effects of employee share options – – – 1.1 – 1.1
Proceeds from share issue – 0.1 – – – 0.1
Gift to Employee Benefit Trust – – – (0.1) – (0.1)
Dividends paid on Ordinary Shares – – – – (7.9) (7.9)
Total transactions with owners, recognised
directly in equity – 0.1 – 1.0 (7.9) (6.8)
Shareholders’ equity as at 27 December 2019 6.2 12.5 141.7 3.7 295.9 460.0
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 27 December 2019
Dignity plc Annual Report & Accounts 2019 | 157
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C1 Principal accounting policies
Basis of preparation
The financial statements of the Company for the period ended 27 December 2019 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 27 December
2019. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
28 December 2018.
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.
158 | Dignity plc Annual Report & Accounts 2019
Notes to the Dignity plc financial statements continued
for the 52 week period ended 27 December 2019
C1 Principal accounting policies (continued)
New standards, amendments and IFRIC interpretations
The Company has applied IFRS 9, Financial instruments for the first time in the preparation of the Company’s financial statements.
IFRS 9, Financial Instruments – impact of adoption
Under IFRS 9 all financial assets and liabilities are measured at fair value on initial recognition. IFRS 9 subsequently measures
financial assets and liabilities at amortised cost, fair value through other comprehensive income (‘FVOCI’) or fair value through
profit and loss (‘FVTPL’). As all assets and liabilities were measured at amortised cost under IAS 39 there is no change in
accounting policy on adoption of IFRS 9.
The Company has changed how it assesses impairment of receivables. The Company calculates expected credit losses (‘ECL’s’)
in line with the guidance under IFRS 9. Where there is evidence of impairment, any impairment loss is recognised in the income
statement. On transition to IFRS 9, a transition adjustment of £0.3 million has been recorded in to opening equity reserves as
at 29 December 2018. Comparatives have not been restated. There has been no movement in the ECL during the period.
No other new accounting standards or amendments to accounting standards, or IFRIC interpretations that are effective for the
period ended 27 December 2019, have had a material impact on the Company.
Critical accounting estimates and assumptions
The preparation of the financial statements in conformity with FRS 101 requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
Management has not made any judgements, estimates or assumptions in preparing these financial statements that materially
affects the application of policies or the reported amounts of assets, liabilities, income or expenses of the Company.
Fixed asset investment
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 – accounting policy applied from 29 December 2018
Borrowings
All borrowings and loans are initially recognised at the fair value of consideration received or paid after deduction of issue
costs and are subsequently measured at amortised cost. The issue costs and interest payable or receivable on debt finance are
charged/credited to the Income statement, as interest payable and similar charges or interest receivable and similar 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 and other receivables
Initial recognition and measurement
Financial assets are classified at initial recognition, and are subsequently measured, at amortised cost as the Company’s financial
assets give rise to cash flows that are solely payments of principal and, where applicable, interest on the principal amount and it
is the Company’s business model to collect the contractual cash flows.
Dignity plc Annual Report & Accounts 2019 | 159
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C1 Principal accounting policies (continued)
Impairment
The Company recognises an allowance for expected credit losses (ECLs) for all receivables held at amortised cost. ECLs are based
on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the
Company expects to receive.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(a 12 month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition,
a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
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.
Financial instruments – accounting policy applied on or before 28 December 2018
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 149.1
Additions in respect of share-based payments 0.8
At end of period 149.9
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 market capitalisation of the Company was lower than the aggregate of the amount of the Company’s investment in
subsidiaries and receivables from those entities. However, the Directors believe that the carrying value of the investments is
supported by their underlying net assets and value in use. This was considered in detail by reference to the Trading Group’s
value in use in addition to appropriate recognition for the value of the Trusts.
C3 Trade and other receivables: amounts falling due within one year
27 December 28 December
2019 2018
£m £m
Amounts owed by group undertakings 295.3 304.7
C4 Creditors: amounts falling due within one year
27 December 28 December
2019 2018
£m £m
Amounts owed to subsidiary undertakings 12.4 12.4
Accruals 1.9 1.1
Corporation tax 0.7 1.2
15.0 14.7
160 | Dignity plc Annual Report & Accounts 2019
Notes to the Dignity plc financial statements continued
for the 52 week period ended 27 December 2019
C5 Called up share capital and reserves
27 December 28 December
2019 2018
£m £m
Allotted and fully paid Equity shares
50,012,394 (2018: 50,008,939) Ordinary Shares of 12 48/143p (2018: 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 24 of the Group’s consolidated accounts for further details.
C6 Dividends
52 week period 52 week period
ended ended
27 December 28 December
2019 2018
£m £m
Final dividend paid: 15.74p per Ordinary Share (2018: 15.74p) 7.9 7.9
Interim dividend paid: nil per Ordinary Share (2018: 8.64p) – 4.3
Dividend on Ordinary Shares 7.9 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. No interim dividend was declared in 2019.
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 £7.9 million, 15.74 pence per share (2018: £12.2 million, 24.38
pence per share).
On 28 June 2019, the Group paid a final dividend, in respect of 2018, of 15.74 pence per share (2018: 15.74 pence per share)
totalling £7.9 million (2018: £7.9 million). The Group is not proposing any dividend for the period ended 27 December 2019.
C7 Staff costs
Directors’ remuneration
Details of the Directors’ emoluments are included in pages 83 to 91. They received no emoluments in respect of their services
to the Company (2018: nil).
C8 Related party transactions
There are no related party transactions for either period requiring disclosure.
Dignity plc Annual Report & Accounts 2019 | 161
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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 2020
Company name
Principal activity
Newport & Telford Funeral Service Ltd Funeral services
162 | Dignity plc Annual Report & Accounts 2019
Notes to the Dignity plc financial statements continued
for the 52 week period ended 27 December 2019
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
Bayley Brothers Hereford 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
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 & L Evans Ltd
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
Graeme Buckle Funeral Services Limited
Graham Sullivan Funeral Directors Limited
Grave Design Limited
Great Southern Group Limited
Grimmett & Timms Limited
Dignity plc Annual Report & Accounts 2019 | 163
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N A Medd Limited
National Funeral Trust Limited
Newco (Crematoria) Limited
Newport Hire (I.W.) Limited
Newsome’s Funeral Service (Royston)
Limited
Nicholls Memorials 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
Robert Nicholls Funeral Directors Limited
Roberts & Brain Limited
Romney Marsh Funeral Services Limited
Rosspark Limited
C9 Subsidiary undertakings (continued)
Dormant companies (continued)
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
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
164 | Dignity plc Annual Report & Accounts 2019
Notes to the Dignity plc financial statements continued
for the 52 week period ended 27 December 2019
U.F.D. Limited
UK Funerals Limited
UKF Limited
Valedictum Group Limited
Valedictum Holdings Limited
Valedictus Group Limited
Valedictus Holdings Limited
Valedictus 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
Wrekin Funeral Service Limited
Yew Holdings Limited
C9 Subsidiary undertakings (continued)
Dormant companies (continued)
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
Sevenoaks District Crematorium 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
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(a)
Dignity plc Annual Report & Accounts 2019 | 165
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Summarised consolidated income statement
2018
2019 restated 2017(c) 2016(d) 2015(d)
£m £m £m £m £m
Underlying revenue
Funeral services 203.3 214.9 221.8 217.8 212.6
Crematoria 76.8 78.0 74.0 67.5 63.1
Pre-arranged funeral plans 21.2 22.7 28.2 28.3 29.6
301.3 315.6 324.0 313.6 305.3
Underlying operating profit
Funeral services 56.3 62.2 79.5 79.0 76.8
Crematoria 38.4 40.3 40.0 37.6 34.6
Pre-arranged funeral plans – 2.8 8.0 8.5 7.8
Central overheads (31.4) (25.1) (22.9) (23.4) (20.5)
63.3 80.2 104.6 101.7 98.7
Underlying finance costs (25.8) (26.0) (26.9) (26.9) (27.0)
Underlying finance income 0.2 0.2 0.1 0.4 0.5
Underlying profit before tax 37.7 54.4 77.8 75.2 72.2
Underlying taxation (7.4) (11.5) (13.8) (15.8) (15.5)
Underlying profit after tax 30.3 42.9 64.0 59.4 56.7
Underlying earnings per share (pence) 60.6p 85.8p 128.3p 119.8p 114.8p
Revenue 338.9 353.7 324.0 313.6 305.3
Operating profit 44.8 75.9 98.0 97.7 95.5
Profit/(loss) after tax 34.9 (17.0) 57.8 57.2 56.9
Basic earnings/(loss) per share (pence) 69.8p (34.0)p 115.8p 115.3p 115.2p
Key performance indicators
2019 2018 2017 2016 2015
Total estimated number of deaths in Britain (number) 584,000 599,000 590,000 590,000 588,000
Number of funerals performed (number) 69,400 72,300 68,800 70,700 73,500
Funeral market share(b) (per cent) 11.7% 11.9% 11.5% 11.8% 12.3%
Number of cremations performed (number) 64,800 65,200 63,400 59,500 57,700
Crematoria market share (per cent) 11.1% 10.9% 10.7% 10.1% 9.8%
Active pre-arranged funeral plans (number) 523,000 486,000 450,000 404,000 374,000
Underlying cash generated from operations (£million) 71.8 101.9 115.4 121.1 125.2
Net debt
2019 2018 2017 2016 2015
£m £m £m £m £m
Net amounts owing on Secured Notes per
financial statements (551.3) (560.6) (565.1) (573.9) (586.5)
Add: unamortised issue costs (0.6) (0.6) (0.6) (0.7) (0.7)
Gross amounts owing (551.9) (561.2) (565.7) (574.6) (587.2)
Net amounts owing on Crematoria Acquisition Facility per
financial statements – – – (15.7) (15.7)
Add: unamortised issue costs on Crematoria Acquisition Facility – – – (0.1) (0.1)
Gross amounts owing (551.9) (561.2) (565.7) (590.4) (603.0)
Accrued interest on Secured Notes (12.2) (12.3) (0.3) (0.3) (12.8)
Accrued interest on Crematoria Acquisition Facility and
Revolving Credit Facility – (0.2) (0.2) (0.1) (0.1)
Cash and cash equivalents – Trading Group 57.9 66.9 49.3 67.1 98.8
Net debt (506.2) (506.8) (516.9) (523.7) (517.1)
166 | Dignity plc Annual Report & Accounts 2019
Financial record(a) continued
Summarised consolidated balance sheet
2018 2017
2019 restated restated 2016(d) 2015(d)
£m £m £m £m £m
Non-current assets
Goodwill and intangible assets 373.1 384.9 385.5 358.1 328.2
Property, plant and equipment 251.3 254.1 248.0 235.4 200.6
Investments in associated undertakings – 6.0 – – –
Financial and other assets 18.2 15.7 14.3 11.3 10.3
Financial assets – held by the Trusts 947.5 862.4 865.6 – –
Deferred commissions 96.8 94.5 92.4 – –
Deferred tax asset 14.0 17.9 6.8 – –
1,700.9 1,635.5 1,612.6 604.8 539.1
Current assets
Cash and cash equivalents – Trading Group 57.9 66.9 49.3 67.1 98.8
Cash and cash equivalents – held by the Trusts 15.5 13.8 21.8 – –
Cash and cash equivalents 73.4 80.7 71.1 67.1 98.8
Other current assets 47.6 46.9 49.6 43.1 38.3
121.0 127.6 120.7 110.2 137.1
Total assets 1,821.9 1,763.1 1,733.3 715.0 676.2
Current liabilities
Financial liabilities 9.6 9.3 4.5 8.8 8.3
Contract liabilities 95.5 91.5 88.3 – –
Other current liabilities 65.3 73.0 62.8 66.3 74.4
170.4 173.8 155.6 75.1 82.7
Non-current liabilities
Financial liabilities 542.3 551.9 561.2 581.5 594.6
Contract liabilities 1,209.1 1,164.6 1,117.3 – –
Other non-current liabilities 37.3 36.7 34.2 61.9 42.8
1,788.7 1,753.2 1,712.7 643.4 637.4
Total liabilities 1,959.1 1,927.0 1,868.3 718.5 720.1
Total deficit (137.2) (163.9) (135.0) (3.5) (43.9)
Total deficit and liabilities 1,821.9 1,763.1 1,733.3 715.0 676.2
NOTES
(a) This information has been extracted from the current and previous Annual Reports and accordingly does not constitute audited information.
(b) Market share excluding funerals performed in Northern Ireland.
(c) 2017 income statement has not been restated for the impact of IFRS 15 or the change in accounting policy in respect of the Trusts.
(d) 2015 and 2016 have not been restated for the impact of IFRS 15 or the change in accounting policy in respect of the Trusts.
Alternative performance measures
Dignity plc Annual Report & Accounts 2019 | 167
Non-GAAP measures
(a) Alternative performance measures
The Board believes that whilst statutory reporting measures provide financial performance of the Group under GAAP, alternative
performance measures are necessary to enable users of the financial statements to fully understand the trading performance
and financial position of the business.
The alternative performance measures provided are aligned with those used in the day-to-day management of the business and
allow for greater comparability across periods.
For this reason, the alternative performance measures provided exclude the impact of consolidating the Trusts and the
changes which relate to the adoption of IFRS 15 (together referred to as ‘other adjustments’), both of which are considered to
mask the underlying trading performance of the Group, as well as non-underlying items comprising certain non-recurring and
non-trading transactions.
Calculation of underlying reporting measures
Underlying revenue and profit measures (including divisional measures) are calculated as revenue and/or profit before
non-underlying items and other adjustments.
Underlying net finance costs are calculated before the impact of consolidating the Trusts. See note 4.
Underlying earnings per share is calculated as profit after taxation, before non-underlying items and other adjustments
(both 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 and other adjustments on a cash paid basis.
(b) 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;
• Group’s share of profit or loss and impairment of associated undertakings; 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 Group 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.
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168 | Dignity plc Annual Report & Accounts 2019
Alternative performance measures continued
Non-GAAP measures (continued)
Funeral Pre-arranged Central
services Crematoria funeral plans overheads Group
52 week period ended 27 December 2019 £m £m £m £m £m
Non-trading
Amortisation of acquisition related intangibles 4.2 0.5 0.1 – 4.8
External transaction costs – 0.7 0.1 0.1 0.9
Profit on sale of fixed assets (1.0) – – – (1.0)
Non-recurring
Transformation Plan costs – – – 12.1 12.1
Operating and competition review costs – – – 3.5 3.5
Trade name impairment 6.8 – – – 6.8
10.0 1.2 0.2 15.7 27.1
Group’s share of loss of associated undertakings 0.6
Impairment of investments in associated undertakings 5.4
Taxation (4.9)
28.2
52 week period ended 28 December 2018
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
(c) Non-underlying cash flow items
27 December 28 December
2019 2018
£m £m
Cash flows from operating activities 64.6 104.2
Cash flows of other adjustments (7.6) (9.3)
Cash flows from operating activities – Trading Group 57.0 94.9
External transaction costs 0.8 1.7
Transformation Plan costs 11.2 2.6
Operating and competition review costs 2.8 2.7
Underlying cash generated from operations 71.8 101.9
(d) Funeral market share
Comparable funeral market share excludes any volumes from locations not contributing for the whole of 2018 and 2019 to
date and therefore excludes eight locations closed and 13 locations opened in 2018 and a further 12 locations closed and one
location opened in 2019.
(e) Average assets per plan
Average assets per plan are calculated as the net assets of the Trusts divided by the number of active plans in the Trusts.
Net assets in this calculation will not equal amounts in the consolidated balance sheet of the Group, as it includes instalment
amounts due in future that become payable immediately on death.
Shareholder information
Dignity plc Annual Report & Accounts 2019 | 169
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
England and Wales.
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 11 June 2020 at 11:00am at DLA Piper UK LLP, Victoria Square House,
Victoria Square, Birmingham, West Midlands, B2 4DL.
Dividends
Although the Group has significant cash resources at hand and continues to be cash generative, in order to maintain maximum
flexibility and liquidity during the transformation, the Board has concluded that it is prudent to temporarily cease dividend
payments. The Group has an established track record of returning cash to shareholders at appropriate times over many years
and once the current uncertain competitive environment becomes clearer, it anticipates resuming dividend payments or
returning excess cash to shareholders.
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170 | Dignity plc Annual Report & Accounts 2019
Contact details and advisers
Registered Office:
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
Tel: +44 (0) 121 354 1557
Fax: +44 (0) 121 321 5644
E-mail: enquiries@dignityuk.co.uk
www.dignityfunerals.co.uk/corporate
Company Secretary:
Tim George FCIS
Registered Number:
04569346
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
Financial calendar
Dignity plc Annual Report & Accounts 2019 | 171
11 June 2020
26 June 2020
29 July 2020
• Annual General Meeting
• 2020 financial half year end
• Announcement of 2020 interim results
25 December 2020
• Financial period end
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172 | Dignity plc Annual Report & Accounts 2019
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.
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.
IFC | Dignity plc Annual Report & Accounts 2019
Welcome
to the 2019
Annual Report
Contents
Strategic Report
02 Leading through change
10 Our summary performance in 2019
12 Chairman’s statement
16 Chief Executive’s review
28 Strategy and business model
30 Key performance indicators
34 Operating review
41 Financial review
46 Principal risks and uncertainties
52 Non-financial information statement
53 Corporate and social responsibility
Governance
61 Chairman’s introduction to governance
63 Governance structure
64 Board of Directors
66 Executive Management Team
67 Directors’ statement on corporate governance
72 Audit Committee report
75 Nomination Committee report
77 Report on Directors’ remuneration
92 Directors’ report
Financial Statements
Group Accounts
95 Independent auditors’ report to the members of Dignity plc
104 Consolidated income statement
104 Consolidated statement of comprehensive income
105 Consolidated balance sheet
106 Consolidated statement of changes in equity
107 Consolidated statement of cash flows
108 Notes to the financial statements
Company Accounts
155 Dignity plc Company balance sheet
156 Dignity plc Company statement of changes in equity
157 Notes to the Dignity plc financial statements
165 Financial record
Other Information
167 Alternative performance measures
169 Shareholder information
170 Contact details and advisers
171 Financial calendar
Consultancy, Design & Production by Bexon Woodhouse
www.bexonwoodhouse.com
Printed in the UK by CPI Colour, a certified CarbonNeutral®
printing company, using vegetable based inks and water
based sealants. The printer and paper manufacturing
mill are both certified with ISO 14001 Environmental
Management systems standards and both are Forest
Stewardship Council® (FSC®) certified.
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityfunerals.co.uk/corporate
Annual Report 2019
Dignity plc Annual Report & Accounts
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Delivering
excellent client
service and
leading through
change