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Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityplc.co.uk
ANNUAL REPORT 2020
Dignity plc Annual Report & Accounts
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Responsible and resilient
through challenging and
changing times
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IFC
Dignity plc Annual Report & Accounts 2020
Who we are
We are one of the UK's major funeral
related service providers and the only
publicly listed company in the UK operating
in the funeral sector. The Group's main
activities are funeral services, crematoria
and pre-arranged funeral plans.
Our aim is to be at the forefront of the
sector in terms of quality, transparency,
standards, choice and value-for-money.
Inside this year’s Annual Report
Strategic Report
Financial Statements
Transparent reporting
01 At a glance
04 Executive Chairman’s review
15 Key performance indicators
18 Operating review
22 Financial review
27 Principal risks and uncertainties
33 Viability statement
34 Non-financial information statement
35 Corporate and social responsibility
42 Section 172 Statement
Governance
45 Chairman’s introduction to governance
50 Governance structure
51 Board of Directors
52 Operating Board
53 Directors’ statement on corporate governance
58 Audit Committee report
62 Nomination Committee report
63 Report on Directors’ remuneration
81 Directors’ report
Group Accounts
84 Independent auditors’ report to the members
of Dignity plc
92 Consolidated income statement
92 Consolidated statement of comprehensive
income
93 Consolidated balance sheet
94 Consolidated statement of changes in equity
95 Consolidated statement of cash flows
96 Notes to the financial statements
Company Accounts
144 Dignity plc Company balance sheet
145 Dignity plc Company statement of changes
in equity
146 Notes to the Dignity plc financial statements
154 Financial record
Other Information
156 Alternative performance measures
162 Shareholder information
163 Contact details and advisers
164 Financial calendar
We aim to report in a transparent and
integrated way to clearly reflect how we
operate. Within this year’s report we have
also sought to address the additional
requirements arising from Section 172
of the Companies Act 2006 and the 2018
UK Corporate Governance Code.
This Annual Report & Accounts contains
forward-looking statements with respect
to the Group’s plans and its current goals
and expectations relating to its future
financial condition, performance, results,
strategic initiatives and objectives.
Consultancy, Design & Production by Bexon Woodhouse
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Dignity plc Annual Report & Accounts 2020
01
At a glance
Strategic report
A caring and responsible business
What we are here for and our role
We are a caring and responsible business.
At its heart is a core social purpose to help
people at one of the most difficult times
in their lives.
It is through the ongoing dedication
of our people, our commitment to
responsible business practice, and by
making a meaningful contribution to
society, that we will ensure we fulfil
both our purpose and our potential.
A core social
purpose
& vital frontline role
As one of the funeral industry leaders, we
have played our part during the evolving and
unprecedented COVID-19 pandemic. We
have worked closely with the Government
and wider funeral sector to ensure that we
deliver the services that are needed.
By managing our business proactively,
we have been able to respond, prioritise
and adapt with pace and agility to these
extraordinary circumstances – for our clients,
colleagues and those who use our facilities.
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02
Dignity plc Annual Report & Accounts 2020
At a glance continued
Strategic report
A strong, resilient and
sustainable business
Our distinctive qualities and strengths
Our Services
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.
Dignity Funerals provides the bereaved
with access to our national network of funeral
directors, where families can arrange a service
personal to their needs.
Simplicity Cremations offers less traditional,
lower cost direct cremation options and smaller,
family-led services, whilst benefiting from
Dignity’s high standards of care and a national
infrastructure of mortuaries and crematoria.
80,300 (2019: 69,400)
Number of funerals conducted during 2020.
795 (2019: 820)
Number of funeral locations we operate
in the UK.
4,900 (2019: 2,700)
Of the 80,300 funerals conducted 4,900
relate to Simplicity and branch direct
cremation based services delivered in 2020.
Crematoria
The Crematorium and Memorial Group
(‘CMG’) is the largest single independent
operator of crematoria in Britain with a
significant portfolio of well-established and
state-of-the-art facilities that meet the needs
of the local communities we serve.
Our crematoria provide a range of cremation
services, from basic unattended cremations to
traditional full services.
Our extensive, peaceful grounds allow families to
remember their loved ones in a very personal way.
74,500 (2019: 64,800)
Number of cremations conducted
during 2020.
46 (2019: 46)
Number of crematoria we operate
in England and Scotland.
Pre-arranged funerals
We are one of the UK’s largest providers
of pre-arranged funerals.
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.
558,000 (2019: 523,000)
Number of active pre-arranged funerals
as at 25 December 2020.
Our People, Culture and Values
Professionalism, resilience, respect and compassion has been
vital in the face of the unprecedented challenges and change
during 2020. We have sought to ensure that our people and
the bereaved families we serve across the UK have been
protected and supported during this time.
Our colleagues across the business have worked flexibly and
determinedly to deliver services to the highest standards and
with the care and commitment they always do.
Our Strengths
• Leading the way for quality of
client care, facilities and standards.
• Strong brands and compelling
client propositions, offering greater
choice and flexibility.
• Leading position in the pre-arranged
funeral market.
• Focused on delivering excellent
client service, and positive
engagement and experience.
• Unique in our service capabilities
as a funeral director, a crematoria
operator and as a pre-arranged
funeral plan provider.
• The only provider with a national
network of funeral locations and
crematoria.
• Leading position in the direct
cremation market.
• An experienced team and
Operating Board.
• Committed to delivering a
progressive, innovative and
increasingly more digital-led
service for clients.
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Dignity plc Annual Report & Accounts 2020
03
Generating sustainable financial and non-financial value
Our Stakeholders
and Sustainability
Engaging with a range of stakeholders informs our
decision-making, builds trust and is key to delivering
our strategy in the long-term.
Our stakeholders include our clients, both our Pre-Need
Funeral Plan holders and the Trustees of the related
Funeral Plan Trusts, communities, colleagues, investors,
suppliers, pensioners and trustees of our pension funds,
and policymakers. For our business to succeed we need
to maintain strong relationships and open engagement
with them all.
We must dedicate time to understand their individual
needs, expectations and aspirations, as meeting or
exceeding them is an essential part of the way we
create and deliver sustainable value.
Sustainability is about the actions we take to fulfil our
purpose and our potential. We remain committed to
driving a sustainable business that is both socially and
environmentally responsible and commercially
successful.
Summary 2020 Challenge
and Opportunity
Our business and people have truly been tested by
the challenging events of 2020. Our response has
demonstrated the strength and resilience of our
business, the dedication of our people in whichever role
they play, and ultimately reaffirmed our commitment
to our core social purpose.
We have an opportunity to reposition the business
along with a clear sustainable growth plan:
• The final outcome and conclusions of the CMA
investigation is now determined;
• Our preparations for regulation of the funeral plan
market by the FCA are progressing;
• Our root and branch review is scheduled to conclude
in the second quarter of 2021; and
• We are long-term advocates of improving standards,
quality, transparency, and providing greater choice in
the funeral sector.
We are determined to grow both funeral and
cremation market share on a sustainable organic
basis whilst safeguarding our future success for
the benefit of all our stakeholders.
Summary Group Financial Performance 2020
Underlying revenue(1)
£314.1m
(2019: £301.3m)
Operating profit
£15.9m
(2019: £44.8m)
Underlying operating profit
£55.7m
(2019: £63.3m)
Dividends paid in the period
Basic (loss)/earnings per share
Underlying earnings per share
£nil
(2019: 15.74p)
(51.0)p
(2019 restated: 61.2p) (2)
46.6p
(2019: 60.6p)
Number of active pre-arranged funerals
Cash generated from operations
Underlying cash generated from operations
558,000
(2019: 523,000)
£62.7m
(2019: £64.6m)
£76.4m
(2019: £71.8m)
(1) Total underlying revenue was £314.1 million (2019: £301.3 million). On a statutory basis the Group recognised Funeral services revenue of £274.8 million (2019: £262.1 million) and Crematoria revenue
of £82.7 million (2019: £76.8 million). Pre-arranged funeral plans are not a separate division in statutory terms.
(2) Prior year basic earnings per share has been restated due to a prior year adjustment in relation to taxation. See page 96 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 application of IFRS 15 and adoption of IFRS 16, all 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 156 to 161.
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04
Dignity plc Annual Report & Accounts 2020
Executive Chairman’s review
Strategic report
Maintaining our resilience
and focus through change
Clive Whiley, Executive Chairman | In a unique
and challenging year, it is the dedication of our
staff that has enabled continued delivery of our
services, supported by a refreshed strategy and
management team.
Overview
The year under review represents my first full year as Chairman
and proved to be a unique and challenging period due to the
conjunction of events surrounding the COVID-19 pandemic,
ongoing regulatory considerations and the Transformation Plan.
However, first and foremost the Board is grateful for the constant
dedication of our staff, whichever role they perform in the business,
as they continue to respond appropriately to people losing loved
ones at a time when their ability to grieve and to gain closure
remains adversely impacted by the pandemic.
Our people are fundamental to both the Group’s success and
sustainability and I would like to thank them for their significant
contribution, resilience and commitment to service during what has
been an exceptional time for society, bereaved families, our people
and our business.
Strategic challenges
Of the triple challenges highlighted, COVID-19 directly contributed
to a total UK 2020 annual death-toll of 663,000, an increase of
14 per cent over 2019, representing the highest total UK deaths
since 1918, which witnessed the end of WW1 and the Spanish
Flu pandemic. Moreover, the year-on-year impact swung from
an increase of one per cent in Q1, to plus 47 per cent in Q2, minus
two per cent in Q3 and back to plus eight per cent in Q4 with the
concomitant stress on our funeral and crematoria operations:
notwithstanding the fact that we deliberately maintain a degree
of structural overcapacity with, for example, over 20 per cent of
private sector mortuary capacity.
At the peak of the pandemic the crisis led to a constricted service
offering, in the interests of the welfare of our staff and clients,
alongside higher PPE and temporary staff expenditure which
translated into underlying operating profit falling by 12 per cent to
£55.7 million and underlying average revenue per funeral of £2,522
(2019: £2,930). Government guidance continues to restrict the
attendance at funerals with limits for all venues, remaining at 30
in England, 20 in Scotland and 25 in Northern Ireland. In Wales as
many attendees as the venue can hold whilst respecting social
distance and COVID-19 Safe protocol is currently allowed.
Whilst COVID-19 featured heavily in our day-to-day
activities into the first quarter of 2021, we did not lose
sight of the numerous project work-streams initiated in
the last year, aimed at affording the Board the time and
collateral necessary to allow the business to self-heal,
without recourse to dilutive funding initiatives.
Deaths in Great Britain
Latest figures from the ONS indicated COVID-19 deaths in Great Britain (where coronavirus
(COVID-19) was mentioned on the death certificate) at 87,500 in 2020.
Number of deaths
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
220,000
200,000
180,000
160,000
140,000
120,000
100,000
Source: Office For National Statistics
2017
2018
2019
2020
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Q1
Q2
Q3
Q4
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Dignity plc Annual Report & Accounts 2020
05
We also had to contend with the ongoing CMA market investigation,
launched in March 2019, which reached an early conclusion with
the publication of the Final Decision Report issued on 18 December
2020 (detailed on pages 12 and 13). We engaged openly and
collaboratively with the CMA throughout the investigation and
look forward to working with the regulator and the Government
to ensure the package of remedies work for consumers and are
implemented effectively across the market.
In fact, Dignity has been working to raise awareness regarding
issues of transparency and consistency in quality of care across the
funerals sector for a number of years and we are determined to
represent a flagship within the industry for quality and governance.
In addition, we welcome the decision to introduce statutory
regulation to pre-arranged funeral plans and are working with
the FCA as it accelerates the development of its future approach
(see page 10).
However, it is the shortcomings exposed by the root and branch
review, arguably self-inflicted by torpid strategic direction over the
last decade, as exacerbated by the extreme volatility in volume
created by the pandemic, that exposed the business most during
the year. The Transformation Plan, launched with great fanfare
and at considerable expense in 2018, in my opinion introduced
too narrow a focus upon one element of the Group, without
considering the capacity to grow the business organically across its
full bandwidth. In short, that was tantamount to admitting defeat
as a Group that had elected for many years to utilise the majority
of its capital investment buying its way out of deteriorating funeral
market share (2001: 491 funeral locations and 11.8 per cent funeral
market share; 2019: 820 funeral locations and 11.7 per cent funeral
market share). At best that consolidated the heritage of strong
family businesses and staff that perform well to this day, at worst
business integration ceased at legal completion: leading to Dignity
essentially becoming the industry retirement plan for independent
funeral directors.
Fortunately, over the same period our cremation market share
has grown by 70 per cent (2001: 21 crematoria and 6.5 per cent
cremation market share; 2019: 46 crematoria and 11.1 per cent
cremation market share) benefitting from a best-in-class capital
development programme, including nine new build crematoria
coming on stream as a result.
Transformation Plan
The Transformation Plan, which was paused indefinitely on
3 April 2020 with the onset of the pandemic, was expected to cost
£50 million over a three year period to deliver mid-range EBITDA
benefits of approximately £10 million per annum. The root and
branch review, initiated upon my appointment, identified benefits
of £8 million in 2020 alone, alongside preserving cash spending
on transformation of in excess of £30 million, simply from better
housekeeping. Furthermore Project 20:20, which is the final
component of the root and branch review, will now shoulder the
burden of effecting appropriate changes to staff working practices
within our funeral division. This project is designed to determine
the optimal scope, size and logistics of our care centre and branch
network, having due regard to both the extensive learnings from
the Transformation Plan alongside output from the pricing,
product and other trial propositions in train.
Strategic update
Future Strategic Direction
Whilst COVID-19 obviously featured heavily in our day-to-day
activities into the first quarter of 2021, we have not lost sight of
the numerous project work-streams initiated in the last year,
aimed at affording the Board the time and collateral necessary
to allow the business to self-heal, without recourse to dilutive
funding initiatives. In that context:
• The root and branch review is scheduled to conclude in
the second quarter of 2021;
• The refocusing of the investment management strategy for
the pre-need Trusts successfully validated the combined trust
assets at a level of some £1 billion alongside implementing
a more defensive risk profile and significantly reduced
annual fees;
• A record 558,000 people have pre-arranged their funerals
with Dignity, a ten year CAGR of 10 per cent and we continue
to strive to set the industry standard;
The consultation paper on the proposed FCA approach to
regulation of funeral plans was published on 2 March and,
if enacted as published, would have a profound impact on
the industry. This is notwithstanding the core strength of our
Funeral Plan Trusts, with assets at a level of some £1 billion
and our ability to perform the at need funeral commitment
from within our own funeral division. Accordingly, we are in the
process of reviewing the possible ramifications for our longer-
term instalment funeral plan sales and the anticipated higher
cancellations thereon and will report on that in due course;
• We commissioned an independent valuation report for our
standalone crematoria operations, which retain the benefit
of several active planning consents as well as the marginal
capacity to perform a materially higher volume, as both a
datum from which to determine future capital structure and
a defence in the event of an unwelcome approach for the
Group; and
• The ongoing success of Simplicity Cremations, launched as a
challenger brand in December 2016, which delivered a record
of 4,300 direct cremation based services in 2020 (an increase
of 106 per cent) has reinforced our determination to ultimately
become the sector leader.
As detailed above, I am satisfied that the Board now has a
very clear understanding of our strategic objectives, with an
overarching desire to significantly grow both funeral and
cremation market share over the next five years on a sustainable
organic basis: whilst preserving our core values built around
quality, providing excellent client service and high standards
of care.
Completing the
root and branch
review
Safeguarding
our future
success
Delivering a
sustainable
growth plan
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06
Dignity plc Annual Report & Accounts 2020
Executive Chairman’s review continued
Strategic report
Board changes
As noted, the onset of the pandemic forced us to accelerate the
root and branch review, alongside pausing the Transformation Plan
in order to preserve cash resources, ahead of anticipated volatility in
funeral and cremation volumes over both 2020 and 2021, also
heralded wholesale change at board level, where:
• On 11 March 2020 Dean Moore joined the Group as a Non-
Executive Director, succeeding as Chair of the Audit Committee
on 11 June 2020 before becoming Interim Chief Financial Officer
on 14 December 2020;
• On 3 April 2020 we agreed with Mike McCollum, who had been a
significant influence behind the Group for over twenty years, that
the approaching strategic crossroads represented an appropriate
time for him to hand over as Chief Executive Officer and I agreed
to step up to the role of Executive Chairman;
• On 3 April Jane Ashcroft, who had completed her contractual term
as a Non-Executive Director, stepped down from the Board;
• David Blackwood, who served as Senior Independent Director and
as Interim Non-Executive Chairman prior to my appointment on
26 September 2019 and Chair of the Audit Committee thereafter,
did not seek re-election at the AGM held on 11 June 2020;
• Gillian Kent, who has strong digital transformation experience,
joined the Board on 11 June 2020 as an independent Non-
Executive Director and as Chair of the Remuneration Committee;
• On 14 December, we reached an agreement with both Steve
Whittern, Finance Director and Richard Portman, Corporate
Services Director, to step down from the Board, which they both
did in December;
• Andrew Judd, Director of the Group’s funeral operations and a
member of the Operating Board, joined the Board as an additional
Executive Director with effect from 14 December 2020; and
• Paul Humphreys joined the Board on 23 February 2021, as an
independent Non-Executive Director and as Chair of the Audit
Committee.
We are currently engaged in seeking a new Chief Financial Officer
and we will continue our search for an appropriate candidate for
the role of Chief Executive Officer, coterminous with the outcome of
the root and branch review. Following these proposed appointments,
we believe that we will have a plc Board that is appropriate for
a company of our size, nature and circumstances. Furthermore,
we now have a cohort of Non-Executive Directors with deeply
embedded and relevant skills who are directly contributing to the
change process and interface cohesively with the Operating Board.
As we approach the end of this period of major change our
management needs and requirements have evolved as we become
singularly focused upon our future strategic direction. Accordingly,
we have also refreshed the majority of our Operating Board
including identifying a strong candidate for the role of Chief
Operating Officer and welcoming several new additions to our
Senior Leadership Team: bringing renewed diversity alongside
relevant skills and expertise.
Finally, we are fortunate to have a workforce that demonstrates
a professionalism, pride and empathy in their work and we are
placing a renewed focus upon long-term staff wellbeing, in addition
to the advanced PPE and vaccination programmes specific to the
pandemic, as we seek to enhance the cohesion between the Board
and the workplace.
Dividend Policy
The Company has not paid a dividend since June 2019 and the
Directors do not expect to pay dividends until the business
has returned to a sustainable and stable financial footing,
notwithstanding the fact that the Group retains significant cash
resources and remains cash generative. The Directors understand
the importance of optimising total shareholder return, as well as
the need to maintain a balance between different groups of
stakeholders, and it is the Directors’ intention to return to paying
a dividend as soon as they believe it is financially prudent for the
Group to do so.
Summary outlook
Unfortunately, notwithstanding the significant progress the
business has made since my appointment, our largest shareholder
Phoenix Asset Management Partners, with whom we believed
we were having a constructive dialogue in relation to the future
strategy of the business, has chosen this moment to seek to
assert what would, in effect, be executive control at Board level.
Whilst, in my view, the Group is now sufficiently robust to
sustain this wholly avoidable and unnecessary challenge, it is
nonetheless an unwelcome distraction as we remain dedicated to
dealing with the ongoing fallout from the pandemic. To minimise
disruption, the independent directors have been charged with
taking the necessary steps to convene the required general
meeting of shareholders and they will share their views on the
resolutions to be considered at that time. It will then be for
shareholders to decide on the merits of the Phoenix proposal.
Our response to COVID-19 and how we have considered
stakeholders during this time
• Our commitment to our core social purpose and to being a
responsible business is central to the way in which we operate.
This has been the governing principle behind our response to
the COVID-19 pandemic. The Board has continued to monitor
its responsibilities to its stakeholder groups. Good engagement
has been crucial in understanding the views of our stakeholders
in order to make informed decisions during this period of
unprecedented challenge.
• Throughout this Annual Report, we provide examples of how we:
take into account the likely consequences of long-term decisions;
build relationships with stakeholders; understand the importance
of delivering for our clients; engaging with our employees; the
impact of our operations on society, the communities we serve
and the environment we depend on; and attribute importance to
behaving as a responsible business. Details of how the Board has
complied with Section 172 and how we engage with stakeholders
can be found on pages 42 and 43.
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Dignity plc Annual Report & Accounts 2020
07
Accountability
A strong and experienced
Operating Board
We have identified clear priorities to be
delivered through the Group going forward,
all driven by our refreshed strategy. The
Board has taken the opportunity to
consider the most effective management
structure to lead and deliver this strategy,
with a refined Operating Board, consisting
of the following members:
Clive Whiley
Executive Chairman
Dean Moore
Interim Chief Financial Officer
Andrew Judd
Executive Director of Funeral Operations
Steve Gant
Crematoria Director
Paul Toghill
Director of Pre Arrangement
Mark Hull
Marketing Director
Alan Lathbury
Business Development Director
Dean Moore, Interim Chief
Financial Officer
In light of the management and Board
changes, Dean Moore, who joined the
Group as a Non-Executive Director in March
2020, was appointed as Interim Chief
Financial Officer in December. In his interim
CFO role, Dean is focused on working with
the Operating Board to safeguard the
future success of the business – delivering
both value for shareholders, and a
sustainable growth plan.
We remain determined to grow both
funeral and cremation market share
and safeguard our future success for
the benefit of all our stakeholders.
Clive Whiley, Executive Chairman
The following pages outline the Operating
Board’s perspectives and approach.
Full biographies for the Operating Board can
be found on page 52.
Details of the Financial review can be found on
pages 22 to 26.
Operating Board perspective
Ensuring the client is at the heart of every decision we make is in our
DNA and crucial to the delivery of our strategy, our operational and
commercial focus.
Our client-led approach builds on our purpose and distinctive qualities
and strengths. It positions us well to respond to the changing market
environment and the opportunities this presents.
A strong and
caring business
with a core
social purpose
1
Andrew Judd is responsible for the
provision of funeral services through
our network of colleagues and funeral
locations ensuring we provide a
consistently high standard of client
service and care for the deceased.
2
Steve Gant is responsible for the
operation of our crematoria and
cemeteries and provision of memorials.
He is a long-standing advocate for high-
quality facilities in the industry with
continuous investment and development.
Committed to
remaining
operational
and keeping
people safe
Preparing for
effective
regulation of
the funeral
plan market
3
Paul Toghill has responsibility for
Dignity Pre Arrangement including
proposition, distribution, marketing
and operations. He is also preparing
the business for regulation of the
funeral plan market by the Financial
Conduct Authority (‘FCA’).
4
Mark Hull is responsible for delivering
the Group’s marketing strategy including
brand development, digital marketing
and product and price proposition, in
addition to providing market and client
experience analysis.
Compelling
propositions,
positive client
experience and
engagement
Responding to
the CMA in a
changing and
competitive
market
5
Alan Lathbury has led Dignity’s open
and constructive dialogue with the CMA’s
investigation into the provision of funeral
and cremation services. He is also
responsible for the development of our
crematoria business through acquisition,
public/private partnerships or construction
of new locations.
6
Clive Whiley as Executive Chairman
provides leadership, advice and
direction to the Operating Board by
facilitating the decision-making. He is
also responsible for developing the
Group’s long-term business strategy,
vision and values pending recruitment
of the new CEO.
A leading
position in
the direct
cremation
market
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Dignity plc Annual Report & Accounts 2020
Executive Chairman’s review continued
Strategic report
1 2
3 4
5
6
A strong and caring business with
a core social purpose
Andrew Judd, Executive Director of Funeral Operations | We are
honoured to serve our communities, continually providing vital services
with expertise and compassion.
I pride myself on having first-hand
experience of arranging and conducting
funerals built across a lifelong career in an
industry I am hugely passionate about. It is
these insights I will bring wholeheartedly
into our discussions and ultimately our
decision-making.
Supporting our people and
bereaved families through the
pandemic
Impact of COVID-19 on funerals
Arranging and conducting funerals that are
memorable and dignified is what we do,
but the pandemic has placed restrictions
on how we can deliver these services.
With limited numbers of mourners
able to attend a burial or cremation, we
have adapted the way we work to offer
an alternative approach we call our
Timeless Funeral.
This involves an intimate funeral for close
family members now, who can still say
goodbye in a meaningful, respectful and
safe way.
Then, once restrictions are fully eased,
we can arrange a suitable memorial or
celebration of life service at a later date,
more in line with the client’s original
expectations, as well as the wishes
of the deceased.
We implemented significant changes
to our working practices and provided
enhanced personal protective equipment
to help ensure everyone’s safety in all
situations and environments. Teams
used their skills to navigate complex and
frequently changing guidelines on caring
for the deceased, some of which varied
across the four devolved nations where
we offer our services.
Above all, we put clients first in extremely
demanding circumstances. Funerals should
always be deeply personal occasions, which
is why colleagues worked tirelessly to
ensure the preferences and individual
wishes of families still found space for
expression, even amidst the restrictions
required to stay COVID-secure.
Constantly adapting
While often borne out of necessity, our
experiences this year have highlighted
alternative ways of doing things that have
the potential to enhance our proposition
going forward.
By embracing digital technology, we can
interact with our clients at a distance, if that
makes them feel more comfortable, as well
as in person. It enables funeral services to
be shared with family members and friends
who are unable to attend and helps us plan
for future opportunities to honour and
remember those who have died.
I have already referred to the strain the
pandemic placed on us operationally, but
it also made clear the importance of
safeguarding the mental health of our
people. We are actively promoting a safe
working environment where anyone can
voice concerns or anxieties and access help.
As attention turns to the year ahead,
we know the challenges presented by
COVID-19 will remain for some time yet.
Experience is on our side and I am confident
that same resilient attitude of our people
will come to the fore again.
Our scope, however, must be wider than
COVID-19. We need to constantly adapt
to changing consumer preferences and
respond appropriately to issues raised by
the CMA through its market investigation.
This focus on client needs resonates firmly
with us and is absolutely the right thing
to do and is reflected in my recent
appointment to the Group Board.
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The strength of our people during
the year has been nothing short
of inspirational. They remained
accountable in their roles as critical
workers and continued to take the
greatest care.
Rising to the challenge
Dignity works in a unique industry and
succeeds by helping people through difficult
times with respect, openness and care.
Our operational colleagues are integral to
this success, representing one of the most
important interfaces in the business –
our service to clients.
We endeavour to make a positive difference
to an essential societal need, but 2020, and
specifically limitations caused by the COVID-
19 pandemic, have tested our collective
resolve like never before.
The strength of our people during the year
has been nothing short of inspirational.
They remained accountable in their roles
as critical workers and continued to take the
greatest care, perhaps not with the public
visibility or acclaim that other frontline
responders had, but always with a level of
professionalism and sensitivity that clients
appreciated.
Together we arranged and delivered more
funerals for our clients than at any other
time in our history, even when our
operational capacity was under strain.
Financial summary 2020 H1 H2 FY
£m £m £m
Underlying operating
profit – 2019 30.5 25.8 56.3
Impact of:
Number of deaths 20.3 3.3 23.6
Market share 4.4 0.1 4.5
Average revenues (19.0) (11.3) (30.3)
Net cost base changes (2.5) (1.6) (4.1)
Underlying operating
profit – 2020 33.7 16.3 50.0
See Operating Review for further details.
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The CMG has worked tirelessly
to create an environment where
bereaved families can safely say
a respectful goodbye to their
loved ones.
Adapting to change
2020 was an extraordinary year. I am very
proud of how The Crematorium and
Memorial Group (‘CMG’) responded to
challenges that none of us had previously
faced in our careers. Our commitment to
remaining operational has been evident
and we continued to provide a vital service
throughout the pandemic.
CMG has been active in encouraging a
consistent, sector wide response to the
pandemic by local authorities, private
crematorium operators, industry bodies
and the funeral directors that use our
facilities. We have met weekly with central
government to offer our expertise and
regularly shared information about our
service capabilities with Local Resilience
Forums.
Due to the pandemic, we have needed to
be flexible and make significant changes to
the way we operate. This has included the
provision of additional service slots during
weekdays or weekends. As just one example
of our continuity planning, approximately
Operating safely
From supplies of PPE, to detailed operational
guidance and the installation of protective
screens, we have provided colleagues with
the equipment and knowledge they need to
provide essential services in a COVID-safe way.
Easing the burden
Our Stay Well campaign has promoted
wellbeing and positive mental health.
All colleagues have access to our Employee
Assistance Programme so they can
confidentially seek professional support
at any time.
Committed to remaining operational
and keeping people safe
Steve Gant, Crematoria Director | A long-standing advocate of high
standards in the industry; continued investment and development.
60 colleagues were upskilled, and each
crematorium partnered with a neighbouring
CMG facility to provide greater flexibility
of resources.
Leading the sector in this way was
instrumental in assisting as many mourners
as possible to participate in the funeral
during lockdown.
Restrictions to funerals, such as the number
of attendees or the closure and re-opening
of cemeteries, crematoria grounds and
offices to visitors, has presented the
challenge of keeping the public informed
about the services we were able to provide
within these guidelines.
Enhancing our locations
As a long-standing advocate of high
standards, we continually invest in our
crematoria to ensure we have modern
facilities that meet the changing needs
of local communities or to react to
operational needs.
While we continue our long-term programme
of investment and refurbishment, we
sometimes need to respond quickly to
incidents outside of our control. During
the year, Haltemprice and Randall’s Park
crematoria respectively suffered damage
from fire and flooding. We took the
opportunity to not only refurbish these
crematoria, but also to modernise them
in line with our other flagship facilities.
Looking forward
I am confident about the future of CMG and
our ability to serve both funeral directors
and the bereaved in our local communities.
We will continue to respond to the
challenges of the pandemic but will also
endeavour to future proof our facilities and
install the latest technology, so we set a high
bar for the crematoria sector in terms of
standards and choice.
Financial summary 2020 H1 H2 FY
£m £m £m
Underlying operating
profit – 2019 20.8 17.6 38.4
Impact of:
Number of deaths 7.4 0.4 7.8
Market share 0.9 0.1 1.0
Average revenues (4.3) 1.4 (2.9)
Cost base changes (1.1) (0.4) (1.5)
Underlying operating
profit – 2020 23.7 19.1 42.8
See Operating Review for further details.
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We also witnessed an increased demand for
unattended direct cremations. We adapted
to meet this challenge whilst continuing to
provide facilities for those that wanted a
more traditional cremation service.
Protecting our community and our
colleagues
The safety of our visitors and colleagues is
one of my greatest priorities. To help reduce
transmission of COVID-19 and ensure that
social distancing guidelines were followed,
we have invested in PPE, perspex screens
in our public offices and created one-way
systems at all our crematoria. We have also
ensured there is enough time between
services to thoroughly sanitise our facilities.
Maximising our investment in technology
In recent years, we have invested in audio
visual equipment at the majority of our
crematoria which this year has proven to
be a timely and invaluable addition to
the services we offer. We can provide
personalised tributes to the person that
died, but also record or webcast the funeral
for those that cannot attend the service.
During the first half of the year our
installation programme was accelerated
at the remaining sites.
Clear and accessible advice
Stay at home instructions shifted client
focus away from locations and more
towards our digital information channels.
Dignity’s funeral and crematoria websites
were regularly updated with comprehensive
advice on planning and attending a service
in line with changing COVID restrictions.
We also shared insight and responded
to general queries via our social media
platforms.
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Preparing for effective regulation
of the funeral plan market
Paul Toghill, Director of Pre Arrangement | Statutory regulation
presents a significant opportunity to create a market that consistently
delivers the best outcomes for all consumers.
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As one of the UK’s leading providers
of pre-arranged funerals, Dignity is
a long-term advocate for stronger
market controls. We welcome the
decision to introduce statutory
regulation and are working closely
with the FCA as it develops its
future approach.
Market context
In an unprecedented year, Dignity’s funeral
planning business has demonstrated its
resilience and an ability to deliver a strong
market performance, despite the distraction
and disruption of external factors.
Whilst COVID-19 has taken its toll on the
wider societal and economic environment,
we have continued to provide clients
exemplary levels of service, adapting and
being flexible in the environment in which
we have been operating. This client-focused
adaptability is a trait we pride ourselves on,
this year seeing both growth in our core
funeral plan offering as well as in our direct
cremation funeral plan model. Our position
of strength in being both a funeral director
and funeral plan provider allows us to
continue to offer clients both a competitive
price point and a market-leading, feature
rich product proposition.
We have also continued to grow our
business through our corporate partners,
including testing different distribution
models and some innovative products
shaped around specific client needs. We
launched a number of new partnerships in
2020, which has given us the opportunity to
grow our volumes further. In addition, 2021
will see us launch a number of initiatives to
grow and develop our funeral director and
direct distribution models.
In addition to funeral plans we continue to
work alongside a number of large UK insurers
to provide funeral propositions which bolt
on to their whole of life assurance products.
Regulation and the funeral plan market
In March 2020, HM Treasury announced that
prepaid funeral plans would be subject to
regulation by the Financial Conduct Authority
(‘FCA’). This decision followed several years
of campaigning by Dignity. We believe
regulation will prevent the small number
of unscrupulous firms undermining what
is otherwise a responsible industry. On
2 March 2021 the FCA published their
consultation paper with their proposed
approach to regulation.
If the FCA rules are enacted in the way
they are currently drafted they will have a
profound impact on both the wider industry
and Dignity. We welcome the opportunity to
work closely with the FCA over the coming
months to ensure the rules provide the
much needed consumer protection, but also
supporting the FCA in their understanding
of the potential unintended consequences
a commission ban would have in removing
quality distributors that provide a valuable
customer service from the market as well
as those that are undermining the industry.
We have also taken a decision to reduce
our instalment terms on the majority of our
plans from 25 to 10 years with effect from
May. We will be reviewing alternative low-
cost product options in the coming months.
Committed to a move towards
a better market
Ahead of statutory regulation, we have
been working diligently to ensure the FCA
readiness of our business. We are already
an organisation that has market-leading,
feature rich products, competitively priced
with high service standards. The majority
of our team already have regulated
backgrounds, as do many of our corporate
partners, such as those in the building
society and insurance space.
Despite any impact the current drafting
may have on our volumes as a result of a
commission ban, we remain confident that
Dignity is in a strong market position, and
that we will be able to deliver products and
a service that will meet and exceed the
regulatory standards set to be established
across the market.
Helping consumers make informed decisions
Regulation timeline
Providing consumers with high
standards and value:
Value – we offer some of the most
comprehensive plans on the market,
underpinned by our cremation
disbursement guarantee.
Choice – we deliver a wide range of choice,
flexibility and price options.
Trust – we provide funeral plans
consumers can trust and know that their
money is secure.
Quality – we are committed to high-quality
service standards and improving outcomes
for consumers.
2019
June HM Treasury consult on
statutory regulation through
the FCA.
2021
March consultation paper issued.
April responses to consultation
to be submitted.
Q3 Policy Statement with Final Rules
will be published.
September FCA application open.
2026
FCA to evaluate the
effectiveness of their
measures.
2020
March HM Treasury confirmation.
November HM Treasury lay
required legislation.
2022
July FCA to regulate
funeral plans.
Planning ahead for peace of mind
1,089,000
Pre-arranged funerals
We have already helped more than 1,089,000
customers plan for their funerals in advance,
of which 558,000 remain outstanding.
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We are committed to ensuring clients
achieve positive outcomes through
all their interactions with us, evolving
to meet their changing needs and
expectations and providing greater
choice and flexibility.
Funeral Notices
We offer a complementary online Funeral Notice
service providing our clients with a simple and
respectful way of sharing the details of their loved
one’s funeral online with family and friends.
• 23,750 clients published a Funeral Notice in 2020.
• Over 4.2 million views of a Funeral Notice.
• Handled over £2.5 million in donations to clients’
chosen charities through Funeral Notices.
Compelling propositions, positive
client experience and engagement
Mark Hull, Marketing Director | Providing greater choice and flexibility
is an important part of Dignity’s broader offering to clients, enabling
them to engage with us in a manner that suits them; to choose a service
that works best for them, whilst we continue to take the greatest care of
our clients. It is central to our reputation and relationships and key to our
ability to create value and grow market share.
A leading digital offer
Like many businesses today, our client
journey now typically begins online. In 2010,
only nine per cent of our Dignity Funeral
clients found our details through the internet,
last year it was over half. For Simplicity
Cremations with no physical branches, every
single Simplicity client will have started online.
Therefore, it is essential that we make it easy
for potential clients to find us online then
provide meaningful help and advice when
they reach our websites. Our websites
provide comprehensive guidance from
subject matter experts on everything to do
with funerals or funeral plans. Each branch
also has a micro-site containing localised
information about that business and its
products and services, including pricing.
We have achieved a lot in the past three
years – our combined website traffic has
grown from just over 1 million hits in 2017 to
5.13 million in 2020. Our digital channels are
continuing to generate increasing volumes
of calls into our branches, enquiries to our
Simplicity call centre and sales of Funeral
Plans. We have been awarded the Feefo
Platinum Trusted Service Award for both
Simplicity and Dignity in 2020 and we passed
10,000 online reviews for our local businesses
with an average rating of 4.89 out of 5.
Providing digital solutions during
the pandemic
The pandemic has increased our clients’
digital interaction with us. Our websites
provide the latest information and help
clients understand what type of funeral is still
possible within the Government restrictions
– both through our funeral business and at
our crematoria. We adapted our processes
and products, including distanced
arrangements being made using digital
information packs and we’ve enabled
more people to view funeral services
through streaming.
Providing greater choice and flexibility
The pricing of funerals is complex and
requires testing to ensure that it’s easy for
the bereaved to understand exactly what
they are paying for. The pace of change
and evolution in the funeral market has
accelerated significantly with increased
demand for personalised funerals, products
such as direct cremation and woodland
burials; and specialist needs in areas of the
UK where traditions, strength of religious
beliefs and the demographic make-up are
all changing.
During 2020, we constantly trialled different
products and prices and we haven’t been
afraid to try alternatives that benefit both
the business and clients. Over 250 branches
currently have comprehensive price lists
online, with the remainder to be updated
by Summer 2021.
An award-winning team
I am very proud of the team I lead and our
continued progress in creating a leading
marketing function that attracts and retains
exceptional marketing talent. In support of
this, I am delighted that our work for Dignity
and Simplicity has been recognised in 2020
with accolades at both the Marketing Society
Brave Awards and the Chartered Institute
of Marketing Excellence Awards.
42.5 per cent increase in call volumes
Our website continues to provide an
increasing volume of calls into our local
businesses, with 228,673 trackable calls in
2020 (+42.5 per cent year-over-year).
Creating a clear brand identity
We continue to develop the identities of
the Group and its component businesses.
In the past, funeral directors had little need
for marketing, however, in an increasingly
competitive sector, with demand for a
wider range of products, it’s imperative to
differentiate ourselves from other providers.
The way we market our business has
changed a great deal in the past three years,
but there remains a lot to do. To continue
to create value and grow market share we
use a blend of national and local marketing,
utilise the latest tools and techniques and
ultimately make the decision for the client
to use us an easy one.
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5.13 million
We have achieved a lot in the past three
years – our combined website traffic has
grown from just over 1 million in 2017 to
5.13 million in 2020.
The role of technology during the
COVID-19 pandemic
We adapted our processes and products,
including distanced arrangements being
made using digital information packs and
we’ve enabled more people to view funeral
services through streaming.
Digital trends
As digital adoption trends evolve we
continue to invest in technology and expertise
to ensure we can make it easy for people to
find us online and that their digital experience
is supportive and useful.
3.9 million
Visitors to our Dignity website
During 2020, we received 3.9 million visitors
to www.dignityfunerals.co.uk.
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Responding to the CMA in a changing
and competitive market
Alan Lathbury, Business Development Director | The funeral sector
remains fiercely competitive and continues to evolve notwithstanding
the impact of COVID-19. The CMA’s investigation into the sector provides
a significant opportunity to align standards and protect consumers.
The UK funeral market
The UK funeral market is becoming more
dynamic – it is more digital than ever before,
and more driven by the evolving client
needs. However, in 2020 the operation of
the funeral industry was largely determined
by the necessary Government restrictions
put in place to reduce COVID-19 transmission
rates. The long-term effects of these
precautions and the impact on consumer
behaviour will emerge as the restrictions
are lifted.
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 clients to exercise the
choice that exists, especially through greater
pricing transparency. The CMA process has
proposed measures to help address this
across the market.
Deaths in Great Britain
In 2020 initial total estimated deaths in
Great Britain for 52 weeks was 663,000,
14 per cent higher than the 52 weeks in
2019. 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 have declined significantly since
the early 1990s from 640,000 to a low of
539,000 in 2011, the last six years have seen
deaths above that level. The ONS (2019
based projections) expects long-term
increases in the number of deaths, but
these projections have been impacted
as a result of COVID-19.
CMA Market Investigation
Overview
In November 2018 the CMA announced its
investigation into the funeral and crematoria
industry. This came 20 years after the last
study of the sector by the former competition
regulator (Monopolies and Mergers
Commission) and followed several months
of market engagement. The CMA sought
to ‘review how well the market works and
whether consumers are getting a good deal.’
What followed was two years of engagement
with providers in the sector, including Dignity,
as well as wider calls for evidence from third
sector organisations (such as bereavement
charities and consumer groups).
The CMA has concluded that consumers
find it intrinsically challenging to purchase a
funeral and can be hindered by lack of easily
accessible and comparable information,
an inability to observe the quality of care
provided, and by barriers to entry and local
concentration in crematoria services.
Dignity’s participation and response
During the investigation we have responded
to the formal CMA process, whilst also
offering sector expertise through our
engagement with the regulator. Our input
has included:
• Over 11 responses to CMA “Requests
For Information” (‘RFI’).
• Supply of thousands of historical e-mail
correspondence.
• Direct engagement via eight face-to-face
or virtual meetings with the CMA team.
As part of our contributions and evidence
to the regulatory process, we hosted
visits with both CMA panel members and
its wider executive team. This offered a
platform for Dignity to showcase its market-
leading services, for both front and back
of house facilities.
Key considerations we’ve communicated
to the CMA include:
• Ensuring that service elements of the
funeral process were fully understood and
assessed, alongside other key aspects,
such as price and transparency.
• Strongly recommending that any
regulation must be independent,
consumer-focused, and implemented
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Dignity has engaged openly, and
constructively with the CMA since the
market investigation into the supply
of services by funeral directors at
the point of need and the supply of
crematoria services was announced
in 2018 and strongly supports the
opportunity to improve standards
within the sector.
Market Drivers
Societal
• The way people arrange a funeral is
changing – moving away from tradition
and becoming increasingly digital and
personalised.
Competition
• To ensure the sector remains
competitive, it must evolve and
modernise services in a way that better
meets client priorities and expectations.
Regulation
• Dignity has been leading the call for
regulation and higher standards in the
funeral sector.
Impact of COVID-19
The whole of the UK has been affected
by COVID-19 and this has had an
unparalleled impact on the number
of deaths registered in 2020. Latest
figures from the ONS indicated
COVID-19 deaths in Great Britain
(where coronavirus (COVID-19)
was mentioned on the death
certificate) at 87,500 in 2020.
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Recommendation for new inspection and
registration scheme to improve the quality
of funeral directors’ back-of-house standards.
This covers collection and transport, care,
storage and preparation of the deceased.
This will potentially be funded through
a levy or license fee imposed on funeral
directors.
After this date, Dignity and others in
the industry will be required to share
information with the CMA. This reporting
and future engagement with Dignity and
the wider sector, will enable the regulator
to ensure its remedies are being applied
correctly, and to understand if the actions
are effective in supporting the bereaved.
for all funeral and crematoria services
providers to ensure a consistent level of
consumer standards across the market.
• Highlighting the capital investment made
by Dignity to continually deliver high
service standards, including provision of
mortuary capacity, development of our
employees, and investment in technology.
It is clear from the financial data 2018 to
2020 that both funeral mix and average
funeral revenues have been affected by
structural changes in the market and the
COVID-19 pandemic. We have worked with
the CMA to ensure that the increased level
of competition and increased engagement
of consumers through online activity will not
be restricted or limited by the proposed
future remedies.
Underlying average revenue (£)
4,000
3,000
2,000
1,000
0
3,800
3,735
3,578
3,337
2017
2018
2019
2020
Full Service Revenue
It will be important for Dignity to continue to
work closely with the CMA and Government
on the implementation and structuring
of regulation, including any appointed
regulator, building on the platform already
being developed by the Funeral Service
Consumer Standards Review (‘FSCSR’).
Accordingly, we have strengthened
our Senior Leadership Team with the
appointment of a Head of Governance
reporting directly to the Chairman.
Commercial remedies that build on and
improve recent industry progress to help
consumers fully engage with the economic
aspects of choosing a funeral provider.
The key elements of this are:
• A Price List that adheres to a specified
CMA template.
• Provision of business information to clients.
• Prohibition of certain types of commercial
arrangements.
The statutory deadline for the implementation
of the remedies is 17 June 2021. We already
comply with many of the remedies and
expect to meet this deadline.
We are a long-term advocate
of improving standards, quality,
transparency and providing greater
choice in the funeral sector.
CMA Market Investigation summary
As one of the UK’s major funeral related
service providers, Dignity has welcomed
and worked with the CMA at each stage
of the investigation process. We support
the conclusions, which focus on
measures to support consumer choice
and transparency. We also welcome the
CMA’s recommendation to Government
for quality and standards regulation in
the UK.
During the next phase of the regulatory
process, which includes a public
consultation on the outlined ‘commercial
remedies’, we look forward to further
engagement with the CMA to ensure the
best long-term outcome for our clients
and the bereaved.
We firmly believe that for the proposed
remedies to be truly effective for
consumers, they must be applied across
all funeral directors and crematoria. This
is vital to ensure that all consumers of
funeral services are equally protected.
Overall, we are confident that the
remedies will help the sector meet the
evolving demands of its clients’ and
continue to improve consumer choice
and propositions in the market.
Dignity has led the calls for greater
regulation of both at need and pre-
arranged funeral sectors, while
continuing to set the standard for
what constitutes best practice in the
industry.
CMA Market Investigation timeline
2018
• CMA announced a market
study into the funeral
industry.
• Nov 2018 CMA issued
funeral market study interim
report and consultation.
2019
• In Apr 2019 CMAs issue
statement published.
2020
• Jun 2020 deadline for all parties’
responses to working papers
published in February.
• Jun 2020 deadline for final
submissions before the Provisional
Decision Report.
• Aug 2020 Provisional Decision
Report published.
• Sept/Oct 2020 Provisional Decision
Response (‘PDR’) hearings.
• Dec 2020 CMA issue Final Decision
Report (‘FDR’).
2021
• 17 Jun 2021 Statutory
deadline.
2018
2019
2020
COVID-19
pandemic
impact and
response
2021
• Dignity’s response
to interim report.
• Dignity letter issued
in Jan 2019.
• Dignity issue final FDR
statement in Dec 2020.
• Statutory deadline.
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14
Dignity plc Annual Report & Accounts 2020
Executive Chairman’s review continued
Strategic report
A leading position in the direct
cremation market
Direct cremation is a significant, growing and evolving proposition
in the funeral industry that impacts every area of our business; as a
funeral director, as a crematorium operator, and as a pre-arranged
funeral provider.
An alternative choice
We know that consumer demand for
alternative and lower priced funerals is rising.
There is a need to cater for those clients that
are seeking to save costs, but also those that
want more control over funeral arrangements.
Awareness of direct cremation as an option
has grown to 52 per cent, with 42 per cent
who would consider using this service
(source: SunLife Cost of Dying report 2020).
Yet in 2019 direct cremations only made
up 2.4 per cent of all funerals in the UK.
2020 has seen direct cremation grow
significantly, in part due to COVID-19.
Through both Simplicity Cremations and in
the CMG, we have seen direct cremation
volumes almost double compared to 2019.
It made up 16 per cent of CMG’s cremation
volumes in 2020 alone. The impact of the
Government’s restrictions placed on funerals
has unsurprisingly forced people to think
differently about the type of service they
would want for themselves or their family
members. We expect this societal shift
to continue.
Amidst a greater focus on funeral costs
and a shift away from tradition, direct
cremation presents a compelling proposition
for the bereaved. By removing the ceremony
or service, direct cremations are much
less expensive, with prices starting from
around £1,000.
It is also very much an active choice for
an increasingly secular, less traditional
segment of consumers. We have found
that many families choose an unattended
direct cremation, whilst holding a more
personalised attended service at an
alternative venue. Also, and particularly
relevant under the restrictions during the
pandemic, some people are choosing to
hold a celebration of life or memorial service
at a completely different time and date
to the cremation itself.
Unique in our service capabilities
We are uniquely positioned as a business
in being able to offer direct cremation at all
levels through our national infrastructure;
either in the care we provide as a funeral
director, as a crematorium operator, or
by facilitating the service through our
dedicated direct cremation brand (Simplicity
Cremations). We also offer consumers pre-
arranged plan options for this type of funeral
– a product that is growing in popularity.
We deliver direct cremations through our
network of 46 crematoria, which provide
allocated slots that can be utilised by our
own direct cremation business, but also
by non-Dignity funeral directors and
agreements with other providers.
Years of experience and operational
efficiencies delivered through Dignity’s
funeral directors and facilities across the UK
underpins the high-quality care provided
through Simplicity Cremations, a capability
that the majority of direct cremation
providers simply do not have.
Future growth
Online continues to be our key route to
market and consumers have responded well
to our innovative Simplicity Cremations TV
and radio advertising campaign. However,
it is important to keep exploring how we
can reach all of those consumers that are
seeking an alternative solution for a funeral
or cremation service.
In addition to Simplicity direct cremations,
we have begun trials offering direct
cremation as a service through several of
our funeral locations, and we are set to roll
this out across more of Dignity’s network
in the next year.
By rethinking how a funeral service is both
marketed and delivered, the Company has
already made a significant step forward in
giving clients greater choice and flexibility
when it comes to arranging a funeral. Direct
cremation is presenting signs of rapid growth
and we will continue to seek ways to expand
our market-leading position in this space.
1 2
3 4
5
6
We are committed to increasing
choice for clients, and ensuring that
there is a wide range of options
available at different price points. 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.
Clive Whiley, Executive Chairman
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Simplicity Cremations: A leading
provider of direct cremation services
in the UK
In December 2016 we launched our own
direct cremation business, Simplicity
Cremations, as a response to the
increased competition, changing
consumer behaviour, and growing calls
for alternative and lower cost funerals.
It is one of the UK’s first predominantly
online cremation offers, at one of the
most competitive price points.
Arrangements are made over the phone
with a team of experts and there is no
requirement to visit a physical branch.
Under the Simplicity Cremations
brand, families have access to affordable
direct cremation options and smaller,
family-led services.
The services provide all the practical and
essential elements of a funeral without
the obligation to pay for a ceremony or
other features of a traditional service
they may not want.
This is supported by the years of
experience and uncompromised quality
of care delivered by Dignity funeral
directors and national facilities.
52%
Awareness of direct cremation as an option
has grown to 52 per cent.
106%
Simplicity Cremations performed 4,300 direct
cremation based services in 2020, an increase
of 106 per cent over the prior period.
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Dignity plc Annual Report & Accounts 2020
15
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 financial
and non-financial KPIs used
to monitor the performance
of the business against its
strategy for many years.
These KPIs have continued
to remain relevant during
this period. Financial KPIs
are measured by reference
to underlying operating
performance and are
therefore unaffected by the
accounting policy changes
made in either period.
Financial
Delivering
Excellent
Client
Service
Strategic &
Operational
How we measure
performance
Financial KPIs
• We monitor our performance
by measuring and tracking
KPIs that we believe are
important to our longer-term
success.
• The Group uses both financial
and non-financial KPIs to
manage the business and
ensure the Group's strategy
and objectives are being
delivered.
• 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 on strategic objectives.
No particular KPI is solely
relevant to one aspect of the
Group’s strategy.
Underlying earnings
per share
(pence)
46.6p
Underlying cash generated
from operations
(£m)
£76.4m
60.6p
46.6p
Definition
This is underlying profit after
tax divided by the weighted
average number of Ordinary
Shares in issue in the period.
Developments in 2020
The reduction follows the
decrease in underlying
operating profit explained
below.
£71.8m
£76.4m
Definition
This is the statutory cash
generated from operations
excluding non-underlying
items and the impact of
consolidating the Trusts,
IFRS 15 and IFRS 16.
Developments in 2020
The Group continues to
convert operating profit
into cash efficiently.
2019
2020
2019
2020
Underlying
operating profit
(£m)
£55.7m
Average revenue
per funeral
(£)
£2,522
£63.3m
£55.7m
Definition
This is the statutory operating
profit of the Group excluding
non-underlying items and the
impact of consolidating the
Trusts, IFRS 15 and IFRS 16.
Developments in 2020
Underlying operating
profit declined year-on-year,
despite higher deaths. This
is primarily due to lower
average revenue due to
the pandemic.
£2,930
£2,522
Definition
Underlying funeral revenue
divided by the number of
funerals performed in the
relevant period.
Developments in 2020
Restrictions in client choices
due to COVID-19 have
adversely impacted average
revenue as clients opted for
simpler funerals.
2019
2020
2019
2020
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16
Dignity plc Annual Report & Accounts 2020
Key performance indicators continued
Strategic report
Non-financial KPIs
Total estimated number
of deaths in Britain
(number)
663,000
Cremation
market share
(per cent)
11.2%
584,000
663,000
Definition
This is as reported by the
Office for National Statistics.
11.1%
11.2%
Developments in 2020
Deaths were materially
higher than originally
anticipated due to the
pandemic.
Definition
This is the number of
cremations performed by
the Group divided by the
total estimated number
of deaths in Britain.
Developments in 2020
Market share is broadly
stable.
2019
2020
2019
2020
Funeral market share
excluding Northern Ireland
(per cent)
12.0%
Number of cremations
performed
(number)
74,500
11.7%
12.0%
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 2020
Market share has improved
slightly.
74,500
64,800
Definition
This is the number of
cremations performed
according to our
operational data.
Developments in 2020
Changes are a consequence
of the total number of
deaths and the Group’s
market share.
2019
2020
2019
2020
Number of funerals
performed
(number)
80,300
Active pre-arranged
funerals
(number)
558,000
523,000
558,000
80,300
69,400
Definition
This is the number of
funerals performed by the
Group according to our
operational data.
Developments in 2020
Changes are a consequence
of the total number of
deaths and the Group’s
market share.
2019
2020
2019
2020
Definition
This is the number of pre-
arranged funerals (both trust
funeral plans and insurance
backed) where the Group has
an obligation to provide a
funeral in the future.
Developments in 2020
This increase reflects
continued sales activity (both
trust funeral plans and
insurance backed) offset by
the crystallisation of plans
sold in previous periods.
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Dignity plc Annual Report & Accounts 2020
17
Our aim is to be at the forefront of the sector
in terms of quality, transparency, standards,
choice and value-for-money.
Non-financial KPIs continued
Delivering excellent client service
With a focus on delivering the highest levels of excellent
client service and standards of care, our client surveys
enable us to track and improve the provision of our
services. This includes feedback on how we share
information with clients and how we guide families
through the arrangement process.
Client perception on quality and value-for-money
Although many things are changing within the industry,
it is still the case that recommendation and previous
experience are key to maintaining our reputation as a
quality and standards leader. We therefore must ensure
our clients are consistently receiving the best levels of
client care and value-for-money, irrespective of the type
of service we have performed for them. Our survey data
helps us understand this.
Digital engagement
As digital adoption trends evolve, we continue to invest in
technology and expertise to ensure we can make it easy
for people to find us online. We continue to develop our
digital communication channels which enhances customer
engagement and offers an additional channel to hear from
our clients. Our combined website traffic has grown from
just over 1 million in 2017 to 5.13 million in 2020.
Meeting and exceeding expectations (% of clients)
100%
99%
98%
97%
96%
95%
66%
64%
62%
60%
58%
56%
54%
6
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D
0
2
c
e
D
Met and exceeded
expectations (left hand axis)
Exceeded expectations
(right hand axis)
(12 month rolling average)
Recommending our services (% of clients)
100%
99%
98%
97%
96%
95%
6
0
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D
7
0
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8
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9
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(12 month rolling average)
Percentage of clients willing to recommend
Dignity’s services
Maintaining 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 2020
Reputation and
recommendation
98.9% (2019: 99.2%)
98.9 per cent of respondents
said that we met or exceeded
their expectations.
97.9% (2019: 98.0%)
97.9 per cent of respondents
would recommend us.
Quality of service and care
99.9% (2019: 99.9%)
99.9 per cent thought our staff
were respectful.
99.6% (2019: 99.7%)
99.6 per cent thought our
staff listened to their needs
and wishes.
99.1% (2019: 99.1%)
99.1 per cent agreed that
our staff were compassionate
and caring.
High standards of facilities
and fleet
99.7% (2019: 99.8%)
99.7 per cent thought our
premises were clean and tidy.
99.2% (2019: 99.7%)
99.2 per cent thought our
vehicles were clean and
comfortable.
In the detail
98.9% (2019: 99.2%)
98.9 per cent of clients agreed
that our staff had fully explained
what would happen before
and during the funeral.
99.2% (2019: 99.0%)
99.2 per cent said that the
funeral service took place
on time.
98.0% (2019: 98.3%)
98.0 per cent said that the
final invoice matched the
estimate provided.
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18
Dignity plc Annual Report & Accounts 2020
Operating review
Strategic report
Funeral services relate to the provision
of funerals and ancillary items, such as
memorials and floral tributes.
During the year we had to
significantly change our working
practices to ensure the safety of
our colleagues and clients while
at the same time delivering the
appropriate service levels during
the pandemic.
Andrew Judd
Executive Director of Funeral Operations
Funeral
services
795
Number of funeral
locations we operate
in the UK.
80,300
Number of funerals
conducted during 2020.
Performance in 2020
Group operating profit share
(before central overheads)
28% (2019: 60%)
Group underlying operating profit
share (before central overheads)
54% (2019: 59%)
Underlying revenue (1)
£202.6m
(2019: £203.3m)
Operating profit
£17.5m
(2019: £54.7m)
Underlying operating profit
£50.0m
(2019: £56.3m)
Funeral mix and underlying average revenue (FY 2020 Actual)
Average underlying revenue (1) (£)
Volume mix (%)
Underlying weighted average revenue (1) (£)
£2,397
Full service 3,337 (2019: 3,578)
Simple and Limited Service 1,941 (2019: 2,047)
Pre-need 1,911 (2019: 1,846)
Other (including Simplicity) 940 (2019: 770)
Full service 39 (2019: 52)
Simple and Limited Service 25 (2019: 14)
Pre-need 28 (2019: 27)
Other (including Simplicity) 8 (2019: 7)
Underlying weighted average revenue 2,397 (2019: 2,699)
Average ancillary revenue 125 (2019: 231)
(1) Total underlying revenue was £202.6 million (2019: £203.3 million). On a statutory basis the Group recognised Funeral services revenue of £274.8 million (2019: £262.1 million).
See note 3 for further details.
Financial summary 2020
H1 H2 FY
£m £m £m
Underlying operating profit – 2019 30.5 25.8 56.3
Impact of:
Number of deaths 20.3 3.3 23.6
Market share 4.4 0.1 4.5
Average revenues (19.0) (11.3) (30.3)
Net cost base changes (2.5) (1.6) (4.1)
Underlying operating profit – 2020 33.7 16.3 50.0
Items totalling £32.5 million (2019: credit £1.6 million) excluded from underlying operating profit resulted in statutory
operating profit of £17.5 million (2019: £54.7 million). These items are discussed in the Financial review but relate to
non-underlying items and the impact of consolidating the Trusts, applying IFRS 15 and adopting IFRS 16.
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Dignity plc Annual Report & Accounts 2020
19
Overview
As at 25 December 2020, we operated
from a network of 795 (2019: 820) funeral
locations. This network covers the UK and
trades under locally established names.
Performance
We conducted 80,300 funerals (2019:
69,400) during the period under review,
more than at any stage in our history
despite operational constraints resulting
from COVID-19.
Underlying operating profit was £50.0
million (2019: £56.3 million), down by 13
per cent due to the impacts of COVID-19,
this can be explained by the financial
summary table on page 18.
Progress and Developments
Market share
Approximately one per cent of all funerals
were conducted in Northern Ireland.
Excluding Northern Ireland, these
funerals represented approximately
12.0 per cent (2019: 11.7 per cent) of
total estimated deaths in Britain. Whilst
funerals divided by estimated deaths is a
reasonable measure of our market share,
the Group does not have a complete
national presence and consequently, this
calculation can only ever be an estimate.
Year-on-year growth in market share
is primarily attributable to growth in
Simplicity 0.3 per cent and pre-arranged
funeral plans 0.1 per cent. Market share
of full, simple and limited funerals was
slightly below the prior year.
On a comparable basis, excluding any
funerals from locations not contributing
to the whole of 2019 and 2020, market
share was 11.9 per cent, compared to
11.6 per cent in 2019. This builds on
the improvement made in 2019 where
comparable market share grew by 0.2 per
cent, both 2020 and 2019 are a significant
improvement on the dramatic market
share declines witnessed in 2016 and
2018, however, further trials are necessary
to complete the Group’s understanding
of the changing relationship between
price and market share.
Funeral mix and Average revenue
As demonstrated in the table, the year-
on-year decline in the underlying average
revenue is primarily due to the COVID-19
pandemic. Q2 was particularly impacted
due to the Group temporarily withdrawing
the provision of limousines in the interests
of the welfare of its staff and clients. Other
choices such as church services also
stopped being possible during this time.
Funeral mix and average revenue Q1 Q2 H1 Q3 Q4 H2 FY
2020 2020 2020 2020 2020 2020 2020
Funeral type Actual Actual Actual Actual Actual Actual Actual
Underlying average Full service 3,521 3,080 3,341 3,308 3,351 3,332 3,337
revenue (£) Simple and Limited service 1,972 1,953 1,956 1,897 1,937 1,917 1,941
Pre-need 1,894 1,869 1,880 1,921 1,979 1,953 1,911
Other (including Simplicity) 888 992 987 811 927 937 940
Volume mix (%) Full service 50 26 37 40 43 42 39
Simple and Limited service 14 37 26 25 21 22 25
Pre-need 29 28 28 27 28 28 28
Other (including Simplicity) 7 9 9 8 8 8 8
Underlying weighted average (£) 2,648 2,136 2,360 2,381 2,476 2,443 2,397
Ancillary revenue (£) 175 49 101 174 169 161 125
Underlying average revenue (£) 2,823 2,185 2,461 2,555 2,645 2,604 2,522
Full service volume as a percentage
of full, simple and limited (%) 78 41 59 62 67 66 61
Funeral mix and average revenue FY Q1 Q2 H1 Q3 Q4 H2 FY
2018 2019 2019 2019 2019 2019 2019 2019
Funeral type Actual Actual Actual Actual Actual Actual Actual Actual
Underlying average Full service 3,735 3,542 3,585 3,558 3,608 3,613 3,605 3,578
revenue (£) Simple and Limited service 2,350 2,159 2,000 2,089 2,000 1,995 1,996 2,047
Pre-need 1,705 1,826 1,789 1,806 1,879 1,899 1,890 1,846
Other (including Simplicity) 570 773 734 756 772 780 774 770
Volume mix (%) Full service 48 52 53 52 52 52 52 52
Simple and Limited service 19 14 13 14 14 13 13 14
Pre-need 27 27 28 28 27 28 28 27
Other (including Simplicity) 6 7 6 6 7 7 7 7
Underlying weighted average (£) 2,734 2,691 2,705 2,694 2,717 2,724 2,717 2,699
Ancillary revenue (£) 239 213 233 225 227 214 224 231
Underlying average revenue (£) 2,973 2,904 2,938 2,919 2,944 2,938 2,941 2,930
Full service volume as a percentage
of full, simple and limited (%) 72 79 80 79 79 80 80 79
There was one branch opening and
26 closures in the year. These closures
represent funeral locations where leases
have naturally come to an end and have
not been renewed and also include nine
freehold closures.
Strategic Focus and Outlook
The Group is focusing on its root and
branch review which will be completed
in the second quarter of 2021. We
continue to develop and trial different
service offerings and propositions and
will continue to work with the regulator
and Government to ensure the
package of remedies recommended
by the CMA work for customers.
Following the installation of perspex
dividing screens and the re-opening of
places of worship (albeit restricted on
number of mourners), the Group’s
average revenue started to improve
during Q3. Q4 witnessed a full service
average that was higher than Q2 and Q3
at £3,351 with 43 per cent of all funerals
being full service and the ratio of full
service to full, simple and limited
increasing to 68 per cent. This resulted in
the underlying average revenue for Q4
being £2,645 compared to £2,555 in the
third quarter of 2020. Client choices and
therefore average revenue are still likely
to vary more by region in the coming
months depending on national and then
potential local restrictions in place.
Investment
Investment in the Group’s locations and
fleet have continued. In 2020, £4.9 million
was invested in maintenance capital
expenditure. Expenditure was lower in
2019 and 2020 than in previous years as
the Group is focusing on priorities around
the root and branch review following the
suspension of the Transformation Plan in
2020. The Group anticipates higher spend
in 2021.
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Dignity plc Annual Report & Accounts 2020
Operating review continued
Strategic report
Crematoria services relate to cremation services
and the sale of memorials and burial plots at the
Group’s crematoria and cemeteries.
in July, having been closed for three
months and were inundated with clients
who understandably needed closure
through creating final resting places for
their loved one’s ashes, as well as the
arrangement of memorials. Nonetheless,
memorial sales and other items were six
per cent lower than the previous period.
Non-underlying costs of £0.2 million
(2019: £1.2 million) and IFRS 16 credit of
£2.6 million (2019: nil) are excluded from
underlying operating profit resulting in
statutory operating profit of £45.2 million
(2019: £37.2 million).
Progress and Developments
The Group has invested £2.7 million
maintaining and improving its locations
in the period.
The Group now has planning permission
for four new crematoria. The total capital
commitment for these four projects is
expected to be approximately £30 million,
with £6.7 million of this amount having
already been invested. Each of the
locations with planning permission will
take five to seven years to reach maturity,
performing 800 to 1,000 cremations
per year.
The Group also has two locations where
it is appealing the planning decisions and
another two that are currently in the
planning process.
Strategic Focus and Outlook
Crematoria remains a stable and
cash generative aspect of the Group’s
operations. However, we have
embarked on a total restructure of
CMG which is still in progress. We have
introduced smaller cluster areas to
encompass a more collaborative team
ethic and an increase in the training
and staff development across all
disciplines. The overall achievement
will be to create a more dedicated and
focused CMG team which will facilitate
further cost savings through a more
streamlined and efficient organisation.
The Crematorium and Memorial Group (‘CMG’)
is the largest single independent 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. Our extensive, peaceful grounds allow
clients to remember their loved ones in a very
personal way.
Steve Gant
Crematoria Director
Crematoria
46
Number crematoria we
operate in England and
Scotland.
74,500
Number of cremations
conducted during 2020.
Performance in 2020
Group operating profit share
(before central overheads)
72% (2019: 40%)
Group underlying operating profit
share (before central overheads)
46% (2019: 41%)
Underlying revenue (1)
Underlying operating profit
Operating profit
£82.7m
£42.8m
£45.2m
(2019: £76.8m)
(2019: £38.4m)
(2019: £37.2m)
(1)There is no difference between underlying revenue and statutory revenue for the Crematoria division.
Overview
The Group remains the largest single
independent operator of crematoria in
Britain, operating 46 (2019: 46) crematoria
as at 25 December 2020.
The greatest challenge of 2020 was
undoubtedly ensuring safety and
continuity of service through an ever
changing landscape forced upon us by the
aggressive growth of COVID-19, leading to
excess deaths and the unmitigated rate at
which the Government had to review and
change the guidelines for businesses.
For CMG this meant creating a safe
environment for visitors and staff.
Performance
The Group performed 74,500 cremations
(2019: 64,800) in the period, representing
11.2 per cent (2019: 11.1 per cent) of total
estimated deaths in Britain.
Underlying operating profit was £42.8
million (2019: £38.4 million), an increase
of 11 per cent. This increase in profitability
is driven by the number of deaths partially
offset by lower average revenues from
the increased use of direct cremation
and lower memorial revenue, as
explained below:
H1 H2 FY
Financial summary 2020
£m £m £m
Underlying operating
profit – 2019 20.8 17.6 38.4
Impact of:
Number of deaths 7.4 0.4 7.8
Market share 0.9 0.1 1.0
Average revenues (4.3) 1.4 (2.9)
Cost base changes (1.1) (0.4) (1.5)
Underlying operating
profit – 2020 23.7 19.1 42.8
Sales of memorials and other items have
been adversely impacted primarily by
COVID-19 and an increasing trend in not
collecting ashes resulting in total memorial
revenue being £16.7 million (2019: £17.8
million) six per cent lower than the prior
year despite cremation volumes being
15 per cent higher. In addition to reduced
memorial sales, the average cremation
revenue has reduced by three per cent to
£885 (2019: £911) due to the increase in
direct cremation related services.
All offices were officially closed in line
with Government guidance. We promptly
made offices safe for staff and visitors
with the use of personal screens and
limiting to an appointment-only basis
for visitors. Our memorial offices reopened
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Dignity plc Annual Report & Accounts 2020
21
Pre-arranged funeral plans represent the sale
of funerals to clients wishing to make their own
funeral arrangements in advance.
We are one of the UK’s largest
providers of pre-arranged funerals
and we continue to strengthen
our business in this competitive
market. This is a real testament,
we believe, to our reputation for
high levels of service, quality and
trustworthiness.
Paul Toghill
Director of Pre Arrangement
Pre-arranged
funeral plans
558,000
Number of active plans
as at 25 December 2020.
Performance in 2020
Underlying
revenue(1)
£28.8m
(2019: £21.2m)
(1)Pre-arranged funeral plans are not a separate division in
Underlying
operating profit
£nil
(2019: £nil)
statutory terms, as a result statutory revenue is £nil (2019:
£nil). Please see note 3 for further details.
Underlying Performance
The Group continues to have a strong
market presence in pre-arranged funeral
plans and insurance policies charged to it
for the provision of a funeral. The plans
represent potential future incremental
business for the funeral division, providing
high-levels of certainty of cash flows as
existing plans mature.
The Trading Group claims a marketing
allowance from the trust that covers the
costs incurred in the selling of Funeral
Plans. As a result, the pre-arrangement
division does not contribute any profit
at the time of sale therefore underlying
operating profit was £nil in both periods.
Of the sales in the period 30,000 plans
were trust based funeral plans (2019:
26,000). In addition, 30,000 (2019: 32,000)
plans were linked to life assurance plans
with third parties. 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.
Historically, as with all the Group’s
divisions, pre-arranged funeral plans
underlying profits broadly reflect the
cash generated by that activity. This
position has started to shift as more long-
term instalment plans are written, where
marketing costs are incurred when a
plan is sold, but, marketing recoveries
are claimed from the trust in line with
instalment payments. This shift has
changed the profile of the early years
cashflow position.
Progress and Developments
Dignity remains focused on selling high-
quality business, in ways that support
the strong reputation of the Group.
Approximately 60,000 (2019: 58,000) new
plan sales were made and the number
of active pre-arranged plans (including
insurance backed arrangements) increased
to 558,000 (2019: 523,000). All plan sales
are stated net of cancellations. Over the
last 12 months the cancellation rate has
increased which primarily relates to the
increase in the mix of long-term instalment
plan sales which have a higher cancellation
rate. The majority of commissions are
clawed back from distribution partners
on cancellation in the first two years (the
majority of expected cancellations take
place in this period).
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 2020, the Trusts had average assets per
plan of £3,400 (2019: £3,300) in respect
of 319,000 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 25 September 2020) showed
them to have a surplus of £4 million
(27 September 2019: surplus £17 million),
based on prudent assumptions by the
Trust’s actuary. 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.
The pre-arrangement Trustees are actively
reviewing the investment strategy of the
Trusts, focused on providing the Trading
Group with greater certainty over amounts
to be paid when funerals are performed
in a rolling five year period. The retention
of cash or high-grade bonds to cover these
liabilities, together with implementing an
overall investment strategy with lower
aggregate fund management and
execution costs will provide more certainty.
These changes to the investment strategy
are imminent and will materially reduce
the overall costs of managing the Trusts’
investments, enhancing the capacity for
future revenue growth.
The Trusts have assets, including cash,
under the management of the Trustees of
£988.7 million (2019: £963.0 million) with
investments split as follows:
Example Target
investment types (%)
Defensive Index linked gilts 18
investments and corporate
bonds
Illiquid investments Private investments 16
Core growth Equities 38
investments
Growth fixed income Emerging market 22
and alternative debt/diversified
investments growth
Liquid investments Open-ended 6
investment funds
The current allocation is subject to annual
review by the Trustees with support from
their investment advisers. See Financial
review for additional discussion of Trust
balances.
Strategic Focus and Outlook
The Group remains optimistic on its
ability to continue to be a market
leader in pre-arranged funerals.
The Group welcomes FCA regulation
of the sector and is planning for
regulation to be effective by the middle
of 2022. The Group will continue
to engage with relevant parties as
appropriate whilst maintaining focus
on selling high-quality, competitive
products to clients.
The Group intends to continue to
sell as many plans as is commercially
possible and economically sensible.
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Dignity plc Annual Report & Accounts 2020
Financial review
Strategic report
We consider these underlying
results to be robust, despite
the pandemic
Dean Moore, Interim Chief Financial Officer
Three quarters of our financial year has been
impacted by the COVID-19 pandemic. Despite this
we consider these underlying results to be robust
having increased our operating cash generation
year-on-year, and remained profitable, albeit at a
reduced level. With the exception of business rate
relief, we have chosen not to take advantage of the
various Government schemes brought in to support
business during the pandemic.
These results have been prepared in accordance with
International Financial Reporting Standards adopted pursuant
to Regulation (EC) No. 1606/2002 as it applies in the European
Union and in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006.
Statutory operating profit was £15.9 million (2019: £44.8 million),
a decrease of £28.9 million. Gross margin increased £3.0 million
with a strong performance in the crematoria division and a higher
contribution from delivery of an increased number of pre-need
funerals, whereas the additional at-need funerals delivered
were more than offset by reductions in average revenues.
Administrative expenses were £31.9 million higher, largely driven
by an increased impairment charge of £37.2 million on goodwill
and trade names compared to last year and after incurring
additional central overheads of £5.7 million in part to help manage
the business through the pandemic. This was partially offset by
a reduction in other non-underlying items, primarily in respect
of £7.4 million less spent on the Transformation Plan which has
been abrogated. See table on page 23 for further details on the
impacts to statutory and underlying operating profit.
The total impairment of £44.0 million has been charged in the
period (2019: £6.8 million), of which £15.3 million (2019: £6.8
million) relates to trade names and £28.7 million (2019: nil)
to goodwill. The impairment has arisen primarily due to the
reduced average revenues and mix that has impacted the
funeral services division over the last 12 months.
The Group’s net finance costs of £35.5 million (2019: income
£5.3 million), a £40.8 million movement primarily due to the
lower increase in fair value movements of the financial assets
held by the Trusts of £38.2 million. In 2019, the Group had a
further £6.0 million of non-underlying items relating to the
impairment of its investment in an associated undertaking.
The above has resulted in losses before tax for the Group
of £19.6 million (2019 profit: £44.1 million).
The Board believes that whilst statutory reporting measures
provide financial performance of the Group under GAAP,
alternative performance measures as used in the day-to-day
management of the business are necessary to enable users
of the financial statements to fully understand the trading
performance and financial position of the business and allow
for greater comparability across periods.
Our performance in 2020 was impacted by COVID-19.
As a result, underlying operating profit decreased by 12
per cent to £55.7 million and underlying average revenue
per funeral reduced from £2,930 to £2,522, reflecting the
impact of a switch to more simple funerals, partly due to
our restricted ability to provide full service requirements,
during the COVID-19 pandemic.
Our market share increased on funeral services and
there was a strong market share performance by our
crematoria business. Our Transformation Plan was
paused indefinitely during the year in order to focus on
the impacts of the pandemic. This will not be resumed.
Cash generation remained strong in the year and will
enable us to continue to invest in our strategic objectives
in the future.
Revenue
£357.5m
(2019: £338.9m)
Underlying revenue
£314.1m
(2019: £301.3m)
Operating profit
£15.9m
(2019: £44.8m)
Underlying operating profit
£55.7m
(2019: £63.3m)
Cash generated from operations
£62.7m
(2019: £64.6m)
Underlying cash generated from
operations
£76.4m
(2019: £71.8m)
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Dignity plc Annual Report & Accounts 2020
23
Financial highlights
The Group’s financial performance is summarised below:
52 week 52 week
period ended period ended
25 Dec 2020 27 Dec 2019 Increase/
restated(b) (decrease)
£m £m %
Underlying revenue(a) (£million) 314.1 301.3 4
Underlying operating profit (a) (£million) 55.7 63.3 (12)
Underlying profit before tax (a) (£million) 30.7 37.7 (19)
Underlying earnings per share (a) (pence) 46.6 60.6 (23)
Underlying cash generated
from operations (a) (£million) 76.4 71.8 6
Revenue (£million) 357.5 338.9 5
Operating profit (£million) 15.9 44.8 (65)
(Loss)/profit before tax (£million) (19.6) 44.1
Basic (loss)/earnings per share (pence) (51.0) 61.2
Cash generated from operations (£million) 62.7 64.6 (3)
Dividends paid in the period:
Final dividend (pence) – 15.74
(a) Further details of alternative performance measures can be found on pages 156 to 161.
(b) See prior year adjustment note on page 96.
Alternative performance measures
The alternative performance measures are stated before non-
underlying items and the effect of consolidation of the Trusts,
applying IFRS 15 and adopting IFRS 16 as defined on page 156.
These items have been adjusted for in determining underlying
measures of profitability as these underlying measures are those
used in the day-to-day management of the business and allow
for greater comparability across periods.
Detailed information on non-underlying items including a
reconciliation of statutory revenue to underlying revenue is set
out on pages 108 and 156 to 160.
Accordingly, the following information is presented to aid
understanding of the performance of the Group:
52 week 52 week
period ended period ended
25 Dec 2020 27 Dec 2019
£m £m
Operating profit for the period as reported 15.9 44.8
Add the effects of:
Acquisition related amortisation 4.6 4.8
External transaction costs in respect of
completed and aborted transactions 0.8 0.9
Profit on sale of fixed assets (0.2) (1.0)
Transformation Plan costs(a) 4.7 12.1
Directors severance pay 1.6 –
Operating and competition review costs 2.9 3.5
Trade name impairment 15.3 6.8
Goodwill impairment 28.7 –
Impact of Trust consolidation and IFRS 15 (14.0) (8.6)
Impact of IFRS 16 (4.6) –
Underlying operating profit (b) 55.7 63.3
Underlying net finance costs (25.0) (25.6)
Underlying profit before tax (b) 30.7 37.7
Tax charge on underlying profit before tax (7.4) (7.4)
Underlying profit after tax (b) 23.3 30.3
Weighted average number of Ordinary
Shares in issue during the period (million) 50.0 50.0
Underlying EPS (pence)(b) 46.6 60.6
Decrease in underlying EPS (per cent) 23 29
(a) The £4.7 million costs incurred in 2020 reflects expenditure up to the point of the
Transformation Plan being abrogated.
(b) Further details of alternative performance measures can be found on pages 156 to 161.
Earnings per share
Statutory loss after tax was £25.5 million (2019 restated:
£30.6 million). Basic loss per share were (51.0) pence per share
(2019 restated earnings: 61.2 pence per share). Underlying profit
after tax was £23.3 million (2019: £30.3 million), giving underlying
earnings per share of 46.6 pence per share (2019: 60.6 pence per
share), a reduction of 23 per cent.
Items excluded from underlying operating profit
Amortisation of acquisition related intangibles
Amortisation of acquisition related intangibles reflects the
write-off of acquired intangibles over the term of their useful life.
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.
Profit on sale of fixed assets
Profits or losses arising from the sale of fixed assets (net of
any insurance proceeds received) are excluded as they are
unconnected with the trading performance in the period.
Transformation Plan costs
Cost incurred in relation to the Group’s now abrogated
Transformation Plan has resulted in significant, directly
attributable non-recurring costs.
Directors severance pay
Following the departure of Mike McCollum, Steve Whittern and
Richard Portman in 2020, severance packages have been agreed
and paid and are considered to be a non-recurring cost.
Operating and competition review costs
The Group has incurred costs with external advisers to support
the Group’s response to the CMA’s funerals market investigation
and HM Treasury‘s consultation on the funeral plan sector. Costs
were also incurred in 2020 with external advisers to support its
operational review.
Trade name impairment
The Group assessed the carrying value of its trade names.
In light of the lower level of profitability and lower anticipated
average revenue per funeral, an impairment of £15.3 million
(2019: £6.8 million) has been recognised.
Goodwill impairment
The Group assessed the carrying value of its goodwill. In light
of the lower level of profitability and lower anticipated average
revenue per funeral, an impairment of £28.7 million (2019: £nil
million) has been recognised.
Trust consolidation/IFRS 15
In the prior period the Group changed its accounting policy
to consolidate the Trusts and to implement 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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Dignity plc Annual Report & Accounts 2020
Financial review continued
Strategic report
IFRS 16
As detailed elsewhere in this report, the Group has adopted IFRS
16 in the period. 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. The impact of IFRS 16 has been reversed in arriving at
the APM for 2020 only. This is due to the modified retrospective
adoption of the standard, meaning the 2019 comparatives have
not been restated and therefore are not comparable.
Capital expenditure
Capital expenditure on property, plant and equipment and
intangible assets was £11.1 million (2019: £18.3 million).
25 Dec 27 Dec
2020 2019
This is analysed as: £m £m
Maintenance capital expenditure:
Funeral services 5.0 5.4
Crematoria 2.7 3.3
Other 1.4 1.1
Total maintenance capital expenditure (a) 9.1 9.8
Branch relocations 0.5 1.1
Transformation capital expenditure 0.2 1.7
Satellite locations – 0.3
Development of new crematoria and cemeteries 1.3 5.4
Total property, plant and equipment 11.1 18.3
Partly funded by:
Disposal proceeds – vehicles – (0.2)
Disposal proceeds – properties (b) (1.1) (1.9)
Net capital expenditure 10.0 16.2
(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.
Cash flow and cash balances for the Trading Group
Underlying cash generated from operations was £76.4 million
(2019: £71.8 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 of the Trading Group at the end of the period were
£73.6 million (2019: £57.9 million). Further details and analysis of
the Group’s cash balances are included in note 17 to the
consolidated financial statements.
Pensions
The balance sheet shows a deficit of £36.6 million before deferred
tax (2019: deficit of £26.0 million). The scheme currently
represents an annual cash obligation of £2.2 million. The triennial
valuation was performed in April 2020, the outcome of which is
awaiting and will determine future annual cash obligations for the
Group from 2021 onwards.
Taxation
The Group’s effective tax rate on underlying profits in the period
was 24.1 per cent (2019: 19.5 per cent). The current period
underlying effective tax rate is higher than originally anticipated
due to the effects of prior year items with a tax impact totalling
£0.6 million.
In 2021, the Group expects its underlying effective tax rate to be
approximately two to three per cent above the headline rate of
corporation tax. This translates to an underlying effective rate
of between 21.0 per cent and 22.0 per cent.
The Group’s effective tax rate on losses is 30.0 per cent (2019:
30.6 per cent) which is higher than the underlying effective tax
rate primarily due to the £4.3 million corporate interest restriction
disallowance and £3.5 million arising on the goodwill and trade
name impairments partially offset by the £1.1 million rate
change credit.
Prior year restatement
A prior year restatement has been made to the magnitude of
£4.3 million to correct the 2019 taxation charge and corresponding
corporation tax liability. This follows the finalisation of the Group’s
detailed corporate interest restriction return and an increase to
the Group’s interest disallowance as a result of the inclusion of
the fair value movements on the Trusts debt investments. Further
details of the prior year restatement are set out in note 1 to the
financial statements.
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 25 December 2034 25 December 2049
Coupon 3.5456% 4.6956%
Rating by Fitch A- BB+
Rating by Standard & Poor’s A- B+
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.
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 25 December 2020 was 1.99 times (2019: 2.13 times).
The Group therefore had EBITDA headroom of approximately
£16 million against its financial covenants at the end of December.
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 consolidation of the Trusts or the application
of IFRS 15 and IFRS 16 described elsewhere, as the Group was able
to elect to disregard those changes when making the calculations.
During the period, certain trade and assets previously held outside
of the Securitisation Group were sold to the Securitisation Group
increasing future EBITDA.
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25
EBITDA for this calculation can be reconciled to the Group’s
statutory operating profit as follows:
25 Dec
2020
£m
EBITDA per covenant calculation – Securitisation Group 67.6
Add: EBITDA of entities outside Securitisation Group 9.8
Less: Non-cash items (a) (1.9)
Underlying operating profit before depreciation
and amortisation – Group 75.5
Underlying depreciation and amortisation (19.8)
Non-underlying items (58.4)
Impact of Trust consolidation and IFRS 15 14.0
Impact of IFRS 16 4.6
Operating profit 15.9
(a) The terms of the securitisation require certain items (such as pensions) to be adjusted
from an accounting basis to a cash basis.
In addition, in order for the Group to transfer excess cash from the
Securitisation Group to Dignity plc, it must achieve both a higher
EBITDA to total debt service ratio of 1.85 times and achieve a Free
Cash Flow to total debt service (a defined term in the securitisation
documentation) of at least 1.4 times. This latter ratio at December
was 1.57 times (December 2019: 1.65 times). These combined
requirements are known as the Restricted Payment Condition
(‘RPC’) which have been met in 2020. Failure to pass the RPC would
not be a covenant breach and would not cause an acceleration of
any debt repayments. Any cash not permitted to be transferred
whilst the RPC is not achieved will be available to be transferred
at a later date once the RPC requirement is achieved.
On 31 July 2020, Standard & Poor’s lowered their rating of the
Group’s Class B Secured Notes from BB- to B+. This change
of rating has no impact on the day-to-day operations of the
Secured Notes.
Revolving Credit Facility
The Group has the benefit of a £10 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 £0.1 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 Trading Group has underlying net debt of £480.6 million
(2019: £506.2 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 £822.7 million,
(Class A Notes: £226.0 million; Class B Notes: £596.7 million)
(2019: £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 £24.1 million (2019: £24.4 million).
Other ongoing underlying finance costs incurred in the period
amounted to £1.0 million (2019: £1.4 million), covering the
unwinding of discounts on the Group’s provisions and other
financial liabilities.
Interest receivable on bank deposits was £0.1 million (2019:
£0.2 million).
The Group also incurred £4.7 million (2019: £nil) lease liability
interest, under IFRS 16, giving a total statutory net finance cost
of £29.7 million (2019: £25.6 million).
Shareholders’ deficit
Consolidating the Trusts and applying 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.
On consolidation of the Trusts, all funds received from the plan
members are deferred until recognised on satisfaction of a funeral
obligation or when a plan is cancelled and refunded (subject to an
administrative fee). These deferred funds increase under IFRS 15
by a material non-cash significant financing charge (see note 1 for
accounting policy). The assets of the Trusts, initially representing
the same funds received from plan members less an amount paid
to the Trading Group to cover marketing costs, are invested by
the Trusts and are subject to market movements. Over time,
investments are also realised to fund funeral payments or refund
obligations. The net impact of the above gives rise to a significant
reduction in the net asset value of the Group to a position where
the Group has reported a net deficit of £174.0 million (2019:
£141.5 million). Whilst this position appropriately reflects the
application of IFRS 15 to the underlying contract with the plan
member, based on the current cost of delivery of a funeral service,
delivery of pre-need funerals is expected to result in the future
recognition of profits under IFRS, which, over time, the Directors
consider would more than eliminate the deficit noted above.
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.
The Trusts
At the balance sheet date, the Trusts had £967.1 million (2019:
£947.5 million) of financial assets and £21.6 million (2019: £15.5
million) of cash, which was recognised in the consolidated balance
sheet. This has resulted in average net Trust assets per plan
increasing three per cent to £3,400 (2019: £3,300). The movement
in financial assets is primarily attributable to remeasurement
gains recognised in the consolidated income statement of £41.3
million (2019: £79.5 million), reflecting changes in asset values
and net disposals of financial assets of £18.7 million (2019 net
purchases: £9.5 million).
Aggregated contract liabilities totalled £1,317.5 million (2019:
£1,304.6 million) with the primary movements being sales of
new plans of £82.0 million (2019: £91.2 million), increases due
to significant financing of £53.1 million (2019: £54.1 million) and
releases due to death or cancellation totalling £122.2 million
(2019: £96.8 million).
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Dignity plc Annual Report & Accounts 2020
Financial review continued
Strategic report
The impact of IFRS 16 – Leases
In 2020, the Group has adopted the new accounting standard
IFRS 16, Leases. This standard requires the Group to recognise
an asset and liability on its balance sheet for operating leases that
were previously held off balance sheet. As approximately half
of the Group’s funeral properties and some of its crematoria are
leased, this has had a material impact to the Group’s statutory
results. The Group has recognised an initial asset of £101.7 million
and an initial liability of £93.6 million. Under the transition approach
being followed comparative results for the prior period are
not restated.
At the period end the Group held a right-of-use asset of £95.2
million and a corresponding lease liability of £88.5 million.
Furthermore, in the period, operating lease costs of £12.1 million
were replaced by a depreciation charge of £9.2 million, finance
cost of £4.7 million and a release of accruals and prepayments
of £1.7 million.
As with the Trust consolidation and the impact of IFRS 15, the
adoption of IFRS 16 does not impact the Group’s securitisation
covenants, as the Securitisation Group has exercised its ability to
disregard the impact of the new standard to maintain consistency
of measurement.
For more information see note 35.
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 £37.1 million (2019:
£31.4 million). As anticipated, this reflects continued investment
in digital activities and central capabilities. The table below
summarises the key movements:
H1 H2 FY
£m £m £m
Central overheads – 2019 14.6 16.8 31.4
Impact of:
Digital activities 1.0 0.9 1.9
Salaries 2.7 1.5 4.2
Other 0.1 (1.0) (0.9)
IT support fees – 0.5 0.5
Central overheads – 2020 18.4 18.7 37.1
The increase in salaries includes increases of £1.6 million relating
to staff incentive bonuses, £0.6 million for option scheme charges
and £0.6 million temporary staff costs primarily to increase the
cover in the call centre during the pandemic.
Non-underlying items of £9.8 million (2019: £15.7 million) and
IFRS 16 credit of £0.1 million (2019: nil) are excluded from
underlying costs resulting in total central costs of £46.8 million
(2019: £47.1 million).
In addition to the above costs, maintenance capital expenditure of
£1.4 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.
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Principal risks and uncertainties
Dignity plc Annual Report & Accounts 2020
27
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.
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.
There has been no change to the Group’s risk appetite in
the period.
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
E
S
A
R
S T
h
h
S
E
V
I
T
C
E
J
B
O
RISK ASSESSMENT
PROCESS
C
I
G
E
T
A
STR
h
E
S
BJECTIV
S
T
R
A
T
E
G
IC
O
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
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.
Identifying risk
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 key controls, procedures and policies are
understood and operated effectively where they serve to
mitigate risks.
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Dignity plc Annual Report & Accounts 2020
Principal risks and uncertainties continued
Strategic report
Risk status summary
The ongoing review of the Group’s principal risks focuses on how
these risks may evolve.
Pre-arranged funeral plans
In November 2020, the Financial Conduct Authority (‘FCA’) issued
a statement welcoming the Government’s laying of legislation
setting out a timetable for bringing the regulation of pre-need
funeral plans within the remit of the FCA, expecting to take
responsibility for the regulation of the sector in Summer 2022.
On 2 March 2021, the FCA released their consultation on funeral
plans and their proposed approach to funeral plans. Dignity will
be engaging constructively through the consultation process
which closes on 13 April with final regulations expected to be
published in Q3 2021.
In order to carry out regulated funeral plan activities, firms must
be authorised by the FCA. Continuing with regulated activity
without authorisation will be a criminal offence.
Dignity believes that this regulation is necessary and welcomes
its planned introduction.
COVID-19 has created new risks relating both to our ability
to deliver our services in the context of restrictions imposed
by the pandemic and the health and safety implications for
our colleagues. The potential risks are assessed regularly in
light of the developing guidance and commentary from
HM Government.
The Group has business continuity and pandemic plans that
are invoked, reviewed and adapted as necessary.
Accordingly, the ability to maintain average revenue is influenced
by changes in the competitive landscape and the continued
impact of COVID-19.
Competition and Market Authority’s Market Investigation:
Change in risk
The CMA’s Final Decision Report into the supply of services
by funeral directors at the point of need and the supply of
crematoria services was published on 18 December 2020 such
that the risk of unexpected findings has now reduced. The Group
supports the CMA’s conclusions which focus on measures to
support consumer choice and transparency and welcomes the
recommendations to Government for quality and standards
regulation in the UK.
Links
See Executive Chairman’s review p.4 to p.14
See KPIs: p.15 to p.17
See Governance: p.44 to p.83
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 movements in the death rate
• Nationwide adverse publicity
• Fall in average revenue per funeral or cremation resulting
from market changes
• 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
• Direct cremations
• Cyber risk
• COVID-19 response related risks
Financial risk management
• Financial Covenant under the Secured Notes
Emerging risks
As part of the July 2018 update to the UK Corporate
Governance Code, Listed companies are required to identify
the procedures they have in place to identify emerging risks
faced by the business and an explanation of how these are
managed or mitigated. This year we have conducted a formal
exercise to identify and assess emerging risks facing the
business and these are outlined on page 32.
Emerging risk and horizon scanning are integrated as part
of regular risk discussions and we will continue to embed
this further going forward.
The principal risks we have identified
We maintain a detailed register of principal risks and
uncertainties covering strategic, operational, financial and
compliance risks. We rate them according to likelihood of
occurrence and their potential impact.
In the tables on pages 29 to 32 we provide a summary
of each risk, a description of the potential impact and a
summary of mitigating actions.
Key: Risk trend measures
Risk exposure increased
Risk exposure decreased
No significant change
New emerging risk
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Dignity plc Annual Report & Accounts 2020
29
Operational risk management
Risk description and impact
Mitigating activities and commentary
Change
Significant movements in the death rate
There is a risk that the number of deaths in any year
significantly reduces or increases. This would have a
direct result on the financial and operational performance
of both the funeral and crematoria divisions.
2020 has seen unprecedented times with COVID-19
impacting all our lives. This has impacted our operations,
our staff and resourcing.
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.
Fall in average revenue per funeral or cremation
resulting from market changes
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
revenue per funeral or cremations at the current level.
Disruptive new business models leading to
a significant reduction in market share
It is possible that external factors such as new
competitors and the increased impact of the internet
on the sector, could result in a significant reduction in
market share within funeral and crematoria operations.
This would have a direct result on the financial
performance of those divisions.
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 2020 was 663,000 which was 14 per cent above the prior year
and significantly higher than originally anticipated before the onset of the pandemic. It
is currently unknown over what time frame the death rate will normalise. Our planning
will continue to be based on the long-term expectations as provided by the Office of
National Statistics.
Operationally, we have spent time understanding lessons from the dramatic increase
in deaths due to COVID-19 to ensure we continue to respond professionally and safely.
A key part has been staffing: absence levels peaked at circa 16 per cent compared to
normal levels of one or two per cent. Where required, this was and continues to be
managed through a national provider of temporary resource. In the Crematoria and
Memorial Group, staff have been upskilled and cross trained to provide cover as required.
See Executive Chairman’s review: p.4 to p.14
This risk is addressed by the strategic decision to support development of strong national
brands via the Group’s websites, TV and radio advertising and increased awareness of the
Group and its services and by the Corporate Communications team monitoring and
responding, where required, to media statements, articles and interviews.
In addition, the Group maintains a strong system of internal control to ensure the business
is managed in line with its strategic objectives.
See The Client Survey performance: p.17
The Group’s strategic review has resulted 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.
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.
This risk has increased due to COVID-19 as the Group has experienced lower average
revenues than originally expected: these are anticipated to return to the levels
previously experienced although the period of time needed for this to occur is
currently unknown. Awareness of simple funerals and Simplicity Cremations has
increased during the pandemic.
See Operating review: p.18 to p.21
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 seek 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.18 to p.21
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.18 to p.21
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Dignity plc Annual Report & Accounts 2020
Principal risks and uncertainties continued
Strategic report
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 revenues or an increase in 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.
The purpose of our root and branch review is to position the Group for all eventualities
whether driven by the rapidly changing competitive environment in which we operate,
the changes resulting from the CMA’s measures to support consumer choice and
transparency and recommendations to Government for quality and standards
regulation in the UK or in response to the COVID-19 pandemic.
The funeral service model will be adapted to better suit evolving client needs and to
improve efficiency. We provide clients 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 continue to develop a new tiered funeral pricing proposition, that will provide
greater flexibility to meet individual client needs.
By unbundling our prices and services to provide our clients 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.
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 are leveraging scale advantages in the digital age. We will continue 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 locations 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 Executive Chairman’s review: p.4 to p.14
Regulation of pre-arranged funeral plans
FCA Regulation may result in changes to processes,
systems, pricing, funding, capital requirements and
terms and conditions of plans.
Regulation could affect the Group’s opportunity to sell
pre-arranged funeral plans in the future or could result
in the Trading Group not being able to draw down the
current level of marketing allowances.
One immediate risk highlighted by the consultation
paper is the proposed removal of commissions from
the Industry, this would have a significant impact on
our ability to distribute through Affinity Partners.
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.
We are engaging with the FCA through the consultations process to highlight the
potential unintended consequences of the proposed ban on commissions. We have
diversified distribution through Partner and Direct channels, as well as a strong market
presence in the Whole of Life Funeral Benefit market. If this change is enacted it will
effect the whole industry, whilst we will experience a material drop in volumes, Dignity
will be in a strong market position as a vertically integrated provider to grow alternative
channels that remain open post FCA regulation.
Regulation of the pre-need industry by the FCA is now confirmed for Summer 2022.
We believe that regulation is necessary and welcome its planned introduction.
See Executive Chairman’s review: p.4 to p.14
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.
The Group already operates at a high standard, compared to the majority of our
competitors, using facilities appropriate for the dignified care of the deceased.
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Dignity plc Annual Report & Accounts 2020
31
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.
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.
Volatility has continued to be seen in global markets since the year end. After a
reduction in market values in the first quarter, the actuarial valuation in September
2020 showed both the NFT and Age UK trusts as showing a surplus.
Changes in the Trust investment strategy have been agreed and are in the process
of being implemented.
See note 30.
Direct cremations
Growth in the direct cremation market could reduce
average revenue in the funeral business and adversely
affect the volume mix and average revenue 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.
Cyber risk
Our business is at risk of financial loss, disruption or
damage to the reputation of an organisation resulting
from the failure of its information technology systems.
This could materialise in a variety of ways including
deliberate and unauthorised breaches of security to gain
access to information systems.
Simplicity Cremations is being promoted via a strong online presence together with
TV advertising. Other media advertising is also planned.
See Executive Chairman’s review: p.4 to p.14
The Group has, in recent years, invested significantly in this area with the objective of
both upgrading all aspects of our systems and our internal resources and also using
external consultants to perform regular external and internal penetration tests, using
the results to drive a continuous improvement programme.
The chance of an organisation falling victim to a cyber-attack is growing. Threats are
more pervasive and sophisticated than ever.
However, in addition to maintaining appropriate levels of Cyber Insurance we continue
our investment in fit for purpose security controls, processes, and technology to allow
us to maintain pace with the current threat landscape whilst proactively monitoring for
breaches and improving internal understanding and communication of initial risks,
mitigations and residual risks.
See Executive Chairman’s review: p.4 to p.14
COVID-19 response related risks
COVID-19 has created new risks relating to our ability to
deliver our services in the context of restrictions imposed
by the pandemic and was added to the risk register as
part of the 2020 Interim Report.
The potential risks of COVID-19 to the Group are assessed
regularly in light of guidance and commentary from HM
Government. Primary risks include:
(i) a lack of availability of staff in operations due to illness,
self-isolation or Government policy including Test and
Trace which may result in a material number of
colleagues needing to self-isolate at the same time
impairing our ability to provide services;
(ii) the need to keep staff safe in the COVID-19 crisis;
(iii) a loss of profit due to the cost of our response plans,
or HM Government intervention causes profit or cash
concerns; and
(iv) mortuary capacity and/or supply of consumables
is exhausted.
If continuing long-term, COVID-19 and related social
distancing measures may result in lower revenues.
In addition to our business continuity and pandemic planning, the risk is mitigated by
illness tracking, the use of agency staff and staff redeployment.
The Group has issued Operational Guidance and a PPE policy, secured an increased
supply of PPE and emphasised HM Government policy such as social distancing.
We have modelled forward- looking scenarios considering volumes, changes to service
and revenue and Government intervention.
We have contingency plans and an escalating route for operations and central offices
to redeploy resources from other teams and locations.
We have established central planning of capacity, put new capacity in place, leveraged
Local Resilience Forums and super-mortuary facilities.
In addition, the Group recognises the toll that the pandemic has taken on colleagues.
Issues include mental health, isolation and matters arising from working from home.
The Group provides the Employee Assistance Programme to all staff which provides
access to anonymous, independent counselling services and advice to help manage
any personal wellbeing concerns and provide additional emotional, physical, and
financial support.
We are also investing in the training and accreditation of a number of colleagues in
mental health first aid.
See Executive Chairman’s review: p.4 to p.14
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Dignity plc Annual Report & Accounts 2020
Principal risks and uncertainties continued
Strategic report
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.
To act as a mitigation against this risk, in 2020 the Group completed an internal
restructure of its trading assets which increases covenant headroom.
See Financial review: p.22 to p.26
Emerging risks
The Group continues to scan for emerging risks through the processes noted above. The key areas where additional risk is
appearing, all of which are extensions of risk already identified above, are as follows:
Risk description and impact
Mitigating activities and commentary
COVID-19 response related risks
COVID-19 has resulted in a risk relating both to our ability
to deliver our services due to restrictions imposed and
the health and safety implications for our colleagues.
The Group has business continuity and pandemic plans that are invoked and reviewed
as necessary. In addition, and to manage staff absences, we have used a national
provider of temporary resource.
Change
New
Regulation of pre-arranged funeral plans
The FCA published its consultation paper – Funeral Plans:
Proposed approach to regulation on 2 March 2021.
The market will be required to adhere to the final post
consultation regulations with effect from July 2022.
Cyber risk
Our business like all others is at risk of financial loss,
disruption or damage to the reputation of an organisation
resulting from the failure of its information technology
systems. This could materialise in a variety of ways
including deliberate and unauthorised breaches of
security to gain access to information systems. The
chance of an organisation falling victim to a cyber-attack
is growing. Threats are more pervasive and sophisticated
than ever.
This emerging risk is mitigated by the high standards of selling and administration
of pre-arranged funeral plans operated by the Group, we have been preparing for
regulation for the last 12 months.
New
Dignity as a vertically integrated provider will still be in a strong market position with
continuing distribution through our funeral locations and the direct to consumer
marketing model in existence today.
However, if the current proposed ban on commissions were to be enacted, it would
have a material effect on volumes for the market and Dignity.
Changes imposed by the FCA will apply to the industry as a whole.
We continue our investment in fit for purpose security controls, processes, and
technology to allow us to maintain pace with the current threat landscape whilst
proactively monitoring for breaches and improving internal understanding and
communication of initial risks, mitigations and residual risks.
New
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Viability statement
Dignity plc Annual Report & Accounts 2020
33
In accordance with Provision 4.31 of the UK Corporate Governance Code, the Board has assessed the Group's viability taking into
account its current position, the Boards assessment of its business prospects, and its principal and emerging risks.
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 2023.
Consistent with the prior period, three years has been selected as the appropriate period of review for the following reasons:
• This period aligns with our current medium-term strategic plan and forecasting; and
• Performance is significantly impacted by deaths which are increasingly difficult to forecast beyond 2023 due to the uncertainty
the COVID-19 pandemic has had on the medium-term death forecast.
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, totalling approximately £34 million per annum (see Going Concern review for further details on the related covenants which
are tested quarterly). In making this statement the Directors have fully considered the principal and emerging risks facing the Group
and have stress tested the impact of a combination of these risks with severe but reasonable scenarios, and the effectiveness of
any mitigating actions. These scenarios were then reviewed in the context of the Group’s ability to generate funds to meet those
obligations and comply with the debt service cover ratio (‘DSCR’) covenant.
The scenarios build on the sensitised base case used for the Going Concern review which assumes that the impact the COVID -19
pandemic has had on the Group continues for the remainder of 2021 with recovery expected from the beginning of 2022. The
scenarios have then specifically considered the following:
• the possibility of 60,000 lower deaths in 2023 compared to the current ONS forecast caused by the excess level of deaths seen
recently due to COVID-19;
• no recovery to the current 70:30 mix and average revenue;
• a worsening of the mix to 65:35 and the average revenue impact;
• a 50bp reduction to market share in 2021 and beyond;
• £100 reduction in cremation average revenue; and
• various combinations of the above.
The Group has also 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 and emerging risks facing the Group, including those that would threaten its business model,
future performance, solvency or liquidity, and how they are managed, as explained in this Strategic Report (pages 27 to 32).
Notwithstanding the above, the Directors confirm that they have a reasonable expectation that the Company will continue in
operation and meet its liabilities as they fall due over the period to December 2023. It is recognised that future assessments are
subject to a level of uncertainty and, therefore, future outcomes cannot be predicted with certainty.
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Dignity plc Annual Report & Accounts 2020
Non-financial information statement
Strategic report
Our objective is not only to provide and enhance the reputation of our Group but also to promote and embed and build the
culture of caring, responsibility and performance that adds value to our clients, our people, our shareholders and the local
communities we serve.
Our corporate responsibility activities are an important way for us to deliver upon our strategic objectives. We believe that the
best way to support a sustainable business is to act in the long-term interests of all our stakeholders, in addition to making a
positive contribution to the communities in which we operate.
The following table summarises the non-financial information provided in the Annual Report and demonstrates how it is linked
to the 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, which they are. 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. In this COVID-19 pandemic, we have
had many staff who have isolated from their families in order to continue their jobs
and serve their communities.
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
• Executive Chairman’s Review – page 4
• Corporate and social responsibility – page 38
• Directors’ Report – page 82
• Code of Conduct (1)
• Equality and Diversity Policy Statement(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 40
• Our CSR commitments(1)
Dignity produces waste that is hazardous. Specifically, these are – items such as
gloves used for handling the deceased, PPE, 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 Group’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.
• Corporate and social responsibility – page 40
• Safe Handling and Use of Substances Policy
• Waste Disposal Mission Statement
• Corporate and social responsibility – pages 40 and 41
• Our CSR commitments(1)
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 audit of ethical production and processes
undertaken in conjunction with the owners of those factories. An E-Learning Module
addressing the Modern Slavery Act is required to be completed by colleagues.
• 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. Each year, an Annual Compliance
Declaration is completed by each member of the Executive and Senior Leadership
Teams for the individual to confirm compliance with all applicable rules, regulations
and policies.
• For our strategy and business model, relationships
and services, see the Executive Chairman’s Review
pages 4 to 14
• Our non-financial key performance indicators are
shown on page 16
• For our principal risks and uncertainties and how they
are mitigated, see page 27
(1) These can be found on the Group’s website
www.dignityplc.co.uk.
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Corporate and social responsibility report
A responsible, sustainable
and inclusive business
Reaffirming our commitment to our core social purpose
Our business and people have truly been tested by the
challenging events of 2020. Our response has clearly
demonstrated the strength and resilience of our business,
the dedication of our people in whichever role they play
and ultimately reaffirmed our commitment to our core
social purpose.
Our culture and commitment to our stakeholders
Commitment to doing business the right way is in the DNA
of the Dignity Group. We are the only publicly listed company
in the UK operating in the funeral sector and as such have a
responsibility as a good corporate citizen. As one of the leading
providers of funeral services in the UK, we seek to earn the trust
of our clients, society and our wider stakeholders by acting with
integrity and a deep sense of responsibility at all times. We look
to build relationships with all our stakeholders based on
openness and continuing dialogue.
Our stakeholders include:
• Clients
• Communities
• Employees
• Investors
• Policymakers
Why it is important to us
Good and authentic CSR enhances business reputation.
It can help to raise awareness among consumers, increase
brand recognition and drive greater levels of engagement and
satisfaction with stakeholders. We also see benefits specifically
among our own people, who feel a strong sense of pride
working for a demonstrably responsible company and become
great ambassadors for it within their own networks. This shows
the importance of not only embedding responsible practices
throughout the business but sharing our ambitions and
achievements too.
We will continue to be a responsible and inclusive business –
in how we operate and behave, serve our clients and society,
respect our people and the environment.
Our long-term approach to sustainability enables us to
demonstrate, measure and improve our performance in
those areas where we can make the greatest impact and
deliver the most significant value.
Throughout this section we outline our commitments and
summarise our actions in 2020:
• Delivering for our clients.
• A meaningful and positive impact in our communities.
• Our people, culture and values.
• Safeguarding the environment.
• Responsible business practice.
We are a caring and responsible business and at
its heart is a core social purpose to help people
at one of the most difficult times in their lives;
for today, tomorrow and future generations.
This purpose connects us with our clients and
communities, inspires our people and reinforces
our commitment to society. It is critical to the
long-term success of our organisation.
We provide a vital service to those in need and
we do so in a sustainable manner that is both
socially and environmentally aware, as well as
commercially successful for the benefit of all
our stakeholders.
Our core social purpose drives our approach
Social
Environmental
Governance
Clients
Colleagues
Managing Our
Environmental
Impact
Communities
Being a
Responsible
Business
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Strategic report
Serving our clients with
care and compassion
Our commitments
• We exist to serve our clients;
• We earn their trust by focusing on their
needs and delivering excellent service;
• We put ourselves at the heart of local
communities; and
• We are determined to make a real
difference to the people we interact
with every day.
Dignity supports and guides clients at every step
of the funeral arrangements, while always treating their
loved ones with the greatest care and professionalism.
Creating safe spaces
We understand how difficult it can be to lose a loved one,
especially in such challenging times. Government guidance has
resulted in changes to how we work, but it does not compromise
our ability to arrange dignified funerals where our clients can
properly say goodbye.
We are taking care to ensure clients feel completely safe with us.
Our funeral homes are COVID-secure for those who still wish to
visit us during the arrangement process, with rigorous hygiene
routines in place, including everywhere we care for the deceased.
Before every funeral, we carefully clean and prepare our
limousines. Thanks to the installation of perspex partitions,
these vehicles provide a safe environment for transporting
families to a service.
A gift to treasure
Personal touches always make a funeral more meaningful. At
the height of the pandemic, a team of colleagues in Lancashire
decided to crochet rainbows in their spare time, placing one
on each coffin while the deceased was in their care.
After the funeral, the rainbows were offered to family members
as a gift. Not only does the rainbow itself serve a symbol of
peace and hope, recipients were especially grateful to have a
keepsake that had been with their loved one throughout their
final journey.
Care that continues long after the funeral
Many of our locations have a longstanding tradition of
organising memorial services during the festive season,
providing recently bereaved families with an opportunity to
commemorate those they have lost. COVID-19 restrictions
meant such face-to-face gatherings were not possible last
Christmas, yet that did not stop our colleagues showing
clients how much they care.
They made use of digital technology to webcast services
for families to watch at home, sending out orders of service
and encouraging them to light a candle of remembrance.
Where live streaming could not be supported, many services
were pre-recorded and made available for secure playback
through our local webpages.
Stars shine bright
Our crematoria proudly came together to honour the
deceased and create poignant visible tributes at all 46 sites.
Families were invited to dedicate a star shaped Christmas
tree tag to a loved one and the displays were completed
with specially-commissioned plaques bearing the words:
in dedication to all those who have shown strength in 2020.
There was a charitable element to the initiative too. Colleagues
at each crematorium selected a local cause and made a £500
donation, plus any additional contributions families wished
to offer.
Care and compassion are second nature to us whenever
a death occurs, but Christmas can be a particularly difficult
time for those coping with grief. Just reaching out to clients
and offering them our support and best wishes can make
a real difference.
Delivering excellent client service
Client service and experience is at the heart of everything we
do and it is the central element that connects all our people
regardless of their role.
We closely monitor the results of our client surveys which are
conducted by our Funeral services division. This is one of our
current measures 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
where we can improve and add value.
Meeting and exceeding expectations
98.9%
In 2020, 98.9 per cent (2019: 99.2 per cent) of respondents
said we met or exceeded expectations.
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Playing our part in local communities
and having a positive social impact
Putting others first
Our colleagues pride themselves on being active in their
communities, regularly helping out with special events, communal
celebrations and getting behind locally-focused charities. This
past year has, of course, been decidedly different because of
measures imposed to limit the spread of COVID-19. However, the
enthusiasm and willingness of our people to put others first and
make meaningful contributions remains as strong as ever.
For some, it has been about fundraising, swapping mass
participation events for virtual challenges in support of vital
causes including life limited children, mental health, heart
disease, homelessness, animal welfare, food banks and the
air ambulance service.
Others have made use of their prominent locations on local high
streets to recognise key calendar events and create striking window
displays – rainbows offering thanks to the nation’s keyworkers
and poppies for Remembrance Sunday to name but a few.
Music to their ears
At a point when lockdown restrictions were beginning to
ease, teams in the North East took to the road with Dignity’s
Charity Organ.
They visited several care homes in the region, using the
Victorian-style fairground organ to play musical recitals which
residents and staff could enjoy from the safety of their rooms
and communal areas. A small gesture, but a welcome distraction
for those having to shield and stay separated from their families.
Helping to transform lives
Our nominated charity
Dignity is delighted to announce a new three year partnership
with Teenage Cancer Trust and colleagues across the country
will be working together to find fun and creative ways to
raise money for young people who are facing the toughest
of times.
Teenage Cancer Trust is the only UK charity dedicated to
providing specialist nursing care for patients aged 13-24 who
have cancer. Their support puts young people in the best
possible place, physically, mentally and emotionally, for their
cancer treatment and beyond.
Giving back to society
We want to play our part in driving positive outcomes for
society and we know that through our actions and by making
a meaningful contribution in the local communities we live
and work in that we fulfil this objective.
Teenage Cancer Trust relies on the generosity and
goodwill of others to fund its expert nurses, support
teams and 28 hospital units.
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Dignity plc Annual Report & Accounts 2020
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Strategic report
Creating an open culture and
safe and inclusive workplace
A different approach
In a year like no other, there has been a fundamental shift in
how many of our colleagues perform their roles. They have
adapted quickly to working from home wherever possible,
embracing digital technology to stay in daily contact with their
team members and make key processes paper-free.
When new challenges emerged, such as the need for some
individuals to shield, or the closure of schools, we remained
fair and flexible in our approach to help alleviate the strain.
The willingness of colleagues to step in and assist, for example
by working in different locations or taking on additional
responsibilities, also deserves recognition and praise.
Looking after each other
We care deeply about the welfare of our people. Their desire to
look after our clients is what sets us apart, but equally that must
not come at the expense of their own health and wellbeing.
While we have supported those unable to take their full
allocation of annual leave by carrying over unused days for a
period of up to two years, everyone is still being encouraged
to regularly take time out and recharge.
Workplace safety, culture and behaviours
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.
Dignity’s Health and Safety team provides support services to
our branches, crematoria, manufacturing site and head office
locations. Alongside Health and Safety training, we are also
investing in the training and accreditation of a number of
colleagues in mental health first aid.
Reduction in reportable accidents
24%
Since 2009 the number of accidents has reduced
by 24 per cent.
Our commitments
• We are all part of one team,
performing at our best when
we work together;
• We treat each other with
patience and kindness;
• We nurture talent and create
opportunities for those who
want to develop; and
• We aim to provide a safe working
environment; ensuring employee
health, safety and wellbeing.
Out of the most testing of circumstances has come an
exemplary response from our people. They help each
other in order to help families in need, creating standards
of care we can all be immensely proud of.
Stay safe and stay well
Working safely
Frontline colleagues have a consistent supply of the
personal protective equipment they need to carry out their
roles in safety. We publish detailed operational guidance
which remains under constant review to reflect any changes
in COVID-related safety measures and recommended
conduct across each of the four devolved nations.
Do not struggle alone
Throughout the pandemic we have sought to discuss
openly the importance of looking after our mental health.
We regularly share information, tips and videos through
our internal news channels, covering topics such as stress
management, isolation, healthy eating, exercise and sleep.
Managers are advised on how to recognise the signs that
someone in their team might be struggling to cope.
All colleagues have 24/7 access to a confidential Employee
Assistance Programme that is available online and over
the telephone. We also promote wider industry schemes
including Our Frontline for critical workers and emotional
wellbeing support via the National Association of Funeral
Directors.
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Dignity plc Annual Report & Accounts 2020
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Long service
28%
28 per cent of our people have worked at Dignity
for more than 10 years.
Employees and service
Total employees/ratio
(% & number)
Employee service
(% & number)
3,323
Male: 47% (1,574 employees)
Female: 53% (1,749 employees)
Employee diversity
Senior managers
(% & number)
Less than 1 year: 24% (800 employees)
1–4 years: 31% (1,018 employees)
5–9 years: 18% (587 employees)
10 –19 years: 18% (606 employees)
Over 20 years: 9% (312 employees)
Senior and middle managers
(% & number)
Male: 81% (25 employees)
Female: 19% (6 employees)
Male: 64% (118 employees)
Female: 36% (66 employees)
Driving employee engagement
Keeping everyone informed
Our business has always communicated regularly with
colleagues and that need is stronger than ever now with less
face-to-face contact taking place while many of us continue
to work remotely. Existing internal news channels were
repurposed at the start of the pandemic so related updates
could be shared promptly.
We established a communal online space specifically
for our managers so it became easier to cascade key
information and share ideas for best practice. We are
also adding elements to make our main news area more
interactive, a recent example being the Good Deed Feed
where colleagues can upload personalised messages of
thanks for great work or acts of kindness.
The Dignity Employee Forum was established to provide the
opportunity for 17 elected employee representatives from
all corners of the Group to represent colleagues. The Forum
provides: a structured voice for colleagues and facilitates
two-way communication between employees, management
and the Board, supports a caring and open culture where
employees can make their voices heard.
Our values and behaviours encapsulate who we are,
support our purpose and help us to preserve a strong
and positive culture.
Building and promoting an inclusive and diverse
workplace culture
Dignity is dedicated to building a workforce which is
representative of the communities we serve in all aspects of
diversity, and encouraging a culture that celebrates difference.
Our inclusion and diversity policies seek to demonstrate our
commitment to providing an inclusive, equal and fair working
environment.
Strengthening our teams
Living up to our promise of taking the greatest care relies on
us recruiting well and having the best people performing the
right roles. We have focused this year on reviewing how we
recruit, identifying areas where we can simplify internal
processes, ease the administrative burden on our hiring
managers and reduce the time required to get from application
to offer. This is proving particularly beneficial for filling essential
operational vacancies during the pandemic while demand
for our services remains high.
Providing opportunities for existing colleagues
We have taken steps to improve our promotion of internal
vacancies, making them more accessible for colleagues who
are eager to progress in their careers. Having such a breadth
of talent at Dignity means we need to ensure new vacancies
get maximum visibility, since the ideal candidate for a role can
often come from within the business.
This has been achieved through the introduction of a new
vacancies portal, which supports online applications as well
as having searchable job listings. The next phase of the project
will be to improve the recruitment experience for external
applicants so the process is more straightforward and offers
greater levels of insight into our culture and values.
Empowering people with future skills
Enter the Learning Zone
Our learning and development function has been quick to
respond to changing working practices, adapting traditional
classroom-based programmes to make them suitable for
delivery via digital platforms such as Teams. This was shortly
followed by the introduction of our Learning Zone, a secure
internet site dedicated to personal development.
The Learning Zone features a wide range of self-study
modules to help build key business and workplace skills
and guide people towards wider responsibilities such as
managing others. Feedback has been extremely positive and
we have engaged with regular site users to help create new
modules based on real everyday needs.
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Dignity plc Annual Report & Accounts 2020
Corporate and social responsibility report continued
Strategic report
Safeguarding the
environment
Our commitments
• Be environmentally responsible to
help maintain the quality of the
communities in which we work;
• Understand the potentially negative
contributions of our actions to the
environment and optimise how we
manage them; and
• Engage and inform our colleagues,
promoting good practices across all
job roles.
Identifying areas for improvement
Our business 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.
Under regulations set by the Department for Environment,
Food and Rural Affairs, 50 per cent of the cremations that
take place in the UK must be subject to mercury abatement.
Our crematoria achieved a level of 56 per cent during 2020,
having carried out a total of 74,500 cremations across all
46 of our sites.
An additional area of focus is looking at ways of proactively
reducing carbon in our gas consumption, either by purchasing
biogas as an environmentally friendly, renewable energy source,
or buying carbon credits which would then help to finance
carbon reduction projects both at home and abroad.
We recognise our environmental responsibilities and are
working hard to lessen the impact of our operations by
reducing carbon emissions, energy consumption and
using resources more efficiently.
Managing our environmental impact
Responsible and sustainable supply chains
Watching our waste
It has been more than 12 months since we began working
with Veolia to handle our general and mixed recyclable waste.
During 2020 we diverted 99.98 per cent of our waste from
landfill and this will reach 100 per cent in 2021 when we
successfully implement a diversion solution for one remaining
business location. A proportion of the total waste handled by
Veolia is used for energy production, in our case enough to
power 99 homes with electricity for a whole year.
Making the right choices
Thanks to a new partnership with the consultancy Inspired
Energy, we are getting greater insight into energy usage
across our property portfolio. One objective is to ensure we
are buying energy at the best prices, but by managing data
from our smart meters and energy bills we can also look
for opportunities to make savings and reduce or offset
carbon emissions.
Meeting increased demand
Dignity’s coffin manufacturing facility is the backbone of our
business, enabling us to provide a complete and seamless
service to our clients. We utilise raw materials that originate
from well-managed and sustainable sources; in fact 98 per
cent of the coffins we produce are made with timber certified
by the Forest Stewardship Council.
Demand for coffins increased dramatically in 2020, particularly
in the early stages of the pandemic after the country entered
its first national lockdown. The factory has been vital in our
response to COVID-19, producing around 2,000 coffins a week
at its peak and a total of 75,000 by the end of the year, which is
20 per cent more than in 2019.
Cutting edge technology helps make the manufacturing
process efficient and scalable, as clearly demonstrated over
recent months. But it is the expertise and craftsmanship within
the team that ensures the end product always meets the high
standards our clients expect.
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100%
All of the electricity supplied to
us across England, Wales and
Scotland comes from 100%
renewable sources.
98%
98 per cent of the coffins we
produce are made with timber
certified by the Forest
Stewardship Council.
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total C02 (Market Based)
FTE Employees
Services Performed
Operating Profit (in £m)
Revenue (in £m)
Energy MWh
Percentage Index Graph Scope
1 & 2 Only (Base Year 2009)
1%
1% reduction in our carbon emissions
during the period.
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150
100
50
0
Environmental performance
Greenhouse gas emissions reporting for 2020
Methodology
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:
2020 2019 2018 2017 2016
Scope 1 15,710 15,844 16,028 15,535 15,616
Scope 2 53 59 174 423 7,106
Total 15,763 15,903 16,202 15,958 22,722
Per FTE Employee 5.3 5.2 5.3 4.8 8.0
Our energy consumption figures over the same periods are:
2020 2019 2018 2017 2016
MWh 94,175 94,067 95,147 92,121 91,413
Our greenhouse gas emissions have been calculated on a per fulltime
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 market based on the Scope 2 calculation method
together with the latest emission factors from recognised public
sources, principally Defra. In addition, Dignity’s carbon emissions
disclosure has been undertaken in accordance with the Companies
Act 2006.
Acting with integrity through strong governance
Trust, Transparency and Accountability
Business integrity
A number of procedures and policies are in place to further
ensure responsible practice is embedded in the way we do
business.
Dignity Code of Conduct
Our Code of Conduct underpins the behaviours of everyone
engaged by us when conducting business on our behalf. It is
a statement of how we maintain good corporate citizenship in
relation to all those who have an interest in our reputation.
Anti-Bribery & Corruption
We insist on honesty, integrity and fairness in all aspects of our
business and expect the highest standards of professionalism
and ethical conduct. We will not engage in bribery or corruption
in any form and have a zero tolerance approach to breach.
Equality & Diversity
There shall be no discrimination or less favourable treatment
of people in respect of age, race, religion or belief, gender,
sex, sexual orientation, pregnancy, disability or marital status.
We engage, promote and train our colleagues on the basis
of their capabilities, qualifications and experience, without
discrimination.
Modern Slavery Act
We are committed to implementing and enforcing effective
systems and controls to ensure slavery and human trafficking
is not taking place anywhere in our supply chains or in any
part of our business.
Supplier Code of Conduct
We rely on our suppliers to provide important services that
help us care for our clients and expect them to support and
promote our core values of professionalism, compassion
and respect.
We are committed to the highest standards of
governance as an essential constituent of the way
we operate and behave based on trust, transparency
and accountability.
Doing the right thing
We believe that operating sustainably and responsibly is
fundamental to creating long-term value. Our objective is
not only to strengthen the reputation of our company, 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.
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Dignity plc Annual Report & Accounts 2020
Section 172 Statement
Strategic report
Stakeholder engagement
and decision-making
An open and collaborative
approach to stakeholder
engagement
Engaging and building trust with
the broad range of stakeholders
that interact with, or are impacted
by, our business is key to delivering
our strategy and ensuring our
success over the long-term.
Section 172(1) Reporting
The revised UK Corporate Governance
Code (‘2018 Code’) was published in July
2018 and applies to accounting periods
beginning on or after 1 January 2019.
The Companies (Miscellaneous
Reporting) Regulations 2018 (‘2018
MRR’) require directors to explain how
they considered the interests of key
stakeholders and the broader matters
set out in Section 172(1) (A) to (F) of
the Companies Act 2006 (‘s172’) when
performing their duty to promote the
success of the Company under s172.
This includes considering the interest
of other stakeholders which will have
an impact on the long-term success
of the Company.
This s172 Statement, which is reported
for the first time, reviews the principal
decisions made by the Board of
Directors and how the Directors have
engaged with stakeholders.
Our approach
In line with the reporting requirements,
we have evolved our stakeholder
engagement section to describe our
stakeholders and how the matters set
out in s172 have been considered in
Board discussions and decision-making.
As a Board, we acknowledge our duty
to make the best decisions we can but
also to make sure that we communicate
well and lead by example. In the 2020
financial period, the Board of Directors
consider they have acted in good faith,
in a way most likely to promote the
success of the Group for the benefits
of its stakeholders as a whole.
Our stakeholders
Employee priorities:
Amongst Dignity’s stakeholders are:
• Our clients who are at the heart of what we
do. We are here to help them at one of the
most difficult times of their lives. Listening to
our clients and understanding their needs
drives what we do as a business.
• Both our Pre-Need Funeral Plan holders and
the Trustees of the related Funeral Plan
Trusts. Our commitment is quality, security
and peace of mind.
• Communities and the environment in which
we operate. We take our role as a
responsible corporate citizen extremely
seriously and recognise that our broader role
in society goes beyond creating value. We will
continue to be a responsible and sustainable
business to meet our social responsibilities.
• Our colleagues who are fundamental to
the operation of our business and for the
delivery of outstanding client service. Their
loyalty, compassion and commitment are
essential to our business.
• Our investors, our shareholders and
bondholders, for whom who we aim to
provide sustainable long-term value.
• Our suppliers. Dignity annually spends about
£200 million acquiring goods and services to
support our business needs and delivering
services to our clients. We engage with all
those in our supply chain to comply with
our values.
• Both our pensioners and the Trustees of
our pension funds who are reliant on good
management and governance to facilitate
our continued success.
• We engage with Government and regulatory
bodies, such as the Financial Conduct
Authority and the Competition and Markets
Authority, that both enact policies required
of a public company and that affect the
funeral industry.
Our commitment to our
stakeholders
Commitment to doing business the right
way is in the DNA of the Dignity Group. We
are the only publicly listed company in the UK
operating in the funeral sector, and as such
have a responsibility to fulfil our role as a good
corporate citizen. This means listening to our
stakeholders and understanding what is
important to them.
As a sector leader, we must look beyond our
own business performance, and consider
societal and economic factors in our wider
environment. It is essential, of course, that we
deliver value to our shareholders. But it is also
important that we provide quality and value to
our clients and make a positive contribution to
society. As a funeral company, we are involved
in a fundamental and timeless human ritual
and we never lose sight of the responsibility
this places on us. As a result, stakeholder
interests are critical to the decisions we make.
Colleagues
We employ 3,323 people who we rely on to
provide our services in a caring, thoughtful
and truly engaged way with the people and
communities we serve.
• Ensuring their health, safety and wellbeing;
• A culture of fairness, respect and valuing;
• Opportunities to develop professionally; and
• Attractive and fair rewards and benefits.
How we engage with colleagues:
• The Dignity Employee Forum was established
to provide the opportunity for 17 elected
employee representatives from all corners
of the Group to represent colleagues and
discuss business-related issues. The Forum
provides:
– a structured voice for colleagues ensuring
information and feedback is provided to
facilitate two-way communication between
employees, management and the Board
of Directors; and
– supports a caring and open culture where
employees can make their voice heard.
Information is shared on topics such as
financial performance, remuneration policy,
strategy and vision.
Clients
Dignity monitors closely the results of client
surveys in order to focus on areas in which
we can improve our service and add value for
our clients. Satisfied clients are essential for
a sustainable and successful business.
In 2020, we received 30,900 responses to our
surveys from clients who used our services.
The results continue to demonstrate the
outstanding service provided by colleagues.
98.9 per cent of respondents said we met or
exceeded their expectations and 97.9 per cent
of respondents said they would recommend us.
Community initiatives
Helping people at one of the most difficult
times in their lives is Dignity’s core social
purpose. Contributing to the communities we
serve benefits both local people and Dignity
as a business.
Our colleagues continue to build strong links
through engagement with local initiatives and
fundraising for charities and support many
events each year.
Our priorities are:
• Build closer relationships locally, developing
a greater understanding of community and
clients’ needs;
• Recruit, train and develop local people;
• Participate in activities that make a
difference; and
• Act in the long-term interests of all our
stakeholders.
These priorities enhance our reputation,
sustain longevity and contribute to local
communities.
For details of the Group’s charity activity
and community initiatives, please see the
Corporate and social responsibility report
on page 37.
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43
Decision-making and considering
the long-term interests of
stakeholders
We recognise the importance
of engaging with stakeholders to
inform our strategy and Board
decision-making. Relevant
stakeholder interests are taken into
account by the Board when it takes
decisions. In making its decisions,
the Board considers the outcomes
of relevant stakeholder engagement,
as well as the need to maintain
a reputation for high-standards
of business conduct, the need
to act fairly and the long-term
consequences of its decisions.
We believe that principal decisions
are both those that are material
to the Group and/or those that
are significant to any of our key
stakeholder Groups.
The following principal decisions
and activities demonstrate how the
Board has assessed and addressed
different stakeholder interests in
making decisions that support the
implementation of the Group’s
long-term strategy.
1.
3.
Strategic review
The combination of price competition and
changing consumer requirements has
necessitated a review of our business model
to ensure our funeral and crematoria services
remain focused on delivering high-standards
while enabling Dignity to adapt and lead in
a changing marketplace.
• Pricing and Brand – this is where we seek to
grow market share through implementing
a more client centric service model, a more
flexible pricing structure and building our
national brands.
• Our Operating Model – where we invest in
and simplify the operating model to include
an enhanced network structure that is lower
cost and provides better service and product
range than the competition.
• Streamline central support and invest in
technology to centralise and automate
administrative processes together with a
simplified, focused management structure.
The Board’s vision is to lead the funeral
sector in terms of quality, standards and
value-for-money. Our root and branch review
will reposition Dignity as a more coherent,
cohesive and technology enabled business
geared to meet the changing needs of our
clients with an enhanced and very competitive
range of services and price options.
2.
Dividends
Although the Group has significant cash
resources and continues to be cash
generative, in order to maintain maximum
flexibility and liquidity, the Board concluded
that it was prudent to continue with the
temporary cessation of 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.
Response to COVID-19
The employees of this organisation have
responded to the pandemic with tireless
effort to support both each other and our
clients during testing times and to provide
some closure for the bereaved. Their
professionalism, flexibility and commitment
have been crucial to providing respectful,
high-quality care to the deceased and their
families notwithstanding the daily obstacles
presented by the pandemic: whether it be
high levels of colleague absence, sourcing
PPE or managing the pressure on
mortuary space.
Our frontline colleagues have been ably
supported by our head office staff who
have embraced and adapted to new ways
of working.
4.
Corporate development
The Board has suspended the acquisition
of small funeral businesses as it is
inconsistent with the Group's strategy and
plans for the future. The Group therefore
does not anticipate acquiring any further
funeral locations in the foreseeable future.
Should opportunities of larger, more
established businesses become available,
the Group will consider these on a case by
case basis.
5.
Covenant levels
Whilst financial performance in 2020 means
that the Group has comfortably achieved the
required covenant levels, it remained prudent
to plan for lower volumes in 2021 and 2022.
As a consequence, in July 2020, the Group
completed an internal restructure of its
trading assets which serves to further
increase covenant headroom.
The principles underpinning s172 are not something that are only
considered at Board level, they are part of our culture and are embedded
in all that we do as a responsible business.
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Governance
Dignity plc Annual Report & Accounts 2020
In this section
45 Chairman’s introduction to governance
50 Governance structure
51 Board of Directors
52 Operating Board
53 Directors’ statement on corporate governance
58 Audit Committee report
62 Nomination Committee report
63 Report on Directors’ remuneration
81 Directors’ report
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Chairman’s introduction to governance
Governance
Dignity plc Annual Report & Accounts 2020
45
Dear Shareholder,
I am pleased to be able to present on behalf of the Board
the Group’s Corporate Governance Report for 2020. 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, the Board of Directors, how
it is applied and how it guides our decision-making.
We are reporting for the first time in line with the UK Corporate
Governance Code July 2018 (the ‘Code’). Following what has
been a challenging year for the Group both in terms of the
impact of COVID-19 and the extent of changes to the Board,
there are a number of areas where the Group are either
currently or have been for part of the year unable to comply
with the Code which are explained later in this report. These
matters of non-compliance are temporary and the Board’s
continued objective remains to manage the Group for the
benefit of all stakeholders for which the application of good
corporate governance is essential and ultimately to comply
with the Code in all respects.
Good governance is, therefore, crucial at all levels within the
Group and it is the responsibility of the Board both to lead by
example and to set the tone from the top. It means ensuring
that an effective internal framework of systems and controls
exists which includes clearly defined authorities and
accountability which promote success, whilst allowing risks to
be managed to appropriate levels. To do this the Board must
make sound judgements whilst giving consideration to the
views of our shareholders and other stakeholders.
I would encourage you to participate in our Annual General
Meeting on 23 June 2021 and take the opportunity to meet the
Board. We will take formal questions at that meeting.
Clive Whiley, Chairman
17 March 2021
Transparent reporting
The Group has a clear purpose, and integral to delivering it
is being a socially responsible company which demonstrates
strong ethical behaviour within a framework of transparent
and robust governance.
Section 172 Statement
In line with the new reporting requirements of the 2018
UK Corporate Governance Code, we have evolved our
stakeholder engagement and included a section to describe how
our stakeholders and the matters set out in Section 172 of the
Companies Act 2006, have been considered in Board discussions
and decision-making. The Board actively engages with our
clients, shareholders, employees and wider stakeholder Groups
when making decisions, and considers the impact of Group
activities on the community, environment and its reputation.
Principles of the UK Corporate Governance Code 2018
The Principles set out in the UK Corporate Governance Code
2018 (the ‘Code’) emphasise the value of good corporate
governance for long-term sustainable success. Whilst we are
reporting a number of areas where we have not been able
to comply with specific Code provisions, we do not consider
this extends to any of the Principles set out within the Code.
Our response to the Principles which fall under the headings
below is set out on pages 48 and 49.
• Section 1: Board leadership and Company purpose.
• Section 2: Division of responsibilities.
• Section 3: Composition, succession and evaluation.
• Section 4: Audit, risk and internal control.
• Section 5: Remuneration.
Compliance with the UK Corporate Governance Code
In the 2020 reporting period, Dignity plc was subject to the
Code issued by the Financial Reporting Council (available at
frc.org.uk) for the first time. 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. Other than as
detailed in the paragraphs below, Dignity has complied with
the provisions of the Code throughout the period ended 25
December 2020. Since the period end to the date of this report,
we have appointed a further independent Non-Executive
Director which has improved our compliance across a number
of Code provisions.
As stakeholders will appreciate, 2020 was a difficult and
challenging year for all of us. Those of us in the funeral sector
had to react, organise and scale-up to continue to ensure that
both our colleagues and the bereaved families we serve across
the UK have been protected and supported during this time.
As previously reported, I became the independent Chairman
of the Board in September 2019 temporarily becoming
Executive Chairman on 3 April 2020 following the departure
of our former Chief Executive, Mike McCollum.
There has been further reorganisation at Board level which
has and continues to be managed for the long-term benefit
of stakeholders.
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Dignity plc Annual Report & Accounts 2020
Chairman’s introduction to governance continued
Governance
Board Changes
In 2020, the following Board changes occurred:
• March: Dean Moore appointed as an independent
Non-Executive Director.
• April: Clive Whiley (formerly independent Non-Executive
Chairman) became Executive Chairman following the
departure of our former Chief Executive, Mike McCollum.
• Jane Ashcroft (independent Non-Executive Director)
stepped down.
• June: Gillian Kent (independent Non-Executive Director) was
appointed, and David Blackwood (independent Non-Executive
Director and Senior Independent Director) retired.
• December: Richard Portman and Steve Whittern (both
Executive Directors) stepped down. Andrew Judd, Director
of Funeral Operations, was appointed to the Board as an
Executive Director. Dean Moore was appointed Interim
Chief Financial Officer.
• Since year-end: Paul Humphreys, has been appointed as an
independent Non-Executive Director.
As a result, the Company has been unable to comply with the
following Code Provisions during the periods noted:
• 9. in respect of the separation of the roles of chair and
chief executive (non-compliant from April 2020).
• 11. in respect of the proportion of the Board, excluding the
Chairman, who are considered to be independent. (non-
compliant from April 2020 to February 2021).
• 12. in respect of the appointment of a Senior Independent
Director. (non-compliant from June 2020).
• 17, 24 and 32. in respect of the composition of the Board’s
key committees (non-compliant from December 2020, until
February 2021).
The Company is also continuing to work to ensure that the
processes adopted by the Company achieve full compliance
in the areas of workforce engagement and assessing and
monitoring the culture within the organisation.
At the current time and, in addition to the Executive Chairman,
the Board comprises two Executive and three Non-Executive
Directors, two of whom, Gillian Kent and Paul Humphreys are
independent. James Wilson is a Non-Executive Director but,
as a partner in Phoenix Asset Management Partners, is not
independent.
The Company is in the process of searching for appropriate
candidates for the role of Chief Executive and Chief Financial
Officer which will enable, Clive Whiley and Dean Moore to
relinquish their executive roles. Following these appointments,
the Board will comprise three Executive Directors and, excluding
the Chairman, four Non-Executive Directors, three of whom
are independent.
The direct and indirect consequences of changing roles during
the year has demanded additional time commitment to Dignity
from a number of Board members. Whilst the Executive
Chairman, Interim Chief Financial Officer and our Independent
Non-Executive Directors have various roles with other
companies, we have ensured that at all times each individual
Board member has the capacity to perform their roles on the
Dignity Board.
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 of 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.
• Analysts’ reports.
Directors’ Report
The Directors present their report for Dignity plc for the period
ending 25 December 2020.
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 Chairs 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.
Workforce engagement
We rely on our colleagues to provide our services in a caring,
thoughtful and truly engaged way with the clients and
communities we serve. We believe that the quality of our
people is a strong enabler of business growth and is central
to delivering our purpose, vision, goals and our strategy.
The Board seeks to maintain good channels of communication
with all its employees and in accordance with the Code, the
Board has reviewed the mechanisms that it uses to engage
with its workforce. 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.
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, amongst many things, news, blogs and opinion polls.
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.
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Dignity plc Annual Report & Accounts 2020
47
The Employee Forum provides a key opportunity for the Board
to assess and monitor the culture of the business and we will be
working to enhance this during the coming year.
• driving inclusion and promoting equal opportunities for all;
• ensuring our workforce, whether part-time, full-time or
temporary, is treated fairly and with respect;
We consider that the mechanisms noted above represent an
effective mechanism for the Board to engage with the workforce,
however due to the importance of our workforce to the business
the Board will continue to review the situation and consider if
incremental benefits can be obtained through the appointment
of a designated non-executive director to lead in this area.
Our HR department has expanded to include a team of eight
regional and one head office Business Partners. The role is very
much a consultative one, so the Partners provide guidance in
areas such as recruitment, learning and development and
improving business results.
Across the organisation, the Board has looked carefully at people
support. 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.
The Board resolved to and successfully established an Employee
Forum to facilitate regular and constructive engagement
between colleagues and senior management, including the
Board. Hundreds applied for the opportunity to represent their
colleagues and business area through the Forum and the
successful 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 and ideas,
helping to ensure that the business decisions we make are
fully-informed with insight from all major stakeholders.
Promoting an inclusive and diverse workforce
Dignity is dedicated to building a workforce which is
representative of the communities we serve, in all aspects
of diversity.
Our inclusion and diversity policies seek to demonstrate our
commitment to providing an inclusive, equal and fair working
environment by:
• eliminating discrimination; and
• ensuring that selection for employment, promotion, training,
development, benefit and reward is based on merit and in line
with relevant legislation.
Board leadership, purpose, values and culture
Our purpose is to help people at one of the most difficult times
in their lives and to create a responsible business that focuses
on meeting the needs of our clients and delivering long-term
success and value for all our stakeholders.
As a business, serving clients is at the heart of everything we do.
Our values underpin our purpose and are recognised across the
Group as the basis of our culture.
The Board sets the strategy for the Group to align with our
purpose. Our values and leadership behaviours are a vital part
of our culture to ensure that through our conduct and decision-
making we do the right thing for the business and our
stakeholders.
The Board has overall responsibility for establishing the
Company’s purpose, values and strategy to deliver the long-term
sustainable success of the Company and generate value for all
our stakeholders.
Ensuring effective decision-making
The parameters within which decisions are taken across the
Group are ultimately directed by our core purpose, which is
designed to drive alignment between why it exists, what it aims
to achieve in the future, who it exists for, and how it generates
sustainable financial and non-financial value for its key
stakeholders. This is discussed further throughout the
Strategic Report.
The Board-agreed matters of purpose, vision and strategy are
not developed in isolation and are influenced by stakeholder
views, our sustainable business goals and our risk environment.
In turn, it is the combination of all of these matters that set
the context and expectations in relation to decision-making
outcomes, attitudes and behaviours, forming the baseline for
management accountability; and in combination with values,
contribute to the overall cultural tone across the Group.
Purpose-led considerations
Purpose
Vision
Strategy
Culture
Decision-making
Stakeholders
CSR
Risks
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Dignity plc Annual Report & Accounts 2020
Chairman’s introduction to governance continued
Governance
How we comply with the 2018 UK Corporate Governance Code
Throughout the year, the Board has applied the Principles and complied with
the majority of the Provisions of the 2018 UK Corporate Governance Code
as set out below:
Principle How we apply the Principles Further information
1. Board leadership and company purpose
A. The Board’s role
A successful company is led by an effective
and entrepreneurial Board, whose role
is to promote the long-term sustainable
success of the company, generating value
for shareholders and contributing to
wider society.
B. Setting purpose, values
and strategy
The Board should establish the company’s
purpose, values and strategy, and satisfy
itself that these and its culture are aligned.
All directors must act with integrity, lead by
example and promote the desired culture.
C. Risk management
The Board should ensure that the
necessary resources are in place for
the company to meet its objectives and
measure performance against them. The
Board should also establish a framework
of prudent and effective controls, which
enable risk to be assessed and managed.
The Board is collectively responsible for the long-term success of the Company, including its
relationships and engagement with all shareholders, and operates via a formal schedule of
matters reserved for its decision.
See the Governance structure on page
50 for further information and details
of the responsibilities of the Board.
The schedule of matters reserved for the Board provide that the Board is responsible for
the overall leadership of the Group and setting its values and standards and for approving
the Group’s strategic aims and objectives.
In addition, the establishment of the Employee Forum is a key element in the Board’s
oversight of culture. Our Code of Conduct also defines the behaviours we expect of our
people and the ethical standards to which we adhere.
See the Executive Chairman’s review for
further information.
The Group has mature risk management and governance processes in place to identify,
report and manage risk. The Audit Committee is provided with a twice yearly review of the
principal risks, including emerging risks, together with updates from Internal Audit on
matters for review.
See pages 45 to 50 for further
information on the Governance
structure and pages 27 to 32 for
our Principal and Emerging risks.
D. Stakeholder engagement
In order for the company to meet its
responsibilities to shareholders and
stakeholders, the Board should ensure
effective engagement with, and encourage
participation from, these parties.
The Board reviews and oversees relationships with the business’s key stakeholders.
At each meeting, the Board, inter alia, receives (i) a report on the performance and
operational issues of each business division (ii) an update from the Chairman on investor
relations, (iii) supplier management and (iv) in 2020, an update on matters relating to the
CMAs market investigation and the FCA’s activities in respect of pre-need regulation. The
Board committees also address such matters as the performance development framework
and whistleblowing. Workforce engagement is achieved as described on page 39.
See the Governance section on pages
45 to 50 for further details and
workforce engagement pages 38 and 39.
E. Workforce policies
The Board should ensure that workforce
policies and practices are consistent with
the company’s values and support its long-
term sustainable success. The workforce
should be able to raise any matters
of concern.
The Board firmly believes that good ethics and good business combine to produce the
best results in the long-term. We take our responsibility and reputation as a good corporate
citizen very seriously and we are committed to ethical business practices which reflect and
enhance our core values of quality, integrity, courtesy and respect. Our Code of Conduct
sets out our policy on the standards to be followed to promote legal, honest, ethical and
safe business practices. There are Group policies that define our approach to managing
health, safety, environmental and social matters affecting our employees. In addition, there
is also an independent and anonymous whistleblowing procedure allowing any employee
to confidentially raise any concerns.
See our website at
www.dignityplc.co.uk.
2. Division of responsibilities
F. Chair leadership
The Chair leads the Board and is responsible
for its overall effectiveness in directing the
company. They should demonstrate
objective judgement throughout their tenure
and promote a culture of openness and
debate. In addition, the Chair facilitates
constructive board relations and the
effective contribution of all non-executive
directors, and ensures that directors receive
accurate, timely and clear information.
The Chairman, in conjunction with the Company Secretary, ensures that quality information
is provided to the Board in advance of each Board meeting. The performance of the
Chairman is monitored through the annual Board evaluation process and through separate
meetings of the Non-Executive Directors without the Chairman present.
See our Governance section on page
50 for further information.
Full Code compliance impacted by
Board roles and composition.
See the Governance structure and how
the Board functions on pages 53 and 54
for further information.
Full Code compliance impacted by
Board roles and composition.
G. Balance of the Board
The Board should include an appropriate
combination of executive and non-executive
(and in particular, independent non-
executive) directors, such that no one
individual or small group of individuals
dominates the Board’s decision-making.
There should be a clear division of
responsibilities between the leadership
of the Board and the executive leadership
of the company’s business.
The Board currently comprises the Executive Chairman and the Interim Chief Financial
Officer (both of whom were independent on appointment), the Executive Director of
Funeral Operations, two independent Non-Executive Directors and a Non-Executive
Director who, as a representative of the Company’s major shareholder, is not independent.
When a new Chief Executive is appointed, the roles of the Chairman and Chief Executive
will, once again, be separate with distinct accountabilities as set out in their role profiles.
The Chief Executive will be responsible for the day-to-day leadership and management
of the business through defined delegated authority limits. The Non-Executive Directors
provide an independent view on the running of our business, governance and boardroom
best practice. They oversee and constructively challenge management in its
implementation of strategy and performance of the Group.
H. NED’s role and time
commitment
Non-executive directors should have
sufficient time to meet their board
responsibilities. They should provide
constructive challenge, strategic guidance,
offer specialist advice and hold
management to account.
I. The Company Secretary
The Board, supported by the Company
Secretary, should ensure that it has the
policies, processes, information, time and
resources it needs in order to function
effectively and efficiently.
The annual Board evaluation process assesses the performance and effectiveness
of Directors and their commitment to meet their board responsibilities. In addition,
prior to taking up a Non-Executive Director position, the Board considers whether the
Non-Executive Director has sufficient time to devote to their role with the Group and
in light of any changes to a Non-Executive Director’s external commitments during the year.
At the Nomination Committee meeting in December 2020, each of the Non-Executive
Directors confirmed that they were able to devote sufficient time to their role as a Director
of Dignity plc. This confirmation is sought annually.
All Directors have access to the advice and services of the Company Secretary.
The Company Secretary ensures that the Board receive papers of a high-quality in a
timely manner. He advises the Board on all governance matters, including compliance
with the Code. He works with the Chairman and Committee Chairs to ensure that the
right matters are escalated to the Board and Committees at the appropriate time and
that sufficient time is devoted to strategic matters. He arranges Directors’ induction and
Board evaluation exercises and supports succession planning and recruitment of new
Non-Executive Directors.
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49
Principle How we apply the Principles Further information
3. Composition, succession and evaluation
There are regular succession reviews at the Nomination Committee, the Operating
Board and at business level. In 2021, a key priority is for the Nomination Committee to
have more direct interaction with employees which can be more valuable in building
understanding of talent issues than consideration of metrics. To achieve this a programme
for individuals to present/contribute at meetings of the Board/Committees, where
appropriate, is being developed.
The Nomination Committee reviews the balance, composition and structure of the Board,
as well as the length of service of each Board member and where considered appropriate
recommends the re-appointment of the Non-Executive Director and any extensions to
their term.
In line with the requirement of the Code, the Board conducts an annual evaluation of the
performance of the Board and Committees and each Director. The last evaluation was
conducted prior to the Board changes announced in December 2020. These evaluations
are externally facilitated annually.
See the Board appraisal on page 54
and the Committee Reports.
J. Board appointments
Appointments to the Board should be
subject to a formal, rigorous and transparent
procedure, and an effective succession plan
should be maintained for Board and senior
management. Both appointments and
succession plans should be based on merit
and objective criteria and, within this context,
should promote diversity of gender, social
and ethnic backgrounds, cognitive and
personal strengths.
K. Skills, experience and knowledge
The Board and its committees should have
a combination of skills, experience and
knowledge. Consideration should be given to
the length of service of the Board as a whole
and membership regularly refreshed.
L. Board evaluations
Annual evaluation of the Board should
consider its composition, diversity and how
effectively members work together to
achieve objectives. Individual evaluation
should demonstrate whether each director
continues to contribute effectively.
4. Audit, risk and internal control
M. Financial reporting integrity
The Board should establish formal and
transparent policies and procedures to
ensure the independence and effectiveness
of internal and external audit functions and
satisfy itself on the integrity of financial and
narrative statements.
The Board delegates detailed oversight of the Group’s system of internal controls to the
Audit Committee, to ensure the integrity of the Group’s full year and half year results and
the Annual Report and Accounts. The Audit Committee ensured it complies with this
requirement as detailed on pages 58 to 61.
On the recommendation of the Audit Committee, the Board reviewed and approved the
2020 half year and full year results and the 2020 Annual Report. In addition, the Board
evaluation process confirmed that the Group’s system of internal controls had operated
effectively during the year.
See our Governance section on page
55 for further information.
See the Audit Committee report on
pages 58 to 61.
N. Fair, balanced and
understandable assessment
The Board should present a fair, balanced
and understandable assessment of the
company’s position and prospects.
O. Risk management and
internal control framework
The Board should establish procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks the company is
willing to take in order to achieve its long-
term strategic objectives.
5. Remuneration
P. Supporting strategy and long-
term sustainable success
Remuneration policies and practices
should be designed to support strategy and
promote long-term sustainable success.
Executive remuneration should be aligned
to company purpose and values, and be
clearly linked to the successful delivery
of the company’s long-term strategy.
Q. Remuneration Policy
A formal and transparent procedure for
developing policy on Executive remuneration
and determining director and senior
management remuneration should be
established. No director should be involved
in deciding their own remuneration
outcome.
R. Independence of remuneration
outcome decisions
Directors should exercise independent
judgement and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and
wider circumstances.
As described in the Audit Committee Report on page 59, the Audit Committee reviewed
the 2020 Annual Report and Accounts in March 2021 and was satisfied that it presents
a fair, balanced and understandable assessment of the Group’s position and prospects.
The Audit Committee reported its findings to the Board.
Please see the Financial review
section on pages 22 to 26 for further
information.
The Audit Committee monitors the Group’s risk management and internal control
systems on behalf of the Board. The Committee reviews the Group’s principal risks and
recommends any changes to risk appetite to the Board. The Group Risk Register is
reviewed twice yearly by the Audit Committee.
Please see the section on Principal risks
and uncertainties on pages 27 to 32.
The Remuneration Committee reviews and proposes the Group’s remuneration policy to
the Board for approval and the Directors’ remuneration report is put to an advisory vote
at the AGM, in line with statutory requirements. In accordance with section 439A of the
Companies Act 2006, a new three year Remuneration Policy will be put to a binding vote
at the 2022 AGM.
Please see the Remuneration
Committee report on pages 63 to 80.
In accordance with its terms of reference, the Remuneration Committee reviewed the
current Remuneration Policy (2019 to 2021) and confirmed that it remains fit for purpose.
A new three year Remuneration Policy will be put to a binding vote at the 2022 AGM.
The remuneration of Non-Executive Directors is a matter for the Board. No Director,
committee attendee, Executive, senior manager or other person can be involved in any
discussion or decision as to their own remuneration.
The Remuneration Policy can be
found on pages 65 to 68 within the
Remuneration report. The terms
of reference for the Remuneration
Committee can be found on our
website at www.dignityplc.co.uk.
The Committee takes advice from an external consultant and ensures that remuneration
for Board and senior management is suitably structured so as to attract, retain and motivate
Executives, and to link reward to corporate and individual performance and all relevant
internal and external factors.
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Dignity plc Annual Report & Accounts 2020
Governance structure
Governance
The Board provides strategic leadership to the
Group within a framework of sound corporate
governance and internal control.
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)
The Operating Board
The Board
The Board is responsible for the long-term success of the
Group which includes:
• Overall management of the Group;
• Setting and reviewing the strategy of the Group;
• Approval of major capital expenditure and acquisition projects, and
consideration of significant financial matters;
• Monitoring the exposure to key business risks;
• Approval of major financing and capital structure changes
to the Group;
• Setting annual budgets and reviewing progress towards
achievement of these budgets; and
• Proposing 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.
The role of the Executive Chairman in 2020
Following the departure in April 2020 of our former Chief Executive,
Mike McCollum, Clive Whiley took on temporarily, the role of
Executive Chairman. In this role, Clive has the responsibilities of both
Chairman and Chief Executive. The Company is searching for a new
Chief Executive and, on appointment, Clive will return to the position
of independent Non-Executive Chairman.
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 Chairman.
The Board Committee Reports are on pages 58 to 80.
The Chief Executive and Executive Directors
The Chief Executive and Executive Directors together with the
Operating Board 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.
Commentary on the Board in 2020
As detailed on page 6 the structure of the Board is currently going
through a period of change. As a result, the Company has not been
compliant throughout the year with the following Code Provisions:
• 9. The roles of chair and chief executive should not be exercised
by the same individual.
• 11. Which requires at least half of the Board excluding the chair,
to be directors considered by the board to be independent.
• 12. The board should appoint one of the independent directors
to be the senior independent director.
• 17. The Nomination Committee should comprise a majority
of independent non-executive directors.
• 24. The Audit Committee should comprise independent non-
executive directors.
• 32. The Remuneration Committee should comprise independent
non-executive directors.
The objective is to return to compliance with the relevant
requirements of the current UK Corporate Governance Code.
At the current time and, in addition to the Executive Chairman, the
Board comprises two Executive and three Non-Executive Directors,
two of whom, Gillian Kent and Paul Humphreys are independent.
James Wilson is a Non-Executive Director but, as a partner in
Phoenix Asset Management Partners, is not independent.
The Operating Board
The Operating Board currently consists of the following Executive
Directors and Senior Managers:
• Executive Chairman: Clive Whiley;
• Executive Director of Funeral Operations: Andrew Judd;
• Interim Chief Financial Officer: Dean Moore;
• Crematoria Director: Steve Gant;
• Marketing Director: Mark Hull;
• Business Development Director: Alan Lathbury; and
• Director of Pre Arrangement: Paul Toghill.
The Operating Board is responsible for determining and setting the
detailed day-to-day tasks required to implement the strategy set by
the Board.
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Dignity plc Annual Report & Accounts 2020
51
Board of Directors
The Board is collectively responsible for the
success of the Group.
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
Executive Chairman
Board composition, balance
and tenure
The Board comprises five Directors and the
Executive Chairman. There are currently two
independent Non-Executive Directors and
two Executive Directors. James Wilson is a
Non-Executive Director but, as a partner in
Phoenix Asset Management Partners, is not
independent.
Executive and
Non-Executive
Directors
Non-Executive
Tenure
3
3
1
3
Executive Directors: 3
0 – 3 years: 3
Non-Executive Directors: 3
Executive Chairman: 1
Key to Committee membership
A
N
R
Audit Committee
Nomination Committee
Remuneration Committee
Green background denotes
Committee Chair.
Links
See Audit Committee report:
p.58 to p.61
See Nomination Committee report:
p.62
See Report on Directors’ remuneration:
p.63 to p.80
Clive Whiley
Executive Chairman
Appointed to the Board: 2019
N
Gillian Kent
Independent Non-Executive Director
Appointed to the Board: 2020
A N R
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, China
Venture Capital Management Limited, First
China Venture Capital Limited and Y-LEE Limited.
Dean Moore
Interim Chief Financial Officer
Appointed to the Board: 2020
A N R
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, who was an independent Non-Executive
Director before stepping into the role of Interim
Chief Financial Officer, remains a member of
the three Board Committees, as the fees he
receives, whilst increased, remain fixed and he
does not participate in any incentive plans.
Andrew Judd
Executive Director of Funeral Operations
Appointed to the Board: 2020
Background and experience:
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 national 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 the British Institute of Funeral Directors
and various positions within the National
Association of Funeral Directors most recently
Past President of the Western Counties Area
Federation and Committee for Professional
Standards. In 2018 Andrew was the driving force
behind the establishment of the Funeral Service
Consumer Standards Review (FSCSR) creating
for the first time in the sector an independently-
chaired project that brings together the skills
and knowledge of industry experts and key
stakeholders with a view to improving quality,
standards and outcomes for funeral service
consumers.
Background and experience:
Gillian has had a broad executive career
including being Chief Executive of real estate
portal, Propertyfinder, until its acquisition by
Zoopla, and 15 years with Microsoft including
three years as Managing Director of MSN UK.
Gillian holds non-executive director roles at
Mothercare plc where she is Chair of the
Remuneration Committee, SIG plc, NAHL
Group plc, Ascential Plc, and at three private
companies, Howsy Limited (formerly No Agent
Technologies Limited), Theo Topco Limited
(which trades as Key Group) and Portswigger
Limited. Formerly she was a non-executive
director at Pendragon Plc and Coull Limited.
Gillian is Chair of the Remuneration Committee
and also serves on the Audit and Nomination
Committees.
James Wilson
Non-Executive Director
Appointed to the Board: 2019
N
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.
Paul Humphreys
Independent Non-Executive Director
Appointed to the Board: 2021
A N R
Background and experience:
Paul is Chair of the Audit Committee and a
member of the Remuneration and Nomination
Committees.
He has had a broad executive career spanning
both quoted and unquoted companies,
including having been Group Finance Director
of Care UK for more than 12 years, including
eight years whilst listed on the International
Stock Exchange.
Paul currently holds advisory roles at a small
number of unlisted companies.
Tim George
Company Secretary
Tim was appointed Company Secretary in
December 2018 and is a Fellow of the Institute
of Chartered Secretaries & Administrators.
The Board records its thanks to Mike
McCollum, Jane Ashcroft, David Blackwood,
Richard Portman and Steve Whittern all of
whom stood down from the Board in 2020.
Each made an outstanding contribution
to the Dignity Group collectively over a
substantial number of years.
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Dignity plc Annual Report & Accounts 2020
Operating Board
Governance
The Operating Board consists of the Executive
Directors and Senior Managers.
The role of the Operating Board
The Operating Board is responsible
for determining and setting the
detailed day-to-day tasks required
to implement the strategy set by
the Board.
The Senior Leadership Team
The Senior Leadership Team are the Senior
Managers across all areas of the business.
They are responsible for the day-to-day
running of the business and report to the
Operating Board.
The depth of experience, knowledge
and complementary skills in our
Operating Board and Senior
Leadership Team, strengthens our
ability to deliver on our strategic
objectives and vision.
Clive Whiley
Executive Chairman
Clive Whiley
Executive Chairman
Full biography on page 51
Andrew Judd
Executive Director of Funeral
Operations
Full biography on page 51
Dean Moore
Interim Chief Financial Officer
Full biography on page 51
Steve Gant
Crematoria Director
Mark Hull
Marketing 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, and the
Scottish Government Working Group consulting
on the revision and update of the Cremation
Acts. He holds a Post Graduate Executive
Diploma in Strategic Leadership from the
Warwick Business School.
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.
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 the Diploma in
Interactive and Direct Marketing.
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Directors’ statement on corporate governance
Dignity plc Annual Report & Accounts 2020
53
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 50. 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 Operating Board (see page 52)
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 five Directors and the Executive Chairman. During the period the total number of directors who
served was ten. Mike McCollum, former Chief Executive, retired from the Board on 3 April 2020 as did Jane Ashcroft, former
independent Non-Executive Director. David Blackwood, former Senior Independent Director retired from the Board on 11 June
2020 and Gillian Kent was appointed as an independent Non-Executive Director and Chair of the Remuneration Committee on
the same date. Richard Portman and Steve Whittern stood down from the Board on 14 December 2020. Subsequent to the
period end, on 23 February 2021 Paul Humphreys was appointed to the Board as an independent Non-Executive Director.
There are currently two independent Non-Executive Directors, a Non-Executive Director who is not independent, and three
Executive Directors, including the Executive Chairman.
The Board considers that three Executive Directors, supported by the wider Operating Board, details of which are on page 52,
are sufficient to manage a Group of this size, complexity and organisational structure.
Biographical details for the serving Non-Executive Directors appear on page 51. 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 up to 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.
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.
Gillian Kent and Paul Humphreys are independent of management as defined by the Code.
Clive Whiley was appointed Executive Chairman of the Company when Mike McCollum stood down from the Board on 3 April
2020 and Dean Moore became Interim Chief Financial Officer on 14 December 2020 following Steve Whittern’s departure. These
interim positions mean that Clive Whiley and Dean Moore do not currently qualify as independent as defined in the July 2018 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 £90 million.
The Directors have, during the period, formally reminded themselves of their duties as Directors under the Companies Act 2006
(Section 171-177). These duties include the need to avoid conflicts of interest (Section 175). No such conflicts of interest exist.
In accordance with the Code, all Directors will submit themselves for election or re-election as appropriate at the 2021 Annual
General Meeting.
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Dignity plc Annual Report & Accounts 2020
Directors’ statement on corporate governance continued
Governance
Board Appraisal
In accordance with the requirements of the Code, a formal evaluation of the Board, its Committees, the Chair and individual
directors was undertaken in 2020. The evaluation was undertaken prior to Richard Portman and Steve Whittern standing down.
The evaluation was conducted by Lintstock a corporate advisory firm, entirely independent of the Group. This evaluation is
undertaken annually by Lintstock and will continue annually. This meets the requirements of the Code.
The evaluation was managed by way of the issue of detailed online questionnaires to all Directors. This was followed by
a detailed review by Lintstock and the Board of the responses and the identification of any actions arising.
Specific matters reviewed by the Board were:
• Response of the organisation to COVID-19;
• Board composition;
• Stakeholder oversight;
• Strategic oversight;
• Board dynamics;
• Board support;
• Focus of meetings;
• 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 are responsible for the performance evaluation of the Chairman taking into 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 9 3 4 4
Jane Ashcroft 2 1 2 –
David Blackwood 4 1 2 3
Mike McCollum 2 1(iii) 2(iii) 1(iii)
Richard Portman 8 2(iii) – 1(iii)
Clive Whiley 9 3(iii) 5(iii) 4
Steve Whittern 8 2(iii) – 1(iii)
James Wilson 8 2(iii) 1(iii) 4
Dean Moore 7(iv) 3 4 3
Gillian Kent 4(iv) 2 3 1
Andrew Judd(iv) – – – –
(i) Only scheduled Board meetings, of which there were nine in the period, have been included in the attendance analysis. A further seven meetings were held to consider
announcements, documents or the issue of shares pursuant to share 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) Dean Moore was appointed to the Board on 11 March 2020, Gillian Kent on 11 June 2020 and Andrew Judd on 14 December 2020.
The Board had nine full Board meetings spread broadly equally across the year. The Board considers that nine 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 2020 without the Executive Directors present. The Non-Executive
Directors also met during 2020 without the Chairman present.
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55
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 Corporate Governance
Report was signed and approved for the Annual Report and Accounts 2020.
The Executive Directors and the wider 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. Please also see the Audit
Committee Report on pages 58 to 61.
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
management and Internal Audit regarding any 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 the 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, Anti-Tax Evasion and Anti-Money Laundering;
• Internal Audit – The Group has a dedicated Internal Audit team, which reports to the Interim Chief Financial Officer, Executive
Chairman and the Audit Committee. The latter reviews and approves the annual work plan of the Internal Audit function
which tests the design and operating effectiveness of key controls across the business. Any significant weaknesses are
reported to management and the Audit Committee on a timely basis. It also 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 2020 (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 Chair of the Audit Committee during 2020 and the Audit Committee
members in December 2020;
• 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
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Dignity plc Annual Report & Accounts 2020
Directors’ statement on corporate governance continued
Governance
• Risk assessment – The Executive Directors and the Operating Board 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 27 to
32 of the Annual Report. These risks have also been formally considered when the Directors prepared their Viability Statement
on page 33 of this Annual Report in accordance with provision 31 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 18 to 21.
Relationship with Shareholders
The Group recognises the importance of good communication with shareholders.
Regular contact with institutional investors, fund managers and analysts is undertaken by the Executive Chairman and the
Interim Chief Financial Officer 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. The Non-Executive Directors are also available to meet separately
with shareholders if necessary, to discuss any issues that they may have. The Executive 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 Operating Board. All shareholders are free to attend and put
questions to any Director and the Chair of each of the Board Committees at the AGM on 23 June 2021. 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 Operating Board after the meeting has concluded subject to social distancing measures.
On 11 June 2020, the Company announced that at the Annual General Meeting held earlier that day 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 11 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 58 to 61
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 a vote withheld 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.dignityplc.co.uk, as
soon as practicable after the conclusion of the AGM.
The Interim Report is no longer published as a paper document but is available on the Group’s investor website upon which
users can also access the latest financial and corporate news. All information reported to the market via regulatory information
services also appears as soon as practicable on that website.
The Group is happy to arrange visits to its funeral locations and crematoria, if requested by a shareholder, at a time suitable
to all parties.
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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 which covers a number of matters including induction,
learning and development.
For further details on Employee diversity, see page 39 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 5 March 2021 As at 25 December 2020
Number of Percentage Number of Percentage
Ordinary of issued Ordinary of issued
Holder Shares share capital Shares share capital
Phoenix Asset Management Partners Limited 14,718,468 29.42 14,718,468 29.42
Granular Capital Limited 5,022,587 10.04 5,022,587 10.24
Artemis Investment Management LLP 4,955,451 9.91 4,955,451 9.91
John Stewart Jakes 3,669,612 7.34 3,669,612 7.34
Indian Creek B.V. 2,508,194 5.01 2,508,194 5.01
Klarus Capital Limited 2,497,569 4.99 2,497,569 4.99
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 1,841,495 3.68 1,841,495 3.68
It should be noted that these holdings may have changed since the Company was notified.
By order of the Board
Tim George
Company Secretary
17 March 2021
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Dignity plc Annual Report & Accounts 2020
Audit Committee report
Governance
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 first report
as the Chair of the Audit Committee (the ‘Committee’) since
my appointment to the Board and this Committee on
23 February 2021.
I am a chartered accountant with extensive public company
experience having been Group Finance Director of Care UK for
more than 12 years and having spent almost ten years as Group
Finance Director at McLeod Russel Holdings Plc. I also have a first
class degree in Economics and Accounting from the University
of Leeds.
In order properly to brief myself following my appointment,
I held a number of calls with the Interim Chief Financial Officer,
the Group Financial Controller, key members of the Operating
Board and other senior management as well as with senior audit
personnel from EY. In addition, I have read previous financial
reports and Audit Committee documents and discussed any
issues arising from these in the calls referred to above. I then
chaired the Audit Committee meeting on 5 March 2021 to
consider all relevant matters as described herein.
Membership and Process
The following Directors served on the Audit Committee during
2020: Dean Moore, Gillian Kent, David Blackwood and Jane
Ashcroft. Gillian is an independent Non-Executive Director, as
Dean was until his appointment as Interim Chief Financial Officer
on 14 December 2020. Gillian was appointed to the Committee
on 11 June 2020. Jane and David were independent Non-
Executive Directors but stood down as Directors on 3 April and
11 June 2020 respectively.
The Board is satisfied that, as Chair of the Committee, I have
recent and relevant financial experience together with competence
in accounting and auditing that can be appropriately and
successfully applied at Dignity. In addition, the Committee is
satisfied that it has a broad range of experience across a number
of sectors that are relevant to Dignity. The Company Secretary
acts as Secretary to the Committee. I report the Committee’s
deliberations at the next Board meeting and the minutes of
each meeting are made available to all members of the Board.
The Committee met three times during 2020; in March prior to
the release of the 2019 Preliminary Announcement; in July prior
to the release of the 2020 Interim Announcement in August and
again in December 2020 immediately prior to the end of the
financial period. The attendance records of the members are
shown on page 54. All Committee members were present at all
meetings. The external auditors, EY, the Executive Chairman, the
former Chief Executive, the former Finance Director, the former
Corporate Services Director, the Head of Internal Audit, the
Financial Controller and James Wilson, Non-Executive Director,
have all attended meetings by invitation.
The Committee holds a private session with the audit team from
our external auditors, EY, without management present at least
once a year. In addition, as Chair of the Audit Committee, Dean
had a discussion with the Lead Partner on two 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.
Member Since Experience
David Blackwood 2015 Previously CFO of Synthomer plc,
(retired 11 June 2020) Chartered Accountant and Fellow
of the Association of Corporate
Treasurers.
Jane Ashcroft 2012 Currently CEO of Anchor Hanover,
(retired 3 April 2020) Fellow of the Institute of Chartered
Secretaries and Administrators
and Member of the Chartered
Institute of Personnel and
Development.
Dean Moore 2020 Currently Chairman of the Audit
Committees at Cineworld plc and
Volex plc.
Gillan Kent 2020 Previously Managing Director of
MSN UK. Non-executive director
roles at Mothercare plc where
Gillian is Chair of the Remuneration
Committee, SIG plc, NAHL Group
plc, Ascential Plc, and at three
private companies.
Paul Humphreys 2021 A broad executive career spanning
both quoted and unquoted
companies, including having been
Group Financial Director at Care
UK. Currently holds advisory roles
at a small number of unlisted
companies.
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 and other stakeholders
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 and stakeholders 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).
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The terms of reference of the Committee are available on
the Group’s corporate website at www.dignityplc.co.uk.
Activities in the period
The key activities of the Committee during the period and up
to the date of this report were:
• Review and agreement of the 2020 Internal Audit Plan and
budget;
• 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;
• 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 33;
• A six-monthly review of the Group’s Principal Risks and
recommendation of adoption by the Board. This is part of an
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 27 to 33 of this
Annual Report;
• 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;
• An assessment of the effectiveness of the external auditors;
• A comprehensive review of the 2019 and 2020 Annual Report
and Accounts and the 2020 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 made to the
London Stock Exchange; and
• The formal review of the going concern assumptions adopted
in the preparation of the 2019 and 2020 financial statements.
Areas that have been discussed and considered by the
Committee to be appropriate in relation to the 2020 Annual
Report and Accounts are:
• Impairment – the Committee considered the results and
disclosures 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 the impact
of COVID-19, increased consumer price awareness and
competition, digitalisation and the conclusions of the CMA’s
Final Decision Report following the market investigation;
• 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;
• Leases – the Committee considered the disclosure provided
in respect of the impact of IFRS 16 ‘Leases’ on accounting.
See note 1 to the financial statements for further details;
• Taxation including Corporate Interest Restriction (‘CIR’) – in light
of the impact on the Group and the resultant need to record
a prior period adjustment, the Committee considered the
consequences of consolidating the Trusts on the application
of the CIR rules and the associated charge to corporation tax in
both the current and prior period, considering advice received
from the Group’s tax advisers;
• Pre-need Trust accounting – valuation of Level-3 Trust assets –
the Committee considered the basis of valuation of private
(illiquid) investment funds which are classified as Level-3 assets
for the purpose of fair value disclosures, including the adequacy
of the disclosures made in the Financial Statements;
• Risk – the Committee performed a comprehensive review
of the principal risks and uncertainties disclosed in the 2020
Annual Report based on the changing and competitive
environment in which the Group operates;
• Corporate Governance – the Committee reviewed the
Statement on Corporate Governance and the adequacy of the
explanation set out in respect of those provisions with which
the Company is currently not compliant;
• Section 172 Statement – as the first time of reporting, this was
reviewed by the Committee;
• Alternative Performance Measures (‘APMs’) – as the Group’s
APMs are stated after adjustment for non-underlying items and
to reverse the impact of consolidating the Trusts and applying
IFRS 15 and adopting IFRS 16, the Committee considered the
nature and quantum of the adjustments made in arriving at
the APMs. The Committee also considered the disclosures
provided with respect to the reconciliation of APMs to ensure
they considered these to be clear to a user of the Financial
Statements;
• Going Concern and Viability – the Committee performed an
assessment and ratification of the Going Concern and Viability
Statements, including giving due consideration to severe but
plausible downside risks; and
• Annual Report and Accounts are fair, balanced and
understandable – having been given sufficient time to consider
the Annual Report and Accounts, the Committee considered
the narrative and numerical disclosures within the Annual
Report and Accounts to assess whether the disclosures made
gave appropriate levels of emphasis to both favourable and
unfavourable aspects of the Group’s performance, covering
all aspects of the Group, in a manner which was clearly
understandable. As a result of this review, the Committee
made a recommendation to the Board that it could make the
statement that the Annual Report and Accounts were fair,
balanced and understandable.
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Dignity plc Annual Report & Accounts 2020
Audit Committee report continued
Governance
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 Interim Chief Financial Officer,
Dean Moore. The Committee also retains responsibility for the
appointment and removal of the external auditors, who are
currently EY.
The Audit Committee, on an annual basis, formally considers the
performance and independence of the external auditors. The
formal annual review was completed in the first quarter of 2021.
This review took the form of a detailed questionnaire that was
sent to all Committee members and attendees at the Committee
meetings. 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 2020 and a resolution
to re-appoint them as external auditors will be tabled at the
AGM on 23 June 2021.
The Committee confirms that during the year the Group has
complied with the provisions of the Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014, as published by the UK
Competition and Markets Authority.
Policy on non-audit fees
The Group has a rigorous and comprehensive policy on the use
of the external auditors for non-audit work. The policy states that
non-audit fees are limited to no more than 50 per cent of the
annual audit fee unless there are exceptional circumstances,
which are defined as:
• The work necessitates the use of the auditor for regulatory
reasons; and
• Their use represents a material time/cost benefit to the Group
in conducting a transaction.
The policy also precludes the use of the external auditors
for certain types of work. All such work 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 non-audit work on behalf of the
Group including a review of the Interim Report for 2020, a
financial covenants compliance certificate and certifications
required as part of the Group’s membership renewal of the
Funeral Planning Authority. Total fees of £59,000 were charged
for non-audit services. The EY fee for audit services was
£631,000.
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 2020.
Audit partner and firm 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 2020.
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. The Committee confirmed compliance with the Statutory
Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014, having last carried out
a competitive tender for audit services in 2014 which resulted in
EY being appointed for the December 2014 period end. In line
with the statutory requirements, the position of Group auditor
will be re-tendered in advance of the 2024 period end.
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 Interim Chief Financial Officer, Executive Chairman 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 2020 (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 the Head
of 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 the Chair 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.
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61
Whistleblowing
We have a policy and procedure by which employees of the
Group may, in confidence, raise concerns about possible
improprieties in financial reporting or any other matter.
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 54. Specific matters reviewed by the
Committee were:
• Time management;
• Committee processes and support;
• Quality of information received;
• Support, training and induction;
• The relationship with the Interim Chief Financial Officer, the
former 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;
• The effectiveness of the Committee in reviewing the work
of both External and Internal Audit; and
• Priorities for change.
Issues arising from the evaluation are reviewed and addressed.
I will be available to answer any questions about the work of the
Committee at the AGM on 23 June 2021.
This Audit Committee report was reviewed and approved by the
Board on 17 March 2021.
Paul Humphreys
Chair of the Audit Committee
17 March 2021
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Dignity plc Annual Report & Accounts 2020
Nomination Committee report
Governance
The Committee has overseen the appointment of
both a new Chair of the Audit Committee and of the
Remuneration Committee. The Committee continues
to ensure we have and will have the right blend of skills
and experience on the Board to deliver our strategy.
Dear Shareholder,
On behalf of the Board, it is my pleasure to present the 2020
Nomination Committee report as both Chairman of the
Company and the Nomination Committee.
All the Non-Executive Directors are appointed for up to two year
terms which may then be renewed up to a maximum of nine
years service in accordance with the independence guidelines in
the 2018 UK Corporate Governance Code.
During 2020, the membership of the Nomination Committee
(the ‘Committee’) comprised Jane Ashcroft and David Blackwood
both of whom stood down in the year (Jane in April and David in
June) and James Wilson, Dean Moore and Gillian Kent.
Dean Moore was appointed to the Board and this Committee on
11 March 2020 and, similarly, Gillian Kent on 11 June 2020.
On 23 February 2021, Paul Humphreys was appointed an
independent Non-Executive Director and now serves on this
Committee.
Currently, Gillian and Paul are the independent Non-Executive
Directors serving on the Committee although both Dean and I
were independent on appointment to the Board. The Company
Secretary is Secretary to the Committee.
Currently, the Committee is looking to appoint a Chief Executive
coterminous with the outcome of the strategic review. We have
also commenced a search for a Chief Financial Officer. The
objective is to maintain an appropriate balance of independent
Non-Executive Directors and suitable representation for the
Board committees including throughout the period where
Dean Moore is Interim Chief Financial Officer.
The authorities delegated to the Committee by the Board
comprise, among other matters:
• The review of the structure, size, and composition of the Board;
• 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.
The principal duties of the Committee in 2020 were overseeing
the appointment of Dean Moore to succeed David Blackwood
as Chair of the Audit Committee and Gillian Kent as Chair of the
Remuneration Committee. The Committee also reviewed the
monitoring and oversight of succession planning processes
together with ongoing succession planning and talent mapping
within the Group, identifying individuals and any development
requirements necessary to ensure effective succession.
Succession planning, development and leadership requirements
will continue to be reviewed in 2021.
The Committee is committed to embedding inclusion and diversity
throughout the Group. The Company provides a balanced,
supportive, caring 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.
Tenure
Length of tenure at 25 December 2020 (years)
Name 1 2 3 4 5 6 7
David Blackwood (retired 11 June 2020)
Jane Ashcroft (retired 3 April 2020)
James Wilson
Clive Whiley
Dean Moore
Gillian Kent
At 25 December 2020, Dean Moore had been on the Board for
nine months and Gillian Kent six months.
The terms of reference of the Committee are available on the
Group’s corporate website at www.dignityplc.co.uk.
The Committee is committed to ensuring inclusion and diversity
at Board and all levels throughout the Group. Employee diversity
of those in senior and middle management roles is shown on
page 39.
We acknowledge that we have much to do to fulfil our diversity
ambitions and it will take time: we will work towards making
progress on this matter.
Following Jane Ashcroft’s retirement from the Board, Gillian Kent
is currently the only woman on a Board of six Directors (17 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 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 54. Specific matters reviewed by the
Committee were:
• The process by which Board appointments are made;
• Performance in reviewing the composition of the Board;
• Any aspect of plans for Executive and Non-Executive succession
which give cause for concern; and
• How the Committee can improve its performance over the
coming year.
Issues arising from the evaluation are reviewed and addressed.
Finally, all Directors offer themselves for election or re-election
at the AGM on 23 June 2021 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 17 March 2021.
The members of the Committee’s attendance record is set out on
page 54. 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.
Clive Whiley
Chair of the Nomination Committee
17 March 2021
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Report on Directors’ remuneration
for the 52 week period ended 25 December 2020
Dignity plc Annual Report & Accounts 2020
63
Dear Shareholder,
On behalf of the Board, I am pleased to present this Directors’
Remuneration Report for the period ended 25 December
2020, my first since being appointed Chair on 11 June 2020.
This has been a period of significant change for the business
and Board and I am grateful for the support I have received
from my Board colleagues through what has been a
challenging period for the business and its employees.
We have needed to act with great care and sensitivity during
the year, to apply the remuneration policy to reflect the very
significant impact on all stakeholders in the business caused by
the COVID-19 pandemic, and at the same time to ensure that
we could move swiftly to refresh the Executive leadership team
and accelerate the business transformation necessary to
position us for the long-term.
We believe that our current remuneration policy has enabled
us to pay our senior executives appropriately and as we enter
the third and final year of the current three year policy period,
the Committee is comfortable that it still supports the long-
term business strategy. Accordingly, we are proposing no
changes to the policy for FY2021.
Board changes
On 3 April 2020 the Board agreed with the Chief Executive,
Mike McCollum, that he should step down from the Board
with immediate effect.
Mike McCollum was paid 12 months’ salary, benefits and
pension in lieu of notice in line with his contractual entitlements
and treated as a ‘good leaver’ for the purpose of the 2020
annual bonus plan and for outstanding LTIP awards, which
enabled a pro rata payment under both plans, dependent
on the achievement of the performance conditions.
Clive Whiley, who was appointed Non-Executive Chairman on
19 September 2019, agreed to step up temporarily to the role
of Executive Chairman and his fee increased from £175,000
to £475,000 for the duration of the temporary role. We are
currently in a process to find a new Chief Executive Officer.
On 14 December we announced that we had reached an
agreement with Steve Whittern, our Finance Director, and
Richard Portman, our Corporate Services Director, to step
down from the Board and they stepped down from the
business with immediate effect in the case of Steve Whittern
and on 31 December in the case of Richard Portman. Both
executives were paid 12 months’ salary, benefits and pension
in lieu of notice in line with their contractual entitlements and
treated as a ‘good leavers’ for the purpose of the 2020 annual
bonus plan and for outstanding LTIP awards, which enabled
a pro rata payment under both plans, dependent on the
achievement of the performance conditions. The Committee
used discretion to pay the bonus to Richard Portman and Steve
Whittern in cash rather than 20 per cent deferred in shares.
Dean Moore, who was appointed to the Board as a Non-
Executive Director on 11 March 2020, has become Interim
Chief Financial Officer and is receiving a fee of £316,200 for
the role, whilst the Company identifies a suitable candidate
for the permanent role.
Andrew Judd, previously director of the Group’s funeral
operations, joined the Board as an additional Executive
Director with immediate effect. His package comprises a salary
of £200,000, pension contribution of 4 per cent (in line with the
rate for the majority of the workforce), bonus opportunity of
100 per cent of salary and an LTIP award for FY21 of 100 per
cent of base salary.
Finally, I would like to welcome Paul Humphreys to the Board
and this Committee.
Activities in the period
The key activities of the Committee during the period up to the
date of this report were:
• Reviewing base salaries for Executive Directors and senior
management;
• Approving the fee of the Executive Chairman and
Interim CFO;
• Approving the 2020 bonus outturn for Executive Directors
and senior management;
• Setting the 2021 bonus targets for the Executive Director;
• Approving awards and setting performance measures under
the Company’s share plan;
• Assessment of the 2018 to 2020 Long-Term Incentive Plan
performance;
• Application of the remuneration policy in 2020 and 2021;
• Alignment of Executive Director pension contribution rates
to the wider workforce;
• Reviewing Executive Director share ownership levels;
• Reviewing trends in market practice and investor guidelines;
• Reviewing the Gender Pay Gap and plans for diversity and
inclusion;
• Reviewing the Company Performance Management
framework; and
• Approving the 2020 Directors’ Remuneration Report.
Performance in 2020 and annual bonus and 2018-20
LTIP outcome
The 2020 annual bonus was measured 70 per cent against
stretching underlying operating profit targets, our key short-
term financial performance indicator. Underlying operating
profit in 2020 was £55.7 million (before the Committee used
discretion to reduce management bonuses and make the staff
award, detailed below), which was within the target range and
would have generated a bonus of 41.8 per cent out of the
70 per cent for 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. The 10 per cent element based on the Transformation
Plan was not achieved, as this was paused in order to conduct
the strategic review. Our Funeral Market Share of 11.98 per
cent and our Customer Recommendation score of 90.8 per
cent exceeded the top end of the target ranges of 11.72 per
cent and 90.8 per cent respectively and so each 10 per cent
element based on Funeral Market Share and Customer
Recommendation were achieved in full. On this basis the
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
formula driven bonus indicated a pay out of 49.3 per cent
of the maximum. However, the Committee considered this
bonus outturn in light of higher than average death rate in
2020 caused by the impact of the pandemic, as well as the
extremely challenging operating environment that all of our
employees faced during the year and used its discretion to
determine that the bonus level for Executive Directors and
other senior executives should be scaled back significantly. In
considering the appropriate bonus level for Executive Directors
and the rest of the management population, the Committee
determined that the scale back should be based on delivering
the same bonus level (as a percentage of maximum bonus) for
the entire management population, equivalent to 18 per cent
of their maximum bonus opportunity. In addition to ensuring
that the outturn was consistent with the employee experience,
the Committee also noted that, with the exception of business
rates relief, the Company had not benefitted from any direct
Government financial support and had not needed to use the
Coronavirus Job Retention Scheme.
achieving growth in Market Share, this measure will be subject
to a performance underpin which requires the Remuneration
Committee to be satisfied that our underlying profitability is
in line with our business plan over the performance period.
The other 50 per cent of the award is based on the Company’s
relative Total Shareholder Return compared to the Companies
in the FTSE SmallCap Index. This provides a good balance
between the financial strategic measure (underpinned by
profitability) and the overriding objective of delivering a
superior level of shareholder return.
The LTIP award was granted at a 100 per cent of salary level,
reduced from the policy level of 150 per cent of salary in light
of the current relatively low share price.
How we will apply the new policy in 2021
The Executive Chairman and Interim Chief Financial Officer
will receive a fee of £475,000 and £316,200 respectively and
will not participate in the annual bonus plan or LTIP.
This significant saving generated by scaling back the potential
bonus pay-out to the senior managers and executives in the
business, has been used to contribute towards an additional
£500 bonus to all staff and £150 to casual staff in recognition
of their outstanding performance and commitment to the
Company and the public over the year.
The LTIP award granted in 2018 was subject to performance
against an absolute TSR target to be achieved at the end of
2020. Dignity's TSR performance over this period failed to
achieve the minimum threshold and so this award will lapse
with no shares vesting.
The Committee considers that, having used discretion to
scale back the 2020 annual bonus pay-out, there has been an
appropriate link between reward and performance, taking into
account external factors and internal relativities between the
pay levels of executives and employees.
Furthermore, the Committee confirms that targets for annual
bonus and outstanding LTIP awards have not been adjusted
in light of COVID-19 related factors.
FY20 LTIP award
As described in last year’s report, we delayed the grant of the
2020 LTIP award as it was very difficult to set accurate long-
term financial performance conditions until the findings of
the CMA report were published. Subsequently there was a
further delay due to the impact of the COVID-19 pandemic
on the business and the realignment of the business strategy.
The Committee approved the LTIP award levels, performance
measures and the weightings in September and finalised the
targets in December.
There is a very clear priority in our business strategy to grow
our Funeral Market Share, following several years of decline.
Accordingly, for this award the Committee determined that
there should be a clear focus on growing our Funeral Market
Share and so 50 per cent of the award is based on this measure,
providing a direct line of sight for our senior management
team to this cornerstone in the business strategy. However,
recognising the importance of ensuring that our profit margin
remains in line with our business plan at the same time as
The Executive Director of Funeral Operations will receive a
salary of £200,000, and will participate in the annual bonus
plan, with a maximum opportunity of 100 per cent of salary.
70 per cent of the bonus will be based on a mix of stretching
underlying operating profit targets and 30 per cent based on
market share measures which underpin our strategy as set
out on page 5. We will move from underlying EBIT to underlying
EBITDA this year, as this will provide a cleaner measure of
profitability as we transform the business in line with the
strategic review.
In relation to the FY21 LTIP award, having considered the
performance measures carefully for the delayed FY20 award,
the same Market Share and Relative TSR performance
measures will again apply, with updated performance targets.
The Committee will consider carefully the grant level in light
of the prevailing share price at the time of grant, but intends
to apply a grant level of 100 per cent of base salary for the
award to the Executive Director of Funeral Operations, which is
a reduction from the usual policy level of 150 per cent of base
salary. Recognising the short period of time that has elapsed
since the delayed FY20 grant, the ongoing uncertainty relating
to the pandemic and that the rolling three year business plan
is due to be completed in the Summer, the Committee has
determined that the Market Share targets to be achieved in
FY23 should be set later in the year (within six months of the
grant). This short delay will enable the Committee to pitch the
appropriate level of stretch in the target range more accurately.
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.
Gillian Kent
Chair of the Remuneration Committee
17 March 2021
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Dignity plc Annual Report & Accounts 2020
65
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 66 and 67 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 70.
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Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
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 for additional detail.
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67
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 2020.
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.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
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 67):
• 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 2021 vary under
three performance scenarios: minimum, target and maximum.
Remuneration (£000s)
£750
£500
£250
£-
£475
£475
£475
£316
£316
£316
£220
Fixed Pay
Annual Bonus
LTIP
LTIP with 50% Share Price Growth
£720
32.5%
32.5%
£620
£420
24%
24%
100%
100%
100%
100%
100%
100%
100%
52%
35%
Below
target
Target Maximum
Below
target
Target Maximum
Below
target
Target Maximum
Executive Chairman
Interim Chief Financial Officer
Executive Director of
Funeral Operations
Notes
• Below target comprises fixed pay, which comprises 2021 basic salary, the value of benefits in 2020 and a four per cent 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, assumes full bonus payment of 100 per cent of salary and full LTIP vesting of 100 per cent of salary. 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.
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69
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.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
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. This policy does not apply to the Executive Chairman and Interim Chief Financial Officer.
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 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 Chair’s Annual Statement) will be
put to an advisory shareholder vote at the 2021 AGM. The information below includes how we intend to operate our policy in 2021
and the pay outcomes in respect of the 2020 financial year. The information from the single total remuneration figures for Directors
on page 72 to the end of the section on loss of office payments on page 78 has been audited. The remainder is unaudited.
Implementation of Remuneration Policy in 2021
Salaries
The Committee has determined that the Executive Directors will not receive a base salary/fee increase for 2021. Therefore, the
salaries as at 1 January 2021 are:
2021 2020 Increase
£ £ %
Clive Whiley (Executive Chairman) 475,000 475,000(a) –
Dean Moore (Interim Chief Financial Officer) 316,200 316,200(b) –
Andrew Judd (Executive Director of Funeral Operations) 200,000 200,000(c) –
(a) Since being appointed Executive Chairmen on 3 April 2020.
(c) Since being appointed Interim Chief Financial Officer on 14 December 2020.
(c) Since being appointed Executive Director of Funeral Operations on 14 December 2020.
Non-Executive Directors' fees
The current fee levels for Non-Executive Directors, are as detailed below. There is no increase in fee levels for 2021:
2021 2020 Increase
£ £ %
Basic fee for Non-Executive Directors 46,850 46,850 –
Supplementary Senior Independent Director fee 9,700 9,700 –
Supplementary Audit Committee Chairman fee 9,350 9,350 –
Supplementary Remuneration Committee Chairman fee 6,300 6,300 –
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71
Pension and Benefits
Andrew Judd will receive a salary supplement in lieu of pension of four per cent of 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 100 per cent of salary for the Executive Director of Funeral Operations. The Executive Chairman
and Interim Chief Financial Officer (both temporary appointments) will not participate in the annual bonus plan.
70 per cent of the bonus will be based on a mix of stretching underlying operating profit targets and 30 per cent on a strategic
objective in relation to Project 20:20 (see page 5 of the Executive Chairman’s review). Underlying EBITDA will provide a measure
of underlying profitability and the Project 20:20 objective will support our business in accordance with the strategic review.
For the underlying EBITDA element, 20 per cent of the maximum will become payable for achieving a threshold level of performance,
rising incrementally so that 50 per cent of the maximum will be payable for achieving a target level of performance and there will be
a full pay out for significant over-achievement of target.
The strategic element will be based on a stretching target range in relation to Project 20:20 under which we aim to grow our market
share significantly to 20 per cent by 2025.
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 EBITDA 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
The Executive Director of Funeral Operations will receive an LTIP award at 100 per cent of base salary.
The awards will be based 50 per cent on Funeral Market Share with a requirement to achieve an improved level of Market Share.
Recognising the short period of time that has elapsed since the delayed FY20 grant, the ongoing uncertainty relating to the pandemic
and that the rolling three year business plan is due to be completed in the Summer, the Committee has determined that the Market
Share targets to be achieved in FY23 should be set later in the year (within six months of the grant). This short delay will enable the
Committee to pitch the appropriate level of stretch in the target range more accurately. As with the FY20 grant, there will again be an
underpinning performance condition whereby the Committee must be satisfied that our underlying profitability must be in line with
the business plan over the performance period. The remaining 50 per cent will be based on the Company’s Total Shareholder Return
compared to the FTSE SmallCap Index of companies (excluding Investment Trusts) over the three year period to 31 December 2023.
In each case 25 per cent of each element of the award will vest for threshold performance.
The Market Share performance conditions will be published later in the corporate governance section of the website and disclosed
fully in the next Annual Report.
We are conscious that our Market Share performance measure will be a performance condition in both the FY21 annual bonus and
the Long-Term Incentive Plan awards. We believe that this overlap is appropriate this year as we aim to kick-start our growth towards
the achievement of this critical strategic objective.
Executive Directors are required to hold the net of tax vested shares for two years following vesting.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
Total remuneration payable to Directors in 2020
Fixed Pay Pay for Performance
Total Annual Total Total
Salary/fee Benefits(a) Pension fixed pay bonus(j) LTIP variable pay remuneration
£000 £000 £000 £000 £000 £000 £000 £000
Executive Directors
Clive Whiley
Andrew Judd(k)
Mike McCollum(b)
Richard Portman(d)
Steve Whittern(c)
Dean Moore(h)
Non–Executive Directors
Dean Moore(h)
Gillian Kent(i)
Jane Ashcroft(g)
David Blackwood(f)
James Wilson(j)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
400
– – 400 – – – 400
46 – – 46 – – – 46
190
–
171
512
248
248
316
316
5
–
59
–
30
–
12
47
27
110
n/a
n/a
12 8 210 26 – 26 236
– – – – – – –
10 26 207 31 – 31 238
20 77 609 124 – 124 733
19 37 304 56 – 56 360
18 37 303 56 – 56 359
20 47 383 71 – 71 454
20 47 383 71 – 71 454
– – 5 – – – 5
– – – – – – –
– – 59 – – – 59
– – – – – – –
– – 30 – – – 30
– – – – – – –
– – 12 – – – 12
– – 47 – – – 47
– – 27 – – – 27
– – 110 – – – 110
n/a n/a n/a n/a n/a n/a n/a
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) Mike McCollum stepped down from the Board on 3 April and remuneration is up to that date. In addition to remuneration receivable for services as a Director, contractual
amounts were payable in relation to his Settlement Agreement. Further details of the breakdown are on page 77.
(c) Steve Whittern stepped down from the Board on 14 December and remuneration is up to that date. In addition to remuneration receivable for services as a Director, contractual
amounts were payable in relation to his Settlement Agreement. Further details of the breakdown are on page 77.
(d) Richard Portman stepped down from the Board on 14 December and remuneration is up to that date. In addition to remuneration receivable for services as a Director, contractual
amounts were payable in relation to his Settlement Agreement. Further details of the breakdown are on pages 77 and 78.
(e) Clive Whiley was appointed to the Board as Non-Executive Chairman on 26 September 2019. The fee for 2020 is the Non-Executive Chairman’s fee to 3 April 2020 and the Executive
Chairman’s fee for the remainder of the year.
(f) David Blackwood stepped down from the Board at the AGM on 11 June 2020.
(g) Jane Ashcroft stepped down from the Board on 3 April 2020 and the fee represents the pro rata payment to that date of the base Non-Executive Director fee.
(h) Dean Moore was appointed to the Board on 11 March 2020 and the remuneration payable represents his standard Non-Executive Director fees from that time to 14 December
and then an enhanced fee for 15 December to 31 December for his role as Interim Chief Financial Officer.
(i) Gillian Kent was appointed to the Board on 11 June 2020 and the fee is the pro rata payment of the base Non-Executive Director fee and the supplement for chairing the
Remuneration Committee.
(j) James Wilson has elected not to receive a Non-Executive Director’s fee.
(k)Andrew Judd was appointed to the Board on 14 December 2020. £190,000 was his 2020 full year salary.
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73
Determination of 2020 annual bonus
The 2020 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:
Threshhold Stretch 2020 actual
(for which 20% of (for which 100% of (before additional Bonus payable
Weighting maximum payable) maximum payable) bonus payment to staff) (out of maximum)
% £m £m £m %
Underlying operating profit
Strategic measures
70
30
55.2
67.2
58.5
Two thirds
Total overall bonus before Committee discretion
to scale back
Total overall bonus after Committee discretion
to scale back
29.3
20
49.3
18.0
The level of EBIT that would have been used to determine Executive bonuses in line with the formula set at the start of the year was
£58.5 million, before the Committee used discretion to reduce executive bonuses significantly, which contributed towards the staff
award, the net effect of which reduced declared profit to £55.7 million.
Strategic objectives were set based on the three most critical business priorities for the year each equally weighted at 10 per cent.
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 2020 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 11.62 per cent, at which point 20 per cent of this
element of the bonus would be payable, and 11.72 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 11.98 per cent (up from 11.7 in 2019) the maximum threshold was exceeded.
Outcome
10 per cent out of 10 per cent achieved.
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 2020 financial year who confirmed that they would definitely
recommend Dignity.
The target range required the Customer Recommendation to be equivalent to the average of 2017-19, at which point 20 per cent of
this element of the bonus would be payable, and 90.8 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 90.8 per cent, resulting in the maximum target being achieved. This was
recognised as being an excellent result in very challenging market and operating conditions.
Outcome
10 per cent out of 10 per cent achieved.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
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
2020 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
The Board paused the Transformation Plan in light of the Strategic Review so this measure was not achieved.
Outcome
Nil per cent out of 10 per cent.
The Committee was comfortable that the improvements in Funeral Market Share and the excellent Customer Recommendation
result were notable achievements in a challenging year and important building blocks to future shareholder value and that progress
on each measure merited a bonus payment.
Summary of performance achievement and bonus payments
The formula driven bonus indicated a pay out of 49.3 per cent of the maximum. However, the Committee reviewed this bonus
outturn in light of higher than average death rate in 2020 caused by the impact of the pandemic, as well as the extremely challenging
operating environment that all of our employees faced during the year and used its discretion to determine that the bonus level for
Executive Directors and other senior executives should be scaled back significantly. In considering the appropriate bonus level for
Executive Directors and the rest of the management population, the Committee determined that the scale back should be based
on delivering the same bonus level (as a percentage of bonus opportunity) for the entire management population, equivalent to
18 per cent of the bonus opportunity.
This significant saving generated by scaling back the potential bonus pay-out to the senior managers and executives in the business,
has been used to pay an additional £500 bonus to all full-time staff and £150 to casual staff in recognition of their outstanding
performance and commitment to the Company and the public over the year.
Pay-out (% of maximum) Pay-out (% of Bonus outcome after use of
Bonus maximum before Committee maximum) after Committee discretion
Director (% of base salary) discretion Committee discretion £000
Mike McCollum 135 49.3 18 31
Richard Portman 125 49.3 18 56
Steve Whittern 125 49.3 18 71
Andrew Judd 100 49.3 18 26
Mike McCollum’s annual bonus was scaled back pro rata to the period of service in 2020 to 1 May 2020.
Normally 20 per cent of any bonus earned is deferred in shares, for 2 years and this will apply for Mike McCollum’s 2020 bonus.
However, for Richard Portman and Steve Whittern the Committee has used discretion to determine that the annual bonus will be
payable 100 per cent in cash.
Determination of LTIP awards with performance periods ending in the year
The LTIP awards made in 2018 were subject to a range of absolute share price performance targets (to be reduced by the value
of dividends paid over the performance period) and subject to a financial performance underpin. These awards lapsed in full, as
shown below:
Share price target (closing 3 month average for
FY20 year end) % vesting
less than 1550p –
1550p 25
1,950p or higher 100
594.32p closing average 3 month share price
plus 40.12p of dividends paid –
2018 LTIP award Award value
Director number of shares Vesting level £000
Mike McCollum 31,253 – –
Richard Portman 15,150 – –
Steve Whittern 19,320 – –
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Dignity plc Annual Report & Accounts 2020
75
LTIP awards granted in the year
The terms of the LTIP award granted to the Executive Director of Funeral Operations on 22 December 2020 were as follows:
Face/maximum
Number of LTIP value of awards % of award vesting at
Executive awards at grant date*£ threshold Performance period
Andrew Judd 31,509 178,971 25 01.01.20 – 31.12.22
* Based on a share price on the date of grant on 22 December 2020 of 568 pence.
50 per cent of the 2020 award will vest subject to a range of relative total shareholder return performance against the companies
comprising the FTSE SmallCap Index (excluding investment trusts) over the performance period commencing 1 January 2020.
The vesting of this award is dependent on the following:
TSR relative to FTSE SmallCap companies
Performance required % vesting
Below threshold
Threshold
Stretch or above
Below median
Median
Upper quartile or above
–
25
100
The remaining 50 per cent of the award will be based on our Funeral Market Share in the final year of the performance period, 2022.
Funeral market share Growth above
performance required in 2022 2019 baseline of 11.7% % vesting
Below threshold Below 12.5%
Threshold 12.5% 6.83%
Stretch or above 15 or above 28.2%
–
25
100
The Funeral Market Share measure is based on growth from the level of our Market Share in 2019 of 11.7 per cent and recognises that
this follows several years of decline. The Funeral Market Share measure will be subject to a performance underpin which requires the
Remuneration Committee to be satisfied that our underlying profitability is in line with our business plan over the performance period.
The Market Share will be calculated using the average of the 12 monthly Market Share figures for 2022 and independently verifiable
using ONS external market figures. The Committee is satisfied that the target range is sufficiently stretching, particularly as this requires
growth following several years of decline and the fact that the starting period for the average is based on monthly figures over the final
year, and not just the final month or few months of the year (which would give longer to achieve the target, but would not be
independently verifiable).
The award will vest on the third anniversary of grant. Clawback and malus provisions apply and there is a holding period requiring the
net of tax value of shares to be held for two years after the awards vest.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
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) 27.12.19 year year during year 25.12.20 acquired acquired
Andrew Judd
Mike McCollum
Richard Portman
Steve Whittern
16.03.17(i)
23.03.18(ii)
13.06.19(iii)
22.12.20(iv)
16.03.17(i)
23.03.18(ii)
13.06.19(iii)
16.03.17(i)
23.03.18(ii)
13.06.19(iii)
16.03.17(i)
23.03.18(ii)
13.06.19(iii)
2,455
890
633.5
584
2,455
890
633.5
2,455
890
633.5
2,455
890
633.5
1,000
7,486
22,494
–
31,253
31,253
80,741
15,150
15,150
39,139
19,320
19,320
49,913
–
–
–
31,509
–
–
–
–
–
–
–
–
–
1,000
–
–
–
31,253
7,814
47,099
15,150
–
–
19,320
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,486
22,494
31,509
–
23,439
33,642
–
15,150
39,139
–
19,320
49,913
16.03.20
23.03.21
13.06.22
22.12.23
16.03.20
23.03.21
13.06.22
16.03.20
23.03.21
13.06.22
16.03.20
23.03.21
13.06.22
16.03.27
23.03.28
13.06.29
22.12.30
16.03.27
23.03.28
13.06.29
16.03.27
23.03.28
13.06.29
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 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.
(ii) 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 2019 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 2019 pricing announcement.
(iii) 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.
(iv) Subject to TSR and Funeral Market Share performance conditions as set out on page 75 of this report.
(v) Awards lapsed in respect of the awards granted to Mike McCollum in 2018 and 2019 relate to the scaling back of the awards pro rata for the service period.
The aggregate gain on the exercise of Long-Term Incentive Plan options by the continuing Directors in the period was £nil (2019: £nil).
Directors’ interest in shares
The interests of the Directors (including those of their connected persons) in the share capital of Dignity plc at 25 December 2020
are set out below:
Number of Ordinary Shares
At 25 December 2020 (or date of cessation of employment if earlier)
At 25 December
2020
Legally owned Value of shares
(or date of Subject to counting towards
At 27 December cessation of Deferred performance Vested but proposed Percentage of
2019 employment Subject Annual Bonus conditions unexercised shareholding salary held as
Legally owned if earlier) to SAYE Options under the LTIP under the LTIP guideline(1) shares(1)
Andrew Judd n/a 3,460 – 1,245 54,003 – £28,340 14
Mike McCollum 126,845 126,845 – 13,129 111,994 17,437 £984,007 192
Richard Portman 50,000 50,000 – 5,158 39,139 8,431 £393,494 159
Steve Whittern 38,076 88,076 – 6,582 49,913 10,763 £669,113 211
Clive Whiley(2) 3,000 25,000 – – – – – –
David Blackwood 7,154 n/a – – – – – –
Jane Ashcroft 1,917 n/a – – – – – –
Dean Moore n/a – – – – – – –
Gillian Kent n/a – – – – – – –
James Wilson 1,000 1,000 – – – – – –
(1) Based on the average share price of the last financial month of the year of 687.9 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) Clive Whiley has a beneficial interest via Zodiac Executive Pension Scheme, of which he is the sole beneficiary, in 25,000 Dignity plc shares.
There has been no change in the interests set out above between 25 December 2020 and 17 March 2021.
Shareholding guideline
The current shareholding guideline for the Executive Directors was not met and, accordingly, the Executive Directors 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.
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77
Loss of office payments and payments to past Directors
On 3 April 2020 the Company agreed with Mike McCollum that he should step down from the Board with immediate effect.
He continued to be paid base salary, benefits and pension until 30 April and in accordance with Mike McCollum's service contract,
the following payments have been or will be made:
• 12 monthly payments of £50,560 covering 12 months' base salary, pension and benefits from 1 May 2020.
• The Remuneration Committee has used discretion to allow Life assurance and private medical insurance to continue for 12 months
from 1 May 2020.
• The Remuneration Committee has determined that good leaver treatment should apply to the 2020 annual bonus for, which was
based on the original performance conditions, pro rata to 1 April 2020. 20 per cent of any annual bonus will be deferred in shares
for two years. This bonus is noted above in the table of Directors’ Remuneration.
• 2020 Deferred Bonus Plan awards granted in respect of the 2019 and 2020 annual bonus will vest at the normal time together with
any dividend equivalent payments.
• Outstanding Long-Term Incentive Plan awards granted in March 2018 and June 2019 over 23,439 and 33,642 shares respectively will
be capable of vesting at the normal vesting date after three years, together with any dividend equivalent payments, subject to the
achievement of the performance conditions and in each case will be scaled back pro rata for the proportion of the performance
period that has elapsed to 1 April 2020. The 2 year post vest holding period will continue to apply to all vested awards.
• Other vested but unexercised LTIP and deferred annual bonus awards, which are structured as nil cost options, may also be
exercised.
• A severance payment of £85,000 gross was paid to settle any potential claim for unfair dismissal, £30,000 paid immediately and the
balance at £4,583 per month for the subsequent 12 months.
• Clawback and malus provisions will continue after cessation of employment.
On 14 December 2020 the Company announced that it had agreed with Steve Whittern that he should resign and he ceased
employment on 31 December 2020. In accordance with Steve Whittern’s service contract and agreed terms, the following payments
have been or will be made:
• Continued payment of current base salary, benefits and pension from 15 December until 31 December 2020 (the date upon
which employment terminated). This is included in the table of Directors’ remuneration in this report.
• A payment in lieu of notice for the 12 month period from 1 January 2021 of £381,630 (representing base salary, car allowance,
pension and life assurance premium).
• A severance payment as compensation for loss of office of £30,000 (taking into account length of service, base salary and
mitigation obligations).
• Private medical insurance will continue until 31 December 2021 or until the date upon which full time employment with another
employer is taken up.
• The Remuneration Committee has determined that good leaver treatment should apply to the 2020 annual bonus, which was
based on the original performance conditions. The Committee has used discretion to pay the bonus exclusively in cash.
• Outstanding Long-Term Incentive Plan awards granted in March 2018 and June 2019 over 19,320 and 49,913 shares respectively will
be capable of vesting at the normal vesting date after three years, together with any dividend equivalent payments, subject to the
achievement of the performance conditions and in each case will be scaled back pro rata for the proportion of the performance
period that has elapsed to 31 December 2020. The two year post vest holding period will continue to apply to all awards.
• Other vested but unexercised LTIP and deferred annual bonus awards, which are structured as nominal cost options, may also
be exercised.
• Clawback and malus provisions will continue after cessation of employment.
On 14 December 2020 the Company also announced that it had agreed with Richard Portman that he should resign and he ceased
employment on 31 December 2020. In accordance with Richard Portman's service contract and terms agreed, the following
payments have been or will be made:
• Continued payment of current base salary, benefits and pension from 15 December until 31 December 2020 (the date upon which
employment terminated). This is included in the table of Directors’ remuneration in this report.
• A payment in lieu of notice for the 12 month period from 1 January 2021 of £303,140 (representing base salary, car allowance,
pension and life assurance premium).
• A severance payment as compensation for loss of office of £30,000 (taking into account length of service, base salary and
mitigation obligations).
• Private medical insurance to continue until 31 December 2021 or until the date upon which full time employment with another
employer is taken up.
• The Remuneration Committee has determined that good leaver treatment should apply to the 2020 annual bonus, which was
based on the original performance conditions. The Committee has used discretion to pay the bonus exclusively in cash.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
• Outstanding Long-Term Incentive Plan awards granted in March 2018 and June 2019 over 15,150 and 39,139 shares respectively will
be capable of vesting at the normal vesting date after three years, together with any dividend equivalent payments, subject to the
achievement of the performance conditions and in each case will be scaled back pro rata for the proportion of the performance
period that has elapsed to 31 December 2020. The two year post vest holding period will continue to apply to all vested awards.
• Other vested but unexercised LTIP and deferred annual bonus awards, which are structured as nominal cost options, may also
be exercised.
• Clawback and malus provisions will continue after cessation of employment.
Other than the amounts disclosed above, there are no other remuneration payments or payments for loss of office for these or any
other Directors.
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 2020 financial year
compared with the prior year:
2020 2019 Change
£m £m %
Dividends – 7.9 (100)
Employee remuneration costs 116.4 107.4 8.4
Percentage change in Directors’ pay
The table below shows the percentage change between 2019 and 2020 in the value of salary, benefits and annual bonus for each
Director compared to that of the average employee on a full-time equivalent basis.
2019 vs 2020
% change % change in
in salary/ taxable % change
fees benefits in bonus
Chairman – – –
CEO – (50) (75)
Chief Financial Officer – – –
Director of Corporate Services – 5 –
David Blackwood n/a n/a n/a
Jane Ashcroft n/a n/a n/a
Dean Moore n/a n/a n/a
Gillian Kent n/a n/a n/a
All employees 2 – –
The Executive Director of Funeral Operations is not included in the table above as he was appointed a Director on 14 December 2020.
CEO pay ratios
The Committee has decided to use Option A in the relevant regulations to calculate the Chief Executive Officer pay ratio.
This methodology was selected as the Committee believes this provides a more accurate and consistent calculation based on the
information available at this time. The Committee will monitor investor guidance and evolving best practice which may move in
favour of using Option A to calculate the ratios and will review its approach next year (restating any prior year figures, as appropriate).
The following table sets out the CEO pay ratio at the median, 25th and 75th percentile.
25th percentile 75th percentile
Financial year Method pay ratio Median pay ratio
2020 Option A 33.45:1 18.19:1 22.54:1
The three employees used for comparison for 2020 are shown below:
Employees salary Total remuneration
(£) (£)
Q 25 pay 17,380 17,965
Q 50 pay 21,190 21,325
Q 75 pay 26,337 26,662
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79
The pay ratios have been calculated in accordance with Option A. This methodology was selected as the Committee believes this
provides the most accurate calculation. The full-time equivalent remuneration for FY20 was calculated for employees of Dignity as
at 31 December 2020. Employees that joined the Company prior to this date have been grossed up to full time equivalent pay and
any employee that left the Company prior to this date has been excluded. Part time employees have been grossed up to full time
equivalents based on full time equivalent hours for the role. Total pay for employees includes salary, casual pay, allowances and
variable pay.
The reward policies and practices for our employees, which the Remuneration Committee reviews, are appropriately cascaded from
the Executive Directors’ remuneration policy and furthermore the Committee continues to monitor Group policies and practices to
ensure they are appropriate, fair and aligned and support the culture of the business. Therefore, the Remuneration Committee is
satisfied the median pay ratio is consistent with the Company’s pay, reward and progression policies for all employees.
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.
Ten Year Total Shareholder Return
)
d
e
s
a
b
e
R
(
)
£
(
e
u
a
V
l
400
300
200
100
0
0
1
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e
D
1
1
c
e
D
2
1
c
e
D
3
1
c
e
D
4
1
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e
D
5
1
c
e
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6
1
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7
1
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9
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D
Dignity plc
FTSE 350 Index
FTSE SmallCap Index
Source: Datastream (Thomson Reuters)
This graph shows the value, by 25 December 2020, of £100 invested in Dignity plc on 25 December 2010, compared with the value of
£100 invested in the FTSE 350 Index and FTSE SmallCap Index on the same date.
The table below shows the total remuneration figure for the CEO over the same ten year period.
2020 2020
2011 2012 2013 2014 2015 2016 2017 2018 2019 Mike McCollum* Clive Whiley*
CEO single total figure of
remuneration (£000) 917 2,081 2,217 2,426 2,440 2,372 966 1,010 733 238 400
Annual bonus pay-out
relative to maximum (%) 100 100 100 100 100 100 – 58 18 18 n/a
LTIP vesting (%) – 100 100 100 100 100 50 – – – n/a
*This represents the pro rata total remuneration for Mike McCollum to 3 April 2020 and Clive Whiley for the remainder of 2020 in his role as Executive Chairman.
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
Andrew Judd
Clive Whiley
Gillian Kent
James Wilson
Dean Moore
Contract date
14 December 2020
26 September 2019
11 June 2020
1 May 2019
11 March 2020
Notice period
6 months
3 months
3 months
3 months
3 months
Non-Executive Directors will normally serve for two terms of three years which may be extended to three terms.
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Dignity plc Annual Report & Accounts 2020
Report on Directors’ remuneration continued
for the 52 week period ended 25 December 2020
Governance
External directorships
Clive Whiley is Chair of Mothercare plc, China Venture Capital Management Limited, First China Venture Capital Limited and
Y-LEE Limited. The fees earnt are retained. Dean Moore is a Non-Executive Director of Cineworld plc and Volex plc and retains
the fees for these appointments. Andrew Judd does not hold any external directorships.
Membership of the Remuneration Committee
The Remuneration Committee currently comprises two independent Non-Executive Directors, Gillian Kent and Paul Humphreys
who was appointed on 23 February, and Dean Moore, who was an independent NED before stepping into the role of Interim Chief
Financial Officer and who remains independent in the view of the Board as he still receives a fixed fee and does not participate in
any incentive plans. During 2020, the Committee was chaired by David Blackwood until the 2020 AGM and then Gillian Kent from the
date of her appointment on 11 June 2020. Jane Ashcroft was a member of the Committee until she stepped down from the Board
on 3 April 2020.
The Remuneration Committee members have no personal financial interest 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 2019 and the application of the remuneration policy for 2020. During the year the
Committee considered the termination of employment arrangements for the departing Executive Directors and the remuneration
package for the Executive Director of Funeral Operations, who was promoted to the Board on 14 December.
The Committee receives advice from several sources, namely:
• The Chairman, Chief Executive and Finance 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 Chair 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 2020, total fees charged in the period by Korn Ferry in relation to advice
to the Committee were £31,079.25 + VAT (2019: £74,751 + VAT) and were charged on a time spent basis.
Statement of shareholder voting at the AGM (Unaudited)
Votes cast by proxy at the Annual General Meeting held on 11 June 2020 in respect of the Remuneration Report and at the AGM on
13 June 2019 in respect of the binding three year policy vote, are as shown below:
2020 AGM Remuneration Report
Total number Percentage of
of votes votes cast
For 29,207,486 96.72
Against 991,481 3.28
Total votes cast 30,198,967 100
Abstentions 139,408 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
On behalf of the Board
Gillian Kent
Chair of the Remuneration Committee
17 March 2021
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Directors’ report
for the 52 week period ended 25 December 2020
Dignity plc Annual Report & Accounts 2020
81
The Directors present their report and the audited consolidated
financial statements for Dignity plc and its subsidiaries for the
52 week period ended 25 December 2020.
The company registration number of Dignity plc is 04569346.
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 adopted
pursuant to Regulation (EC) No. 1606/2002 as it applies in
the European Union and in accordance with international
accounting standards in conformity with the requirements
of the Companies Act 2006 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;
• Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• Provide additional disclosures when compliance with the
specific requirements in IFRSs and in respect of the parent
company financial statements, is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the Group and company financial
position and financial performance;
• In respect of the Group financial statements state, whether
accounting standards in conformity with the requirements
of the Companies Act 2006 and IFRSs adopted pursuant to
Regulation (EC) No. 1606/2002 as it applied in the European
Union have been followed and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, subject to any
material departures disclosed and explained in the Group
financial statements;
• In respect of the Parent Company financial statements,
state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in Parent Company financial statements
respectively; and
• Prepare the financial statements on the going concern basis
unless it is appropriate to presume that the Company and/or
the Group will not continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and
enable them to ensure that the financial statements and the
Report on Directors’ Remuneration comply with the Companies
Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Group’s websites. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed
on page 51 of this Annual Report, confirm that, to the best
of their knowledge and belief:
• The Group financial statements, which have been prepared
in accordance with IFRSs adopted pursuant to Regulation
(EC) No. 1606/2002 as it applied in the European Union and
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006,
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 43 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 adopted pursuant to Regulation (EC) No. 1606/2002
as it applied in the European Union and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 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.
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Directors’ report continued
for the 52 week period ended 25 December 2020
Governance
Principal risks and uncertainties
Operational, financial and emerging risks are considered on
pages 29 to 32.
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, 8,089 Ordinary Shares of 12 48/143 pence
each were issued to satisfy share incentives which became
exercisable in the period.
The issued share capital of Dignity plc at 25 December 2020
consisted of 50,020,483 Ordinary Shares of 12 48/143 pence
each. All the Ordinary Shares carry the same rights and
obligations. There are no other class or type of share in issue.
A special resolution passed at the last AGM on 11 June 2020
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 23 June 2021. 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 92. The Group’s loss before tax
amounted to £19.6 million (2019: Profit of £44.1 million).
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.
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, and management briefings. This is
discussed in more detail in the Corporate and social
responsibility report on pages 35 to 41.
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.dignityplc.co.uk during 2020 in accordance with
the Equality Act 2010 (Gender Pay Gap) Regulations 2018.
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 76 to 79.
In accordance with the July 2018 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 23 June 2021.
During the period, the Company maintained liability insurance
for its Directors and Officers to a value of £90 million. The
Directors of each of the Company’s subsidiaries have the
benefit of an indemnity provision in the Company’s Articles
of Association. The indemnity provision, which is a qualifying
third party indemnity provision as defined by Section 234 of
the Companies Act 2006, was in force throughout the period
and is currently in force.
Health and Safety policy
The Group’s operations are designed at all times in such a way
as to ensure, so far as reasonably practicable, the health, safety
and welfare of all of our employees and all other persons who
may attend our premises. This is discussed in the Corporate
and social responsibility report on page 38.
Corporate Social Responsibility
Maintaining the quality of the environment in which we all
live is an important concern for the Group. This is discussed
in the Corporate and social responsibility report on page 40
alongside other social and ethical considerations.
Going concern
In order to assess the appropriateness of the application of
the going concern principle in this Annual Report, the Directors
have considered the principal risks and uncertainties and
financial position of the Dignity Group.
The Group has carried out a detailed going concern analysis
and considered the ongoing impact of the COVID-19 pandemic,
on these financial statements. Full details of this analysis are
set out in Note 1 to the financial statements.
Following consideration of the base case forecasts, and the
range of downside stress test scenarios, the Directors have a
reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future
and for a period through to 31 March 2022. The Directors
formally considered this matter at the Board meeting held on
5 March 2021. For these reasons, they continue to adopt the
going concern basis for preparing the Annual Report.
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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 53 to 57, which is incorporated by
reference.
Strategic Report
The Strategic Report on pages 1 to 43 has been approved
by the Board.
By order of the Board
Tim George
Company Secretary
17 March 2021
Post balance sheet events
Regulation and the funeral plan market
HM Treasury had previously announced that prepaid funeral
plans would be subject to regulation by the Financial Conduct
Authority (‘FCA’). On 2 March 2021, the FCA published their
consultation paper with their proposed approach to regulation.
If the FCA rules are enacted in the way they are currently
drafted they will have a profound impact on both the wider
industry and Dignity. We welcome the opportunity to work
closely with the FCA over the coming months to ensure the
rules provide the much needed consumer protection, but also
supporting the FCA in their understanding of the potential
unintended consequences on the industry as a result of the
current drafting.
Tax rate change
In the budget on 3 March 2021 by HM Government, legislation
to increase the main rate of corporation tax from 19 per cent
to 25 per cent from 1 April 2023 was announced. This will be
reflected in the Group’s financial results once substantively
enacted.
Requisition Notice
On 11 March 2021, Dignity plc received a requisition notice
pursuant to section 303(1) of the Companies Act 2006 requiring
that the Board convenes a general meeting of shareholders
for the purposes of considering and, if thought fit, approving
resolutions to remove the existing Executive Chairman, Clive
Whiley as a Director and appoint Gary Channon as an Executive
Director. The Requisition Notice was delivered by Phoenix UK
Fund Limited, the Company's largest shareholder.
The Phoenix UK Fund is managed by Phoenix Asset
Management Partners and Mr Channon is the founder and
chief investment officer of Phoenix Asset Management
Partners.
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.
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Dignity plc Annual Report & Accounts 2020
Independent auditors’ report to the members of Dignity plc
for the 52 week period ended 25 December 2020
Financial statements
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 25 December 2020 and of the group’s profit for
the 52 week period then ended;
• the group financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union;
• the parent company financial statements have been properly prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006 as applied in accordance with section 408 of the Companies
Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Dignity plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the 52 week
period ended 25 December 2020 which comprise:
Group
Parent company
• Consolidated balance sheet as at 25 December 2020
• Consolidated income statement for the 52 week period ended
• Balance sheet as at 25 December 2020
• Statement of changes in equity for the 52 week period ended
25 December 2020
25 December 2020
• Consolidated statement of comprehensive income for the 52 week period
ended 25 December 2020
• Statement of cash flows for the 52 week period ended 25 December 2020
• Related notes C1 to C9 to the financial statements including a summary
• Consolidated statement of changes in equity for the 52 week period
of significant accounting policies
ended 25 December 2020
• Consolidated statement of cash flows for the 52 week period ended
25 December 2020
• Related notes 1 to 35 to the financial statements, including a summary
of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and International Accounting
Standards in conformity with the requirements of the Companies Act 2006 and, as regards to the group financial statements,
International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union
and as regards the parent company financial statements, as applied in accordance with section 408 of the Companies Act 2006.
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. We are independent of the group 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 going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent
company’s ability to continue to adopt the going concern basis of accounting included the following procedures:
• Understanding and walking through management’s process for and controls related to assessing going concern including
discussion with management to ensure all key factors were taken into account.
• Read and considered the directors’ going concern assessment covering the period through to 31 March 2022, including their
assessment of the risks and impact of COVID-19, to understand the key assumptions upon which it was based and testing the
model integrity for clerical accuracy.
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• As described in Notes 1 and 18 to the financial statements the company has in issue Class A Notes with an outstanding
principal of £185,784,000 and Class B Notes with an outstanding principal of £356,402,000 that are listed on the Irish Stock
Exchange. The terms and conditions for these notes is covered by an Issuer/Borrower Loan Agreement (‘IBLA’). We inspected
the debt service cash requirement (‘DSCR’) definition as per the IBLA to confirm the basis of the covenant calculation.
• Tested compliance with the EBITDA:DSCR covenant in the financial reporting period as follows:
– Recalculated the EBITDA for the Securitisation Group and assessed whether it has been correctly calculated in accordance
with the definition of EBITDA provided in the IBLA;
– Agreed the DSCR to the underlying audited interest and principal repayment schedules; and
– Recalculated the EBITDA:DSCR ratio to confirm the company is compliant with this ratio during the period and at the period
end date.
• Tested the forecast compliance with the EBITDA:DSCR covenant ratio as follows:
– Agreed the DSCR to the interest and principal repayment schedules;
– Obtained management’s forecast through 31 March 2022 which was formed using the 2021 budget as a basis and the
2022 plan, which was presented to and approved by the Board, having given due consideration to changes in financial
performance in respect of expected number of deaths, market share and funeral mix (between lower cost ‘simple’ and
higher cost ‘full’ service funerals);
– Tested the underlying assumptions and data upon which the budget and forecast were based to ensure their
reasonableness, by;
• assessing the accuracy of management’s historical budgeting (pre COVID-19);
• comparing forecast deaths to independent information from the Office for National Statistics (‘ONS’);
• assessing cost saving initiatives against management plans, considering both the timing and quantum of achievability; and
• assessing current trading performance by inspecting the January 2021 period end management accounts and additional
financial information available for February 2021 in addition to making inquiries of management to identify any issues
with current trading, average incomes, funeral mix, debtor recoverability and availability of coffin stock;
– Obtained the sensitivity testing performed in the director’s going concern assessment. We checked the calculations for
accuracy and evaluated the underlying assumptions related to average price, market share and death rate by comparison
to the trend in actual deaths, funeral numbers performed and revenues achieved since the COVID-19 outbreak and, where
relevant, statistics published by the ONS;
– Performed additional stress testing to model the impact of further severe, but plausible scenarios to assess their impact
upon the EBITDA:DSCR covenant ratio;
– Performed a reverse stress test to evaluate the level of downturn in performance that would result in a breach of the
EBITDA:DSCR covenant; and
– For mitigations modelled we assessed whether management had the ability to affect these in the time period involved.
• Whilst not forecast in any scenario, we understood the implications of a breach of the EBITDA:DSCR covenant ratio as follows:
– Reviewed the directors’ assessment of the implication of a breach of the covenant ratio and evaluated this assessment in the
context of the terms of the IBLA; and
– Assessed the completeness and accuracy of the explanation provided in note 1 to the financial statements describing the
impact of a breach of the covenant ratio.
• Assessed the liquidity of the group, including both its current cash resources and the availability of further facilities, should
they be required, in order to meet the debt service payments falling due over a period through to 31 March 2022.
• Inquired of management as to their knowledge of events or conditions beyond the period of their assessment that may
cast significant doubt on the entity's ability to continue as a going concern and compared their response to forecast market
conditions by the ONS, the profile of payments and covenant requirements of the IBLA and other information that could
impact the funeral and crematoria sectors, notably the Competition and Markets Authority report issued in December 2020.
• Assessed the going concern disclosures in the financial statements to ensure they are in accordance with the revised ISA UK
570 going concern auditing standard.
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Dignity plc Annual Report & Accounts 2020
Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 25 December 2020
Financial statements
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern
from when the financial statements are authorised for issue through 31 March 2022.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit on the consolidated financial records of the group to the materiality and performance
materiality described below.
Key audit matters
Group
• Revenue recognition – risk of management override.
• Carrying value of goodwill, other intangible assets, property, plant and equipment and right-of-use assets.
• Accounting for pre-need Trusts level 3 (illiquid) investments.
Company
• Carrying value of subsidiary investments.
Materiality
• Overall group materiality of £1.2 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.
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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.
We consider the group’s
conclusions in respect of
impairment of intangible
and tangible assets are
appropriate, and that the
£28.7 million impairment of
funeral segment goodwill and
£15.3 million impairment of
trade names are fairly stated.
The impairment disclosures
are in accordance with IAS 36.
Risk
Our response to the risk
• 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
91% 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 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 (pre COVID-19) 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;
– reconciling the forecast used in the CGU impairment models for 2021 and
beyond to the scenario analysis prepared for use elsewhere in the group,
e.g., the going concern review; and
– challenging whether the forecast growth rates have been appropriately
adjusted to reflect the group’s strategy and the changes experienced in the
funeral market, together with comparing them to observable market data.
• We performed sensitivities on the group’s forecasts by incorporating
reasonable possible changes in key assumptions including EBITDA growth
rates and the discount rate and assessed the decline in headroom/change
in impairment;
• Where CGUs were not impaired, 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; and
• We audited the disclosures in note 9 against the requirements of IAS 36
Impairment of Assets.
Revenue recognition – risk of
management override (Revenue 2020:
£357.5 million, 2019: £338.9 million)
Given investor focus on the Group’s
underlying revenue (2020: £314.1
million, 2019: £301.3 million) we
consider there to be a risk in relation
to the manipulation by group
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.
Refer to the Accounting policies, Note 1
and Note 3 of the Consolidated Financial
Statements and the Audit Committee
report (pages 58 to 61).
Carrying value of goodwill, other
intangible assets, property, plant and
equipment and right-of-use assets
(2020: £660.5 million, 2019: £624.4
million), net of a £44.0 million
impairment of funeral segment
goodwill and trade names (2019: £6.8
million impairment of trade names)
The group has a significant value
of goodwill, other intangible assets,
including trade names, property plant
and equipment and right-of-use assets
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 an increased
number of simple (rather than full
service) funerals due to COVID-19
which has lowered average incomes.
Despite the increased volumes, the
group has experienced an overall
decline in underlying operating profit
from £63.3 million in 2019 to £55.7
million in 2020.
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 58 to 61).
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Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 25 December 2020
Financial statements
Risk
Our response to the risk
• We understood the group policy in relation to financial assets held by
the Trusts, obtained the breakdown of investments and performed the
following procedures:
Existence
• For the investments held at the 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 the fund manager.
Valuation
• 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 2020
with a bridging letter to 31 December 2020. 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 independently built an expectation of the valuation as at 25 December
2020 having considered the fund monthly management accounts (directly
obtained from the fund manager) for December 2020 and the level of
investment units held by the Trusts as obtained directly from the asset
custodian.
• Our assessment involved independently calculating an expectation of the
price at 25 December 2020, derived using an appropriate publicly available
benchmark (considering the nature and geography of the investments in the
fund) and by performing a variance analysis between the December 2017,
2018 and 2019 management accounts with audited financial statements of
the funds for the same years. We then compared this expectation with the
actual price at 25 December 2020, as confirmed by the fund manager.
• We reviewed the financial instruments and fair value disclosures in the
group’s financial statements and assessed whether they met the
requirements of IFRS 7 and IFRS 13.
• 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, other intangible assets and property, plant and equipment
impairment assessment (see analysis above) for net debt, pensions and
cashflows and assets associated with the Trusts;
• We tested the mathematical integrity of the calculation performed;
• 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, other intangible assets and property, plant and equipment
impairment assessment purposes, we vouched each of the adjustments
made to amounts recorded elsewhere in the financial statements or
underlying accounting records; and
• We audited the related disclosures with reference to the requirements
of IAS 36.
Valuation of pre-need Trusts level 3
(illiquid) investments (2020: £49.9
million out of total Trust financial
assets of £967.1 million, 2019:
£40.1 million out of £947.5 million)
Certain assets held by the pre-need
Trusts require a level of estimation in
assessing their valuation, specifically the
private (illiquid) investment fund which
are classed as Level 3 assets.
The valuation of these assets is
dependent on unobservable market
inputs. Given there is no active market
price for this investment, nor are the
audited financial statements at
December 2020 for the private (illiquid)
investment fund available, and given the
current volatility in the capital markets,
there is a risk that the investment value
recorded is inappropriate.
Refer to the Accounting policies, note 1,
and note 14 of the Consolidated
Financial Statements and the Audit
Committee report (pages 58 to 61).
Carrying value of subsidiary
investments (2020: £151.3 million,
2019: £149.9 million)
The parent company holds investments
in subsidiaries with a significant carrying
value.
As at 25 December 2020, the market
capitalisation of Dignity plc was 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, COVID-19 driven increase in
funeral volume which has been
countered by the delivery of more
simple as opposed to full price funerals,
thereby reducing underlying profitability.
Therefore, there is 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 58 to 61).
Key observations
communicated to the
Audit Committee
The carrying value of the Level
3 Trust assets is fairly stated.
The related disclosures are in
accordance with IFRS except
for the omission of certain
IFRS 13 disclosures related to
valuation sensitivity as this
information was not available
to management (as explained
in note 23).
Based on our procedures,
we have not identified any
impairment in the carrying
value of investments.
With minimal headroom, the
carrying value is sensitive to
reasonable possible changes
in key assumptions.
In the prior period, our auditor’s report included a key audit matter in relation to the re-assessment of judgement regarding the
extent of the group’s power over the two principal pre-need trusts, being Trust for Age UK Plans (‘Age UK’) and National Funeral
Trust (‘NFT’), together the ‘Trusts’ resulting in consolidation and significant additional complexity to the financial statements.
In the current period, we updated our identified risk, removing the reassessment of judgement resulting in consolidation of
Trusts and the evaluation of the Trust liabilities on initial consolidation, but keeping unchanged the risk around the complexity
of pre-need Trusts level 3 (illiquid) investment as shown above.
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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 £1.2 million (2019: £1.5 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)) (2019: 4.6% calculated on the same basis).
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 £4.6 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 £8.2 million achieved by the group as a result of the consolidation
of the pre-need Trusts. 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 pre-need trusts is consistent with how
management prepare their underlying results and communicate financial performance to investors.
Starting basis
• Loss before tax as reported in the financial statements – £19.6 million
Adjustments
• Adjustment for non-underlying items (excluding acquisition related amortisation of £4.6 million) – £53.8 million
• Exclude the profit impact of consolidation of the Trusts – £(8.2) million
Materiality
• Underlying profit before tax – £26.1 million
• Materiality calculated at 4.6% – £1.2 million
We determined materiality for our audit of the standalone parent company financial statements to be £4.7 million (2019: £4.6
million), which is 1% (2019: 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’s overall control environment, our judgement was
that performance materiality was retained at 50% (2019: 50%) of our materiality, being £0.6 million (2019: £0.8 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.1 million (2019:
£0.1 million), which is set at 5% of materiality (to the nearest £0.1 million), 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 83 and 156 to 164, including
the Strategic Report set out on pages 1 to 43, Governance set out on pages 44 to 83 and Other Information set out on pages 156 to
164, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information
contained within the annual report.
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Independent auditors’ report to the members of Dignity plc continued
for the 52 week period ended 25 December 2020
Financial statements
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.
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 course of 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 themselves. 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.
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 period for which the financial statements
are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In 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.
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the group and company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 82;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is
appropriate set out on page 33;
• Directors’ statement on fair, balanced and understandable set out on page 81;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 82;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on pages 55 and 56; and
• The section describing the work of the audit committee set out on pages 58 to 61.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 81, 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.
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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
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance
of the company and management.
• 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 2018) and the relevant tax
compliance regulations in the UK. In addition, we concluded that there are certain significant laws and regulations which may have
an effect on the determination of the amounts and disclosures in the financial statements being the Listing Rules of the UK Listing
Authority, and those laws and regulations relating to occupational health and safety and data protection.
• We understood how the group is complying with those frameworks by making enquiries of management, internal audit and those
responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes, papers
provided to the Audit Committee and any correspondence received from regulatory bodies.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by
meeting with management to understand where it considered there was susceptibility to fraud. We also considered performance
targets and their influence on efforts made by management to manage earnings or influence the perceptions of analysts. We
considered the programmes 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 programmes 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 material misstatements
arising from fraud.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
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
• Following the recommendation from the audit committee, we were appointed by the company on 13 June 2020 to audit the
financial statements for the 52 weeks ended 25 December 2020 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is seven years, covering the
periods ending 26 December 2014 to 25 December 2020.
• 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.
Adrian Roberts (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
17 March 2021
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.
92
Dignity plc Annual Report & Accounts 2020
Consolidated income statement
for the 52 week period ended 25 December 2020
Financial statements
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance costs
Finance income
Share of loss and impairment in respect of associated undertakings
Deferred revenue significant financing
Remeasurement of financial assets held by the Trusts and related income
(Loss)/profit before tax
Taxation
(Loss)/profit for the period attributable to equity shareholders
(Loss)/earnings per share for profit attributable to equity shareholders
– Basic (pence)
– Diluted (pence)
52 week period
ended
25 December
2020
£m
357.5
(177.3)
180.2
(164.3)
15.9
(29.8)
0.1
–
(53.1)
47.3
(19.6)
(5.9)
(25.5)
52 week period
ended
27 December
2019
restated
£m
338.9
(161.7)
177.2
(132.4)
44.8
(25.8)
0.2
(6.0)
(54.1)
85.0
44.1
(13.5)
30.6
(51.0)p
(51.0)p
61.2p
61.2p
Note
3
3
4
4
12
4
4
5
6
3
8
8
Prior year comparatives have been restated due to a prior year adjustment in relation to taxation. See page 96 for further details.
The results for the 52 week period to 25 December 2020 reflect the impact of adopting IFRS 16, Leases. Comparatives in respect
of the 2019 reporting periods have not been restated in this respect as permitted under the specific transition provisions of the
standard. See note 35 for 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 25 December 2020
(Loss)/profit for the period
Items that will not be reclassified to profit or loss
Remeasurement loss on retirement benefit obligations
Tax credit on remeasurement on retirement benefit obligations
Restatement of deferred tax for the change in UK tax rate
Other comprehensive loss
Comprehensive (loss)/income for the period
Attributable to:
Equity shareholders of the parent
52 week period
ended
25 December
2020
Note
£m
52 week period
ended
27 December
2019
restated
£m
29
6
6
(25.5)
(11.7)
2.2
0.5
(9.0)
(34.5)
30.6
(1.8)
0.3
–
(1.5)
29.1
(34.5)
29.1
Prior year comparatives have been restated due to a prior year adjustment in relation to taxation. See page 96 for further details.
The results for the 52 week period to 25 December 2020 reflect the impact of adopting IFRS 16, Leases. Comparatives in respect
of the 2019 reporting periods have not been restated in this respect as permitted under the specific transition provisions of the
standard. See note 35 for details.
Consolidated balance sheet
as at 25 December 2020
Dignity plc Annual Report & Accounts 2020
93
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use asset
Financial and other assets
Financial assets held by the Trusts
Deferred commissions
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Deferred commissions
Cash and cash equivalents – Trading Group
Cash and cash equivalents – held by the Trusts
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Financial liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Contract liabilities
Provisions for liabilities
Non-current liabilities
Financial liabilities
Other non-current liabilities
Lease liabilities
Contract liabilities
Provisions for liabilities
Retirement benefit obligation
Total liabilities
Shareholders’ deficit
Ordinary share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total deficit
Total deficit and liabilities
25 December
2020
Note
£m
27 December
2019
restated
£m
9
9
10
11
13
14
20
22
15
16
20
17
18
19
18
20
21
18
19
18
20
21
29
24
203.9
120.5
240.9
95.2
10.7
967.1
101.3
20.3
232.6
140.5
251.3
–
18.2
947.5
96.8
14.0
1,759.9
1,700.9
9.0
30.0
7.6
73.6
21.6
95.2
7.9
32.4
7.3
57.9
15.5
73.4
141.8
1,901.7
121.0
1,821.9
15.1
68.7
7.3
8.7
95.5
2.4
9.6
61.6
–
6.0
95.5
2.0
197.7
174.7
526.6
2.1
81.2
1,222.0
9.5
36.6
1,878.0
2,075.7
6.2
12.7
141.7
(3.0)
(331.6)
(174.0)
542.3
2.0
–
1,209.1
9.3
26.0
1,788.7
1,963.4
6.2
12.5
141.7
(4.0)
(297.9)
(141.5)
1,901.7
1,821.9
Prior year comparatives have been restated due to a prior year adjustment in relation to taxation. See page 96 for further details.
The balance sheet as at 25 December 2020 reflects the impact of adopting IFRS 16, Leases. Comparatives in respect of the 2019 reporting
periods have not been restated in this respect as permitted under the specific transition provisions of the standard. See note 35 for details.
The alternative performance measures included within the Group’s consolidated financial statements present information on a comparable basis.
The financial statements on pages 92 to 143 were approved by the Board of Directors on 17 March 2021 and were signed on its behalf by:
C P Whiley, Executive Chairman D R Moore, Interim Chief Financial Officer
94
Dignity plc Annual Report & Accounts 2020
Consolidated statement of changes in equity
for the 52 week period ended 25 December 2020
Financial statements
Ordinary
share
capital
£m
6.2
–
Share
premium
account
£m
12.4
–
Capital
redemption
reserve
£m
141.7
–
Other
reserves
£m
(5.1)
–
Retained
earnings
£m
(319.1)
34.9
Shareholders’ equity as at 28 December 2018
Profit for the 52 weeks ended 27 December 2019 –
as originally presented
Impact of corporate interest restriction
disallowance – prior year adjustment
Remeasurement loss on retirement benefit
obligations
Tax on retirement benefit obligations
Total comprehensive income – restated
Effects of employee share options
Tax on employee share options
Proceeds from share issue(1)
Gift to Employee Benefit Trust
Dividends (note 7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
Shareholders’ equity as at 27 December 2019 –
6.2
12.5
141.7
restated
Adjustment on initial application of IFRS 16 on
28 December 2019 (note 35)
Loss for the 52 weeks ended 25 December 2020
Remeasurement loss on retirement benefit
obligations
Tax on retirement benefit obligations
Restatement of deferred tax for the change in UK
tax rate
Total comprehensive loss
Effects of employee share options
Proceeds from share issue(2)
Gift to Employee Benefit Trust
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
Total
equity
£m
(163.9)
34.9
(4.3)
(1.8)
0.3
29.1
1.1
0.1
0.1
(0.1)
(7.9)
(4.3)
(1.8)
0.3
29.1
–
–
–
–
(7.9)
(297.9)
(141.5)
0.8
(25.5)
(11.7)
2.2
0.5
(33.7)
–
–
–
0.8
(25.5)
(11.7)
2.2
0.5
(33.7)
1.2
0.2
(0.2)
–
–
–
–
1.1
0.1
–
(0.1)
–
(4.0)
–
–
–
–
–
–
1.2
–
(0.2)
Shareholders’ equity as at 25 December 2020
6.2
12.7
141.7
(3.0)
(331.6)
(174.0)
(1) Relating to issue of 3,455 shares under 2016 DAB scheme.
(2) Relating to issue of 7,745 shares under 2017 DAB scheme and 344 issued under the 2019 SAYE scheme.
Prior year comparatives have been restated due to a prior year adjustment in relation to taxation. See page 96 for further details.
The results for the 52 week period to 25 December 2020 reflect the impact of adopting IFRS 16, Leases. Comparatives in respect
of the 2019 reporting periods have not been restated in this respect as permitted under the specific transition provisions of the
standard. See note 35 for 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,
£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 25 December 2020
Dignity plc Annual Report & Accounts 2020
95
Cash flows from operating activities
Cash generated from operations
Finance income received
Finance costs paid
Transfer from restricted bank accounts for finance costs
Payments to restricted bank accounts for finance costs
Total payments in respect of finance costs
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Maintenance capital expenditure(1)
Branch relocations
Transformation capital expenditure
Satellite locations
Development of new crematoria and cemeteries
Purchase of property, plant and equipment and intangible assets
Purchase of financial assets (by the Trusts)
Disposals of financial assets (by the Trusts)
Realised return on financial assets
Net cash used in investing activities
Cash flows from financing activities
Payments due under Secured Notes
Transfer from restricted bank accounts for repayment of borrowings
Payments to restricted bank accounts for repayment of borrowings
Total payments in respect of borrowings
Principal and interest elements of lease payments
Dividends paid to shareholders on Ordinary Shares
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Restricted cash
Cash and cash equivalents at the end of the period as reported in the
consolidated balance sheet
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
62.7
0.1
(24.5)
12.1
(12.0)
(24.4)
(6.9)
31.5
1.1
(9.1)
(0.5)
(0.2)
–
(1.3)
(11.1)
(778.1)
796.8
3.8
12.5
(9.6)
4.8
(4.9)
(9.7)
(12.5)
–
(22.2)
21.8
56.5
78.3
16.9
95.2
64.6
0.3
(25.0)
12.3
(12.1)
(24.8)
(7.9)
32.2
2.1
(9.8)
(1.1)
(1.7)
(0.3)
(5.4)
(18.3)
(736.1)
726.6
3.6
(22.1)
(9.3)
4.6
(4.8)
(9.5)
–
(7.9)
(17.4)
(7.3)
63.8
56.5
16.9
73.4
Note
27
17
14
14
17
7
17
17
17
(1) Maintenance capital expenditure includes vehicle replacement programme, improvements to locations and purchases of other tangible and intangible assets.
96
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
European law requires that the Group’s consolidated financial statements for the 52 week period ended 25 December 2020 are
prepared in accordance with all applicable International Financial Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applied in the European Union. These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006.
In the current period, the Group’s consolidated financial statements have been prepared for the 52 week period ended
25 December 2020. For the comparative period, the Group’s consolidated financial statements have been prepared for the
52 week period ended 27 December 2019.
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 Annual Reports prior to 2019.
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.
Prior year restatement
Following the finalisation of the Group’s 2019 corporation tax returns for its subsidiary undertakings and the corresponding
detailed Group corporate interest restriction return it became apparent that the interaction of the consolidation of the Trusts
and the application of the complex tax provisions relating to the level of interest deductibility within the Group had been
understated and consequently the 2019 financial statements were misstated. Due to an increased amount of disallowed interest
expense arising predominately from the inclusion of realised and unrealised fair value movements on the bond investments
within the Trust consolidation a prior year adjustment has been booked due to the magnitude of the disallowance. The Group
has therefore restated its consolidated financial statements for 2019. There is no impact on any further previous accounting
periods. The restatement increases the tax charge by £4.3 million with a corresponding increase in the Group’s current tax
liabilities by £4.3 million. Accordingly, retained earnings as at 27 December 2019 have reduced by £4.3 million and statutory EPS
has also been restated to 61.2p. A deferred tax asset cannot be recognised in this respect as it is not considered probable that
the Group will be able to access the disallowed interest amounts under the corporate interest restriction rules in the
foreseeable future.
Going concern
The key factors which impact the Group’s financial performance are death rate, market share, mix and average revenue per
funeral. As this Annual Report describes, during the COVID-19 pandemic, whilst the death rate in the UK has sadly increased and
the Group’s market share remained broadly stable, both the average revenue received per funeral and the revenue received for
memorial sales has declined. Whilst not back to pre-pandemic levels, following the adaptation of limousines and application of
other protective measures for our colleagues and customers, the take up of full service funerals compared to simple funerals
has increased to approximately 68:32 in the fourth quarter compared to 54:46 in the second quarter. This has resulted in the
recovery of average revenues through 2020 to close the year (and start 2021) at approximately 94 per cent of those achieved
prior to the start of COVID-19. The Group has also taken prudent action to manage costs, where appropriate, to protect its
position in terms of ensuring sufficient headroom on both profitability and liquidity measures.
Dignity plc Annual Report & Accounts 2020
97
1 Accounting policies (continued)
Going concern (continued)
The impact on 2021 revenue and profitability will depend in part on various factors outside of the Group’s control, such as the
number of deaths in the UK and the length of time social distancing measures continue to be in place.
The financial performance of the Group and the Securitisation Group has been forecast and those forecasts have been
subjected to a number of sensitivities. These forecasts reflect an assessment of current and future market conditions and their
impact on the future profitability of the Group and the Securitised Group. The forecasts reflect recovery at the beginning of 2022.
When considering the going concern assumption, the Directors of the Group have reviewed the principal risks within the
environment in which it operates and have prepared relevant sensitised scenarios, these include:
• Prolonged period of social distancing restrictions which may serve to keep the mix and average revenue per funeral lower for
a sustained period; and
• A significant reduction in the number of deaths.
In all base scenarios modelled, the Group is forecast to have sufficient liquidity and meet its debt service cover ratio (‘DSCR’) in
the period assessed through to 31 March 2022.
To provide further consideration of going concern, the Directors also considered what would happen in an ongoing scenario of
reduced profitability significantly below management’s forecasts, such as a significant reduction in the market share or average
revenues (the year to date analysis through February 2021 does not indicate the likelihood of such a scenario). In such a
scenario, the Securitised Group may not meet its DSCR covenant requirements before the consideration of additional mitigating
activities such as reducing controllable spend. Under the terms of the Securitised Group’s borrowings, the Securitised Group is
required to maintain a DSCR of at least 1.5 times (see note 26), measured on a rolling 12 month basis every quarter. However,
a breach of the covenant does not give rise to an immediate requirement to repay the associated borrowings. Rather, such a
breach results in a requirement for the bond trustees to appoint a financial adviser who will review the financial and operational
circumstances of the Securitised Group prior to making recommendations as to how the breach can be resolved. Notwithstanding
this, given the current cash on hand and facilities available to it, the Securitised Group (as supported by the Company) would
have sufficient liquid resources to make all required debt service payments for a period through to 31 March 2022.
Having considered all the above the Directors remain confident in the long-term future prospects for the Group and its ability to
continue as a going concern for the foreseeable future and for a period through to 31 March 2022 and therefore continue to
adopt the going concern basis in preparing the Annual Report.
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 APM’s 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 APM’s provided exclude the impact of consolidating the Trusts and the
changes which relate to the application of IFRS 15 and adoption of IFRS 16, all 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 pages 23 and 24 and alternative performance measures on pages 156 and 157 for
further information.
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.
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.
98
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies (continued)
Revenue
At-need funerals and cremations
Revenue from funeral operations related to at-need funerals comprises the amount recoverable from clients 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 clients (plan holder) at cost and not controlled by Dignity.
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 if a single payer or on each individual instalment received. 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 for the
duration of each plan at inception and is based on the estimated incremental borrowing rate of the Group at the time of each
cash flow.
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.
As the only directly attributable costs in respect of the marketing of the pre-arranged funeral plans are commission payments,
these 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 outside of a clawback period).
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 trusts to the Group.
Dignity plc Annual Report & Accounts 2020
99
1 Accounting policies (continued)
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.
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.
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Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies (continued)
Intangible assets – software
Where computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible
asset. Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring into use the
specific software.
An internally generated intangible asset arising from the Group’s development of computer systems (including websites) is
recognised if, and only if, the costs are directly associated with the production of identifiable and unique software products,
controlled by the Group and it is probable that future economic benefits will flow to the Group.
Costs recognised as assets are amortised over their estimated useful lives (three to eight years) using the straight line method.
Intangible assets – use of third party brand name
The Group has a marketing agreement with Age UK Enterprises Limited, giving rights to market pre-arranged funeral plans
under the Age UK brand. The value of this right has been recognised as a separate intangible asset.
This asset is being amortised over 20 years on a straight line basis, recognising that each year’s additional marketing activity
generates incremental revenues and profits to the Group for at least the following 20 years.
Intangible assets – other
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
Short leasehold buildings
Motor vehicles
Computers
Other plant and equipment
Fixtures and fittings
2% – 10%
Over term of lease
7% – 20%
20%
5% – 33%
15%
Freehold land is not depreciated on the basis that land has an indefinite life. Where the historical cost of land and buildings
cannot be split, the Directors have estimated that the historical cost attributable to land is one third (based on historical data) of
the original cost of acquiring the land and buildings. This estimate is regularly reviewed.
Major renovations of the Group’s trading premises and cremator re-linings are depreciated over the remaining life of the related
asset or to the estimated date of the next major renovation or cremator re-lining, whichever is sooner. Asset lives and residual
values for each class of asset are reviewed annually and adjusted if appropriate at each balance sheet date.
Assets in the course of construction are shown as work in progress at a value equal to costs incurred to date. Once completed,
they are reclassified and depreciated using the Group’s depreciation policy above.
Borrowing costs
If the construction phase of property, plant or equipment extends over a long period, the interest incurred on borrowed capital
up to the date of completion is capitalised as part of cost of construction as permitted by IAS 23 (Borrowing Costs).
Repairs and renewals
All repairs and renewals are charged to the income statement unless they represent an enhancement to the original asset.
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.
Dignity plc Annual Report & Accounts 2020
101
1 Accounting policies (continued)
Property, plant and equipment held under leases (accounting policy applied pre 28 December 2019)
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.
Right-of-use assets and lease liabilities (accounting policy applied from 28 December 2019)
At inception of a contract the Group assesses whether the contract is or contains a lease. A lease is present where the contract
conveys, over a period of time, the right to control the use of an identified asset in exchange for consideration.
Where a lease is identified the Group recognises a right-of-use asset and a corresponding lease liability, except for short-term
leases (defined as leases with a lease term of 12 months or less), leases of low-value assets (defined as leases with rentals below
£1,000 per annum) and leases with contingent rentals.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease and comprise the initial measurement of the
corresponding lease liability and any initial direct costs. They are subsequently measured at cost less accumulated depreciation
and impairment losses.
The right-of-use asset is presented as a separate line in the consolidated balance sheet.
Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
Right-of-use assets are subject to impairment under IAS 36.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any
lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. The variable lease payments that do not depend on an index or a rate are recognised as expense in
the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset.
The lease liability is presented as a separate line in the consolidated balance sheet, split between current and non-current
liabilities.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (defined as leases with a lease term of
12 months or less). It also applies the lease of low-value assets recognition exemption to leases that are considered of low-value
(defined as leases with rentals below £1,000 per annum). Lease payments on short-term leases and leases of low-value assets
are recognised as operating expense on a straight-line basis over the lease term.
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.
102
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies (continued)
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. The cost of PPE
inventory is calculated using average costing.
Taxation
The tax charge for the period includes the charge for tax currently payable and deferred tax. The current tax charge represents
the estimated amount due that arises from the operations of the Group in the period and after making adjustments to
estimates in respect of prior years.
Deferred tax is recognised in respect of all differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, except where the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are offset to
generate a net asset or liability if the conditions of IAS 12 are met.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence,
it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the
deductible temporary difference can be utilised.
Deferred tax is measured at the tax rates that are expected to apply in the periods in which the temporary differences are
expected to reverse, based on tax rates and laws that have been enacted or substantively enacted, by the balance sheet date.
Pensions
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that have terms to maturity approximating to the terms of the related pension
obligation.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to retained earnings in other comprehensive income in the period in which they arise.
Changes in the present value of the defined benefit obligation resulting from plan amendments, curtailments or one off
adjustments such as GMP equalisation are recognised immediately in the consolidated income statement as a past service cost.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it is
probable that a transfer of economic benefits will be required to settle the obligation and where a reliable estimate can be made
of the amount of the obligation.
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 (2019: 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.
Dignity plc Annual Report & Accounts 2020
103
1 Accounting policies (continued)
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.
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 (‘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 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
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.
104
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies (continued)
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’).
IFRS 10 is 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. The Group concluded as part of its 2019 period end 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 reached a judgement, the basis of which is summarised below,
that it does have control as defined by IFRS 10 and therefore those pre-arranged funeral plan trusts where it has the ability to
appoint and remove trustees are now consolidated.
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
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.
Analysis
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.
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.
Dignity plc Annual Report & Accounts 2020
105
1 Accounting policies (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. 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 2019 and 2020, 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.
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.
IFRS 16 Incremental Borrowing Rate (‘IBRs’)
On transition to IFRS 16 the Group’s IBR has been applied to the lease liabilities that were in scope as at 28 December 2019. The
weighted average IBR applied was 4.9 per cent, with a minimum rate of 3.6 per cent and a maximum rate of 6.8 per cent. These
rates have been based on corporate bond yields to maturity reflecting the Group’s indicative credit rating. In order to assess the
Group’s IBR’s we have considered yield curves at 28 December 2019 for similarly rated listed corporate bonds for durations
aligned with the adjusted unexpired lease durations.
Standards, amendments and interpretations effective in 2020
The Group has applied IFRS 16, Leases for the first time in the preparation of the Group’s consolidated financial statements.
A description of the nature and effect of transition to this standard are presented in note 35.
Comparatives in respect of the 2019 reporting periods have not been restated as permitted under the specific transition
provisions of the standard.
106
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
1 Accounting policies (continued)
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 2021 or later periods but which the Group has not early adopted:
IFRS 17, Insurance Contracts. The standard is expected to be effective 1 January 2023 and will therefore impact on the Group’s
2024 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 relation to its pre-need funeral plans.
IAS 1, Presentation of financial statements. The amendment to the standard is expected to be effective 1 January 2023 and will
therefore impact on the Group’s 2024 Annual Report. The amendment to the standard is to specify the requirements for
classifying liabilities as current or non-current. This is not expected to have a material impact on the Group.
All other new accounting standards and interpretations that have been published are not effective for 25 December 2020 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 Trading 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 2021 then the Group would receive no interest income due to the rates all currently being
below one per cent. If interest rates were to increase by one per cent at the beginning of 2021 then the Group would receive
£0.1 million additional interest on an annualised basis for each £10.0 million held.
The Trusts also hold significant cash balances which are also subject to interest rate fluctuations, as well as holding equity and
bond investments which see fluctuations due to market conditions. 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 above 1.5 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 25 December 2020 the actual
ratio was 1.99 times (2019: 2.13 times).
Dignity plc Annual Report & Accounts 2020
107
2 Financial risk management (continued)
Capital risk management
The Group’s objective under managing capital is to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and repay holders of Secured Notes. It also aims to reduce its cost of capital by maintaining an
optimal capital structure. The Group’s capital comprises equity and net debt as set out in note 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 B+ respectively by Fitch and Standard & Poor’s.
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 (which includes the Executive Chairman). For statutory
purposes the Group has two reporting segments, funeral services and crematoria, as under IFRS 15 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:
• Funerals arranged and funded by the client 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 Group’s crematoria and
cemeteries.
Pre-arranged funeral plans represent the sale of funerals in advance to clients wishing to make their own funeral arrangements
and the marketing and administration costs associated with making such sales.
Substantially all Trading Group revenue is derived from, and substantially all of the Trading 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, applying IFRS 15 and adopting IFRS 16 as defined on pages 156 and 157.
Reconciliations to statutory amounts
Non-underlying items represent certain non-recurring or non-trading transactions. See alternative performance measures on
pages 156 and 157 for further details.
Other adjustments reflect the impact of consolidating the Trusts and subsequent impact on corporate interest restriction
disallowances, applying IFRS 15 and the adoption of IFRS 16 in the current period. It also includes the impact of the deferred
tax rate change on the Trust and IFRS 15 balances. 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. See
alternative performance measures on pages 159 and 160 for a full reconciliation.
108
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
3 Revenue and segmental analysis (continued)
Disaggregated revenue
The disaggregated revenue and operating profit/(loss), by segment, is shown in the following tables:
52 week period ended 25 December 2020
Funeral services
Crematoria
Pre-arranged funeral plans
Group
Underlying
revenue
£m
Other
adjustments (1)
£m
202.6
82.7
28.8
314.1
72.2
–
(28.8)
43.4
Revenue
£m
274.8
82.7
–
357.5
(1) See alternative performance measures on page 159 for a reconciliation of other adjustments.
Within funeral services revenue £113.2 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 applying 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. Furthermore, for the
period ended 25 December 2020 ‘other adjustments’ to operating profit also includes the impact of adopting IFRS 16, with
operating lease rentals being replaced with depreciation, finance costs and a release of accruals and prepayments.
Underlying
operating profit/
(loss) before
depreciation and
amortisation
£m
Underlying
depreciation
and
amortisation
£m
Underlying
operating
profit/
(loss)
£m
Non-underlying
items(1)
£m
Other
adjustments(1)
£m
Operating
profit/(loss)
£m
52 week period ended 25 December 2020
Funeral services
Crematoria
Pre-arranged funeral plans
Central overheads
Group
Finance costs
Finance income
Deferred revenue significant financing
Remeasurement of financial assets held by the
Trusts and related income
(Loss)/profit before tax
Taxation – continuing activities
Taxation – rate change
Taxation – total
Underlying earnings for the period
Non-underlying items
Other adjustments
Loss after taxation
62.1
48.7
–
(35.3)
75.5
(12.1)
(5.9)
–
(1.8)
(19.8)
50.0
42.8
–
(37.1)
55.7
(25.1)
0.1
30.7
(7.4)
–
(7.4)
23.3
(48.3)
(0.2)
(0.1)
(9.8)
(58.4)
(58.4)
6.1
(3.6)
2.5
(55.9)
(Loss)/earnings per share for profit attributable to equity shareholders
– Basic (pence)
– Diluted (pence)
46.6p
(1) See alternative performance measures on page 159 for a reconciliation of non-underlying items and other adjustments.
15.8
2.6
0.1
0.1
18.6
(4.7)
–
(53.1)
47.3
8.1
(5.7)
4.7
(1.0)
7.1
17.5
45.2
–
(46.8)
15.9
(29.8)
0.1
(53.1)
47.3
(19.6)
(7.0)
1.1
(5.9)
(25.5)
(51.0)p
(51.0)p
Dignity plc Annual Report & Accounts 2020
109
3 Revenue and segmental analysis (continued)
52 week period ended 27 December 2019
Funeral services
Crematoria
Pre-arranged funeral plans
Group
Underlying
revenue
£m
Other
adjustments (1)
£m
203.3
76.8
21.2
301.3
58.8
–
(21.2)
37.6
Revenue
£m
262.1
76.8
–
338.9
(1)
See alternative performance measures on page 160 for a reconciliation of other adjustments.
Within funeral services revenue £91.7 million relates to deferred revenue arising on the completion of performance obligations
under pre-need Trust plans.
52 week period ended 27 December 2019
Funeral services
Crematoria
Pre-arranged funeral plans
Central overheads
Group
Finance costs
Finance income
Deferred revenue significant financing
Remeasurement of financial assets held by the
Trusts and related income
Share of loss in associated undertakings
Impairment of investments in associated
undertakings
Profit before tax
Taxation
Underlying earnings for the period
Non-underlying items
Other adjustments
Profit after taxation
Earnings per share for profit attributable to equity
shareholders
– Basic (pence)
– Diluted (pence)
Underlying
operating profit/
(loss) before
depreciation and
amortisation
£m
Underlying
depreciation and
amortisation
£m
Underlying
operating profit/
(loss)
£m
Non-underlying
items(1)
£m
Other
adjustments(1)
restated
£m
Operating
profit/(loss)
restated
£m
68.6
43.6
–
(29.6)
82.6
(12.3)
(5.2)
–
(1.8)
(19.3)
(10.0)
(1.2)
(0.2)
(15.7)
(27.1)
(0.6)
(5.4)
(33.1)
4.9
(28.2)
8.4
–
0.2
–
8.6
(54.1)
85.0
39.5
(11.0)
28.5
56.3
38.4
–
(31.4)
63.3
(25.8)
0.2
37.7
(7.4)
30.3
60.6p
54.7
37.2
–
(47.1)
44.8
(25.8)
0.2
(54.1)
85.0
(0.6)
(5.4)
44.1
(13.5)
30.6
61.2p
61.2p
(1)
See alternative performance measures on page 160 for a reconciliation of non-underlying items and other adjustments.
110
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
4 Net finance costs
Finance costs
Secured Notes
Other loans
Net finance cost on retirement benefit obligations (note 29)
Unwinding of discounts
Underlying finance costs
Finance cost on IFRS 16 lease liability
Finance costs
Finance income
Bank deposits
Finance income
Deferred revenue significant financing (note 20)
Remeasurement of financial assets held by the Trusts and related income
Realised investment income
Changes in fair value of financial assets held by the Trusts (note 14)
Remeasurement of financial assets held by the Trusts and related income
Underlying net finance costs
Underlying finance costs
Finance income
Underlying net finance costs
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
23.4
1.1
0.5
0.1
25.1
4.7
29.8
(0.1)
(0.1)
53.1
(6.0)
(41.3)
(47.3)
25.1
(0.1)
25.0
23.7
1.3
0.7
0.1
25.8
–
25.8
(0.2)
(0.2)
54.1
(5.5)
(79.5)
(85.0)
25.8
(0.2)
25.6
Dignity plc Annual Report & Accounts 2020
111
5 Profit before tax
Analysis by nature
The following items have been included in arriving at profit before tax:
Staff costs (note 28)
Cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment – owned assets (note 10)
Deprecation of right-of-use asset (note 11)(1)
Amortisation of intangible assets (included in administrative expenses) (note 9)
Expense related to practical expedients applied under IFRS 16 (note 11)
Operating lease rentals – property
Business rates relief
Inventory provisions (note 15)
Trade receivables impairment (included in administrative expenses) (note 23(c))
Transformation Plan costs(1)
Directors severance pay
External transaction costs (included in administrative expenses)(1)
Operational review and competition review costs(1)
Trade name impairment (note 9)(1)
Goodwill impairment (note 9)(1)
Share of loss of associated undertakings(1)
Impairment of investments in associated undertakings(1)
Profit on sale of fixed assets(1)
Services provided by the Group’s auditors and its associates:
Fees payable to the Company’s auditors for the audit of parent company
and consolidated financial statements
Fees payable to the Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries
– Tax advisory services
– Other advisory services
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
116.4
17.4
19.6
9.2
4.9
0.2
–
(4.1)
1.3
1.9
4.7
1.6
0.8
2.9
15.3
28.7
–
–
(0.2)
0.3
0.3
–
–
0.6
107.4
17.3
19.1
–
5.0
–
15.0
–
–
1.1
12.1
–
0.9
3.5
6.8
–
0.6
5.4
(1.0)
0.4
0.2
–
–
0.6
(1)
Items are excluded in arriving at underlying performance measures. Please see the alternative performance measures on pages 156 and 157 for further details.
During 2020, the Group paid £59,000 (2019: £65,000) 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.
112
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
6 Taxation
Analysis of charge in the period
Current tax – current period
Adjustments for prior period
Total corporation tax
Deferred tax – current period
Adjustments for prior period
Restatement of deferred tax for the change in UK tax rate
Total deferred tax
Taxation
Tax on items credited to other comprehensive income or equity
Deferred tax credit on remeasurement losses on retirement benefit obligations
Deferred tax credit relating to maturity of option schemes
Restatement of deferred tax for the change in UK tax rate
Total deferred tax credited to other comprehensive income or equity
52 week period
ended
25 December
2020
£m
9.4
0.1
9.5
(2.9)
0.4
(1.1)
(3.6)
5.9
52 week period
ended
27 December
2019
restated
£m
9.1
0.1
9.2
4.9
(0.6)
–
4.3
13.5
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
(2.2)
–
(0.5)
(2.7)
(0.3)
(0.1)
–
(0.4)
The taxation charge in the period is higher (2019: higher) than the standard rate of corporation tax in the UK of 19.0 per cent
(2019: 19.0 per cent). The differences are explained below:
(Loss)/profit before taxation
(Loss)/profit before taxation multiplied by the standard rate of corporation
tax in the UK of 19.0% (2019: 19.0%)
Effects of:
Adjustments in respect of prior period
Corporate interest restriction disallowance
Restatement of deferred tax for the change in UK tax rate
Expenses not deductible for tax purposes
Total taxation charge
52 week period
ended
25 December
2020
£m
(19.6)
(3.7)
0.5
4.3
(1.1)
5.9
5.9
52 week period
ended
27 December
2019
restated
£m
44.1
8.4
(0.5)
4.3
–
1.3
13.5
Under IFRS the tax rate is higher (2019: higher) than the standard UK tax rate of 19.0 per cent (2019: 19.0 per cent) principally
due to the non-deductible expenses, prior period adjustments and corporate interest restriction disallowance (2019:
non-deductible expenses, prior period adjustments and corporate interest restriction disallowance). See Financial Review for
further details. The Group’s effective tax rate on underlying profits in the period was 24.1 per cent (2019: 19.5 per cent). The
current period underlying effective tax rate is higher due to the effects of permanent disallowables and adjustments in respect
of the prior period with a tax impact totalling £1.5 million (2019: £0.2 million). The Group expects its future underlying effective
tax rate to be approximately two to three per cent above the headline rate of corporation tax. This translates to an underlying
effective rate for 2021 and thereafter of between 21.0 per cent and 22.0 per cent. The Group does not have any provisions for
uncertain tax positions.
In the budget announced in March 2020, the legislation to reduce the main rate of corporation tax to 17 per cent was cancelled
and the main rate of corporate tax will remain at 19 per cent from 1 April 2020 and 1 April 2021. The change was substantively
enacted at the balance sheet date and is therefore recognised in these financial statements. As a result, the Group recognised
a non-underlying taxation credit of £1.1 million through its income statement and a credit of £0.5 million through other
comprehensive income to reflect the one off increase in the period of the Group’s deferred tax position.
Following the budget announced on 3 March 2021, the legislation to increase the main rate of corporation tax from 19 per cent
to 25 per cent from 1 April 2023 was not substantively enacted at the balance sheet date and so has not been reflected in the
deferred tax balances as at 25 December 2020. Each percentage increase in the corporation tax rate would increase deferred
tax balances by £1.1 million.
Dignity plc Annual Report & Accounts 2020
113
7 Dividends
Final dividend paid: nil per Ordinary Share (2019: 15.74p)
Interim dividend paid: nil per Ordinary Share (2019: nil)
Dividend on Ordinary Shares
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
–
–
–
7.9
–
7.9
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 2020 (2019: nil).
The final dividend in 2019 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 £nil million, nil pence per share (2019: £7.9 million, 15.74 pence
per share). No final dividend was declared in respect of 2019 totalling £nil million (2019: final dividend in respect of 2018 was
15.74 pence per share totalling £7.9 million). The Group is not proposing any dividend for the period ended 25 December 2020.
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. As the impact of these shares is anti-dilutive for the 52 week period ended
25 December 2020, no adjustment has been made in respect of arriving at diluted earnings per share measures for that period
(2019: no adjustment).
The Group’s underlying measures of profitability exclude non-underlying items, the effects of IFRS 15, consolidation of the Trusts
and the adoption of IFRS 16 as set out on pages 156 and 157. 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.
114
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
8 Earnings per share (continued)
Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below:
52 week period ended 25 December 2020
Underlying profit after taxation and EPS
Add: Non-underlying items (net of taxation credit of £2.5 million)
Add: Other adjustments (net of taxation charge of £1.0 million) (1)
Loss attributable to shareholders – Basic EPS
Loss attributable to shareholders – Diluted EPS
52 week period ended 27 December 2019 – restated(2)
Underlying profit after taxation and EPS
Add: Non-underlying items (net of taxation credit of £4.9 million)
Add: Other adjustments (net of taxation charge of £11.0 million)(1)
Profit attributable to shareholders – Basic EPS
Profit attributable to shareholders – Diluted EPS
(1) See note 3 for further details.
Weighted
average
number of
shares
millions
Per share
amount
pence
50.0
46.6
50.0
50.0
(51.0)
(51.0)
50.0
60.6
50.0
50.0
61.2
61.2
Earnings
£m
23.3
(55.9)
7.1
(25.5)
(25.5)
30.3
(28.2)
28.5
30.6
30.6
(2) Prior year comparatives have been restated due to a prior year adjustment in relation to taxation. See page 96 for further details.
9 Goodwill and other intangible assets
Cost
At 28 December 2018
At 27 December 2019
Additions
At 25 December 2020
Accumulated amortisation and impairment
At 28 December 2018
Amortisation charge
Trade name impairment
At 27 December 2019
Amortisation charge
Impairment
At 25 December 2020
Use of third
Trade party brand
name
£m
names(1)
£m
Non–
compete
Software agreements
£m
£m
Other(2)
£m
Sub–total
£m
Goodwill
£m
Total
£m
150.4
150.4
–
150.4
(5.4)
(4.2)
(6.8)
(16.4)
(4.1)
(15.3)
3.2
3.2
–
3.2
(1.7)
(0.1)
–
(1.8)
(0.2)
–
4.7
4.7
–
4.7
(0.9)
(0.5)
–
(1.4)
(0.4)
–
2.5
2.5
0.2
2.7
(0.5)
(0.2)
–
(0.7)
(0.2)
–
0.2
0.2
–
0.2
(0.2)
–
–
(0.2)
–
–
161.0
161.0
0.2
232.6
232.6
–
393.6
393.6
0.2
161.2
232.6
393.8
(8.7)
(5.0)
(6.8)
(20.5)
(4.9)
(15.3)
–
–
–
–
–
(28.7)
(8.7)
(5.0)
(6.8)
(20.5)
(4.9)
(44.0)
(35.8)
(2.0)
(1.8)
(0.9)
(0.2)
(40.7)
(28.7)
(69.4)
Net book amount at 25 December 2020
Net book amount at 27 December 2019
Net book amount at 28 December 2018
114.6
134.0
145.0
1.2
1.4
1.5
2.9
3.3
3.8
1.8
1.8
2.0
–
–
–
120.5
203.9
324.4
140.5
152.3
232.6
232.6
373.1
384.9
(1)
(2)
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.
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.
Dignity plc Annual Report & Accounts 2020
115
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:
Funeral services
Crematoria
25 December
2020
£m
27 December
2019
£m
148.1
55.8
203.9
176.8
55.8
232.6
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. The value-in-use calculations for the 2020 model include the approved annual budget for 2021 and a forecast
for 2022. Cash flows for all segments beyond the initial 24 month period (2019: 12 month period) are extrapolated using a
growth rate of 2.25 per cent (2019: 2.25 per cent), being an estimate of long-term growth rates for impairment review purposes
only, which reflects the expectations of long-term inflation and death rates. The cash flows for each segment are discounted at
a pre-tax rate of 10.3 per cent (2019: 12.0 per cent).
Goodwill assessment
The impairment calculation indicated no impairment in the crematoria division with headroom under the current assumptions
used of £99.1 million (2019: £102.9 million). The discount rate would need to increase to 14.1 per cent (2019: increase to 25.8 per
cent) or the long-term growth rate would need to fall to minus 1.4 per cent (2019: minus 2.8 per cent) for the impairment test to
result in £nil headroom for this segment. The likelihood of such movements in the discount rate and growth rate is deemed
unlikely based on current market conditions.
The impairment calculation has also been performed on the funeral services division and an impairment of £28.7 million (2019:
£nil) has been recognised within administrative expenses in the Income statement.
If the value-in-use calculations for the funeral services division used a discount rate of 11.3 per cent instead of 10.3 per cent, then
the impairment would increase by £40.6 million to £69.3 million. The discount rate would have to reduce to 9.7 per cent to result
in no goodwill impairment.
If the value-in-use calculation for the funeral services division used a growth rate of 1.75 per cent instead of 2.25 per cent, then
the impairment would increase by £20.3 million to £49.0 million. The growth rate would have to increase to 2.82 per cent to
result in no goodwill impairment.
If the value-in-use calculations for the funeral services division used a year one cash flow assumption of £3.0 million less than
that forecast, then the impairment would increase by £43.9 million to £72.6 million.
Trade name assessment
In addition to the Group’s annual goodwill impairment test, given the changes in the funeral market and a decrease (2019: 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 intangible 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 £15.3 million (2019: £6.8 million) arose and has been provided accordingly. This is due to lower levels of
profitability and lower anticipated average revenue per funeral.
The trade name impairment and the subsequent reduction in net book value has been reflected within the above goodwill
impairment calculations to reflect the lower asset base.
If the value-in-use calculations used a discount rate of 11.3 per cent instead of 10.3 per cent, then the impairment would
increase by £1.8 million to £17.1 million. If the value-in-use calculations used a growth rate of 1.75 per cent instead of 2.25 per
cent, then the impairment would increase by £0.9 million to £16.2 million. If the value-in-use calculations used an initial cash flow
assumption of £3.0 million less than that forecast, then the impairment would increase by £2.3 million to £17.6 million.
116
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
10 Property, plant and equipment
Cost
At 28 December 2018
Additions
Disposals
Reclassification
At 27 December 2019
Transferred to right-of-use asset (note 35)
Additions
Disposals
Reclassification
Freehold
land and
buildings
Leasehold
buildings
Plant,
machinery,
fixtures and
fittings
Motor
vehicles
Work
in progress
£m
£m
£m
£m
£m
178.7
2.0
(0.5)
1.8
182.0
–
0.7
(0.8)
1.2
57.9
1.3
(0.2)
5.2
64.2
(0.7)
0.6
(0.7)
1.7
53.8
2.3
(0.4)
2.6
58.3
–
3.2
(0.3)
1.5
81.6
1.3
(3.1)
–
79.8
–
0.1
(1.3)
–
At 25 December 2020
183.1
65.1
62.7
78.6
Accumulated depreciation
At 28 December 2018
Depreciation charge
Disposals
At 27 December 2019
Transferred to right-of-use asset (note 35)
Depreciation charge
Disposals
At 25 December 2020
Net book amount at 25 December 2020
Net book amount at 27 December 2019
Net book amount at 28 December 2018
(32.2)
(5.3)
0.2
(37.3)
–
(5.3)
0.1
(18.9)
(3.2)
0.1
(22.0)
0.2
(3.8)
0.5
(29.4)
(4.6)
0.3
(40.3)
(6.0)
2.5
(33.7)
(43.8)
–
(4.9)
0.3
–
(5.6)
1.2
(42.5)
(25.1)
(38.3)
(48.2)
140.6
144.7
146.5
40.0
42.2
39.0
24.4
30.4
24.6
24.4
36.0
41.3
Total
£m
374.9
17.4
(4.2)
–
388.1
(0.7)
10.7
(3.1)
–
395.0
(120.8)
(19.1)
3.1
(136.8)
0.2
(19.6)
2.1
(154.1)
240.9
251.3
254.1
2.9
10.5
–
(9.6)
3.8
–
6.1
–
(4.4)
5.5
–
–
–
–
–
–
–
–
5.5
3.8
2.9
Depreciation expense of £9.1 million (2019: £8.5 million) is included within cost of sales and £10.5 million (2019: £10.6 million) is
included within administrative expenses.
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.
The Group had capital expenditure authorised by the Board and contracted for at the balance sheet date of £9.6 million (2019:
£7.9 million) in respect of property, plant and equipment and intangible assets.
Dignity plc Annual Report & Accounts 2020
117
11 Leases
The Group has applied IFRS 16 for the first time within the current period. Comparatives in respect of the 2019 reporting period
have not been restated as permitted under the specific transition provisions of the standard. See note 35 for more details on the
transition methodology applied.
Right-of-use asset
At 28 December 2019
Additions
Depreciation charge
Impact of changes in lease payments
At 25 December 2020
All right-of-use assets are related to leasehold properties.
Lease liability
At 28 December 2019
Additions
Impact of changes in lease payments
Interest expense
Payments
At 25 December 2020
Current
Non-current
See note 23 (e) for maturity analysis of lease liabilities.
The following are the amounts recognised in the consolidated income statement:
Depreciation expense of the right-of-use asset
Interest expense on lease liabilities
Expense related to practical expedients applied
Total amount recognised in the consolidated income statement
Total
£m
101.7
1.4
(9.2)
1.3
95.2
Total
£m
93.6
1.4
1.3
4.7
(12.5)
88.5
7.3
81.2
£m
9.2
4.7
0.2
14.1
In addition, £1.4 million has been recognised in the consolidated income statement in respect of contingent rentals and other
charges on leases.
The Group had total cash outflows for leases classified under IFRS 16 of £12.5 million. The Group also had non-cash additions to
right-of-use assets and lease liabilities of £1.4 million.
Sublease payments received in the period amount to £0.3 million (2019: £0.3 million). Total future sublease payments receivable
relating to leases amount to £0.3 million (2019: £0.4 million).
Obligations under IAS 17 leases:
Obligations under finance leases and hire purchase payable:
Within one year
Between one and two years
Between two and five years
After five years
The IAS 17 leases and hire purchase liabilities are secured on the related assets.
These liabilities are included in the IFRS 16 lease liability above in 2020.
25 December
2020
£m
27 December
2019
£m
–
–
–
–
–
–
–
0.2
0.4
0.6
118
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
12 Investments in associated undertakings
In August 2018 and December 2018, the Group increased its investment in Funeral Zone Limited (‘Funeral Zone’). At
27 December 2019 and 25 December 2020 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 having an appointed board member who represents 25 per cent of the Board of Directors and therefore has the power
to participate in the financial and operating policy decisions. The Group also hold a call option over a further 44.4 per cent of
shares. These potential voting rights are not currently taken into consideration when assessing control as the call option is not
considered to be substantive in nature at this time, due to the exercise price of the option. The option is considered to have a
£nil fair value at 25 December 2020 for the same reason.
In the prior period the Group performed a review to assess whether there was objective evidence that the carrying value of the
investment was 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 fully provided against its investment. At 25 December 2020, the
company continues to make losses and the investment is still fully provided against.
13 Financial and other assets
Non-current
Prepayments
Reclassification of prepayments to right-of-use asset on transition of IFRS 16
Prepayments
Deferred insurance commissions
Note
(a)
(b)
25 December
2020
£m
27 December
2019
£m
7.2
(7.2)
–
10.7
10.7
7.2
–
7.2
11.0
18.2
(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. The balance has been
reclassified into right-of-use asset on transition to IFRS 16. See note 35.
(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.
14 Financial assets – held by the Trusts
Financial assets – held by the Trusts
25 December
2020
£m
27 December
2019
£m
967.1
947.5
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 2021 and beyond, gradually resulting in a portfolio in the following profile:
Defensive investments
Illiquid investments
Core growth investments
Growth fixed income and alternative investments
Liquid investments
Index linked gilts and corporate bonds
Private investments
Equities
Emerging market debt/ diversified growth
Open-ended investment funds
18
16
38
22
6
Example investment types
Target (%)
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.
Dignity plc Annual Report & Accounts 2020
119
14 Financial assets – held by the Trusts (continued)
Analysis of the movements in financial assets held by the Trusts:
Fair value at the start of the period
Remeasurement recognised in the consolidated income statement
Investment income
Purchases
Disposals
Investment administrative expenses deducted at source
Fair value at the end of the period
25 December
2020
£m
27 December
2019
£m
947.5
41.3
2.2
778.1
(796.8)
(5.2)
967.1
862.4
79.5
1.9
736.1
(726.6)
(5.8)
947.5
Interest and dividend income received is included within remeasurements recognised in the consolidated income statement.
15 Inventories
Materials
Finished goods
25 December
2020
£m
27 December
2019
£m
0.6
8.4
9.0
0.5
7.4
7.9
During the period a £1.3 million (2019: nil) provision has been charged to the consolidated income statement relating to obsolete
PPE.
16 Trade and other receivables
Trade receivables: Trusts
Trade receivables: at-need
Less: provision for impairment (note 23(c))
Net trade receivables
Prepayments and accrued income
Other receivables
25 December
2020
£m
27 December
2019
£m
10.0
21.3
(7.2)
24.1
3.2
2.7
30.0
11.4
21.8
(6.7)
26.5
4.2
1.7
32.4
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.
120
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
17 Cash and cash equivalents
Trading Group
Trusts
Operating cash as reported in the consolidated statement of cash flows as cash
and cash equivalents
Amounts set aside for debt service payments
Cash and cash equivalents as reported in the balance sheet
Note
(a)
(b)
25 December
2020
£m
27 December
2019
£m
56.7
21.6
78.3
16.9
95.2
41.0
15.5
56.5
16.9
73.4
(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 2020. Of this amount,
£12.0 million (2019: £12.1 million) is shown within the Statement of Cash Flows as ‘Payments to restricted bank accounts for
finance costs’ and £4.9 million (2019: £4.8 million) is shown within ‘Financing activities’ as ‘Payments to restricted bank accounts
for repayment of borrowings’.
18 Financial liabilities
Current
Secured A Notes
Lease liabilities
Non-current
Secured Notes
Lease liabilities
Finance lease obligations
25 December
2020
£m
27 December
2019
£m
Note
(a)
(c)
(b)
(a)
(c)
(c)
15.1
7.3
22.4
526.6
81.2
–
607.8
9.6
–
9.6
541.7
–
0.6
542.3
(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 25
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 25 December 2020, £0.2 million (2019: £0.2 million) and £0.3 million (2019: £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).
Dignity plc Annual Report & Accounts 2020
121
18 Financial liabilities (continued)
The amortisation profile of the Secured Notes is as follows:
Secured A Notes
June
December
Total
June
December
Total
Secured B Notes
June
December
Total
June
December
Total
2021
£m
5.1
5.1
2022
£m
5.2
5.3
2023
£m
5.4
5.5
2024
£m
5.6
5.7
2025
£m
5.8
5.9
2026
£m
6.0
6.1
2027
£m
6.2
6.4
2028
£m
6.4
6.6
2029
£m
6.7
6.8
2030
£m
6.9
7.1
10.2
10.5
10.9
11.3
11.7
12.1
12.6
13.0
13.5
14.0
2035
£m
8.4
8.5
2036
£m
8.7
9.0
2037
£m
9.1
9.4
2038
£m
9.6
9.8
16.9
17.7
18.5
19.4
2039
£m
10.0
10.3
20.3
2040
£m
10.5
10.8
21.3
2031
£m
7.2
7.3
2032
£m
7.4
7.6
2033
£m
7.7
7.8
2034
£m
7.9
8.1
Total
£m
89.5
91.3
14.5
15.0
15.5
16.0
180.8
2041
£m
11.0
11.3
22.3
2046
£m
13.8
14.2
28.0
2042
£m
11.5
11.8
23.3
2047
£m
14.5
14.8
29.3
2043
£m
12.1
12.3
24.4
2048
£m
15.2
15.5
30.7
2044
£m
12.6
12.9
25.5
2049
£m
15.9
16.2
32.1
2045
£m
13.2
13.5
26.7
Total
£m
176.1
180.3
356.4
(b) Current financial liabilities
The current financial liabilities represent the amounts falling due within one year of the Group’s balance sheet date.
(c) Lease liabilities
See note 11 for more details on the Group’s lease liabilities under IFRS 16.
See note 23 (e) for maturity analysis of the Group’s lease liabilities.
(d) Changes in liabilities arising from financing activities
Current
Secured Notes
Lease liabilities(1)
Non-current
Secured Notes
Lease liabilities(1)
Total liabilities from financing activities
27 December
2019
£m
IFRS 16
transition
£m
Cash flow
£m
9.6
–
541.7
0.6
551.9
–
5.9
–
87.1
93.0
(9.6)
(12.5)
–
–
(22.1)
Other
£m(2)
15.1
13.9
(15.1)
(6.5)
7.4
25 December
2020
£m
15.1
7.3
526.6
81.2
630.2
(1) See note 11 for more information on the Group’s lease liabilities under IFRS 16.
(2) Other includes reclassification from non-current to current, unwinding of discounts and movement in the lease portfolio in the period.
122
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
18 Financial liabilities (continued)
Current
Secured Notes
Non-current
Secured Notes
Finance lease liabilities
Total liabilities from financing activities
28 December
2018
£m
Cash flow
£m
9.3
551.3
0.6
561.2
–
(9.3)
–
(9.3)
Other
£m
0.3
(0.3)
–
–
27 December
2019
£m
9.6
541.7
0.6
551.9
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.
19 Trade and other payables
Current
Trade payables
Tax and social security
Other current liabilities
Accruals
Deferred income relating to at-need deposits
Non-current
Other non-current liabilities
Deferred income relating to at-need deposits
Deferred consideration for acquisitions
25 December
2020
£m
27 December
2019
£m
5.5
3.2
2.9
52.3
4.8
68.7
1.6
0.4
0.1
2.1
7.5
2.8
2.3
44.9
4.1
61.6
1.4
0.5
0.1
2.0
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.
20 Deferred commissions and contract liabilities
Deferred commissions
Deferred commissions – current
Deferred commissions – non-current
25 December
2020
£m
27 December
2019
£m
7.6
101.3
7.3
96.8
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 £7.8 million (2019: £6.4 million) has been amortised to the consolidated
income statement within administrative expenses.
Contract liabilities
Current
Contract liabilities – deferred revenue
Contract liabilities – refund liability
Non-current
Contract liabilities – deferred revenue
Contract liabilities – refund liability
25 December
2020
£m
27 December
2019
£m
Note
(a)
(b)
(a)
(b)
94.4
1.1
95.5
1,208.1
13.9
1,222.0
94.4
1.1
95.5
1,194.6
14.5
1,209.1
Dignity plc Annual Report & Accounts 2020
123
20 Deferred commissions and contract liabilities (continued)
Movement in total contract liabilities
Balance at the beginning of the year
Sale of new Trust plans
Increase due to significant financing
Recognition of revenue following delivery or cancellation of a Trust plan
Balance at the end of the year
25 December
2020
£m
27 December
2019
£m
1,304.6
82.0
53.1
(122.2)
1,317.5
1,256.1
91.2
54.1
(96.8)
1,304.6
(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.
21 Provisions for liabilities
At beginning of period
Charged to income statement
Released to income statement
Utilised in period
Amortisation of discount
Reclassification to lease liabilities on transition of IFRS 16
At end of period
Provisions have been analysed between current and non-current as follows:
Current
Non-current
Dilapidations
(a)
£m
Onerous
contracts
(b)
£m
11.2
1.7
(0.7)
(0.4)
0.1
–
11.9
0.1
–
–
–
–
(0.1)
–
Total
£m
11.3
1.7
(0.7)
(0.4)
0.1
(0.1)
11.9
25 December
2020
£m
27 December
2019
£m
2.4
9.5
11.9
2.0
9.3
11.3
(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, £2.4 million (2019: £2.0 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 2030.
(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 is no longer
required on the transition to IFRS 16.
124
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
22 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19 per cent
(2019: 17 per cent).
The movement on the deferred tax account is as shown below:
At beginning of period
(Credited)/charged to income statement (note 6)
Taken to other comprehensive income (note 6)
Restatement of deferred tax for the change in UK tax rate
Taken to equity (note 6)
At end of period
25 December
2020
£m
27 December
2019
£m
(14.0)
(2.5)
(2.2)
(1.6)
–
(20.3)
(17.9)
4.3
(0.3)
–
(0.1)
(14.0)
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted
by IAS 12) during the period are shown below:
Deferred tax liabilities
Accelerated tax
depreciation
£m
Trade names
£m
Deferred
commissions
and Trust
assets
£m
At beginning of period
(Credited)/charged to income statement (note 6)
Restatement of deferred tax for the change in UK tax
rate taken to the income statement (note 6)
At end of period
Deferred tax assets
11.8
(2.1)
1.4
11.1
At beginning of period
Charged/(credited) to income statement (note 6)
Restatement of deferred tax for the change in UK tax
rate taken to the income statement (note 6)
Restatement of deferred tax for the change in UK tax
rate taken to other comprehensive income
Taken to other comprehensive income/to equity
At end of period
17.1
(2.1)
2.0
17.0
Pensions
£m
(4.5)
0.2
–
(0.5)
(2.2)
(7.0)
183.9
5.7
21.6
211.2
Contract
liabilities
£m
(224.3)
(4.3)
(26.3)
–
–
Other
£m
2.7
0.3
0.3
3.3
Other
£m
(0.7)
(0.2)
(0.1)
–
–
Total
£m
215.5
1.8
25.3
242.6
Total
£m
(229.5)
(4.3)
(26.4)
(0.5)
(2.2)
(254.9)
(1.0)
(262.9)
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax asset at
25 December 2020 was £20.3 million (2019: £14.0 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.
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.
No deferred tax asset has been recognised in relation to £8.6 million (2019: £4.3 million) disallowed interest expense calculated
in the annual corporate interest restriction returns due to insufficient evidence to support recognition.
Dignity plc Annual Report & Accounts 2020
125
22 Deferred tax (continued)
The deferred income tax credited to other comprehensive income or charged to equity during the period was as follows:
Deferred tax credit on remeasurement losses on retirement benefit obligations
Restatement of deferred tax for the change in UK tax rate
Total credited to other comprehensive income
Deferred tax credit relating to maturity of option schemes
Total credited to equity
23 Financial instruments
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
(2.2)
(0.5)
(2.7)
–
–
(0.3)
–
(0.3)
(0.1)
(0.1)
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
Financial assets at fair value through consolidated income statement
Defensive investments – Index linked gilts and corporate bonds
Core growth investments – Equities
Growth fixed income and alternative investments – Property funds and emerging market debt
Liquid investments – Open-ended investment funds
Illiquid investments – Private investments
Total financial assets at fair value
25 December
2020
£m
27 December
2019
£m
174.3
262.9
417.0
63.0
49.9
967.1
170.3
268.5
468.6
–
40.1
947.5
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.
126
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
23 Financial instruments (continued)
The following table provides the fair value measurement hierarchy of the Trusts’ financial assets.
25 December 2020
Defensive investments – Index linked gilts and corporate bonds
Core growth investments – Equities
Growth fixed income and alternative investments – Property funds and
emerging market debt
Liquid investments – Open-ended investment funds
Illiquid investments – Private investments
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
£m
Significant
observable
inputs
(Level 2)
£m
Significant
unobservable
inputs
(Level 3)
£m
–
–
–
–
–
174.3
262.9
401.4
63.0
–
–
–
15.6
–
49.9
Total
£m
174.3
262.9
417.0
63.0
49.9
During the period £64.6 million was transferred out of level 3 into level 2. There were no transfers to/from level 1 during 2020.
27 December 2019
Defensive investments – Index linked gilts and corporate bonds
Core growth investments – Equities
Growth fixed income and alternative investments – Property funds and
emerging market debt
Illiquid investments – Private investments
There were no transfers between level 1, level 2 or level 3 during 2019.
The following methods and assumptions were used to estimate the fair values:
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
£m
–
–
–
–
Total
£m
170.3
268.5
468.6
40.1
Significant
observable
inputs
(Level 2)
£m
170.3
268.5
269.3
–
Significant
unobservable
inputs
(Level 3)
£m
–
–
199.3
40.1
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 & liquid 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:
Fair value at the start of the period
Remeasurement recognised in the consolidated income statement
Purchases
Sales
Investment administrative expenses
Fair value at the end of the period
25 December
2020
£m
27 December
2019
£m
239.4
(2.9)
–
(168.9)
(2.1)
65.5
252.7
8.3
11.3
(30.3)
(2.6)
239.4
Dignity plc Annual Report & Accounts 2020
127
23 Financial instruments (continued)
At 25 December 2020, the Trust financial assets (all level 2 or 3, fair value of £967.1 million (2019: £947.5 million)) are exposed to
market sensitivity and changes in valuation over time due to factors including currency, interest rate 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 five per cent movement in the fair value of
these assets would result in a £48.4 million (2019: £47.4 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
£96.7 million (2019: £94.8 million).
(b) Fair value of current and non-current financial liabilities
Secured A Notes – 3.5456% maturing
31 December 2034
Secured B Notes – 4.6956% maturing
31 December 2049
25 December 2020
27 December 2019
Nominal value
£m
Book value
£m
Fair value
£m
Nominal value
£m
Book value
£m
185.8
356.4
185.6
356.0
199.2
289.2
195.5
356.4
195.3
356.0
Fair value
£m
209.7
290.0
Total
542.2
541.6
488.4
551.9
551.3
499.7
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 lease payables of £88.5 million (2019: £0.6 million), which represent the
present value of future minimum lease payments. At 25 December 2020 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 25 December 2020, £10.2 million of the individual gross
at-need trade receivables (2019: £10.7 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 25 December 2020, was £7.2 million (2019: £6.7 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:
One to six months
Over six months
25 December
2020
£m
27 December
2019
£m
3.6
6.6
10.2
5.0
5.7
10.7
The amount of gross at-need trade receivables past due that were not impaired was not significant.
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.
128
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
23 Financial instruments (continued)
Movements on the Group’s loss allowance for trade receivables are as follows:
At beginning of period
Charged to income statement
Utilised in period
At end of period
25 December
2020
£m
27 December
2019
£m
(6.7)
(1.9)
1.4
(7.2)
(6.9)
(1.1)
1.3
(6.7)
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. £10.0 million
(2019: £11.4 million) is excluded from the analysis as it relates to trade receivables held by the Trust.
25 December 2020
Days past due
Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss
4.3%
11.1
0.5
10.1%
1.5
0.1
24.5%
0.8
0.2
41.5%
1.4
0.6
88.3%
6.5
5.8
21.3
7.2
Current
30–60 days
61–90 days
91–180 days
>181 days
Total
27 December 2019
Days past due
Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss
3.0%
11.1
0.3
11.0%
2.7
0.3
25.1%
0.9
0.2
43.4%
1.4
0.6
90.9%
5.7
5.3
21.8
6.7
Current
30–60 days
61–90 days
91–180 days
>181 days
Total
(d) Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 25 December 2020, all of which were at
floating interest rates, in respect of which all conditions precedent had been met at that date:
Expiring within one year
Expiring between one and two years
Expiring in more than two years
25 December
2020
£m
27 December
2019
£m
10.0
–
55.0
65.0
5.0
–
105.0
110.0
£55.0 million (2019: £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 (2019: £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.
Following the sale of various trading assets held outside the Securitisation Group into the Securitisation Group in July 2020, the
Group’s revolving credit facility (‘RCF’) was reduced by £40.0 million to £10.0 million (2019: £50.0 million). The RCF is provided by
the Royal Bank of Scotland, which is secured against the remaining 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.
In 2019, the remaining £5.0 million facility was extended for a further 12 months and expired in October 2020 and has not been
renewed. These facilities incurred commitment fees at market rates.
Dignity plc Annual Report & Accounts 2020
129
23 Financial instruments (continued)
(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.
Cash liabilities
Secured Notes (gross)
Interest payable on Secured Notes
Lease liabilities
Debt repayments
Other financial liabilities
Refund liability
Total liabilities
Cash liabilities
Secured Notes (gross)
Interest payable on Secured Notes
Finance leases
Debt repayments
Other financial liabilities
Refund liability
Total liabilities
25 December 2020
In less than
one year
£m
In more than
one year but
not more than
two years
£m
In more than
two years but
not more than
three years
£m
In more than
three years but
not more than
five years
£m
In more than
five years
£m
15.1
34.7
11.9
61.7
68.4
130.1
1.1
131.2
10.6
22.7
11.0
44.3
0.4
44.7
1.1
45.8
10.9
22.3
10.4
43.6
0.3
43.9
1.1
45.0
23.0
43.5
19.2
85.7
0.5
86.2
2.2
88.4
482.6
316.9
93.7
893.2
0.7
893.9
9.5
903.4
27 December 2019 – restated
In less than
one year
£m
In more than
one year but
not more than
two years
£m
In more than
two years but
not more than
three years
£m
In more than
three years but
not more than
five years
£m
In more than
five years
£m
9.6
23.5
0.1
33.2
61.4
94.6
1.1
95.7
15.1
34.7
–
49.8
0.4
50.2
1.1
51.3
10.6
22.7
–
33.3
0.5
33.8
1.1
34.9
22.2
44.3
0.1
66.6
0.6
67.2
2.2
69.4
494.4
338.4
2.4
835.2
0.2
835.4
10.1
845.5
Total
£m
542.2
440.1
146.2
1,128.5
70.3
1,198.8
15.0
1,213.8
Total
£m
551.9
463.6
2.6
1,018.1
63.1
1,081.2
15.6
1,096.8
Other financial liabilities due in less than one year as at 27 December 2019 has been reduced by £2.7 million to reflect the
elimination on consolidation of balances between the Trading Group and the Trusts which was omitted in error in establishing
the amount disclosed in the prior period financial statements. Consequently, the above table has been restated.
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.
130
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
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.
25 December 2020
In less than
one year
£m
In more than
one year but
not more than
two years
£m
In more than
two years but
not more than
three years
£m
In more than
three years but
not more than
five years
£m
In more than
five years
£m
–
–
–
–
–
–
–
–
0.6
0.6
27 December 2019
In less than
one year
£m
In more than
one year but
not more than
two years
£m
In more than
two years but
not more than three
years
£m
In more than
three years but not
more than
five years
£m
In more than
five years
£m
–
–
–
–
–
–
–
–
0.6
0.6
Total
£m
0.6
0.6
Total
£m
0.6
0.6
Non-cash liabilities
Issue costs on Secured Notes
Non-cash liabilities
Issue costs on Secured Notes
24 Ordinary share capital
25 December
2020
£m
27 December
2019
£m
6.2
6.2
Allotted and fully paid Equity shares
50,020,483 (2019: 50,012,394) Ordinary Shares of 12 48/143 pence (2019: 12 48/143 pence) each
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 7,745 shares issued under the 2017 DABS 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 2018, 2019 and 2020.
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:
Year of grant
2019 – SAYE
2018 – LTIP
2019 – LTIP
2020 – LTIP
Exercise price
(pence)
383.52
–
–
–
Exercise
period
2020
Number
2019
Number
435,664
498,164
2018
Number
n/a
120,523
146,157
146,157
270,904
388,719
264,271
n/a
n/a
n/a
1 December 2022
to 31 May 2023
16 March 2020
to 16 March 2027
23 March 2021
to 23 March 2028
12 June 2022
to 12 June 2029
Dignity plc Annual Report & Accounts 2020
131
25 Share-based payments
In respect of share-based payments, total charges to the income statement were £1.4 million (2019: £0.8 million). The Group has
both LTIP and SAYE schemes, both of which are equity based settled.
LTIP Schemes
The LTIP Scheme was introduced after the flotation of the Group in 2004. Under the LTIP Scheme, the remuneration committee
can grant options over shares in the Company to employees of the Group. Awards under the LTIP Scheme are generally
reserved for the Executive Directors, the Operating Board Directors and senior management. The Company has made annual
grants since April 2004. Options granted under the LTIP Scheme will normally become exercisable on the third anniversary
of the date of grant, subject to the conditions described on page 75. For the 2019 and 2020 schemes the vested shares must
be retained for two years by the Executive Directors and the Operating Board Directors. Exercise of an option is subject to
continued employment unless an individual ceases to be an employee by reason of death, illness, redundancy or other
similar circumstances.
Options were valued using the Monte Carlo option pricing model. Performance conditions were included in the fair value
calculations. The fair value per option granted and the assumptions used in the calculation are as follows:
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividends expressed as a dividend yield
Possibility of ceasing employment before vesting
Fair value per option
22 December
2020
£6.03
–
36
264,271(1)
3
60.2%
10
3
0.11%
0%
0%
£4.63
13 June
2019
£6.33
–
39
388,719
3
45.3%
10
3
0.78%
3.3%
0%
£3.85
23 March
2018
£8.90
–
37
146,157
3
29%
10
3
1.03%
1.4%
0%
£1.22
(1) 50 per cent of these options relate to total shareholder return with the remaining relating to market share price.
The expected volatility is calculated by reference to historical volatility over the last three years. The expected life is the average
expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds of a term consistent
with the assumed option life.
Reconciliation of LTIP awards:
Award grant date
(i) 16.03.17
(ii) 23.03.18
(iii) 13.06.19
(iv) 22.12.20
Outstanding
as at
27.12.19
133,942
146,157
388,719
–
Granted
during the period
Lapsed
during the period
Forfeited
during the period
Vested and
exercised
during the period
Outstanding
as at
25.12.20
–
–
–
264,271
(133,942)
–
–
–
–
(25,634)
(117,815)
–
–
–
–
–
–
120,523
270,904
264,271
The options under the 2018, 2019 and 2020 LTIP Schemes have not yet vested.
During the period nil options under the 2017 scheme were exercised.
The charge to the income statement in the period in respect of the LTIP Schemes was £1.0 million (2019: £0.6 million), all of
which are equity based settled.
132
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
25 Share-based payments (continued)
SAYE Scheme
One Inland Revenue approved SAYE Scheme was in place during the period. Options were valued using the Black-Scholes option
pricing model. No performance conditions were included in the fair value calculations. The fair value per option granted and the
assumptions used in the calculation are as follows:
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividends expressed as a dividend yield
Possibility of failing to save
Fair value per option
2019 Scheme
10 October 2019
£5.33
£3.83
901
506,837
3
47.0%
3.5
3
0.70%
0%
20%
£2.40
During the period 61,542 options (2019: 8,673 options) under the 2019 SAYE Scheme were forfeited and 958 options (2019: nil
options) were exercised with a weighted average share price of £3.71.
The charge to the income statement in the period in respect of the SAYE Schemes was £0.4 million (2019: £0.2 million) all of
which are equity based settled.
The expected volatility is calculated by reference to historical volatility over the last three years. The expected life is the average
expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds of a term consistent
with the assumed option life. The options under the 2019 SAYE Scheme have not yet vested.
26 Net debt
Net amounts owing on Secured Notes per financial statements
Add: unamortised issue costs (note 18(a))
Gross amounts owing
Accrued interest on Secured Notes
Cash and cash equivalents – Trading Group (note 17)
Net debt
25 December
2020
£m
27 December
2019
£m
(541.7)
(0.5)
(542.2)
(12.0)
73.6
(551.3)
(0.6)
(551.9)
(12.2)
57.9
(480.6)
(506.2)
Net debt is an alternative performance measure calculated as shown in the table. Net debt excludes any liabilities recognised in
accordance with IFRS 16.
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 25 December 2020, the actual ratio was 1.99 times (2019: 2.13 times).
These ratios are calculated for EBITDA and total debt service on a 12 month rolling basis and reported quarterly. In addition,
both terms are specifically defined in the legal agreement relating to the Secured Notes. As such, they cannot be accurately
calculated from the contents of this report.
Dignity plc Annual Report & Accounts 2020
133
27 Reconciliation of cash generated from operations
Net (loss)/profit for the period(1)
Adjustments for:
Taxation(1)
Finance costs(2)
Profit on sale of fixed assets
Depreciation charges on property, plant and equipment
Depreciation charges on right-of-use asset
Amortisation of intangibles
Movement in inventories
Movement in trade receivables
Movement in trade payables
Movement in contract liabilities
Fair value movement on Trust assets(2)
Net pension charges less contributions
Trade name impairment (note 9)
Goodwill impairment (note 9)
Share of loss and impairment in respect of associated undertakings
Changes in other working capital (excluding acquisitions)
Trust investment administrative expenses deducted at source(3)
Employee share option charges (note 25)
Cash flows from operating activities
52 week period
ended
25 December
2020
£m
(25.5)
5.9
76.8
(0.1)
19.6
9.2
4.9
(1.1)
2.4
(2.0)
(40.2)
(41.3)
(1.6)
15.3
28.7
–
5.1
5.2
1.4
62.7
52 week period
ended
27 December
2019
restated
£m
30.6
13.5
74.2
(1.0)
19.1
–
5.0
0.6
(1.5)
(0.8)
(5.6)
(79.5)
(1.7)
6.8
–
6.0
(7.7)
5.8
0.8
64.6
(1) Restatement reflects the corporate interest restriction disallowance treated as a prior year adjustment. See note 1 for further details.
(2)
(3)
Restatement reflects the separation of fair value movements on trust assets out of net finance costs/(income) to provide more accurate presentation in line with the
consolidated income statement.
Restatement reflects the separation of Trust investment administrative expenses deducted at sources out of changes in other working capital to provide more accurate
presentation of working capital.
Other non-cash transactions
Non-cash charges comprise of amortisation of deferred debt issue costs, as discussed in note 18(a).
134
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
28 Employees and Directors
Wages and salaries
Social security costs
Other pension costs (note 29)
Share option charges (note 25)
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
101.9
9.0
4.2
1.3
116.4
94.1
8.5
4.0
0.8
107.4
For the period ended 25 December 2020, key management are considered to be the Board of Directors plus the members of the
Operating Board. For the period ended 27 December 2019, key management were considered to be the Board of Directors only.
Total key management remuneration in the period was £3.0 million (2019: £2.2 million), including £0.2 million (2019: £0.3 million)
relating to pensions and £0.4 million (2019: £0.3 million) related to share based payments. The monthly average number of
people, including Directors, employed by the Group during the period was as follows:
Management and administration
Funeral services staff
Crematoria staff
Pre-arranged funeral plan staff
2020
Number
286
2,475
406
176
3,343
2019
Number
restated
286
2,548
420
160
3,414
Directors’ emoluments
Details of Directors’ emoluments are disclosed in the Report on Directors’ Remuneration on pages 70 to 80 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:
Defined contribution schemes
2020
£m
3.6
2019
£m
3.5
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 2018 and subsequent reviews were completed at 6 April 2019 and 6 April 2020. This latest view has been
updated to 25 December 2020 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 9.2per 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 2020 were £0.1 million (2019: £0.1 million of contributions). In addition special
contributions of £2.1 million (2019: £2.1 million) have been paid to make total contributions for the year of £2.2 million (2019:
£2.2 million).
Dignity plc Annual Report & Accounts 2020
135
29 Pension commitments (continued)
The principal actuarial assumptions at the balance sheet date were:
Assumptions
Discount rate
Rate of increase in salaries
Pensions increase assumption: RPI capped at 5% p.a.
Pensions increase assumption: RPI capped at 2 1/2% p.a.
RPI price inflation assumption
CPI price inflation assumption – Pre February 2030
CPI price inflation assumption – Post January 2030
2020
%
1.35
2.20
3.10
2.20
3.20
2.20
3.20
2019
%
1.95
2.20
3.10
2.20
3.20
2.20
2.20
The demographic assumptions used include rates for mortality which, for example, lead to an average projected life expectancy
of 22.0 (2019: 19.8) years for male members and 24.3 (2019: 25.1) years for female members currently aged 65 and of 22.9 (2019:
20.7) years from age 65 for male members and 25.4 (2019: 26.3) 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:
Fair value of plan assets
Present value of funded obligations
Net obligation recognised in the balance sheet
Analysis of amount charged to income statement in respect of defined benefit schemes
Current service cost included within cost of sales (staff costs)
Administration expenses paid by the scheme
Interest costs less interest income included within net finance cost
Analysis of fair value of plan assets
Equity and diversified growth funds
Debt
Cash
Fair value of plan assets
£m
62.0
56.8
2.8
121.6
2020
£m
121.6
(158.2)
(36.6)
2019
£m
114.5
(140.5)
(26.0)
2020
£m
0.1
0.4
0.5
2020
2019
%
51.0
46.7
2.3
£m
60.6
53.4
0.5
2019
£m
0.1
0.4
0.7
%
52.9
46.6
0.5
100.0
114.5
100.0
At 25 December 2020 and 27 December 2019 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.
136
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
29 Pension commitments (continued)
Changes in the present value of the defined benefit obligation are as follows:
Present value of obligation at beginning of period
Current service cost
Interest cost
Benefits paid
Remeasurement losses – financial
Remeasurement (losses)/gains – demographics
Remeasurement (losses)/gains – experience
Present value of obligation at end of period
Changes in the fair value of plan assets are as follows:
Fair value of plan assets at beginning of period
Interest income on plan assets
Contributions by Group
Benefits paid
Administration expenses paid by the scheme(a)
Remeasurement gains/(losses)
Fair value of plan assets at end of period
(a) Administration expenses paid by the scheme includes £0.2 million charged (2019: £0.2 million charged) to other comprehensive income.
Analysis of the movement in the balance sheet obligation
At beginning of period
Total expense as above charged to the income statement
Remeasurement losses and administration expenses charged to other comprehensive income
Contributions by Group
At end of period
The actual return on plan assets was £10.5 million (2019: £14.7 million).
Change in assumptions
No change
0.25% rise in discount rate
0.25% fall in discount rate
0.25% rise in inflation
0.25% fall in inflation
Liabilities
£m
(158.2)
(151.3)
(165.4)
(163.0)
(153.6)
Assets
£m
121.6
121.6
121.6
121.6
121.6
2020
£m
(140.5)
(0.1)
(2.7)
4.8
(17.4)
(1.9)
(0.4)
(158.2)
2020
£m
114.5
2.2
2.2
(4.8)
(0.7)
8.2
121.6
2020
£m
(26.0)
(1.1)
(11.7)
2.2
(36.6)
Deficit
£m
(36.6)
(29.7)
(43.8)
(41.4)
(32.0)
2019
£m
(128.7)
(0.1)
(3.5)
5.2
(16.6)
2.5
0.7
(140.5)
2019
£m
103.5
2.8
2.2
(5.2)
(0.6)
11.8
114.5
2019
£m
(25.2)
(1.2)
(1.8)
2.2
(26.0)
(Increase)/
decrease in
deficit
£m
–
6.9
(7.2)
(4.8)
4.6
The above sensitivity analysis has been determined by applying the results of a fully accurate sensitivity analysis as at 6 April
2020 to the value placed on the Scheme liabilities as at 25 December 2020, 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 2020.
Analysis of present value of scheme liabilities
Active members(a)
Deferred pensioners
Current pensioners
Average duration of liabilities
(a) Active members are members of the Scheme who are still employed by the Group.
2020
2019
33%
27%
40%
18 years
33%
26%
41%
18.5 years
Dignity plc Annual Report & Accounts 2020
137
29 Pension commitments (continued)
Scheme characteristic
The Company currently operates a defined benefits plan, the Dignity Pension & Assurance Scheme. 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 lastest full valuation is being undertaken as at 6 April 2020.
The Group currently commits deficit contributions of £1,700,000 per annum. Based on the results of the 2017 actuarial
valuation, this rate of contributions was projected to eliminate the deficit disclosed by that valuation by 31 March 2024. The
initial results of the valuation as at 6 April 2020, suggest this level of contributions will need to be significantly increased.
The employees of the LGPS Section currently contribute to the Plan in line with the rates set out in the Plan Rules and the
Employer contributes £45,720 per annum 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:
Assets held by investment managers
Balance of the Trustees’ bank account
Total
2020
£m
121.0
0.6
121.6
2019
£m
114.0
0.5
114.5
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 the 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.
138
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
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 £16.9 million (2019: £17.5 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 because the Group does not include future receivable amounts in the consolidated
balance sheet.
The Trustees have advised that the latest actuarial valuations of the Trusts were performed as at 25 September 2020 (2019:
27 September) using assumptions determined by the Trustees. Actuarial liabilities in respect of the Trusts have increased to
£995 million as at 25 September 2020 (2019: £987 million). The corresponding market value of the assets of the Trusts was
£999 million (2019: £1,004 million) as at the same date. Consequently the actuarial valuations recorded a total surplus of
£4 million at 25 September 2020 (2019: surplus of £17 million). The Group considers these to be prudent assumptions.
Active members and assets per plan
Supported by:
The Trusts
The Small Trusts
Insurance Plans
25 December
2020
Number
27 December
2019
Number
319,000
46,000
193,000
558,000
311,000
48,000
164,000
523,000
The Trusts have approximately £3,400 (2019: £3,300) per active plan. On average the Trading Group received approximately
£3,000 (2019: £2,900) 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.
(c) 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
£0.9 million (2019: £1.1 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.
Dignity plc Annual Report & Accounts 2020
139
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 have 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 have granted the Security Trustee with full title
guarantee, a first legal mortgage over each of its rights, title and interest from time to time in properties situated in England
and Wales;
• Dignity Funerals Limited has granted the Security Trustee with full title guarantee(iii), a first legal mortgage over its rights, title
and interest from time to time in properties situated in Northern Ireland;
• Dignity Finance PLC has granted BNY Mellon Corporate Trustee Services Limited (in its capacity as Note Trustee) with full title
guarantee, an assignment by way of security of its benefit in each Issuer Transaction Document (other than the Trust
Documents), the Security Trust Deed and each Obligor Security Document and charges by way of first fixed charge the benefit
of its accounts; and
• Dignity Funerals Limited has, in respect of any Scottish property which is capable of being so charged, granted ‘standard
securities’ in favour of the Security Trustee(iv).
(i) Means Dignity (2002) Limited and its subsidiaries.
(ii)
Means the Obligors (other than Dignity (2002) Limited (as Borrower)), Dignity (2004) Limited, Dignity plc, Dignity Holdings No.2 Limited, Dignity Holdings Limited and Dignity
Mezzco Limited.
(iii) This mortgage is governed by the laws of Northern Ireland.
(iv) The standard securities are governed by Scots Law.
At 25 December 2020, the amount outstanding in relation to these borrowings was £542.2 million (2019: £551.9 million).
140
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
31 Contingent liabilities (continued)
(b) £10,000,000 Revolving Credit Facility
As a consequence of the legal structure of the £10 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
Regulation and the funeral plan market
HM Treasury had previously announced that prepaid funeral plans would be subject to regulation by the Financial Conduct
Authority (‘FCA’). On 2 March 2021, the FCA published their consultation paper with their proposed approach to regulation.
If the FCA rules are enacted in the way they are currently drafted they will have a profound impact on both the wider industry
and Dignity. We welcome the opportunity to work closely with the FCA over the coming months to ensure the rules provide the
much needed consumer protection, but also supporting the FCA in their understanding of the potential unintended
consequences on the industry as a result of the current drafting.
Tax rate change
In the budget on 3 March 2021 by HM Government, legislation to increase the main rate of corporation tax from 19 per cent to
25 per cent from 1 April 2023 was announced. This will be reflected in the Group’s financial results once substantively enacted.
Requisition Notice
On 11 March 2021, Dignity plc received a requisition notice pursuant to section 303(1) of the Companies Act 2006 requiring that
the Board convenes a general meeting of shareholders for the purposes of considering and, if thought fit, approving resolutions
to remove the existing Executive Chairman, Clive Whiley as a Director and appoint Gary Channon as an Executive Director. The
Requisition Notice was delivered by Phoenix UK Fund Limited, the Company’s largest shareholder.
The Phoenix UK Fund is managed by Phoenix Asset Management Partners and Mr Channon is the founder and chief investment
officer of Phoenix Asset Management Partners.
35 Adoption of IFRS 16 – Right-of-use assets and lease liabilities
Background
The Group has adopted the requirements of IFRS 16, Leases, for the first time within this Annual Report. The adoption of the
standard has had 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 began on 29 December 2018 the Group has adopted IFRS 16 retrospectively for its 2020 reporting period beginning on
28 December 2019. Comparatives for the 2019 reporting period have not been restated as permitted under the specific
transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules have therefore
been recognised in the opening balance sheet on 28 December 2019.
Approximately 50 per cent of the Group’s properties are on lease terms that were previously accounted for as an operating lease
under the principles of IAS 17, Leases. The minimum undiscounted lease commitment on these leases as disclosed in the 2019
Annual Report was approximately £228 million at the end of 2019.
Dignity plc Annual Report & Accounts 2020
141
35 Adoption of IFRS 16 – Right-of-use assets and lease liabilities (continued)
On adoption of IFRS 16, the Group has recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’. These liabilities are 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 for a borrowing of similar duration. The weighted
average lessee’s IBR applied to the lease liabilities on 28 December 2019 was 4.9 per cent, with a minimum rate of 3.6 per cent
and a maximum rate of 6.8 per cent.
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 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 is then 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 reference points.
On adoption of IFRS 16, the Group has recognised 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 are 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 have been transferred into the right-of-use asset.
The right-of-use asset has been depreciated on a straight-line basis over the life of the lease. Interest has been 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.
Transition
In order to establish 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 has resulted in the recognition of right-of-use assets of £101.7 million,
with corresponding lease liabilities of £93.6 million.
For the period ending 25 December 2020, operating profit increased by £4.6 million and profit before tax decreased by
£0.1 million as the pre-IFRS 16 rental charge was replaced by depreciation, interest charge and a release of accruals and
prepayments. The Group’s 2020 current tax charge is unaffected. Furthermore, there will be no impact on profit before tax or
the Group’s current tax charge (assuming consistent rates of tax) over the life of the lease portfolio.
At 25 December 2020 the Group held a right-of-use asset of £95.2 million and a corresponding lease liability of £88.5 million.
Furthermore, operating costs of £12.1 million were replaced by a depreciation charge of £9.2 million, a release of accruals and
prepayments of £1.7 million and a finance cost of £4.7 million. See note 11 for further details.
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. The presentation of the cash flow statement will also change as operating cashflows will include
adjustments for depreciation and finance costs, tax paid will decrease/increase (no impact over the life of the lease portfolio) and
principal and interest costs will be included under financing activities.
Due to the modified retrospective transition method being applied there has been no deferred tax implications on transition
as the right-of-use asset equals the lease liability being recognised, with the exception of a £0.9 million difference relating to
prepaid and accrued lease payments and £7.2 million representing amounts paid to acquire the long leasehold interest in land
at certain of the Group’s properties. In addition, £0.8 million has been credited to equity on transition, which represents rent
reviews not contractually concluded as at 28 December 2019. This £0.8 million credit to reserves is a restatement from the
balances reported in the 2020 Interim Report following a more detailed review of the contractual rent reviews.
142
Dignity plc Annual Report & Accounts 2020
Notes to the financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
35 Adoption of IFRS 16 – Right-of-use assets and lease liabilities (continued)
Transition roll
Below is a reconciliation from previously disclosed operating lease commitments to lease liability on transition:
Operating lease commitments disclosed as at 27 December 2019
Less: non-IFRS 16 leases and practical expedients
IFRS 16 qualifying leases – undiscounted
Group’s weighted average incremental borrowing rate at the date of application (1)
Lease liabilities recognised as at 27 December 2019
Add: finance leases already held under IAS 17
Add: onerous leases held as provisions
Lease liability recognised as at 28 December 2019
Of which:
Current lease liability
Non-current lease liability
(1) This weighted average rate is based on various lease terms ranging from 1 – 999 years.
The change in accounting policy affected the following items in the balance sheet on 28 December 2019:
Property, plant and equipment (finance leases previously held under IAS 17)
Prepayments (previously held in financial and other assets) (1)
Right-of-use of assets
Total non-current assets
Current lease liability
Non-current lease liability
Total lease liability
27 Dec
2019
£m
0.5
7.2
–
7.7
–
0.6
0.6
Impact of
IFRS 16
£m
(0.5)
(7.2)
101.7
94.0
5.9
87.1
93.0
£m
227.9
(69.2)
158.7
4.9%
92.9
0.6
0.1
93.6
5.9
87.7
28 Dec
2019
£m
–
–
101.7
101.7
5.9
87.7
93.6
(1)
Prepayments represent amounts paid to acquire the long leasehold interest in land at certain of the Group’s properties. These were not included within the right-of-use asset
transition balance as reported in the 2020 Interim Report. They have now been included as, on further review, this is considered necessary to comply with IFRS 16.
Dignity plc Annual Report & Accounts 2020
143
35 Adoption of IFRS 16 – Right-of-use assets and lease liabilities (continued)
Practical expedients applied
In applying IFRS 16 for the first time, the Group has applied 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.
144
Dignity plc Annual Report & Accounts 2020
Dignity plc Company balance sheet
As at 25 December 2020
Financial statements
Fixed assets
Investments
Current assets
Trade and other receivables
Cash
Total current assets
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total equity
25 December
2020
£m
27 December
2019
£m
Note
C2
C3
C4
C5
151.3
149.9
285.7
48.9
334.6
(14.2)
320.4
471.7
471.7
6.2
12.7
141.7
4.8
306.3
471.7
295.3
29.8
325.1
(15.0)
310.1
460.0
460.0
6.2
12.5
141.7
3.7
295.9
460.0
The Company has taken advantage of the exemption permitted by section 408 of the Companies Act 2006 not to publish its
individual profit and loss account and related notes. The Company made a profit attributable to the equity shareholders of
£10.4 million in the period (2019: loss of £12.6 million).
The financial statements on pages 144 to 153 were approved by the Board of Directors on 17 March 2021 and were signed on its
behalf by:
C P Whiley, Executive Chairman
D R Moore, Interim Chief Financial Officer
Dignity plc Company statement of changes in equity
for the 52 week period ended 25 December 2020
Dignity plc Annual Report & Accounts 2020
145
Ordinary
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Shareholders’ equity as at 28 December 2018
Loss for the period
Effects of employee share options
Proceeds from share issue
Gift to Employee Benefit Trust
Dividends paid on Ordinary Shares
Total transactions with owners, recognised
directly in equity
Shareholders’ equity as at 27 December 2019
Profit for the period
Effects of employee share options
Proceeds from share issue
Gift to Employee Benefit Trust
Total transactions with owners, recognised
directly in equity
6.2
–
–
–
–
–
–
6.2
–
–
–
–
–
Shareholders’ equity as at 25 December 2020
6.2
12.4
–
–
0.1
–
–
0.1
12.5
–
–
0.2
–
0.2
12.7
141.7
–
–
–
–
–
–
141.7
–
–
–
–
–
141.7
2.7
–
1.1
–
(0.1)
–
1.0
3.7
–
1.3
–
(0.2)
1.1
4.8
316.4
(12.6)
–
–
–
(7.9)
(7.9)
295.9
10.4
–
–
–
–
306.3
Total
£m
479.4
(12.6)
1.1
0.1
(0.1)
(7.9)
(6.8)
460.0
10.4
1.3
0.2
(0.2)
1.3
471.7
Capital redemption reserve
The capital redemption reserve represents £80,002,465 B Shares that were issued on 2 August 2006 and redeemed for cash on
the same day, £19,274,610 B Shares that were issued on 10 October 2010 and redeemed for cash on 11 October 2010,
£22,263,112 B Shares that were issued on 12 August 2013 and redeemed for cash on 20 August 2013 and £20,154,070 B Shares
that were issued and redeemed for cash in November 2014.
Other reserves
Other reserves includes movements relating to the Group’s SAYE and LTIP schemes.
146
Dignity plc Annual Report & Accounts 2020
Notes to the Dignity plc financial statements
for the 52 week period ended 25 December 2020
Financial statements
C1 Principal accounting policies
Basis of preparation
The financial statements of the Company for the period ended 25 December 2020 were authorised for issue by the Board of
Directors and the balance sheet was signed on the Board’s behalf by Mr C P Whiley and Mr D R Moore. 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 25 December
2020. For the comparative period, the Company’s financial statements have been prepared for the 52 week period ended
27 December 2019.
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.
Dignity plc Annual Report & Accounts 2020
147
C1 Principal accounting policies (continued)
New standards, amendments and IFRIC interpretations
No new accounting standards, or amendments to accounting standards, or IFRIC interpretations that are effective for the year
ended 25 December 2020, 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 estimates, assumptions
and judgements in certain circumstances that affect reported amounts. The key judgements affecting the financial statements
are detailed below:
Investments in subsidiary undertakings impairment assessment
Performing the annual impairment assessment for investments in subsidiary undertakings requires the use of estimates
including those in respect of future cash flows, growth rates and an appropriate discount rate as set out in note 9 to the Group’s
consolidated financial statements. The assessment is also sensitive to movements in the fair value of the financial assets held
within the Trusts and the fair value of the Group’s external debt, as set out in note 23 to the Group’s consolidated financial
statements. The current impairment test indicates minimal headroom such that a change in value-in-use arising as a result of
change in assumptions, or adverse market change in the fair value of the Trust investments or Group debt, would give rise to an
impairment charge of a similar amount.
Fixed asset investments
Fixed asset investments are stated at historical cost, less any provision for impairment.
Impairment of fixed assets
The carrying values of fixed assets are reviewed for impairment in periods where events or changes in circumstances indicate
that the carrying value may not be recoverable or at the end of the first full financial year following the recognition. Any
impairment in the value of fixed assets below depreciated historical cost is charged to the income statement within operating
profit. A reversal of an impairment loss is recognised in the income statement to the extent that the original loss was recognised.
Employee share schemes
The Company operates two employee share schemes: The Save As You Earn Scheme (‘SAYE’) and Long-Term Incentive Plan
Scheme (‘LTIP’).
The Company applies IFRS 2 in respect of share option schemes resulting in the charge for such schemes being recognised in
a subsidiary of the Company. The Company’s financial statements reflect the cost of the scheme as an increase in the cost of
investment in the subsidiary with the corresponding credit included within other reserves.
Employee share trust
The assets of the employee share trust are held by a separate limited company, of which the Directors consider that Dignity plc
has de facto control. In accordance with IFRS, Accounting for ESOP Trusts and the substance of the transaction, the trust’s assets
and liabilities are recognised in the Company’s balance sheet.
Dividends
Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the period in
which they are approved by the Company’s shareholders. Interim dividends are recorded in the financial statements when paid.
Financial instruments
Borrowings
All borrowings 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.
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.
148
Dignity plc Annual Report & Accounts 2020
Notes to the Dignity plc financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
C1 Principal accounting policies (continued)
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.
C2 Investments in subsidiary undertakings
Cost and net book amount
At beginning of period
Additions in respect of share-based payments
At end of period
£m
149.9
1.4
151.3
Additions in the period reflect the effect of capital contributions to subsidiaries as a result of share-based payment schemes
operated in those companies 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 consider that the carrying value of the investments is
supported by their underlying net assets and value-in-use. This assessment is sensitive to assumptions in relation to value-in-use,
as set out in note 9 to the Group’s consolidated financial statements, to movements in the fair value of the financial assets held
within the Trusts and the fair value of the Group’s external debt, as set out in note 23 to the Group’s consolidated financial
statements. The current impairment test indicates minimal headroom such that a change in value-in-use arising as a result of
change in assumptions, or adverse market change in the fair value of the Trust investments or Group debt, would give rise to
an impairment charge of a similar amount.
C3 Trade and other receivables: amounts falling due within one year
Amounts owed by group undertakings
Corporation tax
25 December
2020
£m
27 December
2019
£m
285.5
0.2
285.7
295.3
–
295.3
An ECL of £0.3 million is held against amounts owed by group undertakings. There has been no movement in the ECL during
the period.
C4 Creditors: amounts falling due within one year
Amounts owed to subsidiary undertakings
Accruals
Corporation tax
C5 Called up share capital and reserves
Allotted and fully paid Equity shares
50,020,483 (2019: 50,012,394) Ordinary Shares of 12 48/143p (2019: 12 48/143p) each
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.
25 December
2020
£m
27 December
2019
£m
12.4
1.8
–
14.2
12.4
1.9
0.7
15.0
25 December
2020
£m
27 December
2019
£m
6.2
6.2
Dignity plc Annual Report & Accounts 2020
149
C6 Dividends
Final dividend paid: Nil per Ordinary Share (2019: 15.74p)
Interim dividend paid: Nil per Ordinary Share (2019: nil)
Dividend on Ordinary Shares
52 week period
ended
25 December
2020
£m
52 week period
ended
27 December
2019
£m
–
–
–
7.9
–
7.9
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 2020 (2019: nil).
The final dividend in 2019 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 £nil million, nil pence per share (2019: £7.9 million, 15.74 pence
per share). No final dividend was declared in respect of 2019 totalling £nil million (2019: final dividend in respect of 2018 was
15.74 pence per share totalling £7.9 million). The Group is not proposing any dividend for the period ended 25 December 2020.
C7 Staff costs
Directors’ remuneration
Details of the Directors’ emoluments are included in pages 70 to 80. They received no emoluments in respect of their services to
the Company (2019: nil).
C8 Related party transactions
There are no related party transactions for either period requiring disclosure.
150
Dignity plc Annual Report & Accounts 2020
Notes to the Dignity plc financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
C9 Subsidiary undertakings
Principal subsidiaries
Company name
Advance Planning Limited
Dignity (2002) Limited
Dignity Crematoria Limited
Dignity Crematoria No.2 Limited
Dignity Finance PLC
Dignity Funerals Limited
Dignity Funerals No.3 Limited
Dignity Pre Arrangement Limited
Dignity Securities Limited
Pitcher & Le Quesne Limited***
Other subsidiaries
Company name
Birkbeck Securities Limited
Dignity (2004) Limited
Dignity (2008) Limited
Dignity (2011) Limited
Dignity (2014) Limited
Dignity Finance Holdings Limited
Dignity Holdings Limited
Dignity Holdings No.2 Limited
Dignity Holdings No.3 Limited
Dignity Mezzco Limited
Dignity Services
Valedictum Limited
Principal activity
Pre-arranged funeral plans
Intermediate holding company
Construction and leasing of crematoria
Construction and leasing of crematoria
Finance company
Funeral services
Funeral services
Pre-arranged funeral plans
Pre-arranged funeral plans
Funeral services
Principal activity
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Finance company
Intermediate holding company
Non-trading company
Dignity plc Annual Report & Accounts 2020
151
C9 Subsidiary undertakings (continued)
Dormant companies
A & N Duckworth Limited
A Ashton & Sons Limited
A Bennett & Sons Limited
A F Townsend (Funeral Directors) Limited
A Hazel & Sons Limited
A Shepherd & Sons Limited
A T Genders Limited
A V Band Limited
A. & G. Huteson Ltd
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
152
Dignity plc Annual Report & Accounts 2020
Notes to the Dignity plc financial statements continued
for the 52 week period ended 25 December 2020
Financial statements
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
N A Medd Limited
National Funeral Trust Limited
Newport & Telford Funeral Service Ltd
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
Dignity plc Annual Report & Accounts 2020
153
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
U.F.D. Limited
UK Funerals Limited
UKF Limited
Valedictum Holdings Limited
Valedictum Group Limited
Valedictus Limited**
Valedictus Holdings Limited**
Valedictus Group 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
The registered office for these subsidiaries is 280 Kinfauns Drive, Glasgow, G15 7AR
Registered office
*
** 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.
154
Dignity plc Annual Report & Accounts 2020
Financial record(a)
Financial statements
Summarised consolidated income statement
Underlying revenue
Funeral services
Crematoria
Pre-arranged funeral plans
Underlying operating profit
Funeral services
Crematoria
Pre-arranged funeral plans
Central overheads
Underlying finance costs
Underlying finance income
Underlying profit before tax
Underlying taxation
Underlying profit after tax
Underlying earnings per share (pence)
Revenue
Operating profit
Profit/(loss) after tax
Basic earnings/(loss) per share (pence)
Key performance indicators
Total estimated number of deaths in Britain (number)
Number of funerals performed (number)
Funeral market share(b) (per cent)
Number of cremations performed (number)
Cremation market share (per cent)
Active pre-arranged funerals (number)
Underlying cash generated from operations (£million)
Net debt
2020
£m
202.6
82.7
28.8
314.1
50.0
42.8
–
(37.1)
55.7
(25.1)
0.1
30.7
(7.4)
23.3
46.6p
357.5
15.9
(25.5)
(51.0) p
2019
restated
£m
203.3
76.8
21.2
301.3
56.3
38.4
–
(31.4)
63.3
(25.8)
0.2
37.7
(7.4)
30.3
60.6p
338.9
44.8
30.6
61.2p
2018
£m
2017(c)
£m
2016(d)
£m
214.9
78.0
22.7
315.6
62.2
40.3
2.8
(25.1)
80.2
(26.0)
0.2
54.4
(11.5)
42.9
85.8p
353.7
75.9
(17.0)
(34.0) p
221.8
74.0
28.2
324.0
79.5
40.0
8.0
(22.9)
104.6
(26.9)
0.1
77.8
(13.8)
64.0
128.3p
324.0
98.0
57.8
115.8p
217.8
67.5
28.3
313.6
79.0
37.6
8.5
(23.4)
101.7
(26.9)
0.4
75.2
(15.8)
59.4
119.8p
313.6
97.7
57.2
115.3p
2020
2019
2018
2017
2016
663,000
80,300
12.0%
74,500
11.2%
558,000
76.4
584,000
69,400
11.7%
64,800
11.1%
523,000
71.8
599,000
72,300
11.9%
65,200
10.9%
486,000
101.9
590,000
68,800
11.5%
63,400
10.7%
450,000
115.4
590,000
70,700
11.8%
59,500
10.1%
404,000
121.1
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
Net amounts owing on Secured Notes per
(541.7)
(551.3)
(560.6)
(565.1)
(573.9)
financial statements
Add: unamortised issue costs
Gross amounts owing
Net amounts owing on Crematoria Acquisition Facility
per financial statements
Add: unamortised issue costs on Crematoria Acquisition
Facility
Gross amounts owing
Accrued interest on Secured Notes
Accrued interest on Crematoria Acquisition Facility and
Revolving Credit Facility
Cash and cash equivalents – Trading Group
(0.5)
(0.6)
(542.2)
(551.9)
(0.6)
(561.2)
(0.6)
(565.7)
–
–
(542.2)
(12.0)
–
73.6
–
–
(551.9)
(12.2)
–
57.9
–
–
(561.2)
(12.3)
(0.2)
66.9
–
–
(565.7)
(0.3)
(0.2)
49.3
(0.7)
(574.6)
(15.7)
(0.1)
(590.4)
(0.3)
(0.1)
67.1
Net debt
(480.6)
(506.2)
(506.8)
(516.9)
(523.7)
Dignity plc Annual Report & Accounts 2020
155
Summarised consolidated balance sheet
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Right-of-use asset
Investments in associated undertakings
Financial and other assets
Financial assets – held by the Trusts
Deferred commissions
Deferred tax asset
Current assets
Cash and cash equivalents – Trading Group
Cash and cash equivalents – held by the Trusts
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Financial liabilities
Contract liabilities
Lease liabilities
Other current liabilities
Non-current liabilities
Financial liabilities
Contract liabilities
Lease liabilities
Other non-current liabilities
Total liabilities
Total deficit
Total deficit and liabilities
NOTES
2020
£m
324.4
240.9
95.2
–
10.7
967.1
101.3
20.3
2019
restated
£m
373.1
251.3
–
–
18.2
947.5
96.8
14.0
2018
£m
384.9
254.1
–
6.0
15.7
862.4
94.5
17.9
2017
£m
385.5
248.0
–
–
14.3
865.6
92.4
6.8
1,759.9
1,700.9
1,635.5
1,612.6
73.6
21.6
95.2
46.6
141.8
1,901.7
15.1
95.5
7.3
79.8
197.7
526.6
1,222.0
81.2
48.2
1,878.0
2,075.7
57.9
15.5
73.4
47.6
66.9
13.8
80.7
46.9
49.3
21.8
71.1
49.6
121.0
127.6
120.7
1,821.9
1,763.1
1,733.3
9.6
95.5
–
69.6
9.3
91.5
–
73.0
4.5
88.3
–
62.8
174.7
173.8
155.6
542.3
1,209.1
–
37.3
1,788.7
1,963.4
551.9
1,164.6
–
36.7
1,753.2
1,927.0
561.2
1,117.3
–
34.2
1,712.7
1,868.3
(174.0)
(141.5)
(163.9)
(135.0)
1,901.7
1,821.9
1,763.1
1,733.3
2016(d)
£m
358.1
235.4
–
–
11.3
–
–
–
604.8
67.1
–
67.1
43.1
110.2
715.0
8.8
–
–
66.3
75.1
581.5
–
–
61.9
643.4
718.5
(3.5)
715.0
(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 consolidation of the Trusts.
(d) 2016 has not been restated for the impact of IFRS 15 or the consolidation of the Trusts.
156
Dignity plc Annual Report & Accounts 2020
Alternative performance measures
Other information
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, the corporate
interest restriction disallowance arising as a result of consolidating the Trusts, the changes which relate to the application of IFRS
15 and adoption of IFRS 16. In addition, the deferred tax rate change in 2020 arising on the deferred tax balances on
consolidating the Trusts and application of IFRS 15 have also been included. All of the above 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.
IFRS 16 has been included within the alternative performance measures for 2020 only. This is due to the modified retrospective
adoption of the standard, meaning the 2019 comparatives have not been restated and therefore are not comparable.
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 application of IFRS 15 and the adoption of IFRS 16 and 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 (net of any insurance proceeds received);
• Transformation Plan costs (see below);
• Directors severance pay;
• operating and competition review costs;
• trade name impairments;
• goodwill impairments; and
• the taxation impact of the above items together with the impact of taxation rate changes.
Non-underlying items have been adjusted for in determining underlying measures of profitability as these underlying measures
are those used in the day-to-day management of the Group and allow for greater comparability across periods.
Dignity plc Annual Report & Accounts 2020
157
Non-GAAP measures (continued)
Transformation Plan costs
Cost incurred in relation to the Group’s now abrogated Transformation Plan has resulted in significant, directly attributable
non-recurring costs and these amounts are excluded from the Group’s underlying profit measures and treated as a non-
underlying item.
These costs 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.
52 week period ended 25 December 2020
Non-trading
Amortisation of acquisition related intangibles
External transaction costs in respect of completed and
aborted transactions
Profit on sale of fixed assets
Non-recurring
Transformation Plan costs
Directors severance pay
Operating and competition review costs
Trade name impairment
Goodwill impairment
Taxation
Taxation – rate change
52 week period ended 27 December 2019
Non-trading
Amortisation of acquisition related intangibles
External transaction costs in respect of completed and
aborted transactions
Profit on sale of fixed assets
Non-recurring
Transformation Plan costs
Operating and competition review costs
Trade name impairment
Group’s share of loss of associated undertakings
Impairment of investments in associated undertakings
Taxation
Funeral
services
£m
Crematoria
£m
Pre-arranged
funeral plans
£m
Central
overheads
£m
4.1
0.2
–
–
–
–
15.3
28.7
48.3
4.2
–
(1.0)
–
–
6.8
10.0
0.4
–
(0.2)
–
–
–
–
–
0.1
–
–
–
–
–
–
–
0.2
0.1
0.5
0.7
–
–
–
–
0.1
0.1
–
–
–
–
1.2
0.2
–
0.6
–
4.7
1.6
2.9
–
–
9.8
–
0.1
–
12.1
3.5
–
15.7
Group
£m
4.6
0.8
(0.2)
4.7
1.6
2.9
15.3
28.7
58.4
(6.1)
3.6
55.9
4.8
0.9
(1.0)
12.1
3.5
6.8
27.1
0.6
5.4
(4.9)
28.2
158
Dignity plc Annual Report & Accounts 2020
Alternative performance measures continued
Other information
Non-GAAP measures (continued)
(c) Other adjustments reconciliation
Other adjustments enable a user of the financial statements to assess the financial performance of the Trading Group as it was
historically reported prior to the consolidation of the Trusts and the impact of recent accounting standards, IFRS 15, Revenue
from Contracts with Customers and IFRS 16, Leases. This mirrors the financial reporting provided to management on a monthly
basis to monitor the performance of the underlying Trading Group.
Adjustments to the Group’s consolidated financial statements are made to reflect the following:
• Deferred revenue recognised on the delivery of a funeral is replaced with the payment received by the Trading Group from the
Trust at the same time. Pre-need segment income, in the form of upfront payments received by the Trading Group from the
Trusts in support of marketing are recognised when received at inception of a funeral plan rather than being deferred as part
of the aforementioned deferred revenue.
• Payments made by the Trusts on cancellation are no longer recognised.
• Unlike disbursements on at-need funerals, disbursements on pre-need funerals under IFRS 15 are recognised on a principal
basis within both revenue and cost of sales, but for consistency in the alternative performance measure both are reduced as
these items are not included in either measure. Similarly, pre-need funerals delivered by subcontracted funeral directors,
which form part of deferred income, are excluded within the alternative performance measure with a corresponding
adjustment to cost of sales.
• Commissions payable on securing new Trust plans are recognised at the inception of the plan rather than being deferred and
recognised at the time the funeral service is delivered.
• Rentals payable under operating leases now capitalised under IFRS 16 are recognised in operating costs, replacing the right-of-
use asset depreciation charge on the IFRS 16 right-of-use asset. The finance cost associated with the same lease arrangements
is removed from finance costs.
• The amounts recorded in respect of the remeasurement of assets held in the Trust is removed as is the significant financing
component that only arises when deferred revenue is recognised on consolidation of the Trusts.
• The taxation impact of the above adjustments, including the impact of changes in the rate of deferred tax associated with the
items noted above are removed. In addition, as described in note 1 the consolidation of the Trusts has given rise to a
significant reduction in the level of interest on which the Group is able to obtain a corporation tax deduction. The impact of this
is included in arriving at other adjustments.
Dignity plc Annual Report & Accounts 2020
159
Non-GAAP measures (continued)
(c) Other adjustments reconciliation (continued)
52 week period ended 25 December 2020
Revenue
Trust consolidation:
Release of deferred revenue on death or cancellation
Removal of payments received from the Trusts on death
Payments on cancellation
Derecognise pre-need segment income
IFRS 15:
Recognition of disbursement element of pre-need plans
Revenue – Total other adjustments
Cost of sales
IFRS 15:
Amounts paid on subcontracted funerals
Recognition of disbursement element of pre-need plans
Administrative expenses
Trust consolidation:
Recognition of the Trust costs
Transfer of pre-need costs into funeral segment
IFRS 15:
Net release of deferred costs in respect of commissions
IFRS 16:
Elimination of operating lease rentals
Elimination of operating lease prepayments and accruals
Depreciation of right-of-use asset
Operating profit – Total other adjustments
Finance income/(costs)
Trust consolidation:
Deferred revenue significant financing
Remeasurement of financial assets held by the Trusts
and related income
IFRS 16:
Recognition of finance costs
Finance costs – Total other adjustments
Taxation:
Trust consolidation:
Taxation impact on above adjustments
Corporate interest restriction disallowance
Deferred tax rate change
IFRS 15:
Taxation impact on above adjustments
Deferred tax rate change
IFRS 16:
Taxation impact on above adjustments
Taxation – Total other adjustments
Profit after taxation – Total other adjustments
Funeral
services
£m
Crematoria
£m
Pre–arranged
funeral plans
£m
Central
overheads
£m
Group
£m
122.2
(59.8)
(8.8)
–
18.6
72.2
(8.8)
(18.6)
(6.9)
(28.9)
4.9
9.2
0.4
(7.7)
15.8
–
–
–
–
–
–
–
–
–
–
–
2.6
1.2
(1.2)
2.6
–
–
–
(28.8)
–
(28.8)
–
–
–
28.9
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
0.3
0.1
(0.3)
0.1
122.2
(59.8)
(8.8)
(28.8)
18.6
43.4
(8.8)
(18.6)
(6.9)
–
4.9
12.1
1.7
(9.2)
18.6
(53.1)
47.3
(4.7)
(10.5)
(0.5)
(4.3)
6.8
(0.9)
(2.1)
–
(1.0)
7.1
160
Dignity plc Annual Report & Accounts 2020
Alternative performance measures continued
Other information
Non-GAAP measures (continued)
(c) Other adjustments reconciliation (continued)
52 week period ended 27 December 2019
Revenue
Trust consolidation:
Release of deferred revenue on death or cancellation
Removal of payments received from the Trusts on death
Payments on cancellation
Derecognise pre-need segment income
IFRS 15:
Recognition of disbursement element of pre-need plans
Revenue – Total other adjustments
Cost of sales
IFRS 15:
Amounts paid on subcontracted funerals
Recognition of disbursement element of pre-need plans
Administrative expenses
Trust consolidation:
Recognition of the Trust costs
Transfer of pre-need costs into funeral segment
IFRS 15:
Net release of deferred costs in respect of commissions
Operating profit – Total other adjustments
Finance income/(costs)
Trust consolidation:
Deferred revenue significant financing
Remeasurement of financial assets held by the Trusts and related income
Finance income – Total other adjustments
Taxation:
Trust consolidation:
Taxation impact on above adjustments
Corporate interest restriction disallowance – prior year adjustment
IFRS 15:
Taxation impact on above adjustments
Taxation – Total other adjustments
Profit after taxation – Total other adjustments
Funeral
services
£m
Pre-arranged
funeral plans
£m
96.8
(49.4)
(4.5)
–
15.9
58.8
(9.0)
(15.9)
(6.6)
(21.4)
2.5
8.4
Group
£m
96.8
(49.4)
(4.5)
(21.2)
15.9
37.6
–
–
–
(21.2)
–
(21.2)
–
–
(9.0)
(15.9)
–
21.4
–
0.2
(6.6)
–
2.5
8.6
(54.1)
85.0
30.9
(6.3)
(4.3)
(0.4)
(11.0)
28.5
Dignity plc Annual Report & Accounts 2020
161
Non-GAAP measures (continued)
(d) Non-underlying cash flow items
Cash flows from operating activities
Cash flows of other adjustments
Cash flows from operating activities – Trading Group
Other adjustments – IFRS 16
External transaction costs
Directors severance pay
Transformation Plan costs
Operating and competition review costs
Underlying cash generated from operations
25 December
2020
£m
27 December
2019
£m
62.7
16.3
79.0
(12.5)
0.8
0.7
5.4
3.0
76.4
64.6
(7.6)
57.0
–
0.8
–
11.2
2.8
71.8
(e) Funeral market share
Comparable funeral market share excludes any volumes from locations not contributing for the whole of 2019 and 2020 to date
and therefore excludes 12 locations closed and one location opened in 2019 and a further 26 locations closed and one location
opened in 2020.
(f) 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.
V3 Dignity_AR_Master_Template_2020 tp.qxp_Layout 1 16/04/2021 14:34 Page 95
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Dignity plc Annual Report & Accounts 2020
Shareholder information
Other information
General enquiries may be addressed to the Company Secretary, Tim George, at the Company’s registered office.
General information
The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in
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, EQ. 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
The Company makes documents and information available to shareholders by electronic means and via our website.
The Company’s website is www.dignityplc.co.uk.
Making documents and information available electronically:
• Enables the Company to reduce printing and postage costs;
• Allows faster access to information; and
• Reduces the amount of resource consumed and lessens the impact on the environment of printing and mailing.
The Company provides hard copy documentation to those shareholders who have requested this and is, of course, happy to
provide hard copies to any shareholder upon request.
Electronic communications
The Company encourages shareholders to elect to receive notification of the availability of Company documentation by means
of an email.
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 need your Shareholder Reference Number, which is shown on your share
certificate or dividend tax voucher.
Choosing e-mail notification will result in you joining the EQ 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.dignityplc.co.uk.
Unsolicited approaches to shareholders
Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless
or non-existent, or an inflated price for shares they own. These calls come from fraudsters operating in ‘boiler rooms’ that are
mostly based abroad.
While high profits are promised, those who buy or sell shares in this way usually lose their money. The Financial Conduct
Authority (‘FCA’) has found most share fraud victims are experienced investors who lose an average of £20,000, with around
£200 million lost in the UK each year.
V3 Dignity_AR_Master_Template_2020 tp.qxp_Layout 1 16/04/2021 14:34 Page 96
Dignity plc Annual Report & Accounts 2020
163
PROTECT YOURSELF
If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company
or research reports, you should take these steps before handing over any money:
1. Get the name of the person and organisation contacting you.
2. Check the FCA Register at http://www.fca.gov.uk/register to ensure they are authorised.
3. Use the details on the FCA Register to contact the firm.
4. Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are
out of date.
5. Search the FCA’s list of unauthorised firms and individuals to avoid doing business with.
6. If it sounds too good to be true, it probably is!
If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman
Service or Financial Services Compensation Scheme (‘FSCS’) if things go wrong.
Annual General Meeting
The Company’s Annual General Meeting will be held on 23 June 2021 at 11:00am at the offices of 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 this time, 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.
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
E-mail: enquiries@dignityuk.co.uk
www.dignityplc.co.uk
Company Secretary:
Tim George FCIS
Registered Number:
04569346
Registrars:
EQ
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:
finnCap
One Bartholomew Close
London EC1A 7BL
Investec
A division of Investec Bank plc
30 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
V3 Dignity_AR_Master_Template_2020 tp.qxp_Layout 1 16/04/2021 14:34 Page 97
164
Dignity plc Annual Report & Accounts 2020
Financial calendar
Other information
23 June 2021
25 June 2021
28 July 2021
• Annual General Meeting
• 2021 financial half year end
• Announcement of 2021 interim results
31 December 2021
• Financial period end
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.
Any forward-looking statements made in this Annual Report or
the Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualified in their entirety
by the factors referred to in this statement. Each forward-looking
statement speaks only as of the date it is made. Except as required
by its legal or statutory obligations, the Company does not intend
to update any forward-looking statements.
Nothing in this Annual Report or on the Dignity plc investor website
should be construed as a profit forecast or an invitation to deal in
the securities of the Company.
Forward-looking statements 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.
V2 Dignity_AR_2020_Cover_BP_V1 tp 2.qxp_Layout 1 16/04/2021 13:33 Page 2
IFC
Dignity plc Annual Report & Accounts 2020
Who we are
We are one of the UK's major funeral
related service providers and the only
publicly listed company in the UK operating
in the funeral sector. The Group's main
activities are funeral services, crematoria
and pre-arranged funeral plans.
Our aim is to be at the forefront of the
sector in terms of quality, transparency,
standards, choice and value-for-money.
Inside this year’s Annual Report
Strategic Report
Financial Statements
Transparent reporting
01 At a glance
04 Executive Chairman’s review
15 Key performance indicators
18 Operating review
22 Financial review
27 Principal risks and uncertainties
33 Viability statement
34 Non-financial information statement
35 Corporate and social responsibility
42 Section 172 Statement
Group Accounts
84 Independent auditors’ report to the members
92 Consolidated income statement
92 Consolidated statement of comprehensive
of Dignity plc
income
93 Consolidated balance sheet
94 Consolidated statement of changes in equity
95 Consolidated statement of cash flows
96 Notes to the financial statements
Governance
Company Accounts
45 Chairman’s introduction to governance
50 Governance structure
51 Board of Directors
52 Operating Board
144 Dignity plc Company balance sheet
145 Dignity plc Company statement of changes
in equity
146 Notes to the Dignity plc financial statements
53 Directors’ statement on corporate governance
154 Financial record
We aim to report in a transparent and
integrated way to clearly reflect how we
operate. Within this year’s report we have
also sought to address the additional
requirements arising from Section 172
of the Companies Act 2006 and the 2018
UK Corporate Governance Code.
This Annual Report & Accounts contains
forward-looking statements with respect
to the Group’s plans and its current goals
and expectations relating to its future
financial condition, performance, results,
strategic initiatives and objectives.
58 Audit Committee report
62 Nomination Committee report
63 Report on Directors’ remuneration
81 Directors’ report
Other Information
156 Alternative performance measures
162 Shareholder information
163 Contact details and advisers
164 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.
V2 Dignity_AR_2020_Cover_BP_V1 tp 2.qxp_Layout 1 16/04/2021 13:33 Page 1
Dignity plc
4 King Edwards Court
King Edwards Square
Sutton Coldfield
West Midlands B73 6AP
www.dignityplc.co.uk
ANNUAL REPORT 2020
Dignity plc Annual Report & Accounts
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Responsible and resilient
through challenging and
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