21st Mar 2006 07:02
Dignity PLC21 March 2006 For Immediate Release 21 March 2006 Dignity plc Preliminary results for the 52 week period ended 30 December 2005 Dignity plc, Britain's largest single provider of funeral-related services,namely funeral services, cremations and pre-arranged funeral plans, announcesits preliminary results for the 52 week period ended 30 December 2005. Financial highlights (note a) Revenue up 6% to £143.2 million (2004: £135.7 million) Operating profit up 6% to £41.6 million (2004: £39.2 million) Underlying profit before tax (note b) up 17% to £25.9 million (2004: £22.2 million) Profit before tax up 231% to £26.5 million (2004: £8.0 million) Cash generated from operations up 12% to £49.5 million (2004: £44.2 million) Dividend per share 2.75p with a further £1 return of value proposed to be made in early August 2006 Earnings per share 22.9p (2004: 8.5p) (a) Comparative period is 53 week period ended 31 December 2004. (b) Before profit on sale of fixed assets and non-recurring finance charges. See page 7. Highlights • Strong results despite the lower than expected death rate. • Ten new funeral home locations were acquired in the period and a further location since the period end. • Total unfulfilled pre-arranged funeral plans increased to 181,200 (2004: 170,200). • Client satisfaction continues at record levels. • Successful issue of further securitised debt in February 2006 raising £86 million net of fees and expenses. • A return to shareholders of £80 million (£1 per share) proposed for early August 2006. • A £10 million proposed payment to pension schemes, substantially eliminating the deficit. Peter Hindley, Chief Executive of Dignity plc: "The Group recorded a strong performance again in 2005, slightly ahead of ourexpectations. A 17% increase in underlying profit before tax is especiallypleasing given the shorter trading period and the continued lower than expecteddeath rate. The recent issue of further securitised debt maintains an efficient capitalstructure commensurate with the strong and predictable cash flows of thebusiness. The funds raised will allow us to return £1 a share to ourshareholders and substantially eliminate the pension scheme deficit. I remain confident that we can continue to develop the business and make furtherprogress in 2006." For more information Peter Hindley, Chief ExecutiveMike McCollum, Finance DirectorDignity plc +44 (0) 20 7466 5000 Richard OldworthSuzanne BrocksMark EdwardsBuchanan Communications +44 (0) 20 7466 5000 Chairman's Statement Introduction Dignity is the single largest provider of funeral-related services, namelyfuneral services, crematoria and pre-arranged funeral plans in Britain, and isthe only UK listed company in this area. This is Dignity's second set of fullresults following its admission to the Official List of the London StockExchange in April 2004. Results I am pleased to report a strong trading performance for the 52 week periodending 30 December 2005. Results for the period have been reported for the firsttime under International Financial Reporting Standards (IFRS). Underlying profitbefore tax has increased by 17 per cent to £25.9 million (2004: £22.2 million).Operating profit has increased by 6 per cent to £41.6 million (2004: £39.2million). The reported profit before taxation was £26.5 million (2004: £8.0million). Proposed Return of Value and Dividends We believe an efficient capital structure is consistent with maximisingshareholders returns. Consequently, in February 2006 the Group raised £86million, net of fees, through a further issue of secured notes. We intend toreturn £80 million (£1 a share) to shareholders in August 2006 and use theremaining funds and existing cash resources to make a payment of £10 millioninto the Group's pension schemes, thereby substantially eliminating theirdeficits. The Board declared and paid an interim dividend of 2.75 pence per share in itsinterim results announced in September 2005. Given the intended substantialreturn of value, the Board does not propose to pay a final dividend for 2005,but expects to resume payments with the 2006 interim dividend. Our Staff The Group is committed to continuing to improve our standards of service andthis is critical to our strategy. Client satisfaction, measured by our clientsurveys remains at record levels. I would like to thank our staff in all areas of the business for theircommitment, diligence and hard work. We operate in an industry that requires asensitive and personal service to clients. We are fortunate to employexperienced and caring staff, a large number of whom have devoted their workinglives to the profession. They are critical in delivering superb client service. Outlook for 2006 We expect to be able to develop the business further in 2006 and beyond. Webelieve that delivering ever-greater levels of client service should lead toorganic growth in our revenues which, combined with strong cost control, shoulddeliver growth in our core business. We continue to seek further acquisitions offuneral homes, develop our pre-arranged funeral plan business and identifyadditional crematoria developments and partnerships. Richard ConnellChairman21 March 2006 Operating Review Introduction The Group's operations are managed across three main areas, namely funeralservices, crematoria and pre-arranged funeral plans, which respectivelyrepresent 79 per cent, 16 per cent and 5 per cent of the Group's revenues.Funeral services revenues relate to the provision of funerals and ancillaryitems such as memorials and floral tributes. Crematoria revenues arise fromcremation services and the sale of memorials and burial plots at the Group'scrematoria and cemeteries. Pre-arranged funeral plan income represents amountsto cover the costs of marketing and administering the sale of plans. Performance in the period Total estimated deaths for the 52 week period to 30 December 2005 in GreatBritain were 563,800 compared to 574,500 in the comparative 53 week period in2004. This was 3 per cent below our expectations for the period. The historicnumber of deaths quoted is based on the initial Office of National Statistics(ONS) estimates for each calendar year. These death rates are revised by the ONSfrom time to time but to maintain consistency of reporting, Dignity quotes theoriginal reported numbers. Based on historical evidence Dignity estimates thatfinal deaths reported might fluctuate by around 1 per cent. The Board's view on death rates continues to rely on government forecasts, whichwere updated in October 2005. These forecasts suggest 573,500 deaths in 2006. Funeral services The Group operates a network of 519 funeral homes throughout Britain, tradingunder local established names. In 2005, the Group conducted 67,000 funerals(2004: 67,600), representing approximately 11.9 per cent (2004: 11.8 per cent)of estimated total deaths in Britain. Revenue within funeral services was £113.8 million (2004: £108.8 million).Operating profits were £37.1 million (2004: £33.9 million), an increase of 9.4per cent. Although funeral volumes were lower principally as a result of 2004 beingreported as a 53 week period against 52 weeks in 2005, we are pleased to reportthat this was offset by increased margins. We believe it is important to actively manage the Group's portfolio of funeralhomes. In 2005, we closed three funeral homes whose very low number of funeralsmeant they were no longer profitable. As part of its stated strategy, in 2005the Group acquired ten funeral home locations, investing £6.7m, funded fromexisting cash reserves and internally generated cash flows. These new businessesare located in St Albans, Carlisle, Stroud and Ormskirk. They are all longestablished, highly reputable businesses. In addition, since the period end, thecompany has acquired one additional funeral home in Huddersfield. The quantum of investment and the prices paid were in line with our objectives. Crematoria The Group operates 22 crematoria and carried out 39,500 cremations in 2005(2004: 38,400) representing 7.0 per cent (2004: 6.7 per cent) of estimatedtotal deaths in Britain. The Group is the largest single operator of crematoriain Britain. Turnover within crematoria was £22.5 million (2004: £21.6 million). Operatingprofits were £11.9 million (2004: £11.8 million). In 2004 the operating profitincluded profit on the sale of fixed assets of £0.4 million. In January 2005 the Department of Environment Food and Rural Affairs announcedthat crematoria operators should consider installing equipment to cut mercuryemissions. A 50 per cent reduction in emissions must be achieved by the end of2012 under new statutory guidance. The Group is currently evaluating the best course of action but remainsconfident that it can meet all the new emissions legislation in the requiredtimescales. We expect funding for these changes to be via an industry wideenvironmental levy. Pre-arranged funeral plans Pre-arranged funeral plans allow people to plan and pay for their funeral inadvance. The Group is the market leader in the provision of pre-arranged funeralplans. Unfulfilled pre-arranged funeral plans increased to 181,200 from 170,200during the period. The Group expects to perform the majority of these funerals. The Group sells pre-arranged funeral plans through its network of funeral homesand primarily through affinity partners, notably Age Concern, AXA and RoyalLondon. The Group has tested the mailing of funeral plan information with anumber of potential new affinity partners including a catalogue retailer and twowell respected financial services groups. Further progress is expected withthese parties in 2006. The majority of profits on sale of funeral plans come from sales through Dignitybranches. The profits on plans sold via affinity partners are minimal. Thereforethe overall profits from marketing and administering funeral plan sales willfluctuate depending on the sales mix. The Group continues to focus on growing the bank of funeral plans which leads torevenues at the time the service is provided in the future. These revenues willbe recognised in the funeral division in the cases where Dignity provides theservice. Client service We believe that excellent client service is fundamental to the Group's success.Reputation, recommendation and previous experience are the client's key criteriafor the selection of a funeral director. We continually strive to improve clientservice and during 2005, the Group introduced the "Helping Our Clients EveryStep of the Way" programme. This programme focuses on consistency of serviceand client satisfaction. We send our clients a survey after every funeral to monitor client satisfaction.We have an approximate 50 per cent response rate. This survey was updated aspart of the new programme to make it more straightforward to use. Surveys aremonitored at all levels: nationwide, regional, community groups and individualbranches. Feedback is sought on all aspects of the client experience, rangingfrom prompt answering of the telephone through to staff helpfulness and clientsatisfaction with the overall cost of the funeral. Levels of client satisfactionremain at record levels. Our employees Our employees are critical in the continued success of the Group. At the end of 2005, we announced a bonus totalling £0.8 million (2004: £0.6million) in which every member of staff not covered by existing schemes wasawarded a payment. This was in recognition of the hard work and commitment shownby our staff in all areas of the business and allowed them to share in asuccessful 2005. We hope that strong performances in 2006 and beyond will allowthe Group to pay such bonuses in the future. Pensions The Group operates two principal defined benefit pension schemes. The pensiondeficit has decreased in the period by £1.8 million to £12.0 million. Upon completion of the proposed return of value mentioned earlier, the Groupintends to pay £10 million into its final salary pension schemes, therebylargely eliminating their deficits under IAS19. This will place both schemes ona sound financial basis going forward. The Trustees of the two schemes have agreed in principle to their merger. It isexpected that this will be completed during 2006. The purpose of the merger isto reduce administration costs. None of the benefits offered to members of thescheme are affected and the merged scheme will remain open to new members. Investment for the future Within the funeral services division the Group is committed to the proactivedevelopment of its national network of branches within local communities. Thiswill be achieved by further acquisitions but only where suitable businesses canbe identified and acquired at a price that should deliver returns in excess ofour cost of capital. These initiatives will be progressed in conjunction withreviewing existing locations for suitability and viability. Within the crematoria division the Group is exploring partnership arrangementswith a number of Local Councils. The Group continues to develop its range ofmemorial and interment options within the memorial gardens at its crematoria andcemeteries. Within the pre-arranged funeral plan division we are continuing to seek furthersuitable affinity partners. We continue to maintain our facilities to a high standard. During the period, werefurbished 31 funeral home locations. We have also purchased 65 new Mercedeshearses and limousines, 61 new ambulances and 88 other vehicles. The strong performance of the Group is a reflection of both the diligence andoutstanding service ethic of our staff in all areas of the business. I wouldlike to thank all staff for their contributions for both 2005 and looking aheadinto 2006. Peter HindleyChief Executive21 March 2006 Financial Review The market conditions in which the Group operates and its trading performanceduring the 52 week period ended 30 December 2005 are described in the Chairman'sStatement and the Operating Review. These results are prepared under IFRS. The adoption of IFRS represents anaccounting change and does not affect the ongoing operations or cash flows ofthe Group for 2005 or beyond. The adjustments to the comparative period's results were explained fully in theGroup's 2005 Interim Report, which is available on the Group's investor website(www.dignityfuneralsplc.co.uk) Financial Highlights • Revenue has increased 6 per cent to £143.2 million (2004: £135.7 million). • Operating profit has increased 6 per cent to £41.6 million (2004: £39.2 million). • Underlying profit before tax has increased 17 per cent to £25.9 million (2004: £22.2 million). • Profit before tax has increased 231 per cent to £26.5 million (2004: £8.0 million). • Cash generated from operations has increased 12 per cent to £49.5 million (2004: £44.2 million). • The Group has paid an interim dividend of 2.75 pence per share with a further £1 return of value proposed to be made in early August 2006. • Earnings per share of 22.9p (2004: 8.5p) Underlying profit before tax 2004 witnessed a significant reorganisation of the Group's capital structure,with the listing of its shares and the redemption of expensive debt. TheDirectors are of the opinion that the following provides additional indicativeinformation regarding the underlying profits of the Group: 52 week period 53 week period ended ended 30 December 2005 31 December 2004 £m £mProfit before taxation for the period as 26.5 8.0reported Add/(deduct) the effects of:Profit on sale of fixed assets (0.6) (1.2) Exceptional interest expense - 10.1Interest expense of Mezzanine Loan and Loan - 4.7Notes 2013Amortisation of debt issue costs of Mezzanine - 0.6Loan and Loan Notes 2013Underlying profit before tax 25.9 22.2 Cash flow and cash balances Cash generated from operations was £49.5 million in the period (2004: £44.2million). Expenditure on funeral home acquisitions amounted to £6.7 million (2004: £5.3million). A further £7.6 million was spent on capital expenditure, the majorityof which was spent on replacing or enhancing existing assets, principally theGroup's vehicle fleet and its property portfolio. Cash balances at the end of the financial period amounted to £37.3 million(2004: £24.9 million) although under the terms of the Group's secured borrowing,there are certain restrictions on elements of this balance as described furtherin note 6 to the preliminary statement. The Group's operations continue to besignificantly cash generative. Capital structure and financing The Group's only material external debt financing is the Class A and B SecuredNotes, rated A and BBB respectively, of which £202.6 million was outstanding asat 30 December 2005 (2004: £205.3 million). Both tranches of Notes were issuedin 2003 at fixed rates of interest and will be progressively repaid over thenext 25 years. The Directors are of the opinion that the following provides additionalindicative information regarding the net debt position of the Group: 30 December 31 December 2005 2004 £m £mClass A and B Secured Notes (202.6) (205.3)Loan Notes 2006 (0.1) (0.1)Cash balances 37.3 24.9Net Debt (165.4) (180.5) The Group's financial expense substantially consists of the interest on theClass A and B Secured Notes and related ancillary instruments. The financecharge in the period relating to these instruments was £15.7 million (2004:£16.1 million) including the amortisation of debt issue costs of £0.9 million(2004: £1.0 million). Other ongoing finance costs incurred in the periodamounted to £1.3 million (2004: £1.2 million), representing the unwinding ofdiscounts on the Group's provisions, finance expense on retirement obligationsand other loans. The Group produces a strong and stable cash flow, which has increased since theoriginal securitisation in 2003. Subsequent to the year-end, on 20 February 2006the Group issued a further £45.55 million Class A Secured 6.310% Notes due 2023and £32.50 million Class B Secured 8.151% Notes due 2031. To ensure that the newClass A Notes issued were identical with those already in issue Notes with anominal value of £45.55 million were issued. This, however, after deemedrepayments equates to a nominal value outstanding at the date of issue of £42.5million. The Notes were issued at a premium and raised a total of £86 millionafter fees and expenses. The issue of new Notes will increase the annual interest expense byapproximately £5 million per annum. The Group proposes to return £80 million (£1 per share) to shareholders in earlyAugust 2006 through the creation, issue and redemption of class B shares.Following the return of value, the listed ordinary shares will be consolidatedto maintain the comparability of financial indicators such as share price. Theseproposals will be formally tabled at an Extraordinary General Meeting of theCompany planned for 8 June 2006. Restrictions within the terms of the A and BSecured Notes mean that the return of value to shareholders cannot be madebefore August 2006. We will use the remaining £6 million raised, together with some existing cashresources, to largely eliminate the Group's IAS 19 pension deficit of £12million by paying £10 million into the Group's two pension schemes. The Directors believe that this fund raising and the subsequent proposed returnof value to shareholders is consistent with the strategy of maximising totalshareholder returns through an efficient balance sheet, which neverthelessleaves sufficient flexibility to continue to grow the business. Taxation The overall effective tax rate was approximately 31 per cent and is not expectedto vary significantly in the short-term. This tax rate is marginally higher thanthe standard UK tax rate of 30 per cent due to the impact of disallowabletrading expenses and expenditure on the Group's premises that does not attractany deductions for corporation tax purposes. Earnings per share The basic earnings per share were 22.9 pence per share for the period (2004: 8.5pence per share). The potential issue of new shares pursuant to the Group'sshare option plans in the period would affect the earnings per share by lessthan 0.1 pence per share if exercised. Mike McCollumFinance Director21 March 2006 Consolidated income statementfor the 52 week period ended 30 December 2005 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 Note £m £m Revenue 1 143.2 135.7 Cost of sales (70.0) (68.0) Gross profit 73.2 67.7 Administrative expenses (32.8) (29.7)Other operating income 1.2 1.2Operating profit 1 41.6 39.2 Interest payable before exceptional charges (17.0) (22.6)Exceptional interest payable on redemption of debt - (10.1)Total interest payable and similar charges 2 (17.0) (32.7)Interest receivable and similar income 2 1.9 1.5Profit before tax 26.5 8.0 Taxation 3 (8.2) (2.5)Profit for the period 7 18.3 5.5 Profit attributable to minority interest - -Profit attributable to equity shareholders 18.3 5.5 18.3 5.5Earnings per share attributable to equity shareholders pence) - Basic and diluted 4 22.9p 8.5p Consolidated statement of recognised income and expensefor the 52 week period ended 30 December 2005 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £m Profit for the period 18.3 5.5 Actuarial gains / (losses) on retirement benefit obligations 1.8 (0.7)Deferred tax on the above (0.5) 0.2Net income / (expense) not recognised in income statement 1.3 (0.5) Total recognised income for the period 19.6 5.0 Attributable to:Minority interest - - Equity shareholders of the parent 19.6 5.0 Consolidated balance sheetas at 30 December 2005 30 Dec.2005 31 Dec. 2004 Note £m £m Non-current assets Goodwill 109.1 107.8Intangible assets 9.0 5.2 Property, plant and equipment 86.3 84.0Financial assets 5.5 5.4 209.9 202.4Current assets Inventories 3.3 3.4Trade and other receivables 22.3 19.7Assets held for sale 0.2 0.8 Cash and cash equivalents See (a) 37.3 24.9 below 63.1 48.8 Current liabilities Financial liabilities (2.2) (2.0)Trade and other payables (21.9) (17.6)Current tax liabilities (2.4) (0.1)Provisions (1.0) (1.0) (27.5) (20.7) Net current assets 35.6 28.1 Non-current liabilities Financial liabilities (191.9) (193.8)Deferred tax liabilities (5.2) (1.6)Retirement benefit obligations (12.0) (13.8)Other non-current liabilities (2.9) (2.7)Provisions (2.1) (2.3) (214.1) (214.3) Net assets 31.4 16.2 Shareholders' equityOrdinary shares 5.6 5.6Share premium account 111.6 111.6Other reserves (10.4) (12.5)Retained earnings (74.2) (87.3) )Total shareholders' equity 32.6 17.4Minority interest in equity (1.2) (1.2)Total equity 7 31.4 16.2 (a) Certain cash balances are subject to restrictions. See note 6. Consolidated cash flow statementfor the 52 week period ended 30 December 2005 Note 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £mCash flows from operating activities Cash generated from operations 8 49.5 44.2Interest received 1.8 1.6Interest paid (15.6) (39.4)Tax paid (2.5) (0.1)Net cash from operating activities 33.2 6.3 Cash flows from investing activities Acquisition of subsidiaries and businesses (6.7) (5.3)Proceeds from sale of property, plant and equipment 1.2 2.3Purchase of property, plant and equipment (7.6) (8.5)Transfers from restricted bank accounts - 18.3Net cash (used in) / from investing activities (13.1) 6.8 Cash flows from financing activities Net proceeds from issue of ordinary share capital - 115.2Finance lease principal repayments - -Repayment of borrowings (2.5) (125.5)Dividends paid to shareholders (5.2) (1.5)Net cash used in financing activities (7.7) (11.8) Net increase in cash and cash equivalents 12.4 1.3 Cash and cash equivalents at the beginning of the period 23.7 22.4 Cash and cash equivalents at the end of the period 6 36.1 23.7 Notes to Financial Statements 1 Revenue and segmental analysis 52 week period ended 30 December 2005 Funeral Crematoria Pre-arranged Head Group services £m funeral plans office £m £m £m £mRevenue 113.8 22.5 6.9 - 143.2Segment result 37.1 11.9 2.1 (9.5) 41.6Interest payable and similar charges (17.0)Interest receivable and similar income 1.9Profit before tax 26.5Taxation (8.2)Profit for the period 18.3Attributable to:Minority interest -Equity shareholders of the parent 18.3Included within segment result are the following items:Depreciation and amortisation (5.1) (1.2) - (0.9) (7.2)Profit on sale of fixed assets 0.6 - - - 0.6Recoveries from Pre-need Trusts - - 1.2 - 1.2 53 week period ended 31 December 2004 Funeral Crematoria Pre-arranged Head Group services £m funeral plans office £m £m £m £mRevenue 108.8 21.6 5.3 - 135.7Segment result 33.9 11.8 2.5 (9.0) 39.2Interest payable and similar charges (32.7)Interest receivable and similar income 1.5Profit before tax 8.0Taxation (2.5)Profit for the period 5.5Attributable to:Minority interest -Equity shareholders of the parent 5.5Included within segment result are the following items:Depreciation and amortisation (5.5) (0.9) - (0.8) (7.2)Profit on sale of fixed assets 0.8 0.4 - - 1.2Recoveries from Pre-need Trusts - - 1.2 - 1.2 2 Net interest payable 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £mInterest payable and similar chargesClass A and B secured notes 14.8 15.1Mezzanine Loan - 2.1Loan notes - 2.6Amortisation of issue costs 0.9 1.6Other loans 0.1 0.1Interest payable on finance leases 0.1 0.1Net finance expense on retirement obligations 0.4 0.3Unwinding of discounts 0.7 0.7Interest payable and similar charges before exceptional items 17.0 22.6Exceptional interest payable and similar chargesPremium on early redemption of Mezzanine Loan - 4.0Write-off of deferred debt transaction costs - 6.1Exceptional interest payable and similar charges - 10.1Total interest payable and similar charges 17.0 32.7Interest receivable and similar incomeBank deposits (1.7) (1.3)Debenture loan (0.2) (0.2)Total interest receivable and similar income (1.9) (1.5)Net interest payable and similar charges 15.1 31.2 Following flotation of the Company on 8 April 2004, the Group redeemed the £40.0million Mezzanine Loan and the £63.0 million of the Loan Notes 2013, incurringan early redemption penalty of £4.0 million and writing-off £6.1 million ofdeferred transaction costs. 3 Taxation Analysis of charge in the period 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £mCurrent tax 4.9 0.2Adjustment for prior year (0.1) - 4.8 0.2Deferred tax 3.9 2.3Adjustment for prior year (0.5) - 3.4 2.3Taxation 8.2 2.5 Tax on items charged to equity 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £mDeferred tax charge/(credit) on actuarial gains and losses on 0.5 (0.2)retirement benefit obligationsDeferred tax credit on employee share options (0.3) (0.1)Total tax chargeTotal current tax charge 4.8 0.2Total deferred tax charge 3.6 2.2 The taxation charge in the period is higher (2004: higher) than the standard rate of corporation tax inthe UK (30%). The differences are explained below: 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec.2004 £m £m Profit before taxation 26.5 8.0Profit before taxation multiplied by the standard rate of corporation 8.0 2.4tax in the UK of 30% (2004: 30%)Effects of:Adjustments in respect of prior periods (0.6) -Expenses not deductible for tax purposes 0.8 0.1Total taxation 8.2 2.5 Under IFRS the tax rate is marginally higher than the standard UK tax rate of 30per cent due to the impact of disallowable trading expenses and expenditure onthe Group's premises that does not attract any deductions for corporation taxpurposes. 4 Earnings per share The calculation of basic earnings per ordinary share has been based on theprofit for the relevant period. For diluted earnings per ordinary share, the weighted average number of ordinaryshares in issue is adjusted to assume conversion of all dilutive potentialordinary shares. The Group has two classes of potentially dilutive ordinary shares being thoseshare options granted to employees under the Group's SAYE scheme and thecontingently issueable shares under the Group's LTIP schemes. At the balance sheet date, the performance criteria for the vesting of theawards under the LTIP schemes had not been met and these contingently issueableshares have been excluded from the diluted EPS calculations. Reconciliations of the earnings and the weighted average number of shares usedin the calculations are set out below. 52 week period ended 30 Dec. 2005 Weighted average Per share Earnings no. of shares amount £m m PenceProfit attributable to shareholders - Basic and diluted EPS 18.3 80.0 22.9 53 week period ended 31 Dec. 2004Profit attributable to shareholders - Basic and diluted EPS 5.5 65.0 8.5 The calculation of basic earnings per ordinary share has been based on theprofit for the relevant period. The potential issue of new shares pursuant tothe Group's share option plans in the period would affect the earnings per shareby less than 0.1 pence per share if exercised. 5 Dividends 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £m Final dividend in respect of the 53 week period ended 31 Dec. 2004: 3.75p 3.0 -per ordinary 7p share (2003: £nil)Interim dividend paid in respect of the 52 week period ended 30 December 2.2 1.52005: 2.75p (2004: 1.875p) per ordinary 7p shareTotal dividends recognised in the period 5.2 1.5 6 Cash and cash equivalents Note 30 Dec.2005 31 Dec. 2004 £m £m Cash and cash equivalents 37.3 24.9Represented by:Operating cash 24.6 12.4Cash for acquisitions (a) 4.9 7.2Amounts set aside for intercompany loan (b) 7.8 5.3 37.3 24.9 (a) Under the terms of the Group's secured borrowings, this amount isrequired to be retained in a separate bank account. This bank account may, innormal circumstances, only be used for acquiring tangible fixed assets andbusinesses (either trade and assets or share purchases). Included in this amountis £1.2 million (2004: £1.2 million) relating to Recoveries, which may not beused for one year following receipt and hence does not meet the definition ofcash and cash equivalents in IAS 7, Cash Flow Statements. (b) This amount (save for circumstances where the directors believe theremay be a risk of defaulting on the secured notes) may only be used in paying theinterest and principal due on a loan between Dignity (2002) Limited and DignityMezzco Limited, both of whom are wholly owned subsidiaries of the Company. Movements in the amounts described in note (a) as Recoveries have been treatedas 'transfers from /(to) restricted bank accounts' in the cash flow statementand are reported within 'Cash flows from investing activities' as they do notmeet the definition of cash and cash equivalents in IAS 7. Movements in the amounts described in note (b) have been treated as cashequivalents in the cash flow statement as they will become available for theGroup's use once the intercompany payment has been made on 30 January 2006. 7 Statement of changes in shareholders' equity Share Profit Share Premium Other and loss Minority Total capital account reserves account Total interest equity £m £m £m £m £m £m £m Shareholders' equity as at 26 December 2.0 - (12.3) (91.3) (101.6) (1.2) (102.8)2003Share issue 3.6 111.6 - - 115.2 - 115.2Profit for the 53 weeks ended 31 - - - 5.5 5.5 - 5.5December 2004Actuarial gains and losses on defined - - (0.5) - (0.5) - (0.5)benefit plans (net of deferred tax)Effects of employee share options (net - - 0.3 - 0.3 - 0.3of deferred tax)Dividends - - - (1.5) (1.5) - (1.5)Shareholders' equity as at 1 January 5.6 111.6 (12.5) (87.3) 17.4 (1.2) 16.22005Profit for the 52 weeks ended 30 - - - 18.3 18.3 - 18.3December 2005 Actuarial gains and losses on defined - - 1.3 - 1.3 - 1.3benefit plans (net of deferred tax)Effects of employee share options (net - - 0.8 - 0.8 - 0.8of deferred tax) Dividends - - - (5.2) (5.2) - (5.2)Shareholders' equity as at 30 December 5.6 111.6 (10.4) (74.2) 32.6 (1.2) 31.42005 Included within other reserves is the merger accounting consolidation differenceof £12.3 million, which arose on 20 December 2002 as part of the Groupreconstruction effected at that time. 8 Reconciliation of cash generated from operations 52 week 53 week period ended period ended 30 Dec. 2005 31 Dec. 2004 £m £mNet profit for the period 18.3 5.5Adjustments for:Taxation 8.2 2.5Net interest payable 15.1 31.2Profit on disposal of fixed assets (0.6) (1.2)Depreciation charges 6.6 6.6Amortisation of intangibles 0.6 0.5Changes in working capital (excluding acquisitions) 0.8 (1.1)Employee share options 0.5 0.2Cash generated from operations 49.5 44.2 9 Basis of preparation Historically, the Group prepared its results under UK Generally AcceptedAccounting Practice ('UK GAAP'). European law requires that the Group'sconsolidated results for the 52 week period ended 30 December 2005 are preparedin accordance with all applicable International Financial Reporting Standards ('IFRS'), as endorsed by the European Commission. These results have been preparedin accordance with IFRS and IFRIC interpretations and those parts of theCompanies Act 1985 applicable to companies reporting under IFRS. The financial information set out in the announcement does not constitute theGroup's statutory accounts for the periods ended 30 December 2005 or 31 December2004. The financial information for the 53 week period ended 31 December 2004 isderived from the statutory accounts for that year, as adjusted for theimplementation of IFRS. The unadjusted UK GAAP statutory accounts have beendelivered to the Registrar of Companies. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement undereither Section 237(2) or Section 237 (3) of the Companies Act 1985. Thepreliminary results for the 52 week period ended 30 December 2005 are unaudited.The statutory accounts for the 52 week period ended 30 December 2005 are beingprepared on the basis of the accounting policies set out in the Group's 2005interim statement and will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. 10 Securitisation In accordance with the terms of the securitisation carried out in April 2003,Dignity (2002) Limited (the holding company of those companies subject to thesecuritisation) has today issued reports to the Ratings Agencies (Fitch Ratingsand Standard & Poors), the Security Trustee and the holders of the notes issuedin connection with the securitisation, confirming compliance with the covenantsestablished under the securitisation. Copies of these reports are available at www.dignityfuneralsplc.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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