22nd Mar 2007 07:01
Dignity PLC22 March 2007 For Immediate Release 22 March 2007 Dignity plc Preliminary results for the 52 week period ended 29 December 2006 Dignity plc, Britain's largest single provider of funeral-related services,announces its preliminary results for the 52 week period ended 29 December 2006.Financial highlights Underlying earnings per Up 19% to 26.6p (2005: 22.4p)share (note a) Revenue Up 5% to £149.8 million (2005: £143.2 million) Underlying operating profit Up 8% to £44.1 million (2005: 41.0 million)(note b) Underlying profit before Up 8% to £27.9 million (2005: £25.9 million)tax (note b) Cash generated from Up 4% to £51.7 million (2005: £49.5 million)operations (note c) Basic earnings per share Up 13% to 25.9p (2005: 22.9p) Operating profit Up 4% to £43.4 million (2005: £41.6 million) Profit before tax Up 3% to £27.2 million (2005: £26.5 million) Dividend per share Interim dividend of 3.03p paid with a further 6.06p final dividend proposed. Return of value £80 million (£1 per share) returned to shareholders in August 2006. (a) Underlying earnings per share is calculated as profit on ordinary activities before exceptional items and after taxation divided by the weighted average number of Ordinary Shares in issue in the period. (b) Before profit on sale of fixed assets and non-recurring costs expensed relating to return of £1 per share in August 2006. (c) Before lump sum payment in 2006 to final salary pension scheme of £10 million in August 2006 and £0.7 million payment in respect of redemption of B shares. Highlights Six new funeral home locations acquired in the period, as well as a further six subsequent to the period end. Total unfulfilled pre-arranged funeral plans increased to 188,800 (2005: 181,200). Group operating margin continues to grow. £85.8 million net proceeds from the issue of secured notes. Final salary pension scheme now in actuarial surplus on an IAS 19 basis following £10 million lump sum contribution. Peter Hindley, Chief Executive of Dignity plc: "Underlying earnings per share increased 19 per cent to 26.6 pence per share.This is testament to a strong operating performance combined with efficient useof our balance sheet. During the year, we raised £90 million of new long term debt, returned £80million (£1 per share) to our shareholders and saw our final salary pensionscheme return to surplus following a £10 million cash injection by the Group.The return of capital represents 43 per cent of our initial marketcapitalisation at the IPO just three years ago. Initial trading in 2007 has been positive and the Group remains well placed forthe year ahead." For more information Peter Hindley, Chief ExecutiveMike McCollum, Finance DirectorDignity plc +44(0) 20 7466 5000 Richard OldworthSuzanne BrocksNick MelsonBuchanan 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. Results The Group has performed well in the period. Underlying earnings per share (whichexcludes profit on sale of fixed assets and costs of redeeming the B shares)have increased 19 per cent to 26.6 pence per share (2005: 22.4 pence per share).Underlying operating profit has increased 8 per cent to £44.1 million (2005:£41.0 million). Basic earnings per share has increased 13 per cent to 25.9 pence per share(2005: 22.9 pence per share). Operating profit has increased by 4 per cent to£43.4 million (2005: £41.6 million). New secured notes and use of proceeds During the period, the Group issued further secured notes, receiving £85.8million net of fees and returned £80.0 million (£1 per share) to shareholders. In addition, our pension scheme has been returned to surplus primarily through a£10.0 million lump sum payment to the scheme. Dividends The Group paid an interim dividend of 3.03 pence per share. The Board has declared a final dividend of 6.06 pence per share. This will bepaid on 29 June 2007 to shareholders on the register at 8 June 2007, providedappropriate consent is received at the Annual General Meeting, which takes placeon 8 June 2007. Our staff Client service excellence continues to be fundamental in our strategy to growthe business. This cannot be achieved without the dedication and loyalty of eachand every member of our staff. I would like to thank our staff throughout the business for their support andcommitment throughout the period. Changes in directors Jim Wilkinson has recently left Dignity. I would like to take this opportunityto thank Jim for his input into the business. I am delighted that Richard Portman joined the Board as Corporate ServicesDirector following six years as Head of Finance. Richard will also continue toserve as Company Secretary. As in previous years, I am grateful to all my fellow directors for their supportand wise counsel. Outlook for 2007 We continue to focus on the core elements of our strategy, developing thebusiness both organically and by acquisition. Initial trading in 2007 has been positive and the Group remains well placed forthe year ahead. Richard ConnellChairman21 March 2007 Business Review Introduction The Group is firmly established as Britain's largest single provider offuneral-related services. Fundamental to our success is the consistency of our strategy. It focuses onclient service excellence, improving revenues, cost control and selectiveadditions to our funeral locations, crematoria and pre-arranged funeral planpartners. The Group's operations are managed across three main areas, namely funeralservices, crematoria and pre-arranged funeral plans, which respectivelyrepresent 80 per cent, 15 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 29 December 2006 in GreatBritain were 548,100 compared to 563,800 in the comparative 52 week period in2005, a reduction of 2.8 per cent and below government forecasts of 560,000deaths. The historic number of deaths quoted is based on the initial Office ofNational Statistics (ONS) estimates for each calendar year. These death ratesare revised by the ONS from time to time but to maintain consistency ofreporting, Dignity quotes the original reported numbers. Based on historicalevidence, Dignity estimates that final deaths reported might fluctuate by aroundone per cent. Funeral services The Group operates a network of 521 (2005: 519) funeral homes throughoutBritain, trading under local established names. In 2006, the Group conducted66,500 funerals (2005: 67,000), representing approximately 12.1 per cent (2005:11.9 per cent) of estimated total deaths in Britain. Revenue within funeral services was £120.0 million (2005: £113.8 million).Underlying operating profits were £39.3 million (2005: £36.5 million), anincrease of 8 per cent. Reported operating profit was £39.3 million (2005: £37.1million), an increase of 6 per cent. The small increase in the portfolio reflects three distinct activities. Firstly,we acquired six funeral locations, investing £7.3 million, funded frominternally generated cash flows. They are all long established, highly reputablebusinesses. Secondly, we have opened two funeral locations under existing trading names. Finally, we have taken the opportunity, primarily where property leases expired,to close six under performing funeral locations. Crematoria The Group operates 22 crematoria and carried out 38,500 cremations in 2006(2005: 39,500) representing 7.0 per cent (2005: 7.0 per cent) of estimated totaldeaths in Britain. The Group is the largest single operator of crematoria inBritain. Turnover within crematoria was £23.2 million (2005: £22.5 million). Operatingprofits were £12.1 million (2005: £11.9 million). The small reduction in operating margins has been caused by a combination oflower cremation volumes and memorial sales, as well as significant increases incertain costs such as utilities. Pre-arranged funeral plans The Group is the market leader in the provision of pre-arranged funeral plans.Unfulfilled pre-arranged funeral plans increased to 188,800 from 181,200 duringthe period. These unfulfilled pre-arranged funeral plans underpin the futureperformance of the funeral division, as the Group expects to perform themajority of these funerals. The Group sells pre-arranged funeral plans through its network of funeral homesand primarily through affinity partners, notably Age Concern, AXA, Royal Londonand Liverpool Victoria. Liverpool Victoria is a new relationship established in early 2006 followingsome successful test mailings. This continued in the second half of 2006 with anumber of successful campaigns. Client service Client service excellence remains at the heart of our strategy, with familiescontinuing to recommend our services. We have continued to concentrate on the "Helping Our Clients Every Step of theWay" programme and the results of the new survey questions that were bothintroduced in 2005. This programme has helped to focus employees on delivering consistently highlevels of client service and satisfaction. As we continue to receive a high level of responses to our surveys, we are ableto use that feedback to identify elements of our services that are beingperformed well or could be improved. The combination of these approaches has resulted in levels of client servicesatisfaction remaining at a very high level, with 89 per cent of families sayingthey would definitely recommend our services, with a further 9 per cent sayingthey would probably do so. Our employees Our employees continue to play a vital role in this business, whether they dealwith clients on a daily basis, or work in the support functions throughout thebusiness. I am delighted that once again this year, we have been able to share the successof the business with the staff. This was achieved through a bonus of £500 foreach permanent, full time member of staff. This recognises the significant partthey play in the Group's performance and I would like to thank them for theirhard work throughout the year. The first 'Save As You Earn' share scheme will mature in May 2007. An employeewho has been saving the maximum £193 per month for the three year period willreceive shares worth approximately £21,000 based on a share price of £6.54.Given the success of this scheme, we are currently investigating the possibilityof starting a new SAYE scheme in 2007. Pensions The Group operated two final salary pension schemes until 6 April 2006, when theschemes were merged in order to achieve savings in administrative expenses.Benefits offered were maintained and the scheme remains open to current and newemployees. In addition, the Group made a one-off contribution to the scheme of £10.0million in August 2006, demonstrating our commitment to existing and prospectivemembers of the scheme. As a result, the scheme has an actuarial surplus on an IAS 19 basis of £0.6million at 29 December 2006 and is well placed for the future. Investment for the future The period witnessed total capital expenditure of £8.0 million. This providedthe Group with 45 new Mercedes hearses and limousines, 33 new ambulances, 74other new vehicles, 22 major refurbishments and helped to improve facilities ata number of our funeral and crematoria locations. We anticipate a similar amount of investment in 2007. In addition, we will besetting aside further funds, which will be used to improve approximately 50funeral locations. The Group intends to continue to identify and acquire funeral locations thatcompliment our existing portfolio. In the first three months of 2007, we haveinvested £3 million in acquiring 2 funeral businesses, which has added 6 morefuneral locations to our portfolio. In January 2007, the Group signed a new 10 year marketing agreement with AgeConcern, which secures what has historically been an important route to market.As part of this arrangement, the Group paid £2 million to acquire the 25 percent held by Age Concern in Advance Planning Limited, one of the subsidiaries ofthe Group. The pre-arranged funeral plan division is also testing with a number of partiesincluding JD Williams, the Mirror Group, News International and Reader's Digest. Peter HindleyChief Executive21 March 2007 Financial Review The market conditions in which the Group operates and its trading performanceduring the 52 week period ended 29 December 2006 are described in the Chairman'sStatement and the Business Review. Financial highlights Underlying earnings per share have increased 19 per cent to 26.6 pence per share (2005: 22.4 pence per share). Revenue has increased 5 per cent to £149.8 million (2005:£143.2 million). Underlying operating profit has increased 8 per cent to £44.1 million (2005: £41.0 million). Underlying profit before tax has increased 8 per cent to £27.9 million (2005: £25.9 million). Cash generated from operations has increased 4 per cent to £51.7 million (2005: £49.5 million) before the £10 million lump sum payment to the Group's pension scheme and £0.7 million payment in respect of the redemption of the B shares. Earnings per share has increased 13 per cent to 25.9 pence (2005: 22.9 pence). Operating profit has increased 4 per cent to £43.4 million (2005: £41.6 million). Profit before tax has increased 3 per cent to £27.2 million (2005: £26.5 million). The Group has paid an interim dividend of 3.03 pence per share with a further 6.06 pence final dividend proposed. The Group returned £80 million (£1 per share) to shareholders in August 2006. Capital structure and financing The Group's only material external debt financing is the Class A and B SecuredNotes, rated A and BBB respectively. During the period, the Group issued a further £45.55 million Class A Secured6.310 per cent Notes due 2023 and £32.50 million Class B Secured 8.151 per centNotes due 2030. To ensure that the new Class A Notes issued were identical withthose already in issue, Notes with a nominal value of £45.55 million wereissued. This, however, after deemed repayments equates to a nominal valueoutstanding at the date of issue of £42.5 million. The Notes were issued at apremium and raised a total of £85.8 million after fees and expenses. The Board believes that this fund raising and the subsequent return of value toshareholders is consistent with the strategy of maximising total shareholderreturns through an efficient balance sheet, which nevertheless leaves sufficientflexibility to continue to grow the business. The Board is of the opinion that the following provides additional indicativeinformation regarding the net debt position of the Group: 29 December 30 December 2006 2005 £m £m Class A and B Secured Notes*- issued April 2003 (199.7) (202.6)- issued February 2006 (87.3) -Loan Notes 2006 - (0.1)Cash balances 41.4 37.3 Net Debt (245.6) (165.4) * These amounts exclude any costs incurred in issuing the Secured Notes. The Group's financial expense substantially consists of the interest on theClass A and B Secured Notes and related ancillary instruments. The net financecharge in the period relating to these instruments was £19.4 million (2005:£15.7 million). This charge consisted of interest costs on the Secured Notes of£19.9 million (2005: £14.8 million) and amortisation of debt issue costs of £1.2million (2005: £0.9 million), offset by a release of premium of £0.9 million(2005: £nil million) and the release of prepaid interest of £0.8 million (2005:£nil million). The prepaid interest represents an element of the gross proceedsreceived by the Group because interest was due to Noteholders on the new notesfrom 1 January 2006, even though the notes were not issued until February 2006.This will not recur. Other ongoing finance costs incurred in the period amounted to £1.0 million(2005: £1.3 million), representing the unwinding of discounts on the Group'sprovisions, finance expense on retirement obligations and other loans. Interest receivable in the period was £4.0 million (2005: £1.7 million). As aresult of the terms of the securitisation, the net proceeds of the Secured Notesissued in February 2006 remained on deposit for five months before being used.This resulted in approximately £1.8 million of interest receipts Return of value and share consolidation As planned, the Group returned £80.0 million to shareholders in August 2006using the majority of the proceeds of the issue of the Secured Notes by issuingand then redeeming 80 million £1 B Shares. In addition, following approval byshareholders, the ordinary share capital of the Company was consolidated on aseven for nine basis in order to maintain the comparability of financialindicators such as share price. Combined with the return of value, the effectwas the same as buying back 17.8 million shares at a market price of £4.50. Underlying profit after tax The Board believes that whilst statutory reporting measures provide a usefulindication of the financial performance of the Group, additional insight isobtained by excluding significant non-recurring transactions. Accordingly, thefollowing information is presented to aid understanding of the performance ofthe Group:____________________________________________________________________________________ 52 week period 52 week period ended 29 ended 30 December 2006 December 2005 £m £m Operating profit for th eperiod as reported reported 43.4 41.6Add/(deduct) the effects of:Exceptional costs of redemption of B shares 0.7 -Profit on sale of fixed assets - (0.6)___________________________________________________________________________________Underlying operating profit 44.1 41.0____________________________________________________________________________________Net finance costs (16.2) (15.1)____________________________________________________________________________________Underlying profit before tax 27.9 25.9 Tax charge on underlying profit before tax (8.6) (8.0)____________________________________________________________________________________Underlying profit after tax 19.3 17.9____________________________________________________________________________________Weighted average number of ordinary shares inissue during the period (million) 72.6 80.0Underlying EPS 26.6p 22.4p% increase in underlying EPS 19%____________________________________________________________________________________ Earnings per share Following the return of value in August 2006, the Company had 62.2 millionOrdinary Shares in issue, compared to 80 million previously. Therefore, theweighted average number of shares in issue during the period was 72.6 millionOrdinary Shares. Underlying earnings per share increased 19 per cent to 26.6 pence per share(2005: 22.4 pence per share). Basic earnings per share were 25.9 pence per share(2005: 22.9 pence per share), an increase of 13 per cent. Cash flow and cash balances Cash generated from operations was £51.7 million in the period (2005: £49.5million). This is before the £10.0 million lump sum payment to the Group'sdefined benefit pension scheme and the £0.7 million payment in respect of costsof redeeming the B shares. Expenditure on funeral home acquisitions amounted to£7.3 million (2005: £6.7 million). A further £8.0 million (2005: £7.6 million)was spent on capital expenditure, the majority of which was spent on replacingor enhancing existing assets, principally the Group's vehicle fleet and itsproperty portfolio. Cash balances at the end of the financial period amounted to £41.4 million(2005: £37.3 million). £22 million of this amount has been set aside foracquisitions, of which £5 million has since been spent, as described in theBusiness Review. Of the remainder, £15 million has been set aside for tax anddividend payments to be made in 2007. However, this amount could also be usedfor acquisitions if suitable opportunities arose, with statutory payments beingfunded out of future operating cash flows. 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 than the standard UK tax rate of 30 per cent due to the impact of disallowable trading expenses and expenditure on the Group's premises that does not attract any deductions for tax purposes. As a result of the quarterly accounting regime, corporation tax payments in anyfinancial year represent 50 per cent of the estimated corporate tax liabilityfor profits made in that same period and 50 per cent of the estimated corporatetax liability in respect of profits made in the previous period. As a result ofthe Group's ownership prior to flotation, no corporation tax was due on profitsmade in 2004. For these reasons tax payments in 2006 are substantially higherthan in 2005. Mike McCollumFinance Director21 March 2007 Consolidated income statement For the 52 week period ended 29 December 2006 52 week period 52 week period ended ended 29 December 30 December 2006 2005 Note £m £m Revenue 1 149.8 143.2Cost of sales (73.2) (70.0) Gross profit 76.6 73.2 Administrative expenses (34.4) (32.8)Other operating income 1.2 1.2 -------------------------- ------ -------- ----------Operating profit before exceptional(charges) / income 44.1 41.0Exceptional (charges) / income 2 (0.7) 0.6-------------------------- ------ -------- ---------- Operating profit 1 43.4 41.6 Finance charges 3 (22.1) (17.0)Finance income 3 5.9 1.9--------------------------- ------ -------- ----------Profit before tax 27.2 26.5Taxation 4 (8.4) (8.2) Profit for the period 18.8 18.3 Profit attributable to minority interest - -Profit attributable to equity shareholders 18.8 18.3 18.8 18.3 Earnings per share for profit attributable to equity shareholders (pence)- Basic and diluted 5 25.9p 22.9p The results have been derived wholly from continuing activities throughout theperiod. Consolidated statement of recognised income and expense For the 52 week period ended 29 December 2006 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Profit for the period 18.8 18.3Actuarial gains on retirement benefitobligations 2.4 1.8Deferred tax on actuarial gains onretirement benefit obligations (0.7) (0.5) Net income not recognised in income statement 1.7 1.3 Total recognised income for the period 20.5 19.6 Attributable to:Minority interest - -Equity shareholders of the parent 20.5 19.6 Consolidated balance sheet As at 29 December 2006 29 December 30 December 2006 2005 Note £m £m AssetsNon-current assetsGoodwill 111.3 109.1Other intangible assets 12.1 9.0Property, plant & equipment 89.1 86.3Financial assets 5.6 5.5Retirement benefit asset 0.6 - 218.7 209.9 Current assetsInventories 3.0 3.3Trade and other receivables 19.2 22.3Assets held for sale - 0.2Cash and cash equivalents 7 41.4 37.3 63.6 63.1 Total assets 282.3 273.0 LiabilitiesCurrent liabilitiesFinancial liabilities 4.6 2.2Trade and other payables 19.2 21.9Current tax liabilities 2.7 2.4Provisions for liabilities and charges 1.4 1.0 27.9 27.5 Non-current liabilitiesFinancial liabilities 271.0 191.9Deferred tax liabilities 7.2 5.2Retirement benefit obligation - 12.0Other non-current liabilities 2.9 2.9Provisions for liabilities and charges 1.6 2.1 282.7 214.1 Total liabilities 310.6 241.6 Shareholders' equityOrdinary shares 5.6 5.6Share premium account 31.6 111.6Capital redemption reserve 80.0 -Other reserves (9.5) (10.4)Retained earnings (134.8) (74.2) Equity attributable to shareholders (27.1) 32.6Minority interest in equity (1.2) (1.2) Total equity 8 (28.3) 31.4 Total equity and liabilities 282.3 273.0 Consolidated cash flow statement For the 52 week period ended 29 December 2006 52 week period 52 week period ended ended 29 December 30 December 2006 2005 Note £m £m Cash flows from operating activities-------------------------------- ------ --------- ---------Cash generated from operations beforeexceptional payments 51.7 49.5Exceptional costs in respect ofredemption of B shares (0.7)Exceptional contribution to pensionscheme (10.0) --------------------------------- ------ --------- ---------Cash generated from operations 9 41.0 49.5Finance income received 4.2 1.8Finance charges paid (20.8) (15.6)Tax paid (6.1) (2.5) Net cash generated from operatingactivities 18.3 33.2 Cash flows from investing activitiesAcquisition of subsidiaries andbusinesses (7.3) (6.7)Proceeds from sale of property, plant &equipment 0.6 1.2Purchase of property, plant & equipment (8.0) (7.6) Net cash used in investing activities (14.7) (13.1) Cash flows from financing activitiesProceeds from issue of secured notes 90.2 -Issue costs in respect of secured notes (3.7) -Repayment of borrowings (4.1) (2.5)Dividends paid to shareholders (1.9) (5.2)Redemption of B shares (80.0) - Net cash used in financing activities 0.5 (7.7) Net increase in cash and cash equivalents 4.1 12.4 Cash and cash equivalents at thebeginning of the period 36.1 23.7 Cash and cash equivalents at the end ofthe period 7 40.2 36.1 1 Revenue and Segmental Analysis Funeral Crematoria Pre-arranged Head office Group services £m funeral plans £m £m £m £m 52 week period ended 29December 2006 Revenue 120.0 23.2 6.6 - 149.8 ------ ------ ------ ------ ------Segment resultbefore exceptionalcharges 39.3 12.1 2.4 (9.7) 44.1Exceptionalcharges - - - (0.7) (0.7)----------------------- ------ ------ ------ ------ ------ Segment result 39.3 12.1 2.4 (10.4) 43.4 Finance costs (22.1)Finance income 5.9 Profit before tax 27.2Taxation (8.4) Profit for theperiod 18.8 Attributable to:Minority interest -Equity shareholders of the parent 18.8 Funeral Pre-arranged services Crematoria funeral plans Head office Group52 week period ended £m £m £m £m £m30 December 2005 Revenue 113.8 22.5 6.9 - 143.2 ------ ------ ------ ------ ------Segment result beforeexceptional income 36.5 11.9 2.1 (9.5) 41.0Exceptional income 0.6 - - - 0.6---------------------- ------ ------ ------ ------ ------ Segment result 37.1 11.9 2.1 (9.5) 41.6 Finance costs (17.0)Finance income 1.9 Profit before tax 26.5Taxation (8.2) Profit for the period 18.3 Attributable to:Minority interest -Equityshareholders of the parent 18.3 2 Exceptional Items 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Professional fees in relation to redemptionof B Shares 0.7 -Profit on disposal of property, plant andequipment - (0.6) Total exceptional items 0.7 (0.6) 3 Net Finance Costs 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Finance costsClass A and B secured notes - issued April2003 14.6 14.8Class A and B secured notes - issuedFebruary 2006 5.3 -Amortisation of issue costs - issued April2003 0.9 0.9Amortisation of issue costs - issuedFebruary 2006 0.3 -Other loans 0.1 0.1Interest payable on finance leases 0.1 0.1Net finance expense on retirement benefitobligations - 0.4Unwinding of discounts 0.8 0.7 Finance costs 22.1 17.0 Finance incomeBank deposits (4.0) (1.7)Release of premium on secured notes - issuedFebruary 2006 (0.9) -Prepaid interest on issue of Class A and Bsecured notes (0.8) -Debenture loan (0.2) (0.2) Finance income (5.9) (1.9) Net finance costs 16.2 15.1 4 Taxation Analysis of charge in the period 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Current tax - current period 6.6 4.9Adjustment for prior period (0.2) (0.1) 6.4 4.8 Deferred tax - current period 1.8 3.9Adjustment for prior period 0.2 (0.5) 2.0 3.4 Taxation 8.4 8.2 All tax relates to continuing operations. Tax on items charged to equity 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Deferred tax charge on actuarial gains onretirement benefit obligations 0.7 0.5Deferred tax credit on employee shareoptions (1.0) (0.3) (0.3) 0.2Total tax chargeTotal current tax charge 6.4 4.8Total deferred tax charge 1.7 3.6 The taxation charge in the period is higher (2005: higher) than the standardrate of corporation tax in the UK (30 per cent). The differences are explainedbelow: 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Profit before taxation 27.2 26.5 Profit before taxation multiplied by thestandard rate of corporationtax in the UK of 30% (2005: 30%) 8.2 8.0Effects of:Adjustments in respect of prior period - (0.6)Expenses not deductible for tax purposes 0.2 0.8 Total taxation 8.4 8.2 Under IFRS the tax rate is higher (2005: higher) than the standard UK tax rateof 30 per cent due to the impact of disallowable trading expenses andexpenditure on the Group's premises that does not attract any deductions for taxpurposes. 5 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.The Board believes that profit on ordinary activities before exceptional itemsand after taxation is a useful indication of the Group's performance, as itexcludes significant non-recurring items. This reporting measure is defined as'Underlying profit after taxation' in the financial review. Accordingly, the Board believes that earnings per share calculated by referenceto this underlying profit after taxation, is also a useful indicator offinancial performance. Reconciliations of the earnings and the weighted average number of shares usedin the calculations are set out below Weighted average number of Per share Earnings shares amount £m millions pence 52 week period ended 29 December 2006Profit attributable to shareholders - Basic and 18.8 72.6 25.9diluted EPSAdd back: Exceptional items (net of taxation) 0.5 Underlying profit after taxation - Basic EPS 19.3 72.6 26.6 52 week period ended 30 December 2005Profit attributable to shareholders - Basic and 18.3 80.0 22.9diluted EPSDeduct: Exceptional items (net of taxation) (0.4) Underlying profit after taxation - Basic EPS 17.9 80.0 22.4 The potential issue of new shares pursuant to the Group's share option plans inthe period would affect the earnings per share by less than 0.1 pence per shareif exercised. 6 Dividends 52 week period 52 week period ended ended 29 December 30 December 2006 2005 £m £m Final dividend paid: nil p per ordinaryshare (2005: 3.75p) - 3.0Interim dividend paid: 3.03p (2005: 2.75p)per ordinary share 1.9 2.2 Total dividends recognised in the period 1.9 5.2 A final dividend of 6.06 pence per share was approved by the Board on 21 March2007. 7 Cash and Cash Equivalents 29 December 30 December 2006 2005 Note £m £m Cash and cash equivalents 41.4 37.3 Represented by:Operating cash 40.2 24.6Cash for acquisitions (a) 1.2 4.9Amounts set aside for intercompany loan (b) - 7.8 41.4 37.3 (a) Recoveries of £1.2 million (2005: £1.2 million), may not be used for oneyear following receipt and hence do not meet the definition of cash and cashequivalents in IAS 7, Cash Flow Statements. Under the terms of the Group'ssecured borrowings, these amounts are required to be retained in a separate bankaccount. This bank account may, in normal circumstances, only be used foracquiring tangible fixed assets and businesses (either trade and assets or sharepurchases). (b) This amount has been used to pay the interest and principal due on a loanbetween Dignity (2002) Limited and Dignity Mezzco Limited, both of whom arewholly owned subsidiaries of the Company. Movements in this amount were treated as cash equivalents in the cash flowstatement as they became available for the Group's use once the intercompanypayment was made on 31 January 2006. There were no amounts set aside at 29December 2006 as the loan was repaid in full during the period. 8 statement of changes in shareholders' equity Share capital Share premium Capital Other Retained Total Minority Total equity account redemption reserves earnings interest reserve £m £m £m £m £m £m £m £m Shareholders'equity as at31 December2004 5.6 111.6 - (12.5) (87.3) 17.4 (1.2) 16.2 Profit for the52 weeks ended30 December2005 - - - - 18.3 18.3 - 18.3 Actuarialgains andlosses ondefinedbenefit plans - - - 1.8 - 1.8 - 1.8 Deferred taxon pensions - - - (0.5) - (0.5) - (0.5) Effects ofemployee shareoptions - - - 0.5 - 0.5 - 0.5 Deferred taxon employeeshare options - - - 0.3 - 0.3 - 0.3 Dividends - - - - (5.2) (5.2) - (5.2) Shareholders'equity as at30 December2005 5.6 111.6 - (10.4) (74.2) 32.6 (1.2) 31.4 Profit for the52 weeks ended29 December2006 - - - - 18.8 18.8 - 18.8 Reclassification ofactuarialgains andloses ondefinedbenefit plans(net ofdeferred tax)* - - - (0.8) 0.8 - - - Actuarialgains andlosses ondefinedbenefit plans - - - - 2.4 2.4 - 2.4 Deferred taxon pensions - - - - (0.7) (0.7) - (0.7)Effects ofemployee shareoptions - - - 0.7 - 0.7 - 0.7 Deferred taxon employeeshare options - - - 1.0 - 1.0 - 1.0 Issue of Bshares - (80.0) - - - (80.0) - (80.0) Redemption ofB shares - - 80.0 - (80.0) - - - Dividends - - - - (1.9) (1.9) - (1.9) Shareholders'equity as at29 December2006 5.6 31.6 80.0 (9.5) (134.8) (27.1) (1.2) (28.3) * These amounts have been reclassified in accordance with IAS 19 (Revised). 9 Reconciliation of Cash Generated Grom Operations 2006 2005 £m £m Net profit for the period 18.8 18.3Adjustments for:Taxation 8.4 8.2Net finance costs 16.2 15.1Profit on disposal of fixed assets - (0.6)Depreciation charges 6.9 6.6Amortisation of intangibles 0.6 0.6Changes in working capital (excluding acquisitions) 0.1 0.8Employee share options 0.7 0.5 Cash generated from operations before exceptional items 51.7 49.5Exceptional costs in respect of redemption of B shares (0.7) -Exceptional contribution to pension scheme (10.0) - Cash generated from operations 41.0 49.5 10 Basis of Preparation European law requires that the Group's financial statements for the 52 weekperiod ended 29 December 2006 are prepared in accordance with all applicableInternational Financial Reporting Standards ('IFRS'), as adopted by the EuropeanUnion. These financial statements have been prepared in accordance with IFRS andIFRIC interpretations (as issued by the International Accounting StandardsBoard) and those parts of the Companies Act 1985 applicable to companiesreporting under IFRS. The financial information set out in the announcement does not constitute theGroup's statutory accounts for the periods ended 29 December 2006 or 30 December2005, but is derived from them. Statutory accounts for the period ended 30December 2005 have been filed with the Registrar of Companies and those for theperiod ended 29 December 2006 will be filed following the Company's AnnualGeneral Meeting. The auditors reported on these accounts; their reports wereunqualified and did not contain a statement under either Section 237 (2) orSection 237 (3) of the Companies Act 1985. 11 Securitisation In accordance with the terms of the securitisation carried our in April 2003 andthe subsequent further notes issue in February 2006, Dignity (2002) Limited (theholding company of those companies subject to the securitisation) has todayissued reports to the Rating Agencies (Fitch Ratings and Standard & Poors), theSecurity Trustee and the holders of the notes issued in connection with thesecuritisation, confirming compliance with the covenants established under thesecuritisation. 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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