DIGNITY PLC INVESTOR PRESENTATION For the 52 week period ended 28 December 2018
Agenda • 2018 results • CMA & HM Treasury • Transformation Plan update • Outlook • Q&A 2
2018 RESULTS
Financial highlights 52 week 52 week period period ended ended Increase / (decrease) 28 December 29 December 2018 2017 per cent Revenue (£million) 315.6 324.0 (3) Underlying operating profit (£million) 80.2 104.6 (23) Underlying profit before tax (£million) 54.4 77.8 (30) Underlying earnings per share (pence) 85.8 128.3 (33) Underlying cash generated from operations (£million) 101.9 115.4 (12) Operating profit (£million) 66.3 98.0 (32) Profit before tax (£million) 40.5 71.2 (43) Basic earnings per share (pence) 63.0 115.8 (46) Cash generated from operations (£million) 94.9 112.5 (16) Interim dividend paid in the period (pence) 8.64 8.64 - Final dividend proposed in respect of the period (pence) 15.74 15.74 - Number of deaths 599,000 590,000 2 Alternative performance measures All measures marked as underlying in the table above and throughout this presentation are alternative performance measures. The reasons for the Group’s use of alternative performance measures, definitions and where relevant, reconciliations are provided in the appendix to this presentation. 4
2018 key points • • Number of deaths as expected Financial performance in line with market expectations • Deaths flat at 590,000 (2016: 590,000) • Comparable funeral market share increased slightly following significant declines in 2016 and 2017 • Focus remains on customer service, which continues to be high, with 98 per cent of clients • Simple funeral pricing reset saying they would recommend us • • Portfolio expanded through acquisition of 24 funeral locations and one small crematorium Unbundled funeral replacing full service package in the period • Simplicity service offering expanded • Total acquisition activity investment of £28.3 million (net of cash acquired) • Transformation team in place • Another good year of pre-arranged funeral plan sales, with active pre-arranged funeral plans increasing to 450,000 (2016: 404,000), helped by trust and insurance based sales • 3 year detailed Transformation Plan established • Good performance from crematoria • Pre-need environment remains challenging 5
Number of deaths Forecast • 800 2018 was as expected 700 600,000 600 580,000 500 560,000 400 300 540,000 200 520,000 100 0 500,000 2017 2018 1950 60 70 80 90 2000 10 20F 30F 40F 2050F • …but 2019 is lower than 2018 so far 9 weeks Full year 60 120,000 600,000 100,000 580,000 80,000 560,000 60,000 540,000 40,000 520,000 20,000 0 500,000 2015 2016 2017 2018 2015 2016 2017 2018 2019 • Current assumption is that deaths in 2019 will remain flat on 2018 • Longer term expectations (based on ONS) remain unchanged 6
Funeral market share Funeral volume market share (FY 2017 – FY 2018) Percent 12.5 11.9 Changes to pricing had a noticeable 12.0 positive impact on market share 11.5 Non-comparable* 0.7 11.5 Profitability is lower (but higher than 0.4 originally anticipated) 11.4 11.0 11.2 11.1 Comparable 0.0 FY 17 FY 18 Note: * Non-comparable includes volumes from locations not contributing for all of 2017 and 2018 7
Funeral mix and average income FY 2018 Board's FY 2017 H1 2018 Q4 2018 FY 2018 original Funeral type Actual Actual Actual Actual expectation* Full service 3,800 3,800 3,800 3,590 3,735 As anticipated, trials Average Simple and Limited service 2,700 1,965 2,240 2,435 2,350 impacted average incomes revenue Pre-need 1,650 1,650 1,680 1,750 1,705 (£) in the fourth quarter Other (including Simplicity) 500 500 560 610 570 Full service 60 44 52 43 48 Board expects average Simple and Limited service 7 20 15 24 19 Volume income in 2019 to be mix (%) Pre-need 27 30 27 27 27 £2,940 Other (including Simplicity) 6 6 6 6 6 Weighted average (£) 2,945 2,590 2,799 2,637 2,734 Ancillary revenue (£) 277 280 224 260 239 Average revenue (£) 3,222 2,870 3,023 2,897 2,973 Note: * As per January 2018 trading update 8
Crematoria • Unaffected by transformation review, but may benefit from Strong operating technological advances performance • 10.9% share of all deaths: grown slightly as a result of increase in Pricing expected to be locations and direct cremations no more than inflation in the medium-term • Memorial income per cremation robust at approximately £276 Positive outlook for crematoria continues • Rebranded as ‘The Crematorium and Memorial Group’ 9
Crematoria developments • - Opened July 2018 Trent Valley crematorium, Derby • Peterlee (Castle Eden) crematorium, County Durham - Planning permission granted } - Building under construction • Dartford crematorium, Kent - Due to open late 2019 • Sevenoaks crematorium, Kent - Land acquired in 2018 with planning permission - Construction planning underway - Due to open 2020 • Sites under development represent a capital commitment of approximately £20m - £21m, of which £4.3m was invested by the end of 2018 • The Group is also appealing two other planning applications 10
Pre-arranged funeral plans Existing active plans represent a predictable incremental Market environment cash flow stream • Pre-need plan deferred income (trust based plans) Adverse publicity about funeral plan market Millions of pounds • HM Treasury consultation 70 60 • Lower trust based sales £1 billion of deferred cash flows 50 without any further sales • Reduction in marketing allowances provides 40 higher level of capital solvency to protect 30 consumers 20 • IFRS 15 applicable for 2019 10 Income 0 2018 25 50 years years 11
Digital and marketing update Traffic to Dignity Funerals website • Dignity Funerals website still has highest UK domain authority Thousands of hits +76% • 76% increase in traffic to our website as our online search strategy 2,000 proves effective 1,500 1,000 • 38% of our clients now find us online, with over 60% of our website traffic now coming from mobile devices 500 0 • Funeral Notices generating over 100,000 views per month FY 2017 FY 2018 Simplicity Service Bookings • 2018 saw our first ever television adverts for funeral plans and Number of bookings Simplicity +126% 1,000 750 500 250 0 FY 2017 FY 2018 12
Financial performance Funeral Service financial performance 52 wks 52 wks Financial summary (FY 2017 – FY 2018) 28 December 29 December Millions of pounds 2018 2017 % Change Revenue (£m) Funeral services 214.9 221.8 (3.1) 100 Crematoria 78.0 74.0 5.4 90 (17.0) 1.5 Pre-arranged funeral plans 22.7 28.2 (19.5) 2.5 79.5 Revenue (£m) 315.6 324.0 (2.6) 80 Underlying operating profit (£m) (7.3) 70 Funeral services 62.2 79.5 (21.8) + 62.2 3.0 Crematoria 40.3 40.0 0.8 60 Pre-arranged funeral plans 2.8 8.0 (65.0) 50 Central overheads (25.1) (22.9) 9.6 Underlying operating profit (£m) 80.2 104.6 (23.3) 40 Underlying net finance costs (25.8) (26.8) Underlying profit before tax (£m) 54.4 77.8 (30.1) 30 Taxation (11.5) (13.8) 20 Underlying earnings (£m) 42.9 64.0 (33.0) Weighted average number of ordinary 10 shares in issue during the period (million) 50.0 49.9 Underlying EPS (pence) 85.8 128.3 (33.1) 0 FY 2017 Deaths Market share Average Cost base Acquisitions FY 2018 profit income profit 13
Cash conversion 52 wks 52 wks 52 wks 52 wks Cash generation summary 28-Dec 28-Dec 29-Dec 29-Dec 2018 2018 2017 2017 £m (except for amounts per share) Profit Cash Profit Cash EBITDA 99.2 121.7 • Cash generation remains strong Underlying cash generated from operations 101.9 115.4 • Underlying depreciation and amortisation (19.0) (17.1) Working capital fluctuates year on Maintenance capital expenditure (16.1) (20.2) year Underlying operating profit 80.2 104.6 Underlying operating cash flow after capital expenditure 85.8 95.2 • Maintenance capital expenditure Underlying net finance costs (25.8) (26.8) expected to be lower in 2019 as work Net finance payments (24.9) (25.6) Underlying profit before tax 54.4 77.8 will be done as part of Transformation Underlying cash generated before tax 60.9 69.6 Tax on underlying earnings (11.5) (13.8) Plan Tax paid (11.6) (11.9) Underlying earnings 42.9 64.0 Underlying cash after tax 49.3 57.7 Weighted average number of ordinary shares in issue during the period (million) 50.0 50.0 49.9 49.9 Underlying earnings per share (pence) 85.8 128.3 Cash per share (pence) 98.6 115.6 14
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