DTY.L Regulatory News (DTY)

3 Mar 2005 07:00

Dignity PLC03 March 2005 For immediate release 3 March 2005 Dignity plc Preliminary results for the 53 week period ended 31 December 2004 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 53 week period ended 31 December 2004. Financial highlights Underlying profit before tax (note a) up 31% to £22.0 million (2003: £16.8 million) Operating profit (note b) up 17% to £37.4 million (2003: £32.0 million) Turnover up 5% to £135.7 million (2003: £129.0 million) Operating cashflow up 5% to £44.1 million (2003: £41.9 million) Final dividend per share (note c) 3.75p per share (a) Before goodwill amortisation, exceptional items and non-recurring finance charges (b) Before goodwill amortisation and exceptional items (c) Total dividend of 5.625p per share Operating highlights • Results ahead of expectations despite lower than anticipated death rate • Nine new funeral home locations acquired, including three since the year end • Four new branch openings • New crematorium in Scotland • Total unfulfilled pre-arranged funeral plans: 170,200 (2003: 164,300) • Client satisfaction at record high Peter Hindley, Chief Executive of Dignity plc: "I am pleased to report a strong performance for the Group. We have deliveredresults ahead of expectations, despite the lower than anticipated death rate. The Group continues to trade well and we expect to make further progress in2005." 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 This is Dignity's first preliminary announcement following its admission to theOfficial List of the London Stock Exchange in April 2004. Dignity is the largestprovider of funeral related services, namely funeral services, cremations andpre-arranged funeral plans in Britain, and is the only UK listed company in thisarea. As reported in our interim results last August, the listing in April 2004 raised£123.0 million before expenses, which was used by the Group to repay expensivedebt, secure a more diversified ownership and create a platform for sustainedgrowth. Results I am pleased to report a strong trading performance in our first year endresults as a listed company. Operating profit before goodwill amortisation andexceptional items has increased by 16.9% to £37.4 million (2003: £32.0 million).Operating profit has increased by 24.6% to £33.9 million (2003: £27.2 million). The Group performed 67,600 funerals from our network of 512 funeral homes aroundthe country and 38,400 cremations from our 22 crematoria. This was achievedagainst a background of lower recorded deaths in the year. Total recorded deathsfor the 53 week period to 31 December 2004 in Great Britain were 574,500compared to 592,200 in the comparative 52 week period in 2003. This was 3.5%below our expectations for the period. Historically, fluctuations in recordeddeaths have tended to be self-correcting and the Board's view on death ratescontinues to rely on government forecasts. Based on these forecasts, we expect579,700 deaths in 2005. The lower than expected revenues in the period, arising from a fall in thenumber of deaths, was more than offset by continued strong cost control in allareas of the business. The details of the trading results are included in theOperating and Financial Review. The number of unfulfilled pre-arranged funerals plans at the end of the year was170,200 (2003: 164,300). The Group expects to perform the majority of thesefunerals. Underlying profit before tax and dividend Underlying profit before tax in the financial year was £22.0 million compared to£16.8 million in the previous year, an increase of 31.0%. This is stated beforeexceptional items, amortisation of goodwill and non-recurring finance chargesand is ahead of our expectations. After taking account of these items, thereported profit before taxation is £3.1 million (2003: loss £3.5 million). The Board has declared a final dividend of 3.75p per share, which subject toapproval at the Annual General Meeting, will be paid on 31 May 2005 toshareholders on the register at 6 May 2005. This makes a total dividend for theyear of 5.625p per share and is consistent with the Group's dividend policy asset out at the time of flotation. Developments As part of its stated strategy, in 2004 the Group acquired six funeral homelocations, funded from existing cash reserves and internally generated cashflows. In addition, since the year end, the Group has acquired a further threefuneral home locations. Since flotation, this brings the total investment inacquisitions to £8.8 million. The quantum of investment and the prices paid werein line with our previously stated expectations. The Group continues to seekfurther acquisitions to develop and enhance the network of Dignity branches. In addition, the Group opened four new funeral home locations under localestablished trading names, sharing the resources of nearby existing Dignityfuneral homes. We also closed five funeral home locations where low volumes madethem uneconomic. In August, the Group opened a new crematorium at Holytown in North Lanarkshire,built in partnership with North Lanarkshire Council. Planning permission hasbeen granted to the Group for a new crematorium at Sydes Brae in SouthLanarkshire. This will also be built and operated in partnership with the localCouncil. Our staff Our business requires a personal and sensitive service to clients. The Group'scommitment to the highest standards of service is central to our strategy. In2004, customer satisfaction levels, monitored by our continuing client surveys,exceeded last year's record high. We are fortunate to employ experienced andcaring staff, a large number of whom have devoted their working lives to theprofession. I would like to thank all our staff for their hard work anddedication to client service. Outlook for 2005 The successful flotation of the company has created a strong base for the futuredevelopment of the business. We expect to achieve this by a combination offurther acquisitions, opening new locations and seeking further partners for ourpre-arranged funeral plan business. The Group continues to trade well and theBoard expects the Group to make further progress in 2005. Richard ConnellChairman 2 March 2005 Operating and Financial Review Operating Review Introduction The Group's operations are managed across three main areas, namely funeralservices, crematoria and pre-arranged funeral plans, which respectivelyrepresent 80%, 16% and 4% of the Group's revenues. Funeral services relate tothe provision of funerals and ancillary items such as memorials and floraltributes. Crematoria revenues arise from cremation services and the sale ofmemorials and burial plots at the Group's crematoria and cemeteries.Pre-arranged funeral plan income represents amounts to cover the costs ofadministering the sale of plans. Performance in the period Funeral services The Group operates a network of 512 funeral homes throughout Britain, tradingunder local established names. In 2004, the Group conducted 67,600 funerals,representing 11.8% (2003: 11.7%) of total deaths in Britain. Turnover within funeral services was £108.8 million (2003: £103.1 million) andincreased in all geographical areas of the division. Operating profits beforeexceptional items and goodwill amortisation were £33.7 million (2003: £30.0million), an increase of 12.3%. Although funeral volumes were lower as a result of the decline in the number ofdeaths in the year, we are pleased that this was more than offset by strong costcontrol. We believe it is important to actively manage the Group's portfolio of funeralhomes. This year we have closed five funeral homes whose very low number offunerals meant they were no longer profitable. We have opened four new funeralhomes in Edinburgh, Gateshead, Stoke-on-Trent and Southborough. These newlocations share the resources of nearby existing Dignity funeral homes. As part of our stated strategy since listing, we have acquired nine new funeralhome locations, three of which were acquired in 2005. These new businesses arelocated in Basingstoke, Broadstairs, Burnley, Chippenham, St. Albans andFalkirk. They are all long established, highly reputable businesses. Crematoria The Group operates 22 crematoria and carried out 38,400 cremations in 2004representing 6.7% (2003: 6.7%) of total deaths in Britain. The Group is thelargest single operator of crematoria in Britain. Turnover within crematoria was £21.6 million (2003: £20.1 million). Operatingprofits before exceptional items and goodwill amortisation were £11.5 million(2003: £9.1 million), an increase of 26.4%. The performance was achieved througha combination of strong memorial sales that increased by 12.9% and weresignificantly helped by initial sales of crypts at the new mausoleum atLoughborough (approximately £0.4 million) and reduced costs following areorganisation of the business in 2003. In August 2004, we opened a third crematorium in Scotland. The new facility atHolytown in North Lanarkshire was built in partnership with the local Counciland represents a £2.0 million investment in our crematoria business. We are also working with South Lanarkshire Council to provide a similarfacility. Planning permission has been granted at Sydes Brae and building isscheduled to start in 2005. The Group opened a new community mausoleum in July 2004 at our crematorium inLoughborough. This was developed in conjunction with the local Council,Charnwood Borough Council. It has been built to serve the needs of the Italiancommunity in the East Midlands, whose leaders were closely involved in itsdesign and construction. Further mausoleums were also constructed at ourcemetery at Streatham in London. There have been no changes to the regulatory environment during 2004. However,in January 2005 the Department of Environment Food and Rural Affairs announcedthat crematoria operators should install equipment to cut mercury emissions by50% by 2012 under new statutory guidance. The Group is confident that it canmeet all the new emissions legislation in the required timescales. We expectfunding for these changes to be via an industry wide environmental 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 funeral plans.Unfulfilled plans increased to 170,200 from 164,300 by 31 December 2004. TheGroup expects to perform the majority of these funerals. The Group sells funeral plans through its network of funeral homes and primarilythrough affinity partners, notably Age Concern, AXA and Royal London. Althoughthe level of unfulfilled plans grew during the year, this increase was lowerthan expected because of reduced activity. In particular, AXA's planned activityin 2004 was postponed. We are hopeful that activity will recommence in 2005. Client service We believe that excellent customer service is fundamental to the Group'ssuccess. Personal experience, recommendation and location are the customer's keycriteria for the selection of a funeral director. We continually strive tomaintain our high customer satisfaction levels and improve client service. During the year, we held 90 focus group meetings with staff to ask their viewson the service we provide families, and to ensure best practice is shareduniformly throughout the Group. We send our clients a survey after every funeralto monitor customer satisfaction. We have an approximate 50% response rate. Thissurvey monitors all aspects of client service, which continues to be at veryhigh levels. Our employees In 2004, the Group supported staff development and welfare through its WelfareTrust. The Welfare Trust provides funds for staff for professional training,hardship grants, and financial support for employees' children studying infurther education. The Group also provides direct support to employees through both in-housetraining and external training courses. Such external training includes bothrelevant job training and tutoring for professional qualifications. At the end of 2004, we announced a bonus totalling £0.6 million, in which everymember of staff not covered by the existing scheme was entitled to share. Thiswas in recognition of the hard work and commitment shown by our staff in allareas of the business and allowed them to share in a successful 2004. We hopethat strong performances in 2005 and beyond will allow the Group to pay suchbonuses in the future. Investment for the future The Chairman has referred to the future development of the business in hisstatement. Within the funeral services division the Group is committed to thefurther proactive development of the national network of branches within localcommunities. This will be achieved by further acquisitions but only wheresuitable businesses can be identified and acquired at a price that shoulddeliver returns in excess of our cost of capital. In addition to acquisitions,further new funeral homes will be opened where suitable locations and localbrand names can be identified. These initiatives will be progressed inconjunction with reviewing existing locations for suitability and viability. Within the crematoria division the Group remains committed to exploring furtherpartnership arrangements with Local Councils, who own and operate the vastmajority of crematoria in Great Britain. The Group also remains committed to thefurther development of its range of memorial and interment options within thememorial gardens at its crematoria and at its cemeteries. Within the pre-arranged funeral plan division we are continuing to developfurther affinity partners. 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 2004 and looking aheadinto 2005. Peter HindleyChief Executive 2 March 2005 Financial Review The market conditions in which the Group operates and its trading performanceduring the year ended 31 December 2004 are described in the Chairman's Statementand the Chief Executive's Review. Financial highlights • Underlying profit before tax of £22.0 million (2003: £16.8 million), an increase of 31.0%. In addition, Recoveries from the pre-arranged funeral plan trusts were £1.2 million (2003: £1.0 million). • Operating profit before goodwill amortisation and exceptional items has risen 16.9% to £37.4 million (2003: £32.0 million). • Turnover has increased 5.2% to £135.7 million (2003: £129.0 million). • Operating cashflow increased by 5.3% to £44.1 million (2003: £41.9 million). • A final dividend of 3.75p per share, making a total of 5.625p per share for the Group's first year as a listed company. Further statutory disclosures • Operating profit has increased by 24.6% to £33.9 million (2003: £27.2 million). • Profit before tax is £3.1 million (2003: loss of £3.5 million). Underlying profit before tax and goodwill amortisation The past two years have witnessed significant re-organisations of the Group'scapital structure, including the venture capital backed management buyout in2002, the whole business securitisation in 2003 followed by listing andredemption of expensive debt in 2004. Therefore comparison with prior periods orassessment of underlying earnings is not straightforward. The directors are ofthe opinion the following provides additional indicative information regardingthe underlying profits of the Group: 53 week period to 52 week period to 31 December 2004 26 December 2003 £m £mProfit / (loss) before taxation for the period asreported 3.1 (3.5)Add / (deduct) the effects of:Goodwill amortisation 5.9 5.6Exceptional items (credited)/ charged to (1.2) 0.2administrative expensesExceptional items credited to other operating income (1.2) (1.0)(Recoveries from pre-arranged funeral plan trusts)Exceptional interest expense 10.1 -Interest expense of mezzanine loan and loan notes 2013 4.7 14.9Amortisation of debt issue costs of mezzanine loanand loan notes 2013 0.6 0.6 Underlying profit before tax and goodwillamortisation* 22.0 16.8 * In addition, Recoveries from the pre-arranged funeral plan trusts were £1.2million (2003: £1.0 million). Cash flow and cash balances Operating cash flow was £44.1 million in the period (2003: £41.9 million). Expenditure on funeral home acquisitions amounted to £5.3 million (2003: £7.7million), with expenditure on new openings and relocations amounting to £0.8million (2003: £0.2 million). A further £7.7 million was spent on capitalexpenditure, the majority of which was spent on replacing or enhancing existingassets, principally the Group's vehicle fleet. The construction bond of £2.0million in respect of the new crematorium in North Lanarkshire was released inthe year following the payment of the lease premium of the same amount. Cash balances at the end of the financial year amounted to £24.9 millionalthough under the terms of the Group's secured borrowing, there are certainrestrictions on elements of this balance as described further in note 6. TheGroup's operations continue to be significantly cash generative. Capital structure and financing The Group was listed on the London Stock Exchange in April 2004. Funds raisedfrom the issue of shares allowed the redemption of the £40.0 million mezzanineloan and £57.0 million of the £63.0 million principal of the loan notes 2013incurring an early redemption penalty of £4.0 million and the write-off of £6.1mof deferred issue costs. The remaining £6.0 million principal of the loan notes2013 were redeemed on 30 July 2004 from operational cashflows. Following these redemptions, the Group's only material external debt financingis the Class A and B secured notes, rated A and BBB+ respectively, of which£205.3 million (2003: £208.9 million) was outstanding as at 31 December 2004.Both tranches of debt were issued at fixed rates of interest and will beprogressively repaid over the next 26 years. The directors are of the opinion the following provides additional indicativeinformation regarding the net debt position of the Group: 31 December 2004 26 December 2003 £m £m Secured A and B notes (205.3) (208.9)Mezzanine loan - (42.1)Loan notes 2013 - (67.0)Loan notes 2012 - (12.7)Deferred issue costs 17.1 24.0Cash 24.9 41.9Restricted cash balances (1.2) (19.5)Loan notes 2006 (0.1) (0.1) Net Debt per FRS 1 Statement (164.6) (284.4)Restricted cash balances 1.2 19.5Deferred issue costs (17.1) (24.0)Accrued interest on secured A and B - (7.4)notesAccrued interest on mezzanine loan - (6.9)and loan notesEconomic Net Debt (180.5) (303.2) Going forward, the Group's financial expense will substantially consist of theinterest on the Class A and B secured notes and the related ancillaryinstruments that were issued in April 2003. The finance charge in the periodrelating to these instruments was £16.7 million including the amortisation ofdebt issue costs of £1.0 million. Other ongoing interest costs incurred in theperiod amounted to £0.2 million, representing the unwinding of discounts on theGroup's provisions and other loans. Taxation The overall effective tax rate on earnings before goodwill amortisation andexceptional items is approximately 32% and is not expected to vary significantlyin the short term. Significant changes to the capital structure have renderedcomparison of the tax charge to previous periods difficult. This tax rate ishigher than the standard UK tax rate of 30% 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 0.6 pence per share for the period (2003: lossof 13.2p 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. The Board considers the information on underlying profit before tax to be a moreuseful indication of comparative performance given the changes in the Group'scapital structure in the year. International accounting standards Work is continuing to ensure that the Group is in a position to make thetransition to International Accounting Standards with effect from 1 January2005. An initial assessment has been completed of the likely effects. An actionplan and programme of work has been developed and will be completed ahead ofannouncing our 2005 interim results. Based on initial assessments, the greatestimpact is expected to be in the accounting for intangible assets, goodwill,pensions, deferred tax, property leases, share based payments and dividends. The sub-group headed by Dignity (2002) Limited, which raised the secured A and Bnotes, will continue to report under UK GAAP. The usual quarterly report toNoteholders on the Dignity (2002) Limited sub-group will be issued in respect ofthe first quarter of 2005 in May 2005. Pensions The company operates two principal defined benefit pension schemes. Under FRS 17the pension deficit would have increased from £8.9 million to £9.7 million. Mike McCollum Finance Director 2 March 2005 Consolidated profit and loss accountfor the 53 week period ended 31 December 2004 Note 53 week period ended 52 week period 31 December 2004 ended 26 December 2003 £m £m Turnover 1 135.7 129.0Cost of sales (67.3) (66.1)Gross profit 68.4 62.9Distribution and selling costs (4.0) (4.6)Administrative expenses (31.7) (32.1)Other operating income 1.2 1.0Operating profit before goodwill amortisation and 37.4 32.0exceptional itemsGoodwill amortisation (5.9) (5.6)Exceptional items 2.4 0.8Operating profit 1 33.9 27.2Interest payable and similar charges before exceptional 2 (22.2) (31.7)chargesInterest receivable and similar income 1.5 1.0 2Exceptional interest payable and similar charges on 2 (10.1) -redemption of debtNet interest payable and similar charges 2 (30.8) (30.7)Profit/ (loss) on ordinary activities before tax 3.1 (3.5)Tax on profit / (loss) on ordinary activities 3 (2.7) 0.3Profit/ (loss) on ordinary activities after tax 0.4 (3.2)Equity minority interest - (0.3)Profit/ (loss) for the financial period 0.4 (3.5)Dividends 4 (4.5) -Result for the financial period (4.1) (3.5)Earnings/ (loss) per 7p share 5- Basic and diluted 0.6p (13.2)p The results have been derived wholly from continuing activities throughout theperiod. Statement of total recognised gains & losses There were no other gains or losses other than those included within the resultsfor the period as shown above. Note of historical cost profit & loss There is no difference between the result disclosed in the profit and lossaccount and the result on an unmodified historical cost basis. Consolidated balance sheetas at 31 December 2004 31 December 26 December Note 2004 2003 £m £m Fixed assetsIntangible assets 105.4 106.5Tangible assets 89.3 86.2Investments 1.0 1.0 195.7 193.7Current assets Stocks 3.4 3.1Debtors - amounts falling due within one year 19.7 20.8 - amounts falling after more than one year 8.8 11.1Cash at bank and in hand See (a) 24.9 41.9 belowTotal current assets 56.8 76.9 Creditors: amounts falling due within one year (22.5) (47.1) Net current assets 34.3 29.8 Total assets less current liabilities 230.0 223.5Creditors: amounts falling due after more than one year (188.3) (293.1)Provisions for liabilities and charges (10.0) (10.0) Net assets/ (liabilities) 31.7 (79.6) Capital and reserves Called up share capital 7 5.6 2.0Share premium account 7 111.6 -Other reserves 7 (12.1) (12.3)Profit and loss account 7 (72.2) (68.1)Equity shareholders' funds 7 32.9 (78.4) Equity minority interest (1.2) (1.2) Capital employed 31.7 (79.6) (a) Certain cash balances are subject to restrictions. See note 6. Consolidated cash flow statement for the 53 week period ended31 December 2004 Note 53 week period ended 31 52 week period ended 26 December 2004 December 2003 £m £m £m £mNet cash inflow from operating activities 8 44.1 41.9Returns on investments and servicing of 9 (37.8) (16.3)financeTaxation (0.1) -Purchase of tangible fixed assets (10.5) (7.3)Sale of fixed assets 2.3 1.5Transfers from/ (to) restricted bank accounts 18.3 (7.3)Construction bond 2.0 (2.0)Capital expenditure and financial investments 6 12.1 (15.1)Acquisitions and disposals (5.3) (7.7)Equity dividends paid (1.5) - Cash inflow before use of liquid resources 11.5 2.8and financingManagement of liquid resources 6 (5.3) -Financing - issue of shares 115.2 - - decrease in debt (125.4) (0.9) (10.2) (0.9)(Decrease)/ increase in cash in the period (4.0) 1.9 Reconciliation of cash flow statement to movements in net debt 53 week period ended 52 week period ended 31 December 2004 26 December 2003 £m £m(Decrease)/ increase in cash in the period (4.0) 1.9Cash outflow from increase in liquid resources 5.3 -Cash inflows from decrease in debt 125.5 7.2Change in net debt resulting from cash flows 126.8 9.1Other non-cash changes (7.0) (5.8)Movement in net debt in the period 119.8 3.3Net debt at beginning of period (284.4) (287.7)Net debt at end of period (164.6) (284.4) Notes to the Accounts 1 Turnover and segmental analysis 53 week period ended 52 week period ended 31 December 2004 26 December 2003 £m £mTurnoverFuneral services 108.8 103.1Crematoria 21.6 20.1Pre-arranged funeral plans 5.3 5.8 135.7 129.0 Profit/ (loss) before taxation Exceptional items Before exceptional Administrative Other Total items and goodwill income/ operating amortisation (expenses) income £m £m £m £m53 week period ended 31 December 2004 Funeral services 33.7 0.8 - 34.5Crematoria 11.5 0.4 - 11.9Pre-arranged funeral plans 1.3 - 1.2 2.5Head office (9.1) - - (9.1)Operating profit/(loss) before goodwillamortisation 37.4 1.2 1.2 39.8 Goodwill amortisation (5.9)Operating profit 33.9Net interest payable and similar charges (30.8)Profit on ordinary activities before tax 3.1 52 week period ended 26 December 2003 Funeral services 30.0 0.5 - 30.5Crematoria 9.1 (0.3) - 8.8Pre-arranged funeral plans 1.1 - 1.0 2.1Head office (8.2) (0.4) - (8.6)Operating profit/(loss) before goodwill 32.0 (0.2) 1.0 32.8amortisationGoodwill amortisation (5.6)Operating profit 27.2Net interest payable and similar charges (30.7)Loss on ordinary activities before tax (3.5) 2 Net interest payable 53 week period ended 52 week period 31 December ended 2004 26 December 2003 £m £mInterest payable and similar chargesClass A and B secured notes 15.1 10.6Bank loans settled 11 April 2003 - 4.2Mezzanine bank loan 2.1 7.2Loan notes 2.6 7.7Other loans 0.1 0.1Amortisation of issue costs 1.6 1.4Unwinding of discount 0.7 0.5Interest payable & similar charges before exceptional 22.2 31.7itemsExceptional interest payable & similar chargesPremium on early redemption of mezzanine loan 4.0 -Exceptional amortisation of deferred debt issue costs 6.1 -Exceptional interest payable & similar charges 10.1 -Total interest payable & similar charges 32.3 31.7Interest receivable and similar incomeBank deposits (1.3) (0.9)Debenture loan (0.2) (0.1)Interest receivable and similar income (1.5) (1.0)Net interest payable and similar charges 30.8 30.7 Following flotation, the Group redeemed the £40.0 million Mezzanine Loan and£57.0 million of the £63.0 million principal of the Loan Notes 2013, incurringan early redemption penalty of £4.0 million and writing-off £6.1 million ofdeferred issue costs. The remaining £6.0 million principal of the Loan Notes2013 were redeemed on 30 July 2004. Further details are set out in the operatingand financial review. 3 Tax 53 week period ended 52 week period ended 31 December 2004 26 December 2003 £m £mThe taxation charge for the period comprises:Current tax: current period provision 0.2 -Current tax: release of prior period provisions - (0.2) 0.2 (0.2)Deferred tax: origination and reversal of timing differences 3.1 1.1Deferred tax: adjustment relating to prior periods (0.6) (1.2) 2.7 (0.3) 4 Dividends 53 week period ended 52 week period ended 31 December 2004 26 December 2003 £m £mEquity - OrdinaryInterim paid: 1.875p (2003: nil) per 7p share 1.5 -Final proposed: 3.75p (2003: nil) per 7p share 3.0 - 4.5 - 5 Earnings per share The calculation of basic earnings/ (loss) per ordinary share has been based onthe profit/ (loss) for the relevant period. The potential issue of new sharespursuant to the Group's share option plans in the period would affect theearnings per share by less than 0.1 pence per share if exercised. On 31 March 2004, prior to admission to the Official List of the London StockExchange, the Company undertook a restructuring of its existing share capital. The weighted average number of shares used for the current period is based on26,521,740 shares prior to admission and 80,000,000 shares in issue afteradmission. The weighted average number of shares used for the comparative periodis 26,521,740. Earnings Weighted average number Per share of shares amount £m Millions Pence53 week period ended 31 December 2004 0.4 65.0 0.652 week period ended 26 December 2003 (3.5) 26.5 (13.2) 6 Cash at bank and in hand Note 2004 2003 £m £mCash at bank and in hand 24.9 41.9Represented by:Operating cash 12.4 4.3Cash for acquisitions (a) 7.2 10.4Amounts set aside for mezzanine loan (b) - 5.8Cash collateralised for loan notes (c) - 12.7Amounts set aside for intercompany loan (d) 5.3 -Amounts set aside for secured A and B notes - (e) 8.7 24.9 41.9 (a) Under the terms of the Group's secured borrowings, thisamount is required to be retained in a separate account. This 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 (2003: £1.0 million) relating to Recoveries, which may not beused for one year following receipt and hence does not meet the definition ofcash in FRS 1, 'Cash Flow Statements'. (b) This amount (save for circumstances where the directorsbelieved there may have been a risk of defaulting on the secured notes) couldonly be used in paying the interest and principal due on the mezzanine loan.This amount did not meet the definition of cash in FRS 1. (c) This amount was subject to a charge in favour of the loannotes 2012. This amount did not meet the definition of cash in FRS 1. (d) This amount (save for circumstances where the directorsbelieve there may be a risk of defaulting on the secured notes) may only be usedin paying the interest and principal due on a loan between Dignity (2002)Limited and Dignity Mezzco Limited, both of whom are wholly owned subsidiariesof Dignity plc. (e) This amount was required under the terms of the Group'ssecured borrowings to be used to pay interest and principal on 31 December 2004and 31 December 2003 respectively. Movements in the amounts described in notes (a) as Recoveries, together with theamounts described in notes (b) and (c), have been treated as 'transfers from /(to) restricted bank accounts' in the cash flow statement and are reportedwithin 'capital expenditure and financial investment' as they do not meet thedefinition of cash in FRS 1. Movements in the amounts described in note (d) have been treated as 'managementof liquid resources' in the cash flow statement as they do not meet thedefinition of cash in FRS 1, but will become available for the Group's use oncethe intercompany payment has been made. 7 Reconciliation of movements in shareholders' funds Share capital Share Other Profit and Total premium reserves loss account account £m £m £m £m £mShareholders' funds as at 26 2.0 - (12.3) (68.1) (78.4)December 2003Profit for the period - - - 0.4 0.4Dividends - - - (4.5) (4.5)Share issue 3.6 111.6 - - 115.2Effects of long term incentive plan - - 0.2 - 0.2Shareholders' funds as at 31 5.6 111.6 (12.1) (72.2) 32.9December 2004 8 Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 £m £mOperating profit 33.9 27.2Depreciation and amortisation charges 13.1 13.4Profit on disposal of fixed assets (1.2) (0.3)Decrease in provisions (0.4) (0.2)(Increase)/ decrease in stocks (0.3) 0.5Decrease in debtors (0.7) (0.9)(Decrease)/ increase in creditors (0.3) 2.2Net cash inflow from operating activities 44.1 41.9 Included within the operating cash flows shown above are exceptional items(charged) and/ or credited to operating profit. None of these items have animpact on the reported cash flows with the exception of the following: 2004 2003 £m £mExpenses relating to refinancing - (0.5)Recoveries 1.2 1.0Net cash inflow from exceptional items 1.2 0.5 9 Returns on investments and servicing of finance 2004 2003 £m £mInterest paid on Class A and B secured notes (22.4) (3.3)Interest paid on other facilities (0.2) (0.1)Payments in respect of swaps (1.0) (0.2)Interest paid on bank loan repaid April 2003 - (4.4)Interest paid on mezzanine loan (5.1) (2.2)Interest paid on loan notes 2013 (6.6) -Redemption penalty on mezzanine loan (4.0) -Total interest paid (39.3) (10.2)Interest received 1.6 1.1Tax payable on interest payments - (0.9)Issue costs of debt finance (0.1) (6.3)Returns on investments and servicing of finance (37.8) (16.3) As a result of the prior period ending on 26 December 2003, the Group'scashflows in 2004 included expenditure such as interest and debt servicerepayments in respect of the secured A and B notes (£9.1 million) and quarterlyoperating cashflows that were paid in 2003 but are recognised as 2004 cashflowsfor statutory purposes. 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 Rating Agencies (Fitch andStandard & Poor's), the Security Trustee and the holders of the notes issued inconnection with the securitisation confirming compliance with the covenantsestablished under the securitisation. Copies of this report are available at www.dignityfuneralsplc.co.uk. 11 Basis of preparation The abridged accounts for the preliminary results for the 53 week period ended31 December 2004 are unaudited. The financial information set out in theannouncement does not constitute the Group's statutory accounts for the periodsended 31 December 2004 or 26 December 2003. The financial information for the 52week period ended 26 December 2003 is derived from the statutory accounts forthat year which have been delivered to the Registrar of Companies. The auditorsreported on those accounts; their report was unqualified and did not contain astatement under either Section 237 (2) or Section 237 (3) of the Companies Act1985. The statutory accounts for the 53 week period ended 31 December 2004 havebeen prepared on the basis of the accounting policies set out in the Group's2003 financial statements 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. This information is provided by RNS The company news service from the London Stock Exchange