As Diginty is new to the martkets and the first funeral services company to be floated, what are your views on its future potential?

There appears to be little data on which to ascertain a valuation.

I don't suppose we are going to run out of dead people!

Dignity: Berenberg initiates with a target price of 1600p and a buy recommendation.

Rising quietly of late.

Sept 17: Investec: Buy - TP held 1660p.

RNS


RNS Number : 8645R

Dignity PLC

17 September 2014










For immediate release 17 September 2014

Dignity plc

Issue of Exchange Offer Memorandum and Preliminary Prospectus by
Dignity Finance PLC



Potential Return of Capital to Shareholders



Dignity (the 'Group') is pleased to announce the launch of a proposal to the existing holders of its securitised debt, which if approved, is expected to result in the Group materially increasing the quantum and extending the duration of its debt obligations. As a result of the proposal, the Group's annual debt service obligations would be expected to reduce from circa £40m to circa £34m per annum and approximately £1.00 per ordinary share would be returned to shareholders (a total of circa £54m).



The interim dividend declared on 30 July 2014 will still be paid on 31 October 2014 and will not be affected by this announcement.



Rationale



Since its flotation in April 2004, Dignity has periodically issued further Secured Notes, returning the majority of the net proceeds in each case to shareholders.



The Group believes that given the low interest rate environment and the narrow spreads implicit in the market value of the Group's debt, there is an opportunity to extend the life of its debt and raise new funds. Overall, this will result in the Group's annual debt service obligations reducing by approximately 15% per annum. At the same time, the associated agreements will benefit from various amendments that will help the Group operate more efficiently in the future.



The process



Dignity Finance PLC (the 'Issuer') (a subsidiary of Dignity (2002) Limited, the holding company of the securitised sub-group of Dignity plc) has today called meetings of the Class A and Class B Secured Notes ('Existing Notes'), which will be held on 9 October 2014.



The purpose of these meetings is to approve a proposal (the 'Exchange Offers') by the Group to redeem all existing Class A and Class B Secured Notes, with noteholders receiving new Class A and Class B Secured Notes in consideration (the 'New Notes'). The New Notes are expected to have final maturity dates of 2034 and 2049 respectively. The Coupon will be fixed and the principal will amortise over the life of the Notes. As such, the New Notes reflect a similar structure to the Existing Notes and the Group's annual debt service obligation will be constant year on year but at a lower overall quantum. The New Notes are expected to be rated A and BBB respectively by both S&P and Fitch.



The Exchange Offers have been made available on the terms and subject to the conditions set out in the Exchange Offer Memorandum. The Exchange Offers have been considered by Existing Noteholders representing approximately 40 per cent in aggregate of the outstanding principal amount of the Existing Class A Notes and approximately 49 per cent in aggregate of the outstanding principal amount of the Existing Class B Notes. They have informed the Issuer that they find the Exchange Offers acceptable and that they intend to accept the Exchange Offers and approve the Extraordinary Resolutions.



If all the proposals presented to the meeting are approved, the Group intends that in addition to the New Notes issued in consideration for the Existing Notes, further New Notes will be issued for cash and that of the anticipated net proceeds of approximately £70m, approximately £54m will be returned to shareholders in November 2014 using a similar process to that used in 2013. This would equate to a return of circa £1.00 per ordinary share. The remainder of the net proceeds will be used to terminate existing hedging arrangements of the Group of approximately £5m and contribute £1m to the Group's pension scheme, leaving up to £10m to be retained for future acquisition activity. Given the longer duration of the New Notes, the overall annual debt service is anticipated to be circa £34m per annum, approximately £6m lower than the current level paid by the Group.



The Existing Notes are currently recognised on the Group's balance sheet as a total liability of circa £406m, with circa £15m of issue costs offset against this amount in accordance with accounting standards. If the proposals are implemented, given the Existing Notes trade at a premium and the issuance of additional debt for cash, the overall balance sheet liability will increase to approximately £580m. Issue costs relating to the Existing Notes and the Exchange Offer will be written off in accordance with appropriate accounting standards. Consequently, there will be a one-off charge to the Group's income statement in 2014 of approximately £105m to £115m. This amount will be excluded from the Group's underlying performance measures.



If noteholders vote in favour of the resolutions at the respective meetings, any decision to implement the Exchange Offers will be subject to market conditions prevailing at the time and there can be no guarantee at this stage that the New Notes will be issued or that there will be a Return of Capital to shareholders.



The estimates made in this announcement are based on current market conditions and gilt yields. Changes to these prior to the completion of the process may adversely impact the amounts described.



Mike McCollum, Chief Executive of Dignity plc, commented:

"This is an excellent transaction for both our shareholders and bondholders. These proposals, if approved and implemented, will give the Group the opportunity to lock its debt in to the current favourable low interest rate environment for the longer term, whilst maintaining a structure that protects against increasing interest rates and refinancing risk. Shareholders are expected to benefit from a return of approximately £1.00 per ordinary share, the fourth return of cash to shareholders since flotation, whilst the Group's annual cost of servicing its debt should reduce by approximately £6m per annum."





A conference call for analysts will be held at 8.00am BST on 17 September 2014. Please contact Buchanan if you have not received dial in details and wish to attend the call.

Sept 18: Panmure Gordon: Buy - TP: 1800p.

Debt-financed expansion plans often have a questionnable rationale behind them, but in the case of Dignity they seem to make sense. The company, which operates 698 funeral parlours and 39 crematoriums across the UK, has seen steady growth in both revenues and profits since its flotation in 2004. However, it still only provides funeral services for under a quarter of the deaths each year in the UK.

Furthermore, the country has experienced a stable death rate of between 540,000 and 600,000 each year for more than half a century, although it will be at the lower end of that range in 2014. Hence, the business model of acquiring independent providers seems to be on a good footing. In parallel, management is carrying out a debt restructuring which will allow it to return 54m pounds in cash to shareholders. The stock, nonetheless, is currently trading on 15.6 times´ next year´s profits, which looks too rich, although the firm´s shares are well worth watching should a correction in the price offer an opportunity to step in, writes The Daily Telegraph´s Questor column.


http://sharecast.com/news/thursday-tips-round-up-smiths-group-dignity/22056094.html

Questor/Telegraph complete article here.

One thing no one seems to mention is that, if, with the cash return (the DTY
statement says cash will be returned as in 2013) there is a share consolidation as
happened last year, when capital was returned to shareholders,, one is left with fewer
shares, so it makes sense to wait for a market correction and to buy then, as suggested
in the article.
The Questor comment about waiting half-a-century to get one's capital back is pertinent.
I will be dead long before then. At least DTY will look after me then.

Ex dividend Wed 23 Sept 6.49p

Oct 1: Berenberg reiterates: Buy - TP: 1600p.

Dignity pricing
and share consolidation

13 Oct Investec 1,660.00 Buy

Trading statement Mon 10 Nov

Q3 management statement

Nov 10: Panmure Gordon; Buy - TP lifted from 1800p to 1900p

Nov 11: Numis: Hold - TP: 1550p

Nov 12: Investec: Buy - TP lifted from 1660p to 1800p

Nov 19: Berenberg: Buy - Lifts TP from 1600p to 1850p

DC - Remarkable rise of late.