PRESS RELEASE: Fitch Affirms Dignity Fin Notes;Outlook Stable
- Fitch Ratings-London-30 September 2009: Fitch Ratings has today affirmed Dignity Finance Plc's (Dignity) class A and B notes with Stable Outlooks as follows: GBP129.6m class A secured fixed rate notes due 2023: affirmed at 'A'; Outlook StableGBP132.5m class B secured fixed rate notes due 2031: affirmed at 'BBB'; Outlook Stable The rating actions follow a satisfactory review of Dignity's operational and financial performance. Dignity continues to demonstrate its ability to increase revenues whilst maintaining profit margins. Over the last 12 months (LTM) to 26 June 2009, Dignity's EBITDA increased 7% year-on-year (yoy) to GBP 62.5m, reflecting an overall 7% yoy rise in total sales to GBP180.8m. After accounting for maintenance capex and tax, Dignity's LTM free cash flow (FCF) was GBP49.5m, up 3% from the prior year. The FCF DSCR was 2.10x at the end of June 2009, comfortably ahead of the restricted payments condition of 1.4x. Dignity's EBITDA DSCR stood at 2.65x - significantly above both the EBITDA DSCR restricted payments condition (1.85x) and the financial covenant (1.50x). Dignity operates in a stable industry with relatively high barriers to entry. Its most important sales driver is the UK mortality rate, a factor not closely related to economic cycles and one that is relatively predictable. Dignity's cost base continues to remain stable and well managed while various opportunities for growth are regularly being explored both in the funeral homes and crematoria divisions. In H109 Dignity managed to increase its overall market share of the UK cremation business to 7.8% from 7.1% (H108), mostly due to acquisitions. Dignity's market share of the funeral business meanwhile decreased slightly during the same period to 12.0% from 12.5%. This was mostly explained by a slow, but steady increase in the number of smaller competing outlets being established. The average spend per funeral in the UK continued to increase more than general UK inflation and this trend is expected to persist in the next few years despite the current economic climate. This is mainly due to the inelastic nature of Dignity's product offering. Any downside risk on the level of spending per funeral is mitigated by the low level of discretionary spending in the current sales mix, for example most of its clients already opt to purchase relatively inexpensive coffins and therefore there is not much scope to reduce the average cost per funeral. The resilience of the average spend per funeral should help offset the medium-term declines in UK mortality rates which are predicted to reach a trough in 2015 (due to the World War II effect), before increasing again.Dignity's positive financial performance, together with the transaction's de-leveraging, underpins the agency's affirmation of Dignity's notes. The Stable Outlook reflects Fitch's expectations that Dignity will keep delivering stable operational and financial performance and that the UK funeral services industry will remain stable in the medium term. Dignity is a whole business securitisation of funeral homes and crematoria in the UK, involving 545 funeral homes and 30 crematoria. The Dignity group is the second-largest provider of funeral services in the UK and the largest provider of crematoria services. A report detailing Dignity's recent performance will soon be published on the agency's website, www.fitchratings.com. Contacts: Ockert Doyer, London, Tel: +44 (0) 20 7417 6266; Guillaume Langellier, +44 (0) 20 7682 7563. Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=JWM4neLPtDYv8t8s3If73Q%3D%3D. You can use this link on the day this article is published and the following day.
