Books.google.de - Consisting of an integrated technology platform, enterprise information systems enable organizations to integrate and coordinate all business processes, offering a strategic area of focus.Enterprise Information Systems for Business Integration in SMEs: Technological, Organizational, and Social Dimensions. Enterprise Information Systems for Business Integration in SMEs: Technological, Organizational, and Social Dimensions.

Contents Our report is structured as follows. The first section is the summary of our argument. Following this we have provided some background information on Dignity, the UK funeral market and the typical customer purchase cycle. The main section of the reports begins with a look at Dignity’s historical performance. Within this, we will provide analysis around how the historical branch expansion strategy has been undertaken and its effects as well as analysis of how prices have changed historically. We will then look at what constitutes a funeral, whether through Dignity or another provider and show that Dignity operates at a pricing level that is far in excess of market averages.

In here, we will also talk about why we believe this pricing premium cannot be justified to customers. Following this, we will detail why we believe Dignity will not be able to maintain this premium going forward, looking at the impact that price comparison websites will have on the funeral industry and examples of industries where this shift has played out previously.

A History and Development of ebookers plc — Regulation') imposes restrictions on the collection, use and processing of personal data. Even though the purpose of the various E.U. Privacy and other directives is to harmonize the various national laws on data protection in the European Union, the directives set a minimum.

We will close with a section on valuation. The below table shows all the recent director transactions in Dignity shares. The starting balance for each director has been taken from “Director’s interest in shares” on page 60 of the 2016 Dignity Annual Report. Proceeding transactions compiled from RNS releases available on Dignity’s investor relations site. Management has been unloading large portions of their holdings in 2017 from the data we have seen.

The CEO has reduced his shareholding from 0.37% to 0.17% None of the management team has a shareholding of more than 0.21% of the Company. We believe that Dignity is currently valued based upon a view that EPS will continue to grow through a predictable increase in revenue and profits. We do not believe that this will be the case going forward and set out our argument as follows. Between 2005 and 2016 (“the historical period”) the Company delivered: • Revenue growth from £143 to £314 million (7.4% cagr) • Operating profit growth from £42 to £98 million (8.1% cagr) • EPS growth from 22.4p to 119.8p (16.5% cagr) There have been two drivers of this historical performance: • a 53% increase in the number of branches (3.9% cagr); and • an 81% increase in pricing (5.6% cagr) The former is well publicised and reported on by Management.

The latter, however, is not discussed publicly or reported on in annual reports. There are no KPIs reported relating to pricing. To fully understand historical performance, and form a view on future prospects, it is necessary to analyse how both branch expansion and pricing have played their respective parts in Dignity’s growth story. Our view on the historical contributions of these two drivers is that: • Branch expansion has functioned to keep the number of funerals performed steady, offsetting a +30% collapse in branch productivity • Dignity’s market share has been static at c.12% between 2005-16 • Branch productivity (funerals performed per location) has collapsed by more than 30% from 129/year in 2005 to 87/year at H1 2017. • Newly acquired locations typically provide around 150 funerals per year initially, offsetting customer losses elsewhere in the portfolio. • Pricing has been used to provide constant top-line growth • With customer numbers flat over the historical period, pricing has been used as a lever to provide revenue growth • Prices increased every year between 2005 and H1 2017 from £1,699 to £3,153 (cagr 5.6%) Effectively, Management have driven top line growth through large price increases across the existing portfolio, whilst offsetting decreasing customer numbers in the existing portfolio by acquiring new locations. The net result is that Dignity serves roughly the same number of customers each year but charges each of them a higher price.

We believe this strategy will no longer be available to Management and that both branch expansion and price increases are now unsustainable. Branch expansion must logically end at some point. The ability to ever expand branches without cannibalising existing locations or falling foul of competition concerns is not guaranteed. Already, Dignity has twice chosen not to purchase the entirety of a target’s portfolio, citing competition concerns. The method of expansion is also unsustainable.

Dignity’s historic strategy has been to acquire small, family-owned businesses and operate them under the family name. Frequently, the owners and employees of these businesses then establish a new funeral business of their own post-acquisition. There are practically no barriers to entry on a local level for a funeral business and local competition, in part driven by these former owners/employees, helps explain the collapse in productivity. It is our view that Dignity should not continue acquiring further businesses without finding a way to compete effectively on a local level. The Data Warehouse Lifecycle Toolkit Ebook Pdf Gratuit more. We question the worth of the £350 million of goodwill and intangibles (50% of total assets of £715 million) held in relation to these acquisitions when the businesses acquired simply spring up again. However, of more pressing concern for Dignity is whether it will be able to continue increasing prices as it has done historically.

After all, price increases are the only thing that has provided revenue growth with customers numbers flat. Dignity has historically operated in an opaque market where customers have had little knowledge of what a fair price is.

This is now changing rapidly with the advent of price comparison websites, such as ours, for the funeral industry. Within just a few clicks people can now see what funeral directors will charge them for a funeral before choosing who to use. Just as with air travel, insurance and hotels, the internet is democratising information and shifting power to the consumer. With consumers shifting their research and purchasing online, funeral directors will have to increasingly compete to win their business. Within the industry, Dignity is the most exposed provider to any shift to price transparency and increased competition. This is because, following a decade of unremitting price increases, Dignity now operates at a totally disconnected pricing level to the rest of the UK market.

Based on customers through our site in the last year, a Dignity funeral costs 83% more than a funeral arranged through Funeralbooker. Other estimates of this premium can be gained from Royal London research (45%), Ipsos Mori 2010 research (36%) and Sun Life research (32%). With increasing transparency, investors need to consider whether customers will continue to pay a premium for a Dignity funeral. People are typically only willing to pay a premium for a service when it comes from a recognised brand with a demonstrable advantage. We do not view Dignity as being a premium provider owing to: • The collapse in branch productivity. Why would a company with strong a strong product see a 30% collapse in branch productivity? • Dignity does not operate as a national brand.

If the product offered is really at the premium end, why does the Company use over 500 different trading names across the country? The most obvious, and simple, explanation is that Dignity has only been able to charge a large premium because of market opacity. As this opacity erodes, Dignity’s premium recedes. Based on this view, we have provided a financial model showing how a pricing reduction of 3.0% per annum between 2018 to 2021 impacts forecast EPS. This model produces a downside to analyst consensus estimates of EPS in 2018 and 2019 of 7.3% and 14.3% respectively. Dignity PLC is a provider of funerals and related services in the UK. The group was created in 1994 when Service Corporation International (NYSE:SCI), a US-based provider of funeral services, acquired Plantsbrook Group and Great Southern Group.

In 2002, Peter Hindley (CEO) and Mike McCollum (then CFO, now CEO) led an MBO of the group from SCI supported by Montagu Private Equity. The group listed in April 2004 and is now a member of the FTSE 250 with a market cap of £1.2 billion. Since listing, the Company’s share price has grown at a cagr of 14.1% (compared to FTSE250 at 8.9%) on the back of strong revenue and profit growth.

Despite this impressive performance, the Company is often overlooked by investors because of the market it operates in. The UK funeral market is relatively small (c.£2-4bn annual spend) and Dignity is the only listed provider.

Dignity is easy to understand on an operational level. The Company simply provides the services necessary to help a customer arrange a funeral. This includes practical elements such as body collection and preparation, professional guidance through an unfamiliar time, and managing the logistics and details of the funeral event itself. Funerals are a local service and, as such, require a physical branch location from which to serve the customer. These branches often serve as the mortuary or viewing areas.

The Company built a national network of funeral locations between 2005 and 2016, increasing the number of locations from 519 to 792. In doing so, Dignity became the second company with a national presence (Co-operative Funeralcare being the other with c.1,000 locations and is part of the main Co-op group). Alongside its core provision of funeral services through its branch network Dignity also owns a portfolio of 44 crematoria and sells pre-paid funeral plans. The crematoria generate revenue through charging customers a cremation fee. Dignity’s crematoria are used both by its own network of funeral homes and by third-party funeral directors. Dignity sells pre-paid funeral plans through its branch network and also through other marketing channels.

Lvd Cadman Crack. These plans function primarily to “secure” a future customer by allowing them to pre-pay Dignity for their future funeral costs. The revenue from performing these plans is recorded within the previously mentioned funeral revenue when the customer dies and the funeral is performed.

A relatively small “marketing contribution” revenue is recorded at plan sale. Dignity grew revenues from £143 million to £314 million (cagr 7.4%) and operating profits from £42 million to £98 million (cagr 8.1%) between 2005 and 2016.

Clearly, the past decade has been a very successful for Dignity and its shareholders. The UK funeral market is made up of two key business types: • Funeral Directors – this includes Dignity, Co-op and smaller funeral directors. The funeral director is the key contact point with the customer and arranges all aspects of the funeral. They provide the practical services (e.g. Collecting, storing and preparing the body), professional services (e.g.

Assisting with statutory documentation and arranging the funeral event) and pastoral services (e.g. Supporting the deceased’s family through the grieving process).

• Crematoria and cemeteries – these are the locations where the funeral actually takes place. There are 282 crematoria in the UK and thousands of cemeteries. Most crematoria are owned by local councils and Dignity is the single largest operator with 44 crematoria. Cemeteries are typically owned by local councils or churches. Very few customers transact directly with the crematoria or cemetery, as funeral directors will typically arrange the logistics and payment on behalf of the family.

There are roughly 5,000 funeral director branches in the UK and in 2016 there were 597,000 deaths. This gives Dignity a 15.8% market share on a branch basis and a 11.8% share on a death rate basis. Dignity is the second largest player in the UK funeral market after Co-operative Funeralcare (part of the larger Co-operative Group) which has roughly 1,000 branches and performed 98,000 funerals in 2016. The remainder of the UK market primarily comprises small businesses typically with 1-3 locations. This means that, compared to other markets, the UK funeral market is still relatively fragmented with somewhere between 60-65% of branches operated by small, local businesses. Share of Deaths There are no reliable estimates of the total market value of the UK funeral industry.

Estimates of c.£1.7-2 billion are often quoted but it is unclear whether this includes payments to crematoria and cemeteries so we have not used it here. The cremation or burial fee paid to the crematorium or cemetery respectively typically comprises 33-50% of the total funeral bill. The barriers to entry for a new funeral business are relatively low. There are no necessary licenses or regulations to comply with apart from health and safety regulations that cover storage and preparation of bodies.

The largest barrier historically has been the need to have a local, well-established reputation. This barrier has been eroded in recent years with the advent of new channels to reach prospective customers (social media, online comparison sites) as well an increased propensity for customers to shop around and try new businesses. Funerals are a local purchase with the majority of customers choosing a funeral director close to them geographically. Alternatives, such as direct cremation where geographical proximity is less of an issue are emerging but currently only have c.5% of the UK market.

The funeral purchase process can start before a death however most people only start to seriously consider which funeral director to use once a death has occurred. After a death, the next of kin must register the death within 5 days. A funeral director cannot legally begin the process of arranging a cremation or burial until the death has been registered (although often a customer may have already “engaged” a funeral director ahead of registration). Over 50% of deaths occur in hospital and the body can typically be held in the hospital mortuary whilst a customer chooses a funeral director they would like to use. If a death occurs at home, a funeral director will typically be called out to collect the body by the police if the family does not have a chosen funeral director in mind. The customer is not obliged to use a funeral director appointed by the police if they do not wish. The typical customer is aged between 45 and 75 years old and is a close family member of the deceased (spouse or child).

However, given the nature of the purchase, many customers will seek the involvement and participation of a wider group of family members (grand-children, siblings, children if the spouse is the arranger). Expansion has been one of 5-6 core strategies identified by Management each year between 2006-16. In earlier years this was phrased as “selective acquisition” but was later broadened to “developing or acquiring” to reflect the start of the satellite location programme. The number of branches in the portfolio expanded from 519 to 792 between 2005 and 2016, an impressive increase of 53% at a 3.9% cagr. The Company has successfully expanded across all the major towns and cities of the UK, as shown in the network map. This expansion was achieved through acquisitions and organic openings.

Acquisition has been the primary method of expansion, contributing over two-thirds of the increase over the period. Figure 2 – Expansion by acquisition and organic. Branch expansion, and more specifically expansion through acquisition, has clearly been a key focus for Management over the historical period and played a significant part in Dignity’s historical performance. Despite the success of this strategy on the surface, there are two key elements of this strategy that have been historically overlooked.

• Acquisitions actually drive competition on a local level - acquisitions have created numerous well-funded, well-trained and well-motivated competitors • Dignity operates entirely under acquired trading names – sensible historically but increasingly vulnerable to a consumer backlash and also mean there is no customer facing brand The former is important to understanding why branch productivity has collapsed and thus why prices have had to increase so dramatically. The latter is important to understanding how Dignity operates and competes on a local level and thus why it cannot reasonably justify the pricing premium charged. We will discuss both in this section but to start with we will provide detail on the typical acquisition process and rationale. Acquisitions of existing funeral businesses has been the primary expansion method and contributed an extra 216 branches to Dignity’s portfolio over 2005-16. These have typically been the purchase of small, family-owned funeral businesses however, wherever possible, Dignity looks to acquire larger groups. We have estimated a total of £231 million spent on acquiring existing funeral businesses (excluding crematoria acquisition cost where possible and capex for satellite locations) based on available disclosure.

The first large acquisition completed by Dignity was the £58 million purchase of Yew Holdings Limited in January 2013. This contributed 40 funeral locations and two crematoria to Dignity’s portfolio.

Dignity chose not to acquire 20 locations of the Yew portfolio to “minimise any potential competition concerns”. This acquisition increased Dignity’s presence in the North of England. The second, and most recent, major acquisition was the £38 million purchase of 36 locations from Laurel Funerals. In this instance, Dignity chose not to acquire 47 locations.

The RNS states that the locations purchased “complement geographic spread” and, also, that the acquired branches “do not breach any of the established tests that are used as preliminary filters by the Competition and Markets Authority”. The reason we draw attention to the locations not purchased is that, at some point, Dignity reaches a saturation level whereby it cannot acquire further locations without either causing competition concerns or risking existing portfolio cannibalisation. Additionally, any owners of funeral businesses in “white-space” for Dignity will likely be aware they can demand a significant premium for purchase.

We are not providing on whether Dignity has reached saturation yet, however it is clearly closer to this point now than when it listed in 2004. £231 million spent on acquiring existing funeral businesses (excluding crematoria acquisition cost where possible and capex for satellite locations) based on available disclosure. Dignity do not provide details regarding their standard acquisition process and terms.

This is understandable given it is commercially sensitive. However, understanding this is important to forming a full view on the Company. At Funeralbooker, we are constantly in contact with funeral directors. As such, we have been able to build a working knowledge of Dignity’s practices. Acquiring a business typically has the intrinsic benefit of reducing competition to the acquirer.

However, when we look at Dignity we can see that this is false. Every acquisition that Dignity undertakes creates new competition from two sources: • The business owner who, after a lock-up period, starts a new business • Staff who, post-acquisition, decide that they would rather go it alone rather than become part of Dignity Before we go into detail on both of these, we need to dispel the myth that there are high barriers to entry for opening a funeral business. High barriers to entry are frequently cited in due diligence or market research but this does not bear up to scrutiny. • The funeral business is unregulated - anyone can begin trading as a funeral director with no licensing or qualification scheme to undertake first • Premises are not required – many new funeral directors now operate with no fixed premises and instead visit customers at their house • No need to purchase equipment/vehicles - can be hired from other local funeral directors with excess capacity or national firms Although barriers are clearly high to become a national operator at a local level barriers are virtually non-existent. You can literally set up overnight as a funeral director. Knowledge and experience are the main barriers to establishing a viable funeral business – this is clearly of no concern to someone who has just sold a business to Dignity or a long-term funeral home employee. Acquiring customers is clearly a barrier.

However, the number of funerals required to pay for a one-man band funeral home in the early years is low. Even providing just 50 funerals a year at an average take per funeral of £1,000 (assumed after hire of equipment/vehicles) leaves the operator with £50,000. Acquiring customers is also obviously far less of a barrier to someone with years of experience providing funerals. The effect of local competition can be seen in both Dignity’s market share and branch productivity. This was identified by Management in the H1 2017 trading statement, the Company states: “The Group continues to keep market share under review, with reductions in the first half of the year slightly worse than anticipated. This could be a function of increasing numbers of competitor locations or more aggressive price competition.” It has also been reiterated recently by the CEO, Mike McCollum, speaking to The Daily Telegraph: “The funeral sector is unregulated, so it is very easy to set up a new business,” McCollum told The Daily Telegraph. “We have seen, over many years, the number of funeral directors continue to rise, with more vigorous competition in the sector.

It is a very fragmented market, and is fragmenting the whole time. ” This quote is telling and, given the strength of the sentiment and the acknowledgment that this has been a multi-year trend, we are extremely surprised that this has not been brought to investors’ attention previously. We will now show where this “vigorous competition” is coming from. The first source of competition we identified was from the owners of the acquired business. Dignity does not perform acquisitions as partnerships with existing owners.

The owners are kept on for 1-2 years to ease transition but following that they are required to leave. In earlier years, these owners would have moved up through Dignity’s corporate structure (e.g.

Area manager, regional manager, acquisition manager etc) however there are simply not enough roles to keep former owners gainfully employed. Dignity doesn’t like to retain owners within the required business for two reasons: i) they are expensive; and ii) they often chafe under new operation compared to “how things used to be”. It goes without saying that these owners have extensive knowledge of the funeral industry and a thorough understanding of their local community.

The owners will also have a substantial windfall of cash, very useful for any new ventures. We have heard numerous instances of previous owners opening new funeral businesses after an acquisition by Dignity. To provide weight to the anecdotes, we have used Companies House to establish evidence of where this has clearly happened.

S&R Childs Funeral Services Dignity purchased S&R Childs Funeral Services Limited in 2013 (company number 05119459). This business was subsequently dissolved but two of the directors are listed as Sandra Homewood and Geoffrey Homewood, each with a 50% shareholding. At the time of purchase, S&R Childs had four branches located around Oxford all of which trade under the S&R Childs name. In the 2013 Annual Report, Dignity states that it acquired a total of 5 locations (excluding the Yew acquisition) for a cash consideration of £3.4 million.

It is reasonable to assume that the S&R Childs purchase comprises the bulk of this amount. In February 2017, Sandra and Geoffrey Homewood opened a new business trading as Sandra Homewood Funerals (company number 10605301).

The new business is located 5 miles away from the closest S&R Childs branch so will likely see some overlap of customers. More importantly for Dignity, the new Homewood business is located just a few hundred metres from a different Dignity business, L Hartness Funeral Directors in the town of Bicester. We do not know what restrictions, if any, were placed on the Homewoods but it appears they are now in direct competition with Dignity again. We believe the Homewoods will be opening a second branch shortly. As an interesting side note, when Dignity purchased S&R Childs it already owned two locations in Oxford. • Fisher & Townsend at 81 High Street, Witney, OX28 6HY (company number 00772376) which looks to have been owned since around 1991 • P L Barrett Funeral Directors at 81 Ock Street, Abingdon, Oxfordshire, OX14 5AG. It appears that both of these names have now been rebranded as S&R Childs Funeral Directors with the two former names falling out of use.

We assume this is due to S&R Childs having a stronger local reputation than the replaced names. There was no reported impairment or amortisation of the intangible value related to these trade names in the 2013 annual report. James Bradley & Sons Based on Companies House records, James Bradley & Sons began trading in April 1975 (company number 01206116). It is unclear when Dignity purchased the name of this business but the company now operates two locations in Manchester under this name. One of the original directors of the business, Alan Bradley, now owns another business, Alan J Bradley & Sons. This business has been in operations since May 1998 (company number 03572151). This business is located less than half a mile from James Bradley & Sons.

Competition does not just come from the owners of the acquired business. Just like acquisitions in other industries, Dignity transfers existing staff in the business to its operations (often under TUPE regulations). After an acquisition, we believe that staff are required to enter new employment contracts with altered terms. Many staff who leave are experienced and well-trained.

Many commend Dignity’s training as being best in class. Some of the common friction points that arise between Dignity and acquired staff include: • Objection to steeply raised prices as being “unfair” on families • Objection to any instructions to encourage customers to spend more (“upselling”) • Objection to continuing to trade as the previous family name when it is now owned by someone else Fundamentally, the staff who leave to set up their own business simply believe they can do a better job of it themselves.

They have the experience and they know the community. Crucially, they know they can beat Dignity on price too.

“I could never knock the training I received from SCI/Dignity but along the journey I've met more people appalled by their practice than those in favour. I made good lifelong friends whilst working with them but my moral and caring nature made it impossible for me to conform by their rules so I got out!” Simon Helliar-Moore, former employee now runs Crescent Funeral Services Given staff are not owners, it is not possible to use Companies House to provide examples of this. Instead, we have simply provided some examples of how funeral directors talk about their past experiences on their websites. Jeremy Rule of Jeremy Rule Funeral Service: Jeremy was born and brought-up in Royston, he set up his own business in 1999, having worked for over 20 years in the funeral industry and having been manager for another local funeral directors until they were taken over by a larger company.