Dignity to buy 5 crematoria for £43m

Listed funeral firm Dignity said it has signed a deal to buy five crematoria from Co-op Funeralcare for £43m in cash.

Three of the crematoria are freehold operations located in Glasgow, Sheffield and Lichfield, with the other two leased from and managed on behalf of local authorities in Shropshire and Stockport.

Completion of the acquisition of the freehold locations is conditional upon the transfer of trade and assets of the relevant locations to a new entity, which is expected to complete on or around 5 July 2016, Dignity said.

The leasehold purchases are conditional upon consent of the relevant Local Authority and transfer of the trade and assets of the location to a new entity. Consequently, one leasehold location is anticipated to complete on or around 25 July 2016, with the other leasehold location due to complete on or around 1 August 2016, it added.

The crematoria generated earnings before deducting interest, taxation, depreciation and amortisation of £2.9m in the year ended 3 January 2016. Unaudited gross assets at the same date were approximately £10.9m.

Dignity, which is the UK's only listed funeral provider, currently operates 39 crematoria. It said it expected the integration of the acquisition would involve limited reorganisation costs and minimal increase in overheads.

“Allowing for the integration, the group anticipates the annualised earnings before interest, tax, depreciation and amortisation from the acquisition in 2017 to be broadly flat on the actual financial performance achieved in the 12 months to 3 January 2016," Dignity said.

"No cost savings have been assumed. The group anticipates that the acquisition will be earnings accretive in financial year ending December 2017.”

Dignity said that it had extended its £26.25m debt facility with the Royal Bank of Scotland plc until the end of 2016 allowing it to use its existing cash resources to fund crematoria deal “whilst maintaining appropriate resources for future corporate development activities that may arise”.