Working Lunch
In April Dignity Funerals became the first funeral services company to float on the stock market. Chief executive Peter Hindley, the man responsible for orchestrating its rise to become the biggest provider of funeral services in the UK. Read on....
A LITTLE RESPECT
In April Dignity Funerals became the first funeral services company to float on the stock market. Chief executive Peter Hindley, the man responsible for orchestrating its rise to become the biggest provider of funeral services in the UK, talks to Rachel Bristowe about IPOs, US-style funerals and respect
Peter Hindley has a funeral to attend. I hear this as I'm waiting for the Heathrow Express to London, preparing to meet a man who deals with death, in a business sense, on a daily basis. Sadly there's a personal element today - he's leaving our lunch early to pay his respects to one of Dignity's own directors.
Despite Dignity's firm roots in the Midlands I am required to take a plane, train and taxi to arrive at his chosen meeting spot, London eatery Greens - a Wodehousian-style politician's hang-out owned by Camilla Parker Bowles' son where, Hindley later informs me, Princess Diana once had her own booth.
He should know. He's been a regular for 25 years and even held Dignity's management buyout party in the basement. But even Hindley is surprised that our photographer is allowed to capture his every move on film while we dine.
"They're usually funny about that kind of thing," he remarks of the restaurant's discreet management. I explain that I only had to mention his name and their attitude changed. He's surprised and slightly embarrassed. Telltale signs of a modest and gracious man, I fathom.
Hindley is in a business where courtesy and respect are essential. Luckily, for the 108,000 families a year for whom Dignity arranges a funeral or cremation, he has bucketloads of both. For a man who could easily be affected by the trappings his position brings, including the £35.5m (3 per cent of the company) he has just pocketed through the sale of Dignity's stock, his greeting is warm and instantly I'm at ease.
"Before I arrived at Dignity I'd never arranged a funeral and I'd never seen a deceased person in my life," he gently informs me. "I always say to myself, I must never ever forget what I first felt like when I came into the business. That's how the families feel. Most people that come to us have never arranged a funeral. Most will only ever arrange two in their lives."
His attitude is comforting. Maybe his formative years in Rwanda - his dad was a medical missionary and his mum a teacher - growing up during a civil war and witnessing atrocities beyond our comprehension have given him a real respect for people and life.
He has also proven his business acumen, initially building up Sutton Coldfield-based Dignity, which was formerly known as Plantsbrook until 1994, into a profitable operation in the early 1990s, bringing it back from the brink of ruin under US ownership a couple of years later, and restoring and preparing it for stock market glory in 2004.
The company floated at £3200m in April after abandoning a previous attempt because of bad market conditions. It's now worth £3400m - £3210m of which is made up of publicly-traded bonds and equity.
"Our business relies on stability, particularly from a staff's point of view. One option was to change from one venture capitalist to another and refinance the business, but every time you do that the staff think, oh, another change of ownership. They get upset and it's not good."
Towards the end of last year Dignity was approached by stockbroker Panmure Gordon, which advised it to "get in quick and do an IPO". Hindley and finance director Mike McCollum worked doggedly from 8am to 6pm for two and a half weeks conducting 72 presentations to 100 institutions, unsure of how the market would respond.
"It's a great business to present," he says with a proud smile. "It was an easy sell, so to speak. Institutions did come in to invest and now we've got a register of the very good, big institutions - people who want to stay in there for a while and see the share price increase."
Following its flotation, group turnover increased by 6.6 per cent to £337.3m in the first quarter of 2004 and last year sales of pre-paid funerals doubled. As a funeral is something pretty much everyone needs to buy at some point, one could presume that with a steady death rate a business such as this has no worries about going under. But that very nearly happened.
In the 1980s entrepreneur Howard Hodgson grew Plantsbrook through an aggressive acquisition strategy, borrowing substantially and, according to Hindley, paying over the odds for funeral homes. In 1991, following Hodgson's exit and the plummeting of the share price to 37p, the shareholders brought in Hindley, who was by then a stalwart figure in the world of retail.
Not sold on academia, Hindley's career began in the basement of Harrods. He delights in telling me it's where he wooed his wife Lilian. Working there, he says, was like wearing "dead men's shoes", with no managerial opportunities.
In the following 12 years Hindley and his wife lived in no less than 13 homes during stints with BHS, Burtons and Brownes of Chester, ending up at Debenhams, which he "absolutely loved".
In three years he turned Plantsbrook around. "I'd spent most of my life in retailing, which is a fast, dynamic industry. A decent funeral home does 250 funerals a year - that's only five transactions a week - and I wasn't sure I'd cope," he laughs.
The troubles at Plantsbrook became clear early on. "When I arrived there were about 30 people who were called director. In the end I got rid of them. I'll never forget the day I walked into this big garage in Birmingham and there was a sea of blue Jaguars. Then it was all about getting rid of the excesses, motivating people, trying to bring in stability and encouraging the staff. We had to change or it could've gone under," he says ruefully.
In 1994 worse was to come. US funeral giant Service Corporation International (SCI) bought Plantsbrook and another public quoted company, Great Southern, based in East Grinstead. A culture clash threatened to undermine the hard graft.
"Funerals in the States cost three times as much as they do here. Like retailers, their business is about selling products. It was a real misunderstanding of the UK market on SCI's part. The business of funerals is steeped in our culture, religion and tradition and if you ignore that then you'll get into a lot of trouble."
By 1997 Hindley could not take anymore. He went to Houston with the intention of leaving the business but came away with a new job developing SCI's corporate strategy in Europe.
An American Hindley nicknamed Dollar Bill came to run the UK operation and immediately introduced an army of people selling pre-paid funerals. "He [Dollar Bill] planned to be there for three years but I got a call asking if I would come and sort the business out under my terms. The minute I came back, that salesforce went."
After noticing SCI's international operations floundering, Hindley and McCollum put together a business plan in early 2001 and presented it to the American management in a restaurant overlooking London's Tower Bridge. In February 2002 they bought the company for £3135m.
The company was heavily in debt - a mix of mezzannine, loan stock and bonds. Montagu Private Equity and the management bought shares, then Montagu suggested securitising the business.
Securitisation, which happened in 2003, has proved invaluable and Hindley is excited to pass on his new-found knowledge about the complex deal. Whole business securitisation allows a company to borrow against all its assets; traditional securitisation involves only certain revenue streams or assets.
"Very few people understand it - I certainly didn't when we first started. There are only about 12 whole business securitisations in this country. It's much more prevalent in the States but it's very suitable for businesses that are predictable and have good cash flows," he says fixing me into his sea-blue stare.
He's on a roll now and uses some of his service-based skills - he was a retail man, remember - to keep me interested. "Think of it as a mortgage on a business, fixed interest for 28 years. You haven't got to go out to the City and find more money.
"For our business it's a fantastic financial instrument. Because we've floated we've been able to pay down a lot of debt we had on top of these bonds. Our business really lends itself to being leveraged up because it gives a zip to the institutional shareholders."
Dignity's business has three strands. It owns 507 funeral homes across the UK, and despite the Co-op's 14 per cent market share of funerals compared with the group's 12, its 21 crematoria and pre-paid funeral business, which Hindley tells me there's a growing appetite for, means it just has the edge on its closest rival.
Hindley is hoping to grow the pre-paid business but not in the crude and aggressive manner that SCI pursued with nearly disastrous results. This time Dignity is avoiding the hard sell and working with respected insurers such as AXA and Age Concern, which have their own brand names to protect.
Having already spent £38.5m on acquisitions, Hindley is keen to do more but in a measured fashion. "We're not going out to make loads of acquisitions because that's what we did in the past and that's what got the business and SCI into trouble.
"Once you say you're going to double the size of the business by acquisition, you have to start paying silly prices. We want to make six acquisitions a year, selected funeral homes that have a long, established reputation doing 200 funerals plus. Ones we can easily fit into our network."
He might be a bigwig in the City but Hindley is a truly respectful and dignified individual - a devoted family man who is emotionally committed to his business and enjoys the simple pleasures in life such as sailing his boat or driving around in his Range Rover, which he recently swapped for one of the blue Jags.
As our 2pm deadline looms he lets me in on a joke. "I used to run Prenuptials, a retailer of wedding dresses, and now I do this. All my friends say I've got to run Mothercare so I can say I've done births, deaths and marriages," he chuckles
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