31st March, 2021
Open Letter to Shareholders of Dignity Plc
Re: Shareholder Circular & Notice of General Meeting
Dear Fellow Shareholder,
This Letter is a direct response to Dignity's statement published yesterday making claims about why we have acted to requisition the General Meeting.
We have called this shareholders' meeting because we believe we can no longer trust Clive Whiley to be Executive Chairman of Dignity. Therefore, we don’t think it is in the best interests of Dignity and its shareholders for him to be involved with the business.
This is because, as part of our work assisting the Company this year, we uncovered what we believe are some very serious issues in the prepaid funeral plan business (referred to as "pre-need"). We gathered the relevant information and sent it to Clive ahead of the budgeting process and finalisation of the annual results. In our view, his subsequent actions in dealing with the matter, internally and externally, left us no choice but to seek his removal as a director. Conflict is not in our nature but doing nothing would have gone against our company principles and long held standards of integrity.
We are bound by our confidentiality agreement with Dignity and so cannot share all of the details with you. However, we would encourage shareholders to speak with the board to understand this issue in detail.
We must also apologise because we were instrumental in Clive’s appointment. We received advice from people we trusted to avoid working with him. Regrettably, we ignored them.
We have spent the past three years trying to assist Dignity in finding the right strategy to build shareholder value. As we increased our stake and got closer to the Company, it became apparent that the board was dysfunctional and so we put forward a member of our team, James Wilson, to join the board to assist with the issues at hand.
James’ work on the strategy led to some successful trials but we believe that further progress was thwarted by internal vested interests. It seemed that there was resistance to change and that the vested interests favoured short term optics over long term shareholder value.
In such a rapidly evolving funeral market, where the competition grows stronger with every day of Dignity’s stasis, we concluded that wholesale change was needed in November 2020. After meeting with the NEDs and asking them to replace the executive management, including Clive, we compromised in order to avoid the distraction of a shareholder vote and left Clive in place on the basis that we could work together.
We tried our very best to work with Clive in a collaborative and transparent way. Our approach was not reciprocated, and the pre-need issue was the final straw, so we asked the board to remove him.
The work we began in the first couple of months of 2021 started to unleash the wonderful and talented people in Dignity, who we found had all the answers if we just listened to them. That work will resume, but unfortunately the board decided to pause it during this process.
If you look at the other instances where we have a large stake in a business, like Hornby or Stanley Gibbons, you will see that we treat minority shareholders as partners and we don’t take a single penny from the companies in salaries or Phoenix expenses. You can expect the same from us at Dignity where we are proposing no pay and no expenses for Gary. We are also giving you the peace of mind that we won’t use this situation to make a bid for the Company.
The only way we can benefit is by rapidly helping the business find the right long-term strategy that builds shareholder value. We sit right beside you as shareholders and our interests are aligned.
Gary Channon does not seek a long-term position on the Dignity board. We intend to use the position to put in place the right leadership team and then fall back to a supportive role as before.
The fairest and most transparent way to settle this is to allow shareholders to decide on whether they want Clive to continue working for them. We remain open to working with the rest of the board if they wish to stay, but the real asset in the business is the caring and compassionate people who look after our clients every day.
We promise you honesty, hard work and full transparency on both the good and the bad that we find. We have not sought to address every twist and turn of the board’s statement here but if you have any questions, then please get in touch using the email address below.
Note to shareholders:
Phoenix Asset Management Partners is a fund management company founded in 1998, based in Barnes, Southwest London.
We have an investment philosophy inspired by the teachings of Benjamin Graham, Philip Fisher, Warren Buffett and Charlie Munger. We are known for the depth of our research especially our monitoring programmes that are based upon lots of fieldwork as we experience companies through the eyes of their customers. We have a long term track record of generating returns significantly in excess of the market and manage £1.2bn.
Over the past 23 years we have built Phoenix using a principles based approach to business that emphasises integrity, transparency and fairness in all our dealings. You can learn more about us at www.phoenixassetmanagement.com.
Posted on 31 March 2021