Funeral provider Dignity braces for lower death rate in 2016

The death rate rose 7 per cent last year, which makes funeral provider Dignity's (DTY) full-year figures look pretty good. A greater number of funerals conducted at higher average revenue, in addition to tight cost control, left operating profit up 15 per cent at £95.5m. Statutory profit surged by comparison with the prior period, due to refinancing charges in 2014.

Roughly a quarter of the funerals performed last year were pre-arranged and chief executive Mike McCollum says rigorous customer service standards keep pre-bookings high. Approximately 38,000 new plans were sold last year (from 40,000 in 2014), taking the pre-arranged total to 374,000 (348,000 in 2014).

But historical trends tell us that a spike in the death rate is often followed by a decline, which has led management to forecast the number of deaths in 2016 will be "significantly lower" than in 2015. Hence the 7 per cent drop in the group's share price on results day.

For this reason, analysts at Investec Securities have forecast adjusted pre-tax profit of £70.3m for the 2016 financial year, giving EPS of 111p, compared with £72.2m and 114p in FY2015.