It's a morbid thought, but 590,000 deaths in 2016 (up from 588,000 in 2015) was a far better number than funeral service provider Dignity (DTY) had expected. It helped last year's underlying pre-tax profit figure of £75.2m beat consensus forecasts, but fails to explain why the share price fell 17 per cent on results day.
To understand this is to understand the nature of Dignity's business, which is often as simple as high death rate equals good year, low death rate equals bad year. And historical data suggest the number of deaths could be "significantly lower" in 2017, according to management's outlook.
Analysts are also concerned about Dignity's market share, which fell to 11.8 per cent from 12.3 per cent last year, explaining why a lower number of funerals were performed in 2016 (70,700 compared with 73,500 in 2015). But chief executive Mike McCollum isn't panicking yet. High levels of competition are "nothing new" he says, particularly in a sector that is "completely unregulated".
Analysts at Panmure Gordon expect pre-tax profits of £77.4m for 2017, giving EPS of 123p (up from £75.2m and 120p in 2016).
| DIGNITY (DTY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,448p | MARKET VALUE: | £1.22bn | |
| TOUCH: | 2,447-2,450p | 12-MONTH HIGH: | 2,940p | LOW: 2,240p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | * | NET DEBT: | £524m | |
| Year to 30 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 230 | 45.4 | 65.0 | 16.1 |
| 2013 | 257 | 49.6 | 73.0 | 11.8 |
| 2014 | 269 | -67.7 | -104 | 13.0 |
| 2015 | 305 | 69.0 | 115 | 14.3 |
| 2016 | 314 | 71.2 | 115 | 15.7 |
| % change | +3 | +3 | - | +10 |
Ex-div: 18 May Payment: 30 Jun *Negative shareholders' funds | ||||
