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Dignity points to digital improvement

The funeral services provider is investing where it can to fend off advancing competitors
August 3, 2017

The opening quarter is a “peculiarity” for funeral services provider Dignity (DTY), says chief executive Mike McCollum. The first period is seasonally more important, so investors shouldn’t be too surprised to read the second quarter was considerably slower than the first. This was reflected in the death rate, which was 7 per cent higher year-on-year during the first quarter. Across the first half, the year-on-year increase was 2 per cent.

IC TIP: Hold at 2,567p

But Mr McCollum says the group is focused on things it can control, particularly since competition is only intensifying. This has manifested in a £1m investment programme into digital operations, which will hopefully drive better search engine results online and thus lead to wider, national demand for services. More than £23m was also spent on acquiring 14 established funeral locations and one crematorium during the first half.  

Meanwhile, the company is also lobbying for tighter regulation. Selling pre-paid funeral plans is “akin to a financial services product” says Mr McCollum. While Dignity takes this seriously, a report it helped fund uncovered multiple examples of bad practice across the wider sector.

Analysts at Investec expect pre-tax profits of £79.1m for the year ending December 2017, giving EPS of 125p, compared to £75.2m and 119p in 2016.

DIGNITY (DTY)   
ORD PRICE:2,567pMARKET VALUE:£ 1.28bn
TOUCH:2,563-2,572p12-MONTH HIGH:2,940pLOW: 2,261p
DIVIDEND YIELD:0.6%PE RATIO:21
NET ASSET VALUE:56p*NET DEBT:£521m
Half-year to 30 JuneTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201615841.565.97.85
201717045.372.58.64
% change+7+9+10+10
Ex-div:21 Sep   
Payment:27 Oct   
*Includes intangible assets of £379m or 759p a share