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Dignity does a bit better

The funeral provider is trying to shore up confidence after losing half its value at the start of the year
March 14, 2018

After a profit warning added fuel to our sell rating in January, shares in funeral provider Dignity (DTY) bounced back after the group marginally beat expectations at the bottom line last year. Broker Panmure Gordon said pre-tax profit of £77.8m represented a 1 per cent outperformance against its forecasts. Even better, trading into the current financial year has been better than expected – helped by a 7 per cent increase in the number of deaths, as well as a significant price cut to the group’s simple funeral plan and a price freeze on its traditional funeral product.

IC TIP: Hold at 984p

The pricing decision was made in January after a flat death rate left Dignity trailing cheaper, online rivals last year. It’s hoped this new strategy, alongside continued acquisitions (24 new funeral locations were added last year and one small crematorium) will help protect the group’s market share.

As for how the business will manage its high level of fixed costs going forward, analysts suspect more will come to light at the trading update in May. For now, Panmure Gordon expects pre-tax profit of £40.9m for 2018, giving EPS of 64.3p, compared with £77.8m and 128p in 2017.

DIGNITY (DTY)   
ORD PRICE:984pMARKET VALUE:£491m
TOUCH:981-985p12-MONTH HIGH:2,777pLOW: 736p
DIVIDEND YIELD:2.5%PE RATIO:8
NET ASSET VALUE:93p*NET DEBT:£517m
Year to 29 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201325749.673.011.8
2014269-67.7-10413.0
201530569.011521.5
201631471.211523.6
201732471.211624.4
% change+3--+3
Ex-div:17 May   
Payment:29 Jun   
*Includes intangible assets of £386m, or 773p a share