Funerals: dust to gold dust: Shares in funeral providers are likewise pricey. Take Dignity, the U.K.’s only listed operator. Its shares cost over 20 times next year’s earnings. The FTSE all share is on 16. Australia’s InvoCare is also rich; U.S. groups a bit cheaper. Providers can enhance returns from this steady demand in several ways. One is through price increases; although there is an eventual limit to what the market will bear, the bereaved tend not to be price sensitive and most of the ancillary costs (such as use of a crematorium) are simply passed on to the customer. Another is consolidation. Funeral provision tends to be fragmented, with a long tail of small operators which might eventually opt to sell up. Dignity on Tuesday said it would pay £38 million (just over nine times earnings before interest, tax, depreciation and amortisation) for 36 more undertakers. That premium share price is beginning to look justified. Barriers to entry are low, however. Like estate agency, funeral provision in the U.K. is largely unregulated. Those who balk at the prices the operators charge, and do not want to pay up for the shares, can always set up shop themselves.
12 May '15
Dignity profits rise on high death rate: Dignity, the funeral operator, put its profitable start to the year down to an unexpected jump in the number of people dying in the first quarter. Mr McCollum added that the first quarter of the year has historically seen big movements in the number of deaths. However, Dignity expects the number of deaths in 2015 to broadly in line with the 550,000 reported last year. However, Dignity’s costs fall when it buys a funeral parlour because all the products can be purchased in bulk, the computer systems and accounting are upgraded, and cheaper financing is obtained for large capital items such as hearses. Dignity’s steady revenue and strong cashflow means it is comfortable carrying a lot of debt. The company had net debts of £530 million at the end of 2014, following a major refinancing last year. The one-off costs associated with the refinancing led to the company reporting a statutory loss last year, but the underlying profitability of the business remains unaffected. The new borrowing has secured a more stable future for Dignity, with the debts now agreed for 35 years and at cheaper rates than before. Shares in Dignity have been on a strong run, rising by more than 35% in the past six months, and now trade on 21 times forecast earnings, falling to 20 times next year. The stock is certainly not cheap but given the consistent track record of profit growth and returns of cash to investors, they warrant a premium. Shares in Dignity remain an excellent long-term investment and we retain our recommendation. Dignity at £20.82-1p Questor Says “Hold”.
6 Mar '15
Dignity’s shares have jumped in recent months: Funeral group Dignity has been a solid performer over the past few years, and trading update suggests the business has plenty of room to grow. Underlying pretax profit was £59 million in 2014, an 11% increase on the year before. The earnings outperformed analysts’ expectations, and revenue also rose, up 5% to £268.9 million. However, the company reported a statutory pretax loss of £68 million, reversing the £50 million it made last year, as a result of a costly refinancing of its debts, which allowed the business to return £64.4 million to shareholders. This refinancing also contributed to the company’s debt pile growing from £370 million last year to £530 million. Dignity operates 718 funeral parlours and 39 crematoriums across the U.K. The company conducted 65,600 funerals in 2014 – falling from 68,000 the previous year – and performed 53,400 cremations, a slight dip on the year before. The number of deaths in the first eight weeks of 2015 was approximately 23% higher than the abnormally low number in the same period last year, the company said. It therefore expects results for the first quarter to be significantly higher than the same period in 2014. With a steady death rate, business is unlikely to dramatically alter any time soon and this company is well worth watching. The company’s management has done a good job of growing profit, and its share price has risen healthily in the past few months, from £17.65 at the beginning of December to a close of £19.42. Questor Says “Hold”.
19 Feb '15
most interesting chart . figures in early March ,
18 Nov '14
My holding in Dignity has reduced I assume its to do with the cash back option i accepted can anyone explain it I cant find any info thanks
4 Nov '14
Share price £15.92 per share I have been into this share since it was sub £5.00
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