YTD revenue is near top of my range but UOP just below the middle of my range. The Laurel acquisition appears to have impacted margins more than I expected. Looking back, a similar effect was seen in 2013 Q1 following the acquisition of Yew Holdings. There was good margin recovery in the following quarter- expect the same for next quarter (2015 Q4). Based on Q4 revenue growth (8%) and Q4 UOP margin (29%), my full year EPS expectation is now 113-117p. The 2015 full year death rate is pointing to 6% up on 2014.
Good news on the Derby crematorium planning application. This is one of 4 in the pipe-line at the half way stage. The application in Dartford has the support of the borough council and looks likely to go through too.
On my measure (Barclays website) broker forecasts for 2015 were upped this morning to 105.58p following an additional broker forecast. I can’t be certain but adding some maths it appears this broker is forecasting 115.5p for 2015 (in the middle of my forecast range).
Company boasts earnings and successful growth formula Sole UK-listed funeral services provider Dignity (DTY) looks as attractive as ever after underscoring its investment credentials with an upgrades-stoking third quarter update (9 Nov). Shares is sticking with its positive view on this high-quality ...
Q3 is typically Dignity’s weakest quarter but (along with 4 weeks of Q4 ONS numbers) Q3 gives a very good indication of year-end results. Broker forecasts for full year are 102p EPS. Berenberg are on 99.2p but their number preceded the good interims. Perhaps they’ll put out an update after Q3.
Putting my head above the parapet - my full year expectations are well above that at 113p-120p. To hit this range my Q3 YTD target for Monday is Rev £217m-£229m & UOP £76m-£81m, on deaths running 9% ahead of comparable 2014 period.
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.
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