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londoner7: Point 1 - The effect of the report publicity-wise will be enormous as no-one likes to hear of the elderly and vulnerable being ripped off. Undertakers aren't generally well-liked people and the image of the Dignity board rubbing their hands greedily as the money rolls in will be a lasting one.
Point 2 - The CMA has already found big holes in Dignity's responses thus far (e.g. they found that there was no evidence to support their claim that higher prices equates with higher quality). All funeral directors do children's funerals for free, it's not just Dignity, so that's an empty grasp at being virtuous.
Point 3 - Most independent funeral directors already surpass current requirements and would be totally unphased by newly introduced expectations. I fail to see what the financial costs would be. Refrigeration? Who wouldn't have this already?! I think you might find that the new regulations cover such areas as transparency of pricing and the most guilty offender in this regard is Dignity!
Specs1,
So far so good hey mate. Hows your 'short' plan working out ?
At the end of the day I cannot see anything that will make a real big difference from what was happening in the funeral trade prior to the CMA investigation, The big concern was pricing and openness, which dignity have already taken the hit on that one . The crem situation is very complexed and will be hard to change somethings.
I cannot see any great regulation maybe something that could be managed by trading standards.
In the past the CO-OP have had some major cock ups makes the headlines and then fish and chip paper.
Dignity will cope with any bad publicity and move on. Talk to Joe Public and they do no know about any enquiries or anything that is going on, Because funeral homes run under existing names that dignity bought a large % of people do not know it is dignity anyway. Back to regulation as it stands at the moment any body can set up in the funeral trade without so much as a CRB CHECK or any checks, if there was massive regulation it would increase costs more than present level as the councils, would have to charge, and people like HEALTH AND SAFTY ect, ect a big can of worms might escape,
Specs1, thanks for your response. You highlight three areas.
'Effect of report' - The level of publicity will depend on the media's asessment of it's newsworthyness. But whatever comes out will be a one time event and fade from the public consiousness. As an example, we all use and pay for energy so we're inclined to take an interest in energy headlines impacting our pockets, but a small % of the population will be in the market, so to speak, to consider the commercial implications of a report on the funerals business. I don't any media impact will have a longterm consequence on Dignity's business.
'Actions' It still isn't clear to me how the CMA will impact Dignity's business in a market/capitalist economy. Dignity's website has a copy of Dignity's response to the CMA. Dignity point to some possible outcomes and make the point that they already offer free funerals to sectors of the community. Let's wait for the full report.
'regulation' here I disagree entirely with your points. Yes. decent funeral directors would want to meet new regulations - if they are required - but will face higher costs, and an element of that will hit consumers. Less decent funeral directors will attract media attention driving consumers towards the larger groups who are better able to absord these costs across the group. Also, the reputational risk that comes with regulation tends to drive consumers towards the larger groups over time. Look at the poor reputation the low cost energy suppliers now have amongst consumers. The number of funeral locations has increased by 10% over the last five years. I've no doubt regulation will slow that growth.
A correction - in my previous post I questioned the view that creamatorium have high barriers to entry. Further reading suggests barriers do exist, primariliy capital investment cost, but planning less so.
However, this is an investment forum and it's in that context that I assess Dignity. For reasons I've outlined previously I think the next few quarters will be tough comparisons against last year, so I'll be watching for those to pass, hopefully along with the CMA's final report, before evaluating a possible investment in Dignity.
londoner7 - The effect that the report will have is that it will generate publicity and the public will become better informed about shopping around and avoiding being overcharged. If Dignity wants to be able to compete in this more enlightened market, it will have to lower its prices significantly.
There might be action taken against them with regard to their overcharging in their crematoria - they are currently the most expensive by far and the CMA is looking into how the market can be made healthier.
When it comes to increased regulation, most of the more reasonably priced funeral homes have nothing to fear. There shouldn't be anything that would frighten off new entrants - any decent funeral directors who want to make a success of their new venture would want to meet the standards that regulation demands. It was in fact the Co-op that was highlighted in recent years in the media for some practices that were well below where they should be.
Specs1, you're clearly up to speed on the CMA investigation and following your comment on Dignity's claim that their quality of service merited higher pricing was debunked in the CMA report I took a look myself. I agree with your conclusion
I was also surprised to see the argument I held when I was an investor that there were significant barriers to entry in crematorium was also debunked in the report.
But whatever the conclusions of the final report, short of nationalisation which I don't think even you would expect, what impact can the report have on Dignity's business?
They may demand, and enforce full transparency on costs, but Dignity appears to be moving in that direction now.
Anything else?
Dignity would love to see any regulation on business as this always benefits the incumbents creating a barrier to entry for new entrants.
Auson - No, you are wrong, it's far from over. As a result of their initial consulation, the CMA announced in November 2018 that they are consulting on a major funerals probe because of concerns over large price hikes, hitting people at their most vulnerable.
Specs1,
Consultation period finished over a month ago. Do keep up at the back !
Auson, the CMA haven't finished. They've only just got started. As a result of the overpricing they uncovered in their initial investigation, they have escalated matters to a more in-depth examination which might lead to enforced changes to the big overchargers - namely, Dignity.
londoner7,
The latest company update said 2019 guidance remains the same. Surely there are too many moving parts here to predict 2019 earnings, especially with the transformational plan and CMA review in play. The shareprice here is clearly being determined by uncertainty and that is why it is too cheap.
Auson, do you invest on the basis of earnings?
If so, what are you expectations for 2019?
funeralman,
I think the CMA is done and dusted. I noticed a lot of buying just after the consultation period finished. All the while the shorts have been increasing. I think they are probably wrong. The only reason this is not at £10 right now is because of the CMA and the shorters.
Auson,, Would not buy at the moment as I think it is un-clear to what could happen ,
I Would be interested to know what you think of the current position of the future is.