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People are coming around to the idea that this could be one of the few beneficiaries of a widespread pandemic in the UK.
It’s disgraceful that a business such as this can be listed, nevertheless it made me laugh when they reported that deaths were lower than normal so trading was going to be impacted. How can you run a listed company where the main KPI is numbers of deaths?! It’s just beyond ridiculous.
Dignity mentions they will lose profitability if total UK deaths in 2019 come to 588k. Crunching the numbers from gov.co.uk, there are 605k deaths in 2019 from England, Scotland, Wales and Northern Ireland. I don't know if this exceeds the company's expectations or in-line with projections.
This is really motoring today, on actual volume not the usual run up of small automatic trades. Its a bit morbid but I guess a Corona-virus epidemic could create a huge boost for Dignity... still think its a terrible business in a terrible state though
Noheartss, clearly you are not a fan, but I view Dignity from an investors perspective, and it's starting to look interesting to me.
In a recent post you said, ‘Deaths (England & Wales) in Q4 2019 about 4% down v previous year.’ What is your reference?
According to ONS data Deaths in Q4 2019 (138,928) were UP 6.9%, with the highest Q4 number of deaths since at least 2006.
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/datasets/monthlyfiguresondeathsregisteredbyareaofusualresidence
"If true, why is the CMA investigating?"
It can be a competitive market if you are prepared to shop around. However relatively few do.
For the rest, its the ultimate distress purchase.
You are doing it at the a terrible time, have a few days really to get it booked, and have plenty of other things to do surrounding the death. There is deliberate price obfuscation even though the service is often pretty indistinguishable.
I suppose you could have a grudging respect to Dignity for spotting that it was a market ripe for gouging money out of people at a vulnerable time but if ever there was a market now begging for price intervention and enforced price transparency this is it.
It's a far more rigged and inefficient market than the electricity market but look where we are there.
Dignity supposedly welcomed regulation with open arms, except they didn't realise it would be regulation.
You reap what you sow. It would take a heart not to laugh at there pathetic attempts to wriggle out of the mess of their own making.
Almost Dickensian in their shameless greed, Dignity the kind of company that gives capitalism a bad name.
"3.2% pa and 4.0% pa"
Doesn't sound much when you say it quickly but over 10 years its 11%.
Added to that Dignity have been the greediest and their prices rises have been more, so a price cap will have a disproportionate effect.
Add that to the fact that takeover and price gouge is a busted flush, the dividend seems unlikely to be re-introduced shortly, they are awash with debt and the management (one trick pony) is very weak.
There seems to be absolutely no reason to hold these shares.
Could recover a little bit, but can anyone see how they could possible get back into the £12-£15 range in the next 5 years never mind the £20+
People simply blinded to the old share price.
Love re-reading this thread and posters claiming that it was only shorters keeping the price down, or lauding Phoenix buying in at a tenner.
Utterly rancid company.
65jh, only you has linked it to the Coronavirus.
'Still a terribly crowded and competitive sector with just scraps left for the individual chains.'
If true, why is the CMA investigating?
Is this being linked with coronavirus????
Ghoulish!
Still a terribly crowded and competitive sector with just scraps left for the individual chains.
I meant to say, The differential (rather than absolute) is significant but not big considering the likely cutbacks LAs would have made in their services during that austere period.
This bit caught my eye, 'The price control could apply to all crematoria operators or a sub-set. Our current thinking is that it should apply to all operators. However, we are mindful of the fact that local authorities have a cost recovery obligation.'
Price caps. Protecting state pricing. A national cap would have a significant impact on new entrants in the South East. Geographical limits would create boundary issues. A tricky area - like eating soup with a fork.
I get the sense that the CMA are mindful of the unintended consequences of a price cap, so it will be interesting to see how restrictive a remedy will be on Dignity. I note the price inflation over the 2008-2018 period for local authority and private was 3.2% pa and 4.0% pa. Significant but not big considering the likely cutbacks LAs would have made in their services during that austere period.
Good job you didn't buy some. Latest news out today is the CMA is proposing a price cap on crematorium fees as a remedy option. As Dignity's crematoria are the most expensive in the country (19 out of 20 of the most expensive crematoria are owned by Dignity) they'll be taking a big hit! Have a look at the latest working papers published today on the CMA Funeral Market Investigation page.
Being absolutely played here. Note the multiple tiny trades to walk the price up, then huge sells kick in with little impact. Exactly the same with the buys last week. Someone is trading with £70k or so and controlling the market here, no wonder its so volatile. Hope they get caught out.
Prelim results in one month
If the Trend continues the EBITDA will be below the debt covenant ratio = no div
Can’t see that the pilot in 3 branches with have stopped the profit decline.
Dty told the CMA it had done no modelling on the impact of reduced prices in the profitability of the business. I find that unlikely, they just didn’t want to admit it was a nail in the coffin, so to speak.
The crematoria business is the only saving grace here with flat profits, but with the cheaper offering and competition surely that will come under pressure in the 2019 results.
Noting the large late trades over the last few days. Haven’t been watching this for a long time. Are these trades unusual? Looks like maybe Phoenix adding? Surprised anyone with competent analysts would be happy to buy here.
"new IT system, branding and changes to staff roles. The are doing pilots at only 3 of the 826 branches"
Really ? That's laughable.
It's a people business, and I've always thought best served by trusted small local family businesses (and the co-op). Not faceless national companies. They trumpet web and mobile clicks but it will only lead to more price transparency. It's a massive own goal.
A business run by monkeys advised by clowns.
I’ve been reading through the transformation plan, it looks like a hugely complicated process. Absolutely every aspect of the business being overhauled including a new IT system, branding and changes to staff roles. The are doing pilots at only 3 of the 826 branches. I can’t see this being completed by 2021!
Expecting to spend £27m on 4 new crematoriums. Where’s the money coming from? Can’t even maintain a dividend. How much money are they making on £1000 cremations? It seems that they are looking to take the right steps but it will be costly at a Uk e when the whole business model is under pressure. IMO it’s hit a tipping point.
I also noted that S&P downgraded the rating in the secured notes in July.
Covenant:
Secured note require EBITDA to debt service ratio of 1.5 times:
June 18: 3.09 times
Dec 18: 2.55 times
June 19: 2.05 times
In order for the group to transfer excess from the securitisation group to dignity it must achieve Free cash flow to total debt service ratio of 1.85 times:
Jun 18: 2.48 times
Dec 18: 1.98 times
Jun 18: 1.53 times
If the RPC is not achieved the groups ability to pay dividends could be impacted.
Gross debt £552m
The other couple of things are just more general points.
1) The business environment has changed. The government and associated agencies are much less pro business than even 3 years ago. More interventionist and will kill businesses who are price gouging, and or predatory.
2) Apart from the Crem - this is a **** business, really **** & slim to no chance of substantive improvements.
Phoenix have been right mugged off. No chance of ever, EVER, hitting £20 again.
ahha
I appreciate your view but you make the mistake in assuming that the share price will revert to the mean over time. Just because its been £20+ in the past doesnt mean its heading that way at £5.5. This is a £300m valued company with very low and declining profit, loads of debt increasing competition and increasing regulation. I think there's more chance that they go bust than recover to previous levels. I would say that though :0 Having said that there are some large buys going through, makes me wonder if someone is building a stake or increasing a large position.
Prelim results should be around early March ?? so we will know then, I expect the trend to continue and some aspects to worse significantly due to transformation expenses I'm banking on a shock to the market such as no dividend, issue with the debt covenant, asset write-down or operational loss in one of the divisions. All depends if the future plan is credible, but in the meantime anything could happen.
The snouts will be in the trough at the slightest hint of a turnaround. But absolutely no support at the present. I've always said that this is a solid business, but things have become more competitive. I am sure things will come good in time.....but I still say that at present £4.50p is a more realistic price, especially as there is no dividend!
Ah thanks for clarifying the debt covenants I couldn’t find the original documents. I can’t see any div being paid. That’s going to mean that certain types of funds will have to sell because they have to hold income producing holdings. Assume that won’t impact Phoenix but will certainly prompt a close review of their position. I guess the hope is the transformation plan but I agree economies of scale will be difficult to come by, especially when the growth has been so inorganic.its basically lots of disparate poorly run businesses. As a result any regulatory change will be easier for a company like co-op to absorb than Dignity.
Let’s see what happens
Not much too add!
The previous strategy of takeover small independents and whack the prices up is dead. The crematorium businesses is the best bit but that’s it.
The funeral business is at heart a local business and I’m not persuaded that there is huge economies of scale. They are close to debt covenants which could prevent any return of dividend.
No growth, no dividend, over valued intangible on the balance sheet.
Not convinced that management is that great either.
Why would you hold this share ?
Basically only hope would be a spurt upwards in number of deaths - possible I suppose.
Looks like i'm talking to myself on here. I'm used to busy boards!
Assets: £384m
Assets (goodwill/intangible) £384m
Current liabilities: £84m
Debt: £618m
Profit: £58m (2017) £31m (2018) £xx? (2019)
MCAP £280m
I dont see profit increasing in 2019 year on year. I see no reason for the profits not to continue the current downward trend, the MCAP is going to look way overvalued. If there is no dividend what would be the point in holding here.
The funeral Services are losing money hand over foot. The cremation business seems relatively stable but this might have been driven by acquisition, pre-arrange funeral plans is adding next to nothing to the business. With additional costs relating to the transformation the company will be looking at very little left for shareholders, if anything.
Crematoria accounts for 24% of revenue but 41% of operating profit so very important to the business. There is no money to move ahead with the planned expansion.
The Funeral Services is coming under pressure from all angles and will make the material difference in the annual report. The big question is the number of deaths but even with a good quarter the downward trend in all aspects of the business is evident in the financial reports. Debt is too high and very costly to maintain. I expect goodwill is overstated at £232m (and increasing, inflating assets IMO)
Its difficult to work out what they can do. The Simplicity reduced price offering has been scrapped. Front of house and digital offering to be standardised but this will cost and is slow to impact. Staff cuts will cost in the near term. Its a case of expanding to quickly at just the wrong time. Unable to increase prices due to competition. Demographics working against them.
Debt is higher than assets, profits are under pressure, dividend is under pressure, debt costly to service. I think they will need to do a lot of closures and maybe sell part of the business to co-op at a knock down price.
I would love it if someone who believes in this business could add something here as I must be missing something? The only positive I can see is the top shareholders, but while Phoenix have been accumulating aggressively over time reaching 26% in April 2019 and Artemis picked up 5% in August the share price has been flat or on a downwards trend. Any other company would rocket is 30% of the shares where taken off the table. If results get much worse and Phoenix start looking at their exposure this could go from bad to very bad very quickly.
Q3 update:
in order for the Group to transfer excess from the securitisation group to Dignity plc, it must achieve both a higher EBITDA to total debt service ratio of 1.85 times and achieve a Free Cash Flow to total debt service (a defined term in the securitisation documentation) of at least 1.4 times. This latter ratio at September 2019 was 1.52 times
Transformation Plan costs
Given the on-going transformation of the Group’s business will result in significant, directly attributable non-recurring costs over the period of the Transformation Plan, these amounts are excluded from the Group’s underlying profit measures and treated as a non-underlying item.
These costs will include, but are not limited to:
external advisers’ fees;
directly attributable internal costs, including staff costs wholly related to the Transformation (such as the Transformation Director and project management office);
costs relating to any property openings, closures or relocations;
rebranding costs;
speculative marketing costs; and
redundancy costs.
following the appointment of Clive Whiley as Chairman, the Board is also reviewing its current strategy in the context of the current challenges within the industry.
Operating performance in 2020 will rely heavily on the number of deaths, which may or may not revert to higher levels
Thanks Noheartss!
Are you able to expand on the debt covenants. I read that there was some kind of ration and they were getting close to it (1.5?) but I couldn't find the actual debt it related to in terms of maintenance payments and outstanding value.