Dignity share price drops after growth revision

Imran Khan
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Dignity provides funeral services such as pre-arranged funeral plans (Source: Getty)

Dignity, which provides funeral services, crematoria and pre-arranged funeral plans, saw its share price plunge 13 per cent after it revised down its growth rate.

It revised down its medium-term target underlying EPS growth rate to eight per cent per annum from the current 10 per cent.

However, Dignity beat analysts’ consensus profit forecasts after the death rate exceeded last year’s total.

The figures

Deaths at 590,000 were up by 2,000 on 2015, putting them in line with last year but this is a higher result than management had expected at the start of 2016.

Profits before tax were 5 per cent ahead of analysts’ consensus forecasts at £75.2m, up by 4 per cent.

Dividends increased by 10 per cent compared to last year, proposing a final of 15.74p, bringing the total dividend for the year to 23.59p

Management have bolstered their portfolio and acquired 16 funeral locations and five crematoria in the year.

Dignity share price

Dignity has revised down EPS growth rate

Why It’s interesting

Dignity provides services which everyone is going to need eventually. In the past five years, the firm has more than doubled in value and it’s announced acquisitions, alongside strong trading suggests the company may make further gains.

In a note to investors, stockbroker, Panmure Gordon said: “Robust and visible demand, steady 8 per cent earnings compound annual growth rate (CAGR), flawless execution and a sensibly managed balance sheet, and acquisition programme make Dignity a quality core holding for investors whose rating should be maintained at the current levels as earnings progress, generating predictable absolute returns.”

What Dignity said

Mike McCollum, chief executive officer, at Dignity, said:

“Looking into the future, we anticipate further engagement with the Scottish and Westminster parliaments, as we believe regulation of the funeral and pre-arranged funeral markets is necessary to ensure every family receives minimum standards of care from appropriate facilities.

“We also expect to invest more in digital technologies that will help our clients and also act as a source of new business for the Group."

In short

Dignity has been steadily gaining market value since it listed and is beating consensus forecasts but competition from other providers could hurt again in the future.

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