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Funerals provider Dignity sees shares drop as worries over a loss of market share offset growth in 2016 profits

Published: 10:49 08 Mar 2017 GMT

Cemetery
However, Dignity lowered its medium-term growth rate target, citing increasing competition in each of its markets

Britain’s only-listed funerals provider Dignity PLC (LON:DTY) saw its shares drop by over 12% this morning as worries over a loss of market share offset growth in 2016 profits.

In late morning trading, Dignity topped the FTSE 250 fallers list, down 12.7%, or 351p to 2,413p

The FTSE 250-listed firm reported pre-tax profits of £71.2mln for the year to December 31 2016, up 3% from the £69.0mln posted in 2015, as revenues  rose to £313.6mln, up from £305.3mln.

Dignity said its financial performance was better than initially expected at the start of the year, as deaths in the UK were higher than originally anticipated at 590,000.

This was only slightly higher than the previous year, when 588,000 deaths were recorded, but 2015 had seen a significant increase on 2014.

In addition, pre-arranged funeral plans at Dignity increased to 404,000 in 2016, up from 374,000 the year before.

The group said trading in the first few weeks of 2017 has continued to be strong and its expectations remain unchanged for the year ahead.

Increasing competition …

However, Dignity lowered its medium-term growth rate target for underlying earnings per share to 8% per year from 10%, citing increasing competition in each of its markets.

In a note to clients, analysts at Peel Hunt said: “Focus is likely to be on the market share decline to 11.8% vs 12.3%, despite the benefit of acquisitions and pre-arranged.”

They added: “The company describes increased competition from new openings, some of which will be offering lower cost funerals.  This is unlikely to result in a sharp shift in the business, but it will impede progress.”

The analysts reiterated a ‘hold’ rating on the stock , saying: :Dignity continues to be a high quality business with a strong franchise and consistent growth prospects. However, this is reflected in the 21.6x PE and 15.1x EV/EBITDA.”

Dignity hiked its final dividend by 10% to 15.74,, making a total payout of 23.59p, also up 10% on 2015.

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