Dignity PLC (LON:DTY) shares rocketed in relief today as the Competition and Markets Authority dropped plans to introduce price controls on funerals.
Peel Hunt upgraded its rating to 'hold' from 'sell' following the CMA report.
The CMA found that it would not be possible to impose price controls given the current circumstances, said the broker.
As an alternative, the CMA is proposing a ‘Sunlight’ regime, which would make information on prices more visible, an inspection regime and to provide financial information to the CMA.
Consumers are more likely to compare prices going forward, but this should be a relief for the industry given that there will not be a price control regime for some time, said Peel Hunt.
However, the CMA clearly intends to return to this, particularly as it found that “the Co-op and Dignity, which account for 30% of branches, are often significantly more expensive (we estimate by approximately £800 and £1,400 respectively) than many of the small typically family-owned businesses that operate the majority of branches in the UK.”
In a statement, Dignity said it had collaborated openly with the CMA and believes there is a need for more consumer choice and high levels of quality across the sector.
“The group has acknowledged that there is rising consumer demand for lower-cost funeral options and has been making considerable steps to provide a wider range of choice for its customers since January 2018.
“Dignity believes the funeral industry will benefit significantly from proper regulation to ensure that clients can assume high minimum standards, and effectively assess and compare what a funeral service includes.
Shares rose 42 % to 555p.
