Dignity plc (lon:dty)
Dignity – Higher Turnover And Drastic Profit Collapse

Dignity plc Financials

ItemCurrent PeriodPrevious Period
Year20202019
Period6 Months6 Months
Revenue£169m£155m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit(£14m)£58m
Adjusted Profit£27m£23m
Total Debt
Net Debt

Commentary History
Dignity plc Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Dignity – Higher Turnover And Drastic Profit Collapse
Company: DTY - Dignity plc
Share Price Then: 467p
Author: Ian Smith
Date: Wed 26 Aug 2020
Comments: When I last looked at Dignity a couple of years ago I was concerned that they were expanding by acquisition, incurring costs and losing volume per branch.

The first half of 2020 saw an increase in the total number of deaths in the UK to about 370k this was up by 23% on the 2019 figures, along with this came significant restrictions on the type and number of people allowed to be present at funerals.

As a result the first half of 2020 saw the company swing from a £58.2m profit to a £13.6m loss, with no obvious one off costs to account for it.

The number of funerals provided went up to 46,000 from 36,200 in 2019, which is a 27% increase and market share was reported as being pretty much flat. However this is a greater margin of error on market share numbers than usual as funerals are taking longer to arrange than is normal.

The basic numbers for volumes and prices
TypePeriodCost%
Full service funeralTypical£3.5k52%
Full service funeralH1 2020£3k26%
Limited service funeralTypical£2k14%
Limited service funeralH1 2020£2k37%
Prepaid funeralTypical£1.8k28%
Prepaid funeralH1 2020£1.8k28%
CremationTypical£0.8k7%
CremationH1 2020£1.2k9%
seems to support the idea that the group is only profitable when the full range of optional aspects of funerals such as flowers, limousines etc. are provided.

Head office, Central Overheads were up by £3.8m to £18.4m, while this doesn’t sound a lot a very large proportion of this is costs that are solely related to being a large company, the one man band funeral home doesn’t have many of these cost.

The CMA has been investigating the funeral market for a while and released an interim report on the 13th Aug which saw the share price jump from 390p to 634p but it seems to be returning to the pre report level.

Most of the reports seems to be that Funeral directors must have a simple price list and the rest seems to be waffle about good service.

It is expected that the FCA will get involved in Pre-Paid funeral plans which is a plus for Dignity as FCA regulation is likely to suppress any real competition in the market as only the big players can afford the time and cost of regulation.

Not at all unusually the company also produces underlying profit figures that are wildly different from the statutory ones, these show this year was a few % better than last year.
Read Count/ID: 117/13175

Buy/No Buy In A Nutshell
NegativesA big group that seems to be struggling with their costs in a market where many of its competitors are small owner operators. Seem to need big profits from ancillaries such as flowers and car to be profitable.
PositivesFCA regulation planned for pre-paid funeral plans which may hinder their smaller competitors.
Initial Review Price467p
Last Review Price467p
Last Review Date26-Aug-2020
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