4th Mar 2015 11:59
LONDON (Alliance News) - Dignity PLC shares were trading higher on Wednesday after the funeral services company reported strong underlying results, excluding a jump in financing costs, as revenue increased in spite of a fall in the number of funerals it handled.
The FTSE 250 constituent said its underlying pretax profit for the year was GBP58.5 million, compared to GBP52.9 million. The underlying figure strips out the GBP154.8 million financing cost Dignity booked in 2014 related to the refinancing of its debt, which pushed it to a reported pretax loss of GBP67.7 million, compared to a GBP49.6 million profit a year earlier.
Revenue increased to GBP268.9 million from GBP256.7 million, with good performances in its funeral services, crematoria and pre-arranged funeral plans divisions, and Dignity added 2015 has started well, reiterating its positive expectations for the full year.
It said deaths registered in the first eight weeks are approximately 23% higher than the "abnormally low number" in the same period in 2014. It therefore expects a first quarter result significantly ahead year-on-year, though it expects this to normalise over the remainder of the year.
The companyproposed a final dividend of 11.83 pence per share, bringing its total dividend for 2014 to 18.32 pence.
"The group has continued to perform strongly, delivering operational performance ahead of consensus estimates. This performance was underpinned by our ongoing commitment to outstanding customer service, further investment in our business and continued tight cost control," said Chief Executive Mike McCollum.
Dignity shares were up 1.0% to 1,940.00 pence midday Wednesday, having been trading among the best performers in the FTSE 250 for the majority of the morning and hitting an intraday high of 1,962.12 pence, just below its 52-week peak of 2,040.00p.
Dignity said the underlying operating profit in its funeral services division rose 9% in 2014, despite a fall in the number of funerals performed by the company to 65,600 from 68,000 in 2013. Dignity said the increase in profit was driven by its annual price rise being implemented earlier in the year than normal, pushing up its average income per funeral.
The crematoria business also performed well, with underlying operating profit rising 6%, again in spite of a fall in the number of cremations performed to 53,400 from 55,000. Average revenue per cremation increased, and the company said sales of memorials and other items improved, equating to around GBP262 per cremation, compared to GBP254 a year earlier.
Underlying operating profit also increased in its pre-arranged funeral plans business, which sells funerals in advance to people wishing to make their own funeral arrangements, as the number of unfulfilled pre-arranged funeral plans rose to 348,000 from 323,000.
Panmure Gordon hiked its target price on Dignity and reiterated its Buy rating, describing Dignity's results as "excellent" and ahead of the broker's expectations.
Panmure says Dignity is well placed for sustained growth in coming years, even as its operating profit growth is likely to slow as the company expands.
The broker notes the number of registered deaths in the UK in the first eight weeks of 2015 is up 23% year-on-year, against a low comparative and possibly reflective of the ineffectiveness of the current flu bug vaccine.
It says the registered death rate suggested Dignity's first quarter will be very strong, but Panmure keeps its full-year forecasts unchanged as it remains too early to make any upgrades.
By Sam Unsted; [email protected]; @SamUAtAlliance
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