Companies: DTY   

Dignity, the country’s largest single provider of funeral-related services, unveiled a 20% profits jump for the half to 1 July and cheered investors with a 10% dividend increase to 2.75p. Despite operating profits rising by a modest 11.4%, the funeral service and cremations play reported stellar pre-tax profits growth to £15.8m (£13.2m), as the gearing effect took hold. Turnover rose 8% to £74.6m, thanks to acquisitions and a 1.7% rise in the UK death rate. During the half, Dignity acquired four new funeral homes, bringing the total to 516 at the half-end – since then, a further six have joined the Dignity fold, bringing 2005's acquisition spend to £6.9m. Peter Hindley, chief executive, recounted that Dignity performed 36,000 funerals at its homes, which trade under established local names, during the first half, up from 35,100 in 2004, as well as 21,200 cremations, up from 19,800. The group has 12% of the funeral services market, and 9% of the cremations market, so there’s plenty of room in this fragmented market for the group to exploit. Looking ahead, Hindley expects growth to come from further acquisitions, new home openings and tie-ups with partners for its pre-arranged funeral plans business (Dignity is the UK market leader). Even after a good share price run, we remain fans of Dignity, which has predictable cashflows from its homes, excellent operating margins of 31.4% and solid growth prospects. Buy.