Dignity

Dignity, the resilient funeral services provider, continues to deliver measured growth and income and is mulling over a bumper cash return to shareholders.

Interims to 25 June demonstrated Dignity’s robustness amid ongoing tough economic climes. Despite a slight fall in the estimated death rate and with growth rates held back by strong prior year comparatives, dependable Dignity still grew revenues 5.5% to £100.9m and underlying pre-tax profits 5.7% to £24m. From improved earnings of 27p and with Dignity generating £41.8m cash, the interim dividend was lifted 10% to 4.43p.

Mike McCollum, CEO, said the first half performance was ‘more consistent with the average of the last five years than last year’ and highlighted a strong second quarter across all three businesses – funeral services (the company now operates 554 UK funeral locations), crematoria and pre-arranged funeral plans. ‘Discretionary spend on funerals remains very robust’, explained McCollum, adding 'our crematoria and pre-arranged funeral plans have done very well’.

Given its strong ongoing performance and currently attractive bond yields, Dignity is also looking to issue further secured notes (re-leveraging at lower levels than seen historically), then returning the bulk of the proceeds to shareholders. Intriguingly, in either late September or early October, analysts think a cash return of 100p per share could be on the cards.

With Dignity on track to meet full year forecasts – the market is looking for a pre-tax profits push from £36.4m to £39.3m, earnings of 43.5p and a 13.3p dividend – it is well worth topping up existing holdings in Dignity, originally backed by Growth Company Investor at 742p in 2008, ahead of the enticing cash return.