City File: Funeral directors

Funeral directors have been out of fashion for almost as long as Howard Hodgson's hairstyle. After all, businesses with high operational gearing in a market with a structural decline (ie people are living longer) do not stand out as great investments.

However Geoff Douglas at BZW has noted that the businesses benefit from strong cash flow, good dividend growth and an awareness that business has to be won, notably through schemes, such as Great Southern's Chosen Heritage, which pay for the cost of your funeral before you die.

He notes that both Great Southern, the quality company in the sector, and Plantsbrook, the revitalised group formerly run by Mr Hodgson, stand at a significant discount to other small companies and are worth a second look.