Shares in funeral provider Dignity soar as number of deaths increase in first quarter

Group had warned of volatile trading after making price changes

The number of people who died rose 8 per cent compared to the same period last year, increasing from 167,000 to 181,000 (Reuters)

Shares in funeral provider Dignity soared on Wednesday morning after the company raised its expectations for trading this year, based on an increased number of deaths in the first quarter.

The stock was up more than 20 per cent in early trading after the group said the absolute number of deaths in the first seven weeks of 2018 was approximately 7 per cent higher than the prior year. Deaths in the quarter were up around 8 per cent compared to the same period last year, rising from 167,000 to 181,000.

As a result, revenue in the quarter was £95m, up from £93m this time last year, and earnings of £37.5m were “significantly ahead of the board’s expectations”.

Dignity previously said it expects trading over the full year to be volatile after its decision to reduce some funeral prices but hold others, “as the relationship between funeral price, service and volume would take time to settle down”.

Despite Dignity’s positive start to the year, the company said on Wednesday that the board “still believes it is too early to conclude that the trading experienced in the first quarter is indicative of the likely funeral price/volume mix going forward”.

However, it added that based on the numbers for the first quarter it is probable that “results for the full year will be ahead of current market expectations”.

AJ Bell’s investment director Russ Mould noted: “You can almost hear the desperation to keep a lid on expectations in the commentary which accompanies today’s first quarter trading update from Dignity.”

However, he added that shares have yet to recover from the tumble they took in January, when the group first announced the changes to its pricing structure.

“The Dignity example underlines the old maxim that if shares fall 50 per cent you need a 100 per cent gain just to get back to break even,” Mr Mould said.

“Despite a 20 per cent advance in the shares today, building on earlier gains post the full year numbers in March, they still trade more than 40 per cent below the level they traded at before the profit warning earlier this year.”