MARKET REPORT: Dignity warns fewer Covid deaths could hit profits

Shares in Dignity fell after the funeral firm warned price cuts and the end of the pandemic would hit profits.

The stock fell 11.8 per cent, or 63p, to 469p as it said a strategy to overhaul the business, which included cutting prices and raising pay for staff, was ‘likely to lead to lower profits in the short-term’.

The reduction in excess deaths as the pandemic subsided would lead to fewer funerals.

Its new pricing strategy also weighed on revenues in 2021, when they dipped 1 per cent to £312million.

Lockdown restrictions meant customers opted for simpler funerals in the first half of last year, pushing down the average cost of each service.

There has been an improvement since restrictions were removed and more people could attend funerals. Dignity swung to a full-year profit of £32million for 2021 from a £19.6million loss in 2020.

Analysts at Peel Hunt said they expected to reduce their forecasts for the group, adding that its strategy looked like ‘seriously hard work’ and that the shares ‘do not reflect reality’.

The FTSE 100 briefly regained all of its lost ground since the invasion of Ukraine early yesterday, but reversed to close 0.2 per cent, or 16.09 points, lower at 7460.63 following a bleak outlook for the UK economy from the Office for Budget Responsibility, which predicted the biggest fall in living standards since records began.

The FTSE 250 also lost 0.5 per cent, or 110.98 points, to 21,001.62 as surging inflation weighed on sentiment. 

Despite the decline, the FTSE 100 has recovered most of its losses since the outbreak of war thanks to energy, mining and defence stocks. 

BAE Systems – down 0.2 per cent, or 1.8p, at 735p – has been a big winner, rising 24 per cent. And miners have also gained as sanctions slapped on Russia sparked fears of raw material shortages.

Shares in Antofagasta (up 0.5 per cent, or 8.5p, to 1761p) have risen nearly 23 per cent since the invasion, while Glencore (up 1.8 per cent, or 9p, at 511.2p) has gained 19 per cent, Anglo American (up 0.5 per cent, or 17.5p, at 3926p) has added almost 12 per cent and Rio Tinto (up 1.6 per cent, or 91p, at 5800p) has moved up 3.6 per cent.

But the surprise winner in the FTSE 100 since war broke out is education group Pearson, which has surged 26.1 per cent in the last month as it became a takeover target for US private equity giant Apollo. 

Its shares fell back 1.6 per cent, or 12.6p, to 778.4p yesterday.

Meanwhile, firms have risen less than many may have expected as the Ukraine conflict and threats of sanctions on Russian energy caused wild swings in crude prices. 

However, they were on the march again yesterday with Shell up 3.9 per cent, or 77.5p, to 2085p, and BP 4.5 per cent, or 16.6p, to 387.9p. 

AJ Bell investment director Russ Mould said investors may be pricing in the risk of a windfall tax on profits, or that policymakers may move to lower prices by ‘choking off demand and stimulating fresh investment in renewables’.

Elsewhere, Durex and Dettol maker Reckitt fell 4.5 per cent, or 262p, to 5619p after broker Jefferies downgraded it to ‘underperform’ from ‘hold’ and slashed their target price to 5000p from 6150p.

Analysts highlighted a slowdown in sales of its Lysol cleaning products in the US, a coming ‘squeeze’ on its consumer health business and a rise in commodity costs were not priced into the shares.

TP ICAP shares gained 12.5 per cent, or 16.7p, to 150p after an activist investor encouraged the company to sell itself. 

US hedge fund Phase 2 Partners said in a letter to the company’s chairman Richard Berliand that shares in the broker were ‘significantly undervalued’ and that there could be a ‘more attractive future’ for the firm under new ownership.