LONDON -- Few companies can boast such a steady track record as Dignity
Today, Dignity released half-year figures, and they were pretty impressive across the board. Turnover rose 8% to 116.5 million pounds and profit before tax increased 11% to 27.5 million pounds, keeping the company's pretax profit margins at more than 20%.
Cash flow was encouraging as well, with more than 40 million pounds of fresh funds generated from operations. This allowed Dignity to increase its interim dividend again, this time by 10% to 5.36 pence.
The company now has more than 600 locations, having acquired eight new ones and opened nine satellite ones so far this year. Dignity reckons its market share of funerals is between 11% and 12%, so it still sees plenty of room to grow due to the fragmented nature of the market. It also added that "client satisfaction remains high." (I'm assuming they are referring to the families of their clients.)
The steady nature of this business means that management has always carried a relatively high level of debt. Net debt is currently just more than 300 million pounds, which might put off more cautious investors.
The shares rose 1% to 853 pence today, as there was little in the announcement either to worry or to delight investors. The shares have more than tripled since joining the stock market in April 2004. At the current share price, Dignity is valued at 470 million pounds and trades on a forward price-to-earnings ratio of 14. The prospective yield is a shade under 2%.
Dignity is a classic example of an "under the radar" business that can potentially offer investors superb returns over the long haul. For more great examples of such shares, make sure you get "10 Steps To Making A Million In The Market." This free guide from The Motley Fool is available to download now.
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Stuart does not own shares in Dignity. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.