Bosses at Dignity sold millions of pounds of shares before the funeral provider issued a profit warning that halved the company’s value.
About £14 million of shares were sold in 16 transactions between March 2016 and September 2017, according to an analysis of management dealings.
They include Mike McCollum, chief executive, whose wife sold £2.4 million of shares last May, and Peter Hindley, the chairman, whose wife sold £2.1 million of shares the same month.
Dignity’s shares fell by almost 50 per cent on Friday, knocking about £470 million off its market capitalisation, after the FTSE 250 company warned of “substantially lower profits in 2018”. Dignity told the City that it was slashing prices on its “simple” funerals by an average of 25 per cent and was freezing prices on its traditional funerals in most places that it operates.
Dignity is one of the country’s two biggest funeral providers, along with Co-op Funeralcare. It operates from 800 branches, which trade under local names.
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Analysts at Quest, part of Canaccord Genuity, said in a research note titled Death Knell, published shortly after the profit warning: “While the management has been updating the market with the threat of online [competition], it has been selling its equity with some haste.”
Dignity’s filings show 16 director or director-related transactions between March 2016 and September 2017 of shares sold at prices between £22 and more than £26.
Dignity’s shares closed at 962p on Friday, their lowest in five and a half years. From 356p in April 2004, they rose to £28.03 in September 2016.
Mr McCollum said of his share dealings that it was the first time he had sold part of his “core” shareholding since Dignity had floated in 2004 and the move had bee to diversify his savings.
Quest, which had raised concerns about Dignity’s business model last year, said that Dignity had expanded by using the “balance sheet to acquire high street undertakers, growing market share and the balance sheet”. Its loss of market share despite the consolidation “makes the strategy a failed one”.
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Cora McCallum, an analyst at Investec, Dignity’s joint house broker, supported the strategy change, arguing that “with Co-Op cutting the price of its simple funeral, Dignity felt its current strategy of 4 to 6 per cent price rises per annum was unsustainable”.
A spokeswoman for Dignity said: “The board’s comments to the financial markets about increasing competition over the last two years have been well documented . . . Board directors and their immediate families collectively retain a significant number of shares in Dignity and the board believes that the action decided upon late last week, while painful for fellow shareholders in the short term, is the right way forward to restore the group to growth in the medium term.”
