Dignity, the funeral firm based in Sutton Coldfield, pleased the stock market yesterday with its first full-year results since bringing its shares to the market last April.
Although the number of deaths in Britain fell by three per cent last year, squeezing Dignity's revenues, cost cuts enabled it to deliver underlying profits of #22 million, up 31 per cent on 2003 and in line with city expectations.
The shares jumped 12p to 351p, where a final dividend of 33/4p, as forecast in last year's prospectus, makes the yield 1.6 per cent.
Looking ahead, Peter Hindley, chief executive said "Our expectation would be to increase the dividend."
But he added " At the moment we are better off using the free cash flow to make acquisitions rather than paying dividends.
"We value acquisitions on their historic performance on a multiple of six to eight."
Dignity made six acquisitions during 2004 costing #6 million, leaving it with a free cash flow of #7 million. Three more acquisitions since the year-end have brought to total cost to #8.8 million.
It also opened one new crematorium and four new funeral homes, using local trading names. It closed five others that it considered uneconomic.
In all, Dignity now has a network of 512 funeral homes and 22 crematoria. Last year they performed 67,600 funeral and 38,400 cremations.
Pre- payments of #200 million are invested in an independent trust fund.
"It has been a very good year for us," Mr Hindley said.
"Our shares have gone up 50 per cent since our flotation," he added.
"We've managed to produce these results despite the lower death rate." The total number of deaths recorded in Britain fell to 574,500 during the year, against 592,200 previously.
Mr Hindley expects a Government requirement for crematoria to halve their mercury pollution - arising from tooth fillings - by 2012 will be recouped in higher charges.
The cost of installing mercury scrubbing equipment will be substantial - about #600,000 for each crematorium, but it is likely to be spread over up to seven years.