Best and worst shares on 18 April 2018

It's been a grim 2018 for mid-cap stalwarts Dignity and De La Rue, with profit warnings and hefty share price collapses. Now, however, there are signs that at least one of them is winning the battle to get back on track.

Shares in funeralcare firm Dignity jumped 18% today as it reported a rising death rate for the first quarter and said there had not been the anticipated drop off in customers opting to pay for premium funerals. This means profit downgrades will not be as severe as feared at the time of its warning in January.

As a result, shares are up nearly 10% since Dignity's last update in mid-March, when we detailed why the Sutton Coldfield-based firm remains a "buy".

• Why funerals firm Dignity is still a 'buy' 

• A positive spin on Dignity shares

Source: interactive investor                Past performance is not a guide to future performance

For De La Rue, though, the pain continues after it was forced to lower full-year profits guidance for the second time in a month. Today's revision reflected the £4 million in bid costs it will now write off after deciding against appealing the government's controversial UK passport contract award to a foreign firm.

Delays in the shipment of some contracts added to its problems in the final week of the financial year, meaning operating profits will be in the low to mid 60s million pounds. Prior to a warning in March, the City had been looking for a figure between £71 million and £73.5 million.

Shares dropped another 4% today, with De La Rue supporter Investec Securities cutting its price target to 640p from 700p previously.

The bank's new adjusted earnings per share (EPS) forecast for 2018 of 40.1p represents a 13% cut, while it is also taking a more cautious view about the current financial year. Its unchanged dividend forecast for 2019 of 25p a share is covered by free cash flow, however, and gives a dividend yield of 5.1%.

Much will now depend on full-year results in May, when CEO Martin Sutherland will need to reassure about the company's strategy to focus on faster-growing and less capital-intensive areas such as ID services and product authentication.

Source: interactive investor             Past performance is not a guide to future performance

The strategy at Dignity has seen it reset pricing in response to market conditions and increased competition, resulting in a 25% cut in the price of a simple funeral to £1,995 in England and Wales and £1,695 in Scotland.

This move had been expected to increase the proportion of simpler funerals in its business mix to 20%, although the company said today that the rate has been lower than this. In addition, UK deaths rose 8% in the first quarter to 181,000.

As a result, Dignity's first quarter earnings of £37.5 million were much better than the board had hoped for, keeping it on track to deliver full-year profits ahead of the market's previously revised forecasts.

Panmure Gordon raised its full-year EPS estimate by 19% to 76.6p and raised its estimate for funeral numbers in the financial year by 5% to 66,000. Its forecasts continue to assume a 20% ratio for the number of simple funerals.

Shares fell to as low as 711p following the January profits warning, but Panmure analyst Michael Donnelly believes there's scope for a recovery to around 1,410p. This time last year the company had been trading at around 2,400p.

Dignity cautioned that it was still too early to draw firm conclusions about the impact of its pricing strategy. It will provide further details on its plans in the summer, having hired management consultants to review its funeral operations.