Dignity hit by CMA review and Johnson Matthey goes electric

“Continued disagreement around Brexit isn’t doing any favours for sterling with the UK currency slipping 0.2% against the US dollar and down marginally against the euro on Thursday.

“But fortunately for investors, both the FTSE 100 and FTSE 250 managed to push ahead with tobacco, pharmaceutical and mining stocks in favour,” says Russ Mould, Investment Director at AJ Bell.

Dignity

“Dignity has spent many years making large profits from charging high prices for funerals. In such situations it almost seemed inevitable that a) someone would try to undercut its prices in order to scoop up market share and b) the competition authorities would take a close look at whether consumers were being asked to pay too much.

“Today we get confirmation that the Competition and Markets Authority has launched a formal review of the funerals sector, looking at the supply of services by funeral directors and supply of crematoria services.

“There is no point Dignity fighting the review and, unsurprisingly, it has made a statement welcoming the CMA’s actions.

“Dignity has already introduced cheaper funeral prices and we’ve seen the rise of a few price comparison sites but the industry isn’t evenly weighted. Dignity and the Co-operative dominate the market despite there being an estimate 3,000 independent funeral providers also vying for business.

“One of the big risks for Dignity is that the regulator has already commented that the introduction of lower-cost funeral plans doesn’t go far enough to make up for years of above-inflation price increases. It suggests there could be tighter regulation in the market which could really hurt Dignity’s future profitability.”

Johnson Matthey

“In recent years chemicals firm Johnson Matthey has stalled somewhat on fears that its core business of selling catalysts to reduce emissions from vehicles and industry will be undercut by a switch to electric vehicles.

“Today’s news should offer some reassurance as it reveals progress with its own electric vehicle battery technology.

“It’s a bit of a mouthful but in simple terms its enhanced lithium nickel oxide (eLNO) cathode material has the capacity to disrupt the electric vehicle battery market.

“The material is expected to offer more energy density and less cobalt use compared to nickel manganese cobalt cathode materials used in other electric vehicle batteries.

“Given a projected shortfall in cobalt supply, this tech could be attractive to electric vehicle manufacturers.

“The company has not commercialised eLNO yet but getting a site in Poland for construction of a commercial plant, with room to grow, and securing the raw materials it needs through a long-term supply agreement are two significant steps down the road to this goal.

“If it comes off, then Johnson Matthey’s management deserve great credit for responding to a potential threat to the business and turning it into an opportunity.”

These articles are for information purposes only and are not a personal recommendation or advice.