Grave danger: Dignity posts falling profit as death rate dip takes bite out of results
A dip in the number of Brits dying in the first three months of the year buried profits at Dignity, the funeral provider reported today.
It comes as pressure has been growing on the funeral industry, which is facing a competition probe into its practices and prices.
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The figures
Underlying operating profit fell 42 per cent to £21.7m.
The drop was driven largely by a dip in its funeral business, which fell 34 per cent to £18.4m, £6.8m of which came as the death rate fell 12 per cent to 159,000 in the quarter.
Average income per funeral also dipped in the quarter, as Dignity introduced a new, cheaper, plan in a time when pressure is growing on funeral providers over pricing.
The company’s overhead costs increased 55 per cent to 7.6m, helping to squeeze profits, while underlying revenue dipped 15 per cent in the quarter to £81.1m.
Why it’s interesting
Dignity’s share price has taken several hits in the past two years and, as the UK’s only listed funeral provider, is seen as an indicator of how the sector as a whole is doing.
Shares, which stood at 2,450p in November 2017, have lost nearly three-quarters of their value, trading down 6.5 per cent this morning to 632p.
The company has been the bellwether for a sector which faces calls for reform as funerals have become increasingly expensive across the country.
In March the Competition and Markets Authority (CMA) said it was launching an in-depth investigation into the funerals sector.
Interim findings from the CMA last year raised concerns that increases in funeral charges has outstripped inflation for well over a decade, something which the CMA said “does not currently appear to be justified by cost increases or quality improvements.”
The CMA reserved particular criticism for the bigger players, in a market dominated mainly by Dignity and Co-op Funeralcare.
But Dignity has not stood still amid the clouds on the horizon, introducing a new, cheaper, funeral option last year.
It expects the average income from a funeral to remain at around £2,940 across the rest of 2019 the firm revealed this morning.
What Dignity said
Chief executive Mike McCollum said the company will continue to focus on a transformation programme, designed to “build a more coherent, cohesive and technology-enabled business.”
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He said the firm aims to lead the funeral sector by delivering quality, standards and value-for-money and the transformation would help this.
He added: “Whilst the number of deaths in 2019 may mean that our short-term financial performance is lower than we originally anticipated, I am confident that the changes we are making will allow us to generate sustainable growth in the medium to long-term."