Dignity profits take a hit from funeral price war
The company has been facing tough competition from rivals.
Dignity’s profits declined in the third quarter as a price war in the funeral market weighed on its income.
The company has been facing tough competition from rival Co-op, which dropped its prices again in September.
Profits in Dignity’s funeral division were down 27% to £11.1 million in the three weeks to September 29 while cremations were flat at £8.8 million.
Across the first 39 weeks of the year, underlying profits were down 14% at £68.6 million. Revenue was almost flat for the year so far at £244.2 million.
Chief executive Mike McCollum said the group remained on track to deliver full-year expectations.
“We are pleased with how the group has performed in the period and following these results our expectations for the full year remain unchanged,” he said.
“Our work on the transformation plan is critical and we are encouraged by the progress that has been made in the initial weeks.”
Shares in Dignity were down 5% in morning trading.
Average income per funeral was hit by the price war, declining to £2,921 compared to £2,938 in the previous quarter.
The mix of different funerals shifted in favour of simple packages, with full service accounting for 44% of services in the third quarter compared to 60% in 2017. Simple options, meanwhile, jumped from 7% to 24%.
In October, the group launched a no-frills cremation package as part of a move to offer greater choice which costs £1,895.
“The shift could be a result of marketing efforts and thus reverse in future periods or become more pronounced as having a low-cost funeral becomes more ‘fashionable’,” noted analysts at Peel Hunt.
“Bear in mind that most people choose funerals on personal recommendations, so the more that use a simple funeral (and like it) the more are likely to do so in future.”
In October, Co-op’s funeral business ramped up the pressure on Dignity by extending its price guarantee to all funeral plans and probate fees.
This is on top of a previous promise to beat quotes for funeral service costs on a like-for-like basis, which was announced early in September.
Co-op and Dignity are the two leading funeral providers in the UK.