Dignity’s profits drop amid competitive funeral market
Profits have plummeted at Dignity, the UK’s only listed funeral provider, after it slashed prices to keep up with an increasingly competitive market.
Pre-tax profits fell by 43% to £40.5 million in the 52 weeks to December 28, following what management called a year of “radical” change.
Revenue decreased 3% to £315.6 million.
Chief executive Mike McCollum said: “We reduced our funeral prices, created a broader range of choices for clients and embarked on plans to transform the business by the end of 2021.
“Our vision is to lead the funeral sector in terms of quality, standards and value-for-money. To achieve this we are building a more coherent, cohesive and technology-enabled business, one geared to meeting the changing needs of our customers.”
Dignity cut the prices on several of its packages last year, resulting in a reduction of its average income per funeral to £2,973 compared to £3,222 in the previous year.
The “simple funeral” price was reduced by 25% while the no-frills option of direct cremation was extended.
The reductions came amid a price war between Dignity and its main rival The Co-operative Funeralcare, which in October extended its price guarantee to beat competitor quotes.
It also reduced the price of its simple funeral service by £100 in September, sending Dignity’s shares down by more than 5%.
The Competition and Markets Authority (CMA) has signalled that it will investigate the funeral market, after identifying concerns over high prices and the treatment of vulnerable customers.
The timing of a probe has not yet been confirmed but it is expected to take place this year.
Chairman Peter Hindley said: “We have made public our support for such an investigation if it happens and believe it could help improve standards across the sector and deliver better outcomes for customers. We are also keen to work closely with the CMA and help them understand the challenges of providing a quality funeral service.”
Analysts at Peel Hunt said the outcome of the investigation would have major consequences for the company.
“The language from the CMA thus far is very clear, in that they see pricing controls as required given the industry dynamics,” said analyst Charles Hunt. “Furthermore, the larger players (ie, Dignity and the Co-op) are clearly identified as having been the main culprits in raising prices.”