Funeral provider Dignity sees share price slide as profits drop amid rising competition

Funeral provider Dignity saw shares slide more than six per cent today after it reported a £10.8m drop in profits.

The 14 per cent dip in profit to £68.6m in the year to the end of September, compared to £79.4m in the same period last year, comes as the group fought off competition from rivals.

Profit slipped from £19.9m between July and September 2017 to £12.2m for the third quarter this year, the company revealed in today's update.

Revenue was flat at £244m for the year so far.

Dignity warned in September that profits would be lower after funeral parlour rival Co-operative Group slashed costs and introduced a price guarantee.

The following month Dignity expanded its budget “simply cremation” service, with a price tag of £1,895.

The number of deaths in the year to date increased by three per cent to 455,000 but the third quarter saw the number broadly flat year-on-year.

Going forward the group has ruled out acquiring new funeral locations, despite investing £5.4m in acquisitions during the year to date, as it is “inconsistent” with its strategy and plans for the future.

The group has expanded its digital offering to increase online advice and support for customers, with websites seeing an increase in visitors of 52 per cent on the third quarter last year.

Dignity chief executive Mike McCollum said: “We are pleased with how the group has performed in the period and following these results our expectations for the full year remain unchanged. Our work on the transformation plan is critical and we are encouraged by the progress that has been made in the initial weeks.

“Alongside the expansion of our digital offerings, we continue to provide a greater choice for consumers and our focus on high standards and excellent client service remains central to our plans for the future.

“The group’s significant research projects highlight the need for minimum professional standards and support calls for regulation that we have been making for some time."

Fidelity Personal Investing associate director, Emma-lou Montgomery, said Dignity's service was coming under pressure from margin-cutting in the market, chiefly from the Co-operative Group.

“Dignity has honed in on a lucrative gap in the market for dignified but more financially viable funerals," she said.

“However, it isn’t the only one. The Co-Operative Group has also spotted the gap and as a result it’s been going head-to-head with rival Dignity on cost ever since.

“Dignity’s new 'simplicity cremations', which launched last month and are the first of their kind in the UK; complete with a price tag of less than £2,000, will once again put it head-to-head with its rival the Co-Operative Group.”