Profits Warning Issued By Only Listed Funeral U.K. Company, Dignity, Due To Rice War

There is an intensifying price war in the funeral services and this has driven Dignity, the UK’s only publicly listed funeral services company, to announce that its profits for 2018 would decline. This announcement resulted in a the wiping off of about £500 million from the market value of the company.

The market for funeral services are oversupplied and this has resulted in the customers becoming more and more price-conscious, the company said. In order to enforce efficiency related savings and hold on to its market share, the prices for traditional funerals would be frozen for the majority of the locations where it operates, it added.

There is rising inflation and stagnant wage growth in Britain and this has resulted in Britons are becoming more price conscious.

Direct funeral services which entails picking up a deceased form the place of death and transferring him/her directly to the crematorium is reshaping the funeral services sector. in this arrangement, there is no funeral service and the ashes are handed over the relatives after the funeral. Simplicity Cremations is the version of this trend in the industry by Dignity and it was first offered in late 2016.

Direct cremations were opted for by David Bowie and the novelist Anita Brookner.

While the results for 2017 would be commensurate with market expectations, the company expects that its profits would fall in 2018 to a level that would be substantially lower than market expectations due to the price competition in the industry.

This announcement resulted in a 50 per cent drop in its share price as investors were potentially spooked by the profit warning from Dignity. This fall resulted in the market capitalization of the company dropping to £480m from £952m.

The company has announced that it would reduce the price of its lower-cost “simple” option by about 25% to £1,995, in addition to freezing the price of traditional funerals. The value would be applicable in England and Wales and in Scotland it would be £1,695. This service would not include extra costs such as cremation or burial fees.

The company is holding deliberations with the government to make sure that customers were not “misled into accepting below-par service and standards” and in the proper regulation of the industry, it said. The company operates 44 crematoria in the UK and has about 800 funeral locations.

Compared with about 70,700 funerals in 2016, Dignity conducted about 68,800 funerals in 2017 and the number of total reported deaths in the U.K. was 590,000 in 2017, Dignity said. In 2018, the Office for National Statistics expects that there would be about 580,000 deaths, the company noted.

Traditional full-service funerals accounted for 60% of total business of Dignity with an average income of £3,800, while the simple option accounted for 7% of the income with average earning of £2,700, in 2017.

(Adapted from TheGuardian.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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