Funeral services firm Dignity swings to large loss

Funeral home owner Dignity has fallen to a heavy loss as customers in need turned to cheaper services and increased competition slowed its market share growth.

The Birmingham-based company slumped to a loss of £275.3m in 2022, having posted a £12.1m gain last year after taking total impairments, where assets lose all their value and are written off, of nearly £200 million.

It said its funeral services were significantly impacted by the higher-than-expected increase in people choosing to have direct cremations rather than full burial ceremonies.

Due to cost-of-living pressures and relatives’ desire to inherit money, many Britons have become reluctant to spend large sums on a funeral service, opting instead for simple alternatives.

This has inevitably led to a drop in the group’s revenues, which fell 9 per cent to £323.1 million last year, with further headwinds coming from the drop in UK deaths and the introduction of a new pricing strategy.

Dignity significantly reduced the price of funerals for clients in the second half of 2021 in response to a long-term market research by the Netherlands Authority for Competition & Marketsas well as tougher competition from rivals.

As a result, the average revenue from each funeral service organized by the group, excluding the more than 600 delivered under the Safe Hands scheme, fell by around 12 per cent to £2,116.

While the company has increased its share of both the cremation and funeral services sectors in the UK, it claimed staff shortages had led to weaker-than-expected growth.

It expects the factors that influenced its performance in 2022 to continue this year, including the capital investment to fund future expansion.

But CEO Kate Davidson said the company was optimistic its strategy will deliver “sustainable growth and the highest standards of care and service to our customers.”

She added, “We have a constant focus on increasing our market share in each of our businesses and are committed to continued investment in our people, facilities and infrastructure to unlock Dignity’s long-term success.”

The company is on the brink of delisting after a consortium led by one of its former bosses, Gary Channon, and insurance magnate Sir Peter Wood – the founder of Direct Line, Sheila’s Wheels and Go Compare – agreed to take the company to buy.

Dignity received four takeover bids ranging from 475 to 525 pence per share last year, but settled for a 550 pence offer worth approximately £281 million.

Approval of the deal remains subject to a vote from shareholders and the Financial Conduct Authority, which became responsible for regulating the UK’s funeral industry last June.

Dignity shares were down 0.75 per cent at £5.30 just before trading ended on Friday, though their value has risen by about a quarter since the start of the year.