Dignity set to reveal drop in revenue and profits despite rise in deaths

Funeral provider Dignity is expected to reveal a drop in revenue and pre-tax profits despite deaths rising during the coronavirus, as restrictions prevented it from selling additions to its services.

Analysts expect revenue to dip around 2% to £295 million, and pre-tax profit to tumble from £37.7 million in 2019 to under £27.6 million last year.

Although demand for burials were high, figures from the first nine months of 2020, released in November, showed that people were moving away from the company’s more expensive options.

Before the pandemic more than half of Dignity funerals were “full service” options. This fell as low as 26% in the second quarter of the year, and only rebounded to 40% in the third quarter, when the strictest restrictions on funeral gatherings had been lifted.

The price of a full service also dropped in the period, from £3,578 in 2019 to £3,080 in the second quarter of the year.

Dignity has also flagged that the excess deaths this year will likely mean fewer people will die in the coming few years, as Covid-19 overwhelmingly claimed victims who were old or had health conditions.

“The group will not speculate on the most likely outcome for the remainder of the year, however it is possible that the tragic events of 2020 may mean 2021 and 2022 could experience a lower number of deaths than in 2019,” it said in the November update.

Investors will also be looking for some news on what the company will do about the results of a critical Competition and Markets Authority (CMA) report into the funeral sector.

As the UK’s only listed funeral provider, shares in Dignity have been at the mercy of the authority ever since it announced the probe in 2018.

They are currently trading more than four fifths down from a 2016 peak, even after doubling in price since reaching all-time lows last summer.

The rebound came in early August when the news that the CMA would not introduce price controls and other measures it had considered, because of the Covid-19 pandemic.

Shares in Dignity rushed up by 60% in just one day following the news.

But what the CMA gave, the CMA took away just months later as shares fell again, although only by 16%, after the authority released its full report into the sector.

It concluded that the cost of funerals is more than £400 too high, while cremations are also too expensive.

The authority did not agree with the assertions of some providers, Dignity among them, that higher prices necessarily means a higher quality service.

At the time, the company said it would work with the regulator and the Government to ensure that remedies work for customers. Any steer on how this work is going will likely interest shareholders.