Dignity PLC (LON:DTY) shares fell as the funeral operator reported an increase in third quarter revenues and profits but warned that costs are set to rise as it addresses intense competition.
Revenue rose 6% to £243.9mln in the 39 weeks to 29 September 2017 and underlying operating profit increased 5% to £79.4mln, while the number of deaths was flat at 440,000.
READ: UK funeral firm Dignity reports first half profit and revenue growth as number of deaths rise
The company said in its third quarter trading update that it continues to see “significant competition” across its funeral and crematorium businesses.
Dignity tackles competition
In response, Dignity is investing on improving its digital offering and services as part of its strategy to tackle competition and expects incremental costs of up to £1.0mln in 2017.
The costs are expected to be a recurring expense in future years and are likely to increase over time, Dignity said.
Shares fell 7.81% to 2,265p in afternoon trading.
“The board recognises the increasingly competitive environment and the consequential challenges facing the group,” said chief executive Mike McCollum.
“Alongside the work being undertaken on the group's digital strategy and our continued call for regulation of our markets, we are assessing other initiatives to help the group build on its strong market position."
Guidance unchanged
Dignity still remains “positive” on the full year and left its guidance unchanged.
It also continued to invest in its expansion, buying 20 funeral locations and one crematorium for a combined £28.8mln as well as opening 12 satellite locations in the quarter. Since the end of the quarter, the group bought four funeral locations and opened one satellite location.