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Dignity surges as price cuts inspire "step change" in demand for its simple funeral package

It's an ill wind (and we're not talking about the "Beast from the East") ... the number of deaths in the first two months of this year was 7% higher than in 2017
Candle for the dead
The business model for the Group's funeral business is changing as the board focuses on protecting market share by introducing new service offerings and price points.

Shares in Dignity PLC (LON:DTY) surged after the operator of funeral homes and crematoria revealed it has hired a consultant to advise on reshaping the business.

Dignity said the plan for the funeral business would focus on three fronts:

  • Understanding the relationship between price, service and volume to develop a broader proposition for customers across a number of market segments;

  • Developing a more streamlined network operating model that can consistently deliver these propositions at a lower cost; and

  • Developing a modern, efficient, central operating model to support the reconfigured network.

The company announced back in January that it would be cutting the price of some of its funeral packages in response to changing market conditions and this morning it said that since it dropped the price of its simple funeral package, “a step change in simple funerals conducted has occurred, as expected, albeit at this stage at a run rate of approximately 15% of all funerals and therefore below the 20% assumed in the January trading update”.

READ: Dignity to drop funeral prices, issues profit warning for 2018

That being said, the group said it is too early to conclude whether the mix of funeral services has stabilised.

The undertaker admitted in its January update that the new measures to protect market share would substantially hit profits in 2018, it should create a new platform for growth in the years to come.

As for 2017, the firm reported underlying profit before tax of £77.8mln, up 3% from 2016's £75.2mln, on revenue that also rose 3$=%, to £324.0mln.

The final dividend was held at 15.74.

The number of deaths in the UK in 2017 held steady at 590,000 and is forecast by the Office for National Statistics to fall to around 580,000 this year, although the number of deaths in the first two months of this year was 7% higher than in 2017.

"We are the only business with a national network of funeral and crematoria locations, giving us a unique position in the evolving funeral market,2 said Mike McCollum, the chief executive officer of Dignity.

“Following the trading update in January 2018, we have now begun a new chapter for Dignity and for the funeral business in particular. It does not change our focus on excellent client service, which remains core to how we operate. We will also continue to demonstrate industry leadership by seeking the regulated market that will be good for clients and society and which plays to our strengths as a compliant and well managed business," McCollum said.

Shares in Dignity rose 17% to 1,001p in the first hour of trading.

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