Funeral provider Dignity’s profits slump as ‘cost of dying’ rises

Funeral provider Dignity has been hit by the rising “cost of dying”, as higher energy prices and labour costs weigh on profits.

The group, which operates more than 700 funeral locations across the UK, said business had suffered from falling death rates — as the Covid pandemic eased — and inflationary pressures.

It reported a pre-tax loss of £156mn in the six months to June, down from a profit of £50.5mn the previous year.

Dignity said it would consider a temporary fuel surcharge on cremation operations to reflect rising energy costs.

Chief executive Kate Davidson said the cremation side of the business was a “gas heavy process,” on top of energy costs associated with the company’s manufacturing plant and fleet of vehicles.

Dignity is also suffering from a staffing shortage, with 400 vacancies still unfilled, higher labour costs and more expensive materials used to make coffins.

“We are aware that the funeral sector is perhaps not what people necessarily go to straight away when they’re thinking about finding a job, so we do have a challenge really to share with people the amazing work our colleagues do,” said Davidson.

Dignity’s share price was down about 8 per cent on Friday morning to around 36p.

Revenue fell by 12 per cent to £167mn. Operating profit was also down by more than 60 per cent, which the company partly attributed to the introduction of lower-priced services to boost competitiveness.

The Co-operative, the UK’s other major nationwide provider of funeral services, has faced similar pressures.

Shirine Khoury-Haq, the group’s chief executive, said on Thursday that suppliers were increasing their prices, particularly crematoriums that are heavy users of gas.

Customers are also cutting back. “We are seeing massive trading down to entry level products from high-end funerals,” she said.

Direct cremations, also known as unattended funerals, accounted for almost a fifth of funerals in 2021, according to Sun Life’s annual cost of dying report. They include the preparation of the body, the cremation and the return of the ashes, but no hearse, procession or funeral service.

They can cost less than £1,000, compared with the average cost of a cremation at around £3,700 and a burial at closer to £5,000.

First-half revenues at Co-operative Funeralcare fell slightly to £139mn while underlying profit was also down by over a third to £11mn, partly because the company reduced the prices of its most basic funeral services.

The latest pressures on the industry follow two years of disruption from the Covid-19 pandemic and increased scrutiny and regulation.

Since July this year, providers of pre-paid funeral plans have become subject to Financial Conduct Authority regulation and funeral directors can no longer receive commission payments for selling them. Both Dignity and the Co-op are among the 26 plan providers who have been authorised by the regulator.

That followed an intervention by the Competition and Markets Authority in 2021, which required funeral directors to display standardised price lists and banned them from soliciting business through hospices, palliative care centres and care homes.

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