January 19, 2018 / 8:16 AM / 2 years ago

Funeral company Dignity's shares halve after profit warning

(Reuters) - Shares in British funeral services company Dignity (DTY.L) lost half their value on Friday after it warned results for 2018 would be substantially below market expectations as it is forced to cut some of its prices.

Dignity, which is Britain’s largest listed funeral service provider, said families were becoming “increasingly price-conscious” and that it would reduce prices for simple funerals by around 25 percent.

It is also freezing the price of the more expensive — and more popular — full service funerals from which it earns an average income of 3,800 pounds.

Rival Co-op Funeralcare — part of mutually-owned Co-Operative Group (42TE.L) — cut its prices in September.

The comments from Dignity illustrate that its industry is not immune to the pressures facing Britons as higher inflation and subdued wage rises leave them with less money to spend.

“Customers are increasingly price-conscious and in an over-supplied industry, are shopping around more,” Dignity said in its statement.

The price of a simple funeral would fall to 1,995 pounds in England and Wales from 2,660 pounds and come down to 1,695 pounds from 2,260 pounds in Scotland. The company expects the number of simple funerals to rise to around a fifth from only seven percent.

“We decided to act on prices now as we have room for any such manoeuvre”, Chief Executive Mike McCollum told analysts in a briefing.

Dignity expects to spend an additional 2 million pounds this year on digital and other promotional activities to help publicise its new prices.

Dignity, which has close to 800 funeral locations and operates 44 crematoria in the UK, said it was in talks with the government to regulate the funeral industry and ensure customers are not “misled into accepting below-par service and standards”.

Shares in the FTSE-250 company were down 49.9 percent 0932 GMT and were the biggest drag on the index .FTMC

Reporting by Rahul B in Bengaluru; Editing by Amrutha Gayathri and Keith Weir

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