Funeral Director Daily recently learned through this late August article in The Times (of London) that Dignity Funerals of Great Britain recently “has moved to reduce its debts after warning of “material uncertainties” over its ability to continue as a going concern, just over a year after it was taken private from the London Stock Exchange.”

 

According to the article, Dignity Funerals is “one of the country’s two big funeral companies, alongside Co-op Funeralcare. It employs about 3,500 people, has 600 branches, manages 45 crematoriums and 27 cemeteries and has 361,500 pre-paid funeral plans.”

 

The company was taken private in January 2023 by an investment group for a reported 789 million pounds (the equivilent of $ 1.03 billion in United States dollars).  You can read about Funeral Director Daily’s coverage of that transaction here.

 

Here are some other quotes that you will find in the The Times article:

• “Accounts for Dignity Funerals Limited, the group’s main operating company, filed last week at Companies House for the year to December 29 show that the directors “remain confident in the long-term prospects” of the company, but that “material uncertainties exist that may cast significant doubt on the group and parent company’s ability to continue as a going concern” for the period to the end of June.”

 

• “A “severe but plausible downturn” in the group’s financial performance could result in a breach of its debt service covenants, the accounts state. However, the “base case” of the business, which considers the death rate, market share and mix of funerals and costs, predicts it will have “sufficient liquidity”. A non-binding letter of support has been issued by Dignity’s majority shareholders for up to £25 million, should it be required.”

 

• “As part of a long-term solution to improve its capital structure, Dignity is looking to repay the loan notes, such as through the sale of assets or extra capital from shareholders.”

 

• “Before the takeover, Dignity’s share price and balance sheet had been plagued by fierce competition, a growing demand for cheaper and simpler funerals, rising costs and a volatile death rate since the pandemic.”

 

Funeral Director Daily take:  When I saw this article while searching for potential Funeral Director Daily articles the other day it somewhat put a shiver up my spine.  For as long as I can remember, at least all of my working days since 1980, funeral home consolidators/operators have done very well by continuing to add facilities to their numbers.

 

There was the case in the 1990’s of the Loewen Group going into bankruptcy, but that case was probably a combination of many factors including a jury trial judgement against the company in addition to the problems caused by the debt accumulated by the company.

 

Of course, since the 1980’s certain criteria have been in place that have favored acquisitions.  Since inflation started coming down in the mid-1980’s those criteria have included rising funeral prices, low inflation rates, a low cost of capital such as interest on debt, and a probably lower than inflation fixed costs structure which included salaries.

 

In today’s world those criteria have sharply changed. . . especially the fact that the acquisition companies can no longer count on rising funeral and/or cremation pricing.  In addition, interest rates are higher on debt and inflation rates on supplies are also running at rates that are very high.  Finally, fixed costs of the business such as building construction and maintaining facilities and professional staff salaries are higher, on a relative basis, than they were ten years ago.

 

I think those criteria make funeral home acquisitions riskier than they were a decade ago.  I think good operators can still find the acquisition targets than can be accretive to earnings, however, I’m just saying that economic issues and societal changes have made that a little bit harder to do in every case.

 

Knowing that there are changes in our economy and that Death Care is evolving is probably reason enough to look for advice if you are ever thinking about buying or selling. . . . I’m guessing that the people at Johnson Consulting Group would be my first call for help in that situation.

 

Here is the website for Dignity Funeral Directors

 

More news from the world of Death Care:

• I discovered my calling in a cemetery.  We talk about death but are not prepared.  Newsweek
• Can you bury a family member in your backyard?  Here’s what North Carolina law says.  The herald (NC)
• Clark County (NV) covers burial costs for more than 2k people each year.  Originally from the Las Vegas Review.  (NV)  Microsoft Start
• Legal move as Travellers set up camp on Glenrothes crematorium bid land.  The Courier (Great Britain)
• How a pandemic-era surge in tax collections drove a revenue wave — and what it means for future state budgets.  Pew Research

 

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