Dignity plc moves from loss to profit despite lower revenues

Dignity plc, Great Britain’s leading death care provider reported their results for the 2021 calendar year last week and in doing so reported a Profit before taxes of US $42.4 million as compared to a 2020 calendar year pre-tax loss of over US $25 million.  This positive swing was accomplished despite Revenue dropping about 1% to US $ 466.5 million from 2020’s US $ 471.5 million.

You can see the Dignity plc 2021 operating results here.

Even with profits moving up, Dignity plc warned investors of a bumpy road in the future.  Here is some of what was said about future items:

  • (Dignity plc’s) pricing strategy now was to offer the best value for money, and that lowering prices will reduce how much it earns per funeral. Dignity said this will likely lead to lower profits in the short term.
  • Dignity expects to report lower profit in the short term. This is due to the combination of lowering prices and a normalizing the UK death rate as the danger of Covid-19 dissipates and the excess death effect of the past two years start to reverse.
  • (While) there will be a benefit coming through from a reduction in central costs, the biggest factor affecting Dignity plc will likely be excess deaths of the past two years which will reverse itself at some point after Covid-19 passes.

Dignity plc did share some expected good news for the future as well in saying,  “Our experience since we changed prices has been that the market share loss stops and then reverses, and so in time we expect that revenue loss to be more than compensated by volume growth, especially when combined with all the other elements of our strategy.” 

Here are some other key points made in the press release and other articles, including a point about de-centralized management:

  • 2021, like 2020 was another year heavily impacted by the pandemic with an elevated death rate
  • New strategy was agreed to, and good progress was made on implementation.  The strategy involves lowering price points to increase market share.
  • (Dignity plc) Inverted the organization through a new organizational structure with 12 regions; focusing on removing management hierarchy and replacing this with a locally empowered leadership structure
  • (Dignity plc) focused program of work to prepare for the Financial Conduct Authority (FCA) regulation of pre-paid funeral plan market which comes into force in July 2022.
  • In March 2022 Dignity plc “agreed to a 12-month waiver to our main financial covenant with noteholders to protect the company from a post pandemic drop in the death rate.”

Here’s a couple of items that Funeral Director Daily deduced from the report and reading the other articles:

  • Dignity plc conducted 79,200 services in 2021 down from 80,300 in 2020.  That’s about a 1.4% decrease.
  • Dignity plc brought in average revenue per service in 2021 of US $5,889 up very slightly from 2020’s average revenue per case of US $5,872.
  • The 2021 case load of 79,200 services would represent a market share of about 11.9% of all Great Britain’s deaths which were estimated at 664,000 in 2021.
  • Dignity plc operates 776 funeral homes which would bring the average case load per funeral home to 102 cases (based on the 79,200 services in 2021)

Finally, here is part of what Gary Channon, CEO of Dignity plc, said in a prepared statement, “2021 was a year of great change at Dignity as we set out and started implementing the new strategy which at its core promotes a culture focused on serving families and communities in all their end-of-life needs. There isn’t a part of Dignity that hasn’t been affected by the transformation so far as we inverted the whole organization, empowered those serving clients and organized ourselves in a more collaborative structure. . .”

According to the press release, Great Britain recorded about 664,000 deaths in 2021 as compared to 663,000 in 2020.

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Funeral Director Daily take:  After a time period where the British public and regulatory agencies have indicated that they believe funeral prices are too high and market pressures from the growth of direct cremation with no services, including through British start-up Pure Cremation, Dignity plc is changing their business operandi to move to a format with lower prices.

It will be interesting as they move forward with this strategy to see if they do, indeed, get to a point where they have more clientele being served, but at less profitability.  And, especially if that business method leads to higher overall profits.

You may want to look at the road Dignity plc has embarked on closely.  It might be the same highway that United States firms will have to follow some day.

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