(Alliance News) - Funeral services provider Dignity PLC warned on Wednesday a regulatory investigation could "materially" impact both its industry and the company itself.
Shares were down 19% in early trade on Wednesday in London at 403.40 pence each. They have lost 45% in the past 12 months, and in late 2016 were not far off 3,000p.
A year ago, the UK Competition & Markets Authority announced an in-depth probe into the funerals sector amid concerns over competition. Other concerns included the rising cost of funerals, which rose on average 6% a year in the 15 years prior to 2019.
Sutton Coldfield-based Dignity itself has been undergoing a transformation plan since 2018. In July last year it temporarily removed its dividend amid falling profit and revenue.
"We have a strong business that is ready and willing to adapt to the challenges ahead. However, the challenges are significant," said Non-Executive Chair Clive Whiley.
"Average income per funeral and cremation are likely to reduce further; the CMA investigation could materially impact our plans; our transformation plan is strong however timing needs to be amended pending the outcome of the CMA investigation, thereby delaying anticipated savings."
"The impact of these challenges is currently unclear. For example, the draft report from the CMA is not anticipated until April or May 2020, with their final report currently due by the end of September 2020. The board anticipates making further comment on the Group's outlook following the release of the provisional decision report," Whiley continued.
Turning to results for the 52 weeks to December 27, Dignity's average income per funeral fell 1.4% to GBP2,930, with the reduction expected. Revenue fell 4% to GBP338.9 million, and the number of deaths during the period dipped 3% to 584,000.
Dignity swung to a pretax profit of GBP44.1 million, after a GBP18.0 million loss the year before. The 2018 figure was restated from a GBP40.5 million pretax profit, due to accounting changes.
Dignity said the operating performance was in line with market expectations. The Crematoria and Pre-Need divisions did well, it added.
Whiley added: "Whilst we were pleased with the progress we made and the financial performance we delivered in light of the competitive environment, we need to be cautious in the coming months until the CMA's conclusions are finalised."
In a separate announcement Wednesday, Dignity said Dean Moore has been appointed as a non-executive director with immediate effect. He is a former chief financial officer of Cineworld Group PLC and retailer N Brown PLC.
"I am delighted that Dean has joined the board of Dignity. His significant financial, commercial and board experience will be invaluable, and I very much look forward to working with him on the transformation strategy and the future success of the business," said Whiley.
By George Collard; georgecollard@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.