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Funeral provider Dignity is revived as sales rise

It looks to have been too soon for some of its City critics to have been writing the obituaries for Dignity (Other OTC: DGNTY - news) .

The UK's largest quoted funerals provider has been one of the most-shorted stocks in the market this year - that is to say speculators have been betting on a big fall in the share price.

This is due to a fierce price war that has squeezed profits in the sector and a perception in the market that it was more expensive than some of its competitors.

The company responded in January by cutting its prices sharply - but warned that, with customers becoming more price-conscious and increasingly shopping around, this would probably hit profits as more people traded down to its lowest-cost packages.

That whacked Dignity's shares which, since the beginning of the year, had halved as of Tuesday night.

This morning, though, the company said its "simple" funerals - where a basic coffin is provided and where the company, not the bereaved, chooses the time and date of the service - were accounting for a lower-than-expected proportion of the total number of services it conducts.

It had expected "simple" funerals to account for 20% of all services it conducts following its price cuts but said the proportion had held at 15%.

Dignity added that the death rate this year has been higher than expected.

While the Office for National Statistics is expecting the number of deaths this year to be down 0.2% on 2017, the number of deaths during the first three months of the year in the UK was 181,000, up 8% on the same period last year.

That represents an acceleration from the 7% rise in deaths that Dignity reported for the first seven weeks of the year when it last updated the market in March - and suggests that the "Beast from the East" snowstorms that month claimed a large number of casualties.

Dignity said its sales during the period were £95m, up £2m on the same three months last year, while earnings before interest and taxation were £37.5m - in line with a year ago but "significantly ahead" of expectations.

The news has sent shares of Dignity up 17%.

But the company warned: "Despite the positive start to the year, the board still believes it is too early to conclude that trading experienced in the [first three months] is indicative of the likely funeral price/volume mix going forward.

"The board continues to believe that trading during 2018 will be volatile."

City analysts are not getting carried away, either. Charles Hall, of stockbroker Peel Hunt, told clients: "The high death rate in the first quarter is likely to have been caused by the colder winter weather and greater incidence of viruses. After a protracted spike in deaths, it is sensible to assume a reduction."

"We are not changing our forecasts as the number of deaths is likely to normalise and thus be below 2018 levels."

Cora McCallum, of Investec (LSE: INVP.L - news) , added: "Whilst this is a much stronger start to the year than we anticipated, we acknowledge trading is still volatile."

That probably seems fair enough.

The way Britons look at funerals appears to be changing, with more people opting for cremations rather than burials and an increasing number of families opting for a "simple cremation", in which there is no formal service and they merely collect the ashes of their loved one later.

Dignity is carrying out a number of trials at present in which it is apparently experimenting with a mid-price service between that of its "simple" funerals, which cost £1,995 and its full-service funerals, which cost closer to £3,800.

The grieving process, plus the time pressure of needing a professional to deal with a dead body, meant most people used to call their local funeral director rather than shop around or haggle over prices.

However, during an era in which the internet has made it easier and more straightforward to shop around, it seems even the most traditional of industries is having to move with the times.