Cost of dying breathes life into Dignity profits

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"Certainly our business is steady as she goes," said chief executive Mike McCollum.

The listed undertaker performed 4% fewer funerals than last year, but average spending on each rose by 5% as grieving families refused to cut back on flowers and memorials. The average cost of a funeral and cremation is now £2700, with burials costing more.

This helped push pre-tax profits up 3.2% to £22.8 million for the six months to 26 June. Revenues rose 5.5% to £95.6 million.

But Dignity's shares dropped 21½p to 625¾p as broker KBC Peel Hunt advised pocketing profits after a strong run.

Investors were also unnerved by its share of the fragmented funerals market slipping from 12.5% to 12%.

Dignity continues to grow through acquisitions, buying four funeral homes and five crematoria since the start of the year. McCollum said most of its buys come through the owners of larger funeral homes retiring and their children not wanting to take on the businesses.

Although death rates are expected to decline for the next few years, experts predict they will start to climb again by 2015 as the population ages.

The interim dividend has been hiked up to 4.03p from 3.66p last time.