InvoCare Limited (ASX: IVC) is a consumer discretionary company, based out of North Sydney, and provides funeral, cemetery, crematoria, and allied services in Singapore, New Zealand and Australia.
It operates around 250 funeral homes, 16 cemeteries and crematoria through various brands. There are numerous other services provided via online platforms such as HeavenAddress, MyGriefAssist, MyMemorial, Funeral Planner, LifeArt coffins, and FuneralAdvice.
On February 22nd, 2019, the company announced its full-year results for the period ended December 31st, 2018. As per the report, the operating EBITDA for the year 2018 was at $ 119.0 million with 24.9% of operating margins, consistent with the October 2018 trading update. Throughout the year, IVC deployed major capital in driving two of its growth strategies comprising Protect & Grow (P&G) with $ 57 million and Regional Acquisitions with $ 73 million. The company also emphasised that the P&G investment would affect financial performance in 2018 that could cause low single-digit operating EBITDA growth or flat operating EPS.
The funeral market conditions remained soft during the period with lower death volumes due to mild winter and effective flu vaccinations. Also, the number of people infected with influenza-like illness (ILI) and reporting to practitioners was significantly down on both 2017 and the five-year average. The number of reported deaths for the year also declined unusually on 2017, by approximately 3.1%, indicating two rare consecutive years of reduced deaths. According to the Australian Bureau of Statistics (ABS), the data suggests that between 1990-2017, the largest year-on-year fall was 3.4% and the largest year-on-year increase was 4.4%. However, the long-term industry outlook appears strong with estimates depicting 240k deaths per year by 2034 in Australia.
For the concerned year, the business recorded operating sales revenue of $ 477.3 million, up by 1.4% on FY2017 due to 11 successful acquisitions and proceeds from deferred memorial sales. The earnings from operations after tax amounted to $ 49.5 million, down 22.1% on the prior year and the net profit was at $ 41.2 million, reflecting a decline of 57.7% on FY2017 with $ 97.4 million. The reported statutory profit decrease can be attributed to the reduction in comparative return on prepaid contract funds under management.
Besides, the company also recorded operating earnings per share of 45.4 cents and basic earnings per share of 37.8 cents, both significantly lower than prior period figures. Dividends of 37.0 cents per share were paid out to the shareholders representing a pay-out ratio of 82%.
InvoCare has a market capitalisation of AUD 1.39 billion, with approximately 110.26 million outstanding shares. The stock performance of IVC has exhibited an uptrend since the onset of the year with a positive YTD return of 22.97%. With the close of the trading session on February 22nd, the IVC stock’s last sell-price was at AUD 14.090, up by 12.003%, indicating an intra-day gain of AUD 1.510.
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