Certainty In Invocare, But Earnings Growth?

By Tim Boreham | More Articles by Tim Boreham

In the circle of life, every organic being must die and that makes the country’s dominant funeral and crematoria provider the ultimate defensive stock.

Over a long period, mortalities have followed the Australian Bureau of Statistics’ projections although in the past few years deaths have been below par.

But in its recent half-year results InvoCare said mortalities had reverted to trend with an encouraging (our words) 3 per cent increase on a rolling annual basis. A decent flu season (as we have now) is likely to assist.

Ultimately, though, Invocare’s performance will be influenced by other factors such as the average spend per funeral and the growth of its pre-paid funeral funds under management.

The latter was a key contributor to the company’s 50 per cent rise in reported half-year net earnings, to $41.7m.

While an increase in underlying demand is a dead cert (sorry) Invocare needs to be careful to tap into the demands of ageing baby boomers who demand more bespoke and expressive exit arrangements.

These usually involve Harley Davidsons, eco burials or ashes fired from projectiles.

Despite the stellar top line Invocare’s market slipped by 130 basis points, which followed a calendar 2016 decline of 77 b.p.

Reasons cited included “evolution of customer preferences” and low-price competition. Bear in mind that just as folk scour the internet for the cheapest TV or Hawaiian holiday, they’ll increasingly go online to compare funeral costs.

Pretty much anyone with a briefcase and mobile can be a funeral director, providing someone else takes care of the back-end (morgue) stuff.

Under its “protect and grow” strategy, Invocare is spending $200m over four years to tart up its premises and such – but we doubt any promotional pens are on order.

About Tim Boreham

Tim Boreham edits The New Criterion. Many readers will remember Boreham as author of the Criterion column in The Australian newspaper, for well over a decade. He also has more than three decades' experience of business reporting across three major publications.

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