InvoCare Limited (ASX: IVC) has pulled the plug on part of its U.S. business, citing the unlikelihood that it would reach breakeven by the group's mid-2018 target date as its reason. Its shares slipped 1.5% early during Tuesday's session as a result.
InvoCare is a global business that operates funeral homes, cemeteries and crematoria in markets including Australia, New Zealand, Singapore and the U.S. It launched its U.S. business two years ago and has been trialling funeral and cremation operations in the time since.
While it has decided to continue its Macera Crematory business in Los Angeles, however, it has decided to end its funeral operations in that country. Although its financial performance did improve in 2016 compared to the previous year, InvoCare did not believe the business would reach a breakeven result by mid-2018 and within the US$8 million capital limit that had been allocated to the project.
It had previously made a commitment to shareholders that it would close the business if it could not reach that target, and has thus remained true to its word. Thankfully, only US$6 million (three quarters of the capital limit) has been pumped into the low cost and low risk operation, with InvoCare also noting that the impacts of both the closure and trading results in the U.S. since 2015 are immaterial to the group as a whole.
As noted by the business' CEO, Martin Earp:
"While it's disappointing to conclude that the US funeral business should close, our core business will benefit from the very innovative approaches developed by our US team for digital marketing and the use of digital tools to improve customer service and customer care.
He continued:
"The US team has put an enormous amount of time, energy and passion into exploring the new business model and that will add significant value in our core markets of Australia, New Zealand and Singapore."
InvoCare will report its full-year results on 23 February. At its half-year results, which were released in August, it noted "challenging trading conditions" due to lower than anticipated numbers of deaths in the company's core markets. It also said it would focus on managing costs and putting in place revenue generating activities during the second-half, which investors should watch for when InvoCare does report.
