The InvoCare Ltd (ASX: IVC) share price has fallen steeply today after the funeral services company released its results for the half-year ending 30 June 2019 to the ASX this morning. InvoCare shares opened 8.5% lower at $13.86 this morning and are now hovering around the $14.18 level.
How did InvoCare perform in 1H19?
Generally, we see a generally positive set of numbers for InvoCare, but these clearly have not met expectations for a company that is still priced at 37 times earnings.
Revenue came in at $241.5 million, up 7% from $225.7 million for the prior corresponding period (PCP). This was due to normalising death volumes, improved case average and contributions from acquisitions made in 2018.
Operating earnings (EBITDA) saw a healthy 16.9% jump to 462.8 million from $53.7 million in the PCP.
Underlying earnings after tax was $21.2 million, up 8.6% from the PCP's $19.5 million.
Net profits after tax almost doubled over the PCP from $20.8 million to $41.4 million, which the company said was attributable to the "over-performance of the funds under management for pre-paid funerals."
InvoCare's management is bullish on the 'Protect & Grow' program of acquisitions the company has pursued in recent years. InvoCare SEO Martin Earp stated:
InvoCare's operating results for this period were promising and we are beginning to see a positive contribution from Protect & Grow. Customers are responding favourably to the improvements in both the facilities and services, which is reflected in an increasing level of customer satisfaction. Regional acquisitions made a substantial contribution to H1 2019 results, and we have a strong, active pipeline of opportunities.
InvoCare has held its dividend payout steady at 17.5 cents per share, representing a payout ratio of 88% and a yield of 2.5% on current prices. The dividend reinvestment plan remains active and a 2% discount will apply if shareholders have elected to participate. InvoCare will go ex-dividend on 4 September and the dividend will be paid on 4 October.
Outlook
The results InvoCare have released indicate a return to the long-term trend in mortality that disrupted InvoCare's earnings during 2018. Death rates increased by 1.2% compared with the PCP and by 1.9% in the core Australian market.
InvoCare entered the pet cremation industry during H119 with the launch of its first pet cremation facility in Wollongong, NSW, with CEO Mr Earp saying that this "is a natural expansion of our core business". The company commissioned research that "clearly identified the Australian pet industry as one that is growing rapidly and the memorialisation of pets as an area of high growth."
Celebrating its recent acquisition of Heritage Funerals in Toowoomba, QLD, the company also highlighted its intention to continue its 'Protect & Grow' strategy, with "a strong and active pipeline of opportunities".
