The InvoCare Limited (ASX: IVC) share price will be one to watch on Wednesday following the release of the funerals company's full year results.
How did InvoCare perform in FY 2019?
For the 12 months ended December 31, InvoCare reported a 4% increase in revenue to $500.35 million. This was driven by a combination of market share gains, acquisitions, and the number of deaths increasing back toward the long-term trend. Deaths were up 2.9% during the 12 months, compared to a drop of 3.3% in FY 2018.
The company also made big improvements with its costs. Thanks to the success of its Protect and Grow strategy, underlying operational expenses grew only 2.8% during the year. This meant that operational expenses now account for 76.5% of underlying sales, down 1.5 percentage points year on year.
This ultimately led to the company's operating earnings after tax rising 19.6% to $59.2 million and net profit after tax increasing by 54.6% to $63.75 million.
InvoCare's cash flow improved in the second half, leading to it reporting an 82% conversion from operating EBITDA to cash.
This allowed the board to declare a final fully franked dividend of 23.5 cents per share. This brought its full year dividends to 41 cents per share fully franked, which was an increase of 10.8% on last year's dividends.
Management commentary.
InvoCare's Chief Executive Officer, Martin Earp, was pleased with the success of the Protect & Grow strategy.
He said: "The results for 2019 have proven the positive impact of our investment in the Protect & Grow strategy. We continue to receive very favourable feedback from customers to the more contemporary product offering. This is reflected in both our continuing strong customer satisfaction scores as well as improved profitability from these renovated locations as people benefit from our improved service proposition."
"In 2019, InvoCare completed the renovation of 106 locations with plans to accelerate the roll out and renovate a further 74 locations in 2020. The performance of the recent regional acquisitions has exceeded our expectations which is testament to the strength of the teams within these businesses and the strong underlying demographics in these regional markets," he added.
Outlook.
Management advised that it is difficult to provide full year guidance with any degree of certainty. This is due to the importance that the winter trading period has on its results.
But it expects a continuation of the revision to trend in the number of deaths across its three markets. It also expects case average growth of ~2%, continued positive contribution from acquisitions, disciplined cost control, and an NBO drag of ~$4 million on its EBITDA.
