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Why the InvoCare share price rose by 14%

InvoCare Propel IVC PFP share price

The share price of InvoCare Limited (ASX: IVC) grew by 14% after the leading funeral business announced its FY19 result to the market.

InvoCare’s FY19 report numbers

InvoCare announced that for the 12 months to 31 December 2019 it grew operating sales revenue by 3.5% to $494.1 million. The number of deaths increased back toward the long-term trend with deaths up 2.9%, whereas it was a drop of 3.3% in 2018. The average funeral case average increased 2.1% and its market share rose 20 basis points (0.20%).

Operating earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 21.4% to $144.4 million with the operating margin improving by 430 basis points (4.3%) to 29.2%.

Operating earnings after tax rose by 19.6% to $59.2 million and net profit after tax (NPAT) increased by 54.6% to $63.8 million thanks to a strong performance of its pre-paid funds under management.

In 2019, InvoCare completed the renovation of 106 locations with plans to accelerate the roll out and renovate a further 74 locations in 2020.

InvoCare CEO Martin Earp made positive comments about the renovation strategy as well as the regional acquisitions:

“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.

“The performance of the recent regional acquisitions and 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.”

Foolish takeaway

InvoCare is now trading at 27x FY20’s estimated earnings. It’s certainly not cheap at this price, but it could be one of the best defensive plays on the ASX and the coronavirus probably wouldn’t be a negative for its operating profit. For the long-term, InvoCare is well-placed to benefit from the ageing population tailwinds.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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