The Invocare Limited (ASX: IVC) share price edged as much as 2% higher in early trade after the funeral home operator released its half-year results for FY2020. The Invocare share price has since dropped to $9.86 per share at the time of writing, down 1.40% for the day.
How did Invocare perform?
Notwithstanding the difficulties posed by COVID-19 restrictions on funeral attendances specifically, Invocare's performance was largely resilient in the circumstances. In particular, the government-imposed restrictions of funeral attendance numbers was cited as "the key driver in declining revenue".
Invocare's revenue declined by 6.2% overall between the January and June period, operating earnings before interest, taxes, depreciation and amortisation (EBITDA) were down in the order of 22.7% and net profits after tax were down by as much as 143% compared to 2019 half-year levels.
Despite these underwhelming results, the company is seeing customer preferences return to pre-COVID trends since restrictions have eased, with higher attendances expected to drive earnings uplift for the second half of 2020.
The company will pay out to shareholders its previously deferred dividend of 23.5 cents, as well as a 5.5 cent interim dividend on 5 October.
In commenting on the results and Invocare's ability to respond to a challenging environment, CEO Martin Earp added: "Innovative new services, capital raising, debt refinancing, new operational procedures to safeguard the safety of our staff and our client families are all clear examples of a business that has responded in an agile manner to adjust to the challenges experienced due to COVID."
Is the Invocare share price in the buy zone?
As alluded to by this morning's media release, there are a couple of tailwinds benefitting Invocare's business.
Firstly, the strong performance of recently renovated funeral homes, which have outpaced un-renovated sites, is a positive indication that Invocare's 'Protect and Grow' strategy has been worthwhile. As part of the strategy, Invocare has given a facelift to dozens of its funeral homes as a means to adapt to changing societal attitudes and client needs.
On the strong trends of its renovated facilities, Invocare's CEO commented: "One of the key issues to arise from this pandemic has been the recognition by families of the important role of funeral services and this gives us confidence to continue upgrading our service offerings to ensure that we meet the changing needs of our client families into the future."
The other significant tailwind that I believe will benefit the company in the long-term is Australia's ageing population. Government figures from the Australian Institute of Health and Welfare show that as of 2017, close to 4 million Aussies were 65 and over. With the largest market share of any national funeral operator, InvoCare's operations will be a beneficiary of this macro trend.
Foolish takeaway
Invocare's half-year results aren't anything to write home about, but I'm still a believer in the company to perform strongly in the medium to long-term. The company has a track record of paying out a nice yield of 4%, and Australia's ageing population and its continued investment in its funeral sites bodes well for Invocare moving forward.
At the time of writing, the Invocare share price remains 37% lower compared to its 52-week high of $15.79.
