InvoCare (ASX:IVC) share price jumps 9% after reporting strong first half growth

The InvoCare share price is on form on Monday…

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The InvoCare Limited (ASX: IVC) share price has been a strong performer on Monday morning following the release of its half year results.

At the time of writing, the funerals company’s shares are up 9.5% to $12.25.

InvoCare share price jumps after profit rebound

  • Statutory Revenue up 13% to $260.9 million
  • Operating Revenue increased 13% to $257.3 million
  • Operating earnings before interest, tax, depreciation and amortisation (EBITDA) up 31% to $63.6 million
  • Operating EBIT up 46% to $39.4 million
  • Reported Profit After Tax of $44 million, compared to a loss after tax of $18 million
  • Operating earnings per share up 57% to 14.4 cents
  • Interim fully franked dividend of 9.5 cents per share

What happened in FY 2021 for Invocare?

For the six months ended 30 June, InvoCare returned to form thanks to a continued recovery in the value of its funeral case average, continued growth in memorialisation sales in the Cemeteries & Crematoria business, and a strong contribution from acquisitions in the Pet Cremations business.

This resulted in a 13% increase in operating revenue to $257.3 million during the half and an even better 46% lift in operating EBIT. Management notes that cost control was a particular feature in the half and underpinned a return to positive operating leverage.

Another positive boosting the InvoCare share price could be its strong cash balance. Thanks to actions taken at the height of COVID, the company ended the period with a sizeable cash balance of $131.2 million. It also reported a strong operating cash flow result, translating to a cash conversion ratio of 102%.

What did management say?

InvoCare’s CEO, Olivier Chretien, said: “While the operating conditions have not fully returned to pre-COVID levels, it is pleasing to see how resilient the business and our people continue to be, and the operational performance they can deliver when conditions allow.”

“We shared our strategy with investors in May, and we have hit the ground running, with a number of key achievements during the period. Our initial focus has been on further strengthening our business foundations, and we are pleased with the momentum that our teams have established in the half.”

What’s next for InvoCare in the second half?

Management notes that the emergence of the COVID Delta strain in June and the associated government response in Australia is expected to lead to a softening of the funeral services sector in the second half of 2021,

Given that the extent of restrictions remain uncertain, the company is unable to provide earnings guidance for the full year. Nevertheless, management remains confident about the long-term potential of the business, with future growth supported by population and ageing trends in its markets.

Mr Chretien said: “The persistent and sudden impacts of COVID restrictions on consumer confidence and our operating model, as evidenced in the past two months, will continue to restrict our businesses and people in realising the Group’s full potential, but our first half results demonstrate the strength of this organisation when conditions permit.”

“Our focus will be on what we can control, and we remain extremely confident in our team’s capability and the Group’s potential in maintaining the momentum on this phase of our strategy of Raising the bar,” he concluded.

The InvoCare share price is now up 5% in 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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