InvoCare (ASX:IVC) share price jumps as earnings surge 22%

Investors have reacted positively to the company's earnings release this morning, sending its share price to the heavens.

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Key points

  • Funeral company InvoCare has reported its FY21 earnings today
  • InvoCare divulged rises across most key metrics, as well as a hefty dividend raise
  • The InvoCare share price has also reacted positively

The InvoCare Limited (ASX: IVC) share price is jumping today after the funeral company reported its full-year results for the 2021 financial year (FY21). At the time of writing, InvoCare shares are up a pleasing 5.25% at $13.02 a share.

InvoCare share price jumps on solid full-year earnings

  • Operating revenue of $527.1 million, up 11% from FY20
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) of $125.5 million, up 22% from the previous year
  • Operating earnings before interest and tax (EBIT) of $77.8 million, up 26% on previous year
  • Earnings per share (EPS) of 31.6 cents, a rise of 51%
  • Funeral case volumes of 45,781, a 2.2% rise
  • Reported profit after tax of $80.16 million, coming after the loss of $11.54 million from FY20
  • Final dividend of 11.5 cents per share, fully franked, an increase of 64% over FY20's final payment of 7 cents per share. That brings the total dividends for FY21 to 21 cents per share.

InvoCare also reported a pet cremation case volume of 87,440, a 501% increase on FY20's numbers. The company's funeral case average came in at $8,156, a 3.8% increase from FY20.

What else happened over the year?

Over FY21, InvoCare reported $650 million in funds under management from pre-paid funerals, a rise of 6.03% over FY20. The company's return on capital employed (ROCE) metric rose to 11.2%, an increase of 2.4% from the previous year. Last year, InvoCare announced that its reported profits after tax had surged into the black during the company's half-year earnings. That was after the previous net loss of $18 million for the previous half. That helped the InvoCare share price jump meaningfully at the time.

What did management say?

Here's some of what InvoCare CEO Olivier Chretien had to say on the results:

The Group has successfully navigated another COVID-disrupted year. Despite these challenges, we have seen increased customer satisfaction and material improvement in safety outcomes, we have delivered growth, returned the business to positive operating leverage, maintained our strong balance sheet and cash conversion and embarked on a bold change agenda…

Controlling cost growth has been a particular feature across the year and is reflected in some of the improved profit metrics, including 22% growth in Operating EBITDA to $125.5 million and a return to positive operating leverage (of 2.1x)…

As we move into the growth phase of our strategy, I am confident that we do so on more solid foundations. Whilst the COVID environment can change quickly and deliver shocks to consumer confidence, evident in the past two months, our first half 2021 result demonstrated the potential of the business under 'normal' conditions. 

What's next?

The company did issue a warning for an uncertain 2022. InvoCare stated that the impacts of the COVID-19 pandemic remain "difficult to predict and presents an ongoing risk in 2022" for the company's workforce, supply chains and operations. However, the company "remains confident" for both the near- and long-term potential of the business. Management cited population and ageing trends, as well as rising rates of pet ownership, for this optimism.

InvoCare share price snapshot

Today's InvoCare share price rise helps push the company's 12-month share price performance to 14.8%. That includes a return of 10.43% across 2022 to date. However, InvoCare shares remain down by 7.6% over the past five years, a significant underperformance of the 22.5% return the S&P/ASX 200 Index (ASX: XJO) has enjoyed over the same period.

At the current InvoCare share price, this company has a market capitalisation of $1.88 billion, with a dividend yield of 1.27%.

Motley Fool contributor Sebastian Bowen 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 no position in any of the stocks mentioned. 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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