Invocare Limited (ASX: IVC) has reported its FY20 half year result, how is COVID-19 affecting it?
HY20 result
Invocare has reported its result in an “extremely challenging operating environment”.
The company said that it tried to provide innovative solutions to support client family needs, which led to a net promoter score of +78 (which is high).
Operating sales revenue fell by 6.2% to $226.5 million. The average price per funeral fell 5.7% compared to the prior corresponding period. There were restrictions of the number of people that could attend a funeral.
The high level of fixed costs required to continue carrying out funerals led to operating EBITDA (click here to learn what EBITDA means) dropping by 22.7% to $48.6 million.
Operating earnings after tax fell 47.8% to $11.7 million. The company reported a statutory loss after tax of $18 million. The statutory result includes the movement in its investment funds which dropped by 5.4% – however it still has $52.3 million more assets than Invocare’s liabilities.
Invocare dividend and balance sheet
Invocare’s balance sheet remains in good shape after a $274 million capital raising, refinancing of $200 million of bank debt and a cash conversion rate of 98%.
The funeral business said that its deferred final dividend of 23.5 cents per share will be paid. Invocare also declared an interim dividend of 5.5 cents per share.
The board felt confident to pay an interim dividend thanks to the strength of the balance sheet and the resilience of the industry. It continues to invest in growth initiatives.
Management comments
Invocare CEO Martin Earp said: “Our renovated funeral homes are performing strongly when compared to our unrenovated sites. 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.”
Outlook
COVID-19 is causing a lot of uncertainty and the winter season will be different this year due to social distancing measures. Average funeral prices are recovering, but the newer restrictions in Victoria and New Zealand add more uncertainty.
Invocare hasn’t been as defensive through this period as one might first expect. I’m not sure it’s worth buying today because there is still a lot of uncertainty and it may not get back to earnings growth for a while. There are other ASX growth shares and ASX dividend shares I would buy first. Pushpay Holdings Ltd (ASX: PPH) could provide better returns.
[ls_content_block id=”14948″ para=”paragraphs”]
