• Invocare ltd operating revenue was up 11% to $527.1m with acquisitions executed in 2H20 contributing $26.7m - Investor Desk

    Invocare ltd operating revenue was up 11% to $527.1m with acquisitions executed in 2H20 contributing $26.7m

    Invocare ltd operating revenue was up 11% to $527.1m with acquisitions executed in 2H20 contributing $26.7m
    Invocare ltd operating revenue was up 11% to $527.1m with acquisitions executed in 2H20 contributing $26.7m
    Posted On March 7, 2022

    Invocare Ltd (ASX: IVC) – Neutral

    Last Price: A$ 12.54 | Target Price: A$ 13.20

    Investment Thesis

    • Trades in-line with our blended valuation (DCF / PE-multiple). IVC is currently trading on a 12-mth blended forward PE-multiple of 30.0x and 2.4% dividend yield. 
    • IVC continues to be impacted by Covid-19 and associated lockdown/containment measures.
    • Potential for increased death rates.
    • Continued cost control from strategic review and operational efficiency.
    • IVC benefits from demographics and long-term population growth.
    • IVC holds leading market positions in its core markets.
    • IVC has strong cash flow conversion and generation.
    • High barrier to entry with quality assets and a business model that is difficult to replicate.  
    • Increased competition from budget operators in Australia.

    Key Risks

    • Continued reduction in death rate compared to expectations/forecasted trend.
    • Increased competition especially around pricing.
    • Protect and Grow 2020 does not yield incremental returns as anticipated.
    • Underperformance of funds under management.

    FY21 Results Highlights

    • Statutory Revenue of $532.5m, up +11%.
    • Operating Revenue up +11% to $527.1m.
    • Operating EBITDA up +22% to $125.5m, with a return to positive operating leverage.
    • Operating EBIT up +36% to $77.8m.
    • Reported Profit After Tax of $80.2m, was higher than the loss of $11.5m in the pcp.
    • IVC achieved strong cashflow conversion of 105%, ROCE of 11.2% and leverage ratio of 1.2x.
    • Operating EPS of 31.6 cents, up 51% on pcp.
    • The Board declared a final fully franked dividend of 11.5cps which takes Full Year dividends to 21.0cps (equating to 66% dividend payout ratio).
    • IVC maintained a strong balance sheet with net debt at $144m at year-end, representing a leverage of 1.2x, a slight improvement on the pcp.  

    Company Profile 

    InvoCare Ltd (IVC) is the largest private funeral, cemetery and cremation operator in the Asia Pacific Region. It has leading market positions in countries like Australia, New Zealand, and Singapore. 

    (Source: BanyanTree)

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