InvoCare swings to $9.2m loss as people opt for direct cremations during COVID-19

COVID-19 restrictions have hit funeral provider InvoCare hard, with more Australians opting for direct cremations over traditional funeral services.

Funeral case volumes were 2.5 per cent down for InvoCare in 2020.

Funeral home InvoCare has swung to a $9.2m full-year loss as the company reels from coronavirus-fuelled restrictions and people opt for direct cremations over traditional funeral services.

As funerals were stripped back, with the number of mourners limited to curb the spread of COVID-19, InvoCare’s revenue dived 4.5 per cent to $477.7m in the 12 months to December 31.

Its $9.2m loss, meanwhile, represented a 115 per cent turn around on the previous year.

Despite the fall into the red ink, InvoCare will pay a dividend of 7c a share, fully franked, on April 22.

It comes as Olivier Chretien succeeded Martin Earp as the company’s chief executive on January 1.

“While the group’s financial results have been put under pressure in 2020, it is pleasing to see how resilient the business and our people have been,” Mr Chretien said.

“In response to the high level of uncertainty associated with COVID-19, the company took decisive actions during the year to maintain significant balance sheet flexibility. This has allowed the group to continue to fund its strategic initiatives, including 63 network and brand optimisation projects and the acquisition of two successful pet cremation businesses, that provide us with a national footprint and immediate scale in a sector with strong growth prospects.”

Funeral case volumes were 2.5 per cent down for the year, with volumes in the second half down just 1.6 per cent as restrictions eased. The loss was sharper in New Zealand, which had tighter COVID-19 restrictions, with InvoCare’s volumes falling 4.9 per cent, compounded by the number of deaths declining across the Tasman by 4.8 per cent.

“Consistent with Australia, the severe restrictions early in the pandemic saw a shift in consumer preference to simpler funerals and an increase in direct cremations,” Mr Chretien said.

“As a result, a review of the assumptions made in the long-term modelling used to support the carrying value of the New Zealand group of cash generating units was necessary and a non-cash impairment of $19.3m had to be recognised.”

Revenue across its Singapore business fell 8.6 per cent to $19.4m as the country remained in partial lockdown and gatherings limited to 30 people, including at funerals.

“With many customers opting for straight cremations, the funeral case average has declined 5.7 per cent in the year,” Mr Chretien said.

Mr Chretien said the pets business, Patch & Purr, was “largely unaffected by COVID-19”, delivering earnings before interest, tax, depreciation and amortisation of $500,000 in its first year of operation.

Overall, he remained optimistic about the long-term potential of the group, while not given detailed guidance.

“I am energised by the potential of our businesses. We have an experienced team, strong national and local brands, a modernised asset base and leading market positions. I see many opportunities to leverage and optimise our foundations to meet the evolving needs of our client families and communities with an expanding, omni-channel, value proposition.

“We can also extend our industry leadership through increased focus on talent, safety, sustainability, digital, innovation and proactive stakeholder management. I look forward to setting out our strategic plan for the next five years at our inaugural investor day to be held in May.”

InvoCare shares closed up 0.4 per cent on Wednesday at $11.28.