InvoCare, Propel Funeral Parlours show other factors affecting death rates during COVID

Influenza rates and motor vehicle fatalities have dropped during lockdown.

One neat investment theory of the pandemic era is that the deathcare industry provides the perfect hedge against the human cost of the pestilence and the ­ensuing economic chaos.

But as with having blind faith in gold as a safe harbour, the ­notion of funeral parlours as a defensive certainty should be dead buried and cremated.

This month’s profit results from the listed InvoCare (IVC) and Propel Funeral Parlours (PFP) show that while the virus toll is mounting — other factors are keeping mortalities down.

For an industry predicated on fixed costs such as facilities, an ill wind bloweth.

One “problem” is that social distancing and masks mean that influenza rates have plummeted — by as much as 95 per cent, ­according to Propel.

So too have vehicle fatalities: nationally they’re down about 70 (10 per cent) year to date, while in mobility-deprived Victoria the decline is more like 20 per cent.

The other headwind is revenue per funeral has declined, partly because of limits on mourners.

While these largely have been lifted, but in delinquent Victoria a maximum of ten people can attend (including the celebrant, but not the deceased!).

Australia’s biggest funeral ­operator, InvoCare reported first (June) half net profit decline of 48 per cent, to $48m.

Management estimates the overall Aussie death rate declined 2-4 per cent year on year, which is below actuarial assumptions.

Put in context, about 150,000 Australians drop from their perch annually, but small percentage differences can affect the funeral operators given their high fixed costs.

A key stat is that Invocare’s case volumes fell 3.5 per cent to 22,077 funerals, but group revenue fell more than 6 per cent to $226m.

Fewer mourners mean less of a cut on sandwiches, condolence books, flowers, tissues etc and it all adds up. The lack of an “audience” means more bereaved families are opting for direct cremations and foregoing snazzy caskets.

Propel fared notably better, this week disclosing a 6 per cent profit boost to $14.2m, with ­volumes increasing 17 per cent to 13,299. 

One proviso is that unlike ­Invocare’s numbers, Propel’s are for the full year and reflect less of the virus-affected period. ­Adjusting for acquisitions and other factors, volumes were down about 2.2 per cent and revenue was flat.

With a circa 25 per cent market share, InvoCare has a stranglehold on the fragmented sector via names such as White Lady, Simplicity. It also has a Singaporean presence.

Unlike the clients, the sector is down but not out.

Tim Boreham edits The New Criterion

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