InvoCare moves forward despite headwinds Down Under

Foundation Partners why I partnered

Australian funeral service market share leader, InvoCare, is moving forward with capital expenses aimed at becoming more appealing to Baby Boomers in spite of several headwinds on funeral service down under.  You can read an article from Australian Financial Review on the slowing of InvoCare’s business here.

In the article InvoCare CEO, Martin Earp, mentions that by the end of 2018 the company will be through about 40% of its $200 million investment in its modernization program known as “Protect and Grow”.  Earp also points out that of those properties that have already been remodeled to better fit the “Baby Boom Generation” earnings are 30% above what was expected.

InvoCare continues to move on this initiative knowing that first half operating earnings were down 7.4% with total revenue up only 2.5%.  Earp also noted that the guidance for the year was based on an overall funeral market in Australia growing at about 1.5% whereas the market has been soft with less deaths than anticipated in the country — as a matter of fact they are running about 1.2% behind last year.

Funeral Director Daily take:  Last week we wrote an article entitled, “Being Determined to Stay the Course”.  The crux of that article was that when you have researched something and implemented the plan, most times it is best to “Stay the Course” rather than blink and cancel at the first sign of negative returns.  That can somewhat be said here where InvoCare has committed to a course that will expend over $200 million to make their funeral business more attractive to the Baby Boomer generation.

They have to be looking at it with mixed results. On the one hand it looks like a winning combination with profits up 30% at renovated locations.  On the other hand, they know revenue per case and volumes are sliding a little bit and could slide more.  Some other headwinds that they have in Australia include purchase prices going up on acquisitions because of competition with public company newcomer Propel Funeral Partners and a consumer rally for more price openness and transparency — not unlike what the United States faced in the late 1970’s.

At the end of the day I expect their “Protect and Grow” program to be a winner.  Investment today many times pays off down the road and if funeral and memorialization is changing to a more celebratory style in Australia – the company that has the facilities for that type of celebration service will win in the long run.

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