But the recent announcement by United Kingdom’s second-largest funeral business, Dignity to halt its dividend after a significant profit slump has thrown some doubt into the investment equation and raises some interesting questions for Australia’s 1.5 billion death care industry.
According to a report in Reuters (July 31), Dignity was suspending its dividend after profits nearly halved in the first half of 2019, hit by a drop in the number of funerals it conducted and a shift towards lower-cost services, sending its shares down 10%.
The results come at a time when the UK is planning to regulate parts of the funerals business, after a probe found providers were taking advantage of grieving families with high pressure sales tactics.
What does this mean for InvoCare shareholders
InvoCare, which is listed on the Australian Securities Exchange (IVC:ASX), is Australia’s largest provider of funeral services and currently operates over 290 funeral locations and 16 cemeteries and crematoria, across Australia, New Zealand and Singapore. It currently has control of more than 34% of the Australian funeral market.
Over the last several months, investors have become increasingly bearish on InvoCare, however, if you start to dig beneath the surface, the bullish predictions for investors may not be all it seems to be.
“We are seeing cracks in their business model”, says eziFunerals owner Peter Erceg. “For decades, the global formula for leaders in the funeral industry was along the lines of rising death rate plus price rises plus industry consolidation plus operating leverage equals double-digit earnings per share,” he says.
“Investors are clearly rethinking this as a result of Dignity’s recent announcement.”
Erceg says, “Consumers are becoming more demanding and sophisticated. Values are changing, with increased secularism and a growing demand for personalised, lower-cost services, supported with online platforms like eziFunerals,” he said.
Our Clients are becoming more aware of pricing structures and what is available, helped along by eziFunerals, which makes it easier for consumers to plan a funeral and shop around at a time when they are consumed by grief.