Invocare (ASX:IVC) is the largest funeral, cemetery and crematorium industry operator in Australia and Singapore.

It operates national brands such as White Lady, Simplicity and Singapore Casket.

The company operates a network of 180 funeral homes and 12 crematoria and cemeteries across Australia.

This network of facilities makes IVC the largest participant in the “death care” industry, performing over 20% of the burials in Australia. The majority of other funeral providers are well-established, small family operations.

Though IVC already has a stranglehold on a defensive industry that is certain of future business, it has continued to grow its market share over the last year via acquisitions.

It recently completed its latest acquisition which saw its shares surge as the market cheered the news.

Takeover completed

IVC recently completed the acquisition of Bledisloe Group. Bledisloe is the largest operator in New Zealand and one of the top four in several Australian markets.

It has revenues of approximately $60 million and maintainable EBITDA of approximately $11 million.

Invocare expects Bledisloe’s post synergy annual contribution to its EBITDA result to be approximately $14.4 million.

This move increases IVC’s presence in markets it was previously light on. We feel the acquisition is a good move for IVC going forward.

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Profits are alive

In February, IVC reported a 43.2% slide in FY10 net profit to $27.4 million.  Excluding the impact of a change in accounting policy, profit increased 11.9% on-year to $34.2 million.

Revenue grew 4.6% to $267.4 million, which was attributable to increased sales of cemeteries and crematoria memorials.

IVC declared a final dividend of 15.25 cents per share.

For the four months to 30 April 2011, total group sales revenue was up 6.5%. Average revenue per funeral was up 5.7% supported by a 4.5% price increase.

The impressive earnings trend looks set to continue as the business continues to engage in earnings accretive investments.

Looking ahead

IVC’s defensive characteristics give it an edged in the current market conditions.

The company is targeting approximately 6%-7% annual revenue growth. Its pillars of growth include favourable demographics (ageing population), consistent annual pricing improvements and market share improvements.

IVC is currently working on prepaid funerals to lock in future market share. The move gives clients guaranteed future service at today’s price.

The company has around $10 million debt headroom following the completion of the Bledisloe takeover.

Unfortunately the number of deaths is a key variable impacting FY results. IVC has no control over this part of the business.

However, with increasing market share, the prepaid service and price increases, we feel IVC will continue to maximise returns.

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