Death and taxes may be guaranteed but the business of death is not.
InvoCare has advised shareholders that, “Operating results for 2018 were impacted by soft market conditions, namely, fewer deaths”. According to InvoCare, a ‘dip in funeral volumes’ was due to an effective vaccination program and an unusually mild winter flu season, but “expectation is for the number of deaths to return to long term trend”.
However, according to Peter Erceg, Owner and Founder of eziFunerals, there may be bigger things at play which could be impacting on InvoCare’s funeral volumes, rather than a successful flu vaccination program. Namely a more informed consumer, the rise of modern independent funeral homes and funeral shopping platforms, like eziFunerals.
Notwithstanding the above, it is interesting to note that in its latest issue of death rates in Australia (26/09/2018), the ABS reported that there were 160,909 deaths registered in Australia in 2017, 2,405 more than the number registered in 2016 (158,504). Although the crude death rate (CDR) in Australia decreased to 6.5 deaths per 1,000 population, from 6.6 in the previous year, CDRs have been relatively stable with the highest rate at 6.8 deaths per 1,000 population in 2008 and the lowest at 6.4 in 2013.
So the market will be watching closely, when the ABS releases its next death rates report in 2019. Only then will we be in a stronger position to assess InvoCare’s assumptions on lower volumes and the impact of other market forces on the big funeral chains bottom line.
Watch out for Government inquiry into the funeral industry
What should be of even more concern to InvoCare’s shareholders (and Propel Funeral Partners (ASX:PFP) is the current inquiry into the UK funeral industry. This is likely to have serious flow on effects in Australia. The UK’s Competition and Markets Authority (CMA) is currently undertaking a full-scale investigation into the funeral services market. The CMA is concerned that consumers arranging funerals are at their most vulnerable and has accused the UK’s largest funeral chains of lifting charges by up to 8 per cent a year for nearly a decade to meet investor expectations.
Peter Erceg believes that the issues found by the CMA, raises similar concerns about funeral prices in Australia. “People organising a funeral can be exploited at one of the most emotional and stressful times in their lives. Huge upfront costs and unclear fees are far too common, with thousands of dollars of ‘extras’ regularly added for items not wanted or needed by unwary consumers.”
With growing consumer concerns relating to the high cost of funerals, monopolisation of the industry and the need for increased regulation, it’s only a matter of time before Australia’s funeral watchdog initiates a new inquiry, which leaves InvoCare’s shares on shaky ground for a good while yet.
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About eziFunerals
eziFunerals supports individuals and families cope with end of life decisions, death and funerals. We are an independent, Australian-owned and operated company, and are not a subsidiary of any other corporation. We are not part of any other funeral company.