Divorce lawyers plan for COVID-19 surge in business

There is one industry that won’t immediately come to mind as a COVID-19 winner, but is preparing for a spate of business with glee: divorce lawyers.

Down there with funeral homes (ASX investors have Invocare (ASX:IVC) and Propel Funeral Partners (ASX:PFP) to satisfy their morbid tendencies), divorce lawyers are celebrating the “economically resilient nature of the industry”.

That is a direct quote from Australian Family Lawyers (ASX:AFL), which said in the same sentence the “number of total divorces in Australia has historically been very stable” at just under 50,000 a year since 2007.

This highlighted “the recurring and economically resilient nature of the industry”, or Australians’ willingness to spend a mint on a wedding and as much again on erasing all the memories that followed.

But for investors it is clearly a major opportunity, with the stock jumping 30 per cent on Wednesday. Indeed, the stock has recovered all losses from the panic selloff in late March.

The divorce specialist said March quarter revenue rose 48 per cent on the prior quarter to $1.66m, and it saw record file openings in January.

Quarterly operating EBITDA (earnings before interest, depreciation and amortisation) jumped 42 per cent to $620,000, but the EBITDA margin dropped 2 per cent.

COVID-19 leads to more divorces

The company is expecting a spike in business thanks to COVID-19.

“Due to COVID-19, anecdotal reports globally have highlighted recent spikes in divorce rates and online search volumes for divorce lawyers. In Australia, we have also started to observe this trend with online searches up +20 per cent this calendar year compared to the same time last year,” the company said.

“Working from home, self isolation policies and loss of income will inevitably cause a strain on families.

“In 2009, the number of total divorces in Australia increased after the global financial crisis of 2007-2008. AFL continues to see an increase in lead/enquiries volumes each week. We expect this to continue for the foreseeable future.”

The company compared its revenue growth from fiscal 2018 to fiscal 2019 to that of seven listed rivals and claims it is at least double the nearest competitor, IPH (ASX:IPH).