On December 12, 2018, Propel Funeral Partners (ASX: PFP) announced that they signed conditional sale agreements with multiple vendors to acquire the business, assets and specific freehold properties in New Zealand associated with: Dils Funeral Services, Schnapper Rock Cremations, Rowley Funeral Services, and Martin Williams Funeral Directions.
Propel Funeral Partners (ASX: PFP) is in death care services. The company was started in 2012 and listed in 2017. They possess funeral homes, cemeteries, crematoria, and related assets in Australia and New Zealand.
These businesses generated approx. NZ$7.2 million of revenue in the last financial year and conduct approx. 800 funerals per annum. As part of the deal, Propel will acquire three freehold properties which include:
- First, a full funeral service facility a circa of 14,600sqm in the North Shore of Auckland which consist of a chapel with a seating up to 200 people, an adjacent reception and refreshment lounge, three private viewing areas, two garden courtyards, a cremation facility, car parking, administrative offices and a circa of 6,600sqm parcel of vacant land.
- A circa of 650sqm converted dwelling in Devonport, it includes a mortuary and a small chapel.
- A circa of 440sqm funeral home in Birkenhead, it consists of a chapel, office and viewing room.
Propel is also planning to lease an office at Mangere Lawn Cementery in Auckland, from a third-party landlord. The total price payable for the deal on completion of the transactions will contain: approx. NZ$17.1 million in cash and 1,210,589 ordinary shares in the capital of propel to be issued at A$2.64 each which will be subject to arrangements for up to 3 years.
Also, there are certain financial milestones if those are achieved during the 3 years following completion of the relevant transactions then an amount of up to NZ$1.25 million in cash will be paid.
As stated by Propel Managing Director Albin Kurti, New Zealand will be a core market for Propel. These acquisitions will expand their footprint in metropolitan Auckland, especially on the North Shore where there is no presence of them, and it is expected that Propel’s annual revenue will increase by approx. 7%.
FY18 Financial performance: Propel’s revenue was up 76% to $80.9 million, on the back of a 67% increase in funeral volumes and a 5.5% increase in ARPF (Average Revenue Per Funeral). Operating EBITDA was up 75% to $21.5 million, and Operating NPAT more than doubled to $12.3 million, Cash conversion remained strong at 97%. In Q1, revenue was approx. $24 million, up 20% on the corresponding prior period, the Operating EBITDA margin remained above 26%. Cash conversion remained strong and observable market share was stable.
For FY19 outlook, death volumes of the first half of FY19 will be down. However, the company is expecting a reversal in the second half of FY19 based on historical data. Although there is no certainty about it, historical information shows a quick rebound in volumes in the second half of FY19.
In the last six months, the price of the company has shown a negative return of 18.77 percent as on 11 December 2018 and 4.56 percent down over the past one month. Propel Funeral Partners Limited’s shares are trading at $2.520 with a market capitalization of $246.39 million as on 12 December 2018.
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