Funeral company InvoCare Limited (ASX: IVC) has announced a capital raising of up to $85 million.
InvoCare is the largest provider of funeral services in Australia, New Zealand and Singapore. It operates at 290 funeral locations. It is also the largest operator of private cemeteries and crematoria in Australia. The name stores for innovation, vocation and care. Some of its national brands includes White Lady Funerals, Simplicity Funerals and Value Cremations.
Why Invocare is raising $85 million
The funeral company said that in due to the positive reaction to the FY18 result and the good early results of the Protect & Grow plan, the company has decided to raise money.
The net proceeds of the capital raising will be used to increase the balance sheet flexibility as it pursues two different growth strategies.
Protect and Grow
The Protect & Grow program has been going for 15 months and 35% of its sites were completed by the end of 31 December 2018.
There are 49 locations have been operating for six months or more and 61% of them are trading ahead of or in-line with management’s expectations of EBITDA improvement (compared to the base case).
The work that has been done so far has delivered key lessons, which will be applied for the rest of ‘phase one’ and ‘phase two’.
Regional acquisition strategy
Invocare has invested around $73 million during 2018 in 11 acquisitions across five core regional areas and two metropolitan locations. In aggregate, Invocare said that in total, these acquisitions are performing ahead of expectations.
Management said that the company will continue to opportunistically pursue regional acquisitions using cash and/or issuing new shares.
Invocare CEO Mr Martin Earp said: “We have structured our funding policy to retain an appropriate level of flexibility to allow for both of our growth strategies to continue at an appropriate pace.
Having received encouragement from shareholders and investors, we are now pleased to provide eligible shareholders with the opportunity to invest as we continue a disciplined acceleration of our growth capital investment program.”
Should Invocare shareholders take part?
The institutional placement will be priced at $13.30 and raise $65 million, whilst a follow-on share purchase plan (SPP) will be capped at $20 million.
Regular investors will be able to buy up to $15,000 each and it will be priced at either $13.30 or the average price of what the shares traded at five days before the final days of the SPP acceptance.
The $13.30 is a 7.3% discount to the closing price yesterday of $14.34, which is fairly attractive, but it would have been better to buy shares under $11 a couple of months ago. But, Invocare does have long term growth potential with Australia’s ageing population.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).