Propel Funeral Partners Ltd (ASX: PFP) shares are under the spotlight today after it revealed its FY19 result.
Propel Funeral Partners is the second largest death care services in Australia and New Zealand. It currently has operations in 120 locations including 28 cremation facilities and cemeteries. It was set up in FY12 and has used an acquisition strategy to expand its operations.
What Did Propel Report In FY19?
The funeral operator reported that its revenue increased by 17.6% to $95.1 million. This was driven by an increase of the average revenue per funeral (ARPF) by 1.4% to $5,585. However, the like for like ARPF growth was 2.8% in the year.
The number of funerals performed grew by 11.8% to 11,304 thanks to its acquired businesses. Comparable funeral volumes were down 2.1% due to below trend funeral numbers. But there was a recovery in the second half with numbers up 3.6%.
Operating EBITDA (click here to learn what EBITDA means) rose by 10.6% to $23.8 million and operating net profit after tax (NPAT) grew by 8.1% to $13.3 million.
Reported net profit dropped 1.3% to $12.3 million due to the higher transaction costs involved with all of the acquisitions that it made during the year.
Propel Dividend
Propel revealed that its Board decided to pay a final dividend of 5.8 cents per share, bringing the full year dividend to 11.5 cents per share, which is an increase of 79.7% compared to last year and represents 78% of ‘distributable earnings’.
Propel Outlook
In FY20 (and beyond) Propel expects to benefit from acquisitions completed and announced during and since FY19 as well as other potential future acquisitions.
Management also expect funeral volumes to return to long term trends. In the start of FY20 the company has performed a record number of funerals with comparable volumes “materially higher” than expectations and the prior corresponding period.
Propel has also achieved ARPF growth within its target range of 2% to 4%.
Is The Propel Share Price A Buy?
Propel is valued at under 23 times this year’s earnings with a fully franked dividend yield of 3.8%. The ageing population is a slow burner, but it certainly puts some wind behind Propel’s long term earnings.
I’d be happy to buy a few Propel shares at this price considering interest rates are now lower than before. But businesses somewhat relying on acquisitions don’t normally produce the strongest growth compared to some others like the rapidly organically growing companies in the free report below.
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Disclosure: Jaz owns shares of Propel Funeral Partners at the time of writing, but this could change at any time.
