This morning, funeral business Propel Funeral Partners Ltd (ASX: PFP) provided a pleasing trading update for the first quarter of the financial year (FY20).
Propel Funeral Partners is the second largest funeral operator in Australia and New Zealand behind InvoCare Limited (ASX: IVC) . It currently has operations in 120 locations including 28 cremation facilities and cemeteries.
Propel has recorded an impressive 19% increase in revenue for the first quarter of FY20 compared to the corresponding period last year. Total revenue came in at $28.9 million, whilst operating EBITDA (click here to learn what EBITDA means) was up 38% at $8.9 million with gross margins expanding from 26.6% to 30.9%.
Propel performed a record number of funerals during the period and achieved its aim of increasing average revenue per funeral by 2-4%.
The company expects to complete two new acquisitions in the coming months which would likely contribute to revenue in the second quarter.
Commenting on the trading update released earlier this morning, Managing Director Albin Kurti said: “Propel has made a positive start to the new financial year and we expect death volumes will continue to revert to long term trends, given the unusual decline experienced last year, the partial recovery in recent months and the growing and ageing population.”
We are all going to die. Not only that but there are also more of us than ever before and the majority will be given a funeral once we depart. Propel benefits from these natural tailwinds and is likely to be making more money in 10 years than it is today as a result.
However, as I always say, even the best businesses can be a bad investment at the wrong price. Propel is a solid business and potentially worthy of a place in a well-rounded portfolio of ASX shares, but based on currently available information I would want to see the share price down to around $2.50 before buying in.
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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).
At the time of publishing, Luke has no financial interest in any companies mentioned.