The Propel Funeral Partners (ASX:PFP) share price lifts 5% on FY21 performance

Here’s what’s been driving the Propel share price through financial year 2021.
The post The Propel Funeral Partners (ASX:PFP) share price lifts 5% on FY21 performance appeared first on The Motley Fool Australia. –

The Propel Funeral Partners Ltd (ASX: PFP) share price is in the green after the company released its financial year 2021 (FY21) results this morning.

Right now, the Propel share price is trading at $3.62, up 4.93%.

The Propel share price jumps on solid results

Here’s how the death care services company performed during FY21:

Revenue of $120.4 million, up 8.7% on the prior year
Operating earnings before interest, tax, depreciation, and amortisation (EBITDA) of $36.3 million, up 11.9% on that of FY20
Operating net profit after tax of $15.3 million, up 7.6%
Fully franked final dividend of 5.75 cents per share. Adding to the company’s total FY21 dividends of 11.75 cents. Up from 10 cents per share in FY20

Propel saw its average revenue per funeral increase 4.3% over FY21, reaching $5,917. That figure is also 2.8% higher than Propel’s average cost per funeral in pre-COVID-19 times.

The company’s operating costs also increased to $3.3 million in FY21.

Propel ended the period with $7.4 million of cash and $79 million of debt.

What happened in FY21 for Propel?

FY21 was a busy year for Propel and its share price.

The company spent $29.6 million on 3 acquisitions in Australia and New Zealand.

In October, it acquired Mid West Funerals, a funeral provider based in Geraldton, Western Australia. In November, Propel acquired Dils Funeral Services, which provides funeral directing and cremation services in Auckland.

Finally, in December, it made a foray into the pet funeral industry, acquiring Queensland’s Pets RIP, a pet cremation provider in Toowoomba and Ipswich.

Propel also purchased 2 properties in FY21 for a total of $4.25 million, excluding stamp duty.

In addition, the company became internally managed. Previously, Propel had been under the control of Propel Investments Pty Ltd. Propel had to pay the management company a $15 million termination fee, which was settled 50% in cash and 50% in Propel shares.

The company also increased its senior debt facilities with Westpac Banking Corporation (ASX: WBC) by $50 million to $200 million and extended the maturity date to October 2024.

Propel performed 13,916 funerals in FY21, up 4.6% on FY20. However, death volumes were below long-term trends in the company’s key markets. Propel stated this was due to social distancing, travel restrictions, an increased focus on hygiene, and flu vaccinations causing the last 2 flu seasons to be benign.  

What did management say?

Propel’s chair Brian Scullin, and managing director Albin Kurti, made joint comments on the results today, saying:

During FY21, the funeral industry continued to experience operational disruptions and uncertainty, following lockdowns across multiple jurisdictions which resulted in varying funeral attendee limits, travel restrictions, and social distancing directives aimed at curbing the spread of COVID-19.

Measures were implemented to mitigate potential operating and financial impacts from the pandemic. These measures, combined with the company’s diversification in providing essential funeral and related services across seven states and territories of Australia and in New Zealand, including regional and metropolitan markets, delivered considerable resilience in earnings and operating cash flows…

They said demand for death care services was expected to grow in Australia and New Zealand because of “increasing death volumes due to population growth and ageing of the baby boomers”.

The death care industry is highly fragmented with over 1,000 establishments in Australia and many hundreds in New Zealand. The company believes there is significant opportunity for further consolidation in Australia and New Zealand and Propel is well-positioned to capitalise on the acquisition opportunities.

What’s next for Propel?

Here’s what might drive the Propel share price in FY22:

For the year ending 30 June 2022, Propel expects death volumes to revert to long term trends. The company provided “a new record number of funerals” in July.

However, the company expects COVID-19 restrictions will continue impacting its business.

It also aims to complete more acquisitions to gain a greater hold on the fragmented funeral industry.

Propel share price snapshot

The Propel share price has gained 27% year to date. It has also gained 27.9% since this time last year.

The post The Propel Funeral Partners (ASX:PFP) share price lifts 5% on FY21 performance appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Propel Funeral Partners Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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