With the number of deaths expected to grow, Propel acquires three more funeral companies for $37 million

Funeral service providers play the arbitrator in helping people meet their maker and earn a pretty penny while doing so. So it’s no wonder that they want to expand their base. As the Aussie funeral market thrives—with the number of deaths (human and otherwise) having increased in the past decade— funeral services company Propel Funeral Partners (ASX: PFP) is vying for more graveyard shifts. 

Propel has acquired two funeral service businesses and one pet cremation business—including their related assets, infrastructure and real estate—for $36.9 million. These acquisitions will broaden the Company’s network in Australia and New Zealand, allowing it to expand in an existing metropolitan funeral market (Adelaide), enter a new metropolitan funeral market (Hamilton) and a new metropolitan “pet loss” market (Auckland). 

The $36.9 million amount comprises $36.1 million in cash to be paid on completion of the proposed transactions, of which 75% relates to the real estate acquisition, and about $800k will be payable in cash if certain financial milestones are achieved during the three years after the relevant transactions are complete.

The three acquisitions include Alfred James & Sons—expected in Q4 FY23, which operates from seven locations and has provided funeral and related services to client families in and around Adelaide, South Australia, for over a century. The second business is Seddon Park Funeral Home (Q3 FY23), operating in two locations and providing funeral and related services to client families in and around Hamilton and Morrinsville, New Zealand. Finally, Pets at Rest (Q2 FY23) operates from one location and has provided pet loss services to clients in and around Auckland, New Zealand, for over two decades.

These businesses generated $12 million in revenue in their most recent financial year, representing 8% of Propel’s death care revenue in FY22. They perform 1,200 funerals and 7,000 pet cremations annually and operate from ten locations, of which Propel will acquire eight properties, including seven in metropolitan Adelaide and lease two. These are expected to bring in profits this year itself.

So far, in FY23, Propel has put $44 million towards five acquisitions. After these three new acquisitions, the Company’s cash balance stands at $104.5 million.

The Company had an eventful FY22, performing 16,537 funerals, an increase of 18.8% on FY21. Each funeral brought in average revenue of $6,038, up 5% on the pre-Covid period. It also conducted over $20 million worth of acquisitions. 

The profitability trend continued in Q1 FY23, as the Company generated revenue of $44 million, up 33% on Q1 FY22. Its operating EBITDA amounted to $13 million, up 40%, reflecting a 30% margin. It also performed 20% more funerals. 

With enough cash and more businesses absorbed, Propel hopes to expand its services and bring in more customers. The number of deaths in Australia and New Zealand is expected to increase by over 2% in the coming decade, which means more profits are in store for Propel.