Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Propel Funeral Partners Ltd (ASX:PFP, Financial) achieved a record year in FY24 with a 24% increase in revenue to $209.2 million.
- Operating EBITDA increased by 21% to $55.4 million, showcasing strong financial performance.
- The company completed 12 acquisitions, expanding its network significantly in Australia and New Zealand.
- Cash flow conversion remained robust at 99%, indicating strong operational efficiency.
- Propel declared a fully franked final dividend of $0.072 per share, resulting in a total dividend of $0.144 per share for FY24, up from $0.14 in the prior year.
Negative Points
- The industry experienced a contraction in death volumes, which impacted organic revenue growth.
- Pro forma net interest expense increased by $2.8 million due to higher interest rates.
- Operating costs were under pressure due to the inflationary environment.
- The company's EBITDA margin saw a slight contraction due to lower comparable volumes.
- Recent acquisitions had a slight drag on average revenue per funeral and overall margin.
Q & A Highlights
Q: Albin, Lilli, and Fraser, congratulations on the results. A few questions from me. I think to start off with the trading update. Very strong words there. Very nice to see. Usually, July is a pretty seasonal period in the first quarter. But maybe if you all can elaborate on whether this July was much stronger than the usual seasonality? Or how -- how the start of FY25 will sort of reflect the rest of the first quarter performance?
A: Thanks for your question. Yes. Look, I think what I'd say is that you're right, July and the winter period is typically a seasonally strong period for our industry. That's certainly been the case last month. And I'd say that it was the case in July last year, but we were cycling a very strong PCP this time last year. So you have to obviously look back probably a couple of years now. But in terms of July trading, where we're encouraged that it's been a positive start to FY25. And as I called out, revenue growth over the PCP was 20%, and that reflected both strong organic growth in comparable funeral volumes and average revenue per funeral. But it's only 1 month, but it's an important month.
Q: And then secondly, I think the pricing looks pretty strong as well, especially the 5.5% from comparative -- on a comparative basis. Would there be opportunity in FY25 for that gap between the overall business and comparative to narrow somewhat better to drive a better overall average revenue per funeral?
A: Look, we're always looking for ways to optimize our average revenue per funeral, Chami. And really, I think we've demonstrated -- I think the company has demonstrated over the last sort of 24 months its ability to keep pace with CPI. And we don't foresee any significant deviation from that assuming mix is stable.
Q: That's great, Albin. If I could just the last question would be on the acquisitive market. I mean, your largest year, it has been about nine months since the last year in private. How does the market look? And does FY25 look -- how does it look relatively to the last year?
A: Morning, Chami. I mean the pipeline remains pretty robust. We're actively engaged with a number of exciting opportunities but always the tricky thing is timing of when they land. So I'm positive about FY25 and beyond. Compared to last year, I think I'd say mirror the language I used last year, so it's no better, no worse, but I think it's strong, actively engaged with a number of opportunities, and I can see that continuing beyond this year.
Q: Congratulations on a great result. I guess I'll just pick up on the last question a little bit with the acquisition pipeline. Just in terms of the size of the acquisitions that are out there at the moment, and what's really required now to move the dial?
A: Yes. I mean the full spectrum, I think there's large and small metro and regional. But yes, in terms of changing the dial, I think we're opportunistic and wouldn't -- we look at everything. And then obviously, it comes down to pricing. But I don't think we would necessarily sort of look at it from a dial changing perspective. We just look at can we -- are they accretive acquisitions and make sense to us at the time.
Q: Yes. That makes sense. And just on the pricing growth, obviously, the 5.5% organic growth you see was a great outcome. Do you think next year the drag of acquisitions on pricing growth will be less?
A: Look, I think Sophia, certainly, that will have an impact, given that the more recent acquisitions have been at a low level. And I think our long-term CAGR, as we called out in the presentation, has been 3.2%. And you'll need to form your own view about what the inflationary outlook is over the next 6 to 12 months. But I would imagine over time that we will gravitate towards our long- term CAGR.
Q: Just the first question from me. Could you give us some color around what organic revenue growth was versus 20% total revenue growth you indicated in July '24?
A: For the month-- is that the question?
Q: Yes, it's just for the month.
A: Yes. I don't think we've given that granularity for one month, but I'll just reiterate that the organic funeral volumes were materially higher than the PCP, and we saw a higher organic average revenue for funeral as well. It's only one month, so we don't typically give that granularity for one month.
Q: Okay. Great. And then just my second one, how should we think about EBITDA margin into FY25?
A: So look, I guess, from a margin perspective, we've always delivered those margins in the mid-to- high 20s. Obviously, in FY24, we had a slight contraction on FY23, just given where comparable volumes sat. And they were obviously 6% down. So to have sort of a margin contraction of 80 basis points, we thought was pretty good going given that contraction. In terms of '25, it obviously depends on where the organic volumes sit. We've had an encouraging July. But as Albin said, that's only one month. And then the other key impacts are obviously where average revenue per funeral with inflation and then the margins of recent acquisitions, which, as Albin also mentioned, have had a slight drag on average revenue per funeral and on margin.
A: I think maybe just to add to that little, just to give you a sense or to give everybody a sense for the financial impact of the 6% contraction in comparable volumes. I mean that equated to around 1,000 funerals. And at a gross average revenue per funeral of $8,000 to $9,000 depending on mix. That translates to a revenue swing, an organic revenue swing of around $8 million or $9 million. So you can apply your own margin assumptions, your incremental earnings margin assumption. But from our perspective, we think the incremental earnings impact was material to the full year earnings result.
Q: Great. And then just my final question. CapEx was up a lot on year in FY24. Just how should we think about CapEx in FY25 and beyond?
A: So the CapEx number in '24, I think you're referring to the $24 million in the cash flow line. That's actually three components. So we've got our maintenance CapEx in there about $12.5 million. We've got growth CapEx of $3 million. And then we actually acquired four freehold properties that were not connected to business combinations for
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
