This afternoon InvoCare Limited (ASX: IVC) announced the acquisition of Southern Highlands Funerals based in Moss Vale, New South Wales.
InvoCare described Southern Highlands Funerals as a well-established business and has been operating in the area for 20 years. Not only does this allow InvoCare to enter the Moss Vale district, it can roll out the national brands Simplicity and White Lady Funerals into the broader Southern Highlands region. This region is attractive to InvoCare because it’s inbetween the core markets of South West Sydney and Canberra.
Southern Highlands Funerals is performing around 100 funerals per year, which translates to annual revenue of around $0.7 million. The assets include freehold property, the brand, plant & equipment, motor vehicles and prepaid contracts.
The InvoCare CEO and Managing Director said “Southern Highlands represents an opportunity for InvoCare to both acquire a well-established brand and fully equipped funeral facility in Moss Vale which offers an opportunity for future expansion into the broader Southern Highlands region.
“We continue to review acquisition opportunities in both our core and new regional markets, to provide us with the right brands in locations where we can position the business for long-term sustainable growth. Our ‘Protect & Grow’ investment plan is to grow market share in core markets and acquisitions like Southern Highlands Funerals provides us the opportunity to expand our reach into new areas.”
This seems like a fairly small, but positive, move from InvoCare. It may have a large market share of its current operating areas, but there are still many regional areas that it can expand into, like Moss Vale.
It’s currently trading at 24x FY18’s estimated earnings.
The InvoCare share price may come under pressure over the next year or so with its refurbishment plans, but over the long-term I can see InvoCare being a solid performer for shareholders as long as there isn’t any heavy price competition.
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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.