InvoCare Limited (ASX:IVC) makes yet another acquisition

Market-leading funeral business InvoCare Limited (ASX: IVC) has continued its acquisition streak by announcing yet another purchase today.

Today it announced that it would be acquiring Grafton & District Funerals and Clarence Valley Funerals in New South Wales, together known as Grafton & District Funerals.

The two locations serve the Clarence Valley region of New South Wales and conducts around 300 funeral services and generates revenue of approximately $2 million per year. The assets purchased include two fully equipped funeral homes with mortuaries, freehold properties and prepaid contracts.

Grafton & District Funerals has been serving the local region for 35 years and gives InvoCare the opportunity to acquire a quality business to support its expansion into regional markets.

InvoCare will fund this acquisition from existing financing facilities.

The CEO and Managing Director of InvoCare, Martin Earp, said “Grafton & District Funerals provides InvoCare with a strategic opportunity to enhance our business and continue the growth of our regional strategy on the North Coast of NSW. We are excited that Jim Summers, General Manager, has selected InvoCare to continue the legacy of Grafton & District Funerals in the Clarence Valley region and welcome the team and the local community to our business.”

Is InvoCare a buy?

As a reminder, this means InvoCare has now acquired:

  • English Rose with $0.7 million of revenue
  • Lester & Son with $3.5 million of revenue
  • Hope & Sons with NZ$5.8 million of revenue
  • Whitestone with NZ$1 million of revenue
  • Southern Highlands with $0.7 million of revenue
  • J A Dunn with $1 million of revenue
  • Archer & Sons with $2.4 million of revenue
  • And now Grafton & District Funerals with $2 million of revenue

This means InvoCare has acquired annualised revenue of around $16 million, which suggests perhaps a 3.5% increase on FY17’s revenue, which could be a nice boost to FY19.

InvoCare is trading at 25x FY18’s estimated earnings. This isn’t cheap. Rising interest rates and a worse-than-expected report this month could send the share price backwards. I won’t be buying until after the report, but there’s a good chance that I will buy for the long-term tailwinds.

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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia has recommended InvoCare Limited. 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.

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