Propel Funeral Partners share price rising following FY20 Results

The Propel Funeral Partners share price is on the rise this morning following the company's release of resilient earnings in FY20.

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The Propel Funeral Partners Ltd (ASX: PFP) share price is on the rise this morning following the company's release of its FY20 results. At the time of writing, the Propel Funeral Partners share price had increased 2.11% in early trade.

The company is the second largest provider of death care services in Australia and New Zealand and operates from 130 locations.

FY20 Results

Propel Funeral Partners delivered a 16.5% increase in revenue to $110.8 million in FY20, compared to $95.1 million in the prior corresponding period (pcp). 

Additionally, the company's operating earnings before interest, taxation, depreciation and amortisation (EBITDA) has increased 36.4% to $32.4 million in FY20 from $23.8 million in the pcp. Pleasingly, Propel's operating margin increased by 420 basis points to 29.2% in FY20, up from 25% in the pcp.

Adjusted earnings per share (EPS) increased 6.1% to 14.4 cents in FY20. This compares to 13.6 cents in the prior corresponding period. Analysts were predicting EPS of 14.2 cents.

Furthermore, operating net profit after tax increased 6.5% to $14.2 million in FY20, up from $13.3 million in the pcp.

Propel Funeral Partners has declared a fully franked dividend of 6 cents per share which brings the total dividend paid in FY20 to 10 cents per share. 

The amount of funerals performed by the company in FY20 increased 17.6% compared to the pcp. In total, 13,299 funerals were performed. Average revenue per funeral has had a compound annual growth rate (CAGR) of ~2.5% since FY14 and was $5,672 in FY20. 

The company's cash flow conversion has remained strong with 103.4% in FY20 which is an increase of 600 basis points compared to the pcp. Pleasingly, Propel Funeral Partners has been averaging a cash flow conversion of ~99% since FY15.

Additionally, Propel Funeral Partners' market share continues to grow. In calendar year (CY) 2019, the company had a market share of ~6.3% compared to ~1.2% in CY15.

Outlook

The company experienced resilient operating earnings for the month of July 2020. Additionally, average revenue per funeral continued to improve compared to the pcp within Propel Funeral Partners target range of 2-4%. However, it performed ~1200 funerals in line with pcp but below the company's expectations.

Growth is expected in FY21 and the future due to the growing and ageing population, strong funding position and acquisitions.

The coronavirus pandemic is continuing to have an impact because of restrictions related to the number of attendees in Victoria and Auckland. 

Geographic diversification across Australia and New Zealand has provided the company with resilience in earnings and operating cash flow. 

The Propel Funeral Partners share price is currently trading at $2.90 and has a market capitalisation of $279 million.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Propel Funeral Partners Ltd. 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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