And indeed, things are reverting to the mean (see very stale bull case post)

in summary more funerals (muddy waters due to acquisitions) but also 6% revenue more per funeral

Still very much in acquisition phase

  ASX ANNOUNCEMENT

12 October 2022

Trading Update – Q1 FY23

Propel Funeral Partners Limited (ASX: PFP) (Propel or Company) announces that its operating and financial performance for the three months ended 30 September 20221 was materially above the prior corresponding period (PCP), reflecting strong seasonal trading conditions and organic growth, combined with contributions from acquisitions.

In Q1 FY231, Propel:

– generated revenue of ~$44 million, up ~33% on the PCP;

– achieved Operating EBITDA2 of ~$13 million, up ~40% on the PCP and reflecting a margin of ~30% (PCP: ~28%);

– maintained strong Cash Flow Conversion2;

– performed a record number of funerals in a quarter, up ~23% on the PCP, including material growth in comparable funeral

volumes on the PCP; and

– experienced a higher mix of full service funerals compared to the lockdown impacted PCP and FY22, which contributed to

Average Revenue Per Funeral2 growth of: • ~9%onthePCP;and

• ~6%onFY22.

The Company’s Q1 FY23 trading:

– included full period contributions from six acquisitions completed during FY22; and

– did not include contributions from two new acquisitions announced3 in Q1 FY23, which are expected to complete during Q2 FY23.

Death volumes can fluctuate over short time horizons, so caution is required when extrapolating historical data to forecast potential future

Propel had a pretty good report.

despite COVID and all the restrictions around people congregating, including funerals, their margins improved .....marginally  (ahem)

Profit and revenue both increased substantially but much of this is acquisition and debt funded. Like IVC, Propel stand to benefit from long term consolidation of the funeral industry and seem to be executing along these lines pretty effectively and have low costs of funding.

They might be paying out a bit too much in dividends (yield ~4%) IMHO, with debt increasing significantly -which might be appropriate given the model.

The reason for optimism, though, is the resolution of COVID and the reurn of influenza. Morbid as it is, death rates this year have been below trend, due to everyone wrapping t hemselves in cotton wool and refusing to go outside. Influenza rates have collapsed - this is the graph for where I work  ie nothing! As people get out and about, this will revert to the mean, and indeed, ther is a good argument to suggest that mortality rates will be higher than previous years (lots more elderly will die from 'flu than usual).

I suspect PFPs margins and total transaction volume to both improve significantly as a result for a couple of years. 

It is not overly expensive (PE ~ 20) and highly defensive as a business (death and taxes!)

I have a small holding

26-Aug-2020:  Moelis Australia: PROPEL FUNERAL PARTNERS LTD: HOLD: Volumes remain weak but pricing recovers

Recommendation: Hold, Stock Price: $2.83, Target Price: $3.14