Thank you for standing by, and welcome to the Propel Funeral Partners Limited FY 22 results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Albin Kurti, Managing Director. Please go ahead.
Thanks, Sari. Good morning, everyone, and thanks for joining Propel's FY 22 full-year results briefing. I hope that wherever you're listening to this, you and your family are safe and well. First and foremost, I'd like to thank our dedicated staff in Australia and New Zealand for their hard work, professionalism, flexibility, and commitment to providing essential and caring funeral and related services to the communities they served throughout FY 22. I also acknowledge bereaved client families, many of whom farewelled loved ones in particularly challenging circumstances during the first half of FY 22, when extended lockdowns, travel restrictions, and strict funeral attendee limits applied in parts of Australia and New Zealand. Turning to today's presentation. With me are my colleagues, Lilli Gladstone and Fraser Henderson, and together we'll take you through the presentation launched with the ASX this morning.
In terms of the agenda, I'll summarize the key highlights of FY 2022, COVID-19 impacts, and I'll then provide a brief overview of the business. Lilli will cover the financial results in more detail. Fraser will touch on industry trends and acquisitions. Finally, I'll make some concluding remarks before taking questions. The three key takeaways from today's presentation are, firstly, FY 2022 was another record year for Propel. The company achieved continued growth in key financial and operating metrics despite COVID-19 impacts on the back of materially higher funeral volumes and stronger average revenue per funeral growth in the second half of the year compared to the lockdown-impacted first half. Secondly, it was a busy year in terms of corporate and M&A activity, with Propel completing the management internalization and six new acquisitions, expanding and extending the company's debt facilities, and successfully raising equity from existing and new shareholders.
Thirdly, Propel has started FY 2023 with positive trading momentum. With healthy operating margins, conservative gearing, and a strong funding position, Propel remains well-placed to navigate the higher inflationary and interest rate environment, and to continue consolidating what is a highly fragmented and essential service industry with favorable demographic tailwinds. Please turn to slide six for the key highlights. Revenue increased 20.6% to AUD 145.2 million on the back of an 18.8% increase in funeral volumes, including contributions from acquisitions, with comparable funeral volumes up 8.9% and average revenue per funeral proving resilient, up 2% despite extended lockdowns in the first half, which I'll discuss further shortly. Propel continued to grow earnings and maintained a healthy operating margin.
Pro forma operating EBITDA increased 25.2% to AUD 39 million, and pro forma operating NPAT increased 45% to AUD 16.9 million. Pro forma adjustments comprise one-off items relating to the management internalization and government subsidies, which Lilli will cover in more detail. Cash flow conversion remains strong at circa 100%, which is pleasing. From a capital management perspective, the board has declared a final dividend of AUD 0.0625 per share, fully franked, resulting in total dividends of AUD 0.1225 per share, fully franked, in connection with FY 2022, reflecting a payout ratio of 81%. Propel ended the year with a gearing ratio of circa 14%, having successfully completed a AUD 64 million equity raising during the year.
The company also expanded its senior debt facilities during FY 22 by AUD 50 million to AUD 200 million, and importantly, the debt maturity date has been extended, and a key covenant limit was increased. The company has available funding capacity of AUD 136 million, which will support Propel's acquisition-led growth strategy. In terms of growth, Propel grew its network by 8 locations in FY 22, completing six new acquisitions in South Australia, Victoria, Western Australia, and New Zealand. Since its IPO in November 2017, the company has committed approximately AUD 156 million on acquisitions. Propel recently announced two new acquisitions, both of which are expected to complete in Q2 of FY 23. Fraser will provide an acquisition update shortly.
In terms of the outlook, Propel has made a positive start to FY 2023 and expects to benefit from favorable demographics in Australia and New Zealand, a strong funding position, and acquisitions completed and announced to date, and other potential future acquisitions in what remains a highly fragmented industry. I'll talk more about the outlook towards the end of the presentation, and we'll now touch on COVID-19 impacts. Turning to slide seven . That can be seen from the chart on the left. In FY 2022, COVID-19 impacts on average revenue per funeral were less severe than during the initial wave of the pandemic in Q4 FY 2020. Since the start of the pandemic, average revenue per funeral impacts from lockdowns and strict funeral attendee limits have been temporary, with average revenue per funeral generally rebounding quickly as restrictions have eased.
This not only reinforces the value that society places on physical attendance at a funeral service as an important part of the grieving process, it also highlights the defensive nature, diversification, and the social infrastructure characteristics of Propel's network of funeral homes, cremation facilities and cemeteries. Taking a closer look at COVID-19 impacts on average revenue per funeral during FY 22, it was really a story of two halves. As can be seen from the middle chart on this slide, during the first half of FY 22, average revenue per funeral was impacted by extended lockdowns and strict funeral attendee limits in parts of Australia and New Zealand.
For example, funeral attendance in Greater Auckland was initially prohibited and subsequently limited to 10 attendees for approximately three months during the first half of FY 2022, with similar restrictions applying in parts of Australia, which contributed to a higher mix of lower value funerals and comparable average revenue per funeral being in line with the PCP. However, throughout the second half of FY 2022, there were no extended lockdowns or strict funeral attendee limits in Australia and New Zealand, which contributed to a higher mix of full service funerals and stronger growth in comparable average revenue per funeral of 4.3% on the PCP. In terms of funeral volumes, in August last year, we flagged that we expected the below trend death volumes experienced during FY 2021 to result in a deferral of death volumes into future periods.
As you can see from the chart to the right, in the first half of FY 2022, Propel's comparable funeral volume growth of 7.8%, which accelerated to 10.1% in the second half, resulting in full year growth of 8.9%, reflecting an increase in death volumes across most markets in which the company operates. I'll now provide a brief overview of the business. Slide nine illustrates how Propel's network has evolved over the past nine years. We started with one funeral home in Queensland, and today we operate from 144 locations across Australia and New Zealand, including 32 cremation facilities and nine cemeteries. Of those 144 locations, the company owns 79 of the properties. Slide ten shows Propel's main operating brands in Australia and in New Zealand.
Each brand has a distinct identity and is well known in their respective markets. Some have been around for many decades. For example, in Tasmania, Millingtons has been operating in and around Hobart for over 100 years. In New Zealand, Davis Funerals has operated in and around Auckland since 1875. The orange dotted lines show the brands relating to acquisitions completed and announced during and since FY 2022. These brands are an important part of the goodwill of each business. The charts on slide 11 illustrate Propel's historic growth in funeral volumes and revenue. As you can see on the left, the company performed over 16,500 funerals in FY 2022, up 18.8% on the prior year. The chart on the right shows that Propel generated revenue of AUD 145.2 million, up 20.6%.
The charts on slide 12 illustrate Propel's historic growth in operating earnings. As you can see on the left, the company generated pro forma operating EBITDA of AUD 39 million in FY 2022, up 25.2% on the prior year and a more than 12-fold increase since FY 2015. The chart on the right shows that Propel generated pro forma operating NPAT of AUD 16.9 million, up 45%. Lilli will cover the bridge between statutory and pro forma operating earnings shortly. The chart on slide 13 shows Propel's average revenue per funeral since FY 2014, which has grown at a compound annual growth rate of 2.6%. In FY 2022, average revenue per funeral was resilient, up 2% on the prior year and up 4.9% on the pre-COVID-19 period in FY 2020.
As I discussed earlier, it's important to note that Propel achieved comparable average revenue per funeral growth of 4.3% in the second half of FY 2022, following the lockdown impacted first half. Turning to slide 14. Cash conversion continues to be a key focus. As you can see from this chart, Propel's cash conversion remained consistently high, averaging approximately 99% since FY 2015. In FY 2022, cash conversion remained strong at approximately 100%, which is pleasing, particularly given the growth in Propel's operating cash flow. Before I hand over to Lilli, I wanna briefly touch on the company's performance since its IPO. Propel listed on the ASX in November 2017, with an issue price of AUD 2.70.
As you can see from the chart on this slide, as at 30 June 2022, Propel's share price has materially outperformed the S&P/ASX 300 index, and its only listed domestic peer. For investors who participated in Propel's IPO and subsequent share issues, and who retained their shareholding as at 30 June 2022, Propel has generated a total shareholder return of approximately 86% on a pre-tax basis, including dividends. This equates to total shareholder value accretion since the IPO of approximately AUD 280 million pre-tax. On behalf of everyone involved with Propel, I thank shareholders for their ongoing support. I'll now hand over to Lilli, who'll provide further detail on the financial results.
Thanks, Albin, and good morning, everyone. Propel delivered a material increase in total and comparable funeral volumes during the year. This, combined with strong average revenue per funeral in the second half, contributed to the company achieving growth in key financial metrics despite COVID-19 impacts. Today, I'll cover five key areas. Firstly, I'll provide an overview of Propel's full-year results and an analysis of the pro forma income statement. Secondly, I'll comment on the pro forma adjustments and related earnings bridge. Thirdly, I'll touch on key growth drivers of revenue, operating earnings, and margin. I'll then provide an analysis of the cash flows and balance sheet, and wrap up by touching on capital management. Please turn to slide 17. Propel generated revenue of AUD 145.2 million in FY 2022, an increase of 20.6% on the prior year.
The increase was driven by the full-year impact of three acquisitions completed in FY 2021, and a part-year impact of six acquisitions completed during the year. Furthermore, the performance was impacted by a material increase in funeral volumes and a strong growth in average revenue per funeral in the second half. Propel reported a growth margin of 70.6%, which was 140 basis points lower than FY 2021. The growth margin was primarily influenced by three factors. Recent acquisitions, none of which have cremation facilities. Sales mix, represented by higher growth in revenue from funeral operations compared to the higher margin revenue from cemetery, crematoria, and memorial gardens. And funeral mix. However, it should be noted that the FY 2022 growth margin was in line with FY 2019, i.e., pre-COVID.
The company generated pro forma operating EBITDA of AUD 39 million in FY 2022, an increase of 25.2% on the prior year. The increase was due to contributions from nine acquisitions completed in FY 2021 and FY 2022, and operating leverage driven by higher funeral volumes and good cost control, despite the higher inflationary environment. In terms of other items of note on the income statement, depreciation increased circa 7% due to acquisitions. Interest expense and the effective interest rate on drawn debt was in line with FY 2021, and acquisition costs totaled AUD 1.1 million. Propel generated pro forma operating NPAT of AUD 16.9 million in FY 2022, up 45% on the prior year, which translated to operating earnings per share growth of circa 31%, impacted by an 18% increase in shares on issue, primarily relating to the capital raising.
The pro forma adjusted effective tax rate was 29.7%. The bridge on slide 18 sets out the statutory operating EBITDA and the impacts of the two pro forma adjustments. The bridge and pro forma numbers assume the management internalization occurred on the first of July 2020, and therefore additional employment-related costs are included for the full 12 months in both years, and backs out the impact of government subsidies in both years. This results in pro forma operating EBITDA increasing by AUD 7.8 million or 25.2% to AUD 39 million. On a statutory basis, operating EBITDA was AUD 39.6 million in FY 2022, an increase of 9.3% on the prior year. Further information relating to the statutory income statement is set out in the appendix.
The waterfall on slide 19 sets out the sources of revenue growth on the prior year. The chart shows the full-year impact of three acquisitions made in FY 2021, the part-year impact of six acquisitions completed during the year, and organic growth for the relevant businesses. As you can see from the comments on the bottom left of the slide, funeral volumes increased 18.8%, and average revenue per funeral increased 2%, or 4.9% on the pre-COVID period. In terms of organic, in the center of this slide, comparable businesses experienced an 8.9% increase in funeral volumes and a 2.2% increase in average revenue per funeral. Both percentages accelerating in the second half of FY 2022, as Albin mentioned earlier. These two factors contributed to organic revenue increasing 10.7% on FY 2021.
As you can see on the bottom right of this slide, the pro forma operating EBITDA margin was 26.8%, 100 basis points above the prior year. Margin was positively influenced by operating leverage from a material increase in comparable funeral volumes and cost control, with comparable OPEX per funeral at 2% below FY 2021, despite the higher inflationary environment. These were partially offset by sales mix and the margins of recent acquisitions. Moving to slide 20, the statutory ungeared pre-tax operating cash flows were 13.3% higher in FY 2022, with contributions from acquisitions and strong trading being partially offset by higher employment costs paid in connection with the management internalization and lower government subsidies received compared to FY 2021. Cash flow conversion remains strong at circa 100%.
In respect of investing activities during the year, Propel deployed approximately AUD 18 million in cash in connection with acquisitions and half a million relating to earn-out payments, and incurred net capital expenditure of AUD 10.2 million, including growth projects. Maintenance CapEx amounted to 4.4% of revenue. The financing activities largely reflect the net proceeds from the capital raising at AUD 62.3 million and a subsequent reduction of senior debt, as well as dividends paid during the year. Moving to slide 21, there are three main points on the balance sheet. One, as at year-end, Propel had net debt of approximately AUD 40 million. Two, the freehold properties owned by Propel are held at cost at approximately AUD 132 million.
Three, Propel's prepaid contract funds totaled approximately AUD 53 million, which are largely invested with third-party friendly societies who primarily invest the funds in cash and fixed interest. In accordance with accounting standards, the asset increases by the investment return generated during a reporting period, and the liability increases by the financing charge. The difference between those two amounts is recognized in the income statement. The contract turns at need when the service is delivered. At that time, revenue is recognized and the corresponding liability is extinguished. During the year, inconsistent with FY 2021, prepaid contracts that turned at need in Australia accounted for less than 10% of the group's Australian funeral volumes. It should be noted that there are no prepaid funeral contracts in the New Zealand business.
Turning to slide 22, in respect of capital management, during the year, Propel expanded its senior debt facilities to AUD 200 million, which mature in October 2024. Propel raised net proceeds of AUD 62.3 million in connection with the placement and follow-on share purchase plan. After allowing for funds required for the final dividend declared today of AUD 0.0625 per share and binding commitments on acquisitions announced but not yet completed, Propel has available funding capacity of approximately AUD 136 million. Propel remains comfortably in compliance with its debt covenants, reporting a net leverage ratio of 0.8 times. I'll now hand over to Fraser, who will cover industry trends and acquisitions.
Thank you, Lilli. Good morning, everyone. Some of you may be familiar with the graphs on slide 24, which show that the number of deaths is forecast to both increase and accelerate in the countries in which Propel has operations, namely Australia and New Zealand. Death volumes is the most significant driver of revenue in the death care industry. In Australia, the ABS forecasts that death volumes will increase by 2.9% per annum from 2020 to 2031, and 2% per annum from 2031 to 2050. Whereas in New Zealand, Stats NZ forecast that death volumes will increase by 2.2% per annum from 2021 to 2032, and 1.8% per annum from 2032 to 2050. Both industries have the benefit of the certainty of that sort of tailwind.
However, death volume growth is not necessarily linear and can fluctuate from time to time. Social distancing measures, travel restrictions, an increased focus on personal hygiene, and effective flu vaccinations since the start of the pandemic seemingly resulted in a deferral of death volumes into future periods, which is supported by the strong comparable funeral volume growth in FY 2022 that Albin mentioned earlier. The funeral industry is highly fragmented in both Australia and New Zealand, with Propel the second largest in both countries. Slide 25 shows how Propel's estimated market share in Australia, based on reported number of funerals performed and provisional ABS data on Australian deaths in calendar year 2021, has grown in the last five calendar years from circa 1.2% in 2015 to circa 7% in 2021.
However, it is worth noting that notwithstanding that significant increase, over 71% of the market is still owned by entities other than Propel as the largest operator. Turning to slide 26, Propel remains focused on executing its core investment strategy of acquiring assets and social infrastructure which operate in the death care industry. During the financial year 2022, Propel committed approximately AUD 21 million on acquisitions and properties in Adelaide with Berry Funeral Directors and Glenelg Funerals, State of Grace and Eagars in New Zealand, The Quay in Perth, and Crawfords in Geelong. Since 1 July 2022, Propel has committed approximately AUD 8 million and agreed to partner with the owners of Community Funerals and Cremation for Pets in and around Cairns and Mason Park Funerals in Wangaratta. Propel has deployed over AUD 155 million in acquisitions since its IPO in November 2017.
The team remains active in exploring both organic and inorganic growth opportunities. The acquisition pipeline is strong. With approximately AUD 136 million in available funding capacity, Propel is well-positioned to continue consolidating what is a highly fragmented industry. I'll now come back to Albin Kurti.
Thanks, Fraser, and thank you, Lilli. As you can see from our presentation today, Propel achieved material growth in key financial and operating metrics in FY 2022. The company operates in what is a stable, highly fragmented, and essential service industry, with assets and infrastructure that are difficult to replicate and stands to benefit from favorable demographic tailwinds. Propel is well-funded to continue its acquisition-led growth strategy. With its founder-led management team owning approximately 15% of the company, this ensures a strong alignment with fellow shareholders. As I flagged earlier, shareholders who participated in Propel's IPO have benefited from significant shareholder value creation through share price accretion and dividends, and we thank them for their continued support. In summary, Propel has a strong track record, a stable and aligned management team, a defensive market position in a favorable sector thematic, and is well-funded.
In terms of the outlook, demand for funeral services is not correlated to inflation, interest rates, or the economic cycle, and Propel continues to be well-positioned to generate sustainable long-term growth and value creation. Although death volume growth is certain, unavoidable, and predictable over the longer term, it is not linear, and it fluctuates over time. In other words, death is certain, but the timing is not. In FY 2022, Propel achieved material growth in funeral volumes and experienced stronger growth in average revenue per funeral in the second half following the lockdown impacted first half. Encouragingly, the company's positive trading momentum has continued into the start of the new financial year. In the first six weeks of FY 2023, total and comparable funeral volumes were materially higher than the PCP. In the month of July 2022, average revenue per funeral was circa 6% higher than FY 2022.
The company's operating EBITDA margin reflected strong seasonal trading conditions. In terms of the company's financial results, we expect to benefit from favorable demographics in Australia and New Zealand, a strong funding position, and acquisitions completed and announced to date, and other potential future acquisitions. However, it should be noted that death volumes fluctuate over short-time horizons. Higher inflation is expected to impact funeral-related pricing and costs. Ongoing impacts from COVID-19, particularly on death volumes, remain uncertain. In conclusion, and as I summarized at the outset, I think the three key takeaways from our presentation today are, one, FY 2022 was another record year for Propel. The company achieved continued growth in key financial and operating metrics despite COVID-19 impacts on the back of materially higher funeral volumes and stronger average revenue per funeral growth in the second half of the year compared to the lockdown-impacted first half.
two, it was a busy year in terms of corporate and M&A activity, with Propel completing the management internalization and six new acquisitions, expanding and extending the company's debt facilities, and successfully raising equity from existing and new shareholders. three, Propel has started FY 2023 with positive trading momentum. With healthy operating margins, conservative gearing, and a strong funding position, Propel remains well-placed to navigate the higher inflationary and interest rate environment, and to continue consolidating what is a highly fragmented and essential service industry with favorable demographic tailwinds. With that, I'll hand back to the moderator to invite questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Chami Ratnapala from Bell Potter Securities. Please go ahead.
Thanks for that. Hi, Albin, Lilli, and Fraser. Thanks for taking my questions. Firstly, congratulations on a good result today. A couple of questions from me, if I may. Firstly, just on your organic volume growth. This has come in strongly, and I suppose in line with that market growth as well. With high volumes at present, I mean, any sense of you sort of gaining market share in organic volumes specifically in those states where you have higher presence?
Good morning, Chami. Thanks for your question. I think there are certainly pockets across our network where we feel as though we've gained some market share, but nothing I'm going to call out.
Thanks for that, Albin. Secondly, the average revenue per funeral for July looks strong. Are you able to talk to how much of this is the funeral mix versus pricing?
Yeah. It's a combination of the two. The average revenue per funeral as we've disclosed for the month of July was up 6% on FY 2022. I think it's fair to say, Chami, that the majority of that was pricing. Funeral mix also improved and helped with that growth.
Perfect. That's good. Maybe just on price rises. I mean, as you said, you've had a couple for this year. What are your expectations around the increase in that average revenue per funeral as the year progresses, especially in the second half, where you'll be comping high numbers?
Yeah. Obviously, we haven't given any guidance around average revenue per funeral for FY 2023. Obviously, as is usually the case, most of the businesses across the network increase prices around 1 July. Given the higher inflationary environment, there's of course the possibility that some of our businesses will do that more than once through the next 12 months. We'll obviously keep a close eye on inflation and how that's unfolding.
I think to answer your question a little bit more directly, I think the 6% growth that we experienced in July I think is as good a guide as any for the first half, where we will be comping I suppose a weaker PCP. And the second half will depend on a number of factors, including funeral mix, but also to the degree that we might move prices during the year rather than wait till the end of the year.
Perfect. Thanks for that. Lastly, just on acquisitions. I know, I mean, you talked about timing being uncertain, but just with the reopening and travel restrictions eased off, anything that you can talk to on the pipeline from here onwards?
Yeah. I mean, not really. I mean, I think, as we always say, the pipeline is still strong. I think the ability to travel certainly helps sort of cement the relationship, and it's easy to do that over a cup of tea rather than via Zoom. That's certainly the case. I think the reality is that these businesses don't sell because we're able to travel. They sell because there's a reason for vendors wanting to sell and then hopefully decide to partner with us. I don't think our movement necessarily dictates the pipeline. We've been very active in trying to keep that pipeline strong throughout COVID.
Obviously, as we're able to travel more, that allows us to cement and hopefully agree terms with partners into the future.
Thanks for that, Fraser. Thanks team for taking my questions.
No problem. Thank you.
Thanks, Chami. Thank you. Once again, if you wish to ask question, please press star one on your telephone. We will now pause for a moment to allow for questions registration. There are no further questions at this time. I'll now hand back to Mr. Kurti for closing remarks.
Thanks, Ari, and thank you all for joining today's call. Lilli, Fraser, and I look forward to catching up with some of you over the coming days and to providing further updates on the company's progress as and when appropriate. Thanks, everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.