Thanks, Alaric. Good morning, everyone, thanks for joining Propel's FY 2026 half year results briefing. It's a pleasure to present to you today alongside my fellow Co-Founder and Co-CEO, Fraser Henderson, and Propel's CFO, Arash Noaeen. First and foremost, we'd like to acknowledge client families who have farewelled loved ones, particularly those who have suffered a recent loss. We also extend our thanks to Propel staff for their continued commitment to providing essential and caring funeral and related services to the communities we serve across Australia and New Zealand. In terms of the agenda for the presentation lodged with the ASX this morning, I'll summarize the first half results, then provide a brief overview of Propel's business. Arash will cover the financials in more detail, including providing color on the debt refinance announced earlier today.
Fraser will touch on industry trends, acquisitions, and conclude with the outlook for the remainder of FY 2026, and then we'll take questions at the end of the presentation. Turning to Slide 6 for a summary of the results. Revenue increased 3.1% to AUD 118.8 million on the back of a 3% increase in total funeral volumes, including acquisitions. Comparable average revenue per funeral was circa 2% above the PCP, noting that network average revenue per funeral was in line with the PCP. Operating EBITDA increased to AUD 30.3 million, and operating NPAT increased to AUD 12.4 million. Cash flow conversion remains healthy at over 95%.
From a capital management perspective, the Board declared an interim dividend of AUD 0.075 per share, fully franked, up from AUD 0.074 per share in the PCP, reflecting a payout ratio of 83%. Propel ended the first half with a gearing ratio of 29%. Following the refinance of its debt facilities, Propel's pro forma net leverage ratio was 2.0x, and it has funding capacity of AUD 182 million, including the new AUD 50 million accordion facility. Arash will provide further details on the company's financials shortly. In terms of growth, the company completed two acquisitions during the first half, adding three locations to its network. Propel has now committed AUD 306 million on acquisitions since its IPO in 2017.
Fraser will provide an acquisition update and talk more on the company's outlook towards the end of the presentation. I'll now provide an overview of Propel's business. Turning to Slide 8. This slide illustrates how Propel's network has evolved. Propel started with one funeral home in Queensland in 2013. Today it operates from 208 locations across Australia and New Zealand, including 41 cremation facilities and nine cemeteries. Of those 208 locations, the company owns 126, which are held at cost on the balance sheet at over AUD 245 million. Slide 9 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, and in New Zealand, J. Fraser has operated in Southland since the late 1800s. The dotted lines show the brands relating to acquisitions completed to date in FY 2026. These brands are an important part of the goodwill of each business. The charts on Slide 10 illustrate Propel's track record. The company has delivered strong, long-term growth in key metrics. I won't go through each chart, but as you can see, Propel's funeral volumes, revenue, and operating earnings experienced growth in the first half of FY 2026. The chart on Slide 11 shows Propel's average revenue per funeral since FY 2015, which has grown at a compound annual growth rate of 2.8%. In the first half, comparable average revenue per funeral was up circa 2% in constant currency.
Turning to Slide 12. Cash conversion continues to be a key focus. As you can see from this chart, Propel's cash conversion has remained consistently high, averaging approximately 99% since FY 2015. In the first half of FY 2026, cash conversion remained healthy at over 95%. Propel is the only listed death, death care company on the ASX, and before I hand over to Arash, I want to briefly touch on the company's performance since its IPO. The company listed in November 2017 with an issue price of AUD 2.70, and as you can see from the chart on this slide, as at December 31, 2025, Propel's share price has materially outperformed the ASX 300.
For investors who participated in Propel's IPO and subsequent share issues, and who retained their shareholding as at December 31, 2025, Propel has generated a total shareholder return of 88% on a pre-tax basis, including dividends. This equates to total shareholder value accretion since the IPO of close to AUD 400 million pre-tax. I'll now hand over to Arash, who will provide further detail on the half-year results.
Thanks, Lilli. Good morning, everyone. Today, I will cover five key areas. Firstly, I'll provide an overview of Propel's first half results by an analysis of the income statement. Secondly, I'll touch on the key drivers of revenue, operating earnings, and margin. Thirdly, I'll provide an analysis of the cash flow statement. I'll touch on the balance sheet and finally, wrap up with the debt refinancing announced today and other capital management matters. Please turn to Slide 15. In the first half, Propel generated revenue of AUD 118.8 million, up 3.1% on the back of higher funeral volumes. Comparable average revenue per funeral was circa 2% above the PCP, noting that the network average revenue per funeral was in line with the PCP.
Propel reported gross margin of 69.7%, with the comparable gross margin in line with FY 2025. Operating costs were well maintained at circa 44% of revenue, which was favorable to FY 2025 and in line with the PCP. Operating EBITDA increased to AUD 30.3 million. In terms of the other items of note on the income statement, depreciation was in line with the PCP, reflecting prudent investment levels. Interest expense on the senior debt was also in line with the PCP, with the impact of higher drawn debt used to fund acquisitions and property purchases, offset by a lower average effective interest rate. Operating NPAT increased to AUD 12.4 million, and the adjusted effective tax rate was 29.6%. The waterfall on Slide 16 sets out the sources of revenue growth on the PCP.
The chart shows the full period impact of the acquisitions made in the PCP, which was immaterial, given the largest acquisition, Decra, completed in early July of 2024. The impact of acquisitions completed during the calendar year, 2025, and the organic performance of businesses held for the comparable period. As you can see from the comments on the bottom left of the slide, total funeral volumes increased 3%, and average revenue per funeral for the group was in line with the PCP. This was primarily driven by pricing impacts, offset by foreign exchange and acquisition impacts. Noting that recent acquisitions currently generate below network average revenue per funeral.
In terms of organic, on the center of this slide, comparable businesses reported funeral volumes in line with the PCP and a circa 2% increase in comparable average revenue per funeral, with pricing impacts being partially offset by funeral mix towards the end of the first half. As you can see on the bottom right of this slide, the operating EBITDA margin was 25.5%, 0.5% lower than the PCP, primarily impacted by recent acquisitions and the revenue mix in the first half. Disciplined cost control resulted in comparable operating costs being only 1.6% above the PCP, which was below current inflation. Moving to the cash flow statement on Slide 17, operating cash flows increased 2.6%, with cash flow conversion healthy at over 95%.
In respect of investing activities during the period, Propel deployed AUD 1.8 million in connection with acquisitions and AUD 0.4 million relating to earn-out payments. Acquired four freehold properties, three of which were previously leased, for total consideration of AUD 6.2 million, and incurred capital expenditure of circa AUD 12.3 million, with maintenance CapEx of 4.9% of revenue. The financing activities during the period largely reflect the proceeds from senior debt to fund acquisition and property purchases. Moving to Slide 18, there are four main points of note on the balance sheet. One, as at December 31, 2025, Propel had a net debt of AUD 142.8 million. Two, freehold properties owned by Propel are held at a depreciated cost of approximately AUD 245 million.
Three, prepaid contract funds total approximately AUD 83 million, which are largely invested with third-party friendly societies, who primarily invest the funds in cash at fixed interest. During the period, prepaid contracts that turned at need in Australia accounted for less than 10% of the group's Australian funeral volumes. Finally, the reduction in equity on the prior balance date related to non-cash movements in the foreign exchange reserve as a result of a 7% fall in the New Zealand dollar against the Australian dollar. Turning to Slide 19, in respect of capital management, as Lilli mentioned earlier today, Propel is pleased to announce that Propel and Westpac agreed to extend the maturity date of its existing AUD 275 million debt facilities from October 2027 to October 2029.
Improve the pricing, which all other things being equal at that balance date, would result in annualized interest cost savings of circa AUD 0.7 million. In addition to this, a new AUD 50 million accordion facility has been established, drawdown of which is subject to satisfaction of customary conditions. Propel remains in a strong funding position, with AUD 182 million of available funding capacity, including the new AUD 50 million accordion facility. It should also be noted that the company remained comfortably in compliance with its debt covenants, reporting a pro forma net leverage ratio of 2.0x . Finally, Propel declared a fully franked interim dividend of AUD 0.075 per share, up from AUD 0.074 per share in the PCP.
I will now hand over to Fraser, who will cover industry trends, acquisitions, and conclude with the outlook for the remainder of FY 2026.
Thank you, Arash. Good morning, everyone. Some of you may be familiar with the graphs on Slide 21, which show that the number of deaths is forecast to both increase and accelerate in Australia and New Zealand. Death volumes is the most significant driver of revenue in the death care industry. In Australia, death volumes grew by 1.1% per annum between 1990 and 2025, and the ABS forecasts that they will increase by 2.9% per annum from 2026 to 2035, and 2.4% per annum from 2036 to 2045.
Whereas in New Zealand, death volumes grew by 0.9% between 1990 and 2025, and Stats NZ forecast that it will increase by 2% per annum from 2026 to 2035, and 1.8% per annum from 2036 to 2045. Few industries have the benefit of the certainty of this sort of tailwind. However, death volume growth is not necessarily linear and can fluctuate from time to time. The funeral industry is highly fragmented in both Australia and New Zealand. Slide 22 shows how Propel's estimated market share in Australia and New Zealand has grown in the last decade from circa 1% in 2015 to circa 10% in 2025. It is worth noting that notwithstanding this significant increase, the market remains highly fragmented, with many hundreds of independent operators in both countries.
We expect to grow our market share through both partnering with existing operators, but also through selective organic expansion in the years to come. Turning to Slide 23, Propel remains focused on executing its core strategy of acquiring assets and social infrastructure which operate in the death care industry. Since its IPO in November 2017, Propel has committed AUD 306 million on acquisitions, and during the first half of FY 2026, it completed the acquisitions of Jones & Co Funeral Services in Tauranga, Broadway Funeral Home in Matamata, and Jacobsen Memorials in Auckland. The company continues to explore many other acquisition opportunities, with multiple vendor discussions continuing, and the acquisition pipeline remains robust. Turning to Slide 25, Propel has a strong track record and a defensive market position in a favorable sector thematic, and is well-funded and well-positioned to continue its growth profile.
Slide 25 provides some of Propel's key attributes. To highlight a few, Propel operates in a highly fragmented and essential service industry and stands to benefit from favorable demographic tailwinds. Propel owns assets and infrastructure that are difficult to replicate. Propel is well-funded to continue its acquisition-led growth strategy. With a management team and non-executive directors owning approximately 7% of the company, this ensures a strong alignment with fellow shareholders. Turning to Slide 26, Propel is citing a 3% contraction in comparable funeral volumes in the PCP, including a material contraction in Australia in the three months, ended 30 April 2025. Propel remains well-placed to navigate natural fluctuations in the death rate and continue consolidating a highly fragmented, essential service industry benefiting from long-term demographic tailwinds.
With its current market position, Propel is well positioned to continue to generate sustainable long-term growth and value creation, and expects to benefit from its strong funding position and improved pricing and the acquisitions it has completed today, and other potential future acquisitions in both Australia and New Zealand. Before I hand back to the moderator for questions, I want to echo Lilli's earlier comments and thank our client families for entrusting the funeral homes and the Propel network at what often is a very difficult time. I also want to take this opportunity to thank all our staff for their ongoing dedication to the communities we serve. With that, I'll now 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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Elizabeth Miliatis from Macquarie. Please go ahead.
Good morning, thank you for taking my questions. Just the first one is just on, on the year-to-date trading. Can you give a bit of color on, on how you guys are doing so far for the year?
Yeah, yeah. Hi, thanks for the question, Elizabeth. I mean, we have decided to move away from providing comments on short periods of trading. Experience suggests it's not a meaningful time period, and providing sort of granular detail for short periods of time, I think can often lead to incorrect conclusions. What we will say that there have been no major surprises in trading so far, in Q3.
And Fraze, maybe just to add to that, Liz, I think it's important to point out, which we give in the outlook, that we're comping a 3% contraction in our, in our organic funeral volumes in the second half. Now, what we have said that's new today is that it was a material contraction between the months of, of February and April. So we've obviously just entered that period. Time will obviously tell how we would perform against that comp, but certainly the comps are, are easier in the second half.
Okay, got it. That's helpful anyway. Just on the margin profile from Q1 and Q2, there was a bit of a deterioration from Q1 to Q2 in terms of the EBITDA margin. That is pretty seasonal, but was there any sort of surprises there? I think the contraction was almost 3%. It has sort of bounced around a fair bit historically, somewhere between 1% and even as much as 4% or 7%. Just wondering if there was anything unusual in that.
Thanks, Liz. I'll take that one. Yeah, look, you're right. In terms of Q2, it was below Q1. There is seasonality in that Q2 is typically below Q1. We did in our AGM trading update, did provide that Q1 margin, which was in line with the PCP. There was probably two influences in terms of the Q2 margin being below the PCP. One being the nature and timing of the acquisitions. What I mean by that is both acquisitions were in New Zealand, which typically run at a lower margin, and two, was in a period which is typically lower margin as well. Then the other influence on that was the revenue mix that we experienced late in that Q2 period.
Look, they were both mitigated somewhat by disciplined cost management, with cost being well maintained, noting that a comp OpEx was up 1.6% for the half. Hopefully, that gives you some, some color on it.
Yes. Yes. Thank you so much.
Your next question comes from James Bales, from Morgan Stanley. Please go ahead.
Hi, guys. I guess just touching on the margin. You talked a little bit about price growth of 2% on a comp basis and mix being an impact there. Is there anything you can do about that, or is that just part of life?
Mm. James, I'll, I'll take that, that question. Look, you're right. There was some mix impact towards the end of Q2. Look, that's not unusual in, in, in December for that to be the case, James, just as I guess we lead into the sort of festive and holiday period. You know, some client families choose a lower value funeral, and we have seen, I guess, a little bit of softness in our New Zealand business from a, from a mix point of view. Those two factors certainly impacted, I guess, the average revenue per funeral at the back end of, of Q2. To Fraze's point, that, that mix at the start of Q3 has certainly improved at the end of Q2.
In terms of, I guess, cushioning, the impact of that, as you would be aware, the, the cost base is, is, is pretty fixed, in our business, James. Obviously, you know, there's areas that we can touch on, around sort of the staffing. You know, pools of casual staff. Obviously, if we're not doing, as many full-service funerals, you don't necessarily need to use that casual staff as an example. There's some, some cushioning effect, based on volume and, and pricing. As I said, it's a largely fixed cost base.
When you say fixed cost base, is that, yeah, at the.
OpEx.
COGS line? OpEx. Yeah, yeah.
OpEx. OpEx, yeah.
Then on, like, gross margins declined a little bit, both versus the first quarter and year-on-year. Is there something that, like, how do you expect that to play out in terms of pricing being an offset to that? What should our expectations be for the second half and beyond?
In terms of the gross margin there, it was similar impacts in terms of what I described in terms of the EBITDA margin and being that, that revenue mix in Q2 near the end and the acquisition impacts. In terms of how Look, it, the gross margin was from a comparable perspective, in line with FY 2025. I think that 70% is still reasonable to assume for the second half.
Okay. Then maybe just on volumes, you called out flat organic volumes versus PCP. Do you have a view on how that compares to the broader market?
Well, interesting, James, actually, Stats NZ came out last week with their 2025 calendar volumes. I know that's, it's only sort of 25%-30% of our, our market, but interestingly, they are now have disclosed sort of their third consecutive contraction in, in volumes in NZ. I think, I think it's well understood that, you know, as a result of the pandemic, and, and following that period, you know, we had periods of quite high volatility in volumes, James. Obviously, material growth, and then that was followed by material contraction. I think over the past sort of 18, 24 months, we've seen those volumes sort of rebase. Yeah, I think that's an interesting anecdote on, on the NZ volumes.
We, we're only 10% of the market across Australia and New Zealand, so we're certainly not the index. I think that's, that's an important point to point out.
Yeah, that's helpful color. Then maybe just like one last one. M&A, I understand it's always lumpy, but seems to have slowed down a little bit. Is that just normal sort of, you know, pipeline inconsistency, or has there been any internal reassessment of quality and return hurdles?
Yes, I'll take that. Hi, James. Yes, I think more of the former rather than the latter. There's definitely no change in strategy or pricing that we're willing to pay for assets. I think we've been consistent, we see the pricing being consistent over the last sort of 20- odd years in the industry. I think the pipeline remains robust. There are multiple ongoing conversations, some of which are well advanced. It's just, yeah, it's one of those things that we've just got to wait for them to be, to drop and be patient with our sort of fellow partners or future partners.
Awesome. Now, thanks, guys. I appreciate the help.
No problem.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further phone questions at this time. I'll now hand back to Mr. Henderson for the closing remarks.
Thanks. Thank you all for joining today's call. Lilli, Arash, 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. Thank you, everyone, and have a good morning.