With pet ownership on the rise following the so-called "puppy boom" induced by COVID-19 isolation, funeral operator InvoCare (ASX: IVC) appears to be taking a long-term view on the care and love of owners when these animals' lives come to an end.
InvoCare has today announced the $49.8 million acquisition of two pet cremation businesses with operations spanning five states - Perth-based Family Pet Care and Queensland-based Pets in Peace.
Family Pet Care is the country's leading provider of its kind with 52,000 pet cremations annually through the brands Lawnswood in WA and Edenhills in SA, VIC and NSW.
Meanwhile, Pets in Peace is the largest company of its peers in the Queensland market with more than 14,000 pet cremations annually, servicing from four locations in the state's southeast and more recently in Toowoomba.
Today's move includes $11.5 million based on two-year earnings targets, and follows InvoCare's entry into the NSW pet cremation market in 2018 with its business Patch & Purr, which ran at a loss in the first six months of 2020 but saw a year-on-year improvement nonetheless with revenues almost tripling.
In its half-year results InvoCare reported it was ramping up a greenfield development for Patch & Purr at its existing NSW memorial park, while a second greenfield development on the NSW Central Coast reaching practical completion late in the June quarter.
However, the segment to date has still been just a tiny fraction of InvoCare's business, bringing in less than $1 million out of a total revenue of $195 million in Australia.
In contrast, the latest acquisitions are forecast to deliver combined annual revenue of $19.3 million and an EBITDA of $5.2 million, making them earnings accretive in the first full-year of operations.
Completion of the transactions is expected later this month.
"The acquisitions are a significant expansion into the adjacent market of pet cremations building on our 2018 entry into this market in NSW and transforming the Pet Cremation division of InvoCare into a meaningful contributor to overall earnings," says chief executive officer Martin Earp.
"We are excited to complete these transactions as they are both very high-quality businesses providing exceptional levels of customer service.
"Expanding the pet cremation business is a natural evolution for InvoCare providing opportunities to leverage its decades of operating in the end of life market."
Earp believes the company's deep experience in memorialisation in its core business will transfer across to the pet sector, given an "increasing trend towards the humanisation of the pet industry".
"I am also delighted to announce that the current owners and leadership teams of both businesses will remain in place to ensure that we continue to provide the highest level of customer service and facilitate a smooth integration with InvoCare's existing pet cremation operation, Patch & Purr," he says.
"This will include building on the market leading service proposition provided through Patch & Purr's technology and bespoke cremations."
Lance Stringer from Family Pet Care describes the deal as a good fit for businesses that are culturally aligned with a strong emphasis on professionalism.
"We help our clients through a really tough time when their pet passes and it is often not very different to the feelings that people experience when losing human family members," he says.
"The increasing humanisation of pets is well documented and so we need to be able to provide services to human standards and InvoCare has this experience which we can draw on."
Martin Hopp from Pets in Peace says he is excited InvoCare has embraced his company's belief that pets are family and deserve the same respect.
"21 years ago our dream was to be able to offer our four-legged family members the same dignified farewell as we offer other family members," he said.
"We know the high service standards that Pets in Peace have set will continue and the families we help will receive the best possible farewell for their fur babies."
2020 has been a stiff year for InvoCare, whose share price surged in February due to a morbidly high level of investor interest as COVID-19 broke out, only to sharply drop as the reality of reduced mourner numbers at funeral services set in due to pandemic-related restrictions.
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