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Investing.com -- CVS has declared the sale of its Crematoria division for £42 million ($57 million) in a deal that is expected to close within the next five weeks. The sale price represents a 10 times EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) multiple.
The Crematoria division’s revenue for FY24, ending in June, was £12 million ($16.3 million), with an EBITDA of £4.3 million ($5.8 million) and a profit before tax (PBT) of £3.6 million ($4.9 million). The company anticipates the same EBITDA for FY25, slightly higher than RBC’s estimate of £4.5 million ($6.1 million).
The revenue and EBITDA from the Crematoria division account for 1.8% and 3.2% of the CVS group, respectively. The sale is expected to improve the company’s leverage, which stood at 1.66 times at the end of December 2024. CVS maintains that it will keep the leverage under 2.0 times.
CVS’s decision to sell the division comes amidst a relatively low share price, making it less appealing to raise equity to capitalize on its merger and acquisition opportunities in Australia. The sale of the Crematoria division effectively reduces leverage by 0.34 times, providing CVS with the necessary capital to invest.
Analysts at RBC commented on the sale, stating that the move will be value-accretive for the group. They noted that CVS’s ability to acquire quality assets in Australia at around 7 times multiples before cost synergies makes the capital freed up by this sale beneficial.
The analysts also observed that the sale simplifies the business, which is somewhat advantageous given the ongoing CMA investigation into integrated crematoria services, a specific topic of investigation.
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