StoneMor Partners Continues Moving Forward

Foundation Partners why I partnered

Last week cemetery and funeral home consolidator StoneMor Partners issued press releases regarding their company.  In essence the releases shared the following information:

  1. Release of Preliminary Unaudited 2017 Full Year Financials
  2. The appointment of a new CEO for the company, Mr. Joe Redling
  3. The establishment of a committee to look into the possibility of changing the company from a Master Limited Partnership to a “C” Corporation
  4. You can read the press release pertaining to the 2017 financials here.  Here are some highlights:
  • 4th Qtr Total Revenues were down from $88.3 M to $85.3M year over year.  Full year 2017 revenues were up about $12 M to a total of about $338 million.
  • Both cemetery and funeral segments suffered year of year revenue declines for the 4th quarter.  Both were up for the entire year however.
  • Operating income from both the cemetery and funeral segments was up over 2016.  However, as in revenue, both were down for the 4th quarter.
  • Funeral calls for the year dropped about 4%. . .from about 16,998 in 2016 to about 16,298 in 2017.
  • Cash from operations was down to about $15 million from the previous years $22.8 million.

Interim CEO and board member, Mr. Leo Pound commented on the results, “Our financial results. . . are consistent with the message we communicated in our third quarter financial report – that the business is stabilizing.  Obviously our goal is to be able to report improved financial performance, but we are at the end of year one of a three year turnaround process.  Operating performance for 2018 should benefit from further improvement in sales, aided by price increases put in place during the fourth quarter of 2017, as well the reduction of non-recurring costs. . ”

Redling named President and CEO.  You can read a press release from StoneMor Partners here that deals with the announcement of Mr. Joe Redling being appointed as the company’s new leader as well as the idea of taking the company from a Master Limited Partnership to a “C” corporation.According to the release Redling comes from a background of leadership, operations, marketing, and product innovation.  Most recently, Redling worked as the Chief Operating Office of Vonage Holdings, a communications company.

Redling becomes the 4th CEO or interim CEO of the company in the last two years.

Funeral Director Daily take:  We’ve always looked at StoneMor Partners as sort of a death care company enigma.  As I’ve said before – from my point of view they go against the grain in what I consider a sales company rather than a service company.  That is not how most traditional death care companies see themselves.

It is interesting to see former interim CEO Leo Pound ratify that the company is in somewhat of a rebuilding process.  The question that I have is can they truly stem the tide of loss of momentum that seems to be growing as indicated by their 4th quarter 2017 results.

Another question I have is would the company be worth more to the shareholders if it was sold off rather than trying to move forward?  StoneMor Partners has a market value of about $227 million today (stock price of $6.03 times 38 million shares outstanding) as compared to two years ago when the stock was at $25 per share the market value was about $950 million.  That is a market value wealth decline of over $700 million or about 73% of the value of the company.  If our individual funeral homes lost 73% of their value would we try to turn the tide around or think about getting out?

I think that is an interesting question for management.  Should the company continue to try to rebuild itself and continue to try to grow via acquisition or should it look to be a seller of its pieces to other death care companies?  Some of the recent multiples being paid in the acquisition market make that a very valid question.

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