If you’ve been to a funeral in the past few years, odds are it’s been run by an InvoCare brand.
The funeral company has been described as the Coca-Cola of funerals. It owns leading brands such as White Lady and Simplicity, along with dozens of others acquired in recent years, making it the largest funeral and crematorium operator in the Asia-Pacific. It operates in Australia, New Zealand and Singapore.
Yesterday the company posted a healthy rise in net profits – up 65% on the year before to $44.5 million. Gross sales were up 14.9% to $368.7 million.
InvoCare is growing through acquisitions and because of the ageing population. Its bottom line is impacted by the death rate.
But it’s also doing something rather innovative to boost its profits. Today, 13.7% of its business comes from pre-selling funeral plans to ageing baby boomers. It sold 5.5% more of these contracts in 2012 than it did last year, and the average value of these pre-paid funerals rose 7.8%.
“We’re dealing with families 10 to 12 years in advance,” InvoCare CEO Andrew Smith (pictured above) told LeadingCompany. “It gives us an opportunity to talk to the family in a less emotional state about how they would like the funeral to be done.
“With the proliferation of funeral insurance and with InvoCare having a bit more publicity – funerals aren’t such a taboo topic anymore – we’ve seen an increase in people’s propensity to organise funerals in advance. We collect the cash – and put that it into third-party trusts to protect it.”
There are distinct advantages to InvoCare doing this. For one, it locks in business years ahead, reducing the risk of people minimising their spend on funerals during an economic downturn. And secondly, all that money collects interest.
Of the $44 million in profits that InvoCare posted yesterday, $9.4 million came from returns generated by its investments in fixed-term deposits, property and share investments. This return neutralised the increase in InvoCare’s liability to deliver future prepaid funerals.
“It’s grown a lot,” Smith says. “We see it as an important part of our growth pillars. We want to keep growing our market share, and by offering this service to families, we’re doing so before our competitors.”
Another area of growth for InvoCare comes from acquisitions. The company acquired Bledisloe for $108 million in mid-2011. It was the market-leading funeral brand in New Zealand and one of the top-four funeral brands in Australia. InvoCare spent much of last year integrating Bledisloe into the larger business. Two smaller acquisitions came in December 2012 and January 2013.
Smith says that while the company’s always talking to people about acquisitions, there are unlikely to be any more this year. “The timing of our acquisitions depends on the desire of people to sell…. We’re not confident of doing [an acquisition] in 2013,” he said.
Instead, the company plans to focus on the rollout of new technologies.
That includes its $5 million investment in the HeavenAddress website, in which InvoCare has a 34% shareholding.
HeavenAddress.com is an online memorial website that Invocare says attracts a third of all funeral-related web traffic in Australia, New Zealand and Singapore. InvoCare brands represent 75% of those gaining brand exposure on HeavenAddress.
“While we enjoy doing the acquisitions and making the business larger, we don’t want to lose sight of our core business,” Smith said. The company upped its marketing on key brands to monopolise on a slightly higher death rate last year (up 0.9%), and also spent money on improving the technology used by its staff.
“We want to make sure when we’re dealing with families that it’s not such a laborious, manual exercise. We’re using things like iPads a lot more in the business.”