Profit in surging death rate
Death and taxes - supposedly the two unavoidable certainties in life.
"You can avoid tax," notes Luke Gregory wryly.
The general manager of the WA arm of one of Australia's biggest funeral home operators - ASX-listed Invocare - isn't suggesting he does (or urging a Tea-Party style tax revolt). It's simply a dry observation on the industry the former Commonwealth Bank executive finds himself in.
Mr Gregory heads one of the three major players in WA - along with Bowra & O'Dea and the Seasons Group - in what is a booming sector.
Invocare last month posted a sharp 17 per cent jump in underlying earnings for 2012, and its share price has rallied strongly.
The $370 million-a-year business operates in Australia, Singapore and New Zealand, and has seven brands pitched at various price points in WA, including Chippers, Simplicity Funerals and Christian Funerals.
Custom-made metal caskets to cardboard coffins are on offer, depending on budget.
At one of the company's busiest homes - Simplicity Funerals in Osborne Park, which handles about 500 funerals a year - Mr Gregory outlines the radical shift about to hit the industry.
"Our market is really driven by the death rate, and the size of the population, and then it's market share beyond that. They are the keys to the business," he says.
"We are at the start of a structural shift with the baby boomers moving into the 65-plus age bracket. That will stretch over the next 15 or 20 years."
Invocare began life out of the failed shell of a US company that began the consolidation wave sweeping the sector in Australia, but which stumbled on its American ethos of the "hard sell".
Mr Gregory argues that the approach jarred with Australian families, where a more-sensitive approach is appreciated.
It means that funeral companies are understated in their advertising, he says, concentrating more on community sponsorships, or being in convenient locations - part of the furniture.
"We constantly invest in our locations and our people, and just continually to be able to deliver a service that families want," he says.
"We are increasingly seeing that the motivations of families have gone away from simply conducting a funeral to having a celebration of life. The result of that is that funerals tend to be more complex now."
Further consolidation of the industry - with about 80 per cent of the market already controlled by the big three - is likely according to Mr Gregory, given the family, cottage-industry nature of the sector.
"The industry has been based on a family model historically, and the emerging generations don't always want to continue on in the business," he says. "And as the existing owners near retirement, the only exit strategy is to sell."
Along with organic growth, Mr Gregory says the company would like to be able to run its own cemeteries and crematoriums - something that is banned in heavily regulated WA, where even buried potatoes are subjected to a marketing board.
"In NSW and Queensland we are the largest cemetery and crematorium operators, because it is not Government run," he says.
"Our experience in the east is we certainly provide an excellent service and great facilities for people, so it would be a great opportunity for us if it presented itself."
