September 28, 2022

AMA Group releases FY22 report

The AMA group reported $21.8 million in earnings before interest, taxes, depreciation and amortization for fiscal 2022 and closed the period with $52.2 million in cash. The group reported one $148 million report loss after tax for FY2022 which includes another substantial non-monetary depreciation of $41.4 million for Capital SMART and $39.3 million for other Drive sites (excluding Capital SMART), as well as $240.8 million for leases, equipment and plants and costs associated with hibernation, closure or consolidation with other sites.

The report says repair volumes were down 14% (which would represent over $100 million in lost revenue). This drop in volume is attributed to the first half closures and the lack of workforce in the second half due to the shutdown of staff with COVID-19 or the flu.

Comparing some numbers from the titles of the past two years – the numbers in parentheses are a waste.

2021 turnover and other operating income $919.9 million, FISCAL YEAR 2022 $845.1 million

Normalized post AASB 16 EBITDA FY2021 $116.4 million, AF2022 $21.8 millionPre-AASB 16 Normalized EBITDA for FY2021 $64.6 millionfinancial year 2022 ($29 million)

Net profit after tax2021 ($99.1 million), AF2022 ($148 million)

The group reduced its net debt by 31% to $165 million through divestments and fundraising.

In terms of total group operating cash flow, this decreased by 154% from $52.1 million in FY21 to $28.2 million in FY22.

There was also a cost of $10.8 million price supplements on existing acquisitions, this is likely to decrease because the group has not acquired any repair business since the acquisition of the Capital SMART network.

Heavy engine revenue was down nearly $2 million from FY21 – 10.8 million from 12.6 million, but the report notes that an increase in the labor rate is expected to rise margins.

The company’s increased costs were associated with a number of initiatives, including: the resumption of employee options for FY21; new employee shareholding system in ’22; additional recruitment costs associated with the establishment of a new management team.

The AMA Group has approached all of its insurance partners for rate increases to reflect the many inflationary costs that have impacted the industry. The report says insurers have widely recognized the need to realign pricing and those unwilling to budge have been separated.

In an interview with the Australian Financial Review Group CEO Carl Bizon said that for the two big insurers, the motor claims portfolio has protected them from inflation: “Because repairers have been sandwiched between rising costs and insurers who have jealously guarded fixed-price agreements.”

AMA said the value of terminated contracts was just under 10% of revenue (about $84 million). The group has also entered into negotiations with Suncorp for a pay increase for the Capital SMART network.

Essentially, the group now has too many sites and not enough technicians and is looking to close or mothball the less profitable branches. The AMA group has 181 sites in 2020, there are now 156 sites with around 20 more sites under review.

KMPG auditors again warned about the company’s ability to continue in business (similar to FY21 report). AMA says management has prepared cash forecasts for the next 12 months supporting the group’s ability to trade.

The report outlined WADA’s strategy moving forward. This includes diversification and with this in mind has appointed a Managing Director of Direct Sales.

The report also indicates that the AMA group is looking to partner with a technology provider to offer ADAS solutions inside and outside the network. The group says it has sufficient cash to handle the continued profit recovery.