AMA Group posted its annual report on the ASX on 26 August.
Reported revenue from continuing operations has increased from $606.7 million for FY19 to $889.0 million for FY20, representing a 46.5% increase. ‘The increase in revenue is largely due to a full twelve months trading for FY19 acquisitions and partial period trading for FY20 acquisitions’ the report says.
Operating profit before interest and tax has decreased from $34 million profit for FY19 to a $46.9 million loss for FY20. Net profit is down by 426%
The main factors cited for this loss was the acquisition costs of Capital SMART and ACM Parts, dry weather affecting volume in 2019, Covid-19 impact and the adoption of the new accounting standard AASB 16 Leases on 1 July 2019.
The report states: ‘As a result of the above, the statutory results for FY20 are not directly comparable to FY19.’ There was, again, no shareholder dividend paid.
‘The Group remained cashflow positive (inclusive of Government wage subsidy programs) during this period and the net debt position of circa $227 million at 30 June 2020 is also significantly better than anticipated at the outset of the pandemic.’ AMA has reported that is it receiving approximately $10M per month in JobKeeper and records 21M Government payout in the FY20 financial year.
Total borrowings and other financial liabilities are listed as $385,404M for 2020 versus $131,263M for 2021. The report states that AMA is on target to achieve annual synergies of $17 million by the end of FY21 from the acquisition of Capital SMART stating: 'The Group will continue to capitalise on the scale benefits afforded by the size of the broader Group.’
Capital SMART has added $234,545M to revenue and reported a FY20 $73,556 loss. SMART has also changed its paint supplier from PPG to Glasurit.
‘Subsequent to year end, the Group terminated a supply agreement with a key supplier. The supply agreement contained termination fees upon early termination. The Group reached a settlement with the supplier for $9,437,000 (to be expensed in the year ending 30 June 2021). The supplier has agreed to pay rebates owed to the Group of $3,216,000 as at 30 June 2020. The net cash settlement of $6,221,000 is expected to be paid by the Group in the financial year ending 30 June 2021.’
On the subject of paint suppliers: ‘The Group received a further tranche of the market incentive instalment from its paint supplier in the amount of $59.5 million (inclusive of GST). This was used to fund the acquisition of Capital Smart.’
The report mentioned the renegotiation of repair costs with insurers. ‘These provide sustained and improved revenue generation and profitability for the group from 1July 2020 (based on a normal operational environment). As for most businesses, the Group has not been immune to the effects of the COVID-19 pandemic and the emergence of COVID-19 Management immediately responded with a focus on:
- Optimisation of costs in line with repair volume, ensuring customer service was maintained.
- Management of Government lockdowns and state-wide restrictions imposed in New Zealand and Australia.
- Government wage subsidy programs assisted the company in maintaining operations and more importantly retaining capability and skill within the business.
- Engagement with lenders to secure ongoing liquidity to endure an extended period of business interruption.
- Adoption of a high standard of health and safety measures and provision of additional support to our employees including via Employee Assistant Programs.
- Regular Board meetings to assist management and remain close to the business and developments. The Board and senior employees reduced remuneration by 20% from May 2020 to June 2020.
- With management’s commitment to driving efficiencies, cost management, and a return to normal repair volume, the business performed well in Q3 FY20 delivering results in line with achieving the FY20 targets outlined in our announcement to market in February 2020.’
The Group increased its debt facilities to $375.0 million during the period, with $340.0 drawn in cash at balance date (excluding bank guarantees). The drawn debt was to facilitate acquisitions, finalise contractual earn-outs and for general corporate purposes.
‘Within the AMA Panel division, three earn-outs performed worse than originally anticipated at the date of acquisition and as a result, the group has recognised an impairment charge of $2,075,000 to the profit or loss.
Capital Smart
‘The Group performed an annual impairment test to support the carrying value of goodwill. This resulted in Capital Smart Group Holdings Pty Ltd recognising an impairment charge of $50,200,000 in their profit or loss. The impairment charge was fully allocated to goodwill.’
As well as the purchase of Capital SMART and ACM for $416,904M cash AMA also bought:
- Smashcare Group in August 2019 for $8,516M
- BF Panels NSW for $3,962M
- All Transport Crash Repairs (Truck) SA $3,276M
- Diplocks Collision Repair Centre QLD
- Luxury Bodyshop NSW
- Graeme Hull Smash Repairs Wagga Wagga NSW
The reports states $4,828M in it’s acquisitions report under ‘other’
This added 61 sites to the group, although the number of group sites that have been closed in the financial year are not included in the reported.
The Group acquired the remaining 40% interest in Woods Auto Shops (Dandenong) on 1 July 2019, increasing its ownership from 60% to 100%.