AMA Group has released a bullish half year financial report which includes the announcement of the purchase of seven more automotive repair shops bring the group site numbers to 79. More acquisitions are said to be in the pipeline, integration is going well says CEO Ray Malone, and costs are down thanks to economies of scale and the group importing its consumables.
"We can basically do all of our work nationally for cost and still make a 10% margin, so we've put ourselves into a fantastic position. And we are the only independent real scale player in the country,” Malone said.
There are three acquisitions in Victoria: Winter & Taylor in Corio; Soldania Bros in North Geelong; and South City Panel in South Geelong. The release states: “Notably this give us (AMA) a substantial footprint in Geelong (Victoria's second largest city) and provides a springboard into this geographic area; a region we previously have not been represented.” These three sites have been purchased with owners staying on with an 'earn out' agreement.
Three more businesses have been acquired without an earn out. Mark McHugh Bodyworks in Bundall on the Gold Coast, ZZ Auto in Invermay, Tasmania and Colour Code Automotive Refinishing in Kemscott Western Australia.
These acquisitions have been funded using existing financial resources and are expected to have the following financial impact, the release states:
Anticipated consideration $4,240,000
Incremental revenue $20,000,000
Incremental EBITDA $1,760,000
Implied EBITDA 2.41
AMA has also opened a new facility in Mitchum, Victoria and announced the purchase of five new Greenfield sites.
'Following strategic planning and consultation with our insurer partners, we have plans to open a number of Greenfield sites. We have initially agreed to open five new sites: two in the Australian Capital Territory, two additional sites in South West Sydney and and another site in Queensland,' the release states.
Fabulous six months
Malone recorded a commentary on the financial statement stating the company has had “a fabulous six months”.
“If you look at our acquisition pipeline is it is going better than expected. The last two tranches of business, we've bought them at a very good multiple. We just release an announcement of the seven businesses we've bought some with the golden handcuffs on them and our average implied EBITA multiple is 2.1. This will give us another $20 million of revenue in some key areas. Geelong is the second biggest city in Victoria and we have effectively now have the most business in Geelong and it give us a fantastic footprint to grow out from there,” Malone said.
“Our annualised revenue from panel now is in excess of $340 million dollars and its going really well. We've got fabulous relationships and we took out all of the major consolidators in our space. We're getting the lion share of the offerings going forward. We have a minimum of $150 million potential revenue sitting on our desk.
“Gemini and all the other businesses we brought are all integrating well and run rate on profit is all as expected and as we'd planned. All it means is we keep doing all of the same going forward.
“We now have 79 sites across Australia and really are the only national offering for fleet, as well as all the government vehicles.
“We are importing a lot of our own consumables and have had substantial savings. This has allowed us to maintain a health,y respectable, market-acceptable margin while being extremely competitive and offering real value to all our business partners, mainly the insurers.
“Then there's the vendors. The general age of vendors there in the space is 67 and most have no succession plan and the pace of the consolidation is exactly what we would want. It's not too fast it's not too slow.
“We are doing a lot of golden handcuffs deals at the moment. That is so we can grow into zones and have really good operators and give them a benefit to grow into that zone. We think it is a fabulous way to maintain our quality and our service to deliver for the people who trust us with our work," Malone said.
You can download the report here.
The top tier figures for the 2017 half year results are:
Sales $149.3m (+88.7%)
GM $85.5m (+88.8%)
GM 57.3%
The company's published strategy for the next six months is:
- Aggressively participate in the panel industry consolidation
- Identify and execute further “Greenfield” opportunities in vehicle panel repair division
- Prioritise and continually drive vertical integration across vehicle panel repair division
- Renegotiate new strategic partnership agreements with key customers and key suppliers
- Identify and executive strategic acquisitions in the automotive components and accessories divisions
- Manage operating margins to ensure that AMA shareholders are provided with a satisfactory return on investment