The AMA Group has demonstrated steady financial improvement in its first half results published last week. While the Group made a loss of $11.868M up to 31 December 2023 that compares to a $37.267M loss in the previous corresponding first half.

Wales heavy vehicle division enjoyed a 33.9% increase in pre-AASB 16 EBITDA. A better deal with Suncorp for Capital S.M.A.R.T repairs has assisted in improved margins and the Group reports that project SHIFT which will allow S.M.A.R.T sites to upgrade equipment and process to have a wider scope of works is ahead of schedule. The S.M.A.R.T sites delivered operating results ahead of expectations.

The Group is only performing at 79.9% capacity which is primarily because of labour shortages. Fully staffing sites remains one of the biggest challenges to operating more profitably and the Group is directing a lot of resource in this area. Headcount has increased to  3,370, with a ~10% improvement in voluntary employee turnover. The industry leading Apprenticeship program had 442 apprentices at the end of December with 
35 International arrivals and 146 offers in 1H24.

Higher interest rates have meant an increase in the cost of servicing debt. Reduction in repair volume from 1H23 is largely reflective of network consolidation completed in FY23 and continued repair mix change increasing labour hours per repair.
 The business continues to focus on improving performance in all sites with specific improvement plans in place for all underperforming locations. 

The report states that the ACM business has been reset over past two years and is now delivering strong core growth which is expected to result in overall business profitability in 2H24. Normalised pre-AASB 16 EBITDA guidance of $42 – 49 million has been maintained.

Auditors KPMG noted the following in the 'going concern' section of its declaration.

'While performance is improved in 1H24, AMA continues to operate at a net loss and is generating levels of EBITDA that may impact the ability to obtain sufficient leverage to operate effectively upon maturity of existing debt. As a result, continuing at current levels of profitability could adversely impact the ability of the Group to refinance existing debt, which may in turn cast significant doubt on the Group’s ability to continue as a going concern. The Group is progressing its debt refinancing activities for the existing $130 million of senior debt and $50 million of outstanding convertible notes and expects to finalise the new arrangements through 2H24, ahead of the October 2024 maturity of senior debt.

The Group remains confident that based on forecast performance for the remainder of FY24 and FY25 the Group can obtain adequate refinancing at acceptable terms and maintain required liquidity and covenant profiles. In the event that cash flows do not meet expectations, the Group has a number of options which could include restructuring operations, raising additional equity funding or the sale of assets to assist in further reducing leverage to facilitate the debt refinancing if required.

The Directors’ are of the opinion that, as at the date of approving this report, the cash flow forecasts and refinancing progress support the Group’s ability to continue as a going concern including ongoing covenant compliance.'

You can read the full report here.

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