NCR AMA Group Update
Published on April 29th 2022 in

AMA Group showing signs of positive cash flows

AMA Group released its quarterly update to the Australia Stock Exchange. Here is a summary of the narrative.

Business update

As previously noted, AMA Group had hoped the six months ending 30 June 2022 would bring a more “normal” set of operating conditions. However, the impacts of COVID-19 on the Australian and New Zealand economies continued to challenge all labour dependent businesses, including AMA Group, March quarter.

Throughout the quarter, the Group was significantly impacted by COVID-19 related isolation for team members who tested positive for COVID-19 and/or those deemed “close contacts”. With approximately 100 full time equivalent absences per day on average across the three-month period, the Group estimates that the subsequent reduced volume resulted in a negative revenue impact of approximately $10 to 15 million in the quarter.

January repair volumes remained significantly COVID-19 affected, with repair volume recovery slower than anticipated. However, AMA Group repair volumes have continued to increase across the quarter. Improved net cash from operating activities from January to March is reflective of the ongoing improvement in trading conditions and increase in repair volumes, with positive operating cash flows in both February and March 2022.

The March quarter volumes were up approximately 13% on the December quarter and are trending upwards month on month. However, the quarter’s volumes remain significantly down (27%) on the comparable calendar year 2019 period.

ACM Parts

In January, ACM Parts executed a lease for a nearly 20,000 square metre facility in Somerton, Victoria. This will see consolidation of the two existing Victorian sites around mid-year 2022 and will facilitate a significant expansion of ACM Parts’ national distribution network capacity, a key element of AMA Group’s supply chain enhancement initiatives.

Employee Share Plan

As part of AMA Group’s commitment to “building better” for its employees, the Group launched its inaugural offer of the Group’s General Employee Share Plan in March. This initiative is part of the Group’s commitment to addressing the nationwide skills shortage, impacting labour-intensive businesses across a broad range of industries. A total of 9.22 million new shares issued to eligible employees, tangibly acknowledging and rewarding the significant contribution each team member makes to AMA Group.

Quarterly cash flows

As part of the preparation of the Appendix 4C for the March quarter, the breakdown of operating cash flows has been refined, in particular relating to the presentation of “payments to suppliers and employees”. There has been no change to the headline cash flow numbers, however the Supplementary cash flow report includes a restatement of prior quarters to allow a like-for-like comparison.

Operating cash flow was lower in the March quarter compared to the December quarter, largely driven by slower than anticipated repair volumes, repair mix and an increase in staff payments as more employees returned to work to support the expected volume recovery.

Summary of cash position

AMA Group ended the March quarter with a cash balance of approximately $58.3 million and unused available finance facilities of approximately $5.3 million. Based on the approximately $15.3 million net cash used in operating activities in the March quarter, the total available funding of $63.6 million provides an estimated four quarters of funding available.

The Group recognises, however that this does not consider total cash outflows of $27.7 million during the quarter, largely driven by soft operating cash flows in January 2022 and the $5.3 million in unused available finance facilities relates to unused bank guarantees which are not available to fund operations. Calculated using total cash outflows and excluding the unused bank guarantees from available funding, there are less than three quarters of funding available.

The estimates above are based on the continuation of challenging conditions experienced in the March quarter. However, positive cash flows in February and March 2022 reflect the ongoing improvement in operating conditions and the Group expects this trend to continue as conditions normalise.

AMA Group CEO, Carl Bizon said: “Like many businesses that rely on labour for revenue generation we have continued to be impacted by COVID-19. It is pleasing to see returning repair volumes, despite these factors. I am heartened by the trend we have seen and the return to positive operating cash flows. Recently announced changes to isolation rules in Victoria and New South Wales should support ongoing volume recovery as the impact of staff absenteeism is expected to reduce.”

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