Last week the AMA Group released it half year results, its first since the successful acquisition of Capital SMART and ACM Parts from Suncorp.
In essence, the investor presentation indicated that the growth strategy was still on track with very strong strategic progress with the acquisition of Capital SMART and ACM Parts now completed. This is of course a game changer which nearly doubles the size of the Group with revenue projected to be in excess of $1b in FY 21.
Capital SMART integration is well progressed and the team is confident of delivering in excess of $17 million of synergies for FY 21 and AMA is now a market leader in both Vehicle Panel Repairs, with a national footprint of 188 panel sites, and Automotive Parts and Accessories.
However, the Group posted a disappointing first half financial result, indicating several factors, such as: reduced repair volumes due to prolonged dry weather and lower claims frequency, static pricing of repairs and rising costs associated with parts and new vehicle technologies, adverse damage severity mix for Capital SMART, Year on Year decrease in new car sales, the impact of acquisition transaction costs and the impact of adopting new accounting standard AASB 16 Leases.
Significantly, the Group has historically paid an interim dividend, although in light of the first half trading performance and their robust acquisition pipeline, the Company has decided not to pay an interim dividend. However, the Company expects to be in a position to pay a full year dividend, which will then be announced at the time of the full year results in late August 2020.
The Group also reaffirmed its previous guidance of FY 2020 Normalised EBITDAI in the range of $73 to $77 million, which of course means it will need to deliver between $51 to $55 million in the second half, more than 2.3 times the first half result at the bottom of the range.
So, what does it all mean? Well, rather than attempt to decipher the Group’s financials, it appears this has already been done by the investors. Notwithstanding the explanation of the result and reaffirmation of confidence in the second half, the reaction to the announcement, has been savage. In the past 5 days the AMA Group’s share price has fallen 35 percent whilst the ASX 200 has fallen 8.5 percent in the same period, predominately related to ongoing COVID-19 concerns.
I’ll leave you to draw your own conclusions.
For the complete presentation, visit: https://amagroupltd.com/wp-content/uploads/2020/02/HY20-Investor-Presentation.pdf.