Once again the AMA Group annual report is out and we in the industry have an opportunity to look behind the veil and find out a bit more about the biggest single player in our industry. As is usually the case with public companies, AMA’s annual report includes a review of the business performance, explanation(s) of unusual activities – and there have been plenty of those in recent times with AMA – and of course guidance on where the business is headed. This year is no exception.
Firstly, to the results. On the back of an 11.3% revenue increase, predominately due to the benefit of a full twelve month’s trading of acquisitions such as Capital S.M.A.R.T and ACM Parts, the Group posted an EBITDAI of $54.4m, up from $32.4m in 2020. However – and it’s a significant however – the impact of depreciation and amortisation, impairment and finance expenses, take the result to a loss of $104 million! Once again, and prudently, there was no full year dividend.
Taking a closer look at the Vehicle Panel Repair business we find:
- Performance is largely due to the above-mentioned annualised impact and the addition of 10 sites acquired in the prior year.
- Heavy Motor contributing 13% of the total Normalised EBITDAI, up from 10% in 2020.
- Capital S.M.A.R.T’s paint and consumables integration is complete and the $17 million of annual synergies on track to be realised on a normal volume basis.
- Vehicle Panel Repairs received an additional circa. $28 million in government wage subsidies.
One thing that did catch my eye was the impairment charge of $90 million against the Capital S.M.A.R.T acquisition, which is in addition to the $47million impairment charge in 2020. This is a combined write-down of 36% based on the price the Group paid for its 90% equity share in October 2019! At the time AMA Group had valued Capital S.M.A.R.T at 20 times 2019 actual EBITDA and I proffered my opinion, as did many others, that the business was over-valued. Notwithstanding the impact of the pandemic, this is an extraordinary realisation. Of course, the Capital S.M.A.R.T acquisition did not take place on Bizon’s watch, however the same cannot be said for three of the current non-executive directors, including the current Chair.
Looking ahead, the business once again provides a glimpse into the future highlighting the previously announced new structure and enhanced leadership team, together with a focus on improved governance, including the relatively recent appointments of two non-executive directors. Based on the above observation, this appears to be yet another step in the right direction.
AMA also highlights some potential opportunities to “unlock value” in key operational areas such as procurement, production and partnerships and it also reiterates the ongoing efforts to make AMA Group “a great place to work”. Of course, there are also the obligatory indicators of several headwinds and tailwinds and there was no guidance on 2021-22.
Once again, we will leave it to the financial press to analyse the Group’s performance in detail, however, since the beginning of 2021, investors have slashed the AMA share price almost in half while the benchmark index, the ASX200, has increased by 13%. As the custodians of shareholders’ funds, the board and Bizon have clearly yet to gain market confidence – or perhaps the business model fundamentally flawed.
To see the AMA Group 2021 Annual Report, visit: https://amagroupltd.com/investor-centre/annual-reports/.