AMA H1 FY2022 Results: $52m Loss From COVID-19 Restrictions, Rising Costs

AMA H1 FY2022 Results: $52m Loss From COVID-19 Restrictions, Rising Costs

AMA Group has reported an operating loss before interest and tax of $52.44 million in the first half of the 2021-2022 financial year (H1 FY2022), compared with a profit of $7.10 million in the same period in FY2021, saying conditions remained challenging as the impacts of COVID-19 continued to affect the business. AMA said key operating markets in New South Wales and Victoria were in COVID-19 related lockdowns throughout much of H1 FY2022, and the company experienced its lowest total repair volumes in a six-month period since the pandemic began.

The report shows revenue and other income from continuing operations decreased to $418.14 million in H1 FY2022 from $435.10 million in the six months ended 31 December 2020, reflective of decreased repair volumes experienced during the half-year.

In addition to reduced revenue, AMA said the result was also affected by increased costs of raw materials and consumables, along with increased employee benefits expenses after JobKeeper subsidies finished (JobKeeper subsidies totalled $28.35 million in H1 FY2021). Additionally, the company hibernated and consolidated several collision repair sites during the half-year. As a result, AMA declared impairment losses of $16.68 million primarily against right-of-use assets, leasehold improvements, and plant and equipment no longer expected to generate future economic benefit.

As of 31 December 2021, the company had 173 sites across its collision repair network – a decrease of four since 30 June 2021 – and 12 warehouses in its supply business.

According to AMA, its heavy motor division maintained positive momentum through the COVID-19 pandemic. The company completed a significant NSW bus refurbishment programme and said forward work bookings remain “consistently strong”.

Despite what AMA described as the most challenging operational conditions of the COVID-19 period to date, tight management resulted in the company consuming less cash than expected. Some non-recurring and abnormal items also impacted the organisation’s result.

As occurred in H1 FY2021, no interim dividend was paid for H1 FY2022.

AMA also reported a significant reduction in debt balances over time, with net debt dropping from $173.30 million at 30 June 2021 to $83.70 million at 31 December 2021.

Despite the ongoing operating challenges of COVID-19, AMA said prudent actions taken during H1 FY2022 placed the Group in a strong financial position.

“The Group ended [H1 FY2022] with a cash balance of $81.302 million, undrawn bank guarantee facilities of $8.190 million and net assets at 31 December of $307.609 million. With substantial cash reserves, the business is well positioned to manage the ongoing uncertainty created by the ongoing impacts of COVID-19,” AMA said.

The company said it hoped the six months ending 30 June 2022 will bring a more “normal” set of operating conditions, but the impact of COVID-19 on the Australian and New Zealand economies continue to challenge all labour dependent businesses, including AMA.

“COVID-19 related absenteeism is further affecting an already constrained labour market and AMA Group continues to work to minimise the effects of these shortages through careful labour force management. The difficulties resulting from a reduced labour force have been further compounded by increased incidence of repair booking cancellations and no-shows for booked repair drop-offs and pick-ups,” AMA said.

Looking ahead, AMA said it is well placed to respond to current and future challenges. The company said its workforce is “largely intact” despite the highly competitive labour market in passenger vehicle repair, and cost control measures remain in place including reducing indirect labour, improving vehicle pathing to reduce towing costs, and focusing on repair/replace balance. AMA added that adverse legacy contractual impacts continue to be managed and revenue enhancement programmes are underway, including add-on private work.