AMA Group says it is on track to meet its normalised post-AASB 16 EBITDA of between $70 million and $90 million for FY2023, and between $120 million and $140 million for FY2024 after successfully rolling out initiatives aimed at reducing costs and increasing revenue.
Despite posting a $27.2 million net loss for H1 FY2023, Carl Bizon, CEO of AMA Group, said “green shoots” are appearing in the business after prioritising near-term strategic areas in the half year to reset the base business and minimise disruption as it prepares for growth.
“Whilst investment capital is constrained in the immediate term, we have the opportunity to increase capacity through additional workforce deployment and, when available, through relocation of existing facilities,” said Bizon.
The company said that when appropriate, it will seek acquisitions in line with its strategic plan, with Bizon adding the focus has changed from “repair volume for volume’s sake” to growth through profitable and sustainable repair volume into the future. Capital S.M.A.R.T has already recommissioned one facility and opened a new site.
While there were still several unprofitable sites across the network in the second quarter, Bizon said each facility has a pathway to improvement and “sees the value of retaining them within the network for strategic or operational reasons”.
Bizon also said that following network optimisation activities, the company’s Drive and Non-Drive businesses are now referred to as Capital S.M.A.R.T and AMA Collision, respectively.
In the Heavy Motor division, AMA is transitioning its South Australian site to a new facility with increased capacity, while trials continue with two international vendors for the supply of ADAS technology into the network. AMA has also created a centralised customer service function, which will facilitate a ‘one stop shop’ concept that it said is desired by many customers, and it has also partnered with an online booking platform for vehicle repairs.
Pricing negotiations with insurers continue, particularly in light of inflationary pressure.
“While we remain in this current high inflation environment, ongoing price management is required to ensure that payment for the work we complete keeps pace with inflation and we continue to actively engage with our insurer partners on a regular basis,” said Bizon.
AMA has a three-year standstill agreement with Suncorp executed by prior management, but substantial cost increases incurred over the last three years prompted the establishment of interim pricing in October 2022.
The standstill agreement ends on 1 July 2023, on which Bizon expects newly negotiated pricing will allow AMA to achieve the results it needs for the business in the coming financial year. It should also begin “the cadence of annual price reviews” in accordance with the base 15-year agreement that Capital S.M.A.R.T had with Suncorp when AMA acquired the business in 2019.
“We are looking forward to the normalisation of that agreement prior to June 30 and that will allow Suncorp to price for that in future periods [and] AMA to normalise its earnings, which is obviously a key element underpinning the guidance for next financial year,” he said.
Apart from the Suncorp arrangement, Bizon said two insurer customers that reduced volumes throughout H1 FY2023 following unsuccessful pricing discussions will return in H2 FY2023, after they “reached satisfactory commercial terms” with the company at pricing previously contemplated.