AMA Group has provided its Appendix 4C Quarterly Cash Flow and Activities Report for the quarter ended 30 June 2022. The report shows increased full year normalised EBITDA (post-AASB 16) guidance of approximately 30 per cent to $20-22 million and a $52.2 million closing cash balance, which exceeded the guidance by $2.2 million.
Operating cash flows included approximately $10 million of one-off cash inflows, including prepayment of future revenues, which will not carry forward into future trading periods. Total cash used in the quarter was $6.1 million, including earn-out payments of approximately $4.4 million.
The company said that while operating cash flows are projected to be positive in FY2023 (subject to no significant changes to population movement as it relates to COVID-19), the early part of the year will continue to be affected as the benefits of easing labour constraints and the phasing of new commercial pricing arrangements are realised.
“As previously noted, AMA Group had hoped the six months ending 30 June 2022 would bring a more ‘normal’ set of operating conditions. However, labour constraints associated with COVID-19, related isolation requirements, and additional non-COVID-19 related illness, combined with a constrained labour market, [have] continued to impact productivity,” AMA said. “This impact is expected to continue into FY2023, although AMA Group is seeking to address its workforce needs through a combination of increased apprenticeship numbers and the commencement of a targeted multi-country skilled migration programme.”
The company also listed the opening of ACM Parts’ new distribution facility in Somerton, which it described as “a critical strategic enabler”.
According to AMA, Q4 2022 repair volumes were similar to the third quarter. “As the Group continues network optimisation activities, historical volumes analysis becomes less meaningful, as the business is reset to a new capacity baseline in the absence of additional acquisitions in the current period,” AMA said.
During May and June 2022, AMA contacted all insurer partners and advised of updated labour rates and, where relevant, average cost models across the Non-Drive and Drive networks (excluding Capital S.M.A.R.T) which reflect the increased cost of repairs, driven by labour force and inflationary pressures. The Group also advised of additional charges for cost imposts previously absorbed.
“Negotiations with all insurance customers commenced with strong acknowledgement of the need for improved pricing,” AMA said.
The effect of pricing negotiations is expected in FY2023 and beyond, with rate adjustment negotiations with several insurers ongoing into FY2023. During this time, repair volumes at some sites are expected to be impacted.
“It is critical that we are paid fairly for the value we deliver to our insurer partners,” said AMA Group CEO Carl Bizon. “Insurers understand the pressures the industry is facing and I look forward to concluding our negotiations with them, as we seek to continue our long-term partnerships which deliver value to all parties.”
Expanding on its network optimisation plan, AMA said further adjustments were made following its decision to close Gemini in Prestons, New South Wales and consolidate operations at Gemini Melville and Gemini Welshpool Assessment Centre into a super site at Booragoon, Western Australia. The consolidation is expected to deliver annual expense savings of more than $0.6 million.
AMA will relocate the Capital S.M.A.R.T Riverwood (New South Wales) operations to RPM Milperra, which it says offers superior operating conditions to Riverwood but had been underutilised for some time. This move will save the company approximately $0.6 million in expenses associated with the Riverwood site.
The company said it has also decided to exit three hibernated sites in New South Wales which had been fully provisioned for at the half year. These sites are Luxury Bodyworks in Five Dock, Gemini Campbelltown, and JPV Smash Repairs in Kogarah. The closure of these sites will deliver annualised expense savings of $1.2 million.
AMA said Californian Smash Repairs in Botany had operated with inadequate volumes for some time, promoting the decision to exit the site. Annual expense savings of $0.5 million are expected at the conclusion of the lease.
In Victoria, Gemini Sunshine will close at the end of July, saving the company $0.2 million per annum.
Redeployment of staff to other locations across AMA Group sites has commenced, maximising the efficiency of the network and focus on profitable work.
“Our skilled technicians are our most precious resource,” Bizon said. “With a vast, and in several sites, understaffed, network, it is critical that our team is deployed in the most efficient manner across our network.”
AMA Group will release its results for the 12 months to 30 June 2022 on 23 August.