AMA Targets Growth Through Acquisitions, Revised Pricing And Additional Services

AMA Group has outlined a plan to expand operations and revenue over the next five years in its 2022 Investor Day Presentation.

The company wants to expand the number of collision repair centres to more than 200 from 149 currently, and grow revenue to $1 billion, a 25 per cent increase from $801 million in FY2021. It also plans to increase heavy vehicle repair facilities to more than 16 locations from nine currently, and create revenue of $100 million, nearly double the $54 million in FY2021. With all operations included, AMA plans to have more than 250-plus sites from 172 currently. Revenue would grow to more than $1.5 billion from $920 million for the 12 months to June 2021, with 12 per cent-plus AASB-16 margins.

The company said it continues to evaluate unprofitable sites for improvements and will make further consolidation and exit decisions, subject to commercial negotiations with insurance partners.

The proposal also listed AMA’s five-year strategic targets. They include:

  • ‘Resetting’ the business, which includes ‘resetting’ operations, pricing and customer approach to “entrench its leadership position” in the collision repair industry; optimising the network; looking for operational opportunities
  • Growth, which includes expanding the network, maximising existing operations and growing adjacent businesses; accelerating third-party parts and consumables business; organic and acquisitional growth; ADAS opportunities; revenue diversification
  • Minimising disruption caused by situational changes; creating the “workforce of the future”; resetting contract pricing

AMA’s exploration of repair revenue diversification opportunities includes direct business, such as access to non-insurer-based revenue from car rental companies, fleet managers, government fleets and self-insureds. The company is also exploring service opportunities such as claims management, having commenced a small claims handling programme with an insurer in late 2021 and reporting “positive results so far”. AMA said it is targeting revenue growth of around $50 million each for direct business and service business streams.

Capital S.M.A.R.T – one of AMA’s brands – is currently trialling private work opportunities at five sites, with a broader rollout expected in FY2023. It also seeks to implement digital triage / pathing to understand the extent of damage at an earlier stage, and ensure a vehicle ‘pathway’ to the correct facility, avoid towing costs, and achieve work refinement and cost reductions. AMA said it aims to reset the division’s pricing when its three-year fixed price arrangement ends in June 2023.

The proposal also highlights the need for an overall pricing review, with AMA saying “pricing must keep pace with market changes to ensure a fair return on work completed”. Historically, there has been a limited price review – 12-plus months – with the company now targeting “regular” reviews every three to six months. Labour rate reviews have also been historically limited – in some cases longer than three years – however the company is now targeting “regular” six-monthly reviews.

AMA said it has embarked on a group-wide procurement strategy, with a national dealer tender completed and direct negotiations commenced with OEMs. The company is also “forward looking” at new technologies, applications and processes with paint partner BASF to improve cost efficiency and quality outcomes.

Recognising the labour shortage as a challenge, AMA said it aspires to be the industry benchmark, preferred employer within the industry, training “more than our share” of workers. The group currently has 335 apprentices, with a planned annual intake of more than 150. AMA also employs 230 visa holders and has more than 20 applications being processed.

Regarding funding, AMA said it has sufficient liquidity to manage through recovery, with projected available cash of approximately $50 million at 30 June 2022, debt funding in place until October 2024, a “prudent capital structure” based on its FY2024 earnings before interest, taxes, depreciation and amortisation (EBITDA) outlook, ongoing bank support on covenant management through the earnings recovery period, and capital to fund the ongoing earnings recovery period.

According to AMA, 2024 is projected to be the first “clean” year after the pandemic. In its financial outlook, AMA estimates FY2022 EBITDA to be in the region of $12 million to $17 million, with the result impacted by COVID-19 (reduced demand, competitor pressure from the rapid repair sector, and site closures / hibernations / labour shortages), significant parts inflation, and a pause on acquisitions. FY2023 EBITDA is anticipated to be between $70 million to $90 million, with continued demand growth, an expected pause in competitor rollouts, some sites out of hibernation, progressive skilled labour recruitment, and repricing of residual contracts (excluding Capital S.M.A.R.T). Parts and labour inflation is expected to remain high. AMA is also anticipating acquisitional growth.

In FY2024, EBITDA is expected to be in the range of $120 million to $140 million, with demand for panel repairs normalised to pre-COVID-19 levels, all sites operating at capacity, full employment, all insurance contracts reset to commercial arrangements, parts and labour inflation stabilisation and a second round of purchasing tenders initiated. The network should continue to grow, with acquisitions ramped up and the company’s supply strategy running at 100 per cent.