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Date : 03/10/2022

AMA Group Ltd (ASX: AMA) is Breaking the Downward Trend in its Share Price

AMA Group Ltd (ASX: AMA) is an Australian and New Zealand automobile aftercare services and accessories provider. With over 160 locations and 3,500 staff, the firm completed over 271,000 service calls in FY22.

AMA was a significant victim of COVID-19 due to the closing of interstate borders, which affected repair demand, high absenteeism, and labour shortages. In addition to the continued inflation and supply chain challenges, all the variables hurt the company’s profit margins and the availability of its components.

After three months of consolidation in the shape of a reversing triangle pattern, the share price of AMA is breaking downward trend in its Share Price at the beginning of September. This supported analysts’ prediction that AMA would have improved prospects after the pandemic.

AMA: Key Financials FY22

AMA stock is currently trading at $0.24 and has gained more than 53% in the previous month. The current market cap of the company is approximately 257.85 million AUD.

ASX-AMA

  1. AMA Group’s total revenues were $845.1 million ($919.9 million in FY21), including all forms of income in FY22.
  2. After adjusting for AASB 16, the company’s EBITDA has increased to $21.8 million (FY21: $116.4 million from continuing operations), beyond the $12 million to $17 million target set on investor day in May 2022.
  3. Goodwill impairment on Capital S.M.A.R.T. and other fast repair sites was $80.7 million, resulting in a total non-cash impairment charge of $105.5 million.
  4. AMA repaid $72.5 million in debt in FY22 after obtaining $150 million in capital.
  5. Cost control and cash flow led to a cash balance of $52.2 million on June 22.
  6. Similar to FY21, there will be no dividend paid out in FY22.
  7. The effects of COVID-19 on predicted profits have prompted a change in the covenant regime for the following year.

AMA: COVID-19 Caused Severe Loss for AMA

The limits imposed due to COVID-19 profoundly affect AMA’s operations. Less traffic meant less need for maintenance on the roadways. High absenteeism of personnel owing to testing and isolation restrictions imposed by the government exacerbated the already dire labour shortages caused by blocked international borders.

Runaway inflation affected consumables, components, and paint prices, reducing company margins. Lastly, delays in getting necessary components because of problems with the supply chain caused big problems for AMA.

AMA: Post-Pandemic Situation

Since early 2022, when COVID-19 was declared under control in Australia and New Zealand, motorists have been free to travel freely throughout the two countries. However, it is essential to note that the current level of gasoline prices is far higher than before the pandemic, which should result in a more gradual recovery than originally anticipated.

To maximize profits across the board, AMA is shutting down unprofitable facilities and redistributing workers to more promising ones. It has also hired many interns to help it prepare for the future workforce.

AMA: Inflation and part availability are handled

Since the end of FY22, AMA Group Ltd Shares News & Financial Analysis Stock Price AMA has been in pricing negotiations with its insurance partners to account for rising wages and inflation. The bulk of the Group’s insurance partners have agreed to increase pricing, and the business expects the higher profits to kick in during the fiscal year 2023. AMA is optimizing its operations by terminating contracts where insurers were hesitant to adjust pricing to reflect the present inflationary climate effectively. The firm is no longer ready to tolerate loss-making repair volume to gain scale.

While this shift in approach is likely to result in a drop in overall repair volume, it will free up direct labour to help bring down the abnormally high average repair days at the most lucrative facilities.

In 2022, AMA Group imported more goods and constructed a new warehouse in Victoria to enhance inventory and cut down on delays caused by a lack of replacement components.

Conclusion

AMA Group looks keen on covering the loss that occurred due to the pandemic. The new policies and strategies will help the company adjust to the post-pandemic situation.

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