AMA: Result 2016

AMA's purchase of Gemini dominated its 2016 result.

AMA’s purchase of the Gemini Accident Repair Centres business dominated a much improved 2016 result (see Table 1). Along with a number of abnormal and one-off expenses, this means comparisons with 2015 are fairly meaningless.

Due to the Gemini acquisition and others, AMA’s Panel division – which operates in the vehicle panel repair industry in Australia and New Zealand – now represents more than 81% of the company’s revenue, up from 46% in 2015. With Gemini owned for only nine months of 2016, this figure should rise again in 2017 absent any acquisitions in other divisions. 

Table 1: AMA result 2016
Year to June 2016 2015 /(–)
(%)
Revenue ($m) 264.3 93.2 184
U'lying EBITDA ($m) 31.9 14.2 125
U'lying EBIT ($m) 25.1 12.9 95
U'lying NPAT ($m) 17.6 9.0 96
U'lying EPS (c) 3.6 2.7 33
DPS (c) 2.2* 1.7 2.9
* 1.7c final div, (no change), fully franked, ex date 14 Sep

So far at least, AMA is resisting pricing pressure from insurers Suncorp and IAG – which control around 85% of vehicle smash repair volume.

AMA’s consolidation of the industry is helping in this regard, while also giving it more power when negotiating with its suppliers. The latter is of particular importance given the high percentage of raw materials sourced from overseas and hence subject to exchange rate movements.

Pressure from insurers and the benefits of economies of scale are encouraging the smaller groups and independent operators to sell to the likes of AMA. There's still scope for further consolidation of the panel repair industry and we’d expect AMA to purchase additional smaller operators in coming years, although growth is likely to be slower.

AMA’s Protection division (which sells vehicle protection products and accessories) and its Component division (which remanufactures automotive components) also grew in 2016, increasing their sales by 3% and 20% respectively.

By contrast, the Electrical division (which sells automotive electrical and cable accessories) suffered a disappointing 7% fall in sales. Whilst these divisions are much smaller than the vehicle repair division, AMA hopes to expand each of these businesses too.

AMA’s shares have trebled over the past three years, putting them on a multiple of 29 times 2016 earnings and 21 times those expected for 2017. With growth likely to be slower in coming years, we think there is now better value elsewhere and we're CEASING COVERAGE.