- Car repair company AMA Group (AMA) said it expects to turn COVID-19 headwinds into tailwinds as Australia begins to return to normality
- The company said global trends suggest as lockdown restrictions are lifted, vehicle travel increases far more than public transport use
- While this might cause more traffic on the roads, it also means more people will be after car repairs and services
- With a major service contract with SG Fleet kicking into effect at the start of April, AMA is expecting some nice revenue as demand returns to normal
- Still, the company has slashed Executive and Board payments by 20 per cent and scaled-down its workforce to offset the costs of the virus
- Shares in AMA are trading just over two per cent lower today, currently worth 63 cents each
Car repair specialist AMA Group (AMA) said it expects to turn COVID-19 headwinds into tailwinds as Australia begins to return to normality.
Lockdown restrictions are beginning to lift in stages across the country as the spread of the virus is contained.
According to AMA, global trends suggest that as restrictions have eased and workers return to offices, vehicle travel increases compared to public transport use. This information is based on Chinese trends and current Australian trends.
While the increase in cars on the road is likely unwelcome news for those wanting to beat the traffic, it’s a good sign for a company in the business of car servicing and repairs.
Contracted stability
Helping support AMA through the COVID-19 environment is a major contract with fellow ASX-listed SG Fleet which has been effective as of April 1.
Under the contract, AMA will service the annual repair needs of SG Fleet’s entire customer base, which will amount to roughly 4000 repairs per year.
AMA said this is its first major fleet customer contract. In fact, the SG Fleet contract gives AMA a foot in the door of a segment of the Australian vehicle market which it has never previously serviced.
Moreover, AMA said it is final negotiations with many of its major Insurer customers to bring about improved pricing from July 1, 2020. The company said this will deliver “meaningful revenue growth in real terms” once its repair volumes return to normal levels.
No need for dilution
Importantly, AMA said its liquidity is strong despite the coronavirus crisis and it is well-funded to withstand the current period of economic disruption.
In fact, AMA said its net debt position is tracking along better than originally forecast, and as such it won’t need to raise any capital to survive the pandemic.
Of course, the company has still scaled down its workforce and cost base as the virus rages on, as well as slashed Executive and Board salaries by 20 per cent.
The company has qualified for the government’s JobKeeper Assistance Program and the New Zealand Wage subsidy, helping further offset COVID-19-induced costs.
As such, with vehicle use retuning to normal and demand for repairs on the rise, AMA is set to stay healthy in the face of the virus.
Shares in AMA Group are a slight 2.33per cent down today, currently worth 63 cents each.