Automotive conglomerate, AMA Group, has locked in its first fleet customer in SG Fleet who manages a 140,000 strong fleet of vehicles. The deal with the fleet management, vehicle leasing and salary packaging firm should add 4000 new repair jobs a year to AMA’s network of panel shops and mechanical repair businesses across Australia and New Zealand.
In addition to its fleet management services, the ASX-listed SG Fleet, operates a salary packaging business which allows employees to lease a vehicle and pay the lease payments, fuel costs and repairs out of their gross salary before tax, taking advantage of the Australian Government’s very generous rules around vehicle leasing.
The deal with SG Fleet gives AMA exposure to this rapidly growing section of the automotive market place as lessees will often use their leasing company’s recommended repairer in order to access their negotiated discounts.
The deal with SG Fleet, which represents AMA Group’s first fleet contract, comes on the back of the company’s price re-negotiations with its major insurer clients which AMA says should result in “meaningful revenue growth in real terms” once the coronavirus inspired market dip has passed.
Interestingly, AMA says the current coronavirus market headwinds are turning to tailwinds as both Australia and New Zealand re-open for business.
AMA says it could be a net beneficiary of the public’s ongoing concern about COVID-19 with early indications from the “Australia Mobility Index” showing a much sharper upward trend in people driving their own cars than those taking public transport as the country tentatively re-opens for business.
The experience in China also underlines this theory with China’s “Urban Congestion Index” bouncing back by around 25% in mid-April with the number of passengers taking the metro train system in China still down about 30% on normal levels at the same time.
In response to the current coronavirus environment, AMA says it has been and will continue to ratchet its cost base and staff numbers up and down to meet demand and that its entire board has taken a 20 per cent haircut in salary.
The company says it is financially secure and able to ride out the coronavirus with the help of its lenders who have agreed to re-purpose some of its lines of credit which means that it has no current requirement to raise capital.
AMA has also qualified for the Federal Government’s Job Keeper program which will see it collect some millions of dollars from the Federal Government with every qualifying full time, part time and casual employee wage now subsidised by $750 a week for up to 6 months.
AMA has also qualified for New Zealand’s Wage Subsidy program.
AMA achieved automotive industry heavyweight status late last year with the acquisition of Suncorp’s significant automotive parts and panel businesses that were headlined by the Capital SMART network of automotive panel shops.
From there, the Andrew Hopkins-led company had its sights set on an ongoing aggressive acquisition and consolidation strategy which was quickly curtailed by the ravages of the coronavirus.
AMA Group CEO, Andy Hopkins said: “Our performance for April was better than expected and our net debt position at the end of April remains above our predictions. Covid-19 has brought positive changes and opportunities for our business. The consolidation of some sites will create a more efficient infrastructure for the future when volumes return, and in the coming months we expect to see an increase in potential acquisition opportunities.”
“Most importantly, vehicles are returning to pre-Covid-19 levels which will drive more demand through our business due to a likely slower transition to people making use of public transport.”
Interestingly, the coronavirus has put a dent in many smaller automotive businesses that do not have the size and scale necessary to survive the virus and it is likely that AMA will be able to continue its acquisition strategy with vigour after COVID-19 has passed.
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