On 22 August 2012, AMA Group published its preliminary full year result. Whilst the headline results appeared to be poor, with a decline in NPAT of 36.3%, the underlying results were actually much better than expected. Once again, investors would have had some early indication of this result from the earlier results of ARB Corporation Limited (ASX: ARP), the ABS monthly data on motor vehicles and SUV sales to date, and the results of TJM products division, part of the CMI Group (ASX: CMI).
The positives from the latest results are:
- Sales increased 16.7% to 62.3m
- EBIT improved by 35% to 11 m
- EBIT/Sales improved to 17.4%
- Operating Cashflow improved 23% to 7.9m
- Debt decreased by 4m from to 19 m to 15 m with financing costs reduced from 1.2m to 794k.
The negatives for the latest results are:
- Faster growth in receivables than payables;
- Lack of expected dividend;
- Decline in revenue from panel repairs segment.
Management has previously stated its aim to focus on current businesses, to ensure each business is profitable on its own, to reduce debt quickly, and to utilise its franking credits. Apart from the lack of dividend, this latest report confirms that they are delivering in excess of what they have promised.
We have previously stated our hope that the lack of exciting news updates and the absence of a half yearly dividend will cause impatient punters to dump their stock at lower prices. We did not get the very low prices hoped for, but a fair price was available for over 6 months for diligent investors.
AMA's market capitalisation is about $56m. Business operations generate cash of about $7.9m per year, and accrued losses will ensure that no tax is payable for at least 3 more years. Apart from the previous steady as she goes mantra, management has now demonstrated that the businesses are capable of growth. At current prices, investors are getting the growth option for free.
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Motley Fool contributor Peter Phan owns shares in AMA. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
