Ambertech Limited (AMO) Earnings Call Transcript & Summary

Good morning, and welcome to the Ambertech Limited's First Half FY '24 Results Webinar for the period ending 31 December 2023. Presenting today is Ambertech's Chief Operating Officer, Robert Glasson. Today's format will begin with a run-through of the results, followed by a Q&A session. [Operator Instructions] I'll now pass to Robert.

Thank you, Melanie, and welcome, everybody. Thanks for your interest in our first half results. I'll run through our presentation. And as Mel said, we'll take some questions at the end. Firstly, just a brief reminder to those not so familiar with us, what we do, who we are? We operate across 3 broad operating segments with a number of different operating divisions within those. Each have cross -- some crossover in terms of brand, technology and customer base. So that's who we are. We're operating commercial, residential and specialist Hi-Fi in media Systems, in defense, law enforcement, in emergency services space, across professional products, musical instruments and in the home entertainment area. We are a full-service distributor. We offer pre- and post-sale support, and that really distinguishes us along with our diversity from the rest of the marketplace. The highlight results for the half. Good increase in revenue this half, up over 25% on the previous corresponding period, just a tick over $50 million there. Our EBITDA up to $3.6 million, and NPAT of $1.6 million. The earnings per share there, $0.017. The directors have announced today a $0.012 per share interim dividend fully franked, maintaining our payout ratios, as we've previously talked about to the market. Highlight this period has been significant organic growth, so the growth in the top line has been driven by our existing agencies without acquisition, demonstrating what we've spoken to the market before about the potential of our existing agencies. We still maintain significant headroom in our facilities in terms of any opportunities that might arrive for M&A, and our working capital position remains strong. What have we been up to? I think some of this information we talked about at our previous update after the AGM, and it's important to reinforce some of the things that we're working on. We're continuing on our business development investment in terms of making sure that we're across our marketplace, strengthening relationships and really deepening those relationships with our suppliers to ensure that the barriers to entry for competitors are very difficult, and continuing to invest in marketing, training, service and technical support, the things that differentiate us from other distributors. We continue to see opportunity in the growth of our owned brand, Australian Monitor. We are very much a domestic brand at the moment, but we have significant opportunity for growth internationally. We've been expanding our distribution base overseas. We're up now to around 20 distributors internationally, and we continue to see great opportunity to grow our brand, and therefore, leverage the cost -- lower cost of manufacture by doing so. So that's something we'll continue to work on. We are evaluating continuously M&A opportunities. The most recent one has now been fully integrated, the Convoy acquisition from around about this time last year. And as I said, further growth potential from existing brands, but also with potential acquisition opportunities. The brand development, as I said earlier, most of -- all of the growth this period has been from existing brands. It's really important because obviously, keeps the brand principles very happy when they see that. It reinforces our motto of ensuring that each of our brands is equally as important to us. We've maintained focus on those through our brand management team, and they've done a wonderful job in this last 6 months. And at the same time, operationally, we've been working on implementing new systems that help us increase efficiency in terms of AP and a CRM, but also on our HR platforms, which improve our engagement with our people. It's a very important resource of ours and something that we take very seriously. There's been some wins and further growth momentum this period. Just skipping across there to the professional area is where we've had contracts that we announced to the market previously and during the period. So the Network 10 contract continues. We've had a significant supply to the Sydney Opera House of over $3 million worth of SSL consoles, which has been a fantastic win for us. And we have a number of ongoing project opportunities in the -- particularly in the emergency services and law enforcement space at the moment, very hopeful of winning our share of that business. In the integrated solutions area, we have just very recently announced an expansion into building automation and lighting control systems through a very large international brand, ABB, and it's going to be a fantastic relationship. They have representatives in the country here to assist us with the growth of that brand. It sits very well alongside our commercial and residential installation teams with technology that they understand, but it's a kind of a new vertical for us in that space. So very significant opportunity over the next 2 to 3 years to grow that space. And in the major retail space, we've expanded with a couple of new brands. Again, we emphasize brands that have unique features that match the growth strategy of our major retailers. We are very selective in what we choose to take into this space. Robosen is a learning robotics company at the moment, specializing in robots in the kind of transformer area, and some of you may have seen those. Go and check them out if you get a chance. Mojawa is a brand that brings bone conduction headphones into the marketplace, and, with one of their SKUs, has some very unique features in terms of health tracking. Just a quick reminder of where the business units fit together. As I said, our divisional operating units tend to have some crossover with the technology and also with the customers that really matches where we see our supply partners expanding, so makes us very important for them. Without that, they'd be looking for additional distribution. So our spread and their spread matches, which is very good. Same on the dealer side. Dealers in high-end residential, for example, tend to be expanding into light commercial. So being able to supply their full supply is very important. And not many of our competitors are able to match that breadth. And it also provides, of course, security in terms of ongoing revenue, helps us match out the lumps if some divisions are up and some are not so far up, so risk management, very good there as well. We have very much of a growth focus continuing. We are continuing to see our reputation attracting brands to us, and that's very good. We evaluate those on the basis of whether there is conflict with existing brands that we try to avoid, but those are coming to us quite regularly. So that will help drive growth potential in future periods. The expansion into aligned verticals, as I said, a great example is ABB, which we've just taken on now. We have various brands at different stages of the development cycle. Some are mature, some are very new, but there is a large percentage of those brands that have high-growth capacity that's been shown by what we've done in the first half, and we continue to see that capability in coming periods. And most importantly, we get out there, we look at -- go to trade shows. We evaluate new technologies as they're coming out to see what we might be able to introduce to the market either as market leaders -- well, hopefully, as market leaders to get an advantage on the marketplace, but to see what -- where the future trends of the technology are taking us. No acquisitions this period, but again, as we said, we continue to evaluate those as they come to us. And as we seek them out, we have a strategy in place to ensure that we are growing each of our divisions to maintain our growth trajectory and to ensure that we're market leaders. We've managed to successfully integrate each of those acquisitions over the past 3 or 4 years. It's assisting with economies of scale. You can see from the growth journey that we've had in recent years that, that's been a successful strategy, and we're now beginning to see that flow through into the EBIT line as well, which is great. As I said earlier, development of our own brand is something that we continue to work through, very important. That brand is engineered in Australia. We have a team of R&D engineers here, built-in primarily in India. And we're continuing to leverage relationships we have with our own suppliers as a distributor to help us in gaining distribution for that brand internationally. And that's something that we hope we'll continue to see grow in terms of the size of -- and scale and as a percentage of our business moving forward. Just looking at where we've come from and into this current period. As I said, growth on the top line very significant this period, which has been great. That was underpinned by a number of project deliveries, has seen a strong increase in the EBITDA and NPAT lines as well, which is great. And we're going to see that interim dividend shortly $0.012 a share, so it's a great reward for our shareholders, and a good return. A quick snapshot of the financials there. Again, strong balance sheet. Cash flow, not a great -- not a lot to mention in this period, reasonably steady. Some -- we tend to have some increase in inventory levels in the first half, just combination of factors of being a little bit busier through that retail sector and stocking up for Chinese New Year. So those tend to come back in the second half. We'll see that flow through into operating cash flow in the second half. Components of revenue growth this half, you can see there that the large component was from the professional group, which has those project-based sales. We would likely have seen a little bit more growth in a couple of -- in the integrated solutions area, but some issues over at the docks towards Christmas held up a couple of shipments. So those have -- that's released now and come through in the second half, but growth across all areas, very much focused on where we've had those projects, and we expect to see that trend continue in the second half and moving forward. Just a bit of an outlook for where we're headed. As we said, completed those projects, milestones in the first half, which is great. We have started the second half well. We have that ongoing focus on growth. We're also very much focused on margin improvement and greater return on that sales graph through into the bottom line. The dealer-based business is continuing to grow despite some challenges in the marketplace. We're certainly seeing a tougher market in the high-end residential installation market in the specialist Hi-Fi area. But we expect to see that come back in the second half of this year and through into next year. And the pipeline of work in that defense, law enforcement and emergency services work is very strong. So as we go through those trials and tenders, we'll make announcements if we're able to secure any of that business moving forward. And just briefly, the shareholding structure and capital structure. Not a lot of change there in this last 6 months, but continue to be very strongly supported by the Board. And Mel, that's pretty much all I have. So over to you if there's any questions.

At the moment, there's no questions. [Operator Instructions]. We might give it a few seconds before we close off the webinar.

Sure thing.

Robert, David has a question. He's just raised the hand so I might just ask him to ask his question directly.

Sure thing.

David, feel free to ask your question to Robert.

I think you're on just mute there, David?

He's also typed it and it says, how much cash does Ambertech has?

So net debt at the moment is around about $5 million. As a distribution business, we typically run on debt. If you unwound all the stock and debt, as you'd find, we'd be well cashed up. There's around about $1.6 million in cash at the moment, but we do run net debt just at present. Keeping in mind, of course, David, there is significant headroom in those facilities.

Well, Robert, that looks to be the last of the questions at this stage. If anyone has any outstanding questions, feel free to e-mail me directly. My e-mail was on the webinar release.

Thanks, everyone, for their time.