Ambertech Limited (AMO) Earnings Call Transcript & Summary

Good morning and welcome to Ambertech Limited's First Half FY '25 Results Webinar. Presenting today is Ambertech's Managing Director, Peter Amos; and COO, Robert Glasson. Today's format will have the team run through a presentation followed by a Q&A session. [Operator Instructions] I'll now pass to the team to start the presentation.

Good morning. I suppose we'll start with a quick recap in relation to what the company structure is and how it works. So we have 3 operating segments, and each segment has divisions within them. Integrated Solutions is the Commercial Installations, Residential and Specialist Hi-Fi areas. The Professional section is Media Systems, Defense Law Enforcement, Professional Products and Musical Instruments. And our Retail section, which we'll talk about later, is focused on Home Entertainment. We currently have 140 staff across the operation, and that has been stable for some time. The executive summary in relation to the figures this year, first half, $45 million in relation to revenue, $1.1 million in EBITDA and a loss of $0.3 million in NPAT, $0.03 per share. The Integrated Solutions and Retail segment is performing well with revenues up 6% and 32%, respectively. Where we struggled in relation to the first half was in relation to the Professional segment, where we had softer trading conditions, predominantly due to delay in project work. Material improvement performance in FY '25 with an uplift in January and February trading is looking very good. And the deferred projects are coming through at this point in time.

On to the financials, I'll just give a bit of an update on there, just a little bit more detail. As Peter mentioned, $45.4 million in revenue, which was down period-on-period. In particular, we've been able to isolate where that issue was. It was in the Professional division with projects that were delayed or deferred or had very long lead times. The revenue across the Integrated Solutions and Retail business actually increased during the period, which is fantastic. So that core dealer business has been improving. We'll get to those projects just in a moment. We were able to maintain our GP margins during the period, which is good despite the softer market. So there was no need for any material level of discounting in the market, which is good. There's obviously some restructure costs during the period, about 300 -- just over $300,000 as we kind of rightsized our workforce going forward. And so we'll see some benefit of that in the second half. But as I said, that EBITDA reduction primarily driven by a decrease in the project-based sales. So if we have a look at that in a little bit more detail, you can see that the Integrated Solutions had growth and so did the Retail space. The Professional division, which has our teams that sell to major broadcasters, to defense and law enforcement areas, did see some significant delays. We've shown that detail a little bit more granular than what we have in the past there on that slide on the right-hand side, the chart there. You can see that from period-to-period, the dealer-based business has recovered back to where we were same period last year, but there was a significant deficit in the project-based billing. In the first period -- first couple of months of the second half of the year, we've seen a significant recovery, and we anticipate that continuing through the second half. So if you look there, it was an average of -- tick over $9 million in each half. We had $4.5 million in the first half. We've seen -- we will see around about $8 million booked to the end of March, the January to March period. So I can see a substantial recovery in that space. Just a view of where the results were impacted. So again, primarily, it's in the GP on the sales reduction. We saw some growth in employment costs in a very difficult market. And we've done some restructure there moving forward. That will help us in the second half and beyond. Most other cost categories were pretty well contained. So again, that places us well for the second half of the year. Just looking at the asset side, obviously, there's been an increase in inventory during the period. There's a few reasons for that. We've got some new agencies where the initial stocking sees that inventory come up. It's a busy period in inventory purchasing with the Chinese New Year shutdown. So we'll expect to see those normalize during the second half. That has an impact on funding. So of course, the trade finance increased to the end of the period as we paid for some significant purchases, including the projects that we've now booked in the second half. Other than that, net tangible assets are pretty consistent and that increase in the cash flows down the bottom there, the change in financing cash flows, obviously, as I said, is the funding of that stock purchase towards the end of the half. Back to Peter.

Business update in relation to the areas of the business and market opportunity and size of the individual area. Integrated solutions, you remember the 3 addressable areas working predominantly in the commercial area. We had $24.5 million worth of revenue, quite a good addressable market, $500 million, and we have 1,200 active dealers. I think you'll see on the right-hand side the list of clients we work with, the key clients within that area. This is one of the areas which is continuing to grow within our business. The Professional segment at $12.2 million this year -- this half and with 450 addressable clients. Again, the list of clients there are all Tier 1 clients within the operational areas. This is the area which struggled a little bit with project timing, which is now coming online in the second half. Retail was an interesting area for us because we focused our area -- in this area to a very specific range of products. We've done well within this area. So at $8.7 million and 700-plus clients, again, with the style of clients we have who operates. Business results, we resized the workforce in relation to the operational aspects of the business now, and the dealer-based revenue has grown significantly. The customer focus, our whole game at this point in time is to support, educate and train the dealers and from cradle to grave, and that's supply support and commission in certain areas. And there are significant opportunities in the existing market share we work in. Export market in our Australian Monitor area, we've opened our European operations in relation to a warehousing structure to supply into the European market to reduce the resistance of shipping from Australia. We've added additional dealers. We are adding about one a quarter at the moment, which is helping the growth of this area. This will also help us with our overall aspect of the growth of that particular division, therefore, with a high volume metric with manufacturing. Aligned markets in relation to the building and automation areas is a new area for us, and it's now starting to have some results in our commercial area, and that's an extension of our current activities. So as we said, the building and automation and lighting areas are a growth area. M&A activities, we've had a number of investigations of a number of companies, but none have actually come to a level which we would deem viable for our operation at this point in time. So we've seen a material improvement over the second half, and that's bolstered by the fact that in January and February, the trading has improved. The momentum of the deferred projects is restored. And as Robert said earlier, we'll have near $8 million booked by the end of March. We've reset our growth expectations and adjusted our cost structure, so living in the real world. And there are still some short-term market challenges with still a little uncertainty in the economic area and political uncertainty.

Just a brief overview of the capital structure and shareholders. Not a lot has changed there in recent times. I think I'll probably hand back to you, Mel, to see if there's any questions.

Thanks, Robert and Peter. There are a few questions. The first is the FY '24 webinar also had mentioned deferred projects. Can you tell us the customer segment where the project has not yet started? And also what gives you the confidence that those projects are not lost?

Because we know they're deferred. In some cases, the deferral relates to various milestones within a contract that's already been signed and is underway. And so those milestones can be delayed for a number of reasons. But obviously, being under contract, we have confidence that those milestones are then recognized going forward. In other cases, it really is just delivery times. You might win a contract and then find there's a 120-day delivery time for that equipment. And in other cases, it's our relationship with the customer that gives us confidence that the project is going ahead, it may just have been stalled. And in actual fact, as we've said, we have either booked already or have orders in hand for that first -- that Q3 from January to March that shows that we've made up a significant amount of that deficit.

Thanks, Robert. The next question is, there were a few acquisitions over the last few years. Have they been fully integrated? And how are they performing?

Yes, they've been fully integrated. They have varying levels of impact on the business. Obviously, the biggest one was the Hills AV, one that was quite transformative for us. It gave us additional scale, substantial scale. The others have been more strategic in terms of relationships and potential benefits for the future. I would say none have been the wrong decision. But in the market we're in at the moment, could we be doing better out of them? A little bit, but we think they've all been successful in hindsight.

Thanks, Robert. You mentioned resetting current year growth expectations. What are those expectations?

Look, I think at this stage, it's probably too early to really be out there with any forward-looking statements, particularly on the dealer business with what's going on just in the economy and the federal election coming. So we are acknowledging there are some headwinds there that are a little bit difficult to measure at the moment. Certainly, the project side, we're seeing that restoring. And so we've been pretty open with what we've booked or booking before the end of March. And I think you can -- if you sit that alongside the numbers for the last 3 quarters, you can see what that means -- last 3 quarters -- last 3 halves, sorry. The dealer-based business, I expect the current run rate to continue. It's probably where we're at, but we might be able to update a little bit closer to the end of the year.

Thanks, Robert. You have stated how much you spent on restructuring. But was there a cost benefit analysis done of how much would be saved? So how much in the second half will that $377,000 save?

Yes. The ongoing annual cost of the reduction in staff is probably around about the $1 million mark for the people that were made redundant, unfortunately. So yes, there's obviously a one-off cost to making that change, but there is a substantial reduction in overhead moving forward.

Thanks, Robert. That looks to be the end of our questions for the moment. So I'll pass back to you for final comments.

Okay. Yes. Thanks, everyone, for their support. I hope it's been informative today. And of course, if you've got any questions you didn't think of at the time, send them through to Mel, and we'll do our best to address those for you later on.