It's been a rather pleasant start to the trading week so far this Monday for the All Ordinaries Index (ASX: XAO). At this point of today's session, the All Ords has gained a decent 0.14%. But one All Ords share isn't joining this party. That would be the AMA Group Ltd (ASX: AMA) share price.
AMA shares have had an absolute clanger so far today. This automotive care and servicing company closed at 25 cents a share last week. But today, the AMA share price opened at 22 cents before falling as low as 16 cents a share, a drop of roughly 34%.
Right now, AMA shares have stabilised at 17 cents each, but that still puts the company down a painful 30.6%.
So what on earth has gone so wrong for AMA this Monday?
Why did the AMA share price tank 30% today?
Well, it seems the culprit is a quarterly cash flow and activities report that AMA released to investors this morning before market open.
This report revealed that AMA has been forced to revise its previous earnings guidance for FY2023.
Previously, the company had guided for an earnings before interest, tax, depreciation and amortisation (EBITDA) figure of between $70-90 million for FY2023.
But today, AMA has revised this guidance to between $60-68 million.
The company has blamed "ongoing margin compression adverse to expectations" for the downgrade.
It noted the following causes of its expected lower earnings:
- Strong repair volume demand adversely impacted by industry-wide labour constraint related
throughput challenges.- Elevated lateral hiring activity as industry participants seek to fill vacancies from a limited
labour pool contributing to higher employee costs per hour and operational disruption.- Many industry contracts still do not contain appropriate dynamic adjustment mechanisms
that insulate parties from external pressures such as inflation or increasing repair severity.- Supply strategy progressing slower than anticipated.
So this is almost certainly why investors are selling out of AMA shares today and have sent the company's shares down by such a dramatic margin.
AMA also reported that it was sitting on a cash balance of $20.5 million at the end of the March quarter (the three months ended 31 March 2023). That's after the company generated a net cash from operating activities of $0.3 million over the period. AMA is also anticipating that it can be operating cash flow-positive over the second half of FY2023.
Even so, it's clear investors are disappointed (to say the least) over what AMA has revealed today. Here's some of what AMA CEO Carl Bizon had to tell investors:
We are disappointed that we no longer expect to meet the previously stated guidance range as a result of a number of short- to medium-term challenges.
However, we remain confident in the strategy in place, the fundamentals of the business, and, consequently, the business's ability to realise our medium-term operating margin target.
We have made significant progress across all the areas which are key to the long-term success of the business after weathering the very real challenges of the COVID-19 period and I look forward to the future of AMA Group.
Today's share price falls puts AMA shares at a loss of 19% in 2023:
