The All Ordinaries Index (ASX: XAO) share AMA Group Ltd (ASX: AMA) has had a terrible week. It's currently down 35% from last Friday.
AMA Group describes itself as the leading vehicle collision repairer in the industry. It aims to repair the vehicle to its "pre-accident condition and to provide exceptional customer experience."
Earlier this week, the business provided its quarterly update for investors, which didn't make for good reading.
Guidance reduced by the All Ords ASX share
AMA reduced its $60 million to $68 million of normalised earnings before interest, tax, depreciation and amortisation (EBITDA) compared with the previous guidance of $70 million to $90 million, reflecting "ongoing margin compression adverse to expectations".
It pointed to strong repaid volume demand adversely impacted by "industry-wide labour constraint related throughput challenges".
The tight labour market is leading to higher employee costs per hour and "operational disruption".
The All Ords ASX share said that many industry contracts "still do not contain appropriate dynamic adjustment mechanisms that insulate parties from external pressures such as inflation or increasing repair severity".
AMA also revealed that its supply strategy is progressing slower than anticipated.
The operating cash flow generated in the third quarter of FY23 was $0.3 million. The company said there is an upward trend in its underlying cash flows over the three quarters. It finished with $20.5 million of cash on its balance sheet at 31 March 2023.
Director buys AMA shares
Director Jonathan Talbot Babineau decided to buy 1 million shares on 18 April 2023 on the market. That took the total holdings of his family and entities to around 8 million AMA shares, so he has a lot of money invested in the business.
It's a good sign when one of the leadership wants to buy shares of the company. It can suggest that the director thinks the shares are good value.
When the business announced this update, it outlined a number of factors about why the company's management is still confident.
For the labour shortages, the company is looking at international recruitment, an "industry-leading" apprenticeship program and "enhanced employee satisfaction."
It noted that there's a pathway to long-term improved pricing outcomes. New and/or extended contracts have been entered into with some insurance and direct revenue partners. Its FY24 pricing process has commenced.
The company noted network and organisational optimisation activities, aimed to increase productivity and reduce indirect labour costs.
Management also pointed to expansion progression with investments in heavy motor and its AMA collision.
Foolish takeaway
There may not be a quick fix for AMA, but it's positive that one of the directors thinks it's a buy. Time will tell whether the market or the director is right about the company's prospects.
