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Why the AMA Group share price is crashing 18% lower on Friday

James Mickleboro

The AMA Group Ltd (ASX: AMA) share price is on course to end the week with a heavy decline.

In morning trade the crash repair specialist’s shares are down 18% to 90 cents.

This means it is the worst performer on the All Ordinaries index ahead of aged care provider Regis Healthcare Ltd (ASX: REG) and lottery ticket seller Jumbo Interactive Ltd (ASX: JIN).

Why is the AMA share price crashing lower?

Investors have been selling the company’s shares this morning following the release of a market update.

According to the release, the integration of Capital Smart and ACM Parts is proceeding better than expected. Based on the work undertaken to date, AMA is confident of delivering the previously identified $17 million of synergies for the entire FY 2021.

Furthermore, additional synergies have been identified and will be realised as the integration progresses.

In light of this, management expects the businesses’ full year earnings contribution to be at least in line with previous forecasts.

The company also revealed that it has its eyes on further acquisitions. AMA’s acquisition pipeline remains very strong and management is currently negotiating acquisition opportunities representing $110 million of revenue. It is also evaluating other options that represent over $200 million of revenues.

Tough trading conditions.

Unfortunately, prolonged drier weather conditions and a decline in new car sales have led to tough trading conditions.

As a result, AMA revealed that it expects to deliver normalised EBITDA (excluding transaction and integration costs) in the range of $73 million and $77 million in FY 2020.

Whilst this represents a 25.4% to 32% increase on the $58.2 million normalised EBITDA it posted in FY 2019, it falls well short of the figures mentioned in its October 1 investor presentation.

That presentation revealed that, following the acquisition of Capital Smart and ACM Parts, management expected combined AMA revenues and normalised EBITDA to be over $1.2 billion and $100 million in FY 2020.

The post Why the AMA Group share price is crashing 18% lower on Friday appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019