Crash repairer AMA Group has cut its earnings guidance due to labour shortages, and as many industry contracts still don’t adequately reflect inflation pressures or increasing repair severity.

The business is seeing strong repair volumes but also industry-wide labour constraints, while competition for workers is contributing to elevated employee churn, higher costs per hour and operational disruption. A parts aftermarket program has also experienced delays.

AMA Group has cut its financial year guidance to $60-68 million normalised post-AASB 16 earnings before interest, tax, depreciation and amortisation, compared with previous guidance of $70-90 million.

The outlook for next year will be updated either when a new Capital Smart repricing deal is completed or at the full-year results, the company says in a quarterly cash flow and activities report.

AMA has started working with Suncorp on repricing the Capital Smart agreement, and continues to engage with insurer partners to ensure “underlying commercial constructs and agreements” keep pace with the changing environment, it says.

The group has won new or extended repair contracts with a subset of insurance and direct revenue partners over the financial year to date and has continued reengagement with returning insurer partners where agreement wasn’t reached during pricing negotiations last calendar year, it says.

CEO Carl Bizon says AMA has made significant progress across areas that are key to the long-term success of the business, after weathering covid period challenges.

“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,” he said.

“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.”

AMA says it has a continued focus on international recruitment and on apprenticeships as it addresses the labour issues and is seeking to avoid a “wages break-out” and retain staff through its offerings. These include an employee share plan and a commitment to training and development, mobility and flexibility.