RPM Automotive Group Ltd (ASX:RPM) beat its own revenue forecast in the March quarter, delivering record revenue, up 59% to $14.5 million, with strong year-on-year growth reported across all divisions.
Its strong balance sheet supports its growth initiatives, with $4.45 million cash as of March 31, 2021.
During the third quarter of FY21, the company acquired Traralgon Tyre Service to support its Wheels and Tyres Divisional growth.
The company is on track to meet its projections for the June quarter, adding that it plans to continue with its acquisition strategy to support its expansion.
Shares have been almost 6% higher to 46.5 cents intra-day, approaching the record high of 47 cents set last week.
Economy continues to rebound
RPM Automotive Group chief executive officer Clive Finkelstein said: “This was a record third-quarter across all divisions for the company, and sets us up well as the economy continues to rebound from the challenges created by COVID-19.
“Our acquisition of Traralgon Tyre Service during the quarter and RPM Autoparts in November 2020, coupled with well-stocked warehouses of all our products and brands, have all been key growth drivers.
“A special mention must be given to our Motorsport Division that really recovered well from the COVID-19 disruption and has become our star performer.
Aggressive growth strategy key
“RPM’s aggressive growth strategy, fuelled by a diversity of brands and staff experts across the transport and automotive aftermarket sectors, is key to the group’s success.
“We now have 15 companies across our four divisions – Tyres & Wheels, Repairs & Roadside, Performance & Accessories and Motorsport.
Our customers receive expert advice from our specialist workforce – whether that be racing enthusiasts servicing our performance and motorsport customers, or heavy transport experts helping keep our country’s logistics companies on the road 24/7.
“Our level of service and expertise is a key differentiator across the sector, and this is why we continue to invest heavily in our people.”
Overall results
RPM Automotive beat its projected revenue forecasts by 16%.
In addition, unaudited earnings before interest, tax, depreciation and organization (EBITDA) was up 87% to $1.275 million, and 8.5% above projected forecasts.
Year-on-year unaudited gross profit increased 49% to $3.94 million – even with some pricing pressures, namely: multiple raw material increases in January and March, with those costs only being able to be passed on to customers from April; and the cost of importing goods, especially from China, being higher by between 30 to 100% for much of the quarter due to constrained shipping supply.
That constraint has since eased, with pricing coming off as at late-April and expected to return to normal levels in the coming weeks.
Wheels & Tyres
In the quarter, its Wheels & Tyres generated revenue of $7.1 million, fuelled by:
- Solid trading in its commercial tyres wholesale businesses;
- Excellent organisational skills and leadership from divisional managers;
- Increased vehicle usage generally; and
- The Australian economy returning to more normal trading conditions with its resulting effects on heavy transport and logistics needs.
Gross profit and EBITDA for this division did not follow the record quarterly revenue figure, however, due to lower margins in the new RPM Autoparts acquisition to successfully increase market share against robust competition.
Repairs & Roadside
This division saw year-on-year revenue increase by 131% to reach $4.57 million and EBITDA rose by 40% compared to the corresponding period last year, mainly due to the acquisition of Traralgon Tyre Service, which has been immediately revenue accretive as the team has integrated into this division.
The division continues to feel the intense pressure and competition for quality staff, which the company plans to address through its acquisition strategy.
Motorsport division
In the third quarter, the Motorsport division generated revenue of $2.0 million, up 34% on the prior year, driven by healthy stock levels and demand for quality racing safety gear and attire as the Australian Motorsport Industry returned to more normal levels after COVID-19 restrictions were eased and the 2021 Racing Season got under way.
Outlook
Finkelstein added: “With another quarter of growth completed, we are on track to meet our projections.
“We are confident of delivering strong results into the fourth quarter for our shareholders.
“We plan to continue with our acquisition strategy to support our expansion and place increased focus on where we see the most opportunity, our Tyres & Wheels and Repairs & Roadside divisions.”