RPM Automotive Group Ltd (ASX:RPM) has upgraded its guidance for the 2022 financial year following a busy March quarter that produced strong results.
The company recorded “strong organic growth” across its four divisions on all key financial metrics, with overall organic revenue growth of 16.2% year on year as at March 31.
Its new and recent acquisitions also contributed to the strong financial performance.
“Organic growth across all our divisions is increasing and with the addition of new businesses, RPM is strongly positioned to capitalise on the growing automotive aftermarket sector,” CEO Clive Finkelstein said.
Solid distribution network
This upward trajectory includes revenue and gross margin growth across all four business units, with three units also generating double-digit EBITDA growth.
The strong quarter reflected continued demand from RPM customers for commercial and wholesale passenger tyres, a normalised Formula One calendar, successful integrations of acquired businesses, fleet contract roll-out, cross-channel selling and a solid distribution network.
Given the company’s solid performance in the first half of the financial year, and a strong start to the second year, RPM has upgraded its guidance for 2022.
Upgraded guidance
This reviewed guidance includes revenue between $80 million and $85 million, up from a previously projected $78 million and EBITDA between $7.2 million and $8.2 million from roughly $7 million.
The company has secured a primary debt acquisition facility (up to twice its EBITDA) to facilitate further growth.
All this while maintaining a sound balance sheet, with net cash of $3.8 million as at March 31, which continues to support working capital requirements and further growth initiatives.
A raft of activity
This third quarter of the financial year has seen a raft of activity and change at the company.
It successfully completed the acquisition of Safety Dave during Q3, which recorded sales of $1.6 million after two months of trading as an RPM subsidiary.
RPM became the official distributor of Stamford Sports Wheels (SSW) in Victoria and Queensland, and announced two geographic fill-in acquisitions of Victoria Wide Tyre Service and ACT Total Tyres following the end of the quarter to extend its customer reach and product extension capability. SSW is a listed entity on the Singapore Stock Exchange, manufacturing alloy wheel products in Thailand.
The company also signed leases for two new tyre service stores in Sydney and Adelaide to extend organic growth.
Commenting on this busy time for the company, Finkelstein said: “The RPM Group has had another excellent quarter, underpinned by strong organic growth, cross channel selling, the successful integration of key acquisitions, and solid distribution networks.
“Our expansion into Far North Queensland continues to out-perform expectations, while our new warehouses in Queensland and Victoria have strengthened our expanding distribution network and are supporting the rollout of our brand and product cross-channel strategy.
Motorsport calendar "back to normal"
“With the motorsport calendar back to normal and the Formula 1 Grand Prix returning to Melbourne after a two-year hiatus, it is pleasing to see our Motorsport division bounce back with a very strong quarter.
“We had anticipated strong demand in Motorsport during Q3 and had pre-built inventory in preparation. We’re delighted that this allowed us to convert inventories to strong sales across the quarter. With our increased ability to quickly manage and move high levels of stock through the broader network, we met the surging demand for new safety racewear.”
“Despite a challenging operating environment over the last two years, RPM Automotive Group is on track to exceed medium-term (three-year) targets, and once again grow substantially in 2022 versus 2021.
“We look forward to this continued growth that we believe will ultimately help us reach our goal of becoming a leading Australian business operating well-known brands across the transport and automotive aftermarket sectors.”
Shares were 8.62% higher today to $0.315 and have risen from $0.265 at the market close on March 25.
Watch: RPM Automotive Group sees growth across new and existing operations in a strong March quarter