RPM Automotive Group Ltd (ASX:RPM) has delivered a 7% increase in revenue to $28.4 million for the first quarter of the 2023 financial year, a performance the company described as "strong" despite the first three months tending to be a seasonally softer quarter.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) was up 17% to $2.6 million from the second quarter.
The leading player in the Australian automotive aftermarket sector attributed the positive quarterly result to solid organic growth, a focus on inventory management, increased cross-selling between wholesale and retail operations, as well as the contribution from AFT Automotive Group, which it acquired in July this year.
On an annual basis, RPM chalked up an 89% increase in revenue, up from $15 million, while EBITDA grew a whopping 179% from $0.9 million.
Outlook is positive
Its annualised revenue run rate remains more than $120 million, with the second and third quarters typically being seasonally stronger.
RPM chief executive officer Clive Finkelstein said: “Our business continued to perform well in the first quarter of FY23 with strong top-line growth as well as margin expansion."
Merging smoothly
RPM’s integration with AFT is on track and the combined entity has rolled out expansion projects in Far North Queensland, Victoria and Western Australia.
AFT is now trading out of warehouses in Townsville, Melbourne and Perth, compared to having only a single distribution centre in Brisbane before RPM’s acquisition.
Additionally, AFT has broadened its product range and is now the national distributor of SMM steel canopies, a complementary product to its range of accessories.
Acquisition done
RPM has completed the acquisition of Direct Wholesale Tyres (DWT) after paying the remaining 40% of the transaction price on October 1.
The company acquired DWT in October last year for a total of $1.7 million and paid 60% upfront for the business located in the Townsville Distribution Precinct.
The final earn-out was $680,000, comprising $408,000 in cash and $272,000 in shares.
“The performance of Direct Wholesale Tyres has exceeded our expectations over the past year, and the acquisition was important strategically in expanding our presence in Far North Queensland and building out our national footprint," Finkelstein said.
“We remain confident that our vertically integrated business model will continue to deliver sustainable revenue growth and margin expansion moving forward.”
DWT has performed above expectations, with revenue up by more than 35% in the past year, driven by an expanded product range and increased access to funding to support growth.
Significantly, DWT has been able to improve margins through lower cost of goods sold (COGS) and economies of scale by leveraging on RPM’s wholesale and retail network.