Automotive Aftermarket industry player RPM Automotive Group Limited has released its results for the full year ended June 2023.
It is reporting that revenue is up 48% to $117 million (FY22: $78.8 million), driven by organic growth and the integration of two acquisitions while gross profit up 35% to $37.0 million (FY22: $27.5 million).
Underlying EBITDA is up 40% to $10.6 million (FY22: $7.6 million) according to RPM while it says NPAT from continuing operations is down 38% to $1.8 million (FY22: $2.8 million.)
“Over the past 12 months, we have accelerated our rate of revenue and EBITDA growth across our portfolio of 15 automotive brands through all of our retail and wholesale divisions, Repairs and Roadside, Performance and Accessories, Motorsport, and Wheels and Tyres,” RPM Automotive Group chief executive Clive Finkelstein says.
“We successfully acquired two businesses and launched three new retail operations, unlocking synergies through cross-selling and leveraging existing infrastructure. We improved our gross margin across the network by harnessing our scale and supply chain capability, consolidating brands to maximise awareness at both state and national level and in-filling the network with complementary products.”
FY23 result overview
RPM earned revenue of $117 million in FY23, an increase of 48% on the prior corresponding period (pcp). This was driven by 8% organic growth and the strong performance of recent acquisitions, including Metro Tyre Services (January 2023), as well as the successful integration of Safety Dave (acquired in Feb 2022), ACT Total Tyres (April 2022), VicWide Tyre Services (May 2022) and AFT Automotive (July 2022).
Total gross profit increased to $37.0 million in FY23, up 35% from $27.5 million in FY22 through lower cost of goods sold, and increasing economies of scale across RPM’s wholesale and retail networks.
Strong revenue growth combined with operational optimisation and disciplined cost management, improved RPM’s FY23 EBITDA to $8.8 million, up 21% on FY22, with underlying EBITDA of $10.6 million.
Net Profit After Tax was $1.2 million, down 54%. This was primarily due to accounting adjustments for the disposal of under-performing business units, as well as a one-off goodwill impairment.
Inventory stabilised at $25.1 million. There has been considerable improvement in inventory turnover to 3.4x, a substantial improvement on FY22, with 4.0 turns per annum being the ultimate objective.
In December 2022, RPM successfully raised $3 million via an institutional placement and Share Purchase Plan.
While the optimisation strategy has affected the FY23 results, RPM is confident the strategic changes being implemented across the business will create a more resilient and ultimately more profitable company.
Division Commentary
In FY23, Wheels and Tyres (wholesale tyres) generated revenue of $33.5 million, a 19% increase on FY22. This growth was primarily driven by increasing commercial tyre orders for the transport, agriculture and mining sectors which are more resilient industries to rising inflation. Further wholesale revenue increases were due in part to RPM’s expanding national presence following the acquisition of Metro Tyre Services, the organic expansion of the retail network and continued enhancement of RPM’s distribution capabilities.
The Repairs & Roadside division (retail tyres) saw substantial growth over FY23 through acquisitions and organic expansion, increasing revenue by 55% to $51.0 million and profitability by 53%. As a result of strategic restructuring early in 2H23 to address inflationary pressures and labour availability issues in the service industry, the retail tyre division has significantly improved its margins. Further optimisation strengthens the division. While fluctuations in passenger tyre retail sales are anticipated due to increased volatility in trading conditions driven by cost-of-living rises, the impact on commercial and industrial tyres is expected to be minimal.
The Performance & Accessories division experienced strong trading throughout the year, reporting a 108% increase in revenue to $23.6 million and 87% increase in profitability, due to RPM’s expanding national presence, following the integration of a new business into the division and record sales growth in FY23. RPM has undergone strong organic growth in conjunction with favourable industry tailwinds, driven by the ongoing expansion of the automotive aftermarket segment, notably in the commercial trucking, 4WD and caravan sectors.
The Motorsport division demonstrated steady revenue performance, generating $8.6 million in revenue, an increase of 9% compared to FY22, along with consistent profitability. The Motorsport division is reaffirming its dominance in safety race gear as the motorsport calendar and car club track days return to pre-COVID conditions.
Future outlook
In FY24, RPM anticipates continued growth across the business and expects to achieve between $130 million and $140 million in revenue with a growing earnings ratio. This growth is underpinned by enhanced operating leverage through cross-selling and economies of scale. Simultaneously, the retail and wholesale divisions are expanding through network development, product diversification, and warehouse expansion. The wholesale tyre division will be further strengthened when Chapel Corner Tyres joins the group at the start of Q2 FY24.
RPM’s continued commitment to sustainability is set to advance through the implementation of its Tyre Recycling Strategy, scheduled for rollout during FY24.
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