On the back of unveiling a $5.1 million capital raise just yesterday, RPM Automotive Group (ASX: RPM) published its financials for Q4 2020 (Q2 FY 2021) today with the auto parts company stating it had exceeded its prior performance guidance “by almost every measure” and was now “well placed” for 2021 and beyond.
More specifically, RPM Automotive set new revenue and earnings records: the group’s year-to-date revenue rose to $20.3 million while earnings before interest tax depreciation and amortisation more than doubled to $2.32 million in the same period.
The lion’s share of the company’s income was derived from the wheels and tyre segment ($8.2 million) followed by repairs and roadside ($6.5 million), motorsport ($3 million) and performance accessories ($2.4 million).
However, the leading business segment when it comes to profit and earnings was performance accessories with $819,935 in operating profit and $823,922 in EBITDA so far in the current financial year.
RPM Automotive attributed its strong revenue and earnings growth to “quality business acquisitions” last year. Although from a macro perspective, RPM Automotive cited increased vehicle usage due to widespread border restrictions for the majority of 2020, as positive market catalysts.
“Domestic driving holidays, 4WDing and off-roading activities have risen in popularity as an alternative to interstate and international air travel, which is expected to continue for the foreseeable future,” the company said.
To help consolidate its growing momentum, RPM Automotive completed a $5.1 million placement just this week, as a means of pursuing “several potential growth acquisitions” and thereby seeking out “immediate contributions” to the company’s balance sheet.
RPM Automotive also added that it is currently exploring “several” such potential acquisitions and will advise the market in due course.
“RPM is now in a position to actively pursue its expansion plan and the board is confident that the company has the necessary funding to achieve its medium-term expansion targets,” RPM Automotive managing director Clive Finkelstein said.
Despite COVID-19 still affecting macroeconomic conditions and tempering discretionary spending, RPM Automotive published its full-year forecast for the current financial year, targeting almost $50 million in revenue – a growth rate of 44% year-on-year.
EBITDA is also expected to grow from $3.4 million in 2020 to around $4.6 million in 2021, up more than 35% from last year. Gross profit is expected to rise almost 25% from $11.5 million to $14.4 million.
Given its attraction to earnings-accretive acquisitions and RPM Automotive’s admitted strategy of buying up peers, RPM could repeat its dual record-revenue and earnings feat yet again, later this year.
In recent months, RPM Automotive acquired RPM Autoparts and Traralgon Tyre Service as part of an organic growth strategy including “a tight focus on cost control”. According to the company, both factors are delivering improvements in margins as reflected by its strong EBITDA figures.
“As a company, we are pushing forward with our expansion program and are pleased to report that the newly acquired divisions have integrated well and are performing within expectations,” said Mr Finkelstein.
“With RPM currently trading at a low multiple of less than five times forecast FY21 earnings, while other industry peers in a similar space are trading at much higher multiples, we believe there is a tremendous opportunity for significant shareholder value to be unlocked here as the market becomes more aware of RPM’s accomplishments,” he added.