In a confident financial update, RPM Automotive Group Ltd (ASX:RPM) has reiterated its FY23 guidance, anticipating to report revenue in the vicinity of $118 million to $120 million for the financial year with earnings before interest, taxes, depreciation and amortisation (EBITDA) projected between $10.5 million to $12 million.
The company produced those numbers based on substantial financial growth over the nine months up to March 31, 2023.
Unaudited reports indicate a robust 55% increase in sales revenue compared to last year, touching $88.1 million and unaudited EBITDA boost of 43% to $7.6 million for the same period.
This strong financial development is underpinned by an improved gross margin – a result of normalised trading conditions – enhanced purchasing decisions and a surge in demand for the company's product range.
Restructuring efforts bear fruit
“Earlier this year we initiated a restructure program aimed at making RPM a more efficient and profitable company,” RPM Automotive CEO Clive Finkelstein said.
“Key initiatives were to sell non-core or underperforming assets and to restructure operations, particularly in the Repairs & Roadside retail division.
“We are well on the way to delivering on this program, with around half of the expected $1.5 million in annualised savings already implemented.
“Our core business continues to perform well across RPM’s three other divisions – Motorsport, Performance & Accessories and Wheels & Tyres.
“With a more streamlined operation lowering our cost base, trading conditions normalising and improving margins, we are well placed to close out this financial year and be in a strong position to continue the growth trajectory in FY24.”
Shares higher
Investors have responded positively to the progress report with shares as much as 22.3% higher to $0.11.
RPM’s disposal of non-core assets is expected to generate cash reserves of an additional $1.4 million across the latter half of FY23 and the initial half of FY24, bolstering the company's EBITDA by $400,000 annually.
The company’s proactive approach in streamlining operations, disposing of non-core assets and improved inventory management appears to be paving the way for a resilient financial performance moving forward.
In the next three years RPM will focus on:
- Expansion of wholesale - Warehouses and distribution facilities in each of the major centres.
- Expansion of retail - A well built-out retail network servicing the transport industry in major transportation hubs, focused on commercial and industrial fleets.
- New geographies - A presence in New Zealand and additional footprint of retail networks across Australia.
- Broader product range - A comprehensive range of motor vehicle accessories.
- Complementary activities - Participating in the tyre recycling market.