Company Interview / RPM Automotive revving a near 300% jump in profit

RPM Automotive Group has reported a robust financial year, showcasing an increase of 275% in profit after tax, says CEO Guy Nicholls. This rise reflects their focus not just on the top line, but on optimising each of their metrics, a strategy that has evidently proven effective. Apart from this, the company has highlighted diversified product offerings and strategic focus on selling higher-value products.

Guy highlights three pivotal initiatives that are currently underway, promising momentum for RPM. These involve collaboration with tyre brand Yokohama on a national wholesaling scheme; a technological advancement through a Software-as-a-Service move in partnership with WFG; and lastly the launch of their tyre recycling plant. Guy believes that these initiatives will be crucial propellants for RPM's profitability.

In terms of RPM's future moves, the CEO discusses the impending launch of their tyre recycling program. He states that this is an untapped market in Australia, with less than 50% of tyres being processed annually. The program entails taking used tyres from customers, for which the company will be paid, and then repurposing them for various applications. On top of this revenue stream, Guy discusses the possibility of returning to shareholders in FY 25 should their impressive numbers persist.

Full unedited transcript:

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RPM automotive has posted a jump of 275% in full year net profit after tax to 4.6 million, revenue up 3.7% to 121 million. The company will launch a tyre recycling program in full year 25, creating a new revenue stream from the established infrastructure. Shares rising quite substantially after the result. Let's get more now with CEO of RPM automotive Group, Guy Nichols. Guy. Some pretty big numbers there. Just talk us through the highlights of the year, in your words.

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Um, yeah. Good morning. And firstly, thanks for having me. Juliette. Um, yeah. Look, we're very, very proud of these results. You know, we delivered a really strong first half in the business, and we said that, you know, our focus is a business at the moment is not focusing on the top line. It's getting match fit across all of our metrics. And as you can see, as a result of that, our profit is significantly jumped. And we also mentioned that group revenue rose 3.7%. So what was this through mainly some diversified product offerings. Look a combination of a multiple things. You know we've we've obviously focused more on selling products that are higher value. Strategically, we've focused on making sure that we sell more products. So we've introduced more products into our range. The other thing we're doing as a business now is doing a lot more cross-selling across our wholesale and our retail type businesses. So, you know, as I said, we deliberately have said that we're not focusing on major top line growth because of, you know, historically, our company has through acquisitions, this, this, this metric or what we were hoping to deliver this full financial year is

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making sure we increased our profitability, which we certainly did. Yeah. Well, nearly threefold. Do you think that that kind of I guess performance can be equaled in 2025? Look, I think that, you know, I think um, as a business, you know, as I said, we're focusing on match fitness across our business. Obviously, it goes without saying you hit the low hanging fruit to start off with. I think a lot of the disciplines we've introduced across our business and our teams, um, are carrying, we'll carry through, uh, just from an organic point of view. We've obviously got three major initiatives kicking off at the moment as we speak now, which will help continue that momentum. One is we we launched a, uh, a national wholesaling program with a Thai brand called Yokohama. We've launched a SaaS to software as a service tech tech move with with a company called Wfg, which will move us into the hardware and software space. And then thirdly, of course, we've got later on, you know, this this calendar year, just before Christmas, we'll be launching our tire recycling plant. So to answer your question, absolutely, we'll carry this momentum. All right. Well

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let's talk about your, I guess, segments of your business. So we know that repairs and roadside most of your revenue about a third of it. What are you seeing from the likes of motorsport performance and accessories. Uh, our motorsport business is interesting. You know, everyone says retail is tough at the moment, but that business is a specialist retailer. And I think that that's what the way we sell it is. It's a specialist retailer and it typically is immune from economic conditions. I mean, people that have racing cars have typically got money, but you'll see that business grew 10% this year, which is great across our parts and accessories business which performs particularly in the 4x4 and caravan space. We all know there's been some fairly large sort of headwinds. So some tailwinds across the 4x4 and caravan space over the last couple of years because of Covid. But what we're we're able to do there now is again, focus on making sure we sell more products. We introduce more products. You know, in the in the caravan space, we're sort of pivoting from mainly supplying the OE manufacturers now to supporting the aftermarket. Given that there's so many

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caravans in that aftermarket at the moment. So, you know, we've got plans in place and strategies in place with each business unit to continue to make sure we carry that momentum. So let's talk about some of the other things on your agenda for full year 25. I think you and I have spoken before about your Yokohama um, partnership. How's that going and what's the outlook? Yeah, that's going well. I mean, that was only launched about three months ago now. Um, and we're already starting to see some momentum, particularly in our wholesale business and our wholesale business. The strategy is, is we are a major importer of our own exclusive brands. We're also partnered with the leading brands and of course, other mid-tier brands. So our strategy in that space is to have a good, better, best offer. And particularly what we're seeing in this climate at the moment is particularly as consumers are chasing better value and we know our fleet customers are at the moment, we're able to make sure that regardless of what price position they're willing to pay and obviously what quality they're willing to pay, we're able to give them something. So we make sure we get that sale. From a Yokohama point of view, it's filled that that that space

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perfectly, because what we've got is about 2500 accounts nationally that they wanted access to. And the great thing is our field salespeople are out there offering more products to existing customers. Now, you've got a strong operating cash flow of $7.6 million. What is your debt level looking like? And I guess your debt to EBITDA. Yeah. Look, I mean, I doubt you'll see that one of the major initiatives we focused on through the year was we had a convertible note, which we extinguished as part of a capital raise, which was fantastic. Um, from a from a cash generation point of view as a business. Now, you'll find that you'll see that our metrics have improved significantly. So we're chasing we're making sure that we reduce we reduce our inventory. You know, we reduced our inventory by $3 million compared to the same same. The first half and down on last year, which is fantastic if you consider we grow our business. Um, we're focusing on our debtor days and all those other metrics as well. So you'll find that our cash conversion will continue to be positive moving forward. And again, I'll go back to the point that these are disciplines that are

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now instilled across the business, across our people now. And those things will continue to to obviously yield fruit in the future. You talked there about the implementation of the tyre recycling strategy. Obviously a good environmental initiative as well. Just tell us what this involves. Yeah, absolutely. I mean, you'll see on Friday the government released a um, they're going to work. They're obviously going to focus on making sure the circular economy and recycling improves. Um, but for us, what we are is we as I said, we bring tyres into Australia. We've got warehouses and infrastructure and vehicles going out selling brand new tires to clients. And what we've got now is we're able to reverse logistics to product back into our business. Um, and then obviously we'll process it. But the challenge in Australia at the moment is, is about 70 million used tyres, tires been taken off every year, and you can't ship them overseas. You can't bury them in the ground anymore, and you can't put them in the sea and create reefs. So you've got to deal with them. So the great opportunity is we believe that less than 50% of the tires that are taken off of vehicles, full stop, are actually being processed as we speak. So there's a

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massive void. And again, we're going to utilise our existing infrastructure, put a recycling plant in place, will then take those tyres which customers will pay for us to take back. And we'll process those tyres down to different sizes. And each of those sizes can be used for different things, you know, from sports fields to, you know, roads. It's a popular one. I mean, there's hundreds of uses for these tyres, you know, which which you can, you can check. So again, it's about that circular economy and it's very timely. All right. And just a final question guy. If you do continue to see growth at these impressive records, would you be looking at returning to shareholders in full year 25.

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Something the board are considering? I mean, it's always something we're considering making sure that we look after our shareholders. But, um, you know, again let's we're focused on making sure we carry this momentum and deliver great results again in FY 25.