RPM Automotive Group Ltd (ASX:RPM) expects online sales in a number of areas to improve with the added benefit of relatively low selling expense while retail sales will suffer during the COVID-19 pandemic.
The company’s wholesale and transport service businesses will look to maximise this opportunity in the short term, but its longevity in this current climate is impossible to predict.
Focused on cutting costs
While implementing appropriate sanitation measures to ensure that it can continue trading and providing the necessary products and services required by customers, RPMAG is focused on cost-cutting.
The company remains focused on the health, well-being and safety of both staff and customers.
Being so diversified in the automotive industry, RPMAG is experiencing mixed results across its divisions with improvements during March in Tyres & Wheels along with Repairs & Roadside.
Turnover up in two divisions
Tyres and Wheels turnover is up 21.6% year-on-year for the month of March and this is largely attributable to an acquisition as well as increased wholesale sales.
Repairs and Roadside turnover is up 30.3% year-on-year for the month of March, largely attributable to organic sales growth and internal expansion.
Turnover in the Performance and Accessories division is down 6.2% for March and RPMAG said this was largely due to a sudden reduction in demand for accessories.
Motorsport turnover is down 52.2% for March and this is a direct effect of the impact of COVID-19 with the subsequent cessation of motorsport.
2020 trading results (pre audit).
RPM Automotive Group comprising a number of businesses involved in importing, wholesaling and retailing of tyres, mechanical repairs, motorsport apparel and safety equipment, niche manufacturing and a roadside assistance service for the transport industry.
Supply has largely been unaffected by COVID-19 and RPMAG has been able to capitalise on shortages in the market resulting in this business trending upwards.
RPMAG’s investment into this sector has resulted in an increase in trading opportunities.
The board is closely monitoring the AUD/US$ exchange volatility and has taken some precautions to minimise the forex impact on this business.
While the impact of COVID-19 has at this stage been mitigated by increased revenue as a result of an acquisition strategy, the company expects greater retail business disruption as Australia gets closer to stage 4 lockdown protocols.
The board is monitoring the situation and is taking the necessary precautions to minimise expenditure during these difficult times.
Investment into new operations in the Northwest Corridor of Melbourne has resulted in increased turnover and synergies as far as servicing the fleet business is concerned.
This additional customer-base is strongly associated with the transportation and food industries with stock availability and consistency of supply proving to be a challenge at this time.
While the third quarter is usually the strongest for this company coinciding with the start of the
motorsport season this company has been most affected by COVID-19 starting with cancellation of the Melbourne Grand Prix.
Following the postponement of the motorsport season, Revolution Racegear has experienced a reduction in retail sales across the five stores nationally.
The board expects this trend to worsen and has taken necessary precautions to minimise expenditure during these difficult times.
Genie Headers [Wildcat]
January is historically a very tough month for manufacturing in Australia and this year certainly followed that trend.
At this stage, it is uncertain what impact this business will experience as a result of COVID-19, but RPMAG is anticipating significant disruptions with the board taking the necessary precautions to minimise expenditure.
Like Wildcat, this business experienced a difficult January, however, there has been some improvement since as a result of a stronger team involved in the business.
New supply agreements with Capricorn Society and Autopacific Group bode well for the future.
March proved difficult again as the impact of the effects of coronavirus was felt on this business likewise on the entire vehicle accessories industry.
The board has begun taking the necessary precautions to minimise expenditure.
Overall, RPMAG’s board feels that it is not prudent to reliably forecast results for the fourth quarter of FY20 as a consequence of the increasing levels of economic and social uncertainty as a result of COVID-19.