viewRPM Automotive Group Ltd

RPM Automotive Group completes purchase of Traralgon Tyre Service

The acquired business is a market leader in the supply, fit and servicing of passenger, commercial and industrial tyres in the Gippsland region of Victoria.

RPM Automotive Group Ltd - RPM Automotive Group completes purchase of Traralgon Tyre Service
RPM is on-track for a strong revenue increase in FY2021.

RPM Automotive Group Ltd (ASX:RPM) has completed the acquisition of Traralgon Tyre Service (TTS) after satisfying all necessary conditions as well as the due diligence.

TTS is a market leader in commercial, industrial heavy vehicle tyres in the Gippsland Region in Victoria.

This acquisition will be funded through a mix of shares and cash, which will be paid in tranches over a four-year period.

It comes as the RPM Group is on track for a strong revenue increase in FY2021.

TTS operations and finances

TTS recorded FY20 revenue of $4.25 million and EBIDTA of $370,000 and is forecast to achieve 29% rise in revenue at $5.5 million in FY21 with a 28% increase in EBIDTA at$475,000.

Its revenue is expected to swell to $5.5 million in FY21, and to $6.5 million in FY2022 with the recent securing of specific contracts in regional Victoria.

The business expects to reduce costs through operational synergies with RPM’s existing business and plans to increase revenue generation by leveraging RPM’s expertise, contracts and sales network.

TTS is uniquely positioned to provide OTR service capability to East, Central and West Gippsland.

It operates in a very similar space to Air Anywhere and Gully Mobile Tyres, RPM’s subsidiaries in its Repairs and Roadside Division.

Retaining customer loyalty

Tony Mann, the owner of TTS, will remain on as the company’s director in charge of operations.

Mann said: “We provide solutions to applications, our customers charge us with problems that they face, and it is our responsibility to solve those problems and provide long-term workable solutions.

“This is what we pride ourselves on and therefore we have been able to retain our customers’ loyalty for so many years.”

Over the past 25 years TTS has built a very diverse and unique business servicing the trucking industry, forestry, agriculture and farming and the retail passenger market through strong 4WD, LDV and SUV market.

“Blueprint for future acquisitions”

RPM executive director Lawrence Jaffe said: “I am delighted to announce that we have completed the transaction with Traralgon Tyre Service, a perfect strategic fit for The RPM Group.

“It is a business that could be the blueprint for our future acquisitions with its involvement in mining, agriculture, forestry and trucking industries.”

Outlook for FY2021

RPM will continue to build on its strong foundation to deliver ongoing revenue and earnings growth throughout the remainder of 2021.

The group remains on track for record revenues of $49.2 million in FY21, a 44% increase from FY20, and record EBITDA of $4.7 million, a 37.6% increase from FY20.

With a strong balance sheet following a $5.1 million placement in November 2020, the company has the flexibility to pursue several potential new acquisitions which would provide an immediate contribution to earnings.

The TTS acquisition is the first to be completed since the completion of RPM’s successful capital raising initiative.

More domestic driving

RPM Automotive is also encouraged by an improved Australian auto sector, which appears to be benefiting from COVID-19 tailwinds.

Sales of new cars in Australia climbed 11.1% in January 2021 year-on-year (source: VFACTS) while increased domestic driving activities replace international travel as a result of border closures.

Quick facts: RPM Automotive Group Ltd

Price: 0.275 AUD

Market: ASX
Market Cap: $32.87 m

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RPM Automotive's Clive Finkelstein discusses Traralgon Tyre Service acquisition

RPM Automotive Group Ltd's (ASX:RPM) Clive Finkelstein speaks to Proactive's Andrew Scott after completing the acquisition of Traralgon Tyre Service (TTS). TTS is a market leader in commercial, industrial heavy vehicle tyres in the Gippsland Region in Victoria. It comes as the RPM Group is on...

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