ASX small-cap share jumps 10% on strong FY24 profit growth

ASX small-cap share RPM Automotive Group Ltd (ASX: RPM) has surged into the green on Monday after the company posted its FY24 results.

RPM shares are currently trading more than 9.8% higher at 7.8 cents per share as investors react positively to the update.

Let's see what the auto parts company posted.

ASX small cap share climbs on solid full-year results

Key highlights from the results include:

• Revenue increased by 3.7% year over year to $121 million.
• Gross profit was up 12.0% to $41.4 million.
• Earnings before interest, tax, depreciation and amortisation (EBITDA) surged 41.2% to $12.5 million.
• Operating cash flow jumped to $7.6 million.
• Net profit skyrocketed 275% to $4.6 million, a record for the company.

What else happened in FY24?

The ASX small-cap share delivered a strong set of growth numbers in FY24. Sales were up 4%, but this grew EBITDA by 41%, highlighting the company's operating leverage.

Part of this came from a 250 basis points growth in gross profit to 34.2%, meaning more than 34 cents on every dollar in revenue was recognised as gross profit in FY24.

This drove a triple-digit expansion in net profit to $4.6 million, a company record for any quarter.

RPM also completed the acquisition of Chapel Corner Tyres with the aim of strengthening its wholesale tyre division.

Revenues in the company's wholesale segment, particularly in wheels and tyres, were up 30%, underlined by higher demand from the trucking, agricultural, and mining sectors.

The performance and accessories division also expanded, delivering an 11.8% increase in revenue to $26.4 million.

Additionally, RPM's Motorsports division reinforced its market leadership in soft parts and safety categories, with revenue growing by 9.5% to $9.4 million.

What did management say?

RPM Automotive Group CEO Guy Nicholls was notably pleased with the company's performance:

During FY24, we demonstrated the resilience and diversity of our business with strong earnings performance while launching several strategic initiatives to create new revenue streams and leverage our extensive footprint.

Despite economic headwinds in the retail and consumer markets, we delivered earnings growth across the business, once again showing our resilience. Our wholesale segments, particularly wheels and tyres, performed exceptionally well, significantly contributing to our growth.

With our focus on higher-margin parts of the business, our underlying fundamentals have continued to strengthen, reflecting our commitment to increasing profitability. We've invested in our people, ensuring we have the right talent and culture to drive growth.

Our focus on optimising resources and leveraging our diverse product portfolio has led to improved operational efficiencies and increased cross-selling opportunities. During FY24 margin expansion was driven by strategic pricing and more effective procurement and stock management.

What's next for RPM?

Looking forward, RPM says it is poised to continue its growth trajectory into FY25. This is underscored by "several new initiatives aimed at delivering sustainable growth throughout FY25 and beyond".

The company plans to launch a tyre recycling program in Q2 FY25, utilising its established wholesale infrastructure.

Additionally, new products and partnerships with WHG and Yokohama are expected to drive further growth and enhance margins.

CEO Nicholls said the company was constantly pursuing new opportunities:

In addition to continuing to develop our existing businesses, we remain focussed on the pursuit of new growth opportunities and expect this will position the Company for continued success in the evolving automotive aftermarket.

ASX small cap share snapshot

RPM Automotive Group's share price has shown positive momentum in recent weeks and is up more than 14% in the past month.

Shares are down 25.7% in the past 12 months.

The post ASX small-cap share jumps 10% on strong FY24 profit growth appeared first on The Motley Fool Australia.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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