RPM Automotive Group Secures Funding to Expand Tyre Recycling Program Through Existing Network

RPM Automotive Group Ltd (ASX: RPM) is raising $4 million through a two-tranche placement to fund its tyre recycling program.

Funds will also be used to repay $2 million of the convertible note with Collins Street Value Fund (CSVF), which simplifies the company’s capital structure.

RPM affirms its earnings guidance given in February 2024, of expected FY24 EBITDA of between $11 and $13 million.

With a firm pipeline of organic growth, buoyed by its recent contract wins with Yokohama and WHG, the company expects earnings growth to continue into FY25 with EBITDA expected to be in the range of $16 to $18 million.

RPM has a national footprint with over 26 locations and 11 distribution centres, offering wheel, tyre, accessories and apparel to both wholesale and retail customers.

Raising details

The placement includes 56 million new shares at $0.072, and comes with a one-for-one attaching option priced at $0.10 with an expiry of 31st August 2025.

The remaining $3.8 million of the CSVF convertible note will be rolled over into second-ranking secured debt with an interest rate of 4.35% per annum and a loan maturity date of 31st August 2025.

CSVF will also be granted around 38 million options on the same terms as the placement.

The note was issued in 2021 as part of the RPM acquisition strategy.

Acquistion strategy

Guy Nicholls, chief executive officer, commented:

“RPM has made significant progress in its acquisition strategy since 2021, expanding our national footprint and growing the company to where it is today, which was made possible due to the continued support of investors and funding received from Collins Street Value Fund.

“RPM is now entering its next phase of growth.

“With the benefit of scale, the RPM team is now focused on driving margin expansion across our network.”

The raising strengthens RPM’s balance sheet and allows the company to develop its tyre recycling initiative, while also building an institutional shareholder profile.

Positive cashflow conversion

The first half of financial year 2024 delivered an increase in operating cash generation to $2.4 million, compared to an outflow of $2.8 million for the previous corresponding period.

Key drivers included a renewed focus on working capital management and implementing robust systems and processes, with continued focus on receivables and inventory.

RPM is expecting positive cashflow to continue with further operating cashflow used to retire debt and / or invest in low CAPEX / high return-on-invested-capital projects like tyre recycling.

 

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