RPM Automotive Group’s audited FY26 accounts confirm a sharp deterioration in earnings, a $4 million goodwill impairment and banking covenant non-compliance. Management is now treating FY27 as a transition year focused on cash generation and operational repair.
- Revenue fell to $100.7 million from $112.1 million
- Net loss widened to $12.0 million
- Tyre divisions recorded combined underlying EBITDA losses of $2.0 million
- $4.0 million goodwill impairment recognised
- Bank borrowings classified as current after covenant non-compliance
Audited accounts confirm a difficult FY26
RPM Automotive Group Limited (ASX:RPM) has put the audited stamp on a year the company’s chairman calls “disappointing”. The figures are consistent with the preliminary results released in August, but the annual report gives investors the fuller picture: revenue fell to A$100.7 million from A$112.1 million, while the group swung from a A$1.7 million profit to a A$12.0 million statutory loss.
The deterioration was concentrated in the core tyre businesses. Repairs and Roadside reported underlying EBITDA of negative A$1.1 million, down from a positive A$0.8 million, while Wheels and Tyres swung to a negative A$0.9 million from a positive A$4.5 million. Performance and Accessories remained profitable, but its underlying EBITDA also fell to A$2.4 million from A$4.3 million. Motorsport was the only division to grow sales, although its underlying EBITDA declined to A$0.8 million from A$1.2 million.
Goodwill impairment adds to the earnings damage
RPM recognised a A$4.0 million impairment of goodwill, reducing intangible assets to A$36.1 million from A$40.4 million. Goodwill allocated to the Repairs and Roadside and Wheels and Tyres segments accounted for a substantial portion of the balance tested, at A$11.6 million and A$7.7 million respectively.
The impairment assessment used five-year cash-flow projections, a 12% weighted average cost of capital and terminal growth rates between 1% and 2.5%. The accounts state that sensitivity testing across an average discount-rate range of 10% to 20% resulted in an impairment. The auditor identified the goodwill assessment as a key audit matter because of the judgement involved in forecasting cash flows, growth and discount rates, while issuing an unqualified opinion on the financial report.
Covenant breach reshapes the balance sheet
The more immediate financial pressure sits in the borrowing profile. RPM disclosed that certain financial covenants were not met at 30 June 2026. Its financier subsequently waived further action on this occasion, but the covenant non-compliance required bank borrowings to be classified as current under accounting standards.
That classification lifted current borrowings to A$28.7 million, compared with A$16.1 million a year earlier, while non-current borrowings fell to A$3.2 million from A$17.6 million. RPM says the accounting treatment does not itself change the contractual maturity of the facilities and that discussions with its financier are continuing. The group ended the year with A$7.2 million in cash and A$7.0 million of operating cash flow, but its total financial liabilities, including leases and payables, stood at A$53.3 million.
Management shifts from expansion to repair
The board and management have adopted a four-stage framework - “Stabilise, Restructure, Rebuild, Grow” - and say FY27 will be a transition year. The company has closed identified underperforming operations, paused acquisition activity and increased its focus on inventory, purchasing, supplier relationships, forecasting and accountability. In the tyre division, the stated aim is to improve margins, inventory productivity, cash conversion and returns rather than simply reduce costs.
That strategy has a more solid financial base than the headline loss might suggest: receivables fell by A$4.6 million and inventories by A$4.6 million during the year, helping operating cash flow rise from A$6.5 million to A$7.0 million. Yet those working-capital improvements occurred alongside a statutory loss, higher current borrowings and a goodwill write-down. The test for FY27 is whether the operational changes can produce repeatable earnings and cash generation before lender flexibility is tested again.
Bottom Line?
The audited result changes little from the preliminary numbers, but the covenant disclosure makes liquidity and lender relationships central to RPM’s FY27 turnaround.
Questions in the middle?
- What conditions and duration attach to the financier’s covenant waiver?
- Can the tyre divisions return to positive EBITDA without rebuilding inventory or debt?
- Will the Stabilise-Restructure-Rebuild-Grow plan deliver measurable cash and margin improvement during FY27?