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“A key focus during the year was ensuring that Stealth remains well positioned to continue growing profitably and build our competitive advantage in a higher cost economic environment. That saw us take the opportunity to sell our interest in the BSA (UK) joint venture after our partner Bisley Workwear was sold, and refocus on our Australian operations where we completed another two significant acquisitions and continue to build scale. This provided us entry into fast growth customer markets including Automotive, Truck & Trailer, Mining, Bus, Agriculture, Tooling and Industrial, and significantly expanded our branch, store and independent partner store footprint.”

“The outlook for Stealth in FY23 remains positive and we expect revenue and earnings to continue to grow. This is supported by full year contributions and synergy benefits from our recent acquisitions, a focus on cost and capital management, and continuing positive industry demand conditions despite the normalisation of interest rates.”

2022 Performance Overview

Revenue

The Stealth Group achieved 46.1% growth in consolidated sales to a record $101.8m, up 46.1% from $69.7m (prior corresponding period “pcp”), across business, geographical, trade and consumer markets. Group Revenue from continuing operations increased 49.3% to $99.6m, compared to FY21 of $66.7m. Performance in the second half period was stronger than the first half with Group Sales from continuing operations up 24.8% on 1H22 to $55.3m. The second half of the financial year included a full six-month contribution from Skipper Transport Parts acquisition, plus new acquisitions of United Tools Limited and United Tools Albany and the strategic exit from UK operations post completion of the divestment of 50% equity interest in BSA Brands JV (1 January 2022), allowing the Group to focus on its Australian operations.

Earnings

Stealth achieved a Consolidated Gross Profit Margin of 30.2%, which continued the historical upward trend over the last five years (FY22: 30.2%, FY18: 18.5%). The Gross Profit Margin has improved considerably by over 60% during the period, demonstrating the clear benefits of increased scale and achieving better buying terms. The Gross Profit Margin from continuing operations was 30.2% up 130 basis points (FY21: 28.9%).

Underlying Earnings Before Interest, Tax, Depreciation, Amortisation (EBITDA)1 from consolidated operations were $6.7m in FY22 (FY21: $2.9m). This was after adding back $1.4m of growth-related investment costs (FY21: $1.4m), and excluding the $1.6m of Government support received in FY21. Growth Related Investment costs included acquisition advisory and due diligence, plus personnel related costs.

Statutory EBITDA from consolidated operations was $5.3m, an increase of 71% year on year (FY21: $3.1m). Underlying Net Profit After Tax (NPAT)2 from consolidated operations was $2.4m, excluding investment related costs and government assistance (FY21: $0.4m.) Statutory NPAT for the 12 months ended 30 June 2022 was $1.4m, an increase of 133% (FY21: $0.6m). The performance reported from Stealth’s continuing operations excluded contributions from BSA Brands in FY22 and FY21. Underlying EBITDA from continuing operations was $4.9m (FY21: $2.8m). Statutory EBITDA from continuing operations was $4.0m, up 37.9% year on year (FY21: $2.9m). Underlying NPAT from continuing operations was $1.2m (FY21: $0.4m) and Statutory NPAT from continuing operations was $0.6m (FY21: $0.5m).

Cash Flow and Investments

The Consolidated Group generated operating cash inflow of $0.9m in the 12 months ended 30 June 2022 (FY21: $2.0m) (FY21 included $1.8m in Government incentive cash receipts). The improved operating cashflow (excluding government support payments in FY21) supported working capital investment in STP and other acquisitions, and organic growth across the whole Stealth Group. This allowed the growth in the scale and breadth of the Group’s operations in FY22.

Stealth complete three acquisitions in FY22:

• Skipper Transport Parts (STP) was acquired on 15 August 2021 and contributed $14.5m revenue in its ten and a half months of Group ownership.
• United Tools Limited (UTL) was acquired effective 1 March 2022 and contributed $4.3m revenue in its four months of Group ownership.
• United Tools Albany (UTA) was acquired on 1 May 2022 and contributed $0.25m revenue in its two months of Group ownership.

STP is a market leading Australian distributor of Industrial Maintenance, Repair and Operating (MRO), Automotive, Truck & Trailer, Mining, Bus and Agriculture products. STP has branch store locations in Perth, Albany, Esperance, Karratha, Port Hedland, and onsite stores operations at several customer locations across Western Australia and Queensland. The acquisition of STP further expanded the Group’s geographical, customer and product range.

UTL is one of Australia’s largest buying & distribution co-operatives of independent retailers, selling tools, industrial and trade related products to business and retail customers. Stealth subsidiary, C&L Tool Centre is a licensee member of UTL. The strategic addition of UTL to Stealth significantly boost Stealth’s position as a premier distributor in the Australian industrial MRO supplies marketplace. Stealth’s physical in-store network doubled from 33 to 66 across Australia, with six online marketplaces, making it one of the largest distribution networks of company owned and independent retailer- operator combinations in Australia.

UTA expands Stealth’s Western Australian ‘company-owned’ footprint, including complementing Stealth’s existing STP branch in Albany (STPA), and strengthening its market position. The UTA and STPA combination delivers a powerful service offering, larger range and new competitive advantage within a one-stop super store for industrial, tooling, safety, truck and automotive products, parts and accessories. UTA is also a licensee member and bannered store of the UTL buying group, now owned by Stealth.

On 25 February 2022, Stealth announced it had agreed to sell it 50% equity holding in BSA Brands (UK) (“BSA”) to Bisley Workwear. BSA was established in March 2019 as a 50/50 Joint Venture between Stealth and Bisley Workwear in the United Kingdom. The agreement follows the sale of Bisley Workwear in December 2021 to New York-based Protective Industrial Product (PIP), a global PPE supplier backed by the private equity group Odyssey Investment Partners. PIP’s focus is on
xpanding the Bisley brand globally. The sale completed in March 2022 and included the transfer of the Stealth’s entire UKbased team to Bisley. Stealth has now exited the UK market and is focused on growing and building the scale of its Australian operations.

Stealth funded all of its acquisitions through existing cash reserves, cashflow generation, and through expanded CBA facilities (working capital and acquisition-specific debt).

Balance Sheet and Capital Management

Stealth had $7.5m of Working Capital Facilities available as of 30 June 2022 (FY21: $7.5m) to support organic growth and other potential strategic investments. This included cash on hand of $4.7m (FY21: $3.1m).

Net Debt increased to $10.2m (FY21: $4.2m) primarily as a result of the strategic acquisitions completed in FY22 and FY21. Net Debt increase includes investment in STP (acquisition-specific debt plus working capital investment), C&L deferred consideration, United Tools Albany, inventory investment, facilities and capital expenditure (tangible and intangible assets) net of $1.9m of debt repayments serviced by the Group during FY2022. Net Debt to Underlying EBITDA from continuing operations remains comfortable at around 2.0 times.

The increase in the Group’s inventory holding to $14.1m (FY21: $9.2m, exclusive of $1.6m BSA Brands) predominantly relates to STP acquisition, and was funded via CBA acquisition debt and working capital facilities.

COVID-19

The Stealth Group has diversified operations across Australia and continues to monitor COVID related risks and take measures to ensure the long-term sustainability of the business and to protect the safety and wellbeing of its employees, customers, and the communities in which it operates. COVID continues to impact the Stealth business and industry at large through increased levels of staff absenteeism, increased costs, and supply chain impacts. The successful management of these issues is reflected in Stealth’s improving margins and financial performance as the business gains scale, and the continued management of these remains a priority for Stealth management.

Strategy and Outlook

Strategy

Stealth has continued to make significant progress on executing its strategy to build a larger, more relevant, and diversified business.

During FY22 the Company continued to invest in growth and developing its portfolio to support long-term shareholder returns. This included material expansion of stores network (+41), customers (+2,500), suppliers (+400), marketplaces, products (+22 new categories), team members (+70) and geography (Australia-wide) through organic growth and the acquisitions of STP and the United Tools businesses. These expanded the portfolio to more than 74 store locations, 250 employees, 6 online channels, 400,000 in-stock product lines (plus a further 600,000 available to pull-on-demand), 8,000+ business customers, 34,000 trade and retail consumers and 2,500+ suppliers.

The distribution network has significantly expanded through the addition of 6 company branch stores, onsite stores and 27 independent partner stores. New company operated geographies include Brisbane, Perth, and regional centres of Albany, Esperance, Karratha, Port Hedland, and Kalgoorlie in Western Australia, and Rocklea, Mackay and Emerald in Queensland.

Stealth will continue to generate value for shareholders through the following key areas:

1. Continue to build a larger connected portfolio as a wide-range distributor of Industrial MRO supplies and provider of supply solutions increasing revenue, profit and deploying and creating synergies.
2. Hold an advantaged market position as ‘distributor of choice’: creating more value and better experiences for customers through a renewed operating model focused in 3 key business areas (Business, Consumer, Member) to serve customers of all types and sizes and grow market share, supported by a single vertically integrated platform.
3. Draw on scale and operating leverage from business combinations to improve financial performance using the strengths and advantages in each business in the group. This includes continued optimisation of store networks, formats, expansion of product ranges and consolidation of tier 1 suppliers to deliver better commercial terms.

Outlook

Considerable uncertainty remains for the global economic outlook with rising costs, and interest rates increasing to more neutral levels. However, interest rates and unemployment remain at historical lows, and the Australian economy is relatively well positioned in this environment. Demand remains positive across all of the industries and geographies Stealth operates in driven by activity in the resources and transportation sectors, individual trades, continued spend on infrastructure and energy transition, and the larger network in which Stealth has access to a significantly larger customer and consumer base.

Given continuing market uncertainty Stealth will not be providing a full year guidance but will continue to provide quarterly updates. Stealth currently expects to deliver continued growth in revenue and earnings in FY23 through its everyday supplies model and distribution network, supported by full 12-month contributions from recent acquisitions.

Stealth will remain consistent with its long-term focus, together with targeted investment over recent years, Stealth is well positioned to deliver satisfactory returns to shareholders over the long term.

Investor Presentation Webcast

Stealth will conduct a live webinar conference call and webcast to discuss the FY22 results. Details for registration will be provided separately to this announcement.

About Stealth Global Holdings

Industrial Supplies & Solutions for Every Workplace

Stealth Global Holdings (SGI) with 2022 revenue of more than $100 million, is a leading Industrial distribution company, focused on delivering the wide-range distribution of industrial maintenance, repairs, operations (MRO) supplies, safety and PPE products, truck & automotive parts and accessories, workplace supplies and other related products, services, and solutions to Business, Trade, Retail, and to Independent Retailers and Operators.

Stealth employs approximately 250 people across its five subsidiaries: Heatleys Safety & Industrial, C&L Tool Centre, Skipper Transport Parts, Industrial Supply Group and United Tools.

Founded in 2014, listed on the ASX in October 2018, Stealth is headquartered in Perth Western Australia, with a presence across Australia. It is one of Australia’s largest industrial distribution groups combining the assets of company owned businesses and independent retailer-operators with 74 store locations Australia-wide, supported by two main distribution centres in Perth and Brisbane.

Stealth is a Company for everyone in a workplace.