At a share price of 12 cents and a market capitalisation of $12 million, Perth-based distribution group Stealth Global Holdings flies well under the radar of most investors, but a well-considered program of acquisitions over the last couple of years, strong organic growth and a refocus on Australia have put in place growing scale and nascent operational leverage that could handily reward those who do take a look.

The company is a pure-play distributor for industrial “MRO” – maintenance, repair, operations – and safety supplies and solutions, but broader and deeper than that description might imply. “We want to be the biggest and best supplier of everyday products, for every workplace, at the best prices,” says chief executive (and largest shareholder) Mike Arnold says. “We’re the only company, as a single source, that can provide the depth and breadth of products that we can.”

Arnold says Stealth Global extends across the end-to-end supply chain, covering business, trade, retail, service and the specialist wholesale sector, serving customers of all sizes from a broad collection of industries including commercial, mining, resources, industrial, government, transport, automotive, agriculture, building, construction, manufacturing, engineering, trade and retail consumers.

“We have the most comprehensive product range, from tools to hardware to workwear to truck parts, in our markets,” Arnold says. “It’s safety, industrial, truck & automotive, and workplace consumable products, selling into highly diversified end-markets – that’s why we say, ‘every workplace.’

“We want to transform the delivery of industrial MRO products and solutions in Australia as the market leader, and the company of choice for customers and suppliers. Our mission is to connect thousands of our products to customers of all types and sizes in every industry – to get our products and solutions into every workplace, every industry and every home.”

There are more than one million of these products, supplied by 2,500 suppliers; and at present, Stealth Global distributes these to 5,500 business customers and 34,000 retail customers. It combines its expansive in-stock product offering with the ability to tailor value-adding solutions, using a wide variety of sales channels, including its own sales team serving key accounts, in-store, on-site, online, delivery options and click-and-collect. While that sounds like a multichannel approach, Arnold says it is more of an “omnichannel” strategy, in which the multiple channels are integrated to create a seamless experience for the customer, who can pick-up on one channel where they left-off on another. Within that, Arnold says Stealth is “investing heavily” in expanding its online channel.

‍Stealth Global is both a business-to-business (B2B) distributor – 87% of its sales are to businesses – and business-to-customer (B2C), through its portfolio of core operating brands:

  • Heatley’s Safety & Industrial (October 2018)
  • Industrial Supply Group (May 2019)
  • C&L Tool Centre (December 2020)
  • Skipper Transport Parts (August 2021)
  • United Tools (March 2022)
  • Trade Counter Direct (to start-up in the second half of 2022)

Arnold says the United Tools and Skipper Transport Parts acquisitions are “major steps in building a larger, more relevant, and more diversified business.” Between them, the two businesses brought more than 600,000 new products, more than 2,500 new customers and more than 1,400 new suppliers into the portfolio.

“Our whole M&A blueprint has been all about building more muscle with deals that add big value by having a larger consolidated group. It’s all about scale and leverage, and expansion into newer markets and geographies.

“For example, United Tools doubled our store network, from 33 to 66. C&L has given us an east coast point of distribution, and has been a burster on many fronts – its net profit is up by about 35% since we bought it. Skipper has been the most complicated integration we’ve done, but has brought huge geographical upside, particularly boosting our presence in the Pilbara mining and oil and gas markets.”

In February, Stealth Global sold its 50% stake in in BSA Brands UK – a 50/50 joint venture established in March 2019 between Stealth and Bisley Workwear in the UK – following the sale of Bisley Workwear in December 2021 to New York-based Protective Industrial Product (PIP), a global personal protective equipment (PPE) supplier. Arnold says Stealth realised “significant value” from the transaction, strengthening its capital position while retaining its partnership with Bisley and the PIP group as a major supplier partner to Stealth in Australia (the sale of the BSA Brands stakes sees the cessation of Stealth’s operations international operations in the United Kingdom and Africa.)

With the group as it is currently structured, Arnold says the business model is positioned to capitalise on the economies of scale and reach. “The business model is similar to the Metcash principle of how it works with IGA and Mitre 10: you don’t just supply to them, you invest with them and evolve your business to work directly with them, whether they’re company-owned or independent.

“We’ve now got the depth and breadth in terms of ability to support the independents, but also grow with our company operations, that allows us to be able to provide a genuine alternative to the market. We’re finding that a lot of organisations like dealing with us because we’re agile, we’re nimble in our decision-making, we’re also very keen to invest with our customers, and in doing that we’re seeing the benefits of upside,” Arnold says.

This is crucial in a highly fragmented market. “Our market is very large – we estimate that MRO is a $40 billion addressable market – but it’s very fragmented. We are the largest player with about 4%. But we’ve positioned ourselves between the majors – Wesfarmers and Metcash – and the minors. We think there will be more consolidation, and that’s good for companies like us who are on fast-growth pathways.”

Now, it’s all about demonstrating the value of what Stealth has built. Trading performance from continuing operations in the December 2021 half-year saw record half-year revenue of $44.3 million, up 55%, with online sales increasing ten-fold to $2.2 million, representing 5% of group sales (and 9% of retail sales). Underlying EBITDA (earnings before interest, tax, depreciation and amortisation) more than tripled, to $1.73 million.

“We’re doing $100 million run-rate in sales now, up from $24 million in September 2018,” says Arnold. “It’s interesting, we expect to see a bit of inflation, there have been a lot of supply-chain bottlenecks, but that’s been good for us because the products that we sell are absolutely aligned to the types of industries where that’s being felt.

“As supply chains become slower, we need to make sure that we have the right stock in the right locations at the right time. So, our inventory cost may go up, however, based on that demand, we also see that our sales activity will go up if we have the product that’s available. We’ve made a lot of investments recently, they’ve hugely boosted our scale, but the benefits of that are yet to materialise. We’re pretty excited about the opportunity in front of us,” he says.