COVENTRY GROUP LIMITED — AGM Information 2005

Nov 7, 2005

253 Walter Road Morley, Western Australia

PO Box 63, Morley WA 6943

Telephone (08) 9276 0222 Facsimile (08) 9276 1666 Web www.cgl.com.au

8 November 2005

Dear Shareholder

2005 Annual General Meeting

Enclosed for your information is a copy of the Chairman's Address and Chief Executive Officer's Report which were delivered at the 2005 AGM held today.

Both addresses are also available on the Company's website at www.cgl.com.au.

Yours sincerely

Qual

JOHN COLLI COMPANY SECRETARY

ABN 37 008 670 102

ANNUAL GENERAL MEETING 8 NOVEMBER 2005

CHAIRMAN'S ADDRESS

Ladies & Gentlemen:

I am pleased to have this opportunity to speak to you about the Coventry Group's performance for the year ended 30 June, 2005.

RESULTS

The headline result as already announced, was a net profit after tax of \$16.6 million, an increase of 12% on the previous year. However, this profit included a net \$3.1 million of what are in accounting terms described as "significant items", the major component of which was the after tax profit arising from sales of land and buildings, principally our Morley Head Office and Distribution Centre. Without these significant items, the result would have been a net profit after tax of \$13.7 million, a decrease of 10% on the previous year.

Basic earnings per share for the year were 46.8 cents as against 42.5 cents in the previous year and dividends were 36 cents as against 34 cents. In addition a special dividend of 30 cents per share was paid in July.

My letter to shareholders of 22 August detailed the reasons for the disappointing underlying profit result. The major cause was a deterioration in the performance of Coventry Auto Parts in New South Wales and Queensland and Motor Traders in South Australia. At this time last year we thought we had turned the corner with the Coventry Auto Parts business, particularly in Queensland, and although it was still unprofitable it was heading in the right direction. Unfortunately, as the year progressed performance and profitability fell short in both Queensland and New South Wales. The position of the Automotive division was further aggravated by underperformance in South Australia. As a result, management across the division has been restructured, some managers replaced, stock written off, and branches relocated in both New South Wales and Queensland. There are early signs that these changes are producing the desired turn-around although it is a little early to be certain of success.

The Industrial division produced a very sound result, as did Gaskets, and while Bitumen disappointed, there are signs that it is beginning to recover some of the ground lost over the past year.

ACQUISITIONS

Management and the Board are continually examining acquisition possibilities and a number were brought to fruition during the year at an overall cost of \$17 million. financed from cash flow and bank borrowing. Although we are keen to make a more significant acquisition we have not so far been able to find one that measures up to our investment criteria. While the smaller bolt-on businesses all add value to our existing major divisions, we would still like to make a large acquisition if it falls within our areas of expertise and will add value for shareholders.

CORPORATE GOVERNANCE

As noted in the Annual Report, the Board conducted a self-evaluation exercise during the year, assisted by Egon Zehnder International, a firm specialising in director searches and evaluation. This was a useful exercise in directing attention to aspects of Board and individual director performance that could be improved, and will be repeated from time to time.

As a result of changes to the Corporations Act, this year shareholders are being asked, for the first time, to vote on the Remuneration Report which is set out in the Annual Report. I hope that the Report will give you an understanding of the Company's policies for director and executive remuneration and how they are applied. You will have an opportunity later in the meeting to discuss these and to seek further information if you wish. The outcome of the vote is not binding on the Company.

Also contained in the Annual Report, as Note 34 to the Financial Statements, is an explanation of the effect on the Company's accounts of the adoption of the Australian Equivalents to International Financial Reporting Standards. While a number of changes are detailed, the net effect on the balance sheet and profit and loss account of the Company will not be substantial.

At the conclusion of this meeting Peter Kyle will retire as a director in accordance with the agreement that the Board reached three years ago to limit the terms of directors to 12 years, with a phasing in period for the longer serving directors. Peter has served the Company as a non-executive director for 25 years. I am sure you would wish to join me in thanking him for his dedication and contribution to the Company over such a long period.

One of the outcomes of the Board evaluation exercise, which I referred to earlier, was a view amongst directors that the Company could function efficiently with a smaller Board. Accordingly, the Board has resolved, in terms of Rule 8.1(a) of the Company's Constitution, that from the conclusion of this meeting, the maximum number of directors will be fixed at 7. Consequently, we will not be seeking a replacement for Peter.

CURRENT PERFORMANCE AND OUTLOOK

The Australian economy continues to enjoy good growth, and business conditions generally are favourable. However, there are signs of a slow-down in the housing market and some other areas of construction in both Australia and New Zealand. Discretionary spending also is being affected. Competition is strong across all areas of our business.

The recovery of the Automotive division presents a particular challenge, although following recent changes we are hopeful that results will improve.

Profit for the first quarter has exceeded that of the comparable period of last year. While this is a satisfactory start, it would be premature to project such an outcome for the whole year.

STAFF

On behalf of the Board and shareholders I thank Chris Glenn, his executives and our employees for their efforts over the past year. The executive team and all of our management are responding positively under Chris's leadership. I am sure they will be equal to the challenges that lie ahead.

I also thank my fellow directors for their contributions and their commitment to the Company.

Aharmoo

WARWICK KENT, AO CHAIRMAN

$\overline{3}$

ABN 37 008 670 102

ANNUAL GENERAL MEETING 8 NOVEMBER 2005

CHIEF EXECUTIVE OFFICER'S REPORT

Good afternoon ladies and gentlemen.

Today I will cover the 2004/05 results, the Group's strategic direction, acquisitions and divestments, information systems, people and outlook.

2004/2005 RESULTS

Our operating revenue increased 8% to \$473 million and was a result of a strengthening of the business and three smaller acquisitions.

As reported by the Chairman, net profit after tax increased 12% on last year.

The key factors impacting the performance were:

• 6.9% profit improvement in our Industrial business $\bullet$
• Automotive business profit decreased 31% before significant items
• Bitumen profit declined 7.7%
• Gaskets profit was up 6.9%
• One off profit on the sale of property of \$3.6 million

The earnings per share increased 4.3 cents per share to 46.8 cents.

However the return on shareholders funds before significant items declined from 8.9% to 8.3% which is below our 12% target.

The operating cashflow of \$13 million was down on the \$20.2 million from the previous year. The lower level of cashflow was a result of an increase in inventory. The net debt as of June 30 was \$13.9 million and the debt to equity ratio was 8.4%.

Since June 30 the debt to equity ratio has increased to 25% following the special dividend payment and the acquisition of Amtech Fastenings and Components in New Zealand.

Commencing with Industrial I will run through the operating divisions.

INDUSTRIAL

Revenue for Industrial increased 5% to \$182.3 million with profit before interest and tax increasing 6.9% to \$17 million. The return on capital was 23.6% which was down 5.2% due to higher levels of stock.

Ongoing infrastructure project activity in Western Australia, strong demand from the mining sector and ongoing growth in the construction sector were key contributing factors to the segment's result. Coventry Fasteners in WA and Hylton Parker Fasteners in New Zealand recorded excellent trading performances.

The Industrial business continued to experience strong competition during the year and responded positively and maintained its market position.

Looking forward, the Industrial business has a number of opportunities to grow revenue and profits. These include product expansion, supply chain projects as well as market share growth in product or geographic areas where the business is weaker.

AUTOMOTIVE

The Automotive business unit revenue grew 12.6% to \$273 million with profit declining 31% to \$4.9 million. The decline in profitability was due to softer sales in the existing businesses, restructuring costs, along with the NSW and QLD businesses not achieving their revenue growth targets. As a result a significant amount of restructuring has been undertaken to address the underlying issues in the business. The senior management team of the Automotive business changed during the year and culminated in the ongoing search for a new Group General Manager. In the meantime the focus is on improving the performance of the division.

The losses of Coventry Auto Parts' business in NSW and QLD, increased \$1.7 million as a result of restructuring initiatives and a \$0.8 million stock writedown during the year. The management of NSW and QLD has been radically overhauled with a new and smaller leadership team. The restructure impacted the revenue for a six month period and included the closure of the NSW Distribution Centre, staff redundancies and branch relocations.

The major changes have been completed and the business is now in a position to go forward.

The Automotive business unit has centralised its purchasing and inventory management to facilitate the leveraging of its purchasing power and to improve the management of inventory.

The focus moving forward is to improve the underperforming NSW, QLD and SA businesses, leverage the centralised purchasing and inventory management, expand home branded and imported products, move away from reseller business and concentrate on trade and retail sales. The focus on Holden and Ford product will be to grow the penetration of these products into the trade workshop markets.

The outlook for Automotive is positive with recent restructuring initiatives positioning the business unit to improve its performance.

GASKETS

The Gasket manufacturing business which comprises AA Gaskets and NZ Gaskets achieved a net profit before interest and tax of \$1.9 million - a 6.9% improvement on the prior year. Revenue declined marginally to \$12.4 million. The return on capital was 23.1% - a 1.3% improvement.

Improvements in production efficiencies and increased production capacity following the purchase of new assembly presses contributed to the solid profit result.

It is expected the gasket manufacturing segment will be steady with the business operating in a flat market environment.

BITUMEN

The Bitumen business achieved a net profit before interest and tax of \$1.2 million which was down 7.7%, with the return on capital employed at 25.1%.

Increases in crude oil prices and strong competitive activity in most market segments for Hot Mix's asphalt operation impacted the profit result. Bitumen Emulsion's spray and cover activities achieved above budget results.

3

The steady demand for Hot Mix's recycled asphalt EcoGrade TM and the launch of a new stonemastic product together with a number of initiatives to grow the business into new markets should result in improved production volumes and positively impact the segment's performance for the 2005/06 financial year.

STRATEGY

The Group has a three pronged strategy of lifting the performance of the existing businesses, growing the Industrial and Automotive business units both organically and through acquisition and identifying new business opportunities where the Group's core competencies can be leveraged.

The strategic direction will be supported by implementing a core information technology platform which can be leveraged across the business units, increasing house brands and improving the efficiency of the supply chain.

The Company's Western Australian Automotive and Mining Supplies business and corporate head office will move to a new site located in the suburb of Redcliffe in April 2007.

ACQUISITIONS & DIVESTMENTS

In March 2005 the CGL bearings business, Associated World Bearings was sold for \$3.5 million. The business had annual sales of \$9.2 million.

In February 2005 Automotive and Agricultural Supplies in Toowoomba, Queensland was purchased. This business has a revenue of \$3 million.

In July 2005 AmTech, a New Zealand based fastener business was purchased. AmTech is expected to contribute \$8 million in sales.

The Group will continue to actively pursue acquisition opportunities in both existing and new markets in order to increase revenue and improve returns for shareholders.

INFORMATION SYSTEMS

Over the next two years the ageing, in-house built core operating system will be replaced by the Oracle E Business Suite. This change in systems was a result of an extensive review of the Company's information technology needs. The implementation project commenced in May 2005 with the first pilot rollout commenced in November 2005 with the major business units on the Oracle system by December 2006. I am pleased to report the first implementation which was the finance module went well.

The capital cost of the project is budgeted at \$14 million.

PEOPLE

The key people focus areas for the Company has been occupational health and safety, development of our front line managers and the implementation of incentive based remuneration.

The implementation of the Group's 'Safety First' programme has resulted in a 34% decrease in workers compensation claims and a 60% decrease in the number of days lost for each injury incident.

One of the major challenges the Company has faced over the past year, in a tightening labour market, is staff retention. A number of initiatives have been implemented to improve this issue.

There have been some significant management changes in the Automotive business with the appointment of three Regional Managers covering Western (WA), Central (SA/NT) and Eastern (NSW/QLD).

OUTLOOK

The Group is expecting an improvement in operating performance over the next twelve months especially in the Automotive division where the market has been softer however the benefits of the recent restructuring should see an improvement in performance.

Industrial is continuing to experience strong competition however it should achieve growth especially in areas of the business exposed to the buoyant resources sector.

Bitumen should achieve improved results with higher production volumes. Gasket manufacturing is expected to be a steady contributor.

SUMMARY

The last twelve months has been a challenging period for the Company particularly in the Automotive sector.

Looking forward, I believe we have a great opportunity to build the business and improve the returns to shareholders. To do this we will need to continue to focus on improving all facets of the business and capitalise on opportunities that are available in our chosen markets.

I would like to acknowledge and thank the staff and management of the Company for their efforts and commitment and it is through our people that we will grow our business and improve the returns to our shareholders.

I would like to acknowledge and thank the Chairman and the Board for their support and guidance over the past twelve months.

Min Se

CHRIS GLENN CHIEF EXECUTIVE OFFICER