COVENTRY GROUP LIMITED — AGM Information 2021

Oct 21, 2021

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FY21 Annual General Meeting
22 October 2021
At the Coventry Group we create a sustainable future by
empowering our people to deliver great customer
experiences
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Health, Safety and Wellbeing

Improved health, safety and well-being outcomes in FY21

The health, safety and wellbeing of our people is our number one priority

We value the health, safety and wellbeing of our people first and foremost.

• 7 Lost Time Injuries (LTI’s) for a total of 56 lost days for FY21 (13 LTI’s for 108 lost days in FY20)

• Detailed root cause analysis (RCA) investigations completed and shared across the business for all LTI’s and serious near misses to ensure we minimise risks and improve our safety systems

• Dedicated Safety Managers recruited for each business unit

Our aspiration is zero incidents

• Safety audits completed as part of our acquisition due diligence process

• Improved steel and manual handling systems implemented in the Nubco network

Continuous improvement plans for our health, safety and wellbeing systems in FY22

• We will continue to prioritise the health, safety and wellbeing of our people during the COVID-19 pandemic

• Introducing new business wide safety app (Done Safe) to streamline safety audits and actions

• Improving return to work and rehabilitation procedures

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Our Values

We refreshed our vision and values during the year

• ➢ During the year we refreshed our vision and values of Fairness, Integrity, Respect, Safety and Teamwork (FIRST)

• ➢ We live our values and strive to do the right thing in all our dealings with our people, customers and suppliers

• ➢ Despite a competitive recruitment market, our reputation for having a values-based culture is attracting quality people into the organisation

• ➢ Our engagement results continued to improve during the year

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Source: Chandler
Macleod survey August
2021
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Business Overview

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We supply a range of fastening systems, industrial products and hydraulics, lubrication, fire suppression and refuelling systems, cabinet hardware systems and other products.

Trade Distribution (TD)

Fluid Systems (FS)

Comprises Konnect and Artia Australia (KAA), Konnect and Artia New Zealand (KANZ), and Nubco. Supplies a range of fastening systems, cabinet hardware systems, industrial and construction products through a network of 49 branches in Australia and 16 branches in New Zealand. Customers are in the industrial, manufacturing, construction, infrastructure, agriculture and mining sectors.

Comprises Cooper Fluid Systems, Torque Industries, H.I.S Hose and Fluid Power Services. Designs, manufactures and sells hydraulics, lubrication, fire suppression and refuelling systems and products through 17 branches in Australia. Customers are in the mining, manufacturing, defence, recycling and agriculture sectors.

FS TD

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Corporate Snapshot

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Market capitalisation of $164.6m (30[th] June 2020 - $54.8m)

Key Market Metrics

SHARES ON MARKET ISSUE CAPITALISATION $ 91.4M 164.6M

SHARE PRICE

NET DEBT

21 October 2021 $1.80

30 June 2021 $- 16.3M

We acknowledge the support of our substantial Shareholders

28.5[%]

10.8[%]

5.7[%]

15.4[%]

DIVIDEND

Fully franked

3 cents

5.0[%]

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FY21 Snapshot

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Trading performance improved despite the COVID-19 backdrop

Trading performance improved during FY21 with the Group delivering underlying profitability growth for both EBITDA and EBIT.

FY21 Trading performance

Fourth consecutive year of sales and EBITDA growth.

Group sales growth for FY21 of +16.5% when compared with the prior year. Group sales at $288.5m ($247.6m FY20).

Group underlying EBITDA of $13.4m ($6.6m FY20), a $6.8m improvement on the prior year. Statutory net profit for the year $7.2m (Loss of -$0.5m FY20).

The Group has a solid balance sheet with Net Assets of $109.8m as at 30 June 2021. Inventory levels have been increased to minimise the impact of global supply chain issues and stock shortages.

Net assets

Completed the acquisition of the business and assets of H.I.S. Hose Pty. Ltd. (“H.I.S. Hose”) and the business and assets of Fluid Power Services Pty Ltd (FPS), funded through the Company’s debt facilities.

Acquisitions

Entered a new financing arrangement including a $45m Borrowing Base facility with the National Australia Bank (NAB).

Financing arrangements

COVID-19

Managed lockdowns and restrictions throughout our operations and markets across the period.

Note 1: Underlying EBIT and EBITDA exclude the impact of AASB 16 – Leases Note 2: Statutory net profit includes the impact of cloud based accounting $507k

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FY21 Highlights

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Continuing our journey of sustainable profitable growth

EBITDA year on year growth

People

Reduced LTI’s Excellent engagement rates

Group +6.8m TD +$5.0m FS +3.5m

Sales growth

Digital

E-commerce on- line ordering sites going live

Group +16.5% TD +11.8% FS +24.1%

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Notable events

Managed COVID-19 backdrop KAA small profit after 10+ years of losses NAB banking /debt facility in place Redcliffe WA property close to fully tenanted

Acquisition growth

Nubco and Torque performing to expectations Acquired H.I.S. Hose and FPS

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KAA return to profit after 10+ years of losses

Historical Highlights

Significant achievements over the last four years

• ➢ Four consecutive years of sales and profit growth

• ➢ KAA returned to profit after 10 plus years of losses

• ➢ Transformed the culture in the Group based on our core values

• ➢ Completed four acquisitions – Torque Industries, Nubco, H.I.S. Hose and Fluid Power Systems

• ➢ Divested the AA Gaskets business

• ➢ Navigating the COVID-19 pandemic and cyber-attack in 2018

• ➢ Secured banking arrangements with the NAB

• ➢ Resumption of dividend payments

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Note: Underlying EBIT and EBITDA exclude the impact of AASB 16 - Leases
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FY22 Q1 Update

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Pleasing sales growth on prior year of +14.3% despite COVID-19 related disruptions

One LTI in Q1 2021 for a total of 6 lost days.

Health and safety

Group sales growth for Q1 FY22 of +14.3% on the prior year. Group sales at $78.2m ($68.3m FY21). FS sales for Q1 FY22 up +23.4% on the prior year. TD sales for full year FY22 up +8.5% on the prior year. Konnect and Artia Australia up +22.0% on the prior year.

Q1 FY22 Trading performance

Sales impacted by the enforced New Zealand Government Alert 4 lockdown and State Government restrictions in Australia which we estimate negatively impacted sales in the order of $2.5m - $3.5m.

The Group has a solid balance sheet with Net Assets of $111.0m as at 30 September 2021. Inventory levels have been increased by $5.0m YTD FY22 to minimise the impact of global supply chain issues and stock shortages.

Net assets

All business units are operating with COVID-safe plans. We are managing the impact of Government lockdowns in Australia and New Zealand along with supply chain and stock shortage issues.

COVID-19

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We remain cautiously optimistic

Current challenges

Managing COVID risk – vaccinations Government lockdowns Construction shutdowns Supply chain issues Stock shortages Labour shortages Wage pressures Commodity price fluctuations Price inflation

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Current challenges will continue into the medium term

The current environment

Yet we remain cautiously optimistic Our markets are performing well Government stimulus will continue Significant organic growth opportunities exist - new stores, store makeovers, new products, marketing and promotion, on-line ordering Acquisition opportunities exist

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Fluid Systems

Fluid Systems markets have to date continued to perform well

Markets

COVID-19

  - No Government JobKeeper support received

• Mining and resources

• Iron Ore – performing very well and expected to stay solid

• COVID-19 impacts managed well

• Coal – performing very well despite China sanctions

• Supply chain disruption overseas and locally is being managed

• Defence – major opportunity for FS

• Suppliers are reporting difficulties obtaining raw materials – we are expanding our forward order program to increase stock holdings

• Transport – growing sector

• Agriculture – growing sector

• Recycling – growing sector

• The majority of suppliers are increasing prices – we are passing on where possible

• Infrastructure – growing sector

Key wins/recent developments

Opportunities

• Delivery of additional services and geographic branch expansion

• Active discussions in progress aimed at delivering further refuelling systems sales in FY22

• Expand hydraulic cylinder market share – investment already made into required equipment

• Expanded Redcliffe WA operations to second location

• Expand hydraulics, fluid dispensing and refuelling systems capabilities and customers

• Completion of the H.I.S. Hose acquisition 1 Dec 2020

• Completion of the FPS acquisition 1 May 2021

• Increase exposure to other sectors such as agriculture, oil & gas, defence, transport, recycling and manufacturing

• New branch opened in Port Hedland

• Acquisitions

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Trade Distribution

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Trade Distribution continues to be a big opportunity for growth

COVID-19

Markets

• No Government JobKeeper support received in Australia.

• Industrial – performing well

• Commercial construction – performing well with some localised softness due to lockdowns

• Some Government assistance received in New Zealand during Q1 FY22 Alert 4 business shutdown.

• Infrastructure – market is expanding and will continue to do so with significant Federal and State Government spend commitments

• • Oil and gas – sector is recovering

• Supply chain disruption overseas and locally is being managed – we are increasing stock holdings where we can.

• The majority of suppliers are increasing prices – we are passing on where possible

• Cabinet making – performing well

• Roofing and cladding – performing well

• Agriculture and aquaculture – performing well and expected to grow

Key wins/recent developments

Opportunities

• KAA return to profit and strong sales growth Q1 FY22

• Store expansion and makeovers in Australia and New Zealand

• Opened a new branch in Invercargill, New Zealand in FY21

• Product range expansion

• Increasing size and capability of business development and sales representative field team

• Opened a new branch in Rockhampton, Australia in FY22

• Mount Gambier branch, Mount Manganui and Auckland CBD branches expanded in FY21. Gold Coast, Cairns and Burnie store makeovers completed in FY21.

• Steel reinforcing and concrete formwork market growth

• Infrastructure market and large national customers

• Sales growth following installation of Off-Coil Bender in Nubco

• Digital customer engagement – e-commerce

• Acquisitions

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Outlook

The Group is cautiously optimistic for the FY22 financial year

• ➢ The markets in which FS and TD operate are to date performing well.

• ➢ There are significant growth opportunities across all segments of the business – market share gains, new branches, product range extension and acquisitions.

• ➢ Medium-term target to achieve 7.5% group EBITDA margins.

• ➢ Whilst pleased to report improving performance for FY21 and a positive start to FY22, we are not providing FY22 guidance due to continuing COVID-19 uncertainty.

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Disclaimer

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Reliance on third party information

The information and views expressed in this presentation were prepared by Coventry Group Ltd (the Company ) and may contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. No responsibility or liability is accepted by the Company, its officers, employees, agents or contractors for any errors, misstatements in or omissions from this presentation.

Presentation is a summary only

This presentation is information in a summary form only and does not purport to be complete. It should be read in conjunction with the Company’s 2021 full year financial report. Any information or opinions expressed in this Presentation are subject to change without notice and the Company is not under any obligation to update or keep current the information contained within this presentation.

Not investment advice

This presentation is not intended and should not be considered to be the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. The information provided in this presentation has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs. Each party to whom this presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.

No offer of securities

Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell Company securities in any jurisdiction.

Forward looking statements

This presentation may include forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, these statements are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control. As a result, actual results or developments may differ materially from those expressed in the statements contained in this presentation. Investors are cautioned that statements contained in the presentation are not guarantees or projections of future performance and actual results or developments may differ materially from those projected in forward-looking statements.

No liability

To the maximum extent permitted by law, neither the Company nor its related bodies corporate, directors, employees or agents, nor any other person, accepts any liability, including without limitation any liability arising from fault or negligence, for any direct, indirect or consequential loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

For more information, please contact:

Robert Bulluss

CEO and Managing Director Coventry Group Ltd (03) 9205 8219

Authorised for release by the Board of Directors of Coventry Group Limited.

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