COVENTRY GROUP LIMITED — AGM Information 2022

Oct 20, 2022

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FY22 Annual General Meeting
21 October 2022
At the Coventry Group we create a sustainable
future by empowering our people to deliver great
customer experiences
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			Agenda
1.	Health, Safety and Wellbeing		4
2.	Our strategy		5
3.	Our business units		8
4.	Historical highlights		12
5.	FY22 Results Highlights		15
6.	FY23 Q1 highlights		17
7.	ERP project update		18
8.	Trading Update/Outlook	2	19		ASX: CYG

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Our purpose

Our Purpose at the Coventry Group is to Create a Sustainable Future by Empowering Our People to Deliver Great Customer Service

A clear opportunity exists to build a highly focused scaled Industrial Supply and Services business with leading market positions across multiple geographies, market sectors and product categories Our customers needs are our priority Our specialisation, value proposition, service levels and customer engagement differentiate us from our competitors

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Health, Safety and Wellbeing

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We Value the Health, Safety and Wellbeing of Our People First and Foremost The health, safety and wellbeing of our people is our number one priority

• 4 Lost Time Injuries (LTI’s) for a total of 63 lost days for FY22 (7 LTI’s for 56 lost days in FY21)

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

• Group Health, Safety and Environmental Manager role established in FY22

• Introduced new business wide safety app ( Donesafe ) to streamline safety audits and actions – resulted in a 200% increase in hazards reported and resolved

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

• Continued to improve steel and manual handling systems implemented in the Nubco network

Continuous improvement plans for our health, safety and wellbeing systems in FY23

• We will continue to prioritize the health, safety and wellbeing of our people

• 1 Lost time injury for a total of 2 lost days in FY23.

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Vision and Strategic Direction

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Our Vision is to be Australia and New Zealand’s Leading Industrial Supply and Services Group where we do the Right Thing by our People, Customers and Partners to Create a Sustainable Future

AN EXCITING OPPORTUNITY EXISTS TO BUILD A LEADING SCALED INDUSTRIAL SUPPLY AND SERVICES GROUP

A clear opportunity exists to build a highly focused scaled Industrial Supply and Services business with leading market positions across multiple geographies, market sectors and product categories.

The Board and Coventry Leadership Team (CLT) have developed a clear vision and strategy for the business for the next five years.

The Board and

Growth can be achieved through a combination of:

CLT have significant experience in B2B trade / industrial supply and service distribution

• Organic growth market share gains, e-commerce, new branches, store makeovers, marketing and promotion, new products and new geographies

markets and have developed a blueprint for success.

We are on a journey of long term sustainable profitable growth through delivery of our mission and strategic objectives.

The CLT has substantial experience identifying, completing and integrating acquisitions.

• Sensible strategic and accretive acquisitions

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Our Values

We do the Right Thing by our People, Customers and Suppliers

• ➢ Our values are 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

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• ➢ During FY22 we appointed an experienced Chief People Officer and expanded our Health and Safety and Human Resources team to support our growing business

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

• ➢ We expanded our social and community support programs during the year including supporting employees who lost possessions during the Lismore floods

• ➢ We retained and fully paid our Trade Distribution New Zealand team through the second NZ Government enforced lockdown. No COVID-19 related Government assistance was received in Australia

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Our Value Proposition

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We are Focussed on Our Customers Needs

• ➢ Our customers needs are our priority

• ➢ Our value proposition, service levels and customer engagement differentiate us from our competitors

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• ➢ We continue to strengthen our business development and sales teams to meet our customers needs

• ➢ We have prioritized service levels over reducing inventory – particularly in the current uncertain times and with global supply issues

• ➢ We are investing in our store network with new stores and existing store makeovers and relocations to improve the customer experience

• ➢ We are upgrading our ERP system to improve service levels and point of sale capabilities

• ➢ We are introducing digital engagement strategies for customers who want to deal with us electronically

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Business Overview – Trade Distribution

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Trade Distribution (TD) comprises our network of Konnect and Artia Australia (KAA), Trade Distribution New Zealand (TDNZ) and Nubco branches

• ➢ KAA is one of Australia’s leading fastener specialists and supplier of cabinet hardware, operating through 41 branches supported by Distribution Centres in Melbourne and Perth.

• ➢ TDNZ is New Zealand’s leading fastener specialist and supplier of cabinet ware and temporary fencing, operating through 18 branches supported by a Distribution Centre in Auckland.

• ➢ Nubco is a major supplier of Steel, Reinforcing, Fasteners, Construction Products, Power Tools, Hand Tools, PPE and consumables in Tasmania through 7 branches supported by a Distribution Centre in Devonport.

The Business Has Significant Opportunity For Growth

• ➢ We have a strong value proposition based on our large range of quality products, high stock availability, having inventory where and when the customer wants it, our expertise, extensive branch network and our flexible and adaptable service model.

• ➢ Opportunity for expansion exists through:

• ➢ Greenfield store growth and targeted makeovers for KAA, KANZ and Nubco branches

• ➢ Broader product range and commercial construction and infrastructure market growth. Experienced business development team now in place

• ➢ E-commerce and marketing and promotions

• ➢ Acquisition opportunities

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Business Overview – Trade Distribution

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What we do

Sell, warehouse and distribute products through a network of branches across Australia and New Zealand Specialists in our product categories

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Product categories

Fastening Systems

Cabinet Hardware Systems Steel Construction products Power and hand tools PPE Consumables Temporary fencing

Customer segments

Industrial Building and Construction Infrastructure Mining and Resources Agriculture and Aquaculture Transport Fabricators and Manufacturing

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Business Overview – Fluid Systems

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Fluid Systems Is a Market Leader, Continuing to Deliver Excellent Results

• ➢ Fluid Systems is an innovative service provider to the mining, agriculture, defence, construction, manufacturing and allied industries – specializing in hydraulics, lubrication, fire suppression, refuelling and fluid transfer systems/products.

The Business has Substantial Room to Grow both through Organic Expansion and Acquisition Opportunities

• ➢ Delivery of additional services and geographic branch expansion to increase market share.

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

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

• ➢ Increase exposure to other sectors outside of mining such as agriculture, defence, transport, recycling, manufacturing and waste.

• ➢ E-commerce and marketing and promotions

• ➢ Acquisition opportunities.

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Business Overview – Fluid Systems

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What we do

Sell, warehouse and distribute products Engineered solutions

Workshop service and repairs Onsite service and repairs, shutdowns and installations Design and manufacture of specialised equipment

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Market/product segments

Hydraulics

Lubrication Fluid dispensing Re-fuelling systems Fire suppression High force tooling Automation

Customer segments

Mining and resources Agriculture Defence Transport Recycling Manufacturing Waste OEM’s

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Historical Highlights (1 of 2)

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5 years of profitable growth – Sales CAGR 16.4%

Note 1: EBIT and EBITDA exclude the impact of AASB 16 – Leases

Note 2: The Directors believe that the presentation of unaudited non-IFRS financial information on this slide is useful for users of the accounts as it provides useful information about the financial performance of the business.

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Historical Highlights (2 of 2)

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A Significant Achievement over the Last Five Years

KAA returned to profit after >10 years of losses Divested AA Gaskets

Five consecutive years of sales and profit growth

Six successfully integrated acquisitions – Torque Industries, Nubco, H.I.S. Hose, Fluid Power Systems, GHL and Fraser Coast Bolts

Secured expanded banking arrangements with the NAB

Resumed dividend payments

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Transformed the culture in the Group based on our core values

Profitably navigated the COVID-19 pandemic without emergency equity raises or asset divestments

Continued to improve Board governance, appointed aligned and experienced members

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FY22 Highlights

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Fifth Consecutive Year of Revenue and Profit Growth

Revenue EBITDA[1] $322.3m $15.5m +11.7% on FY21 +16.1% on FY21

EBITDA[1] Margin 4.8% Up from +4.6% in FY21

EBIT[1] $12.4m +17.0% on FY21

Available Tax Losses $76.6m Franking Credits $9.9m

Growth in all key ratios Dividend 3.5 cents +16.7% on FY21

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EBITDA [1] per share
17cps
+13.9% on FY21
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Note 1: EBIT and EBITDA exclude the impact of AASB 16 – Leases

Note 2: The Directors believe that the presentation of unaudited non-IFRS financial information on this slide is useful for users of the accounts as it provides useful information about the financial performance of the business.

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FY22 Financial Results

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Sales Growth Achieved in Both Business Segments

Trade Distribution

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Revenue EBITDA
$193.1m $16.1m
+13.4% on FY21 +37.6% on FY21
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Fluid Systems

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Revenue EBITDA
$129.8m $12.9m
+9.0% on FY21 -6.8% on FY21
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Balance Sheet and Cash Flow

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Net Assets Increased to $113.6m

$ Million	FY22	FY21	% change
Net debt	33.1	16.3
Net assets	113.6	109.8	+3.5%
Net tangible assets	36.1	36.8	-1.9%
Current assets - current liabilities	27.7	33.6	-17.6%

Target cash conversion ratio of 80% to EBIT priority project for FY23 with strong focus on inventory

Maximising Cash conversion to Minimise Debt and Interest Charges

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Commentary

• ➢ Net debt position at 30 June 2022 of $33.1m (net debt position as at 30 June 2021 of $16.3m)

• ➢ Increased net debt due to:

• ➢ $10.0m acquisition related payments

• ➢ $7.0m inventory price inflation

• ➢ $4.8m build in stock holdings to maintain service levels due to global supply chain issues and business growth

• ➢ $5.4m capital expenditure

• ➢ The Group has a strong working capital position with Net Assets of $113.6m and Current Assets exceeding Current Liabilities by $27.7m as at 30 June 2022

• ➢ Tax losses of $76.6m available for use in Australia

• ➢ Franking credits of $9.9m available at balance date

• ➢ Balance sheet will support $15.0m ERP upgrade project over two and a half year project life.

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FY23 Q1 Sales and EBIT Performance

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Sales Growth Achieved in Both Business Segments

Fluid Systems

Group

Trade Distribution

Revenue[1] +20.8% on Q1 FY22

Revenue

Revenue[1]

+14.8% on Q1 FY22

+6.4% on Q1 FY22

We estimate unplanned public holidays impacted Revenue -$1.5m and EBIT -$0.6m

EBIT[1 2]

+20.3% on Q1 FY22

Notes

1. TD Sales growth and adjusted EBIT positively impacted by the New Zealand Government lockdown in FY22.

2. For comparison purposes, unaudited EBIT has been adjusted for the estimated impact of the application of AASB16.

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ERP upgrade

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Upgrading our Enterprise Resource System (ERP) to the latest technology

Microsoft Dynamics Replaces our 15 year 365 Finance and old Oracle eBS system Operations system that no longer meets selected as our new existing and future Group ERP system business needs

Project will be completed in stages over two and a half years at a total cost of

$15.0m

Project currently progressing to plan – on time and on budget

The benefits of the new system are significant

• ➢ Enhanced customer service levels by improving stock availability and fill rates, point of sale capabilities, digital options and increased customer facing roles.

• ➢ We are introducing digital engagement strategies for customers who want to deal with us electronically.

• ➢ Business process improvements and automation removing repetitive labour intensive tasks.

• ➢ New solutions and capabilities such as Point of Sale, Manufacturing, Material and Distribution Requirement Planning, Demand Planning, Budgeting and Forecasting.

On-going costs lower in the order of $500k per annum

Project delivery by an experienced dedicated project team supported by

• ➢ Enables future integration of acquired businesses with confidence.

• ➢ Provides a pathway of digital transformation for the entire business - reducing paper orientated manual processes.

• ➢ Fits with existing CGL IT systems such as Office, SharePoint, CRM and Power BI.

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The Group is Cautiously Optimistic for FY23

Outlook

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

• ➢ Given continuing market uncertainty we will not be providing full year guidance but will continue to provide quarterly trading updates to the market.

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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 2022 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.

Non-lFRS Financial Information

Coventry uses certain measures to manage and report on its business that are not recognised under Australian Accounting Standards. These measures are collectively referred to as non-lFRS financial measures. Although Coventry believes that these measures provide useful information about the financial performance of Coventry, they should be considered as supplemental to the measures calculated in accordance with Australian Accounting Standards and not as a replacement for them.

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Disclaimer

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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