COVENTRY GROUP LIMITED — AGM Information 2024

Oct 24, 2024

FY24 AGM Presentation

DRIVING GROWTH in fragmented markets with significant organic opportunities

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Agenda

01

Coventry Group’s strategy

04

FY25 Q1 update

02

Our growth opportunity

05 Summary

03

Our growth strategy

06 Appendix

01 Coventry Group’s strategy

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A growth story

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FY24 Group Revenue up 3.4% to A$370.8m (A$358.5m FY23) FY24 Group EBITDA[1] up 22.4% to A$20.8m (A$17.0m FY23)

Note 1: EBITDA is earnings before interest, tax, depreciation, amortisation before significant items and has been adjusted to exclude the impact of AASB 16 Leases.

Our strategy

Our purpose

Our values

Our vision

Strategic priorities

Customer promise

The right people for growth

Zero harm

To provide specialised industrial products, services and solutions to our customers

Safety first

Do the right thing (Fairness, Integrity and Respect)

Work as a team

Be the best at everything we do

Profitable sales growth

Leading Trade Distribution and Fluid Systems Groups across Australia and New Zealand

10.0% EBITDA (Pre AASB16)

Strong cash conversion

Improving earnings per share profitable sales growth

Accelerate profitable organic growth to achieve 10%+ EBITDA

Optimising financial health

Digitalising core systems including delivering the ERP project

Exceptional specialist services and solutions to help our customers be successful

People

Customers

How we run our business. What we want to achieve. The standards and behaviours that guide how we work together to achieve it. How we do things.

What we promise our customers. What they experience. What it looks and feels like for them. How and what we communicate.

Our strategies are delivering

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FY24 Gross Margin % improvement
40.5%
39.9%
40.0%
39.5%
39.0%
38.5%
+2.3%
38.0%
37.6%
37.5%
37.0%
36.5%
36.0%
FY23 FY24
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Our gross margin buyside and sell-side initiatives delivered a 2.3% year on year improvement and along with sales growth will remain a focus throughout FY25.

Initiatives to grow EBITDA[1] to sales to 10% are delivering.

Note 1: EBITDA is earnings before interest, tax, depreciation, amortisation before significant items and has been adjusted to exclude the impact of AASB 16 Leases.

02 Our growth opportunity

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We operate in large fragmented markets

A small share of large markets means there’s significant opportunity for organic growth

Mining and resources

Continued strong demand for products and services from mining and energy sectors.

Our value proposition

Infrastructure

Building and construction

Industrial and manufacturing

$100b committed government spend over the next ten years.

Commercial construction markets have continued to perform well despite cost inflation and labour shortages.

• Markets are driven by activity in the Mining and Resources, Infrastructure, Building and Construction and other markets serviced by Coventry.

We continue to build our capability and value proposition to support the infrastructure market.

Coventry has limited exposure to residential construction in Australia – housing shortage and immigration to drive future demand.

Quality products, stock availability, expertise, agility, geographic coverage.

Other markets

Our secondary markets are all performing well:

• Agriculture and aquaculture

• • Renewable energy • Oil and gas • Defence

• Recycling

Our opportunities and threats

Markets generally perform better than the overall economy.

Positive demand in the mining and resources sector, Western Australia and Queensland. Short term softening in the other states.

Labour and skills shortages are challenging.

Ongoing macroeconomic volatility (short-term in Australia and NZ).

Note 1: EBITDA is before significant items and excludes the impact of AASB 16 – Leases and significant items

Significant opportunities for growth

Industry Forecasts – Industrial Fasteners Market

• We operate in growth markets that generally perform better than GDP.

• Based on A$3.343 billion market size in Australia we have only a 2.5% share of the fastener market.

• Globally, the Industrial Fasteners Market is expected to grow at a CAGR of 5.9% by 2030. Locally, the Australia and New Zealand market is forecast to grow at a CAGR of 7.4% by 2030 bringing the total market value to A$6.538 billion.

Global Industrial Fasteners Market Market forecast to grow at a CAGR of 5.9%.

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Source: Research and Markets

Source: Straits Research

Significant opportunities for growth

Industry Forecasts – Fluid Power Equipment Market

Organic growth opportunities

Fluid Power Equipment market is forecast to grow at a CAGR of 6.5%.

• ➢ Expanding sales in existing markets.

Based on A$3.5b market size in Australia, we have only a 2.0% share of the fluid power equipment market.

• ➢ Diversifying into markets outside of mining and resources – defence, recycling, manufacturing, transport and agriculture.

• ➢ Expanding or relocating facilities to accommodate growth opportunities.

• ➢ Increasing engineering capability to deliver customised solutions for customers.

These forecasts plus continued focus on our strategic initiatives will help achieve our business unit EBITDA target.

• ➢ Developing capabilities for move from manual processes to automated and electric systems and Industry 4.0.

• ➢ Exploring options for branches in new geographical regions.

03 Our growth strategy

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Operational excellence for growth

Expand Improving the Improve value Service and network network proposition product extensions

Digitalisation

Greenfield Konnect Australia and New Zealand, and Steelmasters Trade stores.

Fluid Systems branches in new geographical regions.

Trade store makeovers and relocations to improve in store customer experience and deliver growth opportunities.

Improving our value proposition to retain customers, increase share of wallet, acquire new customers, and improve margins. Expansion into Tier 2 markets. Marketing and promotion programs. Alignment with key suppliers.

Expanding product ranges. Enhance stud bolt capability. Increasing engineered customised solutions capability in Fluid Systems. Establishing industry 4.0, automation, and electrification capabilities in Fluid Systems.

ERP upgrade delivers significant customer service and productivity improvements.

E-commerce.

Digitalisation and continuous improvement programs to improve customer service and increase productivity.

Improving people management systems to build skills and expertise for future business growth

Our value proposition

We deliver on our customer promise to deliver exceptional specialist services and solutions to help our customers be successful through:

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Quality products and recognised leading brands.

Stock availability The stock the customer needs when and where they need it.

Qualified, welltrained teams providing expert advice and solutions for our customers.

Responding to Our wide customer needs geographical with agility and coverage and flexible service. scale.

We are implementing systems that will enhance customer service and productivity.

Proven capability

The Coventry Board has two former senior executives from Reece who have significant insights and networks to help drive the Greenfield expansion model.

The business will add additional management capability and resources to help accelerate this strategy including:

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Partnership with leading national shopfitters with proven capability of building out trade distribution store networks.

Enhanced merchandising capabilities.

Increasing resourcing in the property team to secure new location opportunities. The softening economic environment on the east coast of Australia is providing increased opportunities.

Investing significantly in our training and development to ensure we have a pipeline of new branch managers that know the “Konnect Way”.

Expanding our KAA/Boltmasters network

KAA is currently under-represented in Australia. Based on the market share in NZ, there is considerable opportunity for growth in Australia.

We plan to grow our footprint to 100 stores nationally over the next five years with a focus on NSW and Victoria.

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Opportunity

Existing

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0
19
7
2
10
1
8
1
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Greenfield Model

Factors required to ensure success of network expansion.

The right size and location

The right demand

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The right team at the right time

The right investment

KAA new store rollout profile

The primary growth driver going forwards will revolve around an aggressive rollout of Greenfield sites. Greenfield has several advantages over acquisitions, including lower capex (no goodwill), singular operating model, consistent culture, and systems.

Bolt-on acquisition opportunities will only be contemplated when they gives us access to difficult to enter geographies, bring unique capabilities, and can be purchased at attractive valuations.

	FY25	FY26	FY27	FY28	FY29
Opening stores	46	54	64	75	87
New stores targeted	5	6	7	8	9
Potential bolt-on acquisitions	3	4	4	4	4
Closing stores	54	64	75	87	100

Targeted Greenfield economics

We are developing a high growth, high return on capital Greenfield branch rollout strategy.

Minimum Targeted	Minimum Targeted	Minimum Targeted	Minimum Targeted
New Store Economics	Year 1 forecast	Year 2 forecast	Year 3 forecast
Sales	$1m+	$1.5m+	$2m+
EBIT margin	10% +	15% +	20%+
EBIT	$100k+	$225k+	$400k+
Capex	~$220k
Inventory	~$300k
ROIC	15%+	40%+	75%+

A greenfield model that works

Branch 1

Branch 2

Opened June 2024

Opened January 2024

	Year 1 forecast	Year 2 forecast
Sales	$1m+	$1.5m+
EBIT margin	20% +	20% +
EBIT	$200k+	$300k+
Capex	~$220k
Inventory	~300k
ROIC	30%+	55%+

	Year 1 forecast	Year 2 forecast
Sales	$2.5m+	$3m+
EBIT margin	12% +	15% +
EBIT	$300k+	$450k+
Capex	~$220k
Inventory	~300k
ROIC	55%+	85%+

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04 FY25 Q1 Update

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FY25 Q1 update

Positive profit growth despite challenging economic conditions and expected disruption during the ERP go-live stage.

• Group EBITDA[1] growth of 0.7%

• Group EBITDA[1] % to sales of 5.8%

• Group sales flat with PCP

EBITDA[1] $5.526m +0.7% on FY24

Revenue

$95.025m Flat with PCP

• Sales impacted by:

• Difficult economic conditions, particularly in New Zealand and East Coast of Australia.

• D365 go-live cutovers (one off impact).

• RBNZ now aggressively cutting rates which is expected to lead to improving conditions in NZ leading into calendar year 2025. The KANZ business has strengthened its market position during the downturn and enhanced gross margins so will have significant operating leverage as volumes return.

Note 1: EBITDA is before significant items and excludes the impact of AASB 16 – Leases and significant items

05 Summary

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Seven consecutive years of sales and profit growth

A clear strategy with the principal focus on organic growth

Summary

Exceptional people

Operating in resilient markets and industries

Specialisation will help us win

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06 APPENDIX About the Coventry Group

About Coventry

1929

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Coventry Group founded
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~1,050 people employed at Coventry Group

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42 Konnect and Artia branches (AUS)

15

Fluid Systems branches (AUS)

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98
QLD
locations across
Fluid Systems: 5
Australia and
KAA: 14
SM: 6 New Zealand
25
14 NSW
4 Fluid Systems: 1
WA 10 KAA: 8
SA
Fluid Systems: 4
Fluid Systems: 1
KAA: 8 KAA: 3 1 ACT
SM: 1 12 KAA: 1
DC: 1 23
VIC TAS
Fluid Systems: 3 10 Fluid Systems: 1
KAA: 7 Nubco: 7 NZ
SM: 1 KAA: 1 KANZ: 18
DC: 1 DC:1 SM: 4
DC: 1
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4

7

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12

18

Nubco branches (AUS)

Konnect and Artia branches (NZ)

Steelmasters branches (AUS & NZ)

Distribution Centres (AUS & NZ)

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Specialisation is how we win

Our operating business units provide specialised industrial products, services, and customised solutions to a wide range of customers, from blue chips to tradespeople. Specialisation differentiates us from our competitors.

Where we specialise

Fluid Systems

Fluid Systems is an innovative service provider to the Mining and Resources, Renewable Energy, Agriculture and Aquaculture, Defence, Food & Beverage Manufacturing, and allied industries.

Fluid Systems specialises in hydraulics, lubrication, fire suppression, refuelling, and fluid transfer systems/products through a network of 15 branches .

Trade Distribution

Trade Distribution comprises:

• Konnect and Artia Australia (KAA)

• Konnect and Artia New Zealand (KANZ)

• Nubco

• Steelmasters (SM)

Supply’s a range of fastening systems, cabinet hardware systems, industrial and construction products through a network of 57 branches in Australia and 22 branches in New Zealand supported by 4 Distribution Centres.

Target 10%+ EBITDA[1]

Improving earnings per share through:

• Organic sales growth

• Accelerating KAA new store roll out program

• Margin improvements

• Buy side initiatives

• Sell side initiatives

• Fixing underperforming branches

• Sensible cost control

Targeting

• 14.0%+ EBITDA[1] for each business unit

• 4.0% Corporate costs to Group sales

Delivering results

• Q1 EBITDA[1] improvement of +0.7%

• FY24 EBITDA[1] improvement of +22.4%

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KAA profitability improvements

Accelerate profitable organic growth in Trade Distribution:

• Increasing share of wallet and acquiring new customers.

• Accelerating new store growth.

• Improving capability to deliver store makeovers, store relocations, and new stores.

• Develop marketing and digital capability.

• Fixing underperforming branches.

• Improving margin management.

• Improving supply chain and stock availability.

• Sensible cost control.

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ERP upgrade project

ERP upgrade progressing well

• The Microsoft D365 ERP system utilises the latest technology and will deliver significant customer service and productivity improvements.

• Fluid Systems, KANZ, Finance, and the pilot KAA branch live on the system.

• Experienced project team and implementation support partners working closely together.

• On target to complete project December 2024.

• Estimated FY25 cost of $3.5m.

• The ERP upgrade continues to progress broadly to plan, schedule and budget.

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Optimising financial health

Continue focus on rightsizing inventories and cash conversion

• Cash conversion project delivered positive results.

• Inventory optimisation project continuing.

• Implementing demand planning systems as part of ERP upgrade.

• Cash conversion program delivering results – 112.1% FY24 (112.5% in FY23).

• FY25 cash flow to be positively impacted by the end of the ERP project, full year impact of Steelmasters, organic profit growth, and utilisation of tax losses in Australia.

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Develop marketing and digital capability

Implementing e-commerce solutions

• Developing our marketing and promotion capability to increase brand recognition and awareness.

• Ensuring all business units deliver an enhanced omnichannel customer experience.

• Improving our digital offering – Nubco on-line store to be launched early FY25.

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FY24 performance

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FY24 financial performance snapshot

Financial performance - Solid revenue and profit growth

Revenue EBITDA[1] $370.8m $20.8m +3.4% on FY23 +22.4% on FY23 Cash conversion[3] Net Assets 112.1% $143.1m 112.5% FY23 $113.0m FY23

EBIT[2] $19.8m +26.9% on FY23 Net Debt $47.3m $33.5m as at 30 June 2023

Statutory net profit $0.7m $2.5m FY23 Net Debt impacted by • ERP upgrade project ($9.1m) • Steelmasters acquisition ($13.4m) • Capital expenditure ($4.4m)

Note 2: EBIT is before significant items

Note 3: Cash conversion = Gross operating cash flow less cash lease payments, addback significant items, divided by EBITDA[1]

FY24 Segment performance

Fluid Systems

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Revenue EBITDA [1]
$159.2m $19.0m
+7.5% on FY23 +23.5% on FY23
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• Fluid Systems EBITDA[1] % to sales of 11.9%.

• Trade Distribution EBITDA[1] % to sales of 7.9%.

• Trade Distribution impacted by difficult economic conditions, particularly in New Zealand and Tasmania combined with wage inflation.

Trade Distribution

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Revenue EBITDA [1]
$212.1m $16.7m
+1.0% on FY23 -2.0% on FY23
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Note 1: EBITDA is before significant items and excludes the impact of AASB 16 – Leases and significant items

Disclaimer

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 2024 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 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

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

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

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.

Thank you