COVENTRY GROUP LIMITED - Annual Report 2007

==> picture [583 x 207] intentionally omitted <==

==> picture [583 x 208] intentionally omitted <==

==> picture [583 x 207] intentionally omitted <==

==> picture [583 x 205] intentionally omitted <==

==> picture [566 x 195] intentionally omitted <==

==> picture [566 x 194] intentionally omitted <==

Coventry Group Ltd and its controlled entities

ABN 37 008 670 102

Financial Report 30 June 2007

Coventry Group Ltd Directors’ Report For the year ended 30 June 2007

The directors present their report together with the financial statements of Coventry Group Ltd (the Company) and its controlled entities for the year ended 30 June 2007.

1. Directors

Information on Directors

The directors of the Company at any time during or since the end of the financial year and up to the date of this report are:

Independent, non-executive directors

Joseph Boros Warwick Gordon Kent, AO – Chairman (resigned 6 November 2006) Ross Malcolm McLean, AM

Barry Frederick Nazer

Non-executive directors

Clifford Maxwell Kyle (resigned 6 November 2006)

Executive directors

Roger Baden Flynn – Executive Chairman (appointed Chairman 7 November 2006; appointed Executive Chairman 11 April 2007)

Christopher James Glenn – Managing Director & Chief Executive Officer (resigned 11 April 2007)

Particulars of their qualifications, experience and special responsibilities are set out on page xx of the Annual Report.

Directors’ Interests

As at the date of this report particulars of the relevant interest of each director in the shares of the Company are as follows:

R B Flynn J Boros R M McLean B F Nazer	Number of Ordinary Shares
	32,146 17,320 29,698 26,182

During the 2006/07 financial year and as at the date of this report no director has declared any interest in a contract or proposed contract with the Company, the nature of which would be required to be reported in accordance with subsection 300(11)(d) of the Corporations Act 2001, except as follows:

Mr C J Glenn, who had a service contract with the Company which entitled him to benefits and the right to shares in the Company as disclosed in the Remuneration Report section of this report; and
Mr R B Flynn, who has a service contract with the Company which entitles him to benefits in the Company as disclosed in the Remuneration Report section of this report.

Coventry Group Ltd Directors’ Report (continued) For the year ended 30 June 2007

Directors’ Meetings

The following table sets out the number of meetings of the Company’s board of directors and each board committee, held during the year ended 30 June 2007, and the number of meetings attended by each director.

	Board of	Board of	Audit	& Risk	Remuneration	Remuneration	Nomination	Nomination
	Directors		Committee		Committee		Committee
	Held	Attended	Held	Attended	Held	Attended	Held	Attended
R B Flynn	14	14	2	2	1	1	2	2
J Boros	14	13	4	4	1	1	-	-
C J Glenn	10	10	-	-	-	-	-	-
W G Kent	5	5	-	-	1	1	1	1
C M Kyle	5	5	2	2	1	1	-	-
R M McLean	14	14	-	-	2	2	2	2
B F Nazer	14	14	4	3	-	-	1	1

Note: Directors may pass resolutions in writing without a formal meeting being convened. Such resolutions are deemed by the Company’s Constitution to be meetings. The above table does not include such deemed meetings.

2. Principal activities

The principal activities of the consolidated entity during the financial year were:

Automotive Parts

distribution and marketing of automotive parts and accessories, tools and workshop equipment; mining and general industrial consumables; specialised transport and heavy haulage products.

Industrial Products

distribution and marketing of industrial and construction fasteners including bolts, nuts and screws; general industrial products.
distribution, design and installation of lubrication and hydraulic fluid systems, hose and fittings products.
- importation, distribution and marketing of hardware, components and finished products to the domestic and commercial furniture, cabinet making, joinery and shop fitting industries; office chair components.

Bitumen Products (i)

manufacture and application of asphalt.
road profiling and maintenance.
manufacture and spraying of bituminous products for road construction and environmental protection.
treatment of recreational and coloured surfaces.

Gasket Manufacturing

manufacture and distribution of automotive and industrial gaskets.
(i) These activities have since ceased as the Company’s bitumen business was sold on 29 June 2007.

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

3. Consolidated results

Results of the consolidated entity for the year ended 30 June 2007 were as follows:

	2007	2006
	$000	$000
Revenue from sale of goods	506,355	485,400
(Loss) / Profit before tax	(2,433)	13,515
Income tax expense	(2,064)	(4,691)
(Loss) / Profit from continuing operations for the year	(4,497)	8,824
Profit of discontinued operation (net of income tax)	3,335	817
(Loss) / Profit for the year attributable to:
- equity holders of the Company	(1,409)	9,337
- minority interest	247	304
(Loss) / Profit for the year	(1,162)	9,641

4. Dividends

The directors have not declared a final dividend for the year ended 30 June 2007.

An interim dividend of 17 cents, fully franked, for each ordinary share was declared by the directors on 23 February 2007 and paid on 29 March 2007.

Accordingly for the year ended 30 June 2007 the total dividend on ordinary shares is 17 cents for each share.

For the year ended 30 June 2006 the final dividend of 17 cents for each ordinary share referred to in the Directors’ Report dated 5 September 2006 was paid on 12 October 2006.

5. Review of operations and results

A review of the consolidated entity’s operations for the financial year and the results of those operations are contained in pages xx to xx of the Annual Report and in particular in the Executive Chairman’s review section.

6. Earnings per share

Basic (loss) / earnings per share for the year ended 30 June 2007 was (3.8) cents. This compares to 26.1 cents for the previous year.

7. Significant change in the company’s affairs

The directors are not aware of any significant change in the consolidated entity’s state of affairs that occurred during the financial year not otherwise disclosed in this report or the consolidated accounts.

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

8. Events subsequent to reporting date

The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report that has significantly affected, or may significantly affect:

(a) the consolidated entity’s operations;
(b) the results of those operations; or
(c) the consolidated entity’s state of affairs

in future years.

9. Likely developments

The consolidated entity will continue to evaluate and look for opportunities to grow its business. It will actively pursue strategic acquisitions if they fit with the core business of the consolidated entity and have the potential to increase and maximise shareholder wealth.

In the opinion of directors it would be prejudicial to the consolidated entity’s interests if any further information on likely developments and expected results of operations was included in this report.

10. Remuneration Report

Remuneration is referred to as compensation throughout this remuneration report.

10.1 Key Management Personnel ( KMPs ) – audited

KMPs have authority and responsibility for planning, directing and controlling the activities of the Company and the consolidated entity. The KMPs include the directors and the 5 highest paid executive officers (as referred to in Section 300A of the Corporations Act 2001) for the Company and the consolidated entity.

The following were KMPs of the consolidated entity at any time during the reporting period and unless otherwise indicated were KMPs for the entire period:

Non-executive directors Executives J Boros V Scidone, Group General Manager – Industrial W G Kent, AO – Chairman (resigned 6 November 2006) D J Beisley, Group General Manager – Automotive C M Kyle (resigned 6 November 2006) S A Cooper, Chief Financial Officer (resigned 8 June 2007) R M McLean, AM J S Furness, Chief Information Officer (resigned 28 June 2007) B F Nazer J Colli, Company Secretary A P Hockley, Chief Financial Officer (appointed 28 May 2007) M Ridley, Chief Information Officer (appointed 29 May 2007)

Executive directors

R B Flynn (appointed Chairman 7 November 2006; appointed Executive Chairman 11 April 2007) C J Glenn - Chief Executive Officer and Managing Director (resigned 11 April 2007)

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

10. Remuneration Report (Continued)

10.2 Principles used to determine the nature and amount of compensation – audited

Non-executive directors

Fees paid to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees are reviewed annually by the Remuneration Committee. The Remuneration Committee also seeks the advice of independent remuneration consultants to ensure non-executive directors’ fees are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive directors based on comparable roles in the external market. Non-executive directors do not receive any equity-based compensation.

Directors’ fees

Non-executive directors’ fees are determined within an aggregate directors’ fees pool limit, which is periodically recommended for approval by shareholders. The total pool currently stands at $550,000 per annum, which was last approved by shareholders in November 2004 with effect from 1 July 2004. The Board determines the allocation of the maximum amount approved by shareholders amongst the respective directors, having regard to their duties and responsibilities. Directors’ fees are not directly linked to Company performance nor are bonuses paid to non-executive directors. There is no provision for retirement allowances to be paid to non-executive directors.

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued) 10.2 Principles used to determine the nature and amount of compensation (continued)

For the year ended 30 June 2007 the Board determined that non-executive directors fees be allocated as follows (does not include statutory superannuation contributions):

Chairman (base fee)	$116,000
Non-executive Directors (base fee)	$58,000
Interstate Non-executive Director (base fee)	$69,000
Chairman of Audit & Risk Committee
(in addition to base fee)	$11,000
Chairman of Remuneration Committee
(in addition to base fee)	$8,300

Executive pay

The objective of the Company’s executive reward framework is to ensure that rewards properly reflect duties and responsibilities, are competitive in retaining and motivating people of high calibre, and are appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders. The framework provides a mix of fixed and variable pay, and has three components as follows:

Base pay and benefits, including superannuation (“fixed annual compensation”);
Short-term performance incentives; and
Long-term performance incentives.

The combination of these comprises the executive’s total compensation. This compensation framework also applies to executive directors.

During the reporting period, the Chairman of the board was appointed to an executive role. The total compensation of the Executive Chairman reflects the combination of duties fulfilled as Chairman of the Board and as Managing Director of the company.

Fixed annual compensation

Fixed annual compensation is structured as a total employment cost package which is delivered as a mix of cash and prescribed non-cash benefits partly at the executive’s discretion. Fixed annual compensation for senior executives is reviewed annually by the Remuneration Committee to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are no guaranteed fixed annual compensation increases set in any senior executive’s contract.

The non-cash benefits received as part of fixed annual compensation include the provision of a fully maintained motor vehicle and contributions to accumulation based superannuation funds.

Performance linked compensation Short-term incentives

Short-term cash incentives of up to 25% of fixed annual compensation (for the Managing Director, 35% of base salary) are payable to the senior executives upon the achievement of various annual performance targets, which currently include net profit after tax, return on equity, budget earnings before interest and tax, return on capital employed (for certain executives on a consolidated basis and for others on a business unit basis) and personal goals. Such targets ensure that incentives are principally paid when value has been created for shareholders and when profit is consistent with the budget.

Each year the Remuneration Committee considers the appropriate targets and maximum payouts under the short-term incentive plan for recommendation to the Board. Incentive payments may be adjusted up or down by the Board in line with the degree of achievement against target performance levels.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10. Remuneration report (continued) 10.2 Principles used to determine the nature and amount of compensation (continued)

For the Executive Chairman, short term cash incentives of up to 35% of fixed annual compensation are payable for performance periods commencing from 1 July 2007. No short term incentives are payable for the 2006/07 financial year.

Long-term incentives

Long-term incentives are provided through the Company’s executive long-term incentive plan (“ELTIP”), which was approved at the annual general meeting on 5 November 2003. It provides for eligible executives (up to 8, including the Managing Director) to receive fully paid ordinary shares in the Company, upon achieving performance criteria set by the Board. Under the plan, eligible executives are offered ordinary shares worth up to 25% of fixed annual compensation as at the start of the performance period, which will only vest upon the achievement of certain performance criteria.

At the 2006 Annual General Meeting shareholders approved a renewal of the Managing Director’s participation in ELTIP as well as an amendment to the participation level whereby offers of ordinary shares for performance periods commencing on 1 July 2006 would be determined by reference to 35% of his fixed annual compensation.

Offers have been made in respect of the 3 year performance period commencing on 1 July 2003 (“the 2003 Offer”), on 1 July 2004 (“the 2004 Offer”), on 1 July 2005 (“the 2005 Offer”) and on 1 July 2006 (“the 2006 Offer).

The performance criteria for the 2003, 2004, 2005 and 2006 Offers under the ELTIP are as follows:

One half of the offered shares will vest to the participant upon the achievement of a threshold earnings per share (“EPS”) growth hurdle over the relevant 3 year performance period. The offered shares will be vested in differing amounts depending on the percentage growth in EPS in excess of the threshold level over the 3 year period being cumulative $1.269 EPS for the 2003 Offer, cumulative $1.548 EPS for the 2004 Offer, cumulative $1.675 for the 2005 Offer and cumulative $1.260 for the 2006 Offer with all of the offered shares under these hurdles vested once an additional 10% growth in EPS over and above the threshold levels has been achieved; and
One half of the offered shares for the 2003 and 2004 Offers will vest to the participant upon the achievement of a relative total shareholder return (“TSR”) hurdle over the relevant 3 year performance period. The offered shares will be vested in differing amounts depending on the Company’s TSR performance over the relevant 3 year performance period compared to the TSR performance of the companies comprising the S&P/ASX Small Industrials Index at the start of the relevant performance period (“Comparator Group”). No offered shares, under this hurdle, will vest under the 2003 and 2004 Offers unless the Company’s TSR performance is at least equal to the TSR performance of the company which is at the 50[th] percentile of the Comparator Group ranked by TSR. All offered shares under this hurdle in the 2003 Offer will vest if the Company’s TSR over the three years is equal to or greater than the TSR performance of the company which is at the 60[th] percentile of the Comparator Group ranked by TSR. All offered shares under this hurdle in the 2004 Offer will be vested if the Company’s TSR over the three years is equal to or greater than the TSR performance of the company which is at the 75[th] percentile of the Comparator Group ranked by TSR.

Offered shares under the 2005 and 2006 Offers are subject to the achievement of a return on equity (“ROE”) hurdle over the relevant 3 year performance period. Under the ROE hurdle all offered shares in the 2005 and 2006 Offers will be vested if a ROE target of at least 12% is attained as at the end of the 2007/08 and 2008/09 financial years respectively.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10.2 Remuneration report (continued)

10.2 Principles used to determine the nature and amount of compensation (continued)

Shares vested under the ELTIP will rank equally with all other existing ordinary shares in all respects, including having full dividend and voting rights.

The EPS, TSR and ROE performance hurdles were chosen to ensure that key management personnel are only rewarded when shareholder wealth is increased.

The Remuneration Committee considers the audited financial results of the consolidated entity and seeks external advice from human resources consultants in assessing the extent to which the performance hurdles have been satisfied.

During the reporting period, the 2003 Offer was assessed against the established performance hurdles. As the minimum criteria for both performance hurdles was not attained, all offers of shares under the 2003 Offer lapsed.

As at the date of this report, no specific arrangements for a long term incentive for the Executive Chairman have been approved by shareholders. However, it is intended to seek shareholder approval at the 2007 Annual General meeting for a long term incentive for the Executive Chairman.

Consequences of performance on shareholders wealth

In considering the consolidated entity’s performance and benefits for shareholders wealth, the Remuneration Committee have regard to the following measures in respect of the current financial year and the previous four financial years.

	*2007*	*2006*	*2005*	*2004*	*2003*
	$	$	$	$	$
(Loss) / profit attributable to
equity holders of the Company	(1,409,000)	9,337,000	16,556,000	14,800,000	10,767,000
Dividends paid	12,489,000	23,510,000	12,704,000	11,091,000	8,844,000
Change in share price	0.30	(1.60)	0.08	0.77	1.48

Profit is considered as one of the financial performance targets in setting the short term incentives. The profit amounts for years 2003 to 2005 were calculated in accordance with previous Australian GAAP. The profit/loss amounts for 2006 and 2007 have been calculated in accordance with Australian equivalents to IFRS (AIFRS). Dividends and changes in share price are included in the TSR calculation which is one of the performance criteria assessed for the long term incentives. For the 2005 Offer for the long term incentives, return on equity has been used as one of the performance criteria as it is considered to be consistent with growth in shareholder wealth. The other performance criteria assessed for the LTI is growth in earnings per share, which again takes into account the consolidated entity’s profit.

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued)

10.3 Details of compensation – audited

The following table provides the details of the nature and amount of elements of compensation for the directors and the key management personnel of the Company and the consolidated entity for the year ended 30 June 2007.

Key management personnel of Coventry Group Ltd

Name	Short-term Benefits	Short-term Benefits	Short-term Benefits	Post Employment Benefits	Other Long-term Benefits	Share- based Payment
	Cash salary and fees $	STI Cash Bonus $	Non- monetary Benefits $	Super- annuation (i) $	Long Service Leave Provision $	Value of ELTIP shares $	Termination Benefits	Total $	Proportion of compensation performance related %
Non-executive Directors J Boros WG Kent (ii) CM Kyle (ii) RM McLean BF Nazer	58,000 40,759 20,379 - -	- - - - -	- - - - -	5,220 3,668 1,834 72,267 75,319	- - - - -	- - - - -	- - - - -	63,220 44,427 22,213 72,267 75,319	- - - - -
Total	119,138	-	-	158,308	-	-	-	277,446
Executive Directors RB Flynn (iii) CJ Glenn (iv)	164,735 406,889	- 2,000	- 12,840	100,000 37,527	469 (2,825)	- 15,566	- 467,077	265,204 939,074	- 1.9
Total	571,624	2,000	12,840	137,527	(2,356)	15,566	467,077	1,204,278

Name	Short-term Benefits	Short-term Benefits	Short-term Benefits	Post Employment Benefits	Other Long-term Benefits	Share- based Payment
	Cash salary and fees $	STI Cash Bonus $	Non- monetary Benefits $	Super- annuation (i) $	Long Service Leave Provision $	Value of ELTIP shares $	Termination Benefits	Total $	Proportion of compensation performance related %
Other key management personnel of the Company and consolidated entity V Scidone DJ Beisley SA Cooper (v) JS Furness (vi) J Colli A P Hockley (vii) M Ridley (viii)	319,868 281,044 248,600 185,128 158,027 7,272 20,035	64,475 16,100 75 13,892 14,196 - -	27,259 11,834 17,006 38,169 11,248 - -	29,500 24,392 24,654 17,041 14,488 23,481 1,607	24,384 596 (17,528) (411) 10,755 196 143	24,493 9,972 7,082 6,523 12,915 - -	- - - 33,000 - - -	489,979 343,938 279,889 293,342 221,629 30,949 21,785	18.2 7.6 2.6 7.0 12.2 - -
Total	1,219,974	108,738	105,516	135,163	18,135	60,985	33,000	1,681,511
Total compensation key management personnel (Company & consolidated entity)
	1,910,736	110,738	118,356	430,998	15,779	76,551	500,077	3,163,235

Premiums in respect of the Directors’ and Officers’ insurance policy are not included above, as the policy does not specify the premium paid in respect of individual directors and officers.

(i) Includes statutory superannuation contributions and additional voluntary contributions in some cases.
(ii) Resigned 6 November 2006.
(iii) Appointed Chairman 7 November 2006; appointed Executive Chairman 11 April 2007.
(iv) Resigned as Managing Director 11 April 2007.
(v) Resigned 8 June 2007.
(vi) Resigned 28 June 2007.
(vii) Appointed 28 May 2007.
(viii) Appointed 29 May 2007.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10. Remuneration report (continued)

10.3 Details of compensation – audited (continued)

Key management personnel of Coventry Group Ltd

Name		Short-term Benefits		Post Employment Benefits	Other Long- term Benefits	Share- based Payment
	Cash salary and fees $	STI Cash Bonus $	Non- monetary Benefits $	Super- annuation (i) $	Long Service Leave Provision $	Value of ELTIP shares $	Total $	Proportion of compensation performance related %
Non-executive Directors WG Kent (Chairman) J Boros RB Flynn CM Kyle P Kyle (ii) RM McLean BF Nazer	110,250 54,600 53,648 54,600 19,484 15,619 48,825	- - - - - - -	- - - - - - -	4,961 4,914 17,883 4,914 1,754 52,479 22,134	- - - - - - -	- - - - - - -	115,211 59,514 71,531 59,514 21,238 68,098 70,959	- - - - - - -
Total	357,026	-	-	109,039	-	-	466,065	-
Executive Director CJ Glenn	458,018	12,100	31,528	43,013	1,844	71,091	617,594	13.5

		Short-term Benefits		Post Employment Benefits	Other Long- term Benefits	Share- based Payment
Name	Cash salary and fees $	STI Cash Bonus $	Non- monetary Benefits $	Super- annuation (i) $	Long Service Leave Provision $	Value of ELTIP shares $	Total $	Proportion of compensation performance related %
Other key management personnel of the Company and consolidated entity V Scidone DJ Beisley (iii) SA Cooper JS Furness J Colli	322,193 232,450 204,789 180,110 152,971	14,191 - 8,704 13,877 2,204	28,569 4,362 17,667 38,100 12,087	28,275 19,921 19,799 17,497 14,365	14,038 194 7,626 154 5,519	43,113 - 30,130 27,748 23,622	450,379 256,927 288,715 277,486 210,768	12.7 - 13.5 15.0 12.3
Total	1,092,513	38,976	100,785	99,857	27,531	124,613	1,484,275
Total compensation key management personnel (Company & consolidated entity)
	1,907,557	51,076	132,313	251,909	29,375	195,704	2,567,934

Premiums in respect of the Directors’ and Officers’ insurance policy are not included above, as the policy does not specify the premium paid in respect of individual directors and officers.

(i) includes statutory superannuation contributions and additional voluntary contributions in some cases. (ii) resigned 8 November 2005. (iii) appointed 31 August 2005.

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007

10. Remuneration report (continued) 10.4 Value of Shares – audited

The fair value of services received in return for the offers of the ELTIP shares have been calculated at the date of grant using a Black-Scholes model incorporating the factors and assumptions detailed below. The fair value of the services is remeasured, having regard to non-market and service conditions only, at each balance sheet date and at settlement date.

Grant date	Expiry date	Fair value	Exercise	Price of	Estimated	Risk free	Dividend
		per share	price	shares on	volatility	interest	yield
				grant date		rate
1 July 2003	30 June 2006	$3.96	$0.01	$4.95	24%	5.7%	7.4%
1 July 2004	30 June 2007	$4.71	$0.01	$5.72	24%	5.4%	6.4%
26 June 2006	30 June 2008	$3.52	$0.01	$4.20	25%	5.1%	8.6%
3 October 2006	30 June2009	$3.41	$0.01	$4.26	23%	5.8%	7.4%

10.5 Analysis of bonuses included in compensation - unaudited

Details of the vesting profile of the short term incentive cash bonuses awarded as compensation to each director and the key management personnel of the Company and consolidated entity are detailed below:

Short Term Incentive Cash Bonus

	*included in compensation*	*% vested in year*	*% forfeited in year*
Executive Directors
RB Flynn	-	-	-
CJ Glenn	2,000 (i)	1	99
Other key management personnel of
the consolidated entity
V Scidone	64,475 (ii)	70	30
DJ Beisley	16,100 (ii)	20	80
SA Cooper	75 (i)	-	100
JS Furness	13,892 (ii)	25	75
J Colli	14,196 (ii)	30	70
AP Hockley	-	-	-
M Ridley	-	-	-

(i) these amounts represent the difference between the accrual and actual payment made for the year ended 30 June 2006.

(ii) these amounts have been accrued for the year ended 30 June 2007. The actual short term incentive bonus paid may differ as determined by the Remuneration Committee.

10.6 Employment contracts - audited

Compensation and other terms of employment for the Executive Chairman and other key management personnel are formalised in employment contracts. Each contract deals with the provision of fixed annual compensation, short-term incentives, and long-term incentives. Other major provisions of the contracts relating to compensation are set out below:

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007

10. Remuneration report (continued)

10.6 Employment contracts – audited (continued)

RB Flynn, Executive Chairman (appointed 11 April 2007)

The contract has no fixed term.
Commencing fixed annual compensation is $720,000 to be reviewed annually by the Board.
Subject to the achievement of key performance indicators, an annual short-term incentive of up to 35% of fixed annual compensation will be paid by the Company. No short-term incentive is payable for the 2006/07 financial year.
Whilst the contract provides for a long term incentive, as at the date of this report, no specific scheme has been agreed.
Long service leave is payable by the Company in accordance with relevant state legislation.
Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct, termination of employment requires 12 months notice by the Company. In the event that the Company no longer requires Mr Flynn to report directly to the Board or if the Company no longer requires Mr Flynn to carry out the normal functions of Managing Director, the Company must pay the equivalent of the fixed annual compensation as a redundancy payment.
V Scidone, Group General Manager – Industrial
The contract has no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans is at the discretion of the Company.
Other than for serious misconduct, termination of employment requires 6 months notice by the Company. Upon termination, for each year of service in excess of 5 years continuous service, the Company must pay an additional 2 weeks pay, up to a maximum of 26 weeks pay.

DJ Beisley, Group General Manager - Automotive

Initial contract for a fixed term; 31 August 2005 to 31 December 2005 (subsequently extended to 31 July 2006) for the position of Business Consultant to the Company’s Automotive Business Unit.
New contract commenced 1 August 2006 for the position of Group General Manager – Automotive with the following key provisions:
Long service leave is payable by the Company in accordance with relevant state legislation.
Participation in short-term incentive plan is at the discretion of the Company.
Other than for serious misconduct, termination of employment requires 4 weeks notice by the Company.
The contract to be reviewed on 30 June 2007. As at the date of this report the contract has not been reviewed as Mr Beisley has notified the Company of his intention to resign effective from 14 September 2007.

J Colli, Company Secretary

The contract has no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans is at the discretion of the Company.
Other than for serious misconduct, termination of employment requires 6 months notice by the Company. Upon termination, for each year of service in excess of 5 years continuous service, the Company must pay an additional 2 weeks pay, up to a maximum of 26 weeks pay.

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10.

10.6 Employment contracts – audited (continued)

AP Hockley, Chief Financial Officer (appointed 28 May 2007)

The contract has no fixed term.
Commencing fixed annual compensation is $300,000 to be reviewed annually by the Remuneration Committee. The Company will also pay up to $30,000 for relocation costs.
Long service leave is payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans is at the discretion of the Company.
Other than for serious misconduct, termination of employment requires 26 weeks notice if the termination occurs prior to 1 July 2008. Thereafter 12 weeks notice by the Company is required. Upon termination, for each year of service in excess of 5 years continuous service, the Company must pay an additional 2 weeks pay, up to a maximum of 26 weeks pay.

M Ridley, Chief Information Officer (appointed 29 May 2007)

The contract has no fixed term.
Commencing fixed annual compensation is $220,000 to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans is at the discretion of the Company.
Other than for serious misconduct, termination of employment requires 12 weeks notice by the Company. Upon termination, for each year of service in excess of 5 years continuous service, the Company must pay an additional 2 weeks pay, up to a maximum of 26 weeks pay.

CJ Glenn, Managing Director (resigned 11 April 2007)

The contract had no fixed term.
Fixed annual compensation to be reviewed annually by the Board. The Company also pays for home telephone expenses.
Subject to the achievement of agreed key performance indicators, an annual short-term incentive of up to 35% of base salary would be paid by the Company.
For each financial year up to and including the year ended 30 June 2006, subject to the achievement of certain performance criteria over a 3 year period, a long-term incentive of a minimum of 25% of fixed annual compensation would be paid by the Company in the form of shares. From 1 July 2006, and as approved by shareholders at the 2006 Annual General Meeting, the long-term incentive was amended to 35% of fixed annual compensation.
Long service leave was payable by the Company in accordance with relevant state legislation.
Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct, termination of employment required 12 months notice by the Company.

SA Cooper, Chief Financial Officer (resigned 8 June 2007)

The contract had no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave was payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans was at the discretion of the Company.
Other than for serious misconduct, termination of employment required 6 months notice by the Company. Upon termination, for each year of service in excess of 5 years continuous service, the Company must pay an additional 2 weeks pay, up to a maximum of 26 weeks pay.

JS Furness, Chief Information Officer (resigned 28 June 2007)

The contract had no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave was payable by the Company in accordance with relevant state legislation.
Participation in short-term and long-term incentive plans was at the discretion of the Company.
Other than for serious misconduct, termination of employment required 6 months notice by the Company. In the event of redundancy, the Company must pay an additional 4 weeks pay after 1 year of continuous service, with the redundancy payment obligation increasing progressively for each year of service up to a maximum of 52 weeks pay.

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued)

10.7 Rights over shares granted as compensation - audited

The movement during the reporting period in the number of rights over ordinary shares in the Company offered as compensation under the ELTIP to directors and other key management personnel of the Company and consolidated entity is as follows:

	Held at	Granted as	Vested during	Lapsed during	Forfeited during	Held at
1	July 2006	_compensation _	_the year _	the year (ii)	the year (iii)	_30 June 2007 _
Executive Directors
RB Flynn	-	-	-	-	-	-
CJ Glenn	124,666	46,754 (i)	-	80,081	91,339	-
Other key management
personnel of the consolidated
entity
V Scidone	75,873	22,267	-	46,084	-	52,056
DJ Beisley	-	19,496	-	-	-	19,496
SA Cooper	53,085	16,837	-	32,605	37,317	-
JS Furness	48,786	13,604	-	30,173	32,217	-
J Colli	41,519	11,625	-	25,678	-	27,466
AP Hockley	-	-	-	-	-	-
M Ridley	-	-	-	-	-	-

(i) 2006 Offer approved at the 2006 Annual General Meeting.

(ii) 2003 Offer lapsed as none of the performance hurdles were achieved.

(iii) 2004, 2005 and 2006 Offers forfeited due to resignations of Messrs Glenn, Cooper and Furness during the reporting period.

The grant date, the fair value at grant date and expiry date of the rights over shares are shown at item 10.4 of the remuneration report.

	Held at	Granted as	Vested during	Held at
	1July 2005	_compensation _	_the year _	30 June 2006
Executive Director
CJ Glenn	102,113	22,553	-	124,666
Other key management
personnel of the consolidated
entity
V Scidone	60,899	14,974	-	75,873
DJ Beisley	-	-	-	-
SA Cooper	42,629	10,456	-	53,085
JS Furness	39,406	9,380	-	48,786
J Colli	33,559	7,960	-	41,519

For the year ended 30 June 2006 there were no rights over shares that lapsed or that were forfeited.

There were no rights over equity instruments held by non-executive directors as at 30 June 2007 and 30 June 2006.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10. Remuneration report (continued)

10.8 Analysis of rights over shares granted as compensation - unaudited

Details of the vesting profile of the rights over shares granted as compensation to each director and the key management personnel of the Company and consolidated entity during the reporting period are as follows:

	Rights Granted as				Value Included	% of Total
	Compensation		Value of	Value of Rights	as	Compensation
	Value at Grant	Value of	Rights	Forfeited	Compensation	that Consists of
	Date (i)	Rights Vested	Lapsed (ii)	(iii)	(iv)	Rights
	$	$	$	$	$
Executive Directors
RB Flynn	-	-	-	-	-	-
CJ Glenn	159,431	-	317,121	342,587	15,566	1.7
Other key
management
personnel of the
consolidated entity
V Scidone	75,930	-	182,493	-	24,493	5.0
DJ Beisley	66,481	-	-	-	9,972	2.9
SA Cooper	57,414	-	129,116	141,432	7,082	2.5
JS Furness	46,390	-	119,485	122,895	6,523	2.2
J Colli	39,641	-	101,685	-	12,915	5.8
AP Hockley	-	-	-	-	-	-
M Ridley	-	-	-	-	-	-

(i) value of 3.41 per right calculated in accordance with item 10.4 of the remuneration report.

(ii) 2003 Offer lapsed as none of the performance hurdles were achieved. Value of $3.96 per right calculated in accordance with item 10.4 of the remuneration report.

(iii) 2004, 2005 and 2006 Offers forfeited due to resignations of Messrs Glenn, Cooper and Furness. Values of $4.21, $3.52 and $3.41 per right respectively calculated in accordance with item 10.4 of the remuneration report.

(iv) for rights subject to internal performance hurdles the value included as compensation takes into account the probability of achieving those hurdles as at balance date.

The number of rights over shares to which the above values relate are shown at item 10.7 of the remuneration report.

11. Environmental regulation

The consolidated entity was subject to environmental regulation in respect of its bitumen and asphalt manufacturing activities. The Company’s bitumen business unit which had two divisions and traded as Hot Mix and Bitumen Emulsions was sold on 29 June 2007.

The Company’s Hot Mix division procured asphalt in accordance with an agreement entered into with Works Emoleum (which is part of the Downer EDI Group). Under the agreement, an asphalt production sharing facility had been established at Rinker Group Ltd’s Gosnells quarry. The relevant EPA licence for the Gosnells site is held by Works Emoleum.

The Hot Mix and Bitumen Emulsions divisions also complied with the dangerous goods code. Accordingly, the divisions had an ongoing programme for the licensing and inspection of their transport vehicles for the carriage of dangerous goods. Both divisions held and complied with a licence issued by the Department of Minerals and Energy in Western Australia in relation to the storage of bituminous products. The two divisions had procedures and systems to ensure compliance with environmental regulations which were regularly reviewed.

During the financial year the Contaminated Sites Act 2003 came into operation in Western Australia. In accordance with this legislation the Company has lodged a suspected contaminated site report to the Department of Environment and Conservation. The report relates to two adjoining freehold properties owned by the Company on which the bitumen divisions operated prior to their divestment.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 11. Environmental Regulation (continued)

The consolidated entity is not subject to any other specific environmental regulation.

The consolidated entity mainly operates warehousing and distribution facilities throughout Australia and New Zealand which have general obligations under environmental legislation of the respective statutory authorities in relation to pollution prevention.

For the financial year ended 30 June 2007 and as at the date of this report, the consolidated entity has not been prosecuted nor incurred any infringement penalty for environmental incidents.

12. Insurance of officers

During the financial year the Company has paid premiums in respect of contracts insuring the directors and officers of the Company against certain liabilities incurred in those capacities. The contracts prohibit further disclosure of the nature of the liabilities and the amounts of the premiums.

13. Corporate governance

The Statement of Corporate Governance Practices as disclosed on pages xx to xx of the Annual Report sets out the Company’s main corporate governance practices throughout the financial year and as at the date of this report.

14. Options

The Company has not issued any options over unissued shares.

15. Non-audit services

During the year KPMG, the Company’s auditor, provided non-audit services to the consolidated entity for fees totalling $10,000. The non-audit services related to work undertaken to review the transition to the new Oracle IT platform.

In accordance with advice from the Company’s Audit & Risk Committee, the directors are satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Also in accordance with advice from the Company’s Audit & Risk Committee, the directors are satisfied that the provision of non-audit services during the year did not compromise the auditor independence requirement of the Corporations Act 2001 because:

all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor;
the non-audit services provided do not undermine the general principles relating to auditor independence as set out by regulatory bodies; and
the nature of the non-audit services provided is consistent with the policy adopted by the Company for the provision of non-audit services by the external auditor.

Details of fees paid to the Company’s auditor, KPMG, for statutory audit services are set out in Note 5 to the financial statements.

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007

16. Lead Auditor’s independence declaration

The lead auditor’s independence declaration made in accordance with Section 307C of the Corporations Act 2001 is set out on page xx of the Annual Report and forms part of this report.

17. Company secretary

Mr John Colli was appointed to the position of Company Secretary in November 1998. Mr Colli previously held the role of company secretary for the former listed company Challenge Bank Limited for seven years.

18. Rounding off

The Company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors.

R B Flynn Executive Chairman

Perth

24 August 2007

Coventry Group Ltd and its controlled entities Income statements

For the year ended 30 June 2007

In thousands of AUD *Note* Revenue from sale of goods Cost of sales Gross profit Other revenue Other income 3 Employee benefits expense Depreciation and amortisation expenses Occupancy costs Communication costs Impairment, write off and restructuring costs Other expenses Profit (loss) before financing costs Financial income 6 Financial expenses 6 Net financing costs (Loss)/profit before tax Income tax expense 7 (Loss)/profit from continuing operations for the year Discontinued operation Profit of discontinued operation (net of income tax) 25 (Loss)/profit for the year Attributable to: Equity holders of the Company Minority interest (Loss)/profit for the year Earnings per share: Basic (loss)/earnings per share: 8 Diluted (loss)/earnings per share: 8 Continuing operations Basic (loss)/earnings per share: Diluted (loss)/earnings per share: Dividends per share Ordinary shares 21	Consolidated The Company 2007 2006 2007 2006 506,355 485,400 467,334 435,269 (310,019) (304,708) (289,203) (276,242)
	196,336 180,692 178,131 159,027 2,880 2,311 2,464 1,969 125 687 125 471 (104,957) (97,773) (97,618) (87,941) (7,623) (6,752) (7,055) (5,821) (12,718) (12,030) (11,666) (10,262) (3,360) (3,604) (2,958) (3,042) (17,592) (3,426) (17,592) (4,546) (50,570) (43,345) (45,998) (37,050)
	2,521 16,760 (2,167) 12,805
	240 523 1,765 2,898 (5,194) (3,768) (4,873) (3,398)
	(4,954) (3,245) (3,108) (500)
	(2,433) 13,515 (5,275) 12,305 (2,064) (4,691) (751) (3,562)
	(4,497) 8,824 (6,026) 8,743
	3,335 817 3,335 817 (1,162) 9,641 (2,691) 9,560
	(1,409) 9,337 (2,691) 9,560 247 304 - -
	(1,162) 9,641 (2,691) 9,560
	(3.8)cents 26.1 cents
	(3.7)cents 25.8 cents
	(12.6)cents 23.8 cents
	(12.6)cents 23.5 cents
	34.0 cents 36.0 cents

The income statements are to be read in conjunction with the accompanying notes to the financial statements.

Coventry Group Ltd and its controlled entities Statements of changes in equity

For the year ended 30 June 2007

In thousands of AUD *Note* Total equity at the beginning of the financial year Adjustment to reserves, net of tax, on adoption of AASB 132 and AASB 139 Restated total equity at the beginning of the financial year Changes in the fair value of cash flow hedges, net of tax 21 Exchange differences on translation of foreign operations Net income recognised directly in equity (Loss)/profit for the year Total recognised income and expense for the year Transactions with equity holders in their capacity as equity holders Contribution of equity Changes in value of share based payments reserve Dividends provided for or paid Dividends paid to minority interests in controlled entities Total equity at the end of the financial year Total recognised income and expense for the year is attributable to: Members of Coventry Group Ltd 21 Minority interest	Consolidated The Company 2007 2006 2007 2006 166,425 168,488 158,595 158,916
	- (188) - (188)
	166,425 168,300 158,595 158,728
	491 325 491 325 1,331 (1,401) - -
	1,822 (1,076) 491 325 (1,162) 9,641 (2,691) 9,560
	660 8,565 (2,200) 9,885
	13,803 2,724 13,803 2,724 55 127 55 127 (12,489) (12,869) (12,489) (12,869) (371) (422) - -
	998 (10,440) 1,369 (10,018)
	168,083 166,425 157,764 158,595
	369 8,310 (2,200) 9,885 291 255 - -
	660 8,565 (2,200) 9,885

The statements of changes in equity are to be read in conjunction with the accompanying notes to the financial statements.

Coventry Group Ltd and its controlled entities Balance sheets

As at 30 June 2007

In thousands of AUD *Note* Assets Cash and cash equivalents 9 Trade and other receivables 10 Inventories 11 Income tax receivable 12 Total current assets Investments 13 Deferred tax assets 14 Property, plant and equipment 15 Intangible assets 16 Derivatives asset Total non-current assets Total assets Liabilities Trade and other payables 17 Interest-bearing loans and borrowings 18 Employee benefits Income tax payable 12 Provisions 20 Total current liabilities Interest-bearing loans and borrowings 18 Employee benefits Derivatives liability Total non-current liabilities Total liabilities Net assets Equity Issued capital 21 Reserves 21 Retained earnings 21 Total equity attributable to equity holders of the parent Minority interest Total equity	Consolidated The Company 2007 2006 2007 2006 2,356 2,493 178 184 87,982 86,713 90,358 89,830 105,354 100,706 93,482 90,863 1,082 151 1,005 -
	196,774 190,063 185,023 180,877
	- - 9,542 9,542 10,042 10,096 9,719 9,286 50,815 49,662 46,856 45,602 39,024 51,847 27,523 41,425 914 210 914 210
	100,795 111,815 94,554 106,065
	297,569 301,878 279,577 286,942
	36,977 39,726 33,943 37,253 5,164 1,938 5,164 1,938 10,944 10,917 10,444 10,494 - 405 - 398 572 2,069 572 2,069
	53,657 55,055 50,123 52,152
	72,719 76,977 69,000 73,195 3,110 3,406 2,690 2,985 - 15 - 15
	75,829 80,398 71,690 76,195
	129,486 135,453 121,813 128,347
	168,083 166,425 157,764 158,595
	112,676 98,873 112,676 98,873 24,667 22,738 24,241 23,599 27,984 41,978 20,847 36,123
	165,327 163,589 157,764 158,595 2,756 2,836 - -
	168,083 166,425 157,764 158,595

The balance sheets are to be read in conjunction with the accompanying notes to the financial statements.

Coventry Group Ltd and its controlled entities Statements of cash flows

For the year ended 30 June 2007 In thousands of AUD *Note* Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest paid Income taxes paid Net cash from operating activities 28 Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from sale of business Interest received Dividends received Acquisition of business, net of cash acquired 27 Acquisition of property, plant and equipment 15 Acquisition of intangible assets 16 Loans to controlled entities Repayment of loans to controlled entities Net cash from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Issue of shares Dividends paid Dividends paid to outside equity interests 21 Net cash from financing activities Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June 9	Consolidated The Company 2007 2006 2007 2006 589,849 555,465 546,610 500,547 (569,462) (543,029) (530,266) (490,321)
	20,387 12,436 16,344 10,226 (5,163) (4,372) (4,842) (4,003) (5,245) (6,004) (3,857) (4,543)
	9,979 2,060 7,645 1,680
	1,365 1,190 1,318 1,122 7,440 - 7,440 - 240 523 786 933 - - 979 1,965 (418) (24,692) - (16,419) (12,602) (7,919) (12,178) (7,173) (6,033) (12,101) (6,027) (12,089) - - (686) (4,042) - - - 906
	(10,008) (42,999) (8,368) (34,797)
	6,000 39,500 6,000 39,500 (10,254) (329) (9,800) - 9,452 - 9,452 - (8,138) (20,785) (8,138) (20,785) (371) (422) - -
	(3,311) 17,964 (2,486) 18,715
	(3,340) (22,975) (3,209) (14,402) 927 23,902 (1,382) 13,020
	(2,413) 927 (4,591) (1,382)

The statements of cash flows are to be read in conjunction with the accompanying notes to the financial statements.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies

Coventry Group Ltd (the ‘Company’) is a company domiciled in Australia. The consolidated financial report of the Company for the financial year ended 30 June 2007 comprises the Company and its controlled entities (together referred to as the ‘consolidated entity’).

The financial report was authorised for issue by the directors on 24 August 2007.

(a) Statement of compliance

This financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001.

(b) Basis of preparation

The financial report is presented in Australian dollars. The financial report is prepared on the historical cost basis except that derivative financial instruments are stated at their fair value.

The Company is of a kind referred to in ASIC Class Order (‘CO’) 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005 and CO 06/51 effective 31 January 2007) and in accordance with that, amounts in the financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the consolidated entity.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(b) Basis of preparation (continued)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of Australian Accounting Standards that have a significant effect on the financial report, and estimates with a significant risk of material adjustment in the next year, are discussed in note 1(w).

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report.

(c) Basis of consolidation

Controlled Entities

Controlled entities are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of controlled entities are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in controlled entities are carried at their cost of acquisition in the Company’s financial statements, net of impairment writedowns.

Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

(d) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in the translation reserve.

Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges, are taken to the translation reserve. They are released into the income statement upon disposal.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(e) Derivative financial instruments

The consolidated entity uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investing activities. In accordance with its treasury policy, the consolidated entity does not hold or use derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see accounting policy 1(f)).

The fair value of interest rate swaps is the estimated amount that the consolidated entity would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

(f) Hedging

On entering into a hedging relationship, the consolidated entity formally designates and documents the hedge relationship and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the forecasted transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability.

If a hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a financial liability, then the associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss eg. when interest income or expense is recognised.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(f) Hedging (continued)

For cash flow hedges, other than those covered by the preceding two paragraphs, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss is recognised immediately in the income statement.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement.

Hedge of monetary assets and liabilities

When a derivative financial instrument is used to hedge economically the foreign exchange exposure of a recognised monetary asset or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in the income statement.

When an anticipated transaction is no longer expected to occur as designated, the deferred gains or losses relating to the hedge transaction are recognised immediately in the income statement.

Where a hedge transaction is terminated early and the anticipated transaction is still expected to occur as designated, the deferred gains or losses that arose on the hedge prior to its termination continue to be deferred and are included in the measurement of the purchase or sale or interest transaction when it occurs. Where a hedge transaction is terminated early because the anticipated transaction is no longer expected to occur as designated, deferred gains or losses that arose on the hedge prior to its termination are included in the income statement for the period.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(g) Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. An impairment allowance is made for obsolete, damaged and slow moving inventories.

The cost of inventories is based on weighted average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Trade and other receivables

Trade and other receivables are stated at amortised cost less impairment losses.

(j) Property, plant and equipment Owned assets

Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. The cost of acquired assets includes (i) the initial estimate at the time of installation and during the period of use, when relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and (ii) changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate.

Certain items of property, plant and equipment that had been revalued to fair value on or prior to 1 July 2004, the date of transition to AIFRSs, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.

Where parts of an item of property plant and equipment have different useful lives they are accounted for as separate items of property, plant and equipment.

Leased assets

Leases in terms of which the consolidated entity assumes substantially all of the risks and rewards of ownership are classified as finance leases. The consolidated entity does not have any finance leases. Other leases are classified as operating leases.

Subsequent costs

The consolidated entity recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred, if it is probable that the future economic benefits embodied within the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(j)[Property, plant and equipment (continued) ]

Depreciation

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated.

The depreciation rates used for each class of depreciable assets for the current and comparative periods are:

Class of Fixed Asset Depreciation Rate - Plant and Equipment 5% - 40% - Buildings 2%

Where appropriate, the residual value is reassessed at least annually.

Disposal

The gain or loss on the disposal of property, plant and equipment is recognised on a net basis and is included in other income or other expenses.

(k) Intangible assets

Goodwill

Business combinations prior to 1 July 2004

Goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 July 2004 has not been reconsidered in preparing the consolidated entity’s opening AIFRS balance sheet at 1 July 2004.

Business combinations since 1 July 2004

All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is no longer amortised but is tested annually for impairment.

Negative goodwill arising on acquisition is recognised directly in profit or loss.

Computer software

Computer software comprises licence costs and direct costs incurred in preparing for the operation of that software, including associated process re-engineering costs, and is stated at cost less accumulated amortisation and impairment losses.

Other intangible assets

Other intangible assets that are acquired by the consolidated entity are stated at cost less accumulated amortisation and impairment losses.

Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(k) Intangible assets (continued)

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortisation of intangibles

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill is systematically tested for impairment at each annual balance sheet date. Other intangible assets are amortised from the date that they are available for use. In the current and comparative periods, goodwill was estimated to have an indefinite useful life, distribution rights was estimated to have a useful life of 10 years and computer software was estimated to have a useful life of 3 to 7 years.

(l) Impairment

The carrying amounts of the consolidated entity’s assets, other than inventories (refer note 1(h)) and deferred tax assets (refer note 1(u)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill, intangible assets that have an indefinite life, and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.

Calculation of recoverable amount

Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Receivables that are not assessed as impaired are placed into portfolios of assets with similar risk profiles and a collective assessment of impairment is performed. Non-significant receivables are not individually assessed. Instead impairment testing is performed by placing non-significant receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any effects of conditions existing at each balance date.

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(l) Impairment (continued)

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(m) Interest bearing loans and borrowings

Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

(n) Employee benefits

Provision is made for the consolidated entity’s liability for employee benefits arising from services rendered by employees to balance date. These benefits include wages and salaries, annual leave and long service leave. Sick leave is non-vesting and has not been provided for. Employee benefits expected to be settled within one year have been measured at the undiscounted amounts expected to be paid when the liabilities are settled including related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits including related on-costs.

The consolidated entity makes contributions to accumulation style superannuation funds for its employees. These contributions are charged through the income statement.

A liability is recognised for short term incentive plans. The calculation is based on the achievement of annually agreed key performance indicators by eligible employees.

The long term incentive plan allows specified employees to acquire shares of the Company subject to the achievement of internal and external performance hurdles. The fair value of shares granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the shares. The amount recognised as an expense is adjusted to reflect the actual number of shares that vest, and for those shares subject to internal performance hurdles, the probability of achieving those hurdles as at the reporting date. The value of shares that are yet to vest are recorded in a share based payments reserve and transferred to share capital once vested. The fair value of the shares granted is measured based on the Black-Scholes formula, taking into account the terms and conditions upon which the shares were granted.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(o) Provisions

A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

Warranties

Provisions for warranty claims are made for claims received and claims expected to be received in relation to sales made prior to reporting date, based on historical claim rates, adjusted for specific information arising from internal quality assurance processes.

Surplus lease space

Provision is made for non-cancellable operating lease rentals payable on surplus leased premises when it is determined that no substantive future benefit will be obtained from its occupancy and sub-lease rentals do not recover the full rental costs.

The estimate is calculated based on discounted net future cash flows, using the interest rate implicit in the lease or an estimate thereof.

Dividends

A provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the entire undistributed amount, regardless of the extent to which they will be paid in cash.

Restructuring

A provision for restructuring is recognised when the consolidated entity has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

Make-good

Provision for make-good in respect of leased properties is recognised based on the estimated cost to be incurred to restore premises to the required condition under the relevant lease agreements.

(p) Trade and other payables

Trade and other payables are stated at amortised cost.

Trade payables are non-interest bearing and are normally settled within 60-day terms.

(q)[Revenue ]

Revenues are recognised at the fair value of the consideration receivable net of the amount of goods and services tax payable to the taxation authority.

Revenue from the sale of goods is recognised upon delivery of the goods to customers.

Rental income is recognised in the income statement on a straight-line basis over the term of the lease.

(r)[Operating lease payments ]

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(s) Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement (see accounting policy 1(f)). Borrowing costs are expensed as incurred and included in net financing costs.

Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established.

(t) Segment reporting

A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

(u) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Tax consolidation

The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 November 2002 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Coventry Group Ltd.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the controlled entities is assumed by the head entity in the tax-consolidated group and recognised by the Company as an equity contribution or distribution.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(u) Income tax (continued)

The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only.

(v) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.

(w) Accounting estimates and judgements

Management discussed and agreed with the Audit and Risk Committee the development, selection and disclosure of the consolidated entity’s critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Key sources of estimation uncertainty

Note 16 contains information about the assumptions and their risk factors relating to goodwill impairment.

Impairment of goodwill

The consolidated entity assesses whether goodwill is impaired at least annually in accordance with the accounting policy in note 1(l). These calculations involve an estimation of the recoverable amount of the cash-generating units to which the goodwill is allocated.

(x) Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the comparative period.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies (continued)

(y) New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2007, but have not been applied in preparing this financial report:

AASB 7 Financial Instruments: Disclosures (August 2005) replaces the presentation requirements of financial instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007, and will require extensive additional disclosures with respect to the Group’s financial instruments and share capital.
AASB 2005-10 Amendments to Australian Accounting Standards (September 2005) makes consequential amendments to AASB 132 Financial Instruments: Disclosure and Presentation, AASB 101 Presentation of Financial Statements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings Per Share, AASB 139 Financial Instruments: Recognition and Measurement, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 4 Insurance Contracts , AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts arising from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007 and is expected to only impact disclosures contained within the consolidated financial report.
AASB 8 Operating Segments replaces the presentation requirements of segment reporting in AASB 114 Segment Reporting. AASB 8 is applicable for annual reporting periods beginning on or after 1 January 2009 and is not expected to have an impact on the financial results of the Company and the Group as the standard is only concerned with disclosures.
AASB 2007-3 Amendments to Australian Accounting Standards arsing from AASB 8 makes amendments to AASB 5 Non-current Assets Held for Sale and Discontinued Operations, AASB 6 Exploration for and Evaluation of Mineral Resources, AASB 102 Inventories, AASB 107 Cash Flow Statements, AASB 119 Employee Benefits, AASB 127 Consolidated and Separate Financial Statements, AASB 134 Interim Financial Reporting , AASB 136 Impairment Assets, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. AASB 2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 8 Operating Segments . This standard is only expected to impact disclosures contained within the financial report.
Interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss recognised in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. Interpretation 10 will become mandatory for the Group’s 2008 financial statements, and will apply to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date that the Group first applied the measurement criteria of AASB 136 and AASB 139 respectively (i.e. 1 July 2004 and 1 July 2005, respectively).

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

2. Segment reporting

Segment information is presented in respect of the consolidated entity’s business segments. The format is based on the consolidated entity’s management and internal reporting structure.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

The consolidated entity comprises the following main business segments:

Automotive Parts Distribution
Industrial Products Distribution
Bitumen Products (Discontinued)
Gasket Manufacturing

The consolidated entity operates primarily in one geographical segment, being Australia.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

Segment reporting (continued) Automotive parts distribution Industrial products distribution Bitumen products Gasket manufacturing Eliminations 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 240,847 259,718 255,639 216,493 16,972 16,574 9,869 9,189 - - (29) 597 1,470 703 - - 1,134 2,073 (2,575) (3,373) 1,215 1,310 1,441 883 281 275 128 118 - -	Consolidated Less Bitumen Products (Discontinued) 2007 2006 2007 2006 523,327 501,974 16,972 16,574 - - - - 3,065 2,586 281 275	Continued Operations 2007 2006 506,355 485,400 - - 2,784 2,311
242,033 261,625 258,550 218,079 17,253 16,849 11,131 11,380 (2,575) (3,373)	526,392 504,560 17,253 16,849	509,139 487,711
- - - - - - - - - -	96 - - -	96 -
(8,228) (1,940) 22,859 20,082 1,351 1,172 1,190 1,488 - -	526,488 504,560 17,172 20,802 1,351 1,172	509,235 487,711
		15,821 19,630
	(13,300) (2,870)	(13,300) (2,870)
90,055 111,855 144,796 125,202 2,952 7,534 10,124 10,430 (1,175) (783)	3,872 17,932 1,351 1,172	2,521 16,760
	(4,954) (3,245) - - (1,082) 14,687 1,351 1,172 (2,471) (5,046) (407) (355)	(4,954) (3,245)
		(2,433) 13,515 (2,064) (4,691)
	2,391 - 2,391 -	- -
	(1,162) 9,641 3,335 817	(4,497) 8,824
	246,752 254,238 50,817 47,640 297,569 301,878 58,958 54,966 70,528 80,487 129,486 135,453
20,839 27,722 36,998 25,156 1,136 1,808 1,160 1,063 (1,175) (783)

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

2. Segment reporting (continued) Industry Segments Automotive parts distribution Industrial products distribution Bitumen products Gasket manufacturing Eliminations In thousands of AUD 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Acquisition of property, plant and equipment, intangibles and other non-current segment assets 7,945 3,247 3,408 16,352 385 513 181 242 - - Unallocated corporate acquisition of non-current assets Total acquisition of property, plant and equipment, intangibles and other non-current assets Segment depreciation and amortisation expense 1,849 2,117 2,076 1,946 531 488 363 419 - - Unallocated net corporate depreciation and amortisation expense Total depreciation and amortisation expense Segment other non-cash expenses 261 4,626 1,901 802 (52) (20) (10) (79) - - Unallocated corporate non-cash expenses Total other non-cash expenses Individually material items included in net profit before interest and tax: Impairment loss on goodwill of automotive parts distribution business 8,835 1,486 - - - - - - - - Loss on exiting NSW automotive parts distribution business 728 1,940 - - - - - - - - Executive termination payment - - - - - - - - - - Write down on Company-wide information system and expenditure related to non recurring IT contracts - - - - - - - - - - 9,563 3,426 - - - - - - - -	2. Segment reporting (continued) Industry Segments Automotive parts distribution Industrial products distribution Bitumen products Gasket manufacturing Eliminations In thousands of AUD 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Acquisition of property, plant and equipment, intangibles and other non-current segment assets 7,945 3,247 3,408 16,352 385 513 181 242 - - Unallocated corporate acquisition of non-current assets Total acquisition of property, plant and equipment, intangibles and other non-current assets Segment depreciation and amortisation expense 1,849 2,117 2,076 1,946 531 488 363 419 - - Unallocated net corporate depreciation and amortisation expense Total depreciation and amortisation expense Segment other non-cash expenses 261 4,626 1,901 802 (52) (20) (10) (79) - - Unallocated corporate non-cash expenses Total other non-cash expenses Individually material items included in net profit before interest and tax: Impairment loss on goodwill of automotive parts distribution business 8,835 1,486 - - - - - - - - Loss on exiting NSW automotive parts distribution business 728 1,940 - - - - - - - - Executive termination payment - - - - - - - - - - Write down on Company-wide information system and expenditure related to non recurring IT contracts - - - - - - - - - - 9,563 3,426 - - - - - - - -	Consolidated 2007 2006 11,919 20,354
	1,849 2,117 2,076 1,946 531 488 363 419 - -	6,335 13,232
		18,254 33,586
		4,819 4,970
	261 4,626 1,901 802 (52) (20) (10) (79) - -	3,335 2,270
		8,154 7,240
		2,100 5,329
	8,835 1,486 - - - - - - - - 728 1,940 - - - - - - - - - - - - - - - - - - - - - - - - - - - -	(220) 52
		1,880 5,381 8,835 1,486 728 1,940 500 - 10,352 -
	9,563 3,426 - - - - - - - -	20,415 3,426

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

3. Other income

In thousands of AUD Net gain on disposal of property, plant and equipment Other income	Consolidated The Company 2007 2006 2007 2006 - 313 - 294 125 374 125 177
	125 687 125 471

4. Individually material items included in profit before tax

In thousands of AUD *Note* Net gain on sale of Bitumen business (tax effect $609,000) 25 Impairment loss on goodwill of automotive parts distribution business (nil tax effect)(i) 16 Loss from exiting New South Wales automotive parts distribution business (tax effect of $218,000 for the Company and consolidated entity) (2006: tax effect of $582,000 for the Company and consolidated entity) Write down of Company-wide information system and expenditure related to non recurring IT contracts (tax effect of $3,106,000)(ii) Impairment loss on advance to controlled entity (nil tax effect) Executive termination payment (tax effect $150,000) 29	Consolidated The Company 2007 2006 2007 2006 3,000 - 3,000 - (8,835) (1,486) (8,835) (1,486) (728) (1,940) (728) (1,940) (10,352) - (10,352) - - - - (1,120) (500) - (500) -
	(17,415) (3,426) (17,415) (4,546)

In thousands of AUD
Note
Net gain on sale of Bitumen business (tax
effect $609,000)
25
Impairment loss on goodwill of automotive
parts distribution business
(nil tax effect)(i)
16
Loss from exiting New South Wales
automotive parts distribution business (tax
effect of $218,000 for the Company and
consolidated entity) (2006: tax effect of
$582,000 for the Company and consolidated
entity)
Write down of Company-wide information
system and expenditure related to non
recurring IT contracts (tax effect of
$3,106,000)(ii)
Impairment loss on advance to controlled
entity (nil tax effect)
Executive termination payment (tax effect
$150,000)
29

Consolidated
The Company
2007
2006
2007
2006
3,000
-
3,000
-
(8,835)
(1,486)
(8,835)
(1,486)
(728)
(1,940)
(728)
(1,940)
(10,352)
-
(10,352)
-
-
-
-
(1,120)
(500)
-
(500)
-

(17,415)
(3,426)
(17,415)
(4,546)

(i) Due to lower than expected sales, an impairment loss of $8,835,000 has been recognised during the period to reduce the carrying amount of goodwill of the automotive parts distribution businesses in Queensland and Northern Territory to recoverable amount. The impairment tests for those businesses were based on value in use calculations, in which projected pre-tax cash flows for the next five years, together with a terminal value based on year five cash flows, were discounted at a pre-tax discount rate of 11.97%. The projected cash flows are based on detailed operating budgets for the year ending 30 June 2008 approved by the board, and higher level forecasts for the following four years approved by management.

The carrying amount of the Queensland and Northern Territory automotive parts distribution business goodwill has now been written down to nil. Further details are set out in note 16.

(ii ) Details of the Company-wide information system write off are set out in note 16.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

5. Auditors’ remuneration

In AUD Audit services Auditors of the Company KPMG: Audit and review of financial reports Other services Auditors of the Company KPMG: Project assurance services	Consolidated The Company 2007 2006 2007 2006 317,231 298,940 246,582 244,940
	10,000 204,429 10,000 204,429

6. Net financing costs

In thousands of AUD Interest income from controlled entities Interest income from other entities Dividends from controlled entities Financial income Interest expense Financial expenses Net financing costs	Consolidated The Company 2007 2006 2007 2006 - - 694 603 240 523 92 330 - - 979 1,965
	240 523 1,765 2,898
	5,194 3,768 4,873 3,398
	5,194 3,768 4,873 3,398
	4,954 3,245 3,108 500

7. Income tax expense Recognised in the income statement In thousands of AUD Current tax expense Current year Adjustments for prior years Deferred tax expense Origination and reversal of temporary differences Exchange rate movements on temporary differences brought forward Effect of tax rates applicable to foreign controlled entity Income tax expense excluding tax on sale of discontinued operation Income tax expense from continuing operations Income tax expense from discontinuing operation (excluding gain on sale) 25 Income tax on gain on sale of discontinued operation 25 Total income tax expense in income statement	Consolidated The Company 2007 2006 2007 2006 3,361 6,264 1,941 5,033 (27) (10) (27) (10)
	3,334 6,254 1,914 5,023
	(820) (1,185) (756) (1,106) (20) (23) - - (23) - - -
	(863) (1,208) (756) (1,106)
	2,471 5,046 1,158 3,917
	2,064 4,691 751 3,562 407 355 407 355
	2,471 5,046 1,158 3,917 609 - 609 -
	3,080 5,046 1,767 3,917

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

7. Income tax expense (continued)

Numerical reconciliation between tax expense and pre-tax net profit

In thousands of AUD Operating profit (loss) before tax Income tax calculated at 30% Increase in income tax expense due to: Non-deductible expenditure Assessable profit on sale of property Non-deductible provision for loss on advance to controlled entity Non-deductible impairment loss Over provision from prior year Effect of higher tax rate applicable to foreign controlled entity Decrease in income tax expense due to: Rebatable dividends Non-assessable dividends Capital losses utilised not previously brought to account as a deferred tax asset Tax benefit on losses transferred from controlled entity Income tax expense	Consolidated The Company 2007 2006 2007 2006 1,918 14,687 (924) 13,477 575 4,406 (277) 4,043 122 152 67 131 7 13 7 13 - - - 336 2,651 445 2,651 445 (27) (10) (27) (10) 112 74 - - - - (294) (334) - - - (256) (360) (34) (360) (34) - - - (417)
	3,080 5,046 1,767 3,917

In thousands of AUD
Operating profit (loss) before tax
Income tax calculated at 30%
Increase in income tax expense due to:
Non-deductible expenditure
Assessable profit on sale of property
Non-deductible provision for loss on
advance to controlled entity
Non-deductible impairment loss
Over provision from prior year
Effect of higher tax rate
applicable to foreign controlled entity
Decrease in income tax expense due to:
Rebatable dividends
Non-assessable dividends
Capital losses utilised not previously
brought to account as a deferred tax
asset
Tax benefit on losses transferred from
controlled entity
Income tax expense

Consolidated
The Company
2007
2006
2007
2006
1,918
14,687
(924)
13,477
575
4,406
(277)
4,043
122
152
67
131
7
13
7
13
-
-
-
336
2,651
445
2,651
445
(27)
(10)
(27)
(10)
112
74
-
-
-
-
(294)
(334)
-
-
-
(256)
(360)
(34)
(360)
(34)
-
-
-
(417)

3,080
5,046
1,767
3,917

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

8. Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 30 June 2007 was based on the loss attributable to ordinary shareholders of $1,409,000 (2006: profit $9,337,000) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2007 of 37,548,000 (2006: 35,805,000), calculated as follows:

(Loss)/profit attributable to ordinary shareholders

In thousands of AUD (Loss)/profit for the period (Loss)/profit attributable to ordinary shareholders Weighted average number of ordinary shares In thousands of shares *Note* Issued ordinary shares at 1 July 21 Effect of shares issued in October 2006 Effect of shares issued in March 2007 Effect of shares issued in April 2007 Weighted average number of ordinary shares at 30 June	Consolidated 2007 2006 (1,409) 9,337
	(1,409) 9,337
	2007 2006 35,950 35,469 1,117 189 406 106 75 41
	37,548 35,805

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2007 was based on loss attributable to ordinary shareholders of $1,409,000 (2006: profit $9,337,000) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2007 of 37,652,000 (2006: 36,238,000), calculated as follows:

Weighted average number of ordinary shares (diluted) In thousands of shares Weighted average number of ordinary shares at 30 June (basic) Effect of share rights on issue related to long term incentive plan Weighted average number of ordinary shares (diluted) at 30 June Earnings per share Basic (loss)/earnings per share Diluted (loss)/earnings per share	2007 2006 37,548 35,805 104 433
	37,652 36,238
	(3.8) cents 26.1 cents (3.7) cents 25.8 cents

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

9. Cash and cash equivalents

In thousands of AUD Cash on hand Bank balances Call deposits Cash and cash equivalents Bank overdrafts repayable on demand Cash and cash equivalents in the statement of cash flows	Consolidated The Company 2007 2006 2007 2006 139 144 131 137 1,239 1,247 - - 978 1,102 47 47
	2,356 2,493 178 184 (4,769) (1,566) (4,769) (1,566)
	(2,413) 927 (4,591) (1,382)

10. Trade and other receivables

Trade and other receivables
In thousands of AUD Other trade receivables and prepayments Allowance for impairment losses Receivables due from controlled entities Allowance for impairment losses	Consolidated The Company 2007 2006 2007 2006 90,965 89,154 83,605 83,197 (2,983) (2,441) (2,731) (2,235)
	87,982 86,713 80,874 80,962 - - 9,484 9,988 - - - (1,120)
	- - 9,484 8,868
	87,982 86,713 90,358 89,830

11. Inventories

Inventories
In thousands of AUD Raw materials and consumables Finished goods Allowance for impairment losses	Consolidated The Company 2007 2006 2007 2006 487 524 - - 112,135 106,163 100,239 96,387 (7,268) (5,981) (6,757) (5,524)
	104,867 100,182 93,482 90,863
	105,354 100,706 93,482 90,863

Normal purchasing terms for finished goods include retention of title clauses.

12. Current tax assets and liabilities

The current tax asset for the consolidated entity of $1,082,000 (2006: $151,000) and for the Company of $1,005,000 (2006: $nil) represent the amount of income taxes recoverable in respect of the current and prior financial periods and that arise from the payment of tax in excess of the amounts due to the relevant tax authority. The current tax liability for the consolidated entity of $nil (2006: $405,000) and for the Company of $nil (2006: $398,000) represent the amount of income taxes payable in respect of current and prior financial periods.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

13. Investments

Investments
In thousands of AUD Investments in controlled entities – at cost Allowance for impairment losses	Consolidated The Company 2007 2006 2007 2006 - - 9,542 44,769 - - - (35,227)
	- - 9,542 9,542

14. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Consolidated In thousands of AUD Trade and other receivables Inventories Property, plant and equipment Intangible assets Employee benefits Trade and other payables Provisions Other items Translation reserve Tax value of loss carry forwards recognised Tax (assets) / liabilities Set off of deferred tax liability Net deferred tax asset	Assets Liabilities Net 2007 2006 2007 2006 2007 2006 (880) (708) 282 62 (598) (646) (3,782) (2,446) 551 677 (3,231) (1,769) - (119) 2,182 2,202 2,182 2,083 - - 120 - 120 - (4,224) (4,302) - - (4,224) (4,302) (279) (137) - - (279) (137) (172) (653) - - (172) (653) (1) (4) 24 - 23 (4) - (369) 182 - 182 (369) (4,045) (4,299) - - (4,045) (4,299)
	(13,383) (13,037) 3,341 2,941 (10,042) (10,096) 3,341 2,941 (3,341) (2,941) - -
	(10,042) (10,096) - - (10,042) (10,096)

The Company In thousands of AUD Trade and other receivables Inventories Property, plant and equipment Intangible assets Employee benefits Trade and other payables Provisions Other items Tax value of loss carry forwards recognised Tax (assets) / liabilities Set off of deferred tax liability Net deferred tax asset	Assets Liabilities Net 2007 2006 2007 2006 2007 2006 (805) (655) 274 62 (531) (593) (3,627) (2,302) 551 653 (3,076) (1,649) - (120) 2,171 2,182 2,171 2,062 - - 120 - 120 - (3,941) (4,043) - - (3,941) (4,043) (245) (107) - - (245) (107) (172) (653) - - (172) (653) - (4) - - - (4) (4,045) (4,299) - - (4,045) (4,299)
	(12,835) (12,183) 3,116 2,897 (9,719) (9,286) 3,116 2,897 (3,116) (2,897) - -
	(9,719) (9,286) - - (9,719) (9,286)

The Company has recognised a deferred tax asset of $9,719,000 for carried forward tax losses and temporary differences. While the Company has made a loss before tax for the current period of $924,000, after adjusting for one off significant items as disclosed in note 4, the profit before tax would have been $16,491,000, thereby evidencing the recoverability of tax losses.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

14. Deferred tax assets and liabilities (continued)

Movement in temporary differences during the year

Consolidated

In thousands of AUD Trade, other receivables and derivative assets Inventories Property, plant and equipment Intangibles Employee benefits Trade and other payables Provisions Other items Translation reserve Tax value of loss carry forwards recognised The Company In thousands of AUD Trade, other receivables and derivative assets Inventories Property, plant and equipment Intangibles Employee benefits Trade and other payables Provisions Other items Tax value of loss carry forwards recognised	Balance 1 July 05 Recognised through business combination Recognised in income Recognised in equity Balance 30 June 06 Recognised through business combination Recognised in income Recognised in equity Balance 30 June 07 (842) - 134 62 (646) - (158) 206 (598) (1,380) 432 (821) - (1,769) - (1,462) - (3,231) 2,308 - (225) - 2,083 - 99 - 2,182 - - - - - - 120 - 120 (3,639) (299) (364) - (4,302) - 78 - (4,224) (341) - 208 (4) (137) - (146) 4 (279) (123) (17) (513) - (653) 113 368 - (172) (4) 23 (23) - (4) - 27 - 23 208 - - (577) (369) - - 551 182 (4,718) - 419 - (4,299) - 254 - (4045)
	(8,531) 139 (1,185) (519) (10,096) 113 (820) 761 (10,042)
	Balance 1 July 05 Recognised through business combination Recognised in income Recognised in equity Balance 30 June 06 Recognised through business combination Recognised in income Recognised in equity Balance 30 June 07 (659) (97) 101 62 (593) - (144) 206 (531) (1,066) 180 (763) - (1,649) - (1,427) - (3,076) 2,279 - (217) - 2,062 - 109 - 2,171 - - - - - - 120 - 120 (3,219) (466) (358) - (4,043) - 102 - (3,941) (302) (37) 236 (4) (107) - (142) 4 (245) (79) (50) (524) - (653) 113 368 - (172) (4) - - - (4) - 4 - - (4,718) - 419 - (4,299) - 254 - (4,045)
	(7,768) (470) (1,106) 58 (9,286) 113 (756) 210 (9,719)

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

15. Property, plant and equipment

In thousands of AUD Cost Balance at 1 July 2005 Acquisitions through business combinations Acquisitions of net assets of controlled entity Other acquisitions Transfer from capital works in progress Disposals Effect of movements in foreign exchange Balance at 30 June 2006 Balance at 1 July 2006 Acquisitions through business combinations Other acquisitions Disposals Effect of movements in foreign exchange Balance at 30 June 2007	Consolidated The Company Land and buildings Plant and equipment Under construction Total Land and buildings Plant and equipment Total 23,060 62,508 19 85,587 20,760 50,148 70,908 400 1,649 - 2,049 400 1,373 1,773 - - - - - 3,602 3,602 79 8,612 - 8,691 79 7,860 7,939 - 19 (19) - - - - (115) (14,988) - (15,103) (115) (12,357) (12,472) - (53) - (53) - - -
	23,424 57,747 - 81,171 21,124 50,626 71,750

	23,424 57,747 - 81,171 21,124 50,626 71,750
	- 23 - 23 - - -
	10 12,592 - 12,602 10 12,168 12,178
	(458) (14,107) - (14,565) (458) (13,877) (14,335)
	- 273 - 273 - - -
	22,976 56,528 - 79,504 20,676 48,917 69,593

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

15. Property, plant and equipment (continued)

In thousands of AUD Depreciation and impairment losses Balance at 1 July 2005 Depreciation charge for the year Disposals Balance at 30 June 2006 Balance at 1 July 2006 Depreciation charge for the year Disposals Effect of movements in foreign exchange Balance at 30 June 2007 Carrying amounts At 1 July 2005 At 30 June 2006 At 1 July 2006 At 30 June 2007	Consolidated The Company Land and buildings Plant and equipment Under construction Total Land and buildings Plant and equipment Total 1,624 38,187 - 39,811 1,440 31,254 32,694 285 5,634 - 5,919 255 4,843 5,098 (7) (14,214) - (14,221) (7) (11,637) (11,644)
	1,902 29,607 - 31,509 1,688 24,460 26,148

	1,902 29,607 - 31,509 1,688 24,460 26,148
	280 5,510 - 5,790 250 4,997 5,247
	(53) (8,745) - (8,798) (52) (8,606) (8,658)
	- 188 - 188 - - -
	2,129 26,560 - 28,689 1,886 20,851 22,737
	21,436 24,321 19 45,776 19,320 18,894 38,214
	21,522 28,140 - 49,662 19,436 26,166 45,602

	21,522 28,140 - 49,662 19,436 26,166 45,602
	20,847 29,968 - 50,815 18,790 28,066 46,856

Security

As at 30 June 2007, property, plant and equipment with a carrying amount of $47,787,000 (2006: $46,428,000) was subject to various security charges in relation to the consolidated entity’s finance facilities.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

16. Intangible assets

In thousands of AUD *Note* Cost Balance at 1 July 2005 Acquisitions through business combinations Additions Effect of movements in foreign exchange Balance at 30 June 2006 Balance at 1 July 2006 Acquisitions through business combinations . 27 Additions Write off Effect of movements in foreign exchange Balance at 30 June 2007	Consolidated The Company Goodwill Distribution rights Customer contracts Computer software Total Goodwill Distribution rights Computer software Total 30,434 641 - 2,909 33,984 21,843 641 2,721 25,205 10,360 - 69 - 10,429 8,078 - - 8,078 - - - 12,101 12,101 - - 12,089 12,089 (496) - - (1) (497) - - - -
	40,298 641 69 15,009 56,017 29,921 641 14,810 45,372

	40,298 641 69 15,009 56,017 29,921 641 14,810 45,372
	- - - 3 3 - - - -
	397 - - 5,636 6,033 397 - 5,630 6,027
	- - - (9,758) (9,758) - - (9,758) (9,758)
	1,094 - - 2 1,096 - - - -

	41,789 641 69 10,892 53,391 30,318 641 10,682 41,641

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

16. Intangible assets – (continued)

In thousands of AUD Amortisation and impairment losses Balance at 1 July 2005 Amortisation for the year Impairment charge Balance at 30 June 2006 Balance at 1 July 2006 Amortisation for the year Impairment Amortisation on assets written off Balance at 30 June 2007 Carrying amounts At 1 July 2005 At 30 June 2006 At 1 July 2006 At 30 June 2007	Consolidated The Company Goodwill Distribution rights Customer contracts Computer software Total Goodwill Distribution rights Computer software Total - 200 - 1,169 1,369 - 200 1,050 1,250 - 72 69 1,174 1,315 - 72 1,139 1,211 1,486 - - - 1,486 1,486 - - 1,486
	1,486 272 69 2,343 4,170 1,486 272 2,189 3,947

	1,486 272 69 2,343 4,170 1,486 272 2,189 3,947
	- 72 - 2,290 2,362 - 72 2,264 2,336
	8,835 - - - 8,835 8,835 - - 8,835
	- - - (1,000) (1,000) - - (1,000) (1,000)

	10,321 344 69 3,633 14,367 10,321 344 3,453 14,118
	30,434 441 - 1,740 32,615 21,843 441 1,671 23,955
	38,812 369 - 12,666 51,847 28,435 369 12,621 41,425

	38,812 369 - 12,666 51,847 28,435 369 12,621 41,425
	31,468 297 - 7,259 39,024 19,997 297 7,229 27,523

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

16. Intangible assets (continued)

Impairment and write off

In thousands of AUD Write off of Company-wide information system(i) Impairment of goodwill(ii)	Consolidated The Company 2007 2006 2007 2006 8,757 - 8,757 - 8,835 1,486 8,835 1,486
	17,592 1,486 17,592 1,486

(i) In April 2007 the Company announced the review of its major projects. This included the status of the implementation of the Company wide information system. From that review the Company has concluded that a number of key deliverables have not been successfully completed, have been abandoned or will require additional work and remediation. The review analysed the costs incurred relating to those areas of the implementation project and determined that they do not satisfy the intangible asset recognition criteria. Accordingly, after reversing previous amortisation, a total of $8,757,000 has been expensed. The resulting carrying value of the Company-wide information system is $6,834,000.

(ii) Due to lower than expected sales, an impairment loss of $8,835,000 (2006: $1,486,000) has been recognised during the period to reduce the carrying amount of goodwill of automotive parts distribution businesses in Queensland and Northern Territory to recoverable amount.

The following units have significant carrying amounts of goodwill:

In thousands of AUD Queensland fastener distribution Western Australia and Northern Territory fastener distribution New Zealand fastener distribution Australia and New Zealand cabinet and furniture hardware distribution Northern Territory automotive parts distribution Queensland automotive parts distribution Multiple units without significant goodwill	Consolidated The Company 2007 2006 2007 2006 3,714 3,714 3,714 3,714 4,192 4,192 4,450 4,450 10,950 9,930 - - 5,660 5,190 4,881 4,485 - 6,727 - 6,727 - 2,107 - 2,107 6,952 6,952 6,952 6,952
	31,468 38,812 19,997 28,435

The impairment tests for the cash generating units separately identified above are based on value in use calculations, in which projected pre-tax cash flows for the next five years, together with a terminal value based on year five cash flows, have been discounted at a pre-tax discount rate of 11.97% (2006: 11.30%). The projected cash flows are based on detailed operating budgets for the year ending 30 June 2008 approved by the Board, and higher level forecasts for the following four years approved by management.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements 16. Intangible assets (continued)

The key assumptions used in the value in use calculations are as follows:

Cash Generating Units	Key Assumptions	Basis For Determining Values Assigned to Each Key Assumption
Queensland fastener distribution Western Australia and Northern Territory fastener distribution New Zealand fastener distribution Australia and New Zealand cabinet and furniture hardware distribution	Projected gross margins Projected sales growth Projected expenses/sales ratio	Based on average gross margins achieved in the period immediately before the budget period, adjusted for known changes in purchasing terms and the expected level of competition. Based on regional economic growth forecast and maintaining existing market share, except where new competition is expected. Based on expenses/sales ratio experienced in period immediately before the budget period, adjusted for known changes in expenses and expected impact of sales volumegrowth.
Northern Territory automotive parts distribution	Projected gross margins Projected sales growth Projected expenses/sales ratio	Based on average gross margins achieved in the period immediately before the budget period, adjusted for known changes in purchasing terms, expected level of competition, and expected changes to sales mix. Based on impact of planned marketing initiatives to increase market share in the short- term, and thereafter based on regional economic growth. Based on expenses/sales ratio experienced in period immediately before the budget period, adjusted for known changes in expenses and expectedimpact ofsalesvolume growth.
Queensland automotive parts distribution	Projected gross margins Projected sales growth Projected expenses/sales ratio	Based on average gross margins achieved in the period immediately before the budget period, adjusted for known changes in purchasing terms, expected level of competition, and expected changes to sales mix. Based on impact of planned marketing initiatives to increase market share in the medium term, and thereafter based on regional economic growth. Based on expenses/sales ratio experienced in period immediately before the budget period, adjusted for known changes in expenses and expectedimpact ofsalesvolume growth.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

17. Trade and other payables

In thousands of AUD Trade payables Non trade payables and accrued expenses	Consolidated The Company 2007 2006 2007 2006 31,659 32,380 29,321 30,585 5,318 7,346 4,622 6,668
	36,977 39,726 33,943 37,253

18. Interest-bearing loans and borrowings

In thousands of AUD Current Bank overdraft – secured Unsecured loan Non-current Bill acceptance facility - secured Unsecured loan Financing facilities Total facilities available at balance date Bank overdraft Bill acceptance facility Guarantee facility Corporate credit card facility Facilities utilised at balance date Bank overdraft Bill acceptance facility Guarantee facility Corporate credit card facility Facilities not utilised at balance date Bank overdraft Bill acceptance facility Guarantee facility Corporate credit card facility	Consolidated The Company 2007 2006 2007 2006 4,769 1,566 4,769 1,566 395 372 395 372
	5,164 1,938 5,164 1,938
	72,719 76,583 69,000 72,801 - 394 - 394
	72,719 76,977 69,000 73,195
	5,000 5,000 5,000 5,000 82,000 82,000 78,000 74,800 882 882 882 882 365 350 365 350
	88,247 88,232 84,247 81,032
	4,769 1,566 4,769 1,566 72,719 76,583 69,000 72,801 834 730 834 730 - - - -
	78,322 78,879 74,603 75,097
	231 3,434 231 3,434 9,281 5,417 9,000 1,999 48 152 48 152 365 350 365 350
	9,925 9,353 9,644 5,935

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

18. Interest-bearing loans and borrowings (continued)

Financing arrangements

Bank overdraft facility

The bank overdraft facility may be drawn at any time and is repayable on demand. Interest is charged at prevailing market rates.

Bill acceptance facility

The bill acceptance facility is next subject to review on 7 July 2009. Each bill drawn on the facility is discounted at the prevailing market rate at the time of draw-down, with the rate applying for the term of the bill, generally 90 days.

Guarantee facility

Bank guarantees may be arranged from time to time under this facility, whereby the bank guarantees the performance of the consolidated entity in relation to certain contractual commitments, up to the limit specified in each individual guarantee.

Corporate credit card facility

Credit cards for business use may be issued under this facility from time to time.

Securities

All of the above facilities are secured by fixed and floating charges over the assets and undertakings of the parent entity, a general security agreement from Coventry Group (NZ) Limited, and by a deed of cross guarantee between those companies.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

19. Share based payments

Long term incentives are provided to senior management, including key management personnel, through the Executive Long Term Incentive Plan (“ELTIP”) which was approved by shareholders at the annual general meeting on 5 November 2003. The ELTIP provides for eligible executives (currently 4) to receive fully paid ordinary shares in the Company up to a value of 25% of fixed annual remuneration at the start of the performance period, upon achieving certain performance criteria set by the Board.

Details of the offers made under the ELTIP are as follows:

Description	Number of shares offered	Number of shares forfeited	Vesting conditions
2003 Offer	302,392	261,278	Earnings per share in excess of $1.27 cumulative over 3 years. Total shareholder return over 3 years at least equal to that of the company at the 50thpercentile of the Comparator Group, being the companies comprising the S&P/ASX Small Industrials Index at 1 July 2003. Continuous servicefor3 years.
2004 Offer	90,640	55,511	Earnings per share in excess of $1.55 cumulative over 3 years. Total shareholder return over 3 years at least equal to that of the company at the 50thpercentile of the Comparator Group, being the companies comprising the S&P/ASX Small Industrials Index at 1 July 2004. Continuous servicefor3 years.
2005 Offer	85,203	56,976	Earnings per share in excess of $1.68 cumulative over 3 years. Return on equity of at least 12% for the year ending 30 June 2008. Continuous service for 3years.
2006 Offer	130,583	77,195	Earnings per share in excess of $1.26 cumulative over 3 years. Return on equity of at least 12% for the year ending 30 June 2009. Continuous servicefor3 years.

During the year ended 30 June 2007, 77,195 shares under the 2006 Offer, 56,976 shares under the 2005 Offer, 55,511 shares under the 2004 Offer and 261,278 shares under the 2003 Offer were forfeited. No shares were forfeited in the year ended 30 June 2006.

The fair value of services received in return for the offers of the ELTIP shares has been calculated at the date of grant using a Black-Scholes model incorporating the factors and assumptions detailed below. Non-market and service conditions are not taken into account in the measurement of fair value at grant date of the services received. The fair value of the services is remeasured, having regard to non-market and service conditions only, at each balance sheet date and at settlement date.

Grant date	Expiry date	Fair value	Exercise	Price of	Estimated	Risk free	Dividend
		per share	price	shares on	volatility	interest rate	yield
				grant date
1 July 2004	30 June 2007	$4.71	$0.01	$5.72	24%	5.4%	6.4%
28 June 2006	30 June 2008	$3.52	$0.01	$4.20	25%	5.1%	8.6%
3 October 2006	30 June 2009	$3.41	$0.01	$4.26	23%	5.8%	7.4%

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

19. Share based payments (continued)

The total employee benefits expense recognised for the reporting period under each ELTIP offer is as follows:

In thousands of AUD 2003 Offer – equity settled 2004 Offer – equity settled 2005 Offer – equity settled 2006 Offer – equity settled	Consolidated The Company 2007 2006 2007 2006 - 61 - 61 48 37 48 37 (20) 29 (20) 29 27 - 27 -
	55 127 55 127

20. Provisions

In thousands of AUD Consolidated Balance at 1 July 2006 Provisions made during the year Provisions used during the year Provisions acquired through business combinations Balance at 30 June 2007 The Company Balance at 1 July 2006 Provisions made during the year Provisions used during the year Provisions acquired through business combinations Balance at 30 June 2007	Lease makegood Warranty Restructuring Loss on sublease Total
	381 131 1,235 322 2,069 44 28 - 30 102 (5) (7) (1,235) (352) (1,599) - - - - -
	420 152 - - 572
	381 131 1,235 322 2,069 44 28 - 30 102 (5) (7) (1,235) (352) (1,599) - - - - -
	420 152 - - 572

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

21. Capital and reserves

Reconciliation of movement in capital and reserves

Consolidated In thousands of AUD Balance at 1 July 2005 Effect of change in accounting policy Total recognised income and expense Equity settled share based payment transactions Transfer to reserve Contribution of equity Dividends to shareholders Balance at 30 June 2006 Balance at 1 July 2006 Total recognised income and expense Equity settled share based payment transactions Transfer to reserve Contribution to equity Dividends to shareholders Balance at 30 June 2007	Share capital Translation reserve Realisation reserve Hedging reserve Share-based payments reserve Retained earnings Total for members of the Company Minority interest Total equity 96,149 491 22,822 - 479 45,544 165,485 3,003 168,488 - - - (188) - - (188) - (188) - (1,352) - 325 - 9,337 8,310 255 8,565 - - - - 127 - 127 - 127 - - 34 - - (34) - - - 2,724 - - - - - 2,724 - 2,724 - - - - - (12,869) (12,869) (422) (13,291)
	98,873 (861) 22,856 137 606 41,978 163,589 2,836 166,425

	98,873 (861) 22,856 137 606 41,978 163,589 2,836 166,425

	- 1,287 - 491 - (1,409) 369 291 660
	- - - - 55 - 55 - 55
	- - 96 - - (96) - - -
	13,803 - - - - - 13,803 - 13,803
	- - - - - (12,489) (12,489) (371) (12,860)
	112,676 426 22,952 628 661 27,984 165,327 2,756 168,083

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

21. Capital and reserves (continued)

Reconciliation of movement in capital and reserves

Company In thousands of AUD Balance at 1 July 2005 Effect of change in accounting policy Total recognised income and expense Equity settled share based payment transactions Transfer to reserve Contribution to equity Dividends to shareholders Balance at 30 June 2006 Balance at 1 July 2006 Total recognised income and expense Equity settled share based payment transactions Transfer to reserve Contribution to equity Dividends to shareholders Balance at 30 June 2007	Share capital Realisation reserve Hedging reserve Share-based payments reserve Retained earnings Total equity 96,149 22,822 - 479 39,466 158,916 - - (188) - (188) - - 325 - 9,560 9,885 - - - 127 - 127 - 34 - - (34) - 2,724 - - - - 2,724 - - - - (12,869) (12,869)
	98,873 22,856 137 606 36,123 158,595

	98,873 22,856 137 606 36,123 158,595

	- - 491 - (2,691) (2,200)
	- - - 55 - 55
	- 96 - - (96) -
	13,803 - - - - 13,803
	- - - - (12,489) (12,489)
	112,676 22,952 628 661 20,847 157,764

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

21. Capital and reserves (continued)

Share capital In thousands of shares On issue at 1 July Issued under dividend reinvestment plan Issued under dividend reinvestment plan underwriting agreement Issued under share purchased plan On issue at 30 June – fully paid	The Company Ordinary shares 2007 2006 35,950 35,469 1,095 481 2,050 - 311 -
	39,406 35,950

Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Realisation reserve

The asset realisation reserve includes revaluation increments and decrements previously included in retained earnings, which have been realised upon the disposal of previously revalued non-current assets.

Share based payments reserve

The share based payment reserve comprises the fair value of shares that are yet to vest under share based payments arrangements.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

21. Capital and reserves (continued)

Dividends

Dividends recognised in the current year by the Company are:

In thousands of AUD Cents per share	Total amount Franked / Unfranked Date of payment
2007
Interim 2007 ordinary 17	6,375 Franked 29 March 2007
Final 2006 ordinary 17	6,114 Franked 12October 2006
Total amount	12,489
2006 Interim 2006 ordinary 18 Final 2005 ordinary 18 Total amount	6,447 Franked 23 March 2006 6,422 Franked 23 September 2005 12,869

Franked dividends declared or paid during the year were franked at the tax rate of 30%.

Dividend franking account In thousands of AUD 30 per cent franking credits available to shareholders of Coventry Group Ltd for subsequent financial years	The Company 2007 2006 20,532 23,085

The above available amounts are based on the balance of the dividend franking account at year-end adjusted for franking credits that will arise from the receivable of the current tax receivables.

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to reduce it by $nil (2006: $2,619,000).

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

22. Financial instruments

Exposure to credit, interest rate and currency risks arises in the normal course of the consolidated entity’s business. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The consolidated entity does not require collateral in respect of financial assets.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

Interest rate risk

Hedging

The consolidated entity adopts a policy of ensuring that a large proportion of its exposure to changes in interest rates on borrowings is on a fixed rate basis. Interest rate swaps, denominated in Australian dollars, have been entered into to achieve an appropriate mix of fixed and floating rate exposure within the consolidated entity’s policy. The swaps mature over the next 4 years and have fixed swap rates ranging from 5.86 per cent to 6.38 per cent. At 30 June 2007, the consolidated entity had interest rate swaps with a notional contract amount of $50 million (2006: $35 million).

The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value.

The net fair value of swaps at 30 June 2007 was $914,000 (2006: $195,000) comprising assets of $914,000 (2006: $210,000) and liabilities of $nil (2006: $15,000).

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

22.Financial instruments (continued)

Effective interest rates and repricing analysis

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.

Consolidated	*Note*				2007									2006
		Effective									Effective
		interest		1 year	1 – 2		2 – 3	3 - 4	4 – 5		interest		1 year or	1 – 2	2 – 3		3 - 4	4 – 5
In thousands of AUD		rate	Total	or less	years		years	years	years		rate	Total	less	years	years		years	years
Cash and cash equivalents	9	4.31%	2,356	2,356		-	-	-		-	4.01%	2,493	2,493	-		-	-	-
Bill acceptance facility	18	6.58%	(72,719)	-		-	(72,719)	-		-	6.19%	(76,583)	(76,583)	-		-	-	-
Effect of interest rate swaps		(0.48%)	-	35,000		-	(10,000)	(25,000)		-	(0.15%)	-	35,000	(15,000)		-	(10,000)	(10,000)
Unsecured loan	18	5.75%	(395)	(395)		-	-	-		-	5.75%	(766)	-	(766)		-	-	-
Bank overdrafts	18	9.50%	(4,769)	(4,769)		-	-	-		-	9.00%	(1,566)	(1,566)	-		-	-	-
			(75,527)	32,192		-	(82,719)	(25,000)		-		(76,422)	(40,656)	(15,766)		-	(10,000)	(10,000)


The Company	*Note*				2007									2006
		Effective									Effective
In thousands of AUD		interest rate	Total	1 year or less	1 – 2 years		2 – 3 years	3 - 4 years	4 – 5 years		interest rate	Total	1 year or less	1 – 2 years	2 – 3 years		3 - 4 years	4 – 5 years
Cash and cash equivalents	9	1.60%	178	178		-	-	-		-	1.40%	184	184	-		-	-	-
Loans to controlled entities	10	7.55%	9,484	9,484		-	-	-		-	7.55%	8,868	8,868
Bill acceptance facility	18	6.47%	(69,000)	-		-	(69,000)	-		-	6.10%	(72,801)	(72,801)	-		-	-	-
Effect of interest rate swaps		(0.37%)	-	35,000		-	(10,000)	(25,000)		-	(0.05%)	-	35,000	(15,000)		-	(10,000)	(10,000)
Unsecured loan	18	5.75%	(395)	(395)		-	-	-		-	5.75%	(766)	-	(766)		-	-	-
Bank overdrafts	18	9.50%	(4,769)	(4,769)		-	-	-		-	9.00%	(1,566)	(1,566)	-		-	-	-
			(64,502)	39,498		-	(79,000)	(25,000)		-		(66,081)	(30,315)	(15,766)		-	(10,000)	(10,000)

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

22. Financial instruments (continued)

Foreign currency risk

The consolidated entity is exposed to foreign currency risk on purchases that are denominated in a currency other than the Australian dollar. The currencies giving rise to this risk are primarily US dollars, Euros and Japanese yen. The consolidated entity selectively uses forward exchange contracts to hedge its foreign currency risk. The forward exchange contracts have maturities of less than one year after the balance sheet date. Where necessary, the forward exchange contracts are rolled over at maturity.

Recognised assets and liabilities

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognised as part of ‘net financing costs’. The fair value of forward exchange contracts used as economic hedges of monetary assets and liabilities in foreign currencies at 30 June 2007 was nil (2006: nil) for the consolidated entity and nil (2006: nil) for the Company recognised in fair value derivatives.

Fair values

The fair values of financial assets and financial liabilities of the consolidated entity approximate their carrying amounts in the balance sheet. The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.

Derivatives

Forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and deducting the current spot rate. For interest rate swaps, market quotes are used. Those quotes are back tested using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on market related data at the balance sheet date.

Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

Trade and other receivables / payables

For receivables / payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

23. Operating leases Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

In thousands of AUD Less than one year Between one and five years More than five years	Consolidated The Company 2007 2006 2007 2006 11,485 11,581 10,361 8,632 24,915 19,456 23,284 16,791 22,581 23,019 22,331 22,991
	58,981 54,056 55,976 48,414

The consolidated entity leases various premises, plant and equipment and motor vehicles under operating leases. The leases typically run for varying periods and in some cases provide for an option to renew the lease after expiry. Lease payments are reviewed periodically to reflect market rentals. None of the leases include contingent rentals.

During the financial year ended 30 June 2007, the consolidated entity recognised $10,599,000 (2006: $10,142,000) as an expense in the income statement in respect of operating leases (the Company : $9,804,000; 2006: $8,647,000).

24. Capital and other commitments

In thousands of AUD Capital expenditure commitments Plant and equipment *Contracted but not provided for and payable:* Not later than one year Contractual commitments Information technology managed services *Contracted but not provided for and payable:* Not later than one year Later than one year but not later than five years	Consolidated The Company 2007 2006 2007 2006 1,961 5,046 1,961 5,046
	1,961 5,046 1,961 5,046
	- 1,411 - 1,411 - 4,112 - 4,112
	- 5,523 - 5,523

[Information regarding commitments under employment contracts is provided in the Remuneration Report ] section of the Directors’ report.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

25. Discontinued operations

In June 2007 the Group sold the majority of assets in its Bitumen segment. The segment was not a discontinued operation or classified as held for sale as at 30 June 2006 and the comparative income statement has been re-presented to show the discontinued operation separately from continuing operations.

Profits attributable to the discontinued operation were as follows:

Consolidated & The Company

In thousands of AUD Results of discontinued operation Revenue Other revenue Other income Expenses Results from operating activities Income tax expense Gain on sale of discontinued operation Income tax on gain on sale of discontinued operation Profit for the year Basic earnings per share Diluted earnings per share	2007 2006 16,972 16,574 281 275 46 - (15,948) (15,677)
	1,351 1,172 (407) (355) 3,000 - (609) -
	3,335 817
	8.8 cents 2.3 cents
	8.9 cents 2.3 cents

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements 25. Discontinued operations (continued)

Cash flows from discontinued operation

In thousands of AUD

Cash flows from discontinued operation In thousands of AUD
Net cash from operating activities Net cash from investing activities Net cash from financing activities Net cash provided by discontinued operations Effect of disposal on the financial position of the Group Property, plant & equipment Inventories Trade & other payables Deferred tax liabilities Net identifiable assets and liabilities Consideration received, satisfied in cash Net cash flow	2007 2006 1,768 843 6,496 (448) - -
	8,264 395
	(3,818) - (310) - 230 - (69) -
	3,967
	6,967 -
	6,967 -

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

26. Controlled entities

Controlled entities
	Country of
	Incorporation	Ownership interest
		2007	2006
		%	%
AA Gaskets Pty Ltd	Australia	73	73
ACN 086 567 713 Pty Ltd(i)	Australia	-	100
Coventry Group (NZ) Limited NZ Gaskets Limited(ii)	New Zealand New Zealand	100 73	100 73
The ultimate parent entity is Coventry Group Ltd.

(i) The company was deregistered during the financial year.

(ii) The company is a controlled entity of AA Gaskets Pty Ltd and operates in New Zealand.

27. Acquisitions of operations

On 6[th] September 2006, the consolidated entity acquired the business of Furniture Joinery Solutions Limited, a New Zealand based distributor of cabinet and furniture hardware

This business contributed $193,000 to the consolidated net loss before interest and tax for the period. If the acquisition had occurred on 1 July 2006, management estimate that the consolidated entity revenue would have been $509,242,000 and the estimated consolidated entity loss before tax would have been $2,473,000.

The fair values (and carrying amounts) at acquisition date of the assets and liabilities acquired were as follows:

In thousands of AUD Property, plant and equipment Trade and other receivables Inventories Intangibles Other creditors and accruals Cash consideration paid Cash acquired Net cash outflow	Consolidated The Company

	23 -
	4 -
	393 -
	3 -
	(5) -
	418 -
	418 -
	- -
	418 -

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

28. Reconciliation of cash flows from operating activities

In thousands of AUD *Note* Cash flows from operating activities (Loss)/Profit for the period Adjustments for: Depreciation Amortisation Impairment and write off of intangibles Investment income 6 Interest expense 6 Dividends from controlled entities 6 Net (gain)/loss on disposal of property, plant and equipment Net gain on disposal of business Income tax expense 7 Operating profit before changes in working capital and provisions (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables Increase in provisions and employee benefits Interest paid Income taxes paid Net cash from operating activities	Consolidated The Company 2007 2006 2007 2006 (1,162) 9,641 (2,691) 9,560 8,080 7,093 7,511 6,237 72 147 72 72 17,592 1,486 17,592 1,486 (240) (523) (786) (933) 5,194 3,768 4,873 3,398 - - (979) (1,965) 143 (313) 98 (294) (3,000) - (3,000) - 3,080 5,046 1,767 3,917
	29,759 26,345 24,457 21,478 (2,490) (12,573) (1,011) (10,638) (7,787) (3,092) (5,974) (3,351) (3,146) (1,685) (3,698) (3,651) 4,051 3,441 2,570 6,388
	20,387 12,436 16,344 10,226 (5,163) (4,372) (4,842) (4,003) (5,245) (6,004) (3,857) (4,543)
	9,979 2,060 7,645 1,680

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

29. Key management personnel disclosures

The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Non-executive directors

Executives

W G Kent, AO (Chairman)[1] V Scidone, Group General Manager - Industrial J Boros D J Beisley, Group General Manager – Automotive R B Flynn[2] S A Cooper, Chief Financial Officer[6] C M Kyle[3] J S Furness, Chief Information Officer[7] R M McLean, AM J Colli, Company Secretary B F Nazer A P Hockley, Chief Financial Officer[8] M Ridley, Chief Information Officer[9]

Executive directors

C J Glenn (Chief Executive Officer and Managing Director)[4] R B Flynn (Executive Chairman)[5]

1 resigned 6 November 2006 2 appointed Chairman 7 November 2006 3 resigned 6 November 2006 4 resigned 11 April 2007 5 appointed Executive Chairman 11 April 2007

6 resigned 8 June 2007

7 resigned 28 June 2007

8 appointed 28 May 2007

9 appointed 29 May 2007

Key management personnel compensation

The key management personnel compensation included in employee benefits expense is as follows:

In AUD Short-term employee benefits Post-employment benefits Termination benefits Equity compensation benefits	Consolidated The Company 2007 2006 2007 2006 2,155,609 2,120,321 2,155,609 2,120,321 430,998 251,909 430,998 251,909 500,077 - 500,077 - 76,551 195,704 76,551 195,704
	3,163,235 2,567,934 3,163,235 2,567,934

Individual directors and executives compensation disclosures

Information regarding individual directors and executives compensation and applicable equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors’ report.

Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

29. Key management personnel disclosures (continued)

Movements in shares

The movement during the reporting period in the number of ordinary shares in Coventry Group Ltd held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

	Held at			Held at		Held at
	1 July 2006	Purchases	Sales	Resignation		30 June 2007
Directors
W J Kent (Chairman)	37,438	13,032	-	50,470		-
J Boros	12,000	5,320	-		-	17,320
R B Flynn	15,201	16,945	-		-	32,146
C J Glenn	14,174	20,063	-	34,237	(i)	-
C M Kyle	3,003,122	-	12,000	2,991,122	(ii)	-
R M McLean	28,465	1,233	-		-	29,698
B F Nazer	25,000	1,182	-		-	26,182
Executives
V Scidone	8,948	6,814	-		-	15,762
D J Beisley	-	-	-		-	-
S A Cooper	4,032	6,888	-	10,920		-
J S Furness	3,662	2,406	-	6,068		6,068
J Colli	-	1,005	-		-	1,005
A P Hockley	-	-	-		-	-
M Ridley	-	-	-		-	-

No shares were granted to key management personnel during the reporting period as compensation.

(i) Includes 5,000 shares held by personally-related entities in which Mr C J Glenn has no relevant interest.

(ii) Includes 1,428,102 shares held by personally-related entities in which Mr C M Kyle has no relevant interest.

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

29. Key management personnel disclosures (continued)

	Held at				Held at		Held at
	1 July 2005	Purchases	Sales		Resignation		30 June 2006
Directors
W J Kent (Chairman)	35,124	2,314		-		-	37,438
J Boros	7,500	4,500		-		-	12,000
R B Flynn	4,738	10,463		-		-	15,201
C J Glenn	13,606	568		-		-	14,174	(i)
C M Kyle	2,936,706	66,416		-		-	3,003,122	(ii)
R M McLean	16,189	12,276		-		-	28,465
B F Nazer	2,000	23,000		-		-	25,000
Executives
V Scidone	6,819	2,129		-		-	8,948
D J Beisley	-	-		-		-	-
S A Cooper	3,782	250		-		-	4,032
J S Furness	1,997	1,665		-		-	3,662
J Colli	-	-		-		-	-

(i) Includes 5,000 shares held by personally-related entities in which Mr C J Glenn has no relevant interest.

(ii) Includes 1,428,102 shares held by personally-related entities in which Mr C M Kyle has no relevant interest.

Other Transactions

From time to time, key management personnel may purchase goods from companies within the consolidated entity on the same terms as apply to other employees of the consolidated entity.

30. Related parties – other than key management personnel

Identity of related parties

The consolidated entity has a related party relationship with its controlled entities (see note 26) and with its key management personnel (see note 29).

Controlled entities

All transactions with controlled entities are on normal terms and conditions.

The aggregate amounts included in the profit before tax for the year that resulted from transactions with controlled entities are:

In AUD Dividend revenue Revenue from sale of goods Purchase of inventories Increase (decrease) in intercompany advance accounts: Aggregate amounts receivable from controlled entities: Advance accounts – interest free1 Advance account subject to interest charges Other	The Company 2007 2006
	978,750 1,965,345

	243,702 452,125

	1,134,440 2,168,387

	787,070 (17,215,894)
	- 1,403,254 9,483,988 8,868,248 - 3,196
	9,483,988 10,274,698

During the year ended 30 June 2007, the Company received interest of $694,000 (2006: $603,000) in respect of the advance account subject to interest charges. Interest is charged at commercial rates.

1 This advance was fully provided for as at 30 June 2006.

Directors’ declaration

In the opinion of the directors of Coventry Group Ltd (‘the Company’):
(a) the financial statements and notes (including the remuneration disclosures that are contained in sections 10.1, 10.2, 10.3, 10.4, 10.6 and 10.7 of the Remuneration report in the Directors' report), set out on pages 20 to 70, are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the financial position of the Company and the consolidated entity as at 30 June 2007 and of their performance, for the financial year ended on that date; and
- (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
(b) the remuneration disclosures that are contained in sections 10.1, 10.2, 10.3, 10.4, 10.6 and 10.7 of the Remuneration report in the Directors’ report comply with Australian Accounting Standard AASB 124 Related Party Disclosures ; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations by the executive chairman and chief financial officer for the financial year ended 30 June 2007 pursuant to Section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

R B Flynn Executive Chairman

Perth

24 August 2007

AI assistant

COVENTRY GROUP LIMITED — Annual Report 2007

64742_rns_2007-08-23_27b39158-5faa-40b9-80b6-f0a127606108.pdf

1. Directors

Information on Directors

Independent, non-executive directors

Non-executive directors

Executive directors

Directors’ Interests

Coventry Group Ltd Directors’ Report (continued) For the year ended 30 June 2007

Directors’ Meetings

2. Principal activities

Automotive Parts

Industrial Products

Bitumen Products (i)

Gasket Manufacturing

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

3. Consolidated results

4. Dividends

5. Review of operations and results

6. Earnings per share

7. Significant change in the company’s affairs

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

8. Events subsequent to reporting date

9. Likely developments

10. Remuneration Report

10.1 Key Management Personnel ( KMPs ) – audited

Executive directors

Coventry Group Ltd Directors Report (continued) For the year ended 30 June 2007

10. Remuneration Report (Continued)

10.2 Principles used to determine the nature and amount of compensation – audited

Non-executive directors

Directors’ fees

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued) 10.2 Principles used to determine the nature and amount of compensation (continued)

Executive pay

Fixed annual compensation

Performance linked compensation Short-term incentives

Long-term incentives

10.2 Principles used to determine the nature and amount of compensation (continued)

Consequences of performance on shareholders wealth

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued)

10.3 Details of compensation – audited

Key management personnel of Coventry Group Ltd

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10. Remuneration report (continued)

10.3 Details of compensation – audited (continued)

Coventry Group Ltd Directors’ report (continued)

10. Remuneration report (continued) 10.4 Value of Shares – audited

10.5 Analysis of bonuses included in compensation - unaudited

Short Term Incentive Cash Bonus

10.6 Employment contracts - audited

Coventry Group Ltd Directors’ report (continued)

10. Remuneration report (continued)

10.6 Employment contracts – audited (continued)

J Colli, Company Secretary

Coventry Group Ltd Directors’ report (continued)

10.6 Employment contracts – audited (continued)

Coventry Group Ltd Directors’ report (continued)

For the year ended 30 June 2007 10. Remuneration report (continued)

10.7 Rights over shares granted as compensation - audited

Coventry Group Ltd Directors’ report (continued) For the year ended 30 June 2007 10. Remuneration report (continued)

10.8 Analysis of rights over shares granted as compensation - unaudited

11. Environmental regulation

12. Insurance of officers

13. Corporate governance

14. Options

15. Non-audit services

16. Lead Auditor’s independence declaration

17. Company secretary

18. Rounding off

Coventry Group Ltd and its controlled entities Income statements

For the year ended 30 June 2007

Coventry Group Ltd and its controlled entities Statements of changes in equity

For the year ended 30 June 2007

Coventry Group Ltd and its controlled entities Balance sheets

As at 30 June 2007

Coventry Group Ltd and its controlled entities Statements of cash flows

Coventry Group Ltd and its controlled entities Notes to the consolidated financial statements

1. Significant accounting policies

COVENTRY GROUP LIMITED Annual Report 2007