COVENTRY GROUP LIMITED — Annual Report 2016

Aug 25, 2016

FY16 RESULTS

25 August 2016

PETER CAUGHEY, CEO & MANAGING DIRECTOR

==> picture [407 x 48] intentionally omitted <==

==> picture [75 x 10] intentionally omitted <==

1

FY16 Overview

• Underlying EBITDA +$0.1m (-$2.3m in FY15)

• Significant improvement in statutory net loss after tax to -$1.8m (-$24.6 in FY15)

• Restructure costs of -$1.9m (-$21.4m in FY15) pre-tax

• One-off gain on sale of Gaskets property of $2.0m pre-tax

• Restructuring of the business nearly complete

• 9 duplicate distribution centres were closed

• Warehouse Management System (WMS) roll out complete

• 11 new stores were opened

• Positive cash position $3.5m as at 30 June 2016

• No final dividend declared

==> picture [75 x 10] intentionally omitted <==

2

Grou – financial summar p y

($m)	FY15	FY16	% change
Revenue from sale of goods	190.7	176.8	-7.3%
Underlying EBITDA1	-2.3	0.1	NM
Underlying EBIT1	-6.4	-3.2	50.0%
Restructuring and related costs	-21.4	-1.9	91.3%
EBIT	-27.7	-3.1	88.8%
Statutory net profit/(loss) after tax2	-24.6	-1.8	92.6%
Net cash	8.7	3.5	-59.5%
Earnings per share (cents)	-65.8	-7.6	88.4%
Dividend per share (cents)	35.3	0.0	NM
Net Tangible Assets per share ($)	2.16	2.03	-6.0%

Improved fourth quarter operating results (positive EBITDA and cashflow)

==> picture [75 x 10] intentionally omitted <==

Note 1 – Excludes net income relating to FX gain/loss, FY16 underlying EBIT & EBITDA excludes a $2.0m gain from sale of property Note 2 – Statutory net profit/(loss) includes loss from discontinuing operation in FY15

3

Restructure update

• Formal restructuring program to be completed by December 2016

• 9 duplicate distribution centres were closed (4 remaining locations)

• Warehouse Management System roll-out complete

• Relocated a majority of the support finance team to Melbourne

• New category management team established to drive consistency and expertise for various product categories

• Benefits from the restructuring program will be fully realised by the end of FY17

Ongoing benefits to be achieved through a Continuous Improvement Program

==> picture [75 x 10] intentionally omitted <==

4

Softening industry environment

==> picture [396 x 334] intentionally omitted <==

----- Start of picture text -----

Australian Engineering and Building industries
$40
$35
$30
$25
$20
$15
$10
$5
$0
Building Work Done ($b) Engineering Work Done ($b)
Work completed ($b)
----- End of picture text -----

Commentary

==> picture [258 x 39] intentionally omitted <==

• CYG predominantly services customers in the engineering and mining industries

• Mining and energy projects drove the boom in engineering work from 2011-2014

• Activity in these sectors has now fallen back to 2010 levels

• This has had a material impact on Group performance

• CYG’s focus is now to reposition business more to the building and construction industries

==> picture [75 x 10] intentionally omitted <==

Source: Australian Bureau of Statistics

5

Coventry’s business segments

1

Trade Distribution

The largest specialty fastener distributor in Australia and New Zealand

Niche supplier of hardware to the kitchen & cabinet maker industry

==> picture [42 x 46] intentionally omitted <==

----- Start of picture text -----

2
----- End of picture text -----

Coopers Fluid Systems

==> picture [291 x 39] intentionally omitted <==

Supplier of spare parts, workshop and on-site services to the mining & related industries

3

==> picture [51 x 11] intentionally omitted <==

----- Start of picture text -----

Gaskets
----- End of picture text -----

==> picture [291 x 40] intentionally omitted <==

• Roofing and Cladding

• Construction

• Branded and Ancillary

• (i.e. power tools)

• Movement systems

• General Fasteners

Market leader in specialised gaskets for the spare parts auto aftermarket sector

==> picture [75 x 10] intentionally omitted <==

6

Trade Distribution

($m)	FY15	FY16	% change
Revenue	116.9	109.6	-6.2%
Underlying EBIT	-7.5	-1.0	87.0%
One-off items	-10.4	-1.5	85.8%

• Operations of Konnect and Artia were integrated in FY16

• Revenue declined by 6.2%

• Due to impact of weakening mining and engineering sectors

• Sale growth is the primary focus

• 11 new stores opened during FY16

• New category management team hired to drive consistency and operational improvements

• Cost reductions also remain a key focus

==> picture [75 x 10] intentionally omitted <==

7

Fluids

($m)	FY15	FY16	% change
Revenue	60.7	53.4	-12.0%
Underlying EBIT	2.1	2.8	34.4%
One-off items	-0.9	-0.1	-89.6%

• The business also faces challenging mining sector contraction, resulting in lower revenue

• Cost base has been ‘right-sized’ to offset the fall in revenue

• As a result, Coopers business continues to be profitable

==> picture [75 x 10] intentionally omitted <==

8

Gaskets[(1) ]

($m)	FY15	FY16	% change
Revenue	13.6	17.3	27.2%
Underlying EBIT	2.1	2.9	38.1%
One-off items	-	2.0	NM

• Underlying EBIT up 38.1% to $2.9m – a record contribution

• $2.0m one-off gain on sale and leaseback of property

• Significant customer win in second half of FY16

• Anticipated to more than offset the additional divisional costs of the lease

==> picture [75 x 10] intentionally omitted <==

9

(1) Coventry owns 72.5% of AA Gaskets

Corporate

($m)	**FY151 **	FY16	% change
Property operations (net)	0.7	0.9	28.6%
Underlying expenses	-9.6	-8.1	15.6%
One-off items	-10.0	-0.3	97.0%

• Head office provides centralised support services to the Group

• Reduced by $1.5m during FY16

• Ongoing program to assess and reduce expenses

• Property operations relates to sub-rental agreements with third parties at Redcliffe, Perth

• Current 15,000sqm warehouse lease expires October 2017 which has $2.2m of associated leasehold improvements

• 2,000sqm office space was vacant during FY16 and successfully rented in July 2016, effective September 2016

==> picture [75 x 10] intentionally omitted <==

1: Excludes MSS discontinued business

10

Cash flow

($m)	FY15	FY16	Comment
Net cash from operating activities	-17.7	-1.9	Material improvements from restructure program
			$5.8m of capex in FY16,
Net cash from investing activities1	36.3	-1.7	expected to reduce in FY17
			to levels of depreciation
Net cash used in financing activities	-18.0	-2.6	Nil dividends declared in FY16
Net (decrease)/increase in cash and cash equivalents	0.6	-6.2
Cash and cash equivalents	8.7	3.5
1: FY15 included $39m proceeds from term deposits

==> picture [75 x 10] intentionally omitted <==

11

Balance sheet

• NTA reduced by 6% to $2.03 per share

($m)	Jun-15	Jun-16
Cash & cash equivalents	8.7	3.5
Inventories	59.3	57.4
Trade and other receivables	31.7	30.8
Other	0.1	-
Total current assets	99.8	91.7
Deferred tax assets	13.4	16.1
Property, Plant & Equipment	16.8	16.0
Intangible assets	4.0	5.1
Non-current assets	34.3	37.3
Total assets	134.1	129.0
Trade and other payables	22.8	21.8
Other liabilities	9.6	8.9
Total Liabilities	32.4	30.7
Issued capital	108.1	108.1
Retained earnings & reserves	-9.0	-11.9
Non-controlling interest	2.6	2.0
Total equity	101.7	98.3
NTA per share (cents)	2.16	2.03

==> picture [75 x 10] intentionally omitted <==

12

Outlook

• Economic conditions expected to remain variable in FY17

• Expect to see full benefits from the restructuring initiatives to flow by the end of FY17

• Trade Distribution’s focus is to balance its business in the engineering/mining sectors with more exposure to the building and construction industries

• Continuous Improvement Program embedded in the business to ensure additional benefits

• Sales growth is the primary focus for Trade Distribution, including a commitment to expanding the store footprint in favourable locations to capitalise on the scalability benefits of the business model

• Introduction of Category Management team to Trade Distribution expected to contribute to driving sales and reducing inventory

• Payment of dividends remains dependent upon sustained profitability for the Group

==> picture [75 x 10] intentionally omitted <==

13

Disclaimer

Reliance on third party information

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

Presentation is a summary only

This Presentation is information in a summary form only and does not purport to be complete. It should be read in conjunction with the Company’s 2014 final financial report. Any information or opinions expressed in this Presentation are subject to change without notice and the Company is not under any obligation to update or keep current the information contained within this Presentation.

Not investment advice

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

No offer of securities

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

Forward looking statements

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

No liability

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

For more information, please contact: Peter Caughey CEO and Managing Director, Coventry Group Ltd - (03) 9205 8223

==> picture [75 x 10] intentionally omitted <==

14