COVENTRY GROUP LIMITED — Interim / Quarterly Report 2016

Feb 25, 2016

1H16 RESULTS

26 FEBRUARY 2016

PETER CAUGHEY, CEO & MANAGING DIRECTOR

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1H16 Overview

• Restructure continuing

  • Distribution Centre rationalisation program completed

  • Organisational structure refreshed and streamlined

  • CGL support services now Melbourne based

  • Changes to pricing, purchasing, freight and warehouse management are ongoing

  • More opportunity for systems improvement and lowering the cost of doing business

  • Sales growth, especially in Trade Distribution, a key focus

• Group EBITDA now positive

• Net loss after tax of $0.8m ($3.3m loss in 1H15)

• $5.2m net cash position as at 31 December 2015

• No interim dividend declared

  • Board placing greater emphasis on actual Company performance when considering dividends

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Group – financial summary

($m)	1H15	1H16	% change
Revenue from Sale of Goods	99.6	92.1	-7.5%
EBITDA	(2.4)	0.3	+112.5%
Net Loss Before Income Tax	(4.1)	(1.1)	+73.2%
Net Loss After Tax	(3.3)	(0.8)	+75.8%
Net Cash	15.4	5.2	-66.2%
Interim Dividend per Share (cents)	4.25	0	N/A
Net Tangible Assets per Share ($)	3.20	2.09	-34.7%

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Restructure update

Expectations for FY16 (at FY15 results):

• Additional $4m savings p.a. by end FY16

• • New warehouse management system to be implemented by June 2016

• Reconfiguration, relocation and refurbishments of Konnect branches

• Targeting a $6m reduction in inventory by the end of FY16

• Substantial simplification of process and consolidation of back office functions

• Re-organisation into ‘One CGL’

Achievements for 1H16:

• 3 new Konnect branch openings

• Outbound call centre established

• Completion of 3 year rationalisation program during the half with distribution centres consolidated from 14 to 4

• Branch refurbishments largely complete

• Warehouse management system roll out on track - 2 of 4 distribution centres completed

• Management have set clear targets to achieve target inventory reduction in the second half

• Support function now largely Melbourne based

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Coventry’s products

Konnect

The largest specialty fastener distributor in Australia and New Zealand

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Cooper Fluid Systems

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

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Artia

Niche supplier of hardware to the kitchen & cabinet maker industry

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Gaskets (72.5% owned)

Market leader in specialised gaskets for the spare parts auto sector

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Trade Distribution (Konnect/Artia)

($m)	1H15	1H16	% change
Revenue	61.8	57.8	-6.5%
Contribution	(1.7)	0.1	105.9%

• Konnect and Artia are now fully integrated

• Trade Distribution now making a positive contribution

• Division remains the focus of restructure initiatives

  • Organisational changes to drive sales completed just prior to Christmas

  • – New products developed

  • New branches opened

• Turnaround is well entrenched and a foundation that can be built upon

  • Distribution centre relocations and closures completed December 2015

  • Sales growth is focus

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Cooper Fluid Systems

($m)	1H15	1H16	% change
Revenue	31.4	27.7	-11.8%
Contribution	1.8	1.7	-5.6%

• Business continues to be profitable, defying mining services trends

• Continue to focus on growing niche service capability

• Negative sales offset by strict cost control

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Gaskets (Investment, 72.5% owned)

($m)	1H15	1H16	% change
Revenue	7.3	7.5	2.7%
EBIT	1.2	1.3	8.3%

• Solid EBIT performance

• Repco secured as a new customer

  • Supply commenced in January 2016

  • Now supply top 5 automotive distributors in Australia

• AA Gaskets have agreed to sell land and buildings in Campbellfield for $3.9m

  • Sale expected to complete 30 March 2016

  • 5 year lease term (2 x 5 year extension options)

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Corporate

($m)	1H15	1H16	% change
Revenue	1.2	1.3	8.3%
Net Corporate Expenses	-4.8	-4.3	10.4%

• Revenue is sourced from rental paid by third parties at Redcliffe, Perth

  • Sub-tenant leases expire in 2017, however, head lease expires in 2027

  • – Initiatives underway to source new sub-tenants

• Net corporate expenses down 10.4%

  • Beginning to realise first full year of savings from restructure initiatives

  • More opportunities exist for further cost reduction

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Balance sheet

($m)	Jun-15	Dec-15
Cash & cash equivalents	8.7	5.2
Term deposits	-	-
Trade and other receivables	31.7	31.1
Inventories	59.3	59.1
Other current assets	0.1	1.9
Total current assets	99.8	97.3
Deferred tax assets	13.4	14.2
Property, Plant & Equipment	16.8	15.4
Intangible assets	4.0	4.6
Other	0.1	0.1
Non-current assets	34.3	34.3
Total assets	134.1	131.6
Total liabilities	32.4	31.3
Share capital	108.1	108.1
Retained earnings & reserves	-9.0	-10.3
Non-controlling interest	2.6	2.6
Total equity	101.7	100.4

• Balance sheet reset at June 2015 following significant restructure initiatives

• Workable net cash position retained

• Import program peaked in 1H16

  • Management confident of achieving target inventory reduction in the second half

• Retained earnings impacted by losses and dividend payments

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Subsequent Events

• Board is very sad to announce the passing of Gaskets GM, Kerry Lee

• Kerry made a significant contribution to Coventry during his 25 years with the Group

• More recently, he secured Repco as a new customer and negotiated the Gaskets property sale agreement

• CGL CEO overseeing Coventry’s interest in Gaskets in the interim

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Outlook

• Restructure program expected to be completed by the end of 2016

• Restructured operations will deliver a more efficient distribution model that improves the Group’s service, sales, and cost-of-doing-business

• Revenue initiatives are the primary focus

  • New product, channels, branches across all divisions

• Expect the Group to return to operating profitability during FY16 assuming no material change in general economic conditions

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Disclaimer

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 Coventry Group Limited’s (the Company’s) final financial report for the year ended 31 December 2015. 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

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