Coventry Group reports a slight dip in H1 FY25 sales but manages a modest EBITDA increase, buoyed by a successful ERP upgrade and strategic growth initiatives.
- H1 FY25 sales marginally down 0.4% to $185.2 million
- EBITDA edges up 0.2% to $9.9 million despite economic headwinds
- Successful ERP upgrade completed across 73 branches
- Trade Distribution segment grows sales by 3.2%, Fluid Systems declines 5.4%
- Plans for 4-5 new stores, refurbishments, and relocations in FY25
Steady Performance Amid Economic Challenges
Coventry Group Ltd (ASX: CYG) has released its trading update for the first half of fiscal year 2025, revealing a nuanced picture of resilience and cautious optimism. Group sales dipped slightly by 0.4% to $185.2 million compared to the prior corresponding period, while unaudited EBITDA inched up 0.2% to $9.9 million. These results come against a backdrop of challenging economic conditions in several jurisdictions, notably New Zealand, and the operational distractions of a major ERP system upgrade.
ERP Upgrade: A Strategic Milestone
The company successfully completed the rollout of its Microsoft D365 ERP system across 73 branches, including Finance, Fluid Systems, Konnect, and Artia operations in both Australia and New Zealand. CEO Robert Bulluss highlighted the absence of the typical "horror stories" often associated with such large-scale IT implementations. While immediate productivity and customer service benefits are already visible, the full advantages are expected to materialize throughout calendar year 2025, positioning Coventry for improved operational efficiency.
Segment Performance and Growth Initiatives
Breaking down the sales figures, the Trade Distribution segment showed encouraging growth of 3.2% for H1 FY25, driven by positive demand in mining and resources sectors, particularly in Western Australia and Queensland. Conversely, the Fluid Systems segment experienced a 5.4% decline, reflecting softer conditions in other Australian states and New Zealand. Coventry’s recent acquisition, Steelmasters, has met performance expectations, adding to the group’s growth momentum.
Looking ahead, Coventry plans to accelerate organic growth through the opening of 4-5 new stores, alongside refurbishments and relocations of a similar number of outlets. These initiatives, combined with a focus on expanding product ranges and enhancing sales and marketing efforts, aim to increase market share in the fragmented multi-billion-dollar markets the group operates within.
Outlook: Focus on Profitable Sales Growth
With the ERP upgrade largely behind it, Coventry’s management is turning its full attention to driving profitable sales growth in calendar year 2025. The company’s strategy, centered on specialisation and service excellence, remains resilient despite short-term economic headwinds. The board and executive team are committed to leveraging the scale benefits of their platform to improve margins and cost control, targeting an EBITDA margin of 10% in the medium term.
While economic conditions in New Zealand and some Australian states remain challenging, the positive demand in mining and resources sectors provides a solid foundation for Coventry’s growth ambitions. Investors will be watching closely to see how effectively the company translates its operational improvements into sustained financial performance.
Bottom Line?
Coventry’s successful ERP upgrade sets the stage for renewed growth, but economic headwinds and segment disparities warrant close monitoring.
Questions in the middle?
- How quickly will the full benefits of the ERP upgrade translate into improved profitability?
- Can Coventry’s Trade Distribution growth offset ongoing softness in Fluid Systems?
- What impact will economic challenges in New Zealand have on overall group performance?