Coventry Group’s FY25 results reveal a sharp EBITDA decline amid ERP disruptions and soft markets, prompting a major cost reduction drive for FY26.
- FY25 sales down 1.7% to $365.2 million
- Unaudited EBITDA fell 40.9% to $12.3 million
- ERP system rollout disrupted operations and financials
- $10 million annualised cost reduction planned for FY26
- FY26 EBITDA guidance set above $20 million
A Challenging FY25 for Coventry Group
Coventry Group Ltd (ASX, CYG) has reported a disappointing financial performance for FY25, with sales slipping 1.7% year-on-year to $365.2 million and unaudited EBITDA plunging 40.9% to $12.3 million. The results reflect a confluence of softer market conditions across Australia and New Zealand, operational disruptions from a major ERP system implementation, and underwhelming sales growth strategies.
While gross margins remained well managed, the company’s cost base proved too high relative to gross profit, squeezing net margins and highlighting inefficiencies that the Board is now prioritising to address.
ERP Implementation, a situation with both benefits and drawbacks
The rollout of Coventry’s new Microsoft D365 ERP system, now live in its Konnect and Fluids business units, has been a costly and disruptive project. The transition has impacted FY25 financial performance and operational stability, with ongoing fine-tuning planned as the remaining units, Steelmasters and Nubco, migrate in FY26. This technology upgrade, while necessary for long-term efficiency, has clearly weighed on short-term results.
Cost Reduction and Debt Management in Focus
In response to the financial pressures, Coventry is embarking on an ambitious $10 million annualised cost reduction program. This recalibration will scrutinise every part of the business, with cost-out targets embedded in management incentives and closely monitored by the Board. The Group’s net debt stood at $56.2 million as of June 30, 2025, influenced by poor earnings, ERP costs, and high inventory levels. A new simplified debt facility has been agreed in principle, expected to be formalised by late August, aiming to ease administrative burdens and provide covenant flexibility.
One-Off Loss and Segment Performance
The Fluids Systems segment recorded a one-off pre-tax loss of approximately $1.3 million due to an onerous contract entered in 2021, which became unprofitable due to underestimated project requirements and failed renegotiations. The Group believes this will not impact FY26 results. Segment-wise, Trade Distribution grew sales by 2.7%, while Fluid Systems declined 7.4%, contributing to the overall sales dip.
Looking Ahead, FY26 Guidance and Strategy
Coventry’s refreshed executive team is focused on a “back to basics” strategy emphasizing sales growth, cost discipline, cash generation, and debt reduction. The Board is confident in the market opportunity and the Group’s scale and margins. FY26 EBITDA guidance is set above $20 million, with expectations of a quarter-on-quarter earnings improvement. Early signs are positive, with July sales up 6.3% on June, suggesting momentum may be building.
Bottom Line?
Coventry’s FY26 will be a critical test of its cost-cutting and growth strategies amid ERP stabilization and market recovery.
Questions in the middle?
- How effectively will Coventry execute its $10 million cost reduction plan?
- What operational improvements will the full ERP rollout bring in FY26?
- Can sales growth initiatives offset lingering market softness and past disruptions?