Coventry Group Faces FY25 Loss Amid ERP Costs, Eyes >$20m EBITDA in FY26
Coventry Group reports a challenging FY25 with a statutory loss driven by ERP implementation costs and asset impairments, while setting ambitious EBITDA targets for FY26 under refreshed leadership.
- FY25 sales decline of 1.7% to $364.6 million
- Underlying EBITDA down 40.9% to $12.3 million
- Statutory net loss of $29.6 million due to ERP costs and $24.5 million impairment
- Net debt stands at $56.3 million; dividends suspended
- FY26 guidance targets EBITDA above $20 million with cost reduction initiatives
A Tough Year for Coventry Group
Coventry Group Ltd has revealed a difficult financial year ending June 2025, with group sales slipping 1.7% to $364.6 million and a sharp 40.9% drop in underlying EBITDA to $12.3 million. The company swung to a statutory net loss of $29.6 million, a stark reversal from the modest profit of $0.7 million reported the previous year. This loss was heavily influenced by $6.8 million in costs related to the rollout of a new ERP system and a significant $24.5 million impairment charge tied to the Trade Distribution segment.
Segment Performance and Operational Challenges
The Fluid Systems division experienced a 7.4% decline in sales to $147.4 million, with EBITDA down nearly 30%, reflecting ongoing pressures in that segment. Conversely, Trade Distribution saw a modest 2.7% sales increase to $217.8 million, boosted by the full-year inclusion of Steelmasters, but EBITDA still fell by 13.4%. The ERP implementation, while intended to streamline operations, proved disruptive and costly, impacting overall financial performance.
Balance Sheet and Strategic Moves
At fiscal year-end, Coventry Group reported net tangible assets of $25.4 million and net assets of $111.2 million, with net debt rising to $56.3 million. The company has replaced its $55 million borrowing base facility with a new revolving cash advance facility, aiming to simplify banking arrangements and provide covenant flexibility. In response to the financial pressures, the Board has suspended dividends and initiated a $10 million annualised cost reduction program, embedding these targets into management incentives.
Leadership and Outlook
Leadership changes include the formal confirmation of Nik Alpert as CEO and a refreshed Board and senior management team, signaling a renewed focus on execution. Coventry Group is pursuing a "back to basics" strategy emphasizing sales growth, cost control, cash generation, and debt reduction. The company projects FY26 EBITDA to exceed $20 million, with expectations of sequential quarterly improvement and additional benefits from ongoing cost-out initiatives. Early signs are encouraging, with July sales up 6.3% compared to June.
Looking Ahead
While the impairment and ERP-related costs weigh heavily on FY25 results, Coventry Group’s strategic recalibration and operational initiatives aim to restore profitability and strengthen the balance sheet. Investors will be watching closely to see if the company can translate these plans into tangible financial improvements in the coming year.
Bottom Line?
Coventry’s FY25 setbacks set a challenging stage, but FY26 targets and leadership changes offer a potential turnaround story.
Questions in the middle?
- How effectively will Coventry execute its $10 million cost reduction program?
- What impact will the ongoing ERP fine-tuning have on operational efficiency and customer service?
- Can Coventry sustainably reduce its net debt while restoring dividend payments?
