Coventry Group reports a solid half-year sales and earnings improvement while initiating a strategic review following unsolicited takeover interest.
- 1H FY26 sales rise to $188.5 million, EBITDA improves to $3.2 million
- Cost savings program delivers $5.1 million in annualised reductions
- Strategic review launched after unsolicited third-party approaches
- FY26 earnings guidance withdrawn amid ongoing review
- Operations continue with focus on sales, margins, and cost improvements
Solid Half-Year Performance
Coventry Group Ltd (ASX – CYG) has reported an encouraging start to fiscal 2026, with unaudited sales reaching $188.5 million and EBITDA climbing to $3.2 million for the first half. This marks a notable improvement over the previous six months, reflecting early gains from the company’s “back to basics” strategy aimed at refining sales processes, enhancing gross margins, and trimming operating costs.
While sales momentum strengthened particularly in the second quarter, the company faced some margin pressure and one-off costs related to relocating its largest Fluid Systems branch in Mackay, Queensland. Additionally, investments in new branches weighed on short-term profitability. Nonetheless, Coventry’s ongoing cost reduction initiatives have already yielded $5.1 million in annualised savings, with further expense reductions expected to materialise in coming periods.
Strategic Review Signals Potential Change
In a significant development, Coventry’s board has commenced a strategic review of the company’s portfolio following unsolicited approaches from third parties interested in individual business units. The review, supported by corporate advisor Allier Capital and legal advisor Talbot Sayer, is exploring options such as portfolio simplification or separation to unlock shareholder value.
The board emphasised that no decisions have been made yet, and there is no certainty that the review will lead to any transaction or structural change. However, the announcement has prompted the withdrawal of previously issued FY26 earnings guidance, reflecting the uncertainty surrounding potential outcomes.
Operational Focus Remains Firm
Despite the strategic review, Coventry’s management remains focused on delivering improved operational and financial performance. Net debt and working capital were managed broadly in line with expectations, and the company retains sufficient liquidity and banking support to navigate the period ahead.
Segment-wise, Trade Distribution sales increased by 6.6% to $112.4 million, while Fluid Systems sales rose 2.7% to $76.1 million, contributing to the overall 5.1% sales growth. EBITDA improved by a third compared to the prior half, underscoring the early success of the company’s turnaround initiatives.
Looking Ahead
Coventry Group plans to provide a more comprehensive update with its full 1H FY26 results announcement. Investors will be watching closely for further clarity on the strategic review’s direction and the company’s ability to sustain operational improvements amid evolving market conditions.
Bottom Line?
Coventry’s strategic review introduces fresh uncertainty but also potential for value creation as operational gains build momentum.
Questions in the middle?
- What specific portfolio changes might emerge from the strategic review?
- How will the relocation and branch expansion impact long-term margins?
- When will Coventry provide updated earnings guidance following the review?