Coventry Group’s Q4 FY26 results show a strong operational turnaround with sales up 11.7% quarter-on-quarter and EBITDA almost doubling to $4.1 million, backed by a $10 million cost reduction program and positive cash flow.
- Q4 FY26 sales rose 11.7% to $98.5 million
- Pre AASB16 EBITDA nearly doubled to $4.1 million
- $10 million annualised cost savings achieved
- Positive operating cash flow of $5.9 million
- Steelmasters integration progressing as planned
Strong Q4 Sales and Earnings Momentum
Coventry Group Ltd (ASX:CYG) powered through the final quarter of FY26 with sales climbing 11.7% from the previous quarter to $98.5 million, marking a 6% uplift on the prior corresponding period. More notably, pre AASB16 EBITDA nearly doubled to $4.1 million, a sharp improvement from the breakeven level a year ago and up from $2.1 million in Q3. This marks the second consecutive quarter of EBITDA gains, underscoring the tangible progress in the Group’s operational turnaround.
The combined Trade Distribution and Fluid Systems segments both contributed to this positive momentum, with Trade Distribution sales up 12.3% quarter-on-quarter and Fluid Systems rising 10.9%. Despite flat overall sales across the full year, second half FY26 EBITDA of $6.2 million almost doubled the first half’s $3.2 million, highlighting the operating leverage now materialising in the business.
Cost-Out Program Delivers $10 Million in Savings
Central to Coventry’s improved earnings has been the successful delivery of a $10 million annualised cost-out program, doubling the $5.1 million savings reported mid-year. These savings are expected to progressively reduce monthly operating expenses, helping the Group absorb inflationary pressures on wages, rents, and other costs. Management signals ongoing efforts to find further efficiencies, aiming to convert sales growth and gross margin gains more directly into bottom-line improvements in FY27.
Cash Flow Strength and Balance Sheet Clean-Up
Operating cash flow surged to $5.9 million in Q4, the strongest quarterly cash generation of FY26. This reflects disciplined working capital management and the benefits of an extensive inventory optimisation program, which included a detailed stocktake covering 88% of inventory value. The program led to a $2.3 million write-off of obsolete stock and a further $2.1 million one-off provision adjustment, alongside additional non-cash write-offs related to IT systems and employee leave provisions. These one-off adjustments, while impacting comparability, leave Coventry with a cleaner, more efficient balance sheet heading into the new fiscal year.
Financing and Covenant Position
Coventry secured waivers from National Australia Bank for the June quarter covenant tests, reflecting the lagging impact of weaker prior periods in the trailing EBITDA calculations. The Group is engaged in positive discussions to extend its financing facility beyond its July 2027 expiry, supported by a healthy liquidity buffer of $14.9 million at 30 June. As earnings improve, the covenant position is expected to strengthen in subsequent periods.
Steelmasters Integration and Outlook
The integration of Steelmasters is progressing on schedule, with operational consolidation advancing and management confident in unlocking medium-term synergies. The process is expected to be substantially complete within six months, providing an additional earnings uplift and operating leverage. With sales growth continuing, gross margin initiatives gaining traction, and cost savings fully ramping up, Coventry enters FY27 with a clear runway for improved financial performance.
The strategic review initiated earlier in the year remains ongoing, with no material updates disclosed. Investors will be watching how the earnings trajectory established in the second half of FY26 translates into sustained growth and profitability in the new financial year.
Bottom Line?
Coventry’s Q4 surge in earnings and cash flow, underpinned by a $10 million cost-out program and inventory optimisation, sets a promising stage for FY27, though execution risks remain in financing and integration.
Questions in the middle?
- How will Coventry manage inflationary pressures beyond current cost savings?
- What milestones will mark the successful completion of Steelmasters integration?
- How might the ongoing strategic review influence capital allocation and growth strategy?