Coventry Group Suspends Dividends Amid Rising Debt and Profit Slump
Coventry Group Ltd reported a challenging FY25 with a 1.7% revenue decline and a 40.9% drop in underlying EBITDA, culminating in a $29.6 million net loss. The company is now targeting over $20 million EBITDA in FY26 through aggressive cost reductions and operational recalibration.
- Revenue down 1.7% to $364.6 million
- Underlying EBITDA fell 40.9% to $12.3 million
- Statutory net loss after tax of $29.6 million
- $24.5 million impairment in Trade Distribution segment
- Board suspends dividends to focus on debt reduction and growth
A Difficult Year for Coventry Group
Coventry Group Ltd’s financial year ended 30 June 2025 revealed significant headwinds after seven years of steady growth. Revenue slipped 1.7% to $364.6 million, while underlying EBITDA plunged 40.9% to $12.3 million. The company recorded a statutory net loss after tax of $29.6 million, a stark reversal from the modest profit of $0.7 million in the prior year.
This downturn was driven by softer market conditions across Australia and New Zealand, compounded by the disruptive and costly implementation of a new Microsoft D365 ERP system. Additionally, the company recognised a substantial non-cash impairment charge of $24.5 million related to goodwill and brand names within its Trade Distribution segment, reflecting more modest revenue growth expectations and working capital challenges.
Operational and Financial Challenges
Despite a slight increase in Trade Distribution sales by 2.7%, the segment’s EBITDA declined by 13.4%, while Fluid Systems saw a 7.4% sales decrease and a 29.1% EBITDA drop. Gross margins remained well managed, but the Group’s cost base was deemed too high relative to gross profit, leading to poor net margin outcomes.
Net debt rose to $56.3 million, reflecting the combined impact of weak financial performance, ERP implementation costs, elevated inventory levels, and capital expenditure. The company’s cash conversion rate remained strong at 136.6%, but the Board emphasised the urgent need to right-size the cost structure.
Strategic Response and Leadership Changes
In response, Coventry Group has launched a targeted cost reduction program aiming to save approximately $10 million annually. This initiative is embedded in management incentive plans and closely overseen by the Board. The company has also suspended dividend payments to prioritise debt reduction and support growth initiatives.
FY25 saw considerable turnover in leadership, including the resignation of CEO Robert Bulluss and the appointment of Nik Alpert as Acting CEO, later confirmed as CEO. The Board was refreshed with new non-executive directors, signaling a strategic reset. The company plans to continue ERP system rollouts across remaining business units in FY26, with a focus on extracting efficiencies and improving customer service.
Looking Ahead, FY26 Outlook
Coventry Group projects an underlying EBITDA exceeding $20 million in FY26, with expectations of sequential quarterly improvement. July sales showed a promising 6.3% increase over June. The company’s new $55 million Revolving Cash Advance Facility, replacing the previous Borrowing Base Facility, provides covenant headroom and simplifies financing arrangements.
The Board remains confident in the underlying market opportunity, citing significant revenue scale, attractive gross margins, and no fundamental market structural issues. The emphasis will be on sales growth, cost discipline, cash generation, and debt reduction to restore profitability and enhance shareholder value.
Bottom Line?
Coventry Group’s FY25 setbacks set the stage for a critical turnaround year in FY26, with cost cuts and leadership changes under close market scrutiny.
Questions in the middle?
- Can Coventry Group successfully execute its $10 million cost reduction without disrupting operations?
- How will the ongoing ERP implementation impact customer service and financial performance in FY26?
- What is the outlook for market conditions in Australia and New Zealand, and how will Coventry’s specialised focus fare?
