Coventry’s EBITDA Drops 41% to $12.3M as Revenue Falls Slightly
Coventry Group Ltd reported a 1.7% revenue decline and a 40.9% drop in EBITDA for FY25, prompting a major restructuring and a bullish FY26 earnings target above $20 million.
- FY25 revenue down 1.7% to $364.6 million
- EBITDA plunged 40.9% to $12.3 million amid ERP challenges
- Significant $24.5 million intangible asset impairment recorded
- New CEO and CFO appointed, with cost base targeted to shrink by $10 million
- FY26 guidance aims for EBITDA exceeding $20 million, excluding cost-out benefits
FY25 Financial Performance, A Challenging Year
Coventry Group Ltd, a specialist in industrial products and services across Australia and New Zealand, disclosed a disappointing financial performance for the fiscal year 2025. Revenue slipped 1.7% to $364.6 million, while EBITDA tumbled 40.9% to $12.3 million compared to the prior year. The results were weighed down by softer market conditions, delays and disruptions linked to the rollout of a new ERP system, and underwhelming sales growth strategies.
Segment-wise, the Fluid Systems division saw a 7.4% revenue decline to $147.4 million and a 29.1% EBITDA drop, impacted by economic headwinds and project delays. Trade Distribution fared slightly better with a 2.7% revenue increase to $217.8 million, boosted by the full-year contribution of Steelmasters, but EBITDA still fell 13.4% due to construction sector softness and ERP-related challenges.
Strategic Restructuring and Leadership Changes
In response to the underperformance, Coventry Group has undertaken a substantial restructuring aimed at restoring growth momentum. The company appointed a new CEO, Nik Alpert, and a new CFO, alongside refreshing its Board. A key focus is on simplifying banking arrangements and aggressively right-sizing the corporate cost base, targeting approximately $10 million in savings.
Significant one-off charges weighed heavily on profitability, including a $24.5 million impairment of intangible assets, $6.8 million in ERP implementation costs, and onerous contract-related expenses. These non-recurring items contributed to a net loss after tax, despite the company maintaining positive operating cash flow and a solid balance sheet with net assets of $111.2 million.
Looking Ahead, FY26 and Beyond
Coventry Group’s outlook for FY26 is cautiously optimistic. The company has set a target of exceeding $20 million in EBITDA, excluding the benefits of cost reductions. This guidance reflects confidence in the underlying market’s robustness and the Group’s significant revenue scale and gross margin potential. The strategy centers on a “Back to Basics” approach, driving sales growth, maintaining disciplined cost control, improving cash generation, and reducing net debt, which stood at $56.3 million at year-end.
Operational priorities include leveraging ERP efficiencies to enhance customer and staff experience, rationalizing the supply chain, and focusing on underperforming branches. While near-term M&A activity is unlikely, measured greenfield expansions and trade store upgrades remain on the table. Dividend payments are suspended until financial performance stabilizes and net debt is meaningfully reduced.
July trading data offers an encouraging sign, with sales up 6.3% month-on-month and EBITDA exceeding budget, suggesting the restructuring efforts may be gaining traction.
Bottom Line?
Coventry’s FY25 setbacks have triggered a decisive reset; the market will watch closely if FY26 targets mark a genuine turnaround.
Questions in the middle?
- How will Coventry manage ERP-related disruptions moving forward?
- What specific cost-cutting measures will deliver the targeted $10 million savings?
- Can Coventry’s sales growth strategies regain momentum amid ongoing market softness?
