Coventry Faces Profit Pressure Amid ERP Challenges and Market Headwinds

A Tough Year for Coventry Group

Coventry Group’s FY25 financial results reveal a company grappling with operational challenges and market headwinds. Group revenue declined modestly by 1.7% to A$364.6 million, but the more striking figure was the 40.9% plunge in EBITDA to A$12.3 million. This sharp earnings contraction reflects the combined impact of a complex ERP system rollout, project delays, and a cost base that has yet to adjust to the softer revenue environment.

The Fluid Systems division bore the brunt of the downturn, with sales falling 7.4% to A$147.4 million and EBITDA dropping 29.1% to A$13.4 million. The segment’s performance was hampered by the ongoing D365 ERP implementation and delays in key projects, alongside an inflexible cost structure. Meanwhile, the Trade Distribution segment managed a 2.7% revenue increase to A$217.8 million, boosted by the full-year contribution of Steelmasters, but its EBITDA still declined 13.4% to A$14.4 million, pressured by the construction sector downturn and costs related to new branches and relocations.

‘Back to Basics’ Strategy Takes Centre Stage

In response, Coventry Group has launched a comprehensive “Back to Basics” strategy focused on organic growth, margin improvement, cost reduction, cash generation, and debt reduction. The company is aggressively pursuing a $10 million annualised cost reduction program, having already achieved $5.1 million year-to-date through headcount and expense cuts. Operationally, the ERP system rollout is stabilising, with the D365 platform now live across key business units and customer-facing issues largely resolved.

Strategic initiatives include expanding the branch network with new and upgraded Konnect locations, relocating Cooper Fluid Systems’ Mackay facility to a state-of-the-art site, and optimising inventory distribution through mini distribution centres. On the margin front, Coventry is implementing dynamic pricing and consolidated purchasing to improve profitability.

Early Signs of Recovery in FY26

Encouragingly, the first four months of FY26 have shown a marked improvement. Group sales rose 8% compared to the prior four months, while EBITDA surged 342%, signaling that cost-cutting and operational fixes are beginning to bear fruit. Management remains focused on achieving the previously guided FY26 EBITDA target of A$20 million, though it acknowledges this remains a challenging goal. A comprehensive re-forecasting process is underway, with updated guidance expected alongside the half-year results in February 2026.

Capital management is also a priority, with an entitlement offer raising approximately A$11.5 million, of which 65% is earmarked for working capital improvements and 35% for debt reduction. This financial discipline aims to strengthen the balance sheet and provide a foundation for sustainable growth.

Market Position and Outlook

Coventry operates in large, fragmented markets including mining, infrastructure, building and construction, and manufacturing. While some regions and sectors remain challenging, particularly Victoria, Tasmania, and New Zealand, the company sees significant upside opportunities in mining and energy, infrastructure projects linked to major events like the Queensland Olympics, and emerging markets such as renewable energy and defence.

The refreshed leadership team is driving a culture of accountability and performance, supported by new sales incentives and data-driven monitoring tools. If Coventry can maintain momentum in cost control and operational efficiency while capitalising on market opportunities, it may well reverse the recent earnings slide and restore investor confidence.