Coventry Group Limited · ASX:CYG
Coventry — Investor Presentation (February 2019)
43 slides from Coventry's investor presentation, Feb 5, 2019
Slide 1: Acquisition of Nubco and Capital Raising
Acquisition of Nubco and Capital Raising Not for release to US wire services or distribution in the United States 5 February 2019
Slide 2: Important information and disclaimer
Important information and disclaimer Important information and disclaimer The information contained in this presentation (Presentation) has been prepared by Coventry Group Ltd ACN 008 670 102 (CYG or Company). This Presentation has been prepared in relation to: CYG’s acquisition of Nubco Proprieta
Slide 3: Contents
Contents Section Page number Equity raising overview 5 Coventry Group 9 Nubco overview 19 Combined group profile 28 Summary and outlook 33 A Risk factors 35 B International Offer Restrictions 40 3
Slide 4: Acquisition target
Acquisition target Nubco is Tasmania’s largest independent retailer of industrial hardware and supplies. Diversified customer and product base Meets Coventry’s key acquisition criteria: • Industrial supply market • >$10m turnover • Profitable business • Management to be retained • Clea
Slide 5: 1. Equity raising overview
1. Equity raising overview Coventry GroupLtd (C) COOPER actt
Slide 6: Equity raising overview
Equity raising overview • Equity raising of approximately $27.6 million, comprising an Accelerated Non-Renounceable Entitlement Offer • Under the Entitlement Offer, eligible shareholders are entitled to 1 New Share for every 1.37 existing ordinary shares held on Friday 8th February Offer size and st
Slide 7: Source and uses of funds
Source and uses of funds Sources A$M Uses A$M Gross proceeds from the equity raising 27.6 Acquisition of Nubco 36.0 Issue of Coventry shares to Nubco vendor 1.8 Transaction costs and working capital 3.4 Debt funding 10.0 Total sources of funds 39.4 Total use of funds 39.4 7
Slide 8: Equity raising timetable
Equity raising timetable ASX announcement of offer and trading halt Tuesday, 5th February 2019 Institutional offer and bookbuild Tuesday, 5th February 2019 Trading halt lifted and return to trading on ASX Friday, 8th February 2019 7.00pm (AEDST) Friday, 8th February Record date for participation in
Slide 9: 2. Coventry Group
2. Coventry Group Coventry Group Ltd (ASX: CYG) delivers innovative industrial solutions to the mining, construction, manufacturing, defense and agriculture sectors.
Slide 10: Company overview
Company overview Coventry Group Ltd (ASX: CYG) delivers innovative industrial solutions to the mining, construction and manufacturing sectors. We supply a range of We value the health, safety fastening systems, cabinet hardware systems and hydraulics, lubrication, and well being of our people fire s
Slide 11: Corporate overview
Corporate overview Financial snapshot Share price 5-Feb-2019 $0.965 Shares outstanding 50.5m Market capitalisation $48.7m Cash (31-Dec-2018) $8.5m Debt (31-Dec-2018) $0.0m Enterprise value $40.2m Substantial shareholders Viburnum Funds 21.0% Spheria Asset Management 10.5% Intrepid Capital 6.9% Sando
Slide 12: Company overview
Company overview Coventry Group (ASX: CYG) delivers innovative industrial solutions to the construction, manufacturing, mining, agriculture and defense sectors. We supply a range of fastening systems, cabinet hardware systems, hydraulics, lubrication, fire suppression, refueling systems and other pr
Slide 13: Coventry's value proposition
Coventry’s value proposition Renewed focus on our people Deliver service excellence Improved financial outcomes and our customers Quality products Grow sales Training Stock availability Improve margins Business Development Employee expertise Reduce DC infrastructure costs Technolog
Slide 14: Vision/strategic direction
Vision/strategic direction Exciting opportunity to build a leading scaled Industrial Supply Group. • As the Group has stabilised performance over recent times and with a clear pathway back to profitability, the Board and Executive Leadership Team have spent time developing the vision for the busines
Slide 15: Acquisition approach
Acquisition approach The Group will take a highly disciplined approach to acquisitions with strict criteria. • A return to pursuing acquisition opportunities represents a pivotal turning point for the • Focus on new • Profitable & company after years of divestments and revenue erosion. geographies a
Slide 16: Board
Board The Coventry Group Board of Directors has a wealth of knowledge and experience. Neil Cathie – Independent Non-Executive Andrew Nisbet – Independent Non-Executive Chairman Director 27 year career at Australia’s largest and most successful Appointed in September 2017 plumbing and bathroom di
Slide 17: Executive Leadership Team
Executive Leadership Team Highly credentialed Executive Leadership Team with a proven track record in B2B trade distribution. Background Robert Bulluss (CEO and See previous slide Managing Director) Rod Jackson (CFO) Rod was appointed Chief Financial Officer in September 2017. He is an ACA qualified
Slide 18: 1HFY19 trading update
1HFY19 trading update • Group Torque Industries • Financial performance continues to improve acquisition • Sales up 5.1% on PCP • Cash position at 31 December 2018 of $8.5m with no debt • Completed on 31 October 2018 • Net tangible assets per share of $1.02 ‒ 8 months profit • CFS contribution • Sal
Slide 19: 3. Nubco Overview
3. Nubco Overview Highly attractive acquisition opportunity
Slide 20: Nubco – History and key milestones
Nubco – History and key milestones Overview Nubco Proprietary Limited (“Nubco”) is Tasmania’s largest independent supplier of industrial and hardware products Founded in 1983 Seven store locations across Tasmania Headquarters and Distribution Centre in Devonport Diversified customer base
Slide 21: Nubco – Products & locations
Nubco – Products & locations Nubco is headquartered in Devonport, with seven store locations across Tasmania. Key products Burnie George Town Distributes an extensive range of equipment, accessories and spare parts Industrial and engineering supplies, fasteners, safety and machinery Devonport La
Slide 22: Nubco – Financials
Nubco – Financials Normalised earnings have grown by a CAGR of 27% between FY14 and FY18. Revenue ($m) EBITDA ($m) 45 7 30% 39.4 6.0 40 6 25% 34.7 Normalised EBITDA margin (%) 35 Normalised EBITDA ($m) 30.3 5 4.8 30 27.7 20% Revenue ($m) 24.4 4 3.8 25 15% 20 2.9 15.2% 3 2.3 13.8% 15 12.5% 10% 2 10.5
Slide 23: Nubco – Financials (cont.)
Nubco – Financials (cont.) 1H19 EBITDA has grown by 9% from 1H18. Revenue ($m) EBITDA ($m) Historically, Nubco earnings show significant seasonality, with second half revenue, earnings and margin higher than first half 21.0 2.7 30% Factors contributing to seasonality include 2.6 20.1 2.6 End o
Slide 24: Nubco – Customer Segments
Nubco – Customer Segments Nubco has a diversified customer base and product mix. FY17 Revenue by Customer Segment Sector Key Customer Segments 15% Trade Trade Trade customers Industrial 20% • Power tools, hardware & gas Retail 65% • Reinforcement products Industrial Industrial consumables co
Slide 25: Nubco – Growth prospects
Nubco – Growth prospects Nubco has a strategy in place for continued sales and profit growth, supported by the Tasmanian economy. Organic Growth Significant industrial tender pipeline Utilities Infrastructure Manufacturing Supported by Potential for the roll out of Nubco locations in regio
Slide 26: Nubco – Potential synergies
Nubco– Potential synergies A number of potential synergy opportunities have been identified. Increased buying power Expand product range Both CYG and Nubco will benefit CYG will be able to expand its product range from increased buying power with products sold at Nubco across the full range of produ
Slide 27: Nubco – Management team
Nubco – Management team Experienced management team that will remain with the business. Name Role Responsibilities Tenure (years) Paul Krawczyk Managing Director Strategy 16 Brett Hodgetts Financial Controller Financial reporting, accounts payable/receivables. payroll 16 Todd Cordwell State Operatio
Slide 28: 4. Combined Group Profile
4. Combined Group Profile Financial results are continuing to improve
Slide 29: Nubco – Acquisition financial impact
Nubco – Acquisition financial impact Attractive acquisition multiple Delivers immediate earnings to Adds to CYG’s ability to CYG generate cash • Expected completion on 1st March 2019 • High EBITDA cash conversion Acquisition price $36.0m ‒ 4 months profit contribution • Cash $34.2m • Low c
Slide 30: Pro forma combined group profile
Pro forma combined group profile Nubco would become CYG’s third largest division. Pro forma FY18 Current sales split by Pro forma FY18 Current sales split by business unit (includes Torque)1 business unit (includes Torque)1 & Nubco 2 17.7% 33.0% 40.1% 43.5% 35.7% 13.5% 16.4% TDA TDNZ CFS TDA TDNZ CF
Slide 31: Pro forma balance sheet
Pro forma balance sheet (A$) Coventry Nubco Fund Pro forma Balance sheet remains conservatively 1 2 3 Dec-18 Dec-18 Raising Dec-18 geared given forecast return to profitability in Cash & cash equivalents 8.5 -34.2 36.3 10.6 FY19 Inventories 48.3 9.6 - 57.9 Trade and other receivables 25.7 3.9 - 29
Slide 32: Risk mitigation
Risk mitigation Risk mitigation is a key focus of CYG. Risks identified Mitigation plan Senior management team retained • Paul Krawczyk has entered into 2 year Loss of management and key personnel service agreement • Other management to be retained Nubco to be operated as a stand-alone business Inab
Slide 33: 5. Summary and outlook
5. Summary and outlook Coventry GroupLtd (C) COOPER actt
Slide 34: Summary and outlook
Summary and outlook ❶ Experienced team is in place Focus on sales growth and sustainable profitable growth ❷ Group sales growth Has continued in first half of FY19 ❸ Our key markets are performing well In mining and resources, construction and industrial sectors ❹ Strong balance sheet Post acquisiti
Slide 35: A. Risk Factors
A. Risk Factors Coventry GroupLtd (C) COOPER
Slide 36: A. Risk Factors
A. Risk Factors The risk factors summarised in this section may materially affect the financial performance of Coventry and the market price of its shares. To that extent, the shares in Coventry carry no guarantee with respect to the payment of dividends or return on capital. Potential investors sho
Slide 37: A. Risk Factors
A. Risk Factors C: Coventry risks Loss of key personnel or skilled workers Coventry’s ability to remain productive, profitable and competitive and to implement planned growth initiatives depends on the continued employment and performance of senior executives and other key members of management. Cov
Slide 38: A. Risk Factors
A. Risk Factors C: Coventry risks (continued) Customer service Coventry's ability to maintain relationships with major customers is integral to its financial performance. This in turn depends on its ability to offer competitive service standards and pricing. Poor performance in either area may lead
Slide 39: A. Risk Factors
A. Risk Factors D: Acquisition risks Completion risk Coventry may terminate the Nubco share acquisition agreement in certain circumstances, including in the circumstance where certain conditions precedent have not been satisfied. If such termination rights are exercised, completion of the acquisitio
Slide 40: B. International offer restrictions
B. International offer restrictions
Slide 41: B. International offer restrictions
B. International offer restrictions This document does not constitute an offer of New Shares of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside Aust
Slide 42: B. International offer restrictions
B. International offer restrictions Hong Kong • WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong
Slide 43: B. International offer restrictions
B. International offer restrictions Singapore • This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials
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