Coventry Group Limited · ASX:CYG
Coventry — Merger or Acquisition (September 2018)
35 slides from Coventry's merger presentation, Sep 26, 2018
Slide 1: Acquisition of Torque Industries
Acquisition of Torque Industries For personal use only 26 September 2018 Not for release to US wire services or distribution in the United States
Slide 2: Acquisition target – Torque Industries
Acquisition target – Torque Industries For personal use only Compelling strategic rationale Diversified customer base with low reliance on the mining and resources markets Meets Coventry’s key acquisition criteria: • Industrial supply market • >$10m turnover • Profitable business • Manag
Slide 3: Important information and disclaimer
Important information and disclaimer For personal use only 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 acquisit
Slide 4: Contents
Contents For personal use only Section Page number Equity raising overview 5 Business update – Coventry Group 9 Torque Industries 16 Combined Group profile 22 Summary and outlook 27 A Risk factors 29 B International offer restrictions 34 4
Slide 5: 1. Equity raising overview
For personal use only 1. Equity raising overview
Slide 6: Equity raising overview
Equity raising overview For personal use only • Equity raising of up to $15.0 million, comprising: • An institutional placement to raise approximately $6.4m; plus Offer size and structure • An Accelerated Non-Renounceable Entitlement Offer to raise approximately $8.6m. • Under the Entitlement Offer,
Slide 7: Source and uses of funds
Source and uses of funds For personal use only Sources A$M Uses A$M Gross proceeds from the equity raising 15.0 Acquisition of Torque 10.5 Transaction costs, Trade Distribution branch expansion and working capital 4.5 Total sources of funds 15.0 Total use of funds 15.0 7
Slide 8: Equity raising timetable
Equity raising timetable For personal use only ASX announcement of offer and trading halt Wednesday 26 September Institutional offer and bookbuild Wednesday 26 September Trading halt lifted and return to trading on ASX Friday 28 September Record date for participation in ANREO 7.00pm (AEST) Friday 2
Slide 9: 2. Business update
For personal use only 2. Business update
Slide 10: Company overview
Company overview For personal use only Coventry Group Ltd (ASX: CYG) delivers innovative industrial solutions We value the health, safety to the mining, construction and manufacturing sectors. We supply a and well being of our people range of fastening systems, cabinet hardware systems and hydraulic
Slide 11: Corporate snapshot
Corporate snapshot For personal use only Financial snapshot Share price (25-Sep-2018) $1.25 Shares outstanding 37.4m Market capitalisation $46.7m Cash (30-Jun-2018) $5.0m Debt (30-Jun-2018) $0.0m Enterprise value $41.7m Substantial shareholders Viburnum Funds 19.5% Intrepid Capital 7.7% Sandon Capit
Slide 12: Market overview
Market overview For personal use only Large mining companies maintenance and capital expenditure 12,000 22,000 • Core markets = attractive and buoyant 11,000 20,000 Maintenance (A$m) 10,000 Capital (A$m) 18,000 ➢ Mining and resources 9,000 8,000 16,000 • Increase in service, repair and maintenance w
Slide 13: Coventry's value position
Coventry’s value position For personal use only 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 infrastructur
Slide 14: Turnaround progress – FY18 snapshot
Turnaround progress – FY18 snapshot For personal use only • Sales +11.7% Konnect Promoter Score trend ➢ Up to $168.7m ($151.0m FY17) Employees engagement 50% Improvement in net ➢ Increased average stock availability across all branches of 96% 45% (FY17: <75%) promoter score of 40.1% (FY17: -31.2%) 4
Slide 15: Corporate snapshot – Board of Directors
Corporate snapshot For personal use only 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 Sept
Slide 16: 3. Torque Industries
For personal use only 3. Torque Industries
Slide 17: Torque Industries – History and key milestones
Torque Industries – History and key milestones For personal use only • Overview ➢ Torque Industries (“Torque”) is a diversified engineering company providing mainly hydraulic and pneumatic products and services ➢ Founded in 1985 ➢ Key industry segments include defence, agriculture, industrial and mi
Slide 18: Torque Industries – Products and services
Torque Industries – Products and services For personal use only Sales • Distributes an extensive range of equipment, accessories and spare parts ➢ Hydraulics, pneumatics, gas generation equipment, filtration products, hoses & fittings, vacuum equipment and material handling • Global strategic relati
Slide 19: Torque Industries – Market segments
Torque Industries – Market segments For personal use only Diversification of revenue through a broad segment exposure offers de-risk to Coventry. FY18 Revenue by Industry Sector Key Market Segments 25% 30% • Defence • Agriculture • Recycling 9% • Manufacturing 10% 18% • Mining 10% Agriculture Defenc
Slide 20: Torque Industries – Market segments
Torque Industries – Market segments For personal use only Growth Opportunities Renewable energy • Ship building Ship building ➢ The Future Submarine program ➢ The Future Frigate program • Infrastructure • Renewable energy Infrastructure demand • Industrial Industrial • Manufacturing repairs and main
Slide 21: Torque Industries – Management team
Torque Industries – Management team For personal use only Experienced management team Name Role Responsibilities Tenure (years) Leigh Thompson General Manager Oversees business operations and leads the management team 8.0 Jethro Laundy Sales/Marketing Manager Oversees the sales function and active i
Slide 22: 4. Combined Group profile
For personal use only 4. Combined Group profile
Slide 23: Acquisition financial impact
Acquisition financial impact For personal use only Attractive acquisition multiple Delivers immediate earnings to Adds to CYG’s ability to CYG generate cash • Acquisition aligned with CYG’s plans to return to • High EBITDA cash conversion Acquisition price → $10.5m Group profitability in FY19
Slide 24: Coventry existing business base earnings
Coventry existing business base earnings For personal use only • All plans geared to return the Group to profitability in FY19 (A$m’s) FY17 FY18 (1) (2) • FY19 will see the full year impact of sales and margin Revenue from sale of goods 151.0 168.7 initiatives, loss making branch closures and consol
Slide 25: Pro forma combined Group profile
Pro forma combined Group profile For personal use only Cooper Fluid Systems surpasses Trade Distribution Australia as the largest business unit by sales following acquisition. FY18 Current sales split by business unit FY18 Proforma sales split by business unit 38.8% 40.1% 43.4% 43.5% 17.8% 16.4% TDA
Slide 26: Pro forma balance sheet
Pro forma balance sheet For personal use only (A$m’s) Coventry Jun-18 Torque Jun-18 Equity Raising Pro forma Jun-18 • Remains debt free Cash & cash equivalents 5.0 -10.5 14.0 8.5 • Balance sheet excludes $71.6m in tax losses Inventories 46.4 1.3 - 47.7 Trade and other receivables 30.5 1.8 - 32.3 to
Slide 27: 5. Summary and outlook
For personal use only 5. Summary and outlook
Slide 28: Summary and outlook
Summary and outlook For personal use only ❶ Experienced team is in place Focus on sales growth and sustainable profitable growth ❷ Group sales growth Has continued in early stages of FY19 ❸ Our key markets are performing well In mining and resources, construction and industrial sectors ❹ Strong bala
Slide 29: A. Risk factors
For personal use only A. Risk factors
Slide 30: A. Risk factors
A. Risk factors For personal use only 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. P
Slide 31: Coventry risks
A. Risk factors For personal use only 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 memb
Slide 32: Coventry risks (continued)
A. Risk factors For personal use only 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
Slide 33: Acquisition risks
A. Risk factors For personal use only D: Acquisition risks Completion risk Coventry may terminate the Torque Business Acquisition Deed in certain circumstances, including in the circumstance where certain conditions precedent have not been satisfied. If such termination rights are exercised, complet
Slide 34: B. International offer restrictions
For personal use only B. International offer restrictions
Slide 35: B. International offer restrictions
B. International offer restrictions For personal use only 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 an
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