Coventry Group LTD Annual Report 2020

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FY2020 Annual Report · Coventry Group LTD

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Results for announcement to the market
Full Year Ended 30 June 2020

ABN 37 008 670 102

Revenues from continuing operations

Profit before interest, taxes, depreciation and
amortisation from continuing operations

Loss before tax from continuing operations

Profit after tax from continuing operations
attributable to members

Dividends (distributions)

Final dividend
Date the dividends are payable
Record date for determining entitlements to the
dividends

Amount of dividend per security

Final dividend current year
previous year

Interim dividend current year
previous year

Special dividend previous year
(paid in each financial previous year

year)

Total dividend current year
previous year

Dividend reinvestment plan (DRP)

The Company’s DRP remained suspended.

Net Tangible Assets Per Security
As at 30 June 2020
As at 30 June 2019

Down

22.3% to

247,567

-97.6%

N/A

(17,030)

791

Amount per security

Franked amount per security

Nil
N/A

N/A

Amount per
security
Nil
Nil

Nil
Nil

Nil

Nil
Nil

Nil

Franked amount per
security at 30% tax
Nil
Nil

Nil
Nil

Nil

Nil
Nil

0.39
0.59

For an explanation of the figures reported above see the attached commentary.

The attached financial statements and Directors’ declaration have been subject to an independent audit review.

ANNUAL REPORT

2020

Coventry Group Ltd and its controlled entities

Contents

Chairman's Report

Chief Executive Officer's Report

Consolidated statement of profit or loss

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements:

Significant accounting policies

Segment information

Business Combination

Auditor's remuneration

Employment costs

Finance income and finance expenses

Taxes

Earnings per share

9. Cash and cash equivalents

10.

11.

Trade and other receivables

Inventories

12. Parent entity disclosures

13. Property, plant and equipment

14. Right-of-use assets

15.

16.

17.

18.

Intangible assets

Impairment of non-financial assets

Trade and other payables

Interest-bearing loans and borrowings

19. Provisions

20. Share-based payments

21. Capital and reserves

22.

Financial risk management

23. Operating leases

24. Controlled entities

25. Reconciliation of cash flows from operating activities

26. Related parties

27.

Impairment and significant items

28. Change in accounting policies

29. Events occurring after the reporting period

Directors' Report

Directors' Declaration

Auditor's Independence Declaration

Auditor's Report

Shareholder Information

Corporate Directory

Chairman’s Report

The Group has continued to improve its financial performance in 2020. Most parts of our business performed well in largely resilient
markets despite considerable operational disruption and uncertainty in the second half cause by COVID-19 restrictions and shutdowns.
Most had revenue growth year on year. Our two most recent acquisitions, Torque Industries (2018) and Nubco Proprietary Limited
(2019), have traded strongly in 2020 and made a material contribution to our improved financial performance. Our New Zealand Konnect
and Artia operations were financially impacted by the pandemic related shutdown imposed by the New Zealand government across
March/April but still had a solid year. Results from our Australian Konnect and Artia network have not met expectations and this part of
the business is receiving disproportionate but appropriate Board and management focus. It is proving stubborn to turn around but we
remain convinced that we have the right plan, the right people and a much improved reputation in the markets in which we operate.
The first month of the new financial year has started positively with Group revenue ahead of last year.

Our CEO and Managing Director, Robert Bulluss and his executive team are to be commended for their management of the Group
during 2020. Year on year financial improvement is of course a measure of their effectiveness however not all stakeholders are in a
position to see the focused, determined and values driven leadership that we are fortunate to have at Coventry, particularly in these
difficult times.

An underlying EBITDA of $6.6m in 2020 represents a substantial turnaround from what we are calling our base year of 2017 which
marked the pivotal appointment of our CEO (May 2017) but also marked a low point in the Group’s financial performance with sales
from continuing operations sinking to $151.0m and a statutory loss after tax of $37.7m.

Fluid Systems has continued to perform strongly in 2020 and has had a record year. Fluid Systems has an excellent reputation in the
markets in which it operates and continues to be well led with a stable and experienced team. We announced the planned acquisition
of HIS Hose in Victoria in March 2020 but to date have been unable to complete due to pandemic restrictions.

Trade Distribution comprises our Australian and New Zealand network of Konnect, Artia and Nubco branches, which are serviced by a
number of distribution centres.

Our New Zealand network continues to be well led by a stable and experienced team and, notwithstanding the pandemic shutdown
across March/April, has had a solid 2020 with contribution just ahead of last year on a small revenue increase.

Our Australian Nubco network recorded strong sales growth for the year and profitability in line with expectations. This business is now
incurring some additional cost associated with lifting standards in key areas such as Health and Safety and employee wellbeing. Lifting
standards in these areas is not negotiable and is aligned to the Group’s values.

Our Australian network of Konnect and Artia branches did not produce planned financial outcomes and although it achieved revenue
growth in 2020 it remains a detractor to Group profitability. No-one understands this better than the Board and management and we
are staying the course, driving revenue and margin growth initiatives and accelerating further cost out plans. The CEO will talk to this
key part of our business further in his report.

The Executive and Director Incentive Plan approved at the 2017 Annual General Meeting of the Company provides for the granting or
issuing of performance rights to eligible Executives in accordance with its terms and subject to the terms and performance hurdles set
by the Board. Mr Bulluss’s total remuneration includes a Plan award and, as required by the ASX Listing Rules, the Company will seek
shareholder approval to grant him Performance Rights for his participation in the Plan for 2021. Full particulars will be published in the
Notice of Annual General Meeting for the meeting to be held on 23 October 2020.

Our Redcliffe, Perth property, with its single term of 20 years not expiring until 2027, remains only partially sub-let. Consequently, and
in accordance with Australian Accounting Standards, we have recorded a one-off, non-cash onerous lease transaction of $12.2m at 30
June 2020 in relation to the vacant parts of the property. The vacant parts of the Redcliffe property continue to be actively marketed by
our Property Manager in conjunction with local resources.

The Group continues to have a strong working capital position with Current Assets exceeding Current Liabilities by $42.7m. We have
taken the opportunity in 2020 to clear a legacy of old and unsaleable inventory. Considerable effort has been made over the last couple
of years to clear this inventory, but a point has been reached where further effort would be, in the Board’s view, misplaced and
uneconomic. As a result, a write-off of $6.5m has been made at 30 June 2020. Net debt at financial year end was $3.3m and we are
very pleased to have locked in an increased $40m securitised trade receivables facility with our principal financier, Scottish Pacific, for
a 36 month term. The Group has substantial Australian tax losses of $75.5m and, with a return to profitability, a Deferred Tax Asset of
$13.1m in relation to these accumulated losses has been recognised in its Statement of Financial Position.

On behalf of the Board my sincere thanks go to the CEO, the Leadership Team and our colleagues throughout the business for their
commitment to our values and their disciplined leadership and management of the Coventry business during a year of challenges which
none of us expected or could have foreseen.

Outlook

All our plans have been and are structured to achieve sustainable profitable growth for the Group with improved financial performance
delivered year on year. Our best view of 2021 is that the momentum we currently have will continue largely unabated, that we continue
to deliver well on our tactical plans and that the markets in which we operate remain buoyant. However, given market uncertainties
resulting from the pandemic’s impacts, we will not be providing full year guidance but will continue to provide quarterly trading updates
to the market.

The board has determined that no final dividend will be paid. Looking ahead the Board will assess the Company’s ability to pay dividends
against earnings and the financial position of the business.

Neil G. Cathie
Chairman of the Board of Directors

Chief Executive Officer’s Report

The Group’s performance improved in FY20 delivering underlying profitability for the second consecutive year for both EBITDA and
EBIT. The Group has produced an EBITDA turnaround of $16.3m in three years. Our best result in many years has been achieved
against the backdrop of the COVID-19 pandemic shutdowns and restrictions in Australia and New Zealand and with headwinds
encountered during the financial year. We remain confident that we have the right strategy, the right people and operate in the right
markets to continue our journey towards sustainable profitable growth. Improved profit results are proof that our strong value proposition
and dedication to our core values are delivering results.

I would like to acknowledge the response to the COVID-19 pandemic by the Coventry Leadership Team (CLT) and our people which
is on-going and has been exemplary. The Group has prioritised the health, safety and wellbeing of our people along with our customers,
suppliers and communities, adapting the way we work accordingly. To date, we have retained our people at full employment whilst
reducing costs, managed the enforced Government temporary shutdown of our New Zealand operations, managed supply chain risks,
preserved cash and improved the financial health of the Group. We are operating the Group as close as possible to business as usual.

The health, safety and wellbeing of our people is our number one priority. During the year we had 13 Lost Time Injuries (LTI’s). Of
these LTI’s, 8 were in our recently acquired businesses. All incidents and serious near misses are reviewed by the CLT to ensure we
improve our safety systems. In future we will accelerate implementation of Coventry safety systems into newly acquired businesses.
Early in FY21 we will launch a new Safety1st awareness program. Our aspiration is for zero LTI’s and zero impact on our people.

Our values of Respect, Fairness, Teamwork, Professionalism and Integrity are at the core of our culture. We do the right thing in all
our dealings with our people, customers and suppliers. Our culture is assisting us in attracting high quality people to the Group,
retaining our employees and improving employee engagement. Our employee retention rates are at their highest levels since the start
of the implementation of our strategy for sustainable profitable growth. Keeping our people is a critical success factor for the future as
we transition into the new normal post COVID-19.

During the year we successfully transitioned Nick Daw into the General Manager – Nubco role. Nick joined the Coventry Group in
March 2019 with the acquisition of Nubco. Formerly the Sales and Marketing Manager, Nick has been with the business for 16 years
working in customer, purchasing and operational roles. Paul Krawczyk has moved into the role of General Manager – Special Projects.

Our customer service levels continued to improve. This is evidenced by our sales growth and growing ability to win large customer
contacts and projects. We provide customer service excellence through quality products, stock availability, expertise, agility and our
geographic coverage. Major customer wins for Konnect and Artia Australia that will impact on the FY21 result are West Gate Tunnel
Project in Melbourne, QTower in Sydney and Mineral Resources Limited contract in WA. Fluid Systems have won business with BMA
for the supply of fuel dispensing systems for mobile plant in the Bowen Basin.

Sales skill and pricing improvement programs, supplier engagement, cost reductions and supply chain optimisation, continue to
contribute to improved financial performance.

Our Digital Customer Engagement (DCE) project to provide on-line and mobility solutions for customers as well as a Customer
Relationship Management (CRM) system and a user-friendly Point of Sale (POS) module is well advanced. The IT team led by Ken
Lam have been integral to the DCE project whilst continuing to work on simplifying and enhancing legacy computer systems. The team
has also put considerable effort into setting up our people, where they are able, to work securely from home with Cyber security systems
being enhanced during the year. The IT team have also supported many other business improvement projects.

The support provided by our central services teams (Finance, Accounts Payable, Accounts Receivable and Payroll) has continued to
improve and collection performance by the Accounts Receivable team, whilst working from home, has been outstanding.

Fluid Systems (FS), which comprises our Cooper Fluid Systems (CFS) and Torque Industries (Torque) businesses, performed very
well. FS are positioned for further growth in coming years as we expect their core markets of mining and resources, defence and
agriculture to perform well. The merge of our Cooper Fluid Systems and Torque businesses in Adelaide has been completed along
with relocation to a new custom-built facility.

Trade Distribution (TD) comprises our network of Konnect and Artia Australia (KAA), Konnect and Artia New Zealand (KANZ) and
Nubco branches.

KANZ had another positive year despite the impact of the Government enforced shutdown of the business which resulted in the
estimated loss of sales in the order of $2.8m - $3.2m. The Group received $713k in wage subsidies from the New Zealand Government
that partly defrayed employment costs during the Government enforced shutdown. Despite the shutdown and continuing disruption,
full year sales were only 0.5% down on last year and contribution was slightly up. Business performance has returned to normal levels
post the shutdown.

We made further progress improving the capability of our people, our service levels and our supply chain in the KAA business. The
COVID-19 pandemic has forced us to fast track variable cost savings and take firmer action with underperforming areas of the business.
KAA will benefit in FY21 from the full year impact of these initiatives along with additional supply chain savings being implemented in
Q1 FY21. We remain confident we have the right strategy, right people and operate in markets that will be robust in the current situation.
Generating sales growth of 3.4% within the framework of the COVID-19 pandemic is evidence of our improving capability.

Our Nubco network delivered strong sales growth and contribution in line with expectations. The Tasmanian economy is strong and
we have benefitted from increased sales in the DIY and home renovation markets.

Our market leading businesses, FS, Nubco and KANZ, are well placed to continue to grow and perform well. We believe the building
blocks are in place for KAA to have the breakout year we have been looking for and return to profitability in FY21. Of course, we have
the global pandemic, recession in Australia, Victorian Government stage 4 restrictions, New Zealand Government stage 3 restrictions
and global economic downturn, ensuring the future is not without significant challenges. Our strategy to concentrate on more recession
proof markets has to date proven to be the right one.

In accordance with Australian Accounting Standards, we have recorded a one-off, non-cash onerous lease transaction for our Redcliffe
WA property of $12.2m and also made the decision to take a one off, inventory write off of $6.5m being legacy unsaleable slow moving
and obsolete stock. The stock write off enables us to downsize our Thomastown VIC DC and free up space in the branch network to
expand our complimentary range of products.

The Group has tax losses of $75.5m available for use in Australia and franking credits of $11.1m available.

We remain fully focussed on our People, Customers and our Suppliers, and applying our values of Respect, Fairness, Teamwork,
Professionalism and Integrity.

COVID-19

The major impact on the Group in FY20 from the COVID-19 pandemic was the suspension of operations in New Zealand. Since
recommencing operations, sales in New Zealand have continued to perform to expectations, as have our Australian operations.

Activity in our major end markets (commercial construction, infrastructure and mining) has remained solid to date. However, there is a
high level of uncertainty surrounding the scale and duration of COVID-19 and the potential impact in these markets. Under the Victorian
Government Stage 4 restrictions in the Melbourne metropolitan area and New Zealand Government Stage 3 restrictions in Auckland,
we are a permitted business and able to operate our branches and Distribution Centres. It is too early to assess the impact on sales.
Otherwise all business units remain fully operational.

Our COVID-19 response is focussed on:

• Prioritising the health, safety and wellbeing of our people along with our customers, suppliers and communities.
• Adapting to the new work environment incorporating working from home and flexible work arrangements whilst improving

productivity.

• Prudent cost management.
• Managing supply chain risks.
• Cash preservation.
• Ensuring the Group is well capitalised and has excess liquidity.
• Operating the Group as close as possible to business as usual.

Given market uncertainties resulting from the pandemic’s impacts, we are not providing full year guidance.

Business Performance

Trading performance improved during the year. May and June were our two most profitable months for the year following a poor March
and April at the start of COVID-19 pandemic restrictions and disruption. Our improved financial performance has continued in July
2020.

Group sales growth for FY20 including acquisitions of 22.3% and excluding acquisitions of 4.7% on the prior year. Group sales including
acquisitions at $247.6m ($202.3m FY19). We estimate FY20 sales were negatively impacted in the order of $2.8m to $3.2m due to
the enforced Government shutdown of our New Zealand operations. Group underlying EBITDA of $6.6m ($2.8m FY19), a $3.8m
improvement year on year. Group underlying EBIT of $4.0m ($1.1m FY19). Reported net profit for the year of $0.8m (net loss for the
year of $1.4m FY19).

The Group has a solid balance sheet with Net Assets of $102.1m and Net Tangible Assets of $47.6m as at 30 June 2020. At 30 June
2020 the Group had net debt of $3.3m.

Performance by Division

Fluid Systems
Fluid Systems (FS), led by Bruce Carter and his leadership team have had an excellent year with continuing sales growth in both
Cooper Fluid Systems (CFS) and Torque Industries. Sales growth is being driven by our customer value proposition, ability to win
major contracts, continuing market leading position in mining and resources and diversification into agriculture, defence, transport and
recycling markets. Sales growth of 15.2% including acquisitions on the prior year and 8.5% excluding acquisitions on the prior year.
Underlying EBITDA in FY20 of $10.3m compared to $8.8m in FY19.

We have successfully integrated the Torque and CFS businesses in Adelaide SA and completed the relocation in early August 2020 of
the merged businesses into a new custom-built facility that will cater for future growth. During the year we also relocated our Hunter
Valley branch to a larger custom-built facility.

We remain cautiously optimistic about growth in FS in FY21 as a result of the strong mining and resources sector, increasing market
share through our value proposition, expansion of our product and service offering, expanding our hydraulics capabilities and further
diversification into sectors outside of the mining and resources sector. We are however realistic and understand FS will not be immune
from unforeseen impacts of the COVID-19 pandemic. As FS has demonstrated through various cycles, it has the capability to scale
according to prevailing market conditions.

The planned HIS Hose acquisition was announced earlier in the year, but to date we have been unable to complete due to pandemic
restrictions.

Trade Distribution (TD)
TD sales for the year including acquisitions up 28.1% on the prior year and excluding acquisitions up 2.6% on the prior year. The
underlying EBITDA for TD was $6.7m compared to $3.3m in FY19. Sales growth and EBITDA were both negatively impacted by the
enforced Government shutdown in New Zealand.

Konnect and Artia New Zealand (KANZ)

KANZ full year sales down 0.5% on prior year but impacted by the loss of 23 days sales during the shutdown and continued disruption
due to the pandemic restrictions.

KANZ is the leading fastening systems business in the construction and roofing and cladding markets in New Zealand. Future growth
is expected to come from a combination of organic sales growth, the potential for further branches in new locations, the potential
acquisition of profitable businesses in New Zealand and adding complimentary products.

Konnect and Artia Australia (KAA)

We are making positive progress in KAA. The KAA business has proven more difficult to turnaround than expected. Whilst not an
excuse, the COVID-19 pandemic has disrupted us just as we were starting to build sales momentum. KAA full year sales were up
3.4% on the prior year. Konnect was up 4.0% on the prior year however Artia had a slight decline on the prior year. Gross margin is
increasingly under pressure in a very competitive market. Despite considerable improvement across many areas of this business, KAA
has fallen short of recording a breakeven EBITDA for the full year.

In Q4 FY20 we fast tracked action to ensure the building blocks are in place to return to profitability in FY21. We have merged our
Chinchilla and Toowoomba branches and Morningside and Pinkenba branches and in June closed our unprofitable Darwin branch.
Action in other underperforming branches was accelerated in Q4 FY20. In addition, variable costs were reduced at the start of the
COVIID-19 pandemic restrictions and the majority of these savings will be on-going. Further cost savings through supply chain
optimisation will be delivered in Q2 FY21.

We now have an experienced and stable leadership team led by Peter Shaw, the right people and operate in more resilient markets.

Key further activities in FY21 include:

•

Improving our value proposition by expanding our range of quality products, continuing to build our supplier relationships,
ensuring our stock availability and DIFOT levels in the branch network remain high, increasing the level of expertise in the
business through training and development and adapting to providing agile service in the changing business environment.

• Our business development teams are focussed on infrastructure projects and major contract and tender opportunities.

• Opening new stores. During the year we opened a branch in Mackay and have advanced plans for two additional branches

in Q1 FY21.

• Reviewing and refining pricing strategies and tools.

• Fixing underperforming branches with a combination of sales, margin and cost initiatives.

• Further supply chain optimisation resulting in cost reductions though the downsizing of our Thomastown DC and closure of

our under-utilised 3rd party China Hub facility.

• Growing sales through our recently launched on-line ordering sites for Konnect and Artia. Our CRM system will also go live

in FY21.

Nubco

Our network of Nubco branches in Tasmania had a very strong sales year in its first full year with the Group since acquisition in February
2019. We have a strong leadership team in Tasmania led by Nick Daw and recently strengthened with the appointment of Stuart Green
(ex-Milwaukee) as Sales and Marketing Manager. The business had record sales months in May and June and is well placed to take
advantage of the strong economy in Tasmania.

Corporate Costs

Corporate costs increased during the year due to higher IT costs in relation to the Digital Customer Engagement project, fixing legacy
IT issues, higher insurance costs and the loss of Redcliffe WA sub-tenant income. We expect productivity projects using technology
will allow us to reduce corporate costs in FY21. Corporate costs are currently running at 4.7% of sales (4.9% FY19).

The property at Redcliffe WA remains a concern despite taking up an Onerous Lease Transaction. We have a comprehensive
marketing program in to place in conjunction with local resources in order to secure sub tenants.

Net Assets/Working Capital

The Group has a solid balance sheet with Net Tangible Assets of $47.6m and Net Assets of $102.1m compared to $101.0m in FY19.
Initiatives to reduce working capital and maximise cash generation remain a key focus area for the Group. During the second half of
FY20 we materially reduced inventory levels and the Accounts Receivable team did an excellent job with collections. This enabled us
to reduce debt levels and improve the financial health of the business. The Group continues to take action to reduce inventory levels,
tightly manage collections and manage operating costs to improve our cash position.

The Group has budgeted for $2.5m of capital expenditure in FY21.

Net debt position and banking arrangements
Net debt of $3.3m at 30 June 2020 (net debt of $4.1m at 30 June 2019).

Our CFO, Rod Jackson, successfully negotiated to increase the Group’s securitised trade receivables facility with Scottish Pacific to
$40m from $25m for a 36 month term. We are very pleased in the current environment to have locked away long-term funding for the
Group.

Outlook

While it is impossible to predict the full impact of the pandemic on the Group, we remain confident that we have the right strategic plan,
the right people and operate in markets that will enable us to navigate the situation and take advantage of opportunities as they arise.

I would like to acknowledge the support received from the Board and thank the Coventry Leadership Team and every person in the
Group for their contribution during the year. We have faced unique challenges during the year and responded well, particularly in the
face of the COVID-19 pandemic which we hope will be a once in a lifetime event. We remain confident that we will deliver sustainable
profitable growth to our shareholders.

Regardless of what challenges we face we will apply our values and do the right thing.

Robert J Bulluss
Chief Executive Officer and Managing Director

Coventry Group Ltd and its controlled entities
Consolidated statement of profit or loss
For the year ended 30 June 2020

Revenue from sale of goods
Cost of sales
Gross profit

Other income
Employment costs
Depreciation and amortisation expense
Occupancy costs
Communication costs
Freight
Vehicle operating costs
Impairment and significant items
Other expenses
Profit/(loss) before financial income and tax

Financial income, including net foreign exchange gain
Financial expense
Net financial expense
Profit/(loss) before income tax

Income tax benefit/(expense)
Profit/(loss) for the year

Profit/(loss) attributable to:

Owners of the Company

Earnings/(loss) per share:
Basic earnings/(loss) per share:

Diluted earnings/(loss) per share:

Note

6
6
6

2020
$’000
247,567
(154,473)
93,094

3,582
(57,751)
(11,969)
(666)
(3,120)
(5,008)
(1,847)
(19,954)
(8,632)
(12,271)

573
(5,332)
(4,759)
(17,030)

17,821
791

2019
$’000
202,346
(123,624)
78,722

3,732
(48,676)
(1,666)
(10,553)
(2,503)
(5,395)
(1,775)
(1,354)
(10,741)
(209)

92
(624)
(532)
(741)

(685)
(1,426)

791

(1,426)

0.9 cents

(2.3 cents)

The consolidated statement of profit or loss is to be read in conjunction with the accompanying notes to the consolidated financial
statements.

Coventry Group Ltd and its controlled entities
Consolidated statement of comprehensive income
For the year ended 30 June 2020

Note

Profit/(loss) for the year

Other comprehensive income/(loss) items that may be
reclassified to profit or loss:
Foreign currency translation differences
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income/(loss) for the year, net of income tax

Total comprehensive income/(loss) for the year, attributable to:

Owners of the Company

2020
$’000

791

(418)
(96)
(514)

2019
$’000

(1,426)

191
(96)
95

277

(1,331)

The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes to the consolidated
financial statements.

Coventry Group Ltd and its controlled entities
Consolidated statement of financial position
As at 30 June 2020

Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets
Total current assets

Trade and other receivables
Deferred tax assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets

Total assets

Liabilities
Trade and other payables
Employee benefits
Interest-bearing loans and borrowings
Lease liability
Income tax (refundable)/payable
Total current liabilities

Employee benefits
Other payables
Provisions
Lease liability
Total non-current liabilities

Total liabilities

Net assets

Equity
Issued capital
Reserves
Retained earnings
Total equity

Note

9
10
11
10
10

10
7
13
14
15

17
19

2020
$’000

7,542
33,549
53,560
2,133
3,421
100,205

1,828
19,011
6,777
39,835
47,902
115,353

2019
$’000

5,314
35,833
59,886
2,023
1,623
104,679

-
1,185
5,864
-
46,562
53,611

215,558

158,290

40,846
5,821
10,869
9,725
(23)
67,238

335
178
3,125
42,562
46,200

38,204
5,734
9,411
-
526
53,875

157
3,228
-
-
3,385

113,438

57,260

102,120

101,030

149,617
(5,388)
(42,109)
102,120

149,517
(4,874)
(43,613)
101,030

The consolidated statement of financial position is to be read in conjunction with the accompanying notes to the consolidated financial
statements.

Coventry Group Ltd and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2020

Balance at 30 June 2019
Adjustment on initial application of
AASB16, net of tax
Adjusted Balance at 1 July 2019
Total comprehensive income/(loss)
for the year
Profit/(loss) for the year
Other comprehensive income/(loss):
Foreign currency translation differences
Effective portion of changes in fair value
of cash flow hedges
Total other comprehensive
income/(loss)
Total comprehensive income/(loss)
for the year
Transactions with owners, recorded
directly in equity
Share issue
Balance at 30 June 2020

Amounts are stated net of tax

Balance at 1 July 2018
Total comprehensive (loss)/income
for the year
(Loss) for the year
Other comprehensive (loss)/income:
Foreign currency translation differences
Effective portion of changes in fair value
of cash flow hedges
Total other comprehensive
(loss)/income
Total comprehensive (loss)/income
for the year
Transactions with owners, recorded
directly in equity
Share issue
Share issue costs
Balance at 30 June 2019
Amounts are stated net of tax

Hedge
reserve

$’000
96

Translation
reserve

$’000
(1,396)

Other
reserve

$’000
(3,574)

Total
reserves

$’000
(4,874)

Share
capital

$’000
149,517

Retained
earnings

$’000
(43,613)

Total
equity

$’000
101,030

(96)

713

(1,396)

(3,574)

(4,874)

149,517

(42,900)

101,743

(418)

(96)

(514)

791

(418)

(96)

(514)

277

100

(1,814)

(3,574)

(5,388)

149,617

(42,109)

102,120

Hedge
reserve
$’000
192

Translation
reserve
$’000
(1,587)

Other
reserve
$’000
(3,574)

Total
reserves
$’000
(4,969)

Share
capital
$’000
107,770

Retained
earnings
$’000
(42,187)

Total
equity
$’000
60,614

(96)

-
-

191

-
-

191

(96)

-
-

(1,396)

(3,574)

(4,874)

(1,426)

191

(96)

(1,426)

(1,331)

44,641
(2,894)

149,517

-
-

(43,613)

44,641
(2,894)

101,030

Coventry Group Ltd and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2020

Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash from/(used in) operations
Interest paid
Income taxes refunded/(paid)
Net cash from/(used in) operating activities

Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payment for acquisitions of business, net of cash acquired
Interest received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash from/(used in) investing activities

Cash flows from financing activities
Proceeds from Borrowings
Repayment of Borrowings
Repayment of Lease liabilities
Proceeds from issue of shares
Share issue costs
Net cash (used in)/from financing activities

Note

13
15

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of movements in exchange rates on cash and cash equivalents
Cash and cash equivalents at 30 June

2020
$’000

272,959
(251,981)
20,978
(5,332)
(860)
14,786

59
-
235
(2,490)
(2,431)
(4,627)

200,495
(199,037)
(8,746)
-
-
(7,288)

2,871
5,314
(643)
7,542

2019
$’000

217,522
(220,872)
(3,350)
(624)
(396)
(4,370)

85
(43,208)
34
(1,092)
(393)
(44,574)

194,597
(185,186)
-
42,673
(2,894)
49,190

246
4,966
102
5,314

The consolidated statement of cash flows is to be read in conjunction with the accompanying notes to the consolidated financial
statements.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

Significant accounting policies

Coventry Group Ltd (the “Company”) is a for profit company domiciled in Australia. The address of the Company’s registered office is
235 Settlement Road Thomastown VIC 3074 Australia. The consolidated financial statements ("financial report" or "consolidated
financial report") of the Company for the financial year ended 30 June 2020 comprises the Company and its controlled entities (together
referred to as the “Group”).

The financial report was authorised for issue by the Directors on 21 August 2020.

(a) Statement of compliance

This financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial report of the Group complies with the International Financial Reporting Standards (IFRSs) and
interpretations adopted by the International Accounting Standards Board (IASB).

(b) Basis of preparation

The financial report is presented in Australian dollars, which is the Company’s functional currency. The financial report is prepared on
the historical cost basis except for certain financial assets and liabilities (including share based payments and derivative financial
instruments) which are stated at their fair value.

The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March
2016 and in accordance with that Instrument, amounts in the financial report have been rounded off to the nearest thousand dollars,
unless otherwise stated.

The Group has consistently applied the accounting policies (as set out in Note 1(d) – 1(v)) to all years presented in this consolidated
financial report. Certain prior year figures have been reclassified to conform with the presentation in the current year.

Going Concern
In preparing the financial report, the Directors have made an assessment of the ability of the Group to continue as a going concern,
which contemplates the continuity of business operations, realisation of assets and settlement of liabilities in the ordinary course of
business and at the amounts stated in the financial report. The Directors have a reasonable expectation that the Group will have
adequate resources to continue to meet its obligations as they fall due.

The Group has applied the following standard for the first time for the annual reporting period commencing 1 July 2019:

•

AASB 16 Leases

Due to the transition method chosen by the Group in applying this standard, comparative information throughout the annual financial
report has not been restated to reflect the requirements of the new standard.

The impact of the adoption of this standard and the new accounting policies is disclosed in note 28.

Other new standards or amendments did not have a material or significant impact on the Group’s consolidated financial report.

(d) Basis of consolidation

Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. In assessing control, the Group takes
into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:
•
•
•
•

the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

Significant accounting policies (continued)

(d) Basis of consolidation (continued)

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a
business combination are expensed as incurred.

Controlled entities
Controlled entities are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Investments in
controlled entities are carried at their cost of acquisition in the Company’s financial statements, net of impairment write downs. Intra-
group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.

Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and
other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is
measured at fair value when control is lost.

(e) Foreign currency

Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at
the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined.
Foreign currency differences arising on translation are recognised in the statement of profit or loss.

Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to
Australian dollars at exchange rates at the reporting date. The revenues and expenses of foreign operations are translated to Australian
dollars at rates approximating the foreign exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and presented in the translation reserve in equity.
However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is
allocated to the non-controlling interests.

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short term deposits with a maturity of three months or less at inception date.

(g)

Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on weighted average cost. In
the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads. An impairment allowance
is made for obsolete, damaged and slow moving inventories.

(h) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less loss allowance.

(i)

Property, plant and equipment

All classes of property, plant and equipment are stated at cost less depreciation and any accumulated impairment loss.

Depreciation
Items of property, plant and equipment are depreciated on a straight line basis over their estimated useful lives from the date that they
are installed and are ready for use.

The estimated useful lives for each class of asset are:

Class of Fixed Asset
- Plant and Equipment

Depreciation Rate
5% - 40%

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

(j)

Significant accounting policies (continued)

Intangibles

Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial
recognition, see Note 1(d). Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Computer software
Computer software comprises licence costs and direct costs incurred in preparing for the operation of that software, including associated
process re-engineering costs. Computer software is measured at cost less accumulated amortisation and impairment losses.

Other intangible assets
Brand names and customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Brand
names have an indefinite useful life and are measured at cost less accumulated impairment losses. Customer relationships have a
finite useful life and are measured at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation
Except for goodwill and brand names, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful
lives, from the date that they are available for use. In current and comparative periods, computer software was estimated to have a
useful life of 3 to 10 years, and customer relationships was estimated to have a useful life of 10 years. Amortisation methods, useful
lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(k) Financial Instruments

Investments and other financial assets
The Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss
(“FVPL”), transaction costs that are directly attributable to the acquisition of the financial asset. Transactions costs of financial assets
carried at FVPL are expensed in profit or loss.

Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses associated with its instruments carried at amortised costs
and fair value through other comprehensive income (“OCI”). The impairment methodology applied depends on whether there has been
a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk
characteristics as the trade receivables for the same type of contract. The Group has concluded that the expected loss rates of trade
receivables are a reasonable approximation to the loss rates for the contract assets.

(l)

Impairment of assets (financial and non-financial)

Non-financial
Goodwill and intangible assets that have an indefinite useful life are not amortised but are tested annually for impairment in accordance
with AASB 136. Other assets are tested for impairment whenever events or circumstances arise that indicate that the carrying amount
of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount.
The recoverable amount of an asset is defined as the higher of its fair value less costs of disposal and value in use.

Financial
Financial assets are tested for impairment at each financial year end.

(m) Employee benefits

A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. These
benefits include wages and salaries, annual leave and long service leave. Sick leave is non-vesting and has not been provided for.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

1. Significant accounting policies (continued)

(n) Provisions

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Make good
Provision for make good in respect of leased properties is recognised where appropriate based on the estimated cost to be incurred to
restore premises to the required condition under the relevant lease agreements.

(o) Trade and other payables

Trade and other payables are stated at amortised cost.

(p) Revenue and other income

Revenue is recognised when control of a good or service transfers to a customer. Determining the timing of the transfer of control – at
a point in time or over time - requires judgement.

Sale of goods – revenue recognised at a point in time
Revenue from the sale of goods that are not subject to contract manufacturing arrangements is measured at the fair value of the
consideration received or receivable, net of returns, rebates and goods and services tax payable to the taxation authority.

Revenue is recognised when a customer obtains control of the promised goods and the Group has satisfied its performance obligation
in relation to the promised goods. In determining when control of promised goods passes to the customer, the Group considers the
transfer of significant risk and rewards of ownership of the goods to the customer. The timing of the transfer of risk and reward to the
customers for the sale of goods occurs either:

• When the goods are despatched or delivered in line with the Incoterms as detailed in the relevant contract of sale or purchase
order for the goods. The Group sells a significant proportion of its products on Free-In-Store/ Delivered at Place Incoterms.
This means the Groups control of the goods passes when the product is delivered to the agreed destination.

• When they are made available to the customer and ownership transfers prior to despatch as detailed in the relevant contract

of sale or purchase order for the goods.

• On notification (following stocktake) that the product has been used when the goods are consignment products located at

customers’ premises.

Where cash consideration has been received but the revenue recognition criteria has not been met, such amounts have been recorded
on the consolidated statement of financial position as a contract liability.

Sale of goods – contract manufacturing and supply revenue recognised over time
The Group has determined that for bundled contract manufacturing comprising design, build, install and service elements, the customer
controls the goods once the goods are finished and installed on premises in accordance with the relevant contract. This is because
under the contract, goods are manufactured to a customer’s specification, and if a firm order that is placed by the customer in
accordance with the agreement is terminated, the Group is entitled to a reimbursement of the costs incurred in manufacturing the
goods, including a reasonable margin. Therefore, revenue for the agreements and the associated costs are recognised over time. That
is, before the goods are delivered to the customer’ premises. Invoices issued according to contractual terms and amounts not yet
invoiced are presented as contract assets.

Rental income
For operating leases under AASB16, rental income is recognised in the statement of profit or loss on a straight line basis over the term
of the lease. Rental income from subleased property is recognised as other income.

(q) Leases

The accounting policies for Leases are explained in note 28.

(r) Finance income and finance costs

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the
effective interest method.

Finance costs comprise interest expense on borrowings and finance leases.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in
profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or
finance cost depending on whether foreign currency movements are in a net gain or net loss position.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

1. Significant accounting policies (continued)

(s)

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of profit or
loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences
are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable
profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences only to the extent
that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined
based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to
recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered,
based on the business plans for the Group.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related
dividend.

Tax consolidation

The Company and its wholly owned Australian resident entities have formed a tax consolidated group with effect from 1 November
2002 and are therefore taxed as a single entity from that date. The head entity within the tax consolidated group is Coventry Group
Ltd.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the
‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial
statements of each entity and the tax values applying under tax consolidation.

Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the controlled entities is assumed by the
head entity in the tax consolidated group and recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is
probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the
probability of recoverability is recognised by the head entity only.

(t) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST
incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition
of the asset or as part of the expense.

Receivables and payables in the statement of financial position are stated with the amount of GST included. Cash flows are included
in the statement of cash flows on a gross basis.

(u) Accounting estimates and judgements

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the
application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expense. The estimates and
associated assumptions are based on historical experience and on other factors it believes to be reasonable under the circumstances,
the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions and conditions.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

1. Significant accounting policies (continued)

(u) Accounting estimates and judgements (continued)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in the financial statements are:

•

•
•
•
•
•

estimation of current tax payable, current tax expense and recovery of deferred tax assets based on forecasted taxable profit
– note 1(s) and note 7
estimated useful life of intangible assets – note 1(j)
estimated impairment of non-financial assets and measurement of the recoverable amount of cash generating units – note 16
estimation of impairment of inventories – note 1(g)
valuation of trade receivables – note 1 (k) and note 22
estimation of lease term under AASB16 – note 28

(v) New standards and interpretations not yet adopted

There are no significant new standards or interpretations not yet adopted.

2. Segment information

(a) Description of segments

The Group has reportable segments as described below. For each of the strategic operating segments, the CEO reviews internal
management accounts on a monthly basis. The following summary describes the operations of each of the Group’s reportable
operating segments:

Trade
Distribution

Includes the importation, distribution and marketing of industrial fasteners, industrial hardware supplies and
associated products and cabinet making hardware.

Fluid Systems

Includes the design, manufacture, distribution, installation and maintenance of lubrication and hydraulic fluid
systems and hoses.

(b) Segment information

Information regarding the results of each reportable segment is included below.

Information about reportable segments

Trade
Distribution

Fluid Systems

30 June 2020

Segment revenue
Inter-segment revenue
Revenue from external customers

Timing of revenue recognition at
point in time
over time

Underlying EBITDA

Depreciation and amortisation

Underlying EBIT

$’000

95,942
-
95,942

94,289
1,653
95,942

10,319

659

9,660

$’000

151,292
-
151,292

6,652

614

6,038

Other business
units and
consolidation
adjustments
$’000

(55)
-
(55)

(10,334)

1,338

(11,672)

Total
reportable
segments

$’000

247,179
-
247,179

245,526
1,653
247,179

6,637

2,611

4,026

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

2. Segment information (continued)

(b) Segment information (continued)

Information about reportable segments

Trade
Distribution

Fluid Systems

30 June 2019

Segment revenue
Inter-segment revenue
Revenue from external customers

Timing of revenue recognition at
point in time
over time

Underlying EBITDA

Depreciation and amortisation

Underlying EBIT

$’000

118,074
-
118,074

3,199

486

2,713

$’000

83,253
-
83,253

8,834

572

8,262

Other business

units and
consolidation
adjustments
$’000

-
-
-

(9,283)

604

(9,887)

Total
reportable
segments

$’000

201,327
-
201,327

2,750

1,662

1,088

i. Segment Revenue
A reconciliation of segment revenue to total revenue from the sale of goods in the Statement of Profit or Loss is provided as follows:

Total segment revenue

Foreign exchange translation variance
Total revenue

2020
$’000
247,179

388
247,567

2019
$’000
201,327

1,019
202,346

ii. Segment Operating Profit/(Loss)
The Coventry Leadership Team (CLT) measures the performance of the Group’s reportable segments based on underlying EBIT
(Earnings before Interest and Tax). This measurement basis excludes the effects of interest on external borrowings and income tax
expense. A reconciliation of underlying EBIT to operating profit/(loss) in the Statement of Profit or Loss is provided as follows:

Total segment Underlying EBIT

Foreign exchange translation variance
Impairment and significant items
Net financing expense, excluding interest on lease liabilities (AASB16)
Income tax benefit/(expense)
Impact of AASB16
Depreciation of Right-of-use Assets
Net Interest on lease liabilities and sub-lease investment
Reversal of net rent and lease payments and receivables
Income tax benefit
Foreign Exchange translation
Total operating profit/(loss)

(d) Geographic information

Note

6
7

2020
$’000
4,026

45
(19,954)
(966)
17,768

(9,357)
(3,824)
12,991
53
9
791

2019
$’000
1,088

57
(1,354)
(532)
(685)

-
-
-
-
-
(1,426)

Revenue based on the geographic location of customers were Australia $213,895,875 (2019: $168,360,000) and New Zealand
$33,671,458 (2019: $33,986,000).

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

3. Business Combination

There were no adjustments made in the 2020 financial year that relate to business combinations that occurred in the 2019 financial
year, being Torque Industries Pty Ltd and Nubco Proprietary Limited.

2020
$

2019
$

250,000
23,000

273,000

220,000
7,000

227,000

130,203

110,575

7,210

137,413

10,300

120,875

2020
$’000
45,524
4,215
4,175
2,658
1,179

57,751

2020
$’000
235
338
573

(1,315)
(4,017)
(5,332)

(4,759)

2019
$’000
38,175
3,629
3,425
2,165
1,282

48,676

2019
$’000
34
58
92

(624)
-
(624)

(532)

Auditor's remuneration

Audit services
Auditors of the Group
KPMG Australia:
Engagement of audit and review of financial reports
Prior year additional charges and out of scope audit services

Other services
Auditors of the Group
KPMG Australia:
Transaction services
KPMG New Zealand:
Tax services

Employment costs

Wages and salaries
Liability for annual leave and long service leave
Contributions to superannuation funds
Payroll taxes
Other associated personnel expenses

Finance income and finance expenses

Interest income from other entities
Net foreign exchange gain

Financial income

Interest expense
Interest expense on lease liabilities

Financial expenses

Net financial expense

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

Taxes

Current tax expense/(benefit)
Current year
Under provision / (over provision) prior year
Tax recognised in the profit or loss

Deferred tax expense
Recognition of previously unrecognised Deferred Tax Assets (DTA)
Origination and reversal of temporary differences
Total deferred tax expense/(benefit)

Total income tax expense/(benefit)

Reconciliation of effective tax rate

Profit/(Loss) from operations for the period
Total income tax loss/(benefit)
Loss before income tax

Income tax using the Company’s domestic tax rate of 30%
Revenue tax losses (recognised)/not recognised
Non-deductible expenditure
Recognition of previously unrecognised DTA
Over provision in prior periods
Effect of lower tax rate applicable to foreign controlled entity

Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:

2020
$’000

260
-
260

(13,112)
(4,969)
(18,081)

(17,821)

2019
$’000

470
36
506

-
179
179

685

791

(1,426)

(17,821)
(17,030)

685
(741)

(5,109)
414
6
(13,112)
-
(20)
(17,821)

(222)
881
26
-
36
(36)
685

Trade and other receivables
Inventories
Property, plant and equipment
Right-of-use assets
Intangible assets
Employee benefits
Trade and other payables
Provisions
Lease liability
Tax losses carried forward
Tax assets/(liabilities)
Set off of deferred tax liability
Net deferred tax asset

Assets

Liabilities

Net

2020
$’000
97
2,917
2,360
-
-
1,858
565
836
14,712
13,112
36,457
(17,446)
19,011

2019
$’000
111
1,731
2,360
-
-
1,813
413
-
-
-
6,428
(5,243)
1,185

2020
$’000
-
-
-
(12,447)
(4,999)
-
-
-
-
-
(17,446)
17,446
-

2019
$’000
-
-
-
-
(5,243)
-
-
-
-
-
(5,243)
5,243
-

2020
$’000
97
2.917
2,360
(12,447)
(4,999)
1,858
565
836
14,712
13,112
19,011
-
19,011

2019
$’000
111
1,731
2,360
-
(5,243)
1,813
413
-
-
-
1,185
-
1,185

Within the Group Australian operations there are unutilised carried forward tax losses of $75,549,267 (2019: $71,946,759) for which
$13,111,836 (2019: Nil) deferred tax asset has been recognised. As it is probable that future taxable profits would be available for use
against tax losses, the Group recognised a DTA on previously unrecognised tax losses.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

Earnings per share

8.
Earnings used in basic and diluted earnings per share calculation ($)
Weighted average of shares in year used in basic and diluted earnings per share
(number)
Earnings/(loss) per share (cents)

9. Cash and cash equivalents

Cash on hand
Bank balances
Cash and cash equivalents

2020
791,497

89,781,624
0.9 cents

2019

(1,425,920)

60,714,882
(2.3 cents)

2020
$’000

4
7,538
7,542

2019
$’000

4
5,310
5,314

Non-cash investing and financing activities
There were no non-cash investing and financing activities during the year (2019: 2,400,000 shares at $0.82 per share were issued as
part of the consideration paid for Nubco).

Net debt reconciliation

2020

Financing
liabilities

Other assets

2019

Financing
liabilities

Other assets

Borrowings

Cash

Net debt

Borrowings

Cash

Net debt

Analysis of changes in net debt
Opening balance at the beginning
of the financial year
Foreign exchange adjustment
Cash movements excluding
exchange movements
Closing balance

$’000

9,411

(5,314)

-
1,458

(9)
(2,219)

10,869

(7,542)

$’000

4,097

(9)
(761)

3,327

$’000

(4,966)

9,411
9,411

(359)
(5,314)

9,052
4,097

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 22.

Trade and other receivables

10.
Current
Trade receivables
Loss allowance (note 22(a))

Net investment in sub-lease

Other receivables
Prepayments

Non-current
Net investment in sub-lease

Total trade and other receivables

2020
$’000
33,539
(326)
33,213
336
33,549

2,133
3,421
5,554

1,828

40,931

2019
$’000
36,206
(373)
35,833
-
35,833

2,023
1,487
3,510

-
-
39,343

Information about the Group’s exposure to credit risk, foreign currency risk and interest rate risk is disclosed in note 22.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

11.

Inventories

Finished goods
Provision for obsolescence
Net Inventory balance

2020
$’000
58,882
(5,322)
53,560

2019
$’000
65,723
(5,837)
59,886

$6,882,638 (2019: $1,058,334) of inventory write-downs were recognised during the year.

12.

Parent entity disclosures

As at, and throughout, the financial year ending 30 June 2020 the parent company of the Group was Coventry Group Ltd.

Results of the parent entity

Profit/(loss) for the period
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the period after tax

Financial position of parent entity at year end
Current assets
Total assets

Current liabilities
Total liabilities

Total equity of the parent entity comprising of:

Issued capital
Reserves
Retained earnings
Total equity

13. Property, plant and equipment

Cost at 1 July 2019
Accumulated Depreciation at 1 July 2019
Carrying amounts at 1 July 2019
Additions
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2020

Company
2020
$’000
(5,414)
(119)
(5,533)

67,614
205,234

58,262
96,809

149,617
(23)
(41,169)
108,425

Note

Cost at 1 July 2018
Accumulated Depreciation at 1 July 2018
Carrying amounts at 1 July 2018
Additions
Acquisition through business combination
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2019

2019
$’000
(5,046)
(116)
(5,162)

72,936
160,325

43,817
47,201

149,517
75
(36,468)
113,124

Plant and
equipment
$’000
44,083
(38,219)
5,864
2,490
(1,521)
(57)
1
6,777

41,582
(37,001)
4,581
1,092
1,442
(1,218)
(36)
3
5,864

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

14. Right -of-use assets

Carrying amounts at 30 June 2019
Recognition of right-of-use asset on initial application of AASB16

Adjusted carrying amount at 1 July 2019

Additions
Terminations
Impairment
Depreciation for the period
Effect of movements in foreign exchange

Carrying amount at 30 June 2020

15.

Intangible assets

Carrying amounts at 1 July 2019

Additions

Amortisation for the year

Carrying amounts at 30 June 2020

Carrying amounts at 1 July 2018

Acquisition through business combination

Additions
Amortisation for the year

Carrying amounts at 30 June 2019

16. Impairment of non-financial assets

Property

Vehicles

$’000

-
50,125

50,125

5,387
(1,517)
(11,075)
(7,318)
(11)

35,591

$’000

-
4,865

4,865

1,666
(245)
-
(2,039)
(3)

Total

$’000

-
54,990

54,990

7,053
(1,762)
(11,075)
(9,357)
(14)

4,244

39,835

Total

$’000
46,562

2,431

(1,091)

47,902

2,431

(481)

4,842

2,744

6,071

40,546

393
(245)

2,892

393
(448)

46,562

Brand
name
$’000
11,376

Customer
relationships
$’000
5,899

Computer
software
$’000
2,892

Note

Goodwill

$’000
26,395

26,395

11,376

3,327

23,068

11,376

-
-

26,395

11,376

(610)

5,289

6,102

-
(203)

5,899

For the purpose of impairment testing, goodwill and indefinite life intangible assets are allocated to the Group's operating divisions. The
aggregate carrying amounts of goodwill and indefinite life intangible assets allocated to each CGU are as follows.

Fluid Systems
Trade Distribution

2020
$’000
11,518
26,253
37,771

2019
$’000
11,518
26,253
37,771

The key assumptions used in the value in use calculations include projected sales growth, projected gross margins, terminal value,
improvements in working capital and the discount rate. These assumptions are based on historical experience and projected
performance.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

16.

Impairment of non-financial assets (continued)

The Group assessed the carrying value of its assets as follows:

Fluid Systems
For the year ended 30 June 2020, the Group's value in use model showed the recoverable amount exceeded the carrying amount of
the Fluid Systems CGU. The values assigned to the key assumptions were:
• Sales growth at 4.8% for FY21 and 6.0% thereafter
•
Terminal growth 2.5%
• Pre-tax WACC of 14.95%

Trade Distribution
For the year ended 30 June 2020, the Group's value in use model indicated no evidence of the requirement for impairment in the
carrying amount of the assets of this business. Value in use was based on the following key assumptions:
• Sales growth at 5.2% for FY21, 6.0% for FY22, 7.9% for FY23 and 6.0% thereafter
•
Terminal growth 2.5%
• Pre-tax WACC of 14.95%

The calculation of value in use for all CGUs is most sensitive to the following assumptions:
• Sales growth
• Gross margin
• Operating expense
Any adverse change in the key assumptions may result in impairment.

Redcliffe Onerous Lease
During 2020, a sublease contract in place with a tenant at the Redcliffe property concluded. As at 30 June 2020, no replacement tenant
is in place.

Accordingly, the Group has assessed the recoverable amount of the lease in 2020 having regard to the current economic conditions
and has recorded an impairment loss of $11,074,597 for the year ended 30 June 2020. In addition to this impairment of carrying value,
the FY20 costs of un-tenanted space at Redcliffe of $1,083,326 was reclassified to impairment and significant items at year end.

17.

Trade and other payables

Trade payables
Non trade payables and accrued expenses
Total trade and other payables

Current
Non-current
Total trade and other payables

2020
$’000
31,338
9,686
41,024

40,846
178
41,024

The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 22.

18.

Interest-bearing loans and borrowings

Current
Debtor Financing Facility
Total interest-bearing loans and borrowings

2020
$’000

10,869
10,869

Details about the Group’s financing facilities, exposure to interest rate, foreign currency and liquidity risks is provided in note 22.

2019
$’000
31,070
10,362
41,432

38,204
3,228
41,432

2019
$’000

9,411
9,411

19. Provisions

Non-current
Balance at 1 July 2019
Provisions increased/(decreased)
Provisions used
Provisions released
Balance at 30 June 2020

Make good
$’000

-
3,319
(6)
(188)
3,125

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

20. Share-based payments

Executive and Director Incentive Plan
An Executive and Director Incentive Plan was approved by shareholders in 2017. The Plan governs the future granting of performance
rights and issue of shares based on annual Company performance. Vesting of performance rights varies with the extent that
performance hurdles have been met. On vesting, the performance rights entitle the recipient to receive fully paid shares in the Company.

21. Capital and reserves

Share capital

On issue at 1 July
Conversion of performance rights
Share issue (i)
Share issue (ii)
Share issue (iii)
On issue at 30 June

Ordinary shares Ordinary shares
2019
‘000
37,380
-
13,084
36,836
2,400
89,700

2020
‘000
89,700
109
-
-
-
89,809

(i) On 26 September 2018 the Company announced an underwritten $15m equity raising to fund the acquisition of Torque Industries.
The raising successfully completed in October 2018 with the issue of 13,083,533 ordinary shares at $1.15 from a 1 for 5 accelerated
non-renounceable pro-rata entitlement offer and an institutional placement.

(ii) On 5 February 2019 the Company announced an underwritten $27.6m equity raising to fund the acquisition of Nubco Proprietary
Ltd. The raising successfully completed in February 2019 with the issue of 36,835,730 ordinary shares at $0.75 from a 1 for 1.37
accelerated non-renounceable pro-rate entitlement offer.

(iii) On 1 March 2019, the Company issued 2,400,000 shares in escrow as part of the purchase price consideration for the acquisition
of Nubco Proprietary Limited.

Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Nature and purpose of reserves

Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations where their functional currency is different to the functional currency of the reporting entity, as well as from the translation
of liabilities that hedge the Company’s net investment in a foreign subsidiary.

Share based payments reserve
The share based payment reserve comprises the fair value of shares and options that are yet to vest under share based payment
arrangements.

Hedge reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash
flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect profit or loss.

Dividends
No dividends have been declared or paid for the year ended 30 June 2020 (2019: $Nil).

Dividend franking account
30 per cent franking credits available to shareholders of the Company for subsequent
financial years

Company
2020
$’000

2019
$’000

11,069

10,843

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

22. Financial risk management

The Group has exposure to the following risks from their use of financial instruments:

Credit risk
Liquidity risk

•
•
• Market risk

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

(a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s cash and cash equivalents and receivables from customers.

Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The maximum exposure to credit risk
at the reporting date was:

Cash and cash equivalents
Trade and other receivables

Note

Carrying amount

9
10

2020
$’000
7,542
35,346
42,888

2019
$’000
5,314
37,856
43,170

Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on
credit risk. The Group has no significant concentration of customer base.

Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the
Group’s standard payment and delivery terms and conditions are offered.

Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The
Group's terms and conditions of trade have been amended to incorporate the Personal Property Security legislation. The Group does
not normally require collateral in respect of trade and other receivables.

The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was Australia
$31,064,000 (2019: $33,449,000) and New Zealand $4,282,000 (2019: $4,407,000).

Cash at bank and short or long term deposits are held with Australian and New Zealand banks with acceptable credit ratings.

Impairment of Trade Receivables
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics, days past
due and historic credit loss data.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

22. Financial risk management (continued)

(a) Credit risk (continued)

The loss allowance as at 30 June 2020 was determined as follows for trade receivables:

30 June 2020
Australia
Expected loss rate (%)
Gross carrying amount ($’000) / balance outstanding as
reporting date
Loss allowance ($’000)
New Zealand
Expected loss rate (%)
Gross carrying amount ($’000) / balance outstanding at
reporting date
Loss allowance ($’000)

30 June 2019
Australia
Expected loss rate (%)
Gross carrying amount ($’000) / balance outstanding as
reporting date
Loss allowance ($’000)
New Zealand
Expected loss rate (%)
Gross carrying amount ($’000) / balance outstanding at
reporting date
Loss allowance ($’000)

(b) Liquidity risk

Current More than 30
days past due

More than 60
days past due

More than
120 days
past due

Total

0.0%

26,993
0

0.0%

3,849
0

0.1%

1,085
1

0.1%

16
0

0.9%

33.4%

651
6

767
255

29,496
262

1.1%

44.0%

33
0

145
64

4,043
64

Current More than 30
days past due

More than 60
days past due

More than
120 days
past due

Total

0.0%

28,833
0

0.0%

3,988
0

0.1%

1,772
1

0.1%

119
0

1.2%

47.8%

681
8

629
301

31,915
310

1.2%

45.1%

47
1

137
62

4,291
63

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group maintains a $40 million
securitised trade receivables facility on which interest is payable at prevailing market rates.

Maturities of financial liabilities

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:

Non derivative financial liabilities
Trade and other payables
Debtor financing facility
Lease liability

Carrying
amount
$’000

Contractual
cash flow
$’000

40,846
10,869
52,287
104,002

(40,846)
(10,869)
(52,287)
(104,002)

2020
6 mths
or less
$’000

(40,846)
(10,869)
(1,097)
(52,812)

6-12 mths

$’000

-
-
(12,948)
(12,948)

1-2 years More than 2
years
$’000

$’000

-
-
(2,793)
(2,793)

-
-
(35,449)
(35,449)

The outflows associated with forward contracts used for hedging are US$5.4 million (A$7.9 million), 2019: US$6.1 million, (A$8.5
million) and will have been made within 11 months or less.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

22. Financial risk management (continued)
(b) Liquidity risk (continued)

Non derivative financial liabilities
Trade and other payables
Debtor financing facility

Carrying
amount
$’000

Contractual
cash flow
$’000

2019
6 mths
or less
$’000

38,204 (38,204)
9,411 (9,411)
47,615 (47,615)

(38,204)
(9,411)
(47,615)

6-12 mths

$’000

-
-
-

1-2 years More than 2
years
$’000

$’000

-
-
-

Debtor financing facility
The Group has a $40million (2019: $25 million), securitised trade receivables facility with Scottish Pacific with a current expiry of July
2023. The facility is subject to a floating interest on funds drawn.

Guarantee facility
In addition to the borrowing facilities above, the Group has a guarantee facility, whereby the bank guarantees the performance of the
Group in relation to certain contractual commitments, up to the limit specified in each individual guarantee. The Guarantee facility
available at 30 June 2020 was $1,000,000 (2019: $155,000).

Securities
The securitised trade receivables facility is secured by a fixed and floating charge over relevant assets. The guarantee facility is
secured by fixed and floating charges over the assets and undertakings of the Company, general security agreements as well as
corporate guarantees and indemnities from Coventry Group Limited and Coventry Group (NZ) Limited, a deed of priority and a
security sharing deed.

Interest rate risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Variable rate financial assets

Carrying amount

2020
$’000
7,538

2019
$’000
5,310

Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not
designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change
in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments
The impact of a change of 100 basis points in interest rates at the reporting date is immaterial.

Fair values
The fair values of financial assets and financial liabilities of the Group approximate their carrying amounts in the statement of financial
position.

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.

Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the Australian dollar. The
currencies giving rise to this risk are primarily US dollars and Euros. The Group adopts a policy of obtaining, foreign currency forward
contracts to hedge its exposure to USD foreign currency risks.

Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Group defines capital as cash, banking facilities and equity.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

23. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years

2020
$’000
289
-
-
289

2019
$’000
11,464
26,005
9,949
47,418

The Group leases various premises, plant and equipment and motor vehicles under operating leases. The leases run for 12 months or
less. Lease payments are reviewed periodically to reflect market rentals. None of the leases include contingent rentals.

During the financial year ended 30 June 2020 the Group recognised $696,124 (2019: $8,953,921) as an expense in the statement of
profit or loss in respect of operating leases.

The material movement in operating leases from 2019 to 2020 is largely due to the adoption of AASB16 Leases, whereby leases are
classified as finance rather than operating.

Leases as lessor
At the end of the reporting period, the future minimum lease payments under non-cancellable leases are receivable as follows.

Less than one year
Between one and five years
More than five years

2020
$’000
519
93
-

612

2019
$’000
1,411
1,090
-

2,501

The Group subleases a property under an operating lease. The lease runs to September 2021.

During the financial year ended 30 June 2020, the Group recognised $989,525 (2019: $1,655,262) as income in the statement of
profit or loss.

24.

Controlled entities

COV Holdings (Aust) Pty Ltd
Coventry Group (NZ) Limited
COV Holdings (NZ) Pty Ltd (i)
Nubco Proprietary Limited

Country of
Incorporation

Australia
New Zealand
New Zealand
Australia

Ownership interest

2020
%
100
100
100
100

2019
%
100
100
100
100

The ultimate parent entity is Coventry Group Ltd.
(i) The company is a 100% controlled entity of COV Holdings (Aust) Pty Ltd and operates in New Zealand.

Note

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

25. Reconciliation of cash flows from operating activities

Cash flows from operating activities
Profit/(loss) for the period
Adjustments for:
Provision for stock obsolescence
Depreciation and amortisation
Impairment
Other non-cash or non-operating exceptional items
Interest income from other entities
Interest expense
Net (gain) on disposal of property, plant and equipment
Income tax expense/(benefit)
Operating profit/(loss) before changes in working capital
and provisions
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions and employee benefits

Interest paid
Income taxes paid
Net cash used in operating activities

26. Related parties

Transactions with key management personnel
Key management personnel compensation
Key management personnel compensation comprised the following:

Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments

2020
$’000
791

3,939
11,969
11,075
(255)
(235)
5,332
(2)
(17,821)
14,793

774
2,387
2,759
265
20,978
(5,332)
(860)
14,786

2020
$
1,027,781
64,936
105,727
-
64,266
1,262,710

2019
$’000
(1,426)

(540)
1,666
-
(4)
(34)
624
(50)
685
921

(4,499)
(2,111)
2,103
236
(3,350)
(624)
(396)
(4,370)

2019
$
908,797
62,895
76,369
5,723
-
1,053,784

Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous
financial year and there were no material contracts involving directors’ interests existing at year-end.

Key management personnel transactions
From time to time, key management personnel may purchase goods from companies within the Group on the same terms as apply to
other employees of the Group. The value of these transactions is insignificant.

Transactions with other related parties
The Group has a related party relationship with its controlled entities (see Note 24). Transactions between the parent entity and its
controlled entities are eliminated on consolidation and are not disclosed.

27.

Impairment and significant items

The following significant costs were incurred in the year ended 30 June 2020.

Impairment and significant items
Impairment and other costs of Redcliffe lease FY20 – FY27
Inventory write-downs
Other

2020
$’000

12,158
6,434
1,362
19,954

2019
$’000

-
266
1,088
1,354

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

28. Change in accounting policies

This note explains the impact of the adoption of AASB 16 Leases on the Group’s financial statements and also discloses the new
accounting policies applied from 1 July 2019.

(i) Accounting policies applied effective 1 July 2019

Leases in which the Group is a lessee
From 1 July 2019, the Group recognises all lease liabilities and corresponding right-of-use assets, with the exception of short-term (12
months or fewer) and low value leases, on the balance sheet.

Lease liabilities are initially measured at the net present value of future lease payments and extension options expected to be exercised.
Variable lease payments not dependent on an index or rate are excluded from the calculation of lease liabilities. Payments are
discounted at the incremental borrowing rate of the lessee. Non-lease components are excluded from the projection of future lease
payments and recorded separately within operating costs on a straight-line basis.

The right-of-use asset, resulting from a lease arrangement, at initial recognition reflects the lease liability, initial direct costs and any
lease payments made before the commencement date of the lease less any lease incentives and, where applicable, provision for
dismantling and restoration.

The Group recognises depreciation of right-of-use assets and interest on lease liabilities in the income statement over the lease term.
Repayments of lease liabilities are separated into a principal portion (presented within financing activities) and interest portion (which
the Group presents in operating activities) in the cash flow statement.

Leases in which the Group is a lessor

The Group sub-leases some of its properties. The accounting policies applicable to the Group as a lessor are not different from those
under AASB 117. However, the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with
reference to the underlying asset.

(i) Accounting policies applied for comparative reporting period ended 30 June 2019
Leased assets
Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified
as finance leases. Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement
of financial position.

Lease payments
Payments made and material incentives received under operating leases are recognised in profit or loss on a straight-line basis over
the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the
lease.

(ii)

Impact on adoption on 1 July 2019

Leases in which the Group is a lessee
The Group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is
recognised in retained earnings at 1 July 2019. Accordingly, the information presented for comparative periods has not been restated.

The Group made the following additional choices, as permitted by AASB 16, for existing operating leases:

•

for contracts in place on 1 July 2019, the Group continued to apply its existing definition of leases under the previous
standards.
not to bring leases with 12 months or fewer remaining to run as at 1 July 2019 (including reasonably certain options to
extend) on balance sheet. Costs for these items will continue to be expensed directly to the income statement.
to apply the use of hindsight when reviewing the lease arrangements for determination of the measurement or term of the
lease under the retrospective option.
to apply a single discount rate to a portfolio of leases with reasonably similar characteristics.

On transition to AASB 16, the Group recognised additional right-of-use assets of $55.0 million additional lease liabilities of ($56.5)
million net adjustments to other assets and liabilities of $2.2 million, and a charge of ($0.7) million to retained earnings.

Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020

28. Change in accounting policies (continued)

(iii) Impact on adoption on 1 July 2019 (continued)

The most significant differences between the Group’s undiscounted non-cancellable operating lease commitments of $47.4 million at
30 June 2019 is summarised below:

Operating lease commitment at 30 June 2019 as disclosed in the Group’s
consolidated financial statement
Leases expiring in 12 months or fewer
Cost of reasonably certain lease extension options (undiscounted)
Effect of discounting on payments included in the calculation of the lease liability
Lease liability opening balance reported as at 1 July 2019 under AASB 16

(iv)

Impact on the financial statements for reporting period ended 30 June 2020

$’000

47,418
(1,014)
32,101
(22,013)
56,492

In relation to the leases recognised under AASB 16 the Group recognised depreciation and interest costs, instead of operating lease
expense, During the reporting period ended 30 June 2020, the Group recognised $9.4 million of depreciation charges and $3.8
million of interest costs from these leases.

29. Events occurring after the reporting period

On 2 August 2020, the Victorian government declared a state of disaster and announced stage 4 restrictions for Melbourne and stage
3 restrictions for regional Victoria. Given the dynamic nature of these circumstances and the significant increase in economic
uncertainty, the related impact on the Group’s go forward consolidated results of operations, cash flows and financial condition cannot
be reasonably estimated at this stage and will be reflected in the Group’s 2021 interim and annual financial statements.

Other than the matters outlined elsewhere in the Group’s financial statements, no matters or circumstances have arisen since the end
of the financial year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs
on the Group in subsequent accounting periods.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

The directors present their report together with the consolidated financial report of the Group comprising Coventry Group Ltd (the
“Company”) and its controlled entities for the year ended 30 June 2020.

Contents of Directors' Report

1. Directors

2. Principal activities

3. Consolidated results

4. Dividends

5. Review of operations and results

6. Earnings per share

7. Significant change in the company's affairs

8. Events subsequent to reporting date

Likely developments

10. Remuneration report - audited

10.1 Key Management Personnel (KMPs)

10.2 Principles used to determine the nature and amount of compensation

10.3 Details of compensation

10.4 Service contracts

10.5 Director share movement

11. Environmental regulation

12.

Insurance of officers

13. Corporate governance

14. Non-audit services

15.

Lead auditor's independence declaration

16. Company secretary

17. Rounding off

Directors' Declaration

Lead Auditor’s Declaration under S307C of the Corporations Act 2001

Independent Auditor’s Report

Shareholder Information

Corporate Directory

Page

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

1. Directors
Information on Directors
The directors of the Company at any time during or since the end of the financial year and up to the date of this report are:
Name, qualifications, independence
status and special responsibilities

Experience and other directorships

Neil George Cathie
FCPA, GAICD, FCIS
Independent non-executive Chairman
Chairman of Remuneration Committee
Member Audit and Risk committee

Mr Cathie was appointed as a director of the Company in September 2014 and as
Chairman in January 2015. He has extensive experience in very relevant areas
including having a 27 year career at Australia’s largest and most successful plumbing
and bathroom distributor, ASX listed Reece Limited, during which time he served as its
Chief Financial Officer, Company Secretary and General Manager, Finance and IT. He
is currently a director of and advisor to a number of private companies.

Mr Cathie is a non-executive director of Experience Co. Ltd (since 2019) and was a non-
executive director of Millennium Services Group Ltd from 16 October 2018 to 7 March
2019.

He held no other listed company directorships during the past three financial years.

Robert James Bulluss
FCPA, GAICD, B Bus (Acc)
Managing Director
Chief Executive Officer

Mr Bulluss was appointed Chief Executive Officer on 3 May 2017 and Managing
Director and Chief Executive Officer on 29 August 2017. He was previously Chief
Finance Officer (CFO) of the Company from October 2016 to April 2017. Prior to joining
the Company he was CFO for over 15 years for the Australasian division of Bunzl plc.

Andrew William Nisbet
GAICD
Independent non-executive Director
Member of Audit and Risk Committee
Member of Remuneration Committee

James Scott Charles Todd
B.Comm, LLB, FFin, MAICD
Independent non-executive Director
Chairman of Audit and Risk Committee
Member of Remuneration Committee

Tony Howarth AO
FAICD, SF FIN
Non-executive Director
Member of Audit and Risk Committee
Member of Remuneration Committee

He held no other listed company directorships during the past three financial years.

Mr Nisbet was appointed as a director of the Company in October 2017.

During his extensive career at ASX listed Reece Limited he held a variety of senior
leadership roles, from Marketing to Merchandising, IT, Supply Chain Transformation,
Innovation and the management of a number of Strategic Business Units, including the
Reece expansion into New Zealand.

Mr Nisbet is a graduate of the Australian Institute of Company Directors. he continues to
consult to businesses on strategy and works with SME’s in setting up their advisory
boards.

He held no other listed company directorships during the past three financial years.

Mr Todd was appointed as a director of the Company on 3 September 2018.

Mr Todd is an experienced company director, corporate adviser and investor. He
commenced his career in investment banking, and has taken active roles with, and
invested in, a range of public and private companies. He was until recently Managing
Director of Wolseley Private Equity, an independent private equity firm which he co-
founded in 1999.

He is also a Non-executive Director of two other ASX listed companies, IVE Group Ltd
(director since June 2015) and HRL Holdings Ltd (director since March 2018).

He has held no other listed company directorships during the past three financial years.

Mr Howarth was appointed as a director of the Company on 4 May 2020.

Mr Howarth has a strong background in the banking and finance industry having held
executive positions in government, regional and major banks as well as building societies
and stockbroking companies. He has broad based industry experience from his time as
President of the Australian Chamber of Commerce and Industry and Australian
International Chamber of Commerce, as well as Chair of Catholic Health Australia. He
has had a long involvement with the University of Western Australia and is an Adjunct
Professor at the UWA Business School.

He is also a Non-Executive Director of Alinta Energy, BWP Management Ltd, and
Viburnum Funds as well as the Chairman of St John of God Foundation Inc.

Mr Howarth was a Non-Executive Director of Wesfarmers Ltd from 2007 to 2019 and
Chairman of MMA Offshore Ltd from 2006 to 2017. Previously he had been Chairman of
Home Building Society and Deputy Chairman of Bank of Queensland Ltd.

He has held no other listed company directorships during the past three financial years.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

1. Directors (continued)

Directors’ Interests

As at the date of this report particulars of the relevant interest of each director in the securities of the Company are as follows:

NG Cathie

RJ Bulluss

AW Nisbet

JSC Todd

T Howarth

Number of Ordinary Shares
744,397

339,914

119,885

116,746

During the 2019/20 financial year and as at the date of this report no director has declared any interest in a contract or proposed
contract with the Company, the nature of which would be required to be reported in accordance with subsection 300(11)(d) of the
Corporations Act 2001.

Directors’ Meetings

The following table sets out the number of meetings of the Company’s board of directors and each board committee, held during the
year ended 30 June 2020, and the number of meetings attended by each director.

NG Cathie
RJ Bulluss
AW Nisbet
JSC Todd
T Howarth

11
11
11
11
11

Held

Attended

Board of Directors
Eligible
to attend
11
11
11
11
2

11
11
10
11
2

Attended

Held

Audit & Risk Committee
Eligible
to attend
3
3
3
3
1

3
3
3
3
1

3
3
3
3
3

Attended

Held

Remuneration Committee
Eligible to
attend
2
0
2
2
0

2
0
2
2
0

2
2
2
2
2

Note: Directors may pass resolutions in writing without a formal meeting being convened. Such resolutions are deemed by the
Company’s Constitution to be meetings. The above table does not include such meetings.

2. Principal activities

The principal activities of the Group during the financial year were:

Trade Distribution
•

•

Fluid Systems
•
•
•
•
•

The importation, distribution and marketing of industrial fasteners, stainless steel fasteners, construction fasteners, specialised
fastener products and systems, industrial hardware and associated industrial tools and consumables.
importation, distribution and marketing of hardware, components and finished products to the commercial cabinet making, joinery
and shop fitting industries.

design and installation of lubrication systems
distribution of hose, connectors, fittings and hydraulic hose assemblies
design and supply of service truck components
installation of fire suppression systems
design and distribution of fluid handling systems, pneumatic component sales and sale of hydraulic associated products and
consumables
rock hammer service and repairs

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

3. Consolidated results

Results of the Group for the year ended 30 June 2020 were as follows:

Revenue from sale of goods
Loss before tax
Income tax benefit/(expense)
Profit/(loss) after tax for the year

4. Dividends

2020
$’000
247,567
(17,030)
17,821
791

2019
$’000
202,346
(741)
(685)
(1,426)

There were no dividends paid or declared by the Group to members for the year ended 30 June 2020 (2019: $Nil).

5. Review of operations and results

People

The Group had 13 Lost Time Injuries (LTI’s) during the year. Of these LTI’s, 8 were in our recently acquired businesses. Our aspiration
is for zero LTI’s and zero harm to our people. Plans are being implemented to improve our safety systems to achieve this goal.

We remain fully focussed on our Customers, Suppliers and People, applying our values of Respect, Fairness, Teamwork,
Professionalism and Integrity.

Financial performance

Revenue from sale of goods
Underlying EBITDA
Underlying EBIT
NPAT
NTA per share ($)
Net cash/debt
Share price at year end ($)

Review of businesses

2020
$M
247.6
+6.6
+4.0
0.8
0.39
-3.3
0.57

2019
$M
202.3
+2.8
+1.1
-1.4
0.59
-4.1
0.91

$M change

+45.3
+3.8
+2.9
+2.2

-0.8

Trade Distribution
Trade Distribution (TD)
TD sales for the year including acquisitions up 27.6% on the prior year and excluding acquisitions up 2.1% on the prior year. The
underlying EBITDA for TD was $6.7m compared to $3.3m in FY19. Sales growth and EBITDA were both negatively impacted by the
enforced Government shutdown in New Zealand.

KANZ were on track for a record full year sales and EBITDA result before the Government enforced shutdown of the business in
March/April. The leadership provided by Mike Wansink and his management team through the shutdown and subsequent return to
operations was critical to the business returning to close to normal operations and sales levels immediately post the shutdown. The
Group supported our people in line with our values during the shutdown. KANZ full year sales down 0.5% on prior year but impacted
by the loss of 23 days sales during the shutdown and continued disruption due to the pandemic restrictions. The Group received $713k
in wage subsidies from the New Zealand Government that partly defrayed employment costs during the Government enforced
shutdown.

We are making positive progress in KAA. The KAA business has proven more difficult to turnaround than expected. Whilst not an
excuse, the COVID-19 pandemic has disrupted us just as we were starting to build sales momentum. KAA full year sales were up
3.4% on the prior year. Konnect was up 4.0% on the prior year however Artia had a slight decline on the prior year. Despite
considerable improvement across many areas of this business, KAA has fallen short of recording a breakeven EBITDA for the full year.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

5. Review of operations and results (continued)

Our network of Nubco branches in Tasmania had an excellent sales year in its first full year with the Group since acquisition in February
2019. We have a strong leadership team in Tasmania led by Nick Daw and recently strengthened with the appointment of Stuart Green
(ex-Milwaukee) as Sales and Marketing Manager. The business had record sales months in May and June and is well placed to take
advantage of the strong economy in Tasmania.

6. Earnings per share

Basic earnings per share for the year ended 30 June 2020 was 0.9 cents. This compares to a basic loss from operations per share of
2.3 cents for the previous year.

7. Significant change in the Company's affairs

In the opinion of the Directors, there have been no other significant changes in the Group’s state of affairs during the financial year.

8. Events subsequent to reporting date

The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report
that has significantly affected, or may significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.

9. Likely developments

The Group will continue to implement its five year strategy and continue to operate in the markets in which it currently participates.

10. Remuneration report - audited

Remuneration is referred to as compensation throughout this remuneration report.

10.1 Key Management Personnel (KMPs)

KMPs are the persons who have authority and responsibility for planning, directing and controlling the activities of the Company and
the Group. The following were KMPs of the Group at any time during the reporting period and unless otherwise indicated were KMPs
for the entire period:

Directors
NG Cathie
RJ Bulluss (CEO and Managing Director)
AW Nisbet
JSC Todd
T Howarth

Key Management Personnel
RJ Jackson

10.2 Principles used to determine the nature and amount of compensation

Non-executive directors
Non-executive Directors receive cash fees for their board and committee work. They are eligible to participate in the Executive and
Director Incentive Plan which was approved by shareholders at the Annual General Meeting of the Company in November 2017.

Non-executive directors’ cash fees are determined within an aggregate directors’ fees pool limit, which is periodically recommended for
approval by shareholders. The total pool currently stands at $550,000 (2019: $550,000) per annum, which was last approved by
shareholders in November 2004 with effect from 1 July 2004. The Board determines the allocation of the maximum amount approved
by shareholders amongst the respective directors, having regard to their duties and responsibilities. Directors’ fees are not directly
linked to Company performance. Non-executive directors do not receive termination benefits. There is no provision for retirement
allowances to be paid to non-executive directors.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

10. Remuneration report – audited (continued)

10.2 Principles used to determine the nature and amount of compensation (continued)

As at 30 June 2020 the non-executive directors’ fees were allocated as follows (includes statutory superannuation contributions):

Chairman (inclusive of Board and Committee work)
Non-executive Directors (inclusive of Board and Committee work)

Executive pay

2020
$
100,800
75,600

2019
$
96,000
72,000

Remuneration policies
Remuneration of directors and senior executives is the responsibility of the Remuneration Committee. The Committee has resolved to
set remuneration packages which are appropriate in the context of the company’s size, complexity and performance but which will
attract the calibre of executive required to drive necessary change in order to enhance performance. The Committee seeks external
advice in relation to these matters where necessary.

Remuneration for the CEO and senior executives currently comprises three elements:

(1) Fixed, cash-based remuneration which includes salary, superannuation and benefits
(2) Eligibility to participate in the Company’s short term incentive plan (STI Plan)
(3) Eligibility to participate in the Company’s long term share based Executive and Director Incentive Plan (LTI Plan)

The CEO and senior executives have employment contracts with notice periods executable by either party. There are no arrangements
in place to provide the CEO or any senior executive with a retirement benefit other than those which accrue by law. Superannuation
contributions are paid at the superannuation guarantee rate.

Cash incentives under the STI Plan of up to 65% of fixed annual compensation are payable to the CEO and senior executives based
on financial and non-financial measures framed around the Company’s trading performance and each individuals performance.

The LTI Plan was approved by shareholders at the 2017 annual general meeting. This share-based plan provides for the granting or
issuing of performance rights in accordance with its terms and subject to the terms and performance hurdles set by the Board.

Business Performance

In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee have regard to the following
financial performance metrics in respect of the current financial year and the previous four financial years.

Sales revenue
EBITDA
EBIT
NPAT (ii)
Dividends paid
Share price at year end ($)

2020
$’000
247,567
19,652
7,683
791
-
0.57

2019
$’000
202,346
2,811
1,145
(1,426)
-
0.91

2018
$’000
168,050
(4,748)
(6,085)
(8,301)
-
1.35

2017(i)
$’000
169,146
(5,790)
(8,714)
(35,539)
-
0.60

2016
$’000
176,784
2,036
(1,291)
(1,821)
-
0.94

(i) Comparative information for the year ended 30 June 2017 has not been restated for the effects of the application of AASB 5 Non-
Current Assets for sale and Discontinued Operations following the disposal of the AA Gaskets business.

(ii) Profit is one of the financial performance targets considered in setting the Short Term Incentive (STI). Profit amounts have been
calculated in accordance with Australian Accounting Standards (AASBs).

Performance Rights

In FY20, one third of the performance rights that were vested to the CEO and Managing Director (R Bulluss) in relation to the FY19
performance period were exercised. One third of the performance rights that were vested to four other Company senior executives in
relation to the FY19 performance period were also exercised in FY20.

In relation to FY20, the CEO and Managing Director (R Bulluss) was granted 297,100 performance rights under the terms of the LTI
Plan following the successful passing of a resolution at the 2019 Annual General Meeting of the Company. These performance rights
had a performance period that ended on 30 June 2020 with performance hurdles set by the Board. The Board has determined one third
of the performance rights granted will vest in accordance with the LTI Plan. The unvested balance will be forfeited. In making this grant
the Board has exercised discretion provided for under the Plan. The directors unanimously agreed that a partial grant was appropriate
in relation to a performance period which delivered improved financial results but also presented great uncertainty and many tests of
management capability, discipline and resolve.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

10. Remuneration report – audited (continued)

10.2 Principles used to determine the nature and amount of compensation (continued)

In relation to FY20 an offer to participate in the LTI Plan was made to a number of other Company senior executives. The total
performance rights granted was 657,613. The Board has determined one third of the performance rights will vest in accordance with
the Plan in the same manner and for the same reasons as outlined for the CEO and Managing Director. The unvested balance will be
forfeited.

It is intended that the CEO and Managing Director will participate in the LTI Plan in relation to FY21. The maximum face value of the
CEO’s FY21 grant is based on the LTI opportunity of 60% of his fixed annual remuneration. The number of performance rights to be
granted is determined by dividing the maximum face value by the 10-day volume weighted average price (VWAP) of the Company’s
shares preceding the start of the performance period, being the 10 trading days up to and including 30 June 2020. The performance
rights will vest at the Board’s discretion, taking into consideration internal EBITDA targets developed and refined as FY21 progresses.
An appropriate resolution will be put to the 2020 Annual General Meeting of the Company.

It is intended that a number of senior executives will participate in the LTI Plan in relation to FY21. The maximum face value of each
senior executive’s FY21 grant is based on the LTI opportunity of 25% to 40% of his or her fixed annual remuneration. The number of
performance rights to be granted is determined by dividing the maximum face value by the 10-day volume weighted average price
(VWAP) of the Company’s shares preceding the start of the performance period, being the 10 trading days up to and including 30 June
2020. The performance rights will vest in the same manner as outlined for the CEO and Managing Director.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

10. Remuneration report – audited (continued)

10.3 Details of compensation

The following table provides the details, nature and amount of elements of compensation for the key management personnel of the Company and the Group for the year ended 30 June 2020.

Directors

NG Cathie - Chairman

RJ Bulluss

AW Nisbet

JSC Todd (appointed September 2018)

T Howarth (appointed 04 May 2020)

Total directors' remuneration

Key Management Personnel
RJ Jackson

A Donaldson (resigned September 2018)
Total key management personnel
remuneration
Total directors' and key management
personnel remuneration

Short-term

Cash salary,
leave paid
and fees

STI
cash
bonus

Non-
monetary
benefits

Total

Post-
employment

Super-
annuation (i)

Other
long-term
Long-service &
annual leave
provision
accrual
$

2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019

2020
2019
2019
2020
2019
2020
2019

92,055
87,671
398,997
379,469
69,041
65,753
69,041
55,233
11,233
640,367
588,126

315,049
299,517
21,154
315,049
320,671
955,416
908,797

-
-
40,200
-
-
-
-
-
-
40,200
-

32,165
-
-
32,165
-
72,365
-

-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-

92,055
87,671
439,197
379,469
69,041
65,753
69,041
55,233
11,233
680,567
588,126

347,214
299,517
21,154
347,214
320,671
1,027,781
908,797

8,745
8,329
21,003
20,531
6,559
6,247
6,559
5,247
1,067
43,933
40,354

21,003
20,531
2,010
21,003
22,541
64,936
62,895

-
-
69,193
46,500
-
-
-
-
-
69,193
46,500

36,534
29,869
-
36,534
29,869
105,727
76,369

Share-based payment

Termination
benefits

Share-
based
payment

Proportion of
remuneration
performance
related

Total

-
-
-
-
-
-
-
-
-
-
-

-
-
5,723
-
5,723
-
5,723

-
-
41,910
-
-
-
-
-
-
41,910
-

22,356
-
-
22,356
-
64,266
-

100,800
96,000
571,303
446,500
75,600
72,000
75,600
60,480
12,300
835,603
674,980

427,107
349,917
28,887
427,107
378,804
1,262,710
1,053,784

-
-
14.4%
-
-
-
-
-
-
-
-

12.8%
-
-
-
-
-
-

Premiums in respect of the Directors’ and Officers’ insurance policy are not included above, as the policy does not specify the premium paid in respect of individual directors and officers.

(i) Includes statutory superannuation contributions and additional voluntary contributions.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

10. Remuneration report – audited (continued)

10.4 Service contracts

Compensation and other terms of employment for the CEO and Managing Director and other key management personnel are formalised
in employment contracts. Major provisions of the contracts relating to compensation are set out below:

Robert Bulluss, CEO and Managing Director
•
•
•
•
• Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct,

The contract has no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
The contract provides for participation in short-term and long-term incentive plans.

termination of employment requires six months’ notice by the Company.

Rodney Jackson, Chief Financial Officer
•
The contract has no fixed term.
•
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
•
Long service leave is payable by the Company in accordance with relevant state legislation.
•
The contract provides for participation in short-term and long-term incentive plans.
• Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct,

termination of employment requires eighteen weeks’ notice by the Company.

10.5 Director share movement

The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by
each key management person, including their related parties, is as follows:

Held at
30 June 2019

Purchases

Directors
NG Cathie
AW Nisbet
RJ Bulluss
JSC Todd
T Howarth
Key Management Personnel
RJ Jackson

734,520
119,885
300,000
116,746
-

63,221

Conversion of
Performance
Rights
-
-
39,914
-
-

9,877
-
-
-
-

21,291

Sales /
Cancelled

-
-
-
-
-

Held at
Resignation
/ Retirement
-
-
-
-
-

Held at
30 June 2020

744,397
119,885
339,914
116,746
-

84,512

Mr Howarth has declared his indirect interest in the shares of the Company as being a shareholder of Viburnum Funds Pty Ltd who is
a major shareholder of the Company. No other key management person held shares, directly, indirectly or beneficially, in the Company
at 30 June 2020 (2019: Nil).

11. Environmental regulation

The Group is not subject to any specific environmental regulation.

The Group mainly operates warehousing and distribution facilities throughout Australia and New Zealand which have general
obligations under environmental legislation of the respective statutory authorities in relation to pollution prevention.

The Company has reviewed its obligations under the National Greenhouse & Energy Reporting Act 2007 (the Act). As the Group is
under the minimum greenhouse and energy thresholds stipulated in the Act, there are no registration and reporting requirements that
have to be complied with as at the date of this report.

For the financial year ended 30 June 2020 and as at the date of this report, the Group has not been prosecuted nor incurred any
infringement penalty for environmental incidents.

12.

Insurance of officers

During the financial year the Company has paid premiums in respect of contracts insuring the directors and officers of the Company
against certain liabilities incurred in those capacities. The contracts prohibit further disclosure of the nature of the liabilities and the
amounts of the premiums.

13. Corporate governance

The Statement of Corporate Governance Practices is disclosed on the company's website.

Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2020

14. Non-audit services

During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board
has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001, for the following reasons:

•

all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by
the Company’s Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and
rewards.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided
during the year are set out in Note 4 to the full financial report.

15. Lead Auditor’s independence declaration

The lead auditor’s independence declaration made in accordance with Section 307C of the Corporations Act 2001 forms part of this
directors’ report.

16. Company Secretary

Mr Mark Licciardo of Mertons Corporate Services Pty Ltd is the Company Secretary.

Mr Licciardo (B.Bus (Acc), GradDip CSP, FAICD, FGIA, FCIS) is the founder and Managing Director of Mertons Corporate Services
Pty Ltd and a former company secretary of a number of ASX 50 companies. His expertise includes working with boards of directors in
the areas of corporate governance, business management, administration, consulting and company secretarial matters.

17. Rounding off

The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in
accordance with that Instrument, amounts in the financial report and Directors’ Report have been rounded off to the nearest thousand
dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors.

N.G. CATHIE
Chairman
Melbourne
21 August 2020

R.J. BULLUSS
CEO and Managing Director
Melbourne
21 August 2020

Coventry Group Ltd and its controlled entities
Directors’ declaration

In the opinion of the directors of Coventry Group Ltd (“the Group”):

the financial statements and notes, and the remuneration report in the directors' report, set out on pages 36 to 44, are in
accordance with the Corporations Act 2001, including:

ii.

giving a true and fair view of the Group’s financial position as at 30 June 2020 and of their performance, for the
financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;

the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a) of the full financial
report;
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.

2. The directors have been given the declarations by the chief executive officer and chief financial officer for the financial year ended

30 June 2020 pursuant to Section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

N.G. CATHIE
Chairman
Melbourne
21 August 2020

R.J. BULLUSS
CEO and Managing Director
Melbourne
21 August 2020

Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001

To the Directors of Coventry Group Ltd

I declare that, to the best of my knowledge and belief, in relation to the audit of Coventry Group Ltd for the
financial year ended 30 June 2020 there have been:

ii.

no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

J. Carey

Partner

Melbourne

21 August 2020

KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG
International Cooperative
(“KPMG International”), a Swiss entity.

Liability limited by a scheme approved
under Professional Standards Legislation.

Independent Auditor’s Report

To the shareholders of Coventry Group Ltd

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of
Coventry Group Ltd (the Company).

In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:

• giving a true and fair view of the

financial position as at

Group's
30 June 2020 and of its financial
performance for the year ended on
that date; and

•

complying with Australian Accounting
Standards and
the Corporations
Regulations 2001.

Basis for opinion

The Financial Report comprises:

• Consolidated statement of financial position as at

30 June 2020;

• Consolidated statement of profit or loss, Consolidated
statement of comprehensive income, Consolidated
statement of changes in equity, and Consolidated
statement of cash flows for the year then ended;

• Notes including a summary of significant accounting

policies; and

• Directors' Declaration.

The Group consists of Coventry Group Ltd (the Company)
and the entities it controlled at the year end or from time to
time during the financial year.

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our
audit of the Financial Report of the current period.

This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on this matter.

KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
International Cooperative
affiliated with KPMG
(“KPMG International”), a Swiss entity.

Liability limited by a scheme approved
under Professional Standards Legislation.

Valuation of goodwill and indefinite life intangible assets of the Trade Distribution CGU ($26.3
million)

Refer to Note 16 to the Financial Report

The key audit matter

How the matter was addressed in our audit

indefinite

A key audit matter for us was the impairment
testing of the goodwill and
life
intangible assets of the Trade Distribution CGU,
given the size of the balance (being 12% of total
impairment
assets) and
the existence of
indicators
estimation
uncertainty arising from the COVID-19 global
pandemic, and the market capitalisation of the
Group ($53.9m) being lower than the net asset
position ($102.1m) as at 30 June 2020.

including

higher

We focussed on the significant forward-looking
assumptions the Group applied in their value in
use model, including;

•

Forecast operating cash flows and growth
rates – the Trade Distribution business has
recognised goodwill and other intangible
assets relating to the recent acquisition of
Nubco, which has increased the potential
risk of impairment of this specific CGU. In
addition, the economic uncertainty from the
COVID-19 pandemic has increased the risk
of inaccurate cash flow forecasts; and

The Group’s model is sensitive to changes
in key assumptions, specifically forecast
growth rates and discount rate. This drives
additional audit effort in assessing the
of
feasibility
assumptions.

appropriateness

and

The model the Group uses to perform its
impairment assessments is manually developed
and uses a range of internally and externally
sourced inputs. Models that use forward-looking
assumptions tend to be prone to greater risk for
potential bias, error and inconsistent application.
These conditions necessitate additional scrutiny
by us, in particular to address the objectivity of
sources used
their
consistent application.

for assumptions, and

We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.

Our procedures included:

• We tested key controls relating to the preparation
of the impairment model, including approval of the
budget by the Board;

• We considered the appropriateness of the CGU
designation applied by the Group, and the
allocation of corporate assets to CGUs against the
requirements of the accounting standards;

• We considered the appropriateness of the value in
use method applied by the Group to perform
impairment testing against the requirements of
the accounting standards;

• We assessed the integrity of the value in use
model used, including the mathematical accuracy
of the underlying calculation formulas;

• We compared the forecast cash flows contained
in the value in use model to Board approved
budgets;

• We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the models;

• We considered the sensitivity of the model by
varying key assumptions, such as forecast growth
rates and discount rates within a reasonably
possible range;

• We challenged the Group’s forecast cash flow and
growth assumptions in light of the current market
conditions. We used our knowledge of the Trade
Distribution operations, its past performance,
business and customers, and our
industry
experience to inform our assessment;

• Working with our valuation specialists we
independently developed a discount rate range
using publicly
for
comparable entities, adjusted by risk factors
specific to Trade Distribution and the industry it
operates in; and

available market data

• We assessed the disclosure in the financial report
using our understanding of the issue obtained
from our testing and against the requirements of
the accounting standards.

Other Information

Other Information is financial and non-financial information in Coventry Group Ltd’s annual reporting which
is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

•

preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;

implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and

assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

•

to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and

to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This
description forms part of our Auditor’s Report.

Report on the Remuneration Report

Opinion

Directors’ responsibilities

In our opinion, the Remuneration
Report of Coventry Group Ltd for the
year ended 30 June 2020, complies
with Section 300A of the Corporations
Act 2001.

The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.

Our responsibilities

We have audited the Remuneration Report included in pages 39
to 43 of the Directors’ report for the year ended 30 June 2020.

Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.

KPMG

J. Carey

Partner

Melbourne

21 August 2020

KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG
International Cooperative
(“KPMG International”), a Swiss entity.

Liability limited by a scheme approved
under Professional Standards Legislation.

Ordinary Shares

Number
25,719,855
11,860,484
11,649,613
4,213,832
2,400,000
1,456,704
1,356,660
1,265,434
1,145,244
1,025,142
1,000,000
923,000
884,855
583,963
460,000
455,333
436,500
421,526
417,638
400,000
400,000
68,475,783

Number of
shares
241,273
1,673,827
1,543,357
10,461,052
75,889,434
89,808,943

% of Total
28.64
13.21
12.97
4.69
2.67
1.62
1.51
1.41
1.28
1.14
1.11
1.03
0.99
0.65
0.51
0.51
0.49
0.47
0.47
0.45
0.45
76.25

0.27
1.86
1.72
11.65
84.50
100.00

Coventry Group Ltd
Shareholder Information
As at 17 August 2020

TWENTY LARGEST SHAREHOLDERS

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20

Name
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
ONE MANAGED INVT FUNDS LTD
LA VIE INVESTMENTS PTY LTD
ONE MANAGED INVT FUNDS LTD <1 A/C>
DORSETT INVESTMENTS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
DIXSON TRUST PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
MRS ANNE KYLE
DRNEWNHAM SUPER PTY LTD
DIXSON TRUST PTY LIMITED
DEVADIUS PTY LTD
MR GEOFFREY KYLE
ELLAND ROAD PTY LTD
ARUMA BEACH PTY LTD
ROMNEY LODGE PTY LTD
CHARLES PETER TAYLOR
GARSIND PTY LTD
TPSC SMIRK PTY LTD

DISTRIBUTION OF SHAREHOLDING

Size of holding

1 – 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over

Unmarketable parcels field information:

SUBSTANTIAL SHAREHOLDERS

Number of
holders
411
658
210
338
63
1,680

24.46
39.17
12.50
20.12
3.75
100.00

Minimum
Parcel Size
848

Holders

Units

315

149,557

The Company's register of substantial shareholders showed the following particulars as at 18 August 2020.

Name of Substantial Shareholder

Viburnum Funds Pty Ltd
Sandon Capital Pty Ltd
Castle Point Funds Management
DUMAC Inc.
* Lanyon Asset Management Pty Limited ceased to be a substantial shareholder on 17.01.2020
* Spheria Asset Management Pty Ltd ceased to be a substantial shareholder on 09.09.2019.

UNQUOTED EQUITY SECURITIES
Nil

Extent of Interest
(Number of
Shares)
29,371,273
8,563,454
5,153,693
4,498,152

Date of last
notification

31.03.2020
13.09.2019
27.05.2019
19.12.2019

VOTING RIGHTS
Each member present at a general meeting of the Company in person or by proxy, attorney or official representative is entitled:
•
•

on a show of hands - to one vote
on a poll - to one vote for each share held

Coventry Group Ltd
Corporate Directory

Coventry Group
ABN 37 008 670 102

Registered and Principal Administrative Office
235 Settlement Road,
Thomastown, Victoria 3074

Postal Address
P O Box 526
Thomastown, Victoria 3074

Website
www.cgl.com.au

Secretary
Mark Licciardo

Bankers
Australian and New Zealand Banking Group Limited
Scottish Pacific Business Finance Pty Ltd

Auditors
KPMG
Tower Two
Collins Square
727 Collins Street
Melbourne, Victoria 3008

Share Registry
Computershare Limited
Yarra Falls
452 Johnston Street, Abbotsford
Melbourne Victoria 3067

GPO Box 2975
Melbourne, Victoria 3000

Telephone from within Australia: 1300 763 414
Telephone from outside Australia: (+61) 3 9415 5000
Facsimile: +(61) 3 9473 2500
Email: web.queries@computershare.com.au
Website: www.investorcentre.com

Securities Exchange Listing
The Company's shares are listed on the ASX Limited and trade under the code CYG. The home exchange is Melbourne.

Shareholder Enquiries/Change of Address
Shareholders wishing to enquire about their shareholdings, dividend payments, or change their address should contact the
Company's share registry.