Saturday, August 15, 2020

Stock of the day: Coventry Group share price lifts 17% on fourth quarter trading

share market high, all time high, percentages increasing with red arrow, asx 200

The Coventry Group Ltd. (ASX: CYG) share price is up more than 17% today after the industrial group delivered a strong fourth quarter trading update. Sales increased 22.3% in FY20 compared to FY19 including acquisitions, or 4.7% if acquisitions are excluded. 

What does Coventry Group do? 

Coventry Group provides industrial solutions to the mining, construction, and manufacturing sectors. The company is behind a range of fastening systems, cabinet hardware systems, hydraulics, lubricants, fire suppression, and refueling projects. The Coventry Group share price collapsed in March, falling from over a dollar to 47 cents. The share price has yet to recover to previous highs, however today’s announcement has helped. 

What did Coventry Group announce? 

Coventry Group gave an update on its performance, which was better than expected. The Fluid Systems division saw sales increase 15.2% in FY20 including acquisitions, or 8.5% excluding acquisitions. Growth is being driven by the strong value proposition and activity in the mining and resources sector. The company’s Trade Distribution division saw a 27.3% increase in sales in FY20 including acquisitions, or 2% excluding acquisitions. 

Impact of COVID-19

COVID-19 meant the company had to suspend operations in New Zealand for a period of 23 days, however operations have since re-commenced. Sales have continued to perform to expectations as have sales at the Australian operations. Coventry Group is focused on managing the financial health and stability of the group as well as undertaking prudent cash management. 

Net debt at 30 June 2020 was -$3.3 million, an improvement on the -$10.9 million debt at 31 March 2020. Coventry Group is taking action to reduce inventory levels and manage operating costs to improve its cash position. The company is currently unable to estimate the potential impacts of COVID-19 on FY21 earnings. 

What is the outlook for the Coventry Group share price? 

Coventry Group reports that activity in its major end markets (commercial construction, infrastructure and mining) has remained solid to date. Nonetheless, it has warned that there is a high level of uncertainty surrounding the scale and duration of COVID-19 and its impact on these markets. Despite the uncertainty, Coventry Group is confident in its strategic plan and believes it is operating in markets that will enable it to navigate the situation and take advantage of opportunities as they arise. The Coventry Group share price closed the day at 68 cents which is still around 39% lower than it’s pre-pandemic high in February.

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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Stock of the day: Coventry Group share price lifts 17% on fourth quarter trading appeared first on Motley Fool Australia.


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