The Australian government has pledged about $100 billion to infrastructure over the next decade. There is a massive spotlight on high-growth industries like infrastructure, mining and construction, especially as immigration booms and property prices rise. For companies like industrial products distributor Coventry Group (ASX: CYG), this is the opportunity to milk the potential cash cow.

In just the first three months of FY24, Coventry’s sales reached $94.6 million, up over 6.1% on Q1 FY23. Its unaudited EBITDA of $5.4 million was up 10.8%.

Group CEO and Managing Director of Coventry Group, Robert Bulluss, said, “The Group delivered solid FY24 quarter one sales and unaudited EBITDA growth. Initiatives to grow EBITDA % and Sales to 10% in the medium term have delivered early positive improvements, and our strategy based on specialisation and service excellence is continuing to be resilient. These buy-side and sell-side initiatives were implemented early in the financial year and started to become evident in the month of September with EBITDA up 26.7% on the pcp. We expect the run-rate from these initiatives to continue to improve over the December quarter.”

Coventry supplies a range of customisable products and tools for industrial use. These include fastening, cabinet hardware, hydraulics, lubrications, fire suppression, and refuelling systems. Its primary end markets are mining and resources, infrastructure, commercial construction and industrial avenues. 

With an expansive geographical base across Australia and New Zealand, Coventry functions through its two distinct business arms: Fluid Systems (supplying hydraulics, lubrications and such) and Trade Distribution (comprising Konnect and Artia and Nubco divisions for fastening systems, hardware and the like).

Due to New Zealand’s recessionary environment, the Company saw some weakness in the Konnect and Artia New Zealand business and the businesses’ exposure to residential construction through roofing screws. Konnect is among the top industrial fasteners business in New Zealand. 

What’s more, as competitors slowly withdraw from the market due to increasing inflationary pressures, Coventry expects to become stronger and more prominent. There are already signs of green shoots in the economy driven by record rates of immigration.

In FY23, Coventry’s sales revenue was up 11.2% on FY22 to $358.5 million, while Underlying EBITDA improved 9.7% to $17 million. The Company ended FY23 with $3.8 million cash in hand. It also upgraded its enterprise resource planning (ERP) solution for $5.5 million, incorporating the Microsoft suite. 

Coventry holds a modest market share in a multi-billion-dollar fragmented market. The Company has some plans to expand its presence, including new branch openings, branch refurbishments, business development, product range expansion and an enhanced focus on sales and marketing. 

Plus, its board and management aim to leverage the scale benefits of the platform established over recent years. Specifically, its goal is to achieve best-in-class trade distribution margins over time. 

Despite the overall optimism, the Company acknowledged the ongoing market uncertainty, with demand still suspended in limbo, resulting in Coventry’s inability to provide an FY24 guidance. However, the first quarter seems to paint a positive picture.