The Coventry Group Ltd (ASX: CYG) share price is surging on the back of the company's earnings for the first half of financial year 2022.
At the time of writing, the Coventry Group share price is $1.72, 6.17% higher than its previous close.
Coventry Group share price soars alongside profits
- Revenue of $156.9 million – 13.9% more than the first half of financial year 2021
- Net profit after tax (NPAT) of $2.4 million – a 116% increase
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $7.3 million – up 4%
- New Zealand COVID-19 lockdown estimated to have cost EBITDA of $750,000 and $3 million of sales
- No interim dividend declared
Over the first half of financial year 2022, the distributor of industrial products' trade distribution sales increased 13.9%. Meanwhile, its fluid systems sales grew by 15%.
The trade distribution leg's EBITDA came to $7.6 million – up from $5.7 million in the prior comparable period.
The company's fluid system segment, however, saw its EBTIDA fall to $6.3 million, down from $6.7 million.
As of the end of the half, Coventry Group had net debt of $26.9 million. For context, its debts came to $16.3 million at the end of financial year 2021.
Its increased debt was mostly down to the company boosting its inventory by $11.3 million due to inflation and increases in stock levels in an effort to dodge supply chain issues.
Capital expenditure for the period came to $2.3 million.
Finally, the company isn't paying an interim dividend. It stated that, in the context of current capital needs, a final dividend will suffice.
What else happened in the half?
The only time the market heard price-sensitive information from the company last half – aside from news of its annual general meeting and full-year results – was in October.
Then, it released a trading update on the first quarter of financial year 2022.
The Coventry Group share price jumped 5% after the company announced its sales and earnings were strong in the September quarter.
What did management say?
Commenting on the result fuelling the Coventry Group share price, CEO and managing director Robert Bulluss said:
The group delivered pleasing sales and profit growth in [the first half of financial year 2022].
This was despite the negative impact of the enforced New Zealand Government Alert 4 lockdown in Auckland which we estimate negatively impacted sales in the order of $3 million and EBITDA in the order of $750,000.
What's next?
Unfortunately for eager investors, the company has declined to provide guidance for the rest of financial year 2022.
It said the markets in which its fluid systems and trade distribution businesses operate are performing well.
However, continuing uncertainty due to COVID-19 has spurred its decision to eliminate guidance.
Though, it did say it plans to provide a dividend for financial year 2022 after it resumed handing investors a portion of profits last financial year.
Additionally, the company noted that its priority has been to continue providing the same level of service to customers during the recent uncertainty.
Now, during financial year 2022, it will be taking action to "prudently manage" its inventory levels, collections, and operating costs to boost its cash position.
Coventry Group share price snapshot
Today's gains have boosted the Coventry Group share price into the year-to-date green.
It's now 2% higher than it was at the start of this year. It has also gained 67% since this time last year.
