Late last Friday afternoon, the small WA industrial products company Coventry Group (CYG) became the latest in the growing list of profit downgrades when it issued a market update that warned that net earnings would more than halve to around "$6 million" for the year to June.
The media missed the news and it went unreported over the weekend because, it seems, the concentration of investors on the wider sell-off.
But the reasons advanced by Coventry continue the theme seen recently from groups such as Worleyparsons, UGL, Fantastic Furniture and Coffey International – that for a mixture of reasons trading conditions across a wide range of industries has gotten much tougher in this current half year.
It’s tougher in mining, and seems tougher for companies based in WA, which Coventry. the downgrade won’t impact on the bearish sentiment that currently surrounded the local market because Coventry is too small a company to have a significant impact.
But it is another brick in the wall for market watchers still reeling after the 3.8% drop in value last week.
Coventry shares ended at $2.92 on Friday, down 3.95% on the day.
CYG YTD – Watch The Downgrade
But as rough as conditions have become for the likes of Coventry, the board is doing its best to make sure shareholders are spared as much as they can be at the moment.
Directors intend continuing to paying an unchanged final dividend of 11c a share (the same as paid for the first half of 2012-13), even though earnings will be down sharply from $19 million (after all items), or around $13 million before tax to the $6 million figure.
"Like many suppliers to the resources, manufacturing and construction industries we have seen a decrease in demand in the second half of the 2013 financial year, which has not yet turned around," Coventry told the ASX.
"Accordingly at this time we expect the full year Net Profit After Tax result will be in the vicinity of $6 million. In the volatile markets we operate in it is extremely difficult to forecast accurately.
"It is the Board’s intention to maintain dividends at their current levels utilising the substantial cash and franking reserves available within the Group.
"Coventry further advises that the Board has taken the decision to exit the furniture and furniture component segment of the Artia business and concentrate resources and ability on the traditional hardware component (hinges, draw slides, handles and similar).
"This will be achieved through a sell down of furniture inventory and rationalization of costs. This will facilitate the Artia and Fasteners businesses sharing distribution centres and achieving operating efficiencies. Dedicated customer facing sales teams will be maintained for both the Fastener and Artia businesses."
