Welcome to the 87th. Can hear me okay? I haven't got this done. My name is Neil Cathie, as you all know, and I'm Chairman of your board at this meeting. Today's meeting is a hybrid meeting, both in Melbourne and online via the Microsoft Teams platform. This allows shareholders, proxy holders, and guests to attend the meeting. Shareholders and proxy holders have the ability to ask questions and votes during the meeting. I would now like to introduce the members of the board: James Todd, Tony Howarth, Robert Bulluss, our CEO and MD. Alex White today is represented by Edmund Ödser and Andrew Nisbet is apology today due to ill health. We also have in attendance our CFO, Rod Jackson, and Robyn Fry and Rebecca Gordon from Acclime Australia, representing Mark Lucciardo, our Company Secretary.
On queue.
Mark Lucciardo. Right on cue. Our external auditor, KPMG, is represented today by Partner Simon Quill, who will be able to respond to any questions relating to the FY 2023 audit. Also in attendance is our share registry, Computershare, represented by Julian Mazza, who will act as Returning Officer. My Chairman's Report is contained in the 2023 Annual Report. I don't intend to repeat that content here. More important, I think, that you hear from Robert, our CEO, who will provide an overview of the FY 2023 financial year and the current state of the business. I'd remind everyone in attendance that this is a formal meeting of shareholders. While visitors are welcome, only members of the company, proxy holders, or appointed representatives are permitted to submit questions in person or online. Questions can be submitted online at any time.
Please follow the steps outlined on the screen. Type your question in the chat window, stating your name or the organization you represent, and send to the meeting moderator titled 2023 AGM questions. The meeting moderator will forward. I will address questions as we move through the respective items of business, and at the end of the meeting, there will be an opportunity for general questions. Lastly, Computershare will be facilitating voting on the formal part of this meeting, both in person and using their online voting platform, accessible on your desktop or Internet-enabled device, as detailed in the shareholder letter sent to you on the 19th of September 2023 and posted on the ASX Market Announcement page and company website.
Eligible shareholders who have not already voted by proxy and wishing to cast a vote, please follow the steps as outlined on the screen and submit your vote at any time during the meeting. Voting is now open. As the meeting has been properly constituted and the Company Secretary has advised a quorum is present, I declare it open. Notice convening the meeting, having been provided to shareholders, will be taken as read. Resolutions 3, 4, and 5 are subject to voting exclusions as outlined in the Notice of Annual General Meeting. As Chairman of the meeting, I intend to vote in favor on all open proxies, resolutions. The minutes of the 86th Annual General Meeting, held on the 21st of October 2022, have been signed at. Thank you, Robert. Signed as a true and correct record by me, in fact.
Ladies and gentlemen, the first item of ordinary business is the consideration of the Financial Report, Directors' Report, and Auditors' Report for the year ended 2023. These were circulated as part of the Annual Report, which you received in hard copy, selected, or were able to access on our website. I will now hand over to Managing Director and CEO, Robert Bulluss.
Thanks, Neil. Welcome, everyone. Welcome, Campbell. Maybe if you just click to the next slide, storyline. I'm gonna just go through a little bit about the group very briefly because everyone here does know a lot about us already. Talk about where our markets are at the moment and the industries that we operate in to give you a view of how all of those are going. Discussion around our strategy, which has evolved, I'd say, over the journey that we've gone on so far. We haven't made wholesale changes to it. It's been working. Touch on the results for FY 2023. Look forward at what we're seeing happening and what we're seeing happening in the first quarter of FY 2024 coming. Just a quick summary at the end.
The group, nearly 100 years old now, getting quite close to that. Two quite diverse parts to our business, the Trade Distribution side and the Fluid System side. We've built up over time now to 85 locations, five D.C.s or four D.C.s and 81 branches. The most recent of those was our Palmerston North branch that we opened over in New Zealand. Quite a diverse business, a lot of good geographical coverage across both Australia and New Zealand, and we're also closing in now on 1,000 people employed. When I joined, it was at just over 400, so quite a substantial increase in the number of people that we employ. Two sides of the business are very, very distinct.
I think when they originally acquired them, they thought there would be a large crossover between the customer bases, particularly in the mining sector. It's really not the case because the people at our Konnect, purchasing people or salespeople deal with the purchasing people in their businesses are very different to the people that the Fluids salespeople deal with. There's no real crossover there at all. Two very, very solid businesses. Fluid Systems is lubrication, hydraulics, refueling, fire suppression, but more so now also moving into automation, electrical automation, and a lot more customized type works. That customized type work we can get a lot bigger margin for, and it really ties you into the customers very, very closely 'cause we're solving problems for them. Often safety issue, often a productivity issue, quite often both at the same time.
A very good business. I divested away from mining to some extent. When I joined, it was about 95% mining resources. Today, we're down to about 70%, so I build into those other sectors in recycling, agriculture, transport, defense. Just trying to spread that out a bit. The trade distribution business, the three different businesses there. We've got the Konnect Artia Australia business, its sister company in New Zealand, and the Nubco business that we acquired down in Tasmania. Konnect, those businesses are fastener specialists. We want a customer to come to us 'cause they need a fastening solution. We'll sell them some other products that help install those products, but we want that specialization and expertise in that particular area.
Nubco, a little bit different 'cause it's a broader-based industrial supply business, but with a very niche range of products that we rarely see anywhere else in the market. The steel products, fasteners, and a much, much broader range of what we call branded and ancillary products. We spend a bit of time every year, we refresh the strategic plan. The last time we did it, we really focused in on, well, what is it that we're all about? It all came back to this specialization piece. What we wanna be is something that our customers come to us specifically for and that we're really good at. We've seen a lot of our competitors over the journey try and spread too wide, trying to grow.
They lose the expertise, and their ability to help the customer just starts to deteriorate over time. We want to learn from those lessons that we've seen in some of the other players in the market and make sure we've got a real reason for a customer to come and talk to us. All right, so moving on to the markets that we operate in. It's all a bit of a moving feast the whole time at the moment. You know, we've now got the Israel situation, we've got currency changing with interest rates movements as well. It's always got quite a bit going on. Nowhere near as complicated the macroeconomic environment as it was during COVID, but nonetheless, we've still got a whole bunch of things that we're trying to deal with the whole time.
I'll give you more detail on the markets, but they're going okay. We've seen a little bit of softness in some areas, but it's isolated to certain areas. All of the supply chain issues that we had have now gone. The cost of bringing import product is back to what I would call normal levels, and in fact, in some cases, with China's internal demand down, that's actually making it a bit easier for us because those manufacturers we use are looking for more volume, so they're easier to deal with, let's say, at the moment. Labor and skills, definitely still a big problem for us, particularly on the Fluid Systems side. We still can't get enough engineers and tradespeople to do the work that we can get. So at the moment, we reject some work.
Obviously, we try to take the higher margin opportunities out there. If we could get another 50 fitters at the moment, we could employ them tomorrow without any problem at all. That's still a challenge. We saw yesterday 3.6% unemployment, so it doesn't look like it's gonna change in the short term. As I said, lots going on in the macro situation, but to date, not a lot of impact on our business, which is good. All right, the markets that we operate in, sorry, we'll start with mining resources. Mining resources sector is still very, very strong. We've seen no downturn at all there at the moment. I find that interesting, given that China is in a low economic activity environment over there.
I think when that comes back, when they come back, that's only gonna strengthen the mining sector here in Australia at the moment. Very strong. As I say, we can't keep up with the work that's out there, so we're having to pick and choose a little bit there. Infrastructure, still very strong. I know there's been media about projects being canceled and things like that, but jobs that they're already on gonna continue on for the next two, three, four years anyway. A lot of new projects coming. The stadium down in Tassie, the Bridgewater Bridge, has already started down there. We've got the games up in Queensland, so there's a lot gonna be happening in that sector. We struggle to keep up with the opportunities in that market.
Building and construction is a story of two tales, so commercial construction is still very strong. We can see lots of activity today in the city here. There has been some business failures. We have had a higher degree of debt than what we're used to, but nothing too serious. Commercial construction, we don't see that coming off anytime in the future. All of our customers in that area are saying they've got good order books moving forward. Resi is a different story. We're definitely seeing a downturn there in both Australia and New Zealand. That has impacted our New Zealand business more so than Australia. We've got limited exposure here. Our Artia business probably is the most affected.
[audio distortion]. Our view remains with our markets. If GDP is 3%, market's probably performing at 6 GDP 0, we're still gonna be able to see a little bit of growth. Our market should outperform the overall economy is our view. Just the strategy, and this is something that we do, as I said, refresh every year. I think we fine-tune it. We haven't changed it. We've had six consecutive years of sales and profit growth. I think fair proof that the strategy's working. Haven't done quite as well. I'll talk to that when we get to the FY 2023 results. I think a couple of things just to pull out of the story up on the board there. The values are very, very important to us.
We do operate the business in a way where we do the right thing, we look after our people. We actually believe in those, we don't just put them on the wall, and I think that does set us apart from a lot of businesses out there today. One of the changes, and everybody, of course, picked up on it from the last correspondence that we sent out, was the change to the 10% EBITDA region, let's call it. So we're working towards that. That's not going to happen overnight, obviously, but I'll talk to you a little bit about how we're trying to achieve that when I get to the FY 2023 and FY 2024 numbers. Again, we try and just focus on what are the key things that are going to make us successful.
There's obviously a lot of tasks underneath each of those strategic priorities, but try and keep the business focused at all times on a few things, not trying to do everything. We've got so much opportunity in our markets, and we've got so much opportunity internally to improve the way we operate, to improve productivity. If we try and do it all, we just get lost in it and it doesn't really happen. Just having a look at the opportunities, and what I always find is promising with Coventry Group is when you sit down and try and map out all the things that you can do, you can fill pages very, very quickly. That's a good thing. That tells you that your markets are strong, there's no real paradigm shifts coming your way, and that's a good place to be.
As I said, we've got to pick and choose through these because we've only got so much capital. We can't do everything at the same time. Business as usual is always happening, so we try and just focus our teams very, very clearly on what the things are that we need them to do. This year, we will open two more stores, minimum, in Australia for Konnect. We've already opened one in New Zealand. I already mentioned that. We'll look to expand one of our fluids businesses up in Mackay, but that'll probably be into FY 2025. With our market share at 5%, a lot of the time is just focused in on trying to get more share of wallet in customers and build the base of the business that way.
As you can see, I'm not gonna go through it all. Lots and lots of stuff that we can do there. We're only just scratching the surface on the digital side, and we had a presentation yesterday from our new team, our new experts in that area, showing us what they think we need to do, and I'll share that with the Board today. All right, going to FY 2023, and as I said, the sixth year of consecutive sales and profit growth. Well, very strong sales growth at 11.2%, double digits, so really pleased with that. The EBITDA dollars was good to see another increase there. You'll see from the Board that the profit growth, the EBITDA growth percentage was less than the sales growth, and that's not what we actually want to see.
We want to see the profit percentage growth higher than that. Where we give ourselves ticks on a lot of things up there, what we haven't done in the last two years is increase the percentage EBITDA in sales, and that's what we're working on at the moment to dial that up to start that moving towards that 10% target that we've set ourselves. Cash conversion, really, really pleased with that. Fair to say we probably haven't done a great job of that over the journey. COVID didn't help. All of those supply chain issues didn't help. Last year, a very good result, and we expect to be able to continue now to convert cash ups at least 90% each year.
Net debt, about the same as last year, but we had the dividend, a lot higher dividend than what we expected. That's not been repeated this year. It's only AUD 100,000, I think we paid out this year. That'll help the cash flow for this year. The ERP project is the big burn, AUD 5.5 million last year, probably around the AUD 7 million mark this year. AUD 2 million of overflow into FY 2025. That's really the driver for the lowest statutory net profit is the ERP project that we're doing. This is just the actually running rate. Like to put that up. Makes me feel good. Yeah, the key here is here. We haven't quite quick enough here, and it's that percentage. I'll talk to how we fix that.
That's been our problem in the last couple of years. Balance sheet, very, very similar story there from last year. The net assets around the same position. You can see the significant increase in the cash conversion rate there. I won't go into that one in any more detail. The split by the segments, Fluid Systems are really, really strong performance last year. You can see mid-double-digit growth there from a sales perspective and a much better translation of those sales into profit growth. A really, really pleasing result there in a strong market, but we've got a very, very good business. Trade Distribution, close to double-digit sales, only the 5.4% EBITDA growth.
[audio distortion] 6.1, not too bad. We've got New Zealand in recession, so we didn't get sales growth in that region. Tasmania has been impacted more, our Nubco business, by interest rates and a reduction in discretionary spend for DIY projects, renovations. We rely a bit more on them to have traffic through the stores for sales, and we've seen all of that drop down. Mainland Australia for both Fluid Systems and Konnect and Artia Australia, quite strong sales growth still, so quite pleasing there. Again, you can see Fluids, very strong. Trade, only small growth, but Australia are offset by really no growth at all in New Zealand or Tasmania.
Overall, a good result, and we saw a strong performance in the September result, the increase in the EBIT, EBITDA percentage to sales, and I'll talk a little bit more about what we're doing there. Fluids, what are we looking at there? Well, if we could get a whole lot more people, that'd be great. That would help us. The things we're trying to do there is continue the diversification away from the mining sector, so trying to just reduce our dependency there. We don't see it happening soon, but at some point, the mining sector will fall away again.
Very importantly is increasing this engineering capability and our automation capability so that we're able to take advantage of these customized solutions, and a move in the markets away from manually moving a lever to using automation to do those things. There is a little bit of a paradigm shift there, which we're at the forefront of, and we'll be able to take advantage of. A couple of facilities that we're just maxed out in, we're looking for options there, but lots and lots of opportunities still for Fluid Systems. You know, we've got very small market share. Moving to Trade Distribution, the three businesses there. Konnect Artia Australia, for those who've been on the journey will know that was the business that was the most broken.
It still has the biggest opportunity for improvement from a growth perspective and also a profit growth perspective. A lot of focus into that business at the moment. A lot of work happening around trying to increase share of wallet, new customers, new stores. We find whenever we do a store makeover, so this is either relocating it to a better location in a better facility or fixing up the showroom, we have an immediate uptick in sales as well. We're trying to do probably three or four or five of those makeovers, relocations a year, as well as the new stores. At the moment, we've got 41. We still think that we could get back to Konnect's heyday when it had about 100 stores. That's a six, seven, eight-year journey to achieve that.
New Zealand, not so much opportunity for store growth, but we can expand into different markets. We don't have a big exposure to industrial over there. What we're seeing is competitors contracting very quickly as the economy goes off. That'll create opportunity for us as the market comes back to us as well. Nubco, lots and lots of infrastructure projects going on down there. I'm seeing success getting into those projects, and then the residential thing will come back to us. The DIY thing will come back to us as well, and that will rebuild the sales growth pipeline for us down there. A little bit of stalling in a couple of those geographical regions at the moment, but overall, still strong and lots and lots of opportunities moving forward.
Some of the big initiatives I've already touched on K.A., so I won't do that again. The ERP project is continuing to progress well. We're pretty much at the end of the build phase now. There's a little bit of work just to finish off there. We've started our first round of testing. We'll do five, maybe six rounds of testing. Normally, businesses do two, so we're gonna make sure by the time we get to the first pilot branch that goes live with finance, that thing is very, very robust and ready to go. All right? We're trying to minimize the risk of our users having a bad experience and getting them onside, but also making sure we don't trip ourselves up when we actually go live. If we have a problem, we'll stop, reset.
We won't shoot the rocket up into the air if it's not ready to go. So far, so good, and very pleased with the way the team's gone about that. At the moment, we're right at the top of the cash burn cycle because we've got the build team still there and the testing team all going at the same time. It's a fair bit of cost there. A couple of others. I've already touched on the optimizing financial health. Rod's credit team do a fantastic job looking after the debtors. We're probably best practice or close to it in that area. We're very good at managing the creditor side now. Really, from a debt position, cash position, it's all about inventory for us.
We're trying to keep the inventory about the same level as it was at the start of the year by the end of this year, and that's how we get a good cash conversion rate for F.Y. 2024. The marketing and digital piece, we're sort of running that concurrently to the side of the ERP project. There's a bit of pressure on I.T., as always, to commit resources to everything we'd like to do. We haven't had a huge amount of success, it's fair to say, so far with our online ordering platforms. We now have a team of experts in the business who are looking at that, and as I said, have given us recommendations yesterday for consideration. Still another big opportunity.
The priorities at the moment, always trying to get the right people for growth, accelerating the trade distribution side of the business, particularly Konnect and Artia Australia, making sure we've got the cash conversion right and delivering that ERP project. I think the key thing that we've been working on for the last few months is really just focus on our trading margin and our gross margin.
As we've gone through COVID and a whole lot of other things coming at us, as we've rebuilt the Konnect and Artia Australia business, which had a very poor reputation, very poor service, we've taken business, it's fair to say, at lower margins over the journey, and now have the best service, we think, in the market, and we haven't gone back and rerated our pricing to reflect that high level of service that we've got. On the other side, we also haven't gone back to our suppliers at AUD 150 million of sales. Now we've got AUD 380, and we haven't gone back and said: "Hang on a second, you're getting a lot more from us. Want some better deals here?" The teams, not just in KA, but across all of the business units, are working on those things at the moment.
We've had quite a bit of success in the first quarter, it's fair to say, on both the buy side and the sell side, without impacting, in our view, sales. Lots of little things rather than just wholesale price increases to try and get margins up. By doing this, it takes a lot of pressure off that bottom line and helps us get that EBITDA percentage up quicker towards that 10% target that we've got. A good project, probably something we've already done, but we're getting it done now and seeing a really good impact on the profitability of the business. Reasonable performance, FY 2023. A good start to Q1. We expect that to continue into Q2, subject to the economy continuing to track as it is at the moment.
As I said, hopefully, calendar year, next year, we start seeing the Resi market come back to us a bit as well. Overall, the markets are good. They'll outperform the economy. We think our strategy around specialization is the right one, and we think that's what helps us get the customers on side. We will do things outside of what a lot of our competitors will do. Plus, not this weekend gone, the one before, we had people on site at West Gate Tunnel Project at 3:00 A.M. Sunday morning, helping them solve a problem that they thought might have been our issue, but it definitely wasn't. We went out of our way to make sure we got them up and running again as quickly as we possibly could.
That will serve us well on that project or on every other infrastructure project that those people go and work on post that. That's what we're about, is just going that extra mile. It helps us down the track.
There's a question about trading in the current time, but anyway.
Slide sheets.
Slide sheets. Okay, there.
Do I sit or do I stand?
Oh, just stand. That's fine. As we normally do, we'll deal with any questions in relation to the financial statements, reports, and anything, in fact, Robert has said. Have we any questions online? Are there any questions from those in attendance? Okay, we'll move straight along. I'll therefore declare the financial statements report considered and received. Thank you very much. Now, we're gonna move to the resolutions now. As you all know, voting will be conducted by a poll on all items of business, and the poll announced will be really announced to the ASX as soon as practicable. We'll deal with the discussion on each resolution, if there is any, as we move through them.
The first item of business or the, sorry, the next item of business, re-election of Director, Mr. James Todd. Explanatory notes in the notice of meeting contained all the particulars about Mr. Todd's skills, qualifications, experience, and I'm not going to repeat that here. I'm in fact, not also, I mean, with all the resolutions, a bit of slight change of practice here, I'm not going to read the resolutions out there. They're on screen. You've all got them in front of you. I would ask if there are any questions in relation to this resolution online. Thank you. With no questions, I'll direct you to the slide, which is up on the screen. I think you've just scraped over. We'll move to the next item, which is re-election of a Director, Mr.
Anthony Tony Howarth. As with James, on the explanatory notes, the notice of meetings, I won't repeat them here. We certainly unanimously recommend that in favor of this, his re-election. Again, I'm not going to read out the resolution. It's up there on the screen and, of course, it was in your notice of meeting. Any questions? No further questions. Cool. Well, similarly, Tony, you've managed to scrape in as well there. The next item is the adoption of the remuneration report. The notice of the meeting outlined why this comes to the meeting, so I am not going to read all this gamble out again, as you've all had the opportunity to see it and read it and digest it. The resolution is up on the screen.
Rebecca, do we have any questions? The screen now is displaying the results of the voting. Well, we scored there as well, so that's great. The next item of business is to seek shareholder approval of the changes in the Executive and Director Incentive Plan. Really housekeeping, but recommended by our Company Secretary, and that's why it's appearing in front of you today. Very important to us, of course, on the board, because it gives this plan, while it is called the Directors and Executive Incentive Plan, directors don't typically participate, apart from our Managing Director, but it is very important to our executives, all our executives, that there's an opportunity to share it, business as it continues to prosper.
The ordinary resolution is again up on the screen, so I'm not going to read that. Do we have any questions? Any questions? Well, no further questions. I'll direct you to the slide on the screen, which provides the... Lastly, we have the granting of performance rights to Mr. Robert Bulluss. We've seen this for a number of years now. This is nothing new. This is part of our CEO remuneration package, and we are just seeking shareholder approval for the issue of performance rights in relation to FY 2024. The ordinary resolution, again, is up on the screen. I don't intend reading that today. Are there any questions, Rebecca, on that?
With no questions, once again, I'll just remind you about the voting exclusion statement for this resolution, which is detailed in the Notice of Meeting. Again, the results of the vote on that item. We move to General Business. Have there been any items of General Business received? No. Any other questions received? Are there any questions? Okay, thank you. Those shareholders who have not already voted are encouraged to do so now, in accordance with the instructions provided at the beginning of the meeting and as detailed in the Shareholder Letter sent to you on the 19th of September 2023. Also displayed again on the screen. Yeah, displayed again on screen. Not there? Don't worry about it. Okay, everyone knows what to do.
Please note that the voting closes at the conclusion of the meeting. With the results of the poll not available immediately, shareholders are advised the results will be announced to the ASX and displayed on the company's website as soon as they become available. With there being no other business, thank you, and I'll close the meeting. Thank you all. Very good.