I would now like to hand the conference over to Robert Bulluss, Chief Executive Officer and Managing Director, and Rod Jackson, Chief Financial Officer of the Coventry Group. Please go ahead.
Great. Thank you. Hi, everyone. So, Rob Bulluss, I'm the CEO and Managing Director of the Coventry Group, and as stated, we've also got Rod Jackson, our CFO, here with us today as well.
Hello.
We're gonna cover off on a number of areas during the call. The first one, we'll just touch on the FY23 financial results. Second, we'll give you an update on how our markets are trading and what we think the outlook there is. Third, we'll go through some of our key strategic initiatives and how we're working on those, how they're going. And then finally, we'll look at our growth opportunities, which are still significant across all of the business units that we operate here at the Coventry Group. At the end, you'll get the chance also to ask questions. So first of all, to the FY23 results, pleasingly, our trading performance improved again during FY23, delivering solid sales and pre-AASB 16 EBIT year-on-year growth.
As I go through the conference, any references I make to EBITDA are to EBITDA pre-AASB 16 and also before significant items. It's our sixth consecutive year of sales and EBITDA growth after a long period of decline for the business. Highlights, 11% sales growth, now up to AUD 358 million, and EBITDA growth up 9.7% to AUD 17 million. Statutory net profit of AUD 2.5 million, this is lower than the previous year, but we've had so far AUD 5.5 million of investment into the transformational ERP system upgrade that we're completing at the moment. The AUD 0.035 fully franked dividend, this is the third consecutive year now that we've managed to pay a dividend.
As long as the business has the capacity to do so, the intention is to continue to do that. Balance sheet's strong. We've got net tangible assets of AUD 34.3 million and net assets at AUD 113.3 million. Net debt position at AUD 33.5 million, this is slightly up on the previous year, but there's some outlays that explain that. I've already mentioned the AUD 5.5 million for the ERP project. There was also AUD 3 million went out for the FY 2022 dividend payment, and we invested in capital expenditure, AUD 3.7 million, mainly into equipment for our Fluid Systems business, but also into some store makeovers and other activities like that.
Much, much better working capital management this year compared to previous years, and that resulted in a cash conversion rate of 112.5%. We also re-signed the AUD 55 million net financing facility late in the year, and that now runs through to July 2026. So a positive result, there was a number of factors that we had to deal with during the year. All businesses, as I'm sure you know, operating at high wage and cost inflation. This did in particular impact our Trade Distribution business. The Fluid Systems is less, they were able to pass some of that wage inflation on in higher labor recovery rates. We also saw labor and skills shortages. That in particular impacted our Fluid Systems business.
We can't get enough employees, particularly tradespeople and engineers, to do the work that we've got, and that resulted in higher levels of overtime and higher labor in that business. New Zealand was impacted by floods and cyclone, and then we also had the unplanned public holiday along the way as well. From a business unit perspective, Sales in Trade Distribution were up 8.8% to AUD 210 million, and EBITDA was up 5.4% to AUD 17 million. There was some softening in New Zealand in the last quarter. That economy has gone into recession, and some slowdown in store, discretionary store spending in Tasmania due to discretionary spend slowing as interest rates have been rising.
Our Fluid Systems sales up 14.1% to AUD 148 million, and EBITDA up 19% to AUD 15.4 million. So super performance from fluids, and we expect that to continue on in FY 2024. Corporate costs steady at 4.6% of group sales. So that, that's the results for this year. We're quite pleased with them. Great to get a 6th year of consecutive growth, and we look forward to that continuing in FY 2024. Moving on to our markets and the outlooks for those, we still remain cautiously optimistic that all the market segments we operate in will largely continue to perform. And as a result, we expect the group to continue to grow profitably.
Moving through all of the different markets that we operate in, the mining resources sector is still very strong. So really good demand for the products and services. Commodity prices still look okay. China obviously is in a bit of a downturn over there, but if they pick that up again and put stimulus into that economy, we think that can again only help the mining resources sector. So really the only thing holding us back there is the labor and skills shortage that's occurring at the moment. But otherwise, we see that sector just continuing on the way it has been. Infrastructure sector, which we've spent quite a bit of time building our capability in, we're winning more and more business in that sector across all states in Australia and in New Zealand as well.
There's still AUD 100 billion of government spend committed over the next 10 years. There's been a bit of media coverage around governments canceling projects. These are all future projects that aren't going to impact us. They can't, at the moment, keep up with the projects they've got due to labor shortages and material shortages in any case, and so we see no slowdown in that market at all. Commercial construction is an interesting one. That market is likewise still going very, very well despite cost inflation and labor shortages. We have seen an increase in business failures in that sector and have some increase in bad debt, certainly not material.
But again, most of our major customers in those sectors in both Australia and New Zealand are reporting strong order books and work going well into the calendar year 2025. So again, we don't see any slowdown there. Wherever a business fails, another company picks up the work, so it's positive news there. The residential market, we've certainly seen a decline there. That has impacted, to some degree, our business in New Zealand, which has relied more on, roofing and roofing screws. Overall, our exposure to the market's not particularly great, but regardless, we see that market coming back stronger again in 2025, sorry, 2024. There's already a housing shortage. We've got lots of immigration coming into both Australia and New Zealand, so something's got to give there, and we see that market strengthening again next year.
Our core industrial manufacturing markets are driven by the other markets I've already mentioned, so they're continuing to perform well. So again, we don't see any real concern with those markets. And then all of our secondary markets, which are the big growth and diversification opportunities for us, are all continuing to perform well as well. So that includes agriculture and aquaculture, renewable energy, oil and gas, defense and recycling. So again, all in all, a really fairly positive outlook for our markets. Our view, even if the overall economies slow in Australia and New Zealand, that our markets will outperform the overall economy, and we'll still get reasonable results. So then moving on to key initiatives and projects. First and foremost to our ERP upgrade project.
For those of you that, who know about that project, it's a AUD 15 million-AUD 15.5 million dollar project that's running over 2.5 years. To date, that's gone very well. It's focused with the objectives of improving our customer service level and also improving productivity in the business. At the moment, we're on very, very old technology, and this will get us up to date. We've got a very experienced project team internally. We've got good project partners. We've allocated dedicated subject matter experts from our business into the project, and to date, all of those resources are performing well. So the status of the project at the moment, we've completed the requirements definition phase, the design phase, and we're now well advanced in the build phase.
So we're currently probably in the last 10%-15% of the build phase, and then we will move into a testing phase, which will go through 5 cycles to get us a very, very high level of comfort and confidence that the system's ready to go live. At this stage, we think it's either gonna be early or late February that we'll go live with the first branch, and at the same time, our finance function will also go live with that branch. And that'll be Fluid Systems branch that we start with. Once we're comfortable that that's working 100%, we'll then start rolling out in batches, the rest of the Fluid Systems branches, then move on to Konnect and Artia in New Zealand, and then move back to Australia to complete Konnect and Artia Australia.
So look, so far, so good with that. We've avoided, we think, most of the pitfalls that other organizations have with when implementing an ERP system. We've kept our customizations to a minimum. We're doing lots of testing as we go through the build phase, and we're fixing things as we go. Another key project that we've worked on through last year was our cash conversion project. This was really about optimizing our inventory positions to ensure that we were converting profit into cash. It's fair to say we probably didn't do a great job of that in the previous couple of years, partly due to the need to build inventory because of the COVID supply chain issues that we were having. Those are now gone. Supply chain is back to normal.
We did manage to reduce our inventory by about AUD 3 million last year, despite having 11.2% sales growth. So that was a very good result. And that all resulted in that very strong cash conversion result of 112.5%, which was a vast improvement on previous years. There's still more we can do with the inventory. The D365 demand planning component of that build will also give us a lot more sophistication and capability to forecast and plan our ordering around inventory as well. Another key project for us, which has been ongoing since the start, is accelerating the profit growth in the Konnect Australia business.
This was the business that was the most broken when we came into the business six or seven years ago. We're working on multiple fronts there to accelerate not only sales growth, but also profit growth in that particular business unit. There's many things we can do, including fixing the underperforming branches, improving our capability around sales and business development. We're constantly doing store makeovers, store relocations, and new stores. The store makeovers and store relocations are quite critical. A lot of the branches were put into very small buildings in the wrong parts of town in the past.
We're fixing all of that up, and there was a few examples in the investor presentation of how quickly those branches start to generate profit growth once we complete those makeovers or relocations. We're also improving the margin management in that business, improving supply chain and stock availability, and we've also delivered some annualized operating cost reductions during the last quarter of FY 2023, as well, which will impact into FY 2024. So the last thing I wanna talk then about is our opportunity for growth. It's still very, very significant. We think, at best, we've got 5% market share across both the trade distribution and the Fluid Systems markets. They all have lots and lots of players in both of those markets.
In both, there's only a couple of larger competitors, and then it drops very, very quickly down to some regional players, and then down into lots and lots of local single-branch businesses. So, lots of consolidation and a lot of those businesses have aging owners as well. And if I look at the Trade Distribution market first and our key strategic growth initiatives there, we can always be increasing our share of wallet with our existing customers and winning new customers. Our value proposition, based on specialization, is very good now. Our service levels, we believe, are better than our competitors out there. We can increase the market share through new branch openings. The plan will be to try and open 2 to 3, 4 branches per year.
For those of you who've been on June for a while, you'll recall that the Konnect Australia business, in its heyday, had about 100 branches, and we think there is the opportunity to do that again. At the moment, we're around the 40-branch mark. As I said, this is very rapid return on investment when we relocate to the right location and set up the stores for success. The critical success factor for that to work is having the right branch manager. If you have the right branch managers, they tend to then be able to find the right team for that business as well. So a lot of work going on in that space at the moment. We just yesterday did the relaunch for our Mildura branch.
This year, we've also relaunched Latrobe as well. There's a number of initiatives that we're working on around trading and gross margin, and a lot of work going on around building capability in our sales and marketing team. That's traditional marketing, as well as building our digital capability and extracting more growth and benefit out of the online systems that we've developed. From a Fluid Systems perspective, the growth initiatives there include expanding sales in our existing markets, definitely diversifying into markets outside of mining resources. I think when I started, we had 90% of the sales in mining and resources. That's closer to 70% today, and so we've made quite some progress moving into other markets, but there's a lot more that we can do there. Both our Mackay and Redcliffe facilities are at capacity.
We're looking to either expand those or look for other property in those regions so that we can continue growth in those areas. We've invested quite a bit already into our engineering department to improve the capability there. Where we do customized work for customers, we get better margins. We need that engineering capability to be able to do that, and there's also a move in the industry from manual processes to automated and electric systems, so we're building the capability to be at the forefront of that in our markets as well. There's still opportunities for branches in new geographical regions, and certainly, there's opportunities for acquisitions in lots of very, very fragmented markets for Fluid Systems. From a group perspective, we're really focused on people. We need to have the right people for growth.
We're looking at accelerating the organic growth and improving margins, particularly in Trade Distribution, continuing to rightsize our inventories and cash conversion, making sure we deliver that ERP upgrade to schedule and on budget and not disrupting the business when we do it, and then just continually reinforcing with our customers our focus on specialization. So look, you know, we've built the base now. We're committed to taking advantage of the scale on the platform that we've got at the moment, that we've built. We're particularly keen to achieve best-in-class Trade Distribution margins, and making sure that the group returns the right shareholder return. So I think at the moment, we're in very big markets. We've got clear plans for accelerating our growth. The markets we operate in, we believe, will continue to perform.
Our strategy is working, and largely we've got the right people to deliver sustainable, profitable growth. So that's the update. I'll now hand back to see if there's any questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask the question. We'll pause for questions to register. Once again, to ask a question, please press star one. Thank you. Your first question come`s from Liam Cummins, from Petra. Please go ahead.
Hi, Rob. Congratulations on another solid result. Just, just regarding your chat around M&A, can you give us a bit of a feel for, if, if at all, what expectations are set in the market on, multiples? I know that things are probably getting a little bit more difficult. Interest rates have gone up, and we've seen a, a response from, vendors and their expectations on what the businesses are worth.
Yeah, look, you know, I think I've referenced the acquisitions that we've already done. We've paid between anything as low as 2x, up to 6x, for the businesses that we've acquired so far. I think at the moment you would be wanting to pay more at the lower end. We think, you know, Trade Distribution business is, you know, probably somewhere between 4x and 6x. At the moment, probably you'd want to be between 4x and 5x. And for a Fluid Systems business, you probably wouldn't want to be above 4x, probably closer to 3x. But right at the moment, you know, we're not proposing acquisitions right at the moment with our debt level where it is, because we're keen to, you know, keep our debt to 1.5x EBITDA.
But yeah, if the right opportunity come up at the right price, we will assess them.
Thanks.
Thank you. There are no further questions at this time. I'll now hand back to Robert Bulluss for closing remarks.
Okay, great. Thank you. All right. Well, thanks for joining today. Just to reiterate, we're operating in the right markets is our view. Our strategy is working. We've got the right people. We've got really, really clear plans on how we're going to accelerate profitable growth and increase shareholder returns. And we're reasonably upbeat about our prospects for FY 2024, despite interest rates being up and the New Zealand economy in recession and the potential for slowdown here. Overall, we're still positive about the outlook, and we believe we'll deliver a seventh consecutive year of sales and profit growth. So look forward to giving you an update throughout the year. We look forward to catching up with some of you guys in the next couple of weeks as we do our roadshow. So thanks again for joining.
Yeah, thank you.
That does conclude our conference for today. Thank you for` participating. You may now disconnect.