Announcement
MKTUPDTE: CAV: FY19 Earnings Guidance
08:52am
CAV
24/05/2019 08:52
MKTUPDTE
PRICE SENSITIVE
REL: 0852 HRS Cavalier Corporation Limited
MKTUPDTE: CAV: FY19 Earnings Guidance
Trading Update and FY19 Earnings Guidance
New Zealand carpet company, Cavalier Corporation Limited (NZX: CAV) is today
providing an update on trading performance and earnings for the year ending
30 June 2019 (FY19).
Trading Update
The challenging market conditions noted in February 2019, particularly in
Australia, have continued into the second half of the financial year, with
slowing demand also being seen in the New Zealand market in recent months.
Economic reports note that New Zealand manufacturers are struggling in
Australia's current environment and softer carpet sales are being seen by
many distributors, particularly of lower quality synthetic carpets.
Cavalier continues to hold market share in both New Zealand and Australia.
Demand for the company's top end Bremworth Collection wool carpets continues
to grow; while volumes are small, these high quality, higher margin carpets
provide a significant contribution to group profits. Demand for lower margin
synthetic carpets continues to trend downwards.
Wool prices have continued to be impacted by decreased Chinese demand for
coarser carpet wool, adversely affecting sales and margins for Cavalier's
wool buying business, Elco Direct.
Management is taking measures to increase both market share and sales. The
focus is on growing the trade customer base and improving customer
relationships, increasing the distribution footprint and continuing to design
and launch new and innovative carpets and rugs. Following the success of
Cavalier's instore displays, increased investment has been put into rolling
these pop-up 'store within a store' units across the trade customer network.
The focus on cost management has continued and the recent restructure of the
Australian organisational structure will provide further efficiencies in
FY20.
Growth opportunities in Australia are being investigated and resource is also
being put into building Cavalier's global presence. Cavalier has identified a
number of market opportunities and is in the process of reinforcing and
expanding its international presence, particularly in the USA.
FY19 Earnings Guidance
Given the soft market and current trading conditions, Cavalier expects a
second half profit performance close to break even and is forecasting a FY19
normalised Net Profit After Tax around the $1.9 million reported at the half
year. 1H19 result included a $0.6m contribution from the wool scouring
business (FY18 $1.4m contribution). Cavalier's interest in the wool scouring
business was sold in September 2018 and provided no further contribution in
2H19.
Chief Executive Officer of Cavalier, Paul Alston, commented: "Current market
conditions are challenging and our trading is below where we would like it to
be. We remain focused on the areas that will drive our performance and
remain positive about our long-term future as a manufacturer and marketer of
high end, predominantly wool, carpets."
Introduction of Long-Term Incentive Scheme
The company's management team was restructured during the past year and
Cavalier has established a Long-Term Incentive (LTI) Scheme for key
executives. The LTI scheme is based on Total Shareholder Returns measured
over a three-year period. The Board believes this will further align
management and shareholder interest, ensure that long term growth and
shareholder value are not compromised in favour of short-term actions, and
support the retention of high performing executives in the business.
24 May 2019
ENDS
For further information please contact:
Paul Alston
Chief Executive Officer
palston@cavbrem.co.nz
+64 21 918 033
+64 9 277 1135
Jackie Ellis
Media and Investor Relations
Jackie@ellisandco.co.nz
+64 27 246 2505
End CA:00334979 For:CAV Type:MKTUPDTE Time:2019-05-24 08:52:50
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