Announcement
HALFYR: CAV: Preliminary FY20 Half Year Result
09:23am
CAV
21/02/2020 09:23
HALFYR
PRICE SENSITIVE
REL: 0923 HRS Cavalier Corporation Limited
HALFYR: CAV: Preliminary FY20 Half Year Result
CAVALIER INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2019
21 February 2020
o Results slightly above November 2019 guidance with revenue of $64.4m and a
Net Loss After Tax (NLAT) of $(1.2)m. The reported result includes adjustment
for NZ IFRS 16 and $0.8m of transformation costs incurred for the period to
31 December 2019.
o Excluding transformation costs, normalised EBITDA of $3.0m and normalised
NLAT was $(0.6)m.
o Trading conditions remain soft for carpet, impacting on sales. In addition,
softer demand for wool has also affected Elco Direct's revenue although
margin has improved.
o Development of Cavalier's transformation strategy is being finalised as the
company moves to position itself as a wool-focused, design-led business and
capture customer demand for high quality sustainable products.
Cavalier Corporation Limited (NZX: CAV) has today released its unaudited
interim results for the six months to 31 December 2019.
The challenging trading conditions have continued and revenue was down 8%
compared to the prior comparative period. Both the New Zealand and Australian
economies remained soft during the period, with growth deceleration and
business uncertainty in both countries.
Pressure continues to be seen in low margin synthetic carpets with increasing
competition in a tight market and Cavalier expects this trend to continue.
Cavalier is positioning itself in the higher value end of the woollen
flooring market and, while a smaller part of the market, sales of Cavalier's
premium Bremworth Collection wool carpets continue to grow.
Cavalier has reported a NLAT of $(1.2)m for the six month period (1H19:
$(10.0)m) . No interim dividend has been declared.
Normalised earnings before interest, tax, depreciation and amortisation
(EBITDA) was $3.0m including a $1.0m benefit from the adoption of NZ IFRS 16
for leases (1H19: $4.6m). Normalised EBITDA excludes $0.8m of transformation
costs incurred to 31 December 2019, which are associated with the development
of Cavalier's new business model and strategy. Further transformation costs
are expected in 2H20 as the company moves to reposition itself as a
wool-focused, design-led organisation.
Normalised NLAT, excluding transformation costs, was $(0.6)m (1H19 normalised
NPAT: $1.9m).
Prudent capital management remains a priority and debt has reduced by more
than 70% since FY14, from $58.8m down to $17.7m as at 31 December 2019. The
continuing reduction of debt and strengthening of the balance sheet remains a
priority for the Board.
Inventories have also reduced by $22.1m since FY14, with $44.7m of raw
materials and finished goods on hand as at 31 December 2019. The reduction of
stock levels, particularly of lower value synthetic carpets, remains a focus
for management and proceeds will be used to further reduce debt.
Cavalier is currently developing a new strategy as it moves to become a
wool-focused, design-led business. In the interim, management remain focused
on lifting the performance of the existing business. In particular,
initiatives are focused around building sales through in-store presence,
supply chain improvements, ongoing product development and innovation, and
reducing the cost base.
New Strategy
Cavalier is considered a world leader in the manufacture of quality wool
carpet. The company is planning to leverage this expertise and build on its
heritage to capture the growing consumer demand for more natural, sustainable
and healthier products.
CEO of Cavalier, Paul Alston, said: "We are on the cusp of a societal change,
with consumers becoming increasingly aware of the negative impacts of
plastics, micro-plastics and synthetic products. As a leader in the
manufacture and sale of beautiful, premium wool carpets, Cavalier is well
positioned to meet customer demand for natural, sustainable products.
"For years, manufacturers of synthetic carpets have been marketing their
products by denigrating wool carpets. We believe it is time to dispel the
myths - wool is naturally resilient, hard wearing, fire and stain resistant
and easy to clean. Not only that, it is soft, warm, a great insulator and
100% sustainable.
"We are working closely with New Zealand Merino and other advisers to
finalise our strategy, which will see Cavalier go back to its roots as a
wool-focused, design-led business. We will be building on the strength of our
brand to cement and grow our position in the high value wool and natural
fibre sector and look forward to taking our place alongside other iconic New
Zealand wool brands such as Icebreaker and All Birds. Our opportunity lies
not just in New Zealand, but in other markets around the world."
Cavalier anticipates finalising and launching its new strategy prior to the
start of the FY21 financial year (1 July 2020). The focus will be on five
critical streams - Marketing & Sales, Operations, Inventory, Adjacencies &
Growth Opportunities and Funding.
Chair of Cavalier, Alan Clarke, commented: "The trends being seen in the
flooring sector and the results from Cavalier's existing business, further
reinforce the need for Cavalier to change and develop a new strategy for the
future. The transformation will see Cavalier positioned for growth in today's
world, meeting the growing customer demand for natural, sustainable products.
This change will take patience, investment and time, however, the Board
believes this repositioning of Cavalier back to its heritage of beautifully
designed woollen flooring is the optimal pathway for future growth."
Adoption of NZ IFRS 16 for leases
NZ IFRS 16 is the new accounting standard in relation to the treatment of
leases. It is important to note that the impact of NZ IFRS 16 is non-cash and
is for financial reporting purposes only. NZ IFRS 16 classification has
resulted in an increase of $1.0m in EBITDA and a reduction of $0.2m in profit
due to increased depreciation and interest expense.
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:00348776 For:CAV Type:HALFYR Time:2020-02-21 09:23:47
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