Earnings Guidance - April 2012

20 April 2012

Market conditions for our carpet businesses remain very soft on both sides of the Tasman, with both volumes and margins under pressure. Broadloom carpet margins are particularly weak, as we are having to absorb the high wool prices of recent times. Our wool scouring and wool buying businesses are performing satisfactorily and returning profits at or close to budgeted levels.

Underlying earnings for the current year ending 30 June are likely to be in the range of $3 to 5 million after tax.

In response, the Company has developed a comprehensive business improvement plan. The implementation of this plan means the Company has incurred, and continues to incur, substantial one-off costs as it repositions the broadloom carpet businesses to cope with this difficult operating environment. The impact of the one-off costs, both cash and non-cash, on the current year's result is difficult to project because of uncertainties as to timing. However, if the estimated cost of all contemplated initiatives were taken into the current year, they would have the effect of reducing underlying earnings for the year to a loss of $1 to 3 million after tax.

The effect of these initiatives, some of which are well underway, will be to reduce operating costs significantly. In addition, we are anticipating gains from lowering wool prices, which have recently corrected. A preliminary look at the 2013 year indicates that with the benefit of the above, and with a modest improvement in market conditions, we will be looking at a tax-paid profit in the range of $10 to 12 million.

There will be no dividend in the current year. Based on current projections, the Company intends to recommence dividend payments in 2013.

Colin McKenzie,
Managing Director and CEO