Half year result to Dec 2011

17 February 2012

The Directors of Cavalier Corporation report an unaudited profit after tax for the six months to 31 December 2011 of $3.5 million, a decrease of 58% on the $8.5 million the previous year. This result includes $0.7 million of restructuring costs, net of tax, but otherwise reflects the very difficult and challenging conditions that the Group has been encountering in both the New Zealand and Australian markets in which it participates.

Group revenue for the six months was $108 million, a decrease of 7% on the $117 million the previous year, with New Zealand-based revenue unchanged on the previous year, but Australian-based revenue down a significant 14% on the previous year.

Return on average shareholders' equity for the six months was 7.3% and earnings per share was 10.4 cents (both annualised) - compared with 18.5% and 25.1 cents respectively the previous year - as a result of the disappointing financial performance.

Earnings Outlook

Unfortunately, we do not see any immediate relief from the current very soft market conditions for our carpet business.

For the second half of the year, we expect to see market conditions remain similar to those experienced in the first half. This is against our earlier predictions in November last year when we were expecting an improvement in market conditions.

As a result, the earnings guidance range that was provided in November last year of $8.5 million to $10.5 million tax-paid is now no longer attainable.

Given these difficult and unpredictable trading conditions, it is also not possible to provide shareholders with a full year earnings guidance update at this stage.

Naturally, the Directors are very disappointed with this situation, but wish to take this opportunity to assure shareholders that the management team is doing everything it can under these very trying conditions to optimise performance.

Given the disappointing results for the first half and the short term earnings outlook, the Directors have decided not to pay any interim dividend for the current 2011/12 financial year.

This will come as a disappointment to shareholders, but the Directors believe that it is important that we focus on strengthening the Group's financial position and reducing debt during these challenging times.

The Directors will review the dividend position again at the end of the year when we ought to have a better feel for the trading conditions and the earnings outlook further out.

 Wayne Chung
 Managing Director