Trading Update - 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 Tax1 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.


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

CAVFY19 Earnings Guidance
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