Haley van Leeuwen
Cavalier Corporation has reported half-year normalised
profit after tax of $1.01 million, down 76% from a year ago,
but signalled it expects an improvement in the next six months.
The company expects demand for carpet to lift in New Zealand
with increased building activity, helped by Christchurch
rebuilding work and a general uplift in real estate turnover.
The latest normalised after-tax earnings outlook remained in
the $6 million to $10 million range.
For the half-year to December, Cavalier reported earnings
before interest and tax (before restructuring costs) of
$496,000, down 92% on a year ago.
The result included, net of tax, $149,000 of redundancy costs
and a $576,000 write back of over-accrued restructuring costs
from the 2012 financial year.
The company described the results as disappointing but not
Cavalier Corporation has described the first six months of
2012-13 as challenging with the run out of high cost stocks
due to unusually high wool prices from the preceding year
and soft trading conditions. Photo by Beef and Lamp New
It said the first six months of 2012/13 were challenging,
with the run out of high cost stocks due to unusually high wool
prices from the preceding year and soft trading conditions in
New Zealand and Australia.
Group revenue for the six months was $101 million, a decrease
of 6% on the $108 million the previous year.
Return on average shareholders' equity for the six months was
2.2% and earnings per share were 3c (both normalised and
annualised), compared with 8.8% and 12.5c respectively the
It had been a difficult six months for the company's carpet
business which produced a segment result before restructuring
costs of $1 million on revenue of $88 million, compared with
$6.7 million on revenue of $92 million the previous year.
There were signs the economy was picking up in New Zealand,
however sentiment in Australia was ''more worrying'' and the
Australian economy appeared to be slowing down.
Feedback on Cavalier's new synthetic carpet range was
encouraging and it expected sales before the year's end.
There had been ''significant reduction'' in headcount in the
previous 12 months and the business had been reorganised to
operate more efficiently. The reduced costs would flow
through into future earnings.
Directors were not recommending an interim dividend payment,
saying that while the company was in a much better financial
position with ''considerably less'' interest-bearing debt,
there needed to be a lift in earnings to justify payment of a
However, if earnings improved as forecast and the outlook
remained positive, directors expected to declare a dividend
with the announcement of the full-year results in August,
subject to capital requirements and the cost of any further
In terms of market demand, Forsyth Barr investment adviser
Haley van Leeuwen said it was interesting New Zealand
customers seemed to be moving away from traditional woollen
carpets in favour of new synthetic carpet products, whereas
the Australians were ''moving in the opposite direction''.
Currency still represented a major risk for the company, with
the Australian market being a major export market.
Every 1c movement in the AUD/NZD exchange rate was estimated
to affect Cavalier's pre-tax profit by about $700,000.