New Zealand and Australian carpet markets were softer in the year ended June 30 but favourable wool prices helped the group to an impressive profit turnaround, achieving an after-tax profit of $4.1 million, compared to a $2.1m loss a year earlier.
After completing its restructuring in 2017 Cavalier’s streamlined operations allowed it to boost operating cashflows and reduce borrowings, both by significant amounts.
Cashflows were $12.1m from an outflow of $5.4m and that helped reduce borrowings to $29.4m at balance date from $40.2m previously.
Further improvement is expected this year and the group is very focused on lifting volumes and revenues and achieving sustainable and profitable growth, chief executive Paul Alston said.
Dividends to shareholders are still being held back while that is achieved.
Cavalier is increasing focus on higher-end, high-margin products for sale mainly in NZ and Australia but will also consider large-population markets with high socio-economic consumers wanting the best of the best in their homes.
Though there had been a move from wool to synthetics there is now increasing demand for environmentally sustainable products and the virtues of wool are becoming more widely known.
Wool will increasingly be a focus for Cavalier and the company is well placed.
Chairman Alan Clarke said it is an exciting time for Cavalier with its strong operational platform, new sales strategy and rising demand for high-end products.
Carpet sales for the year were $123.7m, down from $131.6m. As well as softer sales there had also been a short-term impact on supply to Australia as a result of the consolidation programme. The segment profit was $7.1m compared to a loss of $4.47m after restructuring costs a year earlier.
Revenue for the wool acquisition business was $27.4m, down from $29m, and the segment profit was $1.29m, up from $430,000.
Cavalier reported total assets of $133m at balance date, with shareholders’ funds of $72.2m. The company’s 27.5% stake in scouring company Cavalier Wool Holdings is valued at $24.5m.
