After completing a major and high-cost restructuring of the yarn and carpet manufacturing arms the company will soon be giving shareholders details of a strategic review aimed at achieving sales growth.
“The consolidation is behind us, the cost-base sorted and now we can focus on the top line,” chief executive Paul Alston said.
Cavalier has reaffirmed expectations of reporting operating earnings (Ebitda) in the $9.6 million to $10m range for the year-ended June 30, when results are released on August 22. That compares with $2.6m a year earlier. The after-tax profit is expected in the $3.7m to $4m range compared with a loss of $1.8m previously.
Alston said a major milestone for the group was reducing borrowings from $40.2m to $29.5m over the trading year, helped by positive cashflows. The level could go lower. The company has renegotiated its banking facility through to January 2020.
The heavy fall in the strong wool price over the last 15 months means the group has now moved through supplies bought earlier at much higher prices, leading to better carpet sales margins.
The wool businesses, Elco Direct, and the scour operations are trading positively.
Cavalier is moving towards long-term, sustainable and profitable growth, he said.
The business has come a long way in the last year. In the 2017 annual report, with the trading loss and negative operating cashflow, the auditors referred to uncertainty about Cavalier meeting its trading forecasts and debt obligations. That followed a difficult several years of trading and, more immediately, the manufacturing consolidation programme taking longer and costing more than expected with an associated impact on sales, especially into Australia.
However, as that was completed and the wool price fell, the outlook soon improved.
The share price has risen to 63c, up 85% on a year ago (34c) and by 54% from the start of this year when it was 41c, according to NZX research data. On a five-year basis it is still down 60% from $1.54 and by 63% over 10-years from $1.70.
Cavalier hasn’t paid a dividend since March 2014.
In April the company said it was going to put its main Cavalier Bremworth brand and top synthetic materials into the custom-made rug market where customers can buy to order. Sales were reasonably slow so far but starting to gain traction, Alston said.
