Cavalier lifts 'normalised' earnings, sales fall

Cavalier weathers global financial crisis, set up for trans-Tasman recovery

By Peter Kerr

Aug. 20 (BusinessDesk) – Cavalier Corp., the only carpet maker on the NZX, has weathered the global financial crisis with a 22% increase in normalised profit to $16.6 million for the year ending June 30, as it reduced interest costs and improved operating efficiencies across its business.

The Auckland-based company said sales fell 11% to $220 million. Net income fell to $11.4 million, reflecting a one-off non-cash adjustment of $5.2 million as a result of changes to tax rules for depreciation of property. The shares climbed about 2% to $2.60.

Cavalier’s managing director Wayne Chung said interest costs fell $2.5 million, and the company’s significantly improved financial position over the past couple of years means it is well placed to weather the continuing difficult trading environment. The company has also spent less on capital projects, which have increased capacity and improved operational efficiencies.

The global downturn resulted in the single largest downturn in the company’s trading history, and the effects are still being felt, Chung said.

The Australian market, which accounted for 54% of Cavalier’s revenue last year, “is recovering even though it still has some way to go to get to those activity levels seen before the global recession,” Chung said. “Residential activity remained reasonably steady for much of the year, but commercial activity, which had been very quiet for the first three quarters of the year, is now showing strong signs of recovery.”

This should benefit both Cavalier’s carpet tile operation and its woolen broadloom carpet business he said.

The New Zealand market continues to experience soft trading condition both residentially and commercially, and neither is expected to improve greatly in the near future. “There is however, a noticeable increase in refurbishment work in the hospitality sector ahead of the 2011 Rugby World Cup, and that is a positive for us,” Chung said.

Because of the continuing economic uncertainty, Chung said it is too early in the financial year to provide earning guidance for 2010/11, but budgets have been drawn up with a 5% increase on the $16.6 million normalised tax-paid earnings for this year.

A fully-imputed final dividend of 11 cents a share, up three cents on last year, has been declared for the year ending June 2010.

(BusinessDesk)

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