Cavalier posts worst ever annual loss amid restructure

Cavalier Corp [NZX: CAV] reported the worst loss in its history as the carpet maker foregoes dividends and sells assets in a bid to restructure its business and return to profitability.

The Auckland-based company posted a loss of $25.7 million, or 37.4 cents per share, in the 12 months ended June 30, from a profit of $5.8 million, or 8.5 cents, the year earlier, it said in a statement. The result, the company's worst since it listed in 1984, includes $24.4 million of asset writedowns and $988,000 of restructuring costs. Revenue gained 7.5 percent to $215.7 million, while costs of sales increased 14 percent to $168.2 million.

Cavalier, whose shares have lost more than half their value the past year, has changed its chief executive and chairman and rejuvenated its board in an attempt to restructure the business and return it back to black. The company is looking at asset sales, job cuts and outsourcing to try and return to profit. It plans to sell its Australian Ontera Modular Carpets unit to release $6.5 million to reduce debt.

"In a challenging economic environment, Cavalier has continued a process of transformation to meet the significant market shifts in recent times that have affected our key businesses," said chief executive Paul Alston. "We are now implementing our plans; the end result will be a tightly focussed and profitable operation."

Cavalier shares increased 8.5 percent to 44.5 cents, having slumped 55 percent the past year.

The company's net debt fell to $53.9 million from $58.8 million a year earlier, while its total equity declined to $66.2 million from $93 million. Cavalier's gearing ratio rose to 81.5 percent from 63.3 percent, and its leverage increased to 44.9 percent from 38.8 percent.

Cavalier's carpets business turned to a loss of $22.5 million from a profit of $8.4 million the year earlier, largely due to its Australian carpet tile business.

"High manufacturing costs have made it difficult to compete in a price-driven market where there has been a large influx of good quality imported alternatives," Alston said.

Revenue from the carpets business increased 6.9 percent to $174.8 million.

While a 9 percent increase in sales volumes in its broadloom carpet unit had boosting revenue, the high New Zealand dollar against the Australian dollar over the past year, increased wool prices and pricing pressure had crimped margins in the business, the company said.

Its wool buying business increased earnings 5.1 percent to $1.5 million, as revenue rose 5.9 percent to $44.8 million.

(BusinessDesk)