Preliminary announcement of December 2017 half year results

MARKET RELEASE
15 February 2018
Cavalier Reports Improved Half Year Result
New Zealand carpet manufacturer Cavalier Corporation Limited (NZX: CAV) has today reported an
improved half year result, with a lift in profit as expected following the consolidation programme
undertaken in the previous year.
Profitability improved markedly during the first half period, reflecting better margins, reduced costs
and a more efficient manufacturing operation.
For the six months ended 31 December 2017, Earnings Before Interest Tax and Depreciation (EBITD)
was $4.4 million (HY17: $2.0m loss) with a Net Profit After Tax (NPAT) of $1.0 million (HY17: NIL).
Normalised NPAT for HY18 was $1.15 million after adding back a $0.15 million non-cash charge for
restructuring costs. This compares to the previous first half year normalised NLAT of $(1.9) million
which excluded net abnormal gains of $1.9 million, including a $3.8 million non-cash valuation gain
made on Cavalier’s interest in the Cavalier Wool Holdings (CWH) scouring joint venture investment.
Revenue for the period was $75.3 million (HY17: $84.3m) reflecting reduced carpet sales in the first
half due to market conditions and supply challenges that arose from the manufacturing
rationalisation, and a materially lower wool price which impacted the revenues of Cavalier’s wool
buying business, Elco Direct.
Residual manufacturing costs continued into the first six months of FY18 but will not repeat in the
second half of the current financial year.
Cavalier Corporation CEO Paul Alston said the company’s improved performance reflects the
significantly reduced cost base. The result was also partially assisted by more favourable external
macro-economic factors.
“We are now seeing early benefits from the activity undertaken in the last year. In FY17 we
undertook extensive manufacturing plant closures and relocations. However, this cost us more than
we had planned with the expected gains taking longer to be realised.”
“While we still have some way to go to reach optimum manufacturing performance, particularly in
Napier, we are making good progress with effective cost controls in place and increased
manufacturing throughput at our felting plant in Wanganui and tufting plant in Auckland.”
“The significantly lower wool price we saw last year is now starting to flow through to our raw
material costs and the result is improved manufacturing margins. Along with strong cash flow
management, this has allowed us to reduce our bank debt position by $7 million to $33 million. We
have also reduced our yarn and carpet stock holding by almost $5 million.”
“We are now working on initiatives with our retail partners to regain their confidence in our ability
to supply them with the carpet they specify, on time and with the same recognised and awarded
Cavalier Bremworth manufacturing excellence. Pleasingly, we are seeing good demand and a
sustained lift in our high end, high margin Cavalier Bremworth woollen products – something we
want to continue to build on.”

“We’ve spent the last eighteen months making tough decisions to right size and reset the company’s
manufacturing base. We are listening carefully to our retail partners and customers and we now
have a clear path forward as a quality focussed carpet manufacturer. With this, we see a return to
sustainable and profitable growth, and while there is still a great deal to do, we expect to see
ongoing improvements into the second half.”
Board Succession
As the Company moves forward into the next stage of implementing its transformation strategy, the
directors are pleased to announce that Alan Clarke will become Chairman of the Board on 1 April
2018. Sarah Haydon, Chairman since 2015, and a director since 2012, will take over the role of
Chairman of the Audit Committee on that date.

ENDS
For further information please contact:
Paul Alston
Chief Executive Officer
palston@cavbrem.co.nz
+64 21 918 033
+64 9 277 1135

---

CAVALIER CORPORATION LIMITED


HALF YEAR REPORT

for the six months ended 31 December 2017

CONTENTS



Financial Summary 1

Condensed Consolidated Income Statement 2

Condensed Consolidated Statement of Comprehensive Income 3

Condensed Consolidated Statement of Changes in Equity 4

Condensed Consolidated Statement of Financial Position 6

Condensed Consolidated Statement of Cash Flows 7

Notes to the Financial Statements 9

Disclosure of Non-GAAP Financial Information 15

Corporate Directory 18

1

Cavalier Corporation Limited and subsidiary companies

Financial Summary - for the six months ended 31 December 2017 (Unaudited)


Unaudited
Six months
ended
31 Dec 2017
Unaudited
Six months
ended
31 Dec 2016
Audited
Year
ended
30 Jun 2017
$000 $000 $000

Revenue $75,316 $84,278 $156,120

EBITDA (normalised)
1
4,418 497 2,572

Depreciation (1,806) (1,680) (3,251)

EBIT (normalised)
1
2,612 (1,183) (679)

Net interest expense (1,504) (1,489) (2,936)

Share of profit after tax of equity-accounted investee
(normalised)
1


381

88

797

Profit/(Loss) before tax (normalised)
1
1,489 (2,584) (2,818)

Tax (expense)/credit (341) 708 962

Profit/(Loss) after tax (normalised)
1
1,148 (1,876) (1,856)

Abnormal net gains/(losses) after tax
1
(140) 1,907 (268)

Profit/(Loss) after tax (GAAP) $1,008 $31 $(2,124)

Net cash flow from operating activities $7,542 $(4,789) $(5,373)

Basic and diluted earnings per share (cents) –
based on weighted average number of shares
outstanding of 68,679,098

Normalised
1
1.7 (2.7) (2.7)
GAAP 1.5 - (3.1)

Return on average shareholders’ equity (%)
Normalised
1
1.7% (2.7%) (2.7%)
GAAP 1.5% - (3.1%)

Unaudited
As at
31 Dec 2017
Unaudited
As at
31 Dec 2016
Audited
As at
30 Jun 2017

Net tangible asset backing per share ($) $0.97 $0.98 $0.95


Equity to total assets (%) 53.1% 49.5% 48.9%


Net interest-bearing debt to equity ratio 33:67 38:62 37:63






1
Normalised is a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be a more
meaningful view of the underlying financial performance of the Group. A reconciliation between GAAP and normalised earnings together with
further commentary on the disclosure of non-GAAP financial information are set out at pages 15 to 17 of the half year report.

2

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Income Statement


Six months ended 31 December 2017 (Unaudited)

Notes Unaudited
Six months
ended
31 Dec 2017
Unaudited
Six months
ended
31 Dec 2016
$000 $000


Revenue 6 75,316 84,278
Cost of sales (57,914) (67,951)

Gross profit 17,402 16,327

Other income and gains 7 76 16
Distribution expenses (11,806) (13,978)
Administration expenses (3,060) (3,547)
Restructuring costs - (3,989)
Reversal of impairment of fixed assets - 1,442

Results from operating activities 2,612 (3,729)

Net finance costs (1,504) (1,489)

Share of profit of equity-accounted investees (net of tax) 5 241 65
Gain on merger and dilution of equity-accounted investee 5 - 3,763

Profit/(Loss) before tax 8 1,349 (1,390)

Tax (expense)/credit (341) 1,421

Profit after tax for the period $1,008 $31

Profit after tax attributable to:
Shareholders of Cavalier Corporation Limited 1,008 31
Non-controlling interests - -

Profit after tax for the period $1,008 $31

Basic and diluted earnings per share (cents) 1.5 -

Weighted average number of shares outstanding during
the period (000s)



68,679

68,679

















This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial
statements.

3

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Comprehensive Income


Six months ended 31 December 2017 (Unaudited)

Note Unaudited
Six months
ended
31 Dec 2017
Unaudited
Six months
ended
31 Dec 2016
$000 $000


Profit after tax for the period 1,008 31

Other comprehensive income that may be reclassified
subsequently to profit or loss

Effective portion of changes in fair value of cash flow hedges 45 846
Net change in fair value of cash flow hedges transferred to profit
or loss



65

121
Tax on other comprehensive income (31) (271)
Share of fair value of cash flow hedges (net of tax) of equity-
accounted investee

5

(24)

(82)
Foreign currency translation differences for foreign operations 116 (27)
171 587

Other comprehensive income not reclassified subsequently
to profit or loss

-

-

Other comprehensive income for the period, net of tax 171 587

Total comprehensive income for the period $1,179 $618

Total comprehensive income attributable to:
Shareholders of Cavalier Corporation Limited 1,179 618
Non-controlling interests - -

Total comprehensive income for the period $1,179 $618

























This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial
statements.

4

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Changes in Equity


Six months ended 31 December 2017 (Unaudited) Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
$000 $000 $000 $000 $000


Total equity at beginning of the period 21,846 (322) (1,419) 47,785 67,890

Total comprehensive income for the period

Profit after tax - - - 1,008 1,008

Other comprehensive income that may be reclassified
subsequently to profit or loss

Changes in fair value of cash flow hedges (net of tax) - 79 - - 79
Share of fair value of cash flow hedges (net of tax) of equity-
accounted investee



-

(24)

-

-

(24)
Foreign currency translation differences for foreign operations - - 116 - 116

- 55 116 - 171

Other comprehensive income not reclassified subsequently to
profit or loss



-

-

-

-

-

Total other comprehensive income - 55 116 - 171

Total comprehensive income for the period - 55 116 1,008 1,179

Total equity at end of the period $21,846 $(267) $(1,303) $48,793 $69,069




This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial statements.

5

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Changes in Equity (continued)


Six months ended 31 December 2016 (Unaudited) Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
$000 $000 $000 $000 $000


Total equity at beginning of the period 21,846 (969) (1,425) 49,909 69,361

Total comprehensive income for the period

Profit after tax - - - 31 31

Other comprehensive income that may be reclassified
subsequently to profit or loss

Changes in fair value of cash flow hedges (net of tax) - 696 - - 696
Share of fair value of cash flow hedges (net of tax) of equity-
accounted investee



-

(82)

-

-

(82)
Foreign currency translation differences for foreign operations - - (27) - (27)

- 614 (27) - 587

Other comprehensive income not reclassified subsequently to
profit or loss



-

-

-

-

-

Total other comprehensive income - 614 (27) - 587

Total comprehensive income for the period - 614 (27) 31 618

Total equity at end of the period $21,846 $(355) $(1,452) $49,940 $69,979




This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial statements.

6

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Financial Position


As at 31 December 2017 (Unaudited)
Note Unaudited
31 Dec 2017
Audited
30 Jun 2017
$000 $000

ASSETS

Property, plant and equipment 35,963 37,123
Intangible assets 2,362 2,362
Investment in equity-accounted investees 5 23,707 23,490
Deferred tax asset 5,426 5,532

Total non-current assets 67,458 68,507

Cash and cash equivalents 843 1,255
Trade receivables, other receivables and prepayments 15,226 17,261
Inventories 45,970 50,635
Derivative financial instruments 457 898
Tax receivable - 301

Total current assets 62,496 70,350

Total assets $129,954 $138,857

EQUITY

Share capital 21,846 21,846
Cash flow hedging reserve (267) (322)
Foreign currency translation reserve (1,303) (1,419)
Retained earnings 48,793 47,785

Total equity attributable to equity holders of the Company 69,069 67,890

LIABILITIES

Loans and borrowings 33,600 35,000
Employee benefits 1,209 1,097
Deferred income 31 18
Provisions 2,274 2,613

Total non-current liabilities 37,114 38,728

Loans and borrowings 500 6,500
Trade creditors and accruals 16,888 18,855
Provisions 1,414 1,693
Employee entitlements 3,736 3,832
Deferred income 31 67
Derivative financial instruments 867 1,292
Tax payable 335 -

Total current liabilities 23,771 32,239

Total liabilities 60,885 70,967

Total equity and liabilities $129,954 $138,857






This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial
statements.

7

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows


Six months ended 31 December 2017 (Unaudited)

Unaudited
Six months
ended
31 Dec 2017
Unaudited
Six months
ended
31 Dec 2016
$000 $000

CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 76,960 86,336
Cash paid to suppliers and employees (69,136) (87,590)
Dividends received 1 1
Other receipts 2 12
GST refunded 850 376
Interest paid (1,503) (1,442)
Income tax refunded/(paid) 368 (2,482)

Net cash flow from operating activities 7,542 (4,789)


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 148 56
Acquisition of property, plant and equipment (721) (1,176)

Net cash flow from investing activities (573) (1,120)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(Decrease) in bank loans and borrowings (7,400) 5,350

Net cash flow from financing activities (7,400) 5,350


NET DECREASE IN CASH AND CASH EQUIVALENTS (431) (559)

Cash and cash equivalents at beginning of the period 1,255 1,200

Effect of exchange rate changes on cash 19 48

CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD



$843

$689



















This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial
statements.

8

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows (continued)


Reconciliation of profit with net cash flow from operating activities

Six months ended 31 December 2017 (Unaudited)

Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000



Profit after tax for the period 1,008
31



Add/(Deduct) non-cash and other items:

Depreciation
1,806
1,680
Share of profit of equity-accounted investee
(241)
(65)
Gain on merger and dilution of equity-accounted investee
-
(3,763)
Reversal of impairment of fixed assets
-
(1,442)
Deferred tax asset
75
989
Employee benefits
112
24
Deferred income
13
(29)
Provisions
(618)
(2,212)
Net gain on sale of property, plant and equipment
(73)
(3)
Net gain on foreign currency balance
(19)
(45)



Changes in working capital items:

Trade and other receivables and prepayments
2,039
2,460
Inventories
4,665
8,529
Tax receivable/payable
634
(4,892)
Trade creditors and accruals
(1,985)
(6,061)
Derivative financial instruments
126
10



Net cash flow from operating activities $7,542
$(4,789)


























This statement is to be read in conjunction with the Notes on pages 9 to 14 and the previous year’s annual financial
statements.

9

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements
For the six months ended 31 December 2017

1. General

Cavalier Corporation Limited (“Cavalier” or “the Company”) is a limited liability company that is domiciled
and incorporated in New Zealand.

The financial statements presented are for Cavalier and its subsidiaries (“the Group”) and the Group’s
investment in equity-accounted investees as at, and for the six months ended, 31 December 2017.

The Company is registered under the Companies Act 1993 and is an FMC reporting entity (by virtue of it
being a listed issuer) for the purposes of the Financial Reporting Act 2013 and the Financial Markets
Conduct Act 2013. The financial statements have been prepared in accordance with these Acts.

The principal activities of the Group comprise carpet sales and manufacturing and wool procurement.

All Group subsidiaries are wholly-owned.

The Group also has a 27.5% interest in commission woolscourer, Cavalier Wool Holdings Limited, and a
50% interest in asset-owning entity, CWS Assets Limited.

The Company is listed on the New Zealand Exchange and is required to comply with the provisions of the
NZX Main Board Listing Rules which require it to present half-yearly reports incorporating, amongst other
things, the interim financial statements covering the Group.

The interim financial statements contained in this half-yearly report were approved for issue by the Board of
Directors of the Company on 15 February 2018.

These interim financial statements are presented in New Zealand dollars ($), which is the Company’s
functional currency. Unless otherwise indicated, all financial information presented in New Zealand dollars
has been rounded to the nearest thousand.

The interim financial statements are condensed financial statements that have been prepared in
accordance with NZ IAS 34 Interim Financial Reporting. The disclosures normally required by other
standards within New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) to be
included in a complete set of annual financial statements are not required to be incorporated into a
condensed set of interim financial statements prepared under NZ IAS 34. As a consequence, the interim
financial statements do not comply with NZ IFRS.

The interim financial statements, and the comparative information for the six months ended 31 December
2016, are unaudited. The comparative information as at 30 June 2017 is audited.

2. Accounting policies

The accounting policies adopted in the preparation of the interim financial statements are consistent with
those adopted in the preparation of the annual financial statements for the year ended 30 June 2017. The
interim financial statements should therefore be read in conjunction with those annual financial statements
and the accounting policies set out therein.

10

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

3. Going concern

The Group prepares its financial statements on a going concern basis and expects to be able to realise its
assets and meet its financial obligations in the normal course of business.

The Group’s ability to comply with the Bank’s financial covenants and generate sufficient cash flows from
operations to satisfy its funding and other financial obligations for a period of at least 12 months following
balance date is important to determining the appropriateness of the going concern basis of accounting.

In this regard, reliance is placed on the forecasts of the Group’s financial performance, cash flows and
financial position that are prepared by management as part of its monitoring of the Group’s operations and
the Group’s ability to comply with, among other things, the Bank’s financial covenants and debt repayment
obligations over the term of its Bank facility.

As discussed in the Group’s annual financial statements for the year ended 30 June 2017, these financial
forecasts are particularly sensitive to changes in some of the assumptions underlying the forecasts –
including sales volumes and margins, manufacturing performances, cost-reduction initiatives and a number
of external factors over which the Group has limited control over, such as exchange rates and raw material
input costs.

However, the Directors note the progress that has been made since August 2017 when they authorised the
issue of the Group’s annual financial statements for the year ended 30 June 2017.

In particular, the Group has – in the six months to 31 December 2017 – not only returned to profitability and
reduced inventory but also generated positive cash flows from operations to allow it to reduce net bank
loans and borrowings by $7 million. As a consequence, it is now in a stronger financial postion.

The Directors also note the initiatives, and the disciplines, in place to further reduce cost, inventory and
bank loans and borrowings and to return the Group to a sound financial footing.

The Directors consider the Group to be a going concern and and believe that the Group will be able to
meet its contractual obligations as these fall due and to renegotiate its funding facilities with the Bank
before it next comes up for renewal.

11

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

4. Segment performance

Unaudited Carpets Wool Acquisition Total

Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016
$000 $000 $000 $000 $000 $000
External revenue 65,959 71,238 9,357 13,040 75,316 84,278
Inter-segment revenue - - 1,482 2,530 1,482 2,530
Total revenue $65,959 $71,238 $10,839 $15,570 76,798 86,808

Elimination of inter-segment revenue (1,482) (2,530)
Consolidated revenue $75,316 $84,278

Segment result before depreciation,
restructuring costs and reversal of
impairment of fixed assets


4,789


954


581


344


5,370


1,298
Depreciation (1,750) (1,620) (56) (60) (1,806) (1,680)
Segment result before
restructuring costs and reversal of
impairment of fixed assets


3,039


(666)


525


284


3,564


(382)
Restructuring costs - (3,989) - - - (3,989)
Reversal of impairment of fixed assets - 1,442 - - - 1,442
Segment result after restructuring
costs and reversal of impairment of
fixed assets


3,039


(3,213)


525


284


3,564


(2,929)

Elimination of inter-segment profits (52) -
Unallocated corporate costs (900) (800)
Results from operating activities 2,612 (3,729)

Net finance costs (1,504) (1,489)

Share of profit of equity-accounted
investee (net of tax)

241

65
Gain on merger and dilution of equity-
accounted investee

-

3,763
Profit/(Loss) before tax 1,349 (1,390)

Tax (expense)/credit (341) 1,421
Profit after tax for the period $1,008 $31

Employee numbers
Operations 437 480 26 29 463 509
Unallocated 5 4
Total 468 513

Capital expenditure 528 1,052 193 124 $721 $1,176


Carpets Wool Acquisition Total

Unaudited
As at
31 Dec 2017
Audited
As at
30 Jun 2017
Unaudited
As at
31 Dec 2017
Audited
As at
30 Jun 2017
Unaudited
As at
31 Dec 2017
Audited
As at
30 Jun 2017
$000 $000 $000 $000 $000 $000
Reportable segment assets 102,128 113,134 4,119 2,233 106,247 115,367
Investment in equity-accounted
investees

23,707

23,490
Total assets $129,954 $138,857

Reportable segment liabilities 24,349 28,149 2,436 1,318 26,785 29,467
Unallocated liabilities 34,100 41,500
Total liabilities $60,885 $70,967

12

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

4. Segment performance (continued)




The Group’s reportable segments are:
 carpets, which comprises the sales and manufacturing of carpets; and
 wool acquisition.




Inter-segment transactions






All inter-segmental sales are at market prices. Inter-segmental sales during the period and
intercompany profits on stocks at balance date are eliminated on consolidation.




Information about geographical areas






In presenting information on the basis of geographical areas, revenue is based on the
geographical location of customers and non-current assets are based on the geographical
location of those assets.




Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000

Revenue



New Zealand
41,399
47,138
Australia
30,442
32,392
Rest of the world
3,475
4,748




$75,316
$84,278




As at
31 Dec 2017
As at
30 Jun 2017

$000 $000

Non-current assets



New Zealand
66,608
65,946
Australia
850
2,561




$67,458
$68,507




Information about major customers







None of the Group’s customers are major customers as defined in NZ IFRS 8 Operating
Segments. Major customers are those external customers where revenues from
transactions with the Group are equal to, or exceed, 10% of the Group’s total revenues.

13

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

5. Equity-accounted investees




The details relating to the Group’s interest in equity-accounted investees (being 27.5%-owned Cavalier
Wool Holdings Limited and 50%-owned CWS Assets Limited (CWSA)) are set out below:




Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000
Carrying value as at 1 July
23,490
23,175
Share of profit after tax
241
65
Share of changes in fair value of cash flow
hedges (net of tax)


(24)

(82)
Dividends received
-
(3,250)
Dividend in specie received
-
(1,700)
Carrying value of CWSA
-
1,700
Gain on merger and dilution
-
3,763
Carry value as at 31 December
$23,707
$23,671




6. Revenue


Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000
Sales of goods
75,251
84,132
Provision of installation services
65
146
Total revenue
$75,316
$84,278




7. Other income and gains


Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000
Rentals received
2
12
Dividends received
1
1
Net gain on sale of property, plant and equipment
73
3
Total other income and gains
$76
$16

14

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)




8. Expenses


Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2016

$000 $000

Profit/(Loss) before tax includes the following:




Depreciation
$1,806
$1,680
Operating lease and rental costs
$1,792
$1,916

9. Capital expenditure commitments


As at
31 Dec 2017
As at
30 Jun 2017

$000 $000
Capital expenditure commitments
-
$188

10. Contingent liabilities


As at
31 Dec 2017
As at
30 Jun 2017
Bank guarantees in respect of operating leases
and other commitments



$1,224

$1,347

11. Related party transactions





Equity-accounted investee
Cavalier Wool Holdings Limited (CWH), the Group’s equity-accounted investee, provides the
Group’s carpet operations with wool scouring services, whether directly or through wool
exporters from whom the Group purchases most of its wool.

The value of services contracted directly with CWH during the six months ended 31 December
2017 was $175,000 (six months ended 31 December 2016 $249,000).

No dividends were declared by, and received from, CWH during the six months ended 31
December 2017 (six months ended 31 December 2016 – refer to Note 5).

15

Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information
For the six months ended 31 December 2017


The half year report for the six months ended 31 December 2017 contains financial information that is non-GAAP
(Generally Accepted Accounting Practice) and therefore falls within the Financial Markets Authority’s guidance note
on “Disclosing non-GAAP financial information” issued in September 2012.

Non-GAAP financial information has been prepared using the unaudited GAAP-compliant half year and audited
GAAP-compliant full year financial statements of the Group.

Non-GAAP financial information contained within the half year report (more particularly, the non-GAAP measures
of financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before tax (normalised)” and
“Profit after tax (normalised)” provide useful information to investors regarding the performance of the Group
because the calculations exclude restructuring costs and other gains/losses (for example, gain on sale of property)
that are not expected to occur on a regular basis either by virtue of quantum or nature.

In arriving at this view, the Directors have also taken cognisance of the regular requests by users of the Group
financial statements, including analysts and shareholders, regarding the nature and quantum of significant items
within the GAAP-compliant results and the way analysts distinguish between GAAP and non-GAAP measures of
profit.

The disclosure of the non-GAAP financial information is also consistent with how the financial information for the
Group is reported internally, and reviewed by the Chief Executive Officer as its chief operating decision maker, and
provides what the Directors and management believe gives a more meaningful insight into the underlying financial
performance of the Group and a better understanding of how the Group is tracking after taking into account these
significant items.

In putting together the half year report, the Directors have taken into account all of the requirements within the
guidance note. More specifically, these include:

 outlining why non-GAAP financial information is useful;
 ensuring that:
- no undue prominence, emphasis or authority is given to any non-GAAP financial information;
- non-GAAP financial information is appropriately labelled;
- the calculation of non-GAAP financial information is clearly explained; and
- a reconciliation between non-GAAP and GAAP financial information is provided (see below);
 applying a consistent approach from period to period and ensuring that comparatives are similarly adjusted
for consistency;
 ensuring that non-GAAP financial information is unbiased and taking care when describing, or referring to,
items as ‘one-off’ or ‘non-recurring’; and
 identifying the source of non-GAAP financial information

16

Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


Reconciliation of GAAP-compliant to non GAAP-compliant measures of profit/(loss) after tax

Six months ended 31 Dec 2017

GAAP Adjustments Normalised
$000 $000 $000

Revenue $75,316 - $75,316

EBITDA 4,418 - 4,418

Depreciation (1,806) - (1,806)

EBIT

2,612 - 2,612

Net interest expense (1,504) - (1,504)

Share of profit after tax of equity-accounted investee 241 140 381

Profit before tax 1,349 140 1,489

Tax expense (341) - (341)

Profit after tax $1,008 140 1,148

Abnormal net loss after tax (140) (140)

Profit after tax (GAAP) - $1,008

Analysis of adjustments

Profit/(Loss)
before tax
Tax effect Profit/(Loss)
after tax
$000 $000 $000
Scour restructuring costs (140) - (140)
$(140) - $(140)

17

Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


Reconciliation of GAAP-compliant to non GAAP-compliant measures of profit/(loss) after tax (continued)


Six months ended 31 Dec 2016

GAAP Adjustments Normalised
$000 $000 $000

Revenue $84,278 - $84,278

EBITDA (2,049) 2,546 497

Depreciation (1,680) - (1,680)

EBIT

(3,729) 2,546 (1,183)

Net interest expense (1,489) - (1,489)

Share of profit after tax of equity-accounted investee 65 23 88
Gain on merger and dilution of equity-accounted investee 3,763 (3,763) -

Loss before tax (1,390) (1,194) (2,584)

Tax credit 1,421 (713) 708

Profit/(Loss) after tax $31 (1,907) (1,876)

Abnormal net gains after tax 1,907 1,907

Profit after tax (GAAP) - $31

Analysis of adjustments

Profit/(Loss)
before tax
Tax effect Profit/(Loss)
after tax
$000 $000 $000
Restructuring costs (3,988) 1,117 (2,871)
Reversal of impairment of fixed assets 1,442 (404) 1,038
Scour merger costs (23) - (23)
Gain on merger and dilution of equity-accounted investee 3,763 - 3,763
$1,194 $713 $1,907

18

Cavalier Corporation Limited

Corporate Directory


Board of Directors:
Grant Biel B.E. (Mech.) Member of Audit, Remuneration and Nomination
Non-independent Committees

Alan Clarke B.Sc.(Hons), MBA, CFInstD Deputy Chairman of the Board of Directors
Independent Chairman of Remuneration Committee
Member of Audit and Nomination Committees

Sarah Haydon B.Sc., FCA, CMInstD Chairman of the Board of Directors
Independent Chairman of Nomination Committee
Member of Audit and Remuneration Committees

Dianne McAteer B.Com., MBA, CMInstD Member of Audit, Remuneration and Nomination
Independent Committees

John Rae B.Com., LLB, CMInstD Chairman of Audit Committee
Independent Member of Remuneration and Nomination Committees

Chief Executive Officer:
Paul Alston BBS, CA

Chief Financial Officer and Company Secretary:
Victor Tan CA, FCIS

Founding Shareholder:
The late Anthony Charles Timpson ONZM

Registered Office:
7 Grayson Avenue, Auckland 2014, P O Box 97-040, Auckland 2241.
Telephone: 64-9-277 6000, Facsimile: 64-9-279 4756

Share Registrar:
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Auckland 0622, Private Bag 92-119, Auckland 1142.
Telephone: 64-9-488 8700, Facsimile: 64-9-488 8787, Investor Enquiries: 64-9-488 8777

Auditors:
KPMG

Legal Advisors:
Russell McVeagh

Bankers:
Bank of New Zealand National Australia Bank Limited

Websites:
Corporate www.cavcorp.co.nz

Carpet Operation www.cavbrem.co.nz, www.cavbrem.com.au,
www.normanellison.co.nz, www.normanellison.com.au
www.radfordyarn.com

Wool Operation www.elcodirect.co.nz

Share Registrar www.computershare.co.nz/investorcentre