Preliminary FY19 Half Year Result

Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 28 January 2019

NOTE: This form is required by Rule 3.5.1 and paragraph 1 of Appendix 2 of the NZX Listing Rules dated 1 January
2019. It must be completed by an Issuer and released through MAP no later than 60 days after the end of each
financial year or half year.

 A Results Announcement for a full financial year may be made before or together with the release of an
annual report.
 If an Issuer is required to consolidate the financial results of another listed issuer, it may make its Results
Announcement up to 5 Business Days after the earlier of the release of the other Listed Issuer’s Results
Announcement and the timeframe above.

This form must be attributed to an authorised representative of the Issuer. All cash amounts must be expressed to 6
decimal places. Cash amounts should be expressed in one of the following currencies: NZD, AUD, CAD, EUR, GBP,
or USD. Issuers may delete this instructional block when using this template to create their announcements.


Results for announcement to the market
Name of issuer Cavalier Corporation Limited
Reporting Period 6 months to 31 December 2018
Previous Reporting Period 6 months to 31 December 2017

Amount (000s) Percentage change
Revenue from ordinary
activities
$69.996 (7.1%)
Profit (loss) from ordinary
activities after tax attributable
to security holder
$1,931 68.2%
Net profit (loss) attributable
to security holders
$(10,033) -%
Interim/Final Dividend
Amount per Quoted Equity
Security
No dividend payable
Imputed amount per sec
Quoted Equity Security
Not applicable
Record Date Not applicable
Dividend Payment Date Not applicable
Net tangible assets per
Quoted Equity Security
$0.81 $0.89
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Including the non-cash write down of $12.0m on Cavalier’s
carrying value of its 27.5% in Cavalier Wool Holdings (CWH),
following the sale at the end of September 2018, the company
reported a net loss after tax of $10.0m.
Excluding the non-cash write down, Cavalier delivered a 68%
increase in normalised net profit after tax to $1.9m (HY18:
$1.1m). This included a non-cash contribution from the
investment in CWH for three months prior to its sale.

Authority for this announcement
Name of person authorised
to make this announcement
Victor Tan
Contact phone number +64 27 668 8963
Contact email address vtan@cavbrem.co.nz
Date of release through MAP 22 February 2019

Unaudited financial statements accompany this announcement.

---

MARKET RELEASE
22 February 2019

CAVALIER DELIVERS HALF YEAR RESULT AT TOP END OF GUIDANCE AND
NOTES SECOND HALF SOFTNESS
For the six months to 31 December 2018

$Millions HY19 HY18 Variance HY19 Guidance
Revenue 70.0 75.3 (7%) Revenue down 7%
EBITDA 4.6 4.4 5% 4.2 to 4.7
NPAT (10.0) 1.0 (9.8) to (10.2)
Normalised NPAT
1
1.9 1.1 68% 1.6 to 2.0
Net Debt 17.3 33.3 (48%)

New Zealand carpet company, Cavalier Corporation Limited (NZX: CAV), has delivered a half year
result at the top end of its guidance as it benefits from a more efficient organisational structure and
a strategic focus on high quality, higher margin wool carpets and notes that the first two months of
the second half have seen decreasing demand and softer carpet sales, especially in Australia.

As foreshadowed in the guidance, revenue was down 7% on the prior year as softer market
conditions impacted on sales, particularly of lower margin synthetic carpets and as an increasing
emphasis was placed on marketing high end woollen carpets. Pleasingly, demand for Cavalier’s high-
end wool carpets is up year on year, with the company reporting one of its highest sales months yet
for its high end felted carpets, while lower margin synthetic sales decreased in line with Cavalier’s
new strategic focus.
Despite lower revenue, EBITDA was up 5% on the prior comparative half year (HY18) to $4.6m.
Higher carpet earnings were offset by reduced earnings from the wool buying business, Elco Direct.
Wool prices are being driven down due to decreased Chinese demand for coarser carpet wool and
while this is benefitting the carpet business’ cost of sales, it is impacting on sales and margins for
Cavalier’s wool buying business.
Including the non-cash write down of $12.0m on Cavalier’s carrying value of its 27.5% in Cavalier
Wool Holdings (CWH), following the sale at the end of September 2018, the company reported a net
loss after tax of $10.0m.
Excluding the non-cash write down, Cavalier delivered a 68% increase in normalised net profit after
tax to $1.9m (HY18: $1.1m). This included a non-cash contribution from the investment in CWH for
three months prior to its sale.
Including proceeds of $11.8m from the Cavalier Wool Holdings sale as well as other initiatives, net
debt reduced to $17.3m (down 48% year on year) as at 31 December 2018. This resulted in a
positive impact on interest expense and normalised net profit after tax.


1
Normalised NPAT is a non-GAAP measure and excludes the $12.0m non-cash write down on the sale of the 27.5% in
Cavalier Wool Holdings at the end of September 2018.

Operating expenses decreased with further gains being targeted. Increased investment is being
made into direct and indirect marketing, as the company promotes its high-end offer both in New
Zealand and in existing and new overseas markets, as well as into people to support Cavalier’s
growth strategy. Gross margin improved to 26% (HY18: 23%).
While no interim dividend has been declared, the company remains committed to the re-
introduction of dividends as part of its long term financial strategy.
Outlook
Cavalier CEO, Paul Alston, commented: “Cavalier is in good shape and well positioned to take
advantage of the global resurgence in demand for high end woollen flooring. However, market
conditions on both sides of the Tasman are becoming increasingly difficult with reduced consumer
confidence and lower flooring sales. Confidence in Australia is particularly low and sales are
softening. These conditions are expected to continue and will make for a challenging second half of
the financial year.”
In addition, Cavalier will no longer have investment earnings from CWH which contributed $1.0m to
NPAT in the FY18 second half.
Paul said: “We are building on the success of our Cavalier Bremworth World of Difference
positioning and have a number of exciting initiatives underway to build our market share in our
home markets of Australia and New Zealand, as well as new opportunities offshore. We will also be
releasing a new television campaign in the coming months, further establishing ourselves as
marketers of premium wool carpet.
“We will continue to focus on business fundamentals in the second half, including investing in our
core business operations, particularly into a new IT system, customer relationships, an expanding
global presence, innovative new product development, as well as exploring investment
opportunities to grow our market presence.
“While our second half will present some challenges, our direction and our opportunity are clear.
Full year guidance for FY19 will be provided once trading patterns results are established.”
ENDS
For further information please contact:
Paul Alston
Chief Executive Officer
palston@cavbrem.co.nz
+64 21 918 033
+64 9 277 1135
Jackie Ellis
Media Liaison
jackie@ellisandco.co.nz
+64 27 246 2505

---

CAVALIER CORPORATION LIMITED


HALF YEAR FINANCIAL STATEMENTS

for the six months ended 31 December 2018

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 16

Corporate Directory 19

1

Cavalier Corporation Limited and subsidiary companies

Financial Summary - for the six months ended 31 December 2018 (Unaudited)


Unaudited
Six months
ended
31 Dec 2018
Unaudited
Six months
ended
31 Dec 2017
Audited
Year
ended
30 Jun 2018
$000 $000 $000

Revenue $69,996 $75,316 $148,120

EBITDA (normalised)
1
4,624 4,418 9,998

Depreciation (1,755) (1,806) (3,561)

EBIT (normalised)
1
2,869 2,612 6,437

Net interest expense (1,045) (1,504) (2,798)

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


644

381

1,419

Profit before tax (normalised)
1
2,468 1,489 5,058

Tax expense (537) (341) (1,084)

Profit after tax (normalised)
1
1,931 1,148 3,974

Abnormal net gains/(losses) after tax
1
(11,964) (140) 107

Profit/(Loss) after tax (GAAP) $(10,033) $1,008 $4,081

Net cash flow from operating activities $2,405 $7,542 $12,143

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

Normalised
1
2.8 1.7 5.8
GAAP (14.6) 1.5 5.8

Return on average shareholders’ equity (%)
Normalised
1
2.9% 1.7% 5.7%
GAAP (14.9)% 1.5% 5.7%

Unaudited
As at
31 Dec 2018
Unaudited
As at
31 Dec 2017
Audited
As at
30 Jun 2018

Net tangible asset backing per share ($) $0.81 $0.89 $0.94


Equity to total assets (%) 58.0% 53.1% 54.3%


Net interest-bearing debt to equity ratio 22:78 33:67 29:71






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 16 to 18 of the half year report.

2

Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Income Statement


Six months ended 31 December 2018 (Unaudited)

Notes Unaudited
Six months
ended
31 Dec 2018
Unaudited
Six months
ended
31 Dec 2017
$000 $000


Revenue 4 69,996 75,316
Cost of sales (51,741) (57,914)

Gross profit 18,255 17,402

Other income and gains 5 35 76
Distribution expenses (12,028) (11,806)
Administration expenses (3,393) (3,060)

Results from operating activities 2,869 2,612

Net finance costs (1,045) (1,504)

Share of profit of equity-accounted investees (net of tax) 8 644 241
Loss on sale of interest in, and property held by, equity-
accounted investees (net of tax)

8

(11,964)

-

Profit/(Loss) before tax 6 (9,496) 1,349

Tax expense (537) (341)

Profit/(Loss) after tax for the period $(10,033) $1,008

Profit/(Loss) after tax attributable to:
Shareholders of Cavalier Corporation Limited (10,033) 1,008
Non-controlling interests - -

Profit/(Loss) after tax for the period $(10,033) $1,008

Basic and diluted earnings per share (cents) (14.6) 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 15 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 2018 (Unaudited)

Note Unaudited
Six months
ended
31 Dec 2018
Unaudited
Six months
ended
31 Dec 2017
$000 $000


Profit/(Loss) after tax for the period (10,033) 1,008

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

Effective portion of changes in fair value of cash flow hedges 894 45
Net change in fair value of cash flow hedges transferred to profit
or loss



(376)

65
Tax on other comprehensive income (145) (31)
Share of fair value of cash flow hedges of equity-accounted
investee (net of tax)

8

72

(24)
Foreign currency translation differences for foreign operations - 116
445 171

Other comprehensive income not reclassified subsequently
to profit or loss

-

-

Other comprehensive income for the period, net of tax 445 171

Total comprehensive income for the period $(9,588) $1,179

Total comprehensive income attributable to:
Shareholders of Cavalier Corporation Limited (9,588) 1,179
Non-controlling interests - -

Total comprehensive income for the period $(9,588) $1,179

























This statement is to be read in conjunction with the Notes on pages 9 to 15 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 2018 (Unaudited) Notes 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 (70) (1,420) 51,866 72,222

Change in accounting policy 1 - - - (304) (304)
Total equity at beginning of the period after adjusting for
impact of change in accounting policy



21,846

(70)

(1,420)

51,562

71,918

Total comprehensive income for the period

Loss after tax - - - (10,033) (10,033)

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

Changes in fair value of cash flow hedges (net of tax) - 373 - - 373
Share of fair value of cash flow hedges of equity-accounted
investee (net of tax)

8

-

72

-

-

72

- 445 - - 445

Other comprehensive income not reclassified subsequently to
profit or loss



-

-

-

-

-

Total other comprehensive income - 445 - - 445

Total comprehensive income for the period - 445 - (10,033) (9,588)

Total equity at end of the period $21,846 $375 $(1,420) $41,529 $62,330



This statement is to be read in conjunction with the Notes on pages 9 to 15 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 2017 (Unaudited) Note 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 of equity-accounted
investee (net of tax)

8

-

(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 15 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 2018 (Unaudited)
Note Unaudited
31 Dec 2018
Audited
30 Jun 2018
$000 $000

ASSETS

Property, plant and equipment 35,502 35,142
Intangible assets 2,362 2,362
Investment in equity-accounted investees 8 1,500 24,544
Deferred tax asset 4,303 4,971

Total non-current assets 43,667 67,019

Cash and cash equivalents 599 2,111
Trade receivables, other receivables and prepayments 11,401 15,582
Inventories 50,499 47,321
Derivative financial instruments 1,234 971

Total current assets 63,733 65,985

Total assets $107,400 $133,004

EQUITY

Share capital 21,846 21,846
Cash flow hedging reserve 375 (70)
Foreign currency translation reserve (1,420) (1,420)
Retained earnings 41,529 51,866

Total equity attributable to equity holders of the Company 62,330 72,222

LIABILITIES

Loans and borrowings 17,900 27,500
Employee benefits 877 911
Provisions 715 1,118

Total non-current liabilities 19,492 29,529

Loans and borrowings - 4,000
Trade creditors and accruals 18,931 19,490
Provisions 931 2,214
Employee entitlements 4,471 4,076
Deferred income 34 47
Derivative financial instruments 554 593
Tax payable 657 833

Total current liabilities 25,578 31,253

Total liabilities 45,070 60,782

Total equity and liabilities $107,400 $133,004







This statement is to be read in conjunction with the Notes on pages 9 to 15 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 2018 (Unaudited)

Note Unaudited
Six months
ended
31 Dec 2018
Unaudited
Six months
ended
31 Dec 2017
$000 $000

CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 71,223 76,960
Cash paid to suppliers and employees (67,549) (69,136)
Dividends received 2 1
Other receipts 2 2
GST (paid)/refunded (25) 850
Interest paid (1,176) (1,503)
Income tax (paid)/refunded (72) 368

Net cash flow from operating activities 2,405 7,542


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 100 148
Proceeds from sale of interest in, and property held by,
equity-accounted investees

8

10,553

-
Dividends received from equity-accounted investee 8 1,243 -
Acquisition of property, plant and equipment (2,184) (721)

Net cash flow from investing activities 9,712 (573)


CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in bank loans and borrowings (13,600) (7,400)

Net cash flow from financing activities (13,600) (7,400)


NET DECREASE IN CASH AND CASH EQUIVALENTS (1,483) (431)

Cash and cash equivalents at beginning of the period 2,111 1,255

Effect of exchange rate changes on cash (29) 19

CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD



$599

$843

















This statement is to be read in conjunction with the Notes on pages 9 to 15 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/(loss) with net cash flow from operating activities

Six months ended 31 December 2018 (Unaudited)

Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017

$000 $000



Profit/(Loss) after tax for the period (10,033)
1,008



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

Depreciation
1,755
1,806
Share of profit of equity-accounted investees
(644)
(241)
Loss on sale of interest in, and property held by,
equity-accounted investees

11,964

-
Deferred tax asset
523
75
Employee benefits
361
112
Deferred income
(13)
13
Provisions
(1,686)
(618)
Net gain on sale of property, plant and equipment
(31)
(73)
Net (gain)/loss on foreign currency balance
29
(19)



Changes in working capital items:

Trade and other receivables and prepayments
1,454
2,039
Inventories
(1,289)
4,665
Tax receivable/payable
(58)
634
Trade creditors and accruals
(143)
(1,985)
Derivative financial instruments
216
126



Net cash flow from operating activities $2,405
$7,542


























This statement is to be read in conjunction with the Notes on pages 9 to 15 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 2018

1. General information

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

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 interim financial statements contained in this half-yearly report have been prepared in accordance with
these Acts and 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 2018.

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, among other
things, the interim financial statements covering the Group.

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

All Group subsidiaries are wholly-owned.

The Group had a 27.5% interest in commission woolscourer, Cavalier Wool Holdings Limited, which it sold
during the six months ended 31 December 2018 together with the property held by 50%-owned asset-
owning entity, CWS Assets Limited.

Basis of preparation

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.

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, and the comparative information for the six months ended 31 December
2017, are unaudited. The comparative information as at 30 June 2018 is audited.

The interim financial statements were approved for issue by the Board of Directors of the Company on 21
February 2019.

Critical accounting judgements, estimates and assumptions

In preparing the interim financial statements, the Group has consistently applied the judgements, estimates
and assumptions adopted in the preparation of the annual financial statements for the year ended 30 June
2018.

10

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

Accounting policies

The interim financial statements should be read in conjunction with the annual financial statements for the
year ended 30 June 2018 and the accounting policies set out therein.

All accounting policies adopted in the preparation of the interim financial statements are consistent with
those adopted in the preparation of the annual financial statements, with the exception that the Group
adopted NZ IFRS 9 Financial Instruments (NZ IFRS 9) and NZ IFRS 15 Revenue from Contracts with
Customers (NZ IFRS 15) during the six months ended 31 December 2018.

Impact of the adoption of NZ IFRS 9

Effective 1 July 2018, the Group applied NZ IFRS 9 for its accounting of financial instruments, which
included the adoption of the expected loss model, as opposed to the incurred loss model under the old
standard, for the assessment of trade and other receivables for impairment. Under the new standard, the
Group assesses impairment of trade and other receivables on a forward-looking basis, taking into account
not only past events and current conditions, but also forecast of future economic conditions.

It has been determined that the impact of the new standard on the assessment of trade and other
receivables for impairment is not material.

The Group elected to apply the cumulative effect method, with no restatement of comparative period
amounts, in applying NZ IFRS 9. The cumulative effect of applying the new standard is nil, with no
adjustment to the opening balance of retained earnings recognised in the Condensed Consolidated
Statement of Changes in Equity for the six months ended 31 December 2018 required as a consequence.

Impact of the adoption of NZ IFRS 15

Effective 1 July 2018, the Group also applied NZ IFRS 15 for its accounting of revenue from contracts with
customers. Based on the five-step assessment performed by the Group pursuant to NZ IFRS 15, the
impact of the new standard is not material. All of the revenue earned by the Group is derived from the
satisfaction of a single performance obligation for each contract, which can be for the sale of carpet, carpet
yarn or wool. This revenue has historically been recognised at the time there is the transfer of the risks and
rewards of ownership of the products sold to the customer. It has been determined that revenue is now
recognised when the customer obtains control of the products sold, typically on the earlier of payment or
delivery.

It has also been determined that there are:
 no material changes to the accounting for rebates, discounts or any other variable consideration under
NZ IFRS 15; and
 no financing components within the Group’s sales arrangements.

The new accounting policy on revenue is disclosed in Note 3.

The Group also elected to apply the cumulative effect method, with no restatement of comparative period
amounts, in applying NZ IFRS 15. The cumulative effect of applying the new standard is dealt with as an
adjustment to the opening balance of retained earnings recognised in the Condensed Consolidated
Statement of Changes in Equity for the six months ended 31 December 2018.

The Group’s revenue recognition policy remains largely the same with the exception that revenue is now
recognised when the customer obtains control of the products sold, typically on the earlier of payment or
delivery.

The adoption of NZ IFRS 15 has impacted the timing of when some revenue is recognised, resulting in the
following adjustments to opening retained earnings.

11

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

Accounting policies (continued)

Impact of the adoption of NZ IFRS 15 (continued)


$000
Retained earnings as at 1 July 2018 before NZ IFRS 15 adjustments 51,866
Change in revenue (2,371)
Change in cost of sales 1,949
Change in tax expense 118
Retained earnings as at 1 July 2018 after NZ IFRS 15 adjustments $51,562

The table below shows the effect of the adoption of NZ IFRS 15 on 1 July 2018 on the Condensed
Consolidated Statement of Financial Position:


As previously
reported
NZ IFRS 15
reclassifications
Restated

$000 $000 $000
Assets
Trade receivables, other receivables and
prepayments

15,582

(2,727)

12,855
Inventories 47,321 1,889 49,210
Total impact on assets $62,903 $(838) $62,065

Liabilities
Trade creditors and accruals 19,490 (416) 19,074
Tax payable 833 (118) 715
Total impact on liabilities $20,323 $(534) $19,789

Retained earnings $51,866 $(304) $51,562

2. 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.

The Board of Directors (“Board”) notes that these financial forecasts are sensitive to changes in some of
the assumptions underlying the forecasts – including sales volumes and margins, manufacturing
performances and a number of external factors over which the Group has limited control over, such as
exchange rates and raw material input costs.

The Board also notes the progress that is being made to strengthen the Group’s financial position and
reduce bank loans and borrowings and believes that the Group will be able to generate the earnings and
cash flows to comply with the Bank’s covenants and meet its contractual obligations as these become due.

12

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

3. Segment performance

Unaudited Carpets Wool Total

Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017
Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017
$000 $000 $000 $000 $000 $000
External revenue 61,479 65,959 8,517 9,357 69,996 75,316
Inter-segment revenue - - 1,761 1,482 1,761 1,482
Total revenue $61,479 $65,959 $10,278 $10,839 71,757 76,798

Elimination of inter-segment revenue (1,761) (1,482)
Consolidated revenue $69,996 $75,316

Segment result before depreciation 5,459 4,789 14 581 5,473 5,370
Depreciation (1,691) (1,750) (64) (56) (1,755) (1,806)
Segment result after depreciation 3,768 3,039 (50) 525 3,718 3,564

Elimination of inter-segment profits 21 (52)
Unallocated corporate costs (870) (900)
Results from operating activities 2,869 2,612

Net finance costs (1,045) (1,504)

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

644

241
Loss on sale of interest in, and
property held by, equity-accounted
investees (net of tax)


(11,964)


-
Profit/(Loss) before tax (9,496) 1,349

Tax expense (537) (341)
Profit/(Loss) after tax for the period $(10,033) $1,008

Employee numbers
Operations 438 437 30 26 468 463
Unallocated 5 5
Total 473 468

Capital expenditure 1,812 528 372 193 $2,184 $721


Carpets Wool Total

Unaudited
As at
31 Dec 2018
Audited
As at
30 Jun 2018
Unaudited
As at
31 Dec 2018
Audited
As at
30 Jun 2018
Unaudited
As at
31 Dec 2018
Audited
As at
30 Jun 2018
$000 $000 $000 $000 $000 $000
Reportable segment assets 101,207 104,665 4,693 3,795 105,900 108,460
Investment in equity-accounted
investees

1,500

24,544
Total assets $107,400 $133,004

Reportable segment liabilities 24,198 26,122 2,972 3,160 27,170 29,282
Unallocated liabilities 17,900 31,500
Total liabilities $45,070 $60,782

13

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

3. Segment performance (continued)




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




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 2018
Six months
ended
31 Dec 2017

$000 $000

Revenue



New Zealand
38,851
41,399
Australia
28,145
30,442
Rest of the world
3,000
3,475




$69,996
$75,316




As at
31 Dec 2018
As at
30 Jun 2018

$000 $000

Non-current assets



New Zealand
43,089
66,522
Australia
578
497




$43,667
$67,019




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.

14

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

4. Revenue


Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017

$000 $000
Sales of goods
69,996
75,251
Provision of installation services
-
65
Total revenue
$69,996
$75,316




Accounting policy
Revenue is recognised when or as performance obligations are satisfied by transferring control
of the products sold to the customer at the transaction price specified in the contract. Control
typically transfers to the customer on the earlier of payment for, or delivery of, the product. The
transaction price includes all amounts which the Group expects to be entitled to, net of goods
and services tax and other indirect taxes, expected rebates and discounts. Where applicable,
rebates and/or discounts are included within the consideration using an estimation typically
based on the most likely method and are only recognised to the extent that it is highly probable
that a significant reversal will not occur.

5. Other income and gains


Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017

$000 $000
Rentals received
2
2
Dividends received
2
1
Net gain on sale of property, plant and equipment
31
73
Total other income and gains
$35
$76

6. Expenses


Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017

$000 $000

Profit/(Loss) before tax includes the following:




Depreciation
$1,755
$1,806
Operating lease and rental costs
$1,373
$1,792

7. Capital expenditure commitments


As at
31 Dec 2018
As at
30 Jun 2018

$000 $000
Capital expenditure commitments
$435
$397

15

Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

8. Equity-accounted investees




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




Six months
ended
31 Dec 2018
Six months
ended
31 Dec 2017

$000 $000
Carrying value as at 1 July
24,544
23,490
Share of profit after tax
644
241
Share of changes in fair value of cash flow
hedges (net of tax)


72

(24)
Dividends received
(1,243)
-
Proceeds of sale of interest in CWH and property
in CWSA


(10,553)

-
Loss on sale of interest in CWH and property in
CWSA


(11,964)

-
Carrying value as at 31 December
$1,500
$23,707



The Group sold its interest in 27.5%-owned CWH and the property held by 50%-owned CWSA
during the period.

9. Contingent liabilities


As at
31 Dec 2018
As at
30 Jun 2018
Bank guarantees in respect of operating leases
and other commitments



$2,246

$2,095

10. Related party transactions




During the period, the Group did not enter into any material contracts involving related parties
or directors’ interests. No amounts owed by related parties have been written off or forgiven
during the period. Apart from directors’ fees, key executive remuneration and procurement of
wool scouring services from CWH, there have been no related party transactions.

16

Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information
For the six months ended 31 December 2018


The half year report for the six months ended 31 December 2018 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 July 2017.

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 and has not been independently reviewed.

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/loss on sale of
property and investments) 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.

Non-GAAP financial information does not have standardised meaning prescribed by GAAP and therefore may not
be comparable to similar financial information prescribed by other entities.

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 to investors and how it is used internally by
management;
 identifying the source of non-GAAP financial information;
 ensuring that:
- non-GAAP financial information is not presented with undue and greater prominence, emphasis or
authority than the most directly comparable GAAP financial information;
- presentation of non-GAAP financial information does not in any way confuse or obscure presentation
of GAAP financial information;
- a reconciliation from the non-GAAP financial information to the most directly comparable GAAP
financial information, including that for the previous period, can be easily accessed (see below);
- a consistent approach is adopted from period to period with respect to the presentation of non-GAAP
financial information, including that for comparative periods;
- where there is any change in approach from the previous period, the nature of the change is explained
and the reasons and financial impact provided;
- non-GAAP financial information is unbiased; and
 taking care when describing, or referring to, items as ‘one-off’ or ‘non-recurring’.

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

Six months ended 31 Dec 2018

GAAP Adjustments Normalised
$000 $000 $000

Revenue $69,996 - $69,996

EBITDA 4,624 - 4,624

Depreciation (1,755) - (1,755)

EBIT

2,869 - 2,869

Net interest expense (1,045) - (1,045)

Share of profit of equity-accounted investees (net of tax) 644 - 644
Loss on sale of interest in, and property held by, equity-
accounted investees (net of tax)

(11,964)

11,964



-

Profit/(Loss) before tax (9,496) 11,964 2,468

Tax expense (537) - (537)

Profit/(Loss) after tax $(10,033) 11,964 1,931

Abnormal net loss after tax (11,964) (11,964)

Loss after tax (GAAP) - $(10,033)

Analysis of adjustments

Profit/(Loss)
before tax
Tax effect Profit/(Loss)
after tax
$000 $000 $000
Loss on sale of interest in, and property held by, equity-
accounted investees
(11,964) - (11,964)
$(11,964) - $(11,964)

18

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 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 of equity-accounted investees (net of tax) 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 merger costs (140) - (140)
$(140) - $(140)

19

Cavalier Corporation Limited

Corporate Directory


Board of Directors:
George Adams DipFSA(Hons), FCA, CMInstD Chairman of Audit Committee
Independent Member of Remuneration and Nomination Committees

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

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

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

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

Wool Operation www.elcodirect.co.nz

Share Registrar www.computershare.co.nz/investorcentre

---

HY19 Interim Results
For the six months to 31 December 2018

•$13.3m from sale of Cavalier’s 27.5% in its wool
scouring business (Cavalier Wool Holdings, CWH)
and the associated property.
•Entered into long-term scouring arrangement
with CWH.
•Retirement of Director, Sarah Haydon, at the
2018 Annual Meeting.
•Embarked on inaugural shareholder roadshow to
six regional centres across New Zealand.
•Post-period end: Exhibited at Domotexglobal
flooring show in Germany for the first time with
very encouraging feedback from participants.
HY19 KEY EVENTS
2
Cavalier Corporation | HY19 Results Presentation

•Soft market conditions, particularly in Australia
where consumer confidence has dropped.
•Sales of lower margin synthetic carpets are down
across the industry.
•Global resurgence in demand and sales of higher
margin wool carpets.
•Wool prices being driven down due to decreased
Chinese demand for coarser carpet wool –
benefitting Cavalier’s carpet business but
impacting on sales and margins for Cavalier’s wool
buying business.
HY19 OPERATING ENVIRONMENT
3
Cavalier Corporation | HY19 Results Presentation

Cavalier Corporation | HY19 Results Presentation
•Revenue impacted by softer market conditions, particularly of lower margin synthetic carpets.
•Sales of higher margin wool carpets have grown year on year, as Cavalier increases its focus on
the high end of the market.
•EBITDA up 5% on HY18 with higher carpet earnings offset by reduced earnings from the wool
buying business.
•68% increase in Normalised NPAT* to $1.9m.
•Net debt reduced to $17.3m (down 48% year on year).
•Operating expenses decreased with further gains being targeted following the 2017
restructure.
•Gross margin improved to 26% (HY18: 23%).
HY19 RESULTS SNAPSHOT
Half year result at the top end of guidance as Cavalier benefits from a more efficient
organisational structure and a strategic focus on high quality, higher margin wool carpets.
4
*Normalised NPAT is a non-GAAP measure and excludes the $12.0m non-cash write down on the sale of the 27.5% in Cavalier Wool Holdings at the end of September 2018.

Cavalier Corporation | HY19 Results Presentation
HY19HY18
Revenue70.075.3
X
EBITDA4.64.4

NPAT/NLAT(10.0)1.0
-
Normalised NPAT1.91.1

Net Debt17.333.3

HALF YEAR COMPARATIVE
5
Normalised NPAT is a non-GAAP measure and excludes the $12.0m non-cash write down on the sale of the 27.5% in Cavalier Wool Holdings at the end of September 2018.
0
20
40
60
80
HY18HY19
Revenue
0
1
2
HY18HY19
NormalisedNPAT
0
1
2
3
4
5
HY18HY19
EBITDA

•Ongoing focus on debt reduction has
yielded good results.
•Proceeds of $11.8m from sale of CWH
wool scouring business used to pay
down debt.
•Strong financial platform with capacity
to invest in growth strategy.
•Committed to re-introduction of
dividends as part of long term financial
strategy.
CAPITAL MANAGEMENT
Significantly reduced debt position
6
59.0
32.7
42.3
33.3
17.3
0
10
20
30
40
50
60
70
Dec-14Dec-15Dec-16Dec-17Dec-18
Net Debt $m
Aggressive debt
reduction
Investment into brand and
consolidating manufacturing
operations
Major focus on reducing debt
Proceeds from
sale of CWH
Cavalier Corporation | HY19 Results Presentation

A proud and successful manufacturer of
high quality carpets.
Moving from being a manufacturer
towards customer-led marketing focus –
delivering carpets that our customers
want.
Focus on delivering long term sustainable
growth, improving margins and quality
earnings.
STRATEGIC FOCUS
7
Cavalier Corporation | HY19 Results Presentation

Auckland
•Head office
•Tufting factory
•Sales office
Cambridge
•Wool store
Taumaruni/Raetihi/Taihape
•Wool stores
Wanganui
•Felting plant
•Wool store
Napier
•Spinning factory
Wellington
•Sales office
Christchurch
•Sales office
Cavalier Corporation | HY19 Results Presentation
OUR COMPANY
Operations are based in New Zealand and Australia with exports around the world
8
Brisbane
•Sales office
Sydney
•AU head office
•Administration
•Sales office
Melbourne
•Sales office
Adelaide
•Sales office
Perth
•Sales office

Percentage of sales
•Wool carpets are our heritage.
•Majority of current sales into
Australia and New Zealand.
•Growth opportunities in other
world markets with wool
carpets –particularly North
America and the UK.
•US wool carpet market
estimated at USD$513m.
•UK wool carpet market
estimated at USD$498m.
OPPORTUNITY IN THE GLOBAL WOOL MARKET
9Cavalier Corporation | HY19 Results Presentation
2%
42%
55%
0.5%
0.5%

Cavalier Corporation | HY19 Results Presentation
•In good shape and well placed to take advantage of global
resurgence in demand for high end woollenflooring.
•Market conditions on both sides of the Tasman are becoming
increasingly difficult and the next few months will be challenging.
•No contribution from investment earnings in CWH which
contributed $1.0m to NPAT in the FY18 second half.
•Will continue to invest in core business operations including new
IT system, customer relationships, an expanding global presence
and innovative new product development.
•Exploring investment opportunities to grow market presence and
build on Cavalier BremworthWorld of Difference positioning.
•Progressing new opportunities in international markets.
•FY19 guidance will be provided once trading patterns results are
established.
OUTLOOK FOR 2H19
10
10

•Build on leadership position in wool.
•Increased focus on high-end, higher margin
products.
•Growth opportunities in woollenproducts
outside of New Zealand.
•Increased R&D and marketing spend –
innovation and product development.
•Opportunities for growth in Australia and
Rest of World markets.
•Invest in and promote the environmental
benefits of our woollenproducts.
•Increased investment in our people.
THE FUTURE
11
Cavalier Corporation | HY19 Results Presentation
11

Contact: Paul Alston
Chief Executive Officer
t: 09 277 1135
e: palston@cavbrem.co.nz
12

Cavalier Corporation | HY19 Results Presentation
Experienced Board and Leadership
Team
13
G C W (Grant) Biel
T H G (George) Adams
A W (Alan) Clarke
J M (John) Rae
D V (Dianne) Williams
Leadership Team
CEO: Paul Alston
CFO: Victor Tan
GM Australia: Michael Richardson
National Sales Manager NZ:
Dean Chandler
GM Product Development/ Marketing:
Rochelle Flint
GM Manufacturing: Craig Wallis

EBITDAEarnings Before Interest, Tax, Depreciation and Amortisation. EBITDA excludes profit/losses generated by the
wool scouring business, in which Cavalier had a 27.5% shareholding. The results for this business were equity
accounted on a separateline in the financial statements and therefore not included in the consolidated EBITDA.
Normalised NPATNPAT/NLAT excluding abnormal items and non-trading adjustments. A reconciliation of NPAT/NLAT to
Normalised NPAT is below.
NPAT/NLATNet Profit After Tax /Net Loss After Tax
Glossary and Reconciliation
$000’sHY19HY18
NPAT/NLAT(10,033)1,008
Restructuring costs-140
Loss on sale of interestin wool scouring business
and associated property
11,964-
Normalised NPAT1,9311,148
Cavalier Corporation | HY19 Results Presentation14

Cavalier Corporation | HY19 Results Presentation
This presentation has been prepared by Cavalier Corporation Limited (“CAV”).The information in this presentation is of a general nature only. It is
not a complete description of CAV.
This presentation is not a recommendation or offer of financial products for subscription, purchase or sale, or an invitationorsolicitation for such
offers.
This presentation is not intended as investment, financial or other advice and must not be relied on by any prospective investor.It does not take
into account any particular prospective investor’s objectives, financial situation, circumstances or needs, and does not purportto contain all the
information that a prospective investor may require. Any person who is considering an investment in CAV securities should obtainindependent
professional advice prior to making an investment decision, and should make any investment decision having regard to that person’s own
objectives, financial situation, circumstances and needs.
Past performance information contained in this presentation should not be relied upon (and is not) an indication of future performance.This
presentation may also contain forward looking statements with respect to the financial condition, results of operations and business, and business
strategy of CAV. Information about the future, by its nature, involves inherent risks and uncertainties. Accordingly, nothinginthis presentation is a
promise or representation as to the future or a promise or representation that a transaction or outcome referred to in this presentation will
proceed or occur on the basis described in this presentation. Statements or assumptions in this presentation as to future matters may prove to be
incorrect.
A number of financial measures are used in this presentation and should not be considered in isolation from, or as a substitutefor, the information
provided in CAV’s financial statements available at www.cavcorp.co.nz.
CAV and its related companies and their respective directors, employees and representatives make no representation or warranty of any nature
(including as to accuracy or completeness) in respect of this presentation and will have no liability (including for negligence)for any errors in or
omissions from, or for any loss (whether foreseeable or not) arising in connection with the use of or reliance on, information in this presentation.
Disclaimer
15