Preliminary FY20 Full Year Result

Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019


Results for announcement to the market
Name of issuer Cavalier Corporation Limited
Reporting Period 12 months to 30 June 2020
Previous Reporting Period 12 months to 30 June 2019
Currency
Amount (000s) Percentage change
Revenue from continuing
operations
$117,981 (13)%
Total Revenue $117,981 (13)%
Net profit/(loss) from
continuing operations
$(21,451) N/A
Total net profit/(loss) $(21,451) N/A
Interim/Final Dividend
Amount per Quoted Equity
Security
It is not proposed to pay dividends
Imputed amount per Quoted
Equity Security
Not applicable
Record Date Not applicable
Dividend Payment Date Not applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.47 $0.72
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to Directors’ report attached
Authority for this announcement
Name of person

authorised
to make this announcement
Victor Tan
Contact person for this
announcement
Victor Tan
Contact phone number 027 668 8963
Contact email address vtan@cavbrem.co.nz
Date of release through MAP

28 September 2020

Unaudited financial statements accompany this announcement.

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MARKET RELEASE
28 September 2020

CAVALIER CORPORATION FULL YEAR RESULTS ANNOUNCEMENT

For the 12 months ended 30 June 2020:
 The key outcome for the year was the announcement of Cavalier’s new transformational
strategy to become a sustainable, interior solutions business.
 The FY20 preliminary results reflect the re-setting of the organisation as Cavalier commences
its pivot, as well as the softening trading conditions noted in 1H20, which were further
exacerbated by the COVID-19 pandemic in 2H20.
 Revenue was $118.0m, down 13% on prior year, due to the softer trading conditions
reported in 1H20 and the impact of COVID-19 restrictions and the lockdown in New Zealand
in April 2020.
 Statutory NLAT of $(21.5)m, with normalised NLAT
1
of $(3.5)m excluding non-trading
adjustments.
 Normalised EBITDA
1
was $2.3m, excluding non-trading adjustments of $(11.2)m pre-tax
primarily related to the strategic change and company re-set.
 Net debt reduced to $14.5m as at end of June and has further reduced since year-end to
$7.2m as at end-August 2020.
 Since year-end, shareholders have approved the sale and leaseback of the Auckland
property which will support the execution of the new strategy.
 FY21 sales volumes to date have been stronger than anticipated with increasing sales of
wool carpets.

Cavalier Corporation Limited (NZX: CAV) has today released its unaudited preliminary results for the
twelve months to 30 June 2020.

The FY20 results reflect the re-setting of the company as it commences its new strategy and
transformation, as well as the softening trading conditions noted in 1H20, which were further
exacerbated by the COVID-19 pandemic in 2H20.



1
Normalised EBITDA and Normalised NLAT are non-GAAP measures. Normalised EBITDA excludes non-trading
adjustments of $11.2m which comprise restructuring costs of $1.2m and asset write downs of $10.0m,
primarily associated with the re-set of the Cavalier business as it commences its new strategy, and as a result
of a conservative valuation of assets more closely aligning market capitalisation and net asset value.
Normalised NLAT excludes the above as well as derecognition of deferred tax assets. A reconciliation of GAAP
to non-GAAP measures is provided on page 51 in the accompanying unaudited financial statements.

Revenue of $118.0m was down 13% on prior year, with sales reduced significantly in April and May
(compared to the same months in the prior year) as a result of the COVID-19 shutdown. The revenue
impact was mainly felt in New Zealand where annual sales volumes were down 17% on the prior
year, with Australia finishing the year down just 5%. Since emerging from the lockdown, sales
volumes have been stronger than initially anticipated. Partly, this has been led by pent up demand
and consumers spending money on their homes in lieu of other discretionary spends, as well as sales
of synthetic carpets as retailers have been stocking up ahead of Cavalier’s transition away from
these fibres.

Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) was $2.3m,
excluding non-trading adjustments of $(11.2)m pre-tax which were primarily related to Cavalier’s
strategic transformation and company re-set. These are non-cash adjustments and have no effect on
the underlying operations or trading of the business.

While some operating expenses were able to be reduced during the shutdown period, Cavalier has a
number of fixed costs which were still incurred during this time. The business was able to continue
paying all salaried and waged staff throughout the shutdown period, supported by the
Government’s wage subsidy of which 46% of the $2.8m claimed was recognised in the FY20 results.
The remaining $1.5m will be recognised in the current financial year.

Operating cashflows were strong at $6.8m, mainly due to the release of cash as Cavalier commenced
its transition away from synthetics and ceased acquiring synthetic yarn inventory.

The company reported a statutory net loss after tax of $(21.5)m with profitability impacted by the
COVID-19 lockdown, particularly in April and May. Excluding the non-cash, non-trading adjustments
and derecognition of deferred tax assets, the normalised NLAT was $(3.5)m.

Net debt reduced to $14.5m as at 30 June 2020 and has further reduced to $7.2m as at 31 August
2020 due to stronger than expected trading in the new financial year and the accelerated sell down
of remaining synthetic stocks.

Chair of Cavalier, George Adams, said: “The focus for the last 18 months has been on the
development of a solid strategic plan to differentiate Cavalier’s positioning and to create a
sustainable and prosperous future for the company. Over the next 10 years, Cavalier’s vision is to
become a global leader in designing and creating desirable, safe, sustainable and high performing
natural interior solutions. Swift debt reduction coupled with the sale of the Auckland building has
been integral to providing strong financial platform for the company to execute its plan.

“As part of the transformation, there is a challenge with impairment assumptions especially with a
market capitalisation considerably less than the net asset value of the company. Directors agreed to
take the conservative position of writing-down assets (including deferred tax assets) as the
transformation changes the risk profile of the company and returning to acceptable profitability is a
few years away.”

Outlook

Cavalier has a comprehensive plan to grow value for shareholders through growing the wool flooring
market, building demand for Cavalier’s woollen carpets and rugs, strengthening its presence in retail
channels through expanded distribution and actively seeking other opportunities in the interior
solutions sector to leverage the company’s strengths and capabilities.

Since year-end, shareholders have approved the sale and leaseback of Cavalier’s Auckland property,
which will put the company into a debt free position and provide the financial strength to execute its
transformational plans at pace.

As previously advised, trading has been stronger than anticipated in the FY21 year to end-August
2020, with New Zealand sales revenues up approximately 10% and Australia down just 6%. That
strength has continued into September with sales in both New Zealand and Australia up on the same
period last year. Increases in woollen carpet sales have been encouraging, especially in Australia.

As advised, total sales revenue for FY21 is expected to reduce as Cavalier exits its synthetic plastic
carpet business, and as a consequence of COVID-19. Investment costs will be incurred as the
company’s manufacturing and sales base is re-set to reflect the new sales focus; and marketing
spend and people costs will increase significantly to support the new strategic direction and enhance
Cavalier’s market presence.
George Adams said: “Like many businesses around the world, Cavalier has been materially impacted
by COVID-19. As we move to a new normal, it reinforces our belief that our transformation to a
purpose led, sustainable business model is the right decision for our company and our long-term
future.
“Consumers are increasingly moving away from plastics and demanding products that are natural
and sustainable. We are ideally placed to respond to this demand, by building on our heritage as a
global leader in the manufacture of beautiful woollen flooring to deliver desirable, sustainable, safe
and high performing interior products.”
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 and Investor Relations
Jackie@ellisandco.co.nz
+64 27 246 2505

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UNAUDITED
ANNUAL FINANCIAL STATEMENTS - YEAR ENDED 30 JUNE 2020
CONTENTS
Directors’ Responsibility Statement2
Income Statement3
Statement of Comprehensive Income4
Statement of Changes in Equity5
Statement of Financial Position7
Statement of Cash Flows8
Notes to the Financial Statements
1. Company information10
2. General information relating to preparation of financial statements10
3. Leases and right-of-use assets13
4. Financial performance
4a. Segment performance17
4b. Earnings per share19
4c. Revenue19
4d. Other income and gains/losses19
4e. Administration expenses19
4f. Personnel expenses20
4g. Government grants20
4h. Net finance costs20
4i. Income tax20
5. Capital and funding
5a. Capital management23
5b. Share capital, dividends and reserves24
5c. Loans and borrowings25
6. Assets employed
6a. Property, plant and equipment26
6b. Capital commitments28
7. Working capital
7a. Cash and cash equivalents28
7b. Trade receivables, other receivables and prepayments28
7c. Inventories28
7d. Trade payables and accruals29
8. Risks and financial instruments30
9. Others
9a. Equity-accounted investees41
9b. Provisions42
9c. Employee benefits43
9d. Contingencies43
9e. Related parties44
9f. Group entities45
9g. Events after balance date45
9h. Standards, interpretations and amendments to standards45
NON-GAAP FINANCIAL INFORMATION
Trend Statement47
Disclosure of Non-GAAP Financial Information50
Page 1

Cavalier Corporation Limited and subsidiary companies
Directors’ Responsibility Statement
DIRECTORS' RESPONSIBILITIES
ACCOUNTING POLICIES
ACCOUNTING RECORDS
SAFEGUARDING OF ASSETS AND INTERNAL CONTROLS
FINANCIAL STATEMENTS
Chairman of the Audit Committee
The Directors are responsible for the preparation of the Group financial statements. The Directors discharge this responsibility by ensuring that the financial statements
comply with Generally Accepted Accounting Practice and give a true and fair view of the financial position of the Group as at balance date and of its operations and
cash flows for the year ended on that date.
The Directors consider that the accounting policies used in the preparation of the Group financial statements are appropriate, consistently applied, and supported by
reasonable judgements and estimates. All relevant financial reporting and accounting standards have also been followed.
The Directors believe that proper accounting records, which enable, with reasonable accuracy, the determination of the financial position of the Group and facilitate the
compliance of the financial statements with the Financial Markets Conduct Act 2013, have been kept.
The Directors consider that they have taken adequate steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Internal
control procedures are also considered to be sufficient to provide a reasonable assurance as to the integrity and reliability of the financial statements.
The Directors present, on pages 3 to 45, the Group financial statements for the year ended 30 June 2020.
These financial statements were authorised for issue by the Directors on 28 September 2020 and, as required by section 461(1)(b) of the Financial Markets Conduct
Act 2013, are dated and signed as at that date.
For and on behalf of Cavalier Corporation Limited
T H G Adams
Chairman of the Board of Directors
J M Rae
Page 2

Cavalier Corporation Limited and subsidiary companies
Consolidated Income Statement
For the year ended 30 June 2020
UnauditedAudited
20202019
Note$000$000
4c 117,981 135,234
(94,443)
(102,378)
23,538
32,856
4d
35
41
(19,039)
(22,486)
4e
(6,696)
(6,814)
(1,186)
-
6a
(7,077)
(6,129)
3, 6a
(2,909)
-
-
(2,362)
(13,334) (4,894)
4h
(2,535)
(1,790)
9a
-
644
9a - (11,884)
(15,869)
(17,924)
4i
7,309
1,144
4i
(12,891)
-
($21,451)
($16,780)
4b
(31.2)(24.4)
This statement is to be read in conjunction with the notes on pages 10 to 45.
Administration expenses
Restructuring costs
Impairment of plant and equipment
Gross profit
Cost of sales
Impairment of right-of-use assets
Derecognition of deferred tax assets
Loss on sale of interest in, and property held by, equity-accounted investees
Loss before income tax
Income tax benefit
Loss after tax for the year
Impairment of goodwill
Results from operating activities
Net finance costs
Share of profit after tax of equity-accounted investees
Basic and diluted loss per share (cents)
Revenue
Other income and gains/losses
Distribution expenses
Page 3

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2020
UnauditedAudited
20202019
Note$000$000
(21,451)
(16,780)
(178) 229
315 (536)
4i
(38)
86
9a - 72
99 (149)
($21,352)
($16,929)
This statement is to be read in conjunction with the notes on pages 10 to 45.
Net change in fair value of cash flow hedges transferred to profit or loss
Income tax on changes in fair value of cash flow hedges
Other comprehensive income that may be reclassified subsequently to profit or loss
Effective portion of changes in fair value of cash flow hedges
Loss after tax for the year
Share of fair value of cash flow hedges (net of income tax) of equity-accounted investee
Total comprehensive income for the year
Page 4

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
Share Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
$000$000$000$000$000
21,846 (219) (1,420) 34,782 54,989
- - - (21,451) (21,451)
- 99 - - 99
- 99 - (21,451) (21,352)
$21,846 ($120)($1,420)$13,331 $33,637
This statement is to be read in conjunction with the notes on pages 10 to 45.
Unaudited
Total equity at 30 June 2020
Loss after tax
Other comprehensive income that may be reclassified subsequently
to profit or loss
Changes in fair value of cash flow hedges (net of income tax)
Total comprehensive income for the year
Total equity at 1 July 2019
Total comprehensive income for the year
Page 5

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Changes in Equity (continued)
For the year ended 30 June 2019
Share Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
Note$000$000$000$000$000
21,846 (70) (1,420) 51,866 72,222
- - - (304) (304)
21,846 (70) (1,420) 51,562 71,918
- - - (16,780) (16,780)
- (221) - - (221)
9a - 72 - - 72
- (149) - - (149)
- (149) - (16,780) (16,929)
$21,846 ($219)($1,420)$34,782 $54,989
This statement is to be read in conjunction with the notes on pages 10 to 45.
Audited
Total equity at 30 June 2019
Impact of adopting NZ IFRS 15 Revenue
Total equity at 1 July 2018 after adjusting for impact of change in
accounting policy
Total comprehensive income for the year
Loss after tax
Other comprehensive income that may be reclassified subsequently
to profit or loss
Total equity at 1 July 2018
Share of fair value of cash flow hedges (net of income tax) of equity-
accounted investee
Total comprehensive income for the year
Changes in fair value of cash flow hedges (net of income tax)
Page 6

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Financial Position
As at 30 June 2020
UnauditedAudited
20202019
Note$000$000
6a 22,725 30,164
3 430 -
4i 600 5,456
23,755 35,620
7a 1,276 2,724
7b 12,607 12,344
7c 32,081 47,678
8 160 653
102 315
46,226 63,714
$69,981 $99,334
EQUITY
5b 21,846 21,846
5b (120) (219)
5b (1,420) (1,420)
13,331 34,782
33,637 54,989
5c - 20,500
3 2,224 -
9c 888 903
9b 584 715
3,696 22,118
5c 15,800 -
7d 10,617 17,014
3,444 3,856
3 1,345 -
9b 710 699
8 732 649
- 9
32,648 22,227
36,344 44,345
$69,981 $99,334
This statement is to be read in conjunction with the notes on pages 10 to 45.
Lease liabilities
Retained earnings
Foreign currency translation reserve
Total equity
LIABILITIES
Loans and borrowings
Lease liabilities
Provisions
Total non-current liabilities
Employee benefits
Loans and borrowings
Trade payables and accruals
Share capital
Derivative financial instruments
Deferred tax asset
Cash flow hedging reserve
Inventories
Total non-current assets
Cash and cash equivalents
Trade receivables, other receivables and prepayments
Total liabilities
Total equity and liabilities
Employee entitlements
Provisions
Total current liabilities
Derivative financial instruments
Income tax receivable
Total current assets
Total assets
Deferred income
Property, plant and equipment - owned
Property, plant and equipment - right-of-use
ASSETS
Page 7

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
UnauditedAudited
20202019
Note$000$000
117,836
135,700
(107,965)
(130,611)
9,871 5,089
1
2
4
4
(10)
14
(2,006)
(1,918)
(536)
-
(551)
(285)
6,773
2,906
28
110
6a (2,119)
(4,705)
9a -
10,593
9a -
2,783
(2,091)
8,781
5c (4,700)
(11,000)
3
(1,490)
-
(6,190)
(11,000)
2,724
2,111
60
(74)
$1,276
$2,724
This statement is to be read in conjunction with the notes on pages 10 to 45.
Net cash flow from operating activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends received from equity-accounted investees
Cash and cash equivalents at end of the year
Repayment of bank borrowings
Cash and cash equivalents at beginning of the year
Principal repayment of lease liabilities
(1,508) 687
Net cash flow from investing activities
Effect of exchange rate changes on cash
Proceeds from sale of interest in, and property held by, equity-accounted investees
Cash receipts from customers
Cash paid to suppliers and employees
Dividends received
Other receipts
GST (paid)/refunded
Interest paid - bank borrowings
Income tax paid
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Interest paid - lease liabilities
Acquisition of property, plant and equipment
Net cash flow from financing activities
Net increase in cash and cash equivalents
Page 8

Cavalier Corporation Limited and subsidiary companies
Consolidated Statement of Cash Flows (continued)
For the year ended 30 June 2020
RECONCILIATION OF PROFIT/LOSS WITH NET CASH FLOW FROM OPERATING ACTIVITIES
UnauditedAudited
20202019
$000$000
(21,451) (16,780)
2,683 3,479
1,779 -
7,077 6,129
2,909
- 2,362
- (644)
- 11,884
(8,073) (399)
12,891 -
(427) (228)
(9) (37)
(174) (1,918)
35 (35)
(60) 74
(263) 511
15,332 1,531
213 (1,030)
(6,400) (2,060)
711 67
$6,773 $2,906
This statement is to be read in conjunction with the notes on pages 10 to 45.
Impairment of goodwill
Deferred tax credit
Loss on sale of interest in, and property held by, equity-accounted investees
Derecognition of deferred tax assets
Employee benefits
Inventories
Share of profit of equity-accounted investees
Impairment of right-of-use assets
Net cash flow from operating activities
Trade and other receivables
Loss after tax for the year
Add/(Deduct) non-cash items:
Depreciation - owned assets
Impairment of plant and equipment
Income tax payable/receivable
Trade payables and accruals
Derivative financial instruments
Deferred income
Provisions
Net loss/(gain) on sale of property, plant and equipment
Net (gain)/loss on foreign currency balance
Changes in working capital items:
Depreciation - right-of-use assets
Page 9

Cavalier Corporation Limited and subsidiary companies
Notes to the Financial Statements
For the year ended 30 June 2020
1.
2.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
On 22 May 2020, the Board of Directors approved a strategic decision to transform the business to an all-wool and natural materials organisation. The
Company has commenced its exit from the non-wool carpet business so that it can focus on its woollen carpet operations – with the funds released from
the sale of non-wool inventory being used to reduce the Group’s net bank debt position. The Board also advised shareholders and the market that to
facilitate the Group’s transformation, it would require significant additional investment and funding.
2c (i) Transformation to the all-wool and natural materials business model
Cavalier Corporation Limited (“Cavalier” or “Company”) is a limited liability company that is domiciled and incorporated in New Zealand.
They have been prepared on the historical cost basis, except for derivative financial instruments which are measured at fair value as disclosed at note 8
(Risks and financial instruments) to the financial statements.
The financial statements are presented in New Zealand dollars ($), which is the Company’s functional currency. All entities in the Group have New Zealand
dollars as their functional currency. Unless otherwise indicated, all financial information presented in New Zealand dollars has been rounded to the nearest
thousand.
The income statement and statements of comprehensive income, changes in equity and cash flows are stated exclusive of GST. All items in the statement
of financial position are stated exclusive of GST, except for trade receivables and trade payables, which include GST invoiced.
2c. Critical accounting estimates and judgements and significant accounting policies
2b. Basis of preparation
The principal activities of the Group comprise wool acquisition, and carpet and rug manufacturing and sales.
All Group subsidiaries are wholly-owned.
2a. Statement of compliance
The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), other applicable New Zealand
accounting standards and authoritative notices as appropriate for Tier 1 For-Profit entities. The financial statements also comply with International Financial
Reporting Standards (IFRS).
On 17 September 2020, the sale and leaseback of the Auckland property was approved by shareholders, with the sale expected to be settled in early
October. The net proceeds from the sale of approximately $24,000,000 will be used by the Company to fully repay bank debt, with the balance to be
applied towards providing the Group with the financial resources to undertake its strategic transformation.
The preparation of financial statements in conformity with NZ IFRS requires the directors to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, income and expenses. Judgements and estimates are continually evaluated
and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) as appropriate for Tier
1 For-Profit entities.
The financial statements presented are for Cavalier and its subsidiaries (“Group”) as at, and for the year ended, 30 June 2020.
COMPANY INFORMATION
GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS
The Company is registered under the Companies Act 1993 and is an FMC reporting entity 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.
Page 10

2c. Critical accounting estimates and judgements and significant accounting policies (continued)
In future reporting periods, the Group’s funding structure, levels of working capital, and leasing arrangements will be materially different.
2c (ii) COVID-19
On 11 March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak and spread of COVID-19. Following this, on
Wednesday, 25 March 2020, the New Zealand Government raised its Alert Level to 4 (full lockdown of non-essential services) for a period of four weeks
during which the manufacturing facilities of the Group were shut down and its network of retail customers were unable to trade. In Alert Level 3, the Group
recommenced manufacturing and there has subsequently been a strong recovery in sales to normal levels. However, the impact of COVID-19 on the
economy remains uncertain, particularly with further outbreaks of COVID-19 in New Zealand and Australia. The Group has considered the impact of
COVID-19 in forecasting its projected cashflows when assessing its ongoing liquidity, valuation of non-current assets and the Group’s ability to comply with
the terms of its debt facilities.
2c (iii) Others
Significant accounting policies and critical estimates, judgements and assumptions are disclosed in the relevant notes to the financial statements and
identified using the following coloured boxes:
Accounting policies
Note 7c – inventory provisioning
The Board is currently not considering further sale and leaseback of the Group’s other properties but is continuing to investigate other additional sources of
funding should these be required to enable it to fully execute the transformation strategy.
The Board acknowledges that the Group’s strategic decision to transform the business model, in particular judgements and estimates around the projected
increase in woollen carpet sales, has substantially increased the level of estimation uncertainty with respect to a number of areas in the financial
statements as identified below:
Estimates, judgements and assumptions
Note 6a Property, plant and
equipment
Impairment of non-current assets
Note 3 Leases and right-of-
use assets and Note 6a
Property, plant and
equipment
Liquidity and going concernNote 2d Going concern
Areas involving substantially increased level of judgement and estimation uncertainty
as a consequence of the transformation to an all-wool and natural materials model
Recoverability of deferred tax assets and tax losses carried forward
Note 9b – measurement of provisions
Note 9c – measurement of employee benefits
Information about estimates and judgements that have a significant effect on the amounts recognised in the financial statements are also disclosed in the
following notes:
Classification of non-current assets as held for sale
The Group’s transformation represents a material change in direction of the business and the forecasts include a significant level of estimation uncertainty
and execution risk. Five-year modelling of Cavalier’s future financial performance and the investment needed to bring about the transformation has been
undertaken by management and external advisers. In summary:
•   The surplus cash at the end of FY21, arising primarily as a result of the sell down of non-wool inventory, the sale of the Auckland property and settlement
of bank debt during FY21, will also be required in FY22 for the ongoing transformation;
•   Total sales revenue for FY21 and FY22 will reduce as Cavalier exits its non-wool carpet business;
•   Investment costs, including the restructuring of the Group's operations, will be incurred as the business adjusts its manufacturing and sales base to
reflect the new sales focus, with these costs also inclusive of new display stands at retail to expand its market presence;
Net realisable value of non-wool inventoryNote 7c Inventories
Effectiveness of hedging instruments
Note 8 Risks and financial
instruments
Notes to the financial
statements
•   Marketing spend and people costs associated with the sustainability initiative will increase as Cavalier will be investing in a number of initiatives to
enhance its market presence and ensure its strategy is successfully communicated, understood and implemented – in the process growing the wool
flooring market while also growing its share of the wool market;
•   As Cavalier’s strategy progresses and sales of higher margin, higher value woollen carpets replace and eclipse the previous synthetic carpet sales,
Cavalier’s financial performance is forecast to improve, with growing revenues expected from FY23 and FY24 onwards as the business builds woollen
carpet sales;
•   The full benefits from the transformation are expected from FY25 onwards.
Note 4i Income tax
Page 11

2e. Basis of consolidation
• manufacturing discipline and cost control.
The financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2020 and the results of all subsidiaries for the
year then ended. Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
• NZD/AUD exchange rate changes, after considering hedged positions;
•   future economic and market conditions, including the uncertainty brought on by COVID-19;
• wool prices movements, after recognising wool purchase contracts;
• net proceeds and ongoing costs from the sale and leaseback of the Auckland property;
• progress being made with the exit from the non-wool carpet business and expected realisation of funds from the sell down of non-wool inventory; and
The Board notes that while these financial forecasts and the success of the transformation are highly dependent on the projected increase in woollen
carpet sales, it is satisfied that the sell down of non-wool inventory and net proceeds from the sale of the Auckland property, after settlement of the Group’s
bank debt, will provide it with sufficient liquidity to meet its other financial commitments for a period of at least 12 months following the issuance of the
Group’s financial statements.
The Board therefore considers the Group to be a going concern while also noting that it is continuing to investigate other additional sources of funding
should these be required to enable it to fully execute the transformation strategy.
There have been no changes in the accounting policies adopted in the preparation of the financial statements except as a consequence of the Group’s
adoption of NZ IFRS 16 Leases (NZ IFRS 16) during the year.
The impact of the adoption of NZ IFRS 16 can be found at note 3 (Leases and right-of-use assets) to the financial statements.
2d. Going concern
As discussed at note 9g (Events after balance date) to the financial statements, on 17 September 2020, the shareholders of Cavalier approved the sale
and leaseback of the Auckland property with settlement set down for early October 2020. The net proceeds of sale of the Auckland property will be applied
in the first instance towards the repayment of bank debt, with the balance to be utilised to provide the Group with the funding required to execute its
transformation.
Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
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.
During the year ended 30 June 2020, the Group continued to encounter challenging trading conditions, including those arising from the COVID-19
pandemic, which resulted in the Group failing to achieve its forecast sales and profitability targets.
The Group was able to renegotiate its banking facilities and covenant settings during the year to better reflect the changes in operating conditions, including
those brought on by COVID-19. The Group also negotiated the extension of its funding facilities to 1 July 2021 prior to balance date, with the extended
banking facilities establishing debt reduction targets and covenant settings that were consistent with management’s inventory and debt reduction targets for
FY21.
Management forecasts the Group’s financial performance, cash flows and financial position as part of its management and monitoring of the Group’s
operations and its ability to comply with its financial covenants and debt repayment obligations over the term of its banking facilities as well as meet its
other financial commitments as they fall due in the normal course of business.
In preparing these forecasts, as detailed at note 6a (Property, plant and equipment) and note 8 (Risks and financial instruments - Liquidity risk),
management considered and, where required, made assumptions in relation to:
• the Group’s strategic transformation to an all-wool and natural materials business model and, in particular, the capital investments and marketing spends
that would be required to execute the transformation and reposition the Group;
•   projected growth in woollen sales volumes from the implementation of initiatives underpinning the transformation;
2f. New and amended accounting standards adopted and changes in accounting policies
The Group also early adopted the January 2020 amendments to NZ IAS 1 Presentation of Financial Statements during the year.
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the financial statements.
Unrealised losses are also eliminated unless the underlying intra-group transaction provides evidence that the asset transferred is impaired.
Page 12

3.
Assets
Current liabilities
Effective 1 July 2019, the Group applied NZ IFRS 16 for its accounting of leases, using the modified retrospective approach. Under this approach, the
cumulative effect of initially applying NZ IFRS 16, if any, is recognised as an adjustment to equity at that date. Comparative figures for the year ended 30
June 2019 are not restated to reflect the application of NZ IFRS 16.
Prior to 1 July 2019, the Group treated its leases of property, plant and equipment as operating leases pursuant to NZ IAS 17 Leases, with lease payments
recognised through profit or loss on a straight-line basis over the term of these leases.
Effective 1 July 2019, NZ IFRS 16 eliminates the lessee’s classification of leases as either finance leases (on balance sheet) or operating leases (off
balance sheet) and introduces a single lessee accounting model. Applying the new model, a lessee is required to recognise a right-of-use (or leased) asset
and a corresponding lease liability (reflecting the present value of future lease payments) at the date at which the leased asset is available for use unless
the term of the lease is 12 months or less (a short-term lease) or the underlying leased asset is of low value (low-value lease). Lease payments are then
allocated between the lease liability recognised and finance costs, with the amount of finance costs charged to profit or loss over the lease term using the
effective interest rate method on the outstanding lease liability for each reporting period.
As a consequence, the way lease payments are recognised in profit or loss changes under NZ IFRS 16, with the Group now recognising a depreciation
charge for right-of-use assets and interest expense on lease liabilities, whereas previously, the Group recognised an operating lease expense over the term
of the lease.
The application of NZ IFRS 16 does not impact the Group’s cash flow or its ability to comply with its debt covenants because all changes effected by NZ
IFRS 16 are not required to be taken into account for the purpose of calculating financial covenants pursuant to the terms of the Group’s facility agreement
with the Bank.
6,338
Provision for make good
Provision for make good
Lease liabilities
LEASES AND RIGHT-OF-USE ASSETS
Lease liabilities
Impact of the adoption of NZ IFRS 16
Total non-current liabilities
Total adjustments - Assets
$7,831
Total current liabilities 1,443
Liabilities
Non-current liabilities
7,831
1,438
6,388
50
$000
The operating lease commitments as at, and for the year ended, 30 June 2019, to the extent that they relate to leases of identifiable assets with a lease
term of 12 months or more or which were not low value, were brought onto the statement of financial position on 1 July 2019.
Some property leases contain an extension option that can be exercised at the discretion of the Group. Where an extension is reasonably certain of being
exercised, that extension period and related costs are recognised in the Statement of Financial Position as additional right-of-use (or leased) asset and
additional lease liability.
Certain practical expedients permitted by NZ IFRS 16 were adopted in applying NZ IFRS 16 for the first time as follows:
• use of a single discount rate for portfolio of leases with reasonably similar characteristics;
• use of onerous contract assessment under NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial
application instead of performing an impairment review under NZ IAS 36 Impairment of Assets;
• accounting for operating leases with remaining lease terms of less than 12 months as at 1 July 2019 as short-term leases;
• exclusion of initial direct costs for the measurement of right-of-use assets at the date of initial application;
• use of hindsight in determining the lease term where the contract contains options to extend the lease; and
• the election not to reassess whether a contract is, or contains, a lease at the date of initial application, with reliance placed on NZ IAS 17 and NZ IFRIC 4
Determining whether an Arrangement contains a Lease for contracts entered into before the transition date.
Summary of the impact on the Statement of Financial Position on the adoption of NZ IFRS 16:
Adoption date
1 Jul 2019
Non-current assets
Property, plant and equipment – right-of-use
Total adjustments - Liabilities
$7,831
5
Page 13

Effect of discounting using incremental borrowing rates at 1 July 2019
Balance Additions DepreciationBalance
1 Jul 2019
30 Jun 2020
$000$000$000$000
Buildings 6,381 22 (1,116) 430
Other assets 1,450 225 (663) -
Total
$7,831 $247 ($1,779)$430
BalanceBalance
1 Jul 2019
30 Jun 2020
$000$000
Total$7,776 $3,569
Non-current 6,338 2,224
Current 1,438 1,345
Total$7,776 $3,569
Remeasurement
Right-of-use assets
The reconciliation of right-of-use assets recognised on initial application of NZ IFRS 16 as at 1 July 2019 with those as at 30 June 2020 by class is set out
below:
$7,776
6,338
1,438
$7,776
A weighted average discount rate of 7.5% was used to determine the present value of lease liabilities as at 1 July 2019.
Lease liabilities recognised at 1 July 2019
Non-current
Lease liabilities
The reconciliation of lease liabilities recognised on initial application of NZ IFRS 16 as at 1 July 2019 with those as at 30 June 2020 is set out below:
Remeasurement
5,131
10,330
Reconciliation between operating lease commitments in accordance with NZ IAS 17 as at 30 June 2019 and lease liabilities recognised on initial
application of NZ IFRS 16 as at 1 July 2019:
$000
5,510
(266)
Operating lease commitments as at 30 June 2019
Less short-term leases (less than 12 months) not recognised
AdditionsRepayment
$000
$243 ($1,490)($2,960)
Lease liabilities were remeasured at the balance date to recognise the fact that it was no longer reasonably certain that the Group would be exercising the
option to renew the lease of a property as a consequence of the transformation to the all-wool model.
(45)
(1,012)
($2,909)
Current
Lease liabilities recognised as at 1 July 2019
Impairment losses
$000
(1,897)
$000$000
(2,554)
$000
($2,960)
(2,960)
-
Less low-value leases not recognised
Add adjustments for lease extensions reasonably certain to be exercised
Impact of the adoption of NZ IFRS 16 (continued)
Based on the Group's assessment of the carrying value of property, plant and equipment and other assets for impairment as discussed at note 6a
(Property, plant and equipment) to the financial statements, all of the Carpet cash-generating unit's right-of-use assets with a carrying value of $2,909,000
were impaired. The Board approved the $2,909,000 impairment of right-of-use assets in addition to the $7,077,000 impairment of plant and equipment and
other assets as disclosed at note 6a (Property, plant and equipment) to the financial statements.
Page 14

Revenue
Cost of sales
Gross profit
Other income and gains
Distribution expenses
Administration expenses
Restructuring costs
Result from operating activities
Net finance costs
Loss before tax
Tax expense
Loss after tax
Cost of sales
Distribution expenses
Administration expenses
Net finance costs
Short term lease expense
Low-value asset lease expense
Total
Impairment of right-of-use
assets
Impact of the adoption of NZ IFRS 16 (continued)
-
-
(2,909)
(2,909)
Assuming application of NZ
IAS 17
Impact of NZ IFRS 16Reported result
$000$000
$000
Impairment losses
$000
-
-
-
-
-
Summary of the impact of NZ IFRS 16 on the Income Statement for the year:
(18,334) (208) (21,451)
-
(19,081) 42 (19,039)
(6,715) 19 (6,696)
23,352 186 23,538
35
Basic and diluted earnings per
share (cents)
(1,186) (1,186) -
117,981 117,981
(94,629) 186 (94,443)
(5,663) 81 (5,582)
(1,999)
(2,909)
(7,077)
-
- 35
-
-
(2,909)
-
(2,909)
(4.2)
Impairment of plant and
equipment
(31.2)
Analysis of the impact of NZ IFRS 16 on the Income Statement:
Lease payments booked to
lease liabilities in the
Statement of Financial
Position
Additional depreciation charge
for right-of-use assets
recognised in profit or loss
Additional finance costs on
lease liabilities recognised
in profit or loss
Impact on Income Statement for
year ended 30 June 2020
(45)
(850) - 186
$000
- -
Expense recognised in profit or
loss
$2,026 ($1,779)($536)($289)
822 (780) - 42
168 (149) - 19
Short-term lease and low-value asset lease expense for the year:
1,036
($311)
(536) (536)
(266)
(26.7) (0.3)
$000$000$000$000
(536) (2,535)
(12,671) (289) (15,869)
(10,672) 247 (13,334)
(7,077)
Page 15

Estimates, judgements and assumptions
($2,337)
The Group’s leases predominantly relate to buildings, forklifts and motor vehicles. A right-of-use (or leased) asset and a corresponding lease liability
(reflecting the present value of remaining lease payments) are recognised at the date on which the leased asset is available for use.
- to interest expense (now included in interest paid within cash flows from operating activities) (536)
Cash outflow has been reallocated:
Accounting policy
Summary of the impact of NZ IFRS 16 on the presentation of the Consolidated Statement of Cash Flows for the period:
Prior to the adoption of NZ IFRS 16, the total cash outflow relating to operating leases were included in cash paid to suppliers and employees within cash
flows from operating activities.
Right-of-use assets are depreciated over their expected lease terms on a straight-line basis. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the asset or the site on which it is located, less any lease
incentives received.
Lease liabilities are measured at the present value of the remaining lease payments, discounted using a discount rate derived from the Group’s incremental
borrowing rate where the interest rate implicit in the lease is not readily available. Lease liabilities are amortised using the effective interest rate method.
Lease liabilities are remeasured when there is a change in future lease payments if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying value of
the right-of-use asset, or it is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of short-term and low-value assets. Short-term leases are leases
with a lease term of 12 months or less. Low-value leases are those for which the underlying asset is of low value. Payments associated with short-term
leases and low-value leases are recognised as an expense in the Income Statement on a straight-line basis over the lease term.
The Group has also elected to not separate in respect of motor vehicle leases non-lease components from lease components and instead account for each
lease component and any associated non-lease component as a single lease component.
- to lease liabilities (treated as repayment of lease liabilities and now included in repayment of lease liabilities
within cash flows from financing activities)
(1,490)
- to short-term and low-value leases not included in the measurement of lease liabilities (continues to be
included in cash paid to suppliers and employees within cash flows from operating activities)
(311)
Total cash outflow reallocated($2,337)
Following the adoption of NZ IFRS 16, the cash outflow is dealt with as follows in the Statement of Cash Flows:
Year ended 30 June 2020
$000
Total cash outflow relating to operating leases (previously included in cash paid to suppliers and employees
within cash flows from operating activities)
Impact of the adoption of NZ IFRS 16 (continued)
The assessment of the incremental borrowing rate used to determine the present value of lease liabilities requires significant judgement.
Page 16

4.
Revenue
Major customers
Australia 1,015 665
$23,755
$35,620
None of the Group’s external customers contributed revenues in excess of 10% of the Group’s total revenues.
30 Jun 202030 Jun 2019
$000$000Non-current assets
New Zealand 22,740 34,955
65,012 78,316
Australia 50,071 52,640
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.
20202019
$000$000
· wool acquisition (Wool).
An operating segment is a component of the Group:
· that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with
any of the Group’s other components;
· whose operating results are regularly reviewed by the Group’s chief operating decision maker - in this case, the Chief Executive Officer - to make
decisions about the resources to be allocated to the segment and to assess its performance; and
· for which discrete financial information is available.
$135,234
As atAs at
$117,981
All inter-segmental transactions included in revenue and operating expenses for each segment are on an arm’s-length basis. Inter-segmental sales during
the year and intercompany profits on stocks at balance date are eliminated on consolidation.
Geographical areas
This section deals with the financial performance of the Group and addresses, among other things, the financial performance of the Group’s reportable
segments and the key areas that impact on the Group’s profitability, including operating revenue, other income, gains/losses on sale of property, plant and
equipment, expenses and taxation.
4a. Segment performance
Reportable segments
The Group’s reportable and operating segments are:
· carpet sales and manufacturing (Carpet); and
Rest of the world
2,898
4,278
New Zealand
Inter-segment transactions
FINANCIAL PERFORMANCE
Page 17

202020192020201920202019
$000$000$000$000$000$000
101,135 113,059 16,846 22,175 117,981 135,234
- - 1,788 3,277 1,788 3,277
Total revenue 101,135 113,059 18,634 25,452 119,769 138,511
(1,788) (3,277)
$117,981 $135,234
3,484 7,721 102 928 3,586 8,649
(2,532) (3,339) (151) (140)
(2,683) (3,479)
(1,649) - (130) - (1,779) -
(697) 4,382 (179) 788 (876) 5,170
(1,186) - - - (1,186) -
(7,077) (6,129) - - (7,077) (6,129)
(2,909) - - - (2,909) -
- (2,362) - - - (2,362)
(11,869) (4,109) (179) 788 (12,048) (3,321)
50 (30)
(1,336) (1,543)
(13,334) (4,894)
(2,535) (1,790)
- 644
- (11,884)
(15,869) (17,924)
(5,582) 1,144
($21,451)($16,780)
202020192020201920202019
$000$000$000$000$000$000
67,474 96,300 2,507 3,034 69,981 99,334
- -
$69,981 $99,334
2,067 4,328 52 377 $2,119 $4,705
19,363 21,496 1,181 2,349 20,544 23,845
15,800 20,500
$36,344 $44,345
Total
4a. Segment performance (continued)
Carpets sales and
manufacturing
Wool acquisition
Impairment of goodwill
Segment result after restructuring and impairment
Elimination of inter-segment profits
Unallocated corporate costs
Results from operating activities
Net finance costs
Elimination of inter-segment revenue
Segment result before depreciation, restructuring related
expenses and impairment
Depreciation - right-of-use assets
Segment result before restructuring and impairment
Restructuring costs
Impairment of plant and equipment
Depreciation - owned assets
Impairment of right-of-use assets
External revenue
Inter-segment revenue
Consolidated revenue
Total assets
Capital expenditure
Reportable segment liabilities
Unallocated liabilities - Loans and borrowings
Total liabilities
Carpets sales and
manufacturing
Wool acquisitionTotal
Reportable segment assets
Unallocated assets
Share of profit after tax of equity-accounted investees
Loss on sale of interest in, and property held by, equity-
accounted investees
(Loss)/Profit before income tax
Income tax benefit/(expense)
(Loss)/Profit after tax for the year
Page 18

Other income
61 -
4b. Earnings per share
Basic and diluted (loss)/earnings per share (EPS)
20202019
$000$000
Sales of goods
Carpet 98,985 111,412
Basic and diluted EPS (cents) (31.2)
(24.4)
4c. Revenue
20202019
(Loss)/Profit after tax attributable to shareholders of the Company ($000)
(21,451)
(16,780)
Weighted average number of ordinary shares outstanding
68,679,098
68,679,098
Accounting policies
Sale of goods
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.
Provision of installation services
Revenue from installation services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date.
The stage of completion of installation services rendered is determined by having regard to the quantity of carpet installed at balance date relative to the
total quantity of carpet required for each contract.
4d. Other income and gains/losses
116,845 134,463
Provision of installation services 1,136 771
Total revenue$117,981
$135,234
Wool fibre 16,846 22,175
Carpet yarn 1,014 876
Installation contracts outstanding at balance date totalled $105,000 (2019: $52,000).
Credit terms for carpet sales are generally no later than 30 days after the month in which invoices are raised and, in the case of wool fibre, within 14 days of
invoice date or on despatch whichever is the earlier.
Total other income and gains/losses$35
$41
4e. Administration expenses
Dividends received 1 2
Net (loss)/gain on sale of property, plant and equipment (35) 35
20202019
$000$000
Rentals received 4 4
65 -
Other services - 6
Total fees paid and payable to KPMG$452
$204
Fees paid and payable to KPMG for:
Audit of financial statements - current year 371 168
Tax services 20 30
The following items of expenditure are included in administration expenses:
20202019
$000$000
Donations$3
$15
Audit of financial statements - additional for prior year
Tax services were in respect of transfer pricing review, R&D incentive tax advice, review of income tax returns and assistance with COVID-19 wage
subsidy applications.
Page 19

2,819
(1,500) -
(1,531)
(468) -
Derecognition of deferred tax assets
4g. Government grants
20202019
$000$000
COVID-19 wage subsidy
Total wage subsidy received -
Employee termination benefits 364 552
Employee benefits 2,568 2,692
Directors’ fees 368 387
Wages, salaries, bonuses and holiday pay 28,300 32,694
4f. Personnel expenses
20202019
$000$000
Interest income - 2
Interest expense - lease liabilities (536) -
Personnel costs are included in cost of sales, distribution expenses and administration expenses in the income statement (except for employee termination
benefits relating to restructuring of the Group’s operations which are classified under restructuring costs).
4h. Net finance costs
20202019
$000$000
Decrease in liability for retiring allowances and long service leave (15) (8)
Total personnel expenses$31,585
$36,317
Interest expense - bank borrowings (1,792)
Interest rate swap - hedge ineffectiveness
Less amount carried forward in inventory
Wage subsidy recognised in income statement
$1,319 -
The Group applied for and received $2,818,870 under the New Zealand Government's COVID-19 wage subsidy scheme. $1,319,222 of the wage subsidy
was recognised in cost of sales, distribution expenses and administration expenses in the income statement, with the balance relating to the employees
involved in the manufacturing of carpet carried forward in inventory at the balance date.
Accounting policies
Government grants which compensate the Group for expenses incurred are recognised in the income statement on a systematic basis over the period, and
against the expenses, to which the grants relate when the grants become unconditional. Grants are reported on a net basis in the same line as the related
expense.
Current year 773 (646)
Adjustment for prior years (9) (99)
20202019
$000$000
Income tax expense/(benefit) in the income statement
Current tax expense/(benefit)
Net finance costs($2,535)
($1,790)
Accounting policies
Net finance costs include interest expense on borrowings and interest income on funds invested. All interest expense and income are recognised in profit
or loss using the effective interest method.
4i. Income tax
Income tax expense/(benefit)$5,582
($1,144)
Adjustment for prior years 9 93
4,818 (399)
764 (745)
Deferred tax expense/(benefit)
Origination and reversal of temporary differences (8,082) (492)
12,891
-
Page 20

202020192020201920202019
$000$000$000$000$000$000
181 - - (1,130) 181 (1,130)
Right-of-use assets
- - - - - -
- - - - - -
100 644 - - 100 644
130 1,124 - - 130 1,124
Lease liabilities 146 - - - 146 -
44 1,193 - - 44 1,193
- 3,625 - - - 3,625
$600 $6,586 - ($1,130)$600 $5,456
4i. Income tax (continued)
Reconciliation of effective tax rate
Loss after tax for the year (21,451) (16,780)
20202019
$000$000
Loss on sale of interest in, and property held by, equity-accounted investees - 3,328
Impairment of goodwill - 661
(4,443) (5,019)
Share of profit after tax of equity-accounted investees - (180)
Income tax expense/(benefit) 5,582 (1,144)
Loss excluding income tax($15,869)
($17,924)
Income tax using the Company’s domestic tax rate of 28% (2019: 28%)
(2,940)
12,890 -
- Impending change in legislation relating to tax depreciation on buildings
Derecognition of deferred tax assets
Income tax expense/(benefit)$5,582
($1,144)
20202019
$000$000
Underprovided in prior years - (6)
Other - 1
Non-deductible expenses 42 36
Effect of tax rate difference in foreign jurisdiction 33 35
AssetsLiabilitiesNet
Property, plant and equipment
Derivatives
Inventories
Imputation credits
Imputation credits available to shareholders of the Company$9,233 $9,232
Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Income tax recognised directly in equity
Derivative financial instruments 38 (86)
Income tax on income and expense recognised directly in equity$38
($86)
Employee benefits
Provisions
Tax loss carry-forwards
Net tax assets/(liabilities)
Deferred tax assets have also not been recognised in respect of temporary differences and tax loss carry-forwards totalling $24,150,000 (2019:
$24,150,000) relating to an Australian subsidiary that currently does not have trading activity on the basis that it is also not probable that future taxable
profit will be available against which the Group can use the benefits therefrom, taking the total deferred tax assets unrecognised to $37,041,000 (2019:
$24,150,000).
In arriving at this view, the Board noted the history of tax losses generated by the Group, the further losses that are expected in FY21 and FY22 as the
Company executes its strategic decision to restructure the business to an all-wool and natural materials business, the significant level of estimation
uncertainty in management's forecasts and the execution risk underlying the transformation and the material change in direction of the business.
Notwithstanding the derecognition of deferred tax assets for accounting purposes, these deferred tax assets remain available to the Group for income tax
purposes.
Deferred tax assets in respect of temporary differences and tax loss carry-forwards totalling $12,891,000 were derecognised (2019: Nil).
Deferred tax assets at the balance date relate to the Group's Australian carpet sales operations where it is expected that there will be taxable profits in
future periods to allow for the utilisation of the deferred tax assets.
Page 21

Movement in temporary differences during the year:
Recognised on
transition to NZ
IFRS 16
Recognised in
profit or loss
Recognised
in equity
Derecognition
of deferred tax
assets in
profit or loss
Balance
30 June 2020
$000$000$000$000$000
- 4,476 - (3,165) 181
Right-of-use assets
- (2,194) 1,245 - 949 -
- 38 (38) - -
- 612 - (1,156) 100
- (5) - (989) 130
Lease liabilities - 2,177 (349) - (1,683) 146
17 (216) - (950) 44
- 2,273 - (5,898) -
- $8,073 ($38)($12,891)$600
$000
1,614
(86)
55
(108)
(899)
(177)
$399
Estimates, judgements and assumptions
$000
Property, plant and equipment (1,130)
Deferred tax assets and liabilities (continued)
Balance
30 June 2019
4i. Income tax (continued)
Tax loss carry-forwards
3,625
Total$5,456
Employee benefits 1,124
Provisions 1,193
Derivatives -
Inventories 644
Derivatives - 86 -
Inventories 589 - 644
$000$000$000
Property, plant and equipment (2,744) - (1,130)
Balance
Recognised in
profit or loss
Balance
30 June 201830 June 2019
Recognised in equity
Accounting policies
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items
recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable
in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes and is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that it is probable that future taxable profits will
be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group.
Deferred tax assets are reviewed at each balance date and adjusted to the extent that it is no longer probable that sufficient taxable profits will be available
in the future to utilise the deferred tax asset. In arriving at the decision to derecognise deferred tax assets at the balance date, regard was given to the
history of tax losses generated by the Group, the further losses that are expected in FY21 and FY22 as the Company executes its strategic decision to
restructure the business to an all-wool and natural materials business, the significant level of estimation uncertainty in management's forecasts and the
execution risk underlying the transformation and the material change in direction of the business.
Tax loss carry-forwards 3,802 - 3,625
Total
$4,971 $86 $5,456
Employee benefits 1,232 - 1,124
Provisions 2,092 - 1,193
Page 22

5.
CAPITAL AND FUNDING
The allocation of capital between the Group’s specific business segment operations and activities is, to a large extent, driven by the opportunities that exist
within each of these segments and the optimisation of the return achieved on the capital allocated. The process of allocating capital to specific business
segment operations and activities is determined by the Chief Executive Officer in consultation with the Board and is therefore undertaken independently of
those responsible for the operation.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board.
There have been no material changes in the Group’s management of capital during the year.
Consistent with best practice, the Group monitors capital on the basis of the leverage. Leverage is calculated as net debt divided by total capital employed.
Net debt is determined as total loans and borrowings (including both non-current and current as shown in the consolidated statement of financial position)
plus bank overdraft less cash and cash equivalents. Total capital employed is calculated as equity as shown in the consolidated statement of financial
position plus net debt financing assets in operation.
This section looks at the Group’s two key sources of funding, how it manages its funding and other related matters.
5a. Capital management
The Group’s capital includes share capital, reserves and retained earnings.
The Group’s capital management policy is aimed at maintaining a strong capital base so as to maintain investor, creditor and market confidence in the
Group and to enable it to continue to fund the ongoing needs of the business and to sustain its future development.
The impact of the level of capital on shareholders’ return is also recognised, as is the return to shareholders in the form of dividends paid and growth in
share price, and the Group works to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and
security afforded by a sound capital base.
The Group is not subject to any externally imposed capital requirements, except that one of the covenants with its Bank requires total equity, after
deducting intangibles, to be maintained at a pre-determined percentage of total tangible assets. There is satisfactory headroom in this covenant at balance
date.
Page 23

5b. Share capital, dividends and reserves
Share capital
20202019
Number of ordinary shares issued 68,679,098
68,679,098
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New Zealand dollars at
exchange rates at the reporting date. The income and expenses of foreign operations are translated to New Zealand dollars at exchange rates at the dates
of the transactions.
The foreign currency translation reserve comprises all exchange rate differences arising from the translation of the financial statements of foreign
operations and the translation of liabilities designated as hedges against the Company’s net investment in a foreign operation.
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and
investing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition,
derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss.
Where derivatives qualify for hedge accounting, changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are
recognised in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are
recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income remains there until the forecast transaction
occurs at which time the gain or loss is transferred to profit or loss. When the hedge item is a non-financial asset, the amount recognised in the cash flow
hedging reserve is transferred to the carrying amount of the asset when it is recognised. In other cases, the amount recognised in the cash flow hedging
reserve is transferred to profit or loss in the same year that the hedged item affects profit or loss.
The cash flow hedging reserve represents the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to
hedged transactions that have not yet occurred.
Foreign currency translation reserve
All issued shares are fully paid up and have no par value.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and one vote per share at meetings of the Company. All
shares rank equally with regard to the Company’s residual assets.
Dividends
No dividends were paid during the year (2019: Nil).
The Board has not declared a final dividend in respect of the current year ended 30 June 2020 (2019: Nil).
Cash flow hedging reserve
Page 24

Nominal
interest rate
2020
Notional value
2020
Fair value 2020
Nominal
interest rate
2019
Notional value
2019
Fair value 2019
%$000$000%$000$000
- - 20,500 20,500
15,800 15,800 - -
7.3$15,800 $15,800 7.0 $20,500 $20,500
5c. Loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s
exposure to interest rate risks, see note 8 (Risks and financial instruments) to the financial statements.
The Group’s funding facilities are provided by Bank of New Zealand and National Australia Bank Limited (together, “the Bank”).
The Group had total New Zealand dollar-denominated bank funding facilities of $20,000,000 at balance date, with $15,800,000 drawn down at that date
(2019: $23,400,000 and $20,500,000 respectively).
The Group had no other borrowings at balance date (2019: Nil).
Certain companies in the Group have granted in favour of Bank of New Zealand, as security agent for the Bank, a first-ranking composite general security
deed and cross guarantee securing all obligations of the Group to the Bank, including obligations for the payment and repayment of moneys due, owing or
payable by the Group to the Bank. The property-owning companies in the Group have also granted in favour of Bank of New Zealand first-ranking
mortgages in respect of land and buildings as security for all obligations of the Group to the Bank, including obligations for the payment and repayment of
moneys due, owing or payable by the Group to the Bank (see note 6a (Property, plant and equipment) to the financial statements).
The Group negotiated the extension of its funding facilities to 1 July 2021 prior to balance date, with reductions to facility limits of $7,500,000 on 30
September 2020, $2,500,000 on 31 December 2020 and $2,000,000 on 30 April 2021 consistent with management’s inventory and debt reduction targets
for FY21.
In extending the funding facilities, the Group also negotiated its financial covenants with the Bank, with revenue, inventory and equity ratio targets reset to
reflect the Group’s latest financial forecasts.
The Group also had overdraft facilities totalling $1,598,000 at the balance date. These facilities are repayable on demand and none of these were utilised
at that date.
The Group had financial covenants with the Bank that required the Group to meet, amongst other things, certain EBITDA, revenue, inventory and equity
ratio targets during the year. The Group was not in breach of these financial covenants throughout the year ended 30 June 2020 as it was able to
renegotiate these with the Bank in advance where required to better reflect operating conditions, including the challenges brought on by COVID-19, and
financial performance as the year progressed.
Details of the Group’s loans and borrowings at 30 June are as follows:
Non-current
Current
Total secured bank loans
As discussed at note 9g (Events after balance date) to the financial statements, on 17 September 2020, the shareholders of Cavalier approved the sale
and leaseback of the Auckland property with settlement set down for early October 2020. Part of the net proceeds of sale of the Auckland property will be
used to fully repay Bank debt on settlement date.
Page 25

6.
Land and
buildings
Plant and
equipment
Other assetsTotal
$000$000$000$000
24,159 68,848 16,169 110,133
387 221 892 2,119
- (1,321) (2,845) (4,166)
282 350 289 -
$24,828 $68,098 $14,505 $108,086
23,734 72,603 14,601 111,057
434 694 2,621 4,705
(9) (4,511) (1,109) (5,629)
- 62 56 -
$24,159 $68,848 $16,169 $110,133
2,651 63,938 13,380 79,969
338 1,524 556 2,418
- 3,874 2,548 7,077
- (1,271) (2,832) (4,103)
$2,989 $68,065 $13,652 $85,361
2,403 61,444 12,068 75,915
257 2,568 654 3,479
- 4,369 1,760 6,129
(9) (4,443) (1,102) (5,554)
$2,651 $63,938 $13,380 $79,969
$21,839 $33 $853 $22,725
$21,508 $4,910 $2,789 $30,164
$21,331 $11,159 $2,533 $35,142
Auckland property
Other assets
6a. Property, plant and equipment
Under construction
$000
Cost or deemed cost
Balance at 1 July 2019 957
ASSETS EMPLOYED
This section covers non-current assets, being property, plant and equipment and other assets that the Group employs in the production and sale of carpet,
and the acquisition and sale of wool fibre, to generate revenues and profits.
Disposals -
Transfers (118)
Balance at 30 June 2019
$957
Balance at 30 June 2020$655
Balance at 1 July 2018 119
Additions 956
Additions 619
Disposals -
Transfers (921)
Depreciation for the year -
Impairment losses provided -
Disposals -
Disposals -
Balance at 30 June 2020$655
Balance at 1 July 2018 -
Depreciation and impairment losses
Balance at 1 July 2019 -
Depreciation for the year -
Impairment losses provided 655
Other assets comprise fixtures and fittings (including leasehold improvements and display stands), computer equipment, motor vehicles and office
equipment.
Impairment
Impairment losses in respect of plant and equipment and other assets of $7,077,000 were recognised for the year (2019: $6,129,000).
At 30 June 2020, the carrying value of the Group’s net assets exceeded its market capitalisation by $36,500,000 (before impairment of right-of-use assets
and plant and equipment and other assets and derecognition of deferred tax assets). In addition, the Group’s strategic decision to restructure its business
to an all wool and natural materials business represents a fundamental change to the business model of Cavalier and has a substantial impact on projected
cashflows and the certainty of achieving those forecasts. As a result, the Group conducted an impairment test of the carrying value of property, plant and
equipment and other assets that are allocated to the carpet sales and manufacturing cash-generating unit (“Carpet CGU”) at the balance date.
The carrying value of property, plant and equipment was tested for impairment by determining the value in use of the Carpet CGU and assessing the extent
to which the carrying value of these assets exceeds their value in use, with an impairment loss recognised to the extent of that excess. The value in use of
the Carpet CGU was determined by discounting Carpet CGU cash flow projections for the next five years, taking into consideration historic data and
forecast economic conditions as well as the five-year modelling that had been undertaken for the transformation and the potential impact of COVID-19.
Balance at 30 June 2019
-
Carrying amounts
At 30 June 2020 -
At 30 June 2019
$957
The Group’s property, plant and equipment includes the Auckland property with a carrying value of $12,877,000 that was sold and leased back subsequent
to the balance date. The property was not classified as held for sale at the balance date as other funding arrangements for the transformation to an all-
wool and natural materials organisation were being considered at that time, and the final offer that was made for the property subsequent to the balance
date was subject to consideration and approval of the Directors, Overseas Investment Office (OIO) and shareholder approval.
The Board is not considering further sale and leaseback of the Group’s Napier and Whanganui properties at this time.
The Carpet CGU comprises the carpet sales and manufacturing unit which has carpet yarn spinning plants in Napier and Whanganui and a carpet tufting
plant in Auckland. Because the carpet sales and manufacturing unit produces and sells largely a single product, being carpet, it is not possible for future
cash inflows to be attributed to each of the three plants which are interdependent - making the carpet and sales manufacturing unit the lowest cash-
generating unit.
The Carpet CGU is identical to the Carpet segment in note 4a (Segment performance) to the financial statements.
At 1 July 2018
$119
Page 26

The land and buildings of the Group have not been impaired as their fair values exceed their carrying values at the balance date.
The key assumptions underlying the five-year cash flow projections are summarised below:
• a decrease in woollen carpet sales volumes by 5%, and a sell down of all non-wool inventory in FY21;
• woollen carpet sales volumes from FY22 to FY25 up on the previous year by between 22% and 37% every year as the strategic initiatives associated
with the transformation to an all-wool and natural materials business model are implemented and expected to gain traction;
• woollen carpet sales prices up by 1.5% in FY22 and then remaining unchanged thereafter;
• average wool price, scoured and delivered, of $4.23/kg from FY22 to FY25;
Under construction
Items being constructed for future use are held as part of property, plant and equipment under construction. The carrying amounts of these represent the
costs incurred at balance date and will be transferred to the appropriate classification of property, plant and equipment on completion. Initial cost includes
the purchase consideration and those costs directly attributable in bringing the asset to the location and condition necessary for its intended use. These
costs include site preparation costs, installation costs, borrowing costs, unrecovered operating costs incurred during planned commissioning and the costs
of obtaining consents.
Costs cease to be capitalised when all the activities necessary to bring the asset to its location and condition for its intended use are complete.
Depreciation
Depreciation is recognised in the income statement over the estimated useful lives of each part of an item of property, plant and equipment. Land is not
depreciated.
The principal rates used for the current and comparative periods are as follows:
At balance date, the Group’s property, plant and equipment were subject to various registered charges in favour of the Group’s bankers as security for the
Group’s banking facilities and arrangements (see note 5c (Loans and borrowings) to the financial statements).
Accounting policies
Recognition and measurement
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and
direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing
the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as
part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of
property, plant and equipment.
• average NZD/AUD exchange rate of between 0.8846 and 0.9067 from FY22 to FY25;
• long term growth rate of 1.5% (2019: 1.5%).
Management believes that the key assumptions used, and estimates made, represent the most realistic assessment of the value in use of property, plant
and equipment and other assets allocated to the Carpet CGU. The Group’s restructuring represents a material change in direction of the business and the
forecasts include a significant level of estimation uncertainty and execution risk which has been reflected in the discount rate applied to the impairment
model.
Based on this assessment, all the Carpet CGU’s plant and equipment and other assets with a carrying value of $7,077,000 have been impaired. The
Board approved the $7,077,000 impairment of plant and equipment and other assets in addition to the $2,909,000 impairment of the Group’s right-of-use
assets as disclosed at note 3 (Leases and right-of-use assets) to the financial statements.
Security
• post-tax discount rate of 20.0% (pre-tax equivalent of 24.05%) (2019: post-tax discount rate of 12.8% (pre-tax equivalent of 16.7%);
The carrying amount of property, plant and equipment and other assets is tested for impairment whenever there are indicators of impairment.
An impairment loss is recognised if the carrying amount of the cash-generating unit (being the smallest identifiable asset group that generates cash flows
that are largely independent from other assets and groups) to which the property, plant and equipment and other assets is allocated exceeds its
recoverable amount.
The recoverable amount of a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the cash-generating unit.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and
then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
o computer equipment20.0 – 25.0% straight line
o motor vehicles and office equipment
20.0% diminishing value
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
Impairment
· buildings
1.0 - 2.5% straight line
· plant and equipment
6.7 – 10.0% straight line
· other assets
o fixtures and fittings10.0% straight line
Page 27

7.
Accounting policy
The assessment of the recoverable amount of the Carpet CGU requires judgements, estimations and assumptions regarding the various inputs underlying
the five-year cash flow projections of the Carpet CGU as well as the discount rate used to determine the net present values of those future cash flows.
6b. Capital commitments
The Group had outstanding commitments for the purchase of plant and equipment of $469,000 at balance date (2019: $361,000).
6a. Property, plant and equipment (continued)
Estimates, judgements and assumptions
Trade receivables due from trade customers 12,148 11,808
Other receivables 17 78
Cash and cash equivalents comprise cash on hand, deposits held at call with financial institutions and bank overdrafts used for cash management
purposes.
7b. Trade receivables, other receivables and prepayments
20202019
$000$000
WORKING CAPITAL
This section reviews the level of working capital the Group generates and utilises in its normal day-to-day operating activities. The Group’s working capital
includes short-terms assets (cash and cash equivalents, trade receivables, other receivables and prepayments and inventories) and liabilities (trade
payables and accruals).
7a. Cash and cash equivalents
Cash and cash equivalents at balance date comprise cash on hand and deposits held with the Bank.
Accounting policy
12,547 16,653
1,439 1,639
18,095 29,386
Impairments losses on trade receivables and other receivables are assessed collectively and on a portfolio basis based on the number of days overdue
using the expected loss model, taking into account the historical loss experienced in portfolios with a similar number of days overdue as well as current
conditions and forecast of future economic conditions.
Trade receivables and other receivables are recognised initially at transaction price and subsequently at amortised costs less impairment losses.
20202019
$000$000
7c. Inventories
Prepayments 442 458
$12,607
$12,344
The Group's approach and policy with respect to, and quantitative disclosure of, credit risk are discussed at note 8 (Risks and financial instruments) to the
financial statements.
Raw materials and consumables
Work in progress
Finished goods
$32,081
$47,678
Carrying amount of inventories subject to retention of title clauses
$1,851
$2,004
Inventory provision at 1 July 2,576 2,307
Change in provision during the year 2,165 269
$4,741
$2,576 Inventory provision at 30 June
Additional inventory provisioning was taken up during the year largely against non-wool carpet inventory as a consequence of the Group’s transformation to
the all-wool and natural materials business model and the sell down of non-wool inventory.
Page 28

20202019
$000$000
Trade payables 8,705 15,102
7c. Inventories (continued)
Accounting policies
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes
expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and
work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated
selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Estimates, judgements and assumptions
At balance date, additional judgements and estimates were involved with respect to the provisioning of non-wool carpet inventory as a consequence of the
Group’s transformation to the all-wool and natural materials business model and the sell down of non-wool inventory as discussed at note 2c (General
information relating to preparation of financial statements - Critical accounting estimates and judgements and significant accounting policies) to the
financial statements. In determining the provision against non-wool inventory, management have assessed normal inventory turns and quantities on hand,
while also considering colour and popularity of the range and the pricing strategy put in place to manage the sell-down of inventory. The provision also
includes an estimate for inventory that may remain unsold towards the end of the sell-down programme and may therefore require additional discounting.
7d. Trade payables and accruals
Inventory provisions are recognised for oddments and obsolete, aged and discontinued inventories to arrive at their likely net realisable value.
Judgement and estimates are applied in identifying and categorising obsolete, aged and discontinued inventory and determining the level of provisioning
that is required – with a range of factors including inventory rationalisation plans, consumer demand and trends, available distribution channels and
historical sales and margin data considered.
Accruals 1,912 1,912
$10,617
$17,014
Page 29

8.
Management has a credit policy in place under which each new customer is individually analysed for credit worthiness and assigned a purchase limit before
the standard payment and delivery terms and conditions are offered. Because of the Group’s customer base, there is no need for the Group to rely on
external ratings. In most cases, bankers’ references, trade credit insurance approvals and/or credit references from other suppliers are considered
adequate. Purchase limits are reviewed on a regular basis.
In order to determine which customers are classified as having payment difficulties, the Group applies a mix of duration and frequency of default. The
Group does not generally require collateral in respect of trade and other receivables.
The Group’s exposure to credit risk is mainly influenced by its customer base. As such, it is concentrated to the default risk of its industry. However,
geographically, there is no credit risk concentration, with the Group’s customers spread throughout New Zealand, Australia and other overseas markets.
Credit risk exposure with respect to debtors is limited by stringent credit controls, by the utilisation of irrevocable letters of credit and trade credit insurances
wherever required, and by the large number of customers within the Group's customer base.
The Group does not invest in securities, but accepts that surplus cash and cash equivalents may arise from time to time during the course of its
management of cash. In these instances, it requires these surplus cash and cash equivalents to be deposited on call and only with counterparties approved
by the Board as having the required credit ratings.
Foreign currency forward exchange contracts and interest rate swaps have been entered into with counterparties approved by the Board as having the
required credit ratings. The Group's exposure to credit risk from these financial instruments is limited because it does not expect the non-performances of
the obligations contained therein due to the high credit ratings of the financial institutions concerned. The Group does not require any collateral or security
to support these financial instruments.
This section identifies the risks faced by the Group, explains the impact of these risks on its financial position, performance and cash flows, outlines the
Group’s approach to financial risk management and highlights the financial instruments used to manage risks.
Management commentary
Exposure to credit, liquidity, foreign currency and interest rate risks arises in the normal course of the Group’s businesses.
The Group enters into derivative financial instruments in the ordinary course of business to manage foreign currency and interest rate risks in accordance
with the treasury policy approved by the Board. A financial risk management committee, composed of senior management and operating under the Board-
approved treasury policy, ensures that procedures for derivative instrument utilisation, control and valuation, risk analysis, counterparty credit approval, and
ongoing monitoring and reporting are adhered to.
The Group manages commodity price risks through negotiated supply contracts and forward physical contracts. However, because these contracts are,
generally, in respect of raw material and utility purchases for own use, they are not accounted for as financial instruments.
Credit risk
RISKS AND FINANCIAL INSTRUMENTS
The amount and timing of collection of trade receivables and estimate of expected credit losses under NZ IFRS 9 Financial Instruments have been
considered and included in the financial statements. There has been no indication of a significant change in amounts or timing of receipts from trade
receivables as at 30 June 2020 due to the impact of COVID-19.
Page 30

8.
RISKS AND FINANCIAL INSTRUMENTS (continued)
The Group’s policy allows management to hedge up to between 25% and 75% of the Group’s core loans and borrowings without the prior approval of the
Board having first been obtained.
The Group enters into foreign currency contracts within policy parameters to manage the risk associated with forecast sales and purchases. The Group’s
policy allows management to hedge up to 12 months forecast sales and purchases without prior approval of the Board having first been obtained.
The Group does not engage in speculative transactions or hold derivative financial instruments for trading purposes and requires that exposures to foreign
currency risks, and details of all outstanding derivative instruments, are reported to and reviewed by the Board on a monthly basis.
The Group applies a hedge ratio of 1:1. The method used to assess hedge effectiveness is Critical Match Terms whereby the hedging instrument and the
hedged item are matched to the key terms. In the hedge relationship, the main cause of ineffectiveness includes a change in the critical terms, for
example, the timing of the transaction.
Interest rate risk
Interest rate risks are continually monitored having regard to the circumstances at any given time.
Interest rate swaps have been entered into to hedge a proportion of the Group’s exposure to interest rate fluctuations by ensuring that there is an
appropriate mix, after having regard to the circumstances prevailing at the time, of fixed and floating rate exposure within the Group’s total loans and
borrowings.
Management commentary (continued)
Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis. In
general, the Group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has credit lines
in place to cover potential shortfalls.
The Group’s contractual cash flows and liquidity risk profile are set out in detail on page 33.
Foreign currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases,
receivables and payables are denominated. All entities in the Group have New Zealand dollars ($) as their functional currency.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and
timing of the respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is expected to be, and has been,
effective in offsetting changes in cash flows of the hedged item using the critical matched terms method.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates,
tenors, repricing dates and maturities and the notional or par amounts. The Group assesses whether the derivative designated in each hedging relationship
is expected to be effective in offsetting changes in cash flows of the hedged item using the critical matched terms method.
As a result of the Group's transformation to an all-wool and natural materials organisation, it expects to generate funds of approximately $17,000,000 from
the sell-down of non-wool inventory. Additionally, subsequent to balance date (as discussed at note 9g (Events after balance date) to the financial
statements), the Group entered into an agreement for the sale and leaseback of its Auckland property, with the $24,000,000 net proceeds of sale to provide
it with the funds to settle the Group's bank debt and provide sufficient liquidity to fund its transformation and settle its ongoing financial obligations for at
least 12 months after the date of issuing these financial statements.
Page 31

8.
Current
0 – 30 days
past due
31 – 120 days
past due
Total
0%0%0%
11,275 754 103 12,207
- - - (42)
0%0%0%
9,873 1,574 313 11,899
- - - (13)
RISKS AND FINANCIAL INSTRUMENTS (continued)
Quantitative disclosures
Credit risk
The carrying amount of financial assets represents the Group’s maximum credit exposure.
The Group has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible
past due status.
Trade and other receivables$12,165
$11,886
The status of trade and other receivables at the reporting date is as follows:
More than 120 days past
due
2020
Australia 4,431 5,322
Other regions 411 443
The Group’s maximum exposure to credit risk for trade and other receivables by geographic regions is as follows:
20202019
$000$000
New Zealand 7,323 6,121
In summary, trade and other receivables are determined to be impaired as follows:
20202019
$000$000
Trade and other receivables - gross 12,207 11,899
2019
Expected loss rate9%
Gross carrying amount – trade and other receivables 139
Loss allowance (13)
Expected loss rate56%
Gross carrying amount – trade and other receivables 75
Loss allowance (42)
Balance at 1 July (13) (43)
Impaired trade receivables written off - -
Individually impaired trade receivables relate to a small number of customers where the amounts involved are immaterial. In the case of insolvency, the
Group generally writes off the receivable in full unless there is clear evidence that a receipt, whether directly or by way of a claim under the Group’s trade
credit insurance policy, is highly probable.
The Group adopts the expected loss model in assessing its trade and other receivables for impairment. In doing so, it determines impairment on a forward-
looking basis, taking into account not only past events and current conditions, but also forecast of future economic conditions. Bad debts are written off
when they are considered to have become uncollectable.
The details of movements in the impairment provision are as follows:
20202019
$000$000
Individual impairment provisions (42) (13)
Trade and other receivables - net$12,165
$11,886
Changes in the impairment provision are included in distribution expenses in the income statement.
Changes in impairment provision (29) 30
Balance at 30 June($42)
($13)
Page 32

8.
Statement
of financial
position
Total
contractual
cash flows
6 months or
less
6-12 months 1-2 years2-5 years
Greater than 5
years
$000$000$000$000$000$000$000
15,800 16,206 6,048 2,158 8,000 - -
8,705 8,705 8,705 - - - -
Lease liabilities 3,569 3,569 689 656 1,104 1,119 -
$28,074 $28,480 $15,442 $2,814 $9,104 $1,119 -
560 571 166 68 137 200 -
(20,478) (16,775) (3,703) - - -
20,496 16,744 3,752 - - -
12 18 (31) 49 - - -
$572
732
(160)
$572
20,500 21,440 403 403 20,634 - -
15,102 15,102 15,102 - - - -
$35,602 $36,542 $15,505 $403 $20,634 - -
621 575 156 114 135 154 16
(22,636) (21,343) (1,293) - - -
21,979 20,738 1,241 - - -
(625) (657) (605) (52) - - -
($4)
649
(653)
($4)
2020
Secured bank loans
Trade payables
Total non-derivative liabilities
Interest rate swaps
Forward exchange contracts
RISKS AND FINANCIAL INSTRUMENTS (continued)
Quantitative disclosures (continued)
Liquidity risk
The following table sets out the contractual undiscounted cash flows for all material financial liabilities (including projected interest costs).
Timing of contractual cash flows
Interest rate swaps
Forward exchange contracts
Inflow
Outflow
Inflow
Outflow
2019
Secured bank loans
Trade payables
Total non-derivative liabilities
Total derivative liabilities
Disclosed in statement of financial position
Under current liabilities
Under current assets
Total derivative liabilities
Disclosed in statement of financial position
Under current liabilities
Under current assets
Total derivative assets
Total derivative assets
Page 33

8.
AUDUSDEUROthers
$000$000$000$000
4,699 320 6 -
(1,745) (1,130) (1) -
2,954 (810) 5 -
14,805 - - -
- (320) - -
17,759 (1,130) 5 -
(17,759) 2,618 - -
- $1,488 $5 -
5,196 178 2 28
(2,412) (4,131) (1) (7)
2,784 (3,953) 1 21
9,992 - - -
- (5,804) - -
12,776 (9,757) 1 21
(12,776) 9,757 - -
- - $1 $21
Foreign currency risk
The Group’s exposure to foreign currency risk can be summarised as follows:
NZD equivalent of these foreign currencies:
2020
Trade receivables
Trade payables
RISKS AND FINANCIAL INSTRUMENTS (continued)
Quantitative disclosures (continued)
Estimated forecast purchases for which hedging is in place
Net cash flow exposure before hedging activity
Forward exchange contracts
Notional amounts
Net unhedged exposure
Net unhedged exposure
2019
Trade receivables
Trade payables
Net statement of financial position exposure before hedging activity
Estimated forecast sales for which hedging is in place
Net statement of financial position exposure before hedging activity
Estimated forecast sales for which hedging is in place
Estimated forecast purchases for which hedging is in place
Net cash flow exposure before hedging activity
Forward exchange contracts
Notional amounts
Page 34

8.
Total
6 months or
less
6-12 months 1-2 years2-5 years
Greater than 5
years
$000$000$000$000$000$000
1,276 1,276 - - - -
(15,800) (15,800) - - - -
(14,524) (14,524) - - - -
- 5,000 - - (5,000) -
($14,524)($9,524) - - ($5,000) -
2,724 2,724 - - - -
(20,500) (20,500) - - - -
(17,776) (17,776) - - - -
- 10,000 - (5,000) (2,500) (2,500)
($17,776)($7,776) - ($5,000)($2,500)($2,500)
RISKS AND FINANCIAL INSTRUMENTS (continued)
Cash and cash equivalents
Secured bank loans
Related derivatives
Effect of interest rate swaps
Total
Secured bank loans
Related derivatives
Effect of interest rate swaps
Total
2019
Financial assets and liabilities
Quantitative disclosures (continued)
Interest rate risk – re-pricing analysis
At balance date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
2020
Financial assets and liabilities
Cash and cash equivalents
Page 35

8.
StrengthenWeakenStrengthenWeaken
$000$000$000$000
30 June 2020
NZD/AUD (+/- 5%)
- - 433 (480)
NZD/USD (+/- 10%)
- - - -
30 June 2019
NZD/AUD (+/- 10%)
- - 413 (504)
NZD/USD (+/- 10%)
- - (374) 457
StrengthenWeakenStrengthenWeaken
10.0% (10.0%)10.0% (10.0%)
$000$000$000$000
($181)$221 - -
- - - -
IncreaseDecreaseIncreaseDecrease
1% point(1% point)1% point(1% point)
$000$000$000$000
$152 ($152)$18 ($18)
($93)$93 $81 ($81)
RISKS AND FINANCIAL INSTRUMENTS (continued)
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term,
however, changes in foreign exchange and interest rates will have an impact on profit.
For foreign exchange contracts that continue to meet the hedge accounting criteria at the balance sheet date to hedge foreign exchange exposures, it is
estimated that a general change in the value of the New Zealand dollar against other foreign currencies as set out below would have no impact on the
Group’s profit or loss before income tax for the years ended 30 June 2020 and 2019. The impact on equity, net of tax, for these foreign exchange contracts,
is disclosed in the table below:
The impact of a change in interest rates by one percentage point on the Group’s profit or loss and OCI is set out as follows:
P&LEquity, net of tax
P&LEquity, net of tax
Impact of the derecognition at balance date of US dollar denominated forward exchange
contracts as at 30 June 2020
Impact of the derecognition at balance date of US dollar denominated forward exchange
contracts as at 30 June 2019
P&LEquity, net of tax
For foreign exchange contracts that do not meet the hedge accounting criteria at the balance sheet date, the estimated impact on the Group’s profit or loss
due to a general change in the value of the New Zealand dollar is disclosed in the table below:
In the year ended 30 June 2019, the Group used a general change in the value of the New Zealand dollar against other foreign currencies of 10%
(including the NZD/AUD) in assessing the impact of changes in currency rates on profit or loss and OCI. The Group has used five percent for the NZD/AUD
for the year ended 30 June 2020 to better reflect volatility in NZD/AUD exchange rates.
Forecast transactions
The Group classifies the forward exchange contracts taken out to hedge forecast transactions as cash flow hedges.
Interest rate impact - Net FY20
Hedging
Interest rate hedges
The Group has a policy of ensuring that between 25% and 75% of its exposure to changes in interest rates on borrowings is on a fixed rate basis.
The critical matched terms method is used to assess hedge effectiveness at inception and on an ongoing basis. As the Group will be repaying bank debt
within the next 12 months as a result of the sale of the Auckland property as set out at note 9g (Events after balance date) to the financial statements, it has
been determined that the interest rate hedges will be ineffective from that time. There was no hedge ineffectiveness in FY19.
Interest rate impact - Net FY19
Page 36

8.
The following relates to items designated as hedging instruments:
Notional
amount
Assets Liabilities
Line item in
statement of
financial
position
Changes in the
value of the
hedging
instrument
recognised in
OCI during the
year
Hedge
ineffectiveness
recognised in
profit and loss
Line item in
profit and
loss that
includes
hedge
ineffectivenes
s
Balance in
CFHR
Average rate of
hedging
$000$000$000$000$000$000
AUD16,675 62 (172)
Derivative
financial
instruments -
assets and
liabilities
(348) - - (77)0.9390
USD1,746
2
98 -
Derivative
financial
instruments
– assets
(44) 60
Cost of
sales
- 0.6624
NZD10,000 - (560)
Derivative
financial
instruments -
liabilities
(529) (468)
Net finance
costs
(92) 2.88% - 4.88%
1
100% of notional amount expiring within 12 months of balance date
Interest rate risk
Interest rate swaps
3, 4
Foreign currency risk
Carrying amount
RISKS AND FINANCIAL INSTRUMENTS (continued)
2020
Forward exchange contracts
– sales and receivables
1, 3
Forward exchange contracts
– inventory purchases
1, 3
4
$5 million of notional amount of interest rate swaps expiring within 6 months of balance date. Balance of $5 million expiring over the next four years. However it is
expected that the interest rates swaps will be settled within 12 months of balance date following the sale of the Auckland property - see note 9g (Events after balance
date) to the financial statements.
2
Includes USD1,019k of foreign exchange contracts relating to inventory purchases which are deemed to be ineffective as at 30 June 2020.
3
Hedge ratio 1:1
Page 37

8.
Notional
amount
Assets Liabilities
Line item in
statement of
financial
position
Changes in the
value of the
hedging
instrument
recognised in
OCI during the
year
Balance in CFHR Hedge ratio
Average rate of
hedging
Maturity date
$000$000$000$000$000
AUD11,680 541 -
Derivative
financial
instruments -
assets
(40) 271 1:10.9142
100% of
notional amount
expiring within
12 months of
balance date
USD6,605 112 (28)
Derivative
financial
instruments –
assets and
liabilities
(231) 44 1:10.6770
100% of
notional amount
expiring within
12 months of
balance date
NZD12,500 - (621)
Derivative
financial
instruments -
liabilities
(36) (621)1:1
2.88% -
4.92%
$2.5 million of
notional amount
expiring within
6 months of
balance date.
Balance over
the next six
years.
RISKS AND FINANCIAL INSTRUMENTS (continued)
Carrying amount
2019
Foreign currency risk
Forward exchange contracts
– sales and receivables
Forward exchange contracts
– inventory purchases
Interest rate risk
Interest rate swaps
Page 38

8.
Fair value
hierarchy
Level 2
$000$000$000$000
160 - 160 160
- 12,165 12,165
- 1,276 1,276
$160 $13,441 $13,601
- - -
- - -
- 15,800 15,800
732 - 732 732
- 15,406 15,406
732 31,206 31,938
$732 $31,206 $31,938
Fair value
hierarchy
Level 2
$000$000$000$000
653 - 653 653
- 11,886 11,886
- 2,724 2,724
$653 $14,610 $15,263
- 20,500 20,500
- 20,500 20,500
- - -
649 - 649 649
- 20,870 20,870
649 20,870 21,519
$649 $41,370 $42,019
RISKS AND FINANCIAL INSTRUMENTS (continued)
Classification and fair values
The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.
2020
Assets
Derivatives
Trade and other receivables
Cash and cash equivalents
Total assets
Hedging
instruments
Amortised
cost
Total carrying
amount
Total assets
Liabilities
Loans and borrowings
Total non-current liabilities
Loans and borrowings
Derivatives
2019
Assets
Derivatives
Trade and other receivables
Cash and cash equivalents
Total carrying
amount
Total liabilities
Liabilities
Loans and borrowings
Total non-current liabilities
Derivatives
Trade and other payables
Total current liabilities
Loans and borrowings
Hedging
instruments
Amortised
cost
Trade and other payables
Total current liabilities
Total liabilities
There were no financial assets or liabilities with fair values classified as Level 1 or Level 3 in the fair value hierarchy.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the
Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred. Financial liabilities are derecognised if the
Group’s obligations specified in the contract expire or are discharged or cancelled.
Derivatives, being forward exchange contracts and interest rate swaps, have been measured at fair value using relevant valuation techniques which include
net present value and discounted cash flow models and comparison with similar instruments for which observable market prices exist. Assumptions and
inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other information used in estimating discount rates
and foreign currency exchange rates.
Page 39

8.
Derivative
assets
Derivative
liabilities
Derivative
assets
Derivative
liabilities
$000$000$000$000
160 (732) 653 (649)
- - - -
160 (732) 653 (649)
(160) 160 (649) 649
- ($572)$4 -
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that
is, derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred.
Master netting or similar agreements
RISKS AND FINANCIAL INSTRUMENTS (continued)
Classification and fair values (continued)
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value, inclusive of transaction costs, and are subsequently measured at amortised cost
using the effective interest rate method less any impairment losses.
The underlying interest rate margins of loans and borrowings, which were renegotiated in June 2020, approximate current margins, and fair value
approximates the present value of future principal and interest cash flows.
Determination of fair values
The fair value of an asset or a liability is measured on a recurring basis. When measuring the fair value of an asset or a liability, the Group uses market
observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
Amounts offset
Net amounts in the statement of financial position
Related amounts that are not offset based on ISDA
Net amounts
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under
such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding are aggregated into a single net
amount that is payable by one party to the other. In certain circumstances – for example, when a credit event such as a default occurs, all outstanding
transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all
transactions.
The ISDA agreements do not meet the criteria for offsetting in the statement of financial position. This is because the Group does not have any currently
legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrences of future events such as a default
on the bank loans or other credit events.
The following table sets out the carrying amounts of recognised derivatives that are subject to master netting agreements:
20202019
Gross amounts in the statement of financial position
Page 40

9.
20202019
$000$000
- 24,544
- 716
- (2,783)
- (10,593)
- (11,884)
- -
CWHCWSACWHCWSA
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - 13,431 72
- - (998) (5)
- - (365) -
Other expenses - - (8,838) (1)
- - 3,230 66
- - (974) (18)
- - 2,256 48
- - - -
- - $2,256 $48
0.00%0.00%27.50%50.00%
CWHCWSACWHCWSA
- - - -
- - - -
- - - -
- - 620 24
- - 72 -
- -
$692 $24
This section includes the remaining information relating to the Group financial statements which is required to be disclosed to comply with financial
reporting standards.
9a. Equity-accounted investees
The Group sold its interest in 27.5%-owned Cavalier Wool Holdings Limited (“CWH”) and the property held by 50%-owned CWS Assets Limited (“CWSA”)
on 30 September 2018.
The details relating to the Group’s investments in CWH and CWSA are set out below:
Carrying value at 1 July
Share of comprehensive income
OTHERS
Current liabilities
Non-current liabilities
Total liabilities
Net assets (100%)
Revenue
Depreciation
$000$000
Cash and cash equivalents
Other current assets
Non-current assets
Total assets
Dividends received
Proceeds of sale of interest in CWH and property in CWSA
Loss on sale of interest in CWH and property in CWSA
Carrying value at 30 June
The following tables summarise the financial information of CWH and CWSA as included in their own financial statements (unadjusted for the percentage
ownership interest held) and the Group’s share of net assets, profit and other comprehensive income of CWH and CWSA as at and to 30 June 2020:
20202019
Share of net assets
Initial transaction costs
Carrying value of interest in equity-accounted investees
Group’s share of profit after tax
Group’s share of changes in fair value of cash flow hedges (net of income
tax)
Percentage ownership interest
20202019
$000$000
Net interest expense
Profit before income tax
Income tax expense
Profit after tax
Changes in fair value of cash flow hedges (net of income tax)
Total comprehensive income (100%)
Group’s share of total comprehensive income of equity-accounted
investees
Page 41

WarrantiesTotal
$000$000
1,040 1,414
- 59
- (164)
(15) (15)
$1,025 $1,294
530 584
495 710
$1,025 $1,294
1,006 3,332
37 49
(3) (1,742)
- (225)
$1,040 $1,414
505 715
535 699
$1,040 $1,414
Utilised during the year - (150) (14)
Released to profit or loss during
the year
- - -
Balance at 1 July 2019
210 150 14
Provided during the year - 59 -
9b. Provisions
Workplace accidentsMake goodOnerous contracts
$000$000$000
Balance at 1 July 2018 210 1,875 241
Provided during the year - - 12
Current 210 5 -
Balance at 30 June 2020$210 $59 -
Balance at 30 June 2020$210 $59 -
Non-current - 54 -
Current - 150 14
Balance at 30 June 2019
$210 $150 $14
Balance at 30 June 2019
$210 $150 $14
Non-current 210 - -
Utilised during the year - (1,500) (239)
Released to profit or loss during
the year
- (225) -
Provision for warranties requires judgement to be applied by considering a range of factors including the nature and extent of historical claims data
associated with similar products sold by the Group, the terms of the warranties built into supply contracts, consumer protection laws in key markets and the
corrective actions being taken to address quality issues at production.
Warranties
The provision for warranties relates mainly to carpet sold during the years ended 30 June 2020 and 2019. The provision is based on estimates made from
historical warranty data associated with similar products sold by the Group.
Accounting policies
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Estimates, judgements and assumptions
Workplace accidents
Certain companies within the Group are parties to the ACC Partnership Programme under which these companies assume the costs normally assumed by
ACC (Accident Compensation Corporation of New Zealand) for accidents in the workplace, with the provision for claims incurred but yet to be settled.
Make good
Provision for make good relates to the costs expected to be incurred in relation to make good obligations under leases entered into, with the provision
utilised as the costs relating thereto are incurred or adjusted to reflect current estimates of costs to be incurred. The amount incurred during the year relates
to the amount paid.
Onerous contracts
The provision for onerous contracts relates to operating leases in respect of premises that were surplus to requirements following the consolidation of the
Cavalier Bremworth and Norman Ellison Carpets broadloom carpet businesses in 2012 and 2013, with the provision reflecting the shortfall between sub-let
income and rental expense, discounted to net present value.
Warranties relating to the sale of carpet are standard warranties. The Group does not offer extended warranties that would be subject to a separate
performance obligation.
Page 42

9c. Employee benefits
20202019
$000$000
Estimates, judgements and assumptions
In assessing the Group’s liabilities for long-term employee benefits, regard was given to the age of employees, the likelihood of their reaching the various
qualifying dates for retiring allowances and long service leave and their length of service at those dates.
Total employee benefits$888
$903
Accounting policies
Short-term employee benefits are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be estimated reliably. The Group’s net obligation in respect of long-term employee benefits is the
amount of future benefit that employees have earned in return for their service in the current and prior periods adjusted for the probability of the benefits
vesting and discounted at the appropriate rate to determine its present value.
Liability for retiring allowances
96
96
Liability for long service leave
792
807
9d. Contingencies
The Group has granted indemnities in favour of Bank of New Zealand and National Australia Bank Limited (together, “the Bank”) at balance date in respect
of Bank guarantees relating to operating leases and other commitments totalling $899,000 (2019: $879,000).
Some subsidiaries in the Group are parties to a cross guarantee in favour of the Bank securing each other’s obligations.
The Group’s indebtedness under the cross guarantee at balance date amounted to $15,800,000 (2019: $20,500,000).
Page 43

20202019
$000$000
2,770
2,525
116 53
107 251
$2,993 $2,829
Other transactions
9e. Related parties
Transactions with directors and key management personnel
For the purposes of this note, key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
As shareholders
Some of the Directors are shareholders in the Company.
Their shares rank pari passu with all the other ordinary shares in the capital of the Company and do not therefore confer additional rights to dividends paid
or to attend or vote at any meetings of the shareholders of the Company.
Non-executive directors (including Deputy
Chairman of the Board)
$61,000 Inclusive of time spent on Board committees
Chairman of the Audit Committee$10,000
In recognition of additional time and responsibilities as Chairman of Audit
Committee
Directors’ feesPer annumExplanatory notes
Non-executive Chairman of the Board$128,100
Inclusive of time spent on Board committees and as Chairman of Nomination
Committee
As lenders or borrowers
There were no loans to, or from, the Directors and key management personnel during the year ended 30 June 2020 (2019: Nil).
Directors’ remuneration and benefits
The fees paid to the Directors for services in their capacity as directors totalled $368,000 during the year ended 30 June 2020 (2019: $387,000).
No other services were provided by the Directors during the year (2019: Nil).
The scale of fees payable to the Directors was last reviewed and approved by the Board in January 2019, with the current scale of fees applying with effect
from 1 January 2019 set out below:
Termination payments
The Group has not provided the Chief Executive Officer and key management personnel with any post-employment benefits.
The Group deals with many entities and organisations in the normal course of business. The Group is not aware of any of the Directors, the Chief
Executive Officer or key management personnel, or their related parties, holding positions in any of these entities or organisations that result in them having
control or significant influence over the financial or operating policies of these entities or organisations.
The Group does not transact with the Directors, the Chief Executive Officer or key management personnel, and their related parties, other than in their
capacity as directors and employees, except that they may purchase goods from the Group for their own domestic use. These purchases are on the same
terms and conditions as those applying to all employees of the Group and are immaterial and personal in nature.
Key management personnel’s (including the Chief Executive Officer’s) remuneration and benefits
In addition to salaries and performance-based payments, the Group also provides non-cash benefits to the Chief Executive Officer of the Company and key
management personnel of the Group.
These non-cash benefits may include the provision of motor vehicles, income protection and life insurances and medical insurances.
The remuneration paid and payable, and the benefits provided, to the Chief Executive Officer and key management personnel (but excluding the Directors’
remuneration and benefits which are set out on the previous page) comprised:
Salaries, bonuses and leave entitlements
Employee benefits
Chairman of the Remuneration Committee$5,000
In recognition of additional time and responsibilities as Chairman of
Remuneration Committee
G C W Biel, a long-serving Director, is entitled to a lump sum retiring allowance pursuant to an arrangement that is contained in the Company’s
constitution. The amount of this retiring allowance, which was set in November 2007, is $96,000. The Company decided at that time that retiring
allowances would no longer be offered in respect of new Directors appointed to the Board.
The Group notes that the Directors are precluded by the NZX Listing Rules from voting at general meetings of shareholders on certain matters prescribed
by the New Zealand Exchange. These matters include, in the case of the Directors who are also shareholders, shareholders’ approval of directors’ fees.
The Directors agreed to a 20% reduction in fees from 1 April 2020 to 31 July 2020 in response to the uncertain COVID-19 operating environment.
Page 44

20202019
100100
100100
100100
100100
20202019
0
50
9f. Group entities
Operating subsidiaries of the Group
Elco Direct LimitedWool acquisitionNew Zealand
Equity-accounted investees of the Group
Principal activityCountry ofInterest (%)
incorporation
Cavalier Bremworth Pty LimitedCarpet salesAustralia
Cavalier Spinners LimitedCarpet yarn salesNew Zealand
Principal activity
Country of
Interest (%)
incorporation
Cavalier Bremworth LimitedCarpet sales and manufacturingNew Zealand
9g. Events after balance date
On 17 September 2020, the shareholders of Cavalier approved the sale and leaseback of the Auckland property. The net proceeds of sale of the Auckland
property are expected to be in the vicinity of $24,000,000, after real estate agent commission and other expenses such as legal fees, with settlement
scheduled to take place in early October 2020.
As disclosed at note 2d (General information relating to preparation of financial statements - Going concern) and note 5c (Loans and borrowings) to the
financial statements, the net proceeds of sale of the Auckland property will be applied in the first instance towards the repayment of bank debt, with the
balance to be utilised to provide the Group with the funding required to execute its transformation into an all-wool business and natural materials
organisation.
9h. Standards, interpretations and amendments to standards
Other than the adoption of NZ IFRS 16 Leases and the early adoption of the January 2020 amendments to NZ IAS 1 Presentation of Financial Statements
during the year, there are no new standards or amendments to existing standards which have or are expected to have a material impact on the Group.
The Company has estimated the present value of the rental obligation in respect of the Auckland property to be around $16,000,000, based on the initial
term of the leaseback of 14 years and the net rent during that initial term (but ignoring the market rent review to take place on the sixth anniversary of the
commencement date), discounted at the rate of 7.5% per annum. The lease liability and right-of-use asset will be recognised in accordance with NZ IFRS
16 Leases.
CWS Assets LimitedProperty owning, with property sold on 30
September 2018 as part of the sale of the
Group’s 27.5% interest in Cavalier Wool
Holdings Limited
New Zealand
The initial term of the leaseback is 14 years plus one right of renewal of six years, with net rent at commencement date of $1,600,000 per annum and a
2.5% increase in rent per annum on each anniversary of the commencement date (except where that anniversary coincides with a market rent review date).
Market rent reviews will take place on the sixth anniversary of the commencement date and on renewal date, with market rent to be no less than 90% or
greater than 110% of the annual rent immediately preceding the relevant rent review date.
Page 45

NON-GAAP FINANCIAL INFORMATION
CONTENTS
Trend Statement47
Disclosure of Non-GAAP Financial Information50
Page 46

2020201920182017201620152014
$000$000$000$000$000$000$000
$117,981 $135,234 $148,120 $156,120 $190,371 $215,728 $200,642
2,300 7,076 9,998 2,572 12,275 8,517 14,609
(2,683) (3,479) (3,561) (3,251) (3,352) (5,862) (5,849)
(1,779) - - - - - -
(2,162) 3,597 6,437 (679) 8,923 2,655 8,760
(2,535) (1,790) (2,798) (2,936) (3,374) (3,948) (3,484)
-
644 1,419 797 2,670 2,034 2,044
(4,697) 2,451 5,058 (2,818) 8,219 741 7,320
1,240 (572) (1,084) 962 (1,906) 454 (1,530)
(3,457)
1,879 3,974 (1,856) 6,313 1,195 5,790
(17,994) (18,659) 107 (268) (3,198) (26,910) -
(21,451)
(16,780) 4,081 (2,124) 3,115 (25,715) 5,790
- - - - - - (4,785)
($21,451)($16,780)$4,081 ($2,124)$3,115 ($25,715)$1,005
33,637 54,989 72,222 67,890 69,361 66,184 92,959
- 20,500 27,500 35,000 37,700 45,000 61,220
3,696 1,618 2,029 3,728 4,461 4,938 6,363
15,800 - 4,000 6,500 - 11,767 -
16,848 22,227 27,253 25,739 35,854 41,237 37,518
$69,981 $99,334 $133,004 $138,857 $147,376 $169,126 $198,060
22,725 30,164 35,142 37,123 36,820 47,910 63,900
430 - - - - - -
- - 24,544 23,490 23,175 24,937 25,900
- - 2,362 2,362 2,362 2,362 7,794
600 5,456 4,971 5,532 3,496 1,388 3,107
23,755 35,620 67,019 68,507 65,853 76,597 100,701
1,276 2,724 2,111 1,255 1,200 2,834 2,375
44,950 60,990 63,874 69,095 80,323 89,695 94,984
$69,981 $99,334 $133,004 $138,857 $147,376 $169,126 $198,060
2020201920182017201620152014
$000$000$000$000$000$000$000
- - - - - (9,132) -
(5,095) (4,413) - - (1,573) (4,344) -
(2,094) - - - - - -
- (2,362) - - - (5,432) -
2,940 - - - - - -
(12,890) - - - - (6,771) -
(854) - 136 (4,542) (3,222) (711) -
- - 99 1,083 - - -
- - - - 2,035 - -
- - (128) (738) (438) (520) -
-
- - 3,929 - - -
- (11,884) - - - - -
Total($17,994)($18,659)$107 ($268)($3,198)($26,910) -
1
2
Financial Performance
Operating revenue
EBITDA (normalised)
Depreciation - right-of-use assets
EBIT (normalised)
Net interest expense
Cavalier Corporation Limited and subsidiary companies
Trend Statement
Depreciation - owned assets
Loans and borrowings – current portion
Current liabilities
Shareholders’ equity and total liabilities
Property, plant and equipment
Investment in equity-accounted investees
Goodwill and other intangibles
Ordinary dividends paid
(Loss)/Profit after dividends
Financial Position
Shareholders’ equity
Loans and borrowings - term portion
Term liabilities
Share of profit after tax of equity-accounted
investees (normalised)
(Loss)/Profit before income tax (normalised)
Income tax (expense)/benefit
(Loss)/Profit after tax (normalised)
Abnormal costs (after tax)
(Loss)/Profit after tax attributable to
shareholders of the Company (GAAP)
Reversal of impairment of fixed assets
Gain on sale of property
Scour merger costs
Gain on merger and dilution of equity-accounted
investee
Loss on sale of interest in, and property held by,
equity-accounted investees
Incurred as part of the Group’s strategic plan to address its cost base, with the consolidation of its yarn spinning operations in Napier, Wanganui and
Christchurch. The costs included employee termination benefits, employee support costs, costs to relocate plant and equipment and abnormal
manufacturing costs and inefficiencies during the consolidation process, which included:
Impairment of carpet tile business assets
Impairment of plant and equipment
Impairment of intangible assets
Derecognition of deferred tax assets
Restructuring costs
Deferred tax asset
Non-current assets
Cash and cash equivalents
Current assets
Total assets
Abnormal items (after tax)
Impairment of right-of-use assets
Impending change in legislation relating to tax
depreciation on buildings
- consolidation of woollen yarn spinning operations (previously in Napier and Wanganui) to a single hub at the Napier plant;
- down-scaling of the semi-worsted yarn spinning operation in Wanganui;
- relocation of the felted yarn operation from Christchurch to Wanganui; and
- closure of the Christchurch plant.
Incurred as a consequence of various business improvement plans initiated, with costs made up of employee termination benefits, employee support costs,
costs to relocate plant and equipment and contract termination costs.
Right-of-use assets
Page 47

2020201920182017201620152014
-7.8%3.0%5.7%-2.7%9.3%1.5%6.2%
-5.0c
2.7c5.8c-2.7c9.2c1.7c8.5c
$0.47 $0.72 $0.94 $0.87 $0.92 $0.91 $1.19
48.1%55.4%54.3%48.9%47.1%39.1%46.9%
30:7024:7629:7137:6334:6645:5539:61
N/A 2.0 2.41.54.41.52.5
- - - - - - 7.0c
- - - - - - 100%
- - - - - - 1.2
- - - - - - 1.24c
$0.22 $0.32 $0.62 $0.35 $0.76 $0.36 $1.33
$0.38 $0.68 $0.63 $0.95 $0.77 $1.36 $2.03
$0.16 $0.31 $0.27 $0.33 $0.35 $0.31 $1.33
$15,109 $21,977 $42,581 $24,038 $52,196 $24,724 $91,343
$2,119 $4,705 $1,622 $2,123 $2,076 $2,564 $2,494
$2,683 $3,479 $3,561 $3,251 $3,352 $5,862 $5,849
$1,779 - - - - - -
Net tangible asset backing per ordinary share
Equity ratio
Net interest-bearing debt : equity ratio
Net interest cover (normalised) (times)
Return to Shareholders
Dividends paid per ordinary share (excluding
supplementary)
Trend Statement (continued)
Financial Ratios and Summary
Use of Funds and Return on Investment
Return on average shareholders’ equity
(normalised)
Basic earnings per ordinary share (normalised)
Financial Structure
Cavalier Corporation Limited and subsidiary companies
52 week low
Market Capitalisation ($000)
30 June
Capital Expenditure and Depreciation ($000)
Capital expenditure
Depreciation - owned assets
Dividend imputation
Ordinary dividend cover (normalised) (times)
Supplementary dividends paid per ordinary
share
Share Price
30 June
52 week high
Depreciation - right-of-use assets
Page 48

Cavalier Corporation Limited and subsidiary companies
Trend Statement (continued)
Glossary of financial terms
EBITDA
EBIT
EBITDA (normalised)
EBIT (normalised)
Net assets
Use of funds and Return on investment
Financial structure
Return to shareholders
Earnings before abnormal costs, interest and tax
Total assets less total liabilities
Return on average shareholders’Profit/(Loss) after tax (normalised)
Ordinary dividend cover (normalised)Profit/(Loss) after tax attributable to shareholders of the Company (normalised)
Ordinary dividends paid
Shareholders’ equity and total liabilities
Net interest bearing debt : equity ratioInterest-bearing debt less cash and cash equivalents : Shareholders’ equity
Net interest cover (normalised)EBIT (normalised) plus dividends received from equity-accounted investees grossed up for imputation
Net interest expense
Net tangible asset backing per ordinary share Net assets less goodwill and other intangibles
Number of ordinary shares on issue at balance date
Equity ratioShareholders’ equity
equity (normalised)Average shareholders’ equity
Basic earnings per ordinary shareProfit/(Loss) after tax (normalised)
(normalised)Weighted average number of ordinary shares on issue during the year
Earnings before interest, tax, depreciation and amortisation
Earnings before interest and tax
Earnings before abnormal costs, interest, tax, depreciation and amortisation
Page 49

The Directors believe that the non-GAAP financial information contained within the Trend Statement (more particularly, the non-GAAP measures of
financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before income tax (normalised)” and “Profit after tax (normalised)” as
well as the various other financial ratios that are based on normalised results – for example, earnings per share) 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 abnormal 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 items of an
abnormal nature, including items that are unlikely to recur or otherwise unusual in nature.
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.
Cavalier Corporation Limited and subsidiary companies
Disclosure of Non-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’.
In collating the Trend Statement, 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;
The Directors acknowledge that the Annual Report, including the Trend Statement from pages 51 to 53, 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.
The Trend Statement has been prepared using the unaudited GAAP-compliant financial statements of the Group.
Page 50

AdjustmentsNormalisedAdjustmentsNormalised
$000$000$000$000
- $117,981 - $135,234
11,172 2,300 8,491 7,076
- (2,683) (3,479) - (3,479)
- (1,779)
- -
11,172 (2,162) 8,491 3,597
- (2,535) - (1,790)
- - - 644
- - 11,884 -
11,172 (4,697) 20,375 2,451
6,822 1,240 (1,716) (572)
17,994 (3,457) 18,659 1,879
(17,994) (17,994) (18,659) (18,659)
- ($21,451) - ($16,780)
Tax effect
(Loss)/Profit
after tax
Tax effect
(Loss)/Profit
after tax
$000$000$000$000
332 (854) - -
1,982 (5,095) 1,716 (4,413)
815 (2,094) - - -
2,940 2,940 - - -
(12,890) (12,890) - - -
- - - (2,362)
- - - (11,884)
($6,822)($17,994)$1,716 ($18,659)
(Loss)/Profit after tax (21,451)
(16,780)
Abnormal net loss after tax
(Loss)/Profit after tax (GAAP)
Analysis of abnormal items
(Loss)/Profit before tax
Year ended 30 June 2020Year ended 30 June 2019
GAAPGAAP
$000
Restructuring costs (1,186)
- (11,884)
($11,172)($20,375)
Impairment of goodwill - (2,362)
Cavalier Corporation Limited and subsidiary companies
(1,779)
-
Depreciation - owned assets (2,683)
$000
Revenue$117,981
$135,234
Disclosure of Non-GAAP Financial Information (continued)
Reconciliation of GAAP-compliant to non-GAAP-compliant measures of profit/loss after tax
$000
(Loss)/Profit before tax
(Loss)/Earnings per share (basic and diluted) (cents)
(24.4)
Calculation of basic and diluted (loss)/earnings per share
under GAAP and non-GAAP measures of profit/loss after
tax
GAAP-compliant reported
(loss)/profit after tax
Reverse abnormal items
(net of tax)
-
Impairment of plant and
equipment
(7,077) (6,129)
(2,535) (1,790)
-
-
2.7
Loss per share (basic and diluted) (cents)
(31.2) (5.0)
Year ended 30 June 2019
(Loss)/Profit attributable to shareholders ($000)($16,780)$18,659
$000
Impending change in legislation
relating to tax depreciation on
buildings
Derecognition of deferred tax
assets
Share of profit after tax of equity-
accounted investees
- 644
Loss on sale of interest in, and
property held by, equity-
accounted investees
- (11,884)
$1,879
Year ended 30 June 2020
Loss attributable to shareholders ($000)($21,451)
Weighted average number of ordinary shares 68,679,098 68,679,098
Non-GAAP-compliant
normalised (loss)/profit after
tax
Loss on sale of interest in, and
property held by, equity-
accounted investees
EBIT (13,334) (4,894)
Net interest expense
(Loss)/Profit before tax
EBITDA (8,872) (1,415)
Depreciation - right-of-use
assets
$17,994 ($3,457)
Weighted average number of ordinary shares 68,679,098 68,679,098
Impairment of right-of-use
assets
(2,909)
(15,869) (17,924)
Tax benefit/(expense) (5,582) 1,144
Page 51