Amended FY20 Annual Report

MARKET RELEASE
23 November 2020

Amended FY20 Annual Report

Cavalier Corporation Limited (NZX: CAV) has provided an updated copy of its FY20 Annual Report,
amended to correct for the following errors:

– removal of a sentence that was incorrectly included in the Independent Auditor’s Report on
Going Concern and Liquidity on page 35

– correction of the heading from “For the year ended 30 June 2020” to “As at 30 June 2020” on
page 43



ENDS

For further information please contact:
Paul Alston
Chief Executive Officer
palston@bremworth.co.nz
+64 21 918 033
+64 9 277 1135
Jackie Ellis
Media and Investor Relations
Jackie@ellisandco.co.nz
+64 27 246 2505

---

ANNUAL REPORT 2020

CHANGE FEELS GOOD.
WE'RE ON A MISSION TO DELIVER A
RANGE OF HOME EXPERIENCES BUILT
WITH PEOPLE, THE PLANET AND
GROWTH IN MIND. TO NOT JUST MOVE
WITH WHERE THE WORLD'S HEADED
BUT LEAD THE WAY.
TO DEVELOP NEW IDEAS, TO INNOVATE
AND EVOLVE AS A NEW BREED OF
BUSINESS. BECAUSE THE CHANGES WE
MAKE TODAY WILL PREPARE US FOR
THE FUTURE.
Contents
2 About
4 Our Vision
5 Our Strategy
6 Our New Brand Identity
8 Our Growth Strategy
10 FY20 Year in Review
11 Post-Period End
12 Chairman & Chief Executive Officer’s Report
16 Our Unifying Values
17 Our People
18 Our Sustainable Future
20 Our Natural Ethos
21 Our Alignment with Nature
22 New Colours & New Product
24 Our Suppliers
25 Our Customers & Consumers
26 Board of Directors
28 Four Year Performance Graphs
29 Trend Statement
30 Financial Statements
90 Governance and Other Disclosures
109 Shareholder Information
110 Trend Statement
114 Disclosures of Non-GAAP Financial Information
116 Corporate Directory
This Annual Report is dated 20 November 2020 and is signed
on behalf of the Board of Directors by:
George Adams
Chairman

Paul Alston
Chief Executive Officer
1 — ANNUAL REPORT 2020 1 — ANNUAL REPORT 2020

ABOUT
1
3 — ANNUAL REPORT 2020 2

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Sustainable
design-led thinking
that supports people,
planet and proˆt
O
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B
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S
At its core, our business strategy is geared to create a
sustainable, profitable and design-led organisation,
with a purpose of finding a more natural way.
A network of relationships exists between us, our
customers and the end consumer, supported by our
supply partnerships and the products we create.
Our shared values serve to unify these elements
across the entire Bremworth business.
OUR
STRATEGY
WE'RE CHANGING TO BECOME A
PURPOSE-LED BUSINESS.
We aim to incorporate eco-conscious practices into
everything we do. This ethos will help us to ensure
our products are as natural as they can be, to reduce
our impact on the environment in every way we can.
WE'RE CHANGING TO BECOME A
DESIGN-LED BUSINESS.
True innovation starts with listening to, and learning
from end users so that we can keep in step with
consumer trends and solve real world problems.
Our design-led thinking approach will inform and
guide our innovation programme to ensure our ideas
are desirable, long lasting solutions.
OUR VISION IS TO BECOME A
GLOBAL LEADER IN DESIGNING
AND CREATING DESIRABLE,
SAFE, SUSTAINABLE AND HIGH
PERFORMING NATURAL
INTERIOR SOLUTIONS.
BRAND
ARCHITECTURE
OUR WHY?
We believe that by embracing nature we can
make a genuine difference to the wellbeing of
people and the planet and deliver the design and
performance attributes customers care about.
OUR HOW?
We will inspire a lifelong passion for natural
materials in our customers' daily lives by using
design-led thinking, science and innovation to
explore possibilities, create new categories and
enrich customers’ lives.
OUR WHAT?
We make beautifully designed, high performing
interior products for customers to love, with
our choice of natural materials being both safe
and sustainable.
OUR
VISION
5 — ANNUAL REPORT 2020 4

OUR SYMBOL
The new design toolbox includes an aspirational
wool symbol designed to elevate perceptions of
the brand into a new kind of ‘eco-premium’
positioning. A likeable and engaging graphical
device; this symbol is a brand certifier and
signifier of quality that builds on our origins and
natural material stories.
OUR WORDMARK
Our transformation story is signalled with a
more contemporary brand identity that reflects
our constant desire to change and improve.
Our modern, handwritten wordmark is
instinctually positive, human and universally
appealing. Its scripted style is relaxed and
organic; as if born from wool itself.
OUR NEW BRAND IDENTITY
6

We will position Bremworth as the preferred choice for all homes
through marketing and promotion that uses our new, inspirational
and differentiated visual language to build awareness and
connect with customers.
GROW OUR SHARE
OF THE MARKET
We will seek out adjacent opportunities to grow our business
and its value. We will collaborate with like minded individuals and
organisations and use science, design and innovation to create
new product categories and differentiated positionings.
INNOVATION AND
FUTURE THINKING
We will embrace design to lead a movement that elevates the role
of wool carpets and rugs within interior spaces and promotes the true
worth, performance and sustainability benefits of natural materials
so consumers can make better informed decisions.
GROW THE WOOL
FLOORING MARKET
We will nurture existing relationships, grow our channels to
market and expand our influencer and distribution networks.
We will introduce new ranges to make our products more
accessible for more customers.
EXPAND OUR
PRESENCE
OUR GROWTH STRATEGY
9 — ANNUAL REPORT 2020 8

POST-PERIOD END
ORGANISATIONAL
STRUCTURE
Positive impact from the
move in April 2019 to a
more customer focused
organisational structure
in Australia
Alert Level 4 lockdown
and consequent restrictions
on the business adversely
impacted FY20 financial
performance, but with
stronger than anticipated
sales performance
post lockdown
COVID-19
OPERATING ENVIRONMENT
NLAT
REVENUE
EBITDA
NET DEBT
NLAT (NORMALISED)
1
EBITDA (NORMALISED)
1
$
(
21.5
)
m
$118m
$
(
8.9
)
m
$14.5m
$
(
3.5
)
m
$2.3m
1. Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance note on “Disclosing non-GAAP financial
information”. Normalised results are not audited and exclude items that are not expected to occur on a regular basis either by virtue of quantum or nature. Full commentary on
the disclosure of non-GAAP financial information and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information,
including that for the previous period, can be found on pages 114 and 115.
Softening trading conditions encountered in 1H20
which were further exacerbated by COVID-19 in 2H20.
As at end of June, down from $17.8 million a year ago
Excluding non-trading adjustments
Down 13% on prior year, due to softer trading conditions
reported in 1H20 and impact of COVID-19 lockdown and
restrictions, particularly in New Zealand, in April
Excluding non-trading adjustments of $(11.2) million pre-tax,
primarily related to the strategic change and Company re-set
FY20
YEAR IN REVIEW
11 — ANNUAL REPORT 2020 10
NEW TRANSFORMATIONAL STRATEGY
EXIT FROM SYNTHETIC
NEW PRODUCTS LAUNCHED
FY21 Q1
Completion of Cavalier’s strategic review and
unveiling of the new transformational strategy to
become a sustainable, interior solutions business.
Well-advanced, with both the New Zealand
and Australian sales teams able to start
focusing on growing woollen carpet sales.
Three new limited-edition colours into Galet the
gorgeous chunky loop pile within the Bremworth
Collection and the entirely new texture-rich range
Ripples into our Aspire Collection.
Carpet sales volumes stronger than anticipated,
with the business cautiously optimistic about
prospects for FY21 as it executes the transformation
and reinvests for the future.
Launch of a more contemporary brand identity to
signal our future transformation story while also
acknowledging our heritage.
Through the roll out of the Lifestyle Collection currently
underway, we have expanded our reach across Australasia
to make our products more accessible to the market.
With settlement of the sale and leaseback of the
Auckland property expected no later than the end
of January 2021, proceeds of sale will allow Cavalier
to fully repay bank debt and leave it with the cash
resources to execute its new strategy.
NEW BRAND IDENTITY
EXPANDED OUR REACH
SALE AND LEASEBACK OF AUCKLAND PROPERTY

EXECUTIVE OFFICER'S
REPORT
2020 will be remembered for how people, communities
and businesses responded to the challenges of COVID-19.
The announcement of our new strategy in July 2020 was the
result of 18 months of challenging, refining and testing our
new strategic direction. This was followed by the launch of
Bremworth our new contemporary brand identity in
November 2020.
Over the next 10 years, our vision is to become a global
leader in designing and creating desirable, safe, sustainable
and high performing natural interior solutions.
OUR GROWTH STRATEGY
Within our existing product categories, we will grow the wool
flooring market, build demand for our woollen carpets and
rugs, and strengthen our presence in retail channels through
expanded distribution to make our products accessible
to consumers.
But the real growth opportunity is to become market
shapers in home interior solutions, placing end users and
influencers at our core and wrapping our value chain around
their human needs. From this approach, we aim to see the
future first and identify new opportunities, disrupt markets,
and create entirely new product categories.
It is this last pathway which firmly sets us on a different
journey from the past, while still building on our heritage,
expertise and the quality craftsmanship that have made us
one of New Zealand’s most trusted brands.
OUR RESPONSE TO COVID-19
As we started 2020, little did we know that a global pandemic
was quickly going to spread around the world and materially
impact our business and our people. The health and welfare of
our staff quickly became our primary focus, and we formulated
a comprehensive plan to protect our staff while continuing to
operate our business.
During the New Zealand lockdown from late March to late
April 2020, all our sites were closed under level 4, re-opening
Top
George Adams
Chairman
Bottom
Paul Alston
Chief Executive Officer
OVER THE NEXT 10 YEARS, OUR
VISION IS TO BECOME A GLOBAL
LEADER IN DESIGNING AND
CREATING DESIRABLE, SAFE,
SUSTAINABLE AND HIGH
PERFORMING NATURAL INTERIOR
SOLUTIONS.
CHAIRMAN & CHIEF
13 — ANNUAL REPORT 2020 12

under Level 3 using ‘bubble shifts’ where shift teams were
completely separated from each other. This ensured that if
one member in a team became ill, the second ‘bubble’ was
protected and could keep working safely.
In addition to this, the Company also created an app to
support the physical and mental wellbeing of our people.
Pleasingly, our staff adapted well to the changing environment
and engaged readily in optimising our new mode of operating.
While B2B and E-Commerce remained open, retail sales
in New Zealand effectively ceased during this time.
Cost measures and other actions were taken to protect the
business, but all salaried and waged staff continued to be
paid throughout the lockdown period with support from the
Government’s wage subsidy.
Trading activity has been stronger than expected since
emerging from the first lockdown, however, the Board remains
cautious about the ongoing impact of COVID-19 with various
additional restrictions in Auckland and in Victoria, Australia.
On behalf of the Board and management team, we would
like to acknowledge and thank all our people for their support
and efforts, both during the lockdown and as we scaled up
activity to meet pent up demand post lockdown. Many of our
employees have been with the Company for decades and are
truly part of the Bremworth family.
FY20 FINANCIAL PERFORMANCE
Our FY20 financial results were reflective of the softening
trading conditions noted in the first half of the year, which
were further exacerbated by the COVID-19 pandemic in 2H20;
as well as the re-setting of the Company as we commenced
our transformation.
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 lockdown.
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 with retailers stocking up ahead of
the Company’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
the Company’s strategic transformation and 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 lockdown period, the Company 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 lockdown 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 FY21.
Operating cash flows were strong at $6.8m, mainly due to
the release of cash as the Company commenced its transition
away from synthetics and ceased buying synthetic yarn
inventor y.
We reported a statutory net loss after tax (NLAT) 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.
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.
Net debt reduced to $14.5m as at 30 June 2020 and further
reduced to $1.4m as at end-October 2020 due to stronger than
expected trading in the new financial year and the accelerated
sell down of remaining synthetic stocks.
OUTLOOK
While we have sufficient bank facility headroom in the near
term to continue the execution of our strategy, the settlement
of the sale and leaseback of the Auckland property no later
than the end of January 2021 will provide us with additional
support and funding to execute the new strategy.
The outlook for the economy remains uncertain but all
indications are that there will be a downturn in the near term
as a result of COVID-19. We believe the work we are doing to
reposition the Company will allow us to navigate this
environment and build on the consumer trends we are seeing
in the marketplace to deliver value for our shareholders.
Stronger than anticipated trading has continued into the
first quarter of FY21, with New Zealand sales revenues up
approximately 11% and Australia down just 3% on the previous
year. Increases in woollen carpet sales have been encouraging,
especially in Australia.
As previously advised, total sales revenue for FY21 is
expected to reduce as we exit our synthetic 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 Bremworth’s market presence.
From FY23 onwards, we expect growing revenues as new
sales replace and eclipse the previous synthetic carpet sales
and as the economy recovers from COVID-19; with the full
benefits of the transformation expected from FY25 onwards.
Our directors, our management team and our people are
passionate about the Company and what it stands for and
excited about the new strategic direction it has taken.
We are at a defining moment in our history and, while our
transformation will take time and investment, we believe the
time is right to be doing just that and to secure the future of
our Company.
We thank shareholders for your continued support.
George Adams
Chairman
Paul Alston
Chief Executive Officer
14

We are a diverse team of passionate individuals
who believe that if we embrace nature, we can
truly make a difference in the world, without
compromising on the design and performance
attributes our customers care about.
Our new design-led approach will help us to
understand our customer’s needs intimately, and
inform the end-design of our products, including
our systems, our procedures and the overall
customer experience we deliver.
To support this transformation, we are
investing in leadership capability, diversity and
the safety and support of our people.
An important step is the establishment of a
new sustainability division to ensure we have the
right skills to inform our sustainability program.
We are engaging with external experts to assist
with any new specialised activity.
We have also invested in new capability with
a fresh approach to Health & Safety designed to
further promote staff engagement.
An open dialogue approach has resulted in
a stronger, more united voice that encourages
greater ownership of our Health and Safety
programme and is improving the way we manage
our most critical tasks.
OUR PEOPLE
Courage.
Bravery is about taking the lead and not
accepting the status quo. It’s about constantly
searching for better solutions, new ideas and
creative possibilities. We accept that we won’t
always get it right, but a courageous mindset
allows us to adapt faster and find the momentum
we need to push hard into the future.
Customer Focus.
The extra mile comes as standard and there
are no shortcuts in our new ways of working.
We aim to see the future first, and through our
purpose-driven and design-led processes we’ll
seek to create value for our customers to
enhance their lives.
Uncompromising Quality.
We are dedicated to the pursuit of
uncompromising quality in everything we
produce, working to a universally accepted
set of standards, that we measure ourselves by.
The true worth of our relationships and the
products we put into the world will be measured
in the endless pleasure they bring.
Authentic.
Honesty and authenticity underpin everything
we say, all that we do and how we will do it.
We are not perfect, but we’re working to become
better. We will share our story and journey in
interesting ways that inspire others to walk the
talk together with us.
COURAGE
CUSTOMER
FOCUS
UNCOMPROMISING
QUALITY
AUTHENTIC
OUR UNIFYING
VALUES
17 — ANNUAL REPORT 2020 16

OUR
SUSTAINABLE
FUTURE
In line with our belief that stopping plastic
production at its source is best practice, we
are exiting the manufacture of plastic carpet
for good. This is the first step we’re taking, as
we transition towards becoming a more
sustainable company and progressive brand.
We have a long-term view of the challenges
ahead, where solutions are not always obvious
so investment in scientific research is required,
particularly in the innovation space.
Our next step is to define our baseline
range to inform distinct work streams and
our future milestones.
Right now, we are actively removing
single-use plastics from the business.
A recent initiative at our Napier Plant
resulted in a large reduction in shrink wrap use
at this plant and less to be disposed of in our
Auckland plant is one such example. We have
further waste reduction and recycling projects
in the pipeline, to push our change agenda
even further.
WE ARE CHANGING THE WAY WE DO BUSINESS. NOT JUST
BECAUSE OUR CUSTOMERS ARE BECOMING INCREASINGLY AWARE
OF THE IMPACT THEIR DECISIONS HAVE ON THE ENVIRONMENT,
BUT BECAUSE IT'S THE RIGHT THING TO DO.
18

OUR ALIGNMENT WITH NATURE
ALIGNING OUR BUSINESS WITH OUR CORE
VALUES AND BELIEFS SHOWS THE WORLD
WHERE WE COME FROM WITH OUR
NATURAL, SUSTAINABLE AND PURE
NEW ZEALAND WOOL.
What we now know about microplastics, gives us the chance to
lead by example, by exiting synthetic carpet production in favour
of high-performing, natural fibres.
We’ve reduced our contribution to the worldwide plastic
problem by 2.5 million kgs per annum.
That’s equal to six Olympic pools full of synthetic fibre stopped
at source every year.
On average, our 100% wool carpets are made with 87%
natural materials.
1

Whilst this is a great starting point, we want to do better than
that so we are seeking new ways to reduce, recycle and eventually
remove plastic from our products, our business and our daily lives
where possible.
AVERAGE % OF NATURAL MATERIALS IN BREMWORTH 100% WOOL CARPET
2.5 m
Reduction (kg) in synthetic
fibre consumption per annum
87%
1
Average % of natural materials
in 100% wool carpets.
13% Man-made materials
1. This is an approximate for a
middle of the range 100%
Bremworth wool carpet and
varies depending on the
specification of the product
87% Natural materials
100%
WOOL CARPET
EVERY PRODUCT WE MAKE, IS CRAFTED WITH THE SAME CARE, BELIEF
AND ATTENTION TO DETAIL THAT HAS MADE US THE TRUSTED, RESPECTED
AND ICONIC BRAND WE ARE TODAY.
THAT ALL OF OUR PRODUCTS OFFER MORE THAN JUST FUNCTIONAL BENEFITS
WHILE SERVING A GREATER PURPOSE.
THAT THE CREATION OF EACH PRODUCT SHOULD ONLY INVOLVE BEAUTIFUL,
HONEST MATERIALS, CAREFUL CRAFTSMANSHIP AND UNIQUE DESIGN.
THAT THE PRODUCT SHOULD BE SAFE, SUSTAINABLE, DESIRABLE, A JOY TO
LIVE WITH AND HOLD ITS BEAUTY YEAR AFTER YEAR.
TO ELEVATE THE BUYING EXPERIENCE BEYOND EXPECTATION.
BUT ABOVE ALL, MAKE A GENUINE, WHOLEHEARTED DIFFERENCE TO THE
DAILY LIVES OF EVERY ONE OF OUR CUSTOMERS.
OUR NATURAL ETHOS
21 — ANNUAL REPORT 2020 20

NEW PRODUCT
RIPPLES

GALET
Galet is a gorgeous chunky loop pile made from
100% felted New Zealand wool. The random
loop pile combined with the unique yarn
structure creates textural interest on the floor
and unbelievable softness underfoot.
RIPPLES

Ripples brings a natural approach indoors to
inspire a pursuit of happiness with its warm
array of colours. The texture-rich patterns and
use of felted wool provides soft and luxurious
carpet for your home.
NEW COLOURS
GALET
Galet Sage
Galet Indigo
Galet Sienna
23 — ANNUAL REPORT 2020 22

OUR CUSTOMERS
& CONSUMERS
OUR SUPPLIERS
We will intricately get to know our customers, their challenges and what
they care about.
We will wrap our value chain around the needs and values of our customers
and end users, to deliver and delight at every touch point of the customer
experience.
We aim to see the future first to deliver inspiring and innovative product
solutions for our customers.
We believe an interior product must be 4 things and we aim to partner with
suppliers who share these same values and beliefs:
SAFE
SUSTAINABLE
DESIRABLE
HIGH PERFORMING

We are exploring how we can continually improve and decrease our
environmental impact. This will be achieved by focusing on our supply chain,
and investing in targeted research.
We aim to source from local suppliers where possible.
25 — ANNUAL REPORT 2020 24

J M (JOHN) RAE
B.Com., LLB, CMInstD
D V (DIANNE) WILLIAMS
B.Com., MBA, CMInstD
John Rae is an independent Director and
joined the Cavalier Board in July 2015.
He was appointed Chair of the Board’s
Audit Committee in July 2020 and is a
member of the Board’s Remuneration
and Nomination Committees.
John has degrees in Law and
Commerce and spent his early career in
banking in New Zealand and London in
various treasury and capital market roles
for 10 years before returning to New
Zealand and undertaking a number of
private equity, venture capital and
corporate finance transactions in
Australasia.
He is an experienced company
director, currently Chair of Thos Corson
Holdings Limited and Chair of the
Advisory Board of Abodo Limited.
He is also a director of Corson Grain
Limited, the Eastland Group of
companies, Ngapuhi Asset Holding
Company Limited, Smart Environmental
Limited and WET Gisborne Limited, a
Panel Member of the Provincial Growth
Fund and a member of the Advisory
Board of Te Tumu Paeroa.
Dianne Williams is an independent
Director and joined the Cavalier Board
in July 2015.
She was appointed Chair of the
Board’s Remuneration Committee in July
2020 and is a member of the Board’s
Audit and Nomination Committees.
Dianne’s early career was in marketing
in the FMCG sector, driving market
dominance for some of New Zealand’s
favourite brands including Cadbury and
Sealord before taking up senior
executive roles with companies
demanding strong sales and marketing
programmes.
She is currently a director of
Chartered Accountants Australia
New Zealand, Netball Northern Zone
(incorporated Society) and West
Auckland Trust Services Limited.
A W (ALAN) CLARKE
B.Sc.(Hons), MBA, CFInstD
T H G (GEORGE) ADAMS
DipFSA(Hons), FCA, CFInstD
G C W (GRANT) BIEL
B.E. (Mech.)
Grant Biel is a non-independent Director
by virtue of his interests in Rural Aviation
(1963) Limited, a substantial product
holder in Cavalier.
He has been on the Cavalier Board
since July 1984, held the position of
executive Director in Cavalier from July
1984 to September 1995 and is a member
of the Board’s Audit, Remuneration and
Nomination Committees.
Grant is the surviving co-founder of
the Cavalier Carpets business which he
founded with Tony Timpson in 1972.
His other directorships include
Auckland Air Charter Limited, Heli
Harvest Limited, Rural Aviation (1963)
Limited and Westburn Investments
Limited.
Alan Clarke is an independent Director
and was appointed to the Cavalier Board
on 1 November 2017.
He is a member of the Board’s Audit,
Remuneration and Nomination
Committees.
Alan served as Chair of the Board
and Chair of the Board’s Nomination
Committee from April 2018 until his
resignation from these roles in July
2020, having successfully taken the
Group through the development of its
transformation strategy to becoming a
sustainable interior solutions business.
Alan has extensive governance and
strategic experience as a director of both
private and publicly listed companies in
New Zealand and Australia over the last
28 years.
He has held responsibilities as CEO
and Managing Director over that time,
formulating and implementing successful
strategic initiatives. These included
change projects at SGS, a Swiss based
multinational, initially in New Zealand
and then Australia in the 1990’s before he
returned to New Zealand to head
ElderCare, now Abano Healthcare
Group, and most recently Hellaby
Holdings.
He is currently an independent
director of nib NZ, a health insurance
provider.
George Adams is an independent
Director and was appointed to the
Cavalier Board on 1 June 2018.
He was appointed Chair of the Board
in July 2020, having served as Deputy
Chair of the Board since April 2019.
George was also appointed Chair of
the Board’s Nomination Committee in
July 2020 and is a member of the Board’s
Audit and Remuneration Committees.
George brings outstanding
commercial and governance experience
from more than 25 years of international
business experience in the fast-moving
consumer goods and
telecommunications industries, as well
as a strong background in occupational
health and safety.
George was previously Managing
Director of Coca-Cola Amatil New
Zealand and Fiji, a role he held for 10
years. During this time, George also
chaired the New Zealand Food and
Grocery Council. Prior to moving to
New Zealand in 2003, George was
Finance Director of British Telecom
Northern Ireland and Group Finance
Director of Dublin-based bottling
company Molino Beverages.
He is currently Chair of Apollo Foods
Limited, Insightful Mobility Limited,
Mix Limited, Netlogix Group Holdings
Limited, Competenz, The Business
Leaders Health and Safety Forum and
the Work Related Health Advisory Board,
as well as a director of Arborgen
Holdings Limited and Tegel Group
Holdings Limited.
BOARD OF DIRECTORS
27 — ANNUAL REPORT 2020 2627 — ANNUAL REPORT 2020

FOUR YEAR PERFORMANCE GRAPHS
70
60
50
40
30
20
10
0
FY17
59
41
32
43
FY18FY19FY20
39
37
32
38
45
40
35
30
25
20
15
10
5
0
FY17FY18FY19FY20
0
5
10
15
20
25
30
19
24
24
20
FY17FY18FY19FY20
180
160
140
120
100
80
60
40
20
0
FY17FY18FY19FY20
146
154
170
124
-1
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-5
FY17FY18FY19FY20
3
2
2.18
2.11
2.87
1.42
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
FY17FY18FY19FY20
GEARING (%)
GROSS PROFIT (%)
RETURN (NORMALISED NPAT) ON ASSETS %
DAYS SALES IN RECEIVABLES
INVENTORY TURNOVER IN DAYS
CURRENT RATIO
Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance note on “Disclosing non-GAAP financial
information”. Normalised results are not audited and exclude items that are not expected to occur on a regular basis either by virtue of quantum or nature. Full commentary on
the disclosure of non-GAAP financial information and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information,
including that for the previous period, can be found on pages 114 and 115.
TREND STATEMENT
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
2015
$000
2014
$000
Trend Statement (Unaudited)
Operating revenue$117,981$135,234$148,120$156,120$190,371$215,728$200,642
EBITDA (normalised) 2,300 7,0 76 9,998 2,572 12,275 8,517 14,609
EBIT (normalised) (2,162) 3,597 6,437 (679) 8,923 2,655 8,760
(Loss)/Profit before income tax (normalised) (4,697) 2,451 5,058 (2,818) 8,219 741 7,320
(Loss)/Profit after tax (normalised) (3,457) 1,879 3,974 (1,856) 6,313 1,195 5,790
Abnormal costs (after tax) (17,994) (18,659) 107 (268) (3,198) (26,910) –
(Loss)/Profit after tax attributable to
shareholders of the Company (GAAP)
(21,451) (16,780) 4,081 (2,124) 3,115 (25,715) 5,790
Ordinary dividends paid – – – – – – (4,785)
Financial Position
Shareholers’ equity 33,637 54,989 72,222 6 7, 8 9 0 69,361 66,184 92,959
Loans and borrowings 15,800 20,500 31,500 41,500 3 7,7 0 0 56,767 61,220
Fixed assets 22,725 30,164 35,142 3 7,1 2 3 36,820 4 7, 9 1 0 63,900
Right-of-use assets 430 – – – – – –
Goodwill and other intangibles – – 2,362 2,362 2,362 2,362 7,7 9 4
Cash at bank 1,276 2,724 2,111 1,255 1,200 2,834 2,375
Return on average shareholders’ equity
(normalised)
( 7. 8)%3.0%5.7%(2.7)%9.3%1.5%6.2%
Basic earnings per ordinary share (normalised)(5.0)c2.7c5.8c(2.7)c9.2c1.7c8.5c
Net tangible asset backing per ordinary share$0.47$0.72$0.94$0.87$0.92$0.91$1.19
29 — ANNUAL REPORT 2020 28

2
FINANCIAL
STATEMENTS
31 — ANNUAL REPORT 2020 30

33 — ANNUAL REPORT 2020
Contents
33 Directors’ Responsibility Statement
34 Independent Auditor’s Report
39 Income Statement
40 Statement of Comprehensive Income
41 Statement of Changes in Equity
43 Statement of Financial Position
44 Statement of Cash Flows
Notes to the Financial Statements
46 1. Company information
2. General information relating to preparation of financial statements
46 2a. Statement of compliance
46 2b. Basis of preparation
46 2c. Critical accounting estimates and judgements and significant accounting policies
48 2d. Going concern
50 2e. Basis of consolidation
50 2f. New and amended accounting standards adopted and changes in accounting policies
51 3. Leases and right-of-use assets
4. Financial performance
56 4a. Segment performance
58 4b. Earnings per share
58 4c. Revenue
58 4d. Other income and gains/losses
59 4e. Administration expenses
59 4f. Personnel expenses
59 4g. Government grants
60 4h. Net finance costs
60 4i. Income tax
5. Capital and funding
64 5a. Capital management
65 5b. Share capital, dividends and reserves
66 5c. Loans and borrowings
6. Assets employed
67 6a. Property, plant and equipment
70 6b. Capital commitments
7. Working capital
71 7a. Cash and cash equivalents
71 7b. Trade receivables, other receivables and prepayments
71 7c. Inventories
72 7d. Trade payables and accruals
73 8. Risks and financial instruments
9. Others
84 9a. Equity-accounted investees
85 9b. Provisions
86 9c. Employee benefits
87 9d. Contingencies
87 9e. Related parties
88 9f. Group entities
89 9g. Events after balance date
89 9h. Standards, interpretations and amendments to standards
FINANCIAL STATEMENTS
DIRECTORS' RESPONSIBILITY STATEMENT
DIRECTORS' RESPONSIBILITIES
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.
ACCOUNTING POLICIES
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.
ACCOUNTING RECORDS
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.
SAFEGUARDING OF ASSETS AND INTERNAL CONTROLS
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.
FINANCIAL STATEMENTS
The Directors present, on pages 39 to 89, the Group financial
statements for the year ended 30 June 2020.
These audited financial statements were authorised for issue
by the Directors on 20 November 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
Chairman of the Audit Committee
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
32

35 — ANNUAL REPORT 2020 34
To the shareholders of Cavalier Corporation Limited
Report on the audit of the consolidated financial statements
OPINION
In our opinion, the accompanying consolidated financial statements of Cavalier Corporation Limited (the ’Company’) and its
subsidiaries (the 'Group') on pages 39 to 89:
i. present fairly in all material respects the Group’s financial position as at 30 June 2020 and its financial performance and
cash flows for the year ended on that date; and
ii. comply with New Zealand Equivalents to International Financial Reporting Standards and International Financial
Reporting Standards.
We have audited the accompanying consolidated financial statements which comprise:
—the consolidated statement of financial position as at 30 June 2020;
—the consolidated income statement, statements of other comprehensive income, changes in equity and cash flows for
the year then ended; and
—notes, including a summary of significant accounting policies and other explanatory information.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for
Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing
and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for
Professional Accountants (including International Independence Standards) (‘IESBA Code’), and we have fulfilled our other
ethical responsibilities in accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated
financial statements section of our report.
Our firm has also provided other services to the Group in relation to transfer pricing, Research and Development incentive tax
and income tax return review. Subject to certain restrictions, partners and employees of our firm may also deal with the Group
on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired
our independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to the Going concern section in Note 2d of the consolidated financial statements, which indicates there is
a material uncertainty concerning the Group's ability to generate sufficient cash flows to ensure the Group will have sufficient
liquidity to continue as a going concern.
THE AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Going concern and liquidity

Refer to Note 2d to the Financial Statements.

Management has forecast the Group’s financial performance,
cash flows and financial position to support the Directors’
assessment and conclusion that the Group will have sufficient
liquidity to operate as a going concern for a period of at least
one year from the issuance of these consolidated financial
statements. In performing this assessment, assumptions were
made in respect of the Group’s strategic restructure, future
economic and market conditions, such as forecast sales
volumes, expected sales price fluctuations, production
efficiencies, forecast AUD exchange rate movements, and
forecast wool prices, with consideration of the Group’s
hedged positions.


We evaluated management’s forecasts and the Group’s ability
to maintain liquidity for a period of at least 12 months from the
issuance of these financial statements by performing the
following procedures:
—Reviewed terms of the Group’s revised facility
agreement dated 30 June 2020 and considered the
Group’s debt repayment obligations.
—Evaluated the Group’s previous forecasts by comparing
actual performance against forecasts in prior periods.
THE AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Going concern and liquidity (cont'd)


The Group’s strategic decision to restructure its business to an
all wool and natural materials organisation (the “Pivot”) has
substantially increased the level of estimation uncertainty for
the above mentioned assumptions, most notably the
projected sales volumes. As a result of the restructuring,
additional estimates and assumptions have been made around
the conversion and sell down of synthetic inventory, operating
and capital expenditure necessary to transition the business,
levels of working capital required to support the growth of the
wool only business, and the need for additional funding.
Additionally, there is significant estimation uncertainty related
to forecasting cash flows due to the potential future impact of
COVID-19, which may impact future production levels and
ability to sell product through retailers.
On 21 August 2020 the Group entered into an agreement for
the sale and leaseback of its Auckland property for net
proceeds of approximately $24 million. On 6 November 2020
the purchaser failed to settle on the agreement. On 9
November the Group served a settlement notice providing 12
working days to remedy the default. On 13 November 2020
the Group terminated its agreement with the purchaser for
default of payment of the deposit and entered into a new
agreement for the sale and leaseback of the Auckland
property subject to shareholder approval or receiving a waiver
from NZX from the need to obtain such shareholder approval.
At the date of issuing our opinion, shareholder approval and
settlement of the transaction had not been completed.
The Group’s bank facility expires on 1 July 2021 with the
facility limit reducing to $10.0 million on 31 December 2020,
and $8.0 million on 30 April 2021. At the date of issuing our
opinion the bank facility agreement has not been extended
and no other debt or equity funding arrangements have been
put in place.
Following the sell down of the Group’s synthetic inventory,
the Group is expected to generate negative operating cash
flows for a period until the strategic initiatives supporting the
Pivot take effect, and sales volumes of woollen carpets
increase significantly. The Group is projected to have sold its
synthetic inventory by the end of March 2021.
The Group may not be able to continue as a going concern for
a period of at least 12 months from the issuance of these
consolidated financial statements unless it completes the sale
and leaseback of its property, or is able to raise significant
equity and/or debt funding, or a combination of these.

—Reviewed the Group’s forecast financial performance,
cash flows and financial position under various
scenarios, challenged key assumptions against historical
production and market data, reviewed hedging
agreements and wool contracts, and considered
internal and external factors impacting the business,
including the impact of COVID-19.
—Reviewed reports and board approved documents
supporting the restructuring of the business to an all
wool and natural materials organisation.
—Reviewed key inputs and assessed their consistency
with Director-approved forecasts.
—Obtained sale and leaseback agreements relating to the
Auckland property, understood sale conditions, future
lease obligations and settlement terms, sighted receipt
of deposit for the new sale and leaseback agreement.
—Performed a sensitivity analysis of the Group’s forecasts
under various scenarios.
—Assessed the adequacy of related disclosures in the
financial statements against the requirements of the
accounting standards.
As stated in this audit matter, the events or conditions, along
with other matters as set forth in Note 2(d), indicate that a
material uncertainty exists that may cast significant doubt on
the Group’s ability to continue as a going concern. Our opinion
is not modified in respect of this matter.
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
© 2020 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.

37 — ANNUAL REPORT 2020 36
EMPHASIS OF MATTER - RESTRUCTURE OF BUSINESS
We draw attention to Note 2c(i) which describes the effect of the Board approved strategic decision to restructure its
business to an all wool and natural materials organisation. This has substantially increased the level of judgement and
estimation uncertainty in determining the carrying values of certain assets and liabilities recognised in the consolidated
financial statements of the Group. Our opinion is not qualified in respect of this matter.
MATERIALITY
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing
and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated
financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $350,000.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to
address those matters in order that the shareholders as a body may better understand the process by which we arrived at our
audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on
the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the
consolidated financial statements.
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Impairment of non-current assets (Carpets CGU)
Refer to Note 6a to the Financial Statements.

As at 30 June 2020, prior to any adjustment for impairment,
non-current assets relating to the Carpets CGU consisted
of property, plant and equipment with a carrying value of
$28,238,000, and right of use assets with a carrying value
of $2,909,000.
The Group’s market capitalisation of $15,109,000 was
significantly below the carrying value of its net assets of
$53,718,000 (pre-impairment) as at 30 June 2020. This
disparity was an indicator of impairment of non-current assets
in the Carpets CGU. Management performs an impairment
assessment of property, plant and equipment where there
are indicators of impairment. Based on this assessment,
management determined that the property, plant and
equipment and right of use assets allocated to the Carpets
CGU were impaired by $7,077,000 and $2,909,000,
respectively. Property with a carrying value of $21,161,000 is
supported by its fair value which exceeds its carrying value.
As disclosed in Note 6a, in assessing whether property, plant
and equipment is impaired, the Group uses a Discounted Cash
Flow (‘DCF’) value-in-use model. In performing this
assessment, assumptions are made in respect of future
economic and market conditions, such as forecast sales
volumes, expected sales price fluctuations, budgeted
production efficiencies, forecast AUD exchange rate
movements, and forecast wool prices, with consideration of
the Group’s hedged positions. Additionally, management
determined a terminal growth rate and discount rate which
reflect an assessment of the time value of money and the risks
specific to the business.


Our testing of impairment of non-current assets included the
following procedures:
—Evaluated management’s identification of CGU’s.
—Evaluated the methodologies, data and assumptions
used in the discounted cash flow model and in doing
this, we involved our valuation specialists.
—Challenged management’s cash flow assumptions,
including projected sales volumes, sales margin, wool
price and foreign exchange rates against historical
performance and forecast market information.
—Reviewed reports and board approved documents
supporting the restructuring of the business to an all
wool and natural materials organisation and considered
their consistency with the assumptions adopted in the
DCF model.
—We cross referenced the outcome of the DCF
impairment model against the Group’s market
capitalisation with consideration of control premium.
—Reviewed real estate agency reports and offers for the
Group’s property, and sale and purchase agreements
for the Auckland property.
—Performed sensitivity analyses on the key assumptions
used in the impairment model.
—Evaluated disclosure of impairment and related key
assumptions in the financial statements of the Group.
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Impairment of non-current assets (Carpets CGU) (cont'd)

The Group’s strategic decision to restructure its business
to an all wool and natural materials organisation requires a
substantial increase in sales volumes of woollen carpets over
the forecast period which represents significant estimation
uncertainty in assessing the recoverability of property, plant
and equipment.
We focused on the impairment of property, plant and
equipment due to the magnitude of the balance, judgement and
estimation uncertainty related to assessing its recoverability.

The results of our procedures supported the impairment
of non-current assets allocated to the Carpets CGU as
concluded by the directors.
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

Valuation of inventory
Refer to Note 7c to the Financial Statements.

The Group has significant inventory balances consisting of
both raw materials and finished goods relating primarily to
the production of carpets.
Inventory is valued at the lower of cost and net realisable
value. Assessing the net realisable value of inventory is
complex and requires judgement in regard to the identification
and categorisation of inventory as obsolete, slow moving and
at risk of being sold below cost. Estimates are then involved in
determining the amount of provision required against the cost
of such inventory items.
The Group’s strategic decision to transform its business to an
all wool and natural materials organisation has resulted in the
exit from synthetic carpets which are expected to be fully sold
down in FY 2021. There is significant estimation uncertainty
related to assessing the realisable value of synthetic inventory.
We focused on the valuation of inventory due to the
magnitude of the balance, judgement and estimation
uncertainty related to assessing its net realisable value.


We evaluated the valuation of inventory by performing the
following audit procedures:
—Observed the condition of inventory as part of our
physical inventory count procedures.
—We challenged management’s calculation of provisions
recognised against synthetic inventory at the balance
date. We assessed inventory turnover levels of
synthetic carpets, and considered the quantities held
of synthetic yarn and finished goods inventory in
determining the level of provisioning required to fully
sell down the synthetic inventory in FY2021.
—Assessed the Group’s methodology for identifying
slow moving and obsolete inventories, taking into
consideration the nature of the inventory and the
Group’s ongoing inventory rationalisation plans.
—Obtained management’s calculation of net realisable
value for slow moving and obsolete inventories and
compared it to historical sales and margin reports.
We also assessed and challenged key assumptions for
reasonableness and corroborated with explanations
provided by sales and inventory managers.
—Performed a detailed inventory turnover analysis and
considered whether any excess quantities of inventory
are on hand.
—Reviewed and tested underlying sales and inventory
cost reports.
We did not identify material matters that were inconsistent with
the Directors’ conclusion that inventory is appropriately valued.
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)

39 — ANNUAL REPORT 2020 38
OTHER INFORMATION
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual Report.
Other information includes Chairman and Chief Executive’s report, disclosures relating to corporate governance and other
Group specific information. Our opinion on the consolidated financial statements does not cover any other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
USE OF THIS INDEPENDENT AUDITOR'S REPORT
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we
might state to the shareholders those matters we are required to state to them in the independent auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors, on behalf of the Company, are responsible for:
—the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted
accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards)
and International Financial Reporting Standards;
—implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is
fairly presented and free from material misstatement, whether due to fraud or error; and
—assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations,
or have no realistic alternative but to do so.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objective is:
—to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error; and
—to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at the External
Reporting Board (XRB) website at: xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Aaron Woolsey.
For and on behalf of


KPMG
Auckland
20 November 2020
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)


Audited


Note

2020
$000

2019
$000
Revenue4c 11 7, 9 8 1 135,234
Cost of sales (94,443) (102,378)
Gross profit 23,538 32,856
Other income and gains/losses
4d 35 41
Distribution expenses (19,039) (22,486)
Administration expenses
4e (6,696) (6,814)
Restructuring costs (1,186) –
Impairment of plant and equipment
6a (7,077) (6,129)
Impairment of right-of-use assets
3, 6a (2,909) –
Impairment of goodwill – (2,362)
Results from operating activities (13,334) (4,894)
Net finance costs
4h (2,535) (1,790)
Share of profit after tax of equity-accounted investees
9a – 644
Loss on sale of interest in, and property held by, equity-accounted
investees
9a

–

(11,884)
Loss before income tax (15,869) (17,924)
Income tax benefit
4i 7, 3 0 9 1,144
Derecognition of deferred tax assets
4i (12,891) –
Loss after tax for the year ($21,451)($16,780)
Basic and diluted loss per share (cents)4b(31.2)(24.4)
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020

41 — ANNUAL REPORT 2020 40


Audited


Note

2020
$000

2019
$000
Loss after tax for the year (21,451) (16,780)
Other comprehensive income that may be reclassified subsequently to
profit or loss
Effective portion of changes in fair value of cash flow hedges (178) 229
Net change in fair value of cash flow hedges transferred to profit or loss 315 (536)
Income tax on changes in fair value of cash flow hedges
4i (38) 86
Share of fair value of cash flow hedges (net of income tax) of
equity-accounted investee
9a

–

72
99 (149)
Total comprehensive income for the year ($21,352)($16,929)
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020


Audited

Share Capital
$000
Cash Flow
Hedging Reserve
$000
Foreign Currency
Translation Reserve
$000
Retained Earnings
$000
Total Equity
$000
Total equity at 1 July 2019 21,846 (219) (1,420) 34,782 54,989
Total comprehensive income for the year
Loss after tax – – – (21,451) (21,451)
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)

–

99

–

–

99
Total comprehensive income for the year – 99 – (21,451) (21,352)
Total equity at 30 June 2020 $21,846 ($120)($1,420)$13,331 $33,637
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020

43 — ANNUAL REPORT 2020 42


Note

Share Capital
$000
Cash Flow Hedging
Reserve
$000
Foreign Currency
Translation Reserve
$000

Retained Earnings
$000

Total Equity
$000

Audited
Total equity at 1 July 2018 21,846 (70) (1,420) 51,866 72,222
Impact of adopting NZ IFRS 15 Revenue – – – (304) (304)
Total equity at 1 July 2018 after adjusting for
impact of change in accounting policy

21,846

(70)

(1,420)

51,562

71,918
Total comprehensive income for the year
Loss after tax – – – (16,780) (16,780)
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)

–

(221)

–

–

(221)
Share of fair value of cash flow hedges (net of
income tax) of equity-accounted investee
9a

–

72

–

–

72
– (149) – – (149)
Total comprehensive income for the year – (149) – (16,780) (16,929)
Total equity at 30 June 2019 $21,846 ($219)($1,420)$34,782 $54,989
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020


Audited


Note

2020
$000

2019
$000
ASSETS
Property, plant and equipment - owned
6a 22,725 30,164
Property, plant and equipment - right-of-use
3 430 –
Deferred tax asset
4i 600 5,456
Total non-current assets 23,755 35,620
Cash and cash equivalents
7a 1,276 2,724
Trade receivables, other receivables and prepayments
7b 12,607 12,344
Inventories
7c 32,081 4 7,6 7 8
Derivative financial instruments
8 160 653
Income tax receivable 102 315
Total current assets 46,226 63,714
Total assets $69,981 $99,334
EQUITY
Share capital
5b 21,846 21,846
Cash flow hedging reserve
5b (120) (219)
Foreign currency translation reserve
5b (1,420) (1,420)
Retained earnings 13,331 34,782
Total equity 33,637 54,989
LIABILITIES
Loans and borrowings
5c – 20,500
Lease liabilities
3 2,224 –
Employee benefits
9c 888 903
Provisions
9b 584 715
Total non-current liabilities 3,696 22,118
Loans and borrowings
5c 15,800 –
Trade payables and accruals
7d 10,617 1 7,0 1 4
Employee entitlements 3,444 3,856
Lease liabilities
3 1,345 –
Provisions
9b 710 699
Derivative financial instruments
8 732 649
Deferred income – 9
Total current liabilities 32,648 22,227
Total liabilities 36,344 44,345
Total equity and liabilities $69,981 $99,334
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020

45 — ANNUAL REPORT 2020 44


Audited
Note

2020
$000

2019
$000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 117,836 135,700
Cash paid to suppliers and employees (1 0 7, 9 6 5) (130,611)
9,871 5,089
Dividends received 1 2
Other receipts 4 4
GST (paid)/refunded (10) 14
Interest paid - bank borrowings (2,006) (1,918)
Interest paid - lease liabilities (536) -
Income tax paid (551) (285)
Net cash flow from operating activities 6,773 2,906
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 28 110
Acquisition of property, plant and equipment
6a (2,119) (4,705)
Proceeds from sale of interest in, and property held by,
equity-accounted investees
9a

–

10,593
Dividends received from equity-accounted investees
9a – 2,783
Net cash flow from investing activities (2,091) 8,781
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank borrowings
5c (4,700) (11,000)
Principal repayment of lease liabilities
3 (1,490) –
Net cash flow from financing activities (6,190) (11,000)
Net increase in cash and cash equivalents (1,508) 687
Cash and cash equivalents at beginning of the year 2,724 2,111
Effect of exchange rate changes on cash 60 (74)
Cash and cash equivalents at end of the year $1,276 $2,724
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020


Audited

2020
$000

2019
$000
Loss after tax for the year (21,451) (16,780)
Add/(Deduct) non-cash items:
Depreciation - owned assets 2,683 3,479
Depreciation - right-of-use assets 1,779 –
Impairment of plant and equipment 7,0 7 7 6,129
Impairment of right-of-use assets 2,909 –
Impairment of goodwill – 2,362
Share of profit of equity-accounted investees – (644)
Loss on sale of interest in, and property held by, equity-accounted investees – 11,884
Deferred tax credit (8,073) (399)
Derecognition of deferred tax assets 12,891 –
Employee benefits (427) (228)
Deferred income (9) (37)
Provisions (174) (1,918)
Net loss/(gain) on sale of property, plant and equipment 35 (35)
Net (gain)/loss on foreign currency balance (60) 74
Changes in working capital items:
Trade and other receivables (263) 511
Inventories 15,332 1,531
Income tax payable/receivable 213 (1,030)
Trade payables and accruals (6,400) (2,060)
Derivative financial instruments 711 67
Net cash flow from operating activities$6,773 $2,906
This statement is to be read in conjunction with the notes on pages 46 to 89.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

47 — ANNUAL REPORT 2020 46
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. COMPANY INFORMATION
Cavalier Corporation Limited (“Cavalier” or “Company”) is a limited liability company that is domiciled and incorporated
in New Zealand.
The financial statements presented are for Cavalier and its subsidiaries (“Group”) as at, and for the year ended,
30 June 2020.
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.
The principal activities of the Group comprise wool acquisition, and carpet and rug manufacturing and sales. All Group
subsidiaries are wholly-owned.
2. GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS
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).
2b. BASIS OF PREPARATION
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.
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
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.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future
periods affected.
2c (i) Transformation to the all-wool and natural materials business model
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.
On 13 November 2020, the Group entered into an agreement for the sale and leaseback of its Auckland property, with
the net proceeds of sale of approximately $25 million to be used to fully repay bank debt outstanding at settlement date
(expected to be no later than the end of January 2021) and the balance applied towards providing the Group with the
financial resources to undertake its strategic transformation. More information relating to the sale and leaseback of the
Auckland property can be found at note 9g (Events after balance date) to the financial statements.
2. GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS (CONT'D)
2c. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
2c (i) Transformation to the all-wool and natural materials business model (cont'd)
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;
—Marketing investment 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.
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:
Areas involving substantially increased level of judgement
and estimation uncertainty as a consequence of the
transformation to an all-wool and natural materials model
Notes to the financial statements
Liquidity and going concernNote 2d Going concern
Recoverability of deferred tax assets and tax losses
carried forward
Note 4i Income tax
Impairment of non-current assetsNote 3 Leases and right-of-use assets and
Note 6a Property, plant and equipment
Classification of non-current assets as held for saleNote 6a Property, plant and equipment
Net realisable value of non-wool inventoryNote 7c Inventories
Effectiveness of hedging instrumentsNote 8 Risks and financial instruments

In future reporting periods, the Group’s funding structure, levels of working capital, and leasing arrangements will be
materially different.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

49 — ANNUAL REPORT 2020 48
2. GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS (CONT'D)
2c. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
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 cash flows 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
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:
Note 7c – inventory provisioning
Note 9b – measurement of provisions
Note 9c – measurement of employee benefits
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 Estimates, judgements and assumptions

2d. GOING CONCERN
The Group prepares its financial statements on a going concern basis and expects to be able to realise its assets and meet
its financial obligations in the normal course of business.
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 reflected the Group’s transformation to the
all-wool and natural materials business model and 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 performance;
—ability to comply with its financial covenants over the term of its banking facilities; and
—capacity to meet its debt repayment obligations as well as its other financial commitments as they fall due in the
normal course of business.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
2. GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS (CONT'D)
2d. GOING CONCERN (CONT'D)
In preparing these forecasts, management considered and, where required, made assumptions in relation to:
—woollen carpet sales after having regard to future economic and market conditions, including the uncertainty brought
on by COVID-19;
—NZD/AUD exchange rate changes, after considering hedged positions;
—wool price movements, after recognising wool purchase contracts;
—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
—manufacturing discipline and cost control.
The Board notes that these financial forecasts are particularly sensitive to changes in woollen carpet sales and margins, with
the Group’s capacity to meet the Bank’s debt reduction targets highly dependent on these factors – particularly, if woollen
carpet sales volumes were to continue to erode in FY21 and into FY22.
As a consequence, the Board believes that there is material uncertainty concerning the Group’s ability to generate sufficient
cash flows to meet its debt repayment obligations and to provide the Group with sufficient liquidity to operate as a going
concern. Should the Group not complete the sale and leaseback of its Auckland property or raise additional equity or debt
funding, the Group may not be able to continue as a going concern and realise the value of its assets and discharge its
liabilities in the normal course of business.
The Board has implemented a number of initiatives to address this uncertainty including:
—ongoing plans to grow carpet sales by increasing its in-store presence, supply chain improvements and on-going
product development and range refreshment;
—plans to sell-down non-wool carpet inventory in a timely manner, while balancing that against maximising the realisable
value of inventory;
—initiatives to reduce the cost base as the Group exits the non-wool carpet business and transitions to the all-wool
business model;
—actions in place to manage costs relating to the execution of the transformation strategy until completion of the sale
and leaseback, and receipt of the proceeds of sale, of the Auckland property;
—seeking extensive independent advice on options available to the Group on the most effective way of accessing capital
at this time and the capital options available to it to further strengthen its financial position.
Additionally, the Board notes that the sale and leaseback of the Group’s Auckland property remains on track, after the failure
of the original purchaser to settle the transaction.
A new agreement was entered into with another purchaser on 13 November 2020 as discussed at note 9g (Events after
balance date) to the financial statements.
The Board also notes that a deposit has been received, with the settlement of this new agreement only conditional on
receipt of either a waiver being obtained from NZX from the need to obtain Cavalier shareholder approval for the sale
and leaseback or, failing receipt of the waiver, Cavalier shareholder approval at the Annual Meeting of shareholders
on 23 December 2020.
The Board expects settlement of the new agreement will take place towards the end of January 2021 and considers the
Group to be a going concern, with the Group able to not only meet its contractual obligations for a period of at least 12
months from the issuance of the financial statements, but also having the funding over the next few years until it begins to
realise the financial benefits of the transformation strategy.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

51 — ANNUAL REPORT 2020 50
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
2. GENERAL INFORMATION RELATING TO PREPARATION OF FINANCIAL STATEMENTS (CONT'D)
2e. BASIS OF CONSOLIDATION
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.
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.
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.
2f. NEW AND AMENDED ACCOUNTING STANDARDS ADOPTED AND CHANGES IN ACCOUNTING POLICIES
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.
The Group also early adopted the January 2020 amendments to NZ IAS 1 Presentation of Financial Statements during the year.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
3. LEASES AND RIGHT-OF-USE ASSETS
IMPACT OF THE ADOPTION OF NZ IFRS 16
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.
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.

53 — ANNUAL REPORT 2020 52
3. LEASES AND RIGHT-OF-USE ASSETS (CONT'D)
IMPACT OF THE ADOPTION OF NZ IFRS 16 (CONT'D)
Summary of the impact on the Statement of Financial Position on the adoption of NZ IFRS 16
Adoption date
1 Jul 2019
$000
Assets
Non-current assets
Property, plant and equipment – right-of-use 7, 8 3 1
Total adjustments - Assets$ 7, 8 3 1
Liabilities
Non-current liabilities
Lease liabilities 6,338
Provision for make good 50
Total non-current liabilities 6,388
Current liabilities
Lease liabilities 1,438
Provision for make good 5
Total current liabilities 1,443
Total adjustments – Liabilities$ 7, 8 3 1
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
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:
Balance
1 Jul 2019
$000

Additions
$000

Depreciation
$000

Remeasurement
$000

Impairment losses
$000
Balance
30 Jun 2020
$000
Buildings 6,381 22 (1,116) (2,960) (1,897) 430
Other assets 1,450 225 (663) – (1,012) –
Total$ 7, 8 3 1 $247 ($1,779)($2,960)($2,909)$430
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.
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.
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:
Balance
1 Jul 2019
$000

Additions
$000

Repayment
$000

Remeasurement
$000
Balance
30 Jun 2020
$000
Total$ 7,7 76 $243 ($1,490)($2,960)$3,569
Non-current 6,338 2,224
Current 1,438 1,345
Total$ 7,7 76 $3,569
3. LEASES AND RIGHT-OF-USE ASSETS (CONT'D)
IMPACT OF THE ADOPTION OF NZ IFRS 16 (CONT'D)
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:
$000
Operating lease commitments as at 30 June 2019 5,510
Less short-term leases (less than 12 months) not recognised (266)
Less low-value leases not recognised (45)
Add adjustments for lease extensions reasonably certain to be exercised 5,131
10,330
Effect of discounting using incremental borrowing rates at 1 July 2019 (2,554)
Lease liabilities recognised at 1 July 2019$ 7,7 76
Non-current 6,338
Current 1,438
Lease liabilities recognised as at 1 July 2019$ 7,7 76
A weighted average discount rate of 7.5% was used to determine the present value of lease liabilities as at 1 July 2019.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

55 — ANNUAL REPORT 2020 54
3. LEASES AND RIGHT-OF-USE ASSETS (CONT'D)
IMPACT OF THE ADOPTION OF NZ IFRS 16 (CONT'D)
Summary of the impact of NZ IFRS 16 on the income statement for the year:
Assuming application
of NZ IAS 17
$000
Impact of NZ IFRS 16
$000
Impairment losses
$000
Reported result
$000
Revenue 1 1 7, 9 8 1 1 1 7, 9 8 1
Cost of sales (94,629) 186 – (94,443)
Gross profit 23,352 186 – 23,538
Other income and gains 35 – – 35
Distribution expenses (19,081) 42 – (19,039)
Administration expenses (6,715) 19 – (6,696)
Restructuring costs (1,186) – – (1,186)
Impairment of plant and equipment ( 7,0 7 7 ) – – ( 7,0 7 7 )
Impairment of right-of-use assets – – (2,909) (2,909)
Result from operating activities (10,672) 247 (2,909) (13,334)
Net finance costs (1,999) (536) – (2,535)
Loss before tax (12,671) (289) (2,909) (15,869)
Tax expense (5,663) 81 – (5,582)
Loss after tax (18,334) (208) (2,909) (21,451)
Basic and diluted earnings per share (cents) (26.7) (0.3) (4.2) (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
$000
Additional depreciation
charge for right-of-use
assets recognised in
profit or loss
$000
Additional finance costs
on lease liabilities recog-
nised in profit or loss
$000
Impact on Income State-
ment for year ended 30
June 2020
$000
Cost of sales 1,036 (850) – 186
Distribution expenses 822 (780) – 42
Administration expenses 168 (149) – 19
Net finance costs– – (536) (536)
$2,026 ($1,779)($536)($289)
Short-term lease and low-value asset lease expense for the year:
Expense recognised
in profit or loss
$000
Short term lease expense(266)
Low-value asset lease expense

(45)
Total($311)
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
3. LEASES AND RIGHT-OF-USE ASSETS (CONT'D)
IMPACT OF THE ADOPTION OF NZ IFRS 16 (CONT'D)
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.
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)

($2,337)
Cash outflow has been reallocated:
—to interest expense (now included in interest paid within cash flows from operating
activities) (536)
—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)
Accounting policy
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.
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.
Estimates, judgements and assumptions
The assessment of the incremental borrowing rate used to determine the present value of lease liabilities requires
significant judgement.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

57 — ANNUAL REPORT 2020 56
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
4. FINANCIAL PERFORMANCE
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
—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.
Inter-segment transactions
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
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.
Revenue
2020
$000
2019
$000
New Zealand 65,012 78,316
Australia 50,071 52,640
Rest of the world 2,898 4,278
$117,981 $135,234
Non-current assets
As at
30 Jun 2020
$000
As at
30 Jun 2019
$000
New Zealand 22,740 34,955
Australia 1,015 665
$23,755 $35,620
Major customers
None of the Group’s external customers contributed revenues in excess of 10% of the Group’s total revenues.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
4. FINANCIAL PERFORMANCE (CONT'D)
4a. SEGMENT PERFORMANCE (CONT'D)
Carpets sales and manufacturing Wool acquisition To tal
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
External revenue 101,135 113,059 16,846 22,175 11 7, 9 8 1 135,234
Inter-segment revenue – – 1,788 3,277 1,788 3,277
To t al r eve nu e 101,135 113,059 18,634 25,452 119,769 138,511
Elimination of inter-segment revenue (1,788) (3,277)
Consolidated revenue $ 11 7, 9 8 1 $135,234
Segment result before depreciation,
restructuring related expenses and impairment
3,484 7,7 2 1 102 928 3,586 8,649
Depreciation - owned assets (2,532) (3,339) (151) (140) (2,683) (3,479)
Depreciation - right-of-use assets (1,649) – (130) – (1,779) –
Segment result before restructuring
and impairment
(697) 4,382 (179) 788 (876) 5,170
Restructuring costs (1,186) – – – (1,186) –
Impairment of plant and equipment (7,077) (6,129) – – (7,077) (6,129)
Impairment of right-of-use assets (2,909) – – – (2,909) –
Impairment of goodwill – (2,362) – – – (2,362)
Segment result after restructuring
and impairment
(11,869) (4,109) (179) 788 (12,048) (3,321)
Elimination of inter-segment profits 50 (30)
Unallocated corporate costs (1,336) (1,543)
Results from operating activities (13,334) (4,894)
Net finance costs (2,535) (1,790)
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)
(Loss)/Profit before income tax (15,869) (17,924)
Income tax benefit/(expense) (5,582) 1,144
(Loss)/Profit after tax for the year ($21,451)($16,780)
Carpets sales and manufacturing Wool acquisition To tal
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Reportable segment assets 6 7, 474 96,300 2,507 3,034 69,981 99,334
Unallocated assets – –
Total assets $69,981 $99,334
Capital expenditure 2,067 4,328 52 377 $2,119 $4,705
Reportable segment liabilities 19,363 21,496 1,181 2,349 20,544 23,845
Unallocated liabilities - Loans and borrowings 15,800 20,500
Total liabilities $36,344 $44,345

59 — ANNUAL REPORT 2020 58
4. FINANCIAL PERFORMANCE (CONT'D)
4b. EARNINGS PER SHARE
Basic and diluted (loss)/earnings per share (EPS)
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
Basic and diluted EPS (cents) (31.2) (24.4)
4c. REVENUE
2020
$000
2019
$000
Sales of goods
Carpet 98,985 111,412
Wool fibre 16,846 22,175
Carpet yarn 1,014 876
116,845 134,463
Provision of installation services 1,136 771
Total revenue$ 11 7, 9 8 1 $135,234
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
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.
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
2020
$000
2019
$000
Rentals received 4 4
Dividends received 1 2
Other income 65 –
Net (loss)/gain on sale of property, plant and equipment (35)35
Total other income and gains/losses$35 $41
4. FINANCIAL PERFORMANCE (CONT'D)
4e. ADMINISTRATION EXPENSES
The following items of expenditure are included in administration expenses:
2020
$000
2019
$000
Donations$3$15
Fees paid and payable to KPMG for:
Audit of financial statements - current year371168
Audit of financial statements - additional for prior year 61–
Tax services2030
Other services–6
Total fees paid and payable to KPMG$452$204

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.
4f. PERSONNEL EXPENSES
2020
$000
2019
$000
Directors’ fees 368 387
Wages, salaries, bonuses and holiday pay 28,300 32,694
Employee termination benefits 364 552
Employee benefits 2,568 2,692
Decrease in liability for retiring allowances and long service leave (15) (8)
Total personnel expenses$31,585 $36,317
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).
4g. GOVERNMENT GRANTS
2020
$000
2019
$000
COVID-19 wage subsidy
Total wage subsidy received 2,819 –
Less amount carried forward in inventory(1,500)–
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

61 — ANNUAL REPORT 2020 60
4. FINANCIAL PERFORMANCE (CONT'D)
4h. NET FINANCE COSTS
2020
$000
2019
$000
Interest income – 2
Interest expense - bank borrowings (1,531) (1,792)
Interest rate swap - hedge ineffectiveness (468) –
Interest expense - lease liabilities (536) –
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
2020
$000
2019
$000
INCOME TAX EXPENSE/(BENEFIT) IN THE INCOME STATEMENT
Current tax expense/(benefit)
Current year 773 (646)
Adjustment for prior years (9) (99)
764 (74 5)
Deferred tax expense/(benefit)
Origination and reversal of temporary differences (8,082) (492)
Adjustment for prior years 9 93
Derecognition of deferred tax assets 12,891 –
4,818 (399)
Income tax expense/(benefit)$5,582 ($1,144)
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
4. FINANCIAL PERFORMANCE (CONT'D)
4i. INCOME TAX (CONT'D)
2020
$000
2019
$000
RECONCILIATION OF EFFECTIVE TAX RATE
Loss after tax for the year (21,451) (16,780)
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%) (4,443) (5,019)
Impending change in legislation relating to tax depreciation on buildings (2,940) –
Derecognition of deferred tax assets 12,891 –
Share of profit after tax of equity-accounted investees – (180)
Loss on sale of interest in, and property held by, equity-accounted investees – 3,328
Impairment of goodwill – 661
Non-deductible expenses 41 36
Effect of tax rate difference in foreign jurisdiction 33 35
Underprovided in prior years – (6)
Other – 1
Income tax expense/(benefit)$5,582 ($1,144)
2020
$000
2019
$000
INCOME TAX RECOGNISED DIRECTLY IN EQUITY
Derivative financial instruments 38 (86)
Income tax on income and expense recognised directly in equity$38 ($86)
IMPUTATION CREDITS
2020
$000
2019
$000
Imputation credits available to shareholders of the Company$9,233 $9,232
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

63 — ANNUAL REPORT 2020 62
4. FINANCIAL PERFORMANCE (CONT'D)
4i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
AssetsLiabilitiesNet
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Property, plant and equipment 181 – – (1,130) 181 (1,130)
Inventories 100 644 – – 100 644
Employee benefits 130 1,124 – – 130 1,124
Lease liabilities 146 – – – 146 –
Provisions 43 1,193 – – 43 1,193
Tax loss carry-forwards – 3,625 – – – 3,625
Net tax assets/(liabilities)$600 $6,586 – ($1,130)$600 $5,456
Deferred tax assets in respect of temporary differences and tax loss carry-forwards totalling $12,891,000 were
derecognised (2019: Nil).
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.
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.
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 there from,
taking the total deferred tax assets unrecognised to $37,041,000 (2019: $24,150,000).
Notwithstanding the derecognition of deferred tax assets for accounting purposes, these deferred tax assets remain
available to the Group for income tax purposes.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
4. FINANCIAL PERFORMANCE (CONT'D)
4i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities (cont'd)
Movement in temporary differences during the year:

Balance
30 June 2019
$000
Recognised on
transition to
NZ IFRS 16
$000
Recognised in
profit or loss
$000
Recognised in
equity
$000

Derecognition
of deferred
tax assets in
profit or loss
$000



Balance
30 June 2020
$000
Property, plant and equipment (1,130) - 4,476 - (3,165) 181
Right-of-use assets- (2,194) 1,245 - 949 -
Derivatives - - 38 (38) - -
Inventories 644 - 612 - (1,156) 100
Employee benefits 1,124 - (5) - (989) 130
Lease liabilities- 2,17 7 (349) - (1,683) 146
Provisions 1,193 17 (216) - (950) 44
Tax loss carry-forwards 3,625 - 2,272 - (5,897) -
To t al$5,456 - $8,073 ($38)($12,891)$600
Balance
30 June 2018
$000
Recognised in
profit or loss
$000
Recognised in
equity
$000
Balance
30 June 2019
$000
Property, plant and equipment (2,74 4) 1,614 - (1,130)
Derivatives - (86) 86 -
Inventories 589 55 - 644
Employee benefits 1,232 (108) - 1,124
Provisions 2,092 (899) - 1,193
Tax loss carry-forwards 3,802 (177) - 3,625
To t al$4,971 $399 $86 $5,456

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.
Estimates, judgements and assumptions
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.

65 — ANNUAL REPORT 2020 64
5. CAPITAL AND FUNDING
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.
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
5. CAPITAL AND FUNDING (CONT'D)
5b. SHARE CAPITAL, DIVIDENDS AND RESERVES
Share capital
20202019
Number of ordinary shares issued 68,679,098 68,679,098
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
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
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

67 — ANNUAL REPORT 2020 66
5. CAPITAL AND FUNDING (CONT'D)
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 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:

Nominal interest
rate 2020
%
Notional value
2020
$000
Fair value
2020
$000
Nominal inter-
est rate 2019
%
Notional value
2019
$000
Fair value 2019
$000
Non-current – – 20,500 20,500
Current 15,800 15,800 – –
Total secured bank loans7. 3$15,800 $15,800 7.0 $20,500 $20,500
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 the removal of the
EBITDA covenant and reset of the revenue, inventory and equity ratio targets to reflect the Group’s latest financial forecasts.
More information on the Group’s ability to meet its debt reduction targets for FY21 can be found at note 2d (Going concern)
to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
6. 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.
6a. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
$000
Plant and
equipment
$000
Other assets
$000
Under
construction
$000
To tal
$000
COST OR DEEMED COST
Balance at 1 July 2019 24,159 68,848 16,169 957 110,133
Additions 387 221 892 619 2,119
Disposals – (1,321) (2,845) – (4,166)
Tr a n s f e r s 282 350 289 (921) –
Balance at 30 June 2020$24,828 $68,098 $14,505 $655 $108,086
Balance at 1 July 2018 23,734 72,603 14,601 119 111,057
Additions 434 694 2,621 956 4,705
Disposals (9) (4,511) (1,109) – (5,629)
Tr a n s f e r s – 62 56 (118) –
Balance at 30 June 2019$24,159 $68,848 $16,169 $957 $110,133
DEPRECIATION AND IMPAIRMENT
LOSSES
Balance at 1 July 2019 2,651 63,938 13,380 – 79,969
Depreciation for the year 338 1,524 556 – 2,418
Impairment losses provided – 3,874 2,548 655 7,0 7 7
Disposals – (1,271) (2,832) – (4,103)
Balance at 30 June 2020$2,989 $68,065 $13,652 $655 $85,361
Balance at 1 July 2018 2,403 61,444 12,068 – 75,915
Depreciation for the year 257 2,568 654 – 3,479
Impairment losses provided – 4,369 1,760 – 6,129
Disposals (9) (4,443) (1,102) – (5,554)
Balance at 30 June 2019$2,651 $63,938 $13,380 – $79,969
CARRYING AMOUNTS
At 30 June 2020$21,839 $33 $853 – $22,725
At 30 June 2019$21,508 $4,910 $2,789 $957 $30,164
At 1 July 2018$21,331 $11,159 $2,533 $119 $35,142
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

69 — ANNUAL REPORT 2020 68
6. ASSETS EMPLOYED (CONT'D)
6a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Auckland property
The Group’s property, plant and equipment includes the Auckland property with a carrying value of $12,877,000 that was
subject to a sale and leaseback agreement subsequent to the balance date. The property was not classified as held for sale at
the balance date as the sale and leaseback of the Auckland property was one of a number of funding arrangements for the
Group’s transformation that were being considered at that time.
The Board is not considering the sale and leaseback of the Group’s Napier and Whanganui properties at this time.
Other assets
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 cash flows 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 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.
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
6. ASSETS EMPLOYED (CONT'D)
6a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
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;
—average NZD/AUD exchange rate of between 0.8846 and 0.9067 from FY22 to FY25;
—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%);
—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.
The land and buildings of the Group have not been impaired as their fair values exceed their carrying values at the
balance date.
Security
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

71 — ANNUAL REPORT 2020 70
6. ASSETS EMPLOYED (CONT'D)
6a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
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:
—buildings 1.0 - 2.5% straight line
—plant and equipment6.7 – 10.0% straight line
—other assets
–fixtures and fittings10.0% straight line
–computer equipment20.0 – 25.0% straight line
–motor vehicles and office equipment 20.0% diminishing value
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
Impairment
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.
Estimates, judgements and assumptions
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).
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
7. 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
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
2020
$000
2019
$000
Trade receivables due from trade customers 12,148 11,808
Other receivables 17 78
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.
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.
Accounting policy
Trade receivables and other receivables are recognised initially at transaction price and subsequently at amortised
costs less impairment losses.
7c. INVENTORIES
2020
$000
2019
$000
Raw materials and consumables 12,547 16,653
Work in progress 1,439 1,639
Finished goods 18,095 29,386
$32,081 $ 4 7,6 7 8
Inventory provision at 1 July 2,576 2,307
Change in provision during the year 2,165 269
Inventory provision at 30 June $4,741 $2,576
Carrying amount of inventories subject to retention of title clauses $1,851 $2,004

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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

73 — ANNUAL REPORT 2020 72
7. WORKING CAPITAL (CONT'D)
7c. INVENTORIES (CONT'D)
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
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.
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
2020
$000
2019
$000
Trade payables 8,705 15,102
Accruals 1,912 1,912
$10,617 $17,014
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND 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
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 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.
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

75 — ANNUAL REPORT 2020 74
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MANAGEMENT COMMENTARY (CONT'D)
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.
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 a sale and leaseback agreement for
its Auckland property for net proceeds of approximately $25 million. These funds will be used to fully repay the Group’s bank
debt outstanding as at settlement date (expected to be no later than the end of January 2021) and will provide sufficient
liquidity to enable the Group to fund its transformation and settle its ongoing financial obligations for at least 12 months after
the date of issuing these financial statements.
Additional information on liquidity and the Group’s ability to meet its contractual obligations can be found at note 2d (Going
concern) to the financial statements.
The Group’s contractual cash flows and liquidity risk profile are set out in detail on page 76.
Foreign currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in
which sales, purchases, receivables and payables are denominated. All entities in the Group have New Zealand dollars ($) as
their functional currency.
The Group 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.
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.
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.
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 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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
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.
The Group’s maximum exposure to credit risk for trade and other receivables by geographic regions is as follows:
2020
$000
2019
$000
New Zealand 7, 3 2 3 6,121
Australia 4,431 5,322
Other regions 411 443
Trade and other receivables$12,165 $11,886
The status of trade and other receivables at the reporting date is as follows:

Current
0 – 30 days past due31 – 120 days past due
More than 120
days past due

To tal
2020
Expected loss rate0%0%0%56%
Gross carrying amount –
trade and other receivables
11,275 754 103 75 12,207
Loss allowance – – – (42) (42)
2019
Expected loss rate0%0%0%9%
Gross carrying amount –
trade and other receivables
9,873 1,574 313 139 11,899
Loss allowance – – – (13) (13)
In summary, trade and other receivables are determined to be impaired as follows:
2020
$000
2019
$000
Trade and other receivables - gross 12,207 11,899
Individual impairment provisions (42) (13)
Trade and other receivables - net$12,165 $11,886
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:
2020
$000
2019
$000
Balance at 1 July (13) (43)
Impaired trade receivables written off - -
Changes in impairment provision (29) 30
Balance at 30 June($42)($13)
Changes in the impairment provision are included in distribution expenses in the income statement.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

77 — ANNUAL REPORT 2020 76
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
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
Statement
of financial
position
$000
To tal
contractual
cash flows
$000

6 months
or less
$000

6-12
months
$000


1-2 years
$000


2-5 years
$000
Greater
than 5
years
$000
2020
Secured bank loans 15,800 16,206 6,048 2,158 8,000 – –
Trade payables 8,705 8,705 8,705 – – – –
Lease liabilities 3,569 3,569 689 656 1,104 1,120 –
Total non-derivative liabilities$28,074 $28,480 $15,442 $2,814 $9,104 $1,120 –
Interest rate swaps 560 571 166 68 137 200 –
Forward exchange contracts
Inflow (20,478) (16,775) (3,703) – – –
Outflow 20,496 16,744 3,752 – – –
12 18 (31) 49 – – –
Total derivative liabilities$572
Disclosed in statement of
financial position
Under current liabilities 732
Under current assets (160)
Total derivative liabilities$572
2019
Secured bank loans 20,500 21,440 403 403 20,634 – –
Trade payables 15,102 15,102 15,102 – – – –
Total non-derivative liabilities$35,602 $36,542 $15,505 $403 $20,634 – –
Interest rate swaps 621 575 156 114 135 154 16
Forward exchange contracts
Inflow (22,636) (21,343) (1,293) – – –
Outflow 21,979 20,738 1,241 – – –
(625) (657) (605) (52) – – –
Total derivative assets($4)
Disclosed in statement of
financial position
Under current liabilities 649
Under current assets (653)
Total derivative assets($4)
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
Interest rate risk – re-pricing analysis
At balance date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:

To tal
$000
6 months
or less
$000

6-12 months
$000

1-2 years
$000

2-5 years
$000
Greater than
5 years
$000
2020
Financial assets and liabilities
Cash and cash equivalents 1,276 1,276 – – – –
Secured bank loans (15,800) (15,800) – – – –
(14,524) (14,524) – – – –
Related derivatives
Effect of interest rate swaps – 5,000 – – (5,000) –
To t al($14,524)($9,524) – – ($5,000) –
2019
Financial assets and liabilities
Cash and cash equivalents 2,724 2,724 – – – –
Secured bank loans (20,500) (20,500) – – – –
(17,776) (17,776) – – – –
Related derivatives
Effect of interest rate swaps – 10,000 – (5,000) (2,500) (2,500)
To t al($17,776)($7,776) – ($5,000)($2,500)($2,500)
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
Foreign currency risk
The Group's exposure to foreign currency risk can be summarised as follows:

NZD equivelent of these currencies

AUD
$000
USD
$000

EUR$000

Others
$000
2020
Trade receivables4,699320 6 –
Trade payables (1, 745) (1,130) (1) –
Net statement of financial exposure before hedging activity2,954 (810)5 –
Estimated forecase sales for which hedging is in place14,805–––
Estimated forecast purchases for which hedging is in place – (320) – –
Net cash flow exposure before hedging activity1 7,75 9(1,130)5 –
Forward exchange contracts
Notional amounts(1 7,75 9)2.618––
Net unhedged exposure–$1,488$5
2019
Trade receivables5,196178228
Trade payables (2,412)(4,131)(1)(7)
Net statement of financial exposure before hedging activity2,784(3,953)121
Estimated forecase sales for which hedging is in place9,992–– –
Estimated forecast purchases for which hedging is in place –(5,804)––
Net cash flow exposure before hedging activity12,776(9,757)121
Forward exchange contracts
Notional amounts(12,776)9,757––
Net unhedged exposure––$1$21
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020

79 — ANNUAL REPORT 2020 78
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
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:
StrengthenWeakenStrengthenWeaken
P&L Equity, net of tax
$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
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.
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:


Strengthen
10.0%


Weaken (10.0%)


Strengthen
10.0%


Weaken (10.0%)
P&L Equity, net of tax
$000$000$000$000
Impact of the derecognition at balance date of US dollar
denominated forward exchange contracts as at 30 June 2020
($181)$221 - -
Impact of the derecognition at balance date of US dollar
denominated forward exchange contracts as at 30 June 2019
- - - -


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:

Increase
1% point

Decrease
(1% point)

Increase
1% point

Decrease
(1% point)
P&L Equity, net of tax

$000$000$000$000
Interest rate impact - Net FY20$152 ($152)$18 ($18)
Interest rate impact - Net FY19($93)$93 $81 ($81)
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 was expected to be repaying bank debt within 12 months of the balance date 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 was determined that the
interest rate hedges would be ineffective from the date of the sale and leaseback. There was no hedge ineffectiveness in FY19.
Forecast transactions
The Group classifies the forward exchange contracts taken out to hedge forecast transactions as cash flow hedges.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
HEDGING (CONT'D)
The following relates to items designated as hedging instruments:






Notional
amount




Line item
in statement
of financial
position
Changes in
the value of
the hedging
instrument
recognised
in OCI
during
the year


Hedge
ineffective-
ness
recognised
in profit
and loss
Line item
in profit
and loss
that
includes
hedge
ineffec-
tiveness






Balance
in CFHR





Average
rate of
hedging
Carrying amount
AssetsLiabilities
2020 $000 $000 $000 $000 $000 $000
Foreign
currency risk

Forward
exchange
contracts
– sales and
receivables ¹
,
³
AUD16,675 62 (172)Derivative
financial
instru-
ments
- assets
and liabil-
ities
(348) – – (77)0.9390
Forward
exchange
contracts –
inventory
purchases ¹
,
³
USD1,746 ² 98 – Derivative
financial
instru-
ments –
assets
(44) 60 Cost of
sales
– 0.6624
Interest rate
risk

Interest rate
swaps ³
,
⁴
NZD10,000 – (560)Derivative
financial
instru-
ments -
liabilities
(529) (468)Net
finance
costs
(92)2.88% -
4.88%
¹ 100% of notional amount expiring within 12 months of balance date
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
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 was expected that the interest rate swaps would 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.

81 — ANNUAL REPORT 2020 80
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
HEDGING (CONT'D)






Notional
amount
$000


Carrying amount



Line item in
statement of
financial
position
Changes in
the value of
the hedging
instrument
recognised in OCI
during the year




Balance in
CFHR
$000



Hedge ratio


Average
rate of
hedging




Maturity date

Assets
$000
Liabilities
$000$000
2019
Foreign currency risk
Forward exchange
contracts – sales and
receivables
AUD11,680 541 - Derivative
financial
instruments
- assets
(40) 271 1:10.9142100% of
notional
amount
expiring
within 12
months of
balance
date

Forward exchange
contracts – inventory
purchases

USD6,605

112

(28)

Derivative
financial in-
struments –
assets and
liabilities

(231)

44

1:1

0.6770

100% of
notional
amount
expiring
within 12
months of
balance
date
Interest rate risk
Interest rate swapsNZD12,500 - (621)Derivative
financial
instruments
- liabilities
(36) (621)1:12.88% -
4.92%
$2.5
million of
notional
amount
expiring
within 6
months of
balance
date.
Balance
over the
next six
years.

NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
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.

Hedging instruments
$000

Amortised cost
$000

Total carrying amount
$000
Fair value hierarchy
Level 2
$000
2020
Assets
Derivatives 160 – 160 160
Trade and other receivables– 12,165 12,165
Cash and cash equivalents – 1,276 1,276
Total assets$160 $13,441 $13,601
Liabilities
Loans and borrowings– – –
Total non-current liabilities – – –
Loans and borrowings – 15,800 15,800
Derivatives 732 – 732 732
Trade and other payables – 15,406 15,406
Total current liabilities 732 31,206 31,938
Total liabilities$732 $31,206 $31,938


Hedging instruments
$000

Amortised cost
$000

Total carrying amount
$000
Fair value hierarchy
Level 2
$000
2019
Assets
Derivatives 653 – 653 653
Trade and other receivables – 11,886 11,886
Cash and cash equivalents – 2,724 2,724
Total assets$653 $14,610 $15,263
Liabilities
Loans and borrowings – 20,500 20,500
Total non-current liabilities – 20,500 20,500
Loans and borrowings – ––
Derivatives 649 – 649 649
Trade and other payables – 20,870 20,870
Total current liabilities 649 20,870 21,519
Total liabilities$649 $41,370 $42,019

83 — ANNUAL REPORT 2020 82
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
CLASSIFICATION AND FAIR VALUES (CONT'D)
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.
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:
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.
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
8. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MASTER NETTING OR SIMILAR AGREEMENTS
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:
2020 2019
Derivative assets
$000
Derivative liabilities
$000
Derivative assets
$000
Derivative liabilities
$000
Gross amounts in the statement
of financial position
160 (732) 653 (649)
Amounts offset – – – –
Net amounts in the statement
of financial position
160 (732) 653 (649)
Related amounts that are not
offset based on ISDA
(160) 160 (649) 649
Net amounts– ($572)$4 –

85 — ANNUAL REPORT 2020 84
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
9. OTHERS
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:
2020
$000
2019
$000
Carrying value at 1 July – 24,544
Share of comprehensive income – 716
Dividends received – (2,783)
Proceeds of sale of interest in CWH and property in CWSA – (10,593)
Loss on sale of interest in CWH and property in CWSA – (11,884)
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:
2020
$000
2020
$000
2019
$000
2019
$000
CWHCWSACWHCWSA
Cash and cash equivalents – – – –
Other current assets – – – –
Non-current assets – – – –
Total assets – – – –
Current liabilities – – – –
Non-current liabilities – – – –
Total liabilities – – – –
Net assets (100%) – – – –
Revenue – – 13,431 72
Depreciation – – (998) (5)
Net interest expense – – (365) -
Other expenses – – (8,838) (1)
Profit before income tax – – 3,230 66
Income tax expense – – (974) (18)
Profit after tax – – 2,256 48
Changes in fair value of cash flow hedges
(net of income tax)
– – – –
Total comprehensive income (100%) – – $2,256 $48
Percentage ownership interest0.00%0.00%2 7. 5 0%50.00%
NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
9. OTHERS (CONT'D)
9a. EQUITY-ACCOUNTED INVESTEES (CONT'D)
2020 2019
$000$000$000$000
CWHCWSACWHCWSA
Share of net assets – – – –
Initial transaction costs – – – –
Carrying value of interest in equity-
accounted investees

–

–

–

–

Group’s share of profit after tax – – 620 24
Group’s share of changes in fair value of
cash flow hedges (net of income tax)

–

–

72

–
Group’s share of total comprehensive
income of equity-accounted investees

–

–

$692

$24
9b. PROVISIONS
Workplace accidents
$000
Make good
$000
Onerous contracts
$000
Warranties
$000
To tal
$000
Balance at 1 July 2019 210 150 14 1,040 1,414
Provided during the year– 59 – – 59
Utilised during the year– (150) (14) – (164)
Released to profit or loss
during the year

–

–

–

(15)

(15)
Balance at 30 June 2020$210 $59 – $1,025 $1,294
Non-current – 54 – 530 584
Current 210 5 – 495 710
Balance at 30 June 2020$210 $59 – $1,025 $1,294
Balance at 1 July 2018 210 1,875 241 1,006 3,332
Provided during the year – – 12 37 49
Utilised during the year – (1,500) (239) (3) (1,742)
Released to profit or loss
during the year

–

(225)

–

–

(225)
Balance at 30 June 2019$210 $150 $14 $1,040 $1,414
Non-current 210 – – 505 715
Current– 150 14 535 699
Balance at 30 June 2019$210 $150 $14 $1,040 $1,414