Preliminary FY21 Half Year Result

Results announcement
(six months ended 31 December 2020)



Results for announcement to the market
Name of issuer Cavalier Corporation Limited
Reporting Period 6 months to 31 December 2020
Previous Reporting Period 6 months to 31 December 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$60,299 (6%)
Total Revenue $60,299 (6%)
Net profit from continuing
operations
$4,272 470%
Total net profit $4,272 470%
Interim/Final Dividend
Amount per Quoted Equity
Security
It is not proposed to pay dividends.
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.40 $0.59
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to accompanying results announcement and the
FY21 H1 report
Authority for this announcement
Name of person

authorised
to make this announcement
Victor Tan
Contact person for this
announcement
Paul Alston or Jackie Ellis
Contact phone number +64 21 918 033 (Paul Alston) or +64 27 246 2505 (Jackie Ellis)
Contact email address palston@bremworth.co.nz or Jackie@ellisandco.co.nz
Date of release through MAP

25 February 2021

Unaudited financial statements accompany this announcement.

---

MARKET RELEASE
25 February 2021

Cavalier Reports Increased Profit for First Half FY21

Cavalier Corporation Limited (NZX: CAV) has reported a strong year on year uplift in profitability as it
benefits from higher woollen carpet sales, the sell down of its synthetic carpet stock as it exits the
non-wool sector and the gain from the Auckland property sale and leaseback.

Profit after tax increased strongly to $4.3m, up $5.5m on the prior year, with a $3.0m improvement
in underlying business performance and a $2.5m net gain on the sale and leaseback of the Auckland
property.

Results were at the upper end of the guidance range provided in December 2020 with normalised
EBITDA up 61% on the previous comparable period to $4.8m
1
(guidance of $4.0m to $5.0m).

Revenue was down slightly (6%) year on year to $60.3m. Australian carpet sales volumes were
impacted by supply chain disruption and COVID lockdowns, however, are expected to improve as
supply chain disruptions and pandemic effects reduce. Elco Direct, Cavalier’s wool buying business,
was also impacted by subdued offshore demand for New Zealand wool and while volumes were up
12%, the average selling price was well down.

Following the Auckland property sale and with the bulk of synthetic carpet stock sold, all borrowings
were repaid, with the Company holding a significant cash surplus of $26.3m as at 31 December
2020. Prudent capital management remains a priority as the Company invests into resetting the
business, commencing the new strategy and navigating the economic recovery post-COVID. No
interim dividend has been declared.

Cavalier has commenced its transformation strategy to become a global leader in designing
and creating desirable, safe, sustainable and high performing natural interior solutions. In line with
this, the Company is exiting the non-wool sector and has right sized the organisational structure to
meet future manufacturing needs. Shareholder approval on the sale and leaseback of the Auckland
property in December 2020 has provided the financial resources to continue executing
transformation plans, with other capital raising options to be considered, if required.

Key initiatives in 1H21 included the launch of the new Bremworth brand for Cavalier’s carpet
business; the rollout of the Lifestyle (affordable wool) collection ranges and other uniquely designed
products, providing greater choice for consumers; and an expansion of the retailer distribution
networks in both New Zealand and Australia.


1
Normalised EBITDA excludes non-trading adjustments of $1.4m, comprising net gain on sale and leaseback of
property of $2.5m and restructuring costs of $(1.1)m, with a reconciliation of normalised to GAAP results set
out on page 24 of the accompanying 1H21 report.

CEO of Cavalier, Paul Alston, commented: “It has been an encouraging six months for Cavalier with
New Zealand trading recovering strongly post the April COVID lockdowns and increasing sales of
higher margin, more sustainable woollen carpets. Australia offers a significant growth opportunity
with a market five to six times the size of New Zealand, and it will be a primary focus for our team.

“We have a strong pathway forward with a carefully considered strategy that takes advantage of
Cavalier’s strengths and consumer trends, zero debt, a right sized organisational footprint and
funding in place to execute our five-year plan to increasing value and profitability. We are excited
about our future as we continue our journey towards becoming a more sustainable, design-led, wool
and natural materials interior solutions business.”

Outlook

Cavalier will continue to implement its strategy in the second half of FY21 (2H21) and priorities are in
line with Cavalier’s growth strategy:

• Launch of the new Bremworth marketing campaign
• Continue to rollout Bremworth Lifestyle (affordable wool) collection ranges
• Continue to expand our retailer networks, particularly in Australia
• Maintain focus on innovation and the launch of new beautifully designed carpets
• Operational improvements including initiatives to reduce the cost base and mitigate supply
chain disruptions.

The new Bremworth marketing campaign will be launched in 2H21 with a corresponding increase in
marketing spend. The launch of the campaign will be timed to coincide with increasing stock levels in
Australia as supply chain constraints are resolved. As previously announced, there will be a lag
between the FY21 investment in marketing and growth in sales.

While it is still too early, and the operating environment remains uncertain, for the Directors to be
providing shareholders with an earnings guidance for FY21, shareholders should note that earnings
for the rest of this financial year will not track what the Group has achieved in 1H21.

This is partly due to the increased marketing spends in 2H21 as we invest in the transformation as
outlined earlier. At the same time, volumes in 2H21 will be significantly down on 1H21, with the bulk
of the synthetic carpet stock having already been sold in 1H21 and sale of woollen carpet in Australia
likely continuing to be impacted by disruptions to the supply chain.

This is consistent with what the Directors have previously advised:

• Total sales revenue for FY21 will reduce as Cavalier exits its non-wool carpet business and as
a consequence of COVID-19
• Investment costs, including restructuring of its operations, will be incurred as the business
adjusts its manufacturing and sales base to reflect a wool only focus, with these costs also
inclusive of new retail display stands to expand market presence
• Marketing spends and people costs will increase as Cavalier will be investing in a number of
initiatives to enhance its market presence and ensure its strategy is successfully
communicated
• As Cavalier’s strategy bears fruit and sales of higher margin, higher value woollen carpets
replace and eclipse the previous synthetic carpet sales, this will be reflected in Cavalier’s
financial performance, with growing revenues expected from FY23 and FY24 onwards as the
business builds woollen carpet sales and as the economy recovers from COVID-19
• The full benefits from the transformation are expected from FY25 onwards.

There are indications of positive economic growth in both New Zealand and Australia which will
benefit Bremworth retail sales. New Zealand woollen carpet sales volumes for FY21 are expected to
be well up on prior year, with Australian woollen carpet sales volumes also expected to improve
when current disruptions to the supply chain are resolved. Recent initiatives, particularly in
Australia, to expand the retailer networks, are expected to help drive a lift in sales once supply
improves.

Cavalier has a strong platform from which to continue its transformation journey, with a clear
strategy, zero debt, a right sized organisational footprint and an experienced team.


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

---

HALF
YEAR
REPORT

For the six months ended
31 December 2020

CONTENTS
FY21 First Half at A Glance 1
Financial Summary 2
Half Year Review – Chair and CEO Commentary 3
Condensed Consolidated Income Statement 7
Condensed Consolidated Statement of Comprehensive Income 8
Condensed Consolidated Statement of Changes in Equity 9
Condensed Consolidated Statement of Financial Position 11
Condensed Consolidated Statement of Cash Flows 12
Notes to the Financial Statements 14
Disclosure of Non-GAAP Financial Information 23
Corporate Directory 26

1
Cavalier Corporation Limited and subsidiary companies
FY21 First Half (1H21) At A Glance
•Commenced Group strategy to become a design-led wool and natural materials interior solutions business
and launched new Bremworth brand
•Good progress being made on strategic initiatives:
oExpanded retailer distribution networks in New Zealand and Australia
oRight sized organisational structure in response to exit from synthetic carpets
oCommenced wind down of manufacturing and sell down of synthetic carpets with progress faster
than expected
oRollout of Lifestyle (affordable wool) collection ranges and other uniquely designed products
•Shareholder approval and settlement of Auckland property sale and leaseback, with proceeds to fund
transformation strategy
•Strong improvement in net profit after tax to $4.3 million (1H20: NLAT $(1.2) million), comprising $3.0 million
improvement in underlying business performance and $2.5 million net gain on sale and leaseback of Auckland
property
•Small decline in revenue to $60.3m, however generating improving margins from woollen carpet sales
•Normalised EBITDA of $4.8m, up 61% on 1H20 and at the upper end of December 2020 guidance
•Repayment of all borrowings during the period, with a significant cash surplus of $26.3 million as at 31
December 2020

2


Cavalier Corporation Limited and subsidiary companies

Financial Summary - for the six months ended 31 December 2020 (Unaudited)

Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
Audited
Year
ended
30 June 2020
$000 $000 $000

Revenue $60,299 $64,384 $117,981

EBITDA (normalised)
1
4,764 2,951 2,300

Depreciation – owned assets (1,136) (1,700) (2,683)
Depreciation – right-of-use assets (65) (945) (1,779)

EBIT (normalised)
1
3,563 306 (2,162)

Net finance costs (540) (1,055) (2,535)

Profit/(Loss) before tax (normalised)
1
3,023 (749) (4,697)

Tax (expense)/credit (873) 183 1,240

Profit/(Loss) after tax (normalised)
1
2,150 (566) (3,457)

Abnormal net gain/(loss) after tax
1
2,122 (588) (17,994)

Profit/(Loss) after tax (GAAP) $4,272 $(1,154) $(21,451)

Net cash flow from operating activities $17,545 $1,999 $6,773

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

Normalised
1
3.1 (0.8) (5.0)
GAAP 6.2 (1.7) (31.2)

Return on average shareholders’ equity (%)
Normalised
1
6.0% (1.0)% (7.8)%
GAAP 11.9% (2.1)% (48.4)%

Unaudited
As at
31 December
2020
Unaudited
As at
31 December
2019
Audited
As at
30 June 2020

Net tangible asset backing per share ($) $0.40 $0.59 $0.47


Equity to total assets (%) 47.6% 53.2% 48.1%


Net interest-bearing debt to equity ratio Not applicable 25:75 30:70



1
Normalised is a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be a more
meaningful view of the underlying financial performance of the Group. A reconciliation between GAAP and normalised earnings together with
further commentary on the disclosure of non-GAAP financial information are set out at pages 23 to 25 of the half year report.

3


Cavalier Corporation Limited and subsidiary companies

Half Year Review

Chair and CEO Commentary

Cavalier’s strategy to become a global leader in designing and creating desirable, safe, sustainable and high
performing natural interior solutions was unveiled in July 2020 and implementation is now well underway.

Good progress has been made on strategic initiatives as we look to grow the demand for woollen flooring, expand
our market presence and build our market share.

In particular, during 1H21, we commenced the wind down of synthetic carpet manufacturing and right-sized the
organisation in response to the change in manufacturing requirements, with Auckland manufacturing downsized
and increased capacity at our Napier and Whanganui plants.

The exit from the synthetic carpet business is well-advanced and the sell down of the existing synthetic stock has
been faster than anticipated and at better prices. With limited stock remaining, we expect this to be completed
before the end of FY21.

Other initiatives have been progressed including the expansion of the retailer distribution networks in New
Zealand and Australia, and the rollout of Lifestyle (affordable wool) collection ranges and other uniquely designed
products.

The rebranding of the carpet business to Bremworth was completed in November 2020. This signals our
determination to build on our heritage as a leading designer and manufacturer of premium wool carpets and
rugs, while evolving to meet consumer trends and become a more sustainable business.

We have commenced our journey to deliver desirable, safe, sustainable and high performing natural interior
solutions. The average Kiwi home carpeted in synthetics (whether that be nylon, polypropylene and polyester, all
of which are thermoplastics) is similar to having 22,000 plastic bags on the floor, and our exit from synthetics
equates to a reduction of 2.5 million kg of synthetic yarn consumption per annum.

We are also actively removing single use plastics from the business and seeking new ways to reduce or remove
plastic from our products, our business and our daily lives. Our wool carpets are already made with 87% natural
materials and we will invest in scientific research to identify solutions to make our products 100% sustainable. We
believe this will benefit our business, our communities and the planet.

Our Opportunity

Consumers are becoming more aware of the long term dangers of plastic and its impact on our planet and our
health. More and more consumers are choosing products that benefit their personal health and wellbeing and
reduce their ecological impact. Cavalier is well placed to take advantage of changes, being one of the most
innovative woollen carpet manufacturers in the world.

4






The strong wool industry is in a state of crisis, with shearing costs now more than returns from wool. Farmers are
considering alternative uses for their land and different breeds of sheep to avoid shearing. Supporters of the New
Zealand rural sector are becoming more aware of the dire state of the wool industry, along with growing
awareness of the dangers of plastic. With a large proportion of strong wool destined for flooring applications,
Bremworth is leading the industry in promoting wool and its benefits. This is a cause worth supporting.

We believe there is a need to dispel the myths around synthetic carpet performance and rebuild awareness of the
benefits of wool ... ‘the forgotten miracle fibre’. In the last 12 months, we have seen escalating awareness and
positive media coverage of the wool sector and we are glad to be leading efforts to promote the true story.

There is a significant opportunity to expand our presence in our markets. Our products are sold through retailers
and while we have good coverage across New Zealand with some scope to expand, our retailer network in
Australia is a significant growth opportunity. Our goal is to provide access to our Bremworth products in at least
300 more stores in Australia, and we have added a number of new retailers during 1H21 already. We also see an
opportunity to increase the sale of our woollen carpets and, eventually, natural fibre products outside of
Australasia. To that end, we have secured funding from NZ Trade and Enterprise to assist with expansion in the
USA.

While woollen carpets are our primary focus and where our expertise lies, we also see longer term opportunities
to expand into adjacent natural interior products and solutions.

Financial Performance

Cavalier has reported a strong uplift in profitability for the six-month period, driven by higher-than-anticipated
woollen carpet sales, the sell down of synthetic carpets and gain from the Auckland property sale and leaseback.

Revenue was down 6% to $60.3 million, with $2.4 million of the reduction coming from the Bremworth carpet
business and $1.7 million from the Elco Direct wool acquisition business.

Revenue of the carpet business was down 4% for the period, mainly due to a decrease in volume from the wind-
down of the synthetic carpet business offset by improved selling prices from stronger trading conditions and a
stronger product mix towards wool.

While total New Zealand carpet sales volumes (wool and synthetic) were unchanged on last year, the volume and
revenue from woollen carpet sales were up 14% and 27% respectively, with a pleasing improvement in margins.

Total Australian carpet sales volumes were down 21% on last year, due to a combination of stock shortages
caused by shipping delays, port strikes and COVID lockdown activity.

Elco Direct delivered a 12% increase in sales volumes, however, the average selling price was well down due to
subdued offshore demand for New Zealand wool, with sales revenue of $6.0 million for the period.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $6.2 million, with normalised EBITDA of
$4.8 million at the upper end of the December 2020 guidance range and up 61% on the previous year’s equivalent
of $3.0 million as the Group benefited from the improving trading conditions in the carpet business.

5


Cavalier Corporation Limited and subsidiary companies

Half Year Review (continued)

Chair and CEO Commentary (continued)

Net profit after tax improved strongly to $4.3 million compared with the previous year’s (1H20) net loss after tax
of $(1.2) million. This much-improved result was due largely to better underlying business performance of $3.0
million and a net gain on sale and leaseback of the Auckland property of $2.5 million.

Stocks have continued to reduce, with the reduction coming from synthetic stocks as the Group works to exit that
segment of the carpet business.

The stronger trading in 1H21, the settlement of the sale and leaseback of the Auckland property and the sell-
down of synthetic carpet stocks enabled the Group to fully repay bank debt and put it in a significant cash surplus
position of $26.3 million at balance date.

Prudent capital management remains a priority, and the Board will continue to consider other capital raising
options to further strengthen the Group’s balance sheet if required. The Company is investing into its growth
strategy and no interim dividend has been declared for the six-month period.

Outlook

The Board expects the Group’s migration to more natural, sustainable and healthier products to gather
momentum as it works to grow the wool flooring market while also growing share of that market by expanding
Bremworth’s presence through product innovation and retail footprint expansion.

The successful sale and leaseback of the Auckland property has provided Cavalier with the financial resources to
continue its strategic transformation, as well as additional liquidity and funding in the current uncertain operating
environment.

Priorities for the second half of FY21 (2H21) are in line with Cavalier’s growth strategy and are as follows:
• Launching the new Bremworth marketing campaign
• Continuing to rollout Bremworth Lifestyle (affordable wool) collection ranges
• Continuing to expand our retailer networks, particularly in Australia
• Maintaining focus on innovation and the launch of new beautifully designed carpets
• Operational improvements including initiatives to reduce the cost base and mitigate supply chain
disruptions.

The new Bremworth marketing campaign will be launched in 2H21 with a corresponding increase in marketing
spend. The launch of the campaign will be timed to coincide with increasing stock levels in Australia as supply
chain constraints are resolved. As previously announced, there will be a lag between the FY21 investment in
marketing and growth in sales.

While it is still too early, and the operating environment remains uncertain, for the Directors to be providing
shareholders with an earnings guidance for FY21, shareholders should note that earnings for the rest of this
financial year will not track what the Group has achieved in 1H21.

6






This is partly due to the increased marketing spends in 2H21 as we invest in the transformation as outlined
earlier. At the same time, sales volumes in 2H21 will be significantly down on 1H21, with the bulk of the synthetic
carpet stock having already been sold in 1H21 and sale of woollen carpet in Australia likely continuing to be
impacted by disruptions to the supply chain.

This is consistent with what the Directors have previously advised:

• Total sales revenue for FY21 will reduce as Cavalier exits its non-wool carpet business and as a
consequence of COVID-19
• Investment costs, including restructuring of its operations, will be incurred as the business adjusts its
manufacturing and sales base to reflect a wool only focus, with these costs also inclusive of new retail
display stands to expand market presence
• Marketing spends and people costs will increase as Cavalier will be investing in a number of initiatives to
enhance its market presence and ensure its strategy is successfully communicated
• As Cavalier’s strategy bears fruit and sales of higher margin, higher value woollen carpets replace and
eclipse the previous synthetic carpet sales, this will be reflected in Cavalier’s financial performance, with
growing revenues expected from FY23 and FY24 onwards as the business builds woollen carpet sales and
as the economy recovers from COVID-19
• The full benefits from the transformation are expected from FY25 onwards.

There are indications of positive economic growth in both New Zealand and Australia which will benefit
Bremworth sales. New Zealand woollen carpet sales volumes for FY21 are expected to be well up on prior year,
with Australian woollen carpet sales volumes also expected to improve when current disruptions to the supply
chain are resolved. Recent initiatives, particularly in Australia, to expand the retailer networks, are expected to
help drive a lift in sales once supply improves.

Cavalier has a strong platform from which to continue its transformation journey, with a clear strategy, zero debt,
a right sized organisational footprint and an experienced team.



For and on behalf of the Board of Directors:





George Adams Paul Alston
Chairman Chief Executive Officer

24 February 2021

7


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Income Statement


Six months ended 31 December 2020 (Unaudited)

Note Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000


Revenue 4 60,299 64,384
Cost of sales (42,268) (49,150)

Gross profit 18,031 15,234

Other income and gains 5 2,531 5
Distribution expenses (10,248) (10,965)
Administration expenses (4,240) (3,968)
Restructuring and transformation costs (1,117) (816)

Result from operating activities 4,957 (510)

Net finance costs 6 (540) (1,055)

Profit/(Loss) before tax 4,417 (1,565)

Tax (expense)/credit (145) 411

Profit/(Loss) after tax for the period $4,272 $(1,154)

Basic and diluted earnings per share (cents) 6.2 (1.7)

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



68,679

68,679













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual
financial statements.

8


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Comprehensive Income


Six months ended 31 December 2020 (Unaudited)

Note Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000


Profit/(Loss) after tax for the period 4,272 (1,154)

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

Effective portion of changes in fair value of cash flow hedges 503 355
Net change in fair value of cash flow hedges transferred to profit
or loss



(105)

(316)
Tax on other comprehensive income (47) (11)
351 28

Total comprehensive income for the period $4,623 $(1,126)













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual
financial statements.

9


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Changes in Equity


Six months ended 31 December 2020 (Unaudited) Note Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Share-based
Payment
Reserve
Retained
Earnings
Total Equity
$000 $000 $000 $000 $000 $000

Total equity at 1 July 2020 21,846 (120) (1,420) - 13,331 33,637

Total comprehensive income for the period

Profit after tax - - - - 4,272 4,272

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

Changes in fair value of cash flow hedges (net of tax) - 351 - - - 351

Total comprehensive income for the period - 351 - - 4,272 4,623

Transactions with owners of the Company
Equity-settled share-based payment 8 - - - 5 - 5

Total equity at 31 December 2020 $21,846 $231 $(1,420) $5 $17,603 $38,265













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual financial statements.

10


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Changes in Equity (continued)


Six months ended 31 December 2019 (Unaudited) Note Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
$000 $000 $000 $000 $000


Total equity at 1 July 2019 21,846 (219) (1,420) 34,782 54,989

Total comprehensive income for the period

Loss after tax - - - (1,154) (1,154)

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

Changes in fair value of cash flow hedges (net of tax) - 28 - - 28

Total comprehensive income for the period - 28 - (1,154) (1,126)

Total equity at 31 December 2019 $21,846 $(191) $(1,420) $33,628 $53,863













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual financial statements.

11


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Financial Position


As at 31 December 2020 (Unaudited)
Note Unaudited
31 December
2020
Audited
30 June 2020
$000 $000

ASSETS

Property, plant and equipment - owned 9 10,817 22,725
Property, plant and equipment - right-of-use 9 10,239 430
Deferred tax asset 448 600

Total non-current assets 21,504 23,755

Cash and cash equivalents 7 26,263 1,276
Trade receivables, other receivables and prepayments 8,375 12,607
Inventories 11 23,680 32,081
Derivative financial instruments 262 160
Income tax receivable 274 102

Total current assets 58,854 46,226

Total assets $80,358 $69,981

EQUITY

Share capital 21,846 21,846
Cash flow hedging reserve 231 (120)
Foreign currency translation reserve (1,420) (1,420)
Share-based payment reserve 8 5 -
Retained earnings 17,603 13,331

Total equity attributable to equity holders of the Company 38,265 33,637

LIABILITIES

Lease liabilities 20,465 2,224
Employee benefits 905 888
Provisions 614 584

Total non-current liabilities 21,984 3,696

Loans and borrowings 7 - 15,800
Trade payables and accruals 12,919 10,617
Employee entitlements 4,213 3,444
Lease liabilities 2,038 1,345
Provisions 910 710
Derivative financial instruments 29 732

Total current liabilities 20,109 32,648

Total liabilities 42,093 36,344

Total equity and liabilities $80,358 $69,981





This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual
financial statements.

12


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows


Six months ended 31 December 2020 (Unaudited)

Note Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000

CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 64,071 64,984
Cash paid to suppliers and employees (45,640) (61,614)
Dividends received 1 1
Other receipts 2 2
GST (paid)/refunded (67) (130)
Interest paid – lease liabilities (118) (294)
Interest paid – loans and borrowings (491) (758)
Income tax (paid)/refunded (213) (192)

Net cash flow from operating activities 17,545 1,999


CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of plant and equipment 18 2
Net proceeds from sale and leaseback of property 9 5,717 -
Acquisition of plant and equipment (1,103) (1,306)

Net cash flow from investing activities 4,632 (1,304)


CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of principal relating to lease liabilities (690) (713)
Lease liability assumed on sale and leaseback
of property

9

19,306

-
Repayment of loans and borrowings (15,800) (2,450)

Net cash flow from financing activities 2,816 (3,163)


NET DECREASE IN CASH AND CASH EQUIVALENTS 24,993 (2,468)

Cash and cash equivalents at beginning of the period 1,276 2,724

Effect of exchange rate changes on cash (6) 48

CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD



$26,263

$304













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual
financial statements.

13


Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows (continued)


Reconciliation of profit/(loss) with net cash flow from operating activities

Six months ended 31 December 2020 (Unaudited)

Note Six months
ended
31 December
2020
Six months
ended
31 December
2019
$000 $000

Profit/(Loss) after tax for the period 4,272 (1,154)

Add/(Deduct) non-cash and other items:
Depreciation – owned assets 1,136 1,700
Depreciation – right-of-use assets 65 945
Deferred tax asset 104 (213)
Employee benefits and entitlements 786 (4)
Deferred income - (9)
Provisions 200 (164)
Share-based payment 5 -
Net gain on sale of plant and equipment (17) (2)
Net gain on sale and leaseback of property 9 (2,511) -
Net (gain)/loss on foreign currency balance 6 (48)

Changes in working capital items:
Trade and other receivables and prepayments 4,232 760
Inventories 7,543 2,419
Tax receivable/payable (172) (390)
Trade payables and accruals 2,302 (2,132)
Derivative financial instruments (406) 291

Net cash flow from operating activities $17,545 $1,999













This statement is to be read in conjunction with the Notes on pages 14 to 22 and the previous year’s annual
financial statements.

14


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements
For the six months ended 31 December 2020

1. General information

Reporting entity

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

The Company is registered under the Companies Act 1993 and is an FMC reporting entity (by virtue of it
being a listed issuer) for the purposes of the Financial Reporting Act 2013 and the Financial Markets
Conduct Act 2013.

The interim financial statements contained in this half-yearly report have been prepared in accordance with
these Acts and are for Cavalier and its subsidiaries (“the Group”) as at, and for the six months ended, 31
December 2020.

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

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

All Group subsidiaries are wholly-owned.

Basis of preparation

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

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

The interim financial statements, and the comparative information for the six months ended 31 December
2019, are unaudited. The comparative information as at 30 June 2020 is audited.

The interim financial statements were approved for issue by the Board of Directors (“Board”) of the
Company on 24 February 2021.

Critical accounting judgements, estimates and assumptions

In preparing the interim financial statements, the Group has consistently applied the judgements, estimates
and assumptions adopted in the preparation of the annual financial statements for the year ended 30 June
2020.

15


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

Accounting policies

The interim financial statements should be read in conjunction with the annual financial statements for the
year ended 30 June 2020 and the accounting policies set out therein.

All accounting policies adopted in the preparation of the interim financial statements are consistent with
those adopted in the preparation of the annual financial statements.

2. Going concern

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

In preparing the financial statements for the year ended 30 June 2020, the Board noted that there was
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.

With the settlement of the sale and leaseback of the Auckland property on 23 December 2020 (see also
note 9) and the plans to exit the non-wool carpet market having proceeded better than originally expected
(see also note 11), the Group has been able to not only fully repay its loans and borrowings but also put
itself in a significant cash surplus position during the period (see also note 7).

As a consequence, there is no longer any material uncertainty related to going concern at balance date,
with the Group not only able to meet its contractual obligations for a period of at least 12 months from the
issuance of the financial statements, but also have the funding over the next couple of years until it begins
to realise the financial benefits of its transformation strategy to becoming an interior solutions business
focused on wool and natural materials.

16


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

3. Segment performance

Unaudited Carpet sales and
manufacturing
Wool acquisition Total

Six months
ended
31 December
2020
Six months
ended
31 December
2019
Six months
ended
31 December
2020
Six months
ended
31 December
2019
Six months
ended
31 December
2020
Six months
ended
31 December
2019
$000 $000 $000 $000 $000 $000
External revenue 54,322 56,675 5,977 7,709 60,299 64,384
Inter-segment revenue - - 973 1,240 973 1,240
Total revenue $54,322 $56,675 $6,950 $8,949 61,272 65,624

Elimination of inter-segment revenue (973) (1,240)
Consolidated revenue $60,299 $64,384

Segment result before depreciation 5,477 3,564 (52) 78 5,425 3,642
Depreciation – owned assets (1,062) (1,625) (74) (75) (1,136) (1,700)
Depreciation - right-of-use assets - (833) (65) (112) (65) (945)
Segment result before gain on sale
and leaseback of property and
restructuring and transformation
costs



4,415



1,106



(191)



(109)



4,224



997
Gain on sale and leaseback of
property

2,511

-

-

-

2,511

-
Restructuring and transformation
costs

(1,117)

(816)

-

-

(1,117)

(816)
Segment result after gain on sale of
property and restructuring and
transformation costs


5,809


290


(191)


(109)


5,618


181


Elimination of inter-segment profits 10 61
Unallocated corporate costs (671) (752)
Result from operating activities 4,957 (510)

Net finance costs (540) (1,055)
Profit/(Loss) before tax 4,417 (1,565)

Tax (expense)/credit (145) 411
Profit/(Loss) after tax for the period $4,272 $(1,154)


Carpet sales and
manufacturing
Wool acquisition Total

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000 $000 $000 $000 $000
Reportable segment assets 51,235 67,474 2,860 2,507 54,095 $69,981
Unallocated assets 26,263 -
Total assets $80,358 $69,981

Reportable segment liabilities 18,671 19,363 919 1,181 19,590 20,544
Unallocated liabilities 22,503 15,800
Total liabilities $42,093 $36,344

17


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

3. Segment performance (continued)

The Group’s reportable and operating segments are:
• carpet sales and manufacturing; and
• wool acquisition.

Inter-segment transactions

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

Information about geographical areas

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

Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000
Revenue
New Zealand 35,511 36,135
Australia 23,413 26,573
Rest of the world 1,375 1,676

Total revenue $60,299 $64,384

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000
Non-current assets
New Zealand 20,735 22,740
Australia 769 1,015

Total non-current assets $21,504 $23,755

Information about major customers

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

18


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

4. Revenue

Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000
Sales of goods
Carpet 54,105 56,206
Wool fibre 5,977 7,709
Carpet yarn 217 469
Total revenue $60,299 $64,384

5. Other income and gains

Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000
Rentals received 2 2
Dividends received 1 1
Net gain on sale of plant and equipment 17 2
Net gain on sale and leaseback of property 2,511 -
Total other income and gains $2,531 $5


6. Net finance costs

Unaudited
Six months
ended
31 December
2020
Unaudited
Six months
ended
31 December
2019
$000 $000
Interest expense – loans and borrowings 425 761
Interest expense – lease liabilities 118 294
Interest income (3) -
Net finance costs $540 $1,055

7. Loans and borrowings and cash and cash equivalents

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000
Loans and borrowings - 15,800

Cash and cash equivalents 26,263 1,276

The Group fully repaid its loans and borrowings, while also putting itself in a surplus cash position, during
the period, with the cash coming largely from the Group’s sale and leaseback of the Auckland property
and its exit from the non-wool carpet market.

19


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

8. Share-based payment arrangement

Description of share-based payment arrangement

On 18 December 2020, the Company established a long-term incentive scheme for executive employees
pursuant to which the Company will issue performance rights (“Rights”) to the participants which would
entitle the participants to be issued shares in the Company, subject to service and performance
conditions being met, at the end of the stipulated performance period.

On 21 December 2020, the Company offered Rights to selected key management personnel
(“Participants”) that will entitle the Participants to be issued shares in the Company for no cash
consideration provided that total shareholder return (“TSR”) over the period from 1 November 2020 to 1
May 2023 (“Performance Period”) exceeds 14% per annum compounding and they remain employed by
the Company as at 1 May 2023 (“Condition Date”).

TSR is defined as the increase in share price over the Performance Period adjusted upwards for
distributions made by the Company during that period.

The Company has determined the Rights issued under the scheme to be an equity-settled share-based
payment arrangement pursuant to NZ IFRS 2 Share-based Payment, with the Participants not able to
request payment in cash.

The Company has established grant date of the Rights to be 21 December 2020 (“Grant Date”), being the
date at which the parties had a shared understanding of the terms and conditions of the share-based
arrangement.

Shares issued under the arrangement are subject to trading restrictions, with 40% of the shares able to
be traded immediately, 30% one year after issue date and the remaining 30% two years after issue date.

Measurement of fair value

The fair value of the Rights at the Grant Date of $395,000 has been determined using a Monte Carlo
simulation.

Specifically, the Monte Carlo simulation is used as follows:

• to predict Cavalier’s future share prices (a “market” condition” under NZ IFRS 2), gross of dividends,
using a random-walk process which is driven by assumptions regarding volatility and the underlying
drift rate from Grant Date through to Condition Date

• to calculate the annualised TSR at the Condition Date implied by the simulated share price

• to determine the extent to which the calculated TSR exceeds 14% per annum compounding

• to calculate the number of shares to be issued, taking into account the share cap under the share-
based arrangement, and the implied payoff to the Participants based on the number of shares issued
and the simulated share price at Condition Date

The inputs used in the measurement of the fair value at Grant Date of the Rights are as follows.

• Share price at Grant Date - $0.36 per share, being the Cavalier closing share price on NZX on 21
December 2020

• Share price at start of the Performance Period - $0.31 per share, being the 20-day volume weighted
average sale price of a Cavalier share on NZX up to 1 November 2020

20


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

8. Share-based payment arrangement (continued)

Measurement of fair value (continued)

• Expected volatility - 58%, based on the annualised volatility for the 2.5 years prior to Grant Date,
being the historical period commensurate with the expected term of the Rights

• Expected term – 2.5 years

• Expected dividends – Nil

• Drift rate used to discount Participants’ payoff from the Condition Date to the Grant Date – 14% per
annum

Post-vesting trading restrictions relating to the shares that may be issued on Condition Date have been
incorporated into the Monte Carlo simulation modelling used to determine fair value at Grant Date of the
Rights by discounting the simulated value of the shares at the Condition Date, with the discount rate
based on the price of a notional put option which could be purchased to hedge share price exposure
during the restriction period.

Service condition attached to the Rights has not been taken into account in determining fair value
because it is classified as a “non-market” condition (being a condition that is not dependent on share
price) under NZ IFRS 2, with service condition reflected in the number of shares expected to be issued as
a result of the condition.

Outstanding Rights

The number of shares that will be issued on Condition Date of the outstanding Rights is unknown at
balance date.

The number of shares to be issued is dependent on the extent to which TSR exceeds 14% per annum
compounding over the Performance Period and the share price at Condition Date, except that the number
of shares issued to all Participants will not, together with shares issued under NZX Listing Rule 4.6.1 over
the previous 12 months, exceed 3% of the total number of shares on issue at Condition Date.

Expense recognised in profit or loss

The assessed fair value of the Rights at Grant Date of $395,000 will be recognised as an expense in
profit or loss over the period from Grant Date to Condition Date, adjusted to reflect only those Rights
where the service condition will be met, with corresponding entries to the Share-Based Payment Reserve
within equity.

$5,000 (being the proportion of fair value of the Rights relating to the period from Grant Date to balance
date) has been recognised in administration expenses in the Condensed Consolidated Income Statement
for the six months ended 31 December 2020, with a corresponding credit to equity.

21


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

9. Sale and leaseback of property

On 23 December 2020, the Group completed the sale and leaseback of its Auckland property for
$25,500,000.

The initial term of the leaseback is 14 years plus one right of renewal of six years, with net rent at
commencement date of $1,600,000 per annum and a 2.5% increase in rent per annum on each
anniversary of the commencement date (except where that anniversary coincides with a market rent
review date). Market rent reviews will take place on the sixth anniversary of the commencement date and
on the renewal date, with market rent to be no less than 100% and no greater than 110% of the annual
rent immediately preceding the relevant rent review date.

The terms of the sale and leaseback are typical for those entered into for large industrial sites in the
Auckland region and the triple-net lease (where the lessee assumes direct responsibility for all costs
payable in respect of the property (including rates, insurance and maintenance of the premises (including
structural repairs and capital works))) typical after having regard to the age and condition of the Auckland
property.

The Group has estimated the present value of the rental obligations in respect of the leaseback to be
$15,956,000, based on the initial term of the leaseback of 14 years and the net rent during that initial term
(but ignoring the market rent review to take place on the sixth anniversary of the commencement date),
discounted at the Group’s incremental borrowing rate of 7.5% per annum.

The sale and leaseback has been accounted for in accordance with paragraphs 98 to 103 of NZ IFRS 16
Leases because the Group had control of the underlying asset before that asset was transferred to the
buyer-lessor, with the difference between the $25,500,000 from the sale and leaseback of the property
less transaction costs of $477,500 and the carrying value of the property of $12,732,500 giving rise to the
following:

• right-of-use asset of $9,527,000;

• lease liability assumed of $19,306,000; and

• net gain on sale and leaseback of $2,511,000.

The Group decided to exit the non-wool carpet market and return to an all-wool and natural materials
business model – focusing on designing and creating desirable, sustainable, safe and high-performing
natural interior solutions - during the year ended 30 June 2020.

To facilitate that transformation to the new model, the Group needed to raise capital, with the Group
taking extensive external independent advice and investigating a range of opportunities to realise
additional funds to allow the Group to execute its transformation as well as support the business in light of
the impact of, and the uncertainty caused by, COVID 19.

The sale and leaseback of the Auckland property represented the most effective way of accessing capital,
even though the Board is continuing to consider other capital raising options to further strengthen the
Company’s balance sheet if required.

The net proceeds from the sale and leaseback will be used to provide the Group with:

• the financial resources to undertake its strategic transformation to the all-wool and natural materials
business model;

• additional liquidity and funding during the current uncertain operating environment; and

• a sound financial footing to better capitalise on opportunities in the carpet market.

22


Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)

10. Capital commitments

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000
Capital expenditure commitments $154 $469

11. Inventories

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000
Raw materials and consumables 6,107 12,547
Work in progress 671 1,439
Finished goods 16,902 18,095
$23,680 $32,081

Inventory provisioning $3,266 $4,741

During the six months ended 31 December 2020, the net realisable value provision in respect of
inventories decreased by $1,475,000 (six months ended 31 December 2019: increased by $348,000),
with the amount released to profit or loss largely reflecting how the plans to sell down non-wool carpet
inventories had progressed better than originally expected - both in terms of timing and value.

12. Contingencies

Unaudited
As at
31 December
2020
Audited
As at
30 June 2020
$000 $000
Indemnities in favour of Bank of New Zealand and National
Australia Bank (together, “the Bank”) in respect of Bank
guarantees relating to lease and other commitments


$2,405


$899

The increase in indemnities in favour of the Bank relates largely to the Bank guarantee relating to the
leaseback of the Auckland property.

13. Related parties

Apart from directors’ fees, key management personnel remuneration and the issue of performance rights
referred to in note 8 Share-based payment arrangement to selected key management personnel, there
have been no other material transactions with the directors, key management personnel and their related
parties or with any other related parties during the period.

There were no loans to, or from, the directors and key management personnel during the period.

14. Subsequent events

There have been no events subsequent to 31 December 2020 which would materially affect the financial
statements.

23


Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information
For the six months ended 31 December 2020


The half year report for the six months ended 31 December 2020 contains financial information that is non-GAAP
(Generally Accepted Accounting Practice) and therefore falls within the Financial Markets Authority’s guidance note
on “Disclosing non-GAAP financial information” issued in July 2017.

Non-GAAP financial information has been prepared using the unaudited GAAP-compliant half year and audited
GAAP-compliant full year financial statements of the Group and has not been independently reviewed.

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

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

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

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

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

• outlining why non-GAAP financial information is useful to investors and how it is used internally by
management;
• identifying the source of non-GAAP financial information;
• ensuring that:
- non-GAAP financial information is not presented with undue and greater prominence, emphasis or
authority than the most directly comparable GAAP financial information;
- presentation of non-GAAP financial information does not in any way confuse or obscure presentation
of GAAP financial information;
- a reconciliation from the non-GAAP financial information to the most directly comparable GAAP
financial information, including that for the previous period, can be easily accessed (see pages 24 and
25);
- a consistent approach is adopted from period to period with respect to the presentation of non-GAAP
financial information, including that for comparative periods;
- where there is any change in approach from the previous period, the nature of the change is explained
and the reasons and financial impact provided;
- non-GAAP financial information is unbiased; and
• taking care when describing, or referring to, items as ‘one-off’ or ‘non-recurring’.

24


Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


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

Six months ended 31 December 2020

GAAP Adjustments Normalised
$000 $000 $000

Revenue $60,299 - $60,299

EBITDA 6,158 (1,394) 4,764

Depreciation - owned assets (1,136) - (1,136)
Depreciation – right-of-use assets (65) - (65)

EBIT

4,957 (1,394) 3,563

Net interest expense (540) - (540)

Profit before tax 4,417 (1,394) 3,023

Tax expense (145) (728) (873)

Profit after tax $4,272 (2,122) 2,150

Abnormal net gain after tax 2,122 2,122

Profit after tax (GAAP) - $4,272

Analysis of adjustments

Before tax Tax effect After tax
$000 $000 $000
Net gain on sale and leaseback of property 2,511 - 2,511
Restructuring costs (1,117) - (1,117)
Normalisation of tax expense - 728 728
$1,394 $728 $2,122

25


Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


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


Six months ended 31 December 2019

GAAP Adjustments Normalised
$000 $000 $000

Revenue $64,384 - $64,384

EBITDA 2,135 816 2,951

Depreciation - owned assets (1,700) - (1,700)
Depreciation – right-of-use assets (945) - (945)

EBIT

(510) 816 306

Net interest expense (1,055) - (1,055)

Loss before tax (1,565) 816 (749)

Tax credit 411 (228) 183

Loss after tax $(1,154) 588 (566)

Abnormal net loss after tax (588) (588)

Loss after tax (GAAP) - $(1,154)

Analysis of adjustments

Before tax Tax effect After tax
$000 $000 $000
Transformation costs (816) 228 (588)
$(816) $228 $(588)

26


Cavalier Corporation Limited

Corporate Directory


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

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

Paul Izzard BA (Hons) Interior Design Member of Audit and Remuneration Committees
Independent

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

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

Chief Executive Officer:
Paul Alston BBS, CA

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

Founding Shareholder:
The late Anthony Charles Timpson ONZM

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

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

Auditors:
KPMG

Legal Advisors:
Russell McVeagh

Bankers:
Bank of New Zealand National Australia Bank Limited

Websites:
Corporate www.cavcorp.co.nz

Carpet Operation www.bremworth.co.nz, www.bremworth.com.au,

Wool Operation www.elcodirect.co.nz

Share Registrar www.computershare.co.nz/investorcentre

---

1
FY21 Interim Results
For the six months ended 31 December 2020
Cavalier 1H21 Interim Results Presentation

Cavalier 1H21 Interim Results Presentation2
OUR VISION
Our vision is to become a
global leader in designing
and creating desirable,
safe, sustainable and high
performing natural
interior solutions.

Cavalier 1H21 Interim Results Presentation3
OUR GROWTH STRATEGY
GROW THE WOOL FLOORING MARKET
GROW OUR SHARE OF THE MARKET
EXPAND OUR PRESENCE
INNOVATION AND FUTURE THINKING

1H21 TRADING PEFORMANCE
•Strong performance in NZ post April-lockdown
•Some impact from Auckland and Victoria COVID restrictions in 2Q21
•Softer performance in Australia, impacted by shipping and port delays in
December and COVID lockdowns
•More higher margin wool carpets in the sales mix
•Faster than anticipated sell down of synthetic carpet stocks
•Ongoing soft demand for NZ wool from offshore adversely impacting wool
acquisition business (ElcoDirect)
Cavalier 1H21 Interim Results Presentation4

1H21 KEY EVENTS
•Commenced transformation strategy and launched new Bremworth brand
•Rollout of Lifestyle (affordable wool) collection ranges and other uniquely designed
products, providing greater choice for consumers
•Expanded retailer distribution networks in NZ and Australia
•Commenced exit from non-wool sector and sell down of synthetic carpet stocks
•Right sized organisational structure in response to exit from synthetics –downsized
Auckland manufacturing, increased capacity at Napier and Whanganui
•Shareholder approval of Auckland property sale and leaseback, with proceeds to fund
transformation
Cavalier 1H21 Interim Results Presentation5

1H21 FINANCIAL SNAPSHOT
$millions1H211H20
Revenue60.364.4
EBITDA6.22.2
Non-Trading Adjustments*(1.4)0.8
Normalised EBITDA4.83.0
Net Profit/(Loss) After Tax4.3(1.2)
Normalised NPAT/NLAT2.2(0.6)
Net Cash/(Debt)26.3(17.8)
Normalised EPS (cents)6.2(1.7)
Cavalier 1H21 Interim Results Presentation6
* 1H21 non-trading adjustments of $1.4m comprise net gain on sale and
leaseback of property of $2.5m and restructuring costs of $(1.1)m. 1H20 non-
trading adjustments were $(0.8)m of transformation costs. See page 14 of slide
presentation and page 24 of accompanying 1H21 report for reconciliation of
normalised results to GAAP results.
•Normalised EBITDA at upper end of guidance
range
•Earnings benefit from improvement in trading in
the carpet business and sell down of synthetic
stocks
•Year on year profit increase in NPAT of $5.5m –
mainly due to $3.0m improvement in underlying
business performance and $2.5m net gain on
sale and leaseback of property
•Repayment of borrowings, with substantial cash
position of $26.3m at year end

REVENUE
0
10
20
30
40
50
60
70
Carpet SalesWool AcquisitionTotal Revenue
Revenue
1H201H21
Cavalier 1H21 Interim Results Presentation7
•Total revenue of $60.3m, down 6%
•Carpet revenue down 4% mainly due to exit from synthetics:
•NZ sales volumes in line with previous comparable period
but with increasing volume of woollen carpet sales
•Australian sales volumes reduced, in part due to supply
chain disruption
•ElcoDirect: 12% increase in sales volumes; however average
selling price well down due to subdued offshore demand

REVENUE BY REGION
Australia
New
Zealand
Rest of World
1H21 Revenue
AustraliaNew ZealandRest of World
Cavalier 1H21 Interim Results Presentation8
0
5
10
15
20
25
30
35
40
AustraliaNew ZealandRest of World
Revenue
1H201H21

EBITDA
0
1
2
3
4
5
6
7
EBITDANormalised EBITDA
EBITDA
1H201H21
Cavalier 1H21 Interim Results Presentation9
•Increased EBITDA to $6.2m
•Normalised EBITDA up 61% to $4.8m -at upper end
of December 2020 guidance ($4.0m to $5.0m)
•Benefitting from improving trading conditions in the
carpet business
•Normalised EBITDA excludes $2.5m net gain on sale
and leaseback of property and $(1.1)m restructuring
costs in relation to right sizing the organisation, but
includes early stage transformation costs

FINANCIAL POSITION
•Fully repaid bank borrowings; significant cash surplus
of $26.3m at period end following settlement of
Auckland property sale and leaseback and sell down of
bulk of synthetic carpet stocks
•Significant improvement in working capital
•Stock reduction as exit from synthetics progresses and
ahead of increase in woollen stock levels to support
sales
•Prudent capital management remains a priority; no
interim dividend declared
•Strong financial platform with financial resources to
undertake strategic transformation. Other capital
raising options will be considered, if required
Cavalier 1H21 Interim Results Presentation10
$millions1H211H20
Bank debt-(18.1)
Cash and cash
equivalents
26.30.3
Inventories23.744.7
Operating cashflow17.52.0

PRIORITIES FOR 2H21
•Launch new Bremworth marketing campaign
•Continue to rollout Bremworth Lifestyle (affordable wool) collection ranges
•Continue to expand retailer networks, particularly in Australia
•Maintain focus on innovation and launch of new beautifully designed carpets
•Operational improvements including initiatives to reduce the cost base and
mitigate supply chain disruptions
Cavalier 1H21 Interim Results Presentation11

Cavalier 1H21 Interim Results Presentation
2H21 OUTLOOK
•Investment into launching new Bremworth marketing campaign. Launch to coincide with increasing
stock levels in Australia once supply chain constraints are resolved
•Too early, and operating environment too uncertain, to provide earnings guidance for FY21
•Earnings in 2H21 will not track what Group achieved in 1H21, partly due to increased marketing
spends
•Sales volumes in 2H21 will be significantly down on 1H21, with bulk of synthetic carpet stock having
already been sold in 1H21 and sale of woollen carpet in Australia likely to continue to face supply
chain headwinds
•Above consistent with what Directors previously advised
•Indications of positive economic growth in both NZ and Australia which will benefit Bremworth sales
•Expect NZ woollen carpet sales volume to continue to gather momentum and be well up on prior
year
•Australian woollen carpet sales volume expected to improve as supply chain disruptions reduce;
expanded retailer networks will help drive lift in sales

A STRONG FOUNDATION FOR THE
FUTURE
•Carefully considered strategy that takes
advantage of Cavalier’s strengths and consumer
trends
•Zero debt
•Funding of transformation from sale and
leaseback of Auckland property
•Right sized organisational footprint
•Investment into R&D, with focus on sustainability
•A team with significant expertise, industry
knowledge and experience
Cavalier 1H21 Interim Results Presentation13

RECONCILIATION OF GAAP TO NORMALISED
Normalisedis a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be
a more meaningful view of the underlying financial performance of the Group.
Cavalier 1H21 Interim Results Presentation14
$millions1H211H20
EBITDA6.22.2
Net gain on property sale and leaseback(2.5)-
Restructuring/Transformation costs1.10.8
Normalised EBITDA4.83.0
NPAT/NLAT4.3(1.2)
Net gain on property sale and leaseback(2.5)-
Restructuring/Transformation costs1.10.6
Normalisationof tax expense(0.7)-
Normalised NPAT/NLAT2.2(0.6)

DISCLAIMER
•This presentation has been prepared by Cavalier Corporation Limited (“CAV”). The information in this presentation is of a general nature
only. It is not a complete description of CAV.
•This presentation is not a recommendation or offer of financial products for subscription, purchase or sale, or an invitationorsolicitation for
such offers.
•This presentation is not intended as investment, financial or other advice and must not be relied on by any prospective investor. It does not
take into account any particular prospective investor’s objectives, financial situation, circumstances or needs, and does not purport to
contain all the information that a prospective investor may require. Any person who is considering an investment in CAV securities should
obtain independent professional advice prior to making an investment decision, and should make any investment decision having regard to
that person’s own objectives, financial situation, circumstances and needs.
•Past performance information contained in this presentation should not be relied upon (and is not) an indication of future performance.
This presentation may also contain forward looking statements with respect to the financial condition, results of operationsand business,
and business strategy of CAV. Information about the future, by its nature, involves inherent risks and uncertainties. Accordingly, nothing in
this presentation is a promise or representation as to the future or a promise or representation that a transaction or outcome referred to in
this presentation will proceed or occur on the basis described in this presentation. Statements or assumptions in this presentation as to
future matters may prove to be incorrect.
•A number of financial measures are used in this presentation and should not be considered in isolation from, or as a substitutefor, the
information provided in CAV’s financial statements available at www.cavcorp.co.nz.
•CAV and its related companies and their respective directors, employees and representatives make no representation or warranty of any
nature (including as to accuracy or completeness) in respect of this presentation and will have no liability (including for negligence) for any
errors in or omissions from, or for any loss (whether foreseeable or not) arising in connection with the use of or reliance on,information in
this presentation.
Cavalier 1H21 Interim Results Presentation15