Preliminary announcement of June 2019 full year results

o Normalised profit of $1.9m was in line with guidance (1). o Net loss after tax of $(16.8)m includes non-cash impairments of goodwill and fixed assets of $6.8m and $11.9m loss on the sale of the wool scouring business as reported at the half year. o Recent valuations of land and buildings in excess of $30m, with net bank debt less than $18m. o Transformational shift underway as Cavalier positions itself as design-led, wool focused company. o Board is confident in the financial sustainability of the company and excited about its future. Cavalier Corporation Limited (NZX: CAV) has today released its results for the year ended 30 June 2019 (FY19), with normalised profit after tax of $1.9m in line with its May 2019 guidance. The results reflect a continuing soft market and challenging trading conditions in Australia, with some softening in the New Zealand market towards the end of 2H19. Sales of low margin synthetic carpets are declining, while high-end wool carpet sales are increasing as consumers become more aware of the environmental benefits and beauty of wool. These changing market dynamics underline Cavalier's decision to increase its focus on wool as it looks to build on its 50 years of history, innovation and in-depth knowledge of the carpet sector. The company has recently announced a collaboration with The New Zealand Merino Company to develop and implement a transformative and design-led business model focused on connecting consumers with Cavalier's wool product. Demand for the company's top end Bremworth Collection wool carpets continues to grow despite the challenging market conditions, and while volumes are small, these high quality, higher margin carpets provide a significant contribution to group profits. New Zealand revenue came under pressure from the decline in low margin synthetic carpets which affected volumes and margin. The company is known for its design innovation with Cavalier's new rug offer proving popular and a variety of new carpets being finalised for launch. Cavalier has over 1,000 retailer partners across Australia and New Zealand and increased investment has been put into rolling out Cavalier's successful World of Difference instore display stands across the trade customer network, providing a unique retail experience. Driving efficiencies is a focus and structural cost initiatives have been implemented in both Australia and New Zealand, with the positive impact of the Australian change management programme earlier this year now being seen. This resulted in a more customer focused and agile sales team with growth opportunities identified. Wool prices have continued to be impacted by decreased Chinese demand for coarser carpet wool, adversely affecting sales and margins for Cavalier's wool buying business, Elco Direct. Financial Results For the FY19 year, revenue was down 9% to $135.2m and net loss after tax (NLAT) was $(16.8)m. The result includes a $11.9m non-cash loss on the sale of Cavalier's interest in the wool scouring business and associated property as reported at the half year, as well as $6.8m in after tax impairments of goodwill and fixed assets as advised last week. These write downs are non-cash and do not impact the underlying profitability of the company. Excluding these, Cavalier's normalised EBITDA was $7.1m and NPAT was $1.9m. Recent valuations assess the worth of Cavalier's land and buildings at more than $30m and the company has less than $18m in net bank debt. The Board is confident in Cavalier's financial sustainability and the company has the support of its banking partner. The Board considers the Group to be a going concern and believes it will be able to meet its contractual obligations. This going concern relies on future forecasts which are sensitive to sales volumes and margins and subject to material uncertainty if these forecasts are not met. The Board is implementing a number of initiatives to address potential uncertainty and the company has sufficient assets to settle Group debt should the need arise. Outlook Cavalier is well positioned to capture the demand from consumers seeking a more natural, more sustainable, healthier alternative without compromising quality or style, as it transforms into a wool focused, design-led business. Market conditions remain challenging and Cavalier's management and Board continue to work hard to drive efficiencies and lift sales, with a number of initiatives in place to support its wool focus. While New Zealand and Australia remain Cavalier's primary markets, investigations are ongoing into new opportunities, particularly in the US. CEO, Paul Alston, said: "This is a pivotal moment in our company's history. We are in no doubt that natural wool is the optimal choice for carpet design, innovation and overall performance and a better choice for the environment. We believe this is the future for our company and will be building on our heritage as we look to revitalise the demand for beautiful New Zealand wool carpets." The transformation is expected to necessitate organisational change as the business moves towards a stronger wool manufacturing and marketing focus. While there may be some short term costs associated with this, the Board believes it will add long term value to the company. (1) Normalised NPAT is a non-GAAP measure and excludes the $11.9m non-cash loss on the sale of the 27.5% in Cavalier Wool Holdings at the end of September 2018 and impairment of goodwill and fixed assets of $6.8 million after tax. 27 August 2019 ENDS For further information please contact: Paul Alston Chief Executive Officer palston@cavbrem.co.nz +64 21 918 033 +64 9 277 1135 Jackie Ellis Media and Investor Relations Jackie@ellisandco.co.nz +64 27 246 2505 End CA:00339825 For:CAV Type:FLLYR Time:2019-08-27 09:15:24