By Rebecca Howard
Aug. 22 (BusinessDesk) - Cavalier Corp shares fell 16 percent after it announced plans to write-down or impair the value
of goodwill and various plant and equipment by as much as $9 million as it prepares to shift its strategic direction.
The stock was recently at an all-time low 24 cents and has almost halved in value so far this year.
The Auckland-based carpet maker said it is at an "early stage" in developing a new strategic direction that will result
in a significant change to the operations of the company.
It said it is in discussions "with a respected industry participant regarding a collaboration that will build on
Cavalier’s capabilities and make a transformative change into a design-led, wool focused company."
Cavalier said after considering the implications of that change and assessing the book value of non-current assets based
on future cashflows, directors opted to write-down or impair the value of goodwill and various plant and equipment, it
said. The write down is non-cash and does not impact the underlying profitability of the company.
In recent years it has incurred significant restructuring costs as it closed factories and laid off staff to consolidate
operations in a bid to limit its product range and meet customer demand, primarily in Australia.
Cavalier reiterated it is on track to achieve its May forecast for normalised profit of $1.9 million for the year ended
June 30. Normalised net profit was $4 million in the prior year.
The figure includes the non-cash write-down of $11.9 million on Cavalier’s carrying value of its 27.5 percent
shareholding in Cavalier Wool Holdings following its sale at the end of September 2018 and impairment of goodwill and
fixed assets of between $6 million and $9 million.
Cavalier reiterated that it's benefitting from a soft market and challenging trading conditions for synthetic carpets,
with sales growth among high-end wool carpets, such as its premium Cavalier Bremworth Collection.
The board still considers the group to be a "going concern" and believes it will be able to meet its contractual
obligations as they fall due. However, "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," Cavalier said.
Recent valuations assess the worth of Cavalier’s land and buildings at more than $30 million and the company has less
than $18 million in net debt. 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, it said.
Today's slump in the share price puts a market value of $16.5 million on the carpet maker.
Cavalier will provide further details on its FY19 results and FY20 progress to date in its results announcement on Aug.
27, it said.
(BusinessDesk)
ends