Cavalier plans to sell assets,cut jobs,outsource operations
By Tina Morrison
Aug. 3 (BusinessDesk) - Cavalier Corp is selling assets, outsourcing operations, reducing staff and paying down debt as the carpet maker tries to improve profits after restructuring its board and management as it battles declining earnings. The shares jumped.
The Auckland-based company is finalising the sale of the assets of its Australian carpet tile manufacturer Ontera Modular Carpets to US-based Milliken & Company, it said in a statement. Cavalier is also outsourcing its Australian broadloom carpet warehousing and distribution operations to increase efficiency and reduce costs, paving the way for the sale of its Sydney premises, it said. The company is currently consulting with staff over plans to cut about 20 full-time New Zealand support function jobs.
The carpet maker has faced shareholder criticism about its poor financial performance, suspension of dividends and slumping share price. Last month, it announced chairman Alan James would step down after 22 years with the company, which he initially joined as chief executive, and said three new directors would join the board. In May, Cavalier said chief executive Colin McKenzie would step down ahead of asset write downs that will result in a full-year loss for the company.
Interim chief executive Paul Alston said today the company has reduced net bank debt by $6 million in the six months through June, mainly as the result of a reduction in inventory. The sale of the tile manufacturing business and Sydney premises will reduce debt further in coming months, he said.
Shares in Cavalier rose 8.7 percent to 50 cents, making them the best performer on the S&P/NZX All Index so far today.
In May, the company projected improved profitability and a “substantial” reduction in bank debt in 2015/16 and “a return to adequate levels of profitability” in 2016/17 by focusing on its core business. At the time, it flagged the carrying value of certain assets would be written down, resulting in a net loss this year.
Alston said today the company expects tax-paid writedowns of $20 million to $23 million, the bulk of which relate to the tile manufacturing business.