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Results from Cavalier wool operations substantially down
Feb '11
The Directors of Cavalier Corporation are pleased to report an unaudited profit after tax for the six months to 31 December 2010 of $8.5 million, an increase of 22% on the $7.0 million the previous year.

This result is a particularly pleasing one especially given the lingering effects of the global financial crisis, particularly in New Zealand where activity levels remained subdued and were lower than those experienced in the previous financial year. On the other hand, trading conditions in Australia continued to improve.

Group revenue for the six months was $117 million, an increase of 3% on the $113 million the previous year, with increased Australian-based revenue more than offsetting the reduced revenue in New Zealand. As a result, revenue in Australia now accounts for 60% of the total revenue of the Group, compared with 52% in the previous comparable period.

Return on average shareholders' equity for the six months was 18.5% and earnings per share was 25.1 cents (both annualised) - compared with 15.9% and 20.8 cents respectively the previous year - on the back of the improved financial performance.

Financial Position
Shareholders' equity at 31 December 2010 stood at $92.9 million, which is an improvement of $3.7 million on the $89.2 million a year ago and $1.4 million on the $91.5 million at 30 June 2010.

At the same time, total assets employed at 31 December 2010 were $198 million, compared with $188 million a year ago and $191 million at 30 June 2010 - mainly because of the additional inventories required to support the Group's current levels of activity.

Shareholders' equity accounted for 47% of total assets employed at balance date, compared with 48% a year ago and at 30 June 2010.

Net interest-bearing debt at balance date stood at $59.5 million and net interest-bearing debt to equity ratio was 39:61. These can be compared with $57.3 million and 39:61 respectively the previous year and $49.8 million and 35:65 respectively six months ago.

The Group's financial position remains strong, and it continues to be well-positioned to withstand the difficult operating environment in New Zealand and to grow shareholder value.

Segment Reviews

Carpet Business
Our carpet business comprises broadloom carpets and carpet tiles, and whilst some of its products can be found elsewhere in the world, New Zealand and Australia continue to remain the main markets by far.

In the six month period to 31 December 2010, our carpet business produced earnings before interest and tax (EBIT) of $13.4 million on revenue of $108.3 million, compared with EBIT of $10.1 million on revenue of $103.6 million the previous year, an increase of 33% and 5% respectively on the previous comparable period.

As a result, EBIT as a percentage of revenue improved to 12.4% in this latest six month period, compared with 9.7% in the previous comparable period. This improvement can be attributed to a 33% increase in carpet tile production and sales in Australia and the favourable NZD:AUD exchange rate on our Australian dollar receivables.

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