Cavalier Corp's $24m sale and leaseback remains on track - Paul Alston

Cavalier CEO Paul Alston. Photo / Stuart Munro

Listed carpet manufacturer Cavalier Corp says the sale and leaseback of its South Auckland manufacturing plant remains on track despite the deal having not settled yet.

Shareholders voted in favour of the $24 million sale at a special meeting on September 17 with the company needing funds to pursue a wool and natural fibre strategy and reduce debt.

Asked for an update on the process, Cavalier chief executive Paul Alston said the parties were still working through the details of the transaction and hoped to have it "all signed up and settled in the next couple of weeks".

The purchaser is Kinleith Land and Infrastructure, which is owned by investment company Kinleith Continuation and directed by David Henry, the son of New Zealand First leader Winston Peters' lawyer Brian Henry.

David Henry was in the news this week when it was revealed how another company he's involved with - New Zealand Future Forest Products (NZFFP) – failed to settle on a $126m deal to buy wood processing business Claymark Group out of receivership.

Claymark was instead sold to a consortium headed by Rotorua businessman Paul Pederson for a total of $59m.

This was not the first deal NZFFP had failed to follow through on, including one with Northland-based North Sawn Lumber, NBR reported this week.

The Herald has contacted David Henry for comment and an update on the Cavalier transaction.

Asked if he had any concerns about Cavalier sale going ahead, Alston said he was comfortable having spoken to Kinleith yesterday morning.

"It is happening … we are just working through the finer points of the leases at the moment. There are some minor code of compliance issues to work through and Kinleith is spending a lot of time and effort."

Kinleith had paid a deposit for the building, Alston said.

"There's a bit of work to get done but we have an unconditional deal so it's all locked in."

Cavalier filed its unaudited accounts for the June financial year on September 28, showing a net loss after tax of $21.5m with profitability hit by the Covid-19 lockdown, particularly in April and May.

Revenue fell 13 per cent to $118m on the prior year, with the biggest decline felt in New Zealand where annual sales volumes were down 17 per cent. Australia sales were down just 5 per cent.

However, sales volumes had been stronger than initially anticipated since emerging from lockdown.

Net debt had reduced to $14.5m as at June 30, 2020 and has further reduced to $7.2m by the end of August due to stronger than expected trading in the new financial year and the accelerated sell down of remaining synthetic stocks, the company said,

Cavalier said the sale and leaseback of its Auckland property will put the company into a debt free position and enable it execute its transformational plans at pace.

"The focus for the last 18 months has been on the development of a solid strategic plan to differentiate Cavalier's positioning and to create a sustainable and prosperous future for the company," chairman Geo0rge Adams said.

"Over the next 10 years, Cavalier's vision is to become a global leader in designing and creating desirable, safe, sustainable and high performing natural interior solutions. Swift debt reduction coupled with the sale of the Auckland building has been integral to providing strong financial platform for the company to execute its plan."