BRW - FY26 Half Year Results Announcement

Wednesday 25th February 2026

This letter accompanies Bremworth's results for the first half of FY26. Trading conditions have remained challenging and the improvement in sales performance the Board had anticipated has not come through, resulting in continued losses and cash outflows during the half.

During the first half, Bremworth continued to make strategic investments in initiatives aimed at making a positive contribution to Bremworth's performance over time, including the:

- reinstatement of the Napier plant;

- reintroduction of synthetic carpets;

- expansion of the New Zealand and Australian sales teams; and

- ongoing focus on costs.

However, the targeted benefits from most of these investments are not yet reflected in our financial results, with the lead time to volume growth and return to profitability taking longer than anticipated.

First half FY26 performance

Revenue for the first half was $44.7 million, up 6% compared to the prior comparable period, with the increase attributable to a solid performance by Elco Direct. While the volume of carpet sold was up on the prior comparable period, a bias in sales mix towards lower margin products and clearances of excess inventory adversely impacted carpet revenue (slightly down) and gross profit (also lower).

Sales of premium wool and synthetic carpets fell short of our expectations. This was primarily because of the ongoing subdued demand for consumer durables like carpet across both the New Zealand and Australian markets, and delays to the reinstatement of the Napier plant and the reintroduction of synthetic carpets into our product mix.

Gross profit was $6.7 million (down 25% compared to the prior comparable period), representing a gross margin of 15%, compared to 21% in the prior comparable period. While part of this decline in gross margin can be attributed to the deterioration in sales mix, the decline also reflects significant under-recovery of fixed manufacturing overheads due to lower sales volumes and delays in reinstatement of the Napier plant.

On a more positive note, distribution and administration costs were down on the prior comparable period.

Closing cash was $34.3 million as at 31 December 2025, down from $42.2 million as at 30 June 2025. The decline in cash was primarily due to cash outflows from operations ($1.9 million) and capital expenditure ($5.4 million).

These results are disappointing. The strategic investments we have made over the past year have not yet translated into the volume growth needed. We remain committed to those initiatives, but the timeline to reach targeted benefits remains uncertain and there are some risks to achieving these.

Strategic Review

As previously communicated to shareholders, the Company announced on 2 October 2025 that it had entered into a scheme implementation agreement ("SIA") with Floorscape Limited ("Floorscape"), and Mohawk Industries, Inc. (as guarantor), under which Floorscape agreed to acquire all of Bremworth's shares through a Scheme of Arrangement ("Scheme").

The SIA remains conditional upon the satisfaction of certain conditions, including shareholder approval, High Court approval, NZ Commerce Commission (“NZCC”) clearance and an IRD ruling on the tax implications of the capital return.

The NZCC published a Statement of Issues on 23 December 2025 which outlines relevant issues the NZCC requires additional time to consider. The publication by the NZCC of a Statement of Issues is a regular part of the merger clearance process – it is not a final decision and does not mean that the NZCC intends to clear or decline a merger. Bremworth recently responded to the Statement of Issues.

The current decision date indicated by the NZCC is 13 March. However, in accordance with its usual process, this date may be extended if the NZCC advises that it needs to continue assessing the competitive effects of the proposed Scheme. If extended, Bremworth expects the NZCC to issue a final decision in mid to late May.

At the time of signing of the SIA, Bremworth indicated that the likely range of the capital return to shareholders as part of the Scheme was in the range of $0.30 to $0.40 per share. The capital return is in addition to the $0.75 per share consideration payable by Floorscape under the Scheme.

Trading conditions since signing have been more difficult than anticipated, and this is reflected in the first half results. As previously announced, Bremworth now expects the likely range of the capital return to be between $0.20 and $0.30 per share (in addition to the $0.75 cents per share payable by Floorscape). Accordingly, the estimated total consideration for the Scheme has been reduced to a range of $0.95 to $1.05 per share. Bremworth emphasises that this estimate is based on assumptions of market conditions, business performance and the timing of implementation of the Scheme. It therefore remains subject to change.

Bremworth’s Board remains fully supportive of the Scheme and continues to be of the view that this is the best option for shareholders to realise value from their investment in Bremworth. If the Scheme does not proceed it is likely that the deterioration in Bremworth's cash position will continue.

Outlook and guidance

Over the past year, Bremworth has made a number of strategic investments and changes to strategy. These actions were taken to drive higher volumes of carpet sold to our retail customers, with the aim of achieving profitable growth and positive cash flows.

Unfortunately, based on the results for the first half of FY26 and expected trading performance, Bremworth is not expected to be cash flow positive and profitable in the second half of FY26. The Board acknowledges that this represents a change to previous guidance, which had assumed a faster turnaround in sales compared to current expectations.

While the results for the first half of FY26 are below expectations and the near term outlook is uncertain, Bremworth’s Directors and management team remain committed to delivering shareholder value. We thank you for your continued support.

25 February 2026

-ENDS-

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