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Table of Contents
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Directors’ Report ............................................................................................................................................... 3
Corporate Governance Statement .................................................................................................................. 21
Consolidated Statement of Financial Performance ........................................................................................ 26
Consolidated Statement of Comprehensive Income ...................................................................................... 27
Consolidated Statement of Financial Position ................................................................................................ 28
Consolidated Statement of Changes in Equity ............................................................................................... 29
Consolidated Statement of Cash Flows ......................................................................................................... 30
Notes to the Consolidated Financial Statements ........................................................................................... 31
Directors’ Declaration ..................................................................................................................................... 75
Independent Auditor’s Report ......................................................................................................................... 76
Additional Shareholder Information ................................................................................................................ 78
Corporate Directory ........................................................................................................................................ 80
Page 2 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
The Directors present their report together with the consolidated financial statements of Cardno Limited
(“the Company”) being the Company and the entities it controlled at the end of, or during, the year ended
30 June 2010.
1. Directors
The Directors of the Company in office during or since the year ended 30 June 2010 are set out below:
John Massey (Chairman - Non-executive)
Graham Tamblyn (Deputy Chairman - Executive)
Andrew Buckley (Managing Director - Executive)
Anthony Barnes (Non-executive) (appointed 31 July 2008)
Peter Cosgrove (Non-executive)
Jeffrey Forbes (Executive and Company Secretary)
Trevor Johnson (Executive)
Ian Johnston (Non-executive)
Details of the qualifications, experience and responsibilities of the Directors are on pages 4 to 6.
2. Company Secretary
Jeffrey Forbes BCom, MAICD, MAusIMM was appointed to the position of Company Secretary on
10 July 2006. Mr Forbes had been a Company Secretary of another unrelated listed company for 6 years
prior to joining Cardno.
Michael Pearson LLB, BA, ACIS was appointed to the position of Joint Company Secretary on 24 September
2009.
Page 3 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Director
Experience
Special Responsibilities
John C Massey
BCom, CPA, FAICD(Life), FAIM
Non-executive Chairman
Age 64
Graham G Tamblyn
DipCE, MIEAust, CPEng, RPEQ, FAICD
Deputy Chairman
Executive Director
Age 60
John Massey has been Chairman of Cardno Limited since July 2004 and a
Non-Executive Director since March 2004. He has extensive and
broadly-based
strategic
experience,
development skills developed as a Chairman, Director and Chief Executive
spanning many different industries.
commercial
leadership
and
is also Chairman of
As well as being Chairman of the Company,
the Board’s
John
Remuneration
Nominations
Committees.
and
John is also Chairman of Sunstate Cement Limited and a Director of
Macmahon Holdings Limited and the Stockyard / Kerwee Beef Group.
He has been actively involved in corporate governance and director issues
and was made a Life Fellow of the Australian Institute of Company Directors
in recognition of his eminence in the field of directorship and for
distinguished service, and is a member of the Board of Governors of the
Committee for the Economic Development of Australia.
John’s previous Board appointments include being Chairman of Symbiosis
Group and Ventracor and Director of SEQ Water, Dairy Australia, Brisbane
Airport Corporation and KR Castlemaine Foods.
Graham commenced work with the engineering consultancy Cardno &
Davies in 1973. He is an experienced civil engineer in the urban
development field with involvement in such notable projects as the Kawana
Waters master planned community, Noosa Waters, Twin Waters, and
Pelican Waters. Graham’s commitment to the urban development and
engineering industry is evidenced by his considerable involvement in
industry associations such as the Urban Development Institute of Australia
of which he was Sunshine Coast Branch President for 6 years up to 2002.
Graham’s career has included periods as Managing Director and Chairman
of Cardno Holdings Pty Ltd.
Apart from ongoing technical project work Graham plays a role in assisting
with the implementation of the Cardno Group’s growth strategy of merger
and acquisition.
Page 4 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Director
Experience
Andrew D Buckley
BE(Hons), FIEAust, FAICD, CPEng, RPEQ
Managing Director
Age 53
Anthony H (Tony) Barnes
BCom
Non-executive Director
Age 60
Peter J Cosgrove AC, MC
ndc (Ind), jssc, psc (US), Dip Mil Stud, FAICD
Non-executive Director
Age 63
Andrew was appointed Managing Director of the Cardno Group in 1997. He
has thirty years’ experience in executive management, project management,
design and implementation of engineering and development assistance
projects. Andrew has worked in the management, design and construction
of mining, engineering and infrastructure projects in Australia, Africa, USA
and Asia. For the last 15 years he has worked in executive management
roles in the engineering, construction and development assistance sectors
with a special focus on growth. Under Andrew’s leadership the Cardno
Group has grown from an annual turnover of approximately $14 million in
FY1997 to $477 million in FY2010 and from less than 200 people to over
3,700.
Andrew was a Non-executive Director of CBD Professional Services Pty Ltd,
which is associated with Carter Newell Lawyers until December 2009.
Tony Barnes has been a non-executive Director of Cardno since 31 July
2008. He was formerly the Chief Financial Officer of Zinifex Limited, an
international mining, exploration and development company. Mr Barnes also
held the position of Chief Executive Officer of Zinifex Limited during a
management change. Mr Barnes played a key role in the successful IPO of
Zinifex Limited in May 2004 and its subsequent restructure culminating in
the merger with Oxiana Limited in July 2008 to form Oz Minerals Limited. He
has extensive financial experience following a career which included more
than 32 years with BHP, both within Australia and Internationally.
Tony is also a Director of the Victorian Rugby Union.
Retired General Peter Cosgrove joined Cardno as a Non Executive Director
on 26 March 2007, bringing with him a wealth of experience and credentials.
Peter is a Director of Qantas Airways Limited and Qantas Superannuation
Limited, and a Fellow of the Australian Institute of Company Directors. Peter
was a director of Australian Rugby Union Limited until April 2010. He also
holds a number of prestigious memberships and board appointments. Peter
was Chief of the Australian Defence Force from July 2002 until July 2005. In
1999 he was appointed as Commander of the International Forces in East
Timor and helped the country transition to independence. Peter was
awarded the Military Cross in Vietnam and he was appointed as a
Companion of the Military Division of the Order of Australia, Companion of
the New Zealand Order of Merit (CNZM) and Commander of the United
States Legion of Merit. In 2001 Peter was the Australian of the Year.
Page 5 of 80
Special Responsibilities
Andrew is a member of the Nominations
Committee
Tony is Chairman of the Board’s Audit,
Risk & Compliance Committee, the Standing
Due Diligence Committee and a member of
the Remuneration Committee.
Peter is a member of the Nominations
Committee
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Director
Experience
Jeffrey I Forbes
BCom, MAICD, MAusIMM
Chief Financial Officer, Company Secretary, Executive
Director
Age 57
Trevor C Johnson
BE, MEngSc, PhD, FIEAust, CPEng, RPEQ, MAICD
Executive Director
Age 53
Ian J Johnston
DipCM, GradDip App Fin & Inv, ASIA, ACIS, FAICD
Non-executive Director
Age 61
Jeff joined Cardno in July 2006 as Chief Financial Officer, Company
Secretary and Executive Director, Finance. Jeff has more than 32 years
experience as a finance manager, primarily in the resources sector prior to
joining Cardno.
Jeff has significant experience in the financing and development of resource
projects in both Australia and in the Asia Pacific region. He has held senior
positions domestically and internationally. Prior to joining Cardno he was an
Executive Director, Chief Financial Officer and Company Secretary of
Highlands Pacific Limited. Jeff has significant experience in capital raisings
and during his career Jeff has worked for a number of major companies
including Rio Tinto, BHP and CSR.
Trevor has 30 years experience as a civil engineer, with special expertise in
the fields of hydraulics, water quality and environmental analysis. He
continues to act as Project Director for many of Cardno’s major urban
development projects, and regularly appears as an expert witness on
engineering matters. In his executive role as Director Corporate, he is also
responsible for a number of acquisition, co-ordination and communication
activities within the Group.
Trevor has been an employee of Cardno for over 25 years, and has been a
Director of Cardno Holdings Pty Ltd and subsequently Cardno Limited since
1996.
Ian Johnston became a Non Executive Director of Cardno Limited in
November 2004 bringing with him extensive experience in treasury,
corporate banking and equity capital markets.
Following a career of nearly 25 years in the banking industry, Ian joined
RBS Morgans in 1988 as Head of Corporate Finance and is now Chairman
Corporate Finance and a member of its advisory board.
He is also a Director of RBSM Foundation Limited and Data#3 Limited. He
is also a member of the National Trust of Queensland Brisbane City Hall
Conservation Appeal Committee and Rowland advisory board.
Ian’s previous Board appointments include Symbiosis Group Limited and
The Rock Building Society Limited.
Page 6 of 80
Special Responsibilities
Jeff is a member of the Standing Due
Diligence Committee.
Trevor is Chairman of the Standing Due
Diligence Committee and is a member of the
Board’s Audit, Risk & Compliance
Committee.
Ian is a member of the Board's Audit, Risk &
Compliance Committee, the Remuneration
Committee, the Nominations Committee and
the Standing Due Diligence Committee.
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
3. Principal Activities
The principal activity of the consolidated entity during the financial year was operating as a provider of
professional services in physical and social infrastructure. There were no changes to the principal activities
of the Cardno Group during the financial year under review.
4. Review of Results and Operations
Cardno achieved a record net profit after tax of $37.60 million for the year ended 30 June 2010, a 10.1%
increase over the 2009 financial year. Basic earnings per share increased to 43.86 cents.
Cardno had strong operating cash flow of $46.75 million in 2010, an increase of 21% over 2009, and had
cash of $56.28 million at 30 June 2010.
The Company’s balance sheet remains strong with low net debt. In August 2010, the company completed a
successful Rights issue raising $49 million.
The Board has declared a fully franked final dividend of 15 cents per share to be paid on 15 October 2010 to
all shareholders registered on 17 September 2010. With the interim dividend of 14 cents per share in March
2010, this will result in a full year dividend of 29 cents, which is also a record for Cardno.
Revenue was $477.24 million, which was slightly down from 2009, with most of this reduction resulting from
the strengthening Australian dollar in 2010.
Cardno delivered another record profit for its shareholders during a period of significant adverse economic
conditions. This is the sixth consecutive year of record profit and earnings per share growth since listing in
2004 with total shareholder return in this period of over 400%.
Cardno has performed strongly through the global financial crisis. The company’s strategy of diversifying its
operations through acquisitions and growth across multiple geographic regions and disciplines has proven
successful. The company now employs over 3,700 staff worldwide, operating out of 150 offices.
During the financial year Cardno made four acquisitions. The 615-person Cardno ENTRIX and the
155 person Cardno ERI have increased Cardno’s exposure to the highly strategic and growing
environmental consulting market, as well as the oil and gas sector in the US and internationally. In
Australia, Cardno acquired two specialist businesses: Cardno ITC a 100-person Australia wide electrical,
mechanical and specialist engineering group providing services to the building sector; and Cardno AUS a
utility detection and mapping services business based in Victoria.
The Board noted that the Company’s second half performance was stronger than the first half as expected,
reflecting the impact of improving market conditions and the benefit of acquisitions undertaken in recent
months.
Cardno’s markets continue to improve. Cardno has traditionally achieved organic growth of 7% to 9% before
the global financial crisis. With the strong performance of recent major acquisitions and a return to organic
growth, the company is well positioned for 2011.
Page 7 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
5. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
Type
Declared and paid during the year
- Final 2009 ordinary
- Interim 2010 ordinary
Declared after end of year
- Final 2010 ordinary
Dealt with in the financial report as:
- Dividends paid or provided
- Noted as a subsequent event (Note 29)
Cents per share
Total amount
$’000
Franked/
unfranked
Date of payment
14.0
14.0
15.0
11,801
12,154
Franked
Franked
13 October 2009
26 March 2010
15,840
Franked
15 October 2010
23,955
15,840
39,795
All dividends paid or declared by the Company since the end of the previous financial year were fully franked
at 30%.
6. Events Subsequent to the Reporting Date
On 11 August Cardno completed a $49m capital raising via a 1:6 fully underwritten renounceable rights
issue. The number of ordinary shares issued under the rights issue was 15,089,139. The capital raised will
be used to reduce debt used for the June 2010 acquisition of ENTRIX and ERI and for working capital.
On 16 August 2010, the Directors of Cardno Limited declared a final dividend of 15.0 cents per share for the
2010 financial year. The fully franked dividend will be paid on 15 October 2010 to shareholders registered
on 17 September 2010 and will total $15,839,940. The dividend has not been provided for in the 30 June
2010 financial statements.
7. Likely Developments
The consolidated entity will continue to manage its global business in physical and social infrastructure and
pursue its policy of growing the Company both organically and by acquisition during the next financial year.
8. Significant Changes in the State of Affairs
Other than detailed elsewhere, there have been no significant changes in the state of affairs since 30 June
2009.
9.
Indemnification and Insurance of Officers
The Company has agreements with each of the Directors and Officers of the Company in office at the date of
this report indemnifying them against liabilities to any person other than the Company or a related body
corporate that may arise from their acting as Directors or Officers of the Company. The indemnity continues
to have effect when the Directors and Officers cease to hold office, other than where such liabilities arise out
of conduct involving a wilful breach of duty by the Officers, the improper use by the Directors or Officers of
their position or of information to gain advantage for themselves or someone else or to cause detriment to
the Company.
The Directors have not included details of the nature of the liabilities covered or the amount of the premium
paid in respect of the Directors’ and Officers’ liability, as such disclosures are prohibited under the terms of
the contract.
Page 8 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
10. Directors’ Meetings
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2010 is set out
below:
No. of Meetings Held
A H Barnes
A D Buckley
P J Cosgrove
J I Forbes
T C Johnson
I J Johnston
J C Massey
G G Tamblyn
(cid:138) not a member of this committee
Board of
Directors
A
13
13
13
13
13
13
13
12
B
13
13
13
13
13
13
13
13
Audit, Risk &
Compliance
Committee
B
A
4
(cid:138)
(cid:138)
(cid:138)
4
4
1
(cid:138)
4
(cid:138)
(cid:138)
(cid:138)
4
4
1
(cid:138)
Remuneration
Committee
Nominations
Committee
A
4
(cid:138)
(cid:138)
(cid:138)
(cid:138)
4
4
(cid:138)
B
4
(cid:138)
(cid:138)
(cid:138)
(cid:138)
4
4
(cid:138)
A
(cid:138)
2
2
(cid:138)
(cid:138)
2
2
(cid:138)
B
(cid:138)
2
2
(cid:138)
(cid:138)
2
2
(cid:138)
A = number of meetings attended.
B = number of meetings held during the time the Director held office during the year or was a committee member.
The Standing Due Diligence Committee was not required to meet during the year. The Board established a specific Due
Diligence Committee in relation to the ENTRIX and ERI acquisitions and associated equity raising.
11. REMUNERATION REPORT - AUDITED
Principles of Compensation
Compensation levels for Directors and secretaries of the Company and relevant key management personnel
of the consolidated entity are competitively set to attract and retain suitable qualified staff, reward the
achievement of strategic objectives and achieve the broader outcome of creating value for shareholders. The
remuneration structure takes into account:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
the capability and experience of the Directors and Senior Executives;
the Directors’ and Senior Executives’ ability to control the performance of areas of the Company’s
business;
the Company’s performance; and
the amount of incentives within each Director’s and Senior Executive’s remuneration.
Total shareholder return is an essential element of the Company’s strategy, and the remuneration framework
serves this aim by seeking to attract and retain high calibre executives. Since Cardno Limited was
established in March 2004 the Company has exceeded the growth and profit targets set by the Board and
this successful performance has been reflected in the remuneration of Executives.
The Executive Director and Senior Executive Remuneration Policy is set out below:
Cardno Limited seeks to set fair and market competitive remuneration for its Executive Directors and Senior
Executives to ensure high performance and long-term commitment while taking into consideration the best
interest of shareholders. Executive Directors and Senior Executives remuneration consists of fixed salary,
potential Performance Equity Plan participation, discretionary cash bonuses and other benefits including
superannuation and salary sacrificing. In determining the salary of Executive Directors and Senior
Executives, an assessment of performance is completed and a review of the market is conducted. The
Company takes into account the responsibilities of the individual’s position, the level of skill and experience
as well as the Company’s business.
If the employment of an Executive Director or Senior Executive is terminated, the Executive Director or
Senior Executive may be entitled to receive from the employer pay in lieu of notice and compensation for
employee entitlements such as annual leave and long service leave up to the termination date and by
reference to the Executive’s remuneration.
Page 9 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Remuneration Committee
The Remuneration Committee reviews and makes recommendations to the Board on remuneration issues
and policies applicable to all staff for the consolidated entity. It is also responsible for reviewing share option
schemes, incentive performance packages, superannuation entitlements, retirement and termination
entitlements and fringe benefits policies.
The members of the Remuneration Committee during the year were John Massey (Chairman), Ian Johnston
and Tony Barnes, all independent Non-Executive Directors.
The Remuneration Committee is required to meet at least twice a year. The Remuneration Committee met
four times during the year.
Compensation levels are reviewed annually by the Remuneration Committee through a process that
considers individual, segment and overall performance of the consolidated entity. In addition, external
consultants provide analysis and advice to ensure the Directors’ and Senior Executive’s compensations are
competitive in the market place where required.
Fixed Compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis) and includes
any FBT charges related to employee benefits (including motor vehicles), as well as employer contributions
to superannuation funds.
Fixed compensation is generally reviewed on an annual basis.
Performance-linked Compensation
Performance-linked compensation includes both short-term and long-term incentives and is designed to
reward key management personnel for meeting or exceeding their financial, divisional and personal
objectives. In 2009 the Cardno Board had an independent review undertaken of the long term incentive plan
for Senior Executives. Changes recommended by the consultants were approved by shareholders at the
2009 AGM and have been adopted.
The short-term incentive is an ‘at risk’ bonus provided in the form of cash. The long-term incentive consists
of the issue of Performance Options or Rights which are subject to certain vesting conditions related to the
Company’s Earnings Per Share Growth and, in the case of Rights, also Total Shareholder Return over
3 years. The Executive Directors did not participate in the 2008 PEP and so the Company implemented an
alternative cash based transitional long-term incentive plan linked to the performance of the Company over
3 years commencing in the 2009 financial year.
Short-Term Incentive Bonus
Each year the Remuneration Committee reviews the key performance indicators (KPIs) for the key
management personnel. The KPIs generally include measures relating to the consolidated entity, the
relevant segment, the individual and include financial, people, customers, strategy and risk measures. The
principal financial performance objectives are compared to budgeted amounts. The non-financial objectives
vary with position and responsibility.
At the end of the financial year the Remuneration Committee assesses the actual performance of the
consolidated entity, the relevant segment and individual against the KPI’s set at the beginning of the financial
year. The Remuneration Committee approves the discretionary bonus to be paid to individuals on the
delegated authority of the board. The method of assessment was chosen as it provides the committee with
an objective assessment of the individual performance. Half of the bonus is paid in the year the bonus is
granted while the balance is paid 12 months later, subject to continuing employment.
Page 10 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Long-Term Incentive Bonus
Employee Share Acquisition Plans (“ESAP”)
Shares are issued under the ESAP, in accordance with thresholds approved by shareholders at the 2009
AGM. It provides employees with the opportunity to acquire shares in the Company for no consideration as a
bonus component of their remuneration. Employees with 12 months service or greater who have worked an
average of 100 hours or more per month are entitled to $1,000 of shares each year and employees with 6 to
12 months service are entitled to $500 of shares each year. Employees who work part time, who have
greater than 12 months service and who have worked more than 600 hours per year are also entitled to
$500 of shares each year. Shares issued under ESAP rank equally with other fully paid ordinary shares from
the date of issue.
Shares are issued in the name of the participating employee and are subject to a restriction period. The
shares are restricted under the plan until the earlier of three years from the date of acquisition or the date
they cease to be an employee. Once the restriction period is lifted the shares can be traded as fully paid
ordinary shares. The ESAP has no conditions that could result in the recipient forfeiting ownership of shares.
The number of shares still under a restriction period at 30 June 2010 are detailed in the table below:
Grant Date
Issue Price
29 January 2008
23 February 2009
9 March 2010
$6.19
$3.18
$4.07
Restricted at
30 June 2010
121,739
352,779
401,373
Shares issued during the reporting period are valued at the average market price over the 5 trading days
prior to the date of the issue to employees, which approximates the fair value.
Performance Equity Plan (PEP)
The PEP is designed to reward strong performance by individuals within the Cardno Group of companies.
Options and Rights are issued under the PEP, in accordance with thresholds approved at the 2009 AGM,
which provides certain employees, as determined by the Managing Director and Remuneration Committee,
with the opportunity to acquire shares in the Company, or rights to acquire shares in the Company.
The plan rules contain a restriction on removing the “at risk” aspect of the instruments granted to executives.
Plan participants may not enter into any transaction designed to remove the “at risk” aspect of an instrument
before it vests.
(cid:131) Options
The plan operates by granting an option to key staff to purchase a prescribed number of shares at a
pre-determined time in the future. During the 2010 financial year, options with a grant date fair value of
$1,728,573 were issued with a vesting period of three years from the grant date.
Each option is convertible to one ordinary share. The exercise price of the options, determined in
accordance with the rules of the plan, is based on the weighted average price of the Company’s shares
traded during the five days preceding the date of offering the option. All options expire on the earlier of their
expiry date or termination of the employee’s employment. The options may be exercised at any time during
a 12 month period ending thirty-six months after the date the options are issued.
There are no voting or dividend rights attached to the options. Voting rights and dividends will be attached to
the unissued ordinary shares when the options have been exercised.
No options were exercised during the 2009/10 financial year. Options with a grant date fair value of
$310,405 lapsed during the year as a result of vesting conditions not being satisfied.
Page 11 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Grant Date
Vesting
Date
Expiry Date
25 October
2007
25 October
2007
5 December
2007
5 December
2007
5 December
2008
2 December
2009
19 October
2009
19 October
2010
29 November
2009
29 November
2010
29 November
2011
2 December
2012
25 October
2009
25 October
2010
5 December
2009
5 December
2010
5 December
2011
2 December
2013
Exercise
Price
$
Fair
Value at
Grant
Date
$
Number of
Options at
Beginning
of Year
7.57
0.68
230,000
7.57
0.92
330,000
7.71
0.70
1,272,500
7.71
0.95
1,719,000
3.35
0.41
2,421,000
Options
Granted
Options
Lapsed
Options
Vested
Not
Exercised
Number of
Options as
at 30 June
2010
-
-
-
-
-
-
-
230,000
-
-
330,000
103,000
1,169,500
-
180,500
163,000
-
-
-
1,538,500
2,258,000
2,244,900
4.43
0.77
-
2,244,900
-
Weighted average exercise price
Weighted average remaining contract life
Total expense recognised $454,311 (2009: $552,687)
5.93
4.43
6.12
7.69
5.00
670 days
The options outstanding at 30 June 2010 have not vested, are not exercisable at 30 June 2010 and have an
exercise price in the range of $3.35 to $7.71.
The options issued prior to FY2010 are subject to a performance hurdle and will not vest unless there has
been at least a 5% improvement per year (compounded) in the earnings per share of the Company over the
vesting periods.
The options issued during FY2010 are subject to a performance hurdle and to vest the Company must
achieve earnings per share (EPS) growth in accordance with the following scale:
EPS Growth Over 3 Years
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
≥40% (12% pa)
% of Performance Options in
Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
The fair values of options granted during the year has been calculated using the Black-Scholes model, taking
into account price volatility, risk free interest rates and the dividend yield.
(cid:131) Rights
At the 2009 AGM the Board proposed, upon recommendations by an independent consultant to the
Remuneration Committee, the introduction of performance rights alongside changes to the vesting criteria
and hurdles.
The plan operates by granting a right to acquire an ordinary share at nil consideration at a predetermined
time in the future. During the 2010 financial year 359,000 rights with a grant date fair value of $1,098,625
were issued with a vesting period of three years from the grant date.
Each right is convertible to one ordinary share. All rights expire on the earlier of their expiry date or
termination of the employee’s employment. The rights may be exercised at any time during a one-year
period ending thirty-six months after the date the rights are issued if performance hurdles have been met.
There are no voting or dividend rights attached to the rights. Voting rights and dividends will be attached to
the ordinary shares issued when the rights have been exercised.
Page 12 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Grant Date
Exercise
Date
Expiry Date
Performance
Hurdle
Fair
Value at
Grant
Date
$
Number of
Rights at
Beginning
of Year
Rights
Granted
Rights
Lapsed
Rights
Vested
Not
Exercised
Number of
Rights as
at 30 June
2010
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
Total expense recognised $95,899 (2009: NIL)
EPS Growth
TSR
EPS Growth
TSR
3.96
3.19
3.20
2.30
-
-
-
-
67,500
67,500
112,000
112,000
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
The rights outstanding at 30 June 2010 have not vested, are not exercisable at 30 June 2010 and have no
exercise price.
The rights are subject to performance hurdles of total shareholder return (Tranche 1: 50%) and EPS growth
(Tranche 2: 50%) in accordance with the following scale:
TSR of Cardno Relative to
TSRs of Companies in
Comparator Group
Over 3 Years
<50th percentile
50th percentile
>50th & <75th percentiles
75th percentile and above
% of Rights to Vest
(Tranche 1 50%)
0%
50%
Pro rata
100%
EPS Growth Over 3 Years
% of Rights to Vest
(Tranche 2 50%)
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
≥40% (12% pa)
0%
30%
Pro rata
70%
Pro rata
100%
The fair values of rights granted during the year with a total shareholder return performance hurdle, have
been calculated using a Monte-Carlo simulation valuation model taking into account price volatility, risk free
interest rates and comparator company shareholder return performance. A Black-Scholes model has been
used to value the rights with an EPS performance hurdle taking into account price volatility, risk free interest
rates and the dividend yield.
Executive Director 2009 Transition Long Term Incentive Plan (TLTI)
The Executive Directors did not participate in the 2008 PEP. In 2009 the Board determined to introduce an
alternative cash based transitional long term incentive plan while the Company developed a new long term
incentive plan for Executive Directors and senior management. The new long term incentive plan was
developed in FY2010.
The Group’s performance will be measured over a period of three years commencing with FY2009.
Performance will be measured by reference to two measures each weighted at 50%. The first measure will
be total shareholder return (TSR) compared to the TSR of the smallest 100 companies in the S&P/ASX300
excluding companies in the resources and financial sectors and the second measure will be absolute growth
in earnings per share (EPS). The Board has discretion to adjust earnings so that they accurately reflect
ongoing Company performance. Each measure will have an equal weighting and is pro-rated between a
base threshold and stretch targets. Performance will be measured at the end of FY2011.
In the event of a takeover or change-in-control, the stretch TLTI award opportunities will become immediately
payable to participants. A takeover or change in control is deemed to have occurred when more than 30% of
ordinary issued shares are acquired by, or their voting is controlled by, a person or group of related persons.
Page 13 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
The award opportunities for the participants will be a percentage of the Executive Director’s base package as
at 1 July 2008 and be paid in cash:
Performance Level
Managing Director
Other Executive
Directors
Below threshold
Threshold
Between threshold & target
Target
Between target & stretch
Stretch & above
0%
25%
Pro rata
50%
Pro rata
100%
0%
12.5%
Pro rata
25%
Pro rata
50%
The respective measures for TSR and EPS are:
Performance Level
Threshold
Target
Stretch
Employment Agreements
Relative TSR
50th Percentile
62.5th Percentile
75th Percentile
EPS Growth
3% per annum compound
5% per annum compound
15% per annum compound
Employment Agreements have been entered into with Executive Directors and Senior Executives. The
agreements contain remuneration, performance and confidentiality obligations on the part of both the
employer and the employee. The Executives covenant that during the term of employment and for at least
six months after termination they will not solicit any existing client or employee of the Company.
Non-executive Directors
The Non-executive Directors of Cardno Limited are entitled to a fee that is determined by the Board on
commencement of the role and reviewed on an annual basis thereafter. The fee includes compulsory
superannuation contributions. Non-executive Directors do not participate in equity plans of the Company and
do not receive retirement benefits.
Page 14 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Director, Executive Officer and Key Management Remuneration
Details of the nature and amount of each major element of remuneration of each Director of the Company and each of the five named Company executives and
relevant Group executives who receive the highest remuneration are:
Short Term
Salary and
Fees
$
STI Cash
Bonus
$
Non-
Monetary
Benefits
$
Total
$
Post
Employment
Long
Term
Super-
annuation
Benefits
$
Other
Long
Term
Benefits*
$
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
147,321
87,000
33,000
-
73,394
73,394
73,394
73,394
594,121
524,633
288,564
228,083
298,925
297,425
250,568
240,688
-
-
-
-
-
-
-
-
540,000*
225,000*
96,000*
60,000*
30,000
57,500
10,000
27,737
-
-
-
-
-
-
-
-
-
-
-
-
4,000
4,000
4,000
4,000
4,000
4,000
4,000
4,000
-
-
147,321
87,000
33,000
-
73,394
73,394
73,394
73,394
1,138,121
753,633
388,564
292,083
332,925
358,925
264,568
272,425
-
-
22,679
83,000
47,000
73,623
6,606
6,606
6,606
6,606
52,121
101,234
52,436
112,917
50,000
50,105
46,557
55,987
-
-
-
-
-
-
-
-
114,916*
114,916*
28,750*
28,750*
29,310*
29,310*
25,056*
25,056*
-
-
-
-
Director
Non-Executive
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Former
James Verco
Total Compensation – 2010
1,759,287
676,000
16,000
2,451,287
284,005
198,032*
Total Compensation – 2009
1,524,617
370,237
16,000
1,910,854
490,078
198,032*
Termination
Benefits
$
Share Based
Payments
Shares
Options &
Rights*
Total
$
Proportion of
Remuneration
Performance
Related
Value of
Options &
Rights as a
Proportion of
Remuneration
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
170,000
170,000
80,000
73,623
80,000
80,000
80,000
80,000
166,779**
23,575**
80,149**
11,254**
60,732**
8,363**
43,851**
4,267**
1,471,937
993,358
549,899
445,004
472,967
446,703
380,032
357,735
-
5,015**
-
5,015
-
-
351,511**
3,284,835
52,474**
2,651,438
-
-
-
-
-
-
-
-
55.8%
36.6%
37.3%
22.5%
25.4%
21.3%
20.8%
16.0%
-
-
33.3%
23.4%
-
-
-
-
-
-
-
-
11.3%
2.4%
14.6%
2.5%
12.8%
1.9%
11.5%
1.2%
-
-
5.0%
2.0%
* Includes STI and TLTI cash bonuses which have been accrued but not paid based on estimates of achievement of performance targets.
** The amount included in remuneration is the grant date fair value which has been recognised in accordance with accounting standards over the expected vesting period and includes amounts relating to revised estimates
for the number of equity instruments likely to vest not recognised in prior periods.
Page 15 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Director, Executive Officer and Key Management Remuneration continued
Executives
Executives
Roger Collins-
Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
(appointed 12/10/09)
Former
Steven Coote
(ceased employment
25/09/10)
Charles Tapp
(ceased employment
15/04/10)
Short-Term
Post
Employment
Long
Term
Salary
$
STI Cash
Bonus
$
Non-
Monetary
Benefits
$
Total
$
Super-
annuation
Benefits
$
Other
Long
Term
Benefits
$
Termination
Benefits
$
Share Based
Payments
Shares
Options &
Rights*
Total
$
Proportion of
Remuneration
Performance
Related
Value of
Options &
Rights as a
Proportion of
Remuneration
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
317,752
314,107
335,428
339,577
381,476**
444,904**
156,410
-
101,018
335,779
273,301
324,807
40,000
60,000
40,000
80,000
43,798
45,000
-
-
-
80,000
27,000
45,000
4,000
4,000
4,000
4,000
-
3,600
-
-
-
4,000
-
-
361,752
378,107
379,428
423,577
425,274
493,504
156,410
-
101,018
419,779
300,301
369,807
30,848
30,889
32,755
28,592
-
-
13,780
-
7,058
32,470
36,097
28,795
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131,022
-
1,000
1,000
1,000
1,000
1,000
1,000
-
-
-
1,000
1,000
1,000
63,153*
6,671*
77,987*
8,937*
63,153*
6,671*
2,501*
-
456,753
416,667
491,170
462,106
489,427
501,175
172,691
-
-
8,937*
108,076
462,186
43,198*
5,406*
511,618
405,008
131,022
-
4,000
5,000
249,992*
2,229,735
36,622*
2,247,142
22.6%
16.0%
24.0%
19.2%
21.9%
10.3%
1.4%
-
-
19.2%
13.7%
12.7%
18.0%
15.4%
13.8%
1.6%
15.9%
1.9%
12.9%
1.3%
1.4%
-
-
1.9%
8.4%
1.6%
11.2%
1.6%
Total compensation – 2010
Total compensation – 2009
1,565,385
1,759,174
150,798
310,000
8,000
1,724,183
15,600
2,084,774
120,538
120,746
* The amount included in remuneration is the grant date fair value which has been amortised on a straight line basis over the expected vesting period.
** Salary includes expatriate benefits and is payable in USD.
Additional Information – Cash Bonuses
Name
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Charles Tapp
STI
TLTI
Vested%
Forfeited %
Vested %
Forfeited %
72%
80%
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
28%
20%
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
0%
0%
0%
0%
N/A
N/A
N/A
N/A
N/A
0%
0%
0%
0%
N/A
N/A
N/A
N/A
N/A
Note 1: No STI incentive maximum or minimum amount is contracted between Cardno and the individuals noted in the table.
Page 16 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Consequences of Performance on Shareholder Wealth
In considering the Group’s performance and benefits for shareholder wealth, the Remuneration Committee
has regard to the following indices in respect of the current financial year and the previous four financial
years.
Net Profit After Tax (‘000’s)
Dividends Paid or Provided (000’s)
Change in Share Price – year on
year
Basic Earnings Per Share Growth
Return on Capital Employed
2010
2009
2008
2007
2006
$37,597
$23,955
$0.53
0.1%
17.3%
$34,154
$21,434
-$1.06
4.3%
19.0%
$27,452
$16,349
-$2.69
12.6%
25.8%
$18,468
$9,903
$2.83
18.9%
35.5%
$12,663
$6,859
$1.55
62.6%
62.7%
Over the past four years, the Group’s profit after income tax has grown at an average rate per annum of 42%
and revenue from $101 million (2005) to $477 million (2010). During the same period average key
management personnel total compensation has grown by approximately 16% per annum.
Performance Options & Rights
Options and Rights granted to Executive Directors and Officers of the Company
Details of vesting profiles of options and rights granted as remuneration to the Executive Directors and key
management personnel and to the most highly remunerated Offices of the Group and still outstanding at
30 June 2010, including Rights granted during the financial year are as follows:
Key Management
Personnel
Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Charles Tapp
Outstanding
Grant Date
Vesting Date
% Vested in
Year
% Forfeited in
Year
Options
Rights
-
150,000
-
70,000
-
50,000
-
40,000
-
60,000
45,000
-
70,000
55,000
-
60,000
45,000
-
50,000
35,000
60,000
-
30,000
-
25,000
-
20,000
-
30,000
-
-
30,000
-
-
30,000
-
-
8,000
-
22-Oct-09
25-Oct-07
22-Oct-09
25-Oct-07
22-Oct-09
25-Oct-07
22-Oct-09
25-Oct-07
2-Dec-09
5-Dec-08
5-Dec-07
2-Dec-09
5-Dec-08
5-Dec-07
2-Dec-09
5-Dec-08
5-Dec-07
2-Dec-09
5-Dec-08
5-Dec-07
22-Oct-12
19-Oct-10
22-Oct-12
19-Oct-10
22-Oct-12
19-Oct-10
22-Oct-12
19-Oct-10
2-Dec-12
29-Nov-11
29-Nov-10
2-Dec-12
29-Nov-11
29-Nov-10
2-Dec-12
29-Nov-11
29-Nov-10
2-Dec-12
29-Nov-11
29-Nov-10
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
No options were issued to Executive Directors and key management personnel during the financial year.
Non-Executive Directors do not participate in any of the Company’s incentive plans.
No options and rights granted during the financial year have vested. No options or rights have been granted
since the end of the financial year and up to the date of this report. No options or rights were exercised
during the financial year. Details of the performance criteria are included on page 13.
Page 17 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
The movement during the reporting period, by value, of options and rights over ordinary shares in Cardno
Limited held, directly, indirectly or beneficially, by each key management person, including their related
parties, is as follows:
Key Management Personnel
Granted in
year $
Exercised in
year $
Lapsed in year $
Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
214,500
107,250
89,375
71,500
82,500
82,500
82,500
22,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12. Directors’ and Executives’ Interests
As at the date of this report, the interests of the Directors in the shares of Cardno Limited were:
A H Barnes
A D Buckley
P J Cosgrove
J I Forbes
T C Johnson
I J Johnston
J C Massey
G G Tamblyn
Cardno Limited
Ordinary Shares
Shares held in
Escrow
Options over
Ordinary Shares
Performance Rights
4,044
2,450,261
-
24,856
2,050,001
241,955
58,334
1,248,211
-
-
-
-
-
-
-
-
-
150,000
-
70,000
50,000
-
-
40,000
-
60,000
-
30,000
25,000
-
-
20,000
The movement during the reporting period in the number of ordinary shares in Cardno Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at 1 July
2009
Purchases
Received as
Compensation
Sales
Held at 30 June
2010
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Graham Tamblyn
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
44,382
3,348
-
207,390
1,426,330
2,359,037
19,947
1,967,399
653,652
800,141
153,213
-
5,618
118
-
-
521
-
1,358
-
-
-
10,359
3,580
-
-
-
-
-
-
-
-
245
245
245
-
-
-
-
-
210,000
-
-
-
-
-
-
-
50,000
3,466
-
207,390
1,216,851
2,359,037
21,305
1,967,399
653,897
800,386
163,817
3,580
13. Unissued shares under options and rights
At the date of this report unissued ordinary shares of the Company under option are:
Exercise Date
Expiry date
Exercise price
Number of options
19 October 2010
29 November 2010
29 November 2011
2 December 2012
25 October 2010
5 December 2010
5 December 2011
2 December 2013
$7.57
$7.71
$3.35
$4.43
330,000
1,538,500
2,258,000
2,244,900
Page 18 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
At the date of this report unissued ordinary shares of the Company in relation to performance rights are:
Exercise Date
Expiry date
Exercise price
Number of rights
22 October 2012
2 December 2012
22 October 2013
2 December 2013
Nil
Nil
135,000
224,000
These options and rights do not entitle the holder to participate in any share issue of the Company.
14. Non-Audit Services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their
statutory duties.
The Board has considered the non-audit services provided during the year by the auditors and in accordance
with written advice provided by resolution of the Audit, Risk & Compliance Committee, is satisfied that the
provision of those non-audit services during the year by the auditor is compatible with, and does not
compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:
(cid:131)
(cid:131) all non-audit services are subject to the corporate governance procedures adopted by the Company
and have been reviewed by the Audit, Risk & Compliance Committee to ensure they do not impact
the integrity and objectivity of the auditor; and
that non-audit services provided do not undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants, in that they do
not involve reviewing or auditing the auditor’s own work, acting in a management or decision making
capacity for the Company, acting as an advocate for the Company or jointly sharing risks and
rewards.
Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and
non-audit services provided during the year are set out in note 31.
15. Lead Auditor’s Independence Declaration Under Section 307C of the Corporations Act 2001
The lead auditor’s independence declaration is set out on page 20 and forms part of the Directors’ report for
the year ended 30 June 2010.
16. Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and
Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ report and financial
statements. Amounts in the Directors’ report and financial report have been rounded off in accordance with
that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Signed in accordance with a resolution of Directors.
On behalf of the Directors
JOHN C MASSEY
Chairman
Brisbane
16 August 2010
Page 19 of 80
Corporate Governance Statement
The Board of Directors of Cardno Limited is ultimately responsible for all corporate governance matters of the
consolidated entity and is accountable to the shareholders for the overall business performance of the company. Details
of the corporate governance policies of the company can be found in the Investor Centre of the company’s website,
www.cardno.com.au.
Cardno Limited is committed to implementing and maintaining sound corporate governance practices and has
considered the ASX Corporate Governance Principles and Recommendations (Second Edition) in the development of its
corporate governance. The Board has assessed the company’s current practice against these Principles and
Recommendations and notes that the company’s practices are consistent except where stated below.
Principle 1: Lay solid foundation for management and oversight
The role of the Board and delegation to Senior Executives has been formalised. The most significant responsibilities of
the Board are:
(cid:131)
(cid:131)
providing strategic guidance to the company including contributing to the development of and approving the
corporate strategy;
reviewing and approving business plans, the annual budget and financial plans including available resources and
major capital expenditure initiatives;
(cid:131)
reviewing the operational and financial performance of the company’s activities;
(cid:131)
reporting to shareholders and the market;
(cid:131)
ensuring compliance with prudential regulations and standards;
(cid:131)
ensuring adequate risk management processes are in place;
(cid:131)
reviewing internal controls and internal and external audit reports;
(cid:131) monitoring and influencing the culture and reputation of the company;
(cid:131) monitoring board composition, director selection and board process and performance;
(cid:131)
(cid:131)
(cid:131)
approving key executive appointments and ensuring executive succession planning;
reviewing the performance and remuneration of the Managing Director and Senior Executives;
ensuring that the Board as a whole has an appropriate understanding of each substantial segment of the
business; and
authorising and monitoring major investment and strategic commitments.
(cid:131)
The Board has delegated to Senior Executives responsibility for the implementation of the company’s strategic direction,
business plans and day-to-day management of the company’s operations.
The performance of Senior Executives is evaluated by the Board through formal performance reviews undertaken on an
annual basis. The individual performance of each Senior Executive is reviewed against goals set in the previous year
and new objectives are established for the following financial year. The performance reviews were completed during the
year in accordance with the process agreed by the Board.
The Board endorses a culture of continuous improvement and will therefore continue to refine and develop its role and
the delegation of responsibilities to management as the company develops.
The Board’s responsibilities and functions are also contained in the company’s Corporate Governance Policy which can
be accessed in the Investor Centre on the company’s website.
Principle 2: Structure the Board to add value
To add value, the Board has been formed so that it has effective composition, size and commitment to adequately
discharge its responsibilities and duties. Collectively the Directors have a broad range of experience, expertise, skills,
qualifications and contacts relevant to the business. Details of the skills and experience of each Director are contained in
the Directors’ Report and on the company’s website.
The Board currently comprises four Non-executive Directors including the Chairman, and four Executive Directors.
The Board has adopted the following criteria to determine the independence of a Director as someone who must be a
Non-executive Director and:
(cid:131)
is not a substantial shareholder of the company or an officer of, or otherwise associated directly with, a
substantial shareholder of the company;
(cid:131) within the last three years has not been employed in an executive capacity by the company or another group
member, or been a director after ceasing to hold any such employment;
(cid:131) within the last three years has not been a principal of a material professional adviser or a material consultant to
(cid:131)
the company or another group member or an employee materially associated with the service provided;
is not a material supplier or customer of the company or another group member, or an officer of or otherwise
associated directly or indirectly with a material supplier or customer;
(cid:131) has no material contractual relationship with the company or other group member other than as a Director of the
company;
Page 21 of 80
Corporate Governance Statement
(cid:131) has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere
(cid:131)
with the Director’s ability to act in the best interests of the company; and
is free from any interest and any business or other relationship which could, or could reasonably be perceived
to, materially interfere with the Director’s ability to act in the best interests of the company.
The Board has confirmed that based on this definition of independence, Mr Massey, General Cosgrove and Mr Barnes
are independent Non-executive Directors. The Board determined that Mr Johnston meets the independence definition
except with respect to his former role as a Director of RBS Morgans Limited. The Board does not consider that Mr
Johnston’s current role with RBS Morgans materially interferes with his ability to act independently in the interests of the
company.
It is currently considered appropriate to have a number of Executive Directors on the Board as they have a strong
awareness of management issues and a deep knowledge of the company. The company has reduced the number of
Executive Directors and increased the number of Non-executive Directors over recent years. The Board considers it
appropriate to transition over time to a majority of Non-executive Directors.
The role of the Chairman and Chief Executive Officer are separate. The Chairman of the Board is Mr Massey who is an
independent Non-executive Director. The Chief Executive Officer and Managing Director is Mr Buckley. Each Director, as
part of his agreement with the company has the ability to seek independent advice at the company’s expense after
consultation with the Chairman.
The Nomination Committee is comprised by three Non-executive Directors, Mr Massey (Chairman), General Cosgrove,
Mr Johnston and the Managing Director Mr Buckley. Details of the number of meetings of the Committee and members’
attendance can be found in the Directors’ Report.
The Nomination Committee facilitates Board and individual Director performance reviews and evaluation on at least an
annual basis using an external facilitator as necessary to ensure independent professional scrutiny and benchmarking
against developing best practices. The results of the review are presented to the Chairman and to the Board. A
performance evaluation in the financial year 2010 was undertaken in accordance with board procedure and involved an
independent board consultant.
The Board acknowledges that performance can always be enhanced and will continue to seek and consider ways of
further enhancing performance both individually and collectively.
The Nomination Committee assists the Board in determining the composition of the Board and its committees. When
considering a candidate as a Director, consideration is given to the candidate’s ability to act in the best interests of
shareholders as well as specific skills and expertise. Consideration is also given to the candidate’s capacity to
understand the impacts of various laws and regulations on their role and on the company including company law, trade
practices legislation, environmental law, occupational health and safety, equal opportunity and taxation.
As the company has significant operations outside of Australia, consideration is also given to the candidate’s ability to
understand the impacts of foreign jurisdiction legislation, foreign currency issues and the business environment in the
countries in which the company operates. In addition, consideration is given to the candidate’s knowledge of the areas of
the company’s operations, risk management concepts and how they apply to the company and also whether the
candidate is up to date with issues of corporate governance.
New Directors undergo an induction process in which they are given an extensive briefing on the company. This
includes meetings with key executives, tours of the relevant premises, an induction package and presentations. A formal
letter of appointment is provided.
In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continuing
professional development. Specifically, Directors are provided with the resources and training to address skills gaps
where they are identified.
The Nomination Committee has responsibility for independently supervising the company’s Leadership Development
Programme as part of its succession considerations.
The roles and responsibilities of the Nomination Committee are summarised in the Investor Centre of the company’s
website.
Principle 3: Promote ethical and responsible decision making
The Board has adopted a Code of Conduct for Directors, Senior Executives and staff. The Code of Conduct is regularly
reviewed and updated as necessary to ensure it reflects the highest standards of behaviour, professionalism and
practices necessary to maintain confidence in the company’s integrity. The code has six governing principles namely
honesty and integrity, confidentiality of information, integrity of personal dealings, conflicts of interest, abiding by the law
and gifts and entertainment.
Page 22 of 80
Corporate Governance Statement
The Board also promotes the maintenance of an open working environment in which all employees and contractors are
able to report instances of unethical, improper, unlawful or undesirable conduct without fear of intimidation or reprisal.
This is endorsed through the Whistleblowers Protection Policy.
The Board has adopted a policy for trading in Cardno securities by Directors, Senior Executives and staff. The purpose
of these codes is to guide Directors and Senior Executives in the performance of their activities and to define the
circumstances in which both they and staff, and any associates, are permitted to deal in securities. This policy was
reviewed and updated during the year to ensure best practice principles continue to be incorporated in the policy in line
with the Listing Rules.
These codes and policy have been designed with a view to ensuring the highest ethical and professional standards as
well as compliance with legal obligations. Both codes and the policy are available for review in the Investor Centre of the
company’s website.
Principle 4: Safeguard integrity in financial reporting
The Managing Director and Chief Financial Officer have provided the Board with a statement confirming that the
company’s financial reports present a true and fair view of the company’s financial position and are in accordance with
relevant accounting standards. The Audit, Risk & Compliance Committee consists of two Non-executive Directors,
Mr Barnes and Mr Johnston, and one Executive Director, Dr Johnson. Mr Barnes, an independent Non-executive
Director, is Chairman of the Audit, Risk & Compliance Committee. Mr Barnes is not the Chairman of the company.
Mr Massey stepped down from his position on the Committee on 18 August 2009 so as to avoid any potential conflict of
interest between his role as a member of the Committee and his role as Chairman of the Board. Details of the number
of meetings of the Committee and members attendance can be found in the Directors’ Report.
The guidelines provide for the Audit, Risk & Compliance Committee to consist of at least three members and consist only
of Non-executive Directors. The Board considers that it is appropriate to have one Executive Director on the Audit, Risk
& Compliance Committee to ensure there is appropriate insight when considering the company’s operations and risks.
The Audit, Risk & Compliance Committee requires the rotation at least every five years of the external audit engagement
partner. The selection of the external audit engagement partner is assessed against specific criteria established and
agreed by the Audit, Risk & Compliance Committee.
The role, objective and responsibilities of the Audit, Risk & Compliance Committee are able to be accessed in the
Investor Centre of the company’s website.
Principle 5: Make timely and balanced disclosure
The company has adopted a Continuous Disclosure Policy which can be viewed in the Investor Centre of the company’s
website. The purpose of this policy is to set out the procedures to be followed to enable accurate, timely, clear and
adequate disclosure to the market and compliance with the ASX Listing Rules regarding disclosure. The Policy also
operates to ensure that all employees are aware of their obligations for compliance within the continuous disclosure
obligations. The Board regularly reviews its disclosure to ensure the market is kept informed of price sensitive or
significant information in accordance with the Listing Rules.
During the year the company approved a Confidential Information Policy which established standards of behaviour and
processes regarding the manner in which the executives and employees handle confidential information relating to the
company’s business. A copy of the policy has been distributed to all staff and is accessible on the company intranet.
The Company Secretary has been nominated as the person responsible for communications with the Australian
Securities Exchange (ASX). This role includes the responsibility for ensuring compliance with the continuous disclosure
requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts,
brokers, shareholders, the media and the public. Further comments related to making timely and balanced disclosure
are covered with consideration of the next Principle.
Principle 6: Respect the rights of shareholders
The Board recognises the important rights of shareholders and strives to communicate with shareholders regularly and
clearly – both by electronic means and using more traditional communication methods. Shareholders are encouraged to
attend and participate at general meetings. The company’s auditors attend the Annual General Meeting of the company
and are available to answer shareholders’ questions.
The Communications Policy adopted by the company includes:
(cid:131)
communicating effectively with shareholders through releases to the market via the ASX, the media, the
company’s website, information mailed to shareholders and the general meetings of the company;
(cid:131) all information disclosed to the ASX is posted on the company’s website when it is disclosed to the ASX.
Presentation material used in public presentations and to brief analysts is released to the ASX and posted on
the company’s website;
Page 23 of 80
Corporate Governance Statement
(cid:131) giving shareholders ready access to balanced and understandable information about the company and
(cid:131)
corporate proposals; and
the external auditor attending the Annual General Meeting and being available to answer shareholder questions
about the conduct of the audit and the preparation and content of the Auditor’s Report.
A copy of the company’s Communications Policy is able to be reviewed in the Investor Centre of the company’s website.
Principle 7: Recognise and manage risk
The Board, together with management, has sought to identify, monitor and mitigate risk. Internal controls are monitored
on a continuous basis and wherever possible, improved. The issue of risk management is formalised in the company’s
Corporate Governance Policy and in the Audit, Risk & Compliance Committee Terms of Reference which are both kept
under regular review. The review takes place at both committee level through the Board’s Audit, Risk & Compliance
Committee which meets at least four times each year, and at board level. The Audit, Risk & Compliance Committee has
established policies and procedures to identify and monitor business risks as well as adopting an internal compliance
and control system to manage material business risk.
The Operational Risk Management Committee, which is comprised of the Managing Director and Senior Executives who
are representative of all aspects of the company’s business across the globe, regularly reports to the Audit, Risk &
Compliance Committee. The Operational Risk Management Committee has responsibility for oversight and maintenance
of the Enterprise Wide Risk Management System, the company’s Operational Risk Management Plan, which has been
established in accordance with AS/NZ 4360:2004. The Operational Risk Management Committee also has responsibility
for operational risks, quality control issues and operations processes.
The Audit, Risk & Compliance Committee reports to the Board regularly on the implementation and management of the
Enterprise Wide Risk Management System and identifies significant risks to the company and how they are being
mitigated and managed by management via the Operational Risk Management Committee.
This structure allows the company to assess risks ranging from low to very high and it is those risks that are identified as
significant that are referred to in the Financial Report.
The company also monitors the quality and accuracy of its services through a Quality Management System. The details
of the Quality Management System are available to staff via the company’s intranet and client feedback is a feature of
the system.
The Managing Director and Chief Financial Officer attest to the Board the soundness of the risk management and
internal control systems each year and that the system is operating effectively in all material aspects in relation to
financial risks.
The objective, roles and responsibilities of the Audit & Risk Compliance Committee and Operational Risk Management
Committee and each committee’s terms of reference are able to be accessed in the Investor Centre of the company’s
website.
Principle 8: Remunerate fairly and responsibly
The company has established a Remuneration Committee. The Remuneration Committee, which advises and reports to
the Board, is chaired by the Chairman, Mr Massey and includes Mr Barnes and Mr Johnston, all Non-executive Directors.
Details of the number of meetings of the committee and members’ attendance can be found in the Directors’ Report.
The current remuneration of the Directors and the Senior Executives is published in the Directors’ Report.
The Executive Director and Senior Executive Remuneration Policy is:
Cardno Limited seeks to set fair and market competitive remuneration for its Executive Directors and Senior Executives
to ensure high performance and long-term commitment while taking into consideration the best interest of shareholders.
Executive Directors and Senior Executives’ remuneration consists of fixed salary, potential Performance Equity Plan
participation, discretionary cash bonuses and other benefits including superannuation and salary sacrificing. In
determining the salary of Executive Directors and Senior Executives, an assessment of performance is completed and a
review of the market is conducted. The company takes into account the responsibilities of the individual’s position, the
level of skill and experience as well as the company’s business.
If the employment of an Executive Director or Senior Executive is terminated, the Executive Director or Senior Executive
may be entitled to receive from the employer pay in lieu of notice and compensation for employee entitlements such as
annual leave and long service leave up to the termination date and by reference to the Executive’s remuneration.
Where the Executive Directors participate in equity-based incentive plans, the details are submitted to shareholders for
approval.
Page 24 of 80
Corporate Governance Statement
The Remuneration Policy in regard to Non-executive Directors is:
The Non-executive Directors of Cardno Limited are entitled to a fee that is determined by the Board on commencement
of the role and reviewed on an annual basis thereafter. The fee includes compulsory superannuation contributions.
Non-executive Directors do not participate in equity plans of the company and do not receive retirement benefits. The fee
covers both Board and sub-committee responsibilities.
The company’s Trading Policy specifically prohibits any Director, Senior Executive or employee from transacting in short
selling, trading in products which limit the risk associated with the holding of unvested securities or profiting from trading
in securities which decrease in market value. A copy of this policy can be accessed in the Investor Centre of the
company’s website.
The role, objectives and responsibilities of the Remuneration Committee is able to be accessed in the Investor Centre of
the company’s website.
Page 25 of 80
Consolidated Statement of Financial Performance
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Financing costs
Other expenses
Profit/(loss) before income tax
Income tax (expense) / benefit
Net profit/(loss) for the year
Profit attributable to:
Owners of the Company
Note
2
3
3
4
2010
$’000
477,238
(211,888)
(135,520)
(53,470)
(8,525)
(3,166)
(21,090)
43,579
(5,982)
37,597
2009
$’000
515,842
(231,464)
(145,272)
(61,848)
(11,003)
(4,637)
(19,526)
42,092
(7,939)
34,153
37,597
37,597
34,153
34,153
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
30
30
43.86
43.61
43.82
43.82
The statement of financial performance should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 26 of 80
Consolidated Statement of Comprehensive Income
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
Profit for the period
Other comprehensive income
Exchange differences on translation of foreign operations
2010
$’000
2009
$’000
37,597
34,153
(4,214)
(258)
Other comprehensive income for the period, net of tax
(4,214)
(258)
Total comprehensive income for the period
33,383
33,895
Total comprehensive income attributable to:
Owners of the Company
33,383
33,383
33,895
33,895
The statement of comprehensive income should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 27 of 80
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2010
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Current tax liabilities
Short term provisions
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Deferred tax liabilities
Long term provisions
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note
2010
$’000
2009
$’000
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
13
21
22
23
56,282
103,275
71,496
6,211
237,264
1,504
836
29,208
3,551
339,099
89
374,287
65,808
92,072
56,419
4,794
219,093
1,650
553
27,014
2,110
222,091
213
253,631
611,551
472,724
82,462
49,250
1,528
15,501
29,250
58,779
8,976
4,115
13,206
38,033
177,991
123,109
125,990
442
6,527
629
133,588
76,076
1,058
5,629
931
83,694
311,579
206,803
299,972
265,921
252,080
(8,507)
56,399
299,972
227,457
(4,293)
42,757
265,921
The statement of financial position should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 28 of 80
Consolidated Statement of Changes in Equity
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
BALANCE AT 1 JULY 2008
Profit for the period
Exchange differences on translation of
foreign operations
Total comprehensive income for the
period
Transactions with owners in their
capacity as owners:
Shares issued
Notes converted to shares
Dividends paid or provided
BALANCE AT 30 JUNE 2009
Profit for the period
Exchange differences on translation of
foreign operations
Total comprehensive income for the
period
Transactions with owners in their
capacity as owners:
Shares issued
Notes converted to shares
Dividends paid or provided
BALANCE AT 30 JUNE 2010
23
23
5
23
5
Note
Share
Capital
Ordinary
$’000
192,063
Retained
Earnings
$’000
30,038
34,153
Foreign
Translation
Reserve
$’000
Total
$’000
(4,035)
218,066
-
34,153
-
(258)
(258)
34,153
(258)
33,895
-
-
(21,434)
(21,434)
42,757
37,597
-
-
-
-
32,741
2,653
(21,434)
13,960
(4,293)
265,921
-
37,597
-
(4,214)
(4,214)
37,597
(4,214)
33,383
-
-
-
32,741
2,653
-
35,394
227,457
-
-
-
24,623
-
-
24,623
252,080
-
-
(23,955)
(23,955)
56,399
-
-
-
-
(8,507)
24,623
-
(23,955)
668
299,972
The statement of changes in equity should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 29 of 80
Consolidated Statement of Cash Flows
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Interest received
Finance costs
Cash paid to suppliers and employees
Income tax paid
Note
2010
$’000
2009
$’000
508,714
1,474
(2,968)
(451,683)
(8,792)
550,769
1,492
(4,768)
(494,189)
(14,715)
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
25(a)
46,745
38,589
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired
Payment of direct costs of acquisition
Proceeds from sale of property, plant &
equipment
Payments for property, plant & equipment
25(d)
(129,486)
-
691
(3,126)
(42,023)
(620)
1,588
(9,716)
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES
(131,921)
(50,771)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Dividends paid
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
HELD
20,704
(56)
101,086
(19,427)
(2,589)
(22,301)
77,417
28,587
-
-
14,350
-
(19,374)
23,563
(7,759)
11,381
CASH AND CASH EQUIVALENTS AT 1 JULY
65,808
52,624
Effects of exchange rate changes on cash and
cash equivalents at the end of year
(1,767)
1,803
CASH AND CASH EQUIVALENTS AT 30 JUNE
25(b)
56,282
65,808
The statement of cash flow should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 30 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Cardno Limited (the “Company”) is a company incorporated and domiciled in Australia. The consolidated financial report
of the Company for the year ended 30 June 2010 encompasses the Company and its subsidiaries (together referred to
as the “Group”).
The financial report was authorised for issue by the Board of Directors on 16 August 2010.
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (AASBs including Australian Interpretations) adopted by the Australian Accounting Standards
Board (AASB), Urgent Issues Group Interpretations (“UIG”) and the Corporations Act 2001. The financial report of the
consolidated entity also complies with International Financial Reporting Standards and interpretations adopted by the
International Accounting Standards Board.
(b) Basis of Preparation
The financial report has been prepared on an accrual and historical cost basis.
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
The following new standards, amendments to standards and new interpretations have been identified as those which
may impact the entity in the period of initial application. They are available for early adoption at 30 June 2010, but have
not been applied in preparing this financial report.
(cid:131) AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets
resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and
Measurement. AASB 9 will become mandatory for the Group’s 30 June 2014 financial statements. Retrospective
application is generally required, although there are exceptions, particularly if the entity adopts the standard for the
year ended 30 June 2012 or earlier. The Group has not yet determined the potential effect of the standard.
(cid:131) AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements
Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement
purposes. The amendments, which become mandatory for the Group’s 30 June 2011 financial statements, are not
expected to have significant impact on the financial statements.
(cid:131) AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment
Transactions resolves diversity in practice regarding the attribution of cash-settled share-based payments between
different entities within a group. As a result of the amendments Australian Interpretation (AI) 8 Scope of AASB 2 and
AI 11 AASB 2 – Group and Treasury Share Transactions will be withdrawn from the application date. The
amendments, which become mandatory for the Group’s 30 June 2011 financial statements, are not expected to
have a significant impact on the financial statements.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO 05/641 effective
28 July 2005 and CO 06/51 effective 31 January 2006) and in accordance with that Class Order, amounts in the financial
report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by
the Company.
A list of the controlled entities is contained in Note 38 to the financial statements. All controlled entities have a June
financial year-end.
Page 31 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(c) Basis of Consolidation continued
Transactions eliminated on consolidation
Intra-group balances, unrealised gains and losses and inter-entity balances resulting from transactions with or between
controlled entities are eliminated in full on consolidation.
(d) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as
part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the ATO is included as a current asset or liability in the consolidated balance sheet.
Cash flows from operating activities are included in the cash flow statements on a gross basis. The GST components of
cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are
classified as operating cash flows.
(e) Foreign Currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting
date are translated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or loss
on monetary items is the difference between amortised cost in the functional currency at the beginning of the period,
adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at
the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that
are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value
was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for
differences arising on the translation of available-for-sale equity instruments, a financial liability designated as a hedge of
the net investment in a foreign operation, or qualifying cash flow hedges, which are recognised in other comprehensive
income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Australian dollars at exchange rates at the reporting date. The revenue and expenses of foreign operations
are translated to Australian dollars at rates approximating the foreign exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income in the foreign currency translation reserve
(FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to
profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment
in a foreign operation and are recognised in other comprehensive income and are presented within equity in the FCTR.
Hedge of net investment in foreign operation
Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in
a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are
presented within equity in the FCTR. To the extent that the hedge is ineffective, such differences are recognised in profit
or loss. When the hedged part of a net investment is disposed of, the relevant amount in the FCTR is transferred to
profit or loss as part of the profit or loss on disposal.
(f) Revenue Recognition
Revenue is recognised at fair value of the consideration received net of the amount of goods and services tax (GST)
payable to the taxation authority.
Page 32 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(f) Revenue Recognition continued
Sale of goods
Revenue from the sale of goods is recognised (net of rebates, discounts and other allowances) upon the delivery of
goods to the customer.
Consulting revenue
Revenue from consulting services which are provided on a time and material basis is recognised at the contractual
hourly rates as labour hours are delivered and direct expenses are incurred. For long term contracts, revenue and
expenses are recognised in accordance with the percentage of completion method. Where a loss is expected to arise
from a contract, the loss is recognised immediately as an expense. The percentage of completion is determined by costs
to date versus estimated total project costs.
Interest revenue
Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.
Dividends
Revenue from dividends is recognised by the consolidated entity when dividends are received.
(g) Leases
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset. The corresponding rental obligations, net of finance
charges, are included in current and non-current interest-bearing loans and borrowings. Minimum lease payments are
apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to
each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the
liability.
Other leases are operating leases and are not recognised in the Group’s statement of financial position. Payments made
under operating leases which are subject to fixed annual increments are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an
integral part of the total lease expense and are spread over the lease term.
(h) Net Financing Costs
Interest income is recognised in the profit and loss as it accrues, using the effective interest method.
Borrowing costs are calculated using the effective interest method and include interest, amortisation of discounts or
premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of
borrowings and foreign exchange differences arising from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which
take a substantial period of time to get ready for their intended use or sale. Where funds are borrowed specifically for the
acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is the amount
incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed
generally, borrowing costs are capitalised using a weighted average capitalisation rate.
(i) Income Tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Page 33 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(i) Income Tax continued
Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither accounting or taxable profit, and differences
relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not
reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on
the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the
reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probably that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay
the related dividend is recognised.
Tax consolidation
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a consequence,
all members of the tax-consolidated group are taxed as a single entity from the date of forming the tax consolidated
Group. The head entity within the tax-consolidated Group is Cardno Limited.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated Group, has entered into a tax funding
arrangement which sets out the funding obligations of members of the tax-consolidated Group in respect of tax amounts.
The tax funding arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed
by the head entity and any tax-loss deferred tax asset assumed by the head entity.
(j) Segment Reporting
As of 1 July 2009 the Group determines and presents operating segments based on the information that internally is
provided to the Managing Director and Chief Financial Officer, who have been identified as the Group’s chief operating
decision makers. This change in accounting policy is due to the adoption of AASB 8 Operating Segments. Previously
operating segments were determined and presented in accordance with AASB 114 Segment Reporting. The new
accounting policy in respect of segment operating disclosures is presented as follows:
(cid:131) Comparative segment information has been re-presented in conformity with the transitional requirements of AASB 8.
Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on
earnings per share.
(cid:131) An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating results are regularly reviewed by the chief operating decision
makers to make decisions about resources to be allocated to the segment and assess its performance, and for
which discrete financial information is available.
(cid:131) Segment results that are reported to the chief operating decision-makers include items directly attributed to the
segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise of mainly head
office expenses, financing costs, and income tax expense.
(cid:131) Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment,
and intangible assets other than goodwill.
Page 34 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(k) Non-current Assets Held for Sale and Discontinued Operations
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily
through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held
for sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up-to-date in
accordance with applicable accounting standards. Then, on initial classification as held for sale, non-current assets and
disposal groups are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses on
initial classification as held for sale are included in profit or loss, even when there is a revaluation. The same applies to
gains and losses on subsequent re-measurement.
A discontinued operation is a component of the consolidated entity’s business that represents a separate major line of
business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired
exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation,
the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the
start of the comparative period.
(l) Trade and Other Receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts.
Interest income is recognised as it accrues. The recoverability of trade receivables is reviewed on an ongoing basis. An
estimate for impairment of doubtful debts is made when there is objective evidence collection of the full nominal amount
is no longer probable. Bad debts are written off as incurred.
(m) Inventories
Work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised
losses and progress billings. If there are contracts where progress billings exceed the aggregate costs incurred plus
profits less losses, the net amounts are presented as unearned revenue under other liabilities.
Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the
customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the
consolidated entity’s activities in general.
(n) Property, Plant and Equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working
condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they
are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any
gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased
software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in
the income statement.
Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance
are charged to the income statement during the reporting period in which they are incurred.
Page 35 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(n) Property, Plant and Equipment continued
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for
cost, less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives
unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
•
•
•
•
•
buildings
laboratory equipment, instruments and amenities
equipment and motor vehicles
leasehold improvements
office furniture and equipment
40 years
4-7 years
4-7 years
4-5 years
3-11 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(o) Intangible Assets
Business Combinations and Goodwill
The Group has adopted revised AASB 3 Business Combinations (2008) and amended AASB 127 Consolidated and
Separate Financial Statements (2008) for business combinations occurring in the financial year starting 1 July 2009. All
business combinations occurring on or after 1 July 2009 are accounted for by applying the acquisition method. The
change in accounting policy is applied prospectively and had no material impact on earnings per share.
For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of
the other combining entities or businesses. Control is the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights
that currently are exercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement
is applied in determining the acquisition date and determining whether control is transferred from one party to another.
The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any
non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date. Subsequent to initial recognition, goodwill is
measured at cost less accumulated impairment losses.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the
previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the
fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced
mandatorily in the business combination.
Transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due
diligence fees, and other professional and consulting fees, are expensed as incurred.
Works contracts and software intangibles
Works contracts and software intangibles are acquired by the consolidated entity and are stated at cost less accumulated
amortisation and impairment losses. Amortisation is calculated based on the timing of projected cash flows of the
contracts over their estimated useful lives, which currently vary from 1 to 7 years.
Patents and Licenses
Patents and licenses acquired by the consolidated entity are considered to have indefinite useful lives and are stated at
cost less any impairment losses. Patents and licences are not amortised but tested for impairment annually.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
Page 36 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(p) Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.
Amortisation is charged to the profit and loss on a straight-line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Goodwill and intangible assets with an indefinite life are not amortised but are
systematically tested for impairment at each annual balance sheet date. Works contracts which are assigned a value
are amortised over the life of the contract from the date they are available for use.
Amortisation methods, useful lives and residual values are reviewed at each reporting date.
(q) Impairment
The carrying amount of the consolidated entity’s assets, other than inventories (see paragraph (m)), and deferred tax
assets (see paragraph (i)), are reviewed at each statutory reporting date to determine whether there is any indication of
impairment. If any such indication exists, an impairment test is performed. The consolidated entity performs impairment
testing of goodwill and intangibles with indefinite useful lives annually.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its
recoverable amount. Impairment losses are recognised in the profit and loss unless the asset has previously been
revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any
excess recognised through the profit and loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets
in the unit (group of units) on a pro rata basis.
Calculation of recoverable amount
The recoverable amount of the consolidated entity’s receivables carried at amortised cost is calculated as the present
value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate
computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.
The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that
does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit
to which the asset belongs.
Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill
has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which
goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups
of CGUs that are expected to benefit from the synergies of the combination.
Reversals of impairment
An impairment loss in respect of receivables carried at amortised cost is reversed if the subsequent increase in
recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(r) Trade and Other Payables
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the
consolidated entity. Trade accounts payable are normally settled within 60 days. Trade and other payables are stated at
cost.
Page 37 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(s) Interest Bearing Borrowings
Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption
value being recognised in the profit and loss over the period of the borrowings on an effective interest rate basis.
(t) Employee Benefits
Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months of the
period end represent present obligations resulting from employees’ services provided to reporting date, calculated at
undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at
reporting date including related on-costs.
Long-term service benefits
The provisions for employee entitlements to long service leave and other deferred employee benefits represent the
present value of the estimated future cash outflows to be made by the employer resulting from employees’ services
provided up to the balance date and include related on-costs. In determining the liability for long service leave,
consideration has been given to future increases in wage and salary rates, and the consolidated entity’s experience with
staff departures.
Liabilities for employee entitlements which are not expected to be settled within 12 months are discounted using the
rates attached to national government securities at balance date, which most closely match the terms of maturity of the
related liabilities.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which
services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund
or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than
12 months after the end of the period in which the employees render the service are discounted to their present value.
Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense,
with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service
and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is
based on the number of awards that do not meet the related service and non-market performance conditions at the
vesting date.
(u) Provisions
A provision is recognised in the balance sheet when the consolidated entity has a present legal, equitable or constructive
obligation as a result of a past event, and it is probable that a future sacrifice of economic benefits will be required to
settle the obligation, the timing or amount of which is uncertain. If the effect is material, provisions are determined by
discounting the expected future cash flows at the pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability.
Dividends
A provision for dividends payable is recognised in the reporting period in which the dividends are declared.
(v) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and investments in money market instruments. Bank overdrafts are
shown within Interest-bearing loans and borrowings in current liabilities on the balance sheets.
(w) Earnings per Share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive
potential ordinary shares, which comprise share options and rights granted to employees.
Page 38 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(x) Presentation of Financial Statements
The Group applies revised AASB 101 Presentation of Financial Statements, which became effective as of 1 January
2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity,
whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income.
Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.
(y) Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
•
•
•
Estimating impairment of goodwill – refer to notes 1(q) and 14.
Revenue recognition in relation to long term contracts including estimating stage of completion and total contract
costs – refer notes 1(f) and 2.
Accounting for business combinations including estimating fair values of identifiable assets acquired and liabilities
assumed – refer notes 1(o) and 34.
Page 39 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
2. REVENUE
Fees from services
Fees from sale of goods
Fees from recoverable expenses
Dividends received
Interest received
Royalties
Rental income
Other
Revenue
3. EXPENSES, LOSSES AND (GAINS)
Depreciation
Motor vehicles
Plant & equipment
Total Depreciation
Amortisation of non-current assets
Works contracts
Software intangibles
Motor vehicles under lease
Plant & equipment under lease
Total Amortisation
Total Depreciation & Amortisation
Bad and doubtful debts
Financing costs
Interest and finance charges
Amortisation of borrowing costs
Total financing costs
Rental expense relating to operating leases
Minimum lease payments
Net loss on disposal of property, plant and equipment
Foreign exchange (gains) / losses
4. INCOME TAX EXPENSE
(a) The components of tax expense comprises:
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Change in New Zealand tax rate
Total income tax expense/(benefit)
Page 40 of 80
2010
$’000
2009
$’000
366,760
8,227
98,765
6
1,429
126
889
1,036
477,238
689
5,923
6,612
216
205
1,290
202
1,913
8,525
2,211
2,896
270
3,166
402,030
8,643
101,911
-
1,472
147
-
1,639
515,842
1,472
6,019
7,491
770
303
1,119
1,320
3,512
11,003
3,263
4,409
228
4,637
19,027
19,303
(58)
396
432
(4,144)
7,856
(514)
7,342
(1,351)
(9)
5,982
13,438
(3,747)
9,691
(1,752)
-
7,939
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
4. INCOME TAX EXPENSE CONTINUED
(b) Numerical reconciliation between tax expense and pre-tax profit
Profit before tax
Income tax using the Australian corporation tax rate of 30% (2009: 30%)
Increase (decrease) in income tax expense due to:
Non-deductible expenses
Adjustment for branch office taxation
Allowances for R&D expenditure
Tax exempt revenue
Benefit arising from amendment to Australian tax legislation
Sundry items
Effect of tax rates in foreign jurisdictions
Under / (over) provided in prior years
Income tax expense
5. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
(a) Dividends proposed subsequent to year end not recognised as a liability
100% franked dividend at 30% (2009: 30%) (Refer Note 29)
(b) Dividends paid during the year (28 cents per share)
100% franked dividend at 30% (2009: 30%)
(c) Franking credit balance
The amount of franking credits available for the subsequent financial
year are:
2010
$’000
2009
$’000
43,579
42,092
13,074
12,628
338
326
(5,329)
(162)
(1,335)
(407)
(9)
6,496
(514)
5,982
218
623
(1,855)
(840)
-
(879)
-
9,895
(1,956)
7,939
15,840
11,798
23,955
21,434
-
-
franking account balance as at the end of the financial year at 30%
7,021
9,384
franking credits that will arise from the payment of income tax
payable as at the end of the financial year
3,186
10,207
2,273
11,657
The impact on the franking account of dividends proposed after the balance
sheet date but not recognised as a liability is to reduce it by $6,788,546
(2009: $5,056,335)
6. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash (project advances)
Bank short term deposits
7. TRADE & OTHER RECEIVABLES (CURRENT)
Trade debtors
Provision for doubtful debts
Sundry debtors
Forward exchange contract
8. INVENTORIES (CURRENT)
Work in progress
Page 41 of 80
34,438
-
21,844
56,282
109,366
(8,986)
100,380
2,895
-
103,275
34,796
5,005
26,007
65,808
93,283
(5,403)
87,880
3,976
216
92,072
71,496
56,419
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
9. OTHER CURRENT ASSETS
Prepayments
Project advances
Security deposits
10. TRADE & OTHER RECEIVABLES (NON-CURRENT)
Sundry debtors
11. OTHER FINANCIAL ASSETS (NON-CURRENT)
Investments in non-related entities
12. PROPERTY, PLANT & EQUIPMENT
Laboratory equipment, instruments & amenities – at cost
Less accumulated depreciation
Equipment & motor vehicles – at cost
Less accumulated depreciation
Office furniture & equipment – at cost
Less accumulated depreciation
Leasehold improvements – at cost
Less accumulated depreciation
Office furniture & equipment under lease
Less accumulated amortisation
Motor vehicles – under hire purchase
Less accumulated depreciation
Motor vehicles & field lab equipment – under lease
Less accumulated amortisation
Leasehold improvements – under lease
Less accumulated amortisation
Property
Less accumulated depreciation
2010
$’000
2009
$’000
4,825
176
1,210
6,211
4,069
109
616
4,794
1,504
1,650
836
553
12,714
(8,261)
4,453
8,992
(6,328)
2,664
52,782
(40,291)
12,491
9,612
(3,616)
5,996
15
(15)
-
1,197
(497)
700
5,253
(2,516)
2,737
533
(378)
155
75
(63)
12
9,834
(6,065)
3,769
6,741
(4,449)
2,292
39,397
(29,363)
10,034
6,904
(1,443)
5,461
2,091
(988)
1,103
1,193
(395)
798
5,014
(1,931)
3,083
1,200
(889)
311
233
(70)
163
Total Property, Plant & Equipment
29,208
27,014
Page 42 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
12. PROPERTY, PLANT & EQUIPMENT CONTINUED
(a) Movements in carrying amounts
Movements in the carrying amounts for each class of property, plant and
equipment between the beginning and the end of the current financial year.
Laboratory equipment, instruments & amenities – at cost
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation expense
Transfer between classes
Foreign exchange
Carrying amount at the end of the year
Equipment & motor vehicles – at cost
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Office furniture & equipment – at cost
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Leasehold improvements – at cost
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at end of the year
Office furniture & equipment – under lease
Carrying amount at the beginning of the year
Additions
Disposals
Amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Motor vehicles – under hire purchase
Carrying amount at the beginning of the year
Additions
Depreciation expense
Transfer between classes
Carrying amount at the end of the year
Page 43 of 80
2010
$’000
2009
$’000
3,769
919
1,098
(78)
(1,163)
(12)
(80)
4,453
2,292
182
1,104
(308)
(689)
(47)
130
2,664
10,034
1,761
4,204
(175)
(4,041)
(188)
896
12,491
5,461
263
957
(12)
(716)
(72)
115
5,996
1,103
-
-
(92)
-
(1,011)
-
798
-
(135)
37
700
2,821
689
1,375
(390)
(1,087)
436
(75)
3,769
3,144
357
941
(840)
(1,472)
446
(284)
2,292
9,165
4,794
588
(267)
(4,389)
349
(206)
10,034
2,181
3,726
301
(508)
(543)
264
40
5,461
1,474
174
(15)
(1,050)
130
390
1,103
39
679
(37)
117
798
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
12. PROPERTY, PLANT & EQUIPMENT CONTINUED
(a) Movements in carrying amounts continued
Motor vehicles & field lab equipment – under lease
Carrying amount at the beginning of the year
Additions
Amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Leasehold improvements – under lease
Carrying amount at the beginning of the year
Increase through merger acquisitions
Additions
Disposals
Amortisation expense
Transfer between classes
Carrying amount at the end of the year
Property – at fair value
Carrying amount at the beginning of the year
Additions
Disposals
Foreign exchange
Carrying amount at the end of the year
Total Property, Plant & Equipment
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation & amortisation expense
Transfer between classes
Foreign exchange
Carrying amount at the end of the year
13. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Accruals
Provisions
Carried forward tax losses
Lease timing
Property, plant and equipment
Change in tax rate (NZ)
Discretionary reserve
Capitalised software
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Page 44 of 80
2010
$’000
2009
$’000
3,083
925
(1,156)
(12)
(103)
2,737
311
-
15
(7)
(112)
(52)
155
163
-
(151)
-
12
27,014
4,065
7,363
(731)
(8,104)
-
(399)
29,208
2,193
10,034
482
404
88
9
342
340
10
13,902
(10,351)
3,551
2,184
1,977
(1,082)
33
(29)
3,083
1,007
19
19
-
(270)
(464)
311
11
150
-
2
163
22,026
12,565
3,224
(2,020)
(9,930)
-
1,149
27,014
1,719
8,176
932
326
393
-
-
-
446
11,992
(9,882)
2,110
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
13. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
Liabilities
Unrealised foreign exchange gains
Work in progress
Prepayments
Property, plant and equipment
Cash to accrual adjustment
Intangible items
Retentions
Goodwill on acquisition
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
2010
$’000
2009
$’000
741
7,544
440
227
-
300
68
1,473
-
10,793
(10,351)
442
1,026
7,122
403
2
1,447
823
-
-
117
10,940
(9,882)
1,058
NET DEFERRED TAX ASSETS (LIABILITIES)
3,109
1,052
30 June 2010
Movement in temporary differences
during the year:
Accruals
Provisions
Capitalised Software
Carried forward tax losses
Lease Timing
Property, plant & equipment
Cash to accruals adjustment
Unrealised foreign exchange gains
Work in progress
Prepayments
Goodwill on Acquisition (USA)
Retainage
Intangible Items
Sundry Items
1 July 2009
Recognised
in profit or
loss
Recognised
directly in
equity
Acquired in
business
combination
30 June
2010
$’000
$’000
$’000
$’000
$’000
1,719
8,176
-
932
326
391
(1,447)
(1,026)
(7,122)
(403)
-
-
(823)
329
1,052
616
877
340
(450)
(64)
(249)
1,447
285
(422)
28
(1,472)
(68)
523
(32)
1,359
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
979
-
-
-
(281)
-
-
-
-
-
-
-
-
698
2,335
10,032
340
482
262
(139)
-
(741)
(7,544)
(375)
(1,472)
(68)
(300)
297
3,109
Page 45 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
13. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
30 June 2009
Movement in temporary differences
during the year:
Amortised Expenses
Accruals
Provisions
Carried forward tax losses
Lease timing
Deferred Rent
Property, plant & equipment
Cash to Accruals Adjustment
Unrealised foreign exchange gains
Work in progress
Prepayments
Intangible Items
Other
1 July 2008
Recognised
in profit or
loss
Recognised
directly in
equity
Acquired in
business
combination
30 June
2009
$’000
$’000
$’000
$’000
$’000
51
1,310
6,140
177
164
131
(150)
(2,133)
408
(6,280)
(106)
(300)
285
(303)
(51)
409
1,775
755
162
(131)
541
686
(1,434)
(837)
(297)
130
44
1,752
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
261
-
-
-
-
-
-
(5)
-
(653)
-
(397)
-
1,719
8,176
932
326
-
391
(1,447)
(1,026)
(7,122)
(403)
(823)
329
1,052
Page 46 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
14. INTANGIBLE ASSETS
Goodwill at cost
Works contracts
Accumulated amortisation
Patents and licenses
Software intangibles
Accumulated amortisation
2010
$’000
2009
$’000
335,671
218,035
2,840
(2,518)
322
2,110
1,550
(554)
996
2,900
(2,336)
564
2,110
1,795
(413)
1,382
339,099
222,091
Reconciliation of movement in carrying amounts
from beginning of year to end of year:
Consolidated
Year ended 30 June 2009
Balance at the beginning of year
Additions:
- acquisition through business combinations
- current year
- prior year
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2009
Year ended 30 June 2010
Balance at the beginning of year
Additions:
- acquisition through business combinations
- current year
- prior year
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2010
Goodwill is allocated to the following cash-generating units:
Americas and Software
Emerging Markets Region
South East Australia & N.Z
North & Western Australia
Geotechnical Division
Goodwill
$’000
Works
Contracts
$’000
Patents and
Trademarks
$’000
Software
Intangibles
$’000
161,346
36
2,115
1,678
47,236
(36)
-
9,489
218,035
1,039
-
(770)
259
564
-
(5)
-
-
2,110
-
-
(303)
7
1,382
218,035
564
2,110
1,382
124,502
(24)
-
(6,842)
335,671
-
-
(216)
(26)
322
-
-
-
-
2,110
-
-
(205)
(181)
996
2010
$’000
2009
$’000
194,619
34,201
47,377
22,473
37,001
335,671
99,016
34,512
25,033
22,473
37,001
218,035
For the purposes of impairment testing, goodwill is allocated to the Group’s management divisions which represent the
lowest level within the Group at which the goodwill is monitored for internal management purposes.
Page 47 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
14. INTANGIBLE ASSETS CONTINUED
The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations.
Value-in-use is calculated based on the present value of cash flow projections over a 5 year period including a terminal
value at the end of year five. The cash flows are discounted using a pre-tax discount rate of 11.7% (2009: 12.8%) based
on an estimate of the Group’s weighted average cost of capital. This is a blended rate based on Cardno’s debt to equity
profile. Sensitivity analysis at higher rates shows no impairment.
The value-in-use calculations are based on budget forecasts for each cash generating unit for the 2010 year and longer
term year-on-year growth rates as assessed by operational management of the businesses. The growth rate is
calculated as the average growth rate over the forecast period based upon 2010 baseline performance. These forecasts
are based on underlying economic conditions and historical growth of project revenue. Costs are calculated taking into
account historical gross margins as well as estimated cost inflation over the period.
The following assumptions were used in the value-in-use calculations:
Americas and Software
Emerging Markets Region
South East Australia & N.Z
North & Western Australia
Geotechnical Division
Growth Rate
4.7%
2.2%
3.6%
6.6%
9.3%
15. OTHER NON-CURRENT ASSETS
Borrowing costs
16. TRADE & OTHER PAYABLES (CURRENT)
Trade payables & accruals
Forward exchange contract
Vendor liability
17. INTEREST-BEARING LOANS & BORROWINGS
(CURRENT)
Lease liabilities
Hire purchase liabilities
Bank Loans
(i) Details of the terms and conditions of loans
and borrowings are set out in Note 20
18. SHORT-TERM PROVISIONS
Employee benefits
Training benefits
19. OTHER CURRENT LIABILITIES
Unearned revenue
Deferred Rent
20. INTEREST-BEARING LOANS & BORROWINGS (NON-CURRENT)
Lease liabilities
Hire purchase liabilities
Bank Loans
Pre-Tax
Discount Rate
11.7%
11.7%
11.7%
11.7%
11.7%
2010
$’000
2009
$’000
89
213
63,988
-
18,474
82,462
1,539
506
47,205
49,250
15,457
44
15,501
29,194
56
29,250
3,291
124
122,575
125,990
48,633
236
9,910
58,779
1,928
418
6,630
8,976
13,128
78
13,206
38,033
-
38,033
3,482
340
72,254
76,076
Page 48 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
20. INTEREST-BEARING LOANS & BORROWINGS (NON-CURRENT)
Bank Loans
As at 30 June 2010 the Group has bank loans totalling $169,779,591 (2009: $78,884,102), with an effective interest rate
of 2.72% (2009: 3.01%).
The facility limits are multi-currency comprising an on-demand working capital / guarantee facility of AUD19.0 million and
term acquisition financing facilities of USD129.1 million and GBP8.55m repayable in July 2012. Pricing of the working
capital facility is BBSY plus a margin ranging from 2.25% to 3.00% depending on the Maximum Financial Leverage
Ratio, while current interest rates on term facilities range from 2.60% pa. to 3.07% pa. The undrawn portion of facilities
at 30 June 2010 was AUD17.4 million (2009: AUD10.0 million). Facilities are secured by an unlimited interlocking
guarantee and indemnity.
The portion of the bank loans disclosed as a current liability represents amounts due to be repaid within one year.
There were no bank overdrafts in existence at 30 June 2010 (2009: Nil).
21. LONG-TERM PROVISIONS
Employee entitlements
22. OTHER NON-CURRENT LIABILITIES
Deferred rent
Other
2010
$’000
2009
$’000
6,527
5,629
394
235
629
420
511
931
23. ISSUED CAPITAL OF CARDNO LIMITED
Balance at the beginning of the period
- Shares issued during the period:
- Dividend reinvestment scheme
- Shares issued for cash
- Employee Tax Exempt Share Acquisition Plan
- Employee share based payments
- Conversion of Convertible Notes
30 June 2010
30 June 2009
No. of
shares
$’000
No. of
shares
$’000
84,272,249
227,457
73,509,653
192,063
392,854
5,410,426
434,932
-
-
1,646
20,663
1,764
550
-
558,162
8,658,018
485,287
-
1,061,129
2,036
28,612
1,541
552
2,653
Balance at the end of the year
90,510,461
252,080
84,272,249
227,457
The Company does not have authorised capital or par value in respect of its issued shares.
All shares are ordinary shares and have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts
paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of
members.
The Company issued shares subsequent to year end – refer to note 29.
Page 49 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
23. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED
Performance Equity Plan (PEP)
The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Options and
Rights are issued under the PEP (made in accordance with thresholds set in the plan approved at the 2009 AGM) which
provides certain employees (as determined by the Managing Director and Remuneration Committee) with the opportunity
to acquire shares in the Company, or rights to acquire shares in the Company.
Movements in options throughout the year were as follows:
Grant Date
Exercise
Date
Expiry Date
25 October
2007
25 October
2007
5 December
2007
5 December
2007
5 December
2008
2 December
2009
19 October
2009
19 October
2010
29 November
2009
29 November
2010
29 November
2011
2 December
2012
25 October
2009
25 October
2010
5 December
2009
5 December
2010
5 December
2011
2 December
2013
Exercise
Price
$
Number of
Options at
Beginning
of Year
Fair
Value
at
Grant
Date
$
7.57
0.68
230,000
7.57
0.92
330,000
7.71
0.70
1,272,500
7.71
0.95
1,719,000
3.35
0.41
2,421,000
Options
Granted
Options
Lapsed
Options
Vested
Not
Exercised
Number of
Options as
at 30 June
2010
-
-
-
-
-
-
-
230,000
-
-
330,000
103,000
1,169,500
-
180,500
163,000
-
-
-
1,538,500
2,258,000
2,244,900
4.43
0.77
-
2,244,900
-
Weighted average exercise price
Weighted average remaining contract life
Total expense recognised $454,311 (2009: $552,687)
5.93
4.43
6.12
7.69
5.00
670 days
The options outstanding at 30 June 2010 have an exercise price in the range of $3.35 to $7.71. These options do not
entitle the holder to participate in any share issue of the Company.
The options issued prior to FY2010 are subject to a performance hurdle and will not vest unless there has been at least a
5% improvement per year (compounded) in the earnings per share of the Company over the vesting periods.
The options issued during FY2010 are subject to a performance hurdle and to vest the Company must achieve earnings
per share (EPS) growth in accordance with the following scale:
EPS Growth Over 3 Years
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
≥40% (12% pa)
% of Performance Options in
Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
The fair values of options granted during the year has been calculated using the Black-Scholes model, taking into
account price volatility, risk free interest rates and the dividend yield.
The model inputs for the fair value of options granted during the year ended 30 June 2010 include share price at grant
date of $4.07 (2009: $3.26), expected price volatility of the companies shares of 42% (2009: 33%), expected dividend
yield of 8.00% (2009: 8.28%) and risk free interest rate of 4.61% (2009: 6.73%).
Page 50 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
23. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED
Movements in rights throughout the year were as follows:
Grant Date
Exercise
Date
Expiry Date
Performance
Hurdle
Fair
Value at
Grant
Date
$
Number of
Rights at
Beginning
of Year
Rights
Granted
Rights
Lapsed
Rights
Vested
Not
Exercised
Number of
Rights as
at 30 June
2010
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
Total expense recognised $95,899 (2009: NIL)
EPS Growth
TSR
EPS Growth
TSR
3.96
3.19
3.20
2.30
-
-
-
-
67,500
67,500
112,000
112,000
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
The fair values of rights granted during the year with a total shareholder return performance hurdle, have been calculated
using a Monte-Carlo simulation valuation model taking into account price volatility, risk free interest rates and comparator
company shareholder return performance. The fair value of rights with the EPS growth hurdle was calculated using a
Black-Scholes model taking into account price volatility, risk free interest rates and the dividend yield.
The model inputs for the fair value of rights granted during the year ended 30 June 2010 include share price of $5.03
(22 October 2009) and $4.07 (2 December 2009) at grant date, expected price volatility of 42%, expected dividend
spread of 8.00% and risk free interest rate of 5.25% (22 October 2009) and 4.61% (2 December 2009).
The rights are subject to performance hurdles being 50% of the Rights, may vest, on a sliding scale, dependent on
relative total shareholder return performance and 50% of the Rights, may vest, on a sliding scale, dependent on earnings
per share growth. The EPS performance hurdle tranche of the rights vest on a sliding scale depending on EPS growth
averaged over 3 years.
Employee Share Acquisition Plans (“ESAP”)
Shares are issued under the ESAP (made in accordance with thresholds set out in plans approved by shareholders at
the 2009 AGM). It provides employees with the opportunity to acquire shares in the Company for no consideration as a
bonus component of their remuneration. Employees with 12 months service or greater who have worked an average of
100 hours or more per month are entitled to $1,000 of shares each year and employees with 6 to 12 months service are
entitled to $500 of shares each year. Employees who work part time, who have greater than 12 months service and who
have worked more than 600 hours per year are also entitled to $500 of shares each year. Shares issued under ESAP
rank equally with other fully paid ordinary shares from the date of issue.
Shares are issued in the name of the participating employee and are subject to a restriction period. The shares are
restricted under the plan until the earlier of three years from the date of acquisition or the date they cease to be an
employee. Once the restriction period is lifted the shares can be traded as fully paid ordinary shares. The ESAP has no
conditions that could result in the recipient forfeiting ownership of shares.
24. RESERVES
Foreign Currency Translation
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign Group entities where their functional currency is different to the presentation currency of
the reporting entity as well as from the translation of liabilities that hedge the Company’s net investment in a foreign
subsidiary.
Page 51 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
25. NOTES TO THE CASH FLOW STATEMENTS
(a) Reconciliation of Net Cash from Operating
Activities to Net profit/(loss) for the year
Net profit/(loss) for the year
Adjust for non-cash items
Depreciation
Amortisation
Dividend received
Gain/(loss) on sale of property, plant & equipment
Net exchange differences
Share based remuneration
Adjust for changes in assets and liabilities
(increase) / decrease in assets:
Inventories
Deferred tax assets
Trade receivables
Provision for doubtful debts
Other receivables
Prepayments
Other assets
Increase / (decrease) in liabilities:
Trade payables
Income tax payable
Employee provisions
Unearned revenue
Other liabilities
Deferred tax liabilities
(b) Reconciliation of cash
For the purposes of the cash flow statements, cash includes cash on hand,
restricted cash and bank deposits at call net of bank overdrafts. Cash at the
end of the year as shown in the cash flow statements is reconciled to related
items in the accounts as follows:
Cash and cash equivalents (Note 6)
Restricted cash (project advances) can only be drawn in relation to specific
projects for which it has been provided.
(c) Non-cash financing and investing activities
During the financial year, the consolidated entity acquired property, plant and
equipment with an aggregate fair value of $939,867 (2009: $2,848,899) by
means of finance leases. These acquisitions are not reflected in the cash
flow statements.
(d) Acquisition of entities
Details of the acquisitions are as follows:
Purchase consideration
Cash consideration
Vendor liability
Accrued costs relating to acquisition
Direct costs relating to acquisition
Consideration
2010
$’000
2009
$’000
37,597
34,153
6,612
1,913
-
33
1,037
2,321
(1,258)
(691)
13,366
1,322
1,642
1,197
(871)
(5,375)
(1,222)
(101)
(9,630)
(250)
(897)
7,492
3,511
-
432
(2,528)
2,094
(4,714)
(3,027)
1,856
1,540
65
(181)
(44)
(4,133)
(5,654)
(2,591)
7,894
519
1,905
46,745
38,589
56,282
65,808
132,670
18,474
-
-
151,144
43,973
9,027
91
620
53,711
Page 52 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
25. NOTES TO THE CASH FLOW STATEMENTS CONTINUED
Assets and liabilities held at acquisition date:
Cash
Receivables
Deferred tax assets
Property, plant & equipment
Intangibles*
Inventories
Creditors and borrowings
Deferred tax liabilities
Provisions
Goodwill on acquisition*
Consideration
Net cash outflow on acquisition
Cash consideration
Less balance acquired
2010
$’000
2009
$’000
3,184
29,282
750
7,363
-
13,819
(24,756)
(281)
(2,719)
26,642
124,502
151,144
132,670
(3,184)
129,486
1,950
15,217
233
3,224
1,039
3,795
(10,721)
(8,262)
6,475
47,236
53,711
43,973
(1,950)
42,023
* As disclosed in note 34, the acquisitions of ENTRIX and ERI were completed on 10 June 2010. Accordingly, the
accounting for these acquisitions has been completed on a provisional basis. Further analysis will be performed to
determine the existence and fair value of any identifiable intangible assets acquired as part of the acquisition.
26. CAPITAL AND LEASING COMMITMENTS
Finance leases and hire purchase
Commitments in relation to finance leases are payable as follows:
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
- Minimum lease payments
Less: Future finance charges
Recognised as a liability
Present value of minimum lease and hire purchase payment
Commitments in relation to finance leases are payable as follows:
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
Recognised as a liability
Finance leases are taken out over motor vehicle, leasehold improvements
and plant and equipment, with terms varying between 3 and 5 years.
Representing lease and hire purchase liabilities:
Current (note 17)
Non-current (note 20)
2010
$’000
2009
$’000
2,531
3,922
-
6,453
(993)
5,460
2,045
3,415
-
5,460
2,975
4,481
-
7,456
(1,288)
6,168
2,346
3,822
-
6,168
2,045
3,415
5,460
2,346
3,822
6,168
Page 53 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
26. CAPITAL AND LEASING COMMITMENTS CONTINUED
Operating Leases
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
Commitments not recognised in the financial statements
The Group leases office premises under operating leases, with terms varying
from 3 to 10 years. The majority of leases provide for an option of renewal
at the end of the lease term. Premise leases are subject to annual review for
changes in the CPI index and contain restrictions on sub-leasing. The
Group also leases various plant & equipment under terms between 2 and 5
years as well as software licenses with a term of 3 years subject to annual
review based on the number of licences exercised.
27. EMPLOYEE BENEFITS & COMPENSATION
COMMITMENT
The aggregate employee benefit liability is comprised of:
Accrued wages, salaries and on-costs (included in payables)
Provisions (current) (note 18)
Provisions (non-current) (note 21)
Number of employees
Number of full time equivalent employees at 30 June
Defined contribution superannuation expense for the year ended 30 June 2010 was
$9,752,309 (2009: $10,295,787)
2010
$’000
2009
$’000
25,970
52,032
28,021
106,023
20,347
42,163
20,683
83,193
15,063
15,501
6,527
37,091
13,693
13,206
5,629
32,528
3,657
3,008
28. CONTINGENT LIABILITIES
As at the date of this report, there is no current litigation or pending or threatened litigation which would not be covered
by professional indemnity insurance or has not already been provided for in the financial statements of the Company, or
which is likely to have a material effect on the financial performance of the consolidated entity.
The consolidated entity had contingent liabilities at 30 June 2010 in respect of:
Bank guarantees
2010
$’000
2009
$’000
7,287
9,891
The Group has bank guarantees with financial institutions. A multiple guarantee facility is available to the Group totalling
$19 million (2009: $19 million). These facilities are secured by an unlimited interlocking guarantee and indemnity.
29. SUBSEQUENT EVENTS
On 11 August 2010 Cardno completed a $49 million capital rising via a 1:6 fully underwritten renounceable rights issue.
The number of ordinary shares issued under the rights issue was 15,089,139. The capital raised will be used to reduce
debt used for the June 2010 acquisition of ENTRIX and ERI and for working capital.
On 16 August 2010, the Directors of Cardno Limited declared a final dividend of 15.0 cents per share for the 2010
financial year. The fully franked dividend will be paid on 15 October 2010 to shareholders registered on 17 September
2010 and will total $15,839,940. The dividend has not been provided for in the 30 June 2010 financial statements.
Page 54 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
30. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2010 was based on
the profit attributable to ordinary shareholders of $37,597,311 (2009:
$34,153,794) and a weighted average number of ordinary shares
outstanding during the financial year ended 30 June 2010 of 85,716,101
(2009: 77,932,437), calculated as follows:
2010
2009
Profit attributable to ordinary shareholders
37,597,311
34,153,794
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of shares issued for cash consideration
Effect of shares issued in respect of employee share scheme
Effect of shares issued from conversion of convertible notes
84,272,249
1,308,010
135,842
-
73,509,653
3,201,881
168,496
1,052,407
Weighted average number of ordinary shares at 30 June
85,716,101
77,932,437
Options and rights are considered to be potential ordinary shares and are
therefore excluded from the weighted average number of ordinary shares
used in the calculation of basic earnings per share. Where dilutive, potential
ordinary shares are included in the calculation of diluted earnings per share.
Diluted earnings per share
Weighted average number of ordinary shares and potential ordinary shares
used in the calculation of diluted earnings per share reconciles to the
weighted average number of ordinary shares used in the calculation of basic
earnings per share as follows:
Profit attributable to ordinary shareholders (diluted)
Profit attributable to ordinary shareholders
After-tax effect of interest on convertible notes
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares
(diluted)
Weighted average number of ordinary shares at 30 June
Effect of convertible notes
Effect of share options and rights on issue
Weighted average number of ordinary shares (diluted) at 30 June
37,597,311
-
37,597,311
34,153,794
-
34,153,794
85,716,101
-
493,905
86,210,006
77,932,437
9,069
1,066
77,942,572
4,113,400 options issued during the 2008 and 2010 financial years and still on issue as at 30 June 2010 have not been
included in the calculation of diluted earnings per share because they are not dilutive for the year ended 30 June 2010.
These options could potentially dilute basic earnings per share in the future.
Subsequent Event – Impact of Rights Issue
On 11 August 2010 Cardno completed a $49 million capital rising via a 1:6 fully underwritten renounceable rights issue.
The number of ordinary shares issued under the rights issue was 15,089,139.
The current and prior year basic and diluted earnings per share have not been adjusted by the bonus element associated
with the rights issue (factor of 1.02) as it is not material.
Page 55 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
31. AUDITOR’S REMUNERATION
Audit services
Auditors of the Company
KPMG Australia:
-
Audit and review of financial reports
Overseas KPMG firms:
-
Audit and review of financial reports
Other auditors
- Audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
- Other assurance services
-
Taxation services
Overseas KPMG firms:
-
Taxation services
Other auditors
- Other assurance services
-
Taxation services
32. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation included in employee benefits are as follows:
Short-term employee benefits
Other long-term benefits
Post-employment benefits
Termination benefits
Equity compensation benefits
2010
$
2009
$
220,000
272,000
492,000
-
-
-
127,117
619,117
667,176
667,176
-
-
2,350
2,350
54,535
131,262
188,147
-
-
-
-
21,548
127,590
149,138
2010
$’000
2009
$’000
4,175
198
405
131
606
5,515
3,996
198
611
-
94
4,899
Apart from the details disclosed in this note, no Director has entered into a material contract with the Company or the
consolidated entity since the end of the previous financial year and there were no material contracts involving Directors’
interests existing at year-end.
Page 56 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
32. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of options over ordinary shares in Cardno Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
2010 OPTIONS
Directors
A D Buckley
J I Forbes
T C Johnson
G G Tamblyn
Executives
R J K Collins-Woolcock
P W Gardiner
M J Renshaw
Kylie Sprott
S V Coote *
C W N Tapp *
Held at
1 July 2009
Granted as
compensation
Lapsed
Vested
(not
exercised)
Held at
30 June 2010
Vested and
exercisable at
30 June 2010
250,000
120,000
90,000
60,000
135,000
170,000
135,000
-
170,000
110,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
170,000
-
100,000
50,000
40,000
20,000
30,000
45,000
30,000
-
-
25,000
150,000
70,000
50,000
40,000
105,000
125,000
105,000
-
-
85,000
-
-
-
-
-
-
-
-
-
-
* ceased to be employed during the financial year ended 30 June 2010
No options held by key management personnel had vested and were exercisable as at 30 June 2010.
2009 OPTIONS
Directors
A D Buckley
J I Forbes
T C Johnson
G G Tamblyn
Executives
R J K Collins-Woolcock
S V Coote
P W Gardiner
M J Renshaw
C W N Tapp
Held at
1 July 2008
Granted as
compensation
Vested
(not exercised)
Held at
30 June 2009
Vested and
exercisable at
30 June 2009
310,000
150,000
120,000
75,000
100,000
140,000
140,000
100,000
60,000
-
-
-
-
60,000
70,000
70,000
60,000
50,000
60,000
30,000
30,000
15,000
25,000
40,000
40,000
25,000
-
250,000
120,000
90,000
60,000
135,000
170,000
170,000
135,000
110,000
-
-
-
-
-
-
-
-
-
The movement during the reporting period in the number of rights over ordinary shares in Cardno Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
2010 RIGHTS
Directors
A D Buckley
J I Forbes
T C Johnson
G G Tamblyn
Executives
R J K Collins-Woolcock
P W Gardiner
M J Renshaw
Kylie Sprott
Held at
1 July 2009
Granted as
compensation
Vested
Held at
30 June 2010
Vested and
exercisable at
30 June 2010
-
-
-
-
-
-
-
-
60,000
30,000
25,000
20,000
30,000
30,000
30,000
8,000
-
-
-
-
-
-
-
-
60,000
30,000
25,000
20,000
30,000
30,000
30,000
8,000
-
-
-
-
-
-
-
-
The fair value of options and rights are provided in the Remuneration Report section of the Directors’ Report and in
note 23.
Page 57 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
32. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
Movements in shares
The movement during the reporting period in the number of ordinary shares in Cardno Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
2010
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Graham Tamblyn
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
2009
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Graham Tamblyn
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Executives
Roger Collins-Woolcock
Steven Coote*
Paul Gardiner
Michael Renshaw
Charles Tapp*
Held at 1 July
2009
Purchases
Received as
Compensation
Sales
Held at 30 June
2010
Held at 1 July
2008
Purchases
Received as
Compensation
Sales
44,382
3,348
-
207,390
1,426,330
2,359,037
19,947
1,967,399
653,652
800,141
153,213
-
5,618
118
-
-
521
-
1,358
-
-
-
10,359
3,580
-
-
-
-
-
-
-
-
245
245
245
-
30,687
-
-
200,000
1,407,000
2,322,952
3,377
1,963,704
791,090
556,546
796,132
149,284
161
13,695
3,348
-
7,390
19,330
36,085
16,570
3,695
-
-
3,695
3,615
-
-
-
-
-
-
-
-
-
314
314
314
314
314
-
-
-
-
210,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137,752
-
-
-
-
50,000
3,466
-
207,390
1,216,851
2,359,037
21,305
1,967,399
653,897
800,386
163,817
3,580
Held at 30 June
2009
44,382
3,348
-
207,390
1,426,330
2,359,037
19,947
1,967,399
653,652
556,860
800,141
153,213
475
* ceased to be employed during the financial year ended 30 June 2010.
Other key management personnel transactions with the Company or its controlled entities
A number of key management persons, or their related parties, hold positions in other entities that result in them having
control or significant influence over the financial or operating policies of those entities.
One of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions
of the transactions with management persons and their related parties were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-Director related entities on an arm’s
length basis.
Page 58 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
32. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
The aggregate amounts recognised during the year relating to key management personnel and their related parties were
as follows:
(i) Mr A D Buckley was a Director of CBD Professional Services Pty Ltd (until 17 December 2009). The aggregate
amount the consolidated entity billed for services performed by Mr Buckley was $20,688 (2009: $25,220). The
consolidated entity also used Carter Newell Lawyers (associated with CBD Professional Services Pty Ltd) for legal
advice throughout the year and the aggregate amount of fees expensed was $651 (2009: $5,136).
33. FINANCIAL RISK MANAGEMENT
The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange risk, credit risk and
liquidity risk. The Group uses different methods to measure different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rate and foreign exchange risks and ageing analysis for credit risk. The
Board through the Audit, Risk & Compliance Committee reviews and agrees policies for managing these risks and
ensures strategies are implemented in the business. A Quality Management System and an Operational Risk
Committee supports consistent risk mitigation practices and procedures in order to maintain a consistent level of quality
across the Group which includes the minimisation of risk. The policies for managing each of the Group’s risks are
summarised below and remain unchanged from the prior year.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Investments in non-related entities
Financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Credit risk
2010
$’000
2009
$’000
56,282
104,779
836
161,897
65,808
93,722
553
160,083
82,462
175,240
257,702
58,779
85,052
143,831
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised
above.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on customers in accordance with the policy. The Group does not require collateral in respect
of financial assets. Investments are allowed only in liquid securities and only with counterparties that have a credit rating
equal to or better than an approved rating. There are no significant concentrations of credit risk within the Group.
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Australia & New Zealand
Americas
Asia Pacific
Europe & Africa
2010
$’000
39,549
41,763
10,587
8,481
100,380
2009
$’000
35,459
29,055
12,920
10,446
87,880
Page 59 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
33. FINANCIAL RISK MANAGEMENT CONTINUED
Credit risk continued
The ageing of the Group’s trade receivables at the reporting date was:
Not past due (current)
Past due 0-30 days (30 day ageing)
Past due 31-60 days (60 day ageing)
Past due more than 60 days (+90 day ageing)
2010
2009
Gross
$’000
Impairment
$’000
Gross
$’000
Impairment
$’000
58,705
23,912
6,303
20,446
109,366
-
-
-
8,986
8,986
42,122
17,341
9,024
24,796
93,283
-
-
-
5,403
5,403
Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of receivables
not past due or past due by up to 60 days. For those receivables outstanding more than 60 days each debtor has been
individually analysed and a provision for impairment established as necessary.
The movement in the provision for impairment in respect of trade receivables of the Group during the year was as
follows:
Balance at 1 July
Impairment loss recognised
Receivables written off
Merger acquisition
Foreign exchange
Balance at 30 June
Liquidity risk
2010
$’000
2009
$’000
5,403
2,699
(1,242)
2,218
(92)
8,986
3,112
2,951
(1,602)
751
191
5,403
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Prudent liquidity
risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of
committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility
in funding by keeping sufficient committed credit lines available to meet the Group’s requirements.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding
the impact of netting agreements:
Consolidated
30 June 2010
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Derivative financial liabilities
Forward exchange contract
Carrying
amount
Contractual
cash flows
$’000
Less than
1 year
1 – 5 years
Over 5
years
82,462
5,460
169,780
82,462
6,453
170,120
82,462
2,531
47,819
-
3,922
122,301*
-
257,702
-
259,035
-
132,812
-
126,223
-
-
-
-
-
* Bank loans are a term facility repayable in July 2012.
On 11 August 2010 Cardno completed a $49 million capital rising via a 1:6 fully underwritten renounceable rights issue.
The number of ordinary shares issued under the rights issue was 15,089,139. The capital raised will be used to reduce
debt used for the June 2010 acquisition of ENTRIX and ERI and for working capital.
Page 60 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
33. FINANCIAL RISK MANAGEMENT CONTINUED
Liquidity risk continued
Consolidated
30 June 2009
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Derivative financial liabilities
Forward exchange contract
Market risk
(a) Foreign exchange risk
Carrying
amount
Contractual
cash flows
$’000
Less than
1 year
1 – 5 years
Over 5
years
58,543
6,168
78,884
58,543
7,456
79,067
58,543
2,975
6,919
-
4,481
72,148
236
143,831
236
145,302
236
68,673
-
76,629
-
-
-
-
-
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated
in a currency that is not the functional currency of the respective Group entities. The Group operates internationally and
is exposed to foreign exchange risk arising from the currency exposure to the Australian dollar.
The Group borrows funds in foreign currencies to hedge its net investments in foreign operations. The Group has loans
totalling $148.3 million (2009: $54.7 million) denominated in US dollars (USD) and $14.0 million (2009: $17.5 million)
denominated in sterling (GBP) which have been designated as hedges of the Group’s net investments in subsidiaries
with functional currencies in those currencies.
As at 30 June 2010, a 10% strengthening of the Australian dollar against the USD and GBP would have increased equity
by $13.5 million (2009 $5.0 million) and $1.3 million (2009: $1.6 million) respectively. A 10% weakening of the Australian
dollar against the USD and GBP would have decreased equity by $16.5 million (2009 $6.1 million) and $1.6 million
(2009: $1.9 million) respectively. There would be no impact on profit and loss as the loans are designated as net
investment hedges.
Other than interest bearing liabilities, there are no other significant foreign currency exposures in relation to financial
instruments at year end.
(b) Interest rate risk
The Group manages its exposure to interest rate fluctuation by continuously monitoring its debt to ensure any significant
movement would not have a material impact on the performance of the Group. The Group does not engage in any
significant transactions which are of a speculative nature.
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Consolidated
Variable rate instruments
Cash assets
Bank loans
Fixed rate instruments
Finance leases & hire purchase
Bank loans
30 June 2010
30 June 2009
Effective
Interest
Rate
Balance
$’000
Effective
Interest
Rate
Balance
$’000
3.10%
2.72%
7.93%
8.00%
56,282
(169,769)
(113,487)
(5,460)
(11)
(5,471)
2.48%
3.00%
8.49%
6.56%
65,808
(78,728)
(12,920)
(6,168)
(156)
(6,324)
Page 61 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
33. FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
Group sensitivity
At 30 June 2010, if interest rates had changed by -/+ 50 basis points from the year-end rates with all other variables held
constant, post-tax profit for the year would have been $397,000 higher/lower (2009: $45,000 higher/lower), mainly as a
result of lower/higher interest expense on variable bank loans partially offset by higher/lower interest income from cash
and cash equivalents. There have been no changes in the underlying assumptions from the previous year.
Fair values
The carrying values of financial assets and liabilities approximate their fair values due to their relatively short term nature.
Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they
can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total
shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders.
34. BUSINESS COMBINATIONS
Year ended 30 June 2010
(a) During the year the Group acquired 100% of the net assets of ITC Group with an effective date of 1 January 2010
and Australian Underground Services Pty Ltd (AUS) with an effective date of 1 April 2010.
ITC is an Australian based services consulting engineering firm with offices in five Australian States and Territories with
around 100 staff. AUS is an Australian based utility detection and mapping services firm with around 30 staff based in
Victoria.
The acquired businesses contributed revenues of $9,840,744 and net profit after tax (NPAT) of $1,457,039 to the Group
for the year. If the acquisitions had occurred on 1 July 2009 revenue and NPAT for the Group would have been
$489,280,901 and $38,696,379 respectively.
Details of acquisitions
Purchase Consideration
Cash
Vendor liability (including contingent consideration)
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
24,993
2,775
27,768
5,929
21,839
At the time of purchase the vendors of ITC Group subscribed for shares in Cardno Limited to the value of $5,801,549
and the vendors of Australian Underground Services Pty Ltd (AUS) subscribed for shares in Cardno Limited to the value
of $1,498,038. The fair value of the ordinary shares issued was based on the 10 day volume weighted average price
(VWAP) for AUS of Cardno Limited shares and the 30 day VWAP for ITC Group of Cardno Limited shares. The fair
value price was $4.16 for the purchase of shares by vendors of ITC Group issued 11 February 2010 and $3.99 for the
purchase of shares by vendors of Australian Underground Services Pty Ltd issued 14 May 2010.
Page 62 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
34. BUSINESS COMBINATIONS CONTINUED
Contingent consideration
Cardno Limited has agreed to pay an amount of $1,775,170 to the selling shareholders of ITC Group as additional
consideration relating to the collection of accounts receivable as at 1 January 2010. This has been included in purchase
consideration based on estimates of the amount that will be payable to the acquiree.
Cardno Limited has agreed to pay the selling shareholders of Australian Underground Services Pty Ltd additional
consideration of $1,000,000 if the acquiree’s normalised EBIT over the period 1 January 2010 to 31 December 2010 is
$1,700,000. This amount has been included in the purchase consideration based on estimates of the acquiree’s
financial performance over the earn-out period.
The goodwill is attributable to the skills and technical talent of the employee’s of the ITC Group and Australian
Underground Services, the synergies expected to be achieved from integrating the Company into the Group’s existing
operations.
The Group incurred acquisition related costs of $137,506 relating to external legal fees and due diligence costs. These
legal fees and due diligence costs have been included in administrative expenses in the Group’s consolidated statement
of comprehensive income.
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Deferred tax assets
Property, plant and equipment
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net of
cash acquired
Cash consideration
Less: Balances acquired
Cash
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
1,439
5,512
261
1,795
(1,963)
(1,115)
5,929
1,439
5,512
261
1,795
(1,963)
(1,115)
5,929
24,993
1,439
23,554
Page 63 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
34. BUSINESS COMBINATIONS CONTINUED
(b) On 10 June 2010, the Group acquired 100% of ENTRIX, a US based consultancy specialising in water resources
management, environmental risk management, facility permitting and compliance, and natural resource economics.
The effective date of acquisition was 1 June 2010.
For the period 1 June 2010 – 30 June 2010, the acquired business contributed revenue of $16,845,375 and net profit
after tax of $3,005,122.
If the acquisition had occurred on 1 July 2009 revenue and NPAT for the Group would have been $584,149,348 and
$41,702,922.respectively.
Details of acquisitions
Purchase Consideration
Cash
Vendor liability
Total purchase consideration
Fair value of net identifiable assets acquired*
Goodwill*
$’000
81,067
4,294
85,361
17,088
68,273
* The acquisition of ENTRIX was completed on 10 June 2010. Accordingly, the accounting for this acquisition has been
completed on a provisional basis. Further analysis will be performed to determine the existence and fair value of any
identifiable intangible assets acquired as part of the acquisition.
At the time of purchase the vendors of ENTRIX subscribed for shares in Cardno Limited to the value of $4,428,168. The
fair value of the ordinary shares issue was based on the 10 day VWAP of Cardno Limited shares. The fair value price
was $3.71 for the purchase of shares by vendors of ENTRIX issued 10 June 2010.
The goodwill is attributable to the skills and technical talent of the employee’s of ENTRIX, the synergies expected to be
achieved from integrating the Company into the Group’s existing operations.
The Group incurred acquisition related costs of $752,730 relating to external legal fees and due diligence costs. These
legal fees and due diligence costs have been included in administrative expenses in the Group’s consolidated statement
of comprehensive income.
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Inventories
Deferred tax assets
Property, plant and equipment
Creditors & borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net of
cash acquired
Cash consideration
Cash balance acquired
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
1,071
20,079
11,832
718
4,138
(19,254)
(239)
(1,257)
17,088
1,071
20,079
11,832
718
4,138
(19,254)
(239)
(1,257)
17,088
81,067
1,071
79,996
Page 64 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
34. BUSINESS COMBINATIONS CONTINUED
(c) On 10 June 2010 the Group acquired 100% of Environmental Resolutions, Inc, an environmental soil and
groundwater remediation firm primarily focussed on the petro-chemical market in the US. The effective date was
1 June 2010.
For the period 1 January 2010 – 30 June 2010, the acquired business contributed revenues of $1,456,831 and net profit
after tax of $425,548.
If the acquisition had occurred on 1 July 2009 revenue and NPAT for the Group would have been $517,633,465 and
$42,052,758 respectively.
Details of acquisitions
Purchase Consideration
Cash
Vendor liability (including contingent consideration)
Total purchase consideration
Fair value of net identifiable assets acquired*
Goodwill*
$’000
26,610
11,404
38,014
3,624
34,390
* The acquisition of ERI was completed on 10 June 2010. Accordingly, the accounting for this acquisition has been
completed on a provisional basis. Further analysis will be performed to determine the existence and fair value of any
identifiable intangible assets acquired as part of the acquisition.
At the time of purchase the vendors of Environmental Resolutions Inc. subscribed for shares in Cardno Limited to the
value of $6,784,390. The fair value of the ordinary shares issued based on the 10 day VWAP of Cardno Limited shares.
The fair value price was $3.71 for the purchase of shares by vendors of Environmental Resolutions Inc issued 10 June
2010.
Contingent consideration
Cardno Limited has agreed to pay the selling shareholders of Environmental Resolutions, Inc additional consideration of
USD8,089,000 if the acquiree’s normalised EBITDA over the period 1 June 2010 to 31 May 2011 exceeds
USD6,371,000. This amount has been included in the purchase consideration based on estimates of the acquiree’s
financial performance over the earn-out period.
The goodwill is attributable to the skills and technical talent of the employee’s of Environmental Resolutions Inc, the
synergies expected to be achieved from integrating the Company into the Group’s existing operations.
Page 65 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
34. BUSINESS COMBINATIONS CONTINUED
The Group incurred acquisition related costs of $546,593 relating to external legal fees and due diligence costs. These
legal fees and due diligence costs have been included in administrative expenses in the Group’s consolidated statement
of comprehensive income.
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Inventories
Deferred tax assets
Property, plant and equipment
Creditors & borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net of
cash acquired
Cash consideration
Cash balance acquired
Outflow of cash
Year ended 30 June 2009
Acquirees’
carrying
amount
$’000
Fair Value
$’000
674
3,693
1,985
-
1,431
(3,541)
(42)
(576)
3,624
674
3,693
1,985
-
1,431
(3,540)
(42)
(576)
3,624
26,610
674
25,936
(a) The Group acquired the issued share capital of The Ecology Lab Pty Ltd and Spectrum Survey & Mapping Pty Ltd
with an effective acquisition date of 1 July 2008.
The acquired businesses contributed revenues of $8,876,918 and net profit after tax of $981,663 to the Group for the
year.
The Ecology Lab is a Sydney based consultant specialising in marine and freshwater ecology while Spectrum Survey &
Mapping is a specialist survey firm based in Perth and Kalgoorlie.
Details of acquisitions
Purchase Consideration
Cash
Direct costs relating to the acquisitions
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
7,400
122
7,522
2,987
4,535
Page 66 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
34. BUSINESS COMBINATIONS CONTINUED
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Inventories
Deferred tax assets
Property, plant and equipment
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net of
cash acquired
Cash consideration
Less: Balances acquired
Cash
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
1,527
1,995
17
233
1,581
(1,288)
(1,078)
2,987
1,527
1,995
17
233
1,581
(1,288)
(1,078)
2,987
7,400
1,527
5,873
(b) The Group also acquired the issued share capital of TBE Group Inc, a US based infrastructure services firm with
offices across 19 US states as well as China, the UK and Canada, with an effective acquisition date of 15
September 2008 and contributed revenues of $75,381,574 and net profit after tax (NPAT) of $6,260,221 to the
Group.
If the acquisition had occurred on 1 July 2008 revenue and NPAT for the Group would have been $606,730,344 and
$41,856,788 respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability – earn-out agreement
Direct costs relating to the acquisitions
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
The assets and liabilities arising from the acquisition are as follows:
$’000
36,573
9,027
589
46,189
3,488
42,701
Cash
Receivables
Inventories
Property, plant and equipment
Intangibles
Provisions
Creditors & borrowings
Net identifiable assets acquired
Outflow of cash to acquire subsidiary, net of
cash acquired
Cash consideration
Less: Balances acquired
Cash
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
423
13,222
3,778
1,643
-
(7,184)
(9,433)
2,449
423
13,222
3,778
1,643
1,039
(7,184)
(9,433)
3,488
36,573
423
36,150
Page 67 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
35. SEGMENT INFORMATION
The Group has three reportable segments managed separately by location and service provided. Internal management
reports on the performance of these reportable segments, are reviewed monthly by the Managing Director, Chief
Financial Officer and Group Operations Manager. The following summary describes the operations in each of the
Group’s reportable segments:
-
-
-
Professional Services Australia and New Zealand – provides consulting engineering, planning, surveying,
landscape architecture, environmental services and geotechnical services in that region.
Professional Services Americas and Software – provides consulting engineering, planning, surveying,
landscape architecture and environmental services in the Americas and software sales globally.
International Development Assistance – manages aid projects on behalf of unilateral and multilateral
government agencies and private clients.
Comparative segment information has been represented in conformity with the requirement of AASB 8 Operating
Segments.
2010
Segment revenue
Fees from services
and sale of goods
Fees from recoverable
expenses
Inter-segment revenue
External sales
Other income
Total segment
revenue
Segment result
before financing costs
Professional
Services
Australia & NZ
Professional
Services
Americas &
Software
International
Development
Assistance
Total
$’000
208,353
10,146
-
218,499
1,586
220,085
71,875
42,655
-
114,530
186
114,716
96,349
376,577
45,964
(1,590)
140,723
285
141,008
98,765
(1,590)
473,752
2,057
475,809
34,285
11,065
4,009
49,359
Segment assets
217,452
283,807
97,961
599,220
Segment liabilities
91,260
37,040
48,148
176,448
Other
Acquisitions of non-
current segment
assets
Depreciation and
amortisation of
segment assets
26,980
69,576
237
96,793
6,032
1,872
621
8,525
Page 68 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
35. SEGMENT INFORMATION CONTINUED
2009
Segment revenue
Fees from services
and sale of goods
Fees from recoverable
expenses
Inter-segment revenue
External sales
Other income
Total segment
revenue
Segment result
before financing costs
Professional
Services
Australia & NZ
Professional
Services
Americas&
Software
International
Development
Assistance
Total
$’000
224,962
11,788
-
236,750
1,028
237,778
70,309
38,265
-
108,574
234
108,808
118,595
413,866
51,858
(3,193)
167,260
524
167,784
101,911
(3,193)
512,584
1,786
514,370
29,886
6,873
7,004
43,763
Segment assets
202,767
140,119
109,022
451,908
Segment liabilities
82,903
12,530
52,599
148,032
Other
Acquisitions of non-
current segment
assets
Depreciation and
amortisation of
segment assets
62,242
1,783
268
64,293
7,308
2,833
862
11,003
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
2006
$’000
2005
$’000
2010
$’000
2009
$’000
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Interest revenue
Other income
Consolidated revenue
Profit or loss
Reportable segment result before net financing costs
Interest Revenue
Finance costs
Other corporate (costs)/gains
Profit before tax
Income tax expense
Profit after tax
Assets
Total assets for reportable segments
Unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Other liabilities
Other unallocated amounts
Consolidated total liabilities
Page 69 of 80
475,342
(1,590)
1,429
2,057
477,238
49,359
1,429
(3,166)
(4,043)
43,579
(5,982)
37,597
599,220
12,331
611,551
176,448
22,727
112,404
311,579
515,777
(3,193)
1,472
1,786
515,842
43,763
1,472
(4,637)
1,494
42,092
(7,939)
34,153
451,908
20,816
472,724
148,032
23,315
35,456
206,803
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
35. SEGMENT INFORMATION CONTINUED
Geographical information
In presenting information on a geographical basis segment revenue from external customers and segment assets are
attributed based on geographic locations of business unit.
Australia & NZ
Americas
Asia Pacific
UK & Africa
Other segments
Revenues
2010
Total
Non-Current
Assets
Revenues
2009
Total
Non-Current
Assets
286,652
141,301
15,042
32,814
-
475,809
129,277
214,182
545
25,807
4,476
374,287
278,630
162,985
22,234
50,521
-
514,370
123,391
97,045
670
29,649
2,876
253,631
36. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2010 the parent Company of the Group was Cardno Limited.
2
5
Company
2010
$’000
2009
$’000
Results of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Revaluation reserve
Retained earnings
Total equity
Parent entity contingencies
Bank guarantees
29,692
-
29,692
29,882
-
29,882
208,711
327,402
53,833
53,907
252,080
-
21,415
273,495
196,095
293,675
49,725
50,541
227,457
-
15,677
243,134
2,151
4,700
A multiple guarantee facility is available to the Group totalling $19 million (2009: $29 million). The facility is secured by
an unlimited interlocking guarantee and indemnity.
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in
respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed below in note 37.
Page 70 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
37. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below
are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and
Directors’ reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee.
The effect of the Deed is that the Company guarantees to each creditor payment in full for any debt in the event of
winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under
other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been
paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.
The subsidiaries subject to the Deed are:
- Cardno Holdings Pty Ltd
- Cardno (QLD) Pty Ltd
- Cardno Staff Pty Ltd
- Cardno Bowler Pty Ltd
- Cardno Emerging Markets (Australia) Pty Ltd
- Cardno (NSW/ACT) Pty Ltd
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the
Company and controlled entities which are a party to the Deed, after eliminating all transactions between parties to the
Deed of Cross Guarantee, for the year ended 30 June 2010 is set out as follows:
Statement of comprehensive income and retained earnings
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Finance costs
Other expenses
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Retained earnings at the beginning of the year
Transfers to and from reserves
Dividends recognised during the year
Retained earnings at the end of the year
Attributable to:
Owners of the Company
6
0
2005
$’000
2010
$’000
2009
$’000
234,201
211,795
(119,870)
(41,514)
(39,305)
(38)
(2,384)
4,572
35,662
(380)
35,282
(475)
34,807
19,181
475
(23,955)
30,508
(117,502)
(34,899)
(37,355)
(92)
(3,392)
13,253
31,808
(2,328)
29,480
(711)
28,769
11,134
711
(21,433)
19,181
30,508
19,181
Page 71 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
37. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
6
0
2005
$’000
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Current tax liabilities
Short term provisions
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Deferred tax liabilities
Long term provisions
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
2010
$’000
22,337
408,965
18,542
735
450,579
-
174,948
73
5,816
35,663
89
216,589
667,168
197,076
162,300
3,174
9,120
4,187
375,857
-
-
3,807
6,234
-
10,041
385,898
281,270
252,080
(1,319)
30,508
281,270
2009
$’000
28,093
265,366
14,210
387
308,056
-
134,482
98
5,562
35,663
213
176,018
484,074
139,268
72,148
4,989
9,183
3,623
229,211
-
-
3,515
5,559
-
9,074
238,285
245,789
227,458
(849)
19,180
245,789
Page 72 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
38. CONTROLLED ENTITIES
Name
Cardno Holdings Pty Ltd
Cardno (Qld) Pty Ltd
Cardno Staff Pty Ltd
Cardno Staff No. 2 Pty Ltd
Cardno Operations Pty Ltd
Cardno Investments Pty Ltd
Cardno International Pty Ltd
Advanced Water & Wastewater Technologies Pty Ltd
Cardno (WA) Pty Ltd
Cardno CCS Pty Ltd
Cardno Lawson Treloar Pty Ltd
Cardno MBK PNG Ltd
Cardno (NSW/ACT) Pty Ltd
Cardno BLH Pty Limited
Cardno Willing Pty Ltd
Cardno Victoria Pty Ltd
Cardno Alexander Browne Pty Ltd
Cardno (Vic) Pty Ltd
Cardno Young Pty Ltd
Cardno Emerging Markets (Australia) Pty Ltd
Cardno Eppell Olsen Pty Ltd
Cardno UK Limited
Cardno Emerging Markets (UK) Limited
Cardno Emerging Markets (East Africa) Limited
Barton Enterprises Pty Ltd
Cardno Forbes Rigby Pty Ltd
Cardno Gilbert Rose Pty Ltd
Cardno Saraceni Pty Ltd
Cardno Low & Hooke No. 1 Unit Trust
Cardno Low & Hooke No. 2 Unit Trust
Cardno Low & Hooke Pty Ltd
Cardno Low & Hooke Management Services Pty Ltd
Bresfine Pty Ltd
Cardno NZ Limited
Cardno USA, Inc.
Cardno Emerging Markets (USA), Ltd
Emerging Markets Group (EMG) Ltd
Emerging Markets Group (Consulting) Limited
Emerging Markets Group (EMG) s.a.
Cardno WRG, Inc.
Cardno TCB Limited
Cardno Willing (NSW) Pty Ltd
Cardno (NT) Pty Ltd
Cardno (PNG) Ltd
XP Software Pty Ltd
XP Software Inc.
Hydrotech Research Pty Ltd
Cardno Ullman & Nolan Pty Ltd
Cardinal Surveys Pty Ltd
Ullman & Nolan Pty Ltd
Cardno Ullman & Nolan Geotechnic (NT) Pty Ltd
TCB Limited
Middleton Williams & Co Limited
Micro Drainage Limited
Cardno Bowler Pty Ltd
Bowler Geotechnical Pty Ltd
Bowler Geotechnical Cairns Pty Ltd
Bowler Geotechnical Sydney West Pty Ltd
Country of Incorporation
Equity Holding
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New Guinea
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United Kingdom
Kenya
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
United States of America
United States of America
United Kingdom
United Kingdom
Belgium
United States of America
New Zealand
Australia
Australia
Papua New Guinea
Australia
United States of America
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
United Kingdom
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Page 73 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
38. CONTROLLED ENTITIES CONTINUED
Name
Country of Incorporation
Equity Holding
Bowler Geotechnical Gold Coast Pty Ltd
J&D Civil Testing Pty Ltd
Sandhorse Pty Ltd
Kurtway Pty Ltd
Bowler Geotechnical (SC) Pty Ltd
Dumley Pty Ltd
Russhan Pty Ltd
L.A. & S.R. Thorne Pty Ltd
Cardno Spectrum Survey Pty Ltd
Cardno Ecology Lab Pty Ltd
TBE Group, Inc
TBE Holdings, Inc
TBE International Group, Inc
Cardno TBE (Michigan), Inc
TBE (UK) Ltd
TBE Group (Canada), ULC
TBE H&J Subsurface Utility – Engineering (Beijing) Limited
TBE H&J Subsurface Utility – Engineering (Hong Kong) Limited
Cardno ITC Pty Ltd
Cardno ITC (ACT) Pty Ltd
Cardno ITC (QLD) Pty Ltd
Cardno ITC (VIC) Pty Ltd
Cardno ITC (WA) Pty Ltd
Cardno Australian Underground Services Pty Ltd
Environmental Resolutions, Inc
ENTRIX Holding Company
ENTRIX Inc
ENTRIX of North Carolina Inc
ENTRIX Americas, SA
ENTRIX Canada Limited
ENTRIX Venezuela, CA
ENTRIX Bolivia, Limitada
Congo Carta de Costa Rica, SA
ENTRIX, Inc SAC
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States of America
United States of America
United States of America
United States of America
United Kingdom
Canada
China
China
Australia
Australia
Australia
Australia
Australia
Australia
United States of America
United States of America
United States of America
United States of America
Ecuador
Canada
Venezuela
Bolivia
Costa Rica
Peru
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Page 74 of 80
Directors’ Declaration
Cardno Limited and its Controlled Entities for the year ended 30 June 2010
1.
In the opinion of the Directors of Cardno Limited (the Company):
(a)
the consolidated financial statements and notes set out on pages 21 to 69 and the Remuneration report in the
Directors’ report, set out on pages 9 to 19, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance for
the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. There are reasonable grounds to believe that the Company and the Group entities identified in Note 38 will be able
to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross
Guarantee between the Company and those Group entities pursuant to ASIC Class Order 98/1418.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
chief executive officer and Chief Financial Officer for the financial year ended 30 June 2010.
4.
The Directors draw attention to Note 1(a) to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
Dated at Brisbane on the 16th day of August 2010.
Signed in accordance with a resolution of the Directors.
JOHN C MASSEY
Chairman
Page 75 of 80
Additional Shareholder Information
Distribution of Ordinary Shareholders
The number of shareholders, by size of holding, as at 26 August 2010 were:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Ordinary Shares
Number of
Holders
4,172
3,627
1,362
1,209
126
10,496
Number of
Shares
1,812,045
9,450,162
9,653,831
27,907,503
56,776,059
105,599,600
As at 26 August 2010 there were 717 shareholders who held less than a marketable parcel of 123 shares.
Twenty Largest Ordinary Shareholders
The names of the twenty largest holders as at 24 August 2009 were:
RBC Dexia Investor Services Australia Nominees Pty Limited
< PIPOOLED A/C>
J P Morgan Nominees Australia Limited
ANZ Nominees Limited
Andrew Buckley
National Nominees Limited
Pat Beyer
Trevor Johnson
HSBC Custody Nominees (Australia) Limited
Merrill Lynch (Australia) Nominees Pty Limited
Cogent Nominees Pty Limited
Malcolm David Pound
Steve M Zigan
Graham Tamblyn
Joseph E O’Connell
R A Young Investments Pty Ltd
Paul Gardiner
Anne Felicity Phillips
Citicorp Nominees Pty Limited
Roger Collins-Woolcock
KMS Properties Pty Ltd
Total
Substantial Shareholders
Listed Ordinary Shares
Number Held
Percentage
5,707,877
3,541,647
3,212,378
2,450,261
2,129,644
2,128,796
2,050,001
2,028,353
1,881,745
1,830,536
1,101,741
1,046,402
1,009,516
1,005,526
938,239
850,774
767,358
670,491
633,938
629,811
5.41%
3.35%
3.04%
2.32%
2.02%
2.02%
1.94%
1.92%
1.78%
1.73%
1.04%
0.99%
0.96%
0.95%
0.89%
0.81%
0.73%
0.63%
0.60%
0.60%
35,615,034
33.73%
The names of substantial shareholders who have notified the company in accordance with section 671B of the
Corporations Act 2001 are:
Perpetual Limited and subsidiaries
Number of
Shares Held
Percentage
6,847,194
6.48%
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Additional Shareholder Information
Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Escrowed Shares
There are currently 4,793,974 ordinary shares held in escrow. This is approximately 4.54% of the company’s issued
share capital. The details are as follows:-
(cid:131)
(cid:131)
(cid:131)
(cid:131)
In accordance with the Share Sale Deeds between Cardno Limited and the shareholders of ITC Group Pty Ltd
and its associated entities completed on 18 February 2010, ordinary shares issued as part of the purchase price
are escrowed for a period of 18 months to 18 August 2011. This agreement affects 1,391,298 shares, being
approximately 1.32% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of Australian
Underground Services Pty Ltd completed on 18 May 2010, ordinary shares issued as part of the purchase price
are escrowed for a period of 18 months to 18 November 2011. This agreement affects 377,861 shares, being
approximately 0.36% of the company’s issued share capital.
In accordance with the Agreement and Plan of Merger between Cardno Limited and the stockholders of ENTRIX
Holding Company completed on 11 June 2010, ordinary shares issued as part of the purchase price are escrowed
for periods of 18 months to 11 December 2011. This agreement affects 1,194,588 shares, being approximately
1.13% of the company’s issued share capital.
In accordance with the Stock Purchase Agreement between Cardno Limited and the stockholders of
Environmental Resolutions, Inc completed on 11 June 2010, ordinary shares issued as part of the purchase price
are escrowed for periods of 18 months to 11 December 2011. This agreement affects 1,830,227 shares, being
approximately 1.73% of the company’s issued share capital.
Options
As at 26 August 2010 the details of Performance Options on issue are as follows:
Number of Option Holders
Number of Options on Issue
469
6,371,400
Voting Rights of Options
The ordinary shares issued on exercise of the options will rank equally with all other ordinary shares.
Rights
As at 26 August 2010 the details of Performance Rights on issue are as follows:
Number of Option Holders
Number of Options on Issue
18
359,000
Voting Rights of Rights
The ordinary shares issued on exercise of the rights will rank equally with all other ordinary shares.
Page 79 of 80
Lawyers
McCullough Robertson Lawyers
Level 11, Central Plaza Two
66 Eagle Street
BRISBANE QLD 4000
Ph: +61 7 3233 8888
Fax: +61 7 3229 9949
Website: www.mccullough.com.au
Kirkland & Ellis LLP
300 North LaSalle
Chicago, Illinois 60654
USA
Ph: +1 312 862 2000
Fax: +1 312 862 2200
Website: www.kirkland.com
Bankers
HSBC Bank Australia Limited
300 Queen Street
BRISBANE QLD 4000
Ph: +61 7 3835 7820
Fax: +61 7 3835 7830
Website: www.hsbc.com.au
Corporate Directory
Board of Directors
Chairman
John Massey
Deputy Chairman
Graham Tamblyn
Managing Director
Andrew Buckley
Directors
Anthony Barnes
Peter Cosgrove
Jeffrey Forbes
Trevor Johnson
Ian Johnston
Chief Financial Officer & Company Secretary
Jeffrey Forbes
Joint Company Secretary
Michael Pearson
Registered Office
Cardno Limited
ABN 70 108 112 303
Level 11, Green Square North Tower
515 St Paul’s Terrace
FORTITUDE VALLEY QLD 4006
Ph: +61 7 3369 9822
Fax: +61 7 3369 9722
Website: www.cardno.com
Share Registry
Computershare Investor Services Pty Limited
Level 19
307 Queen Street
BRISBANE QLD 4000
Ph: 1300 552 270 (within Australia)
+61 3 9415 4000 (outside Australia)
Website: www.computershare com.au
Auditors
KPMG
Level 16, Riparian Plaza
71 Eagle Street
BRISBANE QLD 4000
Ph: +61 7 3233 3111
Fax: +61 7 3233 3100
Website: www.kpmg.com.au
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