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Table of Contents
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Directors‟ Report ............................................................................................................................................... 3
Corporate Governance Statement .................................................................................................................. 21
Consolidated Statement of Financial Performance ........................................................................................ 27
Consolidated Statement of Comprehensive Income ...................................................................................... 28
Consolidated Statement of Financial Position ................................................................................................ 29
Consolidated Statement of Changes in Equity ............................................................................................... 30
Consolidated Statement of Cash Flow ........................................................................................................... 31
Notes to the Financial Statements .................................................................................................................. 32
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 2011
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 2011.
1. Directors
The Directors of the Company in office during or since the year ended 30 June 2011 are set out below:
John Massey (Chairman - Non-executive)
Graham Tamblyn (Deputy Chairman - Executive) (retired 21 October 2010)
Andrew Buckley (Managing Director - Executive)
Anthony Barnes (Non-executive)
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.
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 2011
Director
Experience
Special Responsibilities
John C Massey
BCom, CPA, FAICD(Life), FAIM
Non-executive Chairman
Age 65
Andrew D Buckley
BE(Hons), FIEAust, FAICD, CPEng, RPEQ
Managing Director
Age 54
Anthony H (Tony) Barnes
BCom
Non-executive Director
Age 61
John Massey has been Chairman of Cardno Limited since July 2004 and a
Non-Executive Director since March 2004. He has extensive commercial
and leadership experience as a Chairman, Director and Chief Executive
spanning many different industries.
John is also Chairman of Sunstate Cement Limited and UQ Holdings, and a
Director of Ambre Energy Limited and the Stockyard Beef Group. His
previous appointments include such diverse companies as Brisbane Airport,
Dairy Australia, Macmahon, Symbiosis, Grainco, Thomas Cook and QDL
Pharmaceuticals.
In 2006, John was made a Life Fellow of the Australian institute of Company
Directors for eminence in the field of directorship and was also subsequently
awarded the 2010 Gold Medal which recognises the Outstanding Company
Director in Queensland for achievements in corporate life and to the
community.
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. He has worked in executive management roles in the
engineering, construction and development assistance sectors since 1991.
Under Andrew‟s leadership the Cardno Group has grown from an annual
turnover of approximately $14 million in FY1997 to $831 million in FY2011
and from less than 200 people to over 4,000.
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. He also held
the position of Chief Executive Officer of Zinifex Limited for a period. He
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. Tony 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.
Page 4 of 80
As well as being Chairman of the Company,
the Board‟s
John
Remuneration
Nominations
Committees.
is Chairman of
and
Andrew is a member of the Nominations
Committee
Tony is Chairman of the Board‟s Audit,
Risk & Compliance Committee and a
member of the Remuneration Committee.
Special Responsibilities
Peter is a member of the Nominations
Committee
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Director
Experience
Peter J Cosgrove AC, MC
ndc (Ind), jssc, psc (US), Dip Mil Stud, FAICD
Non-executive Director
Age 64
Jeffrey I Forbes
BCom, MAICD, MAusIMM
Chief Financial Officer, Company Secretary, Executive
Director
Age 58
Retired General Peter Cosgrove joined Cardno as a Non-Executive Director
in March 2007, bringing with him a wealth of experience and credentials.
Peter is a director of Qantas Airways Limited, Qantas Superannuation
Limited, and Australian Rugby Union Limited. He is Chancellor of the
Australian Catholic University and holds a number of prestigious
memberships and appointments including being a member of the Trustee
Board of the Commonwealth Superannuation Corporation. 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.
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 C Johnson
BE, MEngSc, PhD, FIEAust, CPEng, RPEQ, MAICD
Executive Director
Age 54
Trevor has been a director of the Cardno Group since 1996, and an
employee of the company for more than 25 years. He is a member of the
Senior Executive team which assists the Managing Director in running the
company.
Trevor is a member of the Board‟s Audit,
Risk & Compliance Committee.
In his executive role as Director Corporate, Trevor is responsible for a
number of acquisitions, co-ordination and communication activities within
the Group.
Trevor has more than 30 years‟ experience as a civil engineer, with special
expertise in the fields of hydraulics, water quality and environmental
analysis. He remains significantly involved in the company‟s operational
activity, and is frequently commissioned as a technical expert witness on
engineering matters.
Page 5 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Director
Experience
Special Responsibilities
Ian J Johnston
DipCM, GradDip App Fin & Inv, ASIA, ACIS, FAICD
Non-executive Director
Age 62
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.
Ian is a member of the Board's Audit, Risk &
Compliance Committee, the Remuneration
Committee and the Nominations Committee.
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 Data #3 Limited and RBSM Foundation 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
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 $58.8 million for the year ended 30 June 2011, a 56.4%
increase over the 2010 financial year. Basic earnings per share increased to 56.29 cents, 28.3%. EBITDA
rose 81.2% to $100.2 million compared to $55.3 million prior year.
Cardno has delivered this result for its shareholders during a period of challenging economic conditions.
The performance is due to the Company‟s successful strategy of growing its business both organically and
by acquisition. The result has been achieved through geographic and market diversification.
This is the seventh consecutive year of record profit and earnings per share growth since listing in 2004.
Revenue was $831.2 million, which was a 74.2% increase on 2010, despite the impact of a stronger
Australian dollar.
Cardno had strong operating cash flow of $73.0 million in 2011, an increase of 56.1% over 2010, and had
cash of $84.1 million at 30 June 2010.
The Company‟s balance sheet remains strong with low net debt.
The Board has declared a final dividend of 17 cents per share (70% franked) to be paid on 14 October 2011
to all shareholders registered on 16 September 2011. With the interim dividend of 17 cents per share in
March 2011, this will result in a full year dividend of 34 cents, which is also a record for Cardno.
During the financial year Cardno made three acquisitions:
Cardno BEC, a 100 person business with specialised electrical engineering expertise in the
resources sector increasing Cardno‟s exposure to the resources sector. Cardno BEC is based in
Perth with offices in Brisbane and Tanzania.
Cardno Roadtest, a 60-person construction materials testing and geotechnical engineering firm
based in Central Queensland, will strengthen the existing construction materials testing and
geotechnical operations, providing a strategic presence in the extensive gas and coal developments
in Central Queensland.
Cardno JFNew, a US based 150 person environmental consulting firm, adds to Cardno‟s expertise in
the environmental and natural resources management market in the US.
Cardno‟s strategy continues to deliver business growth in a difficult global economic environment. The
company is well positioned for FY2012.
Page 7 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 2010 ordinary
- Interim 2011 ordinary
Declared after end of year
- Final 2011 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
Date of payment
15.0
17.0
17.0
15,842
18,131
100%
70%
15 October 2010
25 March 2011
18,663
70%
14 October 2011
33,973
18,663
52,636
6. Events Subsequent to the Reporting Date
On 16 August 2011, the Directors of Cardno Limited declared a final dividend of 17.0 cents per share (70%
franked) for the 2011 financial year. The dividend will be paid on 14 October 2011 to shareholders
registered on 16 September 2011 and will total $18,662,605. The dividend has not been provided for in the
30 June 2011 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
There have been no significant changes in the state of affairs since 30 June 2011.
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 or 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 2011
10. Directors’ Meetings
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2011 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
not a member of this committee
Board of
Directors
A
13
13
13
13
13
13
13
2
B
13
13
13
13
13
13
13
3
Audit, Risk &
Compliance
Committee
B
A
4
4
4
4
4
4
Remuneration
Committee
Nominations
Committee
A
5
5
5
B
5
5
5
A
1
2
2
2
B
2
2
2
2
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.
11. REMUNERATION REPORT - AUDITED
Principles of Compensation
Compensation levels for Executive Directors and Senior Executives of the Group are competitively set to
attract and retain suitably qualified staff, reward the achievement of financial performance, strategic
objectives and achieve the broader outcome of creating value for shareholders. The remuneration structure
takes into account:
the capability and experience of the Executive Directors and Senior Executives;
the Executive 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 Executive Director‟s and Senior Executive‟s remuneration.
Total shareholder return is an essential element of the Company‟s strategy, and the remuneration framework
supports this strategy by seeking to attract and retain high calibre executives. Since Cardno Limited was
listed on the ASX in May 2004 the Company has exceeded the profit and growth targets set by the Board
and this successful performance has been reflected in the remuneration of Executive Directors and Senior
Executives.
The Executive Director and Senior Executive Remuneration Policy is set out below:
Cardno 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
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 will be entitled to
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 2011
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
five times during the year.
Executive remuneration decisions are made by the Board in the absence of the Executive Directors on the
recommendation of the Remuneration Committee. 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.
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.
External Consultants were appointed by the Board to provide market information to be used in determining
the Executive Directors and Senior Executives‟ remuneration. Comparator groups for benchmarking are
reviewed on the basis of similar industry sectors, market capitalisation and employee numbers.
Performance-linked Compensation
Performance-linked compensation includes both short-term and long-term incentives and is designed to
reward Executive Directors and Senior Executives 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 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 Executive
Directors and Senior Executives. The KPIs generally include measures relating to the consolidated entity, the
relevant segment and 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 recommends to the Board which approves, in the absence of the
Executive Directors, the discretionary bonus to be paid to individuals. 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 2011
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 at
which the individual ceases 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 2011 are detailed in the table below:
Grant Date
Issue Price
23 February 2009
9 March 2010
25 February 2011
$3.18
$4.07
$6.05
Restricted at
30 June 2011
297,672
336,834
360,648
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.
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 2011 financial year, options with a grant date fair value of
$2,521,365 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 commencing 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 2010/11 financial year. Options with a grant date fair value of $264,144
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 2011
Grant Date
Vesting
Date
Expiry Date
25 October
2007
5 December
2007
5 December
2008
2 December
2009
19 October
2010
29 November
2010
29 November
2011
2 December
2012
25 October
2010
5 December
2010
5 December
2011
2 December
2013
25 November
2010
25 November
2013
25 November
2014
Exercise
Price
$
Fair
Value at
Grant
Date
$
Number of
Options at
Beginning
of Year
7.57
0.92
330,000
7.71
0.95
1,538,500
3.35
0.41
2,258,000
4.43
0.77
2,244,900
Options
Granted
Options
Lapsed
Options
Vested &
Expired
Not
Exercised
Number of
Options as
at 30 June
2011
-
-
-
-
257,000
206,200
-
-
330,000
1,538,500
-
-
-
-
-
2,001,000
2,038,700
3,274,500
4.84
0.77
-
3,274,500
-
Weighted average exercise price
Weighted average remaining contract life
Total expense recognised $1,681,706 (2010: $454,311)
5.00
4.84
3.83
7.69
4.32
857 days
The options outstanding at 30 June 2011 have not vested, are not exercisable at 30 June 2011 and have an
exercise price in the range of $3.35 to $4.84.
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 and since 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.
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 2011 financial year 530,000 rights with a grant date fair value of $1,797,238
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 unless the Board determines otherwise. The rights may be
exercised at any time during a one-year period commencing 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 2011
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
2011
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
21 October
2010
22 October
2013
22 October
2014
25 November
2010
25 November
2013
25 November
2014
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
3.96
3.19
3.20
2.30
3.78
2.71
3.94
2.96
Total expense recognised $609,182 (2010: $95,899)
67,500
67,500
112,000
112,000
-
-
-
-
-
-
-
-
76,250
76,250
188,750
188,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
The rights outstanding at 30 June 2011 have not vested, are not exercisable at 30 June 2011 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
implemented in FY2010.
Under the 2009 TLTI plan 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 2011
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
Below threshold
Threshold
Between threshold & target
Target
Between target & stretch
Stretch & above
Managing
Director
0%
25%
Pro rata
50%
Pro rata
100%
Other Executive
Directors
0%
12.5%
Pro rata
25%
Pro rata
50%
The respective measures for TSR and EPS are:
Performance Level
Threshold
Target
Stretch
Relative TSR
50th Percentile
62.5th Percentile
75th Percentile
Employment Agreements
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.
The total remuneration for all of the Non-Executive Directors was approved by shareholders at the 2007
AGM with a maximum of $600,000 including superannuation. The current fee structure is outlined below:
Chairman of the Board: $200,000 (covers all responsibilities as Chairman of the Board and as Chairman
of the Remuneration and Nomination Committees).
Other Non-Executive Directors: $100,000 (covers all responsibilities as a member of the Board, other
Committee memberships and other duties including representing the Company externally).
In considering the level of remuneration for Non-Executive Directors, the Remuneration Committee uses
independent external advice, industry survey data and other information about the level of fees and benefits
being paid to Non-Executive Directors by comparable companies.
As a consequence of Cardno‟s growth, the increasing demands on directors and the need to plan for
Non-Executive Director succession, the Board intends to seek shareholder approval at the 2011 Annual
General Meeting for an increase in the total amount of Non-Executive Director remuneration.
The limit is being raised to allow for the continuing growth and development of Cardno and to attract suitably
qualified and experienced directors in the future.
Page 14 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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**
$
183,486
147,321
49,464
33,000
91,743
73,394
91,743
73,394
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
183,486
147,321
49,464
33,000
91,743
73,394
91,743
73,394
16,514
22,679
50,536
47,000
8,257
6,606
8,257
6,606
-
-
-
-
-
-
-
-
641,137
594,121
810,000*
540,000*
341,193
288,564
341,919
298,925
105,000*
96,000*
50,000*
30,000
4,000
4,000
4,000
4,000
4,000
4,000
1,455,137
1,138,121
103,725
52,121
329,981**
114,916**
450,193
388,564
395,919
332,925
53,807
52,436
43,006
50,000
91,066**
28,750**
92,099**
29,310**
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
Director
Non-Executive
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Former
Graham Tamblyn
(resigned 21/10/ 2010)
2011
2010
100,083
250,568
20,000*
10,000
4,000
4,000
124,083
264,568
14,033
46,557
79,076**
25,056**
Total Compensation – 2011
1,840,768
985,000
Total Compensation – 2010
1,759,287
676,000
16,000
16,000
2,841,768
2,451,287
298,135
592,222**
284,005
198,032**
* STI cash bonuses which have been accrued but not paid.
** TLTI cash bonuses which have been accrued but not paid based on achievement of performance targets.
Termination
Benefits
$
Share Based
Payments
Shares
Options &
Rights***
Total
$
Proportion of
Remuneration
Performance
Related
Value of
Options &
Rights as a
Proportion of
Remuneration
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
170,000
100,000
80,000
100,000
80,000
100,000
80,000
89,488***
166,779**
*
44,252***
80,149***
35,321***
60,732***
1.978.331
1,471,937
639,318
549,899
566,345
472,967
27,372***
43,851***
244,564
380,032
-
-
196,433***
3,928,558
351,511***
3,284,835
-
-
-
-
-
-
-
-
62.1%
55.8%
37.6%
37.3%
31.3%
25.4%
51.7%
20.8%
45.1%
33.3%
-
-
-
-
-
-
-
-
4.5%
11.3%
6.9%
14.6%
6.2%
12.8%
11.2%
11.5%
5.0%
5.0%
***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. 2010 comparative also 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 2011
Director, Executive Officer and Key Management Remuneration continued
Short-Term
Post
Employment
Long
Term
Executives
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
Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
(appointed 12/10/09)
Jean –Francois Floury
(appointed 11/03/11)
Ross Thompson
(effective 1/7/11)
Former
Steven Coote
(ceased employment
25/09/09)
Charles Tapp
(ceased employment
15/04/10)
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
363,699
317,752
367,761
335,428
418,213
381,476
244,754
156,410
111,688
-
220,183
-
-
101,018
-
273,301
85,000*
40,000
60,000*
40,000
120,000*
43,798
65,000*
-
25,000*
-
65,000*
-
-
-
-
27,000
4,000
4,000
4,000
4,000
-
-
-
-
-
-
-
-
-
-
-
-
452,699
361,752
431,761
379,428
538,213
425,274
309,754
156,410
136,688
-
285,183
-
-
101,018
-
300,301
36,531
30,848
33,009
32,755
-
-
22,608
13,780
10,052
-
22,179
-
-
7,058
-
36,097
Total compensation – 2011
Total compensation – 2010
1,726,298
1,565,385
420,000*
150,798
8,000
8,000
2,154,298
1,724,183
124,379
120,538
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
1,000
1,000
1,000
1,000
1,000
1,000
-
-
-
1,000
-
-
-
45,508**
63,153**
48,244**
77,987**
45,508**
63,153**
14,946**
2,501**
-
-
10,599**
-
535,738
456,753
514,014
491,170
584,721
489,427
348,308
172,691
146,740
-
318,961
-
-
-
-
108,076
-
131,022
-
1,000
-
43,198**
-
511,618
-
131,022
5,000
4,000
164,805**
2,448,482
249,992**
2,229,735
24.4%
22.6%
21.1%
24.0%
28.3%
21.9%
23.0%
1.4%
17.0%
-
23.7%
-
-
-
-
13.7%
23.9%
18.0%
8.5%
13.8%
9.4%
15.9%
7.8%
12.9%
4.3%
1.4%
0.0%
-
3.3%
-
-
-
-
8.4%
6.7%
11.2%
* Includes STI 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. 2010 comparative also includes amounts relating to
revised estimates for the number of equity instruments likely to vest not recognised in prior periods.
Additional Information – Cash Bonuses
Name
STI
TLTI
Vested%
Forfeited %
Vested %
Forfeited %
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
90%
81%
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
10%
19%
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
86%
86%
86%
86%
N/A
N/A
N/A
N/A
N/A
14%
14%
14%
14%
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 2011
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
2011
2010
2009
2008
2007
$58,802
$33,975
$1.49
28.3%
24.9%
$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%
Over the past four years, the Group‟s profit after income tax has grown at an average rate per annum of 34%
and revenue from $265 million (2007) to $831 million (2011). During the same period average key
management personnel total compensation has grown by approximately 12% 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
Senior Executives and to the most highly remunerated Officers of the Group and still outstanding at 30 June
2011, including Rights granted during the financial year are as follows:
Key Management
Personnel
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
Outstanding
Grant Date
Vesting Date
% Vested in
Year
% Forfeited in
Year
Options
Rights
-
-
-
-
-
-
-
-
-
-
60,000
-
-
70,000
-
-
60,000
-
-
-
70,000
60,000
35,000
30,000
27,500
25,000
20,000
20,000
35,000
30,000
-
35,000
30,000
-
35,000
30,000
-
25,000
8,000
25,000
21-Oct-10
22-Oct-09
21-Oct-10
22-Oct-09
21-Oct-10
22-Oct-09
21-Oct-10
22-Oct-09
25-Nov-10
2-Dec-09
5-Dec-08
25-Nov-10
2-Dec-09
5-Dec-08
25-Nov-10
2-Dec-09
5-Dec-08
25-Nov-10
2-Dec-09
25-Nov-10
21-Oct-13
22-Oct-12
21-Oct-13
22-Oct-12
21-Oct-13
22-Oct-12
21-Oct-13
22-Oct-12
25-Nov-13
2-Dec-12
29-Nov-11
25-Nov-13
2-Dec-12
29-Nov-11
25-Nov-13
2-Dec-12
29-Nov-11
25-Nov-13
2-Dec-12
25-Nov-13
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%
*resigned from board of directors 21 October 2010
No options were issued to Executive Directors and Senior Executives 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 11.
Page 17 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 $
Vested in year $
(not exercised)
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
227,150
113,575
89,238
64,900
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
*resigned from board of directors 21 October 2010
120,750
120,750
120,750
86,250
86,250
-
-
-
-
-
-
-
-
-
138,000
64,400
46,000
36,800
42,750
52,250
42,750
-
-
12. Directors’ and Executives’ Interests
As at the date of this report, the interests of the Directors in the shares of Cardno Limited were:
Anthony Barnes
Andrew Buckley
Peter Cosgrove
Jeffrey Forbes
Trevor Johnson
Ian Johnston
John Massey
Graham Tamblyn*
Cardno Limited
Ordinary Shares
Shares held in
Escrow
Options over
Ordinary Shares
Performance Rights
4,307
2,450,261
-
26,466
2,050,001
241,955
58,334
1,009,516
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
130,000
-
65,000
52,500
-
-
40,000
*resigned from board of directors 21 October 2010
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
2010
Purchases
Received as
Compensation
Sales
Held at 30 June
2011
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
50,000
3,466
-
207,390
2,359,037
21,305
1,967,399
1,216,851
Senior Executives
653,897
Roger Collins-Woolcock
-
Jean-Francois Floury
800,386
Paul Gardiner
163,817
Michael Renshaw
3,580
Kylie Sprott
Ross Thompson
348
*resigned from board of directors 21 October 2010
8,334
841
-
34,565
91,224
5,161
82,602
31,360
50,041
-
50,388
27,304
1,420
82
-
-
-
-
-
-
-
-
165
-
165
165
165
-
-
-
-
-
-
-
-
(238,695)
-
-
-
-
-
-
58,334
4,307
-
241,955
2,450,261
26,466
2,050,001
1,009,516
704,103
-
850,939
191,286
5,165
430
Page 18 of 80
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
29 November 2011
2 December 2012
25 November 2013
5 December 2011
2 December 2013
25 November 2014
$3.35
$4.43
$4.48
2,001,000
2,038,900
3,274,500
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
21 October 2013
25 November 2013
22 October 2013
2 December 2013
21 October 2014
25 November 2014
Nil
Nil
Nil
Nil
135,000
224,000
152,500
377,500
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, did not perform any non-audit services.
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 2011.
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 2011
Page 19 of 80
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
To: the directors of Cardno Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2011, there have been:
a)
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Robert S Jones
Partner
Brisbane
16 August 2011
Page 20 of 71
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International, a Swiss cooperative.
Liability limited by a scheme approved under
Professional Standards Legislation.
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:
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;
reviewing the operational and financial performance of the company‟s activities;
reporting to shareholders and the market;
ensuring compliance with prudential regulations and standards;
ensuring adequate risk management processes are in place;
reviewing internal controls and internal and external audit reports;
monitoring and influencing the culture and reputation of the company;
monitoring board composition, director selection and board process and performance;
approving key executive appointments and ensuring executive succession planning;
ensuring that the Board as a whole has an appropriate understanding of each substantial segment of
reviewing the performance and remuneration of the Managing Director and Senior Executives;
the business; and
authorising and monitoring major investment and strategic commitments.
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 three 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:
is not a substantial shareholder of the company or an officer of, or otherwise associated directly with,
a substantial shareholder of the company;
Page 21 of 80
Corporate Governance Statement
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;
within the last three years has not been a principal of a material professional adviser or a material
consultant to 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;
has no material contractual relationship with the company or other group member other than as a
Director of the company;
has not served on the Board for a period which could, or could reasonably be perceived to,
materially interfere 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.
Page 22 of 80
Corporate Governance Statement
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.
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. During the year
this process was enhanced with the establishment of a Whistleblower hotline which is managed by an
independent operator and accessible to all the company‟s staff 24 hours a day, 7 days a week.
The Board has adopted a policy for trading in Cardno securities by Directors, Senior Executives and staff.
The purpose of this policy 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 updated in 2010 and disclosed on the ASX in December 2010 in accordance with
the ASX Listing Rules. The updated policy addresses each of the ASX requirements including provisions
relating to the prohibition of trading by directors and senior executives in the company‟s securities during
defined blackout periods.
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.
The company is currently finalising the adoption of the Diversity Policy which will be available on the
company website.
The company respects and values the competitive advantage of diversity and recognises the benefits of its
integration throughout the company by improving corporate performance, increasing shareholder value and
enhancing the profitability of the company‟s objectives.
Specifically diversity will be reinforced through both strategic and operational means such as being attuned
to diverse corporate, business and market opportunities and by management nurturing and developing the
collective relevant skills of personnel within the company.
The company has established objectives with the aim of increasing diversity within the organisation and the
continued promotion of staff members to and within the business to senior and executive management roles
regardless of gender, age or race.
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.
Page 23 of 80
Corporate Governance Statement
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 specific 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:
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;
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;
giving shareholders ready access to balanced and understandable information about the company
and 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
Page 24 of 80
Corporate Governance Statement
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 25 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 26 of 80
Consolidated Statement of Financial Performance
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Financing costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of the Company
Note
2
3
3
4
2011
$’000
831,201
(321,233)
(158,212)
(216,345)
(11,356)
(4,501)
(35,251)
84,303
(25,501)
58,802
2010
$’000
477,238
(211,888)
(108,342)
(80,648)
(8,525)
(3,166)
(21,090)
43,579
(5,982)
37,597
58,802
58,802
37,597
37,597
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
30
30
56.29
55.35
43.86
43.61
The statement of financial performance should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 27 of 80
Consolidated Statement of Comprehensive Income
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Profit for the year
Other comprehensive income
Exchange differences on translation of foreign operations
2011
$’000
2010
$’000
58,802
37,597
(26,908)
(4,214)
Other comprehensive income for the year, net of tax
(26,908)
(4,214)
Total comprehensive income for the year
31,894
33,383
Total comprehensive income attributable to:
Owners of the Company
31,894
31,894
33,383
33,383
The statement of comprehensive income should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 28 of 80
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2011
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
Loans and borrowings
Current tax liabilities
Short term provisions
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
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
2011
$’000
2010
$’000
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
13
21
22
23
84,047
118,205
80,107
4,957
287,316
535
669
31,937
5,446
355,709
-
394,296
56,282
103,275
71,496
6,211
237,264
1,504
836
29,208
3,551
339,099
89
374,287
681,612
611,551
153,584
1,859
5,514
17,199
32,934
211,090
104,535
140
8,023
628
113,326
82,462
49,250
1,528
15,501
29,250
177,991
125,990
442
6,527
629
133,588
324,416
311,579
357,196
299,972
311,383
(35,415)
81,228
357,196
252,080
(8,507)
56,399
299,972
The statement of financial position should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 29 of 80
Consolidated Statement of Changes in Equity
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
Note
Share
Capital
Ordinary
$’000
Retained
Earnings
$’000
Foreign
Translation
Reserve
$’000
Total
$’000
BALANCE AT 1 JULY 2009
227,457
42,757
(4,293)
265,921
Profit for the year
Exchange differences on translation of
foreign operations
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Shares issued
Dividends paid or provided
BALANCE AT 30 JUNE 2010
Profit for the year
Exchange differences on translation of
foreign operations
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Shares issued
Dividends paid or provided
BALANCE AT 30 JUNE 2011
23
5
23
5
-
-
-
24,623
-
24,623
252,080
-
-
-
59,303
-
59,303
311,383
37,597
-
37,597
-
(23,955)
(23,955)
56,399
58,802
-
58,802
-
(33,973)
(33,973)
81,228
-
37,597
(4,214)
(4,214)
(4,214)
33,383
-
-
-
(8,507)
24,623
(23,955)
668
299,972
-
58,802
(26,908)
(26,908)
(26,908)
31,894
-
-
-
(35,415)
59,303
(33,973)
25,330
357,196
The statement of changes in equity should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 30 of 80
Consolidated Statement of Cash Flows
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Interest received
Finance costs paid
Cash paid to suppliers and employees
Income tax paid
Note
2011
$’000
2010
$’000
858,262
1,949
(5,338)
(757,529)
(23,816)
508,714
1,474
(2,968)
(451,683)
(8,792)
NET CASH PROVIDED BY OPERATING ACTIVITIES
25(a)
73,528
46,745
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired
Proceeds from sale of property, plant &
equipment
Payments for property, plant & equipment
NET CASH USED IN INVESTING ACTIVITIES
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
25(d)
(10,503)
(129,486)
588
(9,063)
691
(3,126)
(18,978)
(131,921)
54,694
(2,054)
10,294
(52,042)
(2,474)
(31,942)
(23,524)
20,704
(56)
101,086
(19,427)
(2,589)
(22,301)
77,417
31,026
(7,759)
CASH AND CASH EQUIVALENTS AT 1 JULY
56,282
65,808
Effects of exchange rate changes on cash and
cash equivalents at the end of year
(3,261)
(1,767)
CASH AND CASH EQUIVALENTS AT 30 JUNE
25(b)
84,047
56,282
The statement of cash flow should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Page 31 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 2011 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 2011.
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
The financial report of the consolidated entity also complies with International Financial Reporting Standards (IFRSs) and
interpretations adopted by the International Accounting Standards Board (IASB).
(b) Basis of Preparation
The financial report has been prepared on a historical cost basis except for derivative financial instruments which are
measured at fair value.
The consolidated financial statements are presented in Australian dollars, which is the Company‟s functional currency.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning
after 1 July 2010, and have not been applied in preparing these consolidated financial statements. None of these is
expected to have a significant effect on the consolidated financial statements of the Group, except for AASB 9 Financial
Instruments, which becomes mandatory for the Group‟s 2014 consolidated financial statements and could change the
classification and measurement of financial assets. The Group does not plan to adopt this standard early and the extent
of the impact has not been determined.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class
Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless
otherwise stated.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. 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 Group.
A list of the controlled entities is contained in Note 38 to the financial statements. All controlled entities have a June
financial year-end.
Transactions eliminated on consolidation
Intra-group balances and transactions, 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 tax authority is included as a current asset or liability in the consolidated balance sheet.
Page 32 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 tax authority are
classified as operating cash flows.
(e) Foreign Currency
(i) 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, (see (ii) below) 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.
(ii) 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.
(iii) 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.
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.
Dividends
Revenue from dividends is recognised by the consolidated entity when dividends are received.
Page 33 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(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.
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.
Page 34 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(i) Income Tax continued
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
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.
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.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill.
(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 receivables 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 Group‟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.
Page 35 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(n) Property, Plant and Equipment continued
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.
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
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on
which control is transferred to the Group. 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.
Acquisitions on or after 1 July 2009
For acquisitions on or after 1 July 2009, the Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquire; plus if the business combination is achieved
in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, the gain is recognised immediately in profit or loss.
Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment loss.
Page 36 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(o) Intangible Assets continued
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group
incurs the connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is
classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes
to the fair value of the contingent consideration are recognised in profit or loss.
When share-based payment awards (replacement awards) are required to be exchanged for awards held by the
acquiree‟s employees (acquiree‟s awards) and relate to past services, then all or a portion of the amount of the acquirer‟s
replacement awards is included in measuring the consideration transferred in the business combination. This
determination is based on the market-based value of the replacement awards compared with the market-based value of
the acquiree‟s awards and the extent to which the replacement awards relate to past and/or future service.
Acquisitions between 1 July 2004 and 1 July 2009
For acquisitions between 1 July 2004 and 1 July 2009, goodwill represents the excess of the cost of the acquisition over
the Group‟s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent
liabilities of the acquiree. When the excess was negative, the gain was recognised immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in
connection with business combinations were capitalised as part of the cost of the acquisition.
Works contracts, software intangibles and customer relationships
Works contracts, software intangibles and customer relationships are acquired by the Group 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 Group 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.
(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 each year at the same time. 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 Group‟s assets, other than inventories (see paragraph (m)), and deferred tax assets (see
paragraph (i)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, an impairment test is performed. The Group 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.
Page 37 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(q) Impairment continued
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 Group‟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
Group. Trade accounts payable are normally settled within 60 days. Trade and other payables are stated at cost.
(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 Group 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.
Page 38 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(t) Employee Benefits continued
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 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 Group 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 statement of financial position.
(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.
(x) 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 2011
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
Customer relationships
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/(gain) 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
2011
$’000
2010
$’000
562,566
7,532
257,567
-
1,948
189
616
783
366,760
8,227
98,765
6
1,429
126
889
1,036
831,201
477,238
1,048
7,209
8,257
1,146
156
163
1,462
172
3,099
11,356
3,713
3,673
828
4,501
689
5,923
6,612
216
205
-
1,290
202
1,913
8,525
2,211
2,896
270
3,166
21,969
19,027
2
(668)
(58)
396
27,674
(625)
27,049
(1,548)
-
25,501
7,856
(514)
7,342
(1,351)
(9)
5,982
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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% (2010: 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
70% franked dividend (2010: 100%) at 30% (2010: 30%) (Refer Note 29)
(b) Dividends paid during the year (Final 2010 15 cents per share, 100%
franked at 30%. Interim 2011 17 cents per share, 70% franked at 30%)
(2010: all dividends 100% franked at 30%)
(c) Franking credit balance
The amount of franking credits available for the subsequent financial
year are:
2011
$’000
2010
$’000
84,303
25,291
1,212
3,361
(3,353)
-
-
(385)
-
26,126
(625)
25,501
43,579
13,074
338
326
(5,329)
(162)
(1,335)
(407)
(9)
6,496
(514)
5,982
18,663
15,840
33,973
23,955
-
-
franking account balance as at the end of the financial year at 30%
10,256
7,021
franking credits that will arise from the payment of income tax
payable as at the end of the financial year
7,925
18,181
3,186
10,207
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 $5,598,782
(2010: $6,788,546)
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
8. INVENTORIES (CURRENT)
Work in progress
Page 41 of 80
57,016
4,652
22,379
84,047
119,415
(6,376)
113,039
5,166
118,205
34,438
-
21,844
56,282
109,366
(8,986)
100,380
2,895
103,275
80,107
71,496
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
Less accumulated depreciation
Motor vehicles
Less accumulated depreciation & amortisation
Office furniture & equipment
Less accumulated depreciation & amortisation
Leasehold improvements
Less accumulated depreciation & amortisation
Property
Less accumulated depreciation
2011
$’000
2010
$’000
3,040
172
1,745
4,957
4,825
176
1,210
6,211
535
1,504
669
836
13,694
(8,554)
5,140
18,830
(11,360)
7,470
40,147
(27,501)
12,646
9,899
(4,497)
5,402
1,974
(695)
1,279
12,714
(8,261)
4,453
15,442
(9,341)
6,101
52,782
(40,291)
12,491
10,145
(3,994)
6,151
75
(63)
12
Total Property Plant & Equipment
31,937
29,208
Page 42 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
12. PROPERTY, PLANT & EQUIPMENT CONTINUED
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
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
Motor vehicles
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Office furniture & equipment
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Leasehold improvements
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at end of the year
Property
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposal
Depreciation expense
Foreign exchange
Carrying amount at the end of the year
Carrying amount at the end of the year
Page 43 of 80
2011
$’000
2010
$’000
4,453
1,914
685
(64)
(1,422)
(226)
(200)
5,140
6,101
3,629
747
(270)
(2,509)
(136)
(92)
7,470
12,491
5,053
1,067
(220)
(4,863)
(955)
73
12,646
6,151
446
(17)
(37)
(1,044)
(342)
245
5,402
12
13
1,372
-
(50)
(68)
1,279
3,769
919
1,098
(78)
(1,163)
(12)
(80)
4,453
6,173
1,107
1,104
(308)
(1,980)
(59)
64
6,101
11,137
1,761
4,204
(175)
(4,133)
(188)
(115)
12,491
5,772
278
957
(19)
(828)
(72)
63
6,151
163
-
-
(151)
-
-
12
31,937
29,208
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
Unearned Revenue
Unrealised Foreign Exchange losses
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Liabilities
Unrealised foreign exchange gains
Work in progress
Prepayments
Property, plant and equipment
Intangible items
Retentions
Goodwill on acquisition
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
2011
$’000
2010
$’000
7,906
10,645
466
472
141
-
502
157
2,133
73
-
22,495
(17,049)
5,446
548
10,140
134
1,067
300
51
4,946
3
17,189
(17,049)
140
2,193
10,034
482
404
88
9
342
340
-
-
10
13,902
(10,351)
3,551
741
7,544
440
227
300
68
1,473
-
10,793
(10,351)
442
NET DEFERRED TAX ASSETS (LIABILITIES)
5,306
3,109
Page 44 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
13. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
30 June 2011
Movement in temporary differences
during the year:
Accruals
Provisions
Capitalised software
Carried forward tax losses
Lease timing
Unearned revenue
Sundry items
Property, plant & equipment
Cash to accruals adjustment
Unrealised foreign exchange gains
Work in progress
Prepayments
Goodwill on acquisition (USA)
Retainage
Intangible items
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 2010
Recognised
in profit or
loss
Recognised
in other
comprehen-
sive income
Acquired in
business
combination
30 June
2011
$’000
$’000
$’000
$’000
$’000
2,335
10,032
340
482
262
-
297
(139)
-
(741)
(7,544)
(375)
(1,472)
(68)
(300)
3,109
4,357
55
(183)
(16)
210
2,133
202
(68)
475
267
(2,374)
241
(3,766)
17
-
1,550
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
312
556
-
-
-
-
-
-
-
-
(221)
-
-
-
-
647
7,004
10,643
157
466
472
2,133
499
(207)
475
(474)
(10,139)
(134)
(5,238)
(51)
(300)
5,306
1 July 2009
Recognised
in profit or
loss
Recognised
in other
comprehen-
sive income
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 2011
14. INTANGIBLE ASSETS
Goodwill at cost
Works contracts
Accumulated amortisation
Patents and trademarks
Software intangibles
Accumulated amortisation
Customer relationships
Accumulated amortisation
2011
$’000
2010
$’000
352,133
335,671
3,622
(3,415)
207
2,110
1,319
(616)
703
710
(154)
556
2,840
(2,518)
322
2,110
1,550
(554)
996
-
-
-
Total Intangibles
355,709
339,099
Goodwill
Works
Contracts
Patents and
Trademarks
Software
Intangibles
$’000
$’000
$’000
$’000
Customer
Relation-
ships
$’000
Reconciliation of movement in carrying
amounts from beginning of year to end of
year:
Consolidated
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
2011
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 2011
218,035
564
2,110
1,382
124,502
(24)
-
(6,842)
335,671
-
-
(216)
(26)
322
-
-
-
-
2,110
-
-
(205)
(181)
996
335,671
322
2,110
996
57,743
(1,545)
-
(39,736)
352,133
-
1,053
(1,146)
(22)
207
-
-
-
-
2,110
-
-
(156)
(137)
703
-
-
-
-
-
-
-
-
-
747
(163)
(28)
556
* Amounts were reclassified from goodwill to identifiable intangible assets following completion of the purchase price accounting for
acquisitions which occurred in 2010.
Page 46 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
14. INTANGIBLE ASSETS CONTINUED
Goodwill is allocated to the following cash-generating units:
Americas and Software
Emerging Markets Region
South East Australia & NZ
North & Western Australia
Geotechnical Division
Electrical Engineering Division
2011
$’000
2010
$’000
162,002
33,285
47,103
22,473
47,210
40,060
352,133
194,619
34,201
47,377
22,473
37,001
-
335,671
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.
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 ranging from 10.5% to 14.6%
(2010: 11.7%) (adjusted for risks specific to the cash generating unit) based on an estimate of the Group‟s weighted
average cost of capital.
The value-in-use calculations are based on budget forecasts for each cash generating unit for the 2012 year and longer
term year-on-year growth rates which are based on underlying economic conditions and cash generating unit sector
specific forecasts. Revenue, gross margin and costs have been estimated using growth assumptions ranging from 1%
to 5%. Sensitivity analysis performed indicates any reasonable possible change in any of the key assumptions would
not result in impairment.
15. OTHER NON-CURRENT ASSETS
Borrowing costs
16. TRADE & OTHER PAYABLES (CURRENT)
Trade payables & accruals
Vendor liability
17. 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. LOANS & BORROWINGS (NON-CURRENT)
Lease liabilities
Hire purchase liabilities
Bank Loans
Page 47 of 80
2011
$’000
2010
$’000
-
89
84,929
68,655
153,584
1,609
239
11
1,859
17,147
52
17,199
32,923
11
32,934
3,128
2
101,405
104,535
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
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
20. LOANS & BORROWINGS (NON-CURRENT) CONTINUED
Bank Loans
As at 30 June 2011 the Group has bank loans totalling $101,416,141 (2010: $169,779,591), with an effective interest
rate of 2.48% (2010: 2.72%).
The facility limits comprise a multi-currency working capital facility of AUD35.0 million (2010: AUD19.0 million) and term
acquisition financing facilities of USD129.1 million (2010: USD129.1 million) and GBP8.55 million (2010: GBP8.55
million) all maturing in July 2014. The weighted average interest rate for term facilities ranges from 2.56% to 2.91%
(2010: 2.74% to 2.93%). Funding available to the Group from undrawn facilities is AUD66.6 million at 30 June 2011
indemnity.
(2010: AUD17.4 million). Facilities are secured by an unlimited
interlocking guarantee and
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 2011 (2010: Nil).
21. LONG-TERM PROVISIONS
Employee benefits
22. OTHER NON-CURRENT LIABILITIES
Deferred rent
Other
2011
$’000
2010
$’000
8,023
6,527
297
331
628
394
235
629
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 (net of transaction costs)
- Employee Tax Exempt Share Acquisition Plan
- Employee share based payments
30 June 2011
30 June 2010
No. of
shares
$’000
No. of
shares
$’000
90,510,461
252,080
84,272,249
227,457
399,663
16,106,665
388,936
-
2,033
52,654
2,351
2,265
392,854
5,410,426
434,932
-
1,646
20,663
1,764
550
Balance at the end of the year
107,405,725
311,383
90,510,461
252,080
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.
Page 48 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
5 December
2007
5 December
2008
2 December
2009
19 October
2010
29 November
2010
29 November
2011
2 December
2012
25 October
2010
5 December
2010
5 December
2011
2 December
2013
25 November
2010
25 November
2013
25 November
2014
Weighted average exercise price
Weighted average remaining contract life
Exercise
Price
$
Number of
Options at
Beginning
of Year
Fair
Value
at
Grant
Date
$
7.57
0.92
330,000
7.71
0.95
1,538,500
3.35
0.41
2,258,000
Options
Granted
Options
Lapsed
Number of
Options as
at 30 June
2011
Options
Vested
and
Expired
Not
Exercised
-
-
-
-
257,000
206,200
-
-
330,000
1,538,500
-
-
-
-
-
2,001,000
2,038,700
3,274,500
4.43
4.84
0.77
0.77
2,244,900
-
3,274,500
-
5.00
4.84
3.83
7.69
4.32
857 days
Total expense recognised $1,681,706 (2010: $454,311)
The options outstanding at 30 June 2011 have an exercise price in the range of $3.35 to $4.84. These options do not
entitle the holder to participate in any share issue of the Company.
The options issued prior to 2010 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 and since 2010 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 2011 include share price at grant
date of $4.86 (2010: $4.07), expected price volatility of the Company‟s shares of 30% (2010: 42%), expected dividend
yield of 7.00% (2010: 8.00%) and risk free interest rate of 4.90% (2010: 4.61%).
Page 49 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
2011
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
21 October
2010
22 October
2013
22 October
2014
25 November
2010
25 November
2013
25 November
2014
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
3.96
3.19
3.20
2.30
3.78
2.71
3.94
2.96
Total expense recognised $609,182 (2010: $95,899)
67,500
67,500
112,000
112,000
-
-
-
-
-
-
-
-
76,250
76,250
188,750
188,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
The fair values of rights granted during the year with a total shareholder return (TSR) 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 2011 include share price of $4.67 for
Rights granted on 21 October 2010 (FY10: $5.03, 22 October 2009) and $4.86 for Rights granted on 25 November 2010
(FY10: $4.07, 2 December 2009), expected price volatility of 32% and 30% (FY10: 42%), expected dividend yield of
7.00% (FY10: 8.00%) and risk free interest rate of 4.90% (FY10: 5.25% and 4.61%).
The rights are subject to performance hurdles measured over three financial years. 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.
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 Reserve
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 50 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
25. NOTES TO THE CASH FLOW STATEMENTS
(a) Reconciliation of Net Cash from Operating
Activities to Net profit for the year
Net profit for the year
Adjust for non-cash items
Depreciation
Amortisation
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 $1,992,336 (2010: $939,867) by
means of finance leases. These acquisitions are not reflected in the cash
flow statement.
(d) Acquisition of entities
Details of the acquisitions are as follows:
Purchase consideration
Cash consideration paid
Vendor liability
Consideration
2011
$’000
2010
$’000
58,802
37,597
8,257
3,097
2
(12,648)
4,630
(7,574)
(604)
227
(3,822)
(1,166)
2,002
(1,209)
16,711
2,813
1,402
3,174
(42)
(524)
73,528
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)
46,745
84,047
56,282
21,940
55,304
77,244
132,670
18,474
151,144
Page 51 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 paid
Less balance acquired
2011
$’000
2010
$’000
11,437
9,598
1,291
4,109
-
1,037
(4,230)
(222)
(3,520)
19,500
57,744
77,244
21,940
(11,437)
10,503
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
* As disclosed in note 34, the acquisition of BEC Engineering Pty Ltd was completed in June 2011. 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.
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)
2011
$’000
2010
$’000
2,351
3,749
-
6,100
(1,122)
4,978
1,848
3,130
-
4,978
2,531
3,922
-
6,453
(993)
5,460
2,045
3,415
-
5,460
1,848
3,130
4,978
2,045
3,415
5,460
Page 52 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 employees at 30 June
Defined contribution superannuation expense
2011
$’000
2010
$’000
23,720
47,740
23,557
95,017
25,970
52,032
28,021
106,023
16,025
17,199
8,023
41,247
No.
4,342
15,063
15,501
6,527
37,091
No.
3,657
$
$
11,994,190
9,752,309
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 Group, or
which is likely to have a material effect on the financial performance of the Group.
The Group had contingent liabilities at 30 June 2011 in respect of:
Bank guarantees
2011
$’000
2010
$’000
9,391
7,287
The Group has bank guarantees with financial institutions. A multiple guarantee facility is available to the Group totalling
$19 million (2010: $19 million). These facilities are secured by an unlimited interlocking guarantee and indemnity.
29. SUBSEQUENT EVENTS
On 16 August 2011, the Directors of Cardno Limited declared a final dividend of 17.0 cents per share (70% franked) for
the 2011 financial year. The dividend will be paid on 14 October 2011 to shareholders registered on 16 September 2011
and will total $18,662,605. The dividend has not been provided for in the 30 June 2011 financial statements.
Page 53 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
2011
$
2010
$
30. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2011 was based on
the profit attributable to ordinary shareholders of $58,802,020 (2010:
$37,597,311) and a weighted average number of ordinary shares
outstanding during the financial year ended 30 June 2011 of 104,463,652
(2010: 85,716,101), calculated as follows:
Profit attributable to ordinary shareholders
58,802,020
37,597,311
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
No.
90,510,461
13,824,398
128,793
No.
84,272,249
1,308,010
135,842
Weighted average number of ordinary shares at 30 June
104,463,652
85,716,101
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
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of share options and rights on issue
$
$
58,802,020
37,597,311
58,802,020
37,597,311
No.
104,463,652
1,771,232
No.
85,716,101
493,905
Weighted average number of ordinary shares (diluted) at 30 June
106,234,884
86,210,006
7,314,200 options issued during the 2008 and 2011 financial years and still on issue as at 30 June 2011 have not been
included in the calculation of diluted earnings per share because they are not dilutive for the year ended 30 June 2011
due to the exercise price being higher than the average market share price for the period. These options could
potentially dilute basic earnings per share in the future.
Page 54 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 services
Auditors of the Company
KPMG Australia:
- Other assurance services
-
Taxation services
Overseas KPMG firms:
-
Taxation services
32. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation included in employee benefits are as follows:
Short-term employee benefits
Long-term benefits
Post-employment benefits
Termination benefits
Equity compensation benefits
2011
$
2010
$
305,500
220,000
350,063
655,563
272,000
492,000
-
-
-
-
-
-
2,350
2,350
2011
$’000
2010
$’000
4,996
592
423
-
366
6,377
4,184
198
396
131
606
5,515
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 55 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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:
2011 OPTIONS
Held at
1 July 2010
Granted as
compensation
Lapsed
Vested &
expired
(not
exercised)
Held at
30 June 2011
Vested and
exercisable at
30 June 2011
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
150,000
70,000
50,000
40,000
105,000
-
125,000
105,000
-
-
*Retired from board of directors 21 October 2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150,000)
(70,000)
(50,000)
(40,000)
(45,000)
-
(55,000)
(45,000)
-
-
-
-
-
-
60,000
-
70,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
No options held by key management personnel had vested and were exercisable as at 30 June 2011.
2010 OPTIONS
Held at
1 July 2009
Granted as
compensation
Lapsed
Vested &
expired
(not
exercised)
Held at
30 June 2010
Vested and
exercisable at
30 June 2010
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Steven Coote *
CharlesTapp *
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)
(30,0000
-
-
(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
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:
2011 RIGHTS
Held at
1 July 2010
Granted as
compensation
Vested
Held at
30 June 2011
Vested and
exercisable at
30 June 2011
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
60,000
30,000
25,000
20,000
30,000
-
30,000
30,000
8,000
-
70,000
35,000
27,500
20,000
35,000
-
35,000
35,000
25,000
25,000
*Retired from board of directors 21 October 2010
-
-
-
-
-
-
-
-
-
-
130,000
65,000
52,500
40,000
65,000
-
65,000
65,000
33,000
25,000
-
-
-
-
-
-
-
-
-
-
Page 56 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
32. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
2010 RIGHTS
Held at
1 July 2009
Granted as
compensation
Vested
Held at
30 June 2010
Vested and
exercisable at
30 June 2010
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
-
-
-
-
-
-
-
-
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.
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:
Held at 1 July
2010
Purchases
Received as
Compensation
Sales
Held at 30 June
2011
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
*Retired from board of directors 21 October 2010
653,897
800,386
163,817
3,580
348
2011
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
2010
Non–Executive Directors
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn
Senior Executives
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
Kylie Sprott
Held at 1 July
2009
Purchases
Received as
Compensation
Sales
50,000
3,466
-
207,390
2,359,037
21,305
1,967,399
1,216,851
8,334
841
-
34,565
91,224
5,161
82,602
31,360
50,041
50,388
27,304
1,420
82
-
-
-
-
-
-
-
-
165
165
165
165
-
44,382
3,348
-
207,390
2,359,037
19,947
1,967,399
1,426,330
653,652
800,141
153,213
-
5,618
118
-
-
-
1,358
-
521
-
-
10,359
3,580
Page 57 of 80
-
-
-
-
-
-
-
-
245
245
245
-
-
-
-
-
-
-
-
(238,695)
-
-
-
-
-
-
-
-
-
-
-
-
(210,000)
-
-
-
-
58,334
4,307
-
241,955
2,450,261
26,466
2,050,001
1,009,516
704,103
850,939
191,286
5,165
430
Held at 30 June
2010
50,000
3,466
-
207,390
2,359,037
21,305
1,967,399
1,216,851
653,897
800,386
163,817
3,580
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
32. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
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.
Mr A D Buckley was a Director of CBD Professional Services Pty Ltd until 17 December 2009. Cardno billed for services
performed by him to a total of $20,688 in the 2010 financial year. The consolidated entity also used Carter Newell
Lawyers (associated with CBD Professional Services Pty Ltd) for legal advice throughout the year. The aggregate
amount of fees expensed was $16,268 (2010: $651).
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
2011
$’000
2010
$’000
84,047
118,740
669
203,456
56,282
104,779
836
161,897
153,584
106,394
259,978
82,462
175,240
257,702
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 material concentrations of credit risk.
Page 58 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
33. FINANCIAL RISK MANAGEMENT CONTINUED
Credit risk continued
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
2011
$’000
54,524
44,680
8,240
5,595
113,039
2010
$’000
39,549
41,763
10,587
8,481
100,380
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)
2011
2010
Gross
$’000
Impairment
$’000
Gross
$’000
Impairment
$’000
58,428
31,056
7,895
22,036
119,415
-
-
-
6,376
6,376
58,705
23,912
6,303
20,446
109,366
-
-
-
8,986
8,986
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
2011
$’000
2010
$’000
8,986
3,713
(6,622)
1,212
(913)
6,376
5,403
2,699
(1,242)
2,218
(92)
8,986
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.
Page 59 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
33. FINANCIAL RISK MANAGEMENT CONTINUED
Liquidity risk continued
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding
the impact of netting agreements:
30 June 2011
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans*
Carrying
amount
Contractual
cash flows
$’000
Less than
1 year
1 – 5 years
Over 5
years
153,584
4,978
101,416
153,584
6,100
101,635
153,584
2,351
238
-
3,749
101,397
259,978
261,319
156,173
105,146
* Bank loans are term facilities all maturing in July 2014.
30 June 2010
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Market risk
(a) Foreign exchange risk
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
-
-
-
-
-
-
-
-
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 $91.3 million (2010: $148.3 million) denominated in US dollars (USD) and $11.0 million (2010: $14.0 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 2011, a 10% strengthening of the Australian dollar against the USD and GBP would have increased equity
by $8.3 million (2010: $13.5 million) and $1.0 million (2010: $1.3 million) respectively. A 10% weakening of the
Australian dollar against the USD and GBP would have decreased equity by $10.1 million (2010: $16.5 million) and
$1.2 million (2010: $1.6 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.
Page 60 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
33. FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
(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
transactions which are of a speculative nature.
At the reporting date the interest rate profile of the Group‟s interest-bearing financial instruments was:
Variable rate instruments
Cash assets
Bank loans
Fixed rate instruments
Finance leases & hire purchase
Bank loans
Group sensitivity
30 June 2011
30 June 2010
Effective
Interest
Rate
Balance
$’000
Effective
Interest
Rate
Balance
$’000
2.43%
2.48%
7.89%
8.00%
84,047
(101,408)
(17,361)
(4,978)
(8)
(4,986)
3.10%
2.72%
7.93%
8.00%
56,282
(169,769)
(113,487)
(5,460)
(11)
(5,471)
At 30 June 2011, 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 $64,000 higher/lower (2010: $397,000 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 2011
(a)
In December 2010, the group acquired JF New & Associates (JFNEW), an environmental consulting firm
specialising in natural resources management, environmental permitting, habitat restoration, mitigation banking,
native plant materials and cultural resources consulting. The effective date was 31 December 2010.
For the period 1 January 2011 - 30 June 2011, the acquired business contributed revenues of $7,919,751 and net profit
after tax of $596,691. If the acquisition had occurred on 1 July 2010 revenue and NPAT for the Group would have been
$842,869,782 and $59,874,331 respectively.
Page 61 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
34. BUSINESS COMBINATIONS CONTINUED
Details of acquisitions
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired*
Goodwill
$’000
9,655
2,528
12,183
4,708
7,475
At the time of purchase the vendors of JF New & Associates subscribed for shares in Cardno Ltd to the value of
$2,409,835. The fair value of the ordinary shares issued was based on the 10 day VWAP of Cardno Ltd shares. The fair
value price was $5.43 for the purchase of shares by vendors of JF New issued 7 January 2011.
Cardno Limited has agreed to pay the selling shareholders of JFNew, additional consideration of USD$2,000,000 if the
acquiree‟s normalised EBITDA over the period 1 January 2011 to 31 December 2012 is USD$2,400,000. Where the
normalised EBIT is between USD$2,000,000 and USD$2,400,000 the payment will be pro-rated.
The goodwill is attributable to the skills and technical talent of the employees of JF New & Associates and the synergies
expected to be achieved from integrating the Company into the Group‟s existing operations.
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Property, plant and equipment
Inventories
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
606
1,997
2,467
339
(568)
(133)
4,708
606
1,997
2,467
339
(568)
(133)
4,708
9,655
606
9,049
Page 62 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
34. BUSINESS COMBINATIONS CONTINUED
(b)
In June 2011, the group acquired Roadtest Services Pty Ltd, an Australian based construction materials testing and
geotechnical engineering firm with around 60 staff based in Central Queensland. The effective date of acquisition
was 1 April 2011.
For the period 1 April 2011 - 30 June 2011, the acquired business contributed revenues of $2,428,405 and net profit after
tax of $975,569. If the acquisition had occurred on 1 July 2010 revenue and NPAT for the Group would have been
$839,067,516 and $61,106,731 respectively.
Details of acquisitions
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
12,285
465
12,750
2,542
10,208
At the time of purchase the vendors of Roadtest Services Pty Ltd subscribed for shares in Cardno Ltd to the value of
$3,071,322. The fair value of the ordinary shares issued was based on the 5 day VWAP of Cardno Ltd shares in the 5
days prior to the date of issuance of the shares. The fair value price was $5.66 for the purchase of shares by vendors of
Roadtest issued 15 June 2011.
The goodwill is attributable to the skills and technical talent of the employees of Roadtest Services and the synergies
expected to be achieved from integrating the company into the Group‟s existing operations.
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Property, plant and equipment
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
1,978
943
502
(374)
(507)
2,542
1,978
943
502
(374)
(507)
2,542
12,285
1,978
10,307
(c)
In June 2011 the Group acquired BEC Engineering Pty Ltd, an Australian based electrical engineering services firm
with around 100 staff. The effective date of acquisition was 1 June 2011.
For the period 1 June to 30 June 2011, the acquired business contributed revenues of $3,783,473 and net profit after tax
of $599,795. If the acquisition had occurred on 1 July 2010 revenue and NPAT for the group would have been
$863,137,384 and $63,959,562 respectively.
Page 63 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
34. BUSINESS COMBINATIONS CONTINUED
Details of acquisitions
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill*
$’000
51,310
1,000
52,310
12,251
40,059
* The acquisition of BEC Engineering was completed during June 2011. 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.
Under the purchase agreement, the vendors of BEC subscribed for shares in Cardno Ltd to the value of $11,250,015.
The fair value of the ordinary shares issued was based on the 5 day VWAP of Cardno Ltd shares in the 5 days prior to
the date of issuance of the shares. The fair value price was $5.52 for the purchase of shares by vendors of BEC issued 6
July 2011.
Cardno Limited has agreed to pay the selling shareholders of BEC Group additional consideration of $1,000,000 if the
acquiree‟s normalised EBIT over the period 1 July 2011 to 30 June 2012 is $9,000,000 or more. Where the normalised
EBIT is between $8,000,000 and $9,000,000 the payment will be pro-rated.
The goodwill is attributable to the skills and technical talent of the employees of the BEC Group and the synergies
expected to be achieved from integrating the company into the Group‟s existing operations.
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Deferred tax assets
Property, plant and equipment
Inventories
Creditors and borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid*
Less: Balances acquired
Cash
Outflow of cash
Acquirees’
carrying
amount
$’000
Fair Value
$’000
8,853
6,532
868
1,140
699
(3,717)
(221)
(1,903)
8,853
6,532
1,290
1,140
699
(3,717)
(221)
(2,325)
12,251
12,251
-
8,853
(8,853)
* The cash component of the purchase consideration was paid on 6 July 2011. As at 30 June 2011, the amount
payable of $51,310,000 has been recognised as a vendor liability and included in note 16.
Page 64 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
34. BUSINESS COMBINATIONS CONTINUED
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 and 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.
Cardno Limited 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. This was calculated and paid
during the year ended 30 June 2011.
Cardno Limited 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 was
$1,700,000 or more. This amount was included in the purchase consideration based on estimates of the acquiree‟s
financial performance over the earn-out period. This has now been achieved and will be paid for in accordance with the
Share Sale Agreement being 50% in April 2011, 25% in April 2012 and 25% in April 2013.
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.
Page 65 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
34. BUSINESS COMBINATIONS CONTINUED
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 paid
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
(b)
In June 2010, the Group acquired 100% of ENTRIX, a US based consultancy firm 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 and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
81,067
4,294
85,361
18,255
67,106
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 employees of ENTRIX and the synergies expected to
be achieved from integrating the Company into the Group‟s existing operations.
Page 66 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
Intangibles
Creditors & borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
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
1,167
(19,254)
(239)
(1,257)
18,255
81,067
1,071
79,996
(c)
In 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 and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
26,610
11,404
38,014
4,280
33,734
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.
Cardno Limited agreed to pay the selling shareholders of Environmental Resolutions, Inc additional consideration of
USD$8,089,000 if the acquiree‟s normalised EBITDA over the period 1 June 2010 to 31 May 2011 exceeded
USD$6,371,000. This amount was included in the purchase consideration based on estimates of the acquiree‟s financial
performance over the earn-out period. This has now been achieved and paid in July 2011.
The goodwill is attributable to the skills and technical talent of the employees of Environmental Resolutions Inc and the
synergies expected to be achieved from integrating the Company into the Group‟s existing operations.
Page 67 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
Intangibles
Creditors & borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
35. SEGMENT INFORMATION
Acquirees’
carrying
amount
$’000
Fair Value
$’000
674
3,693
1,985
-
1,111
-
(3,541)
(42)
(576)
3,304
674
3,693
1,985
-
1,111
975
(3,540)
(42)
(576)
4,280
26,610
674
25,936
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, electrical engineering 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.
2011
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
Segment assets
Segment liabilities
Other
Acquisitions of non-
current assets
Depreciation and
amortisation of
assets
Professional
Services
Australia & NZ
Professional
Services
Americas &
Software
International
Development
Assistance
Total
$’000
229,607
26,022
-
255,629
758
256,387
34,021
285,907
128,778
257,303
184,701
(133)
441,871
447
442,318
51,806
272,162
19,404
84,282
571,192
46,844
257,567
(960)
130,166
382
130,548
(1,093)
827,666
1,587
829,253
4,175
90,002
90,876
648,945
48,059
196,241
58,852
13,643
542
73,037
6,325
4,512
519
11,356
Page 68 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
35. SEGMENT INFORMATION CONTINUED
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 assets
Depreciation and
amortisation of
assets
26,980
69,576
237
96,793
6,032
1,872
621
8,525
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
2006
$’000
2005
$’000
2011
$’000
2010
$’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
828,759
(1,093)
1,948
1,587
831,201
90,002
1,948
(4,501)
(3,146)
84,303
(25,501)
58,802
648,945
32,667
681,612
196,241
35,968
92,207
324,416
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
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
2011
Total
Non-Current
Assets
Revenues
2010
Total
Non-Current
Assets
306,471
480,874
15,334
26,574
-
829,253
151,534
214,160
687
21,785
6,130
394,296
286,652
141,301
15,042
32,814
-
475,809
129,277
214,182
545
25,807
4,476
374,287
36. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2011 the parent Company of the Group was Cardno Limited.
2
5
Company
2011
$’000
2010
$’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
42,696
-
42,696
29,692
-
29,692
291,975
449,661
108,086
108,141
311,383
-
30,137
341,520
208,711
327,402
53,833
53,907
252,080
-
21,415
273,495
2,214
2,151
A multiple guarantee facility is available to the Group totalling $19 million (2010: $19 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 2011
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 2011 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
2011
$’000
2010
$’000
287,971
234,201
(143,792)
(50,712)
(41,983)
(50)
(3,883)
725
48,276
(7,184)
41,092
(2,639)
38,453
30,508
2,639
(33,975)
37,625
(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
37,625
30,508
Page 71 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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
2011
$’000
24,422
294,771
18,569
879
338,641
-
269,304
517
6,571
40,738
370
317,500
656,141
172,485
102,344
6,681
10,935
6,776
299,221
-
-
4,497
7,333
31
11,861
311,082
345,059
311,384
(3,950)
37,625
345,059
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
(1,318)
30,508
281,270
Page 72 of 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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 2011
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
Cardno JF New, Inc
Cardno AUS Pty Ltd
Roadtest Emerald Pty Ltd
BEC Engineering Pty Ltd
BEC Engineering (Qld) Pty Ltd
Cardno (Colombia) S.A.S.
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
United States of America
Australia
Australia
Australia
Australia
Colombia
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 74 of 80
Directors’ Declaration
Cardno Limited and its Controlled Entities for the year ended 30 June 2011
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)
(i)
giving a true and fair view of the Group‟s financial position as at 30 June 2011 and of its performance for
the financial year ended on that date; and
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 37 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 2011.
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 2011.
Signed in accordance with a resolution of the Directors.
JOHN C MASSEY
Chairman
Page 75 of 80
ABCD
Independent auditor’s report to the members of Cardno Limited
Report on the financial report
We have audited the accompanying financial report of Cardno Limited (the Company), which
comprises the consolidated statement of financial position as at 30 June 2011, and consolidated
statement of financial performance, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the
year ended on that date, notes 1 to 38 comprising a summary of significant accounting policies
and other explanatory information and the directors’ declaration of the Group comprising the
Company and the entities it controlled at the year’s end or from time to time during the financial
year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether
due to fraud or error. In note 1(a), the directors also state, in accordance with Australian
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the
financial report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Page 70 of 71
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International, a Swiss cooperative.
Liability limited by a scheme approved under
Professional Standards Legislation.
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2011 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001;
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in note 1(a).
Report on the remuneration report
We have audited the Remuneration Report included on pages 9 to 18 of the directors’ report for
the year ended 30 June 2011. The directors of the Company are responsible for the preparation
and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Cardno Limited for the year ended 30 June 2011,
complies with Section 300A of the Corporations Act 2001.
KPMG
Robert S Jones
Partner
Brisbane
16 August 2011
Page 71 of 71
Additional Shareholder Information
Distribution of Ordinary Shareholders
The number of shareholders, by size of holding, as at 31 August 2011 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
5,204
3,793
1,226
1,107
118
11,448
Number of
Shares
2,131,485
9,803,678
8,813,440
26,739,604
62,291,825
109,780,032
As at 31 August 2011 there were 745 shareholders who held less than a marketable parcel of 96 shares.
Twenty Largest Ordinary Shareholders
The names of the twenty largest holders as at 31 August 2011 were:
RBC Dexia Investor Services Australia Nominees Pty Limited
< PIPOOLED A/C>
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Andrew Buckley
Pat Beyer
Trevor Johnson
J P Morgan Nominees Australia Limited
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