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Cardno LimitedC AR D NO
A NN U AL
RE PO RT
is to be a world leader in
the provision of professional
services to improve the physical
and social environment.
Above:
Training Cardno team members delivers highly valued
expertise to our clients.
Cover:
Top Left: Cardno provided construction and inspection
services on the D-4 Indian Street Bridge in Stuart, Florida.
Bottom Left: Cardno is providing structural engineering for
the Energy Centre Three campus development in Texas.
Cover:
Top Right: Cardno’s Emerging Markets business delivers
social, environmental and engineering services to donors,
governments and private sector clients around the world.
Bottom Right: Cardno delivered services to the stage
one development of the Gold Coast Rapid Transit
System, Queensland.
02 Performance
16 CEO’s report
36 Senior Executives
04 10 years on the ASX
18 Operational review
38 Corporate Governance
06 What we do
24 Mergers and acquisitions
08 Where we work
24 Financial review
10 Featured projects
30 Our people
14 Chairman’s statement
34 Board of Directors
Statement
45 Financial report
116 Corporate directory
Cardno is an ASX200 professional infrastructure and environmental services company, with expertise in the
development and improvement of physical and social infrastructure for communities around the world. Cardno’s team
includes leading professionals who plan, design, manage and deliver sustainable projects and community programs.
Cardno is an international company listed on the Australian Securities Exchange [ASX:CDD].
mission
values
Attracting, developing, retaining and rewarding
valued people
Understanding and meeting the expectations
of our clients
Sustaining the growth of our profile and markets
Continually improving the safety and quality
of our service delivery
Creating shareholder value through
high performance
Self confidence: Positive, Valued, Confident
Safety: Responsible, Aware, Vigilant
Partnering: Client-focused, Trusted, Inclusive
Great people: Determined, Successful, Professional
Passion: Committed, Courageous, Dynamic
Innovation: Forward-thinking, Entrepreneurial, Creative
Integrity: Ethical, Honest, Accountable
Sustainability: Balanced, Aware, Considerate
Cardno Annual Report 2014 01
Cardno achieved a net profit after tax of A$78.1 million,
a 0.6 per cent increase over the 2013 financial year.
Earnings per share decreased by 5.5 per cent to 52.04 cents,
while total revenue was up 9.6 per cent to A$1,309.6 million.
TEN YEAR PERFORMANCE (A$M)
Revenue
EBITDA**
EBIT
NPAT
Operating Cash Flow
EPS - basic (cents)
2004
64.9
8.8
6.9
4.5
9.8
2005
100.1
13.5
10.3
6.9
11.4
2006
186.8
25.6
22.1
12.7
13.4
2007
265.3
33.2
28.0
18.5
25.8
2008
399.0
50.6
42.5
27.5
37.5
2009
515.8
57.7
46.7
34.2
38.6
2010
477.2
55.3
46.5
37.6
46.8
2011
831.2
2012
2013
2014
965.8
1,195.4
1,309.6
100.2
128.7
138.0
141.7
88.0
111.1
114.3
115.2
58.8
73.5
74.2
72.6
77.6
95.7
78.1
84.6
14.44
19.29
31.37
37.29
42.00
43.82
43.86
56.29
61.73
55.09
52.04
Dividend per share (cents)
11
14
19
23
27
28
29
34
36
36
36
SEGMENT REVENUE
Americas
Australia & New Zealand
Rest of World
-
58.6
6.0
-
92.0
8.1
-
6.1
41.9
98.9
106.2
434.8
445.6
150.9
35.5
199.0
59.9
250.2
105.2
237.4
178.1
220.1
252.9
362.1
149.6
141.6
156.2
599.1
411.9
182.9
694.7
392.8
221.1
SEGMENT RESULT (before financing costs and taxation)
Americas
Australia & New Zealand
Rest of World
-
6.3
0.3
-
8.1
1.8
-
19.4
2.4
2.0
22.8
2.9
3.4
31.3
6.0
6.1
29.0
8.6
8.4
33.5
7.5
51.2
33.4
5.4
46.7
55.5
8.3
56.3
57.7
8.0
57.8
51.7
10.1
** EBITDA = EBIT plus depreciation and amortisation
EBITDA and EBIT are unaudited. However, they are based on amounts extracted from the audited financial statements as reported in the consolidated statement of financial performance on
page 65. These metrics provide a measure of Cardno’s performance before the impact of non-cash expense items, such as depreciation and amortisation, as well as interest costs associated with
Cardno’s external debt facility and hire-purchase arrangements.
02 Cardno Annual Report 2014
GROUP REVENUE
A$ million
$1.3B 9.6%
NET PROFIT AFTER TAX
A$ million
$78.1M 0.6%
CAGR*
+35.1%
CAGR*
+33.1%
.
9
4
6
4
0
0
2
.
1
0
0
1
5
0
0
2
.
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7
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.
9
9
3
8
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8
.
5
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5
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2
.
7
7
4
0
1
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2
2
.
1
3
8
1
1
0
2
8
.
5
6
9
2
1
0
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4
.
5
9
1
,
1
3
1
0
2
6
.
9
0
3
,
1
4
1
0
2
5
.
4
4
0
0
2
9
6
.
5
0
0
2
7
.
2
1
6
0
0
2
5
.
8
1
7
0
0
2
5
.
7
2
8
0
0
2
2
.
4
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9
0
0
2
6
.
7
3
0
1
0
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.
8
5
1
1
0
2
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.
4
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2
1
0
2
6
.
7
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3
1
0
2
1
.
8
7
4
1
0
2
EARNINGS PER SHARE (BASIC)
A$ cents per share
52.04c 5.5%
OPERATING CASH FLOW
A$ million
$84.6M 11.6%
CAGR*
+13.7%
CAGR*
+24.1%
4
4
.
4
1
4
0
0
2
9
2
.
9
1
5
0
0
2
7
3
.
1
3
6
0
0
2
9
2
.
7
3
7
0
0
2
0
0
.
2
4
8
0
0
2
2
8
.
3
4
9
0
0
2
6
8
.
3
4
0
1
0
2
9
2
.
6
5
1
1
0
2
3
7
.
1
6
2
1
0
2
9
0
.
5
5
3
1
0
2
4
0
.
2
5
4
1
0
2
* CAGR = 10 Year Compound Annual Growth Rate.
4
.
1
1
4
.
3
1
5
0
0
2
6
0
0
2
8
.
9
4
0
0
2
8
.
5
2
7
0
0
2
5
.
7
3
8
0
0
2
6
.
8
3
9
0
0
2
8
.
6
4
0
1
0
2
5
.
3
7
1
1
0
2
6
.
2
7
2
1
0
2
7
.
5
9
3
1
0
2
6
.
4
8
4
1
0
2
10%
12%
26%
22%
FEE REVENUE BY
OPERATING SEGMENT
(PROFORMA)*
FY2014
32%
58%
37%
FEE REVENUE
BY SERVICES
(PROFORMA)*
FY2014
51%
FEE REVENUE
BY MARKET
(PROFORMA)*
FY2014
12%
29%
11%
Americas
Australia & NZ
Rest of World
Engineering Survey & Planning
Environment & Natural Resources
Social Infrastructure, Economics & Software
Oil & Gas
Contractors
Other Private
Resources
Government
*Graphs presented on a proforma basis which assumes
Cardno acquired its FY2014 merger partners on 1 July 2013.
Cardno Annual Report 2014 03
Cardno was formed as an
engineering practice in Brisbane,
Australia, in 1945. It was listed
on the Australian Securities
Exchange in 2004.
2008
2009
2010
2011
> 20th merger since listing
with acquisition of Cardno
Ecology Lab (New South
Wales, Australia)
> Expands US infrastructure
capabilities with acquisition
of Cardno TBE same day as
Lehman Brothers collapse
GROSS REVENUE EXCEEDS
$400m
STAFF EXCEEDS
3,500
> 30th merger since
listing with acquisition
of Cardno Lane Piper
(Victoria, Australia)
STAFF
EXCEEDS
5,000
GROSS REVENUE
EXCEEDS
$800m
> Environmental leadership
credentials attained with
acquisition of Cardno ERI,
Cardno ENTRIX and
Cardno JFNew
> Significant engagement
on the Gulf of Mexico
Oil Spill
04 Cardno Annual Report 2014
2004
2005
2006
2007
Firm debuts on ASX,
trading as CDD on
20 May (IPO $1 share)
Expands internal
project capabilities in
foreign aid assistance
with acquisition of
Cardno ACIL and
Cardno Agrisystems
Primary entrance to
United States with the
acquisition of Cardno
WRG (Oregon) and
Cardno EMG (Virginia)
>
Initial market
capitalisation $35m
STAFF AT
500
REVENUE AT
$64.8m
> 10th merger since
listing with acquisition of
Cardno Grogan Richards in
Victoria, Australia
GROSS REVENUE EXCEEDS
$100m
STAFF EXCEEDS
2,500
2012
2013
2014
Cardno added to
the ASX200
Achieved 9th year of
record profits
10th YEAR
as an ASX listed entity
> 40th merger with Cardno
Caminosca brings South
America expansion
> Merged with 1,600-person
Cardno ATC in US
> Australian Export
Award winner
> ZweigWhite fastest growing
firm in North America three
years in a row
GROSS REVENUE EXCEEDS
$1billion
> 50th merger with Cardno
PPI augments material oil
and gas capabilities
STAFF EXCEEDS
8,000
“The decision to list
Cardno positioned
the company for
further growth and
now, 10 years on,
we continue to
successfully pursue
our mission to help
shape the future for
communities around
the world.”
MICHAEL RENSHAW,
CEO
Cardno Annual Report 2014 05
WHAT
WE DO
The skills and
experience of our
team allow us to
offer a broad range
of integrated
services globally.
BUILDINGS
Cardno plays a vital role in contributing
to the built environment. Our structural,
electrical, mechanical and facilities
management services support clients to
deliver commercially viable, cost-effective
and innovative solutions. From health,
education and institutional facilities, to
commercial, residential and sports stadium
projects, Cardno can assist with planning,
design, construction, materials testing
and facilities management. Our projects
have won awards for sustainability and
technological innovation.
LAND
Cardno is a leading provider of planning,
environmental, design and construction
services for residential, commercial and
industrial development. From site assessment
to project completion, we offer an extensive
range of services based on our commitment
to our clients, our stakeholder engagement
and the recognition of the possibilities
and potential stakeholder benefits which
can flow from any development challenge.
Our expertise is used to meet the complex
challenges of water and terrain management,
brownfield and greenfield development and
ecologically sensitive sites.
MANAGEMENT SERVICES
Cardno is recognised as a leader in the
provision of management services and
advice to a range of government and other
organisations. Our experienced professionals
work with our clients to review, evaluate
and implement systems, procedures and
policies to help manage and safeguard assets
and achieve strong returns on investment.
Cardno’s management consulting skills
associated with infrastructure development
are many and varied, encompassing due
diligence and feasibility studies, security
audits, privatisation of infrastructure, asset
management, facilities management, value
engineering, risk management, and project
and program management.
ENERGY AND RESOURCES
Cardno has extensive capability, expertise
and experience in the energy and
resources sector. Our clients benefit from
our commitment to providing high level
services and a full range of cost-effective,
sustainable solutions for the resources
sector worldwide. Cardno’s expertise
spans planning and permitting, resource
reserve analysis, exploration, production,
electrical design systems, transportation and
conveyance for mining, oil and gas, electricity
and hydropower projects. Community
engagement and environmental services
from Cardno play a key role in the start-up,
operation and ultimate restoration of energy
and resources projects.
For more
information
about Cardno’s markets
and services please visit
www.cardno.com
06 Cardno Annual Report 2014
COASTAL AND OCEAN
Cardno has expertise in the impact of
natural and built environments in ocean,
coastal and estuarine settings, and the
assessment, management and protection
of the aquatic environment in both salt
and freshwater. Our specialist knowledge
underpins the delivery of infrastructure
which fosters economic growth and
environmental sustainability. Cardno assists
clients to plan, design and monitor diverse
projects such as ports/harbours, marinas
and breakwaters, subsea infrastructure, and
offshore oil and gas facilities.
ENVIRONMENT
Cardno delivers commercially strategic
environmental management solutions.
We employ leading global expertise in
terrestrial and marine ecology, hazardous
materials and contaminated land, waste
management, remediation, environmental
impact statements, water resource
management and regulatory compliance.
Our multi-disciplinary teams work closely
with government, industry, developers,
land owners and the community to utilise,
conserve and enhance resources so natural
systems are managed and preserved for
current and future generations.
EMERGING MARKETS
Cardno has a long history of working in
partnership with developing countries to
deliver solutions for sustainable development.
Through the expertise of professionals
operating throughout the world, we
investigate the underlying causes of poverty
and focus on providing and improving the
physical, economic and social infrastructure
that sustains communities. Cardno utilises its
own skilled staff and a pool of talented global
contractors to deliver projects ranging from
water supply and sanitation, to educational
reform, coordination of elections and
international trade facilitation.
TRANSPORTATION
Cardno is at the forefront of expertise in the
assessment, planning, construction design
and management of transport infrastructure
projects. Our experience spans both local
and international projects, ranging from
providing detailed analysis and reports to
the delivery of major transportation projects.
Working with both major contractors and
government agencies, Cardno’s expertise
supports strategic road, highway, rail, sea
and airport infrastructure. This encompasses
both above-ground infrastructure, as well as
tunnels and subsurface utility coordination.
WATER
Cardno is renowned for its comprehensive
and leading skills in all stages of the
water cycle in both the built and natural
environment. Whether it is a detailed
water supply analysis, a major flooding or
water quantity investigation, a water rights
assessment, or any other water or drought
management issue, Cardno can provide
the expertise needed to address client
requirements. In addition to water cycle
management, clients around the world tap
into Cardno’s expertise to plan, design and
deliver water-related infrastructure, ranging
from dams and reservoirs to water and
wastewater conveyance, treatment
and re-use.
DEFENCE
Cardno has significant experience in
supporting defence-related projects globally
through our environmental and infrastructure
skills. Our expertise is valued by government
agencies and contractors. Our specialists
provide comprehensive services through a
project’s life cycle to help clients effectively
address environmental and operational
issues at installations and training facilities.
From strategic business consulting
and planning to facility assessment,
environmental impact statements and
design, Cardno team members are engaged
to support our clients’ needs.
Cardno Annual Report 2014 07
Anchorage
NEW PARTNER
Cardno Haynes Whaley
A company providing
structural engineering
services across the US.
Portland
6
Washington DC
NEW PARTNER
Cardno IT Transport
A transport consulting
and civil engineering
business operating in
developing countries.
Los Angeles
Honolulu
Tampa
7
5
NEW PARTNER
Cardno PPI
An oil and gas firm that
supplies drilling and
completion services in
the US, Africa and Asia.
Bogotá
Quito
4
Lima
Retford
eee
Thame
Newbury
uryyyuryury
Brussels
10
Nigeria
PEOPLE
8,200
OFFICES
270
COUNTRIES
100
KEY
Countries where Cardno is currently delivering projects
FY2014 merger partners
Cardno of(cid:108)ces
1
Featured projects (please refer to pages 10-13 for details)
08 Cardno Annual Report 2014
Abu Dhabi
Nairobi
9
Manila
8
Singapore
Jakarta
Darwin
Port Moresby
Cairns
Perth
Brisbane
1
3
Sydney
Canberra
Melbourne
Wellington
2
Christchurch
LANGUAGES
SERVICES
NEW MERGER PARTNERS
104
280
3
Our global team is extraordinarily diverse, with roles ranging from environmental scientists, engineering professionals and planners,
to economists, emergency response personnel, large scale project managers, technical experts, industry specialists and designers of
sustainable projects and community programs.
Cardno Annual Report 2014 09
> 1 COMMONWEALTH
> 2 WAIKANAE
GAMES VILLAGE
Queensland, Australia
WATER TREATMENT
PLANT UPGRADE
Waikanae,
New Zealand
Cardno has been engaged to provide
a range of professional services for
the Gold Coast 2018 Commonwealth
GamesTM Village, to be located on a
redeveloped 29-hectare site at Parklands.
The village will include more than 1,200
apartments and townhouses across over
30 new buildings ranging in heights of
up to nine levels. It will also feature a
neighbourhood shopping centre, seven
hectares of parkland and a vibrant
Main Street and village heart precinct.
Cardno’s role will involve town planning,
civil engineering and traffic engineering,
supporting the project through design,
approval and construction. The village
will accommodate 6,500 athletes and
officials during the games and has
been designed to provide a future
legacy for the city.
Cardno provided project management
and planning expertise for an initiative
to upgrade the Waikanae Water
Treatment Plant in New Zealand.
The innovative concept focused on
recharging the Waikanae River with
bore water, allowing the river water
supply to the plant to be maintained
during low river flows. Cardno supplied
mechanical, process, electrical,
civil, geotechnical, architectural and
structural engineering design, as well
as contract administration services.
This project included extensive
upgrades of the water treatment
plant’s raw water intake, raw and
treated water pumps, chemical dosing
systems, electrical systems, and
plant buildings. Extensive reticulation
upgrades were also undertaken.
FEATURED
PROJECTS
For more information
about Cardno’s many
projects please visit
www.cardno.com
10 Cardno Annual Report 2014
> 3 NAMBUCCA
HEADS TO URUNGA
PACIFIC HIGHWAY
UPGRADE
New South Wales,
Australia
> 4 CONSTRUCTION
SUPERVISION OF
QUITO’S FIRST
SUBWAY LINE
Quito, Ecuador
> 5 OILFIELD EQUIPMENT
INVENTORY
MANAGEMENT
PROGRAM
Deepwater Region of the
Gulf of Mexico
Cardno is supervising phase one
construction of the first line of the
Quito Subway, which will feature
15 underground stations in Ecuador’s
capital city. The first phase is focusing
on the La Magdalena and El Labrador
stations, and Cardno is overseeing
construction of these facilities, as
well as surface bus interchanges,
buildings and urban equipment.
Cardno is providing construction
materials testing services for an
initiative to improve safety and reduce
travel times on a major commuter road
in northern New South Wales. The
Nambucca Heads-to-Urunga (NH2U)
project will upgrade and duplicate a
23-kilometre section of the Pacific
Highway. Cardno’s construction
materials testing expertise is being
utilised across bulk earthworks,
pavements, aggregates and concrete
testing. Our experienced team has
already delivered results above client
expectations, such as making a state-
of-the-art laboratory available within
days of the site being established.
A major oil and gas producer adopted
Cardno’s inventory management
system as the system of record for
its drilling and completion equipment
for the deepwater region of the Gulf
of Mexico. Data can be imported
into the client’s existing Enterprise
Resource Planning (ERP) system
while delivering a higher degree of
accuracy. It tracks equipment location,
status, shelf life, drawings and notes,
manufacturer data and inspection
schedule. The client can make
informed decisions on equipment
maintenance and replacement.
Please refer to the global map on
page 8 for project locations.
Cardno Annual Report 2014 11
> 6 MARQUETTE PARK
LAKEFRONT EAST
MASTER PLAN
Indiana, North America
> 7 I-95 CORRIDOR
INTERCHANGE
UPGRADES
Florida, North America
For more information
about Cardno’s many
projects please visit
www.cardno.com
Cardno provided environmental
design, engineering, wetland
delineation, permitting and
construction oversight services for all
phases of this ecological restoration
project. The work also involved
restoration of black oak savanna,
fore dunes, lagoon and fish habitat
and water quality enhancement.
The native landscaping required
more than 84,000 native plants and
more than 200 pounds of native seed
from the Cardno native plant nursery.
In 2014, the project received Indiana
Landmarks’ Cook Cup for
Outstanding Restoration.
Cardno is providing construction
management and construction
engineering and inspection services
for the upgrade and widening of five
major interchanges along the I-95
corridor in Florida. This project will
accommodate projected growth in
urban areas and will provide for the
future addition of toll lanes. Work
includes bridge widening, construction
of a pre-stressed soil anchor abutment
wall and mechanically stabilised
earth (MSE) walls, adding of auxiliary
lanes and ramp widening along
with ancillary sign, signalisation
and lighting improvements. This is
Cardno’s third major I-95 project for
the Florida Department of Transport.
12 Cardno Annual Report 2014
> 8 BASIC
EDUCATION SECTOR
TRANSFORMATION
Mindanao, Philippines
> 9 MOZAMBIQUE
REGIONAL GATEWAY
PROGRAMME
Mozambique
> 10 ASANKO GOLD
MINE 161KV GRID
CONNECTION
Ghana
Cardno has been contracted to manage
a new initiative that will improve
primary and secondary education in
the Philippines. The five-year Basic
Education Sector Transformation
(BEST) program aims to develop student
competencies, particularly in English
(reading), mathematics and science.
The Department of Foreign Affairs
and Trade-funded program will ensure
boys and girls in targeted regions
complete basic education. Working
closely with the Philippines Department
of Education, the BEST program will
also introduce more inclusive, gender
responsive and decentralised education
services. Cardno’s management
work will be supported through
extensive research, change
management and communications.
Cardno has significant management
responsibilities for a large initiative
to improve the volume and quality of
international trade in southern Africa.
The Mozambique Regional Gateway
Programme (MRGP) is improving the
regional infrastructure network, focusing
on roads, railways and ports. The
project is funded by UK Department
for International Development (DFID)
Southern Africa with significant
investment from development finance
institutions and the private sector.
The MRGP is a result of substantial
investment in mining in Mozambique,
Zambia, Malawi, Botswana and the
Democratic Republic of the Congo, which
has created opportunities to expand and
enhance existing transport corridors to
the Indian Ocean ports in Mozambique.
Cardno is applying robust project
management processes and effective
technical support, including pre-feasibility,
feasibility and design studies.
Cardno is providing engineering,
procurement and construction
management for the grid connection at
the new Asanko Gold Mine in Ghana,
West Africa. To supply the new mine
with power, a new 30-kilometre,
161kV power line connected back to
an existing grid and a new 161kV/11kV
substation adjacent to the mine site
are required. Cardno’s scope of work
covers the project management,
conceptual design, selection of
contractors, design review, liaison
with grid authority, consulting,
survey, as well as environmental
and social impact assessment.
It also incorporates testing and
commissioning management.
Please refer to the global map on
page 8 for project locations.
Cardno Annual Report 2014 13
CHAIRMAN’S
STATEMENT
After ten years of growth, Cardno
delivered another steady result for
shareholders in FY2014 despite
variable economic conditions
across several key markets.
RESULTS
The company achieved a net profit after
tax of A$78.1 million, which is marginally
higher than our FY2013 result.
Cardno increased year-on-year earnings,
despite lower than expected levels of
organic growth and reduced EBIT margins.
Revenue increased 9.6 per cent, to
A$1,309.6 million. Basic earnings per share
were 52 cents, while Cardno’s fully franked
dividend was held at 36 cents.
GROWTH
We have continued to expand our
capabilities and offerings across a broad
range of service areas and geographic
locations, generating value for clients and
shareholders over the past year.
The addition of two major merger partners
in the United States has been important.
Structural engineering services firm Cardno
Haynes Whaley and oil and gas engineering
business, Cardno PPI, both performed well
and we welcome them to the company.
MARKETS
Adverse economic conditions around the
world, particularly impacting the engineering
and construction sectors, were the primary
factor affecting our profit performance.
Cardno’s businesses in the United States
achieved consistent revenue growth. Severe
winter weather conditions reduced GDP to
0.1 per cent in the third quarter and had a
material impact on our field services.
Market conditions in the Australia and
New Zealand Region remained subdued.
Governments committed less spending to
infrastructure, urban and environmental
projects, resulting in reduced earnings
from key sectors and competitive pressure
on margins.
THE FUTURE
Despite the impact of a tough operating
environment, we are certainly not satisfied
with our FY2014 financial results. We have
already commenced a significant amount of
work to improve performance.
The company is determined to grow our base
business revenues, improve EBIT margins,
add service capabilities and further develop
our people’s skills and expertise.
Cardno has put important actions in place
to reduce overhead costs, merge office
locations, integrate our shared services
model, and develop priorities to grow
organic revenue.
Our strategic aim is to position the company
as a top 20 global engineering firm by 2020,
build recurring revenue streams, and increase
organic growth through cross-selling services
and leveraging strategic clients.
OUR PEOPLE
One of Cardno’s key competitive advantages
is the high level of diversity and expertise
among our global workforce. More than
80 per cent of our team of 8,200 people
operating in over 100 countries is made up of
professionals and technical staff with well-
developed capabilities and internationally
recognised competencies.
The company is committed to progressively
improving diversity in our employee
recruitment, work practices, development
and training, which we believe create better
business and market opportunities for Cardno.
We are committed
to improving
Cardno’s
capabilities
and profits for
shareholders.
14 Cardno Annual Report 2014
In our view, initiatives that build on
the benefits of a diverse workplace,
encompassing gender, religion, ethnicity,
language and disability, make sound
business sense. Our Women in Cardno
program, which strives to provide career
and advancement opportunities for women
across the business, is just one example.
Cardno has a significant number of Spanish-
speaking employees and translates all
essential communications for their benefit.
SAFETY
Cardno is committed to very high safety
performance by providing a positive and
safe working environment for all of our
employees and contractors. Cardno has
a Zero Harm global safety program that
underpins all operations and responds to
the needs of the business, staff and clients’
standards for workplace health and safety.
In FY2014, we developed a new global
safety reporting tool to provide employees
with an application to report hazards or near
misses by a computer or mobile phone.
A new safety and quality module has been
added to our “Management Essentials”
training program. This equips managers
with the skills to engage directly with our
workforce and is designed to improve
safety outcomes.
We are committed to an environment of
shared responsibility, risk awareness and
clear communication for all employees.
OUTLOOK
The company is well positioned for the
future despite the reality of uneven growth
across some economies and regions.
Growth potential is improving in the Americas
Region, particularly in the United States, with
signs of improvement in the energy, oil and
gas, and infrastructure sectors.
Conditions in Australia and New Zealand
continue to be more challenging. However,
there appears to be positive growth in
the tourism and energy markets, and
government spending is expected to improve
during the 2015 calendar year.
Cardno will continue to seek acquisition
opportunities that develop our service
offerings, particularly in sectors with
improved margins that strengthen our
market position and capabilities. We will
balance these efforts with a primary focus
on core business revenue and earnings
per share growth.
BOARD OF DIRECTORS
Cardno’s rigorous governance structure
works to support competitive and consistent
investment returns for our shareholders.
Our Directors possess the experience,
qualifications and skills to fulfil their
responsibilities, ensuring we operate in an
ethical, sustainable and responsible manner.
I welcome Elizabeth Fessenden to the Board.
As Cardno’s second female Non-Executive
Director and first based in the United States,
she will bring valuable skills and insights on
the Americas market to our Board.
The Board is committed to the ongoing
renewal and development of our capabilities.
We will continue to pursue growth
opportunities and to respond to the dynamic
nature of the market.
THANK YOU
I wish to express my sincere appreciation
to all of Cardno’s employees for their
contributions over the past year. Andrew
Buckley, who retired from the position of
Managing Director after almost 17 years of
exemplary leadership, has created a strong
legacy and we thank him. In March 2014,
Michael Renshaw assumed the role of Chief
Executive Officer. He and his executive team
have ensured a smooth transition process and
are creating a new vision for Cardno’s future.
I acknowledge the support of my colleagues
on the Board. My best wishes go to General
Sir Peter Cosgrove, who stepped down as a
Non-Executive Director on his appointment
as Australia’s Governor-General. Finally, I
express my appreciation to all of Cardno’s
shareholders for their support. We are
committed to delivering strong returns in the
years to come.
John Marlay
Chairman
Above left: Cardno provided structural engineering
services to the Harvey Norman/IKEA Homemaker Centre
project in Springvale, Victoria.
Above right: Cardno serves oil and gas clients ranging
from global corporations to local, specialised companies.
Cardno Annual Report 2014 15
CEO’S
REPORT
Cardno experienced a challenging
year in FY2014 with market
conditions affecting the demand
for services across many sectors.
I am proud of our team’s ability to respond to
these challenges and their continued focus on
improving performance and on returning to
positive organic growth.
Looking ahead we are well placed to continue
our expansion strategy, while strengthening
the foundations of the business to ensure
we remain a world leader in the provision of
professional services.
Cardno commences FY2015 with a record
level of secured work, a solid pipeline of future
opportunities, a robust balance sheet and
strong cashflow. Our diverse service offerings,
mix of quality clients and international reach
continues to provide strength and security in
uneven market conditions.
SAFETY
Safety is a core value at Cardno and this is
reinforced by our safety policies, processes
and systems. Cardno’s Zero Harm program
provides managers and staff with resources
to fulfil their roles and responsibilities with
regard to safety.
Our commitment to continuous improvement
in our safety performance is underpinned by
the provision of extensive staff training.
Available in English and Spanish, our new
Zero Harm Application (ZAP) tool facilitates
rapid communication and increased
visibility of incidents and hazards, improves
reporting analytic capabilities and increases
staff awareness.
Our rigorous approach to risk management
communication and improving our safety
culture helped us achieve an improvement
in our Lost Time Injury Frequency Rate and
Total Recordable Injury Frequency Rate in
FY2014. Our Americas Region has recorded
16 months without a Lost Time Injury.
Cardno will continue to build on this positive
performance in FY2015, responding to the
changing needs of the business and clients,
and ensuring a safe and healthy environment
for employees and the communities we
work in.
PERFORMANCE
Cardno achieved a net profit after tax of
$78.1 million for the year that ended 30 June
2014. This result is a slight increase over the
previous financial year and reflects tough
market conditions offset by contributions
from merger partners. Fee revenue was up
8.7 per cent from the comparative period to
$965.6 million.
Weak conditions in Australia and budgetary
constraints in the US contributed to an
organic revenue decline of 8.3 per cent.
Cardno also suffered from the impact of
severe winter weather in North America
and the conclusion of work associated with
the Gulf of Mexico oil spill. Revenue in
Australian and New Zealand was impacted
by a winding back of project work related
to the resources sector both at home and
abroad which saw EBITDA margins contract
from 15.5 per cent in FY2013 to 14.7 per cent
this financial year.
Notwithstanding these challenges, we
achieved an EBITDA of $141.7 million, up
2.7 per cent on FY2013, witnessed strong
operating cash flow at $84.6 million and
finished the year with a robust backlog of
work valued at $855 million. Basic earnings
per share were 52 cents, a 5.5 per cent
reduction from 55 cents per share in FY2013.
Cardno’s full year dividend was 36 cents per
share as it was in the previous period.
LOOKING AHEAD
Cardno will deliver sustainable, profitable
growth, and deal with the challenges that
lie ahead. The majority of our work comes
from quality, long-term clients and repeat
business, which provides an underlying
reliability and resilience.
Market conditions remain challenging in
Australia and New Zealand, as Cardno looks
to straddle the gap between a resource-
related wind down and an increase in
government-led infrastructure spending.
Cardno has a
robust balance sheet,
strong cash flows
and a solid pipeline
of future work.
16 Cardno Annual Report 2014
However, governments on Australia’s east
coast, particularly New South Wales, have
started to increase development spending
and the energy and tourism industries are
set to provide good opportunities.
Further improvement in the United States
markets is expected, driven by improved
economic growth, an increased backlog of
work and continued solid performance from
recent mergers.
Cardno’s Emerging Markets division enables
us to deliver social, environmental and
engineering services to major development
projects around the world. Our successful
software business is expected to continue to
experience strong growth from new markets
and products.
Cardno will continue to explore opportunities
to expand its global footprint, including
Canada, Asia and Africa. Our balance sheet
has us well positioned for growth, with debt
facilities renegotiated on improved terms
and our first US Private Placement facility
strongly supported.
EFFICIENCY
As Cardno expands across the globe, we are
improving efficiency to support our growth
targets. A number of strategic initiatives
began in FY2014 that will lower cost,
enhance productivity and make better use of
data and technology.
We are restructuring service functions and
streamlining processes and systems to offer
more centralised and responsive support to
business units. Cardno’s Americas Region
was reorganised into five major divisions, a
shared services centre was established in
Denver, Colorado, while a number of other
offices were also co-located to reduce
overheads and provide better access to
professional services and technology.
We are implementing global human
resources information and customer
relationship management systems, and
expanding our internal staff knowledge
management database. More advanced
technology is being made available to
Cardno staff, such as new mobile technology
for field workers. In addition, we are
leveraging technology to accelerate our
merger and acquisition integration process.
PLANNING FOR GROWTH
Cardno shareholders seek results that
demonstrate a capability to grow revenue,
both organically and through a disciplined
approach to mergers and acquisitions.
We will continue to identify acquisition
partners with the skills and geographic
operations to complement and enhance
our own.
Cardno must strengthen focus on organic
expansion and our Grow Cardno campaign
aims to improve performance by investing
in the business to stimulate and support the
growth in fee revenue that comes from our
existing operations.
We are setting specific targets for individual
divisions within the company, developing
better collaboration and generating a growth
culture across all business units.
In addition Cardno will launch its new strategic
plan ‘Vision 20/20’ in FY2015 with the goal of
becoming a top 20 firm by the year 2020.
DIVERSIFICATION
Cardno’s geographic and market diversity
reduces risk and earnings volatility during
challenging times. In FY2014, our diversification
strategy resulted in three complementary
businesses joining the company, all of whom
provided new geographical and skills coverage
(see page 24-25).
Cardno is focused on strengthening our
professional services capability to serve high
quality client sectors, as well as maintaining
productive and effective relationships.
Looking ahead, we will continue to offer
clients access to a wide range of services,
geographic locations and talented people.
THANK YOU
I extend my sincere thanks to Cardno’s
clients for their ongoing support. We will
continue to do all we can to ensure success
for your organisations in the years to come.
On behalf of the management team, I thank
John Marlay and the Cardno Board for
their guidance and advice during a
challenging period.
I must also applaud the tireless efforts
of our executive team and all of Cardno’s
employees. They remain committed to
working safely and delivering excellent
results for our clients, shareholders and the
communities where we work.
Finally, I would like to thank Cardno
shareholders for their unwavering support of
our growing company.
Michael Renshaw
Managing Director and
Chief Executive Officer
Cardno Limited
Above left: Cardno is providing construction inspection
services for the Interstate 4 Connector to Selmon
Expressway in Florida’s Tampa Bay area.
Above right: Cardno’s Zero Harm program reinforces
our commitment to continuous improvement in our
safety performance.
Cardno Annual Report 2014 17
OPERATIONAL REVIEW
AMERICAS
Cardno’s Americas Region comprises more than
5,000 multi-disciplinary professionals who deliver
services and expertise from more than 210 offices
across North and South America.
THE REGION PROVIDES
58%
OF CARDNO’S
FEE REVENUE
The Americas Region
delivers crucial services
to key government and
private sector clients,
enhancing performance in
core markets such as oil
and gas, transportation and
environmental management.
A$m
Fee revenue
Recoverable expenses
Total revenue
EBITDA
EBITDA margin
27%
32%
FEE REVENUE
BY MARKET
(PROFORMA)*
FY2014
24%
Oil & Gas
Contractors
Other Private
9%
8%
Resources
Government
FY2014
FY2013
517.8
176.9
694.7
67.1
13.0%
439.0
160.1
599.1
63.3
14.4%
AMERICAS EXECUTIVES
> Paul Gardiner
General Manager
> Chip Blankenhorn
Natural Resources and Health
Sciences Division Manager
> Bob Kroeger
Engineering and Environmental
Services Division Manager
> Michael Landry
Chief Financial Officer
> Bill Pavlick
Government Services
Division Manager
> Randy Sullivan
Cardno PPI Division Manager
> Edgar Uribe
Latin America Division Manager
> Todd Williams
Strategy and Development Manager
18 Cardno Annual Report 2014
HIGHLIGHTS
In FY2014, the Americas Region focused
growth efforts on market sectors such
as energy and resources, transportation,
environment, land, buildings, management
services and water.
The region achieved strong fee revenue
growth of 18 per cent due to the
contribution of recent acquisitions.
Our clients include both the private sector
and government, and we undertook a
wide variety of infrastructure projects,
providing services ranging from site
planning/environmental permitting,
health and ecological risk assessment,
remediation/mitigation through to design
and construction management.
The Americas Region’s safety record
demonstrated a strong commitment to Zero
Harm, achieving a period of 16 months and
over nine million work hours without a Lost
Time Injury.
The past financial year provided its share of
challenges and they impacted the region’s
profit. Contributing factors were slow
market conditions, the winding down of
several major projects, the ongoing impacts
of the US Federal Government budget
constraints on the award of contracts, and
an extremely harsh and extended US winter.
Despite the challenges, Cardno achieved
the ranking of #27 on Engineering News-
Record’s annual Top 500 Design firms
list. Maintaining such a high position is
testament to our teams working together to
serve our clients’ needs through integrated
selling of services, and a commitment to
align national and global systems.
We welcomed engineering, construction,
consulting and quality management
company Cardno PPI to our operation,
adding significant capability to our existing
services for the oil and gas industry.
The region also added Cardno Haynes
Whaley, a specialised structural
engineering company delivering services
to a broad range of commercial, public and
institutional clients.
The Environmental and Engineering
Services and Government Services divisions
were significantly restructured to align
merger partner resources, capabilities and
seamlessly provide client-service solutions.
Resource and operational efficiencies were
achieved through aligning wellness benefits
for staff, implementing shared services
initiatives across human resources,
information technology, legal and health
and safety, and consolidating financial
systems and reporting mechanisms.
FUTURE OUTLOOK
The region is focused on serving clients
across key market sectors where higher
growth is anticipated including oil and gas,
power, water, transportation, mining/metals,
land/buildings, government and legal.
These sectors represent the region’s best
opportunities for organic growth based on
economic growth prospects, client service
demand and geographic factors. Combined
with organisational enhancements across
the region, including client and business
development team alignment, we are
positioned to capture a greater market
share in FY2015.
Recent project wins have also bolstered our
backlog of work, which is at a record level
of $521.6 million.
We are optimistic about the growth
potential of the Americas Region. Business
and consumer confidence is improving,
the US economy is recovering and an
increase of capital investment is occurring.
South America continues to provide
growth opportunities particularly in oil
and gas, power, mining/metals and public
infrastructure market sectors.
Above far left: Cardno is assessing water quality
and habitat as part of Bucks Creek Hydroelectric Project
in California.
Above left: Cardno is providing construction management
and supervision to the Paute-Sopladora Hydropower
Project in Ecuador.
Above right: Cardno supplied structural engineering
services for the Methodist Hospital Outpatient Centre
in Texas.
Cardno Annual Report 2014 19
OPERATIONAL REVIEW
AUSTRALIA &
NEW ZEALAND
Cardno’s Australia and New Zealand Region
comprises approximately 2,000 professional staff
operating from more than 50 offices.
A$m
Fee revenue
Recoverable expenses
Total revenue
EBITDA
EBITDA margin
FY2014
FY2013
339.0
53.9
392.8
61.7
18.2%
359.1
52.8
411.9
66.0
18.4%
10%
ANZ EXECUTIVES
33%
FEE REVENUE
BY MARKET
(PROFORMA)*
FY2014
19%
Oil & Gas
Contractors
Other Private
18%
Resources
Government
> Roger Collins-Woolcock
General Manager
> Jamie Alonso
20%
Victoria, Western Australia and New
Zealand Division Manager
> Matt Courtney
Construction Sciences
Division Manager
> Troy Donovan
Chief Financial Officer
> Michael Drake-Brockman
Cardno BEC Division Manager
> Geoff Hadwen
Queensland and Northern Territory
Division Manager
> Martin Wells
New South Wales and Australian
Capital Territory Division Manager
THE REGION PROVIDES
32%
OF CARDNO’S
FEE REVENUE
The Australia and
New Zealand Region
(ANZ) provides services
in civil, structural, water,
environmental, coastal,
bridge, geotechnical,
subsurface utility, traffic
and transport engineering,
as well as environmental
science, surveying, landscape
architecture, construction
materials testing, planning and
asset management.
20 Cardno Annual Report 2014
HIGHLIGHTS
The Australia and New Zealand Region
experienced a challenging FY2014 due to
generally difficult market conditions.
Fee revenue for the year was down 5.6 per
cent compared to the previous period.
This decline was largely attributed
to a downturn in the mining industry
across Australia leading to increased
margin pressure. This impacted Cardno’s
businesses operating in Western Australia
and central Queensland.
The region’s organic revenue declined,
driven by the conclusion of major projects,
such as Legacy Way in Brisbane and the
Gold Coast Rapid Transit project.
Despite being in a difficult market with
increased competition, the region was able
to maintain margins on last year which
reflect cost controls put in place and the
diversity of our client base across both
small and medium-sized projects.
Throughout FY2014, the region retained its
steadfast commitment to safety, resulting
in improved near miss reporting and two
million hours without a Lost Time Injury.
Despite the challenges, the ANZ Region
continued to provide high quality services
to our long-standing clients, strengthening
relationships that have lasted many years.
Urban development and transport
infrastructure project opportunities
began to gather momentum particularly in
New South Wales, followed by Queensland
and Victoria.
We were successful on several new
transport projects, such as the Sydney Light
Rail and Albion Park Rail bypass in New
South Wales.
In Victoria, Cardno’s team won a contract
with a major global company to manage
and implement the demolition and
associated activities at 44 oil depots
throughout Australia.
Our water and environment team continued
to showcase their environmental monitoring
capabilities on the high-profile Ichthys LNG
project in Darwin.
The ANZ Region did not complete any
acquisitions during FY2014, focusing on
efforts to strengthen the organic growth
of existing businesses, providing excellent
service to clients, and implementing
structural changes.
FUTURE OUTLOOK
The outlook for the ANZ Region remains
challenging with industry revenue growth
forecast to slow in FY2015. The engineering
sector faces an uncertain transition
from resources-led activity to increased
government spending.
A decrease in funding for large resource
projects in the energy and resources
infrastructure markets will intensify
competition and weaken demand for
engineering consultancy services. This
has already contributed to a 31.8 per cent
reduction in the region’s backlog of work
over the past 12 months.
However, there will be a significant
increase in major transport infrastructure
projects across Australia, in the next few
years, with several multi-billion dollar
initiatives in various stages of development.
These projects include the WestConnex
motorway in Sydney where our team has
been shortlisted to provide detailed tender
design. We are also in a strong position to
win work on the East West Link in Victoria,
the ongoing Pacific Highway upgrade and
a number of key transport infrastructure
projects in Queensland.
Market conditions in New Zealand are
promising due to infrastructure spending,
urban planning and design work and
projects related to rebuilding Christchurch.
The region will continue to implement a
range of cost-cutting measures to better
match our resource levels to available work.
We remain optimistic about growing our
market share across Australia and New
Zealand in the years to come.
Above far left: Cardno delivered construction material
testing services for a resort in Queensland’s Whitsundays.
Above left: Cardno delivered the design and
documentation phases for the Glen Eira Sports and
Aquatic Centre in Victoria.
Above right: Cardno has been working on projects to
expand iron ore processing facilities in Western Australia.
Cardno Annual Report 2014 21
OPERATIONAL REVIEW
REST OF WORLD
The Rest of World operations (comprising Cardno’s
Emerging Markets Division and XP Solutions) is
made up of 1,200 staff who deliver professional
expertise from 10 corporate offices and a network
of project offices across the world.
A$m
Fee revenue
Recoverable expenses
Total revenue
EBITDA
EBITDA margin
FY2014
FY2013
108.9
112.2
221.1
10.7
9.8%
89.9
93.0
182.9
8.5
9.5%
EMERGING MARKETS EXECUTIVES
XP SOLUTIONS EXECUTIVES
> Ross Thompson
Division Manager
> Richard Anderson
Operations Manager
> Marian Boreland
United States and
Latin America Manager
> David Burton
Europe and Africa Manager
> Kristen Collins
Asia Pacific Manager
> Colby Manwaring
Division Manager
> David Fortune
Director of Innovation
> Anthony Kuch
Americas Manager
> Sudesh Mudaliar
Asia Pacific Manager
> Paul Ramshaw
Europe, Middle East,
Africa Manager
THE REGION PROVIDES
10%
OF CARDNO’S
FEE REVENUE
Cardno’s Emerging Markets
business provides social,
environmental and engineering
services to donors, governments
and private sector clients in
emerging countries around the
world. XP Solutions is a world
leading provider of software
for engineering, environmental
and asset management
professionals.
22 Cardno Annual Report 2014
HIGHLIGHTS
Emerging Markets successfully expanded
its consulting business and achieved fee
revenue growth of 21.1 per cent in FY2014.
Despite a challenging development aid
market, operations increased in the
Philippines, Papua New Guinea and
Indonesia, while programs were secured with
Department for International Development
(DFID) in the UK, including a £30 million
security enhancement program in Libya.
We continued to grow engineering
operations globally and were awarded
several donor-funded projects across Africa
and Asia, including a USAID-funded road
project in Liberia. The division grew its
social management consultancy business
winning projects for major oil, gas and mining
clients, including an environmental and social
assessment study in Mozambique.
Emerging Markets added specialist
transport planning services company
Cardno IT Transport in 2014, expanding
access to a number of African and Asian
markets and clients.
In FY2014, XP Solutions secured organic
revenue growth of 12 per cent and organic
profit growth of 16 per cent on the previous
year. Growth has been driven by a strong
demand in the UK and USA as economic
conditions improve, as well as the launch of
software products into new markets.
The business opened an office in the
Philippines, boosting market presence in
Asia and leveraging a high capacity and
lower cost workforce.
New software for facility condition
assessment and capital planning,
XPPARAGON, was released during the
year, while XPDRAINAGE, software for
water-sensitive, low-impact development
design, has established a strong following
as pressure increases on governments and
developers to adopt green infrastructure.
FUTURE OUTLOOK
Several Cardno clients are expanding aid
programs into FY2015 so, despite pressure
on development budgets, we anticipate
minimal impact on our development
assistance work for donors. The region’s
backlog of work has increased 13.5 per cent
over 12 months to $202.2 million.
Donors are increasingly partnering with the
private sector and Emerging Markets is
well placed to facilitate this interaction and
achieve social objectives.
We will continue to diversify Cardno’s client
base, services and geographies through
leveraging existing client relationships and
expertise across Cardno. New projects
with DFID, Department of Foreign Affairs
and Trade (DFAT) in Australia and USAID
will underpin our financial performance
in FY2015, helping us to achieve strong
organic growth.
Emerging Markets will work closely
with existing Cardno operations in Latin
America, offering social and environmental
impact management, urban planning and
economic growth services.
We will focus on growing our operations in
Mozambique, the Philippines, Indonesia and
Kenya, enabling us to secure opportunities
with gas and mining clients.
From our solid UK foundation, XP Solutions
will focus on growth in the European Union,
with France and Germany as initial target
markets. We also anticipate 20 per cent
growth in Asia, as our new Manila office
expands our reach into the region, and as we
increase business support to our distributors
in Japan, China, Malaysia and South Korea.
Our XPPARAGON software will allow us to
push into the facility condition assessment
market, focusing on North America, where
software licensing and consulting services
(provided by Cardno partners) are targeted to
comprise up to 10 per cent of total revenue.
XP Solutions is also looking to boost
regional presence in eastern and central
United States to better serve existing
clients and reach further into the market.
Above far left: Cardno provides operational support for the
Papua New Guinea Australia Law and Justice Partnership.
Above left: XP Solutions released new software to assist
landscape architects, urban planners and civil engineers.
Above right: Cardno is implementing a new regional anti-
trafficking initiative in South East Asia.
Cardno Annual Report 2014 23
MERGERS &
ACQUISITIONS
OCTOBER
2013
CARDNO
HAYNES
WHALEY
Cardno welcomed three new
merger partners in FY2014.
Opposite left: Cardno Haynes Whaley won an Engineering
News Record Best Project Award of Merit for work on Hess
Tower, Houston.
Opposite middle: Cardno PPI provides engineering services
to the midstream and upstream oil and gas sector.
Opposite right: Cardno IT Transport delivers a range of
specialised services for public and private clients.
Cardno Haynes Whaley provides structural
engineering services for a broad range of
commercial, public, and institutional projects.
Based in Houston, Texas, with projects in 40
US states, as well as in Africa, the Caribbean,
Malaysia and Singapore, the firm works with
commercial, public, and institutional clients.
It delivers comprehensive structural design
services extending beyond primary structural
systems to include facades, decorative roofs,
skylights, stairs, specialty equipment support
and interior partitions.
Cardno Haynes Whaley drives additional
opportunities for cross-selling structural
engineering services, while their clients
benefit from access to the broader
range of Cardno’s engineering and
environmental services.
FINANCIAL
REVIEW
Cardno experienced a challenging year in
FY2014 with market conditions affecting the
demand for services across many sectors.
FINANCIAL PERFORMANCE
FINANCIAL PERFORMANCE
PERFORMANCE (A$m)
Revenue
EBITDA
EBIT
NPAT
Operating Cash Flow
EPS - basic (cents)
Dividend per share (cents)
Jun-14
1,309.6
141.7
115.2
78.1
84.6
52.0
36.0
Jun-13
1,195.4
138.0
114.3
77.6
95.7
55.1
36.0
Right: Cardno engineers have been responsible for the
design, programming and commissioning of site-wide
automation and control systems at iron ore facilities in
Western Australia.
24 Cardno Annual Report 2014
APRIL
2014
CARDNO IT
TRANSPORT
MARCH
2014
CARDNO
PPI
Cardno PPI delivers best-practice engineering,
consulting and quality management services
to the oil and gas industry.
Headquartered in Houston, Texas, the
business provides services to more than 300
clients annually in the United States, West
Africa and Asia Pacific.
Cardno PPI’s engineering services to the
midstream and upstream oil and gas sector
complement Cardno’s existing environmental
and permitting capabilities in this market.
Cardno PPI has a strong reputation and
long-term relationships with the major
multi-national oil and gas clients, which has
enabled significant growth history.
Cardno IT Transport provides high quality
consultancy services to projects that
promote economic growth and development,
predominantly in Africa and Asia.
The business offers a wealth of experience
in transport policy formulation, transport
planning, program implementation and
capacity building.
Cardno IT Transport delivers a range of
specialised services for public and private
clients, including the Asia Development Bank,
DFID and the World Bank.
The team provides additional technical
expertise to the Cardno Emerging Markets
businesses in Europe, Africa, Asia-Pacific and
the Americas.
Cardno delivered a net pro(cid:108)t after
tax of $78.1 million for FY2014. This
was a 0.6 per cent increase over
FY2013. This result was broadly
(cid:109)at with the prior year, and re(cid:109)ects
the variable market conditions in
which Cardno has been operating,
offset by contributions from recent
merger partners.
Gross revenue of $1,309.6 million was up
9.6 per cent on FY2013. This was largely
due to the contributions of new merger
partners offsetting an 8.3 per cent organic
revenue decline on the prior year. The
organic revenue decline in the current year
was the result of declines in Cardno’s two
major regions, the Americas Region and the
Australian and New Zealand Region. Factors
impacting organic growth were:
> the tapering and conclusion of consulting
work associated with the Gulf of Mexico
oil spill;
> severe weather conditions experienced
from January through March in the north
east of the USA, limiting field work and
slowing business activity;
> the slowdown in the bulk commodity
resource sectors of iron ore and coal in
Australia resulting in reduced investment
in mining projects;
> ongoing impacts of the US Federal
Government budget constraints on the
award of government contracts; and
> overall lack of confidence in Australia
reducing new project start-ups.
Cardno achieved an EBITDA of $141.7 million
in FY2014, a rise of 2.7 per cent compared
to that achieved in FY2013 of $138.0 million.
However the increase in revenue did not
flow fully through to the bottom line with
the result EBITDA margins declining from
15.5 per cent in FY2013 to 14.7 per cent
in FY2014. This margin decline is due to
difficult market conditions, changes in
business mix and increased merger and
restructuring costs.
Group EBIT increase of 0.8 per cent on
FY2013 to $115.2 million was impacted by
higher depreciation expense. This increase
in depreciation is directly related to higher
investments in tangible assets. Amortisation
of intangible assets remained flat with the
prior year.
Cardno’s mitigating response to growth
pressures experienced during FY2014
has been:
> the co-location of staff in 16 offices
and the closure of 17 surplus offices as
integration activity accelerates;
> the ongoing matching of resources to
market demand which has resulted in the
reduction of staff across the group;
> restructuring the Americas Region to
better service our clients and optimise
management and overhead costs
including establishing a regional service
centre to improve efficiencies; and
> limiting wages growth gloablly to reflect
changed market conditions.
Cardno Annual Report 2014 25
Segment revenue
EBIT
EBIT margin*
2014
2013
2014
2013
2014
2012
694.7
599.1
57.8
56.3
11.2% 12.8%
392.8
411.9
51.7
57.7
15.3% 16.1%
A$m
Americas
Australia &
New Zealand
Rest of World
221.1
182.9
10.1
8.0
9.3%
8.9%
Total segment
1,308.6
1,193.9
119.6
122.0
12.4% 13.7%
*Based on fee revenue
FINANCIAL PERFORMANCE (continued)
Basic earnings per share (EPS) was 52 cents,
a reduction of 5.5 per cent from the FY2013
results of 55 cents per share. EPS was
impacted by the increased number of shares
on issue following equity raised and issued
for major acquisitions and the broadly flat
financial performance of the Group.
The effective tax rate for FY2014 was 26.8
per cent as compared with 27.3 per cent in
FY2013. The tax rate reduction is a result of
an overall decrease in effective tax rate in
the United States.
Cardno’s continued growth and trading
performance is driven by underlying
economic conditions in the markets and
geographic sectors in which the company
operates. These conditions underpin
Cardno’s ability to secure new projects and
achieve organic growth. Competition for
these projects can impact charge out rates
of Cardno’s people which are reflected in
margins. Cardno has experienced margin
pressure in the past year due to changes
in business mix, the conclusion of major
projects and the impact of weather on our
ability to service our clients.
Global market conditions continue to be
variable, however in the United States
economic activity is improving and the
environmental sector continues to be
strong. Market conditions in Australia and
New Zealand remain difficult though there
are signs that residential construction and
infrastructure projects are picking up and we
remain active on several ongoing oil and gas
projects. Our project pipeline of $855 million
as at 30 June 2014 is strong and represents
approximately 10 months of fee revenue.
11.2 per cent from 12.8 per cent in FY2013.
The reduction in margins reflecting the
reduction in higher margin work associated
with the oil spill, the impact from the
adverse winter weather as well as business
alignment costs undertaken to restructure
the business.
AMERICAS REGION
In the Americas Region, segment
revenue was $694.7 million compared
to $599.1 million in FY2013. This was an
increase of 16.0 per cent on the prior year.
This can be attributed to the contributions
from new merger partners Cardno Haynes
Whaley and Cardno PPI who were acquired
during the year. Full year contribution of
FY2013 merger partners also contributed
to the year-on-year revenue growth as well
as the expansion of Cardno Caminosca in
Latin America. All new merger partners are
performing in line with expectations.
This increase in revenue was partially
offset by organic revenue decline of
10.0 per cent for the region due to the
reduction in the Gulf of Mexico oil spill
work, extended winter weather and the
US government sequestration.
Full year EBIT was $57.8 million, 2.7 per cent
up on FY2013. EBIT margins decreased to
The outlook for the Americas Region is
positive as economic activity improves.
The oil and gas, power, transportation and
the government sectors represent good
opportunities for organic growth in the
region. Backlog for the region is at a record
level and was $521.6 million as at 30 June
2014, making the region well positioned
going into FY2015.
AUSTRALIA AND
NEW ZEALAND REGION
Australia and New Zealand Region, segment
revenue was $392.8 million, a 4.6 per cent
decrease on $411.9 million in FY2013. The
decrease in revenue resulted from organic
decline across most divisions, partly offset
by the full year contributions of merger
partners who were acquired in FY2013. This
decline is associated with the slowdown in
the bulk commodity sectors of iron ore and
coal which impacted our Western Australia
and Queensland businesses. In addition
26 Cardno Annual Report 2014
FINANCIAL PERFORMANCE (continued)
DIVIDENDS
Cardno has experienced the conclusion of
major projects. A general lack of confidence
in Australia is reducing the startup of new
projects, however the NSW/ACT division
achieved organic growth during the year
with transport infrastructure opportunities
gathering momentum and Cardno’s continued
involvement on the Ichthys LNG project.
These challenging market conditions saw
the ANZ Region report an EBIT result of
$51.7 million which was 10.4 per cent down
on FY2013. EBIT margins were down slightly
on prior year, 15.3 per cent in FY2014 versus
16.1 per cent in FY2013, although EBITDA
margins were broadly flat despite being in
a difficult market. This reflects cost control
measures implemented and the diversity of
Cardno’s client base across both small and
medium sized projects where pricing, whilst
competitive, has remained fairly stable.
Challenging conditions are expected to
continue into FY2015 for the ANZ region with
the decrease in funding for large resource
projects. Opportunities exist in New South
Wales particularly in the major transport
infrastructure space and specifically on the
Sydney Light Rail and WestConnex motorway
projects in which Cardno is involved.
REST OF WORLD
Cardno’s Rest of World operations, which
includes the Emerging Markets and XP
Solutions divisions, achieved a segment
revenue result of $221.1 million, a 20.9 per
cent increase on FY2013. Both businesses
experienced organic growth during the year
with the Emerging Markets division winning
new projects in the UK and Australia and XP
Solutions releasing updated software and
tackling new markets.
Despite constraints to development
assistance budgets EBIT was $10.1 million
up 26.2 per cent from $8.0 million in FY2013
and EBIT margins were also up. This was
largely attributed to the strength of the
software business.
Recent project wins in the UK, USA and
Australia will underpin performance in
FY2015 in the Emerging Markets division
as reflected in a growth in backlog of
13.5 per cent. New software solutions and
an expansion into continental Europe
will continue XP Solutions growth
opportunities.
Cardno has declared a 17 cent fully franked
final dividend for FY2014, taking the full
year dividend to 36 cents per share. The
dividend payout in dollar terms has been
maintained against the last two prior years
but represents a higher percentage payout
ratio at 69.1 per cent.
The Board has determined that it will
prudently distribute as many franking credits
as possible. The amount of franking credits
available will depend on the future mix of
Australian and international profits.
Above left: Cardno provided large-scale restoration of
stream and floodplain habitat in support of the remediation
of Ninemile Creek in New York.
Above centre: Cardno delivered construction materials
testing services for the Cotter Dam expansion in the
Australian Capital Territory.
Above right: Cardno provided program secretariat
support for the Pacific Leadership Program,(PLP).
Image courtesy of DFAT.
Cardno Annual Report 2014 27
FINANCIAL POSITION
CASHFLOW
BALANCE SHEET (A$m)
Trade and other receivables
Inventories
Other receivables
Trade and other payables
Other liabilities
Total working capital
Cash and cash equivalents
Loans and borrowings
Net debt*
Other financial assets
Property, plant and equipment
Intangible assets
Provisions
Deferred taxes
Tax liabilities
NET ASSETS
Ratio:
2014
245.5
142.6
11.2
(137.0)
(49.5)
212.8
85.9
(306.1)
(220.2)
3.6
60.7
751.6
(45.0)
15.9
(15.9)
763.5
2013
203.2
134.9
8.6
(151.0)
(48.9)
146.8
90.6
(241.7)
(151.1)
1.7
56.9
630.0
(51.5)
7.8
(8.1)
632.5
Net debt to EBITDA
Net debt* to equity
1.6
28.8%
1.1
23.9%
* Total loans and borrowings less cash and cash equivalents
Net assets of the Group increased $131.0 million on FY2013. The
increase can be attributed to an increase in goodwill and other
intangibles recognised through the acquisition of new merger
partners during FY2014. The increase in Cardno’s working capital
and other assets and liabilities is principally attributed to the net
assets acquired from each of the merger partners.
Cardno’s balance sheet is strong with a net debt-to-equity
ratio of 28.8 per cent and cash on hand of $85.9 million at
30 June 2014. Net debt to EBITDA was 1.6 times well within
our covenant requirement of three times. Loans and borrowings
increased slightly on the prior year due to funding the current year
acquisitions but was also partly offset by the repayment of various
term debt. The balance sheet is well positioned for growth with
debt facilities renegotiated on improved terms.
CASHFLOW (A$m)
Net cash provided by
operating activities
Investing activities
Acquisition of subsidiaries
Purchase/sale of property, plant
and equipment
Purchase of intangible assets
Net cash used in
investing activities
Financing activities
Proceeds from issue of shares
Share issue transaction costs
Purchase of own shares
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Dividends paid
Net cash provided by / (used in)
financing activities
Net increase/(decrease) in cash
Cash at 1 July
Effects of exchange rate changes
at year end
Cash at 30 June
2014
2013
84.6
95.7
(191.6)
(92.6)
(19.1)
(0.6)
(18.6)
0.0
(211.3)
(111.2)
94.0
(1.0)
9.4
224.8
(152.1)
(2.0)
(50.9)
122.3
(4.4)
90.6
(0.3)
85.9
18.2
(0.1)
4.1
61.0
(40.1)
(2.6)
(46.0)
(5.5)
(21.0)
107.9
3.7
90.6
In FY2014, Cardno achieved a solid operating cash flow of
$84.6 million despite it being an 11.6 per cent decrease on the
$95.7 million generated in FY2013. This result however is
8.0 per cent higher than FY2014 NPAT of $78.1 million
demonstrating Cardno’s strong cash conversion capability.
28 Cardno Annual Report 2014
During FY2014, the following investing and
financing activities took place:
> The acquisition of three new merger
partners, the PPI Group of companies,
I.T. Transport Limited and the net assets
of Haynes Whaley Associates, Inc., for
a total purchase price consideration of
$163.4 million;
> Deferred consideration paid to all merger
partners acquired in FY2013 and Cardno
ATC in FY2012 of $28.2 million;
> Financing of the acquisitions was through
the combination of cash reserves, bank
debt and issue of Cardno shares.
> The funding strategy for PPI Group of
companies included an equity placement
issue of $50.0 million as part of the
Group’s capital management strategy;
> The full refinancing of the Group’s term
bank debt facilities in December 2013
resulted in reallocation of borrowings
of $58.1 million across debt providers.
This combined with the repayment
of other term bank debt and working
capital lines of $89.2 million, including
$40.0 million from the equity placement
proceeds, helped to maintain a strong
balance sheet and debt to equity ratio at
40.1 per cent;
> Purchase of own shares to be held in
trust by the Cardno Limited Performance
Equity Plan Trust. This trust was formed
solely for the purpose of subscribing
for, acquiring and holding shares
for employees participating in the
Performance Equity Plan (PEP) of
Cardno Limited;
> Investment in property, plant and
equipment to grow and maintain
business operations; and
> Payment of dividends.
The investing and financing activities in
FY2013 principally related to the acquisition
of seven merger partners.
DEBT STRATEGY
TERM DEBT REPAYMENT PROFILE
A$ million
303.1
144.0
53.0
106.2
t
b
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D
m
r
e
T
p
u
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G
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i
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-
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4
2
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2
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A
e
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a
y
a
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-
e
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During FY2014 Cardno successfully
completed two major funding
transactions refinancing existing term
bank debt facilities and issuing long
term notes in the US Private Placement
(USPP) market. These transactions
diversified Cardno’s funding sources
and extended its maturity profile with
terms and conditions reflecting Cardno’s
improved credit standing.
In December 2013 Cardno renegotiated
existing term bank debt facilities by
entering into a series of five year,
multi-currency revolving bilateral
facilities totaling US$330 million. The
banking partners Commonwealth Bank
of Australia, Hong Kong and Shanghai
Banking Corporation, Standard Chartered
Bank and Westpac Banking Corporation
provide a mix of service capability
as more than 50 per cent of Cardno’s
operations are now outside Australia.
Subsequent to financial year end, Cardno
closed its first long term note issue of
US$150 million in the USPP market. The
tranches include US$50 million seven
year term maturing August 2021 and
US$100 million 10 year term maturing
August 2024. The notes were initially
priced on the 15 May 2014 with three
month deferred settlement.
Simultaneously, Cardno issued fixed
to floating USD interest rate swaps
matching the tranches and elected
to fair value hedge the interest rate
risk in accordance with AASB139.
There was no requirement to swap the
US dollar note proceeds into the Group’s
Australian dollar functional currency
given the size of Cardno’s significant
US operations. Cardno’s US dollar debt
facilities are naturally hedged against
US dollar investment and revenue
streams. On a comparable basis the
long term note pricing is approximately
10-15 per cent more favourable than the
bank debt refinancing in December 2013.
The USPP transaction has allowed
Cardno to achieve its debt strategy
objective of establishing its brand
in the USPP market and developing
relationships with blue chip institutional
investors that it can grow with over the
long term. The Group’s average debt
maturity has increased by 4.8 years to
7.2 years subsequent to the long term
note issue.
Cardno’s new combined debt facility
limits comprise facilities of US$480.0
million and working capital facilities
of A$10.0 million and US$15.0 million.
As at 30 June 2014, Cardno has debt
totaling $303.1 million, an increase of
$68.7 million from FY2013, largely due
to bank debt utilised in the acquisition
of PPI Group of companies. Cardno has
$230.9 million of undrawn facilities
available for use in its continued
acquisition strategy.
Cardno Annual Report 2014 29
GROUP LOST TIME INJURY FREQUENCY RATE (LTIFR)
Cardno LTIFR at the end
of June 2014:
0.15 per million person-hours
(0.03 per two hundred
thousand person-hours
– US equivalent)
0.6
0.4
0.2
0.0
Jul-13
Jun-14
In FY2014, our rigorous approach to
risk management communication and
continually improving our safety culture
helped us achieve an improvement in our
Lost Time Injury Frequency Rate and Total
Recordable Injury Frequency Rate. Cardno
will continue to build on this positive
performance in FY2015, responding to
the changing needs of the business and
clients, and ensuring a safe and healthy
environment for employees.
SAFETY
Safety is a core value
at Cardno and our Zero
Harm safety program
fosters an environment
of shared responsibility,
risk awareness and
clear communication.
Group HSEQ (Health Safety Environment
and Quality) has implemented a global
safety framework that underpins region
and division-specific programs. This is
reinforced by our safety policies, processes
and systems which provide managers and
staff with resources to fulfil their roles and
responsibilities with regard to safety.
Cardno introduced a number of new safety
initiatives across the company in FY2014,
including a new global safety reporting tool.
The Zero Harm Application (ZAP) allows
employees to submit a brief hazard or near
miss report to managers either through
a computer or mobile phone. Available
in English and Spanish, the efficient
tool allows for rapid communication
and increased visibility of incidents, in
particular around lessons learned that can
be shared and applied across the company.
It will also improve HSEQ reporting analytic
capabilities and increase staff awareness.
Cardno’s commitment to the continuous
improvement of our safety performance
is also enhanced through the provision of
staff training. This year a new safety and
quality module was added to the Cardno
University “Management Essentials”
training program, equipping managers
with the knowledge and tools to engage
with our workforce and ultimately improve
safety performance through leadership.
30 Cardno Annual Report 2014
CARDNO
CORPORATE
UNIVERSITY
Cardno’s global team
comprises professionals
with a diverse range of
skills, knowledge and
experience.
Managing this pool of talented staff is
critical to the company’s success and Cardno
University delivers training and development
that aligns with our strategic plan.
Over the past 12 months, several key
initiatives have been implemented, covering
project management, compliance and
occupational health and safety training, as
well as leadership development programs.
Cardno University is also introducing a
new Global Learning Management System
designed specifically to track, monitor and
record all eLearning and facilitator-led
training. This will allow for professional
development opportunities more in line
with advanced technology and changing
learner expectations.
Cardno University’s vision is to continue to
be recognised for developing world-class
professionals and, by investing in the
future of our employees, we aim to inspire
employees to achieve their goals while
delivering for our clients.
Cardno Annual Report 2014 31
In response to survey feedback, several
initiatives have been implemented at a
global, regional and divisional level.
These include the introduction of
Cardno University, website and intranet
updates, new orientation programs and
information sessions, global webinars
and the development of the Management
Essentials program.
Cardno’s Corporate Social Responsibility
policy demonstrates our continuing
commitment to behave ethically in all
aspects of our operations.
We aim to achieve the highest standards
of responsible business practice and
sustainability, and produce a positive
overall impact on society.
DIVERSITY
Cardno’s workforce
encompasses more
than 8,200 people across
the globe, with offices in
over 100 countries.
The diversity of staff is celebrated and
acknowledged as one of our key competitive
advantages and we continue to develop
work practices which encourage diversity.
Cardno’s diversity initiatives include the
Women in Cardno program, which strives to
provide opportunities for women across the
business to advance and grow their careers.
The company submitted a Workplace
Gender Equality Agency report in Australia
in May and Cardno CEO Michael Renshaw
is a member of the Male Champions of
Change, a group of ten CEOs championing
diversity initiatives in their organisations.
We also provide cultural awareness
training and translate policies, procedures
and all communications into Spanish,
while our Global Orientation Program
actively promotes the importance of
diversity to all staff.
CULTURE
Cardno’s core values
engender positive
attitudes, encourage
personal and technical
development and
reward achievement,
integrity and initiative.
Our people bring strategic and technical
expertise together to deliver value and long
term results for our clients.
We continually seek to understand
employees’ views on a range of topics
about the company in order to provide
management with meaningful information
to assist our workplace initiatives.
Cardno conducts a Global Employee
Engagement Survey every two years,
with the next results to be announced late
in 2014.
The result for overall employee satisfaction
our 2012 survey placed the company in
the top 3 per cent of all firms surveyed
worldwide with more than 2,000 staff.
32 Cardno Annual Report 2014
BENEFITS
Our employees have access to a wide
range of global benefits, complemented by
competitive local benefits that align with
our country-specific programs.
> Employee Share Plan:
More than 90 per cent of Cardno
employees own shares in the
company, providing an opportunity for
employees to directly share in – and
contribute to – Cardno’s success.
> Performance Pay:
We encourage our staff to perform
and high-achieving employees are
recognised with financial and
non-financial benefits linked to their
level of performance and that of
the company.
> Professional development:
Cardno offers a range of training
programs, initiatives and annual
scholarships which provide
outstanding opportunities for
professional development.
> Work life blend:
Cardno provides mutually-beneficial
flexible working arrangements and
regular opportunities to participate
in social and charitable activities.
Cardno Annual Report 2014 33
BOARD OF DIRECTORS
John Marlay
B.Sc. (Chemistry major), FAICD
Michael Renshaw
B. Business (Hons), MAICD
Anthony Barnes
BCom
Tonianne Dwyer
BJuris (Hons), LLB (Hons), GAICD
Chairman
Age 65
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Age 42
Age 64
Age 51
John Marlay joined Cardno as
a Non-Executive Director in
November 2011 and was appointed
Cardno Chairman in August 2012.
He is also a Non-Executive Director
of Incitec Pivot Limited (since 2006),
and Boral Limited (since 2009).
In July 2013, John was appointed
Independent Chairman of Flinders
Ports Holdings Limited.
From 2002 to 2008 John held
the position of Chief Executive
Officer and Managing Director of
Alumina Limited.
John held various senior
management roles with Pioneer
International Limited and Hanson
PLC from 1995 to 2002. Prior to
that John also held executive
management positions with James
Hardie Ltd and Esso Australia Ltd.
Special Responsibilities
John is Chairman of the
Nominations Committee
and a member of the
Remuneration Committee.
Michael joined Cardno in 2003
and became a Director of the
Cardno Group in 2014. As Chief
Executive Officer he is responsible
for performance, profitability,
growth, marketing, operations,
client relations, quality and
technical development.
Previously Michael worked as
Cardno’s Executive General
Manager International, overseeing
the company’s international growth
and access to new markets in the
USA and Canada, South America
(including Ecuador, Peru, Colombia),
Europe (including UK and Germany)
and the Middle East.
Prior to joining Cardno, Michael
was the Director of the Trade
Division within the Department of
State Development in Brisbane.
Prior to joining the Government in
1997, he was the General Manager
of Gladstone Area Promotion &
Development Ltd.
He brings to the group a strong
understanding of international
markets, strategic management and
project management skills.
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 in 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 Victorian
Rugby Union Inc, the Parent-Infant
Research Institute and the Leo
Cussen Centre for Law.
Special Responsibilities
Tony is Chairman of the Audit,
Risk & Compliance Committee
and a member of the
Remuneration Committee.
Tonianne Dwyer became a
Non-Executive Director of Cardno
Limited in June 2012.
She is also a Non-Executive
Director of DEXUS Property Group,
DEXUS Wholesale Property Fund,
Metcash Limited and Queensland
Treasury Corporation, as well as
being a Senator of the University
of Queensland.
Tonianne’s executive career has
included roles as Executive Director
and Head of Funds Management at
Quintain Estates and Development
(2003-2010), and Director,
Investment Banking at Societe
Generale/SG Cowen/Hambros Bank
in London (1987-2003).
Special Responsibilities
Tonianne is a member of the Audit,
Risk & Compliance Committee and
the Nominations Committee.
34 Cardno Annual Report 2014
Elizabeth Fessenden
MBA, MS Systems Engineering,
BS Electrical Engineering
Trevor Johnson
BE, MEngSc, PhD, FIEAust, CPEng,
RPEQ, MAICD
Ian Johnston
DipCM, GradDip App Fin & Inv, ASIA,
ACSA, ACIS, FAICD
Non-Executive Director
Executive Director
Non-Executive Director
Grant Murdoch
M Com (Hons), FAICD, FICAA
Non-Executive Director
Age 62
Age 59
Age 57
Age 65
Elizabeth Fessenden joined Cardno
as a Non-Executive Director on
1 June 2014. She is retired from
a career with Alcoa where she
last held the position of president
of worldwide flexible packaging
business. Liz’s US-based Alcoa
career also included positions
in engineering management,
marketing, smelting plant
management, and executive
development and staffing.
Following her retirement from
Alcoa, she joined a private equity
firm where she advised portfolio
company executive teams and
served on the boards of several
manufacturing companies.
In May 2014, she completed her
term as a director of O’Brien &
Gere, a consulting engineering
firm in the US. As an experienced
corporate and not-for-profit board
director, she is cited for driving
change and adding value in the
area of operations, financials and
strategic direction.
Special Responsibilities
Elizabeth is a member of the
Remuneration Committee.
Trevor Johnson has been a Director
of the Cardno group since 1996, and
an employee of the company for
more than 30 years. He is a member
of the Global Executive team which
assists the Managing Director in
running the company.
In his executive role as General
Manager Global Technical
Leadership, Trevor is primarily
responsible for the maintenance of
technical capability and standards
across the group. He also carries
out a number of acquisition,
coordination and communication
activities within Cardno.
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.
Ian Johnston became a Non-
Executive Director of Cardno Limited
in November 2004, bringing with
him extensive experience in
treasury, corporate banking and
equity capital markets.
Following a career of nearly 25 years
in the banking industry, Ian joined
Morgans Stockbroking Limited
(now Morgans Financial Limited) in
1988 as an Executive Director and
Head of Corporate Finance. He was
Chairman Corporate Finance until
his retirement in October 2013.
He remains a member of its
Advisory Board.
Ian has served as a director of ASX
listed companies, private companies,
government owned corporations and
not for profit organisations.
He is currently an independent non-
executive Director of Data#3 Limited
and Morgans Foundation Limited.
Ian is a Fellow of the Australian
Institute of Company Directors.
Special Responsibilities
Ian is a member of the Audit, Risk
& Compliance Committee and the
Nominations Committee.
Grant Murdoch became a
Non-Executive Director of Cardno
Limited in January 2013.
Grant is a Chartered Accountant
with over 28 years of experience
as a partner in audit and corporate
finance with international
accounting firms. For eight years, up
to his retirement from the practice in
July 2011, he headed the Corporate
Finance team for Ernst & Young in
Queensland Australia.
He is an independent Non-Executive
Director of ALS Limited, QIC Limited,
OzForex Limited and is Chairman
of the Board of Directors of The
Endeavour Foundation and Senator
of the University of Queensland. He
is a Non-Executive Director of UQ
Holdings and an Adjunct Professor of
the BEL faculty at UQ.
Grant is a Fellow of the Australian
Institute of Company Directors and a
Fellow of the Institute of Chartered
Accountants in Australia. He has
a Master of Commerce (Honours)
from the University of Canterbury,
New Zealand and is a Graduate of
the Kellogg Advanced Executive
Program at the North Western
University, Chicago USA.
Special Responsibilities
Grant is a member of the Audit,
Risk & Compliance Committee
and Chairman of the
Remuneration Committee.
Cardno Annual Report 2014 35
SENIOR EXECUTIVES
Michael Renshaw
Chief Executive Officer
Graham Yerbury
Chief Financial Officer
Trevor Johnson
General Manager Global
Technical Leadership
Kylie Sprott
General Manager Global
Business Services
Michael has full responsibility
for all global group activities at
Cardno, including performance,
profitability, growth, marketing,
operations, client relations, quality
and technical development.
In addition to managing the
company, Michael spends time
interacting with the investment
community, including giving
presentations and roadshows, and
hosting discussions with industry
analysts and shareholders.
He also manages the company’s
interaction with the media and
other public engagements.
Michael maintains relationships
with major clients and Cardno’s
senior executives, and plays a
significant role identifying and
executing merger opportunities.
Michael was appointed to the role
of CEO at Cardno after an 11-year
history with the Company including
establishing Cardno’s operations in
the United States.
Graham joined Cardno in March
2013 to oversee the financial,
treasury, accounting, tax,
commercial, risk management and
internal audit services.
He also leads the company’s
investor relations, statutory and
corporate governance functions.
Graham has held senior financial
management positions in several
countries, including that of chief
financial officer in several ASX
listed companies.
He has extensive experience in
large multi-national mining and oil
and gas companies, and is highly
skilled in capital raising, business
integration, governance and
shareholder engagement.
Trevor Johnson has a multi-
disciplinary role in supporting
and enhancing technical and
communication activities across
Cardno. He oversees standards
of technical excellence across
the Cardno group, and has
key responsibilities in merger
and acquisition assessment.
As a member of the Global
Executive Team, he is a primary
contributor to policy and internal
system development, as well as
maintaining a technical role on
project work.
Trevor also assists Cardno’s
corporate team and the
CEO in review of policy and
communication initiatives across
all of the company’s operations,
based on his broad knowledge
and understanding of the
technical disciplines which the
company delivers.
Kylie Sprott manages Cardno’s
global business services team
including Information Technology,
Human Resources, Marketing
and Communications, and Health,
Safety, Security, Environment
and Quality.
She plays a key role in the cultural
due diligence aspect of merger
and acquisition activities and
is chair to several resulting
integration committees.
Kylie chairs Cardno’s Group Health
and Safety committee, the Grow
Cardno committee, the Cardno
University governing body and the
Women in Cardno governing body.
36 Cardno Annual Report 2014
Paul Gardiner
General Manager Americas
Roger Collins-Woolcock
General Manager
Australia and New Zealand
Roger is the General Manager
of Cardno’s Australia and New
Zealand Region which has nearly
2,000 staff operating from more
than 50 offices.
The region provides services
in civil, structural, water,
environmental, coastal,
bridge, water infrastructure,
geotechnical, subsurface utility,
traffic and transport and building
services engineering, as well
as environmental science,
survey, landscape architecture,
construction materials testing,
and planning.
Roger has focused on streamlining
the ANZ Region’s structure to
better service its clients and
projects. He has also overseen
the transition of multiple senior
managers to suitable successors
in various divisions within the
business.
As General Manager of Cardno’s
Americas Region, Paul leads over
5,000 staff across more than 210
offices in North and South America.
During his tenure, Paul has overseen
the growth of operations in Latin
America from 150 staff to 600
staff and has diversified service
offerings to include infrastructure
design in the areas of hydropower,
transportation and water/
wastewater. In the United States,
he has strengthened Cardno’s
core capabilities in the oil and
gas, mining and natural resource
management sectors.
Paul has also focused on creating
operational efficiencies by aligning
services offered through 12 brands
into five core divisions – Natural
Resource Management and
Health Sciences; Engineering
and Environmental Services;
Government Services; Oil and Gas
Services; and Latin America.
These newly formed divisions
will enable Cardno professionals
to seamlessly deliver diverse
services to address complex
client challenges.
Cardno is helping to
shape the future for
communities around
the world.
Cardno Annual Report 2014 37
Corporate
Governance
Statement
CARDNO LIMITED AND ITS CONTROLLED
ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
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.
The Board oversees a global governance
framework which ensures the highest standards
of corporate governance are uniformly
maintained by all parts of the business in all
locations around the world. Details of the
corporate governance policies of the company
can be found in the Investor Centre of the
Cardno website, www.cardno.com.
Cardno Limited is committed to implementing
and maintaining sound corporate governance
practices and has considered the ASX Corporate
Governance Principles and Recommendations
(Third Edition) in the development of its
corporate governance. The Board has assessed
Cardno’s current practice against these
Principles and Recommendations and notes that
Cardno’s practices are consistent with them
except where stated below.
The Board endorses a culture of continuous
improvement and therefore continues to
refine and develop its governance policies and
practices to meet the needs of the business
and in the interests of shareholders.
38 Cardno Annual Report 2014
PRINCIPLE 1:
Lay solid foundation for
management and oversight
The role of the Board and delegation to the Managing Director
and the senior management team has been formalised. The most
significant responsibilities of the Board are:
> providing strategic oversight including contributing to the
development of and approving the corporate strategy;
> reviewing and approving business plans, the annual budget and
financial plans including reviewing the adequacy of resources and
approving and monitoring major capital expenditure initiatives;
> reviewing the operational and financial performance of Cardno’s
activities including monitoring budgetary control;
> 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 Cardno;
> monitoring Board composition, Director selection and Board
process and performance;
> undertaking appropriate checks and making relevant enquiries
before appointing a person as a Director;
> approving key executive appointments and ensuring executive
succession planning;
> ensuring Cardno has a written agreement with each director and
senior executive setting out the terms of their appointment;
> reviewing the performance and remuneration of the Managing
Director and senior management;
> ensuring that the Board as a whole has an appropriate
understanding of each substantial segment of the business; and
> authorising and monitoring major investment and
strategic commitments.
The Board has delegated to the Managing Director, together
with the senior management team, responsibility for the
implementation of Cardno’s corporate strategy, its business plans
and the day-to-day management of its operations.
The performance of the Managing Director and senior management
team is evaluated by the Board through formal performance reviews
undertaken on an annual basis. The individual performance of the
Managing Director and each member of the senior management
team is reviewed against goals set in the previous year and new
objectives are established for the following financial year. In 2014
individual financial and non-financial goals were agreed for “at
target” and out performance targets. A greater proportion of fixed
annual remuneration is offered “at risk” and payable in the form of
short term and long term incentives. Specific details are set out in
the Remuneration Report commencing at page 49. The Company
Secretary plays an important role in supporting the effectiveness
of the Board and its committees. Cardno’s Company Secretary is
accountable directly to the Board, through the Chair, on all matters
to do with the proper functioning of the Board.
The Board’s responsibilities and functions are also contained in
Cardno’s Corporate Governance Policy which can be accessed in the
Investor Centre on the Cardno website.
PRINCIPLE 2:
Structure the Board to add value
The Board has been established so that it has appropriate
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 on pages 34 to 35 and on the
company’s website.
A Board skills matrix is currently under development to identify the
professional and industry based skill areas which are now and which
need to be collectively held by the Board. The matrix will assist the
Board in determining potential future Non-Executive Directors whom
could complement the Board’s current skill set and to address areas
of future focus and attention for existing Directors.
The Board currently comprises six Non Executive Directors
including the Chairman, and two Executive Directors. On 28 January
2014, General Sir Peter Cosgrove tendered his resignation as a
Non-Executive Director of Cardno Limited following the
announcement of his appointment as Governor-General of Australia.
In March, Executive Director and Managing Director Mr. Buckley
retired and resigned as a Director of the Board. He was replaced
as Managing Director by Mr. Renshaw who previously worked as
Cardno’s Executive General Manager International, overseeing
the company’s international growth and access to new markets
in the USA and Canada, South America (including Ecuador, Peru,
Colombia, Europe (including UK and Germany) and the Middle East.
Mr. Renshaw has been appointed as an Executive Director.
On 1 June this year Ms. Fessenden joined the Board as a
Non-Executive Director. Ms. Fessenden is the company’s first
US based board member and she brings to Cardno a wealth of
experience gained during a 20+ year senior executive career in the
manufacturing and private equity industries. Ms. Fessenden was,
until recently when she completed her term, a director at O’Brien &
Gere, an 800-employee engineering consulting firm in Syracuse, NY.
The tenure of the Independent Non-Executive Directors at 30 June
2014 was as follows:
Non-Executive Director
Current tenure of Non-Executive
Directors of Cardno Limited
0-2 years
2-4 years
4+ years
Ian Johnston
Tony Barnes
John Marlay
Tonianne Dwyer
Grant Murdoch
Elizabeth Fessenden
In accordance with the constitution of Cardno Limited, one half of
the Directors (excluding the Managing Director) retire at each Annual
General Meeting. Accordingly Mr. Johnston, General Cosgrove and
Mr. Barnes retired by rotation at the 2013 Annual General Meeting
and, having offered themselves for re-election, were duly re-elected.
In addition, Mr. Murdoch, who had been appointed since the previous
Annual General Meeting, offered himself for election as a Director and
was duly elected. At the 2014 Annual General Meeting Mr. Marlay,
Dr. Johnson and Ms. Dwyer will offer themselves for re-election.
Ms. Fessenden, who was appointed to the Board following the 2013
Annual General Meeting, will also stand for election.
The Board has adopted the following criteria to determine the
independence of a Non Executive Director:
> is not a substantial shareholder of Cardno or an officer of, or
otherwise associated directly with, a substantial shareholder
of Cardno;
> within the last three years has not been employed in an
executive capacity by Cardno 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 Cardno
or another group member or an employee materially associated
with the service provided;
> is not a material supplier or customer of Cardno 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 Cardno 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 Cardno; 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 Cardno.
Cardno Annual Report 2014 39
PRINCIPLE 2 continued
The Board has confirmed that based on this definition of
independence, Mr. Marlay, Mr. Johnston, Ms. Dwyer,
Mr. Barnes, Mr. Murdoch and Ms. Fessenden are independent
Non-Executive Directors.
The Board currently considers it appropriate to have two Executive
Directors on the Board as they have a strong awareness of
management issues and a deep knowledge of the company. Cardno
has reduced the number of Executive Directors and increased the
number of Non-Executive Directors over recent years to the point
where it now has a majority of Non-Executive Directors.
The role of the Chairman and Managing Director are separate.
The Chairman of the Board is Mr. Marlay who is an independent
Non-Executive Director. The Managing Director is Mr. Renshaw.
Each Director, as part of their agreement with Cardno has the
ability to seek independent advice at Cardno’s expense after
consultation with the Chairman.
The Nominations Committee comprises three Non-Executive
Directors, Mr. Marlay (Chairman), Mr. Johnston and Ms. Dwyer
and the Managing Director Mr. Renshaw. Details of the number of
meetings of the Committee and members’ attendance can be found
in the Directors’ Report.
The Nominations Committee oversees and facilitates Board and
individual Director performance reviews and evaluation on an annual
basis. The Board conducts formal reviews of both individual and
collective performance annually using both internal processes and
external facilitators as necessary to ensure independent professional
scrutiny and benchmarking against developing best practices. During
the year, Mr. Marlay met individually with all Directors to seek their
views on ways to improve the effectiveness of the Board. As a result
of these meetings a number of areas of improvement were identified
and implemented during the year, including identification and
resolution of priority issues impacting the Board; the development
of an annual governance and Board agenda; and the continued
sophistication and delivery of quality information to the Board, thus
promoting improved decision making processes. In addition, at the
end of each Board meeting, Directors are invited to critically evaluate
the meeting. This process has identified both areas of strength
and opportunities for improvement in the process and conduct of
meetings. The Board acknowledges that performance can always
be improved and will continue to seek and consider ways of further
enhancing performance both individually and collectively. In 2014 this
review will be conducted by an external and independent party.
The Nominations 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 Cardno including company law, trade practices
legislation, environmental law, workplace health and safety, equal
opportunity and taxation.
40 Cardno Annual Report 2014
As Cardno 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 Cardno
operates. In addition, consideration is given to the candidate’s
knowledge of the areas of Cardno’s operations, risk management
concepts and how they apply to Cardno and also whether the
candidate is up to date with issues of corporate governance.
Ms. Fessenden was appointed to the Board on 1 June 2014. As Ms.
Fessenden is based in the US, her experience in and knowledge of
the North American marketplace is extensive and provides important
insight for the Board. Ms. Fessenden brings a strong operational
background, professional services knowledge and company director
experience which will be invaluable to Cardno given its now
significant presence in the Americas. Ms. Fessenden’s qualifications
and experience are outlined on page 35.
New Directors undergo an induction process in which they are given
an extensive briefing on Cardno. This includes meetings with key
executives, tours of the relevant businesses, an induction package
and presentations. A formal letter of appointment is provided. In
order to achieve continuing improvement in Board performance,
all Directors are encouraged to undergo continuing professional
development. Specifically, Directors are provided with the resources
and training to address skills gaps where they are identified.
During 2014, the Nominations Committee conducted a thorough
search process to find a successor to Mr. Andrew Buckley. The
Committee was assisted by an external party and both internal
and external candidates were considered. Ultimately the Board
appointed Mr. Michael Renshaw to the position.
Additionally, the Committee agreed to the appointment of Ms. Elizabeth
Fessenden as Cardno’s first US based Non-Executive Director.
The roles and responsibilities of the Nominations Committee are set
out in its Terms of Reference which are displayed on the Investor
Centre of Cardno’s website.
PRINCIPLE 3:
Promote ethical and responsible
decision making
The Board expects Directors and employees to observe high
standards of behaviours and business ethics. All Directors,
executives and employees are expected to act with integrity,
striving at all times to enhance the reputation and performance
of the Company. The Board has adopted a Code of Conduct for
Directors, senior managers 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 sets the standard of behaviour required in areas such
as performance and conduct, health and safety, use of property,
compliance with laws and professional standards, confidentiality
of information and conflicts of interest.
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 Whistleblower Protection Policy and
the Whistleblower hotline which is managed by an independent
operator and accessible to all Cardno staff 24 hours a day, seven
days a week. The Audit, Risk & Compliance Committee receives
notifications and reports of disclosures made under the Policy.
The Board has adopted a policy for trading in Cardno securities by
Directors, senior managers, financial services employees and staff.
The purpose of this Policy is to guide Directors, senior managers
and financial services employees in the performance of their
activities and to define the circumstances in which they, other
employees and associates, are permitted to deal in securities.
The policy addresses each of the ASX requirements including
provisions relating to the prohibition of trading by directors, senior
executives and financial services employees in Cardno’s securities
during defined blackout periods.
The codes and policies have been designed with a view to
ensuring the highest ethical and professional standards as well as
compliance with legal obligations. The code and the policies are
available for review in the Investor Centre of the Cardno website.
The Board continues its commitment to ensuring Zero Harm for
all Cardno employees, clients, visitors and members of the public.
To achieve this goal, the Board requires commitment and visible
leadership from all managers, strong teamwork and the active
participation of everyone to implement and reinforce this policy in
all Cardno offices, facilities and in the field.
DIVERSITY
Cardno’s Diversity Policy recognises that diversity can take many
forms: race, gender, ethnicity, sexual orientation, age, physical
abilities, religious beliefs and political beliefs. Diversity helps Cardno
to view its challenges through many different perspectives and helps
the Board, management and staff to make better informed decisions
for both Cardno and its clients. Cardno respects and values the
competitive advantage of diversity and recognises the benefits of its
integration throughout Cardno by improving corporate performance
and increasing shareholder value.
Cardno’s operations are diverse and widely distributed
geographically with more than 8,200 men and women across 270
offices in over 100 countries. Diversity is a core enabler in meeting
Cardno’s mission statement in regard to its people, clients, growth,
safety and quality, and performance. The Cardno diversity agenda
has developed significantly in the 2013/2014 with a focus on
gender diversity programs and professional development and
improvements in systems to analyse Cardno’s workforce metrics.
Cardno is placing more focus on the importance of diversity and
how this is linked to social, organisational and business outcomes,
with an aim to attract, develop and retain high quality diverse
talent; offer Cardno’s talent an inclusive organisational culture;
and provide exceptional service to diverse clients and communities
throughout the world.
Given the global nature of the workforce and rapidly changing
demographics, having a well-developed diversity and inclusion
program provides a sustainable competitive advantage.
> GENDER
Across the Cardno Group, almost 30 per cent of the workforce is
female and 70 per cent male.
Female gender representation among Executive and Non- Executive
Directors on the Board was 25 per cent as at 30 June 2014. The
proportion of women in leadership roles was almost 19 per cent (up
by 3 per cent since 2012/2013 ) and in technical and business services
staff combined, it was just below 31 per cent. There are more males
in Cardno’s technical streams (76 per cent) and a higher proportion of
females (73 per cent) in Global Business Services.
Results from a number of external studies suggest that women
across certain age groups and countries are less likely to participate
in the workforce. This provides insight around the need to offer
incentives that encourage higher representation of women in the
workforce and to set targets that increase gender role models at all
levels in the organisation.
The Cardno Senior Principals and Principals program recognises
individuals with a specialist focus and dedication in their field. For
the 2013/2014 year, 18 per cent of the appointments to either a
Principal or a Senior Principal role were female. On the learning and
development front, Cardno currently has over 16 per cent of female
managers engaged in the Management Essentials Program provided
through Cardno University.
> AGE
Cardno employees range in age from undergraduate interns in their
early 20’s to specialist and management employees over age 70.
The majority of Cardno’s more than 8,200 employees are in their
mid-20s to mid-40s. The majority of senior managers are in their
mid-40s to mid-50s, however on closer analysis the senior
manager group by gender reveals that most of the women in senior
management positions are in their mid-30’s to mid-40’s.
Service with Cardno is celebrated with recognition awards at five
year increments in some parts of the business.
> LANGUAGE
Employees across the company speak 104 different languages.
Some of these include: Afrikaans, Arabic, Bulgarian, Cantonese,
Czech, Dutch, English, French, German, Greek, Hungarian, Italian,
Korean, Macedonian, Nepali, Polish, Portuguese, Samoan, Spanish,
Swahili (Kiswahili) Tok Pisin, Ukrainian, Vietnamese and Welsh.
Cardno Annual Report 2014 41
PRINCIPLE 3 continued
> DIVERSITY INITIATIVES
The following initiatives have been implemented in the 2013/2014:
> The Women in Cardno program was launched in September 2013
and represents a long term commitment by Cardno to become a
global leader with regard to gender equality. The initial two-year
program will focus on mentoring and sponsorship, the Principals
and Senior Principals program, diversity reporting and metrics,
professional development and learning programs and providing
networking events and opportunities;
> Cardno participated in a number of workgroups and committees
globally to champion diversity at a number of levels. Some of
these included:
• Cardno CEO Michael Renshaw is active with Queensland
Male Champions of Change (www.qldmcc.org). The
organisation recognises the importance of leadership
commitment to gender diversity and building inclusive
cultures within organisations and industries. Women in
Cardno is a featured case study on the QMCC website
• Cardno sponsored and participated in the Society for
International Development (SID) Career Fair in Washington and
the Devex Partnerships Forum in Africa to provide information
on working in the international development sector and the
importance of localisation and national workforces
• One of our Australian employees was selected as a delegate
for White Ribbon Australia first Youth Forum which is a
male-led non-profit organisation working to end violence
against women and girls and promote gender equity and
healthy relationships
• Cardno staff presented at and participated in International
Women’s Day functions globally to inspire change
• The Cardno Emerging Markets team in the United States
completed training with a specialist on gender integration
into project design and proposal development
> All communications and content are now translated into
Spanish for our Latin American employees. This includes all
policies, procedures, intranet pages, email and other internal
communication and other content;
> The Code of Conduct and Diversity Policy were updated to reflect
Cardno’s ongoing commitment to a workplace that provides equal
opportunity for all employees; and
> The Position Classification Framework (PCF) was implemented in
2014 to allow a deeper classification of positions throughout the
business globally and contribute to more detailed analytics.
> FY2014/2015 FOCUS AREAS
Cardno’s focus for the 2014/2015 year and ongoing will be on:
> The inclusion of Diversity as a key enabler in the 2020 strategy;
> Introduction of a Human Resources Information System (HRIS).
The HRIS solution will allow for increased visibility of global
employee records and live reporting. It will provide an opportunity
to have dashboards of data that can be used to track diversity
metrics and set targets;
> Further development of an Indigenous Engagement Strategy (IES)
in our ANZ Region; and
> Ongoing implementation of the Gender Working Group initiatives
that aim to place a focus on gender based discrepancies and
provide balance.
The Board maintains a Diversity Policy which is accessible on the
Cardno website.
PRINCIPLE 4:
Safeguard integrity in
financial reporting
The Board recognises the critical importance of sound financial
management, the accurate and timely reporting of financial
performance and the management of risk. To assist the Board in the
fulfillment of its duties and governance obligations in this area, the
Board has established an Audit, Risk & Compliance Committee.
Its role, objectives and responsibilities are set out in its Terms
of Reference which can be viewed in the Investor Centre of the
company’s website. The Committee meets at least four times per year.
During the year the Audit, Risk & Compliance Committee consisted
of four Non-Executive Directors, Mr. Barnes, Mr. Johnston, Ms.
Dwyer and Mr. Murdoch. Mr. Barnes, an independent Non-Executive
Director, is Chairman of the Audit, Risk & Compliance Committee.
Mr. Barnes is not the Chairman of the company.
Some of the Audit Risk & Compliance Committee actions during
2014 were:
> review of the Cardno Risk Management Policy;
> revision and approval of Delegation of Authority and Code of
Conduct and Corporate Governance and Compliance reporting;
> improved reporting and transparency of breaches of
Cardno policies; and
> continued focus and vigilance on identification and mitigation
of enterprise risks.
In respect of the current year, the Managing Director and Chief
Financial Officer have provided the Board with a statement
confirming that Cardno’s financial reports present a true and fair
view of its financial position and are in accordance with relevant
accounting standards.
42 Cardno Annual Report 2014
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.
Cardno’s auditors attend the Annual General Meeting of the
company and are available to answer shareholders’ questions.
From 1 July 2014 Mr. Mitchell Petrie will assume the role of
external audit engagement partner from Mr. Robert Jones.
PRINCIPLE 5:
Make timely and balanced disclosure
Cardno 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 the Policy to ensure
it reflects best practice standards regarding disclosure and to
ensure the market is kept informed of price sensitive or significant
information in accordance with the Listing Rules. The policy will be
reviewed again in the new financial year.
The Company seeks to improve its disclosure in its annual report by
adopting Regulatory Guide 247 Effective Disclosure in an operating
and financial review issued by the ASIC in March 2013. As a result
the annual report provides more comprehensive information allowing
shareholders to better evaluate the company.
Cardno maintains a Confidential Information Policy which
establishes standards of behaviour and processes regarding the
manner in which the executives and employees handle confidential
information relating to Cardno’s business. A copy of the Policy is
accessible on the Cardno 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 Board has adopted a Communications Policy that provides for:
> communicating effectively with shareholders through releases
to the market via the ASX, the media, Cardno’s website,
information mailed to shareholders and the general meetings
of Cardno;
> all information disclosed to the ASX is posted on the Cardno
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 Cardno’s website;
> giving shareholders ready access to balanced and understandable
information about Cardno 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.
The 2014 Annual General Meeting will be webcast live to allow all
Cardno shareholders around the world to view and listen to the event.
During 2013/2014, Cardno continued to develop its website which
can now be read in Australian, UK and American English and
Colombian Spanish languages. The website also allows members
of the public to register to receive investor alerts when Cardno
issues ASX and media announcements and other publications.
A copy of Cardno’s Communications Policy is able to be reviewed
in the Investor Centre of the Cardno website.
Cardno’s website contains an easily located link to shareholder
information, including corporate governance information such as
details of directors and senior executives, its constitution, its board
charter, charters of each of its board committees and corporate
governance policies. The website also links to copies of Cardno’s
annual reports and financial statement, announcements to the
ASX, notices of meetings and webcasts.
Cardno Annual Report 2014 43
Cardno 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.
Cardno’s internal audit function provides assurance to the Board on
the effectiveness of Cardno’s risk management framework and the
adequacy and effectiveness of the system of internal controls. Group
Audit responsibilities are defined by the Board through the Audit,
Risk and Compliance Committee as part of their oversight role.
The objective, roles and responsibilities of the Audit, Risk &
Compliance Committee and the Operational Risk Management
Committee are set out in their Charters, which are reviewed
annually. A copy of the Charter of each committee can be viewed
in the Investor Centre of the Cardno website. Details of the number
of meetings of the Audit, Risk & Compliance Committee and
members’ attendance can be found in the Directors’ Report.
PRINCIPLE 8:
Remunerate fairly and responsibly
Cardno has established a Remuneration Committee. The
Remuneration Committee, which advises and reports to the Board,
is chaired by Mr. Murdoch and includes Mr. Marlay, Ms. Fessenden
and Mr. Barnes, all Non-Executive Directors. Details of the number of
meetings of the committee and members’ attendance can be found in
the Directors’ Report.
The Board has consciously designed Cardno’s remuneration strategy
to ensure its Managing Director and senior management team are
strongly aligned to achieving Cardno’s business strategies and deliver
shareholder value. A detailed explanation of the remuneration strategy
and arrangements is published in the Remuneration Report which
forms part of the Directors’ Report along with details of the current
remuneration of the Directors and key management personnel.
The company’s Securities Trading Policy specifically prohibits any
Director, senior manager, financial services employee 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 Cardno website.
The role, objectives and responsibilities of the Remuneration
Committee are set out in its Charter, which is reviewed annually.
A copy of the Charter can be viewed in the Investor Centre of the
Cardno website.
PRINCIPLE 7:
Recognise and manage risk
The Board’s responsibility for the oversight of risk management is
formalised in Cardno’s Corporate Governance Policy. The Board,
in consultation with executive management, is responsible for
identifying relevant risks. The risk management responsibilities of
the Audit, Risk & Compliance Committee are set out in its Charter.
During 2014, the Board gave preliminary consideration to forming
a separate Risk Committee, independent from the existing Audit
Risk and Compliance Committee. The Board will give further
consideration to this issue in the forthcoming year.
In pursuit of the fulfillment of their responsibilities for risk
management, the Board, together with the Managing Director
and senior management, regularly review the effectiveness of
the Group’s risk management processes for the identification,
monitoring and mitigation of risk.
In 2013, the Board undertook an externally facilitated workshop
review to ensure that the Board had identified the key enterprise
and strategic risks of the business. The results of this workshop
have allowed the Board to identify and appoint ‘owners’ of these
risks who will take responsibility to ensure appropriate risk
mitigates are implemented. In June 2014 a Group Risk Manager
was appointed to oversee the continued identification and
management of the enterprise and strategic risks of the business.
In accordance with its responsibilities for risk management, the
Audit, Risk & Compliance Committee has approved 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 Cardno’s business across
the globe, reports at each Audit, Risk & Compliance Committee
meeting. 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 Cardno and how they are being mitigated and managed by
management via the Operational Risk Management Committee.
This structure allows Cardno to assess risks ranging from low to
very high and it is those risks that are identified as significant or that
create material exposure in an economic, environmental and social
sustainability sense that are referred to in the Financial Report.
44 Cardno Annual Report 2014
(cid:108)nancial report
46 Directors’ Report
64 Consolidated Statement of Financial Performance
64 Consolidated Statement of Comprehensive Income
65 Consolidated Statement of Financial Position
66 Consolidated Statement of Changes in Equity
67 Consolidated Statement of Cash Flows
68 Notes to the Financial Statements
110 Directors’ Declaration
111 Independent Auditor’s Report
113 Additional Shareholder Information
116 Corporate Directory
Financial calendar
2013/2014
Record Date for Final Dividend
Final Dividend Paid
Annual General Meeting
2014/2015
Half-Year End
Half-Year Results and
Dividend Announced
Record Date for Interim Dividend
Interim Dividend Paid
Note: Dates subject to alteration
12 September 2014
10 October 2014
23 October 2014
31 December 2014
17 February 2015
20 March 2015
10 April 2015
Cardno Annual Report 2014 45
1: DIRECTORS
The Directors of the Company in office during or since the year
ended 30 June 2014 are set out below:
John Marlay
(Chairman - Non-Executive)
Andrew Buckley
(Managing Director - Executive) (resigned 1 March 2014)
Anthony Barnes
(Non-Executive)
Peter Cosgrove
(Non-Executive) (resigned 28 January 2014)
Tonianne Dwyer
(Non-Executive)
Elizabeth Fessenden
(Non-Executive) (appointed 1 June 2014)
Trevor Johnson
(Executive)
Ian Johnston
(Non-Executive)
Grant Murdoch
(Non-Executive)
Michael Renshaw
(Managing Director - Executive) (appointed 1 March 2014)
Details of the qualifications, experience and responsibilities of the
Directors are on pages 34 to 35.
2: COMPANY SECRETARY
Michael Pearson LLB, BA, ACIS, GAICD (Company Secretary).
3: PRINCIPAL ACTIVITIES
The principal activity of the consolidated entity during the
financial year was operating as a professional infrastructure
and environmental services company, with expertise in the
development and improvement of physical and social infrastructure
for communities around the world. There were no changes to the
principal activities of the Cardno Group during the financial year
under review.
Directors’
Report
CARDNO LIMITED AND ITS CONTROLLED
ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
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 2014.
46 Cardno Annual Report 2014
4: REVIEW OF RESULTS AND OPERATIONS
PERFORMANCE (A$m)
Revenue
EBITDA*
EBIT
NPAT
Operating Cash Flow
EPS - basic (cents)
Dividend per share (cents)
2014
1,309.6
2013
1,195.4
141.7
115.2
78.1
84.6
52.04
36.0
138.0
114.3
77.6
95.7
55.09
36.0
* EBITDA = EBIT plus depreciation and amortisation
EBITDA and EBIT are unaudited. However, they are based on amounts extracted from
the audited financial statements as reported in the consolidated statement of financial
performance on page 64. These metrics provide a measure of Cardno’s performance before
the impact of non-cash expense items, such as depreciation and amortisation, as well as
interest costs associated with Cardno’s external debt facility and hire purchase arrangements.
A detailed analysis of the financial performance of Cardno is set
out in the Financial Review and Operations Review Sections of the
Annual Report. The Directors report that Cardno achieved a financial
result for the year ended 30 June 2014 that was broadly in line with
the result achieved in FY2013 in far less favourable conditions.
Highlights of Cardno’s financial performance are as follows:
> Cardno delivered a net profit after tax of $78.1 million for
FY2014. This was a 0.6 per cent increase over FY2013.
> Revenue of $1,309.6 million was up 9.6 per cent on FY2013.
This was mainly due to contributions of new merger partners
as organic growth declined on the prior year by 8.3 per cent.
The organic revenue decline reflects the variable market
conditions in which Cardno has been operating.
> Cardno achieved a record EBITDA of $141.7 million in FY2014
which is an increase of 2.7 per cent compared to that achieved
in FY2013 of $138.0 million. The increase in revenue is not
flowing fully through to the bottom line and as a result EBITDA
margins on fee revenue declined from 15.5 per cent in FY2013
to 14.7 per cent in FY2014. This decline in margin is due to
difficult market conditions, changes in business mix and
increased merger and restructuring costs.
> Basic earnings per share (EPS) was 52.04 cents per share, a
reduction of 5.5 per cent from the FY2013 results of 55.09 cents
per share. EPS was impacted by the increased number of shares
on issue following equity raised and issued for major acquisitions
and the broadly flat financial performance of the Group.
> Cardno achieved a solid operating cash flow of $84.6 million
despite the 11.6 per cent decrease on the $95.7 million
generated in FY2013. This result however is 8.3 per cent higher
than the FY2014 NPAT of $78.1 million demonstrating Cardno’s
strong cash conversion capability.
> Cardno’s balance sheet remains healthy with a net debt-to-
equity ratio of 28.8 per cent including cash of $85.9 million at
30 June 2014. Net debt to EBITDA was 1.6 times.
> The Board has declared a final dividend of 17 cents per
share (100 per cent franked) to be paid on 10 October 2014
to all shareholders registered on 12 September 2014. With
the interim dividend of 19.0 cents per share (100 per cent
franked) in April 2014, this will result in a full year dividend
of 36 cents per share (100 per cent franked), which is equal
to that delivered in FY2013. The Board has determined that it
will prudently distribute as many franking credits as possible.
The amount of franking credits available will depend on the future
mix of Australian and international profits.
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 2013 ordinary
- Interim 2014 ordinary
Declared after end of year
- Final 2014 ordinary
(cid:36)(cid:69)(cid:65)(cid:76)(cid:84)(cid:157)(cid:87)(cid:73)(cid:84)(cid:72)(cid:157)(cid:73)(cid:78)(cid:157)(cid:84)(cid:72)(cid:69)(cid:157)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:157)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:157)(cid:65)(cid:83)(cid:26)
- Dividends paid or provided
- Noted as a subsequent event (note 28)
Cents per share
Total amount
$’000
Franked
Date of payment
18.0
19.0
17.0
25,947
30,583
100%
100%
11 October 2013
7 April 2014
27,755
100%
10 October 2014
56,530
27,755
84,285
Cardno Annual Report 2014 47
6: EVENTS SUBSEQUENT TO THE REPORTING DATE
8: SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 18 August 2014, the Directors of Cardno Limited declared a final
dividend of 17 cents per share (100 per cent franked) for FY2014. The
dividend will be paid on 10 October 2014 to shareholders registered on
12 September 2014 and will total $27,755,385. The dividend has not
been provided for in the 30 June 2014 financial statements.
On 15 August 2014, the Group closed its first long term note
of US$150.0 million in the US Private Placement debt market.
The tranches issued include US$50.0 million with a seven year term
maturing on 15 August 2021 and US$100.0 million with a
10 year term maturing on 21 August 2024. The note was initially
priced on 15 May 2014 with a three month deferred settlement.
Simultaneously, the Group issued fixed to floating USD interest rate
swaps matching the tranches and elected to fair value hedge the
interest rate risk in accordance with AASB139. The proceeds from
the long term note will be used to repay a portion of the Group’s
existing bank debt and for other general corporate purposes.
7: LIKELY DEVELOPMENTS
Cardno will continue to manage its global business in physical
and social infrastructure and pursue its policy of growing both
organically and by acquisition during the next financial year.
Other than as disclosed elsewhere in this Director’s Report,
there have been no significant changes in the state of affairs since
30 June 2013.
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 willful 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.
10: DIRECTORS’ MEETINGS
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2014 is set out below:
No. of Meetings Held
A H Barnes
A D Buckley (i)
P J Cosgrove (ii)
T Dwyer
E Fessenden (iii)
T C Johnson
I J Johnston
J Marlay
G Murdoch
M J Renshaw (iv)
- = not a member of this committee
A = number of meetings attended.
Board of
Directors
Audit, Risk &
Compliance
Committee
Remuneration
Committee
Nominations
Committee*
A
16
9
5
16
1
16
14
16
16
6
B
16
9
6
16
1
16
16
16
16
6
A
4
-
-
4
-
-
4
-
4
-
B
4
-
-
4
-
-
4
-
4
-
A
6
-
-
-
1
-
-
6
6
-
B
6
-
-
-
1
-
-
6
6
-
A
-
1
1
-
-
-
1
1
-
-
B
-
1
1
-
-
-
1
1
-
-
B = number of meetings held during the time the Director held office during the year or was a committee member.
(i) Andrew Buckley resigned from the Board on 1 March 2014
(ii) Peter Cosgrove resigned from the Board on 28 January 2014
(iii) Elizabeth Fessenden was appointed to the Board on 1 June 2014
(iv) Michael Renshaw was appointed to the Board on 1 March 2014
* The nominations committee met as the Board at various times during FY2014 to consider succession of the Chief Executive Officer.
48 Cardno Annual Report 2014
11: REMUNERATION REPORT - AUDITED
The Directors of Cardno Limited present the Remuneration Report
for The Company for the financial year ended 30 June 2014. The
information contained in the Report, which forms part of the
Directors Report, has been audited by KPMG.
This Report details remuneration information for Managing Director,
Key Management Personnel and Non-Executive Directors who have
responsibility for controlling the activities of Cardno.
The ‘question and answer’ format which was adopted for 2013
Remuneration Report received positive feedback from shareholders
and stakeholders and has been continued for this report.
TABLE OF CONTENTS
PAGE
11.1
How does the Company’s remuneration strategy
take into account shareholders’ interests?
11.2
How is executive pay structured at Cardno?
11.3
11.4
11.5
How does company performance impact on
executives’ remuneration?
How is Cardno’s short term program structured
and how does it drive value for shareholders?
How is Cardno’s long term incentive
program structured and how does it drive value
for shareholders?
11.6 Managing Director and Key Management
Personnel Employment Agreements
11.7
How is Non-Executive Director pay structured?
11.8
The Value and Measure of LTI in 2014
50
50
52
52
53
54
55
58
SUMMARY OF REMUNERATION MATTERS IN 2014
Cardno’s group remuneration strategy is designed to attract,
retain and motivate appropriately qualified and experienced Key
Management Personnel in the engineering, environment and
professional consulting services sector.
In March 2014 Michael Renshaw who had been serving as General
Manager – International, was appointed as Cardno’s new Managing
Director and Chief Executive Officer following the retirement of
Andrew Buckley. Other key executive changes were undertaken to
streamline the executive team. A review of responsibilities for each
Key Management Personnel was performed and roles benchmarked
against comparable groups. As a result, changes to the Fixed Annual
Remuneration (FAR) of Michael Renshaw, Paul Gardiner, and Kylie
Sprott were implemented with effect from March/April 2014. Other
changes are proposed to become effective for Graham Yerbury,
Roger Collins-Woolcock and Trevor Johnson from 1 July 2014.
Cardno achieved a FY2014 Net Profit After Tax (NPAT) of
$78.1 million. Although some non-financial goals were partially
achieved and short term incentives (STI) earned, the Managing
Director and Key Management Personnel elected to forfeit any
payment of STI for FY2014.
Long Term Incentives (LTI) were awarded to Key Management
Personnel for the 2015 year to continue to drive the long term
performance of the business. It is proposed to seek shareholder
approval for Executive Directors’ awards at the Annual General
Meeting in October 2014.
OUTLOOK FOR 2015 REMUNERATION
A similar remuneration framework to that set out in this Report
for 2014 has been agreed for 2015, with minor adjustments to
the weighting of STI “at target”, for out performance and as a
percentage of FAR for LTI, meaning a significant proportion of Key
Management Personnel remuneration will continue to be “at risk”
and subject to specific financial and non-financial key performance
indicators (KPI’s). Overall out performance targets will be self-
funding and align with shareholder interests.
As a consequence of Cardno’s continued growth, the increasing
commitment and demands on Directors, and the need to plan for
Non-Executive Director succession, the Board will seek shareholder
approval for an increase to the maximum aggregate remuneration
which may be paid to Non-Executive Directors at the Annual General
Meeting in October 2014.
Cardno Annual Report 2014 49
11: REMUNERATION REPORT - AUDITED continued
11.1
How does the Company’s remuneration strategy take
into account shareholders’ interests?
The ability of Cardno to deliver long term shareholder value relies
significantly upon the capability of Key Management Personnel to
drive business performance and growth, employee engagement,
client service satisfaction, safety and quality.
Net Profit After Tax (000’s)
Dividends Paid or Provided (000’s)
Change in Share Price – year on year ($ per share)
Basic Earnings Per Share Growth
Return on Capital Employed
Total Key Management Personnel Remuneration (000’s)
Over the past five years, Cardno’s profit after income tax has grown
at an average rate per annum of 18 per cent and revenue from
$516 million (2009) to $1,310 million (2014). During the same period
average Key Management Personnel total remuneration has grown
by approximately 5 per cent per annum.
SHAREHOLDER RETURNS
For the five years to 30 June 2014, shareholders achieved total
returns of 138 per cent (before franking credits and tax). This is
illustrated in the below chart.
SHAREHOLDER RETURNS (A$)
138% Return
10
8
6
4
2
0
1.68
8.00
6.32
3.36
Initial investment
30 June 2009
(1 share)
A
Share price as at
30 June 2014
B
Dividends
received over the
5 year period
C
Total value
of share as at
30 June 2014
D
A. A shareholder invests $3.36 to acquire one share of Cardno Limited on
30 June 2009.
B. As at 30 June 2014, the Cardno Limited share price was $6.32.
C. Aggregate dividends paid by Cardno Limited over the five year period were
$1.68 per share (before franking credits).
D. Total value of the share (share price) plus dividends received as at 30 June 2014
was $8.00 (B + C), amounting to a return of 138 per cent over the five year period.
50 Cardno Annual Report 2014
Cardno’s financial performance and resultant benefits for shareholder
return are demonstrated in the below table.
2014
$78,134
$56,530
$1.14
-5.5%
15.1%
$2,819
2013
$77,639
$50,766
-$2.38
-10.8%
17.6%
$ 3,707
2012
$74,168
$43,488
$2.18
9.7%
20.5%
$3,534
2011
$58,802
$33,975
$1.49
28.3%
24.9%
$ 2,446
2010
$37,597
$23,955
$0.53
0.1%
17.3%
$ 2,230
. 11.2
How is executive pay structured at Cardno?
Cardno’s remuneration strategy is offered through a mix of fixed and
variable remuneration including short and long term performance-
based incentives (Total Remuneration). This is designed to maximise
the financial performance and growth of the Company over time.
Exceptional performance by Key Management Personnel which
exceeds at-target performance outcomes can result in Total
Remuneration for that person being towards the 75th percentile
compared to similar roles in the comparator group (which is detailed
in section 11.5).
The primary source for remuneration benchmarking is a group of
Australian listed companies in the Industrial Sector in the range
of half to double Cardno’s market capitalisation. For the Managing
Director and key management personnel, remuneration levels for
comparable roles in appropriate international jurisdictions are also
taken into account.
The Cardno Board retains discretion in approving the Managing
Director’s and the Key Management Personnel’s STI payment and for
the awarding of any Performance Rights as a LTI award under the
Performance Equity Plan (PEP).
STI rewards the achievement or exceeding of both financial and non
financial group, divisional, and personal objectives. The STI also
provides alignment with shareholder rewards through improved
short term earnings growth and business development.
LTI rewards Key Management Personnel for Cardno performance over
a three year period. The LTI provides a retention element through
an exposure to Cardno equities and an alignment with shareholder
rewards through increasing total shareholder return (TSR).
Fixed Annual Remuneration (FAR) for Key Management Personnel is
generally targeted at median levels compared to similar roles in the
Cardno comparator group.
The remuneration of the Managing Director and Key Management
Personnel are set out in the opposite table.
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Cardno Annual Report 2014 51
11: REMUNERATION REPORT - AUDITED continued
11.3
How does company performance impact on
executives’ remuneration?
Executives
Name
Andrew Buckley (i)
Michael Renshaw
Trevor Johnson
Roger Collins-Woolcock
Paul Gardiner
Kylie Sprott
Graham Yerbury
Potential
$
933,333
1,050,000
120,000
256,461
263,755
166,261
248,461
STI FY2014
STI FY2013
LTI FY2014 (ii)
LTI FY2013
Awarded
%
Paid
%
Potential
$
Paid
%
Performance
Rights
Granted
To Vest
%
Performance
Rights
Granted
Vested
%
13%
10%
28%
15%
18%
21%
18%
13%
1,300,000
0%
0%
0%
0%
0%
0%
302,500
100,000
208,100
208,100
133,000
204,000
45%
70%
52%
36%
65%
56%
19%
80,000
50,000
30,000
40,000
40,000
30,000
-
38%
38%
38%
38%
38%
38%
-
70,000
35,000
27,500
35,000
35,000
25,000
-
69%
69%
69%
69%
69%
69%
-
(i) Potential STI for Andrew Buckley has been pro-rated for the year ended 30 June 2014.
(ii) Performance Rights granted in 2011 to vest based on achievement of performance hurdles for the period of 2011 to 2014.
Above are details of the vesting profile for 2014 and the previous
year of the STI cash bonuses and LTI awarded as remuneration to
each of the named Key Management Personnel.
reduction. These vary according to position, responsibility and
areas assessed by the Managing Director to be integral to each
area of accountability.
Performance Rights vesting in FY2014 were granted in October and
November 2011 and are assessed on performance hurdles over the
three year period to 30 June 2014. These Performance Rights are
expected to vest on 20 October 2014 and 1 November 2014.
Performance Rights which vested in FY2013 were granted in October
and November 2010 and were assessed on performance hurdles
over the three year period to 30 June 2013. These Performance
Rights vested on 21 October 2013 and 25 November 2013. The
number of Performance Rights vested was adjusted in accordance
with the Listing Rules to take into account the pro-rata issue of
shares during the three year period to 30 June 2013.
. 11.4 How is Cardno’s short term incentive
program structured and how does it drive value
for shareholders?
STI is assessed over the duration of Cardno’s financial year, and
consists of cash payments to key management personnel, with
50 per cent of any award being deferred and paid 12 months
after achievement.
There are two components to the STI structure.
Firstly, 68 per cent of “at target” performance STI is assessed
on financial KPI’s such as the Group’s overall financial and key
management personnel’s divisional financial performance (where
relevant) against budget.
The second component is assessed on non-financial KPIs including
safety, business growth, client relationships and working capital
For the Managing Director, STIs are assessed against two separate
performance measures.
The first measure is an agreed target level profitability for Cardno.
For 2014 an STI cash bonus of between 50 per cent and 100 per cent
of up to $500,000 was payable for achievement of between 90 per
cent and 100 per cent of the agreed target level Group Net Profit
After Tax (NPAT) pro-rata between the qualification levels. These
terms will also apply in FY15.
The second STI measure is a qualitative assessment of Mr Renshaw’s
performance against specific criteria including non-financial growth,
safety and leadership. A maximum of $200,000 was payable under
this measure for 2014. These terms will also apply in FY15.
The Board has discretion based on the recommendation of the
Remuneration Committee, to award up to an additional $350,000
to the Managing Director for exceptional performance in the
achievement of Group NPAT outcomes in excess of target, business
growth and leadership of critical elements to underpin achievement of
Cardno’s 2015 strategic plan.
No STI for financial KPI’s are payable unless 90 per cent of budgeted
NPAT is achieved. No STI for non-financial KPI’s is payable unless 85
per cent of budgeted NPAT is achieved.
Key Management Personnel can earn an STI ranging between
30 - 50 per cent of FAR (depending on position) for achieving at-target
performance outcomes and up to an additional 20 per cent of FAR for
out-performance through achievement of exceptional financial results
and personal performance targets. This payment is based on the
Managing Director’s and the Remuneration Committee’s assessment
and judgment of performance, measured against the key management
person’s out-performance against individual specific goals.
52 Cardno Annual Report 2014
11: REMUNERATION REPORT - AUDITED continued
In FY14, no STI was payable to the Managing Director or Key
Management Personnel for any financial KPI, as 90 per cent of
budgeted NPAT was not achieved. Although some non-financial
measures were partially achieved and STI earned, the Managing
Director and Key Management Personnel elected to forfeit payment
of the STI.
In FY2015, Key Management Personnel (excluding the Managing
Director) will be able to earn STI of between 35 - 40 per cent of FAR
for achieving “at target” performance and an additional 20 per cent for
out performance and LTI of up to 50 per cent of FAR.
The financial KPI’s for the “at target” portion of STI is Group
NPAT and a combination of organic growth and revenue factor
performance drivers. Non-financial KPI’s are safety measures
including Lost Time Injury Rate (LTIR) and Total Recordable Injury
Rate (TRIR) and operational measures such as staff turnover,
succession planning and executive leadership.
The following table provides a summary of achievement against performance measures for Key Management Personnel in FY14.
Key Performance Indicators (KPI) to
achieve 100% of STI Target
Performance Measure
People
Clients
Growth
Unmanaged staff turnover (% rolling 12 months)
32%
Client Performance Score
Fee Growth
Safety & Quality
Financial Performance
Loss Time Injury Frequency Rate
Overall Company performance Vs Budget
68%
Region performance Vs Budget
Days sales outstanding for debtors
Results (i)
Partially Achieved
Partially Achieved
Partially Achieved
Achieved
Not Achieved
Not Achieved
Partially Achieved
Key Performance Indicators (KPI) to achieve
additional STI of 10% of FAR for Out performance (ii)
Performance Measure
Results (i)
Financial Overachievement
Other agreed specific goals
Consider performance related to market
Health and Safety discipline
Cross selling focus
Regional Performance > 10% Vs Budget
Not Achieved
Individual Critical Performance Goals
Partially Achieved
(i) the results have not been audited.
(ii) Each of these criteria may vary slightly depending on the role of the key management personnel.
. 11.5
How is Cardno’s long term incentive program structured
and how does it drive value for shareholders?
The LTI program seeks to align the Managing Director and Key
Management Personnel decision making with the interests of
shareholders. It also encourages the achievement of performance
conditions likely to sustain long term business growth for Cardno.
The delivery of LTI is made under the Performance Equity Plan (PEP).
Any LTI award is paid in Performance Rights. These may vest after
3 years from the date of issue and are dependent on continuing
employment and the achievement of performance outcomes over
the period. These outcomes are both the compound annual growth
in Cardno’s earnings per share (up to 50 per cent potential) and
the relative TSR achieved by Cardno compared with an ASX-listed
comparator group (up to 50 per cent potential).
The issue of Performance Rights is discretionary and applies to
eligible staff considered to have been high performers in their
respective roles by the Board.
For the Managing Director, in FY14 LTI entitlements up to 50 per
cent of FAR may be awarded at the discretion of the Board on the
recommendation of the Remuneration Committee based on the overall
performance and growth of Cardno Earnings Per Share (EPS) growth
and relative Total Shareholder Return (TSR) performance as well as
other qualitative and quantitative measures of Cardno’s longer term
performance. In FY15 the potential award will be 60 per cent of FAR.
Cardno Annual Report 2014 53
11: REMUNERATION REPORT - AUDITED continued
Each Performance Right is convertible to one ordinary share. All
Performance Rights expire on the earlier of their expiry date or
termination of employment unless the Board determines otherwise.
The Performance Rights may be exercised at any time during a one
year period commencing three years after the date the Performance
Rights are issued provided the performance hurdles have been met.
There are no voting or dividend rights attached to the Performance
Rights. Voting Rights and dividends will attach to the ordinary shares
issued when the Performance Rights have vested and been exercised.
The PEP operates by granting a Performance Right to acquire an
ordinary share at nil consideration at a predetermined time in the
future. During 2014 2,146,820 Performance Rights with a grant date
fair value of $11,627,105 were issued with a vesting period of three
years from the grant dates of 17 October 2013 and 11 November 2013.
Further details of how LTI was valued and measured in 2014 can be
found in section 11.8.
The Board considers the issue of Performance Rights based on the
achievement of specific EPS and TSR targets aligns the performance of
key management personnel and those selected staff who participate
in the PEP with the interests and objectives of shareholders.
The Performance Rights are subject to performance hurdles of TSR (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
% of Performance
Rights to Vest
EPS Growth Over 3 Years
Over 3 Years
<50th percentile
50th percentile
>50th & <75th percentiles
75th percentile and above
(Tranche 1 50%)
0%
50%
Pro rata
100%
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
(cid:116)40% (12% pa)
% of Performance
Rights to Vest
(Tranche 2 50%)
0%
30%
Pro rata
70%
Pro rata
100%
11.6 Managing Director and Key Management
Personnel Employment Agreements
MANAGING DIRECTOR
Mr Renshaw commenced as Managing Director on 1 March 2014.
His employment contract has no fixed term and provides both fixed
and incentive based remuneration which includes STI and LTI.
From the date of his appointment Mr Renshaw’s FAR was $700,000
for the remainder of FY14.
Details of termination benefits payable by way of cash or
Performance Rights to Mr Renshaw are outlined in the
opposite table:
a) TSR
In FY2014 the TSR Comparator Group comprised companies ranked
between 101-200 in the S&P/ASX 300 (i.e. the second 100 companies
in the S&P/ASX 300) based on market capitalisation as at 1 July
2013 excluding companies classified in Financial, Energy, Metals and
Mining GICS sectors.
Based on the TSR result, it is expected that 204,639 of Performance
Rights granted in 2011 will vest on 25 October 2014 and 1 November
2014, based on a TSR result in the 63rd percentile.
b) EPS
The growth in earnings per share is calculated by comparing the basic
earnings per share ‘EPS’ achieved by Cardno in the base year (eg: year
to June 2011) with that achieved in the final year of the performance
period (eg: year to June 2014). The compound annual growth rate
(CAGR) of EPS over the three year period to 30 June 2014 was
negative 2.6 per cent.
Based on the EPS result, none of the Performance Rights granted in
2011 in Tranche 2 will vest on 25 October 2014 and 1 November 2014.
54 Cardno Annual Report 2014
Benefits Payable
Unpaid /
accrued
FAR
Accrued
but untaken
annual leave
Long
service
leave
Unpaid /
Accrued
STI
Severance
payment
Unvested
Performance
Rights
11: REMUNERATION REPORT - AUDITED continued
Mode of retirement
from office
Notice by Mr Renshaw
Termination by the Company
(except for misconduct)
Notice
period
12
months
12
months
Yes
Yes
Yes
Yes
Termination by the Company for misconduct Nil
Nil
Yes
Former Managing Director and Chief Executive Officer Mr Andrew
Buckley, resigned on 1 March 2014. Mr Buckley did not receive any
STI, relative to the financial performance measures of Cardno for
FY14. Mr Buckley did receive payment of $125,000 of a potential
maximum of $240,000, principally for his achievement of non financial
performance measures, in relation to the significant improvement in
Cardno’s safety performance, and for the successful acquisition of
three new growth businesses for Cardno, in FY2014. This amount
was awarded on a pro rata basis of 8/12 reflecting his time in the
Chief Executive role, prior to his retirement during the period.
Mr Buckley will retain unvested Performance Rights,previously
awarded following shareholder approval at the 2011,2012 and 2013
Annual General Meetings, and these Performance Rights, totalling
290,000 will remain subject to both EPS and TSR performance
hurdles for any future payment.
KEY MANAGEMENT PERSONNEL
Each agreement varies according to the individual Key Management
Person but typically includes:
a) Termination provisions relating to notice periods and payments
similar to those outlined for the Managing Director, except
that notice periods are up to six months and reduced where
termination is for performance reasons.
b) Performance and confidentiality obligations on the part of both
c)
the employer and employee,
Employee covenants that during the term of employment and
for at least six months after termination the employee will not
solicit any existing client or employee of the Company.
d) Eligibility to participate in the Performance Equity Plan, based
on financial and non-financial KPI’s.
e) With the exception of the notice period, the termination
benefits payable to Mr Renshaw in the above table, are
generally replicated in the Employment Agreements with Key
Management Personnel.
.
11.7 How is Non-Executive Director pay structured?
Non-Executive Directors remuneration is reviewed annually by the Board.
The review takes account of recommendations of the Remuneration
Committee and external benchmarking of comparable companies.
Yes
Yes
Yes
Yes, at
Board’s
discretion
Yes, at
Board’s
discretion
No
No
No
No
At Board’s
discretion
At Board’s
discretion
No
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 within comparator companies.
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. Cardno targets
to set Non-Executive Director fees at approximately the median of Non-
Executive Director fees in the comparator group.
The fee structure for Non-Executive Directors from 1 July 2013 included
payments of a base Board fee and Committee fees as follows:
> Chairman of the Board: $250,000 (covering all responsibilities
as Chairman of the Board and Chairman and/or member of any
Board Committee)
> Other Non-Executive Directors: $100,000 (covering responsibilities
as a member of the Board and other duties including representing
the Company externally)
> Committee Chairman: $20,000, and Committee member: $10,000
(covering all responsibilities as either chairman or member
respectively of the Audit, Risk & Compliance Committee and of the
Remuneration Committee).
> No fees are payable to either the Chairman or a member of the
Nominations Committee
> The aggregate fee pool for all of the Non-Executive Directors was
approved by shareholders at the 2011 AGM with a maximum
aggregate of $900k including superannuation.
As a consequence of Cardno’s growth, the benchmarking of Non-
Executive Directors fees compared with companies in the market
comparator group, the increasing time commitment and complexity for
Directors and the need to plan for Non Executive Director succession,
the Board has determined that it will seek shareholder approval to
increase the maximum aggregate remuneration which may be paid
to Non–Executive Directors. More details concerning this proposal
will be included in the Notice of Annual General Meeting issued in
September 2014.
The remuneration of the Non-Executive Directors is set out in the
following table on the next page.
Cardno Annual Report 2014 55
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56 Cardno Annual Report 2014
During the 2014 financial year, no remuneration recommendations,
as defined by the Corporations Act, were provided by Ernst & Young.
The Remuneration Committee also engaged KPMG in July 2014
to provide advice regarding market practice for termination
arrangements in relation to the former Managing Director and Chief
Executive Officer. During the 2014 financial year, no remuneration
recommendations, as defined by the Corporations Act, were
provided by KPMG.
The members of the Committee during the year were: Grant
Murdoch (Committee Chair), Tony Barnes, John Marlay and Elizabeth
Fessenden, all independent Non-Executive Directors.
The Committee met six times during the year and committee
members’ attendance record is disclosed in the table of Directors’
meetings (refer to page 48).
11: REMUNERATION REPORT - AUDITED continued
REMUNERATION COMMITTEE ROLE
The Committee is responsible for reviewing and advising the Board
on remuneration policies and practices. The Committee also reviews
and advises the Board on the design and implementation of short
and long term incentive performance packages, superannuation
entitlements, retirement and termination entitlements and fringe
benefits policies.
The remuneration of Directors, Managing Director, Key Management
Personnel, managers and staff is reviewed by the Remuneration
Committee which then provides recommendations to the Board.
Board decisions on the remuneration of the Managing Director
and Key Management Personnel are made in the absence of the
Executive Directors as appropriate.
The Committee obtains independent advice from remuneration
consultants on the appropriateness of remuneration based trends in
comparative countries, both locally and internationally.
In 2014, the Remuneration Committee appointed Ernst & Young as an
adviser to assist with remuneration advice in relation to the provision
of market remuneration data for Executive and Non-Executive
Director roles, general executive remuneration trends and information
and advice regarding termination arrangements for the departing
Managing Director and Chief Executive Officer. Ernst & Young were
engaged by and reported to the Remuneration Committee.
Cardno Annual Report 2014 57
11: REMUNERATION REPORT - AUDITED continued
11.8
The Value and Measure of LTI in 2014
PERFORMANCE RIGHTS GRANTED AS REMUNERATION
Details of vesting profiles of Performance Rights granted as remuneration to the Executive Directors and Key Management Personnel of
Cardno and still outstanding at 30 June 2014, including those granted during the financial year are as follows in the table below:
Key Management
Personnel
Executive Directors
Andrew Buckley
(resigned 01/03/2014)
Michael Renshaw
(appointed 01/03/2014)
Trevor Johnson
Key Management
Personnel
Roger Collins-Woolcock
Paul Gardiner
Kylie Sprott
Graham Yerbury
Outstanding
Performance
Rights
Grant Date
Vesting
Date
% Vested
in Year
% Forfeited
in Year
Fair Value at
Grant Date
80,000
90,000
120,000
50,000
50,000
70,000
30,000
30,000
40,000
40,000
40,000
55,000
40,000
40,000
55,000
30,000
30,000
40,000
50,000
20-Oct-11
18-Oct-12
17-Oct-13
1-Nov-11
1-Nov-12
20-Oct-14
18-Oct-15
17-Oct-16
1-Nov-14
1-Nov-15
11-Nov-13
11-Nov-16
20-Oct-11
18-Oct-12
17-Oct-13
20-Oct-14
18-Oct-15
17-Oct-16
1-Nov-11
1-Nov-12
1-Nov-14
1-Nov-15
11-Nov-13
11-Nov-16
1-Nov-11
1-Nov-12
1-Nov-14
1-Nov-15
11-Nov-13
11-Nov-16
1-Nov-11
1-Nov-12
11-Nov-13
11-Nov-13
1-Nov-14
1-Nov-15
11-Nov-16
11-Nov-16
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%
3.51
5.60
4.75
3.68
5.56
5.47
3.51
5.60
4.75
3.68
5.56
5.47
3.68
5.56
5.47
3.68
5.56
5.47
5.47
Performance Rights granted to Executive Directors and Key Management Personnel have a one year exercise period after the vesting date.
The expiry date of the Performance Rights is one year subsequent to the vesting date. Non-Executive Directors do not participate in any of the
Company’s incentive plans.
No Performance Rights granted during 2014 have vested. No Performance Rights have been granted since the end of the financial year and up
to the date of this report. Details of the performance criteria are included on page 54.
58 Cardno Annual Report 2014
11: REMUNERATION REPORT - AUDITED continued
During the reporting period, the following shares were issued on the
exercise of Performance Rights previously granted as compensation:
Executive Directors &
Key Management Personnel
Number of
shares
Amount
paid $/share
Andrew Buckley
Michael Renshaw
Trevor Johnson
Roger Collins-Woolcock
Paul Gardiner
Kylie Sprott
60,386
30,212
23,723
30,212
30,212
29,522
Nil
Nil
Nil
Nil
Nil
Nil
The movement during the reporting period, by value, of Performance Rights over ordinary shares in Cardno Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Executive Directors and Key Management Personnel
Granted in year $ (a)
Exercised in year $ (b)
(Performance Rights)
(Performance Rights)
Vested in year $
(not exercised)
Executive Directors
Andrew Buckley
Michael Renshaw
Trevor Johnson
Key Management Personnel
Roger Collins-Woolcock
Paul Gardiner
Kylie Sprott
Graham Yerbury
569,400
382,900
189,800
300,850
300,850
218,800
273,500
395,528
208,765
155,386
208,765
208,765
203,997
-
-
-
-
-
-
-
-
(a) The value of Performance Rights granted in the year is the fair
value of the Performance Rights calculated at grant date using
the Monte-Carlo and Black-Scholes pricing models. The total
value of the Performance Rights is allocated to remuneration
over the vesting period (i.e. in years 18 October 2012 – 18
October 2015 and 1 November 2012 – 1 November 2015).
(b) The value of Performance Rights exercised during the year is
calculated as the market price of the shares of the Company
as at closing of trading on the date the Performance Rights
were exercised.
No Performance Options issued under the PEP in prior years are
held, by any key management person, or their related parties as at
30 June 2014 (2013: Nil).
The movement during the reporting period in the number of
Performance Rights over ordinary shares in Cardno Limited held,
directly, indirectly or beneficially, by each key management person,
including their related parties, is set out in the following table on the
next page:
Cardno Annual Report 2014 59
11: REMUNERATION REPORT - AUDITED continued
2014 Performance Rights
Held at
1 July 2013
Granted as
compensation
Vested
Lapsed
Held at 30
June 2014
Vested and
exercisable at
30 June 2014
Executive Directors
Andrew Buckley (i)
Michael Renshaw (ii)
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury (iii)
Paul Gardiner
Kylie Sprott
Ross Thompson (iv)
Graham Yerbury
240,000
135,000
87,500
115,000
70,000
115,000
93,397
85,000
-
120,000
70,000
40,000
55,000
-
55,000
40,000
40,000
50,000
60,386
30,212
23,723
30,212
-
30,212
21,580
21,580
-
9,614
4,788
3,777
4,788
70,000
4,788
11,817
3,420
-
290,000
170,000
100,000
135,000
-
135,000
100,000
100,000
50,000
-
-
-
-
-
-
-
-
-
(i) Andrew Buckley resigned as a director on 1 March 2014
(ii) Michael Renshaw was appointed as a director on 1 March 2014
(iii) Jean-Francois Floury resigned as a key management person on 24 January 2014
(iv) Ross Thompson ceased as a key management person on 1 January 2014
The movement during the reporting period in the number of ordinary shares in Cardno Limited held, directly, indirectly or beneficially, by each
director and key management person, including their related parties, is as follows:
Held at
1 July 2013
Purchases
Received as
Compensation
Sales
Held at
30 June 2014
Non–Executive Directors
Anthony Barnes
Peter Cosgrove (i)
Tonianne Dwyer
Elizabeth Fessenden (ii)
Ian Johnston
John Marlay
Grant Murdoch
Executive Directors
Andrew Buckley (iii)
Michael Renshaw (iv)
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury (v)
Paul Gardiner
Kylie Sprott
Ross Thompson (vi)
Graham Yerbury
5,346
1,024
-
-
268,839
6,095
42,737
2,483,237
283,093
1,626,241
780,832
232
883,092
6,371
11,583
5,850
311
60
3,000
-
-
10,000
818
60,386
30,212
23,723
30,212
-
30,212
29,522
21,580
-
-
-
-
-
-
-
-
-
-
-
78
-
78
78
78
39
-
-
-
-
-
-
-
-
-
-
50,000
-
91,700
25,000
-
-
5,657
N/A
3,000
-
268,839
16,095
43,555
N/A
313,305
1,649,964
761,122
N/A
821,682
10,971
N/A
5,889
(i) Peter Cosgrove resigned as a director on 28 January 2014
(ii) Elizabeth Fessenden was appointed as a director on 1 June 2014
(iii) Andrew Buckley resigned as a director on 1 March 2014
(iv) Michael Renshaw was appointed as a director on 1 March 2014
(v) Jean-Francois Floury resigned as a key management person on 24 January 2014
(vi) Ross Thompson ceased as a key management person on 1 January 2014
N/A Not Applicable
60 Cardno Annual Report 2014
SHARE ISSUED ON EXERCISE OF OPTIONS
During or since the end of financial year, the Group issued
ordinary shares of the company as a result of the exercise of
options as follows:
Number of shares
Amount paid on each share
807,150
1,364,248
$4.19
$4.72
12 SHARE OPTIONS
All options were granted in previous financial years. No options have
been granted since the year ended 30 June 2012.
At the date of this report unissued shares of the Group under
option are:
Expiry date
25 November 2014
1 November 2015
Exercise
price
Number of
shares
$4.84
$5.26
580,731
3,053,000
All unissued shares are ordinary share of the company.
All options expire on the earlier of their expiry date or termination
of the employees employment. In addition, the ability to exercise
the options is subject to a performance hurdle. Further details about
share based payments are included in the notes to the consolidated
financial statements at note 22.
These Performance Options do not entitle the holder to participate in
any share issue of the Company.
13: DIRECTORS’ INTERESTS
As at the date of this report, the interests of the Directors in the
shares of Cardno Limited were:
Anthony Barnes
Tonianne Dwyer
Elizabeth Fessenden
Trevor Johnson
Ian Johnston
John Marlay
Grant Murdoch
Michael Renshaw
Cardno Limited
Ordinary Shares
Shares held in
Escrow
Performance
Options
Performance Rights
5,657
3,000
-
1,649,964
268,839
16,095
43,555
313,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
-
170,000
Cardno Annual Report 2014 61
14: NON-AUDIT SERVICES
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 MARLAY
Chairman
Sydney
18 August 2014
During the year KPMG, the Company’s auditor, has performed
certain other services in addition to their statutory duties.
The Board has considered the non-audit services provided
during the year by the auditor and in accordance with written
advice provided by resolution of the Audit, Risk and Compliance
Committee, is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did
not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
> All non-audit services were subject to the corporate governance
procedures adopted by the Board and have been reviewed by
the Audit, Risk and Compliance Committee to ensure they do not
impact the integrity and objectivity of the auditor; and
> The non-audit services provided do not undermine the general
principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not
involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for Cardno, acting as
an advocate for Cardno or jointly sharing risks and rewards.
Details of the amounts paid to the auditor and its related practices
for audit and non-audit services provided during the year are set
out in note 30.
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 63 and forms part of the Directors’ report for the year ended
30 June 2014.
62 Cardno Annual Report 2014
Auditor’s Independence Declaration
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 2014 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Robert S Jones
Partner
Brisbane
18 August 2014
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Cardno Annual Report 2014 63
Consolidated Statement of Financial Performance
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
Revenue
Other Income
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
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
2A
2B
3
3
4
29
29
2014
$’000
2013
Restated
$’000
1,309,597
1,195,352
5,868
(628,647)
(293,063)
(204,600)
(26,493)
(8,465)
(47,431)
106,766
(28,632)
78,134
78,134
78,134
52.04
50.61
2,711
(564,788)
(254,873)
(195,158)
(23,660)
(7,610)
(45,241)
106,733
(29,094)
77,639
77,639
77,639
55.09
53.43
The statement of financial performance should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Consolidated Statement of Comprehensive Income
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Company
The statement of comprehensive income should be read in conjunction with notes 1 to 38 which form part of the financial statements.
64 Cardno Annual Report 2014
2014
$’000
2013
$’000
78,134
77,639
(5,698)
(5,698)
23,368
23,368
72,436
101,007
72,436
72,436
101,007
101,007
Consolidated Statement of Financial Position
CARDNO LIMITED AND ITS CONTROLLED ENTITIES AS AT 30 JUNE 2014
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
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
6
7
8
9
10
11
12
13
14
15
16
17
18
19
13
20
21
22
The statement of financial position should be read in conjunction with notes 1 to 38 which form part of the financial statements.
2014
$’000
85,885
244,885
142,586
11,196
484,552
605
3,610
60,709
16,671
751,568
833,163
2013
$’000
90,635
203,165
134,927
8,017
436,744
614
1,652
56,862
8,328
630,040
697,496
1,317,715
1,134,240
136,990
3,149
15,870
32,181
48,306
236,496
302,927
816
12,854
1,106
317,703
150,952
3,017
8,142
38,715
48,378
249,204
238,711
490
12,768
543
252,512
554,199
501,716
763,516
632,524
623,875
(20,744)
160,385
763,516
500,374
(6,631)
138,781
632,524
Cardno Annual Report 2014 65
Consolidated Statement of Changes in Equity
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
Note
Share
Capital
Ordinary
$’000
Retained
Earnings
Foreign
Translation
Reserve
$’000
$’000
Reserve
for Own
Shares
$’000
Balance at 1 July 2012
460,947
111,908
(23,970)
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
Employee share based payments
Own shares issued*
Own shares sold*
Dividends paid or provided
Balance at 30 June 2013
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
Employee share based payments
Own shares issued*
Own shares sold*
Dividends paid or provided
Balance at 30 June 2014
22
22
5
22
22
5
-
-
-
27,168
2,127
10,132
-
-
39,427
500,374
-
-
-
100,879
4,790
17,832
-
-
123,501
623,875
77,639
-
77,639
-
-
-
-
(50,766)
(50,766)
138,781
78,134
-
78,134
-
-
-
-
(56,530)
(56,530)
160,385
-
23,368
23,368
-
-
-
-
-
-
(602)
-
(5,698)
(5,698)
-
-
-
-
-
-
(6,300)
-
-
-
-
-
-
(10,132)
4,103
-
(6,029)
(6,029)
-
-
-
-
-
(17,832)
9,417
-
(8,415)
(14,444)
Total
$’000
548,885
77,639
23,368
101,007
27,168
2,127
-
4,103
(50,766)
(17,368)
632,524
78,134
(5,698)
72,436
100,879
4,790
-
9,417
(56,530)
58,556
763,516
* Shares issued are held in trust by the Cardno Limited Performance Equity Plan Trust which has been formed solely for the purpose of subscribing for, acquiring and holding
shares for the benefit of employees participating in the Performance Equity Plan (PEP) of Cardno Limited. Own shares sold are those shares transferred to PEP participants on
exercise of Performance Options.
The statement of changes in equity should be read in conjunction with notes 1 to 38 which form part of the financial statements.
66 Cardno Annual Report 2014
Consolidated Statement of Cash Flows
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
Cash Flows from Operating Activities
Cash receipts from customers
Interest received
Finance costs paid
Cash paid to suppliers and employees
Income tax paid
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of subsidiaries, deferred consideration paid
Payments for intangible assets
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
Sale of own shares*
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Dividends paid
Net Cash Provided by/(Used in) Financing Activities
Note
24(a)
24(d)
2014
$’000
1,370,518
978
(10,440)
2013
$’000
1,251,338
1,421
(7,471)
(1,249,117)
(1,116,662)
(27,328)
84,611
(32,896)
95,730
(163,265)
(28,319)
(603)
2,257
(21,390)
(211,320)
94,003
(1,036)
9,417
224,837
(152,075)
(1,978)
(50,873)
122,295
(81,520)
(11,083)
-
1,639
(20,252)
(111,216)
18,182
(98)
4,103
61,042
(40,096)
(2,571)
(46,047)
(5,485)
Net Increase/(Decrease) in Cash and Cash Equivalents Held
(4,414)
(20,971)
Cash and Cash Equivalents at 1 July
Effects of exchange rate changes on cash and cash equivalents at the end of year
90,635
107,856
3,750
(336)
Cash and Cash Equivalents at 30 June
24(b)
85,885
90,635
* Own shares sold are those shares transfered to PEP participants on exercise of Performance Options.
The statement of cash flows should be read in conjunction with notes 1 to 38 which form part of the financial statements.
Cardno Annual Report 2014 67
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
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 2014 encompasses the Company
and its subsidiaries (together referred to as “Cardno” or the “Group”).
Cardno is a for-profit entity that operates as a professional
infrastructure and environmental services company, with expertise
in the development and improvement of physical and social
infrastructure for communities around the world.
The financial report was authorised for issue by the Board of
Directors on 18 August 2014.
(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) adopted by the
International Accounting Standards Board (IASB).
(b) Basis of Preparation
The financial report has been prepared on a historical cost basis
except where otherwise noted.
The consolidated financial statements are presented in
Australian dollars, which is the Company’s functional currency.
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.
Certain comparative amounts in the financial report have been
reclassified to conform with the current year’s presentation.
Impact of new or amended accounting standards
The Group has adopted the following new standards and
amendments to standards, including any consequential
amendments to other standards, with a date of initial application
of 1 July 2013.
AASB 10 Consolidated Financial Statements (2011)
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits (2011)
AASB 2013-3 Recoverable Amount Disclosures for Non-Financial
Assets (Amendments to IAS 36) (2013)
AASB 10 Consolidated Financial Statements (2011), AASB
11 Joint arrangements, AASB 12 Disclosure of Interests in
Other Entities
As a result of AASB 10 (2011), the Group has changed its
accounting policy for determining whether it has control over
and consequently whether it consolidates its investees. AASB 10
(2011) introduces a new control model that focuses on whether
the Group has power over an investee, exposure or rights to
variable returns from its involvement with the investee and
ability to use its power to affect those returns.
68 Cardno Annual Report 2014
In accordance with the transitional provisions of AASB 10 (2011),
the Group has reassessed the control conclusion for its investees
at 1 July 2013. As a consequence, the Group has not changed its
control conclusion in relation to any investees.
As a result of AASB 11, the Group has changed its accounting
policy for its interest in joint arrangements. Under AASB 11,
the Group has classified its interests in joint arrangements as
either joint operations (if the Group has rights to the assets,
and obligations for the liabilities, relating to an arrangement)
or joint ventures (if the Group has rights only to the net assets
of an arrangement). When making this assessment, the Group
considered the structure of the arrangements, the legal form of
any separate vehicles, the contractual terms of the arrangements
and other facts and circumstances. Previously, the structure of
the arrangement was the sole focus of classification.
There has been no impact on the recognised assets, liabilities
and comprehensive income of the Group.
As a result of AASB 12, the Group has expanded its disclosures
about its interests in subsidiaries and equity-accounted investees.
AASB 13 Fair value measurement
AASB 13 establishes a single framework for measuring fair
value and making disclosures about fair value measurements
when such measurements are required or permitted by other
AASBs. It unifies the definition of fair value as the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. It replaces and expands the disclosure
requirements about fair value measurements in other AASBs,
including AASB 7 Financial Instrument: Disclosures. As a result,
the Group has included additional disclosures in this regard.
In accordance with the transitional provisions of AASB 13, the
Group has applied the new fair value measurement guidance
prospectively and has not provided any comparative information
for new disclosures. Notwithstanding the above, the change had
no significant impact on the measurements of the Group’s assets
and liabilities. Additional disclosures in regard to AASB 13 Fair
Value Measurement are set out in note 32.
These changes have not had either a material recognition or
measurement impact on the financial report.
AASB 119 Employee Benefits (2011) & AASB 2013-39
Recoverable Amount Disclosures for Non-Financial Assets
(Amendments to IAS 36) (2013)
Changes to these standards have not had either a material
recognition or measurement impact on the financial report.
Impact of new accounting standards on future years
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning after
1 July 2013, and have not been applied in preparing these
consolidated financial statements. Those which may be relevant
to the Group are set out below. The Group does not plan to adopt
these standards early.
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
AASB 9 Financial Instruments (2010), AASB 9 Financial
Instruments (2009)
AASB 9 (2009) introduces new requirements for the classification
and measurement of financial assets. Under AASB 9 (2009),
financial assets are classified and measured based on the
business model in which they are held and the characteristics of
their contractual cash flows. AASB 9 (2010) introduces additional
requirements relating to financial liabilities.
(b) Basis of Preparation continued
The IASB currently has an active project to make limited
amendments to the classification and measurement
requirements of AASB 9 and add new requirements to address
the impairment of financial assets and hedge accounting.
Voluntary change in accounting policy
The Group has voluntarily elected to change the way it accounts
for non-refundable R&D tax incentives. Previously the Group
applied AASB112 Income Taxes by analogy by presenting the
R&D tax incentive in profit or loss as a reduction in current
tax expense. From 1 July 2013, the Group has instead elected
to apply AASB120 Accounting for Government Grants and
Disclosure of Government Assistance by analogy which
results in the R&D tax incentive being presented in profit or
loss as other income to the extent the tax incentive results in
an additional reduction in tax payable over the normal 30 per
cent Australia corporate tax rate. The Group believes that this
approach provides for more reliable and relevant information as
it aligns with the Group’s policy for incentivising the business to
participate in R&D programs. Further details to the effect of the
change are set out in note 35.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by Cardno. Control exists
when the Company is exposed to, or has rights to, variable
returns from its involvement with an entity and has the ability
to affect those returns through its power over the entity. 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 Cardno.
A list of the significant subsidiaries 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 statement of financial position.
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.
Cardno Annual Report 2014 69
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(f) Revenue Recognition
Revenue is recognised at the 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 services revenue and recoverable expenses
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 recoverable 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.
(g) Leases
Leases in terms of which Cardno 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
Cardno’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 profit or loss 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 profit or 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.
70 Cardno Annual Report 2014
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
probable 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.
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(i)
Income Tax continued
(m) Property, Plant and Equipment
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
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 mainly comprise 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. Intersegment pricing is determined
on an arms length basis.
(k) Trade and Other Receivables
Trade receivables are recognised and carried at original
invoice amount less a provision for any uncollectible debts.
The recoverability of trade receivables is reviewed on an
ongoing basis and a provision for impairment determined at
both a specific and collective level. All individually significant
receivables are assessed for specific impairment. Those found
not to be specifically impaired are then collectively assessed for
any impairment that has been incurred but not yet identified.
Receivables that are not individually significant are collectively
assessed for impairment by grouping together assets with
similar risk characteristics.
In assessing collective impairment the Group uses historical
trends of the probability of default adjusted for management’s
judgement around current economic and credit conditions. Bad
debts are written off as incurred.
(l)
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 Cardno’s activities in general.
The recoverability of work in progress is reviewed on an ongoing
basis. Amounts assessed as not recoverable from future billings
are written off when identified.
Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs
directly attributable to bringing the asset to a working condition
for its intended use, the costs of dismantling and removing the
items and restoring the site on which they are located, and
capitalised borrowing costs. 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 profit or loss.
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 Cardno 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 profit or loss
during the reporting period in which they are incurred.
Depreciation
Depreciation is calculated on 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 Cardno 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
>
> motor vehicles
>
leasehold improvements
> office furniture and equipment
40 years
4-7 years
4-7 years
4-5 years
3-11 years
laboratory equipment, instruments and amenities
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
Cardno Annual Report 2014 71
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
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.
(o) 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 systematic
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.
(p) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting
period. The accounting for subsequent changes in fair value
depends on whether the derivatives are designated as a hedging
instrument, and if so, the nature of the item being hedged. The
Group designates certain derivatives as either:
> hedges of fair value of recognised assets or liabilities or a
firm commitment (fair value hedges)
> hedges of a particular risk associated with the cash flows of
recognised assets and liabilities and highly probably forecast
transactions (cash flow hedges), or
> hedges of a net investment in a foreign operation (net
investment hedges).
Cardno documents at the inception of the hedging transaction
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy for
undertaking various hedge transactions. Cardno also documents
its assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions
have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in profit or loss,
together with any changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk.
(n) 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 Cardno.
Cardno 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
acquiree; 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.
Subsequent to initial recognition, goodwill is measured at cost
less accumulated impairment losses.
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 Cardno incurs in
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.
Works contracts, software intangibles and
customer relationships
Works contracts, software intangibles and customer
relationships are acquired by Cardno 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 Trademarks
Patents and trademarks acquired by Cardno are considered
to have indefinite useful lives and are stated at cost less any
impairment losses. Patents and trademarks are not amortised but
tested for impairment annually.
72 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(p) Derivatives and hedging activities continued
(ii) 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.
(q) Impairment
The carrying amount of Cardno’s assets, other than inventories
(see paragraph (l)), 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. Cardno performs impairment testing
of goodwill and intangibles with indefinite useful lives annually.
An impairment loss is recognised whenever the carrying amount
of an asset or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the profit and loss
unless the asset has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of that
previous revaluation with any excess recognised through the
profit and loss.
Impairment losses recognised in respect of cash-generating units
are allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generating unit (group of units) and then, to
reduce the carrying amount of the other assets in the unit (group
of units) on a pro rata basis.
Calculation of recoverable amount
The recoverable amount of Cardno’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 Cardno’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 of disposal 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 Cardno.
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 Cardno
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.
Cardno Annual Report 2014 73
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(t) Employee Benefits continued
(w) Earnings per Share
Liabilities for employee entitlements which are not expected to be
settled within 12 months are discounted using the rates attached
to national government securities at balance date, which most
closely match the terms of maturity of the related liabilities.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to
pay further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee benefit expense
in profit or loss in the periods during which services are rendered
by employees. Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in future payments
is available. Contributions to a defined contribution plan that are
due more than 12 months after the end of the period in which the
employees render the service are discounted to their present value.
Share-based payment transactions
The grant date fair value of share-based payment awards
granted to employees is recognised as an employee expense,
with a corresponding increase in equity, over the period that
the employees unconditionally become entitled to the awards.
The amount recognised as an expense is adjusted to reflect
the number of awards for which the related service and non-
market vesting conditions are expected to be met, such that the
amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non market
performance conditions at the vesting date.
(u) Provisions
A provision is recognised in the balance sheet when Cardno
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 with interest-bearing loans and borrowings in current
liabilities on the statement of financial position.
Cardno 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 Performance Options and Performance Rights
granted to employees.
The bonus element in a rights issue to existing shareholders
increases the number of ordinary shares outstanding without
a corresponding change in resources. In this case, the number
of ordinary shares outstanding before the event is adjusted
for the proportionate change in the number of ordinary shares
outstanding as if the event had occurred at the beginning
of the earliest period presented. If the changes occur after
the reporting period but before the financial statements are
authorised for issue, the per share calculations for those
and any prior period financial statements presented shall be
based on the new number of shares. The fact that per share
calculations reflect such changes in the number of shares shall
be disclosed. In addition, basic and diluted earnings per share of
all periods presented shall be adjusted for the effects of errors
and adjustments resulting from changes in accounting policies,
accounted for retrospectively.
(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.
Cardno 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.
> Testing 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(n) and 33.
74 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
2A. REVENUE
Fees from consulting services
Fees from sale of goods
Fees from recoverable expenses
Interest received
Royalties
Rental income
Other
Revenue
2B. OTHER INCOME
Non-refundable R&D tax incentives
Reversal of contingent consideration liability (note 33(k))
Other Income
3. EXPENSES, LOSSES AND (GAINS)
Depreciation
Motor vehicles
Other property, plant & equipment
Total Depreciation
Amortisation of non-current assets
Patents and trademarks
Works contracts
Software intangibles
Customer relationships
Total Amortisation
Total Depreciation & Amortisation
Bad and doubtful debts
Financing costs
Interest and finance charges
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
2014
$’000
951,518
10,955
342,992
978
118
45
2,991
1,309,597
2,415
3,453
5,868
4,790
14,992
19,782
-
3,674
256
2,781
6,711
26,493
2,503
2013
$’000
877,273
8,697
305,957
1,421
89
33
1,882
1,195,352
2,711
-
2,711
4,160
12,883
17,043
39
4,067
233
2,278
6,617
23,660
4,104
8,465
7,610
39,040
(518)
(727)
37,835
(257)
37,578
34,240
(61)
(51)
29,017
(1,732)
27,285
Cardno Annual Report 2014 75
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
4.
INCOME TAX EXPENSE continued
Deferred tax expense
Origination and reversal of temporary differences
Adjustments for prior years
Total income tax expense
(b) Numerical reconciliation between tax expense and pre-tax profit
Profit before tax
Income tax using the Australian corporation tax rate of 30% (2013: 30%)
Increase (decrease) in income tax expense due to:
Non-deductible expenses
Adjustment for branch office taxation
Allowances for R&D expenditure
Benefit arising from amendment to Australian tax legislation
Sundry items
Under / (over) provided in prior years
Income tax expense
The effective tax rate for FY2014 was 26.8 per cent as compared to 27.3 per cent in FY2013.
(c) Amounts recognised directly in equity
Share based payments
5. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
(a) Dividends proposed subsequent to year end not recognised as a liability
100% franked dividend at 30% (2013: 100% at 30%) (Refer note 28)
(b) Dividends paid during the year (19 cents per share, 100% franked at 30%)
(2013: all dividends 100% franked at 30%)
(c) Franking credit balance
The amount of franking credits available for the subsequent financial year are:
> franking account balance as at the end of the financial year at 30%
> franking credits that will arise from the payment of income tax payable
as at the end of the financial year
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 $11,895,165 (2013: $11,087,460)
6 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash (project advances)
Bank short term deposits
2014
$’000
(6,291)
(2,655)
(8,946)
28,632
106,766
32,030
3,640
(1,057)
(725)
-
(2,344)
31,544
(2,912)
28,632
2013
$’000
1,809
-
1,809
29,094
106,733
32,020
1,249
112
(1,045)
9
(1,519)
30,826
(1,732)
29,094
1,989
-
27,755
25,871
56,530
50,766
5,781
11,971
17,752
62,258
3,030
20,597
85,885
13,472
8,355
21,827
60,539
2,949
27,147
90,635
76 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
7
TRADE & OTHER RECEIVABLES (CURRENT)
Trade debtors
Provision for doubtful debts (note 32)
Sundry debtors
8
INVENTORIES (CURRENT)
Work in progress
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
Office furniture & equipment
Less accumulated depreciation
Leasehold improvements
Less accumulated amortisation
Land and buildings
Less accumulated depreciation
Total Property Plant & Equipment
2014
$’000
247,757
(11,376)
236,381
8,504
244,885
2013
$’000
210,342
(12,777)
197,565
5,600
203,165
142,586
134,927
7,981
1,090
2,125
11,196
5,400
502
2,115
8,017
605
614
3,610
3,610
41,357
(25,920)
15,437
30,248
(17,499)
12,749
72,897
(52,094)
20,803
17,927
(8,361)
9,566
3,270
(1,116)
2,154
60,709
1,652
1,652
36,843
(23,771)
13,072
30,810
(17,385)
13,425
66,651
(45,506)
21,145
15,282
(7,437)
7,845
2,398
(1,023)
1,375
56,862
Cardno Annual Report 2014 77
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
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.
2014
$’000
2013
$’000
Laboratory equipment, instruments & amenities
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
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
Land & buildings
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Carrying amount at the end of the year
78 Cardno Annual Report 2014
13,072
4,820
2,209
(199)
(4,287)
(52)
(126)
15,437
13,425
3,969
587
(497)
(4,790)
(36)
91
12,749
21,145
7,656
865
(445)
(8,840)
19
403
20,803
7,845
4,334
167
(598)
(1,748)
(66)
(368)
9,566
1,375
754
163
(118)
-
(20)
-
2,154
8,585
4,908
3,120
(180)
(3,502)
150
(9)
13,072
10,463
6,310
1,380
(611)
(4,160)
187
(144)
13,425
17,687
9,446
1,786
(569)
(7,545)
407
(67)
21,145
5,411
2,609
1,104
(152)
(1,484)
136
221
7,845
1,351
38
-
-
(107)
93
-
1,375
60,709
56,862
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
13. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
Assets
Accruals
Provisions
Work in progress
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Liabilities
Work in progress
Property, plant and equipment
Goodwill on acquisition
Prepayments
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
NET DEFERRED TAX ASSETS (LIABILITIES)
2014
$’000
2013
$’000
26,759
17,034
662
3,715
48,170
(31,499)
16,671
17,445
1,473
12,948
1,477
(1,028)
32,315
(31,499)
816
15,855
16,021
20,899
457
2,881
40,258
(31,930)
8,328
16,766
3,541
8,982
1,067
2,064
32,420
(31,930)
490
7,838
Cardno Annual Report 2014 79
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
13. DEFERRED TAX ASSETS & LIABILITIES continued
30 June 2014
Movement in temporary differences during the year:
Accruals
Provisions
Unearned revenue
Sundry items
Property, plant & equipment
Prepayments
Work in progress
Goodwill on acquisition (USA)
30 June 2013
1 July
2013
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Other*
30 June
2014
$’000
$’000
16,021
20,899
-
817
(3,541)
(1,067)
(16,309)
(8,982)
7,838
11,128
(2,285)
-
613
2,448
(460)
(1,001)
(4,152)
6,291
713
(193)
-
750
1,448
24
(39)
(47)
2,656
1 July
2012
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
(1,102)
(1,387)
-
847
(113)
26
566
233
(930)
Other*
26,760
17,034
-
3,027
242
(1,477)
(16,783)
(12,948)
15,855
30 June
2013
$’000
$’000
Movement in temporary differences during the year:
Accruals
Provisions
Unearned revenue
Sundry items
Property, plant & equipment
Prepayments
Work in progress
Goodwill on acquisition (USA)
20,281
11,493
-
2,044
(2,673)
(598)
(15,931)
(4,972)
9,644
1,034
(1,104)
-
405
119
(230)
1,013
(3,046)
(1,809)
(5,630)
8,969
-
(314)
(50)
(239)
(1,326)
(964)
446
336
1,541
-
(1,318)
(937)
-
(65)
-
(443)
* Other adjustments relate to impacts of translating foreign operations and acquisitions.
16,021
20,899
-
817
(3,541)
(1,067)
(16,309)
(8,982)
7,838
2013
$’000
617,733
617,733
15,329
(11,726)
3,603
2,081
1,822
(1,068)
754
9,037
(3,168)
5,869
2014
$’000
742,680
742,680
17,461
(15,249)
2,212
2,081
2,563
(1,416)
1,147
9,288
(5,840)
3,448
751,568
630,040
14. INTANGIBLE ASSETS
Goodwill at cost
Works contracts
Accumulated amortisation
Patents and trademarks
Software intangibles
Accumulated amortisation
Customer relationships
Accumulated amortisation
Total Intangible Assets
80 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
14. INTANGIBLE ASSETS continued
Reconciliation of movement in carrying
amounts from beginning of year to end of year:
2013
Balance at the beginning of year
Additions:
> acquisition through business combinations
- current year
- reclassification of intangibles*
Write off
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2013
2014
Balance at the beginning of year
Additions:
>
> acquisition through business combinations
internal development
- current year
Write off
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2014
Goodwill
Works
Contracts
Patents and
Trademarks
Software
Intangibles
Customer
Relationships
$’000
$’000
$’000
$’000
$’000
496,887
2,462
2,110
590
2,323
94,740
(2,524)
-
-
28,630
617,733
5,172
51
-
(4,068)
(14)
3,603
10
-
(39)
-
-
2,081
617,733
3,603
2,081
-
132,537
-
-
(7,590)
742,680
-
2,257
-
(3,674)
26
2,212
-
-
-
-
-
2,081
355
-
-
(233)
42
754
754
603
-
-
(256)
46
1,147
3,096
2,473
-
(2,278)
255
5,869
5,869
-
381
-
(2,781)
(21)
3,448
* Amounts were reclassified from goodwill to identifiable intangible assets following completion of the purchase price accounting for acquisitions which occurred in the prior year.
Goodwill is allocated to the following groups of cash-generating units:
> Americas
> Emerging Markets
> Australia & New Zealand
> Software
2014
$’000
485,969
33,624
203,930
19,157
742,680
2013
$’000
364,234
33,062
203,017
17,420
617,733
For the purposes of impairment testing, goodwill is allocated to Cardno’s management divisions which represent the lowest level within
Cardno at which the goodwill is monitored for internal management purposes. During the year, the Group changed its internal reporting
structure which resulted in a change to the allocation of goodwill to groups of cash generating units (CGU). Comparative information above has
been represented to maintain consistency with current year presentation.
The Group uses value in use method to estimate the recoverable amount of its CGU. Value in use is calculated based on the present value of
cash flow projections over a five year period and include a terminal value at the end of year five. The cash flow projections over the five year
period are based on the Group’s budget for 2015 and year on year growth rates over the forecast period based on management’s estimates of
underlying economic conditions, past performance and other factors anticipated to impact the CGU’s performance. The long term growth rate
used in calculating the terminal value is based on long term inflation estimates for the countries in which the CGU operates.
The cash flows are discounted to their present value using a pre-tax discount rate which is based on Cardno’s weighted average cost of capital
adjusted for country and industry specific risk associated with the CGU.
Cardno Annual Report 2014 81
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
14. INTANGIBLE ASSETS continued
The key assumptions used in the estimation of recoverable amount are set out below:
> Americas
> Emerging Markets
> Australia & New Zealand
> Software
Five year
compound average
Growth Rate
9.68%
10.04%
2.09%
1.52%
Terminal
Growth
Rate
3.00%
3.00%
3.00%
3.00%
Pre-Tax
Discount
Rate
14.0%
12.8%
14.7%
14.2%
Assumptions used in impairment testing in 2013 included discount rates ranging from 13.2 per cent to 15.2 per cent and growth rate
assumptions ranging from 2 per cent to 7 per cent.
Sensitivity analysis performed indicates a reasonable possible change in any of the key assumptions for the Emerging Markets, Australia
& New Zealand or Software CGU’s would not result in impairment.
The estimated recoverable amount of the Americas CGU exceeded its carrying amount by approximately $71.3 million. Management has
identified that a reasonable possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount
of the CGU. For the estimated recoverable amount to be equal to the carrying amount, the following assumptions would need to change by
the amount specified (while holding all other assumptions constant):
(a) the pre-tax discount rate would need to increase by 1.1 per cent to 15.1 per cent; or
(b) the compound average growth rate across the five year forecast period would need to decrease by 2.2 percentage points to
7.48 per cent.
15. TRADE & OTHER PAYABLES (CURRENT)
Trade payables & accruals
Vendor liability
16. LOANS & BORROWINGS (CURRENT)
Lease liabilities
Hire purchase liabilities
Bank loans (i)
(i) Details of the terms and conditions of loans and borrowings are set out in note 19
17. SHORT-TERM PROVISIONS
Employee benefits
Legal provision
Movements in legal provision:
Balance at 1 July
Increase through merger acquisition
Provision made during the year
Provision used during the year
Provision reversed during the year
Effect of foreign exchange
Balance at 30 June
82 Cardno Annual Report 2014
2014
$’000
106,145
30,845
136,990
1,944
57
1,148
3,149
28,024
4,157
32,181
9,629
93
1,143
(1,922)
(4,794)
8
4,157
2013
$’000
109,647
41,305
150,952
1,741
243
1,033
3,017
29,086
9,629
38,715
7,642
1,731
850
(652)
(500)
558
9,629
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
17. SHORT-TERM PROVISIONS continued
The Group recognises a provision for legal claims not covered by the Group’s professional indemnity policy and as at 30 June an estimate
of the potential impact of these claims has been made. During the year approximately $2.9m was reversed in Cardno ATC relating to
a large claim that has previously been provided for and existed at acquisition. This claim has not been settled however the Group has
obtained an indemnity from the vendors of Cardno ATC in relation to this particular claim. The vendors have agreed to have the deferred
purchase consideration placed in escrow and held for potential losses relating to the claim. Any portion of the escrowed funds not
required to satisfy indemnity obligations in respect of this claim will be dispersed to the vendors pursuant to the terms of the merger
agreement upon final resolution of the claim or as otherwise agreed. The reversal of this provision is recognised in the statement of
financial performance as a reduction to other expenses.
18. OTHER CURRENT LIABILITIES
Unearned revenue
Deferred rent
19. LOANS & BORROWINGS (NON-CURRENT)
Lease liabilities
Hire purchase liabilities
Bank loans
2014
$’000
47,289
1,017
48,306
3,548
40
299,339
302,927
2013
$’000
48,356
22
48,378
5,138
290
233,283
238,711
Bank Loans
As at 30 June 2014 Cardno has bank loans totalling $300,486,999 (2013: $234,442,361), with an effective interest rate of 1.94 per cent
(2013: 2.23 per cent).
The facility limits comprise working capital facilities of A$10.0 million (2013: A$59.0 million) and US$15.0 million (2013: US$15.0 million) and
term acquisition financing facilities of US$330.0million (2013: US$245.0 million and GBP8.55 million). The weighted average interest rate for term
facilities ranges from 1.89 per cent to 1.99 per cent (2013: 2.06 per cent to 2.51 per cent). Funding available to Cardno from undrawn facilities is
A$72.1million at 30 June 2014 (2013: A$106.6 million). Facilities are secured by an unlimited interlocking guarantee and indemnity.
The portion of the bank loans disclosed as a current liability represents amounts due to be repaid within one year.
There were no bank overdrafts in existence at 30 June 2014 (2013: Nil). Subsequent to the financial year end the Group closed its long term note
issue of US$150.0 million in the US Private Placement bond market. Refer to note 28 for additional details.
20. LONG-TERM PROVISIONS
Employee benefits
21. OTHER NON-CURRENT LIABILITIES
Deferred rent
Other
2014
$’000
2013
$’000
12,854
12,768
854
252
1,106
273
270
543
Cardno Annual Report 2014 83
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
22. 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
> Own shares issued (i)
> Exercise of Performance Options (ii)
30 June 2014
30 June 2013
No. of
shares
$’000
No. of
shares
$’000
143,726,327
500,374
138,159,361
460,947
872,488
15,077,784
351,039
-
2,600,000
-
5,658
92,966
2,255
4,790
17,832
-
665,448
2,722,668
641,670
-
1,537,180
-
4,719
18,085
4,364
2,127
10,132
-
Balance at the end of the year
162,627,638
623,875
143,726,327
500,374
(i) Shares issued are held in trust by the Cardno Limited Performance Equity Plan Trust which has been formed solely for the purpose of subscribing for, acquiring and holding shares for
the benefit of employees participating in the Performance Equity Plan (PEP) of Cardno Limited.
(ii) During 2014, 2,481,030 (2013: 979,326) shares delivered on exercise of Performance Options and Performance Rights were obtained from shares held in trust by the Cardno Limited
Performance Equity Plan Trust and recognised in the Group’s reserve for own shares (refer note 23).
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 process 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.
Performance Equity Plan (PEP)
The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Performance Options and Performance
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 Board) with the rights to acquire shares in the Company or, the option to acquire shares in the Company.
Movements in Performance Options throughout the year were as follows:
Grant Date
Vesting
Date
Expiry Date
Exercise
Price
$
Fair Value at
Grant Date
$
Number of
Performance
Options at
Beginning
of Year
Performance
Options
Granted
Performance
Options
Lapsed
Performance
Options
Exercised
Performance
Options
Vested not
Exercised as
at 30 June
2014
Number of
Performance
Options as
at 30 June
2014
25 November
2010
25 November
2013
25 November
2014
1 November
2011
1 November
2014
1 November
2015
Weighted average exercise price
Weighted average remaining contract life
Total expense recognised $510,034 (2013: $747,027)
4.84
5.26
0.77
2,820,000
0.81
3,580,000
5.07
-
-
-
966,315
1,272,954
580,731
-
527,000
4.99
-
4.19
-
3,053,000
4.84
5.26
489 days
84 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
22. ISSUED CAPITAL OF CARDNO LIMITED continued
The Performance Options outstanding at 30 June 2014 have an exercise price of $5.26. These Performance Options do not entitle the
holder to participate in any share issue of the Company.
Performance Options 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)
(cid:116)40% (12% pa)
% of Performance Options
in Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
There have been no Performance Options granted in FY2014. The fair value of Performance Options granted in previous financial years was
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 Performance Options granted during the year ended 30 June 2012 include share price at grant date
of $5.29 (2011: $4.86), expected price volatility of the Company’s shares of 31 per cent (2011: 30 per cent), expected dividend yield of
6.30 per cent (2011: 7.00 per cent) and risk free interest rate of 3.19 per cent (2011: 4.90 per cent).
Movements in Performance Rights throughout the year were as follows:
Grant Date
Vesting
Date
Expiry Date
Performance
Hurdle
Fair Value at
Grant Date
$
Number of
Performance
Rights at
Beginning
of Year
Performance
Rights
Granted
Performance
Rights
Lapsed
Performance
Rights
Exercised
Performance
Rights
Vested not
Exercised
as at 30 June
2014
Number of
Performance
Rights as
at 30 June
2014
21 October
2010
21 October
2013
21 October
2014
25 November
2010
25 November
2013
25 November
2014
20 October
2011
20 October
2014
20 October
2015
1 November
2011
1 November
2014
1 November
2015
18 October
2012
18 October
2015
18 October
2016
1 November
2012
1 November
2015
1 November
2016
17 October
2013
17 October
2016
17 October
2017
11 November
2013
11 November
2016
11 November
2017
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
Total expense recognised $2,290,744 (2013: $1,379,732)
3.78
2.71
3.94
2.96
4.21
2.81
4.38
2.97
6.74
4.46
6.68
4.43
5.50
3.99
6.10
4.84
76,250
76,250
160,000
160,000
55,000
55,000
226,250
226,250
60,000
60,000
790,083
790,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80,000
80,000
993,410
993,410
10,472
10,472
21,890
21,890
-
-
17,500
17,500
-
-
85,813
85,813
-
-
53,450
53,450
65,778
65,778
118,689
118,689
-
-
19,422
19,422
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,000
55,000
208,750
208,750
60,000
60,000
704,270
704,270
80,000
80,000
939,960
939,960
Cardno Annual Report 2014 85
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
22. ISSUED CAPITAL OF CARDNO LIMITED continued
The fair values of Performance 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 Performance Rights with the EPS growth hurdle was calculated using a Black-Scholes model taking into account risk
free interest rates and the dividend yield.
The model inputs for the fair value of Performance Rights granted during the year ended 30 June 2014 include share price of $6.49 for Performance
Rights granted on 17 October 2013 (2013: $7.97, 18 October 2012) and $7.19 for Performance Rights granted on 11 November 2013 (2013: $7.90,
1 November 2012), expected price volatility of 31 per cent and 31 per cent respectively (2013: 29 per cent and 29 per cent), expected dividend yield
of 5.5 per cent (2013: 5.6 per cent) and risk free interest rate of 2.99 per cent and 3.06 per cent (2013: 2.60 per cent and 2.56 per cent).
The Performance Rights are subject to performance hurdles measured over three financial years. The Performance Rights may vest in accordance
with the following table:
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 Performance
Rights to Vest
(Tranche 1 50%)
0%
50%
Pro rata
100%
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)
(cid:116)40% (12% pa)
% of Performance
Rights to Vest
(Tranche 2 50%)
0%
30%
Pro rata
70%
Pro rata
100%
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 $500 (2013:$1,000) of shares and
employees with 6 to 12 months service are entitled to $250 (2013: $500) of shares. 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 $250 (2013: $500) of shares. 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.
23. 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.
Reserve for Own Shares
The reserve for the Company’s own shares comprises the cost of the Company’s shares held by the Group. The shares are held in trust by the Cardno
Limited Performance Equity Plan Trust which has been formed solely for the purpose of subscribing for, acquiring and holding shares for the benefit
of employees participating in the Performance Equity Plan (PEP) of Cardno Limited and its associates employees. At 30 June 2014 the Group held
353,547 of the Company’s share (2013: 234,577).
86 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
24. NOTES TO THE CASH FLOW STATEMENT
(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 and 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
2014
$’000
2013
$’000
78,134
77,639
26,493
(518)
(2,113)
7,033
190
(8,343)
7,018
(1,717)
(1,826)
(123)
(3,445)
(16,122)
7,332
(1,702)
(2,000)
(4,007)
327
84,611
23,660
(61)
10,574
6,491
(12,375)
5,132
(3,128)
(1,077)
914
(917)
2,200
(12,068)
(9,113)
1,439
9,045
(95)
(2,531)
95,730
Cardno Annual Report 2014 87
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
24. NOTES TO THE CASH FLOW STATEMENT continued
(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)
85,885
90,635
2014
$’000
2013
$’000
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 $154,863 (2013: $3,376,825) by means of finance leases. These
acquisitions are not reflected in the cash flow statement.
(d) Acquisition of entities
Details of signification acquisitions are set out in note 33. Summarised financial information
relating to items presented in the cash flow statement is as follows:
Purchase consideration
Cash consideration paid
Vendor liability
Consideration
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 cash acquired
88 Cardno Annual Report 2014
170,044
22,551
192,595
6,779
49,106
-
4,188
2,637
7,849
(8,352)
-
(2,149)
60,058
132,537
192,595
170,044
(6,779)
163,265
98,435
33,827
132,262
16,915
27,794
1,729
7,389
8,634
14,520
(16,807)
(2,528)
(20,123)
37,523
94,739
132,262
98,435
(16,915)
81,520
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
25. CAPITAL AND LEASING COMMITMENTS
(a) 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 16)
Non-current (note 19)
(b) 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
2014
$’000
2013
$’000
2,491
4,152
-
6,643
(1,054)
5,589
2,001
3,588
-
5,589
2,001
3,588
5,589
40,445
87,431
18,400
146,276
2,658
6,451
-
9,109
(1,697)
7,412
1,984
5,428
-
7,412
1,984
5,428
7,412
38,387
83,776
10,404
132,567
The Group leases office premises under non-cancellable 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.
26. EMPLOYEE BENEFITS
The aggregate employee benefit liability is comprised of:
Accrued wages, salaries and on-costs (included in payables)
Provisions (current) (note 17)
Provisions (non-current) (note 20)
2014
$’000
28,525
28,024
12,854
69,403
$
2013
$’000
21,069
29,086
12,768
62,923
$
Defined contribution superannuation expense
21,445,035
18,906,052
Cardno Annual Report 2014 89
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
27. 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 Cardno, or which is likely to have a material effect
on the financial performance of Cardno.
Cardno had contingent liabilities at 30 June 2014 in respect of:
Bank guarantees
2014
$’000
26,043
2013
$’000
15,610
Cardno has bank guarantee facilities with financial institutions denominated in Australian dollars, United States dollars, Great British
pounds and United Arab Emirates Dirham. The guarantee facilities available to Cardno total A$78.3 million (2013: A$40.5 million). These
facilities are secured by an unlimited interlocking guarantee and indemnity or a parent company guarantee.
28. SUBSEQUENT EVENTS
On 18 August 2014, the Directors of Cardno Limited declared a final dividend of 17 cents per share (100 per cent franked) for the 2014
financial year. The dividend will be paid on 12 October 2014 to shareholders registered on 14 September 2014 and will total $27,755,385.
The dividend has not been provided for in the 30 June 2014 financial statements.
On 15 August 2014, the Group closed its first long term note of US$150.0 million in the US Private Placement debt market. The tranches issued
include US$50.0 million with a 7 year term maturing on 15 August 2021 and US$100.0 million with a 10 year term maturing on 21 August
2024. The note was initially priced on 15 May 2014 with a 3 month deferred settlement. Simultaneously, the Group issued fixed to floating USD
interest rate swaps matching the tranches and elected to fair value hedge the interest rate risk in accordance with AASB139. The proceeds from
the long term note will be used to repay a portion of the Group’s existing bank debt and for other general corporate purposes.
29. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share was based on the following:
Profit attributable to ordinary shareholders
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
2014
$
2013
$
78,134,444
77,638,671
No.
143,726,327
6,329,844
100,022
No.
138,159,361
2,580,444
180,636
Weighted average number of ordinary shares at 30 June
150,156,193
140,920,441
Basic Earnings per Share
Cents
52.04
Cents
55.09
Performance Options and Performance 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.
90 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
29. EARNINGS PER SHARE continued
Diluted earnings per share
The calculation of diluted earnings per share was based on the following:
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of Performance Options and Performance Rights on issue
2014
$
2013
$
78,134,444
77,638,671
No.
150,156,193
4,218,881
No.
140,920,441
4,385,561
Weighted average number of ordinary shares (diluted) at 30 June
154,375,074
145,306,002
Diluted Earnings per Share
30. 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
Cents
50.61
2014
$
Cents
53.43
2013
$
445,000
497,500
737,795
1,182,795
573,186
1,070,686
6,000
6,000
15,250
15,250
Cardno Annual Report 2014 91
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
31. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation included in employee benefits are as follows:
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
Termination Benefits
2014
$’000
4,471
264
701
486
5,922
2013
$’000
6,345
265
483
-
7,093
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.
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.
None of these entities transacted with the Company or its subsidiaries in the reporting period.
32. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT
(a) Accounting classifications and fair values
The carrying value of the Group’s financial assets and liabilities approximate their fair value in the current and prior year. The Group does
not hold any material financial assets or liabilities at fair value at 30 June 2014 that are determined using level 2 or level 3 in the fair value
hierarchy (2013:Nil).
(b) Measurement of fair values
The following table shows the valuation technique used in measuring financial instruments not measured at fair value.
Financial instruments not measured at fair value
Type
Valuation technique
Other financial
liabilities*
Discounted cash flows.
Significant
unobservable inputs
Not applicable.
* Other financial liabilities include secured and unsecured bank loans, finance lease liabilities and contingent consideration.
On 15 May 2014, in conjunction with the Group’s pre-settlement pricing on the long term note, the Group issued fixed to floating USD
interest rate swaps to match the 7 year and 10 year note tranches. The Group elected to fair value hedge the interest rate risk on these
transactions with a fair value adjustment of $0.041 million as at 30 June 2014. Refer to note 28 for additional details.
92 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
32. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT continued
(c) Financial risk management
The main risks arising from Cardno’s financial instruments are interest rate risk, foreign exchange risk, credit risk and liquidity risk.
Cardno 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 (ARCC) 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 Cardno which includes the minimisation of risk. The policies for managing each of Cardno’s financial
risks are summarised below and remain unchanged from the prior year.
Credit risk
Credit risk is the risk of financial loss to Cardno if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from Cardno’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.
Cardno does not require collateral in respect of financial assets.
In line with the Group’s Treasury policy, investments are allowed only in liquid securities and only with counterparties that have a credit
rating equal to or better than a rating approved by the ARCC. The Treasury policy is reviewed by the ARCC annually.
There are no material concentrations of credit risk.
Trade receivables
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
The ageing of Cardno’s trade receivables at the reporting date was:
2014
$’000
64,621
138,051
14,445
19,264
236,381
2013
$’000
64,544
110,282
16,436
6,303
197,565
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
2014
2013
Gross
$’000
131,727
37,009
21,911
57,110
247,757
Impairment
$’000
-
-
-
11,376
11,376
Gross
$’000
123,903
34,912
17,473
34,054
210,342
Impairment
$’000
-
-
-
12,777
12,777
Cardno establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.
The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss
component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
Cardno Annual Report 2014 93
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
32. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT continued
Credit risk continued
The movement in the provision for impairment in respect of trade receivables of Cardno during the year was as follows:
Balance at 1 July
Impairment loss recognised
Receivables written off
Increase through entities acquired
Effect of foreign exchange
Balance at 30 June
2014
$’000
12,777
2,503
(4,125)
316
(95)
11,376
2013
$’000
11,477
4,104
(4,776)
1,621
351
12,777
Liquidity risk
Liquidity risk is the risk that Cardno 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, Cardno aims to maintain flexibility in funding by keeping sufficient committed credit lines
available to meet Cardno’s requirements.
The following are the contractual maturities of financial liabilities at the reporting date, including estimated interest payments and
excluding the impact of netting agreements:
30 June 2014
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans*
30 June 2013
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Carrying
amount
$’000
136,990
5,589
300,487
443,066
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
Over 5 years
$’000
$’000
136,990
6,643
350,170
493,803
136,990
2,491
7,380
146,861
-
4,152
342,789
346,941
-
-
-
-
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
Over 5 years
$’000
$’000
150,952
7,412
234,316
392,680
150,952
9,109
247,045
407,106
150,952
2,658
5,225
158,835
-
6,451
241,820
248,271
-
-
-
-
* Bank loans are term facilities maturing in December 2018
94 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
32. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT continued
Market risk
(a) Foreign exchange risk
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. Cardno operates internationally and is exposed to foreign exchange risk arising
from the currency exposure to the Australian dollar.
Cardno does not engage in any transactions which are of a speculative nature.
Cardno borrows funds in foreign currencies to hedge its net investments in foreign operations. Cardno has loans totalling $294.0 million (2013:
$225.4 million) denominated in US dollars (USD) and $10.8 million (2013: $9.1 million) denominated in pounds sterling (GBP) which have been
designated as hedges of Cardno’s net investments in subsidiaries with functional currencies in those currencies.
As at 30 June 2014, a 10 per cent strengthening of the Australian dollar against the USD and GBP would have increased equity by
$26.7 million (2013: $20.5 million) and $1.0 million (2013: $0.8 million) respectively. A 10 per cent weakening of the Australian dollar
against the USD and GBP would have decreased equity by $32.7 million (2013: $25.0 million) and $1.2 million (2013: $1.0 million) respectively.
There would be no impact on profit and loss as the loans are designated as net investment hedges.
Other than interest bearing liabilities, there are no other significant foreign currency exposures in relation to financial instruments at year end.
(b) Interest rate risk
Cardno 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 Cardno. Cardno does not engage in any transactions which are of a speculative nature.
At the reporting date the interest rate profile of Cardno’s interest-bearing financial instruments was:
Variable rate instruments
Cash assets
Bank loans
Fixed rate instruments
Finance leases & hire purchase
Bank loans
June 2014
June 2013
Effective
Interest
Rate
1.43%
1.94%
6.48%
1.94%
Effective
Interest
Rate
1.38%
2.23%
6.95%
3.44%
Balance
$’000
85,885
(299,339)
(213,454)
(5,589)
(1,148)
(6,737)
Balance
$’000
90,635
(233,283)
(142,648)
(7,412)
(1,033)
(8,445)
Group sensitivity
At 30 June 2014, if interest rates had changed by -/+ 50 basis points from the year-end rates with all other variables held constant, profit after
tax for the year would have been $747,000 higher/lower (2013: $499,000 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.
Cardno Annual Report 2014 95
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
32. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT continued
Capital risk management
Cardno’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, Cardno 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 Cardno defines as net operating income divided by total shareholders’ equity.
The Board of Directors also monitors the level of dividends to ordinary shareholders.
33. BUSINESS COMBINATIONS
Year Ended 30 June 2014
(a) Businesses acquired
2014
Country of
Incorporation
Principal Activity
Haynes Whaley Associates Inc
PPI Group of Companies
I.T. Transport Limited
USA
Various
UK
Structural Engineering
Oil and Gas Engineering
Transportation Consulting
Effective
Acquisition Date
8 October 2013
1 March 2014
1 April 2014
Proportion
of Shares
Acquired (%)
N/A
100%
100%
In the Group’s Americas segment, a subsidiary, Cardno Haynes Whaley Inc was established to acquire the business assets of Haynes Whaley
Associates Inc, a 100 person structural engineering firm headquartered in Houston, Texas with additional offices in Reston, Virginia and Austin,
Texas. The acquisition of Haynes Whaley Associates Inc (HWA) enhances the Group’s structural engineering capabilities across a broad range
of commercial, public and institutional clients. The Group also acquired the PPI group of companies (PPI) with an effective date of 1 March 2014.
PPI provides specialist engineering services to the oil and gas sector in the United States, West Africa and Asia Pacific and employs 760 staff.
The addition of PPI’s engineering services to the midstream and upstream oil and gas sector is expected to complement the Group’s existing
environmental and permitting capabilities in this market as well as new capabilities and proprietary systems in asset and quality management.
During the year the Group also acquired I.T. Transport Limited (ITT) with an effective date of 1 April 2014. Headquartered in Oxfordshire, UK, ITT
is a specialist boutique transportation consulting firm who work in the international development sector. ITT have a solid history of delivering
on complex transport projects and providing high quality services across the world, particularly in Africa, South Asia and Latin America. ITT was
acquired to enhance Cardno’s transport policy formulation, transport planning, program implementation and capacity building capabilities.
The acquired businesses contributed revenue and net profit after tax (NPAT) to the Group for the year ended 30 June 2014 as follows:
2014
Cardno Haynes Whaley Inc
PPI Group of Companies
I.T. Transport Limited
Revenues
Contributed
($)
18,486,094
61,011,642
984,154
NPAT
Contributed
($)
1,820,679
2,719,094
169,639
If all of the acquisitions during the year ended 30 June 2014 had occurred on 1 July 2013, the Group’s revenue and NPAT for the year would
have been $1,420,891,008 and $89,974,068 respectively.
(b) Purchase consideration
2014
Cash
Deferred settlement
Contingent consideration
Total
96 Cardno Annual Report 2014
Americas
Emerging Markets
HWA
$’000
17,654
3,604
2,385
23,643
PPI
$’000
150,189
16,198
-
166,387
ITT
$’000
2,201
364
-
2,565
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
33. BUSINESS COMBINATIONS continued
Deferred and contingent purchase considerations
Purchase consideration of HWA includes deferred settlement of US$3,400,000 which is payable 24 months after completion. Cardno Limited
has also agreed to pay the selling shareholders of HWA additional consideration of US$2,000,000 if the acquiree’s earnings before interest,
tax, depreciation and amortisation (EBITDA) on a stand alone basis over the period 1 November 2013 to 31 October 2014 is US$4,800,000 or
more. This amount has been included in the purchase consideration based on estimates of the acquiree’s financial performance over the earn-
out period. Where the normalised EBITDA is between US$4,350,000 and US$4,800,000 the payment will be pro-rated. Where the normalised
EBITDA is US$5,500,000 or more, then the selling shareholders will be entitled to an additional payment of US$250,000.
Purchase consideration of PPI includes deferred settlement of US$14,500,000 which is payable 18 months after completion.
Purchase consideration of ITT includes deferred settlement of GBP220,000 which is payable 24 months after completion.
Acquisition of ordinary shares in Cardno Limited
At the time of acquisition, the vendors of each acquiree were required to use a portion of the cash consideration paid to subscribe for
ordinary shares in Cardno Limited. A summary of the number and fair value of ordinary shares issued in relation to each acquisition during
2014 is set out below:
2014
Cardno Haynes Whaley Inc
PPI Group of Companies
I.T. Transport Limited
Shares subscribed
in Cardno Limited
($)
Fair Value of
Shares Issued
($)
Shares Issue Date
3,418,230
34,476,710
548,499
6.21
6.38
7.02
9 October 2013
14 March 2014
14 April 2014
The Fair value of the ordinary shares issue for each acquisition was based on the 10 day volume weighted average price (VWAP).
(c) Assets acquired and liabilities assumed at the date of acquisition
2014
Americas
Emerging Markets
Cash
Receivables
Property, plant and equipment
Inventories
Deferred revenue
Intangible assets
Creditors & borrowings
Provisions
Total
HWA
$’000
-
7,645
168
488
(424)
2,637
(1,214)
(514)
8,786
PPI*
$’000
4,639
41,769
4,012
6,521
-
-
(7,031)
(631)
49,279
ITT*
$’000
2,140
259
6
842
(509)
-
(673)
(71)
1,994
* In accordance with Accounting Standards, the accounting for these acquisitions has been completed on a provisional basis.
The fair value of receivables acquired includes trade receivables with a fair value of $43,616,853. The gross amount due is $43,932,720 of
which $315,867 is considered doubtful.
Cardno Annual Report 2014 97
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
33. BUSINESS COMBINATIONS continued
(d) Goodwill arising on acquisition
2014
Americas
Emerging Markets
Consideration transferred
Less: fair value of net identifiable assets acquired
Goodwill arising on acquisition
HWA
$’000
23,644
(8,786)
14,858
PPI*
$’000
166,387
(49,279)
117,108
ITT*
$’000
2,565
(1,994)
571
* In accordance with Accounting Standards, the accounting for these acquisitions has been completed on a provisional basis.
The goodwill recognised in relation to the acquisitions is attributable to the skills and technical talent of the employees of the acquisition
and the synergies expected to be achieved from integrating the businesses into the Group’s existing operations. Goodwill is not expected
to be deductible for tax.
(e) Net cash outflow on acquisition of subsidiaries
Cash consideration paid
Cash balance acquired
Outflow of cash
Year Ended 30 June 2013
(f) Businesses acquired
2013
Marshall Miller &
Associates Inc
EM-Assist Inc
Better Technical Options Ltd
New Zealand
Hard & Forester Pty Ltd
ChemRisk LLC
Caminosca S.A.
Geotech Materials Testing
Services Pty Ltd
Australia
USA
Ecuador
Australia
2014
$’000
170,044
(6,779)
163,265
Country of
Incorporation
Principal Activity
Effective
Acquisition Date
Proportion
of Shares
Acquired (%)
USA
USA
Mining Energy and
Environmental Services
Environmental Services
& Compliance Management
Water & Waste Water
Treatment Engineering
Survey
Environmental Services
Engineering Consultancy
Infrastructure Services
1 July 2012
1 July 2012
1 August 2012
1 October 2012
1 December 2012
1 December 2012
1 February 2013
100
100
100
100
100
100
100
In the Group’s Americas segment, Marshall Miller & Associates, Inc (MM&A) was acquired to increase Cardno’s expertise in mining
engineering, mine reserve evaluation, oil and gas exploration, feasibility studies and due diligence services for mining and resource projects.
The acquisition of EM-Assist, Inc further expands the Group’s expertise in environmental management in both the defence and private sector
markets. The ChemRisk, LLC acquisition provides Cardno with an international platform for environmental risk consulting, while Caminosca
S.A. significantly expands Cardno’s South American portfolio and will play an important role in Cardno’s diversification strategy.
In the Group’s Australia and New Zealand segment, Better Technical Options Ltd (BTO) and Hard & Forester Pty Ltd were acquired to expand
Cardno’s water and waste water treatment, as well as the Group’s survey capabilities. The acquisition of Geotech Materials Testing Services
Pty Ltd (GMTS) will allow Cardno to build on its current construction materials testing, geotechnical engineering, and environmental testing
capabilities in Australia.
98 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
33. BUSINESS COMBINATIONS continued
(f) Businesses acquired continued
The acquired businesses contributed revenue and net profit after tax (NPAT) to the Group for the year ended 30 June 2013 as follows:
2013
Marshall Miller & Associates Inc
EM-Assist Inc & Caminosca S.A.
Better Technical Options Ltd and Hard & Forester Pty Ltd
ChemRisk LLC
Geotech Materials Testing Services Pty Ltd
Revenues
Contributed
($)
NPAT
Contributed
($)
27,057,488
30,430,174
10,645,704
12,452,874
12,669,645
1,582,929
3,098,739
1,782,362
1,309,513
2,380,438
If all of the acquisitions during the year ended 30 June 2013 had occurred on 1 July 2012, the Group’s revenue and NPAT for the year would
have been $1,240,447,942 and $85,404,750 respectively.
(g) Purchase consideration
2013
Americas & Software
Australia & New Zealand
Cash
Deferred settlement
Contingent consideration
Total
MM&A
$’000
25,415
2,788
2,998
31,201
EM-Assist &
Caminosca
$’000
20,991
6,471
5,347
32,809
ChemRisk
$’000
24,333
2,877
3,357
30,567
GMTS
$’000
17,467
764
7,988
26,219
Hard & Forester
and BTO
$’000
10,229
-
1,237
11,466
Deferred and contingent purchase considerations
Purchase consideration for the acquisition of MM&A includes a deferred settlement of US$2,790,000 which is payable 18 months after
completion. This was paid during the 2014 financial year. Cardno Limited also agreed to pay the selling shareholders of MM&A additional
consideration of US$3,000,000 if the acquiree’s EBITDA on a stand alone basis over the period 1 August 2012 to 31 July 2013 was
US$6,400,000 or more. Further details for this additional consideration are set out in note 33(k).
Purchase consideration for the acquisition of EM-Assist includes a deferred settlement of US$1,250,000 which is payable 18 months after
completion. This was paid during the 2014 financial year. Cardno Limited also agreed to pay the selling shareholders of EM-Assist additional
consideration of US$1,500,000 if the acquiree’s EBITDA on a stand alone basis over the period 1 July 2012 to 30 June 2013 was US$2,800,000
or more. This was achieved and paid during the year ended 30 June 2014.
Cardno Limited agreed to pay the selling shareholders of BTO additional consideration of NZ$527,898 if the acquiree’s EBIT on a stand
alone basis over the period 1 August 2012 to 31 July 2013 was NZ$1,125,000 or more. This was achieved and paid during the year ended
30 June 2014.
Cardno Limited agreed to pay the selling shareholders of Hard & Forester additional consideration of $830,000 if the acquiree’s EBIT on a
stand alone basis over the period 1 October 2012 to 30 September 2013 was $2,000,000. This was achieved and paid during the year ended
30 June 2014.
Purchase consideration for the acquisition of ChemRisk includes a deferred settlement of US$3,000,000 which is payable 18 months after
completion in the year ending 30 June 2015. Cardno Limited also agreed to pay the selling shareholders of ChemRisk additional consideration
of US$3,500,000 if the acquiree’s EBITDA on a stand alone basis over the period 1 December 2012 to 30 November 2013 was US$6,100,000 or
more. This was achieved and paid during the year ended 30 June 2014.
Cardno Annual Report 2014 99
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
33. BUSINESS COMBINATIONS continued
(g) Purchase consideration continued
Purchase consideration for the acquisition of GMTS includes a deferred settlement of $763,660 which is payable 24 months after
completion in the year ending 30 June 2015. Cardno Limited also agreed to pay the selling shareholders of GMTS additional consideration
of $7,987,500 if the acquiree’s EBIT on a stand alone basis over the period 1 February 2013 to 31 January 2014 was $7,130,000 or more.
This was achieved and paid during the year ended 30 June 2014.
Purchase consideration for the acquisition of Caminosca includes a deferred settlement of US$1,000,000 which is payable 24 months
after completion in the year ending 30 June 2015. Cardno Limited also agreed to pay the selling shareholders of Caminosca additional
consideration of US$4,000,000 if the acquiree’s EBIT on a stand alone basis over the period 1 December 2012 to 30 November 2013 was
US$3,500,000 or more. This was achieved and partly paid in June 2014 with the outstanding amount being paid in July 2014.
Acquisition of ordinary shares in Cardno Limited
At the time of acquisition, the vendors of each acquiree were required to use a portion of the cash consideration paid to subscribe for
ordinary shares in Cardno Limited. A summary of the number and fair value of ordinary shares issued in relation to each acquisition during
2013 is set out below:
2013
Marshall Miller & Associates Inc
EM-Assist Inc
Better Technical Options Ltd
Hard & Forester Pty Ltd
ChemRisk LLC
Geotech Materials Testing Services Pty Ltd
Shares subscribed
in Cardno Limited
($)
Fair Value of
Shares Issued
($)
2,121,433
366,624
593,299
1,964,030
8,258,800
4,303,086
7.53
7.53
8.28
7.83
6.06
6.91
Shares Issue Date
4 July 2012
4 July 2012
27 August 2012
6 November 2012
10 December 2012
20 February 2013
The Fair value of the ordinary shares issued for each acquisition was based on the 10 day volume weighted average price (VWAP).
(h) Assets acquired and liabilities assumed at the date of acquisition
2013
Americas & Software
Australia & New Zealand
Cash
Receivables
Property, plant and equipment
Inventories
Deferred taxes
Intangible assets
Creditors & borrowings
Provisions
Fair value of net identifiable
assets acquired
MM&A
$’000
1,899
5,191
2,004
3,350
677
961
(3,165)
(542)
10,375
EM-Assist &
Caminosca
$’000
9,813
7,759
1,101
10,802
(1,336)
3,159
(17,188)
(5,742)
8,368
ChemRisk
$’000
225
7,969
769
82
-
1,754
(2,315)
(230)
8,254
GMTS
$’000
3,972
5,123
2,299
-
(577)
2,749
(1,417)
(3,668)
8,481
Hard & Forester
and BTO
$’000
1,006
2,259
1,118
284
437
-
(1,422)
(1,640)
2,042
100 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
33. BUSINESS COMBINATIONS continued
(i) Goodwill arising on acquisition
2013
Consideration transferred
Less: fair value of net identifiable
assets acquired
Goodwill arising on acquisition
Americas & Software
EM-Assist &
Caminosca
$’000
32,809
(8,369)
24,440
MM&A
$’000
31,201
(10,375)
20,826
ChemRisk
$’000
30,567
(8,254)
22,313
Australia & New Zealand
GMTS
$’000
26,219
(8,481)
17,738
Hard & Forester
and BTO
$’000
11,466
(2,042)
9,424
The goodwill recognised in relation to the acquisitions is attributable to the skills and technical talent of the employees of the acquisition
and the synergies expected to be achieved from integrating the businesses into the Group’s existing operations. Goodwill is not expected
to be deductible for tax.
(j) Net cash outflow on acquisition of subsidiaries
Cash consideration paid
Cash balance acquired
Outflow of cash
2013
$’000
98,435
(16,915)
81,520
(k) Contingent purchase consideration – Marshall Miller & Associates Inc (MM&A)
As part of the terms of acquisition of MM&A, Cardno agreed to pay the selling shareholders of MM&A additional consideration of
US$3,000,000 if the acquiree’s normalised earnings before interest, tax, depreciation and amortisation (EBITDA) over the period 1 August
2012 to 31 July 2013 was US$6,400,000 or more. This amount was included in the measurement of the purchase consideration at the date
of acquisition and recognised as a vendor liability based on estimates of the acquiree’s financial performance over the earn-out period.
Where the normalised EBITDA was between US$5,800,000 and US$6,400,000 the payment was to be pro-rated. The earn-out period
expired in the year ended 30 June 2014. The earnout was not achieved due to normalised EBITDA being below the US$5,800,000 required
to achieve a payout. The vendor liability has been reversed during the period and $3,453,000 recognised in other income (note 2B).
34. SEGMENT INFORMATION
Cardno has three reportable segments managed separately by location and services provided. Internal management reports on the
performance of these reportable segments are reviewed monthly by the Managing Director, Chief Financial Officer and Regional CFO’s. The
following summary describes the operations in each of Cardno’s segments:
> Professional Services Americas – provides consulting engineering, planning, surveying, landscape architecture and
environmental services.
> Professional Services Australia and New Zealand – provides consulting engineering, planning, surveying, landscape architecture,
environmental services, electrical engineering and geotechnical services.
> Emerging Markets – manages aid projects on behalf of unilateral and multilateral government agencies and private clients.
> Other Segments – the Group’s other operations include (i) professional consulting engineering services in the Middle East and (ii) the
sale of software and related services globally. These segments do not meet the quantitative thresholds for reportable segments.
During the year, the Group changed its internal reporting structure which resulted in a change to its reportable segments. Comparative
segment information has been represented in conformity with the requirement of AASB 8 Operating Segments.
Cardno Annual Report 2014 101
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
34. SEGMENT INFORMATION continued
2014
Segment revenue
Fees from services and sale of goods
Fees from recoverable expenses
Inter-segment revenue
External sales
Other revenue
Total segment revenue
Other Income
Segment result before financing costs
Segment assets
Segment liabilities
Other
Acquisitions of non-current assets
Depreciation and amortisation of assets
2013*
Segment revenue
Fees from services and sale of goods
Fees from recoverable expenses
Inter-segment revenue
External sales
Other revenue
Total segment revenue
Other Income
Segment result before financing costs
Segment assets
Segment liabilities
Other
Acquisitions of non-current assets
Depreciation and amortisation of assets
Professional
Services
Australia &
New Zealand
$’000
338,736
53,872
-
392,608
218
392,826
2,415
51,712
349,173
73,313
7,334
11,296
Professional
Services
Australia &
New Zealand
$’000
358,734
52,787
-
411,521
359
411,880
2,216
57,680
346,177
86,458
38,500
10,660
Professional
Services
Americas
Emerging
Markets
Other
Segments
Total
$’000
$’000
$’000
$’000
522,025
176,897
(6,088)
692,834
1,842
694,676
104,426
112,033
(8,182)
208,277
1,014
209,291
11,556
190
-
11,746
80
11,826
976,743
342,992
(14,270)
1,305,465
3,154
1,308,619
-
-
-
2,415
57,788
807,498
108,507
144,107
14,640
6,336
95,767
37,380
1,420
484
3,762
119,598
24,505
1,276,943
3,524
222,724
97
73
Professional
Services
Americas
Emerging
Markets
Other
Segments
$’000
$’000
438,957
160,139
(469)
598,627
486
599,113
-
56,308
647,174
117,271
78,276
12,486
80,666
93,388
(3,007)
171,047
1,144
172,191
-
5,332
98,497
33,481
495
432
$’000
11,089
(356)
-
10,733
14
10,747
-
2,665
5,477
3,186
-
82
152,958
26,493
Total
$’000
889,446
305,958
(3,476)
1,191,928
2,003
1,193,931
2,216
121,985
1,097,325
240,396
117,271
23,660
* The Group has changed the composition of its reportable segments during the year end and restates its comparative information accordingly.
102 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
34. SEGMENT INFORMATION continued
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
Revenues
Total revenue for reportable segments
Interest revenue
Consolidated revenue
Profit or loss
Reportable segment result before net financing costs
Interest Revenue
Other income – contingent consideration
Finance costs
Other corporate (costs)/gains
Profit before tax
Income tax expense
Profit after tax
Assets
Total assets for reportable segments
Other assets
Unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Bank loans unallocated
Other unallocated liabilities
Consolidated total liabilities
Geographical information
2014
$’000
1,308,619
978
1,309,597
119,598
978
3,453
(8,465)
(8,798)
106,766
(28,632)
78,134
1,276,943
20,484
20,288
1,317,715
222,724
300,487
30,988
554,199
2013
$’000
1,193,931
1,421
1,195,352
122,480
1,421
-
(7,611)
(9,557)
106,733
(29,094)
77,639
1,097,325
26,705
10,211
1,134,241
240,396
234,316
27,004
501,716
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 & New Zealand
Americas
Asia Pacific
UK & Africa
Other segments
2014
2013
Total
Non-Current
Assets
$’000
262,889
451,215
25,358
73,407
20,294
833,163
Revenues
$’000
466,268
721,295
77,528
43,528
-
1,308,619
Total
Non-Current
Assets
$’000
265,466
388,451
14,213
19,385
9,981
697,496
Revenues
$’000
477,173
638,859
56,194
21,705
-
1,193,931
Cardno Annual Report 2014 103
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
35. VOLUNTARY CHANGE IN ACCOUNTING POLICY
As set out in note 1(b), the Group has elected to change the way it presents non-refundable R&D tax incentives.
The following table summarises the impacts of the Group’s change in accounting policy in relation to R&D tax incentives, on the Group’s
consolidated statement of financial performance. There was no impact on the Group’s statement of financial position, statement of
comprehensive income, statement of changes in equity or statement of cash flows.
For the year ended 30 June 2013
Revenue
Other Income
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
Profit after income tax
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
For the year ended 30 June 2014
Revenue
Overall increase in profit before income tax
Income tax expense
Overall impact on total profit for the year
R&D tax
incentive
$’000
2,711
2,711
(2,711)
-
As previously
reported
$’000
1,195,352
-
(564,788)
(254,873)
(195,158)
(23,660)
(7,610)
(45,241)
104,022
(26,383)
77,639
55.09
53.43
As restated
$’000
1,195,352
2,711
(564,788)
(254,873)
(195,158)
(23,660)
(7,610)
(45,241)
106,733
(29,094)
77,639
55.09
53.43
R&D tax
incentive
$’000
2,415
2,415
(2,415)
-
104 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
36. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2014 the parent Company of Cardno was Cardno Limited.
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
Company
2014
$’000
39,191
-
39,191
553,234
862,344
194,541
194,541
623,875
-
43,928
667,803
2013
$’000
37,142
-
37,142
453,622
690,532
128,891
128,891
500,374
-
61,267
561,641
2,107
2,070
A multiple guarantee facility is available to Cardno totalling $15 million (2013: $19 million). The facility is secured by an unlimited interlocking
guarantee and indemnity.
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of
economic benefits will be required or the amount is not capable of reliable measurement.
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.
Cardno Annual Report 2014 105
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
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 2014 is set out as follows:
Statement of comprehensive income and retained earnings
2014
$’000
459,939
(202,840)
(118,093)
(56,005)
(83)
(7,174)
2,620
78,364
(17,868)
60,496
(1,113)
59,383
92,270
1,113
(56,530)
96,236
2013
$’000
440,186
(208,113)
(114,497)
(46,669)
(67)
(6,326)
3,864
68,378
(14,601)
53,777
7,848
61,625
89,259
(7,848)
(50,766)
92,270
96,236
92,270
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
106 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
37. DEED OF CROSS GUARANTEE continued
Statement of financial position
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current tax liabilities
Short term provisions
Other current liabilities
Total Current Liabilities
Non-Current Liabilities
Interest-bearing loans and borrowings
Deferred tax liabilities
Long term provisions
Other non-current liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
2014
$’000
21,735
953,055
25,253
2,995
1,003,038
-
461,067
137
11,414
41,849
2,094
516,561
1,519,599
438,470
303,081
10,561
13,911
12,174
778,197
-
5,643
10,867
-
16,510
794,707
724,892
623,875
4,781
96,236
724,892
2013
$’000
28,810
808,636
29,466
1,733
868,645
-
393,303
229
11,545
41,849
413
447,339
1,315,984
428,730
234,442
12,580
14,508
10,494
700,754
-
5,864
10,818
-
16,682
717,436
598,548
500,388
5,890
92,270
598,548
Cardno Annual Report 2014 107
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
38. CONTROLLED ENTITIES
Cardno’s significant subsidiaries are listed below.
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United Kingdom
Kenya
New Zealand
New Zealand
United States of America
United States of America
Belgium
United States of America
New Zealand
Australia
Papua New Guinea
Australia
United States of America
United Kingdom
Australia
United States of America
United States of America
Australia
Australia
United States of America
United States of America
United States of America
Ecuador
United States of America
Australia
Australia
Australia
Colombia
Equity
Holding 2014
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%
Equity
Holding 2013
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%
Name
Cardno Holdings Pty Ltd
Cardno (Qld) Pty Ltd
Cardno Staff Pty Ltd
Cardno Staff No. 2 Pty Ltd
Cardno Operations Pty Ltd
Cardno International Pty Ltd
Cardno (WA) Pty Ltd
Cardno CCS Pty Ltd
Cardno Lawson Treloar Pty Ltd
Cardno (NSW/ACT) Pty Ltd
Cardno Willing Pty Ltd
Cardno Victoria Pty Ltd
Cardno Emerging Markets (Australia) Pty Ltd
Cardno UK Limited
Cardno Emerging Markets (UK) Limited
Cardno Emerging Markets (East Africa) Limited
Cardno NZ Limited
Cardno Holdings New Zealand Limited
Cardno USA, Inc.
Cardno Emerging Markets (USA), Ltd
Emerging Markets Group (EMG) s.a.
Cardno WRG, Inc.
Cardno TCB Limited
Cardno (NT) Pty Ltd
Cardno (PNG) Ltd
XP Software Pty Ltd
XP Software Inc.
Micro Drainage Limited
Cardno Bowler Pty Ltd
TBE Group, Inc
TBE Holdings, Inc
Cardno ITC Pty Ltd
Cardno Australian Underground Services Pty Ltd
Environmental Resolutions, Inc
ENTRIX Holding Company
ENTRIX Inc
ENTRIX Americas, SA
Cardno JF New, Inc
Cardno Roadtest Pty Ltd
Cardno BEC Pty Ltd
Cardno BEC (Qld) Pty Ltd
Cardno (Colombia) S.A.S.
108 Cardno Annual Report 2014
Notes to the Consolidated Financial Statements
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
38 CONTROLLED ENTITIES continued
Name
Cardno Humphrey Reynolds Perkins Pty Ltd
Cardno Humphrey Reynolds Perkins Jewell Pty Ltd
Cardno Humphrey Reynolds Perkins Gold Coast Pty Ltd
Cardno Humphrey Reynolds Perkins Sunshine Coast Pty Ltd
Cardno Chenoweth Environmental Planning &
Landscape Architecture Pty Ltd
Cardno Lane Piper Pty Ltd
Moriedale Holdings Pty Ltd
Geotech Solutions Pty Limited
TEC, Inc
ATC & Associates Inc
Marshall Miller & Associates, Inc
EMAssist LLC
Better Technical Options Limited
Hard & Forester Pty Ltd
ChemRisk LLC
Caminosca S.A.
Geotech Materials Testing Services Pty Ltd
Cardno Haynes Whaley Inc
Cardno South Africa (Pty) Ltd
PPI, LLC
PPI Engineering & Construction Services, LLC
PPI Quality & Asset Management, LLC
PPI Technology Services, LLC
PPI Australia Pty Ltd
PPI QAM (Singapore) Pty Ltd
PPI Malaysia
PPI Angola
PPI Libya
PPI Technology Services Nigeria Limited
I.T. Transport Limited
Country of
Incorporation
Australia
Australia
Australia
Australia
Equity
Holding 2014
100%
100%
100%
100%
Equity
Holding 2013
100%
100%
100%
100%
Australia
Australia
Australia
Australia
United States of America
United States of America
United States of America
United States of America
New Zealand
Australia
United States of America
Ecuador
Australia
United States of America
South Africa
United States of America
United States of America
United States of America
United States of America
Australia
Singapore
Malaysia
Angola
Libya
Nigeria
United Kingdom
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%
-
-
-
-
-
-
-
-
-
-
-
-
-
Cardno Annual Report 2014 109
Directors’ Declaration
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
1.
In the opinion of the Directors of Cardno Limited (the Company):
(a)
the consolidated financial statements and notes set out on pages 64 to 109 and the Remuneration Report in section 11 of the
Directors’ Report, set out on pages 49 to 60, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of Cardno’s financial position as at 30 June 2014 and of its performance for the financial year
ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. There are reasonable grounds to believe that the Company and Cardno entities identified in note 38 will be able to meet any obligations
or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those Group
entities pursuant to ASIC Class Order 98/1418.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer
and Chief Financial Officer for the financial year ended 30 June 2014.
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 Sydney on the 18th day of August 2014.
Signed in accordance with a resolution of the Directors.
JOHN MARLAY
Chairman
110 Cardno Annual Report 2014
Independent Auditor’s Report
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 2014, 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.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Cardno Annual Report 2014 111
Independent Auditor’s Report continued
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 2014 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 in section 11 of the directors’ report for the
year ended 30 June 2014. 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 2014
complies with Section 300A of the Corporations Act 2001.
KPMG
Robert S Jones
Partner
Brisbane
18 August 2014
112 Cardno Annual Report 2014
Additional Shareholder Information
CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2014
DISTRIBUTION OF ORDINARY SHAREHOLDERS
The number of shareholders, by size of holding, as at 13 August 2014 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
8,643
4,431
1,180
1,075
109
15,438
Number of
Shares
2,721,243
11,079,178
8,509,194
26,063,463
114,893,895
163,266,973
As at 13 August 2014 there were 2,024 shareholders who held less than a marketable parcel of 84 shares.
TWENTY LARGEST ORDINARY SHAREHOLDERS
The names of the twenty largest holders as at 13 August 2014 were:
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
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