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CARDNO
A NNUAL
RE PORT
CARDNO’S VISION
is to be a world leader in
the provision of professional
services to improve the physical
and social environment.
MISSION
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
IN 2015, CARDNO CELEBRATES
70 YEARS OF OPERATIONS
At the end of WWII, engineers Gerry Cardno and
Harold Davies combined their expertise to establish
the Brisbane-based consultancy - Cardno &
Davies. Cardno today has more than 8,000 staff
worldwide, delivering physical, environmental
and social infrastructure projects in more than
100 countries. We have much to celebrate in
our history, and our future.
ANNUAL REPORT 2015 01
02 Performance
04 Chairman’s statement
06 CEO’s message
08 Working globally
10 Featured projects
12 About Cardno
18 Operational review
22 Financial review
28 Board of Directors
30 Senior Executives
32 Financial report
104 Corporate directory
The Company’s Corporate
Governance Statement can be
viewed on the website at
www.cardno.com/
corporategovernance
Cover:
Left: Cardno restored riverine wetland habitat along a
portion of the Hudson River in New York.
Centre: Cardno’s dedicated professionals promote
sustainable economic development and improve the
wellbeing of people in developing countries.
Right: Cardno provided civil, structural and traffic
engineering, as well as town planning services to
Australia’s largest and most advanced paediatric
facility, the Lady Cilento Children’s Hospital in
Brisbane, Queensland.
Opposite:
Cardno delivered construction materials testing for the
Bruce Highway Upgrade in South East Queensland.
02 CARDNO LIMITED
PERFORMANCE
Cardno achieved a net operating profit after tax of
A$50.3 million, a 35.6 per cent decrease compared
to the 2014 financial year. Reflecting the impact
of goodwill impairment in the Americas and a
write-down of our investment in Ecuador, we
recorded a net loss after tax of $145.2 million.
FIVE YEAR PERFORMANCE (A$M)
2011
2012
2013
2014
2015
831.2
100.2
88.0
58.8
58.8
73.5
56.29
56.29
34.0
965.8
1,195.4
1,309.6
1,426.9
128.7
111.1
74.2
74.2
72.6
61.73
61.73
36.0
138.0
114.3
77.6
77.6
95.7
55.09
55.09
36.0
141.7
115.2
78.1
78.1
84.6
52.04
52.04
36.0
108.4
(148.4)
(145.2)
50.3
48.1
(88.32)
30.59
20.0
Gross Revenue
EBITDA (i)
EBIT
NPAT
NOPAT (ii)
Operating Cash Flow
EPS - basic (cents)
NOPAT EPS - basic (cents)
Dividends per share (cents)
SEGMENT GROSS REVENUE (iii)
Americas
Asia Pacific
510.3
319.0
522.0
441.9
664.2
529.8
774.4
534.2
928.9
497.5
SEGMENT RESULT (before financing costs and taxation) (iii)
Americas
Asia Pacific
54.5
35.5
51.9
58.5
59.8
62.2
63.2
56.4
(178.2)
38.8
(i) EBITDA = EBIT plus depreciation and amortisation and impairment losses
(ii) NOPAT = NPAT plus tax effected impairment losses
(iii) 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.
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 53. These metrics provide a measure of Cardno’s
performance before the impact of non-cash expense items, such as depreciation and amortisation and impairment losses,
as well as interest costs associated with Cardno’s external debt facility and hire purchase arrangements.
NOPAT is unaudited. However it is based on amounts extracted from the audited financial statements. Refer to the
NPAT to NOPAT reconciliation on page 27. This metric provides a measure of Cardno’s operating performance
before the impact of one off adjustments such as impairment losses write down to fair value for assets held for
sale incurred during the current financial year.
Left and Right: Cardno has provided wetland monitoring services at the San Pedro Bay
Mitigation Bank in Florida since 2008.
ANNUAL REPORT 2015 03
GROUP FEE REVENUE BY SEGMENT FY14 v FY15*
Inner Circle:
June 2014
Outer Circle:
June 2015
62%
64%
36%
38%
Americas
Asia Pacific
GROUP REVENUE
A$ billion
NET PROFIT/LOSS AFTER TAX
A$ million
$1.4B 9.0%
-$145.2M
-285.9%
.
8
8
5
1
1
0
2
.
2
4
7
2
1
0
2
.
6
7
7
3
1
0
2
.
1
8
7
4
1
0
2
.
3
0
5
5
1
0
2
2
.
1
3
8
1
1
0
2
8
.
5
6
9
2
1
0
2
4
.
5
9
1
,
1
3
1
0
2
6
.
9
0
3
,
1
4
1
0
2
9
.
6
2
4
,
1
5
1
0
2
GROUP FEE REVENUE BY SERVICE FY14 v FY15*
Based on NOPAT (i)
2
.
5
4
1
-
11%
12%
Inner Circle:
June 2014
Outer Circle:
June 2015
EARNINGS PER SHARE (BASIC)
A$ cents per share
OPERATING CASH FLOW
A$ million
-88.32c
-269.7%
$48.1M
-43.1%
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
Based on NOPAT (i)
9
5
0
3
.
5
1
0
2
.
2
3
8
8
-
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
1
.
8
4
5
1
0
2
29%
37%
51%
60%
Engineering Survey & Planning
Environment & Natural Resources
Social Infrastructure, Economics & Software
GROUP FEE REVENUE BY MARKET FY14 v FY15*
15%
11%
27%
26%
Inner Circle:
June 2014
Outer Circle:
June 2015
22%
24%
29%
31%
12%
3%
Contractors
Oil & Gas
Resources
Government
Other Private
(i) NOPAT = NPAT plus tax effected impairment losses
* Graph detail for FY2014 is presented on a proforma basis which
assumes Cardno acquired its FY2014 merger partners on 1 July 2013.
04 CARDNO LIMITED
CHAIRMAN’S
STATEMENT
2015 was a challenging year for Cardno
resulting in a decline in profitability
across several markets in Australia and
North America.
The company achieved a net operating profit after tax of A$50.3 million,
which is considerably lower than our FY2014 result.
As a result of a non-cash impairment charge relating to the carrying value of
our businesses in the US and Ecuador, Cardno recorded a net loss after tax of
A$145.2 million and negative earnings per share of 88.32c.
Gross revenue increased 9 per cent, to A$1,426.9 million. The company will pay a
full-year, fully franked dividend of 20 cents, which is a payout ratio of 66 per cent
of net operating profit after tax.
MARKET CONDITIONS
Like many in the engineering and construction sector, Cardno’s performance was
affected by adverse economic conditions in our key markets.
Our US business encountered a reduction in the demand for oil and gas services,
slower than anticipated conversion of backlog into project starts and harsh winter
weather in a number of locations.
In Australia, a continuing slowdown in the resource sector, a wind-down of major
project work, and delays in infrastructure investment resulted in a lessening
demand for services and intensified competition for consulting work. This
impacted both our revenue and margins.
The economic outlook for Ecuador has deteriorated due to significant declines
in oil revenue and general economic uncertainty. As at 30 June 2015, our
Cardno Caminosca subsidiary in Ecuador has been written down to its fair
value of zero and disclosed as held for sale.
IMPROVEMENT
Despite the external challenges, we are not satisfied with our results and
are undertaking significant actions to improve overall business
performance and profitability.
ANNUAL REPORT 2015 05
We continue to evaluate all components
of our business with a view to improving
margins and positioning Cardno for a return
to organic growth.
In difficult markets, it is important we
continue to match our resources to client and
market demand, while retaining a collective
focus on safety, streamlined service delivery
and improving the cost effectiveness of
internal functions.
We will continue to prudently invest in
our people and systems to ensure our
long-term success despite revenues being
under pressure.
Cardno’s backlog of work is strong and
includes a range of high-quality clients.
We are optimistic about the company’s
potential in the future.
OUR PEOPLE
Cardno’s greatest asset is our people and we
are committed to attracting, developing and
retaining the very best staff for the company.
Cardno University provides training and
personal development opportunities to
ensure our global team of technical experts
and professionals has the necessary range of
skills, knowledge and experience to serve our
global clients.
In FY2015, a Grow Cardno Academy was
created to provide business development skills
training to employees in client-facing roles,
while we also improved operational efficiency
of field staff through use of mobile technology.
With a workforce of 8,100 employees in 100
countries, staff diversity is a key competitive
advantage, as greater diversity supports
stronger operational and financial success.
A new policy has been launched which
highlights Cardno’s commitment to a range
of diversity initiatives across all aspects of
business activities within the company.
SAFETY
The safety of our employees, contractors
and clients is Cardno’s top priority. This
commitment is underpinned by our policies,
processes and systems. Our Zero Harm
program provides the resources for staff to
fulfil their roles and responsibilities with a
strong safety awareness.
Cardno works collaboratively with our
clients to deliver specialist services and
comprehensive project solutions. We must
deliver this capability along with excellent
safety procedures and performance.
Cardno’s rigorous approach to risk awareness
and communication helped us achieve
improved Lost Time Injury Frequency and Total
Recordable Injury Frequency rates in FY2015.
The safety of our people will continue to be
of paramount importance, for employees in
both field work and office-based activities.
LEADERSHIP
After an extensive search, the Board was
pleased to announce the appointment of
Richard Wankmuller, who commenced
as CEO and Managing Director in June
2015. Richard will be a strong contributor
for the company, with more than 30 years’
experience successfully growing professional
engineering services businesses.
He is a disciplined leader, focuses on
priorities and performance, and has a deep
understanding of client service delivery.
On behalf of the Board, I extend a sincere
thanks to Graham Yerbury for the leadership
and endeavour he demonstrated during his
six months as Acting CEO. The team achieved
much in difficult circumstances under his
guidance. Graham resigned from Cardno in
July to pursue an opportunity in the oil and
gas sector. We wish him success.
I would also like to thank Michael Renshaw
for his efforts during his time as CEO.
BOARD
Cardno’s corporate governance practices are
designed to deliver responsible stewardship,
business integrity, accountability and effective
risk management.
Our Directors bring a range of complementary
skills to the Board, and all are committed to
ensuring Cardno is an ethical, sustainable and
responsible corporate citizen that delivers
attractive returns for our shareholders.
After 10 years of diligent service, our longest-
serving non-executive director, Ian Johnston,
will retire from the Board following the Annual
General Meeting in September 2015. We
will miss Ian’s collegiate style and significant
capabilities. He has been a hard-working and
committed colleague. A replacement for Ian
will be announced in coming months.
OUTLOOK
Cardno continues to face challenges across
a number of our key markets, however, we
remain positive about the opportunities for
the coming year.
In the Americas, we are well positioned with
a record pipeline of work. A commitment
to increased government spending in Asia
Pacific should drive demand for engineering
consulting services, although the timing of
such investment is uncertain.
Merger and acquisition activity slowed
in FY2015 due to the underlying business
performance and our efforts to improve
profitability. We continue to look for
complementary businesses that will add
relevant geography and skills to our current
service platform.
Cardno has the capabilities and technical
expertise to deliver the highest standard of
professional services for our clients on projects
across the world. Our new leadership team is
committed to this objective.
THANK YOU
I wish to recognise Cardno’s professional
and dedicated staff for their commitment to
working safely and delivering high quality
client service over the past 12 months.
I would also like to thank my colleagues
on the Board for their diligence and
continued support.
Importantly, I thank our clients and
shareholders for their confidence in this
great company.
John Marlay
Chairman
Far left: Cardno worked with government agencies,
consultants and the community to prepare structure plans
for the award-winning Cockburn Central Town Centre and
Cockburn Central West projects in Western Australia.
Left: Cardno delivered environmental and cultural resource
field survey and permitting support for a 500-mile natural
gas pipeline from Alabama to Florida.
06 CARDNO LIMITED
CEO’S MESSAGE
Since joining the company in June 2015,
I have met with thousands of Cardno
people while visiting more than 40 of
our offices throughout the world.
WHAT WE DO IS IMPORTANT
Along the way, I have seen firsthand some of the great work we do. This includes
the international development assistance work we undertake, such as helping
to eliminate human trafficking in Southeast Asia. We also support AIDS orphans
and sustain HIV treatment in Uganda, and tackle poverty in Timor Leste through
improved local governance and food security.
Our expert teams perform crucial transport infrastructure work, including light rail
and streetcar projects in Sydney and the Gold Coast, Australia, and Atlanta in the
United States. In addition, we also fulfil important human health risk assessment,
water supply and environmental restoration activities, such as working for over
10 years to restore the fragile Tahoe Basin ecosystem in Nevada and California.
OUR PEOPLE MAKE A DIFFERENCE
As I reflect on this great work, I have to say that I am very proud to be part of
a company that is truly making a difference and helping so many communities
across the globe. What has really struck me is the quality of our people and
their determination, hard work and commitment to success.
This allows me to remain confident about Cardno’s future despite the
challenges which the company has faced during recent times. While
economic conditions remain difficult in a number of key markets, the
response by our people over the past few months has convinced me
that Cardno has a strong workforce that can successfully meet these
challenges. We will do this through a renewed focus on teamwork and
the delivery of superior client service throughout the world.
I look forward to continuing a dialogue on how we can improve
our teamwork and client service capabilities as we develop our
long-term plan, which I expect we will be able to communicate
later this calendar year.
ANNUAL REPORT 2015 07
“I am very proud to be part of a company that is
truly making a difference and helping so many
communities across the globe.”
This client recognition is important to us,
particularly when it comes as a result
of our commitment to improved safety
performance. In 2015, Cardno received a
second consecutive award from a major
global oil and gas company due to our
flawless execution of environmental
services work (see page 14).
THANK YOU
In closing, I would like to acknowledge and
thank our people. I am grateful they choose
to work for us and give us their best every
day. I appreciate their effort and understand
the road has not been easy. In the last four
years alone we have brought in over 3,500
new people, all of whom came from other
companies with their own ways of serving
clients and delivering successful results.
It is impressive to see how they now work
together as a team across Cardno and
deliver the type of results I have highlighted.
This teamwork and an ability to learn from
one another will drive our success and allow
us to continue to be the great company we
are, making a difference to the lives of so
many people across the globe.
Richard Wankmuller
CEO and Managing Director
TEAMWORK
DRIVES SUCCESS
Another clear message I received while
visiting Cardno offices was that we
have only just begun to capitalise on the
synergies of our expert teams across the
world. However, some of the results of our
teamwork to date are very impressive. For
example, we have been able to utilise “big
data” management techniques developed
during our work on the Gulf of Mexico oil
spill on the Ichthys LNG project in Darwin.
We have also successfully transferred our
strong environmental remediation skills
from the US to win similar work for a global
oil and gas major in Australia.
CLIENT SERVICE MATTERS
The firms that win work are the ones which
can better serve their clients and are more
responsive to their needs over time. To
accomplish this, Cardno must continue
to understand our clients’ requirements
better than our competitors. We must then
satisfy these requirements more efficiently.
Cardno is committed to structuring our
business to achieve this outcome. This
means our organisational structure and
business processes must align with our
clients’ needs, and we must have a culture
which prioritises client relationships and
responsiveness above everything else.
Great things happen when we get this
alignment right. We win accolades from our
clients, putting us ahead of our competitors
and positioning Cardno as a pre-eminent
firm in the markets in which we operate.
Left: Cardno provided specialist utility engineering
services for the landmark Sydney Light Rail transportation
infrastructure project.
Right: Cardno provided structural engineering for a
three-phase campus development in Houston, Texas.
08 CARDNO LIMITED
WORKING
GLOBALLY
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.
Anchorage
11
> Environmental
Planning and
Engineering Services
for the US Navy and
US Marine Corps
Worldwide
> Metro Parkway
Widening and
Reconstruction
Fort Myers, Florida
Portland
5
Los Angeles
Washington DC
2222
Tampa
> Upper Truckee
River Streambed
Environment Zone
Restoration Project
Lake Tahoe, California
Bogotá
Quito
Lima
Retford
Thame
Newbury
Brussels
Nigeria
KEY
Countries where Cardno is currently delivering projects
Cardno offices
1
Featured projects
P 10
FOR THE FEATURED
PROJECT DETAILS
ANNUAL REPORT 2015 09
PEOPLE
8,100
OFFICES
259
COUNTRIES
100
Abu Dhabi
4
Nairobi
> Public-Private
Partnerships under
the US President’s
Emergency Plan
for AIDS Relief
Countries Project
Sub-Saharan Africa
> Curtis Island LNG
Gladstone, Queensland
> Lady Cilento
Children’s Hospital
Brisbane, Queensland
Manila
Singapore
Jakarta
Darwin
Port Moresby
Cairns
333
Brisbane
666666
Perth
Melbourne
Sydney
Canberra
Wellington
Christchurch
WHAT WE DO / BUILDINGS / LAND / ENVIRONMENT / INTERNATIONAL DEVELOPMENT ASSISTANCE
MANAGEMENT SERVICES / ENERGY AND RESOURCES / TRANSPORTATION / WATER / DEFENCE
10 CARDNO LIMITED
FEATURED
PROJECTS
1 ENVIRONMENTAL
PLANNING AND ENGINEERING
SERVICES FOR THE US NAVY
AND US MARINE CORPS
2 METRO PARKWAY
WIDENING AND
RECONSTRUCTION
Fort Myers, Florida
Worldwide
3 CURTIS ISLAND LNG
Gladstone, Queensland
As part of a five-year contract, Cardno
is delivering worldwide environmental
planning and engineering services to the
US Navy and US Marine Corps. This is in
addition to another contract with Naval
Facilities Engineering Command (NAVFAC)
Atlantic to support at-sea testing and
training requirements, and working on
similar initiatives with NAVFAC Pacific.
The global contract covers a wide variety
of projects such as in-water noise
modelling and marine mammal exposure
impacts, dredging permitting and disposal,
in-water construction, shoreline training
and restoration.
Additionally, Cardno may be called upon to
help with aircraft homebasing initiatives
throughout the world.
Cardno’s stellar record of performance
supporting the US Navy’s operational
requirements was recognised by the Chief
of Naval Operations, who awarded us
their 2014 Environmental Planning Award
for outstanding support in preparation of
the Environmental Impact Statement for
Homebasing the F-35C Joint Strike Fighter
on the West Coast of the US.
Cardno provided design and engineering
services for the Metro Parkway widening
and reconstruction from 1999 to 2014. The
road required a major upgrade, including
widening to six lanes, bridge construction,
and the realignment and reconstruction of
adjacent railroad tracks.
Cardno liaised with the Florida Department
of Transportation (FDOT), emergency
services and the community throughout the
design and construction process. Our team
conducted a detailed review of the Project
Development and Environment study, which
included public workshops.
Our team delivered techniques for the
bridge construction, detailing alternative
methods and cost analysis for each option.
Cardno also collaborated with Lee County,
City of Fort Myers, Seminole Gulf Railroad
and Southwest Florida Water Management
District to address construction concerns.
Cardno delivered professional engineering
services in connection with the design of
utility relocations impacted by the Metro
Parkway improvements. This included the
relocation of water pipelines, a submersible
sewage pump station and several
roadway crossings.
Cardno is providing a range of services for
the multi-billion dollar Australia Pacific,
Queensland Curtis and Gladstone LNG
projects in Queensland.
We have worked with clients at the sites
on Curtis Island for several years and, due
to exceptional service and value for money,
have received numerous contract upgrades
and extensions.
Our experts have delivered geotechnical
engineering, construction materials testing,
environmental testing, concrete integrity
testing and quality assurance services.
Cardno teams work on projects from our
National Association of Testing Authorities
accredited site laboratories located on
each of the Curtis Island projects. Through
forging strong client relationships, Cardno
is actively developing future partnering
opportunities for LNG plant construction
globally, particularly in the United States.
Continuing to capitalise on a superb
reputation and client relationships, Cardno
has also provided similar services to the
Macedon, Wheatstone, Ichthys, Pluto and
PNGLNG liquefaction projects.
ANNUAL REPORT 2015 11
P 08
FOR THE MAP OF
PROJECT LOCATIONS
For more information about
Cardno’s global projects visit
www.cardno.com
4 PUBLIC-PRIVATE
PARTNERSHIPS UNDER THE
US PRESIDENT’S EMERGENCY
PLAN FOR AIDS RELIEF
COUNTRIES PROJECT
Sub-Saharan Africa
Cardno is providing strategic services to
a portfolio of public-private partnerships
(PPPs) combatting the global HIV/AIDS
epidemic. The Centers for Disease Control
and Prevention (CDC) awarded Cardno a
five-year cooperative agreement to manage
the second phase of the PPPs under the US
President’s Emergency Plan for AIDS Relief
(PEPFAR) Countries Project (P4).
Cardno collaborates with CDC and the
Office of the US Global AIDS Coordinator
to leverage US Government resources
and private sector partners to meet the
PEPFAR goals of improved health outcomes,
sustainability and country ownership.
Our role includes funds management and
governance, program technical support, PPP
strategic expansion, capacity building and
institutional strengthening, communications
services, performance monitoring and
evaluation and results impact assessments.
With a focus on Sub-Saharan Africa, these
PPPs contribute to PEPFAR’s goal of an
AIDS-free generation through innovative
interventions in the areas of health systems
strengthening, treatment, and prevention of
mother-to-child transmission.
5 UPPER TRUCKEE RIVER
STREAMBED ENVIRONMENT
ZONE RESTORATION PROJECT
Lake Tahoe, California
6 LADY CILENTO
CHILDREN’S HOSPITAL
Brisbane, Queensland
Cardno has been working on projects to
restore the fragile Tahoe Basin ecosystem
in Nevada and California for more than
10 years.
We recently completed project
management and engineering services
for the Upper Truckee River Streambed
Environment Zone Restoration Project in
California, which rehabilitated 3,500 linear
feet of stream habitat.
The final design of this work included new
channel and floodplain construction that
increased floodplain connectivity, improved
fish and wildlife habitats, and improved the
quality of the water entering Lake Tahoe.
Our tasks comprised the analysis of
hydrology and hydraulics of river, wetland,
and upland habitats, an effective
restoration design that addressed public
access issues, the development of complete
plans, specifications, and bid support.
For the construction management aspects
of the project, Cardno served as resident
engineer and resident inspector, ensured
storm water pollution prevention planning
compliance, prepared record drawings, and
coordinated project close-out.
Cardno’s role on a state-of-the-art Brisbane
health facility shows how we help deliver
critical infrastructure needs to communities.
We provided civil, structural and traffic
engineering, and town planning services to
Australia’s most advanced paediatric facility,
the Lady Cilento Children’s Hospital.
It features eight main hospital levels, all
requiring variations in the footprint to
accommodate the internal atriums and the
radiating “branches” which cantilever across
the streetscape. To optimise the design, our
team utilised 3D structural modelling, while
wind tunnel testing was carried out to more
accurately predict pressures on the building.
During the site investigations and acquisition
process, Cardno provided town planning
and traffic engineering advice and assisted
the Queensland government to prepare the
planning instrument regulating development
in the precinct. Cardno also prepared the
development applications for Queensland
Health for all aspects of the project.
Traffic forecasting and road network analysis
was also conducted, which informed the
design of surrounding intersections, service
entries and car parking arrangements.
12 CARDNO LIMITED
ABOUT
CARDNO
We are a global services
company with expertise in the
development and improvement
of physical, social and
environmental infrastructure for
communities around the world.
Above: Cardno’s marine and freshwater ecology
group is undertaking statistical analysis of ‘sponge
garden’ habitat in Melbourne’s Port Phillip Heads.
ANNUAL REPORT 2015 13
AT CARDNO . . .
IT’S MORE THAN A JOB
We are committed to respecting and encouraging
the unique contributions of people with diverse
backgrounds, experiences and perspectives.
“No limits
and endless
opportunities.”
“Calling on our global
expertise to deliver world
class local solutions.”
“My job helps
improve people’s health
and wellbeing in
vulnerable countries.”
Melissa Kattenberg,
Hervey Bay, Australia
Kyle Christensen,
Wellington, New Zealand
Violet Ketani,
Washington DC, United States
From trainee to international manager based on Melissa Kattenberg’s 20-year career with
Cardno has grown from strength to strength.
“The best part of my job is going into different parts of the business and seeing what they’ve
developed and sharing the good ideas with others. Cardno is a great place to work because it
is full of opportunities. You are only limited by the ceiling that you place upon yourself.”
Kyle Christensen works on projects across New Zealand ranging from urban stormwater to river
engineering, hydrogeology, ecology, contaminated land, planning and landscape architecture.
“The ability to call on our global expertise to deliver world class local solutions is what makes
coming into work every day so satisfying.”
Violet Ketani is a passionate public health specialist, with strong expertise in health
systems strengthening, monitoring and evaluation, capacity building, HIV/AIDS, and
public-private partnerships.
“Cardno has provided me mentorship and opportunity to grow within the company.
My work is far from monotonous and I’m always learning something new about the
business, which is an invaluable benefit to me.”
14 CARDNO LIMITED
. . . IT’S ABOUT
KEEPING OUR PEOPLE SAFE
Cardno takes individual and company-wide
responsibility for safety in everything we do.
GROUP TOTAL RECORDABLE INJURY FREQUENCY RATE
As at end of
June 2015:
3.16 per million
person-hours
(0.63 per two
hundred thousand
person-hours
– US equivalent)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Jul-12
Jun-15
Cardno’s Zero Harm safety program fosters an environment of shared responsibility and
accountability, risk awareness and clear communication.
Our commitment to the continual improvement of our safety performance has been rewarded
with two consecutive awards from a major global oil and gas company. The recognition came
as a result of Cardno’s flawless execution of environmental services work across a number
of projects in the United States.
The awards highlight Cardno’s extensive pre-field planning, management presence in the
field, as well as the effectiveness of our safety tools. Specific actions included adding core
safety expectations to job safety analysis, conducting injury and case management drills,
implementing hazard identification best practice and an independent review process for
construction and demolition projects to ensure thorough safety and technical planning.
Cardno’s rigorous approach to risk management and the continual improvement in our
safety culture played a key role in securing a five-year Master Services Agreement for
Environmental Services with another global oil and gas major. Renowned for requiring
a high safety standard, the client selected Cardno for our ability to service a nationwide
contract safely through collective technical strength and extensive service offerings.
Above: Cardno is committed to ensuring a safe and healthy
environment for employees and clients.
ANNUAL REPORT 2015 15
. . . IT’S DEVELOPING
OUR PEOPLE
Enhancing the skills, knowledge and experience of
Cardno’s talented pool of 8,100 employees is critical to
our success as a global organisation.
Cardno University delivers training aligned with the company’s strategic plan and aims to
inspire every employee to engage and exceed expectations.
In FY2015, a number of global training initiatives were introduced including:
> A learning management system that houses over 200 courses and can track, monitor
and record all eLearning and facilitator-led training
> Project management for staff in technical and business services roles
> Training to provide employees with advice and tactics about how to enhance client
relationships and implement effective bid strategies
> Compliance and occupational health and safety training to support and reinforce our
Zero Harm safety program
> Leadership development programs, including executive development in line with our
succession planning program.
The company’s best performers are rewarded with scholarships designed to further their
career development in line with their talents and career goals. These include our Future
Leader Scholarship to support Cardno’s next generation of leaders; the Harold Davies
Scholarship that rewards an outstanding performer in a professional role; our Richard Kell
Scholarship awarded to exceptional engineers; and the Gerry Cardno Scholarship, which
recognises an exceptional performer in a services role.
Above: Cardno University equips employees with the skills to shape
their future and realise possibilities for career progression.
16 CARDNO LIMITED
. . . IT’S BEING
INNOVATIVE
Cardno empowers our people to think innovatively, to
develop creative solutions and put them into action
when solving complex project challenges.
Recently, our experts played a leading role on a pioneering project to boost transport
infrastructure in Papua New Guinea (PNG). Working with the PNG Department of Works
and other partners, Cardno developed a technological first that will assist with the planning
of road improvement initiatives.
A Visual Road Condition Survey (VRCS) was conducted to collect and process data for a
total of 6,025 kilometres – or 70 per cent - of national roads in the developing nation. This
information now provides network managers with a useful tool to permit more accurate
programming and budgeting of maintenance works.
Using footage captured during the VRCS, Cardno then delivered PNG’s first ‘Road Viewer
Application’ system. This tool allows users to view an interactive map and detailed video
of various sections of road, often in remote locations, from their computer.
A comprehensive survey of this kind had never been successfully attempted before in PNG
and Cardno was proud to play a key role in such an important development for the country.
The work was funded through the Papua New Guinea – Australia Transport Sector Support
Program and Cardno was able to display how we make innovation happen in partnership
with our clients.
Above: Cardno works innovatively with clients to develop solutions to
complex project challenges.
ANNUAL REPORT 2015 17
. . . IT’S ABOUT
CLIENT SERVICE
Cardno is committed to working collaboratively
with clients to create lasting benefits for
communities around the world.
Cardno has developed an important strategic partnership with property company Amex
Corporation to develop the new township of Providence in Ripley Valley, which is located in
the fastest-growing corridor in South East Queensland. The Valley will provide 50,000 new
homes in the City of Ipswich over the next 20 years.
Since 2006, Cardno has provided extensive engineering and environmental services to
help deliver the vision of a high quality, affordable and sustainable community.
Cardno has mobilised specialist expertise to add value and meet the project time and
budget demands across a significant range of disciplines. As our trusting relationship
has developed over time, the services we have provided have expanded. These include
structural and geotechnical engineering, traffic and transport advice, detailed civil
design integrating stormwater and reticulated networks, acoustic assessment, visual
amenity and significant landscape masterplanning.
We are proud to collaborate with Amex on this pioneering project that aims to
deliver best practice in design and an equally strong sense of community.
Above and right: Cardno’s strategic partnership with Amex Corporation
is delivering a crucial new community for South East Queensland.
18 CARDNO LIMITED
OPERATIONAL REVIEW
AMERICAS
Cardno’s Americas Region comprises 5,000 multi-
disciplinary professionals who deliver services
and expertise from more than 190 offices.
THE REGION
PROVIDES 64%
OF CARDNO’S
FEE REVENUE
A$m (i)
Fee revenue
Recoverable expenses
Total revenue
EBITDA
EBITDA margin
The Americas Region
delivers expertise to private
and public sector clients
across the environmental,
water, transportation,
energy and resources, land,
buildings, international
development assistance
and management services
sectors.
FY2015
FY2014
660.9
268.0
928.9
68.2
10.3%
AMERICAS FEE REVENUE
BY MARKET FY14 v FY15
561.3
213.1
774.4
78.1
13.9%
Inner Circle:
June 2014
Outer Circle:
June 2015
25%
25%
32%
30%
28%
29%
8%
9%
13%
1%
(i) 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.
Contractors
Oil & Gas
Resources
Government
Other Private
ANNUAL REPORT 2015 19
AMERICAS EXECUTIVES
> Paul Gardiner
General Manager
> Marian Boreland
International Development
Assistance
> Chip Blankenhorn
Natural Resources and Health
Sciences
> Mark Gundacker
Human Resources
> Bob Kroeger
Engineering and Environmental
Services
> Michael Landry
Chief Financial Officer
> Colby Manwaring
XP Solutions
> Bill Halperin
Government Services
> Randy Sullivan
Oil and Gas Services
> Edgar Uribe
Latin America
Far Left: Cardno operates a full-service native plant
nursery in the United States to provide quality-assured
native seed and plant material for restoration, mitigation
and native landscaping projects.
Left: Cardno helped develop the design and guided
construction for expansion work on Alfred I. DuPont
Hospital for Children in Delaware.
Right: Cardno delivers surveying and
mapping, subsurface utility engineering and
utility coordination services for transport
infrastructure projects.
HIGHLIGHTS
Our team of experts in the Americas Region
provide a range of services including site
planning, environmental permitting, health
and ecological risk assessment, remediation
and quality assurance through to civil
design, subsurface utility engineering and
construction management.
The region’s performance was impacted by
the wind-down of several large projects,
winter weather conditions, a reduction in
US Government expenditure and business
integration costs. Our oil and gas operations
also experienced a decline, with work
in this sector affected by a drop in prices.
Fee revenue for FY2015 was $660.9 million,
an increase of 17.8 per cent on the previous
year, reflecting full-year contributions from
Cardno PPI and Cardno Haynes Whaley
and currency movements. EBITDA margin
declined from 13.9 per cent to 10.3 per cent.
The challenging conditions contributed to
an organic revenue decline of 6.8 per cent.
However, our backlog of secured work grew
by 2.5 per cent to US$554.8 million due to
a recovery in the US economy, including
increased defence spending.
In FY2015, the Americas Region’s ongoing
commitment to Zero Harm was rewarded
with two consecutive safety awards from a
major global oil and gas company.
The region undertook a range of integration
activities in FY2015, implementing common
financial systems and streamlining reporting
structures, as well as introducing a shared
services model for business services.
Additionally, components of the former
Emerging Markets Division and Cardno’s
software division, XP Solutions, joined the
Americas Region. Improved alignment of
our engineering and social infrastructure
teams has enhanced our ability to offer a
range of services to clients.
XP Solutions has experienced strong
growth in FY2015, driven by the success of
new software products and strong demand
across a range of markets.
Our US expertise was rewarded with a
number 24 ranking in Engineering News
Record’s annual Top 225 International Design
Firms, and the number 6 spot in the United
States region list.
These results are improvements on previous
rankings and strong evidence that Cardno’s
business in the Americas Region is highly
respected and meeting the needs of our
diverse client base.
FUTURE OUTLOOK
The region is focused on deepening our
service delivery offerings, winning more
work with new and existing clients, and
growing revenues organically and through
strategic acquisitions.
The US economic recovery appears to
be slower than expected. We do expect
opportunities will emerge from an expected
increase in government expenditure.
We are well positioned to benefit from the
FY2015 integration activities, allowing us
to pass on these efficiencies to our clients
through greater responsiveness and a
broader range of services.
Recent wins will help fill the gap created
by cancelled work and the completion of
major projects, with the environmental and
transport markets set for improvement.
We will continue to make adjustments
to our business in response to market
conditions, including the dramatic drop
in oil prices.
Despite challenging market conditions, the
Americas Region has the expertise and
diverse platform from which to strengthen
performance in FY2016.
Our team will capitalise on our local
presence, strong client relationships and
ability to cross-sell services so as to be
the provider of choice for the physical and
social infrastructure needs of our clients.
20 CARDNO LIMITED
OPERATIONAL REVIEW
ASIA PACIFIC
Cardno’s Asia Pacific Region comprises
3,100 professional staff operating from
more than 60 offices.
THE REGION
PROVIDES 36%
OF CARDNO’S
FEE REVENUE
A$m (i)
Fee revenue
Recoverable expenses
Total revenue
EBITDA
EBITDA margin
The Asia Pacific Region
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, and
international development
assistance.
(i) 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.
FY2015
FY2014
361.2
136.3
497.5
49.3
13.6%
ASIA PACIFIC FEE REVENUE
BY MARKET FY14 v FY15
6%
8%
31%
28%
404.4
129.8
534.2
68.0
16.8%
Inner Circle:
June 2014
Outer Circle:
June 2015
10%
17%
15%
19%
32%
34%
Contractors
Oil & Gas
Resources
Government
Other Private
ANNUAL REPORT 2015 21
ASIA PACIFIC EXECUTIVES
> Paul Gardiner
Acting General Manager
> Jamie Alonso
Victoria and International
Development Assistance
> Matt Courtney
Construction Sciences
> Troy Donovan
Chief Financial Officer
> Michael Drake-Brockman
Cardno BEC and Western Australia
> Geoff Hadwen
Northern Division
> Janelle Mellor
Human Resources
> Martin Wells
New South Wales, Australian
Capital Territory and New Zealand
Far Left: Cardno provided specialist utility engineering
services for the landmark Sydney Light Rail
transportation infrastructure project.
Left: The Sydenham Street subdivision is an
urban regeneration project in the City of Gosnells,
Western Australia.
Right: Cardno adopts a stringent approach to
evaluating project and economic feasibility, based
on rigorous research and experience.
HIGHLIGHTS
Cardno’s Asia Pacific Region was formed
during FY2015, incorporating the company’s
Australia and New Zealand Region and
components of the former Emerging
Markets Division.
This new structure allows for improved
integration of our engineering and social
infrastructure teams, as well as an
increased focus on expanding service
offerings to clients throughout Asia.
The region encountered uneven market
conditions in FY2015 resulting in fee
revenue of $361.2 million, down 10.7 per
cent on the prior year. Our operations
suffered from a slowdown in resources
sector expenditure with a decline in global
commodity prices and lessening demand
for mining services in divisions such as
Construction Sciences and BEC/WA.
The change of state governments in
Victoria and Queensland adversely
impacted performance following delays and
cancellations of a number of publicly-funded
infrastructure programs, particularly in the
transport sector.
Cardno also completed work on a number of
major projects that have yet to be replaced,
such as INPEX LNG, Legacy Way and the
Gold Coast Light Rail.
These conditions resulted in increased market
competition and the downsizing of a number
of our operations impacting on the region’s
EBITDA margin, which declined to 13.6 per
cent from 16.8 per cent the previous year.
In FY2015, the region reinforced its Zero
Harm program through the introduction of a
Health and Safety Management System to
improve performance and prevent injuries.
Despite the difficult market conditions, the
Asia Pacific Region’s backlog of future work
grew 8.8 per cent to $305.5 million and this
can be partially attributed to recent success
with infrastructure bids.
Our services to oil and gas clients in
Australia continue to expand, and we have
won contracts with new global clients.
Good results were achieved by our teams
that operate in the transport and property
sectors in NSW, while urban development
showed signs of improvement in Queensland,
and Victoria posted a steady result.
While our operations in New Zealand
experienced a decline in revenue, the
International Development Assistance
business had a positive year, finishing well
ahead of budget.
The Asia Pacific Region did not undertake
any acquisitions in FY2015, retaining a focus
on improving service offerings, delivering
high quality work on numerous small and
medium-sized projects and strengthening
relationships with long-term clients.
FUTURE OUTLOOK
The outlook for the Asia Pacific Region
remains variable in FY2016 due to the
continued scaling back of investment in
mineral and energy developments. This will
affect the demand for consultancy services,
intensifying competition for work and
reducing margins.
Despite the winding back of resources
activity, Cardno will have opportunities
to assist clients with the ongoing service
requirements on major LNG facilities in
Queensland, Western Australia and PNG.
There are good prospects in the transport
infrastructure sector, particularly in
NSW, as governments deliver on funding
commitments for road and rail projects.
While there remains uncertainty surrounding
public sector spending and investment
confidence in some states, it is expected
projects delayed from the previous year will
start up in FY2016.
We are enthusiastic about the collaboration
opportunities provided by the new regional
structure, as we aim to increase Cardno’s
share of the resources, transport and
environment markets across Asia.
Further efficiency measures will be
implemented in a bid to match our staff
offerings to client needs, and we will retain
a steadfast commitment to safety and
staff development.
Our expertise across a range of disciplines
will help us navigate the challenges of the
next 12 months as we work closely with our
clients to improve communities throughout
the region.
22 CARDNO LIMITED
FINANCIAL
REVIEW
Challenging markets resulted in a
significant decline in financial and
operational performance for Cardno
during the 2015 financial year.
FINANCIAL PERFORMANCE
PERFORMANCE (A$m)
Gross Revenue
EBITDA
EBIT
NPAT
NOPAT
Operating Cash Flow
EPS - basic (cents)
NOPAT EPS - basic (cents)
Dividends per share (cents)
Jun-15
1,426.9
108.4
(148.4)
(145.2)
50.3
48.1
(88.32)
30.59
20.0
Jun-14
1,309.6
141.7
115.2
78.1
78.1
84.6
52.04
52.04
36.0
Cardno reported a net operating profit after tax (NOPAT) of $50.3 million, a decline
of 35.6 per cent over the prior year. Net loss after tax, after the inclusion of a post
tax non-cash impairment charge of $195.5 million, was $145.2 million. The impairment
charge is associated with the reduced carrying value of our business in the United
States and the write-down of part of our Ecuadorian business which is being held
for sale.
This disappointing set of results reflects a slow down in the Asia Pacific Region,
dominated by the decline of resource-related activity in Australia, combined with a
lower than expected performance in the Americas. The Americas’ performance is a
result of variable growth in the markets we serve, costs associated with integration
and centralisation, and severe impacts of winter weather from December through
to February.
Gross revenue for the Group was $1.4 billion, an increase of 9 per cent over the prior
year. Similarly, net fee revenue increased by 5.9 per cent to $1 billion reflecting the
full year contribution of merger partners
acquired in 2014. Organic fee revenue
declined by 7.9 per cent during the year
when the impact of M&A is excluded. Both
Americas and Asia Pacific reported declines
in net fee revenue on an organic basis.
Operating EBITDA was $108.4 million for the
year, a decline of 23.5 per cent over the prior
year result. The steeper percentage decline
in EBITDA versus fee revenue reflects the
lower margins earned as Cardno transitioned
off higher margin, longer-term projects
in both Asia Pacific and the Americas.
In addition, the businesses experienced
higher restructure and redundancy costs
as management responded to changes in
market demands. Overall EBITDA margin
for the year declined to 10.6 per cent versus
14.7 per cent in FY2014. EBITDA margins
in Asia Pacific continued to outperform the
Americas due to business mix.
The post-tax impairment charge of
$147.9 million associated with the US
business and the $47.6 million write-
down of our investment in Ecuador. The
lower-than-expected performance of the
US business in the second half of FY2015
triggered a reassessment by management
of the pace of recovery in that market and a
downgrade in our future profit expectations.
As a result, Cardno has written down the
carrying value of goodwill associated with
past acquisitions in the Americas region.
In February 2015, Cardno advised
shareholders that it was investigating a
series of transactions in Cardno Caminosca,
Ecuador. That investigation is ongoing
and Cardno continues to cooperate with
the relevant regulatory authorities. In the
intervening period the economic outlook
for Ecuador has deteriorated as a result
of significant declines in oil revenue and
general economic uncertainty. As at 30
June 2015, that part of the business has
been written down to its fair value and
disclosed as held for sale. In addition,
Cardno has commenced legal action against
the previous owners of Caminosca S.A.
for breach of sale and purchase contract
conditions including representations and
warranties. Under the terms of the sale
and purchase agreement this matter is
now before arbitrators in Florida, USA. It is
expected that the binding arbitration will be
resolved in FY2016.
As a result of the impairment charges basic
earnings per share were negative 88.32
cents. Excluding these impacts the operating
earnings per share was 30.59 cents. This
normalised result was 41.2 per cent lower
than the prior year.
The effective tax rate for the group was
9.1 per cent, reflecting the tax effect of
the impairment charges. On a NOPAT basis
the effective tax rate was 21.9 per cent in
FY2015 versus 26.9 per cent in the prior
year. This rate reflects an increase in income
earned in lower tax jurisdictions largely from
Cardno PPI and a lower profit contribution
from the United States operations. We
expect the taxation rate to return to prior
year levels of between 27 per cent and
30 per cent in FY2016.
During the year Cardno commenced
a restructure of the business with a
consequent change to the segment
reporting disclosures. To achieve improved
cross-selling and integration the Emerging
Markets business was divided into two
parts: Asia Pacific and Americas, Europe
and Africa with these two operations
being absorbed by the newly-formed Asia
Pacific Region and the Americas Region
respectively. Operationally these reporting
line changes were effected by May 2015.
In addition, the XP Solutions business
that develops and distributes engineering
software has been absorbed into the
Americas Region. As a result, Cardno will
now report only two segments, being
Asia Pacific and the Americas – all tables
and analysis has been updated to reflect
these changes.
ANNUAL REPORT 2015 23
ASIA PACIFIC REGION
The Asia Pacific Region fee revenue declined
by 10.7 per cent to $361.2 million with a
consequent reduction in EBITDA margin to
13.6 per cent from 16.8 per cent in the prior
year. These results reflect the conclusion of
resource-related major projects in Australia,
typically at higher margin, and subsequent
reduced activity in that sector due to
commodity price volatility, especially for
the bulk commodities of coal and iron ore.
Challenged public sector fiscal positions
have inhibited the expected growth in
infrastructure spend in all Australian states
except New South Wales. Cardno has been
fortunate to secure infrastructure planning
and design work in that state as well as
securing water and urban development work
for private sector land developers and local
authorities in Queensland.
Elsewhere in Australia, Cardno has secured
significant environmental planning and
remediation work in Victoria for a multi-
national oil and gas company. New Zealand
was a disappointing market for Cardno in
FY2015 due to the deferral of some major
water infrastructure projects as well as a
rundown in Christchurch work. To counter
these factors Cardno has opened an office in
Auckland and recruited specialists in service
areas with increased demand.
Recent project wins are reflected in an
improved backlog for the Asia Pacific
region with an 8.8 per cent increase over the
prior year to $305.5 million. This provides
some comfort that there is a reasonable
platform of committed work to support the
business in FY2016. In addition, subsequent
to 30 June 2015, Cardno negotiated a
significant multi-year materials testing
services supply agreement with a multi-
national concrete and quarrying organisation
adding an additional $100 million to the Asia
Pacific region backlog.
Far left: Cardno provided structural engineering services for
the Tysons Corner Center in McLean, Virginia. Photographer:
Alan Karchmer
Left: Cardno develops sustainable approaches to
water resource management by integrating science and
engineering, economics and regulatory compliance expertise
with an understanding of natural systems.
24 CARDNO LIMITED
FINANCIAL PERFORMANCE continued
Segment revenue
EBIT
EBITDA
EBITDA margin*
A$m
Americas
Asia Pacific
2015
928.9
497.5
2014
774.4
534.2
2015
(178.2)
38.8
2014
63.2
56.4
2015
68.2
49.3
2014
78.1
68.0
2015
10.3%
13.6%
2014
13.9%
16.8%
Total segment
1,426.4
1,308.6
(139.4)
119.6
117.5
146.1
11.5%
15.1%
*Based on fee revenue
There is a positive outlook for the Asia
Pacific Region with an increase in backlog
and recent project wins. These indicate that
the recent restructuring of the business away
from the resources sector and matching
of resource levels to market demand are
starting to pay dividends. We consider the
eastern states of Victoria, New South Wales
and Queensland hold the most promise for
recovery, although we expect this to be
variable in terms of activity and timing. The
creation of the Asia Pacific Region has also
spurred greater activity in the development
of a broader service offering across Asia
and we believe that our environmental
services will be an important component of
that expansion. Cardno is well positioned in
terms of staffing levels, geographic coverage
and service offering to continue to improve
profitability as the Australian economy pivots
away from its dependence on the resources
sector towards an investment in public and
private infrastructure.
Right: Cardno is a key member of an alliance that will
deliver new water and wastewater infrastructure to Logan
City, in Australia, over the next three years.
AMERICAS REGION
The fee revenue in the Americas increased
by 17.8 per cent in Australian dollar terms to
$660.9 million but only by 8.5 per cent in US
dollar terms. This increase reflected the full-
year contribution of Cardno Haynes Whaley
and Cardno PPI. Of these recent acquisitions
Cardno PPI has faced the headwinds of a
significantly lower oil price and the impact
this has had on the demand for services.
This business is performing below the
expectations that we had at acquisition in
March 2014, however it continues to be
profitable and has taken necessary steps to
match resources to demand.
EBITDA for the region was $68.2 million,
a decrease of 12.7 per cent compared to
FY2014. EBITDA margin also declined to
10.3 per cent for the year from 13.9 per cent
in FY2014. This reflects the completion of
higher margin, major projects during the
year without similar replacement projects,
increased costs associated with normalising
employee benefits as the businesses are
integrated, restructure costs including
centralisation costs and the effects of
severe winter weather from December
through to February.
In response to these challenges the
Americas Region has been focused on
ensuring the correct match between
resources and market demands, operations
with marginal profitability are being closed,
co-location of offices is being accelerated
and the centralisation of functional support
in Denver is nearing completion.
Backlog for the region has increased in
both Australian and US dollar terms with a
2.5 per cent increase to US$554.8 million.
This represents almost 12 months of
revenue for the region suggesting that
the business outlook is well supported by
committed projects. The Natural Resources
and Health Sciences Division that previously
completed the work around the Gulf of
Mexico oil spill has increased its backlog of
work and continues to see a strong pipeline
of opportunities. Similarly, after a slower
than expected recovery in work for the
US Government, the Government Services
Division has improved both its backlog
and ability to bid for task orders. The
outlook for the Oil and Gas Division will
continue to be subdued in the operational
support and development drilling
areas. However, the quality and asset
management area has a positive
outlook and is expected to grow in
the coming year. The remaining
parts of our Americas operation are
expected to perform in line with
growth in the economy.
ANNUAL REPORT 2015 25
FINANCIAL POSITION
BALANCE SHEET (A$m)
Trade and other receivables
Inventories
Other assets
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
Net deferred taxes
Current tax assets / (liabilities)
NET ASSETS
Ratio:
Net debt to EBITDA
Net debt* to equity
2015
266.5
154.6
12.8
(150.6)
(43.9)
239.4
84.8
(396.1)
(311.3)
7.6
64.9
668.3
(47.4)
43.4
4.6
669.5
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
2.9
46.5%
1.6
28.8%
* Total loans and borrowings less cash and cash equivalents
Net Assets for the Group declined over FY2014 due to the impact
of the impairment of the Americas goodwill and the write-down
of Cardno Caminosca. Absent these impacts the balance sheet is
largely unchanged, however the lower profitability of the Group
combined with lower operating cash flow has resulted in an
increase in the Net Debt position and a deterioration of net debt to
equity ratio, which increased to 46.5 per cent. Net Debt to EBITDA
ratio increased to 2.9 times.
The focus of the Group is to significantly improve operating cash
flow through the improvements in working capital performance.
This will greatly assist in the reduction of debt and an overall
improvement in key financial ratios. The second half of FY2015
saw a significant improvement in cash flow due to changes to
processes and increased accountability.
The Group continues to have significant financial capability with
$258.9 million of undrawn bank facilities at year end. Total interest
expense and finance costs are low, reflecting the Group’s ability to
borrow in US dollars and access the historically low rates available
in that market without having to put in place financial derivatives
to hedge the Australian dollar. The Group remains within its
covenant obligations.
CASH FLOW
CASH FLOW (A$m)
Net cash provided by
operating activities
Investing activities
Acquisition of subsidiaries
Purchase/sale of fixed assets
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
Transfer to disposal group held for sale
Effects of exchange rate changes
Cash at 30 June
2015
2014
48.1
84.6
(11.2)
(23.0)
(1.0)
(35.2)
6.1
(0.0)
1.2
707.2
(688.8)
(2.0)
(42.1)
(191.6)
(19.1)
(0.6)
(211.3)
94.0
(1.0)
9.4
224.8
(152.1)
(2.0)
(50.9)
(18.4)
122.3
(5.5)
85.9
(1.5)
5.9
84.8
(4.4)
90.6
0.0
(0.3)
85.9
After a slow start in the first half of FY2015, the Group delivered
a strong full-year operating cash flow. This was achieved through
greatly improved working capital management in the second half.
Cash flows associated with investing activities were down
significantly compared to the prior year due to the absence of any
merger or acquisition activity. There was the payment of deferred
settlement amounts to the vendors of GMTS and Haynes Whaley.
Investment in property plant and equipment was up marginally on
FY2014 reflecting investments in new computer software systems
and hardware.
Financing activities during the year reflect the receipt of the
proceeds of the US Private Placement funds that were used to
replace existing bank debit. The Group actively manages the
amounts drawn down on the revolving bank facilities by applying
surplus cash to reduce debt levels. Overall cash on hand at year end
of $84.8 million was broadly flat with the prior year.
26 CARDNO LIMITED
DEBT STRATEGY
TERM DEBT REPAYMENT PROFILE
A$ million
391.4
196.9
64.8
129.7
Existing
Group Term
Debt
Repay
Dec 2019
Repay
Aug 2021
Repay
Aug 2024
During FY2015, Cardno completed two
important funding activities closing its
debut long term note issue in the US Private
Placement (USPP) market in August 2014
and successfully renegotiating an annual
extension of term of its existing five-year,
multi-currency revolving bank debt facilities,
in December 2014.
The annual extension of term improved
pricing on Cardno’s bank debt facilities and
extended maturity until December 2019.
DIVIDENDS
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.
Cardno’s combined term debt facilities
comprise the USPP long term note and term
bank debt facilities of US$480 million and
working capital facilities of $10 million and
US$15 million. As at 30 June 2015, Cardno
has term debt totalling $391.4 million, an
increase of $88.3 million from FY2014,
primarily due to AUD/USD foreign exchange
rate revaluations on US dollar debt of
$70.2 million. The weighted average interest
rate of term debt (including the impact of
interest rate hedges) as at 30 June 2015 is
1.74 per cent (2014:1.94 per cent).
Cardno has $258.9 million (2014: $72.1
million) of undrawn bank debt facilities
available to support the business through
both organic and future M&A expansion.
Cardno’s banking partners Commonwealth
Bank of Australia, Hong Kong and
Shanghai Banking Corporation, Standard
Chartered Bank and Westpac Banking
Corporation collectively provide a strong
mix of ancillary service capabilities and
geographical presence supporting Cardno’s
global operations.
The long term note includes seven-year
tranche of US$50 million maturing August
2021 and US$100 million 10-year tranche
maturing August 2024. The proceeds
were used to replace a portion of the
Group’s existing bank loans and increased
the Group’s average debt maturity by
2.1 years. This transaction has allowed
Cardno to achieve its debt strategy objective
of establishing its brand in the USPP market
and developing relationships with blue chip
institutional investors that it can grow with
over the long term.
Simultaneously, Cardno issued fixed to
floating US dollar interest rate swaps
matching the tranches and elected to
fair value hedge the interest rate risk in
accordance with AASB139. There was no
requirement to swap the US dollar note
proceeds into the Group’s Australian dollar
Cardno has declared a 7 cent per share fully
franked final dividend for FY2015. This will
result in a full-year dividend of 20 cents
per share fully franked. This is below the
full year dividend of 36 cents per share in
FY2014 but represents a similar payout
level of 66 per cent of full year NOPAT.
The Board has determined to maintain the
current Dividend Reinvestment Program.
The Board has determined that it will
prudently distribute as many franking credits
as possible. The amount of franking credits
available will depend on the future mix of
Australian and international profits.
Right: Cardno is helping to improve the safety and efficiency
of international and national shipping in the coastal areas
and waterways of Papua New Guinea.
ANNUAL REPORT 2015 27
NPAT TO NOPAT RECONCILIATION
Revenue
EBITDA
Depreciation & amortisation
Impairment of intangibles and goodwill
EBIT
Interest expense
Tax benefit / (expense)
NPAT
EPS (basic - cents per share)
Dividend (cents per share)
Statutory Result
FY2015 RESULT (A$m)
Impairment of
Goodwill
Write down in fair
value for assets held
for sale
NOPAT Result
1,426,916
108,406
(32,821)
(224,023)
(148,438)
(11,179)
14,450
(145,168)
(88.32)
20
(177,856)
(177,856)
30,013
(147,843)
(46,167)
(46,167)
(1,442)
(47,609)
1,426,916
108,406
(32,821)
0
75,585
(11,179)
(14,121)
50,284
30.59
20
10 YEAR PERFORMANCE
PERFORMANCE (A$M)
Revenue
EBITDA
EBIT
NPAT
NOPAT
Operating Cash Flow
EPS - basic (cents)
NOPAT EPS - basic (cents)
Dividend per share (cents)
SEGMENT REVENUE
2006
2007
2008
2009
2010
186.8
265.3
399.0
515.8
477.2
25.6
22.1
12.7
12.7
13.4
31.37
31.37
19.0
33.2
28.0
18.5
18.5
25.8
37.29
37.29
22.5
50.6
42.5
27.5
27.5
37.5
42.00
42.00
27.0
57.7
46.7
34.2
34.2
38.6
43.82
43.82
28.0
55.3
46.5
37.6
37.6
46.8
43.86
43.86
29.0
2011
831.2
100.2
88.0
58.8
58.8
73.5
56.29
56.29
34.0
2012
2013
2014
2015
965.8
1,195.4
1,309.6
1,426.9
128.7
111.1
74.2
74.2
72.6
61.73
61.73
36.0
138.0
114.3
77.6
77.6
95.7
55.09
55.09
36.0
141.7
115.2
78.1
78.1
84.6
52.04
52.04
36.0
108.4
(148.4)
(145.2)
50.3
48.1
(88.32)
30.59
20.0
Americas
Asia Pacific
15.4
171.0
51.1
213.9
129.9
267.3
215.2
299.2
193.6
282.3
510.3
319.0
522.0
441.9
664.2
529.8
774.4
534.2
928.9
497.5
SEGMENT RESULT (before financing costs and taxation)
Americas
Asia Pacific
1.1
20.7
4.1
23.5
8.5
32.2
11.4
32.3
13.8
35.5
54.5
35.5
51.9
58.5
59.8
62.2
63.2
56.4
(178.2)
38.8
28 CARDNO LIMITED
BOARD OF
DIRECTORS
To view each director’s full profile,
see pages 33 - 35, or visit
www.cardno.com
Board profiles listed left to right.
Ian Johnston
DipCM, GradDip App Fin & Inv, ASIA,
ACSA, ACIS, FAICD
Non-Executive Director
Age 66
>
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 in the
banking industry, Ian joined
Morgans Stockbroking Limited
in 1988 as an Executive Director
and Head of Corporate Finance
and was Chairman Corporate
Finance until his retirement in
October 2013.
> He is currently an independent
Non-Executive Director of
Data#3 Limited.
Tonianne Dwyer
BJuris (Hons), LLB (Hons), GAICD
Non-Executive Director
Age 52
Anthony (Tony) Barnes
BCom
Non-Executive Director
Age 65
Grant Murdoch
M Com (Hons), FAICD, FICAA
Non-Executive Director
Age 63
> Tonianne Dwyer became a Non-
Executive Director of Cardno
Limited in June 2012.
> Tony Barnes has been a Non-
Executive Director of Cardno
since July 2008.
> Grant Murdoch became a
Non-Executive Director of
Cardno Limited in January 2013.
> She is also a Non-Executive
Director of DEXUS Property
Group and of DEXUS Wholesale
Property Fund, a Non-Executive
Director of Metcash Limited
and a Director of Queensland
Treasury Corporation.
> Tonianne’s executive career
has included roles as Executive
Director and Head of Funds
Management at Quintain
Estates and Development.
> He was formerly the Chief
Financial Officer of Zinifex
Limited, an international
mining, exploration and
development company.
> Tony is also a Director of the
Victorian Rugby Union Inc,
the Parent-Infant Research
Institute and the Leo Cussen
Centre for Law.
> 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, OzForex Limited
and QIC Limited, and is
Chairman of the Board of
Directors of The Endeavour
Foundation and Senator of the
University of Queensland.
ANNUAL REPORT 2015 29
John Marlay
B.Sc. (Chemistry major), FAICD
Chairman
Age 66
Richard Wankmuller
BCE, MCSE
Chief Executive Officer and
Managing Director
Age 57
Trevor Johnson
BE, MEngSc, PhD, FIEAust, CPEng,
RPEQ, MAICD
Executive Director
Age 58
Elizabeth Fessenden
MBA, MS Systems Engineering,
BS Electrical Engineering
Non-Executive Director
Age 60
> John Marlay joined Cardno
as a Non-Executive Director
in November 2011 and was
appointed Chairman in
August 2012.
> From 2002 to 2008, he held
the position of Chief Executive
Officer and Managing Director
of Alumina Limited.
> Prior to that, John also held
executive management
positions with James Hardie Ltd
and Esso Australia Ltd.
> Richard joined Cardno as Chief
> Trevor Johnson has been a
Executive Officer and Managing
Director in 2015.
> He has more than 30 years’
experience in professional
engineering services,
implementing several successful
growth and transformation
strategies across international
and domestic markets.
> Prior to joining Cardno, Richard
was a Director of GHD Group
Pty Limited and President
of GHD Americas, where he
helped grow the firm from 350
employees to about 4,000.
Director of the Cardno Group
since 1996, and an employee
of the company for more than
35 years.
> He is also a member of the
Executive Leadership Team
which oversees Cardno’s
worldwide operations and
assists the Managing Director in
running the company.
> Trevor has more than 35 years’
experience as a civil engineer,
with special expertise in the
fields of hydraulics, water quality
and environmental analysis.
> Elizabeth Fessenden joined
Cardno as a Non-Executive
Director in June 2014.
> She is retired from a career with
Alcoa where she last held the
position of president of their
worldwide flexible packaging
business.
> She is currently an independent
non-executive director for
Quarles Petroleum and was
previously a director for Polymer
Group Inc. from 2008-2011 and
a Trustee for Clarkson University
from 1990-2012.
30 CARDNO LIMITED
SENIOR
EXECUTIVES
Executive profiles listed left to right.
Cardno is
helping to shape
the future for
communities
around the world.
Richard Wankmuller
Chief Executive Officer
and Managing Director
Graham Yerbury
Chief Financial Officer
As Chief Executive Officer and Managing
Director, Richard is responsible for growth,
performance, profitability, marketing,
operations, client relations and technical
development. In addition to managing the
company, he spends time meeting with the
investment community, giving presentations
and roadshows, and hosting discussions with
industry analysts and shareholders.
Richard manages Cardno’s interaction with
the media and other public engagements and
maintains relationships with major clients and
Cardno’s senior executives. He also has a deep
understanding of client service delivery and
plays a significant role identifying and executing
merger opportunities.
Richard joined Cardno in 2015 and has more
than 30 years’ experience in professional
engineering services.
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.
Graham resigned from Cardno in July 2015 to
pursue an opportunity in the oil and gas sector
and will leave the company in October.
ANNUAL REPORT 2015 31
Trevor Johnson
General Manager
Global Technical Leadership
Kylie Sprott
General Manager
Global Business Services
Paul Gardiner
General Manager Americas
Acting General Manager Asia Pacific
Trevor Johnson has a multi-disciplinary role
supporting the enhancement of Cardno’s
technical reputation and capabilities, as well as
acting as a link between operational units and
business service functions of the company.
As a member of the Executive Leadership Team,
he has a principal role in assisting the Managing
Director and the other members of the team with
communication activities with both internal and
external stakeholders.
Trevor has been an Executive Director of the
Cardno group since 1996, and an employee of
the company for more than 35 years. He holds
Bachelor, Masters and Doctoral degrees in civil
engineering from the University of Queensland,
and is a water engineering specialist. Trevor
maintains significant connections with the
professional engineering community, and was
recently appointed as an Adjunct Professor in
the School of Civil Engineering at the University
of Queensland. He remains significantly involved
in the company’s operational activities, and is
frequently commissioned as a technical expert
witness on civil engineering matters.
Kylie Sprott manages Cardno’s global
business services team including Information
Technology, Human Resources, Marketing and
Communications, and Health, Safety, Security,
Environment and Quality.
Kylie also holds the position of Global Human
Resources Manager which includes overseeing
the company’s succession and development
programs, including Cardno University.
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 is the Chairperson of the Women in Cardno
Governing Body that works to improve the
diversity of the workforce. In addition, Kylie
leads the Grow Cardno initiative that is focused
on improving organic growth across Cardno’s
global business.
As General Manager of Cardno’s Americas
Region, Paul leads about 5,000 staff across
190 offices in North and South America. During
his tenure, Paul has strengthened Cardno’s
core capabilities in the oil and gas, mining and
natural resource management sectors. He has
also focused on creating operational efficiencies
by aligning services and enabling Cardno
professionals to seamlessly deliver diverse
services to address complex client challenges.
In FY2015, Paul also oversaw Cardno’s Asia
Pacific business, which has nearly 3,000 staff
operating from more than 60 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.
32 CARDNO LIMITED
FINANCIAL
REPORT
33 Directors’ Report
53 Consolidated Statement of Financial Performance
53 Consolidated Statement of Comprehensive Income
54 Consolidated Statement of Financial Position
55 Consolidated Statement of Changes in Equity
56 Consolidated Statement of Cash Flows
57 Notes to the Financial Statements
98 Directors’ Declaration
99
Independent Auditor’s Report
101 Additional Shareholder Information
104 Corporate Directory
FINANCIAL CALENDAR
2014/2015
Record Date for Final Dividend
Final Dividend Paid
Annual General Meeting
2015/2016
Half-Year End
Half-Year Results Announced
Note: Dates subject to alteration
8 September 2015
2 October 2015
23 September 2015
31 December 2015
23 February 2016
Left: Cardno is at the forefront of planning the world we live in. Our work is underpinned by
a necessity to be forward-thinking, resourceful and contemporary.
DIRECTORS’
REPORT
Cardno Limited and its Controlled Entities
for the year ended 30 June 2015
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 2015.
ANNUAL REPORT 2015 33
1: DIRECTORS
The Directors of the Company in office during or since the year
ended 30 June 2015 are set out below:
John Marlay (Chairman - Non-Executive)
Anthony Barnes (Non-Executive)
Tonianne Dwyer (Non-Executive)
Elizabeth Fessenden (Non-Executive)
Trevor Johnson (Executive)
Ian Johnston (Non-Executive)
Grant Murdoch (Non-Executive)
Michael Renshaw (Managing Director – Executive)
(resigned 12 January 2015)
Graham Yerbury (Acting Managing Director – Executive)
(12 January 2015 – 29 June 2015)
Richard Wankmuller (Managing Director – Executive)
(appointed 29 June 2015)
Details of the qualifications, experience and responsibilities of the
Directors follow.
John Marlay - Chairman
B.Sc. (Chemistry major), FAICD
Age 66
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), Boral
Limited (since 2009) and Independent Chairman of Flinders Ports
Holdings Limited (since 2013).
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.
34 CARDNO LIMITED
Richard Wankmuller -Chief Executive Officer
and Managing Director
BCE, MCSE
Age 57
Tonianne Dwyer - Non-Executive Director
BJuris (Hons), LLB (Hons), GAICD
Age 52
Richard joined Cardno as Chief Executive Officer and Managing
Director in 2015.
He has more than 30 years’ experience in professional engineering
services, implementing several successful growth and transformation
strategies across international and domestic markets.
Prior to joining Cardno, Richard was a Director of GHD Group Pty
Limited and President of GHD Americas, where he helped grow the
firm from 350 employees to about 4,000.
Tonianne Dwyer became a Non-Executive Director of Cardno
Limited in June 2012. She is also a Non-Executive Director of
DEXUS Property Group and of DEXUS Wholesale Property Fund, a
Non-Executive Director of Metcash Limited and a Non-Executive
Director of Queensland Treasury Corporation.
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).
From 2007 to 2010, he had global responsibility for Parsons’ Water
and Infrastructure business. During this time Parsons moved their
global market position from outside the top 20 to number eight.
SPECIAL RESPONSIBILITIES
Tonianne is a member of the Audit, Risk & Compliance Committee
and the Nominations Committee.
Prior to joining Parsons, he spent 17 years in senior executive roles
at international infrastructure engineering company, MWH, working
across the water, infrastructure, environment, construction, mining,
and oil and gas industries.
He was also a member of GHD’s Board of Directors from 2013 to
2015, and served on MWH’s parent company’s Board of Directors
(MWH Global Inc.) from 2002 to 2007.
Anthony (Tony) Barnes - Non-Executive Director
BCom
Age 65
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 the 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.
Elizabeth Fessenden - Non-Executive Director
MBA, MS Systems Engineering, BS Electrical Engineering
Age 60
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.
Elizabeth’s US-based Alcoa career also included positions in
engineering management, marketing, smelting plant management,
and executive development and staffing. Early in her career she held
a Professional Engineering license.
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 six year term as a director of O’Brien
& Gere, a consulting engineering firm in the US. She is currently an
independent non-executive director for Quarles Petroleum.
Previously she was a director for Polymer Group Inc. from 2008-2011
and a Trustee for Clarkson University from 1990-2012.
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.
ANNUAL REPORT 2015 35
Trevor Johnson - Executive Director
BE, MEngSc, PhD, FIEAust, CPEng, RPEQ, MAICD
Age 58
Grant Murdoch - Non-Executive Director
M Com (Hons), FAICD, FICAA
Age 63
Trevor Johnson has been a Director of the Cardno group since 1996,
and an employee of the company for more than 35 years. He is also a
member of the Executive Leadership Team which oversees Cardno’s
worldwide operations and 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 35 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. In 2015, Trevor was
appointed as an Adjunct Professor in the School of Civil Engineering
at the University of Queensland.
Ian Johnston - Non-Executive Director
DipCM, GradDip App Fin & Inv, ASIA, ACSA, ACIS, FAICD
Age 66
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. 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 38
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, OzForex
Limited and QIC 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.
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.
36 CARDNO LIMITED
4: REVIEW OF RESULTS AND OPERATIONS
PERFORMANCE (A$m)
Revenue
EBITDA*
EBIT
NPAT
NOPAT**
Operating Cash Flow
EPS - basic (cents)
NOPAT EPS - basic (cents)
Dividend per share (cents)
2015
1,426.9
108.4
(148.4)
(145.2)
50.3
48.1
(88.32)
30.59
20.0
2014
1,309.6
141.7
115.2
78.1
78.1
84.6
52.04
52.04
36.0
* EBITDA = EBIT plus depreciation and amortisation and impairment losses
** NOPAT = NPAT plus tax effected impairment losses
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 53. These metrics provide a measure of Cardno’s performance
before the impact of non-cash expense items, such as depreciation and amortisation and
impairment losses, as well as interest costs associated with Cardno’s external debt facility
and hire purchase arrangements.
NOPAT is unaudited. However it is based on amounts extracted from the audited financial
statements. Refer to the NPAT to NOPAT reconciliation on page 27. This metric provides a
measure of Cardno’s operating performance before the impact of one off adjustments such
as impairment losses write down to fair value for assets held for sale incurred during the
current financial year.
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’s result for the year
ended 30 June 2015 showed a significant decline from FY2014 due to
challenging markets in Australia and the United States.
Highlights of Cardno’s financial performance are as follows:
> Cardno delivered a net operating profit after tax (NOPAT) of
$50.3 million for FY2015. This was a 35.6 per cent decrease from
5: DIVIDENDS
FY2014. Net loss after tax, after the inclusion of a post tax non-
cash impairment charge of $195.5 million, was $145.2 million.
The impairment charge is associated with the reduced carrying
value of our business in the United States and the write down of
part of the Ecuadorian business which is being held for sale.
> Revenue of $1,426.9 million was up 9.0 per cent on FY2014.
This was mainly due to full year contributions of FY2014 merger
partners. Organic revenue declined for the second year in a row
as long term major projects in Australia and the United States
wound down without similar engagements to replace them.
> Cardno achieved an EBITDA of $108.4 million in FY2015 which
is a decrease of 23.5 per cent compared to the record EBITDA
achieved in FY2014. The steeper percentage decline in EBITDA
versus fee revenue reflects the lower margins earned as Cardno
transitioned off higher margin longer term projects in both Asia
Pacific and the Americas. In addition, the businesses experienced
higher restructure and redundancy costs as management
responded to changes in market demands.
> Basic earnings per share (EPS) was negative 88.32 cents
per share as a result of the impairment charges recognised.
Excluding these impacts the operating earnings per share was
30.59 cents. This operating result is a decrease of 41.2 per cent
over FY2014.
> Cardno achieved an operating cash flow of $48.1 million which
represents a solid result at 96 per cent of NOPAT. This result
however represents a 43.1 per cent decrease on FY2014.
> The Board has declared a final dividend of 7 cents per share
(100 per cent franked) to be paid on 2 October 2015 to all
shareholders registered on 8 September 2015. With the interim
dividend of 13 cents per share (100 per cent franked) in April
2015, this will result in a full year dividend of 20 cents per share
(100 per cent franked), which is a 44.4 per cent decrease to that
delivered in FY2014.
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 2014 ordinary
- Interim 2015 ordinary
Declared after end of year
- Final 2015 ordinary
Dealt with in the financial report as:
- Dividends paid or provided
- Noted as a subsequent event (note 29)
Cents per share
Total amount
$’000
Franked
Date of payment
17.0
13.0
7.0
28,060
21,391
100%
100%
10 October 2014
7 April 2015
11,594
100%
2 October 2015
49,451
11,594
61,045
ANNUAL REPORT 2015 37
6: EVENTS SUBSEQUENT TO THE REPORTING DATE
9:
INDEMNIFICATION AND
INSURANCE OF OFFICERS
The Company has agreements with each of the Directors and Officers
of the Company in office at the date of this report indemnifying
them against liabilities to any person other than the Company or a
related body corporate that may arise from their acting as Directors
or Officers of the Company. The indemnity continues to have effect
when the Directors and Officers cease to hold office, other than
where such liabilities arise out of conduct involving a wilful breach of
duty by the Officers or the improper use by the Directors or Officers of
their position or of information to gain advantage for themselves or
someone else or to cause detriment to the Company.
The Directors have not included details of the nature of the
liabilities covered or the amount of the premium paid in respect
of the Directors’ and Officers’ liability, as such disclosures are
prohibited under the terms of the contract.
On 17 August 2015, the Directors of Cardno Limited declared a
final dividend of 7 cents per share (100 per cent franked) for the
2015 financial year. The dividend will be paid on 2 October 2015
to shareholders registered on 8 September 2015 and will total
$11,594,347. The dividend has not been provided for in the
30 June 2015 financial statements.
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.
8: SIGNIFICANT CHANGES IN THE
STATE OF AFFAIRS
Other than as disclosed elsewhere in this Directors’ Report,
there have been no significant changes in the state of affairs since
30 June 2014.
10: DIRECTORS’ MEETINGS
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2015 is set out below:
No. of Meetings Held
A H Barnes
T Dwyer
E A Fessenden
T C Johnson
I J Johnston
J Marlay
G Murdoch
M J Renshaw (i)
R N Wankmuller (ii)
G K Yerbury (iii)
- = not a member of this committee
A = number of meetings attended.
Board of
Directors
Audit, Risk &
Compliance
Committee
Remuneration
Committee
Nominations
Committee
A
18
19
19
19
19
19
17
8
-
9
B
19
19
19
19
19
19
19
8
-
9
A
4
4
-
-
4
-
4
-
-
-
B
4
4
-
-
4
-
4
-
-
-
A
7
-
8
-
-
7
8
-
-
-
B
8
-
8
-
-
8
8
-
-
-
A
-
5
-
-
5
5
-
-
-
-
B
-
5
-
-
5
5
-
-
-
-
B = number of meetings held during the time the Director held office during the year or was a committee member.
(i) Michael Renshaw resigned from the Board on 12 January 2015.
(ii) Richard Wankmuller was appointed to the Board on 29 June 2015.
(iii) Graham Yerbury was appointed to the Board on 12 January 2015 and resigned on 29 June 2015.
38 CARDNO LIMITED
11: REMUNERATION REPORT - AUDITED
The Directors of Cardno Limited present the Remuneration Report
for the Company for the financial year ended 30 June 2015. The
information contained in the Report, which forms part of the
Directors’ Report, has been audited by KPMG.
This Report details remuneration information for the Managing
Director, Key Management Personnel and Non-Executive Directors
who have responsibility for controlling the activities of Cardno.
TABLE OF CONTENTS
PAGE
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
How does the Company’s remuneration strategy
take into account shareholders’ interests?
How is executive pay structured at Cardno?
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?
Managing Director and Key Management
Personnel Employment Agreements
How is Non-Executive Director pay structured?
The Value and Measure of LTI in 2015
39
39
41
42
43
44
45
48
SUMMARY OF REMUNERATION MATTERS IN 2015
Cardno’s group remuneration strategy is designed to attract,
retain and incentivise qualified and experienced Key Management
Personnel in the engineering, environment and professional
consulting services sector.
In June 2015 Richard Wankmuller was appointed Chief Executive
Officer and Managing Director of Cardno taking over from Chief
Financial Officer Graham Yerbury who had performed the role in
an acting capacity since January 2015 following the resignation of
Michael Renshaw.
Other key executive changes were undertaken to streamline the
Executive Leadership Team (ELT). The roles of General Manager
Australia and New Zealand performed by Mr Roger Collins-Woolcock
and Division Manager Emerging Markets, performed by Ross
Thompson were made redundant. A new role of General Manager
Asia Pacific was created and continues to be performed in an acting
capacity by Paul Gardiner, General Manager Americas pending
completion of the recruitment process for the position. A new
executive role, General Manager Strategic Business Development
was created and will be filled in early FY2016.
Due to the failure of the Company to meet specific financial goals,
Key Management Personnel and the Acting CEO did not earn any
Short Term Incentives (STI) in FY2015.
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 Mr Wankmuller’s LTI at the Annual General Meeting in
September 2015.
OUTLOOK FOR 2016 REMUNERATION
Changes planned for the remuneration structure in 2016 are
adjustments to the weighting of STI for “at target” goals and for
outperformance. It is also planned to increase the percentage of fixed
annual remuneration available to be awarded as an LTI. This means
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).
During FY2016, a targeted retention incentive will be introduced
for certain key management to support the retention of a stable
senior leadership team during the important business transformation
underway. This is designed to improve Cardno’s financial performance
and to grow shareholder value as a result. The retention incentive will
be issued in the form of retention rights to acquire ordinary shares
for no consideration and will vest 24 months from date of issue if the
executive remains employed with Cardno. No performance conditions
will attach to retention rights.
ANNUAL REPORT 2015 39
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.
Cardno’s financial performance and resultant benefits for shareholder
return are demonstrated in the below table.
Despite the decline in FY2015 net profit, over the past five years,
Cardno’s revenue has grown from $831.2m (2011) to $1,426.9m
(2015). During the same period average Key Management Personnel
(excluding executive and non-executive directors) total remuneration
has increased by approximately 7.3 per cent per annum.
Gross Revenue (000’s)
Net Profit / (Loss) After Tax (000’s)
Dividends Paid or Provided (000’s)
Change in Share Price – year on year ($ per share)
Basic Earnings Per Share Growth
Return on Capital Employed
Total Key Management Personnel Remuneration (000’s) (i)
(i) Key Management Personnel excluding executive and non-excutive directors.
2015
2014
2013
2012
2011
$1,426,916
$1,309,597
$1,195,352
$965,820
$831,201
($145,168)
$49,452
($3.09)
(269.7%)
(22.2%)
$3,175
$78,134
$56,530
$1.14
(5.5%)
15.1%
$2,819
$77,639
$50,766
($2.38)
(10.8%)
17.6%
$3,707
$74,168
$43,488
$2.18
9.7%
20.5%
$3,534
$58,802
$33,975
$1.49
28.3%
24.9%
$2,446
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 on page 43).
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’s 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 table on the following page.
40 CARDNO LIMITED
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ANNUAL REPORT 2015 41
11: REMUNERATION REPORT - AUDITED CONTINUED
During FY2015, Michael Renshaw and Roger Collins-Woolcock ceased
employment with Cardno. Amounts paid to both as part of their
employment contracts and deeds of release, have been recognised in
the above remuneration table as termination benefits. The breakdown
of these termination benefits are detailed below.
Payment in
lieu of notice
Redundancy
Severance
Accrued
Leave
Performance
Rights(i)
Total
Termination
Benefits
573,749
-
155,174
204,013
932,936
192,170
269,043
138,260
129,315
728,788
Executive Director
Michael Renshaw
(resigned 12/01/2015)
Executives
Roger Collins-Woolcock
(ceased 29/01/2015)
(i) The Performance Rights termination benefits provided, relate to unvested Performance Rights which Michael Renshaw and Roger Collins-Woolcock retain on ceasing employment
and remains subject to EPS and TSR performance conditions details on page 43.
11.3
How does company performance impact on
executives’ remuneration?
Executives
Name
STI FY2015
STI FY2014
LTI FY2015
LTI FY2014
Potential
$
Awarded
%
Paid
%
Potential
$
Paid
%
Performance
Rights
Granted (i)
To Vest
%
Performance
Rights
Granted
Vested
%
Michael Renshaw (ii)
Trevor Johnson
Roger Collins-Woolcock (iii)
Paul Gardiner
Kylie Sprott
Graham Yerbury
563,836
195,750
169,816
324,000
252,000
300,000
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
586,841
120,000
256,461
263,755
166,261
248,461
0%
0%
0%
0%
0%
0%
50,000
30,000
40,000
40,000
30,000
-
0%
0%
0%
0%
0%
-
50,000
30,000
40,000
40,000
30,000
-
39%
39%
39%
39%
39%
-
(i) Performance Rights granted in 2012 to vest based on achievement of performance hurdles for the period 2012 to 2015.
(ii) Potential STI for Michael Renshaw has been pro rated for the year ended 30 June 2015.
(iii) Potential STI for Roger Collins-Woolcock has been pro rated for the year ended 30 June 2015.
Above are details of the vesting profile for 2015 and the previous year
of the STI cash bonuses and LTI awarded as remuneration to each of
the named Key Management Personnel.
Performance Rights due to vest in FY2016 were granted in October
and November 2012 and are assessed on performance hurdles over
the three year period to 30 June 2015. These Performance Rights will
not vest as performance hurdles were not achieved.
Performance Rights which partially vested in FY2015 were granted
in October and November 2011 and were assessed on performance
hurdles over the three year period to 30 June 2014. These
Performance Rights vested in October 2014 and November 2014.
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 2014.
42 CARDNO LIMITED
11: REMUNERATION REPORT - AUDITED CONTINUED
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, up to 70 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 and functional financial
performance (where relevant) against budget.
The second component is assessed on non-financial KPIs including
safety, business growth, working capital reduction, staff turnover,
succession planning and executive leadership. These vary according to
position, responsibility and areas assessed by the Managing Director
to be integral to each area of accountability.
For the Managing Director, STIs are assessed against two separate
performance measures. These measures relate to specific, financial,
strategic and corporate development targets.
Key Management Personnel can earn an STI ranging between
40-50 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.
This payment is based on the Managing Director’s and Remuneration
Committee’s assessment and judgment of performance, measured
against the key management person’s outperformance against
individual specific goals.
In FY2015, no STI was payable to the Acting Chief Executive Officer,
Mr Yerbury or Key Management Personnel due to the failure of the
Company to meet specific financial goals.
In FY2016, Key Management Personnel (excluding the Managing
Director) will be able to earn STI of 40 per cent of FAR for achieving “at
target” performance and an additional 20 per cent for outperformance
and LTI of up to 50 per cent of FAR. Details of the Managing Director’s
STI for FY2016 are set out in section 11.6 on page 44.
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 operational measures such as staff turnover,
succession planning and executive leadership.
The following tables provides a summary of achievement against performance measures for Key Management Personnel in FY2015.
Key Performance Indicators (KPI) to
achieve 100% of STI Target
Performance Measure
People
Working Capital
Growth & Clients
Safety & Quality
Unmanaged staff turnover (% rolling 12 months)
20%
Day sales outstanding for debtors
Fee Growth from strategic clients
10%
Loss Time Injury Frequency Rate
Financial Performance
Overall Company performance Vs Budget
70%
Region performance Vs Budget
Days sales outstanding for debtors
Results (i, ii)
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 Outperformance (iii)
Performance Measure
Results (i)
Financial Overachievement
Regional Performance > 10% Vs Budget
Not Achieved
(i) The results have not been audited.
(ii) Although some performance measures were partially achieved Key Management Personnel did not receive any STI award for FY2015.
(iii) Each of these criteria may vary slightly depending on the role of the Key Management Personnel.
ANNUAL REPORT 2015 43
11: REMUNERATION REPORT - AUDITED CONTINUED
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 FY2016 LTI entitlements up to
60 per cent of FAR may be awarded at the discretion of the Board
on the recommendation of the Remuneration Committee. These are
based on the overall performance and growth of Cardno Earnings
Per Share (EPS) growth and relative Total Shareholder Return
(TSR) performance. For Key Management Personnel (excluding the
Managing Director) in FY2016, the potential award is up to 50 per
cent of FAR. 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 are 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 2015 2,999,568 Performance Rights with a grant date
fair value of $9,691,131 were issued with a vesting period of three
years from the grant dates of October 2014 and November 2014.
Further details of how LTI was valued and measured in 2015 can be
found in section 11.8 on page 48.
The Board considers the issue of Performance Rights based on the
achievement of specific EPS and TSR targets to align 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
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)
≥40% (12% pa)
% of Performance
Rights to Vest
(Tranche 2 50%)
0%
30%
Pro rata
70%
Pro rata
100%
a) TSR
b) EPS
In FY2015 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 2014 excluding companies’ classified in Financial, Energy,
Metals and Mining GICS sectors. Based on the TSR result, it is
expected that no Performance Rights granted in 2012 will vest on
October 2015 and November 2015.
The growth in earnings per share is calculated by comparing the
basic earnings per share ‘EPS’ achieved by Cardno in the base year
(i.e. year to June 2012) with that achieved in the final year of the
performance period (i.e. year to June 2015). The compound annual
growth rate (CAGR) of EPS over the three year period to 30 June 2015
was -205.36 per cent.
Based on the EPS result, none of the Performance Rights granted in
2012 in Tranche 2 will vest in October 2015 and November 2015.
44 CARDNO LIMITED
11: REMUNERATION REPORT - AUDITED CONTINUED
11.6 Managing Director and Key Management Personnel
Employment Agreements
MANAGING DIRECTOR
Mr Wankmuller commenced as Managing Director on 29 June 2015
and is paid a cash fixed annual remuneration of $950,000 inclusive
of superannuation. His employment contract has no fixed term and
provides both fixed and incentive based remuneration which includes
STI and LTI.
Mr Wankmuller is able to earn a maximum STI of up to $1,425,000,
if he is able to achieve the following performance measures;
> Specific strategic and corporate development measures
- $950,000,
> Exceptional financial outperformance of the company is
excess of budget targets - $475,000.
LTI in the form of Performance Rights equivalent to 60 per cent of FAR
will be granted to Mr Wankmuller subject to receiving shareholder
approval at the Annual General Meeting in 2015.
Mr Wankmuller will also be entitled to a one off payment of
US$600,000 payable in three tranches over 3 years provided he
remains in continued employment with Cardno at specific milestone
dates in recognition of his forfeiture of entitlements at this former
employer GHD Group.
Cardno will also pay Mr Wankmuller’s relocation expenses
including airfares from the US for him and his family, removal and
transportation costs, accommodation in Brisbane for a period up to
12 months and financial and non-financial assistance with
immigration, visa and tax advice. Such expenses are repayable by
Mr Wankmuller on a pro rata basis if he voluntarily resigns or his
employment is terminated by Cardno within 12 months.
Details of termination benefits payable by way of cash or Performance
Rights to Mr Wankmuller are outlined in the following table.
Mode of retirement
from office
Notice by Mr Wankmuller
Termination by the Company
(except for misconduct)
Notice
period
12
months
12
months
Benefits Payable
Unpaid /
accrued
FAR
Accrued
but untaken
annual leave
Yes
Yes
Long
service
leave
Yes
Yes
Yes
Yes
Unpaid /
Accrued
STI
Yes, at
Board’s
discretion
Yes, at
Board’s
discretion
Termination by the Company for misconduct Nil
Yes
Yes
Yes
No
Severance
payment
No
No
No
Unvested
Performance
Rights
At Board’s
discretion
At Board’s
discretion
No
Former Managing Director and Chief Executive Officer Michael Renshaw
resigned on 12 January 2015. Mr Renshaw did not receive any STI
relative to the financial performance measures of Cardno for FY2015.
Mr Renshaw will retain unvested Performance Rights previously
awarded following shareholder approval at the 2012, 2013 and
2014 Annual General Meetings. These Performance Rights, totalling
250,000, will remain subject to both EPS and TSR performance hurdles
for any future payment. Specific details of the termination payments
paid to Mr Renshaw in accordance with his employment agreement
are contained in the table on page 41.
11: REMUNERATION REPORT - AUDITED CONTINUED
KEY MANAGEMENT PERSONNEL
Each agreement varies according to the individual Key Management
Person but typically includes:
(a) Termination provisions incorporating notice periods and payments
of 6 months, except that notice periods are reduced where
termination is for performance reasons.
(b) Performance and confidentiality obligations on the part of both the
employer and employee.
(c) 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 Wankmuller in the above table, are
generally replicated in the Employment Agreements with Key
Management Personnel.
Between 12 January 2015 and 30 June 2015 Mr Yerbury’s salary was
increased to $700,000 per annum in consideration of him performing
the role as Acting Chief Executive Officer, meaning he received
additional payments totaling $92,055 during this period.
In recognition of higher duties performed by each of the Key
Management Personnel between January and June 2015, each
received a one-time payment to reflect their individual contribution
details of which are as follows:
> Paul Gardiner (paid in USD)
> Kylie Sprott
> Trevor Johnson
$50,000
$30,000
$30,000
Mr Collins–Woolcock ceased employment on 29 January 2015.
Mr Collins- Woolcock did not receive any STI, relative to the financial
performance measures of Cardno for FY2015.
Mr Collins-Woolcock will retain unvested Performance Rights
and these Performance Rights, totalling 171,000, will remain
subject to both EPS and TSR performance hurdles for any future
payment. Specific details of the termination payments paid to
Mr Collins-Woolcock are contained in the table on page 41.
ANNUAL REPORT 2015 45
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 form the
Remuneration Committee and external benchmarking of
comparable companies.
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.
As part of the need to plan for Non-Executive Director succession,
approval was sought and obtained from shareholders at the 2014
Annual General Meeting for an increase in the maximum aggregate
remuneration payable to Non-Executive Directors of $900,000 to a
maximum sum of $1,150,000 a year. The benchmarking of
Non-Executive Directors fees compared with companies in the market
comparator group, the increasing time commitment and complexity
for Directors.
The fee structure (which is inclusive of superannuation contributions
where compulsory) for Non-Executive Directors has remained constant
since 2011 and from 23 October 2014 was adjusted as follows:
> Chairman of the Board: $275,000 (covering all responsibilities
as Chairman of the Board and Chairman and/or member of any
Board Committee)
> Other Non-Executive Directors: $110,000 (covering responsibilities
as a member of the Board and other duties including representing
the Company externally)
> Committee Chairman: $22,000, and Committee member: $11,000
(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 remuneration of the Non-Executive Directors is set out in the
following table on the next page.
46 CARDNO LIMITED
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ANNUAL REPORT 2015 47
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, the 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 2015, 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 and the incoming
Chief Executive Officer Richard Wankmuller. Ernst & Young were
engaged by and reported to the Remuneration Committee. During the
2015 financial year no remuneration recommendations, as defined by
the Corporations Act, were provided by Ernst & Young.
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 eight times during the year and committee
members’ attendance record is disclosed in the table of Directors’
meetings (refer to page 37).
48 CARDNO LIMITED
11: REMUNERATION REPORT - AUDITED CONTINUED
11.8
The Value and Measure of LTI in 2015
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 2015, including those granted during the financial year are as follows in the table below:
Key Management
Personnel
Executive Directors
Trevor Johnson
Michael Renshaw
(resigned 12/01/2015)
Key Management
Personnel
Roger Collins-Woolcock
(ceased 29/01/2015)
Paul Gardiner
Kylie Sprott
Graham Yerbury
Outstanding
Performance
Rights
Grant Date
Vesting
Date
% Vested
in Year
% Forfeited
in Year
Fair Value at
Grant Date
30,000
40,000
68,000
50,000
70,000
130,000
40,000
55,000
76,000
40,000
55,000
94,000
30,000
40,000
66,000
50,000
78,000
18-Oct-12
17-Oct-13
23-Oct-14
1-Nov-12
11-Nov-13
23-Oct-14
1-Nov-12
11-Nov-13
10-Nov-14
1-Nov-12
11-Nov-13
10-Nov-14
1-Nov-12
11-Nov-13
10-Nov-14
11-Nov-13
10-Nov-14
18-Oct-15
17-Oct-16
23-Oct-17
1-Nov-15
11-Nov-16
23-Oct-17
1-Nov-15
11-Nov-16
10-Nov-17
1-Nov-15
11-Nov-16
10-Nov-17
1-Nov-15
11-Nov-16
10-Nov-17
11-Nov-16
10-Nov-17
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%
5.60
4.75
3.46
5.56
5.47
3.46
5.56
5.47
3.22
5.56
5.47
3.22
5.56
5.47
3.22
5.47
3.22
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 2015 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 43.
ANNUAL REPORT 2015 49
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
Roger Collins-Woolcock
Paul Gardiner
Trevor Johnson
Michael Renshaw
Kylie Sprott
15,518
15,518
11,638
19,397
11,638
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)
234,940
449,150
244,340
302,210
212,190
250,770
66,919
107,653
86,125
86,125
64,591
-
-
-
-
-
-
-
Executive Directors
Trevor Johnson
Michael Renshaw
Key Management Personnel
Roger Collins-Woolcock
Paul Gardiner
Kylie Sprott
Graham Yerbury
(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.
50 CARDNO LIMITED
11: REMUNERATION REPORT - AUDITED CONTINUED
2015 Performance Rights
Held at
1 July 2014
Granted as
compensation
Vested
Lapsed
Held at
30 June 2015
Vested and
exercisable at
30 June 2015
Executive Directors
Trevor Johnson
Michael Renshaw (i)
Senior Executives
Roger Collins-Woolcock (ii)
Paul Gardiner
Kylie Sprott
Graham Yerbury
100,000
170,000
135,000
135,000
100,000
50,000
68,000
130,000
76,000
94,000
66,000
78,000
11,638
19,397
15,518
15,518
11,638
-
18,362
30,603
24,482
24,482
18,362
-
138,000
250,000
171,000
189,000
136,000
128,000
-
-
-
-
-
-
(i) Michael Renshaw resigned as a director on 12 January 2015
(ii) Roger Collins-Woolcock ceased to be a Key Management Person on 29 January 2015
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:
Share Movements Directors and
Key Management Personnel
Held at
1 July 2014
Purchases
Received as
Compensation
Sales
Held at
30 June 2015
Non–Executive Directors
Anthony Barnes
Tonianne Dwyer
Elizabeth Fessenden
Ian Johnston
John Marlay
Grant Murdoch
Executive Directors
Richard Wankmuller (i)
Trevor Johnson
Michael Renshaw (ii)
Senior Executives
Roger Collins-Woolcock (iii)
Paul Gardiner
Kylie Sprott
Graham Yerbury
5,657
3,000
-
268,839
16,095
43,555
-
1,649,964
313,305
761,122
821,682
10,971
5,889
399
9,000
3,982
30,000
14,000
59
-
61,638
69,789
731,257
65,418
18,351
8,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
68,839
-
-
-
-
50,314
681,966
49,900
30
-
6,056
12,000
3,982
230,000
30,095
43,614
-
1,711,602
N/A
N/A
837,200
29,292
14,639
(i) Richard Wankmuller was appointed as a director on 29 June 2015
(ii) Michael Renshaw resigned as a director on 12 January 2015
(iii) Roger Collins-Woolcock ceased to be a Key Management Person on 29 January 2015
ANNUAL REPORT 2015 51
12: 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
Richard Wankmuller (i)
Ordinary
Shares
6,056
12,000
3,982
1,711,602
230,000
30,095
43,614
-
Shares held
in Escrow
Performance
Options
Performance
Rights
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
138,000
-
-
-
-
(i) Richard Wankmuller was restricted from acquiring shares in Cardno in accordance with the Cardno Securities Trading Policy.
13: NON-AUDIT SERVICES
During the year KPMG, the Company’s auditor, has performed
certain other services in addition to their statutory duties.
The Board has considered the non-audit services provided
during the year by the 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 31.
14: LEAD AUDITOR’S INDEPENDENCE
DECLARATION UNDER SECTION 307C
OF THE CORPORATIONS ACT 2001
The lead auditor’s independence declaration is set out on
page 52 and forms part of the Directors’ report for the year ended
30 June 2015.
15: 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
Brisbane
17 August 2015
52 CARDNO LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
To: the Directors of Cardno Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2015 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
Mitchell Petrie
Partner
Brisbane
17 August 2015
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.
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
Revenue
Other Income
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Impairment losses
Depreciation and amortisation expenses
Financing costs
Other expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
Profit / (loss) for the year
Profit / (loss) 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
3
4
30
30
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 2015
Profit / (loss) 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.
ANNUAL REPORT 2015 53
2015
$’000
2014
$’000
1,426,916
1,309,597
11,449
(705,806)
(403,478)
(174,754)
(224,023)
(32,821)
(11,179)
(45,922)
(159,618)
14,450
(145,168)
(145,168)
(145,168)
(88.32)
(88.32)
6,595
(628,647)
(293,063)
(204,600)
-
(26,493)
(8,465)
(48,158)
106,766
(28,632)
78,134
78,134
78,134
52.04
50.61
2015
$’000
2014
$’000
(145,168)
78,134
82,993
82,993
(62,175)
(62,175)
(62,175)
(5,698)
(5,698)
72,436
72,436
72,436
54 CARDNO LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Cardno Limited and its Controlled Entities as at 30 June 2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Current tax receivable
Assets held for sale
Total Current Assets
Non-Current Assets
Trade and other receivables
Other financial assets, including derivatives
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
Liabilities held for sale
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
* Restated (refer to note 34).
Note
6
7
8
9
10
11
12
13
14
15
16
17
18
19
10
20
14
21
22
23
2015
$’000
84,750
266,513
154,611
12,794
19,349
9,191
547,208
-
7,625
64,851
45,167
668,265
785,908
2014
Restated*
$’000
85,885
244,885
142,586
11,196
-
-
484,552
605
3,610
60,709
16,671
760,832
842,427
1,333,116
1,326,979
150,566
2,982
14,785
36,959
43,047
9,191
257,530
393,108
1,752
10,342
876
406,078
663,608
669,508
641,661
62,082
(34,235)
669,508
146,254
3,149
15,870
32,181
48,306
-
245,760
302,927
816
12,854
1,106
317,703
563,463
763,516
623,875
(20,744)
160,385
763,516
The statement of financial position should be read in conjunction with notes 1 to 38 which form part of the financial statements.
ANNUAL REPORT 2015 55
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
Note
Share
Capital
Ordinary
$’000
Retained
Earnings
Foreign
Translation
Reserve
$’000
$’000
Reserve
for Own
Shares
$’000
Total
$’000
Balance at 1 July 2013
500,374
138,781
(602)
(6,029)
632,524
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
Loss 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 2015
23
23
5
23
23
5
-
-
-
100,879
4,790
17,832
-
-
123,501
623,875
78,134
-
78,134
-
-
-
-
(56,530)
(56,530)
160,385
-
(5,698)
(5,698)
-
-
-
-
-
-
(6,300)
-
-
-
(145,168)
-
-
(145,168)
82,993
82,993
13,512
2,946
1,328
-
-
17,786
641,661
-
-
-
-
(49,452)
(49,452)
(34,235)
-
-
-
-
-
-
-
-
-
-
-
(17,832)
9,417
-
(8,415)
(14,444)
-
-
-
-
-
(1,328)
1,161
-
(167)
78,134
(5,698)
72,436
100,879
4,790
-
9,417
(56,530)
58,556
763,516
(145,168)
82,993
(62,175)
13,512
2,946
-
1,161
(49,452)
(31,833)
669,508
76,693
(14,611)
* 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.
56 CARDNO LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
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 and equipment
Payments for property, plant and 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
25(a)
25(d)
2015
$’000
1,474,734
506
(7,456)
2014
$’000
1,370,518
978
(10,440)
(1,395,805)
(1,249,117)
(23,856)
48,123
-
(11,187)
(1,005)
1,288
(24,273)
(35,177)
6,135
(18)
1,161
707,228
(688,849)
(2,028)
(42,055)
(18,426)
(27,328)
84,611
(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
Net Increase/(Decrease) in Cash and Cash Equivalents Held
(5,480)
(4,414)
Cash and Cash Equivalents at 1 July
Reclassification of cash included in disposal group held for sale (refer note 10)
Effects of exchange rate changes on cash and cash equivalents at the end of year
85,885
90,635
(1,592)
5,937
-
(336)
Cash and Cash Equivalents at 30 June
25(b)
84,750
85,885
* Own shares sold are those shares transferred 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
ANNUAL REPORT 2015 57
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 2015 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 17 August 2015.
(a) Statement of compliance
The consolidated financial statements are general purpose
financial statements which have been prepared in accordance
with Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act
2001. The financial statements of the consolidated entity also
comply 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 2014. These standards are not expected to have a significant
impact on the Group’s consolidated financial statements.
AASB 2013-4 Novation of derivatives and hedge accounting
Annual improvements project – 2010-2012 cycle
(AASB 2014-1 Part A)
Annual improvements project – 2011-2013 cycle
(AASB 2014-1 Part A)
AASB 2013-4 Novation of derivatives and hedge accounting
AASB 2013-4 makes amendments to AASB 139 to permit the
continuation of hedge accounting in circumstance where a
derivative, which has been designated as a hedging instrument,
is novated from one counterparty to a central counterparty as a
consequence of laws or regulation. There has been no impact on
the recognised assets, liabilities and comprehensive income of
the Group.
Annual improvements project – 2010-2012
Minor amendments have been made to AASB 3 Business
Combinations relating to accounting for contingent consideration.
This is effective for business combinations acquired after 1 July
2014 thus has no impact on the Group for this financial year.
Annual Improvements project – 2011-2013
Amendments have been made to AASB 140 to clarify the
interrelationship of AASB 3 Business Combinations and AASB 140
Investment Property. This amendment has no impact on the Group.
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning after
1 July 2014, 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.
AASB 9 Financial Instruments
AASB 9 (2009) includes revised guidance on the classification and
measurement of financial instruments, including a new expected
credit loss model for calculating impairment on financial assets,
and the new general hedge accounting requirements. It also
carries forward the guidance on recognition and derecognition of
financial instruments.
AASB 9 is effective for annual periods beginning on or after 1
January 2018 with early adoption permitted. The adoption of
these standards is expected to have an impact on the Group’s
financial assets, but no impact on the Group’s financial liabilities.
AASB 15 Revenue from Contracts with Customers (2015)
AASB 15 (2015) establishes a comprehensive framework for
determining whether, how much and when revenue is recognised.
It replaces AASB 111 Construction Contracts, AASB 118 Revenue
and AASB 1004 Contributions. The new standard’s core principle
requires entities to recognise revenue to depict the transfer
of goods or services to customers in amounts that reflect the
consideration to which the company expects to be entitled in
exchange for those goods or services.
AASB 15 is effective for annual reporting periods beginning on or
after 1 January 2017 with early adoption permitted. The Group
is assessing the potential impact on its consolidated financial
statements resulting from the application of AASB 15.
58 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(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.
(f) Revenue Recognition
Revenue is recognised at fair value of the consideration received
net of the amount of goods and services tax (GST) payable to the
taxation authority.
Sale of goods
Revenue from the sale of goods is recognised (net of rebates,
discounts and other allowances) upon the delivery of goods to
the customer.
Consulting services revenue
Revenue from consulting services which are provided on a time
and material basis is recognised at the contractual hourly rates as
labour hours are delivered and 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
ANNUAL REPORT 2015 59
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(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.
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.
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 arm’s length basis.
60 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(k) Trade and Other Receivables
(n) Property, Plant and Equipment
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.
(m) Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held for sale if it is highly probable
that they will be recovered primarily through sale rather through
continuing use.
Such assets, or disposal groups, are generally measured at the
lower of their carrying amount and fair value less costs to sell. Any
impairment loss on a disposal group is allocated first to goodwill,
and then to the remaining assets and liabilities on a pro rata basis,
except that no loss is allocated to inventories, financial assets,
deferred tax assets, employee benefit assets, investment property
or biological assets, which continue to be measured in accordance
with the Group’s other accounting policies. Impairment losses
on initial classification as held-for-sale and subsequent gains or
losses on remeasurement are recognised in profit and loss.
Once classified as held-for-sale, intangible assets and property,
plant and equipment are no longer amortised or depreciated.
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.
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.
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:
laboratory equipment, instruments and amenities
> buildings
>
> motor vehicles
>
leasehold improvements
> office furniture and equipment
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
40 years
4-7 years
4-7 years
4-5 years
3-11 years
ANNUAL REPORT 2015 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(o)
Intangible Assets
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to Cardno.
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.
Cardno measures goodwill at the acquisition date as:
(p) Amortisation
> 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.
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.
(q) 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.
62 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(q) 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.
(r)
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 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.
(s) 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.
(t)
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.
(u) 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.
Liabilities for employee entitlements which are not expected to be
settled within 12 months are discounted using the rates attached
to corporate bonds at balance date, which most closely match the
terms of maturity of the related liabilities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
ANNUAL REPORT 2015 63
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued
(u) Employee Benefits continued
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.
(y) Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and
that are believed to be reasonable under the circumstances.
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.
> Estimating impairment of goodwill – refer to notes 1(r) and 15.
> Revenue recognition in relation to long term contracts
including estimating stage of completion and total contract
costs – refer notes 1(f) and 2A.
> Accounting for business combinations including estimating fair
values of identifiable assets acquired and liabilities assumed
– refer notes 1(o) and 34.
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.
(v) 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.
(w) 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.
(x) Earnings per Share
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.
64 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
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
Foreign exchange gains
Other Income
3. EXPENSES, LOSSES AND (GAINS)
Depreciation
Motor vehicles
Other property, plant and equipment
Total Depreciation
Amortisation of non-current assets
Works contracts
Software intangibles
Customer relationships
Total Amortisation
Total Depreciation & Amortisation
Impairment losses
Impairment of goodwill (note 15)
Impairment loss on remeasurement of disposal group (note 10)
Total Impairment Losses
Bad and doubtful debts
Financing costs
Interest and finance charges
Total Financing Costs
Rental expense relating to operating leases
Minimum lease payments
Net loss/(gain) on disposal of property, plant and equipment
2015
$’000
1,004,479
13,094
404,333
506
158
226
4,120
1,426,916
2,413
-
9,036
11,449
4,841
17,747
22,588
2,076
1,711
6,446
10,233
32,821
177,856
46,167
224,023
9,847
11,179
11,179
41,937
185
2014
$’000
951,518
10,955
342,992
978
118
45
2,991
1,309,597
2,415
3,453
727
6,595
4,790
14,992
19,782
3,674
256
2,781
6,711
26,493
-
-
-
2,503
8,465
8,465
39,040
(518)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
4.
INCOME TAX EXPENSE
(a) The components of tax expense comprises:
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Current year
Adjustments for prior years
Total income tax expense / (benefit)
(b) Numerical reconciliation between tax expense and pre-tax profit
Profit / (loss) before tax
Income tax using the Australian corporation tax rate of 30% (2014: 30%)
Increase (decrease) in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Allowances for R&D expenditure
Impairment of goodwill
Sundry items
Under / (over) provided in prior years
Income tax expense / (benefit)
The effective tax rate for FY2015 was 9.1 per cent as compared to 26.8 per cent in FY2014.
The tax benefit on losses reflects the tax effect of the impairment charges where goodwill is
deductible for tax in the USA. This rate also reflects an increase in income earned in lower tax
jurisdictions and a lower profit contribution from the United States.
(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% (2014: 100% at 30%) (Refer note 30)
(b) Dividends paid during the year (30 cents per share, 100% franked at 30%)
(2014: 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 $4,968,857 (2014: $11,895,165)
ANNUAL REPORT 2015 65
2015
$’000
2014
$’000
15,145
(5,553)
9,592
(26,963)
2,921
(24,042)
(14,450)
(159,618)
(47,885)
5,776
(11,187)
(734)
43,430
(1,218)
(11,818)
(2,632)
(14,450)
37,835
(257)
37,578
(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
283
1,989
11,594
27,755
49,452
56,530
2,325
13,059
15,384
5,781
11,971
17,752
66 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
6 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash (project advances)
Bank short term deposits
7
TRADE & OTHER RECEIVABLES (CURRENT)
Trade debtors
Provision for doubtful debts (note 33)
Sundry debtors
INVENTORIES (CURRENT)
8
Work in progress
9. OTHER CURRENT ASSETS
Prepayments
Project advances
Security deposits
10. DISPOSAL GROUP HELD FOR SALE
2015
$’000
79,510
5,118
122
84,750
265,146
(16,252)
248,894
17,619
266,513
2014
$’000
62,258
3,030
20,597
85,885
247,757
(11,376)
236,381
8,504
244,885
154,611
142,586
8,871
1,709
2,214
12,794
7,981
1,090
2,125
11,196
In May 2015, management committed to a plan to sell Caminosca S.A., a controlled entity based in Ecuador and part of the Americas segment.
Accordingly, Caminosca S.A. is presented as a disposal group held for sale.
(a) Impairment losses relating to the disposal group
Total impairment losses of $46.2 million for write downs of the disposal group to the lower of its carrying amount and its fair value less costs to
sell have been included in ‘impairment losses’ in the consolidated statement of financial performance. The impairment losses have been applied
to adjust the carrying amount of the following assets and liabilities within the disposal group.
Inventories
Vendor liability
Investments
Trade receivables
Goodwill and intangibles
Accruals
2015
$’000
21,926
(566)
1,549
7,074
12,351
3,833
46,167
The net contribution to the Group’s profit after tax by the disposal group, prior to being classified as held for sale, was $4.7 million (before the
impact of the write down).
ANNUAL REPORT 2015 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
10. DISPOSAL GROUP HELD FOR SALE continued
(b) Assets and liabilities of disposal group held for sale
At 30 June 2015, the disposal group was stated at fair value less costs to sell and comprised the following assets and liabilities.
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Other current assets
Assets held for sale
Trade and other payables
Interest bearing loans and borrowings
Employee benefits
Current tax liabilities
Liabilities held for sale
2015
$’000
1,592
5,538
1,919
58
84
9,191
3,674
119
1,748
3,650
9,191
(c) Cumulative income or expenses included in Other Comprehensive Income
Cumulative income included within the foreign currency translation reserve relating to the disposal group is $3,792,447.
(d) Measurement of fair values
Fair value hierarchy
i.
The non-recurring fair value measurement of the disposal group is classified as a Level 3 fair value (refer note 33(a)) and is based on
management’s estimate of expected cash flows adjusted for risk and uncertainty associated with the sale process.
11. TRADE & OTHER RECEIVABLES (NON CURRENT)
Sundry debtors
12. OTHER FINANCIAL ASSETS (NON-CURRENT)
Investments in non-related entities
Interest rate swaps used for hedging
2015
$’000
-
3,496
4,129
7,625
2014
$’000
605
3,610
-
3,610
68 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
13. 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
2015
$’000
49,604
(33,143)
16,461
31,335
(21,524)
9,811
88,735
(63,320)
25,415
21,922
(11,181)
10,741
3,578
(1,155)
2,423
64,851
2014
$’000
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
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.
Movements in carrying amounts
Movements in the carrying amounts for each class of property, plant and equipment between the
beginning and the end of the current financial year.
Laboratory equipment, instruments & amenities
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Reclass to assets held for sale
Disposals
Depreciation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
2015
$’000
2014
$’000
15,437
4,837
-
(226)
(325)
(5,013)
1,222
529
16,461
13,072
4,820
2,209
-
(199)
(4,287)
(52)
(126)
15,437
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
13. PROPERTY, PLANT & EQUIPMENT continued
Motor vehicles
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Reclass to assets held for sale
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
Reclass to assets held for sale
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
ANNUAL REPORT 2015 69
2015
$’000
12,749
1,465
-
(497)
(262)
(4,841)
1,419
(222)
9,811
20,803
13,962
-
(1,196)
(642)
(10,448)
1,562
1,374
25,415
9,566
3,924
-
(213)
(2,175)
1,320
(1,681)
10,741
2,154
109
-
(32)
(111)
303
-
2,423
2014
$’000
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
64,851
60,709
70 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
14. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
Assets
Accruals
Provisions
Work in progress
Intangibles
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Liabilities
Work in progress
Property, plant and equipment
Intangibles
Prepayments
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
NET DEFERRED TAX ASSETS (LIABILITIES)
2015
$’000
2014
$’000
24,517
21,772
-
15,591
5,663
67,543
(22,376)
45,167
21,313
-
755
1,047
1,013
24,128
(22,376)
1,752
43,415
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
ANNUAL REPORT 2015 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
14. DEFERRED TAX ASSETS & LIABILITIES continued
30 June 2015
Movement in temporary differences during the year:
Accruals
Provisions
Sundry items
Prepayments
Work in progress
Intangibles
30 June 2014
1 July
2014
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Other*
30 June
2015
$’000
$’000
26,760
17,034
3,269
(1,477)
(16,783)
(12,948)
15,855
(5,886)
3,616
2,059
523
(1,600)
28,251
26,963
(829)
(814)
(236)
224
(666)
(600)
(2,921)
1 July
2013
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
4,472
1,936
(442)
(317)
(2,264)
133
3,518
Other*
24,517
21,772
4,650
(1,047)
(21,313)
14,836
43,415
30 June
2014
$’000
$’000
Movement in temporary differences during the year:
Accruals
Provisions
Unearned revenue
Sundry items
Property, plant and equipment
Prepayments
Work in progress
Goodwill on acquisition (USA)
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
(1,102)
(1,387)
-
847
(113)
26
566
233
(930)
* Other adjustments relate to impacts of translating foreign operations and acquisitions
15. INTANGIBLE ASSETS
Goodwill at cost
Works contracts
Accumulated amortisation
Patents and trademarks
Software intangibles
Accumulated amortisation
Customer relationships
Accumulated amortisation
Total Intangible Assets
2015
$’000
640,685
640,685
18,574
(18,290)
284
2,081
7,265
(3,406)
3,859
35,184
(13,828)
21,356
668,265
26,760
17,034
-
3,027
242
(1,477)
(16,783)
(12,948)
15,855
2014
Restated
$’000
728,085
728,085
17,825
(15,249)
2,576
2,081
5,446
(1,416)
4,030
29,900
(5,840)
24,060
760,832
72 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
15. INTANGIBLE ASSETS continued
Reconciliation of movement in carrying amounts
from beginning of year to end of year:
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
* Restated (refer to note 34)
internal development
2015
Balance at the beginning of year
Additions:
>
Impairment on remeasurement of
disposal group (note 10)
Amortisation charges
Impairment of goodwill*
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
617,733
3,603
2,081
-
117,942
-
-
(7,590)
728,085
-
2,621
-
(3,674)
26
2,576
-
-
-
-
-
2,081
728,085
2,576
2,081
-
(12,024)
-
(177,856)
102,480
640,685
-
(327)
(2,076)
-
111
284
-
-
-
-
-
2,081
754
603
2,883
-
(256)
46
4,030
4,030
1,005
-
(1,711)
-
535
3,859
5,869
-
20,993
-
(2,781)
(21)
24,060
24,060
-
-
(6,446)
-
3,742
21,356
* During the year ended 30 June 2015, the Americas CGU achieved earnings results below management’s expectations, particularly in the second half of the year, stemming from patchy
growth in various sectors across the region, severe impacts of winter weather in December 2014 through February 2015 and a significantly lower oil price. This triggered a reassessment
by management of the pace of recovery in this market and the forecasts used to estimate the recoverable amount of goodwill attaching to this CGU. Based on this assessment an
impairment loss of $177.9 million (2014: Nil) has been recognised.
Goodwill is allocated to the following groups of cash-generating units:
> Americas
> Asia Pacific
2015
$’000
412,497
228,188
640,685
2014
$’000
499,764
228,321
728,085
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). In the prior year there were four CGU’s being
Americas, Emerging Markets, Australia & New Zealand and Software. As a result of the change, Software and parts of Emerging Markets
are now included in the Americas CGU. Australia & New Zealand, along with the rest of the Emerging Markets is now the Asia Pacific CGU.
Comparative information above has been restated to maintain consistency with current year presentation.
The Group uses the 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 2016 and year on year growth rates over the forecasted 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 growth estimates for the countries and industries in which the CGU operates.
The cash flows are discounted to their present value using a pre-tax discount rate on Cardno’s weighted average cost of capital adjusted for
country and industry specific risks associated with the CGU.
ANNUAL REPORT 2015 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
15. INTANGIBLE ASSETS continued
The key assumptions used in the estimation of recoverable amount are set out below:
> Americas
> Asia Pacific
Five year compound
average Growth Rate
Terminal Growth Rate
Pre-Tax Discount Rate
2015
10.00%
2.68%
2014
9.68%
2.09%
2015
3.00%
3.00%
2014
3.00%
3.00%
2015
12.70%
12.30%
2014
14.00%
14.70%
Sensitivity analysis performed indicates a reasonable possible change in any of the key assumptions for the Asia Pacific CGU would not
result in impairment.
The carrying amount of the Americas CGU was determined to be higher than its recoverable amount of $711.0 million and an impairment
loss of $177.9 million was recognised in 2015 (2014: Nil). The impairment loss was fully allocated to goodwill and included in ‘impairment
losses’ in the consolidated statement of financial performance.
Following the impairment loss recognised in the Group’s Americas CGU, the recoverable amount was equal to the carrying amount.
Therefore, any adverse movement in a key assumption would lead to further impairment.
16. TRADE & OTHER PAYABLES (CURRENT)
Trade payables & accruals
Vendor liability
17. 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 20
18. 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
2015
$’000
127,466
23,100
150,566
1,849
40
1,093
2,982
33,549
3,410
36,959
4,157
-
1,243
(959)
(1,484)
453
3,410
2014
$’000
115,409
30,845
146,254
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
The Group makes provision for legal claims not covered by the Group’s professional indemnity policy and as at 30 June 2015 an estimate of
the potential impact of these claims have been provided for.
74 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
19. OTHER CURRENT LIABILITIES
Unearned revenue
Deferred rent
20. LOANS & BORROWINGS (NON-CURRENT)
Lease liabilities
Hire purchase liabilities
Bank loans
Long term notes
2015
$’000
40,187
2,860
43,047
1,580
-
192,870
198,658
393,108
2014
$’000
47,289
1,017
48,306
3,548
40
299,339
-
302,927
Long Term Notes
On 15 August 2014, the Group closed long term note issue in the US Private Placement debt market. The note is subject to a fixed rate of
interest and is denominated in US dollars with a $65.8 million tranche maturing August 2021 and a $132.9 million tranche maturing August 2024.
The proceeds were used to repay a portion of the Group’s existing bank loans.
The long term note has been designated as part of a fair value hedge in relation to interest rate risk management. The note carrying value includes
a fair value adjustment uplift of $4.1 million (2014: Nil), being the revaluation of the debt for the hedged risk. This fair value loss in the carrying
value of the notes is offset by a gain of $4.1 million (2014: Nil) on the interest rate swap instruments which are designated as an effective fair
value hedge and recognised as a fair value derivative asset (note 12).
Interest is payable semi-annually to noteholders. The weighted average interest rate (including the impact of interest rate hedge) of the long term
note as at 30 June 2015 is 1.74 per cent (2014: Nil).
Under the terms of the note agreement, the Company and a number of its wholly-owned subsidiaries jointly and severally guarantee and indemnify
the noteholders in relation to the issuer’s obligations.
Bank Loans
The Group has bank loans of $194.0 million (2014: $300.5 million) as at 30 June 2015 with weighted average interest rate of 1.75 per cent
(2014: 1.94 per cent). Funding available to the Group from undrawn facilities is $258.9 million (2014: $72.1 million). The loans disclosed as current
represents amounts repayable within one year.
The Group’s facility limits comprise working capital facilities of $10.0 million (2014: $10.0 million) and US$15.0 million (2014: US$15.0 million) as
well as a multi-currency bilateral revolving term facility of US$330.0 million (2014: US$330.0 million). The Group completed a one year extension of
the revolving term facility during the year extending the maturity until December 2019.
There were no bank overdrafts in existence at 30 June 2015 (2014: Nil).
Under the terms of the agreements, the Company and a number of its wholly-owned subsidiaries jointly and severally guarantee and indemnify the
banks in relation to each borrower’s obligations.
21. LONG-TERM PROVISIONS
Employee benefits
22. OTHER NON-CURRENT LIABILITIES
Deferred rent
Other
2015
$’000
2014
$’000
10,342
12,854
589
287
876
854
252
1,106
ANNUAL REPORT 2015 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
23. ISSUED CAPITAL OF CARDNO LIMITED
Balance at the beginning of the period
Shares issued during the period:
> Dividend reinvestment scheme
> Shares issued for cash (net of transaction costs)
> Employee Tax Exempt Share Acquisition Plan
> Employee share based payments
> Own shares issued (i)
> Exercise of Performance Options (ii)
30 June 2015
30 June 2014
No. of
shares
$’000
No. of
shares
$’000
162,627,638
623,875
143,726,327
500,374
1,667,137
1,088,757
-
-
250,000
-
7,397
6,115
-
2,946
1,328
-
872,488
15,077,784
351,039
-
2,600,000
-
5,658
92,966
2,255
4,790
17,832
-
Balance at the end of the year
165,633,532
641,661
162,627,638
623,875
(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 2015, 245,831 (2014: 2,481,030) 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 24).
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 opportunity 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
1 November
2011
1 November
2014
1 November
2015
Weighted average exercise price
Weighted average remaining contract life
Total expense recognised Nil (2014: $510,034)
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
Number of
Performance
Options as
at 30 June
2015
5.26
0.81
3,053,000
5.26
-
-
3,053,000
5.26
-
-
-
-
-
0.00
0 days
76 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
23. ISSUED CAPITAL OF CARDNO LIMITED continued
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)
≥40% (12% pa)
% of Performance Options
in Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
There were no Performance Options granted in FY2015. 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.
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
2015
Number of
Performance
Rights as
at 30 June
2015
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
23 October
2014
23 October
2017
23 October
2018
10 November
2014
10 November
2017
10 November
2018
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
TSR
EPS Growth
4.21
2.81
4.38
2.97
6.74
4.46
6.68
4.43
5.50
3.99
6.10
4.84
4.63
2.28
4.47
TSR
1.96
Total expense recognised $2,662,501 (2014: $2,290,744)
55,000
55,000
208,750
208,750
60,000
60,000
704,270
704,270
80,000
80,000
939,960
939,960
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99,000
99,000
1,400,784
1,400,784
33,663
33,663
127,767
127,767
-
-
68,787
68,787
-
-
70,200
70,200
-
-
1,780
1,780
21,337
21,337
75,164
75,164
-
-
5,819
5,819
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
60,000
635,483
635,483
80,000
80,000
869,760
869,760
99,000
99,000
1,399,004
1,399,004
ANNUAL REPORT 2015 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
23. 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 2015 include share price of $5.46 for Performance
Rights granted on 23 October 2014 (2014: $6.49, 17 October 2013) and $5.27 for Performance Rights granted on 10 November 2014 (2014: $7.19,
11 November 2013), expected price volatility of 30 per cent and 30 per cent respectively (2014: 31 per cent and 31 per cent), expected dividend yield
of 5.5 per cent (2014: 5.5 per cent) and risk free interest rate of 2.57 per cent and 2.57 per cent (2014: 2.99 per cent and 3.06 per cent).
The Performance Rights are subject to performance hurdles measured over three financial years. 50 per cent of the Performance Rights may
vest, on a sliding scale, in accordance with the following scale:
TSR of Cardno Relative
to TSRs of Companies in
Comparator Group
Over 3 Years
<50th percentile
50th percentile
>50th & <75th percentiles
75th percentile and above
% of 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)
≥40% (12% pa)
% of Performance
Rights to Vest
(Tranche 2 50%)
0%
30%
Pro rata
70%
Pro rata
100%
Employee Share Acquisition Plans (ESAP)
No shares were issued under the ESAP in FY2015. In prior years, shares were issued under the ESAP in accordance with thresholds set out
in plans approved by shareholders at the 2009 AGM. It provided 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 had worked an average of 100
hours or more per month were entitled to $500 of shares and employees with 6 to 12 months service were entitled to $250 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.
24. RESERVES
Foreign Currency Translation Reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign Group entities where their functional currency is different to the presentation currency of the reporting entity as well as from the
translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
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 2015 the
Group held 357,716 of the Company’s shares (2014: 353,547).
78 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
25. 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
Impairment loss
Gain/(loss) on sale of property, plant and equipment
Unrealised foreign exchange (gain)/loss
Net unrealised (gain)/loss on fair value hedge
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
2015
$’000
2014
$’000
(145,168)
78,134
32,821
224,023
185
(9,036)
83
2,946
(7,687)
(25,153)
7,918
5,556
(8,593)
(1,024)
(13,218)
4,002
(16,785)
4,761
(7,677)
(767)
936
48,123
26,493
-
(518)
(727)
-
7,033
190
(8,343)
5,632
(1,717)
(1,826)
(123)
(3,445)
(16,122)
7,332
(1,702)
(2,000)
(4,007)
327
84,611
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
ANNUAL REPORT 2015 79
2015
$’000
2014
$’000
25. 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)
84,750
85,885
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 $27,094 (2014: $154,863) by means of finance leases.
These acquisitions are not reflected in the cash flow statement.
(d) Acquisition of entities
Details of significant acquisitions are set out in note 34. 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 and 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
* Comparative information has been restated (refer to note 34)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
170,044
25,003
195,047
6,779
49,673
-
4,186
26,496
7,851
(15,221)
(1,341)
(1,318)
77,105
117,942
195,047
170,044
(6,779)
163,265
80 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
26. 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 17)
Non-current (note 20)
(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
2015
$’000
2,251
1,779
-
4,030
(561)
3,469
1,889
1,580
-
3,469
1,889
1,580
3,469
2014
$’000
2,491
4,152
-
6,643
(1,054)
5,589
2,001
3,588
-
5,589
2,001
3,588
5,589
43,123
80,317
15,779
139,219
40,445
87,431
18,400
146,276
The Group leases office premises under non-cancellable operating leases, with terms varying from three 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 and equipment under terms between two and five years as well as
software licenses with a term of three years subject to annual review based on the number of licenses exercised.
27. EMPLOYEE BENEFITS
The aggregate employee benefit liability is comprised of:
Accrued wages, salaries and on-costs (included in payables)
Provisions (current) (note 18)
Provisions (non-current) (note 21)
Defined contribution superannuation expense
2015
$’000
25,655
33,549
10,342
69,546
21,221
2014
$’000
28,525
28,024
12,854
69,403
21,445
ANNUAL REPORT 2015 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
28. CONTINGENT LIABILITIES
As at the date of this report, there is no current litigation or pending or threatened litigation which would not be covered by professional
indemnity insurance or has not already been provided for in the financial statements of Cardno, or which is likely to have a material effect on
the financial performance of Cardno.
Cardno had contingent liabilities at 30 June 2015 in respect of:
Bank guarantees
2015
$’000
35,390
2014
$’000
26,043
Cardno has bank guarantee facilities/bond 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 $97.8 million (2014: $78.3 million).
These facilities are secured by an unlimited interlocking guarantee and indemnity or a parent company guarantee.
29. SUBSEQUENT EVENTS
On 17 August 2015, the Directors of Cardno Limited declared a final dividend of 7 cents per share (100 per cent franked) for the 2015
financial year. The dividend will be paid on 2 October 2015 to shareholders registered on 8 September 2015 and will total $11,594,347.
The dividend has not been provided for in the 30 June 2015 financial statements.
30. 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
2015
$
2014
$
(145,167,785)
78,134,444
No.
162,627,638
1,740,614
-
No.
143,726,327
6,329,844
100,022
Weighted average number of ordinary shares at 30 June
164,368,252
150,156,193
Basic Earnings per Share
Cents
(88.32)
Cents
52.04
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.
82 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
2015
$
2014
$
30. 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)
(145,167,785)
78,134,444
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
No.
164,368,252
-
No.
150,156,193
4,218,881
Weighted average number of ordinary shares (diluted) at 30 June
164,368,252
154,375,074
Diluted Earnings per Share
31. AUDITOR’S REMUNERATION
Audit services
Auditors of the Company
KPMG Australia:
> Audit and review of financial reports
> Other regulatory requirements
Overseas KPMG firms:
> Audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
> Other assurance services
Cents
(88.32)
2015
$
Cents
50.61
2014
$
579,500
-
445,000
-
887,528
1,467,028
737,795
1,182,795
6,000
6,000
6,000
6,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
32. 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
ANNUAL REPORT 2015 83
2015
$
3,698,041
204,314
532,949
1,661,724
6,097,028
2014
$
4,471,229
263,680
700,797
485,547
5,921,253
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.
33. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT
(a) Determination of fair values
In determining fair value measurement for disclosure purposes, the Group uses the following fair value measurement hierarchy that reflects
the significance of the inputs used in making the measurements:
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique
includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation.
(b) Fair values of financial instruments
The Group’s financial assets and liabilities are included in the balance sheet at amounts that approximate fair values with the exception
of fixed rate long term notes which have a fair value of $197.8 million (2014: Nil). The basis for determining fair value of long term notes
is calculated based on discounted expected future principal and interest cash flows, discounted at the market rate of interest at the
measurement date.
The fair value at 30 June 2015 of derivative assets (2014: Nil) held for risk management, which are the Group’s only financial instruments
carried at fair value, was a net gain of $4.1 million (2014: Nil) measured using Level 2 valuation techniques as defined in the fair value
hierarchy above. The Group does not have any financial instruments that are categorised as Level 1 or Level 3 in the fair value hierarchy.
84 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
33. 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 below.
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:
2015
$’000
47,496
164,276
12,757
24,365
248,894
2014
$’000
64,621
138,051
14,445
19,264
236,381
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
2015
2014
Gross
$’000
120,844
47,811
26,124
70,367
265,146
Impairment
$’000
-
-
-
16,252
16,252
Gross
$’000
131,727
37,009
21,911
57,110
247,757
Impairment
$’000
-
-
-
11,376
11,376
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.
ANNUAL REPORT 2015 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
33. 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
2015
$’000
11,376
9,487
(5,457)
-
846
16,252
2014
$’000
12,777
2,503
(4,125)
316
(95)
11,376
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 2015
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Long term notes
Derivative financial instruments
Interest rate swaps used for hedging
30 June 2014
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
Over 5 years
$’000
$’000
150,566
3,469
193,963
198,658
(4,129)
542,527
150,566
4,030
225,687
261,019
(6,696)
634,606
150,566
2,251
5,170
7,748
(3,752)
161,983
-
1,779
220,517
30,992
(3,640)
249,648
-
-
-
222,279
696
222,975
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
Over 5 years
$’000
$’000
146,254
5,589
300,487
452,330
146,254
6,643
350,170
503,067
146,254
2,491
7,380
156,125
-
4,152
342,789
346,941
-
-
-
-
The long term note includes US$50.0 million seven year tranche maturing August 2021 and US$100.0 million 10 year tranche maturing
August 2024. Bank loans are term facilities maturing in December 2019.
The gross outflows/(inflows) disclosed in the tables above for derivative financial assets represent the contractual undiscounted cash flows
of derivative financial instruments held for risk management purposes and which are usually not closed out prior to contractual maturity.
The disclosure shows net cash flow amounts for derivatives that are net cash settled.
86 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
33. 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 $357.3 million
(2014: $294.0 million) denominated in US dollars (USD) and $12.8 million (2014: $10.8 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. Cardno also has
working capital loans totalling $25.2 million (2014: Nil) denominated in USD and $0.2 million (2014: Nil) denominated in GBP.
As at 30 June 2015, a 10 per cent strengthening of the Australian dollar against the USD and GBP would have increased equity by
$34.8 million (2014: $26.7 million) and $1.2 million (2014: $1.0 million) respectively. A 10 per cent weakening of the Australian dollar
against the USD and GBP would have decreased equity by $42.5 million (2014: $32.7 million) and $1.4 million (2014: $1.2 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
Effect of interest rate swaps*
Fixed rate instruments
Finance leases & hire purchase
Bank loans
Long term notes
Effect of interest rate swaps*
*Represents the net notional amount of interest rate swaps used for hedging.
June 2015
June 2014
Effective
Interest
Rate
0.62%
1.74%
6.30%
-
3.98%
Effective
Interest
Rate
1.43%
1.94%
6.48%
1.94%
-
Balance
$’000
84,750
(193,963)
(109,213)
(194,502)
(303,715)
(3,469)
-
(198,658)
(202,127)
194,502
(7,625)
Balance
$’000
85,885
(299,339)
(213,454)
-
(213,454)
(5,589)
(1,148)
-
(6,737)
-
(6,737)
ANNUAL REPORT 2015 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
33. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT continued
Group sensitivity
Cash flow sensitivity analysis for variable rate instruments
At 30 June 2015, 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 $1,063,000 higher/lower (2014: $747,000 higher/lower), mainly as a result of lower/higher interest expense
on variable term debt partially offset by higher/lower interest income from cash and cash equivalents. There have been no changes in the
underlying assumptions from the previous year.
Fair value sensitivity analysis for fixed rate instruments
The Group has designated interest rate contracts as hedging instruments under a fair value hedge accounting model in relation to its fixed rate
long term notes. The interest rate contracts swap the fixed interest payable on the long term loan notes to variable interest rates for the term
of the debt. In accordance with the Group’s accounting policy (refer note 1(q)(i)) changes in fair value of the interest rate contracts together
with the change in fair value of the debt arising from changes in interest rates are recognised in the profit and loss (to the extent the fair value
hedge is effective). In 2015, the change in fair value of interest rate contracts was $4.1 million (2014: Nil) and was offset in the Group’s profit
and loss statement by change in fair value of the hedged risk of $4.1 million (2014:Nil). A change of 50 basis points in interest rates at the
reporting date would not materially impact the Group’s profit and loss before income tax (2014: Nil).
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.
34. BUSINESS COMBINATIONS
Year Ended 30 June 2015
(a) Businesses acquired
There were no acquisitions made during the year ended 30 June 2015.
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.
88 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
34. BUSINESS COMBINATIONS continued
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
HWA
$’000
17,654
3,451
2,385
23,490
Americas
PPI
$’000
150,189
17,491
-
167,680
ITT
$’000
2,201
1,676
-
3,877
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. This was achieved and paid during the year 30 June 2015.
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).
ANNUAL REPORT 2015 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
34. BUSINESS COMBINATIONS continued
(c) Assets acquired and liabilities assumed at the date of acquisition
2014
Americas
Cash
Receivables
Property, plant and equipment
Inventories
Deferred revenue
Intangible assets
Creditors & borrowings
Deferred taxes
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
-
23,859
(12,401)
(1,341)
(733)
66,325
ITT*
$’000
2,140
259
6
842
(509)
-
(673)
-
(71)
1,994
* At 30 June 2014, the Group had completed the accounting for the acquisition of PPI and ITT on a provisional basis. The finalisation of the assessment of the fair values of the
identifiable assets and liabilities acquired resulted in adjustments to previously reported items and in particular, the recognition of identifiable intangible assets separate from
goodwill. Comparative information has been restated to recognise the adjustments as if they had been completed at the acquisition date in accordance with the requirements
of accounting standards.
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.
(d) Goodwill arising on acquisition
2014
Consideration transferred
Less: fair value of net identifiable assets acquired
Goodwill arising on acquisition
HWA
$’000
23,490
(8,786)
14,704
Americas
PPI
$’000
167,680
(66,325)
101,355
ITT
$’000
3,877
(1,994)
1,883
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
2014
$’000
170,044
(6,779)
163,265
90 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
35. SEGMENT INFORMATION
Cardno has two 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 reportable segments:
> Professional Services Asia Pacific – provides consulting engineering, planning, surveying, landscape architecture, environmental
services, electrical engineering, geotechnical services as well as managing aid projects on behalf of unilateral and multilateral
government agencies and private clients in that region.
> Professional Services Americas – provides consulting engineering, planning, surveying, landscape architecture, environmental services
and software sales globally. It also manages aid projects on behalf of unilateral and multilateral government agencies and private
clients in that region.
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.
2015
Professional Services
Asia Pacific
Professional Services
Americas
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
Impairment losses
$’000
364,135
136,299
(3,168)
497,266
211
497,477
2,413
38,779
396,248
81,167
9,220
10,491
-
Total
$’000
1,058,409
404,332
(40,835)
1,421,906
4,504
1,426,410
$’000
694,274
268,033
(37,667)
924,640
4,293
928,933
-
2,413
(178,186)
(139,407)
857,136
1,253,384
148,435
229,602
24,205
22,330
33,425
32,821
224,023
224,023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
35. SEGMENT INFORMATION continued
2014*
Professional Services
Asia Pacific
Professional Services
Americas
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
$’000
412,234
129,875
(8,111)
533,998
234
534,232
2,415
56,366
409,376
88,791
8,121
11,649
* The Group has changed the composition of its reportable segments during the year end and restates its comparative information accordingly.
ANNUAL REPORT 2015 91
Total
$’000
976,743
342,992
(14,270)
1,305,465
3,154
1,308,619
$’000
564,509
213,117
(6,159)
771,467
2,920
774,387
-
2,415
63,232
119,598
876,831
1,286,207
143,197
231,988
144,837
152,958
14,844
26,493
92 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
35. 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
2015
$’000
1,426,410
506
1,426,916
(139,407)
506
-
(11,179)
(9,538)
(159,618)
14,450
(145,168)
1,253,384
7,400
72,332
1,333,116
229,602
401,576
32,430
663,608
2014
$’000
1,308,619
978
1,309,597
119,598
978
3,453
(8,465)
(8,798)
106,766
(28,632)
78,134
1,286,207
20,484
20,288
1,326,978
231,988
300,487
30,988
563,463
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
2015
2014
Total
Non-Current
Assets
$’000
254,915
376,354
12,669
83,429
58,541
785,908
Revenues
$’000
384,705
830,208
121,469
90,028
-
1,426,410
Total
Non-Current
Assets
$’000
262,889
460,479
25,358
73,407
20,294
842,427
Revenues
$’000
466,268
721,295
77,528
43,528
-
1,308,619
ANNUAL REPORT 2015 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
36. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2015 the parent Company of Cardno was Cardno Limited.
Results of the parent entity
Profit / (loss) 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
2015
$’000
(5,758)
-
(5,758)
696,610
904,099
273,720
273,720
641,661
-
(11,282)
630,379
2014
$’000
39,191
-
39,191
553,234
862,344
194,541
194,541
623,875
-
43,928
667,803
2,018
2,107
A multiple guarantee facility is available to Cardno totalling $15 million (2014: $15 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.
94 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
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 2015 is set out as follows:
Statement of comprehensive income and retained earnings
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Impairment losses
Finance costs
Other expenses
Profit / (loss) before income tax
Income tax expense
Net profit / (loss) 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
2015
$’000
451,550
(191,314)
(104,714)
(80,672)
(84)
(162,760)
(9,380)
10,119
(87,225)
(19,103)
(106,358)
17,744
(88,614)
96,236
(17,744)
(49,452)
(59,574)
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
(59,574)
96,236
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
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, including derivatives
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
ANNUAL REPORT 2015 95
2015
$’000
2,024
1,091,398
32,351
1,063
1,126,836
-
361,814
129
17,167
41,849
-
420,959
1,547,795
500,441
-
11,226
15,393
9,089
536,149
391,528
5,577
10,008
-
407,113
943,262
604,533
641,661
22,446
(59,574)
604,533
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
-
10,561
13,911
12,174
475,116
303,081
5,643
10,867
-
319,591
794,707
724,892
623,875
4,781
96,236
724,892
96 CARDNO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
38. CONTROLLED ENTITIES
Cardno’s significant subsidiaries are listed below.
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, Inc.
Cardno Emerging Markets Belgium s.a.
Cardno (NT) Pty Ltd
Cardno (PNG) Ltd
XP Software Pty Ltd
XP Software, Inc.
XP Software Solutions Ltd
Cardno Construction Sciences Pty Ltd
Cardno ITC Pty Ltd
Cardno Australian Underground Services Pty Ltd
Environmental Resolutions, Inc
ENTRIX, Inc.
ENTRIX Americas, SA
J.F. New & Associates, Inc.
Cardno Roadtest Pty Ltd
Cardno BEC Pty Ltd
Cardno BEC (Qld) Pty Ltd
Cardno (Colombia) S.A.S.
Cardno Emerging Markets (USA), Ltd
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
Australia
Papua New Guinea
Australia
United States of America
United Kingdom
Australia
Australia
Australia
United States of America
United States of America
Ecuador
United States of America
Australia
Australia
Australia
Colombia
United States of America
Equity
Holding
2015
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
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%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
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 LP Pty Ltd
Moriedale Holdings Pty Ltd
Geotech Solutions Pty Limited
Cardno GS, Inc.
ATC Group Holdings, Inc.
Marshall Miller & Associates, Inc.
Cardno EM-Assist, Inc.
Cardno BTO Limited
Cardno Hard & Forester Pty Ltd
Cardno ChemRisk, LLC
Caminosca S.A.S
Cardno Geotech Pty Ltd
Cardno Haynes Whaley, Inc.
Cardno PPI, LLC
Cardno PPI Engineering & Construction Services, LLC
Cardno PPI Quality & Asset Management, LLC
Cardno PPI Technology Services, LLC
PPI Australia Pty Ltd
PPI Quality & Asset Management (Singapore) Pte Ltd
PPI Quality & Asset Management (Malaysia) Sdn Bhd
Cardno PPI Technology Services Nigeria Limited
Cardno South Africa (Pty) Ltd
I.T. Transport Limited
Country of
Incorporation
Australia
Australia
Australia
Australia
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
South America
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
Australia
Singapore
Malaysia
Nigeria
South Africa
United Kingdom
ANNUAL REPORT 2015 97
Equity
Holding
2015
100%
100%
100%
100%
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
98 CARDNO LIMITED
DIRECTORS’ DECLARATION
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
1.
In the opinion of the Directors of Cardno Limited (the Company):
(a)
the consolidated financial statements and notes set out on pages 53 to 97 and the Remuneration Report in section 11 of the Directors’
Report, set out on pages 38 to 50, 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 2015 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 2015.
4. The Directors draw attention to note 1(a) to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Dated at Brisbane on the 17th day of August 2015.
Signed in accordance with a resolution of the Directors.
JOHN MARLAY
Chairman
ANNUAL REPORT 2015 99
INDEPENDENT AUDITOR’S REPORT
ABCD
Independent auditor’s report to the members of Cardno Limited
Report on the financial report
We have audited the accompanying financial report of Cardno Limited (the Company), which
comprises the consolidated statement of financial position as at 30 June 2015, and the
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.
100 CARDNO LIMITED
INDEPENDENT AUDITOR’S REPORT continued
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of
its performance for the year ended on that date; and
(ii) 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 2015. 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 2015
complies with Section 300A of the Corporations Act 2001.
KPMG
Mitchell Petrie
Partner
Brisbane
17 August 2015
ADDITIONAL SHAREHOLDER INFORMATION
Cardno Limited and its Controlled Entities for the year ended 30 June 2015
DISTRIBUTION OF ORDINARY SHAREHOLDERS
The number of shareholders, by size of holding, as at 11 August 2015 were:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
ANNUAL REPORT 2015 101
Ordinary Shares
Number of
Holders
8,346
4,062
1,262
1,227
111
15,008
Number of
Shares
2,617,200
10,396,510
9,291,236
29,526,974
113,801,612
165,633,532
As at 11 August 2015 there were 3,379 shareholders who held less than a marketable parcel of 180 shares.
TWENTY LARGEST ORDINARY SHAREHOLDERS
The names of the twenty largest holders as at 11 August 2015 were:
MALVERN CAPITAL INVESTMENTS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
TREVOR JOHNSON
HALJAN MANAGEMENT LP
BRAMS HOLDING LP
LAGOMAR VENTURES LP
MILTON CORPORATION LIMITED
ANDREW DAVID BUCKLEY
MR STEPHEN GRANT PEDERICK + MISS DENISE ANNE PEDERICK
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