CARDNO
2020 ANNUAL
REPORT
for the year ended
30 June 2020
Cardno Limited
ABN 70 108 112 303
and its controlled entities
Chairman’s Letter
Dear Shareholder,
The year has brought many challenges from the COVID-19 pandemic and natural disasters such as the 2020
bushfires in Australia to the demerger of our Quality, Testing and Measurement business in October 2019 to
create Intega Group Limited (“Intega”).
With this as a backdrop, I am pleased to report that your company achieved results that were both up on last
year and ahead of guidance with an underlying Earnings Before Interest Tax Depreciation Amortisation and
Impairment of $43.0 million (stated on a pre AASB 16 basis). This represents an 11% increase on last year’s
pro-forma result. Pleasingly, this is the fourth year in a row where your company has hit or exceeded market
guidance.
With the demerger of Intega behind us, Cardno is now a focused consulting and professional services company
delivering infrastructure, environmental and social projects in the Americas, Asia-Pacific and various emerging
nations.
IMPACT OF COVID-19 PANDEMIC
Cardno is fortunate in that all of our clients are B2B (business to business) or B2G (business to government).
As such Cardno largely has been able to continue to deliver our services and solutions despite the COVID-19
pandemic. This performance is testimony to the hard work, ingenuity and adaptability of our ~4,400 people
around the world.
The majority of Cardno’s divisions met or exceeded their internal second half FY20 forecast with the company
benefitting from existing work in hand and projects that were already obligated by clients and approved by
government agencies.
While the future impact of COVID-19 on our business is not completely clear, we remain conservative in our
approach to FY21, focusing on what we can control. We actively evaluate and mitigate COVID-19 lockdowns
or restrictions as they emerge in various markets.
OPERATING HIGHLIGHTS
Asia Pacific
As reported last year the Group result is pleasing, but it masks continued financial underperformance in the
Asia Pacific Consulting Division. Our Asia Pacific leadership has spent the year building on Cardno’s core
strengths of Transport, Water, Buildings and Environment. We believe the business is now in good shape
operationally to take advantage of market opportunities, with the Asia Pacific business exiting FY20 with an
improved run-rate over the prior year.
Americas
The Americas had an exceptional year with all businesses meeting or exceeding targets. As Susan details in
her Managing Director’s report, the over performance in some parts of our business is unlikely to continue
through the full FY21 year as certain projects come to an end. We enter FY21 confident in the strength of
performance and profit margins that are more consistent with industry standards.
International Development
Our International Development (ID) business remains a core focus for the company. We remain committed to
the important work we do in support of our clients in bringing positive social and economic impact across the
developing world. The division’s performance was negatively impacted in Europe largely due to political
uncertainty. However, our ID Asia Pacific, Americas and African operations all reported strong performance.
Page | 1
People
I want to thank all our staff for their efforts in this last year under the most trying of circumstances. We have
found ourselves becoming more integral to our clients and we have had to become more innovative in the way
we have been able to serve them. Employee engagement and the desire to deliver quality outcomes for our
clients has never been stronger.
A special thank you to the entire senior management team for the way in which they have handled all the
challenges of the last 6 months in particular, taking care of clients, staff and each other.
Most importantly I would like to thank our clients, banking partners and shareholders for their continued support
and belief in us.
MICHAEL ALSCHER
Chairman
Page | 2
CEO’s Letter
Dear Shareholder,
When I am actively recruiting new staff to Cardno I confidently say that I feel that there has never been a better
time to be at Cardno. That feeling is rooted in the excitement I have with regard to the people, projects and
purpose of mission that defines Cardno. FY20 was a very challenging year not just for Cardno but for the world.
Despite the demerger, a CEO transition, devastating Australian bushfires, and a global pandemic, we emerged
stronger. We emerged stronger financially with 11.1% EBITDAI growth year over year (pre AASB 16 basis) to
$43.0 million, operating cash flow of $43.5 million (pre AASB 16 basis), and a conservative balance sheet (net
debt of $0.6 million), but even more importantly as a global team operating with a single vision, purpose, and
values.
I have had the privilege to be with Cardno since 2015. As you are aware the past five years have been a time
of tremendous challenge. It required us to roll up our sleeves and do the hard work of integrating people,
processes, and systems to begin to realise the true potential of our acquisition growth history. Interestingly
enough I feel very strongly that the demerger was also key to realising our potential. The successful demerger
of our Quality, Testing and Measurement businesses to create Intega Group Limited in October 2019 provided
the honing of services needed to rationalise a Cardno corporate identity. We have moved from a company
trying to be all things to all clients, to a firm that provides consulting solutions to the most complex problems in
the health sciences, energy and natural resources, infrastructure and international development.
OUR COVID-19 RESPONSE
On the heels of the demerger I shared our H1 results and mentioned that our next great challenge would be to
move Cardno from being a company with global offices to a truly global company. Only a few weeks later on 11
March 2020, COVID-19 was declared a pandemic by the World Health Organisation, and that process began in
earnest. Our staff and leadership teams locked arms to mobilise the majority of our staff to Work From Home
(WFH), where the majority of the them remain today. We instituted the Global and Regional Incident
Management Teams and Global and Regional Business Continuity Team to address the myriad of issues that
we were fielding each day, and interestingly a global company was born. Each day we used our shared values
to guide our decision making.
We benefited greatly having our own experts in house. ChemRisk, our team of leading epidemiologists,
toxicologists, and health scientists are one of the reasons that Cardno has had such a low rate of work related
COVID-19 exposure. ChemRisk’s research and guidance informed not only the Cardno response to safety and
business continuity, but that of a long list of clients. In addition, ChemRisk was acknowledged by Lawrence
Slone, CEO of the American Industrial Hygiene Association for the tremendous leadership on AIHA’s COVID-
19 Open America Guidelines Task Force.
Page | 3
CEO’s Letter (continued)
SAFETY is Cardo's number 1 core value. Therefore, it drove each and every business decision we made as we
navigated those early days of response, with the herculean efforts of our International Development team to
first demobilise staff from the field and our companywide mobilisation of the work force to WFH.
SAFETY continues to drive each decision we make today about office reopening and field protocols.
COVID-19 has stressed mental and emotional health throughout the world. Our marketing and communications
team rose to the challenges to create My Cardno Village where we could get together virtually, and crowd
source solutions to the different challenges we face. My Cardno Village includes Kids Corner, Cardno Cooks,
The Wellness Difference, The Cardno Lounge and a variety of communities geared to different needs and
interests.
For the past five years Cardno has continually increased the fiscal discipline with which we run the business.
We have increased the granularity, transparency, and visibility of key business metrics over the past few years.
That work served us well. COVID-19’s major impact was to increase the frequency with which we monitor
segments of the data set, especially with regard to cash flow and backlog.
DIVISION HIGHLIGHTS
Asia Pacific
Asia Pacific’s rebuilding extended well into FY20 burdened by an inefficient operating model and too many
initiatives resulting in a disappointing EBITDAI of $1.0 million (pre AASB 16 basis). H2 saw a significant move
to simplicity with the Asia Pacific leadership team focusing on fewer more impactful drivers like backlog growth,
staffing profile optimisation, and margin protection. Critically Asia Pacific continued to build backlog, now up 3%
year-over-year, not just in size but more significantly in quality. The mid-year staff profile work completed in Q3
was instrumental in weathering Q4, and delivering a Q4 trend consistent with FY21 performance expectations.
Finally, significant progress was made in Q4 establishing consistent financial and project controls and reporting,
leveraging Americas’ means and methods.
Asia Pacific enters FY21 with a strong backlog position, positive trending financial performance, a continued
focus on financial discipline and excellent project delivery.
Americas
Americas had a record year of performance resulting in EBITDAI of $38.7 million (pre AASB 16 basis). This
result was largely driven by specialty service offerings in the health sciences, natural resources and asset
management in Science & Environment (S&E) and Government Services (GS) and achieved through effective
prepositioning and key account management. We were the beneficiaries of a perfect storm of demand in FY20.
Important de-risking was successful with the demerger (reducing conflicts of interest impacting growth) and the
divestiture of the structural engineering business.
While we expect strong performance from the Americas for FY21, we are not counting on a repeat of the over
performance in FY20 from S&E and GS. All groups have strong growth and profitability goals consistent with
industry margins. Americas enters FY21 with momentum and a commitment for acquisitive growth for the
Infrastructure Division with a particular emphasis on Transport and Water.
International Development
International Development had a good year resulting in EBITDAI of $2.7 million (pre AASB 16 basis). The result
was due to the very strong performance of the US and APAC International Development (ID) businesses which
buoyed underperformance in Europe due to political uncertainty. ID’s performance was despite the onset of
COVID-19 and their outstanding feat demobilising and then subsequently remobilising personnel hand-in-hand
with our clients’ project needs and requirements, with the utmost duty of care.
COVID-19 has presented enormous challenges to all of our clients, maybe none more than on our ID clients,
donor organisations driving global solutions to promote environmental, economic, and health resiliency and
sustainability. For FY21 our priority is helping these clients deliver on their respective missions in the wake of
COVID-19.
Page | 4
CEO’s Letter (continued)
EXPECTATIONS FOR FY21
If you are one of the ~4,400 (and growing) staff members of Cardno, Thank You! For FY21 you can expect:
>
the safety and security of employment with benefits and performance based pay,
> engagement, communication, voice
> career path clarity with feedback, opportunity and investment in development
> meaningful commitment to Diversity, Inclusion and Equity
If you are one of our 6,373 clients, Thank You! For FY21 you can expect:
> global thought leadership with accessible local delivery
> delivery based on agreed upon scope, schedule, and budget
>
innovation to increase quality and drive down cost
> partnership for business solutions
If you are one of our ~9,400 shareholders, Thank You! For FY21 you can expect:
> consistent and reliable performance
> stability of the Leadership Team
> getting APAC right
> Environmental, Social and Governance Leadership
I am very proud of how the Cardno team supported our clients, weathered the storm that was FY20 and
delivered for our shareholders. I look forward to a successful FY21.
SUSAN REISBORD
Managing Director and Chief Executive Officer
Page | 5
Consolidated Financial Statements
for the year ended 30 June 2020
CONTENTS
Directors’ Report ..................................................................................................................................................... 7
Auditor’s Independence Declaration ..................................................................................................................... 31
Consolidated Statement of Financial Performance .............................................................................................. 32
Consolidated Statement of Other Comprehensive Income .................................................................................. 33
Consolidated Statement of Financial Position ...................................................................................................... 34
Consolidated Statement of Changes in Equity ..................................................................................................... 36
Consolidated Statement of Cash Flows ............................................................................................................... 37
Notes to the Consolidated Financial Statements.................................................................................................. 38
Directors’ Declaration ........................................................................................................................................... 95
Independent Auditor’s Report ............................................................................................................................... 96
Additional Shareholder Information .................................................................................................................... 102
Corporate Directory ............................................................................................................................................ 104
The Company’s Corporate Governance Statement last updated and Board approved on 25 August 2020
can be viewed on the website at www.cardno.com/corporategovernance.
Page | 6
Directors’ Report
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 2020.
DIRECTORS
The names of Directors of the Company at any time during or since the end of the financial year are set out
below. Directors were in office for this entire period unless otherwise stated.
Michael Alscher
Non-Executive Director and Chairman
Susan Reisbord
Chief Executive Officer and Managing Director (appointed 4 November 2019)
Jeffrey Forbes
Non-Executive Director
Rebecca Ranich
Non-Executive Director
Steven Sherman
Non-Executive Director
Nathanial Thomson
Non-Executive Director
Neville Buch
Non-Executive Director (resigned 31 October 2019)
Ian Ball
Chief Executive Officer and Managing Director (resigned 4 November 2019)
COMPANY SECRETARIES
Peter Barker
Chief Financial Officer & Joint Company Secretary1
Cherie O’Riordan
Group Financial Controller & Joint Company Secretary (appointed 31 October
2019)
Vikash Naidu
General Counsel & Joint Company Secretary (resigned 31 October 2019)
Courtney Marsden
Legal Counsel & Joint Company Secretary (resigned 31 October 2019)
1 Peter Barker gave notice of his resignation on 5 June 2020. The company has agreed with Mr Barker that he will finish at Cardno as Chief
Financial Officer at the end of February 2021.
Qualifications of Company Secretaries
Peter Barker – BComm, MBA, FCPA
Cherie O’Riordan – BEcon/Arts, CA
Particulars of Directors’ qualifications, experience and special responsibilities are listed on the next page.
Page | 7
Directors’ Report (continued)
Director
Experience
Special
Responsibilities
Michael
Alscher
Michael Alscher joined as a Non-Executive Director of Cardno Limited in November 2015.
He then became Chairman in January 2016.
Non-Executive
Chairman
He is the Managing Partner and founder of Crescent Capital Partners, a leading
Australian based private equity firm with $2 billion in funds under management,
specialising in high growth companies and certain industries such as healthcare and the
services sector across multiple disciplines.
Prior to founding Crescent in 2000, Michael was a strategy consultant at Bain
International and the LEK Partnership as well as holding several senior operating roles.
Michael is currently a Non-Executive Director of ClearView Limited, Intega Group Limited
and the Non-Executive Chair of Australian Clinical Labs Pty Ltd, National Dental Care Pty
Ltd, and 24-7Healthcare Pty Limited.
Michael holds a Bachelor of Commerce (Finance & Mathematics) from the University of
New South Wales.
Chairman of
Remuneration
Committee
Member of
Audit, Risk &
Compliance
Committee
Susan
Reisbord
As the Chief Executive Officer and Manager Director of Cardno, Susan Reisbord is
responsible for setting the strategic direction for the Global business, ensuring excellent
project delivery and client satisfaction, driving profitable growth, and sustaining an
inclusive culture where careers can thrive.
Susan’s experience spans thirty years in the consulting engineering and construction
industry. Prior to joining Cardno, she was a senior executive with GHD and MWH Global
in North America. Susan’s strategic leadership and business development skills were
honed as a front-line Client Service Manager for clients such as the City of New York and
General Electric.
Susan holds a Master of Physical Sciences (Geochemistry) from the University of
Chicago and a Bachelor of Science (Geology) from the University of Cincinnati.
Susan is also the CEO of Cardno’s Americas Region.
Jeff
Forbes
Jeff Forbes joined Cardno Limited as a Non-Executive Director in January 2016. He is an
experienced Finance Executive and Company Director with over 30 years’ merger and
acquisition, equity and capital markets and project development experience. He has
significant expertise in the financing and development of resource projects in both
Australia and in the Asia Pacific Region.
Jeff previously worked at Cardno as CFO and Company Secretary before leaving to
commence Non-Executive director roles. He has spent time as a member of the
remuneration and audit and risk committees of both listed and unlisted companies in a
variety of sectors.
Prior to his experience at Cardno, Jeff was the CFO, Company Secretary and
Executive Director at Highlands Pacific Limited, a PNG-based mining and exploration
company. He has significant experience in capital raisings and during his career has
worked for a number of major companies including Rio Tinto, BHP and CSR.
Jeff is the Non-Executive Chair of Herron Todd White Group and Non-Executive
Director of PWR Holdings Ltd and Intega Group Limited. Previously he was a Non-
Executive Director of Talon Petroleum Limited, Exoma Energy Limited, Affinity
Education Limited and CMI Limited.
Jeff holds a Bachelor of Commerce from the University of Newcastle and is a
Graduate of the Australian Institute of Company Directors.
Rebecca
Ranich
Rebecca Ranich joined Cardno Limited as a Non-Executive Director in March 2018. She
has nearly 30 years of experience, and over her career, has led transformational business
initiatives, forged global strategic alliances and led new market ventures in the energy and
infrastructure sectors.
Chief Executive
Officer and
Managing Director
CEO, Americas
Non-Executive
Director
Audit, Risk &
Compliance
Committee
Chairman
Member of
Remuneration
Committee
Non-Executive
Director
Member of
Remuneration
Committee
Page | 8
Directors’ Report (continued)
Rebecca is an investor in and advisor to emerging technology companies, and is a
member of the Technology Commercialization Panel for the Johns Hopkins University
Applied Physics Laboratory.
Rebecca is a former Director at Deloitte Consulting, LLP where she led Energy and
Sustainability Investment Advisory services for public sector clients. Prior to Deloitte, she
was a Vice President at Michael Baker Corporation (Baker).
Rebecca also serves as a Director on the Board of the National Fuel Gas Corporation
(NYSE: NFG, (Chair of the Governance and Nominating Committee, member of the Audit
Committee)); a Vice-Chairman of the Board of the Gas Technology Institute (and Chair
Investment Committee) and serves on the Advisory Board of Yet Analytics, Inc.
Steven
Sherman
Steven Sherman joined Cardno Limited as a Non-Executive Director in January 2016. He
is a Chartered Accountant with more than 35 years’ experience in corporate restructuring
and insolvency. His experience ranges from advising on and facilitating restructuring and
turnaround strategies for large listed enterprises to the re-engineering of entire business
across multiple international jurisdictions.
During his time in private practice Steven was the National Managing Partner of one of
Australia’s largest independent internationally operating restructuring and corporate
advisory firms. He has practiced in the area of financial and operational restructuring and
provided professional advice to multinational financiers and lending syndicates as well as
company boards and executives.
Steven is a Non-Executive Director of Intega Group Limited.
Steven has a Bachelor of Commerce from the University of NSW. He is a Fellow of the
Institute of Chartered Accountants and a member of the Australian Institute of Company
Directors.
Nathanial
Thomson
Nathanial Thomson became a Non-Executive Director of Cardno Limited in May 2016. He
is a Partner at Crescent Capital Partners and responsible for the assessment of potential
investment opportunities and management of investee companies.
Prior to joining Crescent in 2004, Nathanial was a strategy Consultant for McKinsey & Co.
where he executed multiple strategy and operational assignments across industry sectors
and geographies.
He is currently a Non-Executive Director of ClearView Limited, Australian Clinical Labs
Pty Ltd, National Dental Care Pty Ltd and 24-7Healthcare Pty Limited.
Nathanial holds a Bachelor of Commerce with honours and a Bachelor of Law with
honours from the University of Western Australia.
Non-Executive
Director
Member of
Audit, Risk &
Compliance
Committee
Member of
Remuneration
Committee
Non-Executive
Director
Member of
Remuneration
Committee
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.
On 31 October 2019, the company implemented the demerger of its Quality, Testing and Measurement (QTM)
businesses into a separate ASX listed entity named Intega Group Limited. There were no changes to the
principal activities of the Cardno Group during the financial year under review other than the divestment of its
QTM businesses.
DIVIDENDS
No dividends declared for the financial years ended 30 June 2020 or 30 June 2019.
Page | 9
Directors’ Report (continued)
EVENTS SUBSEQUENT TO REPORTING DATE
There has not arisen in the interval between the end of the year and the date of this report, any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the
operations of the Group or the results of those operations.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
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.
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.
INDEMNIFICATION AND INSURANCE OF OFFICERS
The Company has agreements with each of the Directors and Officers of the Company in office at the date of
this report indemnifying them against liabilities to any person other than the Company or a related body
corporate that may arise from their acting as Directors or Officers of the Company. The indemnity continues to
have effect when the Directors and Officers cease to hold office other than where such liabilities arise out of
conduct involving a wilful breach of duty by the Officers or the improper use by the Directors or Officers of
their position or of information to gain advantage for themselves or someone else or to cause detriment to
the Company.
The Directors have not included details of the nature of the liabilities covered or the amount of the premium
paid in respect of the Directors’ and Officers’ liability, as such disclosures are prohibited under the terms of
the contract.
Page | 10
Directors’ Report (continued)
REVIEW OF RESULTS
PERFORMANCE ($’m)
Gross Revenue
Fee Revenue
Underlying EBITDAI 1
Underlying EBITDAI Pre AASB16 impact 2
Underlying NOPAT 3
Loss before tax from continuing operations
Profit before tax from discontinued operations
Net loss after tax from continuing operations
Net profit/(loss) after tax from discontinued operations
Net profit/(loss) after tax
Operating Cash Flow (Pre AASB 16 impact)
EPS from continuing operations – basic (cents)
EPS - basic (cents)
NOPAT EPS - basic (cents)
2020
978.3
677.1
73.5
43.0
9.4
(49.6)
120.7
(67.1)
123.7
56.6
43.5
(15.07)
12.71
2.10
Restated
2019
936.9
606.9
38.7
38.7
16.3
(30.0)
0.4
(40.6)
(3.8)
(44.5)
40.8
(8.93)
(9.78)
3.57
1 Underlying EBITDAI = EBIT plus underlying adjustments, depreciation, amortisation and impairment losses
2 Underlying EBITDAI = EBIT plus underlying adjustments, depreciation, amortisation and impairment losses pre AASB16 impact
3 Underlying NOPAT = NPAT plus underlying adjustments and impairment losses
EBITDAI 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 32. 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 lease arrangements.
NOPAT is unaudited. However, it is based on amounts extracted from the audited financial statements. This metric provides a measure of Cardno’s operating
performance before the impact of underlying adjustments such as impairment losses of goodwill and acquisition related costs.
Cardno has reported a net profit after tax (NPAT) of $56.6 million for the year ended 30 June 2020. The result
from continuing operations is a net loss after tax of $67.1 million, which includes an impairment loss of $69.6
million recorded against the goodwill of the Asia Pacific business during the first half. The result from
discontinued operations is an NPAT of $123.7 million, which includes a demerger gain of $119.1 million.
On 31 October 2019, the Company implemented the demerger of its Quality, Testing and Measurement (QTM)
businesses into a separate ASX listed entity named Intega Group Limited. The results presented in these
financial statements include the results of the divested Intega Group entities for the period 1 July 2019 to 31
October 2019 and are presented as discontinued operations. Comparative information has also been restated
to present the prior year results of the divested entities as discontinued operations.
On 31 May 2020, the Company sold the assets of its Structures business in the Americas segment. The results
of the Structures business to 31 May 2020 are also presented as discontinued operations and comparative
information has been restated to present this disposed business as discontinued operations.
This is the first set of the Group’s annual financial statements in which AASB 16 Leases has been applied.
Under the transition method chosen, comparative information has not been restated, therefore the 30 June
2020 financial statements are not comparable to prior years.
Balance Sheet
The company refinanced its bank debt facilities in October 2019 as a result of the demerger. The new facility is
a three-year multi-currency cash advance and letter of credit syndicated facility, expiring in October 2022. The
company is in a net debt (cash on hand less debt) position of $0.6 million at the end of 30 June 2020 (net debt
of $82.1 million at 30 June 2019).
Page | 11
Directors’ Report (continued)
The Group’s balance sheet has been impacted by the demerger of its QTM businesses including a reduction in
share capital of $391.5 million. See note 3 for further details on the discontinued operations.
Cash Flow
The Company recorded a net operating cash inflow (pre AASB 16 basis) for the year of $43.5 million (inflow
$40.8 million FY19). This is primarily driven by a strong operating result for the year and improved working
capital management, through increased efficiency in the conversion of direct labour costs to debtors then
customer receipts.
Impact of COVID-19 (“COVID”) Pandemic
FY20
Cardno is fortunate in that all of our clients around the world are B2B (business to business) or B2G (business
to government), and we support government clients at federal, state and municipal levels.
The majority of our divisions met or exceeded their 2H FY20 forecast (produced in January 2020).
Overall, the company experienced a mildly positive impact to the P&L as a result of COVID, due to (1) various
stimulus packages invoked in Australia and the United States, and (2) projects that were previously subject to
various approvals being fast-tracked. The exception is our US Government business where a number of
COVID related base closures shifted projects “to the right” (projects delayed not cancelled).
We largely sell consultants’ time and field services that are often deemed essential. Our clients and staff have
adapted to working remotely. Backlog has not materially changed through COVID.
Cardno did not receive Job Keeper. Other than a $12 million payment deferral of Australian GST (no P&L
impact) at June 2020, Cardno has not received any material governmental assistance associated with COVID-
19.
The company experienced a degree of productivity loss during “COVID-transition” (to/from work from home),
but our staff adapted quickly and were largely able to continue to support our clients around the world. In
March we repatriated many of our International Development staff (e.g. Australian nationals directed to “return
home”) from in-station roles in emerging nations. Many of these people are now back in the field.
Debtors+WIP DSO is at a company record low (80 days vs 87 last year and 78 best practice). In reviewing the
balance sheet and all assumption based financial projections and accruals and provisions, management have
considered the impact of COVID. In particular, management determined that a further Expected Credit Loss
provision was appropriate at financial year end.
Beyond FY20
Cardno post-demerger is a focused consulting and professional services company and continues to benefit
from a substantial portfolio effect delivering infrastructure, environmental and social projects in the Americas,
Asia Pacific and International Development.
Cardno’s strategy is to plan for impacts from COVID, but be sufficiently nimble to enable us to react to an
evolving environment. We test backlog monthly and staff utilisation weekly, to flex resources as necessary.
Cardno does not have a material exposure to developers and landlords most immediately impacted by COVID
economics. We are closely watching our municipal clients’ funding streams.
A number of US cities and states have enacted or are considering “COVID-leave”, whereby an employee with
COVID or awaiting a test results receives paid leave to stay home (an employer cost).
While our people have shown impressive ingenuity, and adapted quickly to the evolving environment created
by COVID, continued work from home requirements and needs are bound to stress the mental wellbeing of our
staff. We are closely monitoring the impact.
Page | 12
Directors’ Report (continued)
SEGMENT OVERVIEW
Asia Pacific (APAC)
The APAC business provides services in civil, structural, water, environmental, coastal, bridge, geotechnical,
subsurface utility, traffic and transport engineering as well as environmental science, surveying, landscape
architecture, planning and asset management.
Asia Pacific Consulting EBITDA margins declined from 5.2% to 0.5% with slower than anticipated
implementation of business and project disciplines and associated “project clean up”. The division was
restructured in H2 creating a solid platform for growth going forward. Asia Pacific is in year one of a two year
rebuilding plan with a focus on the basics of project and business controls with activities focused on margin lift.
This includes a simplification of the major services lines to transport, water, buildings and environment. Year-
end backlog is up 2.9%, a number of major projects have been won and are under way. The company expects
a modest sustainable improvement into FY21 and beyond.
Americas
The Americas business delivers services to private and public sector clients across the environmental, water,
transportation, energy and resources, land, buildings and management sectors.
The Americas division’s fee revenue was up 23% on prior year and EBITDA margin increased from 10.4% to
13.9%. While all Americas divisions achieved or exceeded their FY20 internal budget, Cardno’s toxicology
business Chemrisk provided a significant contribution to the FY20 results, driven by US certification work. This
work is scheduled to end in September 2020, thus the company expects that margins achieved in FY20 will
flatten. Year-end backlog is up 4.6% year on year. All businesses within the Americas increased their backlog,
but particularly the Government Services business (mainly serving the US Department of Defence).
International Development (ID)
The ID business designs and implements large-scale sustainable solutions for both development assistance
agencies and private clients. The ID business generally has long term high value contracts, which have a high
‘pass through’ component - Cardno project manages the contract and receives a management fee for doing so.
The ID business generally operates on lower margins than our other divisions.
ID FY20 EBITDA margin is down from 2.7% to 1.4%, driven by under-performance from the ID European
businesses. By contrast, the ID Asia Pacific and Americas businesses performed to plan. Cardno continues its
business development initiatives with Asia Pacific and Americas clients and is de-emphasising its business
development in Europe. By narrowing focus to our traditionally stronger markets, margins are expected to
improve.
Backlog is driven by multi-year procurement cycles with government clients. It is down year on year by 8.5%.
The reduction in backlog represents where we are in the company’s major client procurement cycle.
Portfolio
Portfolio business includes Latin America, which while an integral part of the Group’s current suite of services,
is not considered to be core and hence has slightly different operating methodologies, environments and
markets.
Latin America’s underlying EBITDA is up on PCP by 358.1% primarily due to the improved performance and
growth of its Entrix business. Caminosca continues to wind down and incur some corporate costs such as legal
expenses, which have been excluded from the underlying result.
Page | 13
Asia Pacific
Americas
ID
Portfolio
Continuing operations EBITDAI3, 5
Adjust for AASB 16 impact
Adjusted EBITDAI3,5
Corporate
Total continuing operations
EBITDAI3, 5
Depreciation, impairment and
amortisation expenses
EBIT4,5
Finance costs
Foreign exchange gains/(losses)
Profit/(loss) from continuing
operations before income tax
Income tax (expense)/benefit6
Profit/(loss) from continuing
operations after income tax
Directors’ Report (continued)
SEGMENT OVERVIEW CONTINUED
$’000
Asia Pacific
Americas
ID
Portfolio
Statutory1
Financial year
2020
246,406
372,499
350,708
8,655
Restated
2019*
250,829
319,939
355,348
10,759
Gross Revenue
978,268
936,875
Underlying
Adjustments2
Financial year
2020
Restated
2019*
-
-
-
-
-
3,211
(2,249)
203
-
-
-
-
-
-
3,475
103
-
-
1,165
3,578
-
1,165
887
-
3,578
-
Underlying1
Financial year
2020
246,406
372,499
350,708
8,655
Restated
2019*
250,829
319,939
355,348
10,759
978,268
936,875
962
38,677
2,661
733
43,033
30,436
73,469
-
11,204
23,543
4,297
160
39,204
-
39,204
(504)
(2,249)
40,926
2,458
733
41,868
30,436
72,304
(887)
7,729
23,440
4,297
160
35,626
-
35,626
(504)
71,417
35,122
2,052
3,578
73,469
38,700
(108,592)
(37,175)
(11,791)
(598)
(57,917)
(22,794)
(7,190)
-
69,621
71,673
-
-
46,285
49,863
522
-
34,498
(11,791)
(598)
(38,971)
(11,632)
(49,564)
(17,514)
(29,984)
(10,660)
71,673
(976)
50,385
22,109
1,154
(18,490)
27,069
(6,668)
20,401
(9,506)
10,895
5,360
16,255
(67,078)
(40,644)
70,697
Discontinued operations, net of tax
123,664
(3,846)
(117,921)
Profit/(loss) after income tax
56,586
(44,490)
(47,224)
Attributable to:
Ordinary Equity holders
* Comparative information has been re-presented due to discontinued operations. See Note 3.
(44,490)
56,586
(47,224)
51,539
9,206
60,745
3,619
5,743
9,362
60,745
9,362
16,255
1.
2.
3.
4.
5.
The use of the term ‘Statutory’ refers to IFRS financial information and ‘Underlying’ refers to non-IFRS financial information. Underlying earnings are
categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS
information and are unaudited. Underlying adjustments have been considered in relation to their size and nature and have been adjusted from the
Statutory information, for disclosure purposes, to assist readers to better understand the financial performance of the underlying business in each
reporting period. These adjustments include transactions or costs that on their own or in combination with a number of similar transactions contribute to
more than five percent of profit/(loss) after tax. Underlying adjustments are assessed on a consistent basis year-on-year and include both favourable and
unfavourable items.
The exclusion of these items provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the Group.
Details of adjustments from Statutory to Underlying financial information are set out on page 15.
EBITDAI represents earnings before interest, income tax, depreciation, amortisation and impairment.
EBIT represents earnings before interest and income tax.
EBITDAI 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 32. These metrics provide a measure of Cardno’s performance before the impact of non-cash expense items,
such as depreciation, amortisation and impairment, as well as interest costs associated with Cardno’s external debt facility and lease arrangements.
Page | 14
Directors’ Report (continued)
SEGMENT OVERVIEW CONTINUED
Underlying Profit From Continuing and Discontinued Operations After
Income Tax (Attributable to Ordinary Equity Holders)
Underlying Adjustments to EBITDAI:
Onerous contracts and other costs associated with office rationalisation
and consolidation1
Costs associated with restructuring2
Acquisition related costs3
Legal costs
Foreign stamp duty4
Other
Release of provisions5
Total Underlying Adjustments to EBITDAI
Underlying Adjustments to Depreciation, Amortisation and
Impairment:
Impairment loss on goodwill6
Total Underlying Adjustments to Depreciation, Amortisation and
Impairment
Underlying Adjustments to Finance Costs:
Write off existing borrowing costs on debt refinance7
Total Underlying Adjustments to Finance Costs
Underlying Adjustments to Income Tax:
Tax effect of underlying adjustments
Valuation allowance against foreign tax credits8
Total Underlying Adjustments to Income Tax
Underlying adjustments relating to divested entities9
Total Underlying Adjustments to Discontinued Operations
Statutory Profit / (Loss) After Income Tax
(Attributable to Ordinary Equity Holders)
2020
$’000
Restated
2019
$’000
9,362
16,255
1,667
2,199
193
16
394
400
(2,817)
2,052
(517)
2,162
1,201
732
-
-
-
3,578
69,621
46,285
69,621
46,285
-
-
(5,332)
-
(5,332)
(113,565)
(113,565)
522
522
(4,493)
5,647
1,154
9,206
9,206
56,586
(44,490)
1.
2.
3.
4.
5.
6.
7.
8.
9.
Successful negotiations resulting in the release of prior year onerous lease provisions and other costs associated with the group wide office rationalisation and
consolidation project in the current year.
Prior year termination and redundancy costs associated with the Asia Pacific restructure. Current period costs associated with the restructuring of Group support
functions and further downsizing of the Asia Pacific segment.
Costs incurred in acquiring new businesses in the current and prior year, such as legal, due diligence and insurance costs.
Documentary stamp taxes paid on non-trade intercompany payables.
Release of US medical benefits self-insurance provision no longer required.
Impairment of goodwill relating to the APAC segment.
Break fees and write off of capitalised finance costs on previous debt facility a result of refinancing in December 2018.
Valuation allowance booked against foreign tax credits carried forward in the United States.
Includes costs incurred in relation to the Group demerger, net of the gain on demerge of $119.1 million and write back of the foreign currency translation reserve
relating to discontinued operations.
Page | 15
Directors’ Report (continued)
OUTLOOK
Cardno staff make a difference every day for our clients and stakeholders around the world. Key areas of focus
for the next twelve months are:
> Cardno will complete the transition from a company with global offices to a global company
> Environmental, Social and Governance (ESG) will become more prominent in establishing the Cardno
brand in how we operate and the services we offer
> The Asia Pacific business is in year one of a two year rebuilding plan starting with a focus on project and
business controls with activities focused on margin lift. This includes a simplification of the major service
lines to transport, water, buildings and environment
> The Americas’ businesses focus will be on maintaining momentum despite potential COVID-19 resurgence,
growing the Infrastructure business, and looking to build a Water/Wastewater division. Growth in
Infrastructure and Water/Wastewater may be achieved in part through conservatively funded acquisitions
>
International Development is pivoting resources to the IndoPacific for USAID and DFAT. Focus on re-
establishing brand eminence through enhanced client focus
> There remains significant opportunity for further simplification and lower cost to serve (e.g. moving to a
single global ERP – post demerger Transitional Services Agreement expiry)
> Delivering carefully considered and conservatively funded on-strategy ‘bolt-on’ style acquisitions to
supplement existing divisional businesses
DIRECTORS’ MEETINGS
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2020 is set out below:
No. of Meetings Held
Michael Alscher
Ian Ball (i)
Susan Reisbord (ii)
Neville Buch (iii)
Steven Sherman
Jeffrey Forbes
Nathanial Thomson
Rebecca Ranich
Board of Directors
Audit, Risk &
Compliance Committee
Remuneration
Committee (iv)
A
12
5
7
5
12
12
12
12
B
12
5
7
5
12
12
12
12
A
2
-
-
-
4
4
-
-
B
4
-
-
-
4
4
-
-
A
9
5
4
5
9
9
9
9
B
9
5
4
5
9
9
9
9
A = number of meetings attended
B = number of meetings held during the time the Director held office during the year or was a committee member
(i) Ian Ball resigned from his role as Chief Executive Officer on 4 November 2019
(ii) Susan Reisbord commenced as CEO and Managing Director on 4 November 2019
(iii) Neville Buch resigned from the Board and sub committees on 31 October 2019
(iv) Remuneration Committee meetings are held as part of the Board of Directors meetings, therefore non-members such as the CEO and other Non-Executive
Directors may attend by invitation.
INTERESTS
As at the date of this report, the interests of the Directors in the shares of Cardno Limited were:
Michael Alscher
Steven Sherman
Jeffrey Forbes
Nathanial Thomson
Rebecca Ranich
Susan Reisbord
Ordinary
Shares
Performance
Options
Performance
Rights
-
-
148,619
-
-
146,074
-
-
-
-
-
-
-
-
-
-
-
418,780
Page | 16
Directors’ Report (continued)
Remuneration Report (Audited)
This Remuneration Report (Report) outlines the remuneration arrangements for
Key Management Personnel (KMP) of the Group in accordance with the
requirements of the Corporations Act 2001 and its Regulations. The information
in this Report has been audited as required by section 308(3C) of the
Corporations Act 2001.
CONTENTS
The Report contains the following sections:
A. Key Management Personnel
B. Role of the Remuneration Committee
C. Non-Executive Directors’ Remuneration
D. Executive Remuneration Strategy and Structure
E. Executive Key Management Personnel – Contract Terms
F. Executive Key Management Personnel – Remuneration Tables
G. LTI Share Plans
H. The Group’s Performance
I. Other Related Party Transactions
A. KEY MANAGEMENT PERSONNEL
Key Management Personnel (KMP) are defined as those persons having authority and responsibility for
planning, directing and controlling the activities of the Group, directly or indirectly, including any Director
(whether Executive or otherwise) of the Company.
From financial year ended 30 June 2016 onward, Cardno has for the purposes of this Report, considered the
KMP to be the Chief Executive Officer (CEO), or Executive Chairman and Chief Financial Officer (CFO). Since
FY16 all forms of strategic and management decision making have been centralised with the CEO and CFO
(on behalf of the Board). The Company’s delegation of authority matrix was rewritten and strengthened thus
allowing a delegation of operational (but not management) authority that enables the separate divisions to
operate on a day-to-day basis. Members of management meet with the CEO weekly, and the CEO and CFO
monthly to enable appropriate management oversight.
The KMP disclosed for the financial year ended 30 June 2020 are detailed in the following table.
Name
Title
NON-EXECUTIVE DIRECTORS
Michael Alscher
Non-Executive Director and Chairman
Steven Sherman
Non-Executive Director
Jeffrey Forbes
Non-Executive Director
Nathanial Thomson
Non-Executive Director
Rebecca Ranich
Non-Executive Director
FORMER NON-EXECUTIVE DIRECTORS
Period KMP
(if less than full-year)
Neville Buch
Non-Executive Director
Resigned 31 October 2019
Page | 17
Directors’ Report (continued)
Name
Title
EXECUTIVES
Period KMP
(if less than full-year)
Susan Reisbord
Chief Executive Officer and Managing Director
Appointed 4 November 2019
Peter Barker
Chief Financial Officer
FORMER EXECUTIVES
Ian Ball
Chief Executive Officer and Managing Director
Ceased 4 November 2019
B. ROLE OF THE REMUNERATION COMMITTEE
The remuneration of Directors, the CEO, other KMP, managers and staff is reviewed by the Remuneration
Committee.
Board decisions on the remuneration of the CEO and KMP are made in the absence of the CEO and
executives.
When required, the Committee obtains independent advice from remuneration consultants on the
appropriateness of remuneration-based trends in comparative countries, both locally and internationally.
In the year ended 30 June 2020 the Committee commissioned the Godfrey Remuneration Group (GRG) to
advise on remuneration trends generally and on the future structure of the Long-Term Incentive (LTI) plan
specifically. GRG are an independent agency - their services were directly sourced and they were directly
appointed by the Remuneration Committee. GRG’s recommendations were made directly to the Remuneration
Committee and the Board is satisfied that the recommendation was free from undue influence by those key
management personnel to whom the recommendation related. Committee discussions regarding GRG’s
appointment and assessment of their recommendations were not held in the presence of the Chief Executive
Officer in order to maintain independence. GRG’s recommendations were considered by the Remuneration
Committee, and have been incorporated into the FY2020 LTI plan, which is proposed for shareholder
consideration at the company’s October 2020 Annual General Meeting. GRG also assisted Cardno with
preparation of the documentation for the LTI plan including plan rules, invitations, explanatory booklet, and
preparation of notices for plan approval by shareholders and grant to a director. GRG charged Cardno $25,300
(incl. GST) for all services provided as articulated above.
The Committee met nine times during the year and committee members’ attendance record is disclosed in the
table of Directors’ meetings.
C. NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-Executive Directors are paid a fee for being a Director of the Board and an additional fee if they chair
certain Board Committees. Non-Executive Director fees are not linked to the performance of the Group and
Non-Executive Directors do not participate in any of the Company’s incentive plans.
Non-Executive Director fees are reviewed annually, and are determined within an aggregate Directors’ fee pool
limit, which is periodically recommended for approval by shareholders. The Board seeks to set aggregate
remuneration at a level that provides the Company with the ability to attract and retain Directors of appropriate
calibre, whilst incurring a cost that is acceptable to shareholders.
The current aggregate fee limit of $1,150,000 was approved by shareholders at the Company’s 2014 Annual
General Meeting. There is no intention to increase Non-Executive Directors’ fees for the 2021 financial year.
The fee structure (which is inclusive of superannuation contributions (where compulsory) for Non-Executive
Directors) is detailed in the following table.
Page | 18
Directors’ Report (continued)
Australian based Board members (AUD)
Chairman
Non-Executive Director
US based Board members (USD)
Non-Executive Director
Board
$
Audit, Risk &
Compliance
Committee
$
200,000
100,000
27,273
13,500
100,000
11,000
Remuneration
Committee
$
-
-
-
The remuneration received by Non-Executive Directors for the years ended 30 June 2020 and 30 June 2019 is
set out in the following table.
NON-EXECUTIVE
Michael Alscher1
Neville Buch2
Steven Sherman
Jeffrey Forbes
Rebecca Ranich3
Nathanial Thomson
Robert Prieto4
Gary Jandegian5
Total 2020
Total 2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Salary and Fees
$
200,000
348,603
33,699
100,000
103,652
103,652
116,231
116,231
149,104
139,833
100,000
100,000
-
50,982
-
45,571
Superannuation
Benefits
$
-
-
-
-
9,847
9,847
11,042
11,042
-
-
-
-
-
-
-
-
Total
$
200,000
348,603
33,699
100,000
113,499
113,499
127,273
127,273
149,104
139,833
100,000
100,000
-
50,982
-
45,571
702,686
1,004,872
20,889
20,889
723,575
1,025,761
1 Michael Alscher's fees are paid to Crescent Capital Partners. Mr Alscher was an Executive Director until 9 August 2018, at which point he resumed his non-
executive status.
2 Neville Buch resigned from the board on 31 October 2019.
3Rebecca Ranich is paid in USD. The year on year delta in Ms Ranich’s reported remuneration reflects only the movement in the AUD/USD exchange rate.
4Robert Prieto resigned from the board on 24 October 2018.
5Gary Jandegian resigned from the board on 24 October 2018.
Page | 19
Directors’ Report (continued)
D. EXECUTIVE REMUNERATION STRATEGY AND STRUCTURE
The Board, has developed and adopted a remuneration structure driven by criteria which comprises a mix of
fixed and variable remuneration components as outlined below.
Total Fixed
Remuneration
(TFR)
Consists of base salary plus statutory superannuation contributions and other benefits.
KMP and senior managers receive a fixed remuneration package which is reviewed
annually by the Remuneration Committee and the Board taking into consideration the
responsibilities of the role, the qualifications and experience of the incumbent and
benchmark market data including those companies with which the Group competes
for talent.
In reviewing TFR the Committee and the Board takes into consideration business and
individual performance as well as the factors outlined above.
There are no guaranteed base pay increases included in any KMP contract.
Short-Term
Incentive (STI)
Target STI opportunities are expressed as a percentage of TFR.
For the year ended 30 June 2020, STI payments were determined by achievement of
financial and non-financial performance targets. The Committee and the Board are
responsible for reviewing the achievement of targets.
For Executive KMP’s, STI is assessed 100% against achievement of budgeted EBITDA for
the year. Payment of STI is based on the achievement of the following gates:
Long-Term
Incentive (LTI)
< 90% budget underlying EBITDA achieved
0% STI paid
90% budget underlying EBITDA achieved
50% STI paid
100% budget underlying EBITDA achieved
75% STI paid
> 110% budget underlying EBITDA achieved 100% STI paid
STI’s are paid in cash following the release of the audited financial results to the ASX.
Underlying EBITDA is measured on a pre AASB16 Leases (AASB 16) basis.
Target LTI opportunities are expressed as a percentage of TFR.
Performance Rights issued under the previous LTI plan are tested against the relevant
performance hurdles at the end of the performance period.
For FY20 and beyond, the focus of the LTI scheme will aim to ensure an incentive
program that fundamentally underpins sustained improved performance of the business
and creation of shareholder value. The scheme will provide for the issue of Performance
Rights for nil consideration to KMP and senior management who contribute to the
achievement of performance hurdles over a three-year period related to targeted (pre
AASB 16) EBITDA per share growth (EBITDAPSG) and total shareholder returns (TSR).
Refer section G for the terms and conditions of the Performance Rights and Options.
Subject to meeting the relevant performance hurdles, upon vesting, the Performance
Rights will be converted into ordinary shares in the Company.
Page | 20
Directors’ Report (continued)
E. EXECUTIVE KEY MANAGEMENT PERSONNEL - CONTRACT TERMS
KMP are employed on the basis of Executive Service Agreements (Agreements). These Agreements contain a
range of terms and conditions including remuneration and other benefits, notice periods and termination
benefits. The key contract terms are as follows:
> Contract term: no fixed term.
> Notice Period: (resignation or termination without cause) 6 months.
The Company may terminate Agreements immediately for cause, in which case the Executive is not entitled to
any payment in lieu of notice or contractual compensation. Termination of employment with cause would result
in no STI awards and all unvested LTI to lapse or vest based on the LTI plan rules at the Board discretion. In
the event of termination without cause, the Group is required to pay Executive KMP their notice period of 6
months of salary.
The Agreements also provide for an Executive’s participation in the STI and LTI plans subject to Board
approval of their eligibility and in accordance with the terms and conditions of the respective plans.
Susan Reisbord joined the company in 2015 and was promoted to CEO and Managing Director on 4 November
2019. Ms Reisbord is paid, effective the date of her appointment as CEO and Managing Director, Total Fixed
Remuneration (TFR) of USD $500,000 per annum. She is eligible to receive an STI up to a maximum of 40% of
TFR, subject to certain Cardno Group and Americas Region EBITDA budget thresholds being met. For FY20
Ms Reisbord was awarded her STI on the basis of 110% of both EBITDA targets being met, resulting in 100%
payout of the STI, and the STI to be paid was calculated on a pro-rata basis to reflect her period of continuous
service during the financial year across both her Americas CEO and company CEO and Managing Director
roles. EBITDA is measured on a pre AASB 16 basis.
For each financial year, Ms Reisbord will be awarded a long-term incentive in the form of Performance Rights
equivalent to 60% of her base salary. The number of Performance Rights to be granted will be calculated
based on the LTI opportunity, converted using a fair value methodology, in accordance with Cardno’s internal
policy and vesting criteria as per the senior management LTI plan. Ms Reisbord is also entitled annually to take
up to 25% of her LTI benefit in options as opposed to Performance Rights. The calculation of those options and
vesting conditions will be determined by the board. The 2020 LTI plan is in the process of being finalised and
will be proposed for shareholder consideration at the company’s October 2020 Annual General Meeting.
Ms Reisbord has a six month notice required by either party on termination as well as a six month restraint
period.
Peter Barker commenced as CFO on 1 February 2016 and is paid TFR of AU $487,003 per annum. Mr Barker
did not receive a pay review this financial year. He is eligible to receive an STI up to a maximum of 50% of
TFR, subject to certain Cardno Group EBITDA budget thresholds being met. For FY20, Mr Barker was awarded
his STI on the basis of 110% of the Group EBITDA target being met, resulting in 100% payout of the STI.
EBITDA is measured on a pre AASB16 basis.
In 2017, 2018 and 2019, Mr Barker was awarded an LTI in the form of performance rights equivalent to 50% of
TFR. The number of performance rights granted were calculated based on the LTI opportunity (50% of TFR),
converted using a fair value methodology, in accordance with Cardno’s internal policy. The 2020 LTI plan is in
the process of being finalised and will be proposed for shareholder consideration at the company’s October
2020 Annual General Meeting.
Mr Barker has a six month notice required by either party on termination as well as a six month restraint period.
F. EXECUTIVE KEY MANAGEMENT PERSONNEL - REMUNERATION TABLES
The remuneration received by Executive KMP for the years ended 30 June 2020 and 30 June 2019 is set out in
the following table.
The share-based payments reflect the amounts required under the Australian Accounting Standards to be
expensed by the Company in relation to any long term incentives and the deferral component of any short-term
incentives. It represents the value of vested and unvested equity expensed during the period including
reversals for forfeited equity incentives and the probability of the incentives vesting. These figures are
accounting values and not the amounts actually received by Executive KMP. Whether or not Executive KMP
realise any value from these share based payments will depend upon the satisfaction of the applicable
performance conditions.
Page | 21
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Directors’ Report (continued)
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Page | 22
Directors’ Report (continued)
Executive Key Management Personnel – 2020 Short Term Incentive
As stated in section E, Executive KMP are entitled to receive a short-term incentive, subject to certain Cardno
Group and Americas Region EBITDA budget thresholds being met.
The relevant budget threshold is the company’s internal EBITDA budget for the year – which is set by the
Board as part of the annual budget review process. The FY20 EBITDA budget was set by the Board at its June
2019 meeting.
The company’s actual performance versus budget is reviewed by the Board as part of the process of
completion of the full year accounts and annual report.
In FY20 both the Cardno Group and the Americas Region actual EBITDA achieved were greater than 110% of
the internal budgeted EBITDA for the year. As a result, both KMP’s were awarded 100% of their STI.
EBITDA is determined on a pre AASB 16 basis.
Proportion of Performance Related Remuneration
Percentage of Target
STI Received
Percentage of Remuneration
Performance Related1
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbord
Peter Barker
Ian Ball
2020
2019
2020
2019
2020
2019
100%
-
100%
80%
-
100%
32.9%
-
42.3%
40.5%
-
51.7%
1 Calculated based on STI cash, other cash bonuses and share based payments as a percentage of total remuneration.
Performance Rights and Options Granted and Movement During the Year
The aggregate number of Performance Rights and Options in the Company that were granted as
compensation, exercised and lapsed to each Executive KMP for the year ended 30 June 2020 is set out in the
following table.
Balance at 1
July 2019
Rights /
Options
Exercised
During the
Year
Value of
Rights /
Options
Exercised
During the
Year1
Lapsed /
Cancelled
During the
Year
Value of
Lapsed /
Cancelled2
Balance at 30
June 2020
Maximum
Total Yet to
Vest
No.
No.
$
No.
$
No.
No.
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan
Reisbord
Peter
Barker
Ian Ball
710,928
(146,074)
(93,195)
(146,074)
(135,118)
418,780
418,780
653,386
(140,671)
(89,748)
(140,671)
(130,121)
372,044
372,044
5,600,000
-
-
(5,600,000)
(586,805)
-
-
1.
2.
Calculated per Performance Right as the market value of Cardno shares on the date of exercise.
Value is calculated at fair market value of the performance right on date of grant. Lapsed performance rights were granted in 2016.
Details of vesting profiles of Performance Rights and Options granted as remuneration to Key Management
Personnel of Cardno and still outstanding at 30 June 2020, including those granted during the financial year are
as follows in the table below:
Page | 23
Directors’ Report (continued)
Year
Outstanding
Performance
Rights/Options
Grant Date Vesting Date % Vested
in Year
% Forfeited/
lapsed in
Year
Fair Value at
Grant Date
Tranche 1
Fair Value at
Grant Date
Tranche 2
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbord1
Peter Barker
Ian Ball
2017
2018
2019
2017
2018
2019
2019
292,148
1-Nov-16
15-Oct-19
50.0%
50.0%
182,378
1-Nov-17
1-Nov-20
236,402
1-Nov-18
1-Nov-21
0.0%
0.0%
0.0%
0.0%
281,342
1-Nov-16
15-Oct-19
50.0%
50.0%
172,554
1-Nov-17
1-Nov-20
199,490
1-Nov-18
1-Nov-21
3,600,000 24-Oct-18
9-Aug-22
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.64
1.06
1.08
0.64
1.06
1.08
0.53
0.44
1 Ms Reisbord’s performance rights were granted prior to her commencement as CEO and Managing Director on 4 November 2019.
2,000,000 24-Oct-18
9-Aug-23
100.0%
0.0%
2019
0.93
1.35
N/A
0.93
1.35
N/A
N/A
N/A
The 2020 LTI plan is in the process of being finalised and will be proposed for shareholder consideration at the
company’s October 2020 Annual General Meeting.
The number of Performance Rights and Options included in the balance at 30 June 2020 for the Executive
KMP is set out in the following table.
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbord
Peter Barker
Balance at
30 June 2020
Vested & Exercisable at the
End of the Year
418,780
372,044
-
-
Subsequent to year end, no Performance Rights or Options have been issued to KMP. No terms of
Performance Rights transactions have been altered by the Company during the reporting period, other than
those associated with the demerger as outlined in section G below. The Board has not exercised its discretion
to allow the early vesting of any Performance Rights under any of the incentive plans.
Securities Trading Policy
The Company prohibits KMP from entering into any hedging arrangements or acquiring financial products
(such as equity swaps, caps and collars or other hedging products) over unvested Performance Rights
which have the effect of reducing or limiting exposure to risks associated with the market value of the
Company’s securities.
No Directors or Senior Executives may directly or indirectly enter into any margin loan facility against the
Company’s securities unless the prior written consent of the Chairman of the Board is obtained.
G. LTI SHARE PLANS
Existing LTI plans are delivered through the Performance Equity Plan (PEP). Under this plan any LTI award is
paid in Performance Rights.
Performance Period:
The performance period for Performance Rights issued under the PEP is three years and the rights vest
subject to the achievement of Performance Hurdles detailed below. The issue of Performance Rights is
discretionary and applied to eligible staff considered to have been high performers in their respective roles.
All Performance Rights expire on the earlier of their expiry date or termination of employment. There are no
voting or dividend rights attached to the Performance Rights.
Page | 24
Directors’ Report (continued)
2020 LTI Plan Performance Hurdles:
In the year ended 30 June 2020 the Committee commissioned the Godfrey Remuneration Group (GRG) to
advise on remuneration trends generally and on the future structure of the Long Term Incentive (LTI) plan
specifically. GRG’s recommendations have been incorporated into the FY2020 LTI plan, which is proposed for
shareholder consideration at the company’s October 2020 Annual General Meeting.
Performance Rights are issued in two tranches (subject to the employee continuing to be employed by the
Cardno Group):
Tranche 1: Indexed Total Shareholder Return (iTSR)
Vesting criteria:
- 100% vest at Target with no ability to earn above target.
- 25% vest at Threshold, vesting proportionally from Threshold to Target.
The TSR benchmark measure is the ASX Small Industrials Total Return Index, with vesting criteria subject to
Cardno’s performance against this index.
Tranche 2: EBITDA Per Share Growth (EBITDAPSG)
Vesting criteria:
- 100% vest at Target with no ability to earn above target.
- 25% vest at Threshold, vesting proportionally from Threshold to Target.
2019 LTI Plan Performance Hurdles:
Performance Rights issued are subject to a Group EBITDA performance hurdle in order for the Performance
Rights to vest on the third anniversary of the grant date, in addition to the employee continuing to be employed
by the Cardno Group.
In order to ensure employees are not disadvantaged by the Demerger of Intega Group Limited and the overall
value of the Performance Rights granted to the employees is preserved, the vesting terms for the 2019
Performance Rights were amended under rule 13.2 of the Previous Cardno Plan as follows:
•
One Performance Right will entitle the employee to a number of fully paid Cardno Shares
calculated in accordance with the following formula (rounded down to the nearest whole
number) to ensure the employee receives the same economic value as they would have
received had the Demerger not taken place:
(SP(Cardno) × NS(Cardno)) + (SP(Intega) × NS(Intega))
1
Number of Cardno shares
X SP(Cardno)
Where:
NS(Cardno) means the total number of Cardno Shares on issue on the Reference Date.
NS(Intega) means the total number of Intega Shares on issue on the Reference Date.
Page | 25
Directors’ Report (continued)
Number of Cardno Shares means the total number of Cardno Shares on issue on the date immediately prior
to completion of the Demerger.
Reference Date means the date immediately prior to the vesting date.
SP(Cardno) means the VWAP of a Cardno Share over a 20-day trading period on the ASX ending on and
including the Reference Date.
SP(Intega) means the VWAP of Intega Shares over a 20-day trading period on the ASX ending on and
including the Reference Date.
VWAP for this purpose means the volume weighted average price on the ASX over the relevant reference
trading period.
The EBITDA hurdle remains that 50 per cent of the Performance Rights will vest if the Combined EBITDA for
the full 2021 financial year exceeds $73.5 million, with the remaining 50 per cent vesting in straight line growth
against a Combined EBITDA of $77.5 million. Combined EBITDA for this purpose is calculated by reference to
the following formula:
Combined EBITDA = Cardno EBITDA + Intega EBITDA
EBITDA means, in relation to an entity, the audited consolidated profit from ordinary activities of that entity
before borrowing costs and income tax, plus depreciation, plus amortisation of identifiable, intangible assets for
the relevant corporate group, as determined on a consistent basis with the entity’s statutory accounts, adjusted
for the impact of any acquisition, divestment or changes to the planned capital expenditure determined by the
board of that entity in its absolute discretion at the time of the acquisition, divestment or change to planned
capital expenditure. EBITDA is determined on a pre AASB 16 basis.
Cardno EBITDA means the EBITDA for Cardno for the financial year to 30 June 2021.
Intega EBITDA means the EBITDA for Intega for the financial year to 30 June 2021.
As a result of the modifications made to the Plan as outlined above, an updated valuation was completed on
the modification date to determine the fair value of the share based payment arrangement. The valuation
indicated that there was no material change and therefore no changes required in how to account for these
arrangements.
2018 LTI Plan Performance Hurdles:
Performance Rights issued were allocated in two equal tranches: 50% is subject to the achievement of a Share
Price performance hurdle and 50% is subject to a Group EBITDA performance hurdle. These conditions are
tested independently.
The Performance Rights are subject to performance hurdles of Share Price (Tranche 1: 50%), the volume
weighted average price of Shares at the close of trading over a 20 day trading period immediately prior to the
Company’s 2020 AGM, must be at least $1.10 per share, and Group underlying EBITDA (Tranche 2: 50%) for
the full 2020 financial year must exceed $60 million (adjusted for acquisitions).
In order to ensure employees are not disadvantaged by the Demerger and the overall value of the Performance
Rights granted to the employees is preserved, the vesting terms for the 2018 Performance Rights were
amended under rule 13.2 of the Previous Cardno Plan as follows:
•
One Performance Right will entitle the employee to a number of fully paid Cardno Shares
calculated in accordance with the following formula (rounded down to the nearest whole
number) to ensure the employee receives the same economic value as they would have
received had the Demerger not taken place:
____________________
Combined share price
SP(Cardno)
Page | 26
Directors’ Report (continued)
Where:
Combined Share Price has the meaning set out below, except that the ‘Reference Date’ means the date
immediately prior to the vesting date.
Reference Date, for the purposes of this formula, means the date immediately prior to the vesting date.
SP(Cardno) means the VWAP of Cardno Share over a 20-day trading period on the ASX ending on and
including the Reference Date.
VWAP has the meaning given below.
- The share price hurdle remains $1.10 but share price for this purpose is calculated by reference to the
following formula:
(SP(Cardno) × NS(Cardno)) + (SP(Intega) × NS(Intega))
Number of Cardno shares
Where:
NS(Cardno) means the total number of Cardno Shares on issue on the Reference Date.
NS(Intega) means the total number of Intega Shares on issue on the Reference Date.
Number of Cardno Shares means the total number of Cardno Shares on issue on the date immediately prior
to completion of the Demerger.
Reference Date means the date immediately prior to the vesting date.
SP(Cardno) means the VWAP of a Cardno Share over a 20-day trading period on the ASX ending on and
including the Reference Date.
SP(Intega) means the VWAP of Intega Shares over a 20-day trading period on the ASX ending on and
including the Reference Date.
VWAP for this purpose means the volume weighted average price on the ASX over the relevant reference
trading period.
The EBITDA hurdle remains in excess of $60 million, but EBITDA for this purpose is ‘Combined EBITDA’
calculated by reference to the following formula:
Combined EBITDA = Cardno EBITDA + Intega EBITDA
Where:
EBITDA means, in relation to an entity, the audited consolidated profit from ordinary activities of that entity
before borrowing costs and income tax, plus depreciation, plus amortisation of identifiable, intangible assets for
the relevant corporate group, as determined on a consistent basis with the entity’s statutory accounts, adjusted
for the impact of any acquisition, divestment or changes to the planned capital expenditure determined by the
board of that entity in its absolute discretion at the time of the acquisition, divestment or change to planned
capital expenditure. EBITDA is determined on a pre AASB 16 basis.
Cardno EBITDA means the EBITDA for Cardno for the financial year to 30 June 2020.
Intega EBITDA means the EBITDA for Intega for the financial year to 30 June 2020.
As a result of the modifications made to the Plan as outlined above, an updated valuation was completed on
the modification date to determine the fair value of the share based payment arrangement. The valuation
indicated that there was no material change and therefore no changes required in how to account for these
arrangements.
Page | 27
Directors’ Report (continued)
2017 LTI Plan
The performance rights granted under the 2017 LTI Plan were due to vest on 1 November 2019. The 2017 Plan
was modified at the Board’s discretion to accelerate the vesting date by 16 days to ensure vesting occurred
prior to the demerger. This change did not impact on the remuneration outcomes or expense recognised in
relation to the share-based payment plan.
The majority of the Performance Rights, in accordance with the terms of their grant, were allocated in two equal
tranches: 50% subject to the achievement of a Share Price hurdle and 50% subject to a Group EBITDA
performance hurdle. The remainder of the Performance Rights were subject to an EBITDA hurdle only.
The Share Price hurdle was tested on 9 October 2019 and it was determined that this hurdle was satisfied
under the 2017 LTI Plan. The Group EBITDA performance hurdle was not satisfied and this portion of the
Performance Rights lapsed on 15 October 2019.
Number of Performance Rights:
There are currently 2,047,863 Performance Rights on issue at 30 June 2020. As a share-based payment, these
Performance Rights were valued for accounting and reporting purposes using the Monte Carlo simulation and Black
Scholes method.
Assumption at fair value1
Share Price
Risk Free Rate
Dividend Yield
Volatility
20192
$1.08
-
0%
-
2018
$1.35
1.99%
0%
63%
2017
$0.93
1.725%
0%
60%
1. The 2020 LTI plan is in the process of being finalised and will be proposed for shareholder consideration at the company’s October 2020 Annual General Meeting.
2. Due to the 2019 LTI Plan being only subject to an EBITDA non-market based performance hurdle, the valuation is based on the grant date share price.
There were 5,600,000 CEO Performance Options on issue at 30 June 2019, which were forfeited in November 2019
on the resignation of Mr Ian Ball from his role as CEO and Managing Director. As the Performance Options have no
market based performance hurdle, they were valued for accounting and reporting purposes using the Binomial
method.
Assumption at fair value
Share Price
Risk Free Rate Tranche 1
Risk Free Rate Tranche 2
Dividend Yield
Volatility
Post-vesting withdrawal rate
2019
$1.075
2.49%
2.57%
0%
45%
0%
Page | 28
Directors’ Report (continued)
H. THE GROUP’S PERFORMANCE
The Group’s performance in respect of the current financial year and the previous four financial years is
summarised in the following table.
20201
2019
2018
2017
2016
Gross Revenue (000’s)
Underlying EBITDAI (000’s)2
$978,268 $1,319,272 $1,116,975 $1,182,030 $1,164,613
$43,033
$62,006
$56,210
$44,005
$42,036
Net Profit / (Loss) After Tax (000’s)
$56,586
($44,490)
($14,018)
$8,579
($194,919)
Dividends Paid or Provided (000’s)
-
-
-
-
$11,548
Change in Share Price – year on year ($ per
share)
($0.35)
($0.38)
$0.11
$0.64
($1.18)
1 The current year’s financial result is presented for the company’s continuing operations and is not comparable with prior years which include the results
of its discontinued operations. FY20 is also the first set of the Group’s annual financial statements in which AASB 16 Leases has been applied. Under the
transition method chosen, comparative information has not been restated, therefore the 30 June 2020 financials are not comparable to prior years.
2 Underlying EBITDAI is presented on a pre AASB 16 basis for 2020.
I. OTHER RELATED PARTY TRANSACTIONS
Share Holdings
The movement for the year ended 30 June 2020 in the number of ordinary shares in the Company held, directly
or indirectly or beneficially, by each KMP, including their related parties, is detailed in the following table.
Name
NON-EXECUTIVE DIRECTOR
Michael Alscher
Steven Sherman
Jeffrey Forbes
Nathanial Thomson
Rebecca Ranich
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbordl1
Peter Barker
Ian Ball2
Balance at
the Start of
the Year
Received During
the Year on the
Exercise of Rights
Other
Changes
During the
Year
Balance at the
End of the Year
-
-
148,619
-
-
-
44,500
-
-
-
-
-
-
146,074
140,671
-
-
-
-
-
-
-
-
-
-
-
148,619
-
-
146,074
185,171
N/A
1. Susan Reisbord was appointed CEO and Managing Director on 4 November 2019.
2.
Ian Ball commenced as CEO and Managing Director on 9 August 2018 and ceased on 4 November 2019.
Loans to Key Management Personnel
There were no loans to KMP made during the period and no outstanding balances at reporting date.
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.
Page | 29
Directors’ Report (continued)
NON-AUDIT SERVICES
The Company’s auditor may perform 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
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 33.
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2011
The lead auditor’s independence declaration is set out on page 31 and forms part of the Directors’ report for the
year ended 30 June 2020.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 issued by the Australian
Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report.
Amounts in the Directors’ Report have been rounded off in accordance with that legislative instrument to the
nearest thousand dollars or, in certain cases, to the nearest dollar.
This Report is made in accordance with a resolution of the Directors.
MICHAEL ALSCHER
Chairman
26 August 2020
Page | 30
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 of Cardno Limited for the
financial year ended 30 June 2020 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Simon Crane
Partner
Brisbane
26 August 2020
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.
Page | 31
Consolidated Statement of Financial Performance
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
Continuing operations
Revenue
Other income
Financing income
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses1
Financing costs1
Impairment loss on goodwill
Impairment loss on trade receivables and contract assets
Other expenses
Profit/(loss) before income tax from continuing operations
Income tax expense
Profit/(loss) from continuing operations, net of tax
Profit/(loss) after tax for the year from discontinued operations
Profit/(loss) attributable to:
Owners of the Company
Earnings per share attributable to ordinary equity holders of the
parent from continuing operations
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Earnings per share attributable to ordinary equity holders
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Note
2020
$’000
2019*
$’000
Restated
4A
4B
5
5
13
6, 21
7
3
28
28
28
28
978,268
936,875
14,648
349
(421,673)
(278,058)
(204,927)
(38,971)
(12,140)
(69,621)
(4,949)
(12,490)
(49,564)
(17,514)
(67,078)
123,664
56,586
56,586
(15.07)
(15.07)
12.71
12.71
1,120
753
(410,472)
(298,394)
(190,779)
(11,632)
(7,943)
(46,285)
(2,201)
(1,026)
(29,984)
(10,660)
(40,644)
(3,846)
(44,490)
(44,490)
(8.93)
(8.93)
(9.78)
(9.78)
* Comparative information has been re-presented due to discontinued operations. See Note 3.
The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial
application.
1 The Group has presented interest expense on the lease liability separately from the depreciation charge for the right-of-use asset. Interest
expense on the lease liability is a component of finance costs which is presented separately in the statement of financial performance.
The statement of financial performance and the statement of other comprehensive income should be read in conjunction with the notes to the financial
statements.
Page | 32
Consolidated Statement of Other Comprehensive Income
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
Profit/(loss) for the year
Items that may be subsequently reclassified to profit or loss:
Note
2020
$’000
2019*
$’000
Restated
56,586
(44,490)
Exchange differences on translation of foreign operations
(1,443)
16,757
Reclassification of foreign currency reserves – discontinued
operations and other liquidated operations
Other comprehensive income for the year, net of tax
Total comprehensive profit/(loss) for the year
Total comprehensive profit/(loss) for the year, net of tax,
attributable to members of the parent arising from:
Continuing operations
Discontinued operations
(607)
-
(2,050)
16,757
54,536
(27,733)
(68,521)
123,057
54,536
(19,292)
(8,441)
(27,733)
*The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial
application. Comparative information has been re-presented due to discontinued operations. See Note 3 and Note 16.
The statement of financial performance and statement of other comprehensive income should be read in conjunction with the notes to the financial statements.
Page | 33
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2020
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contract Assets
Work in progress
Other current assets
Current tax receivable
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other financial assets
Property, plant and equipment1
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Current tax liabilities
Employee benefits
Provisions
Contract liabilities
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Lease liabilities
Deferred tax liabilities
Employee benefits
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained losses
TOTAL EQUITY
Note
9
10
4A, 11
25
26
12
8
13
14
15
17
4A, 18
18
14
15
15
8
18
19
2020
$’000
2019*
$’000
57,723
117,132
94,827
1,081
8,793
1,573
55,544
194,084
122,905
1,068
14,942
-
281,129
388,543
1,703
122,545
74,206
182,483
380,937
1,245
52,185
97,310
359,054
509,794
662,066
898,337
122,645
25,371
-
28,539
3,932
39,709
1,554
158,768
2,754
5,594
40,079
4,285
36,613
2,718
221,750
250,811
-
58,326
90,534
-
3,326
1,257
153,443
375,193
286,873
390,682
241,131
14,422
137,677
8,750
1,006
4,896
2,077
168,828
419,639
478,698
782,214
91,861
(344,940)
(395,377)
286,873
478,698
Page | 34
The statement of financial position should be read in conjunction with the notes to the financial statements.
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2020
*The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. See Note 16.
1Following the adoption of AASB 16, the Group has presented right-of-use assets within property, plant and equipment - i.e. the same line item in which it
presents underlying assets of the same nature that it owns. See Note 12.
The statement of financial position should be read in conjunction with the notes to the financial statements.
Page | 35
Consolidated Statement of Changes in Equity
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
Note
Share
Capital
Ordinary
$’000
Retained
Earnings
/ (losses)
$’000
Foreign
Translation
Reserve
$’000
Reserve
for Own
Shares**
$’000
Demerger
Reserve
$’000
BALANCE AT 1 JULY 2018
804,145
(346,041)
89,715
(14,611)
Adjustment on initial application of
AASB 9 (net of income tax)
-
(4,846)
-
-
Adjusted Balance 1 July 2018
804,145
(350,887)
89,715
(14,611)
Profit/(Loss) for the year
Exchange differences on
translation of foreign operations
Total comprehensive
income for the period
Transactions with owners in
their capacity as owners:
Employee share based payments
Share buy-back (net of income tax)
-
-
-
(44,490)
-
-
16,757
(44,490)
16,757
19
19
(461)
(21,470)
(21,931)
-
-
-
-
-
-
-
-
-
-
-
-
BALANCE AT 30 JUNE 2019
782,214
(395,377)
106,472
(14,611)
BALANCE AT 1 JULY 2019*
782,214
(395,377)
106,472
(14,611)
Adjustment on initial application of
AASB 16 (net of income tax)
34(b)
-
(6,149)
-
-
Adjusted Balance 1 July 2019
782,214
(401,526)
106,472
(14,611)
Profit/(Loss) for the year
Exchange differences on
translation of foreign operations
Reclassification of foreign currency
reserves on discontinued and
liquidated operations
Total comprehensive
income for the period
Transactions with owners in
their capacity as owners:
-
-
-
-
56,586
-
-
-
(1,443)
(607)
56,586
(2,050)
Employee share based payments
19
(2)
Capital reduction
3,19
(391,530)
(391,532)
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
533,208
(4,846)
528,362
(44,490)
16,757
(27,733)
(461)
(21,470)
(21,931)
478,698
478,698
(6,149)
472,549
56,586
(1,443)
(607)
54,536
(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
151,320
(240,210)
151,320
(240,212)
BALANCE AT 30 JUNE 2020
390,682
(344,940)
104,422
(14,611)
151,320
286,873
*The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. Comparative information has
been re-presented due to a discontinued operation. See Note 3 and Note 16.
**Shares held in trust by the Cardno Limited Performance Equity Plan Trust are 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. Shares are transferred to PEP participants on exercise of Performance
Rights and Performance Options.
The statement of changes in equity should be read in conjunction with the notes to the financial statements.
Page | 36
Consolidated Statement of Cash Flows
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Interest received
Finance costs paid2
Cash paid to suppliers and employees
Income tax paid
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of discontinued operation, net of cash disposed of1
Acquisition of subsidiaries net of cash acquired
Payments of deferred acquisition consideration
Proceeds from disposal of business assets
Proceeds from sale of property, plant and equipment & rent incentives
Payments for property, plant and equipment
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of debt raising costs
Share Buy-Back
Proceeds from borrowings
Repayment of borrowings
Lease liabilities payments (2019: Finance lease payments)2
NET CASH USED IN FINANCING ACTIVITIES
Note
2020
$’000
2019*
$’000
27
3
19
1,212,789
1,371,434
350
(13,492)
416
(6,852)
(1,125,369)
(1,323,065)
(801)
73,477
(20,588)
(1,232)
(492)
729
132
(9,353)
(30,804)
(1,469)
-
241,550
(1,164)
40,769
-
(76,950)
-
-
7,760
(17,346)
(86,536)
(834)
(21,470)
224,777
(250,221)
(171,239)
(30,990)
(41,130)
(3,401)
27,833
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD
1,543
(17,934)
CASH AND CASH EQUIVALENTS AT 1 JULY
55,544
71,127
Effects of exchange rate changes on cash and cash equivalents
at the end of year
CASH AND CASH EQUIVALENTS AT 30 JUNE
9
636
57,723
2,351
55,544
*The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial
application.
1 The Group has elected to present a statement of cash flows that analyses all cash flows in total – i.e. including both continuing and
discontinued operations; amounts related to discontinued operations by operating, investing and financing activities are disclosed in Note 3.
2 The Group has classified:
-
-
-
cash payments for the principal portion of lease payments as financing activities
cash payments for the interest portion as operating activities consistent with the presentation of interest payments chosen by the
Group
short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the
measurement of the lease liability within operating activities.
The statement of cash flows should be read in conjunction with the notes to the financial statements.
Page | 37
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
Set out below is an index of the notes to the financial statements, the details of which are available on the
pages that follow:
GROUP STRUCTURE
Explains aspects of the Group
structure and how changes have
affected the financial position and
performance of the Group
KEY FINANCIAL STATEMENT ITEMS
Provides a breakdown of individual
line items in the financial statements
RISKS
Discusses exposure to various
financial risks and how these
are managed
UNRECOGNISED ITEMS
Provides information about items
that are not recognised in the
financial statements
OTHER INFORMATION
Provides information not considered
to be significant in the context of the
main operations of the Group or not
directly related to specific items in
the financial statements
1. Segment information
2. Business combinations
3. Discontinued operations
4. Revenue and other income
5. Net finance costs
6. Expenses
7.
Income tax expense
8. Deferred tax assets and liabilities
9. Cash and cash equivalents
10. Trade and other receivables
11. Contract assets
12. Property, plant and equipment
13. Intangible assets
14. Trade and other payables
15. Loans and borrowings
16. Leases
17. Provisions
18. Other liabilities
19. Issued capital
20. Critical estimates and judgements
21. Financial risks
22. Commitments
23. Contingent liabilities
24. Subsequent events
25. Other current assets
26. Other financial assets
27. Notes to the cash flow statement
28. Earnings per share
29. Related party disclosures
30. Controlled entities
31. Parent entity disclosures
32. Deed of cross guarantee
33. Auditor’s remuneration
34. Statement of significant accounting policies
PAGE
39
42
43
46
48
49
49
51
52
53
53
55
57
59
59
62
66
66
66
69
70
76
76
77
77
77
77
78
80
81
83
84
86
86
Page | 38
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
GROUP STRUCTURE
1. SEGMENT INFORMATION
Cardno has three reportable segments managed separately by location and services provided. The segments are
groupings of businesses which provide similar services and markets.
Internal management reports on the performance of these reportable segments are reviewed weekly and monthly by
the Group’s Chief Executive Officer (CEO). The following summary describes the operations in each of Cardno’s
reportable segments.
> Asia Pacific Engineering and Environmental (Asia Pacific) – provides services in civil, structural, water,
environmental, coastal, bridge, geotechnical, subsurface utility, traffic and transport engineering as well as
environmental science, surveying, landscape architecture, planning and asset management.
> Americas Engineering and Environmental (Americas) – delivers expertise to private and public sector
clients across the environmental, water, transportation, energy and resources, land, buildings and
management services sectors.
International Development (ID) – the ID business designs and implements large-scale sustainable solutions
for both development assistance agencies and private clients.
>
> Other non-reporting segments – includes Portfolio Companies including LATAM (engineering, consulting
operations in Latin America) and Group Head Office. These segments don’t meet the quantitative thresholds
for reportable segments.
Segment results that are reported to the CEO include items directly attributed to the segment as well as those that
can be allocated on a reasonable basis.
Reconciliations of reportable segment revenues and profit or loss
2020
$’000
SEGMENT REVENUE
Fees from consulting services
Fees from recoverable expenses
Segment Revenue
Other revenue
Total Segment Revenue
Segment Result
Adjust for AASB 16 impact2
Adjusted Segment Result
Gain on demerger
Gain on sale of business assets
Demerger related costs
Provisions for onerous contracts
Impairment loss on goodwill
Acquisition related expenses
Legal costs
Foreign stamp duty prior years
Restructuring costs
Release of provisions
Other
Depreciation and amortisation expense2
Profit/(loss) before interest and income
tax
Finance costs and interest income2
Foreign exchange gains/(losses)3
Asia
Pacific
Americas
ID
Other
Continuing
operations
Total
Discontinued
operations1
204,967
40,456
245,423
278,423 185,094
8,623
93,040 165,324
-
371,463 350,418
8,623
983
1,036
290
32
246,406
372,499 350,708
8,655
962
15,251
16,213
-
-
-
(1,151)
(69,621)
(193)
(16)
-
(1,851)
-
-
38,677
11,526
50,203
2,661
3,645
6,306
733
14
747
-
-
-
(516)
-
-
-
-
-
-
-
-
-
-
-
-
(52)
2,817
-
(203)
-
-
-
-
-
-
-
-
-
(394)
(93)
-
(400)
677,107
298,820
975,927
2,341
978,268
43,033
30,436
73,469
-
-
-
(1,667)
(69,621)
(193)
(16)
(394)
(2,199)
2,817
(400)
124,622
40,795
165,417
65
165,482
11,004
5,081
16,085
119,102
1,383
(5,112)
-
-
-
-
-
-
-
-
(16,690)
(14,120)
(3,527)
(4,634)
(38,971)
(10,389)
(37,175)
121,069
(11,791)
(598)
(992)
607
Page | 39
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
1. SEGMENT INFORMATION CONTINUED
2020
$’000
Asia
Pacific
Americas
ID
Other
Continuing
operations
Total
Discontinued
operations1
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) after income tax
Profit from continuing and discontinuing
operations after income tax
(49,564)
(17,514)
(67,078)
120,684
2,980
123,664
56,586
1 Discontinued operations relate to Intega Group Limited which was demerged on 31 October 2019 and the Structures business unit which
was sold on 31 May 2020. See Note 3.
2 The adoption of AASB16 had the following impact on the continuing operations segment results for the year ended 30 June 2020: a)
reversal of operating rent expense of $30.4 million; b) an interest charge on the lease liability of $5.5 million and c) amortisation of the right
of use asset of $26.8 million.
3Foreign exchange gains from discontinued operations includes the write off of the foreign currency translation reserve (FCTR) relating to
discontinued and liquidated operations totalling $0.6 million.
Asia
Pacific
Americas
ID
Other
Continuing
operations
Total
Discontinued
operations1
2019
$’000
Restated
SEGMENT REVENUE
Fees from consulting services
Fees from recoverable expenses
Segment Revenue
Other revenue
214,252
36,176
250,428
401
225,660 158,045
8,937
93,746 196,150
319,406 354,195
533
1,153
29
8,966
1,793
Total Segment Revenue
250,829
319,939 355,348
10,759
Segment Result
Redundancy costs
Impairment costs
Acquisition related expenses
Legal costs
Reversal of lease provision
De-merger project costs
11,204
(2,162)
(46,285)
(581)
(732)
-
-
23,543
4,297
(344)
-
-
(620)
-
517
-
-
-
-
-
-
-
-
-
-
-
-
-
Depreciation and amortisation expense
(3,177)
(4,690)
(245)
(3,520)
(11,632)
Profit/(loss)
before interest and income tax
Finance costs and interest income
Profit/(loss) before income tax
Income tax expense
Loss after income tax
Loss from continuing and discontinuing
operations after income tax
(22,794)
(7,190)
(29,984)
(10,660)
(40,644)
606,894
326,101
932,995
3,880
936,875
38,700
(2,162)
(46,285)
(1,201)
(732)
517
-
288,300
93,483
381,783
612
382,395
23,308
-
-
(3,046)
-
-
(4,771)
(15,396)
95
(525)
(430)
(3,416)
(3,846)
(44,490)
Page | 40
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
1. SEGMENT INFORMATION CONTINUED
*The Group has initially applied AASB 16 at 1 July 2019, which requires the recognition of right-of-use assets and lease liabilities for lease
contracts that were previously classified as operating leases. The Group has applied AASB 16 using the modified retrospective approach,
under which comparative information is not restated. (see Note 16).
Moreover, as a result of the demerger of Intega Group Limited (see Note 3) and the disposal of the Structures business unit, the Group has
changed its internal organisation and the composition of its reportable segments to present the results of its Intega divisions and the
Structures business unit as discontinued operations. Accordingly, the Group has restated the comparative operating segment information
for the year ended 30 June 2019.
1 See Note 3 for further details.
GEOGRAPHICAL INFORMATION
Continuing operations
Australia & New Zealand
Americas
United Kingdom
Canada
Africa
Latin America
Asia
Other Countries
Total
2020
2019 Restated*
Revenues
$’000
Non-Current
Assets
$’000
Revenues
$’000
Non-Current
Assets
$’000
389,033
440,204
28,184
-
3,281
9,095
86,600
21,871
188,986
182,066
2,573
(32)
623
1,015
2,731
2,975
401,716
391,637
27,790
-
4,119
10,444
79,615
21,554
270,095
232,830
3,335
(248)
68
1,436
2,150
128
978,268
380,937
936,875
509,794
*Prior year comparative revenues have been restated to exclude revenue from discontinued operations.
Page | 41
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
2. BUSINESS COMBINATIONS
Geochempet Services
On 29 October 2019, the Group acquired 100% of Geochempet Services for a purchase consideration of $1.2
million. Geochempet Services moved to Intega Group Limited on 31 October 2019 as part of the demerger, see
Note 3 for further details.
Raba Kistner Inc.
On 21 December 2018, the Group acquired 100% of Raba Kistner Inc, a Texas based 470 person engineering
services firm.
The provisional fair value of the identifiable assets and liabilities as at the date of acquisition were disclosed in
the 30 June 2019 financial statements as $29.0 million. The fair value of identifiable assets and liabilities, as
finalised in the half year ended 31 December 2019, was $29.9 million per the below reconciliation, resulting in
an increase of $0.9 million.
The final fair value of the identifiable assets and liabilities as at the date of acquisition were:
Cash
Trade and other receivables
Contract assets
Property, plant and equipment
Intangible assets
Current and deferred tax assets
Other current assets
Trade and other payables
Employee benefits
Borrowings
Current and deferred tax liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
$’000
8,762
13,621
4,604
2,825
21,704
607
282
52,405
(9,091)
(6,884)
(1,022)
(5,537)
(22,534)
29,871
42,299
72,170
Purchase consideration comprised $52.2 million paid in cash on acquisition and $11.2 million in deferred
consideration. The deferred consideration was contingent on the acquisition achieving a certain level of
EBITDA in FY19 and FY20. Analysis of cash flows on acquisition is below:
Purchase consideration
Cash balance acquired
Deferred consideration
Net cash flow on acquisition
$’000
72,170
(8,762)
(11,249)
52,159
Raba Kistner, Inc. was transferred to Intega Group Limited on 31 October 2019 as part of the demerger, see
Note 3 for further details.
Page | 42
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
3. DISCONTINUED OPERATIONS
Profit/(loss) after tax for the year from discontinued operations is comprised of the following:
For the year ended
Results of discontinued operations
Demerger of Intega
Disposal of Structures
Reclassification of foreign currency reserves – discontinued
operations and other liquidated operations
Profit/(loss) after tax from discontinued operations
Earnings per share – discontinued operations
Basic earnings per share
Diluted earnings per share
30 June 2020
$’000
30 June 2019
$’000
121,627
(952)
2,989
123,664
(2,888)
(958)
-
(3,846)
27.78
27.78
(0.85)
(0.85)
Demerger of Intega Group Limited
On 21 August 2019, the Company announced the proposed demerger of its Quality, Testing and Measurement
businesses into a separate ASX listed entity, to be named Intega Group Limited. The demerger was completed
on 31 October 2019.
The fair value of Intega Group Limited at the date of settlement, being $240.2 million, was calculated using the
volume weighted average price (VWAP) of Intega's shares as traded on the ASX over the first five trading days
after the demerger date ($0.5401) multiplied by the number of Intega's shares on initial listing (444,749,495).
The demerger distribution is accounted for as a reduction in equity, split between share capital of $391.5 million
and demerger reserve of $151.3 million. The amount treated as a reduction in share capital has been
calculated with reference to the relative market value of Intega shares and the market value of Cardno's shares
post demerger.
The businesses demerged during the period were not previously presented as discontinued operations or
classified as held-for-sale and therefore the comparative consolidated statement of financial performance, the
consolidated statement of other comprehensive income and certain applicable notes have been restated to
show the discontinued operations separately from continuing operations.
For the year ended
Results of discontinued operations
Revenue
Expenses
Results from operating activities
Income tax benefit/(expense)
Results from operating activities, net of tax
Gain on sale of discontinued operations
Income tax on gain on sale of discontinued operation
30 June 2020*
$’000
30 June 2019
$’000
151,880
363,227
(151,496)
(362,409)
384
2,140
2,524
119,103
-
818
(3,707)
(2,889)
-
-
Profit/(loss) from discontinued operations, net of tax:
121,627
(2,889)
*Represents results from operating activities for the four months to 31 October 2019 less demerger related costs incurred.
Page | 43
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
3. DISCONTINUED OPERATIONS CONTINUED
For the year ended
Fair value of Intega Group at demerger
Carrying amount of net assets
Net gain on demerger before income tax
Income tax expense
Gain on demerger after income tax
Cashflows from discontinued operations - Intega
Net cash from operating activities
Net cash used in financing activities
Net cash from investing activities
Net cash flows for the period
Assets and liabilities of controlled entities at date of demerger
30 June 2020*
$’000
30 June 2019
$’000
240,210
(121,107)
119,103
-
119,103
-
-
-
-
-
30 June 2020
$’000
30 June 2019
$’000
14,459
(2,374)
(4,559)
7,526
16,732
49,258
(64,513)
1,477
31-Oct-19
$’000
Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Other current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total assets demerged
Liabilities
Trade and other payables
Loans and borrowings
Current tax liabilities
Employee benefits
Provisions
Contract liabilities
Deferred tax liabilities
Other liabilities
Total liabilities demerged
Net assets demerged
20,588
73,987
21,902
2,576
190
60,868
20,580
104,912
305,603
25,538
119,086
649
16,492
1,557
15,042
5,914
218
184,496
121,107
Page | 44
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
3. DISCONTINUED OPERATIONS CONTINUED
The value of the Intega net assets demerged has been adjusted by $16.7 million since 31 December 2019,
primarily as a result of the true up of current and deferred tax balances as part of the end of financial year tax
calculations, in addition to the finalisation of the impact of adopting AASB 16 Leases.
Disposal of Structures business unit
On 29 May 2020, the company sold its US Structures business unit for a consideration of $4.5 million.
The net book value of the Structures division at the date of settlement was $3.1 million, resulting in a gain on
disposal of $1.4 million.
The Structures business unit disposed of during the period was not previously presented as discontinued
operations or classified as held-for-sale and therefore the comparative consolidated statement of financial
performance, the consolidated statement of other comprehensive income and certain applicable notes have
been restated to show the discontinued operations separately from continuing operations.
For the year ended
Results of discontinued operations
Revenue
Expenses
Results from operating activities
Income tax benefit
Results from operating activities, net of tax
Gain on sale of discontinued operations
Income tax on gain on sale of discontinued operation
Loss from discontinued operations, net of tax:
30 June 2020*
$’000
30 June 2019
$’000
13,894
(17,049)
(3,155)
840
(2,315)
1,363
-
(952)
19,168
(20,416)
(1,248)
291
(957)
-
-
(957)
*Represents results from operating activities for the eleven months to 31 May 2020
Assets and liabilities of controlled entities at date of disposal
Assets
Trade and other receivables
Contract assets
Other current assets
Other financial assets
Property, plant and equipment
Total assets disposed
Liabilities
Trade and other payables
Lease liabilities
Other liabilities
Total liabilities disposed
Net assets disposed
31 May 2020
$’000
4,586
1,255
11
26
4,119
9,997
(10)
(5,356)
(1,489)
(6,855)
3,142
Page | 45
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
KEY FINANCIAL STATEMENT ITEMS
4. (A) REVENUE
REVENUE
Professional services revenue
Fees from consulting services
Fees from recoverable expense
Fees from recoverable expenses
Other
Professional services revenue
2020
$’000
677,107
677,107
298,820
298,820
2,341
978,268
2019
$’000
Restated
606,894
606,894
326,101
326,101
3,880
936,875
The Group performs engineering design and project delivery services. These activities tend to be highly
integrated and accordingly where appropriate will be accounted for as a single performance obligation.
Performance obligations are fulfilled over time as the services are delivered, as the Group has a right of
payment for services delivered to date together with the highly customised nature of the services provided. The
Group recognises revenue for these services over time.
Fees from recoverable expenses
Fees from recoverable expenses represents revenue received from customers for pass through expenses
incurred by the Group in performing professional services. It also includes services from entering into contracts
with customers to acquire, on their behalf, equipment produced by various suppliers or services provided by
different subcontractors. The Group continues to be involved in procurement as a principal and as an agent.
Accounting for Revenue
Revenues from customer contracts is disaggregated into existing segments and the timing of transfer of
services, being overtime versus point in time, in the table below which depicts how the nature, amount and
uncertainty of revenue and cash flows are affected by economic factors.
$’000
Asia Pacific
Americas
International Development
Other
Total revenue
$’000
Asia Pacific
Americas
International Development
Other
Total revenue
Segment Revenue
Over Time Revenue
Point in Time Revenue
For the year ended 30 June 2020
246,406
372,499
350,708
8,655
978,268
246,406
367,662
350,708
-
964,776
-
4,837
-
8,655
13,492
Segment Revenue
Over Time Revenue
Point in Time Revenue
For the year ended 30 June 2019 Restated*
250,829
319,939
355,348
10,759
936,875
250,829
315,504
355,348
1,793
923,474
-
4,435
-
8,966
13,401
Page | 46
* Comparative information has been re-presented due to a discontinued operation. See Note 3
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
4. (A) REVENUE CONTINUED
Revenue from providing services on lump sum contracts is recognised based on the actual services provided to
the end of the reporting period as a proportion of the total services to be provided, on the basis that the Group’s
performance does not create an asset with an alternative use and the Group has an enforceable right to payment
for performance completed to date. This is determined based on the proportion of actual costs incurred relative to
the total expected project costs at completion (input method). Revenue is capped at the approved budget for
each client contract.
The customer pays Cardno based on the agreed payment schedule. If the services rendered by Cardno as at the
reporting date exceed the payments received, a contract asset is recognised. If the payments received exceed
the services rendered, a contract liability (i.e. unearned revenue) is recognised.
Revenue on Cost Plus projects is recognised in line with effort required to satisfy the performance obligations of
the contract with no cap. For Cost Plus Max projects, revenue is capped at the approved budget amount for each
contract.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any
resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in
which the circumstances that give rise to the revision become known by management. This includes variations to
client contracts which increase the total contract value and result in an adjustment to revenue recognised to date
in the period in which the variation is approved.
To date there have been no significant impacts on the Group’s ability to fulfil performance obligations in its
contracts with customers as a result of the COVID-19 pandemic. Certain projects have been subject to delays or
other scope changes due to the safety protocols put in place by customers as well as domestic and international
travel restrictions in force across many countries. These impacts have been taken into account in any estimates
contributing to the recognition of revenue, including the remaining costs to complete a project, where applicable.
Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts
with customers.
$’000
Receivables (included in Trade and other receivables)
Loss allowance
Contract assets
Contract liabilities
Note
30 June 2020
30 June 2019
10
10
11
18
118,232
(15,110)
94,827
39,709
204,621
(21,552)
122,905
36,613
The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the
reporting date. The carrying amount of contract assets as at 30 June 2020 is reduced by an impairment provision
of $9.9 million (30 June 2019: $9.5 million). Impairment provisions are booked against specific high risk and aged
contract assets where billing and recovery is doubtful.
The contract assets are transferred to trade receivables when the rights become unconditional. This usually
occurs when the Group issues an invoice to the customer.
Refer to note 10 and note 11 for details of the impact the COVID-19 pandemic has had on the Group’s
assessment of credit risk relating to receivables and contract assets.
The contract liabilities primarily relate to consideration received from customers in advance of providing goods or
services, or unearned revenue. These liabilities will be recognised as revenue when the services are performed.
As the majority of contracts have a duration of 12 months or less, contract liabilities as at 30 June 2019 were
recognised as revenue in the year ended 30 June 2020.
Page | 47
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
4. (A) REVENUE CONTINUED
Revenue recognition policies
Revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the
transfer of control at a point in time or over time requires judgement. When recognising the contract revenue over
time using the input method, revenue is recognised on the basis of the entity’s efforts or inputs and requires a
judgemental assessment of cost or labour hours incurred to date as a proportion of total cost or labour hours
remaining to fully satisfy contract performance obligations.
Revenue measured and recognised at a point in time requires judgement in relation to the assessment of
whether the entity has a right to payment for services performed to date, whether legal title of an asset has
passed to the client, in addition to the transfer of risks and rewards and the acceptance and physical possession
of the asset by the client.
The following table provides information about the nature and timing of the satisfaction of performance obligations
in contracts with customers and the related revenue recognition policies.
Revenue type
Nature and timing of
performance obligations
Revenue recognition
Professional services revenue
The Group performs
Fees from recoverable
expenses
engineering design and
project delivery services.
Performance obligations
are fulfilled over time as
the services are delivered.
Revenue received from
customers for pass
through expenses incurred
by the Group in performing
professional services and
from entering into
contracts with customers to
acquire equipment or
services provided by
different subcontractors.
Revenue for these services is recognised over time
rather than at a point in time as the Group has a right of
payment for services delivered to date.
The Group recognises revenue as services performed.
4. (B) OTHER INCOME
Non-refundable R&D tax incentives
Gain on disposal of property, plant and equipment
Transitional Services Income – Intega Group
Other
Other Income
5. NET FINANCING COSTS
Interest paid
Interest on leases
Amortisation of borrowing costs
Interest received
Net Financing Costs
2020
$’000
3,675
172
10,425
376
14,648
2020
$’000
5,772
5,950
418
(349)
11,791
2019
$’000
Restated
711
460
-
(51)
1,120
2019
$’000
Restated
6,157
-
1,786
(753)
7,190
Page | 48
Note
16
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
5. NET FINANCING COSTS CONTINUED
Accounting for Net Finance Costs
Finance costs are recognised as expenses in the period in which they are incurred.
Borrowing costs are calculated using the effective interest method and include costs incurred in connection with
arrangement of borrowings. There have been no qualifying assets and related debt to which borrowing costs
could have been applied, and as a result no borrowing costs have been capitalised to qualifying assets.
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
6. EXPENSES
Bad and doubtful debts
Rental expense relating to operating leases1
2020
$’000
4,949
2,458
2019
$’000
Restated
2,201
26,507
1The Group applied AASB 16 as at 1 July 2019 with no restatement of comparatives under the transition method chosen. Only lease
payments on short term leases and leases of low value assets are recognised as operating expenses under AASB 16.
7. 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 from continuing operations
(b) Numerical reconciliation between tax expense and pre-tax profit
Loss before tax from continuing operations
Income tax using the Australian corporation tax rate of 30% (2019: 30%)
Increase/ (decrease) in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Impact of impairment of goodwill
Impact of valuation allowance on foreign tax credits
Impact of change in US tax law on tax revenue recognition
Allowances for R&D expenditure
Sundry items
Under provided in prior years
Income tax expense from continuing operations
2020
$’000
2019
$’000
Restated
3,837
962
4,799
13,241
(526)
12,715
17,514
(1,816)
(201)
(2,017)
12,212
465
12,677
10,660
(49,564)
(14,869)
(29,984)
(8,995)
1,192
6,100
20,886
83
3,699
(137)
124
17,078
436
17,514
2,137
1,671
13,885
5,647
-
(213)
(3,736)
10,396
264
10,660
Page | 49
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
7. INCOME TAX EXPENSE CONTINUED
(c) Amounts recognised directly in equity
Tax benefit on equity raising costs1
Foreign exchange
1 Relates to costs incurred on the share buy-back program.
2020
$’000
-
1,106
2019
$’000
Restated
20
375
The effective tax rate for FY20 was (35.34%) compared to (35.55%) in FY19. If we exclude the impact of (a) the
impairment reflected in the Australian results; (b) one-off adjustments related to continuing operations; (c) prior year
adjustments increasing income tax expense; (d) losses incurred in jurisdictions in which a deferred income tax benefit is not
recognised; (e) true-up of deferred taxes relating to Cardno US goodwill as a result of the demerger; and (f) a change in tax
law on tax revenue recognition in the United States; the effective tax rate is 29.32%.
Page | 50
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
8. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
Assets
Accruals
Provisions
Intangibles
Tax losses
Property, plant and equipment
Lease liability
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Liabilities
Contract assets
Prepayments
Right of use asset
Other
Total deferred tax liabilities
Set-off against deferred tax assets
Net deferred tax liabilities
NET DEFERRED TAX ASSETS
2020
$’000
7,803
15,464
2,297
40,816
1,411
31,587
10,303
109,681
(35,475)
74,206
5,657
576
27,945
1,297
35,475
2019
$’000
4,600
27,499
16,978
53,294
420
-
6,127
108,918
(11,608)
97,310
7,871
813
-
3,930
12,614
(35,475)
(11,608)
-
74,206
1,006
96,304
The group has unrecognised deferred tax assets from tax loss carry forwards as at 30 June 2020: (a) capital
losses in the United States of $19.7 million (2019: $19.3 million) which will expire if not used to offset capital
gains derived by 30 June 2021; (b) revenue losses in the United States of $11.0 million (2019: $11.8 million)
which will expire if not used to offset revenue gains by 30 June 2037; and (c) capital losses in Australia of
$30.0m (2019: $30.6m) the future utilisation of which is reliant on satisfaction of the continuity of ownership
and/or similar business tests and generating capital gains to offset these against.
The group also has unrecognised deferred tax assets from foreign tax credit carry forwards in the United States
of $5.4 million (2019: $5.6m) as at 30 June 2020. These credits will expire if not used to offset tax payable by
30 June 2024 ($1.2 million), 30 June 2025 ($1.0 million), 30 June 2026 ($0.8 million), 30 June 2027 ($1.0
million), 30 June 2028 ($0.5 million), 30 June 2029 ($0.4 million) and 30 June 2030 ($0.5 million).
Judgement is required to determine the amount of deferred tax assets that are recognised based on the likely
timing and the level of future taxable profits. The Group assesses the recoverability of recognised and
unrecognised deferred taxes in Australia and the United States using assumptions and projected cash flows as
applied in the Group impairment reviews for associated operations. Continued recognition of tax losses in
Australia and the US is based on generating sufficient taxable profits against which they can be offset. The
Australian tax losses are not subject to expiry under tax legislation. United States tax losses generated prior to
30 June 2019 are subject to a twenty year expiry period, while losses generated after 30 June 2019 are not
subject to expiry under tax legislation.
Judgements are also required about the application of income tax legislation and its interaction with income tax
accounting principles. These judgements are subject to risk and uncertainty, hence there is a possibility that
changes in circumstances will alter expectations which may impact the amount of deferred tax assets and
deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary
differences not yet recognised. Where the final tax outcomes are different from the amounts that were initially
recorded, these differences impact the current and deferred tax provisions in the period in which the
determination is made.
Page | 51
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
8. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
Movement in temporary differences during the year:
30 June 2020
Accruals
Provisions
Tax losses
Sundry items
Prepayments
Contract assets
AASB 16 – Leases
Goodwill on acquisition
30 June 2019
Accruals
Provisions
Tax losses
Sundry items
Prepayments
Contract assets
Goodwill on acquisition
(USA)
1 July
2019
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Demerger
of Intega
$’000
Sale of
Structures
$’000
Other1
$’000
30 June
2020
$’000
4,600
27,499
53,294
2,617
(813)
(7,871)
-
16,978
96,304
(238)
491
(2,984)
(9,851)
196
1,497
990
(1,455)
(11,354)
92
225
(4,591)
2,298
(63)
1,357
-
(405)
(6,360)
(5,278)
1,083
110
2,652
(587)
-
3,754
(210)
(6,181)
375
13,922
(6)
-
348
-
(2)
(337)
3,576
7,803
15,464
40,816
10,417
(576)
3,642
2,297
(3,290)
(5,657)
1,208
(5,881)
-
(8,553)
526
(14,666)
(201)
3,597
74,206
1 July
2018
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
5,865
21,838
42,815
16,671
(1,667)
(5,733)
22,423
102,212
(460)
558
767
(5,107)
20
684
(5,893)
(9,431)
(4,158)
(8,438)
12,734
2,075
3,908
(7,859)
911
(827)
Other*
$’000
30 June
2019
$’000
3,352
13,541
(3,022)
(11,022)
(3,073)
4,600
27,499
53,294
2,617
(813)
5,037
(7,871)
(463)
4,350
16,978
96,304
1 Other adjustments relate to impacts of translating foreign operations, acquisitions and amounts booked to equity. Other also includes the effect of initially
applying AASB 16 (see Note 16).
9. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash1
Bank short term deposits
2020
$’000
53,685
3,643
395
57,723
2019
$’000
50,074
3,565
1,905
55,544
1 Cash held in relation to foreign ownership compliance for US government contracts.
Accounting for Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and investments in money market instruments which are at
call or with an original term of three months or less. Bank overdrafts are shown with interest-bearing loans and
borrowings in current liabilities on the statement of financial position.
Page | 52
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
10. TRADE & OTHER RECEIVABLES
Trade debtors
Loss allowance
Sundry debtors
2020
$’000
118,232
(15,110)
103,122
14,010
117,132
2019
$’000
204,621
(21,552)
183,069
11,015
194,084
Accounting for Trade and Other Receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible
debts.
The recoverability of trade receivables is reviewed on an ongoing basis and its loss allowance is determined at
both a specific and collective level. All individually significant and aged receivables are assessed for specific
impairment.
The Group has elected to measure its loss allowances for trade receivables at amounts equal to their lifetime
expected credit loss (ECL). The ECLs are a probability weighted estimate calculated based on debtors ageing,
actual credit loss experience over the past three years and future economic conditions. The Group’s trade
receivables were segmented based on common credit risk characteristics such as customer type, geographical
location of customer, and ageing of financial asset. The Group considers a financial asset to be in default when
the client is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions
such as realising security (if any is held) or the financial asset is more than 90 days past due.
The Group has assessed the expected credit losses for trade receivables at 30 June 2020 and determined that
there are no significant or increasing concentrations of credit risk on prior year. However, due to the global
financial uncertainty arising from COVID-19, management have increased the expected loss rates for trade
receivables based on their judgement as to the impact of COVID-19 on the trade receivables portfolio. As part
of this assessment, management segmented its trade receivable portfolio into groupings of customers with
similar credit risk characteristics.
Bad debts are written off when the Group has no reasonable expectations of recovering a financial asset in its
entirety or a portion thereof. In some segments and industries, extended payment terms may be agreed, for
example under a pay when paid arrangement. It is therefore not appropriate to implement a policy of writing off
financial assets based solely on the age of the debtor and other factors are considered.
11. CONTRACT ASSETS
Contract assets
Accounting for contract assets
2020
$’000
94,827
2019
$’000
122,905
Contract assets are 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 represent unearned revenue and are presented as contract liabilities under other
liabilities. Amounts are transferred to receivables when the right to billing and payment becomes unconditional.
Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the
customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the
Group’s activities in general.
Page | 53
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
11. CONTRACT ASSETS CONTINUED
Estimates of the contract assets balances are determined using the percentage of completion methodology. Refer to
Note 4 for further details.
The Group has elected to measure its loss allowances for contract assets at amounts equal to their lifetime
expected credit loss (ECL). The ECLs are a probability weighted estimate calculated based on debtors ageing,
actual credit loss experience over the past three years and future economic conditions. The Group’s trade
receivables and contract assets were segmented based on common credit risk characteristics such as
customer type, geographical location of customer, and ageing of financial asset. The Group considers a
financial asset to be in default when the client is unlikely to pay its credit obligations to the Group in full, without
recourse by the Group to actions such as realising security (if any is held) or the financial asset is more than 90
days past due.
Contract assets held by the Group relate to work in progress which has not yet been billed and as such the
average ECL percentage applied is equivalent to that applied to current (not past due) trade receivables.
The Group has assessed the expected credit losses for contract assets at 30 June 2020 and determined that
there are no significant or increasing concentrations of credit risk on prior year. However, due to the global
financial uncertainty arising from COVID-19, management have increased the expected loss rates for contract
assets based on their judgement as to the impact of COVID-19 on the portfolio of customers to which these
assets relate. As part of this assessment, management segmented its contract assets into groupings of
customers with similar credit risk characteristics.
Page | 54
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
12. PROPERTY, PLANT & EQUIPMENT
Land & buildings
Land & buildings
Less accumulated depreciation
Carrying amount at the beginning of the year
Recognition of right-of-use asset on initial application of AASB 16 (note 16)
Adjusted balance at the beginning of the year
Demerger of Intega
Additions
Increase through acquisition
Disposals
Disposal of structures business unit
Depreciation expense
Foreign exchange
Carrying amount at the end of the year
Office Furniture & Equipment
Laboratory equipment, instruments & amenities
Less accumulated depreciation
Carrying amount at the beginning of the year
Recognition of right-of-use asset on initial application of AASB 16
Adjusted balance at the beginning of the year
Demerger of Intega
Additions
Increase through acquisition
Disposals
Depreciation expense
Foreign exchange
Carrying amount at the end of the year
Motor vehicles
Motor vehicles
Less accumulated depreciation
Carrying amount at the beginning of the year
Recognition of right-of-use asset on initial application of AASB 16
Adjusted balance at the beginning of the year
Demerger of Intega
Additions
Increase through acquisition
Disposals
Depreciation and amortisation expense
Foreign exchange
Carrying amount at the end of the year
Total property, plant & equipment
Property, plant & equipment
Less accumulated depreciation
2020
$’000
125,715
(29,192)
96,523
2,285
136,580
138,865
(23,887)
15,698
-
(1,162)
(4,119)
(30,438)
1,566
96,523
98,940
(77,876)
21,064
39,371
1,426
40,797
(19,569)
10,890
-
(636)
(10,660)
242
21,064
12,309
(7,351)
4,958
10,529
12,831
23,360
(17,412)
2,180
-
-
(3,242)
72
4,958
2019
$’000
4,174
(1,889)
2,285
1,461
-
1,461
325
598
(33)
-
(159)
93
2,285
154,122
(114,751)
39,371
40,907
-
40,907
-
9,567
5,081
(634)
(16,077)
527
39,371
26,002
(15,473)
10,529
6,968
-
6,968
-
7,805
340
(114)
(4,496)
26
10,529
236,964
(114,419)
122,545
184,298
(132,113)
52,185
Page | 55
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
12. PROPERTY, PLANT & EQUIPMENT CONTINUED
Carrying amount at the beginning of the year
Recognition of right-of-use asset on initial application of AASB 16
Adjusted balance at the beginning of the year
Demerger of Intega
Additions
Increase through acquisition
Disposals
Disposal of structures business unit
Depreciation expense – continuing operations
Depreciation expense – discontinued operations
Foreign exchange
Carrying amount at the end of the year
Accounting for Property, Plant and Equipment
2020
$’000
52,185
150,837
203,022
(60,868)
28,768
-
(1,798)
(4,119)
(36,892)
(7,448)
1,880
122,545
2019
$’000
49,336
-
49,336
-
17,697
6,019
(781)
-
(20,732)
-
646
52,185
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.
Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for
cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter
of the lease term and their useful lives unless it is reasonably certain that Cardno will obtain ownership by the end of
the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
> buildings
> motor vehicles
> office furniture and equipment
40 years
4-7 years
3-11 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Property, plant and equipment includes right-of-use assets of $102.6 million (see Note 16). The estimated useful
lives for property right-of-use assets is 3 to 15 years and the estimated useful lives for equipment right-of-use assets
is 3 to 5 years.
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis from the lease commencement date to the end of the
lease term, unless the lease transfers ownership of underlying asset to the Group by the end of the lease term or the
cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use
asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those
of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the lease liability.
Page | 56
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
13. INTANGIBLE ASSETS
Reconciliation of movement in carrying amounts from the beginning of year to end of year:
Goodwill
Customer
Contracts
Patents and
Trademarks
$’000
$’000
$’000
Customer
Relation-
ships
$’000
Total
$’000
2020
Balance at the beginning of year
330,680
11,226
2,609
14,539
359,054
Acquired through business
combination
Demerger of Intega
Impairment losses
Amortisation charges – continuing
Amortisation charges – discontinued
Effect of foreign exchange
Closing value at 30 June 2020
2019
215
(87,637)
(69,621)
-
-
2,291
175,928
-
(6,587)
-
(1,129)
(1,095)
203
2,618
-
-
-
-
-
-
2,609
-
(10,688)
-
(950)
(1,847)
274
1,328
215
(104,912)
(69,621)
(2,079)
(2,942)
2,768
182,483
Balance at the beginning of year
308,950
422
2,609
1,036
313,017
Acquired through business
combination
Impairment losses
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2019
Amortisation of Intangibles
60,927
(46,285)
-
7,088
330,680
13,188
-
(2,874)
490
11,226
-
-
-
-
2,609
17,042
-
(4,139)
600
14,539
91,157
(46,285)
(7,013)
8,178
359,054
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the
straight-line method over their estimated useful lives, and is generally recognised in profit or loss within
depreciation and amortisation expense. Goodwill is not amortised.
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Impairment Testing
The carrying amount of goodwill (pre-impairment) allocated to each of the cash generating units (CGUs) for
impairment testing is as follows:
Americas
Asia Pacific (APAC)
International Development (ID)
2020
$’000
95,985
74,209
5,734
2019
$’000*
96,454
190,542
5,733
175,928
292,729
*Balances shown have been impacted by the transfer of the net book value of certain entities, including their goodwill, to Intega Group Limited as part
of the demerger effective 31 October 2019. See Note 3 for further information.
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated
impairment losses. Goodwill is not amortised but is subject to impairment testing. In accordance with Cardno’s
accounting policies, the Group performs its impairment testing annually or more frequently if required.
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. The CGUs remain
unchanged from prior year, other than the divestment of the Construction Sciences CGU and some businesses
within the Americas CGU as part of the demerger of Intega.
Page | 57
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
13. INTANGIBLE ASSETS CONTINUED
The Group uses the value in use method to estimate the recoverable amount of each CGU. Value in-use is
calculated based on the present value of cash flow projections over a five-year period and includes 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 2021 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 CGUs 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 post-tax discount rate on a weighted average cost of
capital adjusted for country and industry specific risks associated with the CGU.
Group overhead and corporate costs are allocated to the individual CGUs for impairment testing purposes.
Results of Impairment Testing
The Asia Pacific business has seen a year on year reduction in revenue and EBITDA in the half year ended 31
December 2019, reflecting the absence of major project starts and poor utilisation rates across a number of business
units. As a result, the company determined that the carrying amount of the Asia Pacific (APAC) CGU was in excess
of its recoverable amount of $187.5 million and an impairment loss of $69.6 million was recognised in the half year
ended 31 December 2019. The pre-tax discount rate used in estimating the recoverable amount was 12.96%. The
impairment was recognised in full against the carrying value of the APAC goodwill.
At 30 June 2020, the recoverable amount of the APAC CGU exceeded its carrying amount by $94.5 million, driven
by a number of factors including lower discount rates resulting from historically low market interest rates, improved
forecast performance over the five-year period and a reduction in its carrying amount through improved working
capital management.
Management has evaluated the Company’s market capitalisation value against the Group’s net asset position at 30
June 2020 and is comfortable with the valuation of its net assets for a number of reasons, including but not limited to,
that management believes that (1) Cardno Limited shares are “thinly traded” (average daily traded volume is low
compared to the number of shares on issue and the market capitalisation), this being a result of (2) the structure of
the share register whereby more than 50% of the issued shares are held by one investor, Crescent Capital Partners,
which has not traded their holding, (3) Cardno Limited sits outside of the ASX 300 and (4) there is significant
negative market sentiment as a result of the COVID-19 pandemic, although the Group’s operations were not
significantly impacted to 30 June 2020.
The company has considered the impact of the COVID-19 pandemic in estimating the cash flows used in
determining the recoverable amount for each CGU. While the Group has not experienced any material negative
financial impacts from the pandemic thus far, there continues to be uncertainty relating to the ongoing impacts of the
pandemic on the Group’s operations. Based on the information available at 30 June 2020, management have made
additional adjustments to the forecast cash flows in order to reflect the estimated impact. A risk premium for market
uncertainty has also been incorporated into the discount rate.
Key Assumptions
The key assumptions used in the estimation of recoverable amount are set out below. The values assigned to
the key assumptions represent management’s assessment of factors impacting the relevant regions and
industries in which the CGUs operate and have been developed taking into consideration relevant forecast and
historical data from both external and internal sources.
EBITDA Margins1
Terminal Growth Rate
Pre-Tax Discount Rate
2020
2019
Americas
9.4% - 10.0%
6.6% - 8.6%
APAC
ID
4.2% - 9.9%
7.4% - 10.4%
2.4% - 2.9%
1.2% - 3.2%
2020
2.50%
2.50%
2.50%
2019
2.50%
2.50%
2.50%
2020
10.39%
10.82%
14.06%
2019
11.32%
13.19%
12.88%
1 EBITDA margins are applied to net fee revenue and are presented on a pre AASB 16 basis.
Page | 58
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
13. INTANGIBLE ASSETS CONTINUED
Impact of Possible Changes in Key Assumptions
The determination of the recoverable amounts of the Group’s CGUs involves significant estimates and
judgements and results are subject to the risk of adverse and sustained changes in the markets in which the
Group operates.
Any variation in the key assumptions would impact on the assessed recoverable amount both positively and
negatively. Analysis performed on the impact of adverse changes in the key assumptions on the recoverable
amounts of the Americas and ID CGUs concluded that a reasonable possible change in these assumptions did
not result in impairment of either of the CGUs.
In relation to the APAC CGU, the value in use model is particularly sensitive to changes in the EBITDA margin
assumption. The impairment model assumes that the EBITDA margin will increase from 4.3% in FY21 to 9.9%
in FY24 as a result of cost efficiencies delivered through changes to the business operating model and
improved project management. The range of APAC EBITDA margins would need to reduce to 4.3% to 6.0% for
the estimated recoverable amount to be equal to the carrying amount, all other assumptions being held
constant.
14.TRADE & OTHER PAYABLES
CURRENT
Trade payables & accruals
Vendor liability
NON-CURRENT
Vendor liability
2020
$’000
2019
$’000
117,451
149,090
5,194
9,678
122,645
158,768
-
-
14,422
14,422
Accounting for Trade & Other Payables
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not
billed to Cardno, and are stated at cost. Trade accounts payable are normally settled within 60 days.
Vendor liabilities are recognised at the present value of future payments of deferred consideration.
15. LOANS & BORROWINGS
CURRENT
Lease liabilities
NON-CURRENT
Lease liabilities
Bank loans
TOTAL CURRENT & NON-CURRENT LOANS & BORROWINGS
2020
$’000
2019
$’000
25,371
2,754
90,534
58,326
174,231
8,750
137,677
149,181
Page | 59
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
15. LOANS & BORROWINGS CONTINUED
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.
Bank Loans
The Group has bank loans of $58.3 million (2019: $137.7 million) as at 30 June 2020 with a weighted average
interest rate of 3.84% (2019: 4.04%). Funding available to the Group from undrawn facilities is $113.0 million
(2019: $89.8million) of which $42.0 million is available to finance business acquisitions (any other purpose
requires majority lender approval).
In October 2019 the Group re-financed its debt facilities as part of the demerger of Intega. The facility is a multi-
currency secured, revolving syndicated facility, with three-year tenor expiring October 2022.
The new banking group comprises HSBC Bank Australia, HSBC Bank USA, National Australia Bank, and
Investec Bank.
The Group’s new debt facilities include certain financial covenants which are tested quarterly. A breach of a
financial covenant would represent an event of default under the terms of the debt facilities. At 30 June 2020, no
event of default occurred nor was continuing.
Under the terms of the facility agreement, 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.
There were no bank overdrafts in existence at 30 June 2020 (2019: Nil).
As at 30 June 2020 net debt was $0.6 million and the company was within its lending covenants.
Page | 60
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
15. LOANS & BORROWINGS CONTINUED
Reconciliation of movement in loans and borrowings:
$’000
Loans and
borrowings
Lease liabilities
(refer to Note 16)
137,677
-
137,677
241,550
(250,221)
-
-
(8,671)
(72,802)
-
(1,566)
2,468
(418)
-
-
-
1,638
(70,680)
58,326
11,504
164,913
176,417
-
-
(30,990)
(4,932)
(35,922)
(46,284)
(5,356)
-
-
-
5,950
(48)
19,711
1,437
(24,590)
115,905
Balance as at 1 July 2019
Adjustment on initial application of AASB 16
Adjusted balance as at 1 July 2019
Changes from financing and operating cash flows
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Finance costs paid
Total changes from financing cash flows
Other changes
Demerger of Intega
Disposal of structures business unit
Write off capitalised borrowing costs relating to old facility
New capitalised borrowing costs
Amortisation of capitalised borrowing costs
Interest expense
Termination of leases
New leases
Movement in balance due to foreign exchange differences
Total other changes
Balance as at 30 June 2020
$’000
Balance as at 1 July 2018
Changes from financing cash flows
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Total changes from financing cash flows
Demerger of Intega
Other changes
Amortisation of borrwowing costs
New capitalised borrowing costs
New finance leases
Total other changes
Balance as at 30 June 2019
Total
149,181
164,913
314,094
241,550
(250,221)
(30,990)
(4,932)
(44,593)
(119,086)
(5,356)
(1,566)
2,468
(418)
5,950
(48)
19,711
3,075
(95,270)
174,231
Loans and
borrowings
91,065
224,777
(171,239)
(3,401)
50,137
(912)
2,247
6,644
7,979
149,181
Page | 61
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
16. LEASES
Group as a lessee
The Group has lease contracts for various items of plant, machinery, vehicles and other equipment used in its
operations. Leases of land and buildings generally have lease terms between 3 and 15 years, while motor
vehicles and other equipment generally have lease terms between 3 and 5 years. The Group’s obligations
under its leases are secured by the lessor’s title to the leased assets. Generally, the Group is restricted from
assigning and subleasing the leased assets and some contracts require the Group to maintain certain financial
ratios. There are several lease contracts that include extension and termination options and variable lease
payments, which are further discussed below.
The Group also has certain leases with lease terms of 12 months or less and leases with low value. The Group
applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
$’000
As at 1 July 2019
Additions
Depreciation expense
Demerger of Intega
Disposal of structures business unit
Derecognition of right-of use- assets*
Termination of leases
Foreign Exchange
As at 30 June 2020
Right-of-use assets
Office
furniture and
equipment
Motor vehicles
1,426
3,570
(471)
(1,276)
-
-
-
5
3,254
12,831
1,836
(2,724)
(7,755)
-
-
-
163
4,351
Land and
buildings
136,580
12,540
(27,159)
(23,738)
(4,119)
(1,026)
(6)
1,884
94,956
*Derecognition of the right-of-use asset is as a result of entering into a finance sub-lease arrangement.
The following are the amounts recognised in profit or loss:
2020 - Leases under AASB 16
Depreciation expense of right-of-use assets
Income from sub-leasing right-of-use assets presented in other income
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low-value assets
Variable lease payments
2019 – Lease under AASB 117
Lease expense
Total
150,837
17,946
(30,354)
(32,769)
(4,119)
(1,026)
(6)
2,052
102,561
2020
$’000
30,354
355
5,950
2,371
87
(65)
32,936
The Group had total cash outflows for leases of $35.9 million in 2020 ($32.9 million in 2019). There are no
significant leases that have been entered into by the Group for contracts that have not yet commenced as at 30
June 2020.
Page | 62
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
16. LEASES CONTINUED
Group as a lessor
During the year, the Group has sub-leased a building that has been presented as part of a right-of-use asset –
property, plant and equipment.
During FY20, the Group recognised a gain of $452,000 on the derecognition of the right-to-use asset pertaining
to the sub-leased building which is presented within the gain on disposal of property, plant and equipment in
Note 4.
During FY20, the Group recognised interest income on lease receivables of $38,000 (2019: Nil).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments
to be received after the reporting date. Under AASB 117, the Group did not have any finance leases as a
lessor.
> Within one year
>
>
Later than one year but not later than 5 years
Later than 5 years
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
Policy applicable from 1 July 2019
2020
$’000
542
1,135
-
1,677
(134)
1,543
The Group has initially adopted AASB 16 Leases from 1 July 2019 using the modified retrospective approach
and therefore the comparative information has not been restated and continues to be reported under AASB 117
and AASB Interpretation 4. The details of the accounting policies under AASB 117 and AASB Interpretation 4
are disclosed separately.
Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been
applied from the date of initial application:
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset, the Group uses the
definition of a lease in AASB 16.
This policy is applied to contracts entered into, on or after 1 July 2019.
Group as a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone prices. However,
for leases of office equipment the Group has elected not to separate non-lease components and account for
the lease and non-lease components as a single lease component.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received.
Page | 63
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
16. LEASES CONTINUED
Group as a lessee (continued)
Right-of-use assets (continued)
Right-of-use assets are depreciated on a straight-line basis from the lease commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or
the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use
asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those
of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the lease liability.
The Group’s right-of-use assets are included in Property, plant and equipment (see Note 12).
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease
term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on
an index or a rate are recognised as expenses in the period on which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. The lease liability is measured at amortised cost using the effective interest
method. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in
the lease term or a change in the Group’s assessment of whether it will purchase the underlying asset.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group’s lease liabilities are included in Interest-bearing loans and borrowings (see Note 15).
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that
have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases that are considered of low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a
straight-line basis over the lease terms.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by
an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the assets for additional terms. The Group applies
judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all
relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date,
the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business
strategy).
Page | 64
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
16. LEASES CONTINUED
Group as a lessor
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an
operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all
of the risk and rewards incidental to ownership of the underlying asset. Leases in which the Group does not
transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating
leases. As part of this assessment, the Group considers certain indicators such as whether the lease is for the
major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease
separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising
from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which
the Group applies the short-term or low value asset exemption described above, then it classifies the sub-lease
as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies AASB 15 to allocate the
consideration in the contract.
The Group applies the derecognition and impairment requirements in AASB 9 to the net investment in the
lease.
Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue
in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised over the
lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in
which they are earned.
Policy applicable before 1 July 2019
Leases in terms of which Cardno assumed substantially all the risks and rewards of ownership were classified
as finance leases. Upon initial recognition the leased asset was 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
was accounted for in accordance with the accounting policy applicable to that asset. The corresponding rental
obligations, net of finance charges, were included in current and non-current interest-bearing loans and
borrowings. Minimum lease payments were apportioned between the finance charge and the reduction of the
outstanding liability. The finance charge was 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.
Assets held under other leases were classified as operating leases and were not recognised in the statement of
financial position. Payments made under operating leases were recognised in profit or loss on a straight-line
basis over the term of the lease. Lease incentives received were recognised as an integral part of the total
lease expense over the term of the lease.
Page | 65
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
17. PROVISIONS
CURRENT
Provision for legal claims
Accounting for Provisions
2020
$’000
3,932
3,932
2019
$’000
4,285
4,285
The Group makes provision for legal claims not covered by the Group’s professional indemnity policy and as at
30 June 2020 an estimate of the potential impact of these claims has been provided for.
A provision is recognised in the Statement of Financial Position 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.
18. OTHER LIABILITIES
CURRENT
Contract liabilities
Deferred rent
NON CURRENT
Deferred rent
Other
2020
$’000
39,709
1,554
41,263
1,109
148
1,257
2019
$’000
36,613
2,718
39,331
1,949
128
2,077
Contract liabilities relates to amounts received in advance of providing goods or services. Refer to Note 11.
19. ISSUED CAPITAL
Balance at the beginning of the year
444,269,564
782,214
464,381,508
804,145
30 June 2020
30 June 2019
No. of shares
$’000
No. of shares
$’000
Shares issued during the year:
> Employee share based payments
> Share buy-back (i)
> Shares issued under PEP
> Own shares held in trust issued under PEP
>
Issue of shares to key employees
-
-
594,322
(114,391)
2,268,356
(2)1
-
-
-
-
(20,111,944)
-
-
(461)
(21,470)
-
-
> Capital reduction
-
(391,530)
Balance at the end of the year
447,017,851
390,682
444,269,564
782,214
1 Employee share based payments of $2,263 recorded during the year.
Page | 66
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
19. ISSUED CAPITAL CONTINUED
(i) As part of the capital management program, on 21 February 2019 the Group announced the implementation of an on-market buyback
of up to 10% of Cardno ordinary shares commencing 8 March 2019 for a 12 month period. During the prior year ended 30 June 2019,
a total of 20,111,944 ordinary shares were bought back at an average price of $1.07 per share. No shares were bought back in the
year ended 30 June 2020.
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.
Franking account 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/(debits) that will arise from the payment/(receipt) of income
tax payable/(receivable) as at the end of the financial year
2020
$’000
2019
$’000
1,578
1,578
-
-
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 right to acquire shares in the Company, or the option to acquire shares in the Company.
Each right or option is granted to the employee for no consideration and vest upon the achievement of specified
performance hurdles.
At 30 June 2020, there were no Performance Options on issue (2019: 5,600,000) and no options were issued
during the year (2019: 5,600,000).
2020 LTI Plan Performance Hurdles:
In the year ended 30 June 2020, the Remuneration Committee commissioned consultants to advise on the
future structure of the PEP and their recommendations have been incorporated into the 2020 LTI Plan, which is
proposed for shareholder consideration at the company’s October 2020 Annual General Meeting. Refer section
G of the Remuneration Report for further details.
2019 LTI Plan Performance Hurdles:
Performance Rights issued are subject to a Group EBITDA performance hurdle in order for the Performance
Rights to vest on the third anniversary of the grant date, in addition to the employee continuing to be employed
by the Cardno Group.
The grant date for the 2019 LTI Plan was 1 November 2018 with an expiry date of 1 November 2021. The fair
value at grant date was $1.08 per performance right.
As these performance rights were issued prior to the demerger of Intega, to ensure that the LTI program retains
its economic value, the EBITDA hurdle remains that 50 per cent of the Performance Rights will vest if the
combined EBITDA of Cardno and Intega for the full financial year exceeds $73.5 million, with the remaining 50
per cent vesting in straight line growth against a Combined EBITDA of $77.5 million. Refer section G of the
Remuneration Report for further details and definitions.
2018 LTI Plan Performance Hurdles:
Performance Rights issued were allocated in two equal tranches: 50% is subject to the achievement of a Share
Price performance hurdle and 50% is subject to a Group EBITDA performance hurdle. As these performance
rights were issued prior to the demerger of Intega, to ensure that the LTI program retains its economic value,
both tests are measured on the combined outcome of Cardno and Intega. These conditions are tested
independently.
Page | 67
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
19. ISSUED CAPITAL CONTINUED
The grant date for the 2018 LTI Plan was 1 November 2017 with an expiry date of 1 November 2020. The fair
value at grant date was $1.06 for Tranche 1 and $1.35 for Tranche 2, per performance right.
The Performance Rights are subject to performance hurdles of Share Price (Tranche 1: 50%) where the
volume weighted average price of Shares at the close of trading over a 20 day trading period immediately prior
to the Company’s 2020 AGM, must be at least $1.10 per share, and Group EBITDA (Tranche 2: 50%) for the
full 2020 financial year must exceed $60 million (adjusted for acquisitions).
2017 LTI Plan Performance Hurdles:
The grant date for the 2017 Plan was 1 November 2016 with a fair value at grant date of $0.64 for Tranche 1
and $0.93 for Tranche 2 per performance right.
The performance rights granted under the 2017 LTI Plan were due to vest on 1 November 2019. The 2017 Plan
was modified at the Board’s discretion to accelerate the vesting date by 16 days to ensure vesting occurred
prior to the demerger. This change did not impact on the remuneration outcomes or expense recognised in
relation to the share-based payment plan.
The majority of the Performance Rights, in accordance with the terms of their grant, were allocated in two equal
tranches: 50% subject to the achievement of a Share Price hurdle and 50% subject to a Group EBITDA
performance hurdle. The remainder of the Performance Rights were subject to an EBITDA hurdle only.
The Share Price hurdle was tested on 9 October 2019 and it was determined that this hurdle was satisfied
under the 2017 LTI Plan. The Group EBITDA performance hurdle was not satisfied and this portion of the
Performance Rights lapsed on 15 October 2019.
Key Employee Share Grant:
In 2017 Cardno implemented a retention program whereby a select group of key employees were provided with
the option to receive a retention bonus in either cash or shares if they remained employed by the company on
30 January 2020. There were no other conditions precedent to participation in the program.
The movements in the performance rights and options are as follows:
Number
of Performance
Options 2020
Number
of Performance
Rights 2020
Number
of Performance
Rights 2019
Outstanding at the beginning of the period
5,600,000
4,889,915
Granted during the period
Exercised during the period
Vested during the period
-
-
-
-
(594,322)
-
Cancelled/lapsed during the period
(5,600,000)
(2,247,730)
Outstanding at the end of the period
Exercisable at the end of the period
-
-
2,047,863
-
4,168,275
1,394,169
-
-
(672,529)
4,889,915
-
Page | 68
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
19. ISSUED CAPITAL CONTINUED
Performance Rights were valued for accounting and reporting purposes using the Monte Carlo simulation and Black
Scholes method. The below table outlines the key assumptions.
Assumption at fair value date*
Share Price
Risk Free Rate
Dividend Yield
Volatility
20191
$1.08
-
0%
-
2018
$1.35
1.99%
0%
63%
2017
$0.93
1.725%
0%
60%
*The 2020 LTI plan is in the process of being finalised and will be proposed for shareholder consideration at the company’s October 2020 Annual General Meeting.
1. Due to the 2019 LTI Plan being only subject to an EBITDA non-market based performance hurdle, the valuation is based on the grant date share price.
There are currently no CEO Performance Options on issue at 30 June 2020 as disclosed under the Executive Key
Management Personnel – Contract Terms section of the Remuneration Report. The CEO Options had an original
grant date of 24 October 2018 and an expiry date of 9 August 2022 for Tranche 1 and 9 August 2023 for Tranche 2.
They had a fair value at grant date of $0.53 for Tranche 1 and $0.44 for Tranche 2 per Option. In the prior year, as
the Performance Options had no market based performance hurdle, they were valued for accounting and reporting
purposes using the Binomial method. The below table outlines the key assumptions:
Assumption at fair value date
Share Price
Risk Free Rate Tranche 1
Risk Free Rate Tranche 2
Dividend Yield
Volatility
Post-vesting withdrawal rate
RISKS
2019
$1.075
2.49%
2.57%
0%
45%
0%
20. 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.
We have exercised judgement in evaluating the impact of COVID-19 on the financial statements. A number of
areas, including but not limited to expected credit losses of financial assets and impairment testing of goodwill,
have been recognised as being potentially affected by increased estimation uncertainty. Potentially affected
areas have been disclosed in the relevant notes to the Group Financial Statements.
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:
>
Impairment of goodwill and assumptions applied in estimating future cash flows – refer to Note 13
> Revenue recognition in relation to long term contracts including estimating stage of completion and
total contract costs – refer to Note 4.
> Recognition of deferred tax assets – availability of future taxable profit against which deductible
temporary differences and tax losses carried forward can be utilised – refer to Note 8 and 34(e).
Page | 69
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
20. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS CONTINUED
> Assessing the recoverability of trade receivables and contract assets – measurement of ECL allowance
and key assumptions in determining the weighted average loss rate - refer to Note 10 and 11.
> Leases – Lease terms and whether the Group is reasonably certain to exercise extension options –
refer to Note 16. Also the incremental borrowing rates used, including assumptions about movements
in market rates.
21. FINANCIAL RISKS
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.
Fair values of financial instruments
Other than loans and borrowings (including lease liabilities), the Group’s financial assets and liabilities at 30
June 2020 and 30 June 2019 are included in the balance sheet at amounts that approximate fair values. The
Group does not have any derivative financial instruments at 30 June 2020 (2019: nil).
The fair value of loans and borrowings represents level 2 in the fair value hierarchy and has been determined
using the carrying amount of loans repayable to debt providers. The difference between the carrying amount
and fair value of loans and borrowings represents unamortised capitalised borrowing costs.
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 that risk management strategies are implemented in the
business. A Quality Management System 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.
Page | 70
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
21. FINANCIAL RISKS CONTINUED
There are no material concentrations of credit risk (2019: nil). Identifying concentrations of risk requires
judgement in light of specific circumstances, and may arise industry sectors, geographic distribution or a limited
number of counterparties.
Trade receivables and contract assets
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
2020
$’000
15,643
71,331
9,168
6,980
20191
$’000
57,481
107,383
12,710
5,495
103,122
183,069
1. Prior year comparatives have not been restated to reflect the demerger of Intega
The ageing of Cardno’s trade receivables at the reporting date was:
Not past due (current)*
Past due 0-30 days (30 day ageing)
Past due 31-60 days (60 day ageing)
Past due more than 60 days (>90 day ageing)
2020
2019
Gross
$’000
72,139
14,137
10,503
21,453
118,232
Impairment
$’000
Gross
$’000
Impairment
$’000
2,425
110,921
203
274
12,208
15,110
30,988
18,025
44,687
204,621
195
113
140
21,104
21,552
*An additional loss allowance has been applied to the not past due ageing bracket in relation to COVID-19 – see note 10 for further details.
The maximum exposure to credit risk for contract assets at the reporting date by geographic region was:
Australia & New Zealand
Americas
Asia Pacific
Europe & Africa
The ageing of Cardno’s contract assets at the reporting date was:
2020
$’000
43,231
43,551
300
7,745
2019
$’000
44,049
63,504
2,791
12,561
94,827
122,905
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
2020
2019
Gross
$’000
58,231
6,388
2,178
37,924
104,721
Impairment
$’000
427
-
-
9,467
9,894
Gross
$’000
76,499
12,044
4,014
39,896
132,453
Impairment
$’000
-
-
-
9,548
9,548
Page | 71
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
21. FINANCIAL RISKS CONTINUED
Cardno establishes an allowance for impairment that represents its estimate of expected credit losses in
respect of trade and other receivables and contract assets.
Expected credit loss assessment
The recoverability of trade receivables is reviewed on an ongoing basis and its loss allowance is determined at
both a specific and collective level. All individually significant and aged receivables are assessed for specific
impairment.
The Group has elected to measure its loss allowances for trade receivables and contract assets at amounts
equal to their lifetime expected credit loss (ECL). The ECLs are a probability weighted estimate calculated
based on debtors ageing, actual credit loss experience over the past three years and future economic
conditions. The Group’s trade receivables and contract assets were segmented based on common credit risk
characteristics such as customer type, geographical location of customer, and ageing of financial asset. The
Group considers a financial asset to be in default when the client is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as realising security (if any is held) or the financial
asset is more than 90 days past due.
Contract assets held by the Group relate to work in progress which has not yet been billed and as such the
average ECL percentage applied is equivalent to that applied to current (not past due) trade receivables.
Bad debts are written off when the Group has no reasonable expectations of recovering a financial asset in its
entirety or a portion thereof. In some segments and industries, extended payment terms may be agreed, for
example under a paid when pay arrangement. It is therefore not appropriate to implement a policy of writing off
financial assets based solely on the age of the debtor and other factors are considered.
The Group has assessed the expected credit losses for trade receivables and contract assets at 30 June 2020
and determined that there are no significant or increasing concentrations of credit risk on prior year. However,
due to the global financial uncertainty arising from COVID-19, management have increased the expected loss
rates based on their judgement as to the impact of COVID-19 on the portfolio of customers to which these
assets relate. As part of this assessment, management segmented its receivables and contract assets into
groupings of customers with similar credit risk characteristics.
The movement in the provision for impairment in respect of trade receivables of Cardno during the year was as
follows:
Balance at 1 July
Impact of initial adoption of AASB 9
Impairment loss recognised during the year*
Receivables written off
Demerger of Intega
Effect of foreign exchange
Balance at 30 June
2020
$’000
21,552
-
4,949
(4,389)
(7,346)
344
15,110
2019
$’000
33,881
6,923
2,201
(21,770)
-
317
21,552
*An additional loss allowance has been applied in relation to COVID-19 in the current period – see note 10 for further details.
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:
Page | 72
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
21. FINANCIAL RISKS CONTINUED
30 June 2020
Non-derivative financial liabilities
Trade and other payables
Lease liabilities & hire purchase
Bank loans
30 June 2019
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
122,645
115,905
58,326
296,876
122,645
138,253
62,890
323,788
122,645
32,593
1,663
1 – 5 years
$’000
-
79,362
61,227
Over 5
years
$’000
-
26,298
-
156,901
140,589
26,298
173,190
11,504
137,677
322,371
173,190
12,676
152,981
338,847
158,768
3,221
5,626
167,615
14,422
8,962
147,355
170,739
-
493
-
493
Bank loans are revolving syndicated facilities, one of which is multi-currency, maturing in December 2021.
As at 30 June 2020 net debt was $0.6 million and the company was within its lending covenants. Funding
available to the Group from undrawn facilities is $113.0 million, of which $42.0 million is available only for the
purpose of making business acquisitions (2019: $89.8 million).
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 $44.5 million (2019: $75.3 million) denominated in US dollars (USD) which have been designated as hedges
of Cardno’s net investments in subsidiaries with functional currencies in those currencies.
As at 30 June 2020, a 10 per cent strengthening of the Australian dollar against the USD would have increased
equity by $4.0 million (2019: $6.8 million). A 10 per cent weakening of the Australian dollar against the USD would
have decreased equity by $4.9 million (2019: $8.4 million). 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.
Hedge of net investments in foreign operations
The group's net investment in USD in Cardno USA Inc. on 30 June 2020 is US$112.5 million. Included in
interest-bearing loans at 30 June 2020 were borrowings of US$30.5 million. The borrowings are designated as a
hedge of the first US$30.5 million of the net investment in Cardno USA, Inc. The borrowings are being used to
hedge the Group’s exposure to the USD foreign exchange risk on these investments. Gains or losses on the
revaluation of these borrowings are transferred to other comprehensive income to offset any gains or losses on
revaluation of the net investments in the subsidiary.
There is an economic relationship between the hedged item and the hedging instrument as the net investment
creates a translation risk that will match the foreign exchange risk on the USD borrowing. The Group has established
a hedge ratio of 1:1 as the underlying risk of the hedging instrument is identical to the hedged risk component.
Page | 73
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
21. FINANCIAL RISKS CONTINUED
The hedge ineffectiveness will arise when the amount of the investment in the foreign subsidiary becomes lower
than the amount of the borrowing.
The impact of the hedging instrument on the statement of financial position as at 30 June 2020 is as follows:
$’000
Notional
amount
Carrying
amount
Foreign currency denominated borrowing
30,514
30,514
Line item in
the statement
of financial
position
Loans and
borrowings
Change in fair value
used for measuring
ineffectiveness for the
period
1,851
The impact of the hedged item on the statement of financial position as at 30 June 2020 is as follows:
$’000
Notional
amount
Carrying
amount
Net investment in Cardno USA, Inc.
30,514
30,514
Line item in
the statement
of financial
position
Other financial
assets
Change in fair value
used for measuring
ineffectiveness for the
period
(1,851)
The hedging gain recognised in Other Comprehensive Income before tax is equal to the change in fair value used
for measuring effectiveness. There is no ineffectiveness recognised in profit or loss.
Interest rate risk
Cardno manages its exposure to interest rate fluctuation by continuously monitoring its debt to ensure any significant
movement would not have a material impact on the performance of Cardno. Cardno does not engage in any
transactions which are of a speculative nature.
At the reporting date the interest rate profile of Cardno’s interest-bearing financial instruments was:
Variable rate instruments
Cash assets
Bank loans
Fixed rate instruments
Lease liabilities
2020
2019
Effective
Interest Rate
Balance
$’000
Effective
Interest Rate
Balance
$’000
0.02%
3.84%
57,723
(58,326)
(603)
0.14%
4.04%
4.31%
(115,905)
3.89%
(115,905)
55,544
(137,677)
(82,133)
(11,504)
(11,504)
Group sensitivity
Cash flow sensitivity analysis for variable rate instruments
At 30 June 2020, if interest rates had changed by -/+ 50 basis points from the year-end rates with all other
variables held constant, pre-tax profit for the year would have been $5,000 higher/lower (2019: $290,000
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.
Page | 74
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
21. FINANCIAL RISKS CONTINUED
Capital management
Cardno’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that
the Company can 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.
On 21 February 2019, the company announced the board had approved the implementation of an on-market
share buyback of up to 10% of Cardno ordinary shares on issue commencing 8 March 2019. No shares were
bought back during the year ending 30 June 2020, however the board will continue to evaluate the share buy-
back program while it considers this an appropriate allocation of shareholder capital.
Page | 75
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
UNRECOGNISED ITEMS
22. COMMITMENTS
There are no significant leases that have been entered into by the Group for contracts that have not yet
commenced as at 30 June 2020
The Group has no commitments relating to the acquisition of property, plant and equipment or intangible
assets.
23. CONTINGENT LIABILITIES
Cardno had contingent liabilities at 30 June 2020 in respect of:
Bank guarantees and insurance bonds
2020
$’000
38,162
2019
$’000
46,121
Cardno has bank guarantee and insurance bond facilities with financial institutions denominated in Australian
dollars, United States dollars, New Zealand dollars and Euros. These facilities available to Cardno totalled
A$46.5 million at 30 June 2020 (2019: A$71.6 million), the reduction being as a result of the demerger. The
bank guarantee facilities are secured jointly and severally by the Company and a number of its wholly-owned
subsidiaries.
Matters Relating to Cardno Caminosca S.A (“Caminosca”)
In December 2015 a claim was filed and served on Caminosca in Ecuador alleging cost overruns relating to design
and project management work performed by Caminosca during the period from 2008 to 2013. While the damages
claimed would be material if awarded against Caminosca, the claim remains at the preliminary stages and the
Company believes it is spurious in nature. Caminosca has filed an initial response and will defend the claim.
While this matter continues to be monitored and managed, there has been no material change in the matter.
In February 2015, the Group announced it was investigating a series of transactions involving Caminosca. While
there remains the potential that a penalty or sanction could be imposed on Cardno, the company now considers this
highly unlikely. The remaining Caminosca projects are in the process of completion and close out, after which the
Caminosca entity will be closed or sold.
Other Matters
The company has previously advised that members of the Cardno Group were defendants in proceedings instituted
in FY15 in relation to a large infrastructure project. The matter has now been settled and resolved.
Other than the above, the Directors are not aware of any current material litigation involving Cardno. 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.
Casual employees leave liability
Cardno employs approximately 10% of staff in Australia on a casual basis for which there are no leave provisions
currently recognised. Cardno is undertaking a process to determine whether the May 2020 Federal Court ruling on
casual employee leave applies, and if so a leave liability will be recognised for these employees under employee
benefits in future periods.
Page | 76
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
24. SUBSEQUENT EVENTS
There has not arisen in the interval between the end of the year and the date of this report, any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to
affect significantly the operations of the Group or the results of those operations.
There continues to be significant uncertainty relating to the future impacts of the pandemic, with a number of
countries still experiencing high case numbers. There has been no significant impact of the pandemic on the
Group’s operations subsequent to 30 June 2020 but management are continuing to closely monitor the
potential impacts on the Group.
OTHER INFORMATION
25. OTHER CURRENT ASSETS
Prepayments
Project advances
Security deposits
26. OTHER FINANCIAL ASSETS
Investments in non-related entities
Lease receivable
27. NOTES TO THE CASH FLOW STATEMENT
Reconciliation of Net Cash from Operating Activities to Net profit for the year
Net profit/(loss) for the year
Adjust for non-cash items
Depreciation and amortisation
Impairment loss on goodwill
Gain on demerger of Intega Group Limited
Write off FCTR – discontinued and liquidated operations
Gain on sale of property, plant & equipment
Gain on sale of Structures business
Unrealised foreign exchange (gain)/loss
Share based remuneration
Adjust for changes in assets and liabilities:
(Increase)/decrease in assets:
Contract assets
Deferred tax assets
Trade receivables
Provision for doubtful debts
Other receivables
Prepayments
2020
$’000
6,567
1,028
1,198
8,793
2020
$’000
160
1,543
1,703
2020
$’000
2019
$’000
11,080
2,229
1,633
14,942
2019
$’000
1,245
-
1,245
2019
$’000
56,586
(44,490)
49,360
69,621
(119,103)
(607)
(132)
(1,363)
(571)
487
(28,637)
12,586
33,825
1,775
(2,920)
2,222
27,028
46,285
-
-
(459)
-
475
(461)
(6,826)
13,150
21,466
(19,253)
(360)
1,573
Page | 77
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
27. NOTES TO THE CASH FLOW STATEMENT CONTINUED
Other assets
Increase/(decrease) in liabilities:
Trade payables
Income tax payable
Employee provisions
Contract liabilities
Other liabilities
Deferred tax liabilities
28. EARNINGS PER SHARE
The calculation of earnings per share was based on the following:
(a) Earnings per share – continuing operations
Basic earnings per share for continuing operations
Basic profit/(loss) from continuing operations attributable to ordinary
shareholders
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of share buy-back
Effect of shares issued during the year
Weighted average number of ordinary shares at 30 June
Basic earnings/(loss) per share (cents per share) from continuing
operations
Diluted earnings per share – continuing operations
Profit/(loss) from continuing operations attributable to ordinary
shareholders (diluted)
Weighted average number of ordinary shares (diluted)
Issued ordinary shares at 1 July
Effect of Performance Options and Performance Rights on issue
Effect of share buy-back
Effect of shares issued during the year
2020
$’000
1,090
133
(6,394)
4,352
3,942
(1,769)
(1,006)
73,477
2019
$’000
(304)
13,555
45
3,311
(6,553)
(851)
(6,562)
40,769
2020
$’000
2019
$’000
Restated
(67,078)
(40,644)
No.
No.
444,269,564
464,381,508
-
(9,485,821)
954,506
-
445,224,070
454,895,687
Cents
Cents
(15.07)
(8.93)
(67,078)
(40,644)
No.
444,269,564
464,381,508
-
-
-
(9,485,821)
954,506
-
Weighted average number of ordinary shares (diluted) at 30 June
445,224,070
454,895,687
Diluted earnings/(loss) per share (cents per share) from continuing
operations
(15.07)
(8.93)
Page | 78
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
28. EARNINGS PER SHARE CONTINUED
2020
$’000
2019
$’000
Restated
(b) Earnings per share
Basic earnings per share
Basic profit/(loss) attributable to ordinary shareholders
56,586
(44,490)
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of share buy-back
Effect of shares issued during the year
Weighted average number of ordinary shares at 30 June
No.
444,269,564
464,381,508
-
(9,485,821)
954,506
-
445,224,070
454,895,687
Basic earnings/(loss) per share (cents per share)
12.71
(9.78)
Diluted earnings per share
Profit attributable to ordinary shareholders (diluted)
56,586
(44,490)
Weighted average number of ordinary shares (diluted)
Issued ordinary shares at 1 July
Effect of Performance Options and Performance Rights on issue
Effect of share buy-back
Effect of shares issued during the year
No.
444,269,564
464,381,508
-
-
-
(9,485,821)
954,506
-
Weighted average number of ordinary shares (diluted) at 30 June
445,244,070
454,895,687
Diluted earnings per share (cents per share)
12.71
(9.78)
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.
Cardno presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which
comprise share Performance Options and Performance Rights granted to employees.
Page | 79
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
29. RELATED PARTY DISCLOSURES
Key management personnel
Key management personnel compensation included in employee benefits are as follows:
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
Termination benefits
2020
$
2019
$
2,608,406
2,829,792
81,628
(331,918)
458,853
59,435
733,645
-
2,816,969
3,622,872
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.
Two of Cardno’s Non-Executive Directors (Messrs Alscher and Thompson) are Partners at Crescent Capital
Partners, Cardno’s largest shareholder. Invoices are issued by Crescent Capital monthly for their Non-
Executive Director fees. See section C of the Remuneration Report for further details.
Intega Group Limited (Intega) is considered a related party due to the common control held by Crescent Capital
Investments in both companies. Cardno and Intega also share some common Non-Executive Directors, namely
Messrs Alscher, Forbes and Sherman.
During the year, the Company transacted with Intega through the provision of services under the demerger
Transitional Services Agreement (TSA). In return for these services, Cardno issued monthly transitional
services fee invoices from the date of demerger to 30 June 2020, which were cash settled by Intega.
The TSA income recognised of $10,425,480 is shown in Other Income on the Company’s Statement of
Financial Performance. Invoices totalling $2,811,263 were unpaid (but not overdue) by Intega as at 30 June
2020. Costs are invoiced with no mark up at the end of the month in which they are incurred and payment
terms are 60 days from date of invoice.
During the year, the Company paid $92,800 to Crescent Capital Partners (CCP) for the services of a CCP staff
member to perform the role of Cardno’s Acting Asia Pacific CFO and $30,804 in relation to legal services.
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.
Page | 80
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
30. CONTROLLED ENTITIES
Cardno’s significant subsidiaries are listed below. As part of ongoing efforts to streamline the group, a number
of dormant subsidiaries were dissolved or closed and a number of subsidiaries were transferred to the Intega
Group at time of demerger.
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 (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
ENTRIX Americas, SA
Cardno BEC (Qld) Pty Ltd
Cardno Entrix (Colombia) S.A.S.
Country of
Incorporation
Equity
Holding
2020
Equity
Holding
2019
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United Kingdom
Kenya
New Zealand
New Zealand
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
United States of America
100%
United States of America
100%
Belgium
Australia
Papua New Guinea
Ecuador
Australia
Colombia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Page | 81
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
30. CONTROLLED ENTITIES CONTINUED
Name
Country of
Incorporation
Equity
Holding
2020
Equity
Holding
2019
Cardno Emerging Markets (USA), Ltd
United States of America
Cardno Humphrey Reynolds Perkins Pty Ltd
Australia
Cardno GS, Inc.
Cardno BTO Limited
Cardno Hard & Forester Pty Ltd
Cardno ChemRisk, LLC
Caminosca S.A.S
Cardno South Africa (Pty) Ltd
Cardno Emerging Markets (Rwanda) Limited
Cardno Mozambique LDA
I.T. Transport Limited
ES NY Engineering P.A
TGM Group Pty Ltd
David Douglas Associates Inc
Cardno International Development – SMC Ltd
Cardno Canada Holdings Limited
Cardno S&E Limited
United States of America
New Zealand
Australia
United States of America
South America
South Africa
Rwanda
Mozambique
United Kingdom
United States of America
Australia
United States of America
Uganda
Canada
Canada
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Page | 82
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
31. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2020 the parent Company of Cardno was
Cardno Limited.
Results of the parent entity
Profit for the year – continuing operations
Profit for the year – discontinued operations
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
Demerger reserve
Retained earnings
Total equity1
1 Equity balances have been impacted by the demerger of Intega. See Note 3.
Parent entity contingencies
Bank guarantees
Company
2020
$’000
30,239
120,213
150,452
112,592
289,880
138
503
2019
$’000
17,153
-
17,153
120,809
384,344
65,333
65,433
390,682
151,320
782,214
-
(252,625)
(463,303)
289,377
318,911
10,172
27,825
Bank guarantee facilities are available to Cardno totalling $23.3 million (2019: $45.7 million), the reduction
being as a result of the demerger. These facilities are secured jointly and severally by the Company and a
number of its wholly-owned subsidiaries.
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 32.
Page | 83
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
32. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785, 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 Legislative Instrument 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 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 2020 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
Gain on investment
Finance costs
Other expenses
Loss before income tax from continuing operations
Income tax (expense)/benefit
Net loss for the year from continuing operations
Net profit for the year from discontinued operations
Other comprehensive income for the year
Total comprehensive income for the year
Retained losses at the beginning of the year
Remove Cardno Bowler Pty Ltd from Deed on demerge of Intega
Transfers to and from reserves
Retained earnings at the end of the year
Attributable to:
Owners of the Company
2020
$’000
2019
$’000
Restated
412,574
406,180
(160,106)
(167,211)
(173,687)
(164,186)
(88,026)
(2,652)
-
(6,848)
(380)
(19,125)
12,507
(6,618)
138,628
-
(90,530)
(3,760)
563
(7,752)
(9,692)
(36,388)
11,198
(25,190)
50,545
-
132,010
25,355
(406,414)
(431,769)
(81,535)
-
-
-
(355,939)
(406,414)
(355,939)
(406,414)
Page | 84
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
32. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contract assets
Work in progress
Current tax receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Investments
Property, plant and equipment
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Short term provisions
Contract liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Deferred tax liabilities
Employee benefits
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Demerger reserve
Retained earnings
TOTAL EQUITY
2020
$’000
2019
$’000
10,374
602,733
9,184
-
10,885
4,405
11,115
526,858
7,643
50
2,520
7,086
637,581
555,272
248,410
399,358
3,289
36,974
37,208
20,374
43,976
57,031
325,881
520,739
963,462
1,076,011
637,641
473,140
-
19,545
5,444
1,457
16,891
3,495
662,630
494,983
58,326
144,724
856
3,051
62,233
724,863
238,599
390,682
52,536
151,320
3,910
3,010
151,644
646,627
429,384
782,213
53,585
-
(355,939)
(406,414)
238,599
429,384
Page | 85
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
33. AUDITOR’S REMUNERATION
Audit and review services
Auditors of the Company – KPMG Australia:
> Audit and review of financial reports - Group
> Audit and review of financial statements – Controlled entities
> Audit of historical financial information (de-merger project)
Total audit and review services
Assurance services
Auditors of the Company – KPMG Australia:
> Assurance services provided (de-merger project)
> Other assurance services
Total assurance services
Other services
Auditors of the Company – KPMG Australia:
> Sustainability services
> Other services
> Taxation advice and tax compliance services
Total other services
2020
$
2019*
$
513,200
57,164
-
821,400
177,199
205,000
570,364
1,203,599
-
475,000
5,000
5,000
-
475,000
-
71,880
21,975
17,740
39,715
-
36,090
107,970
* Comparative information has been restated. Amounts have been disaggregated further to provide consistent reporting of audit and
non-audit fee information with the current year
34. 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 2020 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 26 August 2020.
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which has been prepared in
accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The financial statements of the consolidated entity also comply
with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards
Board (IASB).
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016 and in accordance with that instrument, amounts in the consolidated financial
statements have been rounded to the nearest thousand dollars, unless otherwise stated.
Page | 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(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.
Standards and Interpretations Affecting Amounts Reported in the Current Period
The Group has initially adopted AASB 16 Leases from 1 July 2019 with the impact outlined below.
A number of other new standards are effective from 1 July 2019 but they do not have a material effect on the
Group’s financial statements.
AASB 16 Leases
AASB 16 Leases supersedes AASB 117 Leases, AASB Interpretation 4 Determining whether an Arrangement
contains a Lease, UIG Interpretation 15 Operating Leases-Incentives and AASB Interpretation 27 Evaluating
the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases
under a single on-balance sheet model.
The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial
application of 1 July 2019. Under this method, the standard is applied retrospectively with the cumulative effect
of initially applying the standard recognised at the date of initial application. The Group elected to use the
transition practical expedient allowing the standard to be applied only to contracts that were previously
identified as leases applying AASB 117 and AASB Interpretation 4 at the date of initial application. Accordingly,
the comparative information presented for 2019 has not been restated – i.e. it is presented, as previously
reported, under AASB 117 and related interpretations.
The Group also applied the following available practical expedients:
Used a single discount rate for a portfolio of leases with reasonably similar characteristics;
Relied on its assessment of whether leases are onerous immediately before the date of initial application;
Applied the short-term leases exemptions to leases with lease terms ending within 12 months from the date
of initial application;
Did not recognise right-of-use assets and liabilities for leases of low value assets
Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial
application; and
Used hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The impact on transition to AASB 16 as at 1 July 2019 (increase/(decrease)) is as follows:
Assets
Right-of-use assets
Deferred tax assets
Other financial assets
Prepayments
Total assets
Liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Trade and other payables
Total liabilities
Total adjustments on equity:
Retained earnings
$’000
150,837
44,088
377
(271)
195,031
164,913
41,911
(5,644)
201,180
6,149
Page | 87
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
AASB 16 Leases (continued)
Nature of the effect of adoption of AASB 16
The Group has lease contracts for various items of property, vehicles, office and other equipment. Before the
adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as either a
finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of
the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an
operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair
value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments
were apportioned between interest (recognised as finance costs) and reduction of the lease liability. In an
operating lease, the leased property was not capitalised and the lease payments were recognised as rent
expense in profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were
recognised under prepayments and trade and other payables, respectively. Upon adoption of AASB 16, the
Group applied a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The standard provides specific transition requirements and practical expedients,
which have been applied by the Group as follows:
Leases previously classified as finance leases
The Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial
application for leases previously classified as finance leases (i.e. the right-of-use assets and lease liabilities are
equal to the finance lease assets and liabilities recognised under AASB 117). The requirements of AASB 16
were applied to these leases from 1 July 2019.
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as
operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets for most
leases were recognised based on the carrying amount as if the standard had always been applied, apart from
the use of incremental borrowing rates at the date of initial application. In some leases, the right-of-use assets
were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and
accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of
the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
The weighted average incremental borrowing rate applied to the lease liabilities recognised at date of initial
application was 4.31%.
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019
as follows:
Operating lease commitments as at 30 June 2019
Discounting impact using the incremental borrowing rate as at 1 July 2019
Discounted operating lease commitments at 1 July 2019
Less:
Commitments relating to short-term leases and low-value assets
Commitments relating to outgoings and similar service costs
Add:
Reassessment of lease term and lease payments
Lease liability to recognise as at 1 July 2019
Commitments relating to leases previously classified as finance leases
Lease liabilities as at 1 July 2019
$’000
181,183
(20,710)
160,473
(2,950)
(2,057)
9,447
164,913
11,504
176,417
Page | 88
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Summary of new accounting policies
Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been
applied from the date of initial application:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. Unless the Group is reasonably certain of
obtaining ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are
depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. In
accordance with Cardno’s accounting policies, the Group performs its impairment testing annually or more
frequently if required.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease
term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on
an index or a rate are recognised as expenses in the period on which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the
Group’s assessment of whether it will purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that
have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases that are considered of low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a
straight-line basis over the lease terms.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by
an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the assets for additional terms. The Group applies
judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all
relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date,
the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business
strategy).
Page | 89
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Summary of new accounting policies
AASB Interpretation 23 Uncertainty over Income Tax Treatments, and relevant amending standards
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that
affects the application of AASB 112 Income Taxes. It does not apply to taxes or levies outside the scope of
AASB 112, nor does it specifically include requirements relating to interest and penalties associated with
uncertain tax treatments. The Interpretation specifically addresses the following:
> Whether an entity considers uncertain tax treatments separately;
> The assumptions an entity makes about the examination of tax treatments by taxation authorities;
> How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and
tax rates; and
> How an entity considers changes in facts and circumstances.
The Group determines whether to consider each uncertain tax treatment separately or together with one or
more other uncertain tax treatments and uses the approach that better predicts the resolution of the
uncertainty.
The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the
Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact
on its consolidated financial statements.
Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions,
particularly with respect to the restructure of loans and the write off of royalty and management fee debts in
FY17. The Group determined that it is probable that its tax treatments will be accepted by the taxation
authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group.
(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 30 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.
Page | 90
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(d) 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.
(e) 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.
Page | 91
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(f) Intangible Assets
Business combinations and goodwill
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the
date on which control is transferred to Cardno.
Cardno measures goodwill at the acquisition date as:
>
>
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
>
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that
Cardno incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
Business combinations and goodwill continued
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.
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.
Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its
residual value.
Amortisation is charged to the profit and loss on a systematic basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite life are not amortised
but are systematically tested for impairment each year at the same time. Works contracts which are assigned a
value are amortised over the life of the contract from the date they are available for use.
Amortisation methods, useful lives and residual values are reviewed at each reporting date.
Page | 92
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(g) Impairment
Non-financial assets
The carrying amount of Cardno’s assets, other than work in progress and deferred tax assets, 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 post-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.
Financial assets
Trade receivables and contract assets
The Group recognises loss allowances for Expected Credit Losses (ECLs) on financial assets measured at
amortised cost and contract assets. The Group has elected to measure its loss allowances for trade
receivables and contract assets at amounts equal to lifetime ECLs. The ECLs are a probability weighted
estimate calculated based on debtors ageing, actual credit loss experience over the past three years and future
economic conditions. The Group’s trade receivables and contract assets are segmented based on common
credit risk characteristics such as customer type, geographical location of the customer and ageing of the
financial asset.
Contract assets held by the Group relate to work in progress which has not yet been billed and as such the
average ECL percentage applied is equivalent to the current (not past due).
Page | 93
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
34. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(h) 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.
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.
(i) 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 offset 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 associate’s employees. At 30 June 2020 the
Group held 357,716 of the Company’s shares (2019: 357,716).
Demerger reserve
The demerger reserve is used to recognise the gain on demerger of Intega Group Limited.
Page | 94
Directors’ Declaration
Cardno Limited and its Controlled Entities for the year ended 30 June 2020
1.
In the opinion of the Directors of Cardno Limited (the Company):
(a) the consolidated financial statements and notes set out on pages 32 to 94 and the Remuneration
Report of the Directors’ Report, set out on pages 17 to 29, are in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards 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 32 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 Corporations
(Wholly Owned Companies) Instrument 2016/785.
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 2020
4. The Directors draw attention to Note 34 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Dated at Brisbane on the 26 day of August 2020.
Signed in accordance with a resolution of the Directors.
MICHAEL ALSCHER
Chairman
Page | 95
Independent Auditor’s Report
To the shareholders of Cardno Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Cardno
Limited (the Company).
In our opinion, the accompanying Financial Report
of the Company is in accordance with the
Corporations Act 2001, including:
• giving a true and fair view of the Group's
financial position as at 30 June 2020 and of its
financial performance for the year ended on
that date; and
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
• consolidated statement of financial position as
at 30 June 2020;
• consolidated statement of financial
performance, consolidated statement of other
comprehensive income, consolidated
statement of changes in equity, and
consolidated statement of cash flows for the
year then ended;
• notes including a summary of significant
accounting policies; and
• Directors' Declaration.
The Group consists of the Company and the
entities it controlled at the year-end or from time
to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• valuation of goodwill and intangible assets;
•
revenue recognition – professional services
revenue;
•
recoverability of deferred tax assets relating to
tax losses; and
• Accounting for the demerger of Intega Group
Limited.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of
our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Page | 96
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.
Valuation of goodwill and intangible assets ($182.5m)
Refer to Note 13 to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the Group’s annual
testing of goodwill and intangible assets for
impairment, given the size of the balance being
27% of total assets and an impairment loss of
$69.6m recognised for the APAC Cash Generating
Unit (CGU) during the year.
We focused on the significant forward-looking
assumptions the Group applied in their value in
use models and the determination of the
impairment loss, including:
•
forecast cash flows (EBITDA margins and
terminal growth rates) – parts of the Group
have experienced competitive market
conditions and lower utilisation, particularly in
APAC, with a decline in major project wins and
a lower level of work across many specialist
areas. This resulted in the impairment of the
APAC CGU during the year. The conditions
and uncertainties associated with the
economic impacts arising from COVID-19
increase the risk of inaccurate forecasts or a
wider range of possible outcomes for us to
consider. This requires additional audit effort
specific to the feasibility of key assumptions
and consistency of application to the Group’s
strategy. The Group’s modelling is sensitive
to changes in the EBITDA margin; and
• discount rates – these are judgemental in
nature and vary according to the conditions
and environment each specific CGU is subject
to from time to time, and economic and
forecasting uncertainty as a result of COVID-
19. The Group’s modelling is sensitive to
changes in the discount rate.
We involved our valuation specialists and senior
audit team members in assessing this key audit
matter.
Working with our valuation specialists, our
procedures included:
• considering the appropriateness of the value in
use models used in the annual test of goodwill
and intangible assets for impairment against
the requirements of the accounting standards;
• assessing the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas;
• comparing the forecast cash flows contained
in the value in use models to the Board
approved budgets;
• assessing the accuracy of the previous Group
budgets to inform our evaluation of forecasts
incorporated in the models. We noted
previous trends where challenging market
conditions existed and how they impacted the
business, for use in further testing;
• considering the sensitivity of the models by
varying key assumptions (forecast EBITDA
margins, terminal growth rates and discount
rates), within a reasonably possible range, to
identify those CGUs at a higher risk of
impairment and to focus our audit procedures;
challenging the Group’s significant forecast
cash flows including EBITDA margin
assumptions in light of the expected
continuation of competitive market conditions,
within APAC in particular, and market
uncertainties associated with COVID-19. We
compared forecast margins to recent
performance and to published information for
comparable companies to inform our
assessment. We used our knowledge of the
Group, their past performance, business and
customers, and our industry experience;
• we independently developed a discount rate
range using publically available market data for
comparable entities, adjusted by risk factors
specific to the Group and the industry it
operates in;
•
recalculating the impairment charge
recognised in the APAC CGU during the year;
and
• assessing the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of
the accounting standards.
Page | 97
Revenue recognition – professional services revenue ($677.1m)
Refer to Note 4 in the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group’s policy is to account for revenue
earned from professional services over time as the
services are delivered. Revenue recognised which
remains unbilled at year end is recorded as a
contract asset.
The recognition of professional services revenue is
a key audit matter due to the audit effort involved
to assess the appropriateness of the revenue
recognised near year end. 69% of the Group’s
revenue relates to professional services revenue.
The features of the Group’s revenue recognition
process driving our audit effort include:
• The large volume of projects which remain in-
progress at year end;
• The variability in contractual terms of these
arrangements; and
• The judgements required by management to
ensure contract asset balances at year end,
and revenue recognised near year-end, reflect
the effort incurred or estimates of the
measure of progress in delivering services
which is recoverable from customers.
Our procedures included:
• Considering the appropriateness of the
Group’s accounting policies against the
requirements of AASB 15 Revenue from
Contracts with Customers and our
understanding of the business;
• For a sample of contracts we:
-
-
-
-
compared the relevant features of the
underlying professional services contracts
to the criteria in the accounting standard
and against identified performance
obligations;
inspected the key terms in the contract
with the customer including pricing,
deliverables, project commencement and
end dates and contract type for
consistency with the approach to
recognising revenue;
conducted inquiries with the relevant
project managers regarding the progress
of the contract against key milestones in
the contract, write ons/offs, progress
against budget, and comparison of effort
to recognised revenue; and
challenged the judgements applied by
management in recognising contract
assets at year end in relation to
unapproved variations to the original
contract with the customer;
• Assessing contract assets remaining unbilled
at year end by selecting a sample and
checking that revenue was recognised to the
extent that time and materials had been
incurred prior to 30 June 2020 with reference
to contracts, timesheets or invoices; and
• Challenging the judgements applied by
management in estimating the provision for
contract assets at year end which are not
considered to be recoverable from the
customer.
Page | 98
Recoverability of deferred tax assets relating to tax losses ($40.8m)
Refer to Note 8 in the Financial Report
The key audit matter
How the matter was addressed in our audit
The recoverability of Deferred Tax Assets (DTA)
relating to historical tax losses is dependent on the
ability of the Group to generate sufficient taxable
income in the future, to which the historical tax
losses can be applied. This is a key audit matter
due to:
•
the high level of judgement required by us in
evaluating the Group’s assessment of the
probability sufficient taxable income will be
generated in the future; and
•
the judgement required by us in evaluating the
Group’s interpretation of tax legislation and
the application of accounting requirements,
particularly in Australia and the United States
of America.
These factors increase the risk associated with
accurately forecasting future taxable income and
create complexity in our work on the recoverability
of the DTA.
We involved our tax specialists and senior audit
team members in assessing this key audit matter.
Working with our tax specialists, our procedures
included:
• comparing the forecasts included in the
Group’s estimate of future taxable income
used in the DTA recoverability assessment to
the Board approved budget and assumptions
used in the Group’s assessment of the
valuation of goodwill and intangible assets for
consistency. Our approach to testing these
forecasts was consistent with the approach
detailed above in relation to the valuation of
goodwill and intangible assets;
• comparing taxable profit to historical trends
and performance to inform our evaluation of
the current taxable profit forecasts;
•
involving our tax specialists from the relevant
jurisdictions to assess the tax loss availability,
utilisation expiry dates and annual utilisation
allowances for consistency with local practice,
regulatory parameters and legislation; and
• understanding the timing of future taxable
profits and considering the consistency of the
timeframes of expected recovery to our
knowledge of the business and its plans. We
placed increased scepticism where there was
a longer timeframe of expected recovery.
Accounting for the demerger Intega Group Limited
Refer to Note 3 in the Financial Report
The key audit matter
How the matter was addressed in our audit
Cardno’s Quality, Testing and Measurement
businesses were demerged from the Group on 31
October 2019 to form Intega Group Limited.
As disclosed in Note 3 Discontinued Operations to
the financial statements, Cardno has recognised a
$119.1 million gain on the demerger.
This is a key audit matter due to the financial
impact of the transaction and estimates and
judgements associated with the demerger
including the calculation of the fair value of Intega
Group Limited on demerger and the separation of
assets and liabilities.
We involved our tax specialists and senior audit
team members in assessing this key audit matter.
Our procedures included:
• obtaining and reading the key documents
associated with the demerger to identify
terms relevant to the calculation of the gain on
demerger;
• assessing the key inputs used to calculate the
gain on demerger, being the fair value of the
Intega Group at the date of settlement and
the book value of the Intega Group Limited net
assets at demerger date;
• assessing whether Cardno accurately
identified the assets and liabilities to be
derecognised at the demerger date including
assets and liabilities held in separate legal
entities and those carved out of remaining
Cardno legal entities;
Page | 99
• assessing whether the operating result at the
point of demerger was correctly calculated
and presented within discontinued operations;
• our tax specialists considered the tax impacts
of the demerger, including consideration of
external advice and private tax rulings obtained
by the Group; and
• assessing the disclosures in the financial
report in accordance with the requirements of
the Australian Accounting Standards.
Other information
Other Information is financial and non-financial information in Cardno Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for
the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we consider whether the Other Information is materially inconsistent with the Financial
Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group and Company’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend
to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
•
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Page | 100
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of Cardno
Limited for the year ended 30 June 2020,
complies with Section 300A of the Corporations
Act 2001.
Directors’ responsibilities
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 responsibilities
We have audited the Remuneration Report
included in pages 17 to 29 of the Directors’ Report
for the year ended 30 June 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit
conducted in accordance with Australian Auditing
Standards.
KPMG
Simon Crane
Partner
Brisbane
26 August 2020
Page | 101
Additional Shareholder Information
DISTRIBUTION OF ORDINARY SHAREHOLDERS
The number of shareholders, by size of holding, as at 31 July 2020 were:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Ordinary Shares
Number of
6,286
1,630
510
836
128
Number of
Shares
1,723,573
3,942,616
3,815,555
23,811,675
413,724,432
9,390
447,017,851
As at 31 July 2020 there were 6,776 shareholders who held less than a marketable parcel of 2,344,646 shares.
TWENTY LARGEST ORDINARY SHAREHOLDERS
The names of the twenty largest holders as at 31 July 2020 were:
Listed Ordinary Shares
Number
Held
Percentage
CRESCENT CAPITAL INVESTMENTS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
HALJAN MANAGEMENT LP
BNP PARIBAS NOMINEES PTY LTD
GEE SUPER PTY LTD
ANNE FELICITY PHILLIPS
BNP PARIBAS NOMS PTY LTD
LUTON PTY LTD
PEDERICK ENTERPRISES PTY LTD
CS THIRD NOMINEES PTY LIMITED
TREVOR JOHNSON
TAMBLYN INVESTMENTS PTY LTD
FOUR G'S HOLDINGS PTY LTD
MISS ZHAOCHU YUAN
MR RICHARD FRANCIS WOODS + MRS THERESE WOODS
STONETALON HOLDING LP
ASLAN EQUITIES PTY LTD
217,946,359
85,357,777
48,188,696
22,051,781
5,517,721
1,686,192
1,575,162
1,568,411
1,101,378
853,365
792,412
762,736
749,680
687,779
650,000
600,000
583,900
497,928
487,194
473,393
Total
392,131,864
48.76
19.09
10.78
4.93
1.23
0.38
0.35
0.35
0.25
0.19
0.18
0.17
0.17
0.15
0.15
0.13
0.13
0.11
0.11
0.11
87.72
Page | 102
Additional Shareholder Information
SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders who have notified the company in accordance with section 671B of the
Corporations Act 2001 are:
Crescent Capital Investments
Viburnum Funds Pty Ltd
VOTING RIGHTS
Number Held
Percentage
228,891,883
26,942,910
51.20%
6.03%
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
ESCROWED SHARES
There are currently no shares held in escrow.
RIGHTS
As at 31 July 2020 the details of Performance Rights on issue are as follows:
Number of Rights Holders
Number of Rights on Issue
8
2,047,863
VOTING RIGHTS OF RIGHTS
The ordinary shares issued on exercise of the rights will rank equally with all other ordinary shares.
Page | 103
BOARD OF DIRECTORS
AUDITORS
KPMG
Level 16, Riparian Plaza
71 Eagle Street
Brisbane QLD 4000
Phone +61 7 3233 3111
Fax +61 7 3233 3100
www.kpmg.com.au
LAWYERS
Gilbert + Tobin Lawyers
Level 35, Tower Two
International Towers Sydney
200 Barangaroo Avenue
Barangaroo NSW 2000
Phone +61 2 9263 4000
Fax +61 2 9263 4111
www.gtlaw.com.au
BANKERS
HSBC
Investec
National Australia Bank Limited
Chairman
Michael Alscher
Directors
Steve Sherman
Jeffrey Forbes
Nathanial Thomson
Rebecca Ranich
Chief Executive Officer
Susan Reisbord
Chief Financial Officer
Peter Barker
Company Secretaries
Peter Barker
Cherie O’Riordan
REGISTERED OFFICE
Cardno Limited
ABN 70 108 112 303
Level 11, North Tower
Green Square
515 St Paul’s Terrace
Fortitude Valley
QLD 4006 Australia
Phone + 61 7 3369 9822
Fax + 61 7 3369 9722
cardno@cardno.com
www.cardno.com
SHARE REGISTRY
Computershare Investor Services
Pty Limited
Level 1, 200 Mary Street
Brisbane QLD 4000
Phone 1300 552 270 (within Australia)
+61 3 9415 4000 (outside Australia)
www.computershare.com.au
Page | 104
Registered office
Cardno Limited
ABN 70 108 112 303
Level 11, North Tower
Green Square
515 St Paul’s Terrace
Fortitude Valley
QLD 4006 Australia
Phone + 617 3369 9822
Fax + 617 3369 9722
cardno@cardno.com
www.cardno.com
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