Cardno Limited
ABN 70 108 112 303
and its controlled entities
CARDNO
2021 ANNUAL
REPORT
for the full-year ended
30 June 2021
FY21
Page | 1
Chairman’s Letter
Dear Shareholder,
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 $51.2
million (stated on a pre AASB 16 basis). This represents a 19% increase on last year’s underlying result.
Pleasingly, this is the fifth year in a row where your Company has hit or exceeded market guidance.
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 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 people around the
world who have coped with an incredibly disruptive year in the way they can engage and deliver projects for
clients.
While the future impact of COVID-19 on our business is not completely clear, we note that the Company had a
successful FY21, beating both internal budgets and external market guidance, focusing on what we can control.
Throughout the year and across all geographies, we have actively evaluated and mitigated COVID-19
lockdowns or restrictions as they have emerged.
OPERATING HIGHLIGHTS
Asia Pacific
Our Asia Pacific leadership has spent the past year both building on Cardno’s core strengths of Transport,
Water, Buildings and Environment and focussing on operational disciplines. This significant work is bearing
fruit. Asia Pacific’s FY21 underlying EBITDA of $8.0 million and EBITDA margin (EBITDA as a percent of net
revenue) of 4.3% are markedly increased from FY20. Pleasingly, the Asia Pacific business exited FY21 at a
considerably improved run-rate versus the FY21 year.
Americas
The Americas had another exceptional year with all businesses meeting or exceeding targets. Underlying
EBITDA grew 8.1% to $37.2 million, with an EBITDA margin (EBITDA as a percent of net revenue) up 1% to
14.9%. We enter FY22 with encouraging levels of backlog and an expectation of ongoing success in
maintaining top quartile industry performance.
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. During the year, the division successfully reduced its operations in Europe in order to
refocus efforts on our key donor clients in the Americas and Asia Pacific. Both of these markets reported a
strong FY21 performance and are well positioned for FY22.
Strategic Review
As advised in our market announcement to the ASX on 9 June 2021, your Board has commenced a Strategic
Review process with the objective of maximising Cardno shareholder value. As advised, this process involves
an assessment of Cardno’s strategic options and the alternative strategies available to unlock and enhance
value for Cardno shareholders. There are no assurances that the Board will decide to pursue, nor that any
transaction or transactions will result from this review.
Crescent Capital Partners, our largest shareholder, has advised the Cardno Board that it is supportive of
Cardno conducting the Strategic Review.
Page | 2
While the Strategic Review continues, we are not in a position to provide any update to the market.
The Board will continue to keep shareholders informed in accordance with Cardno’s continuous disclosure
obligations.
People
I want to thank all our staff for their extraordinary efforts in this last year. Our people continue to deliver
innovative solutions to clients around the world, regardless of social, political, environmental or COVID-19
related challenges.
I would also like to thank our clients, banking partners and shareholders for their ongoing support.
MICHAEL ALSCHER
Chairman
Page | 3
CEO’s Letter
Dear Shareholder,
After six years of transformation, Cardno is hitting its stride with honed service offerings, financial discipline, a
unified leadership team, an engaged workforce and a track record of performance. We completed the move
from a Company trying to be all things to all clients, to a firm that provides consulting solutions to the most
complex problems in health sciences, energy and natural resources, infrastructure and international
development. This is especially exciting because we have hit our stride at the same time market dynamics are
driving a new more deliberate focus on Environment Social and Governance (ESG) expectations for private
industry and governments around the world, providing exciting tailwinds across our portfolio of services.
FY21 was an unusual year for us. It was a year spent navigating the impacts of a global pandemic and a new
work-from-home paradigm for many of our staff. While many of our office buildings sat idle, our team members
did not. Our team members around the world continued to deliver innovative solutions for our clients from
kitchens, home offices, and back porches, with children, spouses, dogs and cats as office mates … and our
amazing field teams continued to execute their projects, albeit with enhanced safety measures. Despite the
challenges we delivered an EBITDA of $51.2 million, representing growth of 19% on relatively flat revenue
compared to prior year (on a constant currency basis).
OUR CONTINUED COVID-19 RESPONSE
Our COVID-19 response continues with Global and Regional Incident Management Teams and Global and
Regional Business Continuity Teams still active. ChemRisk, our team of leading epidemiologists, toxicologists
and health scientists is providing the research and guidance that informs our business decisions each day,
including our protocols for reopening offices. I am pleased to say after 16 months of closure, a third of our US
offices recently opened for vaccinated staff, and more are coming online each day. At the same time, our staff
in offices across Australia and around the world are still experiencing challenging and unpredictable lockdowns.
SAFETY is Cardo's number 1 core value and it will continue to drive each and every business decision we
make as we continue to manage pandemic impacts.
Page | 4
DIVISION HIGHLIGHTS
Asia Pacific
Asia Pacific had a solid FY21 despite COVID-19 lockdowns. Although revenue was down 6.4% year on year,
underlying EBITDA has increased to $8.0 million in FY21 - a tremendous rebound from FY20 EBITDA of $1.0
million. All across the business we saw quality backlog growth complemented with consistent project controls
and reporting which resulted in the positive momentum with which we begin FY22. The positive results we have
seen from the change management program that the team executed over the past few years are a testament to
the leadership and commitment of our Asia Pacific staff.
Americas
Americas had another strong year, achieving revenue growth of 3.3% and underlying EBITDA growth of 8.9%
on prior year. ESG demands are creating robust market demands across all parts of the business, and have
created a unique opportunity to establish a new service line, ESG Services, specifically designed to aid
companies and their investors in understanding and acting on the ESG challenges and opportunities before
them. Continued strong organic growth is anticipated as we enter FY22, which we expect to augment with
acquisitive growth with a particular emphasis on adding to our existing Environment, Transport and Water
services.
International Development
International Development (ID) had a good year and delivered underlying EBITDA of $5.4 million, an increase
of 101.4% on last year. The result was due to strong performance of the US ID and APAC ID businesses. We
made significant progress in de-risking the business by winding down underperforming operations in Europe.
Due to COVID-19 impacts and increasing demand in emerging nations, international development
organisations like the United States Agency for International Development (USAID), Australia’s Department of
Foreign Affairs and Trade (DFAT) and the Millennium Challenge Corporation (MCC) look to Cardno to support
sustainable international development projects across the globe. We are working hand-in-hand with them as
they drive global solutions to promote environmental, economic, and health resiliency and sustainability for a
strong FY22.
LOOK AHEAD
While ESG might be a new acronym for many, at Cardno we have been an ESG Company for decades, having
extensive experience in environmental science, health assessment, sustainable infrastructure design, and
social and economic-oriented international development. ESG is part of our DNA, and is core to the services
we have been providing for more than 75 years. Even more than that though, it is how we do business. FY21
was the year we brought all of the efforts we have been making in all parts of the business around the world,
under a single umbrella and published in our 2020 Global Sustainability Report
(https://www.asx.com.au/asxpdf/20210511/pdf/44wdj9y7dd98zp.pdf).
We don’t simply help our clients meet their ESG commitments, our own Global Sustainability Policy translates
our commitment and intent to promote environmental equity and minimise the environmental impact of our
business into measurable impacts.
We still have a long road ahead in managing the impacts of COVID-19, but with the availability of effective
vaccines, we are on our way. COVID-19 has forever changed us. We enter FY22 with a cohesive and
integrated leadership team more committed than ever to our vision, purpose and values. We enter FY22 with a
battle tested new way to work, the hallmark of which is flexibility. We enter FY22 with stability we have not
experienced in years with balanced financial performance across the business, underpinned by a strong
backlog position and strong market tailwinds.
SUSAN REISBORD
Managing Director and Chief Executive Officer
Page | 5
Consolidated Financial Statements
for the year ended 30 June 2021
CONTENTS
Directors’ Report ..................................................................................................................................................... 6
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 ..................................................................................................... 35
Consolidated Statement of Cash Flows ............................................................................................................... 36
Notes to the Consolidated Financial Statements.................................................................................................. 37
Directors’ Declaration ........................................................................................................................................... 90
Independent Auditor’s Report ............................................................................................................................... 91
Additional Shareholder Information ...................................................................................................................... 97
Corporate Directory .............................................................................................................................................. 99
The Company’s Corporate Governance Statement last updated and Board approved on 22 June 2021 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 2021.
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
Jeffrey Forbes
Non-Executive Director
Rebecca Ranich
Non-Executive Director
Steven Sherman
Non-Executive Director
Nathanial Thomson
Non-Executive Director
COMPANY SECRETARIES
Peter Barker
Chief Financial Officer and Joint Company Secretary
Cherie O’Riordan
Group Financial Controller and Joint Company Secretary
Qualifications of Company Secretaries
Peter Barker – BComm, MBA, FCPA
Cherie O’Riordan – BEcon/Arts, CA, GAICD
Particulars of Directors’ qualifications, experience and special responsibilities are listed on the next page.
Directors’ Report (continued)
Page | 7
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.
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 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.
Non-Executive
Chairman
Chairman of
Remuneration
Committee
Member of
Audit, Risk &
Compliance
Committee
Member of ESG
Committee
Susan
Reisbord
As the Chief Executive Officer and Managing 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.
Chief Executive
Officer and
Managing Director
CEO, Americas
Member of ESG
Committee
Jeffrey
Forbes
Jeffrey 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.
Jeffrey previously worked at Cardno as CFO, Executive Director 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, Jeffrey 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.
Jeffrey is the Non-Executive Chair of Herron Todd White Group and Non-Executive
Director of PWR Holdings Ltd and Intega Group Limited.
Jeffrey holds a Bachelor of Commerce from the University of Newcastle and is a
Graduate of the Australian Institute of Company Directors.
Non-Executive
Director
Audit, Risk &
Compliance
Committee
Chairman
Member of
Remuneration
Committee
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.
Rebecca is an investor in and advisor to emerging technology companies, and is a
member of the Technology Commercialisation Panel for the Johns Hopkins University
Applied Physics Laboratory.
Non-Executive
Director
Member of
Remuneration
Committee
Chair of ESG
Committee
Directors’ Report (continued)
Page | 8
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.
DIVIDENDS
An interim dividend (60% franked) of 1.5 cents per share was declared for the half-year ended 31 December
2020.
The Board has declared a full year dividend of 4.0 cents per share (unfranked). The financial effect of the full
year dividends has not been brought to account in the consolidated financial statements for the full year ended
30 June 2021 and will be recognised in subsequent periods.
No dividends were declared for the financial year ended 30 June 2020.
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)); Chairman of the Board of the Gas Technology Institute (and Chair,
Investment Committee) and serves on the Advisory Board of Yet Analytics, Inc.
Rebecca holds a Bachelor of Arts (BA) with honors from Northwestern University and a
Masters in Business Administration (MBA) from the University of Detroit.
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.
Non-Executive
Director
Member of
Audit, Risk &
Compliance
Committee
Member of
Remuneration
Committee
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
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
Remuneration
Committee
Directors’ Report (continued)
Page | 9
EVENTS SUBSEQUENT TO REPORTING DATE
Subsequent to year end, the Board declared a full year dividend of 4.0 cents per share (unfranked).
On 9 June 2021, the Company announced the commencement of a strategic review process with the objective of
maximising shareholder value. The process involves an assessment of Cardno’s strategic options and the
alternative strategies available to unlock and enhance value for Cardno shareholders. As at the date of this report,
the strategic review process is ongoing and no actions have been taken or decisions made that require further
disclosure.
Other than the above, 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, the results of those operations, or the state of the affairs of the Group,
in future years.
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.
As stated, on 9 June 2021, the Company announced the commencement of a strategic review process. As at the
date of this report, the strategic review process is ongoing and no actions have been taken or decisions made that
require further disclosure.
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.
Directors’ Report (continued)
Page | 10
REVIEW OF RESULTS
PERFORMANCE ($’m)
2021
2020
Gross Revenue
890.4
978.3
Fee Revenue
612.7
677.1
Underlying EBITDAI 1
78.5
73.5
Underlying EBITDAI Pre AASB 16 impact 2
51.2
43.0
Underlying NOPAT 3
27.7
9.4
Profit/(loss) before tax from continuing operations
41.5
(49.6)
Profit before tax from discontinued operations
-
120.7
Net profit/(loss) after tax from continuing operations
32.7
(67.1)
Net profit after tax from discontinued operations
-
123.7
Net profit after tax
32.7
56.6
Operating Cash Flow
62.6
73.5
EPS from continuing operations – basic (cents)
7.88
(15.07)
EPS - basic (cents)
7.88
12.71
NOPAT EPS - basic (cents)
6.69
2.10
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 AASB 16 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.
Cardno has reported a net profit after tax (NPAT) of $32.7 million for the year ended 30 June 2021. This
compares with an NPAT of $56.6 million for the FY20 prior year. 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 FY20 comparative 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, which are presented as discontinued operations. The FY20 result from discontinued operations was an
NPAT of $123.7 million, which included a demerger gain of $119.1 million.
Balance Sheet
The Company’s bank debt facility is a three-year multi-currency cash advance and letter of credit syndicated
facility, expiring in October 2022. The Company is in a surplus net debt (cash on hand less debt) position of
$15.0 million at the end of 30 June 2021 (net debt of $0.6 million at 30 June 2020).
Cash Flow
The Company recorded a net operating cash inflow for the year of $62.6 million (inflow $73.5 million FY20).
This is primarily driven by a strong operating result for the year and ongoing working capital management and
ongoing focus on the conversion of direct labour costs to debtors then customer receipts.
Impact of COVID-19 (“COVID”) Pandemic
FY21
Cardno remains fortunate 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.
Overall, the Company experienced a modest negative impact to the P&L as a result of COVID, whereby, as first
observed in FY20, a number of projects shifted “to the right” (projects delayed not cancelled) associated with
COVID attributed impacts.
Directors’ Report (continued)
Page | 11
Cardno largely sells consultants’ time and field services that are often deemed essential. Our clients and staff
continue to adapt as required to working remotely.
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’s operating metrics have held or improved during FY21. Group wide backlog has not materially
changed through COVID. Debtors + WIP DSO is at another Company record low (75 days in FY21 vs 80 days
in FY20 and 87 days in FY19). 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 the Expected Credit Loss provision associated with COVID (first recorded in FY20) was
appropriate at financial year end.
Beyond FY21
Cardno 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 remains 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.
As previously advised, (1) Cardno does not have a material exposure to developers and landlords most
immediately impacted by COVID economics and (2) we continue to watch our clients’ funding streams.
While our people and ecosystem continue to show impressive ingenuity, and adapt quickly to the ongoing
evolving environment created by COVID, continued COVID related requirements and needs are bound to
stress the mental wellbeing of our staff. We continue to closely monitor the impact.
Directors’ Report (continued)
Page | 12
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.
Fee revenue for APAC was down 8.1% on FY20 to $188.4M, although underlying EBITDA increased from $1.0
million in FY20 to $8.0 million in FY21 (pre AASB 16). Asia Pacific Consulting EBITDA margins increased from
0.5% to 4.3% and, as committed, the business implemented business and project disciplines, focussing on the
basics of project and business controls with activities focused on margin lift. Year-end backlog, being
contracted work that has yet to be delivered, is up 11.4% year on year. The Company expects ongoing steady
and sustainable improvement into FY22 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 business operates in United States dollars (USD). Clients are billed in USD and the vast bulk of
costs (including salaries and associated costs, rent, facilities) are incurred in USD. While this creates a natural
hedge against movements in foreign exchange rates, movements in the Australian dollar (AUD / USD
exchange rate) do impact Cardno’s Group results when reported in AUD. In FY21 the average AUD/USD
exchange rate was 0.7464 whereas in FY20 it was 0.6596. All amounts in this report are shown in AUD
(unless stated otherwise).
The Americas continues to benefit from both (1) the accelerating demand for the Company’s environmental,
social, and governance (ESG) services and (2) ongoing operational discipline across the business.
Despite the previously described impacts from COVID, the Americas fee revenue is up 1.8% on FY20 to USD
$186.9 million, resulting in an 8.9% increase in underlying EBITDA to USD $27.8 million (pre AASB 16). The
Americas EBITDA margin increased from 13.9% to 14.9%. Year-end backlog reduced slightly (down 1.1%)
year on year, as ESG related project wins were offset by reduced infrastructure backlog as previously won
multiyear infrastructure project backlog was utilised through the year. This reflects the infrastructure client
multi-year large project bidding cycles.
International Development (ID)
The International Development (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.
As previously advised, Cardno continues its business development initiatives with Asia Pacific and Americas
clients and has de-emphasised its business development in Europe. ID’s net revenue was down (9.5%) on the
prior comparative period (PCP) to $167.6 million, due to a combination of the stronger AUD/USD exchange rate
and the Company’s decision to scale back its operations in Europe. Correspondingly, underlying EBITDA of
$5.4 million was up 101.4% on PCP and FY21 EBITDA margin is up from 1.4% to 3.2%.
Backlog is driven by multi-year procurement cycles with government clients. On a constant currency basis
(eliminating the impact of AUD/USD exchange rate fluctuations), backlog is down 2.4% on PCP.
Portfolio
The 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 slightly down on PCP primarily due to COVID related project delays.
Caminosca continues to wind down and incur some corporate costs such as legal expenses, which have been
excluded from the underlying result.
Directors’ Report (continued)
Page | 13
SEGMENT OVERVIEW CONTINUED
Statutory1
Underlying
Adjustments2
Underlying1
Financial year
Financial year
Financial year
$’000
2021
2020
2021
2020
2021
2020
Asia Pacific
230,622
246,406
-
-
230,622
246,406
Americas
340,118
372,499
-
-
340,118
372,499
ID
313,260
350,708
-
-
313,260
350,708
Portfolio
6,390
8,655
-
-
6,390
8,655
Gross Revenue
890,390
978,268
-
-
890,390
978,268
Asia Pacific
4,214
(2,249)
3,792
3,211
8,006
962
Americas
37,034
40,926
206
(2,249)
37,240
38,677
ID
3,642
2,458
1,718
203
5,360
2,661
Portfolio
11,374
(154)
(10,749)
887
625
733
Continuing operations EBITDAI3, 5
56,264
40,981
(5,033)
2,052
51,231
43,033
Adjust for AASB 16 impact
27,252
30,436
-
-
27,252
30,436
Adjusted EBITDAI3,5
83,516
71,417
(5,033)
2,052
78,483
73,469
Unrealised foreign exchange losses
(402)
(598)
-
-
(402)
(598)
Total continuing operations
EBITDAI3, 5
83,114
70,819
(5,033)
2,052
78,081
72,871
Depreciation, impairment and
amortisation expenses
(34,578)
(108,592)
-
69,621
(34,578)
(38,971)
EBIT4,5
48,536
(37,773)
(5,033)
71,673
43,503
33,900
Net finance costs
(7,056)
(11,791)
-
-
(7,056)
(11,791)
Profit/(loss) from continuing
operations before income tax
41,480
(49,564)
(5,033)
71,673
36,447
22,109
Income tax (expense)/benefit6
(8,822)
(17,514)
94
(976)
(8,728)
(18,490)
Profit/(loss) from continuing
operations after income tax
32,658
(67,078)
(4,939)
70,697
27,719
3,619
Discontinued operations, net of tax
-
123,664
-
(117,921)
-
5,743
Profit/(loss) after income tax
32,658
56,586
(4,939)
(47,224)
27,719
9,362
Attributable to:
Ordinary Equity holders
32,658
56,586
(4,939)
(47,224)
27,719
9,362
1.
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.
2.
Details of adjustments from Statutory to Underlying financial information are set out on page 14.
3.
EBITDAI represents earnings before interest, income tax, depreciation, amortisation and impairment.
4.
EBIT represents earnings before interest and income tax.
5.
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.
Directors’ Report (continued)
Page | 14
SEGMENT OVERVIEW CONTINUED
2021
$’000
2020
$’000
Underlying Profit From Continuing and Discontinued Operations After Income Tax
(Attributable to Ordinary Equity Holders)
27,719
9,362
Underlying Adjustments to EBITDAI:
Onerous contracts and other costs associated with office rationalisation 1
2,499
1,667
Costs associated with restructuring 2
2,143
2,199
Costs related to disposed entities 3
3,166
-
Receipt of settlement proceeds 4
(8,365)
-
Acquisition related costs 5
-
193
Foreign stamp duty 6
-
394
Release of liabilities no longer required 7
(4,504)
(2,817)
Legal costs
-
16
Other
28
400
Total Underlying Adjustments to EBITDAI
(5,033)
2,052
Underlying Adjustments to Depreciation, Amortisation and Impairment:
Impairment loss on goodwill 8
-
69,621
Total Underlying Adjustments to Depreciation, Amortisation and Impairment
-
69,621
Underlying Adjustments to Income Tax:
Tax effect of underlying adjustments
94
(5,332)
Total Underlying Adjustments to Income Tax
94
(5,332)
Underlying adjustments relating to divested entities 9
-
(113,565)
Total Underlying Adjustments to Discontinued Operations
-
(113,565)
Statutory Profit After Income Tax
(Attributable to Ordinary Equity Holders)
32,658
56,586
1.
Costs associated with the Group wide office rationalisation and consolidation project in the current and prior year.
2.
Termination and redundancy costs associated with the restructuring of APAC, Americas and ID Europe (FY20: Termination and redundancy costs associated with
Group support functions and downsizing of the Asia Pacific Segment).
3.
Insurance costs relating to divested business units for pre-demerger period, working capital true up received in relation to the sale of Structures business unit offset
by legal and other costs incurred in the sale of ID Brussels business unit.
4.
Settlement proceeds in relation to Caminosca.
5.
Costs incurred in acquiring new businesses in the prior year, such as legal, due diligence and insurance costs.
6.
Documentary stamp taxes paid on non-trade intercompany payables in the prior year.
7.
Release of liabilities no longer required and recovery of debtors relating to Caminosca.
8.
Impairment of Goodwill relating to the APAC segment recorded in the prior year.
9.
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.
Directors’ Report (continued)
Page | 15
OUTLOOK
As stated, on 9 June 2021 the Company announced the commencement of a strategic review process. As at the
date of this report, the strategic review process is ongoing and no actions have been taken or decisions made that
require further disclosure. The Board will continue to keep shareholders informed in accordance with Cardno’s
continuous disclosure obligations.
In the meantime, it is very much business as usual for Cardno’s 4,000+ team around the world.
DIRECTORS’ MEETINGS
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2021 is set out below:
Board of Directors
Audit, Risk &
Compliance Committee
Remuneration
Committee (i)
No. of Meetings Held
A
B
A
B
A
B
Michael Alscher
12
12
3
5
9
9
Susan Reisbord
12
12
-
-
9
9
Steven Sherman
12
12
5
5
9
9
Jeffrey Forbes
12
12
5
5
9
9
Nathanial Thomson
12
12
-
-
9
9
Rebecca Ranich
12
12
-
-
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) 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:
Ordinary
Shares
Performance
Options
Performance
Rights
Michael Alscher
-
-
-
Steven Sherman
-
-
-
Jeffrey Forbes
148,619
-
-
Nathanial Thomson
-
-
-
Rebecca Ranich
-
-
-
Susan Reisbord
319,019
-
2,611,572
Directors’ Report (continued)
Page | 16
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 until November 2020, 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. In November 2020, Jenifer Picard
(also CFO of the Americas division) was appointed to the newly created role of Chief Operating Officer (COO).
As a result, the delegation of authority matrix was updated to include the COO with the role assigned the same
delegated authority limits as the CFO. The COO also plays an important role in operational oversight and
management, thus the COO is considered to be KMP.
The KMP disclosed for the financial year ended 30 June 2021 are detailed in the following table.
Name
Title
Period KMP
(if less than full-year)
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
Directors’ Report (continued)
Page | 17
Name
Title
Period KMP
(if less than full-year)
EXECUTIVES
Susan Reisbord
Chief Executive Officer and Managing Director
Peter Barker
Chief Financial Officer
Jenifer Picard
Chief Operating Officer
Appointed 1 November 2020
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 is 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 and FY2021 LTI plans, which were approved by
shareholders 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. In FY2021 GRG charged
Cardno $6,600 (incl. GST) (FY2020: $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 participate
on or 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 2022 financial year.
The fee structure (which is inclusive of superannuation contributions (where compulsory) for Non-Executive
Directors) is detailed in the following table.
Directors’ Report (continued)
Page | 18
Board
$
Audit, Risk &
Compliance
Committee
$
Remuneration
Committee
$
Australian based Board members (AUD)
Chairman
200,000
27,273
-
Non-Executive Director
100,000
13,500
-
US based Board members (USD)
Non-Executive Director
100,000
11,000
-
The remuneration received by Non-Executive Directors for the years ended 30 June 2021 and 30 June 2020 is
set out in the following table.
Salary and Fees
$
Superannuation
Benefits
$
Total
$
NON-EXECUTIVE
Michael Alscher1
2021
200,000
-
200,000
2020
200,000
-
200,000
Neville Buch2
2021
-
-
-
2020
33,699
-
33,699
Steven Sherman
2021
103,652
9,847
113,499
2020
103,652
9,847
113,499
Jeffrey Forbes
2021
116,231
11,042
127,273
2020
116,231
11,042
127,273
Rebecca Ranich3
2021
134,017
-
134,017
2020
149,104
-
149,104
Nathanial Thomson1
2021
100,000
-
100,000
2020
100,000
-
100,000
Total 2021
653,900
20,889
674,789
Total 2020
702,686
20,889
723,575
1 Michael Alscher's and Nathanial Thomson’s fees are paid to Crescent Capital Partners.
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.
Directors’ Report (continued)
Page | 19
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 2021, 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:
< 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 finalisation of the EBITDA result for the year.
Underlying EBITDA is measured on a pre AASB 16 Leases (AASB 16) basis.
Long-Term
Incentive (LTI)
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 aims 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.
Directors’ Report (continued)
Page | 20
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) six months for CEO, three months for CFO and
COO.
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’s discretion. In
the event of termination without cause, the Group is required to pay Executive KMP their notice period, being 6
months of salary for the CEO and 3 months of salary for the CFO and COO.
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 EBITDA budget thresholds being met. For FY21 Ms
Reisbord was awarded her STI on the basis of more than 110% of the Group EBITDA target being met,
resulting in 100% payout of the STI. 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, however to date Ms Reisbord has not taken up this
entitlement.
Ms Reisbord has a six month notice period 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 AUD $487,694 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 FY21, Mr Barker was
awarded his STI on the basis of more than 110% of the Group EBITDA target being met, resulting in 100%
payout of the STI. EBITDA is measured on a pre AASB 16 basis.
For each financial year, Mr Barker will be awarded a long-term incentive in the form of Performance Rights
equivalent to 50% of TFR. 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.
Mr Barker has a three month notice period required by either party on termination as well as a three month
restraint period.
Jenifer Picard was appointed to the newly created role of Chief Operating Officer (COO) effective 1 November
2020. Ms Picard joined the Company in 2017 and has been acting in the role of Americas Regional Chief
Financial Officer since October 2019. She will continue to act in this role in addition to her global COO role.
Ms Picard is paid, effective the date of her appointment as COO, TFR of USD $300,000 per annum. She is
eligible to receive an STI up to a maximum of 40% of TFR, subject to certain Cardno Group EBITDA budget
thresholds being met. For FY21 Ms Picard was awarded her STI on the basis of more than 110% of the Group
EBITDA target being met, resulting in 100% payout of the STI. The STI to be paid was calculated on a pro-rata
basis to reflect her continuous service during the financial year across both her Americas CFO and Global COO
roles. EBITDA is measured on a pre AASB 16 basis.
Directors’ Report (continued)
Page | 21
For each financial year, Ms Picard will be awarded a long-term incentive in the form of Performance Rights
equivalent to 40% 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. For FY21, these will be granted on a pro
rata basis from date of commencement of 1 November 2020.
Ms Picard has a three month notice period required by either party on termination as well as a three month
restraint period.
F. EXECUTIVE KEY MANAGEMENT PERSONNEL - REMUNERATION TABLES
The remuneration received by Executive KMP for the years ended 30 June 2021 and 30 June 2020 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. 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.
Directors’ Report (continued)
Page | 22
Total
$
EXECUTIVE KEY MANAGEMENT PERSONNEL
1,341,879
911,323
-
255,684
917,849
926,387
431,198
-
2,690,926
2,093,394
1 Salary and Fees includes base salary and value of leave entitlements accrued during the period.
2 Susan Reisbord commenced as CEO and Managing Director on 4 November 2019. Susan is paid in US dollars and the remuneration disclosed above has been converted to Australian dollars at an average exchange
rate of 75 cents (2020: 67 cents). Ms Reisbord's remuneration is reflected from 4 November 2019, being the date of her promotion to CEO and Managing Director.
3 Ian Ball commenced as CEO and Managing Director on 9 August 2018 and ceased on 4 November 2019.
4Jenifer Picard commenced as Chief Operating Officer on 1 November 2020. Jenifer is paid in US dollars and the remuneration disclosed above has been converted to Australian dollars at an average exchange rate of 75
cents. Jenifer’s remuneration is reflected from 1 November 2020, being the date of her promotion to COO.
Termination
Benefits
$
-
-
-
458,853
-
-
-
-
-
458,853
POST
EMPLOYMENT
Superannuation
Benefits
$
34,604
28,831
-
10,905
22,529
21,003
11,676
-
68,809
60,739
SHARE-BASED
PAYMENTS
Performance Rights
and Options
$
326,366
103,598
-
(586,805)
216,184
151,289
49,424
-
591,974
(331,918)
SHORT-TERM BENEFITS
Non-
Monetary
Benefits
$
48,349
27,662
-
-
-
-
24,751
-
73,100
27,662
STI Cash
$
267,690
195,817
-
-
223,559
240,847
106,005
-
597,254
436,664
Salary and
Fees 1
$
664,870
555,415
-
372,731
455,577
513,248
239,342
-
1,359,789
1,441,394
2021
2020
2021
2020
2021
2020
2021
2020
Susan Reisbord 2
Ian Ball 3
Peter Barker
Jenifer Picard 4
Total 2021
Total 2020
Directors’ Report (continued)
Page | 23
Executive Key Management Personnel – 2021 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 FY21 EBITDA budget was set by the Board at its June
2020 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 FY21 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, all 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
2021
100%
44.3%
2020
100%
32.9%
Peter Barker
2021
100%
47.9%
2020
100%
42.3%
Jenifer Picard
2021
100%
36.0%
2020
-
-
1Calculated based on STI cash, other cash bonuses and share based payments as a percentage of total remuneration.
Performance Rights Granted and Movement During the Year
The aggregate number of Performance Rights in the Company that were granted as compensation, exercised
and lapsed to each Executive KMP for the year ended 30 June 2021 is set out in the following table.
EXECUTIVE KEY MANAGEMENT PERSONNEL
Balance at
1 July 2020
Rights
Exercised
During the
Year
Value of
Rights
Exercised
During the
Year1
Lapsed /
Cancelled
During the
Year
Value of
Lapsed /
Cancelled2
Rights
Granted
During the
Year3
Value of
Rights
Granted
During the
Year
Balance at
30 June
2021
Maximum
Total Yet to
Vest
No.
No.
$
No.
$
No.
$
No.
No.
Susan
Reisbord
418,780
(91,189)
(49,586)
(91,189)
(123,105)
2,230,368
863,353
2,466,770
2,466,770
Peter
Barker
372,044
(86,277)
(52,409)
(86,277)
(116,474)
1,247,238
481,694
1,446,728
1,446,728
Jenifer
Picard
-
-
-
-
-
584,282
171,428
584,282
584,282
1.
Calculated per Performance Right as the market value of Cardno shares on the date of exercise.
2.
Value is calculated at fair market value of the performance right on date of grant. Lapsed performance rights were granted in 2017.
3.
Rights granted in relation to 2020 and 2021 Performance Equity Plans in 2021.
Directors’ Report (continued)
Page | 24
Details of vesting profiles of Performance Rights granted as remuneration to Key Management Personnel of
Cardno and still outstanding at 30 June 2021, including those granted during the financial year are as follows in
the table below:
Year
Outstanding
Performance
Rights
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
2018
182,378
1-Nov-17
1-Nov-20
50.0%
50.0%
1.06
1.35
2019
236,402
1-Nov-18
1-Nov-21
0.0%
0.0%
1.08
N/A
2020
769,662
1-Nov-19
31-Oct-22
0.0%
0.0%
0.08
0.29
2021
1,460,706
1-Nov-20
31-Oct-23
0.0%
0.0%
0.22
0.29
Peter Barker
2018
172,554
1-Nov-17
1-Nov-20
50.0%
50.0%
1.06
1.35
2019
199,490
1-Nov-18
1-Nov-21
0.0%
0.0%
1.08
N/A
2020
426,354
1-Nov-19
31-Oct-22
0.0%
0.0%
0.08
N/A
2021
820,884
1-Nov-20
31-Oct-23
0.0%
0.0%
0.22
0.29
Jenifer Picard
2021
584,282
1-Nov-20
31-Oct-23
0.0%
0.0%
0.22
0.29
1 Ms Reisbord’s 2018 and 2019 performance rights were granted prior to her commencement as CEO and Managing Director on 4
November 2019.
The number of Performance Rights included in the balance at 30 June 2021 for the Executive KMP is set out in
the following table.
Balance at
30 June 2021
Vested & Exercisable at the
End of the Year
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbord
2,466,770
-
Peter Barker
1,446,728
-
Jenifer Picard
584,282
-
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 for KMP.
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.
Directors’ Report (continued)
Page | 25
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.
If there is a Change of Control in respect of the Company or in the event that a major part of the Company’s
assets or operations will imminently cease to be owned by the Group, then the Participant’s unvested
Performance Rights or unvested Options (or a portion of unvested Performance Rights or unvested Options)
may vest to the extent determined by the Board irrespective of whether the Vesting Conditions are satisfied in
respect of those Performance Rights or Options.
2020 and 2021 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 were incorporated into the FY2020 and FY2021 LTI plan, which were
approved by Shareholders 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.
Directors’ Report (continued)
Page | 26
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.
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.
Directors’ Report (continued)
Page | 27
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)
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
Directors’ Report (continued)
Page | 28
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.
The share price hurdle was tested against the VWAP of Cardno shares over the 20 days prior to the 22
October 2020 and it was determined that this hurdle was not satisfied under the 2018 LTI Plan and this portion
of the Performance Rights lapsed on 4 November 2020. The Group EBITDA performance hurdle was satisfied
under the 2018 LTI Plan.
Number of Performance Rights:
There are currently 12,014,050 Performance Rights on issue at 30 June 2021. 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 value
2021
2020
20191
2018
Share Price
$0.29
$0.29
$1.08
$1.35
Risk Free Rate
0.12%
0.12%
0%
1.99%
Dividend Yield
0%
0%
0%
0%
Volatility
50%
50%
0%
63%
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.
H. THE GROUP’S PERFORMANCE
The Group’s performance in respect of the current financial year and the previous three financial years is
summarised in the following table.
20211
20201
20192
20182
Gross Revenue (000’s)
$890,390
$978,268
$1,319,272
$1,116,975
Underlying EBITDAI (000’s)1
$51,231
$43,033
$62,006
$56,210
Net Profit / (Loss) After Tax (000’s)
$32,658
$56,586
($44,490)
($14,018)
Dividends Paid or Provided (000’s)
$6,019
-
-
-
Change in Share Price – year on year ($ per
share)
$0.73
($0.35)
($0.38)
$0.11
1. Underlying EBITDAI is presented on a pre AASB 16 basis for 2021 and 2020.
2. 2018 and 2019 financial results are presented inclusive of Intega Group, which was demerged in October 2019.
Directors’ Report (continued)
Page | 29
I.
OTHER RELATED PARTY TRANSACTIONS
Share Holdings
The movement for the year ended 30 June 2021 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
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
NON-EXECUTIVE DIRECTOR
Michael Alscher
-
-
-
-
Steven Sherman
-
-
-
-
Jeffrey Forbes
148,619
-
-
148,619
Nathanial Thomson
-
-
-
-
Rebecca Ranich
-
-
-
-
Name
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
EXECUTIVE KEY MANAGEMENT PERSONNEL
Susan Reisbord
146,074
172,945
-
319,019
Peter Barker
140,671
163,629
-
304,300
Jenifer Picard
-
-
-
-
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.
Directors’ Report (continued)
Page | 30
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 32.
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 2021.
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
27 August 2021
Page | 31
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights
reserved. The KPMG name and logo are trademarks used under license by the independent member firms of
the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
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 2021 there have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Jason Adams
Partner
Brisbane
27 August 2021
KPMG
Consolidated Statement of Financial Performance
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 32
The statement of financial performance and the statement of other comprehensive income should be read in conjunction with the notes to the financial
statements.
Note
2021
$’000
2020
$’000
Continuing operations
Revenue
3A
890,390
978,268
Other income
3B
18,215
14,648
Financing income
4
943
349
Employee expenses
(387,383)
(421,673)
Consumables and materials used
(248,790)
(278,058)
Sub-consultant and contractor costs
(179,278)
(204,927)
Depreciation and amortisation expenses
(34,578)
(38,971)
Financing costs
4
(7,999)
(12,140)
Impairment loss on goodwill
12
-
(69,621)
Impairment (loss) / reversal on trade receivables and contract assets
5, 20
1,958
(4,949)
Other expenses
(11,998)
(12,490)
Profit/(loss) before income tax from continuing operations
41,480
(49,564)
Income tax expense
6
(8,822)
(17,514)
Profit/(loss) from continuing operations, net of tax
32,658
(67,078)
Profit after tax for the year from discontinued operations
2
-
123,664
Profit attributable to:
Owners of the Company
32,658
56,586
32,658
56,586
Earnings per share attributable to ordinary equity holders of the
parent from continuing operations
Basic earnings/(loss) per share (cents per share)
27
7.88
(15.07)
Diluted earnings/(loss) per share (cents per share)
27
7.70
(15.07)
Earnings per share attributable to ordinary equity holders
Basic earnings per share (cents per share)
27
7.88
12.71
Diluted earnings per share (cents per share)
27
7.70
12.71
Consolidated Statement of Other Comprehensive Income
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 33
The statement of financial performance and statement of other comprehensive income should be read in conjunction with the notes to the financial statements.
Note
2021
$’000
2020
$’000
.
Profit for the year
32,658
56,586
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations
(15,211)
(1,443)
Reclassification of foreign currency reserves – discontinued
operations and other liquidated operations
-
(607)
Other comprehensive loss for the year, net of tax
(15,211)
(2,050)
Total comprehensive income for the year
17,447
54,536
Total comprehensive income/(loss) for the year, net of tax,
attributable to members of the parent arising from:
Continuing operations
17,447
(68,521)
Discontinued operations
-
123,057
17,447
54,536
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2021
Page | 34
The statement of financial position should be read in conjunction with the notes to the financial statements.
Note
2021
$’000
2020
$’000
CURRENT ASSETS
Cash and cash equivalents
8
37,272
57,723
Trade and other receivables
9
92,911
117,132
Contract assets
3A, 10
80,032
94,827
Work in progress
1,021
1,081
Other current assets
24
6,985
8,793
Current tax receivable
2,699
1,573
TOTAL CURRENT ASSETS
220,920
281,129
NON-CURRENT ASSETS
Trade and other receivables
190
-
Other financial assets
25
2,464
1,703
Property, plant and equipment
11
15,238
19,984
Right-of-use assets
15
76,187
102,561
Deferred tax assets
7
66,211
74,206
Intangible assets
12
172,580
182,483
TOTAL NON-CURRENT ASSETS
332,870
380,937
TOTAL ASSETS
553,790
662,066
CURRENT LIABILITIES
Trade and other payables
13
86,969
122,645
Lease liabilities
14, 15
21,607
25,371
Employee benefits
30,887
28,539
Short-term provisions
16
4,022
3,932
Contract liabilities
3A, 17
38,248
39,709
Other current liabilities
17
-
1,554
TOTAL CURRENT LIABILITIES
181,733
221,750
NON-CURRENT LIABILITIES
Loans and borrowings
14
22,288
58,326
Lease liabilities
14, 15
68,844
90,534
Employee benefits
3,227
3,326
Other non-current liabilities
17
-
1,257
TOTAL NON-CURRENT LIABILITIES
94,359
153,443
TOTAL LIABILITIES
276,092
375,193
NET ASSETS
277,698
286,873
EQUITY
Issued capital
18
370,079
390,682
Reserves
225,920
241,131
Retained losses
(318,301)
(344,940)
TOTAL EQUITY
277,698
286,873
Consolidated Statement of Changes in Equity
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 35
The statement of changes in equity should be read in conjunction with the notes to the financial statements.
Note
Share
Capital
Ordinary
$’000
Retained
Earnings
/ (losses)
$’000
Foreign
Translation
Reserve
$’000
Reserve
for Own
Shares**
$’000
Demerger
Reserve
$’000
Total
$’000
BALANCE AT 1 JULY 2019
782,214
(395,377)
106,472
(14,611)
-
478,698
Adjustment on initial application of
AASB 16 (net of income tax) *
-
(6,149)
-
-
-
(6,149)
Adjusted Balance 1 July 2019
782,214
(401,526)
106,472
(14,611)
-
472,549
Profit for the year
-
56,586
-
-
-
56,586
Exchange differences on
translation of foreign operations
-
-
(1,443)
-
-
(1,443)
Reclassification of foreign currency
reserves on discontinued and
liquidated operations
-
-
(607)
-
-
(607)
Total comprehensive
income for the period
-
56,586
(2,050)
-
-
54,536
Transactions with owners in
their capacity as owners:
Employee share based payments
18
(2)
-
-
-
-
(2)
Capital reduction
2,18
(391,530)
-
-
-
151,320
(240,210)
(391,532)
-
-
-
151,320
(240,212)
BALANCE AT 30 JUNE 2020
390,682
(344,940)
104,422
(14,611)
151,320
286,873
BALANCE AT 1 JULY 2020
390,682
(344,940)
104,422
(14,611)
151,320
286,873
Profit for the year
-
32,658
-
-
-
32,658
Exchange differences on
translation of foreign operations
-
-
(15,211)
-
-
(15,211)
Total comprehensive
income for the period
-
32,658
(15,211)
-
-
17,447
Transactions with owners in
their capacity as owners:
Unmarketable Parcel - Share
Buyback
18
(642)
-
-
-
-
(642)
Share Buyback Program
18
(21,476)
-
-
-
-
(21,476)
Employee share based payments
18
1,515
-
-
-
-
1,515
Dividends paid
18
-
(6,019)
-
-
-
(6,019)
(20,603)
(6,019)
-
-
-
(26,622)
BALANCE AT 30 JUNE 2021
370,079
(318,301)
89,211
(14,611)
151,320
277,698
*The Group has initially applied AASB 16 at 1 July 2019 using the modified retrospective approach. Under this approach, the cumulative effect of initially
applying AASB 16 is recognised in retained earnings at the date of initial application.
**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.
Consolidated Statement of Cash Flows
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 36
The statement of cash flows should be read in conjunction with the notes to the financial statements.
Note
2021
$’000
20201
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
981,681
1,212,789
Interest received
432
350
Finance costs paid
(7,416)
(13,492)
Cash paid to suppliers and employees
(910,607)
(1,125,369)
Income tax paid
(1,507)
(801)
NET CASH PROVIDED BY OPERATING ACTIVITIES
26
62,583
73,477
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of discontinued operation, net of cash disposed of1
2
-
(20,588)
Acquisition of subsidiaries net of cash acquired
-
(1,232)
Payments of deferred acquisition consideration
(2,992)
(492)
Receipt of settlement proceeds
6,307
-
Proceeds from disposal of business assets
3,580
729
Proceeds from sale of property, plant and equipment
271
132
Payments for property, plant and equipment
(4,177)
(9,353)
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES
2,989
(30,804)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
18
(6,019)
-
Payment of debt raising costs
-
(1,469)
Share Buy-Back
18
(22,118)
-
Proceeds from borrowings
14
125,589
241,550
Repayment of borrowings
14
(157,450)
(250,221)
Repayment of lease liabilities
14
(24,291)
(30,990)
NET CASH USED IN FINANCING ACTIVITIES
(84,289)
(41,130)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS HELD
(18,717)
1,543
CASH AND CASH EQUIVALENTS AT 1 JULY
57,723
55,544
Effects of exchange rate changes on cash and cash equivalents
at the end of year
(1,734)
636
CASH AND CASH EQUIVALENTS AT 30 JUNE
8
37,272
57,723
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 2.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 37
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
PAGE
Explains aspects of the Group
structure and how changes have
affected the financial position and
performance of the Group
1.
Segment information
38
2.
Discontinued operations
41
KEY FINANCIAL STATEMENT ITEMS
Provides a breakdown of individual
line items in the financial statements
3.
Revenue and other income
44
4.
Net finance costs
46
5.
Expenses
47
6.
Income tax expense
47
7.
Deferred tax assets and liabilities
48
8.
Cash and cash equivalents
50
9.
Trade and other receivables
51
10. Contract assets
51
11. Property, plant and equipment
52
12. Intangible assets
53
13. Trade and other payables
55
14. Loans and borrowings
56
15. Leases
58
16. Provisions
62
17. Other liabilities
62
18. Issued capital
62
RISKS
Discusses exposure to various
financial risks and how these
are managed
19. Critical estimates and judgements
66
20. Financial risks
66
UNRECOGNISED ITEMS
Provides information about items
that are not recognised in the
financial statements
21. Commitments
72
22. Contingent liabilities
72
23. Subsequent events
73
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
24. Other current assets
73
25. Other financial assets
73
26. Notes to the cash flow statement
74
27. Earnings per share
75
28. Related party disclosures
77
29. Controlled entities
78
30. Parent entity disclosures
79
31. Deed of cross guarantee
81
32. Auditor’s remuneration
83
33. Statement of significant accounting policies
83
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 38
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
2021
$’000
Asia
Pacific
Americas
ID
Other
Total
SEGMENT REVENUE
Fees from consulting services
188,359
250,457
167,558
6,369
612,743
Fees from recoverable expenses
42,119
89,448
145,507
17
277,091
Segment Revenue
230,478
339,905
313,065
6,386
889,834
Other revenue
144
213
195
4
556
Total Segment Revenue
230,622
340,118
313,260
6,390
890,390
Segment Result
8,006
37,240
5,360
625
51,231
Adjust for AASB 16 impact
10,146
12,645
3,354
1,107
27,252
Adjusted Segment Result
18,152
49,885
8,714
1,732
78,483
Costs related to disposed entities
(88)
192
(1,344)
(1,926)
(3,166)
Onerous contracts and other costs
associated with office rationalisation
(2,145)
(354)
-
-
(2,499)
Costs associated with restructuring
(1,559)
(211)
(373)
-
(2,143)
Receipt of settlement proceeds
-
-
-
8,365
8,365
Release of liabilities no longer required
-
165
-
4,339
4,504
Other
-
-
-
(28)
(28)
Depreciation and amortisation expense
(16,552)
(12,406)
(3,275)
(2,345)
(34,578)
Unrealised foreign exchange losses
-
-
-
(402)
(402)
Profit before interest and income tax
48,536
Finance costs and interest income
(7,056)
Profit before income tax
41,480
Income tax expense
(8,822)
Profit after income tax
32,658
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 39
2020
$’000
Asia
Pacific
Americas
ID
Other
Continuing
operations
Total
Discontinued
operations1
SEGMENT REVENUE
Fees from consulting services
204,967
278,423
185,094
8,623
677,107
124,622
Fees from recoverable expenses
40,456
93,040
165,324
-
298,820
40,795
Segment Revenue
245,423
371,463
350,418
8,623
975,927
165,417
Other revenue
983
1,036
290
32
2,341
65
Total Segment Revenue
246,406
372,499
350,708
8,655
978,268
165,482
Segment Result
962
38,677
2,661
733
43,033
11,004
Adjust for AASB 16 impact
15,251
11,526
3,645
14
30,436
5,081
Adjusted Segment Result
16,213
50,203
6,306
747
73,469
16,085
Gain on demerger
-
-
-
-
-
119,102
Gain on sale of business assets
-
-
-
-
-
1,383
Demerger related costs
-
-
-
-
-
(5,112)
Provisions for onerous contracts
(1,151)
(516)
-
-
(1,667)
-
Impairment loss on goodwill
(69,621)
-
-
-
(69,621)
-
Acquisition related expenses
(193)
-
-
-
(193)
-
Legal costs
(16)
-
-
-
(16)
-
Foreign stamp duty prior years
-
-
-
(394)
(394)
-
Restructuring costs
(1,851)
(52)
(203)
(93)
(2,199)
-
Release of provisions
-
2,817
-
-
2,817
-
Other
-
-
-
(400)
(400)
-
Depreciation and amortisation expense
(16,690)
(14,120)
(3,527)
(4,634)
(38,971)
(10,389)
Profit/(loss) before interest and income
tax
(37,175)
121,069
Finance costs and interest income
(11,791)
(992)
Foreign exchange gains/(losses)2
(598)
607
Profit/(loss) before income tax
(49,564)
120,684
Income tax (expense)/benefit
(17,514)
2,980
Profit/(loss) after income tax
(67,078)
123,664
Profit from continuing and discontinuing
operations after income tax
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 2.
2Foreign 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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 40
1. SEGMENT INFORMATION CONTINUED
GEOGRAPHICAL INFORMATION
2021
2020
Revenues
$’000
Non-Current
Assets 1
$’000
Revenues
$’000
Non-Current
Assets 1
$’000
Continuing operations
Australia & New Zealand
379,544
158,216
389,033
160,245
United States of America
393,572
104,965
440,204
138,497
United Kingdom
11,118
466
28,184
2,535
Canada
567
(204)
-
(32)
Africa
2,928
487
3,281
623
Latin America
6,374
968
9,095
985
Asia
73,065
811
86,600
2,731
Other Countries
23,222
950
21,871
1,147
Total
890,390
266,659
978,268
306,731
1 The Non-Current assets disclosed above exclude net deferred tax assets of $66.2 million (2020: $74.2 million).
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 41
2. DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations is comprised of the following:
For the year ended
30 June 2021
$’000
30 June 2020
$’000
Results of discontinued operations
Demerger of Intega
-
121,627
Disposal of Structures
-
(952)
Reclassification of foreign currency reserves – discontinued
operations and other liquidated operations
-
2,989
Profit after tax from discontinued operations
-
123,664
Earnings per share – discontinued operations
Basic earnings per share
-
27.78
Diluted earnings per share
-
27.78
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.
For the year ended
30 June 2021
$’000
30 June 2020*
$’000
Results of discontinued operations
Revenue
-
151,880
Expenses
-
(151,496)
Results from operating activities
-
384
Income tax benefit
-
2,140
Results from operating activities, net of tax
-
2,524
Gain on sale of discontinued operations
-
119,103
Profit from discontinued operations, net of tax:
-
121,627
*Represents results from operating activities for the four months to 31 October 2019 less demerger related costs incurred.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 42
2. DISCONTINUED OPERATIONS CONTINUED
For the year ended
30 June 2021
$’000
30 June 2020
$’000
Fair value of Intega Group at demerger
-
240,210
Carrying amount of net assets
-
(121,107)
Net gain on demerger before income tax
-
119,103
Income tax expense
-
-
Gain on demerger after income tax
-
119,103
Cashflows from discontinued operations - Intega
30 June 2021
$’000
30 June 2020
$’000
Net cash from operating activities
-
14,459
Net cash used in financing activities
-
(2,374)
Net cash from investing activities
-
(4,559)
Net cash flows for the period
-
7,526
31-Oct-19
$’000
Assets and liabilities of controlled entities at date of demerger
Assets
Cash and cash equivalents
20,588
Trade and other receivables
73,987
Contract assets
21,902
Other current assets
2,576
Other financial assets
190
Property, plant and equipment
60,868
Deferred tax assets
20,580
Intangible assets
104,912
Total assets demerged
305,603
Liabilities
Trade and other payables
25,538
Loans and borrowings
119,086
Current tax liabilities
649
Employee benefits
16,492
Provisions
1,557
Contract liabilities
15,042
Deferred tax liabilities
5,914
Other liabilities
218
Total liabilities demerged
184,496
Net assets demerged
121,107
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 43
2. DISCONTINUED OPERATIONS CONTINUED
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.
For the year ended
30 June 2021
$’000
30 June 2020*
$’000
Results of discontinued operations
Revenue
-
13,894
Expenses
-
(17,049)
Results from operating activities
-
(3,155)
Income tax benefit
-
840
Results from operating activities, net of tax
-
(2,315)
Gain on sale of discontinued operations
-
1,363
Income tax on gain on sale of discontinued operation
-
-
Loss from discontinued operations, net of tax:
-
(952)
*Represents results from operating activities for the eleven months to 31 May 2020
31 May 2020
$’000
Assets and liabilities of controlled entities at date of disposal
Assets
Trade and other receivables
4,586
Contract assets
1,255
Other current assets
11
Other financial assets
26
Property, plant and equipment
4,119
Total assets disposed
9,997
Liabilities
Trade and other payables
(10)
Lease liabilities
(5,356)
Other liabilities
(1,489)
Total liabilities disposed
(6,855)
Net assets disposed
3,142
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 44
KEY FINANCIAL STATEMENT ITEMS
3. (A) REVENUE
2021
$’000
2020
$’000
REVENUE
Professional services revenue
612,743
677,107
Fees from consulting services
612,743
677,107
Fees from recoverable expenses
277,091
298,820
Fees from recoverable expenses
277,091
298,820
Other
556
2,341
890,390
978,268
Professional services revenue
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. Where the Group is acting as an agent in these transactions, revenue is only
recognised in relation to handling charges recoverable under arrangements with customers.
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.
For the year ended 30 June 2021
$’000
Segment Revenue
Over Time Revenue
Point in Time Revenue
Asia Pacific
230,622
230,622
-
Americas
340,118
335,920
4,198
International Development
313,260
313,260
-
Other
6,390
33
6,357
Total revenue
890,390
879,835
10,555
For the year ended 30 June 2020
$’000
Segment Revenue
Over Time Revenue
Point in Time Revenue
Asia Pacific
246,406
246,406
-
Americas
372,499
367,662
4,837
International Development
350,708
350,708
-
Other
8,655
-
8,655
Total revenue
978,268
964,776
13,492
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 45
3. (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
Note
30 June 2021
30 June 2020
Receivables (included in Trade and other receivables)
9
90,017
118,232
Loss allowance
9
(7,701)
(15,110)
Contract assets
10
80,032
94,827
Contract liabilities
17
38,248
39,709
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 2021 is reduced by an impairment
provision of $2.8 million (30 June 2020: $9.9 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 9 and note 10 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 2020 were
recognised as revenue in the year ended 30 June 2021.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 46
3. (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 engineering
design and project delivery
services. Performance obligations
are fulfilled over time as the
services are delivered.
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.
Fees from recoverable
expenses
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.
The Group recognises revenue as services
performed.
3. (B) OTHER INCOME
2021
$’000
2020
$’000
Non-refundable R&D tax incentives
3,224
3,675
Transitional Services Income – Intega Group
3,934
10,425
Proceeds from Sale of Structures business
820
-
Settlement proceeds1
8,365
-
Release of liabilities no longer required
1,335
-
Other
537
548
Other Income
18,215
14,648
1 Settlement proceeds in relation to Caminosca.
4. NET FINANCING COSTS
Note
2021
$’000
2020
$’000
Interest paid
3,237
5,772
Interest on leases
15
4,469
5,950
Amortisation of borrowing costs
293
418
Financing costs
7,999
12,140
Interest received
(943)
(349)
Net Financing Costs
7,056
11,791
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 47
4. 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.
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
5. EXPENSES
2021
$’000
2020
$’000
Bad and doubtful debts / (recovery of bad debts)
(1,958)
4,949
6. INCOME TAX EXPENSE
2021
$’000
2020
$’000
(a) The components of tax expense comprises:
Current tax expense
Current year
3,120
3,837
Adjustments for prior years
417
962
3,537
4,799
Deferred tax expense
Current year
8,180
13,241
Adjustments for prior years
(2,895)
(526)
5,285
12,715
Total income tax expense from continuing operations
8,822
17,514
(b) Numerical reconciliation between tax expense and pre-tax profit
Profit / (Loss) before tax from continuing operations
41,480
(49,564)
Income tax using the Australian corporation tax rate of 30% (2020: 30%)
12,444
(14,869)
Increase/ (decrease) in income tax expense due to:
Non-deductible expenses
726
1,192
Effect of tax rates in foreign jurisdictions
3,363
6,100
Impact of impairment of goodwill
-
20,886
Impact of valuation allowance on foreign tax credits
(1,074)
83
Impact of change in US tax law on tax revenue recognition
-
3,699
Allowances for R&D expenditure
(165)
(137)
Non-taxable income
(4,562)
-
Sundry items
568
124
11,300
17,078
(Over) / Under provided in prior years
(2,478)
436
Income tax expense from continuing operations
8,822
17,514
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 48
6. INCOME TAX EXPENSE CONTINUED
(c) Amounts recognised directly in equity
2021
$’000
2020
$’000
Foreign exchange
(567)
1,106
The effective tax rate for FY21 was 21.27% compared to (35.34%) in FY20. If we exclude the impact of (a)
allowances for R&D expenditure; (b) one-off adjustments; (c) prior year adjustments decreasing income tax
expense; (d) losses incurred in jurisdictions in which a deferred income tax benefit is not recognised; the
effective tax rate is 31.49%.
7. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
2021
$’000
2020
$’000
Assets
Accruals
8,650
7,803
Provisions
14,841
15,464
Intangibles
-
2,297
Tax losses
36,317
40,816
Property, plant and equipment
-
1,411
Lease liability
18,734
31,587
Other
19,878
10,303
Total deferred tax assets
98,420
109,681
Set-off of deferred tax liabilities
(32,209)
(35,475)
Net deferred tax assets
66,211
74,206
Liabilities
Contract assets
5,298
5,657
Intangibles
1,750
-
Prepayments
530
576
Property, plant and equipment
1,921
Right-of-use asset
21,769
27,945
Other
941
1,297
Total deferred tax liabilities
32,209
35,475
Set-off against deferred tax assets
(32,209)
(35,475)
Net deferred tax liabilities
-
-
NET DEFERRED TAX ASSETS
66,211
74,206
The Group has unrecognised deferred tax assets from tax loss carry forwards as at 30 June 2021: (a) revenue
losses in the United States of $10.0 million (2020: $11.0 million) which will expire if not used to offset revenue
gains by 30 June 2037; and (b) capital losses in Australia of $30.3m (2020: $30.0m) the future utilisation of
which is reliant on satisfaction of the continuity of ownership and/or similar business tests.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 49
7. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
The Group also has unrecognised deferred tax assets from foreign tax credit carry forwards in the United
States of $5.4 million (2020: $5.4 million) as at 30 June 2021. These credits will expire if not used to offset tax
payable by 30 June 2024 ($1.1 million), 30 June 2025 ($0.9 million), 30 June 2026 ($0.7 million), 30 June 2027
($1.0 million), 30 June 2028 ($0.4 million), 30 June 2029 ($0.4 million), 30 June 2030 ($0.4 million) and 30
June 2031 ($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.
ATO streamlined assurance review
The Group is currently subject to a streamlined assurance review by the Australian Taxation Office (ATO). This
review is in progress and the likely outcomes are not known at the date of issuing the Group’s financial
statements. No amounts have been recognised for uncertain tax positions at 30 June 2021 in relation to the
ATO’s review as no liability was considered probable at that date.
Strategic Review
The Group’s taxation balances at 30 June 2021 have been prepared on the assumption it will continue its
operations in its current structure and form at that date. As outlined in the ASX announcement dated 9 June
2021, the Board is undertaking a Strategic Review and the outcomes of this are not known at the date of
issuing these financial statements. The outcomes of the Strategic Review, and any changes to the Group that
may result from it, may adversely impact the ability of the Group to utilise tax losses recognised as deferred tax
assets at 30 June 2021 in future financial years.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 50
7. DEFERRED TAX ASSETS & LIABILITIES CONTINUED
30 June 2021
1 July
2020
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Demerger
of Intega
$’000
Sale of
Structures
$’000
Other1
$’000
30 June
2021
$’000
Accruals
7,803
984
(26)
-
-
(111)
8,650
Provisions
15,464
(3,146)
(9)
-
-
2,532
14,841
Tax losses
40,816
(1,594)
(2,415)
-
-
(490)
36,317
Sundry items
10,417
1,385
5,428
-
-
(214)
17,016
Prepayments
(576)
79
(83)
-
-
50
(530)
Contract assets
(5,657)
170
-
-
-
189
(5,298)
AASB 16 – Leases
3,642
(2,900)
-
-
-
(3,777)
(3,035)
Goodwill on acquisition
2,297
(3,158)
-
-
-
(889)
(1,750)
74,206
(8,180)
2,895
-
-
(2,710)
66,211
30 June 2020
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
Accruals
4,600
(238)
92
(405)
-
3,754
7,803
Provisions
27,499
491
225
(6,360)
(210)
(6,181)
15,464
Tax losses
53,294
(2,984)
(4,591)
(5,278)
-
375
40,816
Sundry items
2,617
(9,851)
2,298
1,083
348
13,922
10,417
Prepayments
(813)
196
(63)
110
-
(6)
(576)
Contract assets
(7,871)
1,497
1,357
2,652
(2)
(3,290)
(5,657)
AASB 16 – Leases
-
990
-
(587)
(337)
3,576
3,642
Goodwill on acquisition
16,978
(1,455)
1,208
(5,881)
-
(8,553)
2,297
96,304
(11,354)
526
(14,666)
(201)
3,597
74,206
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 in the prior year.
8. CASH AND CASH EQUIVALENTS
2021
$’000
2020
$’000
Cash at bank and on hand
29,459
53,685
Restricted cash1
7,813
3,643
Bank short term deposits
-
395
37,272
57,723
1Cash held in relation to foreign ownership compliance for US government contracts and project advances held in country for International
Development projects.
Accounting for Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand. Bank overdrafts are shown with interest-bearing loans and
borrowings in current liabilities on the statement of financial position.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 51
9. TRADE & OTHER RECEIVABLES
2021
$’000
2020
$’000
Trade debtors
90,017
118,232
Loss allowance
(7,701)
(15,110)
82,316
103,122
Sundry debtors
10,595
14,010
92,911
117,132
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 2021 and determined that
there are no significant or increasing concentrations of credit risk on prior year. However, due to the continuing
global financial uncertainty arising from COVID-19, management have maintained their higher 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 their 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.
10. CONTRACT ASSETS
2021
$’000
2020
$’000
Contract assets
80,032
94,827
Accounting for contract assets
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.
Estimates of the contract assets balances are determined using the percentage of completion methodology. Refer to
Note 3 for further details.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 52
10. CONTRACT ASSETS CONTINUED
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 2021 and determined that
there are no significant or increasing concentrations of credit risk on prior year. However, due to the continuing
global financial uncertainty arising from COVID-19, management have maintained their higher 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 their contract assets into groupings of
customers with similar credit risk characteristics.
11. PROPERTY, PLANT & EQUIPMENT
2021
Property, Plant & Equipment
$’000
Land and
buildings
Office furniture
and equipment
Motor
vehicles
Total
At cost
3,663
80,534
4,150
88,347
Less accumulated depreciation
(1,926)
(67,594)
(3,589)
(73,109)
1,737
12,940
561
15,238
Carrying amount at the beginning of the year
1,567
17,810
607
19,984
Additions
19
3,918
240
4,177
Disposals
-
(371)
(168)
(539)
Depreciation expense
(155)
(7,784)
(402)
(8,341)
Foreign Exchange
306
(633)
284
(43)
Carrying amount at the end of the year
1,737
12,940
561
15,238
2020
Property, Plant & Equipment
$’000
Land and
buildings
Office furniture
and equipment
Motor
vehicles
Total
At cost
3,600
95,215
5,233
104,048
Less accumulated depreciation
(2,033)
(77,405)
(4,626)
(84,064)
1,567
17,810
607
19,984
Carrying amount at the beginning of the year
2,285
39,371
10,529
52,185
Additions
3,158
7,320
344
10,822
Disposals
(130)
(636)
-
(766)
Depreciation expense
(3,279)
(10,189)
(518)
(13,986)
Demerger of Intega
(149)
(18,293)
(9,657)
(28,099)
Foreign Exchange
(318)
237
(91)
(172)
Carrying amount at the end of the year
1,567
17,810
607
19,984
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 53
11. PROPERTY, PLANT & EQUIPMENT CONTINUED
Accounting for Property, Plant and Equipment
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
40 years
>
motor vehicles
4-7 years
>
office furniture and equipment
3-11 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
12. INTANGIBLE ASSETS
Reconciliation of movement in carrying amounts from the beginning of year to end of year:
Goodwill
$’000
Customer
Contracts
$’000
Patents and
Trademarks
$’000
Customer
Relationships
$’000
Total
$’000
2021
Balance at the beginning of year
175,928
2,618
2,609
1,328
182,483
Amortisation charges
-
(911)
-
(883)
(1,794)
Effect of foreign exchange
(7,938)
(203)
-
32
(8,109)
Closing value at 30 June 2021
167,990
1,504
2,609
477
172,580
2020
Balance at the beginning of year
330,680
11,226
2,609
14,539
359,054
Acquired through business
combination
215
-
-
-
215
Demerger of Intega
(87,637)
(6,587)
-
(10,688)
(104,912)
Impairment losses
(69,621)
-
-
-
(69,621)
Amortisation charges – continuing
-
(1,129)
-
(950)
(2,079)
Amortisation charges – discontinued
-
(1,095)
-
(1,847)
(2,942)
Effect of foreign exchange
2,291
203
-
274
2,768
Closing value at 30 June 2020
175,928
2,618
2,609
1,328
182,483
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 54
12. INTANGIBLE ASSETS CONTINUED
Amortisation of Intangibles
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:
2021
$’000
2020
$’000
Americas
88,060
95,985
Asia Pacific (APAC)
74,196
74,209
International Development (ID)
5,734
5,734
167,990
175,928
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.
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 2022 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
Management have determined that no impairment is required to be recognised for the year ended 30 June
2021. In the prior year the Group 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 year ended 30 June 2020. The impairment was recognised in full against the carrying value of the APAC
goodwill.
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 2021, management have
taken into consideration the impact of COVID-19 on forecast cash flows.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 55
12. INTANGIBLE ASSETS CONTINUED
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
2021
2020
2021
2020
2021
2020
Americas
14.8% - 15.6%
9.4% - 10.0%
2.50%
2.50%
10.41%
10.39%
APAC
7.5% - 10.0%
4.2% - 9.9%
2.50%
2.50%
11.07%
10.82%
ID
2.2% - 2.8%
2.4% - 2.9%
2.50%
2.50%
13.70%
14.06%
1 EBITDA margins are applied to net fee revenue and are presented on a pre AASB 16 basis.
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 7.5% in FY22 to 10.0%
in FY26 as a result of margin improvement initiatives delivered through changes to the business operating
model and improved project management implemented during the year ended 30 June 2021. The range of
APAC EBITDA margins would need to reduce from 7.5% - 10.0%, to 6.2% for all forecast years for the
estimated recoverable amount to be equal to the carrying amount, all other assumptions being held constant.
13.TRADE & OTHER PAYABLES
2021
$’000
2020
$’000
CURRENT
Trade payables & accruals
84,809
117,451
Vendor liability
2,160
5,194
86,969
122,645
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 56
14. LOANS & BORROWINGS
2021
$’000
2020
$’000
CURRENT
Lease liabilities
21,607
25,371
NON-CURRENT
Lease liabilities
68,844
90,534
Bank loans
22,679
59,009
Capitalised borrowing costs
(391)
(683)
TOTAL CURRENT & NON-CURRENT LOANS & BORROWINGS
112,739
174,231
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
As at 30 June 2021, the Group has bank loans of $22.7 million (30 June 2020: $59.0 million) with a weighted
average interest rate of 2.53% (30 June 2020: 3.84%). Funding available to the Group from undrawn facilities is
$149.3 million (30 June 2020: $113.0 million), of which $42.0 million is available to finance business
acquisitions (any other purpose requires majority lender approval).
The facility is a multi-currency secured, revolving syndicated facility, with three-year tenor expiring in October
2022. The banking group comprises HSBC Bank Australia, HSBC Bank USA, National Australia Bank and
Metrics Credit Partners. On 30 April 2021 Investec ceased to be a lender, with Metrics Credit Partners taking
up their share in the syndicate.
The Group’s 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 2021, the Group
was compliant with all financial covenants.
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 2021 (30 June 2020: Nil).
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 57
14. LOANS & BORROWINGS CONTINUED
Reconciliation of movement in loans and borrowings:
$’000
Loans and
borrowings 1
Lease liabilities
(refer to Note 15)
Total
Balance as at 1 July 2020
58,326
115,905
174,231
Changes from financing and operating cash flows
Proceeds from borrowings
125,589
-
125,589
Repayment of borrowings
(157,450)
-
(157,450)
Repayment of lease liabilities
-
(28,760)
(28,760)
Total changes from financing and operating cash flows
(31,861)
(28,760)
(60,621)
Other changes
Amortisation of capitalised borrowing costs
269
-
269
Interest expense
-
4,469
4,469
Termination of leases
-
(5,653)
(5,653)
New leases
-
9,212
9,212
Movement in balance due to foreign exchange differences
(4,446)
(4,722)
(9,168)
Total other changes
(4,177)
3,306
(871)
Balance as at 30 June 2021
22,288
90,451
112,739
$’000
Loans and
borrowings
Lease liabilities
(refer to Note 15)
Total
Balance as at 1 July 2019
137,677
11,504
149,181
Adjustment on initial application of AASB 16
-
164,913
164,913
Adjusted balance as at 1 July 2019
137,677
176,417
314,094
Changes from financing and operating cash flows
Proceeds from borrowings
241,550
-
241,550
Repayment of borrowings
(250,221)
-
(250,221)
Repayment of lease liabilities
-
(35,922)
(35,922)
Total changes from financing cash flows
(8,671)
(35,922)
(44,593)
Other changes
Demerger of Intega
(72,802)
(46,284)
(119,086)
Disposal of structures business unit
-
(5,356)
(5,356)
Write off capitalised borrowing costs relating to old facility
(1,566)
-
(1,566)
New capitalised borrowing costs
2,468
-
2,468
Amortisation of capitalised borrowing costs
(418)
-
(418)
Interest expense
-
5,950
5,950
Termination of leases
-
(48)
(48)
New leases
-
19,711
19,711
Movement in balance due to foreign exchange differences
1,638
1,437
3,075
Total other changes
(70,680)
(24,590)
(95,270)
Balance as at 30 June 2020
58,326
115,905
174,231
1 Reconciliation of movement in loans and borrowings has been disclosed net of capitalised borrowing costs.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 58
15. 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:
2021
Right-of-use assets
$’000
Land and
buildings
Office furniture
and equipment
Motor
vehicles
Total
At cost
116,736
3,709
5,720
126,165
Less accumulated amortisation
(45,502)
(1,761)
(2,715)
(49,978)
71,234
1,948
3,005
76,187
Carrying amount at the beginning of the year
94,956
3,254
4,351
102,561
Additions
8,987
-
1,019
10,006
Depreciation expense
(21,897)
(529)
(1,876)
(24,302)
Derecognition of right-of use assets*
(1,491)
-
-
(1,491)
Termination of leases
(5,777)
(537)
(279)
(6,593)
Foreign Exchange
(3,544)
(240)
(210)
(3,994)
As at 30 June 2021
71,234
1,948
3,005
76,187
*Derecognition of the right-of-use asset is as a result of entering into a finance sub-lease arrangement.
2020
Right-of-use assets
$’000
Land and
buildings
Office furniture
and equipment
Motor
vehicles
Total
At cost
119,583
4,149
5,548
129,280
Less accumulated amortisation
(24,627)
(895)
(1,197)
(26,719)
94,956
3,254
4,351
102,561
Carrying amount at the beginning of the year
136,580
1,426
12,831
150,837
Additions
12,540
3,570
1,836
17,946
Depreciation expense
(27,159)
(471)
(2,724)
(30,354)
Demerger of Intega
(23,738)
(1,276)
(7,755)
(32,769)
Disposal of structures business unit
(4,119)
-
-
(4,119)
Derecognition of right-of use assets*
(1,026)
-
-
(1,026)
Termination of leases
(6)
-
-
(6)
Foreign Exchange
1,884
5
163
2,052
As at 30 June 2020
94,956
3,254
4,351
102,561
*Derecognition of the right-of-use asset is as a result of entering into a finance sub-lease arrangement.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 59
15. LEASES CONTINUED
The following are the amounts recognised in profit or loss:
2021
$’000
2020
$’000
Depreciation expense of right-of-use assets
24,302
30,354
Income from sub-leasing right-of-use assets presented in other income
102
355
Interest expense on lease liabilities
4,469
5,950
Expense relating to short-term leases
492
2,371
Expense relating to leases of low-value assets
131
87
Variable lease payments
(59)
(65)
The Group had total cash outflows for leases of $28.8 million in 2021 (2020: $35.9 million). There are no
significant leases that have been entered into by the Group for contracts that have not yet commenced as at 30
June 2021.
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 FY21, the Group recognised a gain of $299,000 (2020: $452,000) on the derecognition of the right-of-
use assets pertaining to sub-leased buildings which are presented within ‘Other’ in Note 3(B).
The Group also recognised interest income on lease receivables of $102,000 (2020: $38,000) during the year.
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments
to be received after the reporting date.
2021
$’000
2020
$’000
>
Within one year
1,111
542
>
Later than one year but not later than 5 years
1,382
1,135
>
Later than 5 years
-
-
Total undiscounted lease receivable
2,493
1,677
Unearned finance income
(231)
(134)
Net investment in the lease
2,262
1,543
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 60
15. LEASES CONTINUED
Group as a lessee
Right-of-use assets
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.
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 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.
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 14).
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 61
15. LEASES CONTINUED
Group as a lessee continued
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).
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 62
16. PROVISIONS
2021
$’000
2020
$’000
CURRENT
Provision for legal claims
4,022
3,932
4,022
3,932
Accounting for Provisions
The Group makes provision for legal claims not covered by the Group’s professional indemnity policy and as at
30 June 2021 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.
17. OTHER LIABILITIES
2021
$’000
2020
$’000
CURRENT
Contract liabilities
38,248
39,709
Other
-
1,554
38,248
41,263
NON CURRENT
Deferred rent
-
1,109
Other
-
148
-
1,257
Contract liabilities relates to amounts received in advance of providing goods or services. Refer to Note 10.
18. ISSUED CAPITAL
30 June 2021
30 June 2020
No. of shares
$’000
No. of shares
$’000
Balance at the beginning of the year
447,017,851
390,682
444,269,564
782,214
Shares issued during the year:
>
Employee share based payments 1
-
1,515
-
(2)
>
Share buy-back 2
(56,836,598)
(21,476)
-
-
>
Unmarketable Parcel – Share Buyback 3
(2,292,700)
(642)
-
-
>
Shares issued under PEP
1,040,557
-
594,322
-
>
Own shares held in trust issued under PEP
-
-
(114,391)
-
>
Issue of shares to key employees
-
-
2,268,356
-
>
Capital reduction
-
-
-
(391,530)
Balance at the end of the year
388,929,110
370,079
447,017,851
390,682
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 63
18. ISSUED CAPITAL CONTINUED
1Employee share based payments of $1,515,380 recorded during the period (FY20: $2,263).
2As part of the capital management program, on 14 February 2020 the Group announced the implementation of an on-market buyback of
up to 10% of Cardno ordinary shares commencing 8 March 2020 for a 12-month period. During the year ended 30 June 2021, a total of
44,372,515 ordinary shares were bought back at an average price of 28.81 cents per share.
On 13 November 2020 the Group announced the implementation of an additional on-market buyback of up to 10% of Cardno ordinary
shares commencing 17 December 2020 for a 12-month period. During the year ended 30 June 2021, a total of 12,464,083 ordinary shares
were bought back at an average price of 65.96 cents per share.
Combining the two buyback programs that occurred during the year, a total of 56,836,598 ordinary shares were bought back.
3On 11 September 2020, the Group announced it had instituted an off-market buyback of all the shares held by shareholders who held
unmarketable parcels in Cardno. A total of 2,292,700 shares were bought back and cancelled under buyback program.
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.
Dividends
The following dividends were declared and paid by the Group during the year.
2021
$’000
2020
$’000
1.5 cents per ordinary share (2020: nil)
6,019
-
After the reporting date, the following dividends were proposed by the board of directors. The dividends have
not been recognised as liabilities.
2021
$’000
2020
$’000
4.0 cents per ordinary share (2020: nil)
15,557
-
Franking account balance
2021
$’000
2020
$’000
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%
30
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 2021, there were no Performance Options on issue (2020: nil) and no options were issued during
the year (2020: nil).
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 64
18. ISSUED CAPITAL CONTINUED
2020 and 2021 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 and 2021 LTI
Plans.
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.
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.
The grant date for the 2020 LTI Plan was 22 October 2020, with a vesting period end date of 30 June 2022.
The fair value at grant date for the 2020 Plan was $0.07 for Tranche 1 and $0.29 for Tranche 2.
The grant date for the 2021 LTI Plan was 22 October 2020, with a vesting period end date of 30 June 2023.
The fair value at grant date for the 2021 Plan was $0.22 for Tranche 1 and $0.29 for Tranche 2.
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
percent 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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 65
18. ISSUED CAPITAL CONTINUED
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.
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).
The share price hurdle was tested against the VWAP of Cardno shares over the 20 days prior to the 22
October 2020 and it was determined that this hurdle was not satisfied under the 2018 LTI Plan and this portion
of the Performance Rights lapsed on 4 November 2020. The Group EBITDA performance hurdle was satisfied
under the 2018 LTI Plan.
Key Employee Share Grant:
The movements in the performance rights are as follows:
Number
of Performance Rights 2021
Number
of Performance Rights 2020
Outstanding at the beginning of the period
2,047,863
4,889,915
Granted during the period
11,433,154
-
Exercised during the period
(971,144)
(594,322)
Cancelled/lapsed during the period
(495,823)
(2,247,730)
Outstanding at the end of the period
12,014,050
2,047,863
Exercisable at the end of the period
-
-
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
2021
2020
20191
2018
Share Price
$0.29
$0.29
$1.08
$1.35
Risk Free Rate
0.12%
0.12%
-
1.99%
Dividend Yield
0%
0%
0%
0%
Volatility
50%
50%
-
63%
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 2021 as disclosed under the Executive Key
Management Personnel – Contract Terms section of the Remuneration Report.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 66
RISKS
19. 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 12.
>
Revenue recognition in relation to long term contracts including estimating stage of completion and
total contract costs – refer to Note 3.
>
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 7 and 33(e).
>
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 9 and 10.
>
Leases – Lease terms and whether the Group is reasonably certain to exercise extension options –
refer to Note 15. Also, the incremental borrowing rates used, including assumptions about movements
in market rates.
20. 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 2021 and 30 June 2020 are included in the balance sheet at amounts that approximate fair values. The
Group does not have any derivative financial instruments at 30 June 2021 (2020: nil).
The Group has loans and borrowings (including lease liabilities), with a fair value of $112.7 million (2020:
$174.2 million) which represents level 2 in the fair value hierarchy and has been determined using the carrying
amount of loans repayable to debt providers and remaining payments on lease commitments. The difference
between the carrying amount and fair value of loans and borrowings (including lease liabilities) represents
unamortised capitalised borrowing costs and interest payable on lease liabilities.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 67
20. FINANCIAL RISKS CONTINUED
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.
There are no material concentrations of credit risk (2020: nil). Identifying concentrations of risk requires
judgement in light of specific circumstances, and may arise in 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:
2021
$’000
2020
$’000
Australia & New Zealand
11,880
15,643
Americas
59,680
71,331
Asia Pacific
8,104
9,168
Europe & Africa
2,652
6,980
82,316
103,122
The ageing of Cardno’s trade receivables at the reporting date was:
2021
2020
Gross
$’000
Impairment
$’000
Gross
$’000
Impairment
$’000
Not past due (current)*
69,569
3,476
72,139
2,425
Past due 0-30 days (30 day ageing)
14,131
227
14,137
203
Past due 31-60 days (60 day ageing)
4,159
1,840
10,503
274
Past due more than 60 days (>90 day ageing)
2,158
2,158
21,453
12,208
90,017
7,701
118,232
15,110
*An additional loss allowance has been applied to the not past due ageing bracket in relation to COVID-19 – see note 9 for further details.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 68
20. FINANCIAL RISKS CONTINUED
The maximum exposure to credit risk for contract assets at the reporting date by geographic region was:
2021
$’000
2020
$’000
Australia & New Zealand
36,304
43,231
Americas
43,176
43,551
Asia Pacific
380
300
Europe & Africa
172
7,745
80,032
94,827
The ageing of Cardno’s contract assets at the reporting date was:
2021
2020
Gross
$’000
Impairment
$’000
Gross
$’000
Impairment
$’000
Not past due (current)
62,208
-
58,231
427
Past due 0-30 days (30 day ageing)
6,959
-
6,388
-
Past due 31-60 days (60 day ageing)
2,917
-
2,178
-
Past due more than 60 days
10,780
2,832
37,924
9,467
82,864
2,832
104,721
9,894
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 2021
and determined that there are no significant or increasing concentrations of credit risk on prior year. Due to the
ongoing global financial uncertainty arising from COVID-19, management have held their position in relation to
increased 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 their receivables
and contract assets into groupings of customers with similar credit risk characteristics.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 69
20. FINANCIAL RISKS CONTINUED
The movement in the provision for impairment in respect of trade receivables of Cardno during the year was as
follows:
2021
$’000
2020
$’000
Balance at 1 July
15,110
21,552
Impairment loss recognised/(reversed) during the year
(1,958)
4,949
Receivables written off
(4,778)
(4,389)
Demerger of Intega
-
(7,346)
Effect of foreign exchange
(673)
344
Balance at 30 June
7,701
15,110
Liquidity risk
Liquidity risk is the risk that Cardno will not be able to meet its financial obligations as they fall due. Prudent
liquidity risk management implies maintaining sufficient cash and the availability of funding through an
adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses,
Cardno aims to maintain flexibility in funding by keeping sufficient committed credit lines available to meet
Cardno’s requirements.
The following are the contractual maturities of financial liabilities at the reporting date, including estimated
interest payments and excluding the impact of netting agreements:
30 June 2021
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
$’000
Over 5
years
$’000
Non-derivative financial liabilities
Trade and other payables
86,969
86,969
86,969
-
-
Leases
90,451
118,215
29,114
67,585
21,516
Bank loans
22,288
23,441
572
22,869
-
199,708
228,625
116,655
90,454
21,516
30 June 2020
Non-derivative financial liabilities
Trade and other payables
122,645
122,645
122,645
-
-
Leases
115,905
138,253
32,593
79,362
26,298
Bank loans
58,326
62,890
1,663
61,227
-
296,876
323,788
156,901
140,589
26,298
As at 30 June 2021 net debt was a surplus $15.0 million and the Company was within its lending covenants.
Funding available to the Group from undrawn facilities is $149.3 million (2020: $113.0 million), of which $42.0
million is available only for the purpose of making business acquisitions.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 70
20. FINANCIAL RISKS CONTINUED
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 currency to hedge its net investments in foreign operations. As at 30 June 2021,
Cardno has loans denominated in US dollars totalling AUD $14.6 million (2020: AUD $44.5 million) which have been
designated as hedges of Cardno’s net investments in subsidiaries with a functional currency of USD.
As at 30 June 2021, a 10 per cent strengthening of the Australian dollar against the USD would have increased
equity by $1.3 million (2020: $4.0 million). A 10 per cent weakening of the Australian dollar against the USD would
have decreased equity by $1.6 million (2020: $4.9 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
Included in interest-bearing loans at 30 June 2021 were borrowings of US$11.0 million. The borrowings are
designated as a hedge of the first US$11.0 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.
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 2021 is as follows:
$’000
USD
Notional
amount
Carrying
amount
Line item in
the statement
of financial
position
Change in fair value
used for measuring
ineffectiveness for the
period
Foreign currency denominated borrowing
11,000
11,000
Loans and
borrowings
(1,746)
The impact of the hedged item on the statement of financial position as at 30 June 2021 is as follows:
$’000
USD
Notional
amount
Carrying
amount
Line item in
the statement
of financial
position
Change in fair value
used for measuring
ineffectiveness for the
period
Net investment in Cardno USA, Inc.
11,000
11,000
Other financial
assets
1,746
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 71
20. FINANCIAL RISKS CONTINUED
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:
2021
2020
Effective
Interest Rate
Balance
$’000
Effective
Interest Rate
Balance
$’000
Variable rate instruments
Cash assets
0.00%
37,272
0.02%
57,723
Bank loans
2.53%
(22,288)
3.84%
(58,326)
14,984
(603)
Fixed rate instruments
Lease liabilities
3.84%
(90,451)
4.31%
(115,905)
(90,451)
(115,905)
Group sensitivity
Cash flow sensitivity analysis for variable rate instruments
At 30 June 2021, 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 $51,000 higher/lower (2020: $5,000
higher/lower), mainly as a result of lower/higher interest expense on variable term debt. There have been no
changes in the underlying assumptions from the previous year.
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.
As part of the capital management program, the Group conducts on-market buybacks of ordinary Cardno
shares, refer to Note 18 for further details.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 72
UNRECOGNISED ITEMS
21. 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 2021.
The Group has no commitments relating to the acquisition of property, plant and equipment or intangible
assets.
22. CONTINGENT LIABILITIES
Cardno had contingent liabilities at 30 June 2021 in respect of:
2021
$’000
2020
$’000
Bank guarantees and insurance bonds
24,125
38,162
Cardno has Bank Guarantee and Insurance Bond facilities with financial institutions denominated in Australian
dollars, United States dollars, New Zealand dollars and Euros.
The Bank Guarantee facilities available to Cardno totalled A$22.8 million (2020: A$23.3 million). The bank
guarantee facilities are secured jointly and severally by the Company and a number of its wholly-owned
subsidiaries. The Insurance Bond facilities do not have a contractual facility limit and are issued on a case by
case basis.
The Insurance Bond facilities are largely issued from a US$15.6 million facility, with others issued on a case by
case basis by other issuers.
Matters Relating to Cardno Caminosca S.A (“Caminosca”)
In 2015, Cardno announced that a claim was filed and served on its subsidiary 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 Company believes that the
claim is spurious in nature. The Company has filed responses and is prepared to vigorously defend the claim. While
the claim remains open and continues to be managed and monitored, Cardno has received no correspondence on
the matter since early 2017.
Also, in 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.
Cardno continues its progress in the wind down of Caminosca’s operations in Latin America, with successful
resolution of matters that had been previously reserved or provided for resulting in the release of these reserves and
provisions. Cardno recorded an aggregate $12.7 million of non-recurring income this financial year associated with
the wind down of Caminosca.
Other Matters
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 73
23. SUBSEQUENT EVENTS
Subsequent to year end, the Board declared a full year dividend of 4.0 cents per share (unfranked).
On 9 June 2021, the Company announced the commencement of a strategic review process with the objective of
maximising shareholder value. The process involves an assessment of Cardno’s strategic options and the
alternative strategies available to unlock and enhance value for Cardno shareholders. As at the date of this report,
the strategic review process is ongoing and no actions have been taken or decisions made that require further
disclosure.
Other than the above, 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, the results of those operations, or the state of
the affairs of the Group, in future years.
OTHER INFORMATION
24. OTHER CURRENT ASSETS
2021
$’000
2020
$’000
Prepayments
5,753
6,567
Project advances
757
1,028
Security deposits
475
1,198
6,985
8,793
25. OTHER FINANCIAL ASSETS
2021
$’000
2020
$’000
Investments in non-related entities
202
160
Lease receivable
2,262
1,543
2,464
1,703
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 74
26. NOTES TO THE CASH FLOW STATEMENT
2021
$’000
2020
$’000
Reconciliation of Net Cash from Operating Activities to Net profit for the year
Net profit for the year
32,658
56,586
Adjust for non-cash items
Depreciation and amortisation
34,578
49,360
Impairment loss on goodwill
-
69,621
Gain on demerger of Intega Group Limited
-
(119,103)
Write off FCTR – discontinued and liquidated operations
-
(607)
(Gain) / Loss on sale of property, plant & equipment
268
(132)
(Gain) / Loss on sale of disposed entities
290
(1,363)
Unrealised foreign exchange losses
(402)
(571)
Share based remuneration
1,515
487
Adjust for changes in assets and liabilities:
(Increase)/decrease in assets:
Contract assets
(22,505)
(28,637)
Deferred tax assets
4,600
12,586
Trade receivables
47,337
33,825
Provision for doubtful debts
(7,409)
1,775
Other receivables
2,959
(2,920)
Prepayments
814
2,222
Other assets
994
1,090
Increase/(decrease) in liabilities:
Trade payables
(39,193)
133
Income tax payable
(1,200)
(6,394)
Employee provisions
3,289
4,352
Contract liabilities
435
3,942
Other liabilities
(361)
(1,769)
Deferred tax liabilities
3,916
(1,006)
62,583
73,477
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 75
27. EARNINGS PER SHARE
The calculation of earnings per share was based on the following:
2021
$’000
2020
$’000
(a) Earnings per share – continuing operations
Basic earnings per share for continuing operations
Basic profit/(loss) from continuing operations attributable to ordinary
shareholders
32,658
(67,078)
Weighted average number of ordinary shares
No.
No.
Issued ordinary shares at 1 July
447,017,851
444,269,564
Effect of share buy-back
(33,275,696)
-
Effect of shares issued during the year
619,875
954,506
Weighted average number of ordinary shares at 30 June
414,362,030
445,224,070
Cents
Cents
Basic earnings/(loss) per share (cents per share) from continuing
operations
7.88
(15.07)
Diluted earnings per share – continuing operations
Profit/(loss) from continuing operations attributable to ordinary
shareholders (diluted)
32,658
(67,078)
Weighted average number of ordinary shares (diluted)
Issued ordinary shares at 1 July
447,017,851
444,269,564
Effect of Performance Rights on issue
9,902,486
-
Effect of share buy-back
(33,275,696)
-
Effect of shares issued during the year
619,875
954,506
Weighted average number of ordinary shares (diluted) at 30 June
424,264,516
445,224,070
Diluted earnings/(loss) per share (cents per share) from continuing
operations
7.70
(15.07)
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 76
27. EARNINGS PER SHARE CONTINUED
2021
$’000
2020
$’000
(b) Earnings per share
Basic earnings per share
Basic profit attributable to ordinary shareholders
32,658
56,586
Weighted average number of ordinary shares
No.
Issued ordinary shares at 1 July
447,017,851
444,269,564
Effect of share buy-back
(33,275,696)
-
Effect of shares issued during the year
619,875
954,506
Weighted average number of ordinary shares at 30 June
414,362,030
445,224,070
Cents
Basic earnings/(loss) per share (cents per share)
7.88
12.71
Diluted earnings per share
Profit attributable to ordinary shareholders (diluted)
32,658
56,586
Weighted average number of ordinary shares (diluted)
Issued ordinary shares at 1 July
447,017,851
444,269,564
Effect of Performance Rights on issue
9,902,486
-
Effect of share buy-back
(33,275,696)
-
Effect of shares issued during the year
619,875
954,506
Weighted average number of ordinary shares (diluted) at 30 June
424,264,516
445,244,070
Diluted earnings per share (cents per share)
7.70
12.71
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 77
28. RELATED PARTY DISCLOSURES
Key management personnel
Key management personnel compensation included in employee benefits are as follows:
2021
$
2020
$
Short-term employee benefits
2,684,043
2,608,406
Post-employment benefits
89,698
81,628
Equity compensation benefits
591,974
(331,918)
Termination benefits
-
458,853
3,365,715
2,816,969
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 (CCP), 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 December 2020, which were cash settled by Intega.
The TSA income recognised of $3,933,790 (2020: $10,425,480) is shown in Other Income on the Company’s
Statement of Financial Performance. No invoices remained unpaid by Intega as at 30 June 2021 (2020:
$2,811,263 unpaid but not overdue). 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. The TSA finished in December 2020.
During the year, the Company paid $144,320 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 $286,184 for support 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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 78
29. 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 during the year, and a number of subsidiaries were
transferred to the Intega Group during 2020 as part of the demerger (see Note 2).
Name
Country of
Incorporation
Equity
Holding
2021
Equity
Holding
2020
Cardno Holdings Pty Ltd
Australia
100%
100%
Cardno (Qld) Pty Ltd
Australia
100%
100%
Cardno Staff Pty Ltd
Australia
100%
100%
Cardno Staff No. 2 Pty Ltd
Australia
100%
100%
Cardno Operations Pty Ltd
Australia
100%
100%
Cardno International Pty Ltd
Australia
100%
100%
Cardno (WA) Pty Ltd
Australia
100%
100%
Cardno (NSW/ACT) Pty Ltd
Australia
100%
100%
Cardno Willing Pty Ltd
Australia
100%
100%
Cardno Victoria Pty Ltd
Australia
100%
100%
Cardno Emerging Markets (Australia) Pty Ltd
Australia
100%
100%
Cardno UK Limited
United Kingdom
100%
100%
Cardno Emerging Markets (UK) Limited
United Kingdom
100%
100%
Cardno Emerging Markets (East Africa) Limited
Kenya
100%
100%
Cardno (NZ) Limited
New Zealand
100%
100%
Cardno Holdings New Zealand Limited
New Zealand
100%
100%
Cardno USA, Inc.
United States of America
100%
100%
Cardno, Inc.
United States of America
100%
100%
Cardno Emerging Markets Belgium s.a.
Belgium
0%
100%
Cardno (NT) Pty Ltd
Australia
100%
100%
Cardno (PNG) Ltd
Papua New Guinea
100%
100%
ENTRIX Americas, SA
Ecuador
100%
100%
Cardno BEC (Qld) Pty Ltd
Australia
100%
100%
Cardno Entrix (Colombia) S.A.S.
Colombia
100%
100%
Cardno Emerging Markets (USA), Ltd
United States of America
100%
100%
Cardno Humphrey Reynolds Perkins Pty Ltd
Australia
100%
100%
Cardno GS, Inc.
United States of America
100%
100%
Cardno BTO Limited
New Zealand
0%
100%
Cardno Hard & Forester Pty Ltd
Australia
100%
100%
Cardno ChemRisk, LLC
United States of America
100%
100%
Caminosca S.A.S
South America
100%
100%
Cardno South Africa (Pty) Ltd
South Africa
100%
100%
Cardno Emerging Markets (Rwanda) Limited
Rwanda
100%
100%
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 79
29. CONTROLLED ENTITIES CONTINUED
Name
Country of
Incorporation
Equity
Holding
2021
Equity
Holding
2020
Cardno Mozambique LDA
Mozambique
100%
100%
I.T. Transport Limited
United Kingdom
0%
100%
ES NY Engineering P.A
United States of America
100%
100%
TGM Group Pty Ltd
Australia
100%
100%
David Douglas Associates Inc
United States of America
100%
100%
Cardno International Development – SMC Ltd
Uganda
100%
100%
Cardno Canada Holdings Limited
Canada
100%
100%
Cardno S&E Limited
Canada
100%
100%
Cardno Technical Asia, Inc
Philippines
100%
-
Cardno Geosciences PNG Ltd
Papua New Guinea
100%
-
30. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2021 the parent Company of Cardno was
Cardno Limited.
Company
2021
$’000
2020
$’000
Results of the parent entity
Profit for the year – continuing operations
9,096
30,239
Profit for the year – discontinued operations
-
120,213
Total comprehensive income for the year
9,096
150,452
Financial position of the parent entity at year end
Current assets
143,889
112,592
Total assets
271,989
289,880
Current liabilities
138
138
Total liabilities
138
503
Total equity of the parent entity comprising of:
Share capital
370,079
390,682
Demerger reserve
151,320
151,320
Retained earnings
(249,548)
(252,625)
Total equity1
271,851
289,377
1 Prior year equity balances have been impacted by the demerger of Intega. See Note 2.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 80
30. PARENT ENTITY DISCLOSURES CONTINUED
Parent entity contingencies
2021
$’000
2020
$’000
Bank guarantees
12,715
10,172
Bank guarantee facilities are available to Cardno totalling $22.8 million (2020: $23.3 million). 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 in Note
31.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 81
31. 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
>
Cardno Victoria Pty Ltd (added to the Deed in December 2020)
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 2021 is set out as follows:
Statement of comprehensive income and retained losses
2021
$’000
2020
$’000
Revenue
417,021
412,574
Employee expenses
(148,209)
(160,106)
Consumables and materials used
(160,584)
(164,859)
Sub-consultant and contractor costs
(88,048)
(88,026)
Depreciation and amortisation expenses
(12,433)
(10,861)
Finance costs
(5,285)
(9,178)
Other expenses
(2,553)
(357)
Loss before income tax from continuing operations
(91)
(20,813)
Income tax benefit
5,033
13,014
Net Profit/(loss) for the year from continuing operations
4,942
(7,799)
Net profit for the year from discontinued operations
-
138,628
Total comprehensive income for the year
4,942
130,829
Retained losses at the beginning of the year
(358,101)
(406,414)
Adjustment on initial application of AASB 16 (net of income tax)
-
(981)
Dividend paid
(6,019)
-
Add Cardno Victoria Pty Ltd to the Deed
30,514
-
Remove Cardno Bowler Pty Ltd from Deed on demerge of Intega
-
(81,535)
Retained losses at the end of the year
(328,664)
(358,101)
Attributable to:
Owners of the Company
(328,664)
(358,101)
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 82
31. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
2021
$’000
2020
$’000
CURRENT ASSETS
Cash and cash equivalents
10,062
10,374
Trade and other receivables
781,082
602,733
Contract assets
14,444
9,184
Current tax receivables
16,326
10,885
Other current assets
3,804
4,405
TOTAL CURRENT ASSETS
825,718
637,581
NON-CURRENT ASSETS
Investments
182,078
248,410
Property, plant and equipment
1,738
3,289
Right-of-use assets
43,036
47,541
Deferred tax assets
62,666
52,163
Intangible assets
37,214
37,208
TOTAL NON-CURRENT ASSETS
326,732
388,611
TOTAL ASSETS
1,152,450
1,026,192
CURRENT LIABILITIES
Trade and other payables
805,740
637,641
Lease Liabilities
12,058
12,094
Short-term provisions
18,316
19,545
Contract liabilities
9,194
5,444
TOTAL CURRENT LIABILITIES
845,308
674,724
NON-CURRENT LIABILITIES
Lease Liabilities
38,420
38,536
Loans and borrowings
22,288
58,326
Deferred tax liabilities
15,554
15,118
Employee benefits
2,945
3,051
TOTAL NON-CURRENT LIABILITIES
79,207
115,031
TOTAL LIABILITIES
924,515
789,755
NET ASSETS
227,935
236,437
EQUITY
Issued capital
370,079
390,682
Reserves
35,200
52,536
Demerger reserve
151,320
151,320
Retained losses
(328,664)
(358,101)
TOTAL EQUITY
227,935
236,437
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 83
32. AUDITOR’S REMUNERATION
2021
$
2020
$
Audit and review services
Auditors of the Group – KPMG Australia:
>
Audit and review of financial statements - Group
479,700
513,200
>
Audit and review of financial statements - Controlled entities
86,200
57,164
565,900
570,364
Other auditors
> Audit and review of financial statements - Controlled entities
95,000
-
Total audit and review services
660,900
570,364
Assurance services
Auditors of the Group – KPMG Australia:
>
Other assurance services
-
5,000
Total assurance services
-
5,000
Other services
Auditors of the Group – KPMG Australia:
>
Other services
50,000
21,975
>
Taxation advice and tax compliance services
5,990
17,740
Total other services
55,990
39,715
33. 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 2021 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 27 August 2021.
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in
accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The financial statements of the consolidated entity also comply
with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards
Board (IASB).
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 84
33. 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 issued but not yet effective
At the date of this report the Standards and Interpretations listed below were issued but not yet effective and
were not adopted in preparing these consolidated financial statements.
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
AASB 2020-1 Amendments to Australian Accounting Standards –
Classification of Liabilities as Current or Non-Current
1 January 2023
30 June 2024
Interpretation decisions adopted in the current year
In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final
agenda decision, Configuration or customisation costs in a cloud commuting arrangement. The decision
discusses whether configuration or customisation expenditure relating to Software-as-a-Service (SaaS)
arrangements is able to be recognised as an intangible asset and if not, over what time period the expenditure
is expensed. The Group has adopted this agenda decision within the financial statements.
The Group does not extensively utilise SaaS arrangements and the historical accounting policy has been to
expense all such costs in the Statement of Financial Performance over the period in which the service is
received. The adoption of this agenda decision has not impacted the 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 29 to the financial statements. All controlled entities
have a June financial year-end.
Transactions eliminated on consolidation
Intra-group balances and transactions, unrealised gains and losses and inter-entity balances resulting from
transactions with or between controlled entities are eliminated in full on consolidation.
(d) 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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 85
33. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(d) Foreign Currency continued
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 86
33. 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.
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.
Software-as-a-Service (Saas) arrangements are service contracts providing the Group with the right to access
the cloud provider’s application software over the contract period. As such, the Group does not receive a
software intangible asset at the contract commencement date. All costs associated with these arrangements
are expensed in the Statement of Financial Performance as the services are received.
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 87
33. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(f) Intangible Assets continued
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.
(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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 88
33. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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).
(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. Amounts paid to defined contribution plans for the year were
$13.5 million (2020: $14.6 million).
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.
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 89
33. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 2021, the
Group did not hold any of the Company’s shares in the reserve (2020: nil).
Demerger reserve
The demerger reserve is used to recognise the gain on demerger of Intega Group Limited in the prior year.
Directors’ Declaration
Cardno Limited and its Controlled Entities for the year ended 30 June 2021
Page | 90
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 89 and the Remuneration
Report of the Directors’ Report, set out on pages 16 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 2021 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 29 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 2021
4. The Directors draw attention to Note 33 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Dated at Brisbane on the 27 day of August 2021.
Signed in accordance with a resolution of the Directors.
MICHAEL ALSCHER
Chairman
Page | 91
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights
reserved. The KPMG name and logo are trademarks used under license by the independent member firms of
the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
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 2021 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 2021;
• 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
of the APAC CGU;
•
revenue recognition – professional services
revenue; and
•
recoverability of deferred tax assets relating
to tax losses.
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 | 92
Valuation of goodwill and intangible assets of the APAC CGU
Refer to Note 12 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 impairment testing of goodwill and
intangible assets of the APAC CGU due to the
high level of judgement applied by us when
assessing the forward-looking assumptions the
Group applied in its value in use model,
including:
•
forecast cash flows (EBITDA margins and
terminal growth rates) – while the financial
performance of the APAC CGU improved in
2021, the ability to sustain this performance
is dependent on the Group’s ability to
execute its strategy and continue delivering
results from margin improvement initiatives
commenced during the year. The
uncertainties from the on-going business
disruption impacts of COVID-19 also
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 APAC CGU’s
recoverable amount is sensitive to changes
in the EBITDA margin; and
•
discount rates – these are judgemental in
nature and vary according to the conditions
and environment the CGU is subject to
from time to time, and economic and
forecasting uncertainty as a result of
COVID-19. The APAC CGU’s recoverable
amount 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 model used in the annual impairment test
of goodwill and intangible assets of the APAC
CGU against the requirements of the
accounting standards;
•
assessing the integrity of the value in use
model used, including the accuracy of the
underlying calculation formulas;
•
comparing the forecast cash flows contained
in the value in use model to the Board
approved budget;
•
assessing the accuracy of the previous Group
budgets to inform our evaluation of forecasts
incorporated in the APAC CGU’s model. We
noted previous trends where challenging
market conditions existed and how they
impacted the business, for use in further
testing;
•
varying key assumptions (forecast EBITDA
margins, terminal growth rates and discount
rates), within a reasonably possible range, to
identify those assumptions to which the
recoverable amount is most sensitive and to
focus our audit procedures;
•
challenging the Group’s significant forecast
cash flows including EBITDA margin
assumptions in light of the risks in executing
the Group’s strategy for the APAC CGU and
the 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 APAC CGU, its past
performance, business and customers, and
our industry experience;
•
independently developing a discount rate
range using publicly available market data for
comparable entities, adjusted by risk factors
specific to the APAC CGU and the industry it
operates in; and
•
assessing the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of
the accounting standards.
Page | 93
Revenue recognition – professional services revenue ($612.7m)
Refer to Note 3 to 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;
• We assessed a sample of contracts by:
- comparing the relevant features of the
underlying professional services contracts
to the criteria in the accounting standard
and against identified performance
obligations;
- inspecting 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;
- conducting 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
- challenging 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 2021 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 | 94
Recoverability of deferred tax assets relating to tax losses ($36.3m)
Refer to Note 7 to 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;
•
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; and
•
assessing the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of
the accounting standards.
Page | 95
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.
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.
Page | 96
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of
Cardno Limited for the year ended 30 June
2021, 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 16 to 29 of the Directors’ report for the
year ended 30 June 2021.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Jason Adams
Partner
Brisbane
27 August 2021
Additional Shareholder Information
Page | 97
DISTRIBUTION OF ORDINARY SHAREHOLDERS
The number of shareholders, by size of holding, as at 31 July 2021 were:
Ordinary Shares
Number of
Number of
Shares
1 – 1,000
446
127,409
1,001 – 5,000
1,130
3,231,382
5,001 – 10,000
489
3,637,816
10,001 – 100,000
914
27,334,266
100,001 – and over
157
354,598,237
Total
3,136
388,929,110
As at 31 July 2021 there were 331 shareholders who held less than a marketable parcel of 38,362 shares.
TWENTY LARGEST ORDINARY SHAREHOLDERS
The names of the twenty largest holders as at 31 July 2021 were:
Listed Ordinary Shares
Number
Held
Percentage
CRESCENT CAPITAL INVESTMENTS
217,946,359
56.04
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
36,103,775
9.28
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
29,230,134
7.52
CITICORP NOMINEES PTY LIMITED
12,940,062
3.33
FIRST SAMUEL LTD ACN 086243567
7,286,099
1.87
NATIONAL NOMINEES LIMITED
4,298,048
1.11
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
2,538,182
0.65
HALJAN MANAGEMENT LP
1,686,192
0.43
GARRETT SMYTHE LTD
1,670,000
0.43
GEE SUPER PTY LTD
1,568,411
0.40
BNP PARIBAS NOMINEES PTY LTD
1,550,608
0.40
PORTA GROUP PTY LTD
1,300,000
0.33
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
1,122,328
0.29
ANNE FELICITY PHILLIPS
1,101,378
0.28
BNP PARIBAS NOMS PTY LTD
868,128
0.22
CS FOURTH NOMINEES PTY LIMITED
838,438
0.22
MR GREGORY SEGAL
800,000
0.21
MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED
789,416
0.20
PEDERICK ENTERPRISES PTY LTD
762,736
0.20
TREVOR JOHNSON
687,779
0.18
Total
325,088,073
83.59
Additional Shareholder Information
Page | 98
SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Number Held
Percentage
Crescent Capital Investments
228,891,883
58.44%
Invesco Australia Limited
38,939,119
8.75%
Richmond Hill Capital Pty Ltd
32,445,731
8.09%
Viburnum Funds Pty Ltd
32,243,725
8.05%
Alberta Investment Management Corp
21,935,794
5.48%
VOTING RIGHTS
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 2021 the details of Performance Rights on issue are as follows:
Number of Rights Holders
Number of Rights on Issue
18
12,014,050
VOTING RIGHTS OF RIGHTS
The ordinary shares issued on exercise of the rights will rank equally with all other ordinary shares.
Page | 99
BOARD OF DIRECTORS
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
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
Metrics Credit Partners
National Australia Bank Limited
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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