for personal use only · the acquisition will further strengthen cardno’s presence in new south...

Cardno LimitedAnnual General Meeting2011

Andrew Buckley - Managing Director

Cardno Limited – 2011 Annual General Meeting

For

per

sona

l use

onl

y

> Highlights > Operations and Segment Review> Significant Projects> Strategy> Outlook

Presentation

“Cardno’s vision is to be a world leader in the provision of professional services to improve the physical and social environment”

Cardno Limited – 2011 Annual General Meeting Slide 2

For

per

sona

l use

onl

y

2011 Highlights

Cardno’s growing profile• Cardno was on the front cover of the July edition of Engineering

News Record (ENR), one of the world’s leading engineeringpublications.

• Cardno debuted at number 35 on the 2011 ENR Top 200International Design Firms .

• Cardno is no. 17 on the top 100 list of pure design firms in theU.S.A.

• Cardno is no. 6 on the list of environmental firms in the U.S.A.

• Cardno is the fastest growing engineering and environmental firmin the U.S.A. (No. 1 on the Zweig Letter Hot Firm List).

• Coverage is positive for clients, investors and staff.


For

per

sona

l use

onl

y

2011 Highlights> Record profit of $58.8m up 56% despite difficult conditions > Record EBITDA of $100.2m up 81.2%> EPS up 44% to 56 cents> Dividend record 34 cents, 70% franked > Strong cash flow $74m up 57%> $49m capital raising in August 2010> Strong 1H 2011 reflective of Gulf of Mexico oil spill contribution > Second half impacted by stronger AUD and wet weather/cyclones, but remained

robust> Strong organic revenue growth of 18% over the previous year> Three acquisitions in 2011FY strengthen environmental, mining and oil and gas

capabilities> Further three acquisitions completed in 2012FY> July 2011 WIH @ $516m - down on pcp but up in constant currency terms


For

per

sona

l use

onl

y

Cardno’s underlying dynamics> Geographic and market sector diversification lowers risk and maximises growth

> Consistent growth of profits and shareholder returns

> 2011 FY seventh consecutive record profit and EPS growth

> 7 year shareholder returns + 600%

> Consistent strong dividend growth delivering 34 cents this year

> Strong critical mass of professional expertise world-wide

> Successful M & A’s = successful cross-selling + increased organic growth


For

per

sona

l use

onl

y

7th consecutive growth year

0

100

200

300

400

500

600

700

800

900

2005 2006 2007 2008 2009 2010 2011

GROUP REVENUE

A$

mill

ions

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011

NET PROFIT AFTER TAX

A$

Mill

ions


For

per

sona

l use

onl

y

7th consecutive growth year

0

5

10

15

20

25

30

35

2005 2006 2007 2008 2009 2010 2011

DIVIDEND

A$

Cen

t/Sha

re0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011

EARNINGS PER SHARE (Basic)

A$

Cen

ts p

er s

hare


For

per

sona

l use

onl

y

Operations and Segment Review

For

per

sona

l use

onl

y

Operating Segment Performance

Australia & NZFY10 FY11

Fee revenue ($000's) 209,939 230,365

Recoverable expenses ($000's) 10,146 26,022

Total revenue 220,085 256,387

EBIT 34,285 34,021

Fee revenue margin 16.33% 14.77%

Commentary• Organic growth strong in first half but

reduced in second half• Second half impacted by floods, cyclones

and wet weather• Margins improving – over 16% in second half• Cardno BEC and Cardno Roadtest added• Improving conditions expected especially in

Queensland and Western Australia


For

per

sona

l use

onl

y

Operating Segment Performance

Americas & SoftwareFY10 FY11

Fee revenue ($000's) 72,061 257,617



EBIT 11,065 51,806Fee revenue margin 15.36% 20.11%

Commentary• Very strong first half with emergency

response on oil spill• Second half slower but still strong • Oil spill work continuing• Broader organic growth across the business• Energy, Oil and Gas are strong• Cardno JFNew added• Environmental consulting growing


For

per

sona

l use

onl

y

Operating Segment PerformanceInternational Development Assistance

FY10 FY11

Fee revenue ($000's) 95,044 83,704



EBIT 4,009 4,175

Fee revenue margin 4.22% 4.99%

Commentary• Revenue down, but half of the drop relates to

currency translation• New management in place• Growth expected through 2012FY• Macro conditions still positive with planned

doubling of spend in U.S. and Australia by 2015

• However, U.S. growth in spending expected to be delayed


For

per

sona

l use

onl

y

Core Businesses> Globally integrated professional services business with more than 4,600 people

in 180 offices spanning projects in over 85 countries

> Approximately 85% of staff professionals and fee earning personnel

> Primary disciplines of diverse planning, surveying, engineering andmanagement services, environmental sciences, CMT and social infrastructuredelivery

> Focus on developing / improving physical and social infrastructure for privateand public sectors

> Focus on Environmental Consulting markets is delivering strong growth

> FY11 acquisitions to add approximately $15m EBIT in FY12


For

per

sona

l use

onl

y

Expanding Globally


For

per

sona

l use

onl

y

Diversified revenue streams

33%

51%

15%

REVENUE BY OPERATING SEGMENT(PROFORMA)

Professional ServicesAustralia &NZ

Professional ServicesAmerica's & Software

International DevelopmentAssistance

39%

2%

56%

3%

REVENUE BY GEOGRAPHIC REGION(PROFORMA)

Australia & NZ

Asia Pacific

America's

UK & Africa


For

per

sona

l use

onl

y

Diversified revenue streams

8.2%1.1%

35.1%

13.6%1.0%

7.8%

18.5%

12.1%2.7%

NET REVENUE BY MARKET SECTORS FY2011 (PROFORMA)

BULDINGS

COASTAL & OCEAN

ENVIRONMENT

EMERGING MARKETS

MANAGEMENT SERVICES

RESOURCES, MINING AND ENERGY

TRANSPORTATION

LAND

WATER

6%10%

7%

41%

1%

9%

6%

7%

12%

REVENUE BY CLIENT FY2011 (PROFORMA)

AID AGENCY

CONTRACTOR/SERVICE PROVIDER

DEVELOPER

RESOURCES, MINING AND ENERGY

GOVERMENT OWNED CORPORATION

GOVERNMENT ‐ FEDERAL

GOVERNMENT ‐ LOCAL

GOVERNMENT ‐ STATE

OTHER CLIENTS


For

per

sona

l use

onl

y


Share Price Performance

For

per

sona

l use

onl

y

Cardno’s competitive strengths> High retention of acquisition principals drives sustainable growth

> Business unit and division structure is attractive to merger partners

> Successful track record of cross selling services to generate organic growth

> Diversity of earnings across business sectors, clients and geographic locationsmitigates risk and optimises growth opportunities

> Focus on maintaining balanced mix between short-term smaller projects andlarger long-term projects

> Strong balance sheet to fund growth

> Significant strengthened presence in high growth global environmental servicesand mining and resources sector


For

per

sona

l use

onl

y

2011FY AcquisitionsCardno JFNew (2011)Cardno JFNew is a 150 person environmental consulting firm based in the Great Lakes area of the US and has 8 offices and a 130acre nursery. The acquisition was effective January 2011 with annual revenue of around US$18m and EBITDA of US$2.7m. Thecompany has specialist expertise in natural resources management, environmental permitting, habitat restoration, mitigationbanking, native plant materials, and cultural resources consulting. Cardno JFNew has become part of Cardno ENTRIX (acquired inJune 2010) and was effective January 2011.

Cardno Roadtest (2011)Cardno Roadtest is a 60 person construction materials testing and geotechnical engineering firm based in Central Queensland withoffices in Rockhampton, Emerald, Gladstone and the Whitsundays. Cardno Roadtest has become part of Cardno Bowler, whichwas acquired in 2008. The acquisition was effective May 2011 with annual revenue of around $8m and EBIT of $3.5m. CardnoRoadtest increases Cardno’s exposure to the work flowing from the extensive gas and coal developments under way or proposedin Central Queensland.

Cardno BEC (2011)Cardno BEC is a 100 person electrical engineering services firm based in Perth, with offices in Brisbane and Tanzania. Theacquisition was effective June 2011 with annual revenue around $35m and an expected FY12 EBIT of $9.0m. Cardno BEC hasbeen established since 1996 and provides electrical engineering services ranging from feasibility studies through project design, toconstruction, commissioning and operations.

The company provides services to the mining, mineral processing, industrial, petro-chemical and utility sectors. Major clientsinclude BHP Billiton, Rio Tinto, Mineral Deposits, Newcrest, Fortescue Metals Group, Barrick Gold, Outotec and Regis.


For

per

sona

l use

onl

y

2012FY AcquisitionsCardno Lane Piper (2011)Cardno Lane Piper is a 40 person environmental and geotechnical engineering firm based in Melbourne, Australia. The acquisitionis expected to contribute approximately $6.5 million in revenue and $1.2 million in EBIT in FY12. Cardno Lane Piper has becomepart of Cardno ERI and was effective September 2011.

Lane Piper services the south-eastern Australian region with projects in New South Wales, ACT, South Australia and Victoria.Cardno’s strategy in acquiring Lane Piper is to focus on the fast growing environmental consulting market and to facilitate furthergrowth and cross selling with the Company’s strong North American environmental skills base.

Cardno Geotech Solutions (2011)Cardno Geotech Solutions is a 22 person geotechnical engineering, environmental and construction materials testing firm based inNewcastle, New South Wales. The acquisition will add revenues of around $2 million per annum. Geotech Solutions has been inoperation since 2007 and services the Newcastle, Hunter Valley and Central Coast regions of New South Wales.

The acquisition will further strengthen Cardno’s presence in New South Wales and enhance its geotechnical engineering andconstruction materials testing capabilities. Cardno Geotech Solutions has become part of Cardno NSW and was effective October2011.


For

per

sona

l use

onl

y

2012FY AcquisitionsCardno TECTEC is a 330 person full service environmental and engineering consulting firm headquartered in Charlottesville, Virginia, with 15mainland U.S. offices and 5 off-shore offices including Hawaii, Guam, Germany, Belgium and Italy, founded in 1990.

TEC is expected to contribute approximately US$52 million in revenue and US$7.2 million in EBITDA over the next 12 months.TEC’s backlog is in excess of US$70 million which is an all time high.

Cardno will pay up to US$50 million to acquire TEC, including an earn out of up to US$8.3 million based on future performance –payable in 18 months.

Cardno TEC’s speciality includes:

• environmental planning and compliance• ports and other infrastructure planning• GIS and data management• asset management services• facility assessments and planning• architecture and engineering design services.• services to the traditional and renewable energy development sectors

Cardno TEC’s key clients such are Department of Defence, Department of Homeland Security, National Park Service and theGeneral Services Administration.


For

per

sona

l use

onl

y

Significant Projects

“A robust project pipeline of $516m in July 2011”

For

per

sona

l use

onl

y

Legacy Way Tunnel Project ‐ A 4.6km long, AU$1.5billion tunnel project will transform the Queensland capital city of Brisbane bylinking the city’s western and inner‐northern suburbs. Constructed by Transcity JV (Acciona, BMD and Ghella) for Brisbane CityCouncil, the design for the Legacy Way Tunnel is made up of a Design Alliance, with Cardno contributing a third of the designresources, including key staff in the Civil, Traffic, Hydrology, Structural, Environment, Geotechnical and M&E teams. Constructionof Legacy Way began in April 2011 and will continue until December 2014.


For

per

sona

l use

onl

y

The Government of Indonesia is committed to ensuring global accessibility to education for all children, particularly in remoteregions, through the Basic Education Program. Cardno Emerging Markets is partnering with AusAID and the Government ofIndonesia to support the improvement of education standards across six provinces in Indonesia through the Basic EducationProgram (BEP). The program includes construction or refurbishment of 2000‐3000 schools, providing asset and contractmanagement support and increased capacity throughout the education sector in Indonesia.


For

per

sona

l use

onl

y

Lihir Island Million Ounce Upgrade, BEC Engineering ‐ the 2011 acquisition of BEC Engineering, a business whichdelivers electrical engineering services to the mining and resources industry, offers broad opportunities for blendingtheir considerable skills and specialist expertise with other Cardno operations globally.


For

per

sona

l use

onl

y

Gold Coast Rapid Transit project, Queensland, Australia (artists impression) – Cardno is providing multi‐disciplinaryservices to McConnell Dowell for Stage 1 of the Gold Coast’s major 13 kilometre light rail corridor. As Queensland’s firstlight rail system, the Gold Coast Rapid Transit project will provide residents with a world‐class public transport networkwhich will generate a number of social, environmental and economic benefits for the city.


For

per

sona

l use

onl

y

Big Creek Hydroelectric Power System (Client: Southern California Edison): Cardno ENTRIX is under contract to Southern California Edisonto manage all FERC relicensing and environmental studies for the Big Creek Hydroelectric System in Northern California. The projectfeatures 7 FERC licenses, 9 powerhouses, 6 major impoundments, over 95 miles of river systems, and pump storage with generatingcapacity of 1,000 MW. Cardno ENTRIX services include strategic regulatory management, environmental resource baseline studies,hydrologic modeling, aquatic biology monitoring, recreational planning, habitat restoration, regulatory agency negotiations and GISmapping.


For

per

sona

l use

onl

y

Keystone and Keystone XL Pipelines (Client: US Department of State and TransCanada): Cardno ENTRIX is the prime contractor for thepreparation of two third party EIS’s for the US Department of State and TransCanada Keystone Crude Oil Pipeline System. The projectfeatures 1,702 miles of new, 36‐inch diameter pipeline (327 miles in Canada and 1,375 miles in U.S.) with capacity for 900,000 barrels perday. Cardno ENTRIX is preparing two Environmental Impact Statements (EIS) and Presidential Permits for international border crossingunder the direction of Department of State and Department of Energy.


For

per

sona

l use

onl

y

RC01 Ore Reclaimer at Rio Tinto’s Cape Lambert Site, Western Australia: Cardno BEC is a business which delivers electricalengineering services to the mining and resources industry. Cardno BEC has carried out the control system programming foroptimisation of the RC01 Ore Reclaimer at Rio Tinto’s Cape Lambert Site.


For

per

sona

l use

onl

y

Strategy“ A seven year track record of strong growth”

For

per

sona

l use

onl

y

Strategy> Combine organic growth and M & A’s to become world leader in our industry

> Build recurring revenue streams through cross selling

> Focus on strengthening core disciplines through strategic acquisitions and organic growth

> Sustain historically high retention of principals

> Foster / encourage high employee shareholding (≈50%) to incentivise performance

> Maintain risk-adverse balance between major and smaller projects

> Continued diversification strategy – both geographical and market sectors


For

per

sona

l use

onl

y

M & A Strategy

> Complementary businesses with strong performance

> Historically pay realistic multiples

> Tried and tested acquisition process with robust due diligence

> Acquisitions must be immediately earnings accretive

> Target businesses which add to and strengthen core competencies

> Integrate and implement systems improvements to drive efficiencies

> Cross-sell services and leverage organic growth


For

per

sona

l use

onl

y


For

per

sona

l use

onl

y

Strategy“One Cardno, One Vision”

> Cardno operates on a 5 year Strategic Planning cycle

> Current plan is the 2010 – 2015 plan

> Theme of the current plan is: “One Cardno, One Vision”

> The focus is to continue to:• Grow Cardno significantly through to 2015• Increase benefits from ongoing integration• Foster cross selling• Cut overhead costs• Aim for audacious growth targets• Broadly increase our profile


For

per

sona

l use

onl

y

“Cross selling”

> Cross selling involves one part of Cardno using their access to a client to sell another Cardno service

> Incentive is to:• Improve / strengthen client relationships• Increase returns for both business units• Increase overall Cardno performance (all managers are shareholders)

> Main strategy is to increase knowledge of the breadth of services> Most Cardno clients need a range of infrastructure services> There are many examples of successful cross selling across Cardno

Strategy


For

per

sona

l use

onl

y

Strategy

> Cardno team initially involved in:• Services relocation design• Traffic management• Landscape architecture

> Further cross sold services include:• Utilities location work for Cardno AUS• Structural review work• Environmental services• Marine Structures advice• Building Services scope for Cardno ITC

> Potential for future cross selling as required by client (MacDow)

Cross selling examplesGold Coast Light Rail


For

per

sona

l use

onl

y

Strategy

> Kalamazoo River and Talmadge Creek in Michigan suffered environmental damage

> Cardno J.F. New leads Cardno work on this restoration project

> Cardno J.F. New has further leveraged Cardno Entrix involvement

> Cardno J.F. New – erosion control and river bank ecological restoration

> Cardno ENTRIX – Damage assessment and geomorphological studies and hydraulic modeling

Cross selling examplesKalamazoo River - U.S.A.


For

per

sona

l use

onl

y

StrategyCross selling examplesSouth America Petrochemical Site Remediation

> Cardno ERI has led the Cardno Team on remediation of retail sites in Ecuador and Colombia

> Cardno ENTRIX has provided the local presence allowing us to win the work

> Cardno ENTRIX is providing local support from Quito, Ecuador

> Cardno TBE is providing utilities location work


For

per

sona

l use

onl

y

StrategyCase Study – Cross Sell TrainingKnowledge Sharing

• Knowledge sharing underpins cross selling• Cardno Intranet incorporates Knowledge

Bank• Cardno management conferences are held

regularly with international managersattending

• Cardno operates a trade show at themanagers’ conference encouraging allmanagers to develop their knowledge of ourservices


For

per

sona

l use

onl

y

Integration of M&A Partners> Brand

• Co-brand initially• Shift goodwill towards Cardno• Drop the co-branding in 3-5 years.

> Systems• New partners immediately adopt authority levels and risk management systems • Management reporting is rigorous from day one• Accounting systems are generally adopted within 12 months• After 3 years the partner has been integrated into Cardno’s business structure• After 5 years the business becomes largely indistinguishable from the rest of

Cardno

Strategy


For

per

sona

l use

onl

y

Integration Case StudiesCardno Lawson Treloar – Australia

> Lawson Treloar was acquired in 2005FY bringing increased costal, ocean and water modeling skills

> Co-branded Cardno Lawson Treloar on day one> Integrated to Cardno systems in first year> Business units (Brisbane and Sydney) moved to regional reporting in first year and

fully integrated after 5 years> Co-brand dropped after 5 years> Neil Lawson (31 years service) is now Regional Operations Manager (South East

Australia and NZ Region)> Doug Treloar (31 years service) is now Senior Principal – Coastal Engineering

Strategy


For

per

sona

l use

onl

y

Integration Case StudiesCardno ERI – U.S.A.

> ERI was acquired in 2010FY bringing environmental remediation skills to Cardno> Co-branded Cardno ERI in 2011FY> Integrated to Cardno risk management immediately after acquisition> Moving onto Cardno accounts systems now> Move to Cardno brand ≈ 3 years> Bob Kroeger now Americas Region Operations Manager> All key Principals still on board> Extensive cross selling is underway

Strategy


For

per

sona

l use

onl

y

Outlook

“Cardno’s vision is to be a world leader in the provision of professional services ”

For

per

sona

l use

onl

y

2012 Growth drivers > Environmental services market is growing strongly

> Mining, energy, oil and gas are also growing strongly

> Public sector infrastructure projects remain active

> Private sector development remains flat but will deliver future growth

> IDA expenditure flat but will grow towards 2015

> M & A pipeline remains strong and competitively priced


For

per

sona

l use

onl

y

2012 Outlook

> Global market conditions continue to improve but slower than expected

> Project pipeline of $516m in early FY12

> Additional growth via organic expansion and acquisitions which further strengthen core competencies

> Well positioned with strong cash flow and strong balance sheet

> Strong pipeline of potential M & A opportunities in North America and Australia

> Returns from US environmental acquisitions continue to be strong

> Increased focus on mining and resources will further aid growth

> Early indications show further strengthening of performance in first quarter 2012FY


For

per

sona

l use

onl

y

“Cardno’s vision is to be a world leader in the provision of professional services

to improve the physical and social environment.”


For

per

sona

l use

onl

y

for personal use only · the acquisition will further strengthen cardno’s presence in new south...

Documents