For personal use only - Home - Australian Securities ... 01 2015 –Full Year Results Presentation Results Highlights NOPAT: non-IFRS term referring to the Net Operating Profit after

For

per

sona

l use

onl

y

1 2015 – Full Year

Results Presentation

Disclaimer

This presentation contains certain statements and projections provided by or on behalf of Cardno Limited with respect to the anticipated future undertakings. Any forward‐looking statements reflect various assumptions by or on behalf of Cardno. Accordingly, these statements are subject to significant business, economic and competitive uncertainties and contingencies associated with the business of Cardno which may be beyond the control of Cardno which could cause actual results or trends to differ materially, including but not limited to competition, industry downturns, inability to enforce contractual and other arrangements, legislative and regulatory changes, sovereign and political risks, ability to meet funding requirements, dependence on key personnel and other market and economic factors. Accordingly, there can be no assurance that any such statements and projections will be realised. Cardno makes no representations as to the accuracy or completeness of any such statement of projections or that any projections will be achieved and there can be no assurance that any projections are attainable or will be realised.

Additionally, Cardno makes no representation or warranty, express or implied, in relation to, and no responsibility or liability (whether for negligence, under statute or otherwise) is or will be accepted by Cardno or by any of their respective officers, directors, shareholders, partners, employees, or advisers (Relevant Parties) as to or in relation to the accuracy or completeness of the information, statements, opinions or matters (express or implied) arising out of, contained in or derived from this presentation or any omission from this presentation or of any other written or oral information or opinions provided now or in the future to any interested party or its advisers. In furnishing this presentation, Cardno undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise.

Except to the extent prohibited by law, the Relevant Parties disclaim all liability that may otherwise arise due to any of this information being inaccurate or incomplete. By obtaining this document, the recipient releases the Relevant Parties from liability to the recipient for any loss or damage which any of them may suffer or incur arising directly or indirectly out of or in connection with any use of or reliance on any of this information, whether such liability arises in contract, tort (including negligence) or otherwise.

This document does not constitute, and should not be construed as, either an offer to sell or a solicitation of an offer to buy or sell securities. It does not include all available information and should not be used in isolation as a basis to invest in Cardno.

For

per

sona

l use

onl

y



01 02 03 04Performance Overview

Financial Review

Outlook Appendix

For

per

sona

l use

onl

y



PERFORMANCE OVERVIEW

For

per

sona

l use

onl

y

4

01

2015 – Full Year


Results Highlights

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax which reflects the operating position of the business

prior to impairment adjustments. A reconciliation of NPAT to NOPAT has been prepared and is shown on slide 13.

Net Loss after Tax of $145.2 million

> Non-cash impairment charge of $224 million reflecting reduced near term outlook for the Americas and the planned exit from Caminosca in Ecuador

Full Year operating results at the upper end of the May guidance in a difficult environment

> Significant improvement in operating cash flow delivery

> Backlog remains strong at almost 12 months of revenue

> Full year dividend of 20 cents per share, fully franked

> Financial covenants met

However business outlook remains challenging

> In Australia we continue to face headwinds as the economyresets from a resources led investment boom to a public infrastructure led recovery

> In the Americas the recent completion of long term major projects, market driven margin pressures and volatility in the oil and gas service sector will continue to temper our performance

For

per

sona

l use

onl

y

5

01

2015 – Full Year


Cardno Performance

Full year group revenue from operations is up 9.0%

however this reflects the full year impact of prior

acquisitions and devaluation of the Australian dollar

partially offset by decline in underlying organic revenue.

NOPAT decline of 35.6% reflects margin pressures in

both the Asia Pacific and Americas regions, impact of

restructure and centralisation costs and oil and gas

sector slow down.

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax which

reflects the operating position of the business prior to impairment adjustments.

For

per

sona

l use

onl

y

6

01

2015 – Full Year


Cardno 2015 FY Highlights - Revenue

> Full year net fee revenue growth of 5.9% however organic fee revenue has declined

> Full year M&A contribution reflects an additional five months of Cardno Haynes Whaley and an additional eight months of Cardno PPI

> The FX effect reflects the additional contribution in Australian dollar terms of the translation of the Americas revenue with the average rate for FY15 being 85 cents versus 92 cents in FY14

For

per

sona

l use

onl

y

7

01

2015 – Full Year


Changes in Business Mix

> Exposure to mining and resources has decreased significantly from 12% in FY14 to 3% in FY15 as bulk commodities (coal and iron ore) reduced investment and operational spend –this is not expected to recover in the near term

> Increased revenue contribution from Contractors from 11% in FY14 to 15% in FY15 due to successful participation in major infrastructure projects in Australia

> Oil & gas exposure has increased from 22% in FY14 to 24% in FY15 reflecting the full year contribution of Cardno PPI partially offset by reduced demand from clients in that sector due to lower oil prices

> Government sector contribution increased from 29% in FY14 to 31% in FY15 reflecting recovery in the Americas and recent Federal Government contract wins in Asia Pacific

For

per

sona

l use

onl

y

8

01

2015 – Full Year


Cardno 2015 FY Highlights - Backlog

> In Australian dollar terms backlog has increased by 19.9% from 30 June 2014. Adjusting for FX rate changes the total growth rate is 4.9%

> Notably Asia Pacific region has recorded improved backlog year on year due to recent successful bids for infrastructure projects such as Sydney Light Rail

> 85% of the backlog is expected to be completed in the next 12 months broadly underpinning our revenue expectations for FY16

For

per

sona

l use

onl

y

9

01

2015 – Full Year


Safety Performance

Cardno’s Zero Harm initiative continues to deliver continuous improvement in workplace safety:

> A 40% reduction of total injuries over the two years to FY15

> An 85% reduction in injury severity over the last two years

> Our continuing objective now is to drive our total recordable injury rate lower – we want zero harm to our people and contractors every job every day

Cardno TRIFR*

at the end of FY15:

3.16 per million

person-hours

(0.63 per two hundred

thousand person-hours

- US equivalent)

* Total Recordable Injury

Frequency Rate

Cardno TRISR**

at the end of FY15:

2.00 per million

person-hours

(0.40 per two hundred

thousand person-hours

- US equivalent)

** Total Recordable Injury

Severity Rate

For

per

sona

l use

onl

y

10

01

2015 – Full Year


Our People

> Around 8,100 staff working in 259 offices around the world

> Year on year net reduction in head count as a result of matching resources to client demands

We strive to provide opportunities

for all staff to grow their careers

through programs such as

Women in Cardno.

Our global learning management

system houses over 200 courses

for learning, development and

career progression.

Our global organic growth

campaign facilitates improved

client management, collaboration,

thought leadership and

cross-selling.For

per

sona

l use

onl

y



FINANCIALREVIEW

For

per

sona

l use

onl

y

12

02

2015 – Full Year


Full Year 2015 Financial Highlights

Net Operating Profit after Tax : non-IFRS term referring to the operating position of the business prior to impairment adjustments.

A reconciliation of NPAT to NOPAT has been prepared and is shown on slide 13.

For

per

sona

l use

onl

y

13

02

2015 – Full Year


NPAT to NOPAT Reconciliation

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax

For

per

sona

l use

onl

y

14

02

2015 – Full Year


NPAT to NOPAT Reconciliation Bridge

For

per

sona

l use

onl

y

15

02

2015 – Full Year


Net Operating Profit After Tax Bridge - FY14 v FY15

1. Americas region down in constant currency terms due to lower US Government expenditure, extended winter weather in the North East, margin pressures, lower oil price, the impact of greatly reduced GoM spill response work and higher costs associated with business restructuring. In addition several major long term projects were concluded during the year which were not replaced with similar work

2. Asia Pacific decline driven by reduction in higher margin mining and resource work, slow down on LNG major projects

3. Higher finance costs, DD&A and corporate costs. The higher corporate costs relate to additional $6.8M of intangible asset amortization recognised in FY15

4. FX impact on US dollar earnings and year end balance sheet revaluations on US dollar denominated working capital

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax which reflects the operating position of

the business prior to impairment adjustments.

For

per

sona

l use

onl

y

16

02

2015 – Full Year


Net Operating Profit After Tax Bridge - H1 FY15 v H2 FY15

1. Americas region, in constant currency, experienced a challenging second half of FY15 with market driven margin pressures in technical services, extended winter weather delaying service delivery and tougher overall market conditions

2. Slight improvement in second half of FY15 for Asia Pacific region, as areas previously involved in mining and resources redirected marketing efforts to other market sectors

3. Higher finance costs, DD&A and corporate costs

4. FX impact on US$ earnings and year end balance sheet revaluations

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax which reflects the operating position of

the business prior to impairment adjustments.

For

per

sona

l use

onl

y

17

02

2015 – Full Year


Cash and Earnings - Key Results

Improved cash conversion rate in H2 FY15 has Cardno

delivering a strong cash conversion capability with our

operating cash flow of $48.1M in FY15 more consistent

with our historical performance (H1 FY15 $0.9M)

NOPAT: non-IFRS term referring to the Net Operating Profit after Tax which

reflects the operating position of the business prior to impairment adjustments.

EBITDA of $108.4M down on prior year 23.5%.

EBITDA margin reflective of continued margin

pressures throughout the Americas and Asia Pacific,

changes in business mix and restructuring costs For

per

sona

l use

onl

y

18

02

2015 – Full Year


EPS and Dividend - Key Results

EPS is impacted by decreased financial performance

during FY15 and impairment losses recognised in

relation to the Americas and assets held for sale.

EPS based on NOPAT is 30.59 cents per share

Dividend per share (fully franked) is down in absolute

terms reflecting lower overall profitability however the

payout ratio of 66% of NOPAT is broadly consistent

with previous yearsFor

per

sona

l use

onl

y

19

02

2015 – Full Year


Debt and Liquidity

> Debut USPP close issuing US$150m bonds across seven year and ten year maturities

> Cardno successfully completed one-year extension and improved pricing of existing bank debt facilities. This extension increases maturity until December 2019

> Total liquidity provides Cardno with the ability to support the business through both organic and future M&A expansion

* excludes fair value hedge adjustment

** represents bank guarantees drawn under a guarantee sub facility as part of a combined working capital facility

For

per

sona

l use

onl

y

20

02

2015 – Full Year


Leverage Ratio - FY14 to FY15 Bridge

> The bridge illustrates the movements in the Leverage Ratio between FY14 and FY15 highlighting the covenant ratio per the agreements with our lenders and the prima facie ratio as calculated from the financial report

> The debt covenant calculation of 2.6 averages the impact of FX rate changes over the period of review rather than using the spot rate to revalue net debt at year end. This results in halving the FX impact on the calculation to 0.3 times

> During the period net borrowings increased by $23.0 million contributing 0.2 times

> The reduction in EBITDA from $141.7 million to $108.4 million contributing 0.5 times

> A continued focus on cash collections and working capital management will further improve this ratio

> The Leverage Ratio is calculated by dividing Net Debt (Total Debt less Cash and Cash Equivalents ) by EBITDA.

> Cardno’s covenants with its lenders requires this ratio to be less than or equal to 3.0 times.

For

per

sona

l use

onl

y

21

02

2015 – Full Year


$1.0 Billion Fee Revenue Analysis

Note: 2014 Fee Revenue is presented on a proforma basis which assumes Cardno acquired its FY14 merger partners on 1 July 2013.

For

per

sona

l use

onl

y

22

02

2015 – Full Year


Operating Segment Performance - Americas

COMMENTARY

> Backlog has remained broadly flat (increasing 2.5% in USD terms) in FY15 with larger increase in Backlog in AUD due to recent devaluation of AUD

> Strong headline revenue growth due to full year contribution from acquisition of Cardno Haynes Whaley and Cardno PPI

> Organic growth declined overall due to reduction in oil spill work, low oil price and slow restart of work for US Government

> Margins down significantly due to less high margin oil spill work, higher costs associated with normalization of benefit plans, restructure costs and margin pressures in some areas

Note: the above figures include Emerging Markets EMEA and Software which have been merged into the Americas Region.

The Americas Region comprises

5,000 staff who deliver professional

expertise and services to government

and private sector clients across

North and South America, enhancing

performance in markets such as

environment, transportation, energy

and resources, land, buildings,

management services and

international development assistance.

USD Version included in Appendix slide 36.

For

per

sona

l use

onl

y

23

02

2015 – Full Year


Fee Revenue Stream Breakdown - Americas

COMMENTARY

> Slight increase in government sector in FY15 due to project wins during the year

> Resource sector exposure has contracted significantly reflecting a slowdown in the demand for mining related services due to recent downward price volatility for commodities – particularly coal in the Americas

> Decrease in social infrastructure services in FY15 due to continued constrained development assistance budgets in the UK and Europe, with slight recovery in the US

Note: 2014 Fee Revenue is presented on a proforma basis which assumes Cardno acquired its FY14 merger partners on 1 July 2013.

For

per

sona

l use

onl

y

24

02

2015 – Full Year


Operating Segment Performance - Asia Pacific

COMMENTARY

> Full year increase in backlog of 8.8% due to success in recent infrastructure and water bids

> Organic revenue decline driven by conclusion of major projects with no short term replacement projects being available and less mining and resource work

> Margins have continued to decline in difficult market conditions in conjunction with higher restructure costs – mainly redundancy payments.

The Asia Pacific Region comprises

3,100 staff providing services in civil,

structural, water, environmental,

coastal, bridge, geotechnical,

subsurface utility, traffic and

transport engineering, as well as

environmental science, surveying,

landscape architecture, construction

materials testing, planning and asset

management and international

development assistance.

Note: the above figures include Emerging Markets Asia Pacific which has been merged with the former Australia & New Zealand Region to become the Asia Pacific Region.F

or p

erso

nal u

se o

nly

25

02

2015 – Full Year


Fee Revenue Stream Breakdown - Asia Pacific

COMMENTARY

> Environmental services have fallen 5% due to wind down of major projects

> Decrease in resources sector fee revenue in FY15 due to slow down in this sector. This is expected to remain flat in FY16.

> Increase in social infrastructure services in Asia Pacific due to project wins in later FY14 within the former Emerging Markets division which underpinned performance in FY15.

For

per

sona

l use

onl

y



OUTLOOK

For

per

sona

l use

onl

y

27

03

2015 – Full Year


Newly Appointed CEO - Early Observations - 45 days in

As I travelled the Cardno globe and met with well over a thousand of our people a few things became clear

> Cardno genuinely makes a difference to communities in need as well as to our substantial client base by delivering innovative solutions that are cost effective and environmentally and socially responsible

> Cardno has great people with sector leading expertise who are committed to delivering the best solutions for our clients

> The markets that we operate in have been very challenging but our people have remained determined, hardworking and committed to superior client service

> Our people acknowledge the imperative to understand our client’s needs better than our competitors and to prioritize client relationships and responsiveness above everything else

> Cardno’s commitment to safety is real and our people understand how important this is to our clients and our own long term competitiveness

> There is a deep understanding that our performance needs to improveF

or p

erso

nal u

se o

nly

28

03

2015 – Full Year


Progress Report - Scorecard Versus 2015 Goals

THE GOOD

> Outlook - Further expansion of secured backlog – delivered

> Cash flow – Net operating cash flow ~ NOPAT – delivered

> Balance Sheet – Conservative Net debt to EBITDA < 3 – delivered

THE NOT SO GOOD

> Growth - Return to positive organic growth – not entirely achieved – but some great progress

> Efficiency – Increase in revenue factor > 2% – not achieved

> Margins - EBITDA margin improvement – not achieved

> Shareholder Returns – Return to positive EPS growth– not achieved

For

per

sona

l use

onl

y

29

03

2015 – Full Year


Key Areas of Focus

> Finish the integration

Align our organization structure and business processes to meet our clients needs

Optimize our cost structure

Align our business processes to generate the performance metrics we need to be successful

> Continue improving working capital and cash management – continue the gains made in the second half of FY15

> Profitability improvement as a priority (over revenue growth)

> Strategic investment/divestment program

> Upgrading our business development capabilities and instilling teamwork and knowledge sharing across all of our business units

For

per

sona

l use

onl

y

30

03

2015 – Full Year


Outlook and Conclusion

> Asia Pacific performance to remain subdued at least for

FY2016 with the notable exception being infrastructure work in

New South Wales

> Americas well positioned with improving backlog, but conversion

into profitable fee generating revenue will be a key success factor

> Project margin pressure will continue and we are unlikely to see

significant improvements in project margins in the near term

As such we remain committed to the delivery of cost reductions

through lower overheads and completion of the Cardno

Business Service initiative in the Americas

> Strengthening USD against the AUD provides a positive impact

to group results and a partial hedge against the impacts from the

oil price volatility

> Overall, in spite of a challenging market, for all our recent wins and

work with new clients demonstrates that we can win more than our

fair shareFor

per

sona

l use

onl

y



APPENDIXSupporting Material

For

per

sona

l use

onl

y

32

04

2015 – Full Year


Featured Projects

As part of a five-year contract, Cardno is delivering

worldwide environmental planning and engineering

services to the US Navy and US Marine Corps. This is

in addition to another contract with Naval Facilities

Engineering Command (NAVFAC) Atlantic to support

at-sea testing and training requirements, and working

on similar initiatives with NAVFAC Pacific.

The global contract covers a wide variety of projects

such as in-water noise modelling and marine mammal

exposure impacts, dredging permitting and disposal,

in-water construction, shoreline training and restoration.

Additionally, Cardno may be called upon to help with

aircraft home basing initiatives throughout the world.

Cardno’s stellar record of performance supporting the

US Navy’s operational requirements was recognised by

the Chief of Naval Operations, who awarded us their

2014 Environmental Planning Award for outstanding

support in preparation of the Environmental Impact

Statement for Homebasing the F-35C Joint Strike

Fighter on the West Coast of the US.

Environmental Planning and Engineering Services for the US Navy and US Marine Corps

For

per

sona

l use

onl

y

33

04

2015 – Full Year


Cardno’s role on a state-of-the-art Brisbane health

facility shows how we help deliver critical infrastructure

needs to communities. We provided civil, structural and

traffic engineering, and town planning services to

Australia’s most advanced paediatric facility, the Lady

Cilento Children’s Hospital.

It features eight main hospital levels, all requiring

variations in the footprint to accommodate the internal

atriums and the radiating “branches” which cantilever

across the streetscape. To optimise the design, our

team utilised 3D structural modelling, while wind tunnel

testing was carried out to more accurately predict

pressures on the building.

During the site investigations and acquisition process,

Cardno provided town planning and traffic engineering

advice and assisted the Queensland government to

prepare the planning instrument regulating

development in the precinct. Cardno also prepared the

development applications for Queensland Health for all

aspects of the project.

Traffic forecasting and road network analysis was also

conducted, which informed the design of surrounding

intersections, service entries and car parking

arrangements.

Featured Projects

Lady Cilento Children’s Hospital

For

per

sona

l use

onl

y

34

04

2015 – Full Year


Featured Projects

Cardno has been working on projects to restore the

fragile Tahoe Basin ecosystem in Nevada and

California for more than 10 years.

We recently completed project management and

engineering services for the Upper Truckee River

Streambed Environment Zone Restoration Project in

California, which rehabilitated 3,500 linear feet of

stream habitat.

The final design of this work included new channel and

floodplain construction that increased floodplain

connectivity, improved fish and wildlife habitats, and

improved the quality of the water entering Lake Tahoe.

Our duties covered the analysis of hydrology and

hydraulics of river, wetland, and upland habitats, an

effective restoration design that addressed public

access issues, the development of complete plans,

specifications, and bid support.

For the construction management aspects of the

project, Cardno served as resident engineer and

resident inspector, ensured storm water pollution

prevention planning compliance, prepared record

drawings, and coordinated project close-out.

Upper Truckee River Streambed Environment Zone Restoration Project

For

per

sona

l use

onl

y

35

04

2015 – Full Year


Cardno is providing strategic services to a portfolio of

public-private partnerships (PPPs) combatting the

global HIV/AIDS epidemic. The Centers for Disease

Control and Prevention (CDC) awarded Cardno a

five-year cooperative agreement to manage the second

phase of the Public-Private Partnerships under the

US President’s Emergency Plan for AIDS Relief

(PEPFAR) Countries Project (P4).

Cardno collaborates with CDC and the Office of the US

Global AIDS Coordinator to leverage US Government

resources and private sector partners to meet the

PEPFAR goals of improved health outcomes,

sustainability and country ownership.

Our role includes funds management and governance,

program technical support, PPP strategic expansion,

capacity building and institutional strengthening,

communications services, performance monitoring and

evaluation and results impact assessments.

With a focus on Sub-Saharan Africa, these PPPs

contribute to PEPFAR’s goal of an AIDS-free

generation through innovative interventions in the areas

of health systems strengthening, treatment, and

prevention of mother-to-child transmission.

Featured Projects

Public-Private Partnerships under the U.S. President’s Emergency Plan for AIDS Relief Countries Project

For

per

sona

l use

onl

y

36

04

2015 – Full Year


Operating Segment Performance - Americas (USD)

For

per

sona

l use

onl

y

37

04

2015 – Full Year


Operating Segment Performance - Prior Structure

For

per

sona

l use

onl

y



For more information

Richard WankmullerCEO and Managing Director

Graham YerburyGroup CFO

Office: +61 7 3369 9822

www.cardno.com

Thank you

For

per

sona

l use

onl

y

For personal use only - Home - Australian Securities ... 01 2015 –Full Year Results Presentation Results Highlights NOPAT: non-IFRS term referring to the Net Operating Profit after

Documents