AMERICAN SALE PUSHES CARDNO TO $53M LOSS
Written on the 23 February 2016 by Nick Nichols
CARDNO'S (ASX:CDD) expansion in the US market four years ago, and the subsequent downturn in the resources sector, has taken its toll on the company's bottom line in the latest half-year.
The Brisbane-based company, which provides professional services in the mining and infrastructure sectors, has posted a net loss of $53.6 million for the six months to the end of December.
The result compares with a $31.5 million profit a year earlier.
The loss has been triggered by a $59.1 million non-cash impairment related to the sale of the low-margin Cardno ATC business in the US which was acquired in 2012 for $98 million.
Cardno sold the business, which has 70 offices in the US and employs 1350 staff, to Bernhard Capital Partners for $89.1 million in November.
Cardno notes that its remaining US operations will benefit from key executive appointments made last year.
The company's bottom line would have been worse but for a lower Australian dollar otherwise bolstering the company's performance, leaving revenue in the Americas roughly in line with last year's figure.
The favourable exchange rate helped group revenue lift 2.6 per cent to $597 million. Without it revenue would have been 9.8 per cent lower.
However, Cardno's underlying performance suffered a dramatic slide with pre-tax net profit from continuing operations of $5.5 million in the first half of FY16, down 82.8 per cent from $32.3 million a year earlier.
However, group EBITDA held few surprises for shareholders, coming in at $23.6 million. This was in line with the company's November forecast of $23-$25 million.
"This decline reflects the continued weakness in the Americas region, particularly in the markets of oil and gas, mining and Latin America, which have faced increasingly difficult conditions," says Cardno in the notes accompanying today's results.
The company fared better in the Asia Pacific region where earnings stabilised during the period and the backlog of work has increased. Cardno says the growth in infrastructure work in Australia has partially offset lost business from the resources downturn.
Cardno says it is on track to cut overheads by $20 million through its strategic review. The balance sheet was bolstered during the year through a $78 million capital raising.
"While the overall results are not currently where we want them to be long term, there are a number of bright spots and we have done a reasonable job of fighting off the impacts of the continued slowness in the oil and gas and natural resources markets, and adjusting to the slowdown in the Chinese economy," says CEO Richard Wankmuller.
"Our immediate priority over the period in review has been to focus on getting the basics right, as articulated in our strategic review.
"While we have a great deal of work to do, we are beginning to see results and are anticipating continued improvement in the second half."
Cardno is not paying an interim dividend.
Author: Nick Nichols