Written on the 22 March 2012


CARDNO has increased its share of the market by exploring offshore opportunities.

Strong performance from US operations, improved conditions in Australia and acquisitions have produced a healthy return for Cardno (CDD).

The global infrastructure services consultancy recorded a $36.1 million net profit after tax for the six months to December 2011, representing a 14 per cent increase on the previous corresponding period.

“There was really positive growth at our businesses in Queensland and Western Australia that both performed strongly,” says managing director Andrew Buckley (pictured).

“Overall there was 8.4 per cent organic growth nationally. New South Wales and Victoria were a bit flatter, failing to produce as strongly because their clients did not dig so deep (into their pockets).”

CDD has worked on the Grantham town relocation and various road design and redesign matters along the Queensland coast. It expects the next round of work to come from the mining and gas boom. Cardno has increased its share of the market by exploring offshore opportunities.

“We targeted that market with our 2011 acquisition of geothermal engineering company Roadtest ($11.7 million) to enter the structural materials space,” says Buckley.

“Private sector development market has not come on-board yet, but it has potential to add another string to our bow.”

Revenue rose 2.1 per cent to $445.5 million compared with FY10, while earnings before interest, tax, depreciation and amortisation were up 12.3 per cent to $65.5 million in the same period.

Buckley believes CDD is increasingly chosen for its global perspective and environmental consulting on the 2010 BP oil-spill disaster in the Gulf of Mexico.

“Our North American operations have grown rapidly on the back of our strong environmental consulting business. We expect 9.5 per cent growth annually for the next five years,” he says.

The company has won a $22 million contract for an electrical and controls system infrastructure upgrade at the Rio Tinto-owned Tom Price, Paraburdoo and Channar iron ore mines in WA. Its construction materials testing businesses have secured more than $15 million in liquefied natural gas project work near Gladstone.

The company’s balance sheet is resilient with a debt-to-equity ratio of 42.5 per cent and $80.4 million in cash reserves as of December 2011. It is no surprise that Buckley is so confident about his US expansion plans.

“We are believers in the US market. We have chased that environmental consulting market for years. The US$106 million ($99.3 million) acquisition of Louisiana-based ATC Associates adds 1600 more staff and strong growth,” he says.

“However, we still find it is fairly difficult in China, India and other Asian countries to make sure you get paid all your money owing, and that nobody steals your intellectual property (IP). These have been issues in our dealings with Asia.

“Our preference is to attack it from Singapore or Hong Kong, where there is rule of law and a low-risk (trading) environment.

“There is no secret that in some of those markets there is not the same perspective on IP as in Australia. You only have to go to China and see the pirated DVDs for sale. We have seen people have difficulty in that regard and do not want that level of risk.”

Buckley confirms CDD has net debt equity of 20 per cent and gross debt of about $150 million.

“We have restructured out debt facility to not only involve HSBC but also Westpac, CBA and NAB for three to five years,” he says.

“We also earn all our revenues in the same currencies expended. We have raised debt in US dollars that serve as a natural hedge.”

The board declared an interim dividend of 18 cents a share, slightly up from the previous corresponding period, to be paid on April 4.


Cardno (CDD)
MD: Andrew Buckley
Market Cap: $822m
Revenue ’11: $831.2m
Profit ’11: $58.8m
Staff: 6400
Established: 1945

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