CARDNO INTERIM FINANCIAL REPORT

Transcription

1 CARDNO INTERIM FINANCIAL REPORT for the half-year ended 31 December 2014 Cardno Limited ABN and its controlled entities

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3 02 Directors Report 05 Auditor s Independence Declaration 06 Consolidated Interim Statement of Financial Performance 06 Consolidated Interim Statement of Comprehensive Income 07 Consolidated Interim Statement of Financial Position 08 Consolidated Interim Statement of Changes in Equity 09 Consolidated Interim Statement of Cash Flows 10 Notes to the Consolidated Interim Financial Statements 19 Directors Declaration 20 Independent Auditor s Review Report 22 Corporate Directory Financial calendar 2014/2015 Record Date for Interim Dividend 20 March 2015 Interim Dividend Paid 7 April /2016 Full-Year End 30 June 2015 Full-Year Results and Dividend Announced 18 August 2015 Record Date for Final Dividend 11 September 2015 Final Dividend Paid 9 October 2015 Annual General Meeting 23 September 2015 Note: Dates subject to alteration Cardno Interim Financial Report

4 Directors Report CARDNO LIMITED AND ITS CONTROLLED ENTITIES FOR THE HALF-YEAR ENDED 31 DECEMBER 2014 The Directors present their report together with the consolidated financial report of Cardno Limited ( the Company ) and its controlled entities for the half-year ended 31 December 2014 and the auditor s review report thereon. 1: DIRECTORS The Directors of the Company in office during or since the end of the half-year ended 31 December 2014 are set out below: John Marlay (Chairman - Non-executive) Anthony Barnes (Non-executive) Tonianne Dwyer (Non-executive) Elizabeth Fessenden (Non-executive) Trevor Johnson (Executive) Ian Johnston (Non-executive) Grant Murdoch (Non-executive) Michael Renshaw (Managing Director - Executive) (resigned 12 January 2015) Graham Yerbury (Managing Director - Executive) (appointed 12 January 2015) All Directors held office during and since the end of the half-year unless otherwise indicated. 2: COMPANY SECRETARY Michael Pearson (Company Secretary) 3: REVIEW OF RESULTS AND OPERATIONS PERFORMANCE (A$m) 31-Dec Dec-13 Revenue EBITDA* EBIT NPBT NPAT Operating Cash Flow EPS - Basic (cents) Interim Dividend per Share (cents) * EBITDA = EBIT plus depreciation and amortisation EBITDA and EBIT are unaudited. However, they are based on amounts extracted from the reviewed financial statements as reported in the consolidated statement of financial performance on page 6. These metrics provide a measure of Cardno s performance before the impact of non-cash expense items, such as depreciation and amortisation, as well as interest costs associated with Cardno s external debt facility and hire-purchase arrangements. 02 Cardno Interim Financial Report 2015

5 Cardno Limited (the Company) recorded a net profit after tax (NPAT) of $31.5 million for the half-year to December 2014, a decrease of 27.0 per cent over the previous corresponding period (pcp) of $43.1 million. EBITDA reduced 15.2 per cent to $63.2 million compared to $74.5 million for the pcp. The profit result for the half-year reflects the difficult market conditions in Australia and slower than anticipated start on new projects in America. Gross revenue was $686.1 million, which was 8.4 per cent higher than the pcp figure of $633.0 million and fee revenue was $502.4 million which was up 7.8 per cent on the pcp. The increase was due in part to new merger partner contributions from Cardno PPI and Cardno Haynes Whaley, and favourable exchange rates on translation of US earnings. Revenue gains were, however, partially offset by tightening market conditions putting pressure on margins as well as a reduction in investment activity in the mining sectors across Australia. During the December 2014 half-year, Cardno made no acquisitions and the current half-year result includes the full impact of the acquisitions made in FY2014. In the prior half-year the Group recognised gains of $6.2 million (EBIT) which reflected the reversal of contingent consideration for the acquisition of Cardno MM&A ($3.2 million) as required results were not achieved, and the reduction of the legal provision raised on the acquisition of ATC ($3.0 million), reflecting changes in the indemnity arrangements. There are no adjustments of the same nature in the current half year results for December Basic earnings per share were cents which is down 35.5 per cent on the pcp of cents. The Company s balance sheet remains solid with a gross debt to equity ratio of 44.1 per cent and cash of $60.2 million at December The Company s net debt to equity ratio at December 2014 was 36.9 per cent. During the half-year, the Group closed its first long term note of US$150.0 million in the US Private Placement debt market. The tranches issued include US$50.0 million with a seven year term maturing on 15 August 2021 and US$100.0 million with a ten year term maturing on 21 August Simultaneously, the Group issued fixed to floating USD interest rate swaps matching the tranches and elected to fair value hedge the interest rate risk in accordance with AASB139. The proceeds from the long term note were used to repay a portion of the Group s existing bank debt. On the 15 December 2014, the Group also completed a one year extension of its existing five-year revolving bank debt facilities of US$330 million. This extension increases the maturity of existing facilities until December Segment revenue (A$m) EBIT (A$m) EBIT Margin (%)* 31-Dec Dec Dec Dec Dec Dec-13 Americas % 12.0% Australia & New Zealand % 16.7% Emerging Markets % 4.7% Other % 34.0% Total segment % 13.3% *Based on fee revenue Cardno Interim Financial Report

6 3: REVIEW OF RESULTS AND OPERATIONS continued AMERICAS Revenue was up on prior year by 22.6 per cent mainly due to contributions from FY2014 merger partners Cardno PPI and Cardno Haynes Whaley. Results were further assisted by more favourable exchange rates compared to the pcp. The conclusion of significant, higher margin projects in Latin America, reductions in US Federal Government spending and continued right-sizing of the Natural Resources Division, resulted in an overall EBIT decline in the Americas of 20 per cent. EBIT margin on fee revenue declined to 7.6 per cent from 12 per cent in the pcp. This reflects the reduction in higher margin work associated with the GoM Oil Spill, increased allocations of group costs, increased overhead costs associated with standardisation of medical plans, and the establishment of shared services which will provide future benefits in FY2016. The outlook in the Americas is improving. At the end of December 2014, Cardno Americas had the strongest backlog the region has ever had of A$646.5 million (US$530.1). The US Federal budget process is underway with optimism of increased spending activity. Continued oil price volatility may impact our Americas business however only 4.7 per cent of Group revenue is exposed to the upstream drilling and production in the oil and gas sector. There is sufficient diversity in our service offering to mitigate this impact in the near to medium term. AUSTRALIA AND NEW ZEALAND Revenue and EBIT were down 16.2 per cent and 44.1 per cent respectively on the pcp. This can largely be attributed to revenue downturn associated with the Region s construction material testing and electrical engineering operations, which experienced a decline of 20.5 per cent on the pcp. This was a result of the completion or wind down of major projects, such as LNG works on both Curtis Island in Queensland and in Western Australia, while other projects were delayed or cancelled due to a decreased investment in the mining and resources sectors. This lack of investment had a particularly strong impact on the regions of North and Central Queensland, and Western Australia. Competition in these areas has increased, resulting in pricing pressures and a decline in the ANZ s EBIT margins, which decreased from 16.7 per cent to 11.4 per cent on the pcp. While the outlook remains challenging for the ANZ Region, there is increased activity in the transport and urban sectors, as well as an improved economy in New Zealand. However, these continue to be overshadowed by the continued expected spending slowdown in the mining and resources sectors and a potential decrease in infrastructure spending following government changes in Victoria and Queensland. REST OF WORLD The rest of the world is comprised of the Emerging Markets and XP Solutions segments. For these segments fee revenue was up 16.7 per cent on the pcp and EBIT was up 80.5 per cent on the pcp. EBIT margin has increased from 3.8 per cent to 6.0 per cent in the pcp. Backlog has increased by 12.8 per cent on the pcp. The segment continues to support cross-selling across the Group, especially in Papua New Guinea, Indonesia, Philippines and Mozambique. The outlook for this segment is good but we are projecting limited growth in FY16 due to a number of key government donor clients reducing their budgets. 4: DIVIDENDS The Board has declared an interim dividend of 13 cents per share (19.0 cents pcp) franked to 100 per cent to be paid on 7 April 2015 to all shareholders registered on 20 March : SUBSEQUENT EVENTS Other than the declaration of the interim dividend, there has not arisen in the interval between the end of the half-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 affairs of the Group, in future years. 6: LEAD AUDITOR S INDEPENDENCE DECLARATION The lead auditor s independence declaration under Section 307C of the Corporations Act is set out on page 5 and forms part of the Directors report for the half-year ended 31 December : ROUNDING OF AMOUNTS The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order amounts in the directors report and financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise stated. Signed in accordance with a resolution of Directors. On behalf of the Directors JOHN MARLAY Chairman Brisbane 16 February Cardno Interim Financial Report 2015

7 Auditor s Independence Declaration ABCD 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 review for the half-year ended 31 December 2014 there have been: no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and no contraventions of any applicable code of professional conduct in relation to the review. KPMG Mitchell Petrie Partner Brisbane 16 February 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. Cardno Interim Financial Report

8 Consolidated Interim Statement of Financial Performance Note 31-Dec Dec-13 $ 000 $ 000 Revenue 2A 686, ,018 Other income 2B 7,220 5,210 Employee expenses (345,819) (302,490) Consumables and materials used (169,750) (138,346) Sub-consultant and contractor costs (89,657) (100,797) Depreciation and amortisation expenses 3 (13,471) (12,077) Financing costs 3 (5,397) (4,061) Other expenses (24,946) (22,096) Profit before income tax 44,300 58,361 Income tax expense 4 (12,797) (15,230) Profit for the half-year 31,503 43,131 Profit attributable to: Owners of the Company 31,503 43,131 31,503 43,131 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) The consolidated interim statement of financial performance is to be read in conjunction with the notes to the consolidated financial statements set out on pages 10 to 18. Consolidated Interim Statement of Comprehensive Income 31-Dec Dec-13 $ 000 $ 000 Profit for the half-year 31,503 43,131 Other comprehensive income Items that may be subsequently reclassified to profit or loss: Exchange differences on translation of foreign operations 55,926 14,407 Other comprehensive income for the half-year, net of tax 55,926 14,407 Total comprehensive income for the half-year 87,429 57,538 Total comprehensive income attributable to: Owners of the Company 87,429 57,538 87,429 57,538 The consolidated interim statement of comprehensive income is to be read in conjunction with the notes to the consolidated financial statements set out on pages 10 to Cardno Interim Financial Report 2015

9 Consolidated Interim Statement of Financial Position CARDNO LIMITED AND ITS CONTROLLED ENTITIES AS AT 31 DECEMBER 2014 Note 31-Dec Jun-14 $ 000 $ 000 Current Assets Cash and cash equivalents 60,243 85,885 Trade and other receivables 266, ,885 Inventories 168, ,586 Other current assets 19,218 11,196 Total Current Assets 515, ,552 Non-Current Assets Trade and other receivables Other financial assets 9,626 3,610 Property, plant and equipment 67,868 60,709 Deferred tax assets 15,730 16,671 Intangible assets 827, ,568 Total Non-Current Assets 920, ,163 Total Assets 1,435,900 1,317,715 Current Liabilities Trade and other payables 121, ,990 Loans and borrowings 6 10,348 3,149 Current tax liabilities 1,339 15,870 Short term provisions 8 34,723 32,181 Other current liabilities 60,872 48,306 Total Current Liabilities 229, ,496 Non-Current Liabilities Loans and borrowings 7 357, ,927 Deferred tax liabilities Long term provisions 12,169 12,854 Other non-current liabilities 1,119 1,106 Total Non-Current Liabilities 371, ,703 Total Liabilities 600, ,199 Net Assets 834, ,516 Equity Issued capital 9 635, ,875 Reserves 35,148 (20,744) Retained earnings 163, ,385 Total Equity 834, ,516 The consolidated interim statement of financial position is to be read in conjunction with the notes to the consolidated financial statements set out on pages 10 to 18. Cardno Interim Financial Report

10 Consolidated Interim Statement of Changes in Equity Note Share Capital Retained Earnings Foreign Translation Reserve for Own Ordinary Reserve Shares Total $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 July , ,781 (602) (6,029) 632,524 Profit for the year - 43, ,131 Exchange differences on translation of foreign operations ,407-14,407 Total comprehensive income for the year - 43,131 14,407-57,538 Transactions with owners in their capacity as owners: Shares issued 5, ,604 Employee share based payments 1, ,406 Own shares issued* 10, (10,460) - Own shares sold* ,060 6,060 Dividends paid or provided 5 - (25,947) - - (25,947) 17,470 (25,947) - (4,400) (12,877) Balance at 31 December , ,965 13,805 (10,429) 677,185 Balance at 1 July , ,385 (6,300) (14,444) 763,516 Profit for the year - 31, ,503 Exchange differences on translation of foreign operations ,926-55,926 Total comprehensive income for the year - 31,503 55,926-87,429 Transactions with owners in their capacity as owners: Shares issued 9 9, ,646 Employee share based payments 9 1, ,133 Own shares issued* 9 1, (1,328) - Own shares sold* ,294 1,294 Dividends paid or provided 5 - (28,057) - - (28,057) 12,107 (28,057) - (34) (15,984) Balance at 31 December , ,831 49,626 (14,478) 834,961 * Shares issued 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. Own shares sold are those shares transferred to PEP participants on exercise of Performance Options. The interim statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements set out in pages 10 to Cardno Interim Financial Report 2015

11 Consolidated Interim Statement of Cash Flows Note 31-Dec Dec-13 $ 000 $ 000 Cash Flows from Operating Activities Cash receipts from customers 680, ,633 Interest received Finance costs paid (4,161) (5,417) Cash paid to suppliers and employees (648,919) (604,533) Income tax paid (26,377) (11,427) Net Cash Provided by Operating Activities ,836 Cash Flows from Investing Activities Acquisition of subsidiaries, net of cash acquired 12 - (17,654) Acquisition of subsidiaries, deferred consideration paid (7,668) (4,058) Proceeds from sale of property, plant & equipment 893 1,893 Payments for property, plant & equipment (19,055) (11,207) Net Cash Used in Investing Activities (25,830) (31,026) Cash Flows from Financing Activities Proceeds from issue of shares 5,232 3,648 Share issue transaction costs - (33) Sale of own shares* 1,294 6,060 Proceeds from borrowings 321,619 85,391 Repayment of borrowings (308,225) (70,961) Finance lease payments (1,228) (1,055) Dividends paid (23,645) (23,960) Net Cash Provided by/(used in) Financing Activities (4,953) (910) Net Increase/(Decrease) in Cash and Cash Equivalents Held (29,894) 1,900 Cash and Cash Equivalents at Beginning of Half-Year 85,885 90,635 Effects of exchange rate changes on cash and cash equivalents at the end of half-year 4,252 2,174 Cash and Cash Equivalents at End of Half-Year 60,243 94,709 * Own shares sold are those shares transferred to PEP participants on exercise of Performance Options. Refer to note 9 on page 13. The interim statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements set out in pages 10 to 18. Cardno Interim Financial Report

12 Notes to the Consolidated Interim Financial Statements 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Cardno Limited (the Company ) is a company incorporated and domiciled in Australia. The condensed consolidated interim financial report of the Company for the half-year ended 31 December 2014 comprises the Company and its subsidiaries (together referred to as Cardno or the Group ). The condensed consolidated interim financial report was authorised for issue by the Directors on 16 February (a) Statement of compliance This financial report for the interim half-year reporting period ended 31 December 2014 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting, IAS 34 Interim Financial Reporting and the Corporations Act This condensed consolidated interim financial report does not include all the information normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the consolidated annual report for the year ended 30 June 2014 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act (b) Significant accounting policies This financial report is presented in Australian dollars. The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its annual consolidated financial report as at and for the year ended 30 June The accounting policies have been consistently applied throughout the Group for the purposes of this condensed consolidated interim financial report. (c) Estimates The preparation of this condensed consolidated interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from those estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June Recoverable amounts for goodwill and other non-current assets At 31 December 2014, the market capitalisation of the Company was below the carrying value of the Group s net assets. Under the requirements of Australian Accounting Standards, this is a trigger event for assessing whether the carrying value of the Group s goodwill and other non-current assets may be impaired. In line with this requirement, the recoverable amounts of each of the Group s Cash Generating Units (CGU) were estimated having regard to the higher of their value in use (VIU) or their fair value less costs of disposal (FVLCOD). Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. VIU as at 31 December 2014 was determined in a consistent manner to that disclosed in the Group s 2014 Annual Report for assessing the impairment of goodwill as at 30 June FVLCOD is based on a capitalisation of maintainable earnings before interest, tax, depreciation and amortisation (EBITDA) approach less an allowance for costs of disposal and is categorised as Level 3 of the fair value hierarchy as discussed below. Maintainable earnings were determined with regard to past experience, current performance and short term forecasts. EBITDA multiples were determined with reference to trading multiples of comparable entities and recent sale transactions for which information is readily available. As at 31 December 2014 the estimated recoverable amounts determined using the methods outlined above were found to exceed the carrying values of the assets of each CGU and accordingly, no impairment was required. In the event that management s future earnings and growth assumptions are not achieved, impairment of goodwill and other non-current assets allocated to the Americas CGU may occur in future periods. Reducing the compound annual growth rate assumption across the five year forecast period of 8.4 per cent by 1.7 percentage points to 6.7 per cent (while keeping all other assumptions constant) would result in the carrying amount of the Americas CGU to equal the recoverable amount under the VIU approach at 31 December Financial Risk Management The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial report as at and for the year ended 30 June Fair value of financial instruments The Group s financial assets and liabilities are included in the balance sheet at amounts that approximate fair values. Fair value hierarchy In determining fair values for measurement or 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. 10 Cardno Interim Financial Report 2015

13 Notes to the Consolidated Interim Financial Statements 2A. REVENUE 31-Dec Dec-13 $ 000 $ 000 Fees from consulting services 495, ,493 Fees from sale of goods 6,057 5,188 Fees from recoverable expenses 183, ,208 Interest received Royalties Rental income Other 1,086 1,474 Revenue 686, ,018 2B. OTHER INCOME Non-refundable R&D tax incentives 1,100 1,996 Reversal of contingent consideration liability - 3,214 Net foreign exchange gains 6,120 - Other Income 7,220 5, EXPENSES, LOSSES AND (GAINS) Depreciation Motor vehicles 1,495 1,295 Plant & equipment 8,402 7,154 Total Depreciation 9,897 8,449 Amortisation of non-current assets Works contracts 1,239 1,090 Software intangibles Client related intangibles 1,483 1,337 Motor vehicles under finance lease 727 1,073 Plant & equipment under finance lease - 3 Total Amortisation 3,574 3,628 Total Depreciation & Amortisation 13,471 12,077 Bad and doubtful debts 2,745 2,697 Financing costs Interest and finance charges 4,063 3,234 Amortisation of borrowing costs 1, Total financing costs 5,397 4, INCOME TAX EXPENSE Income tax expense is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period. The Group s consolidated effective tax rate for the half year ended 31 December 2014 was 28.9 per cent (half-year to 31 December 2013: 26.1 per cent). The change in effective tax rate was mainly driven by changes in the mix of geographical sources of profit, with more profit coming from higher tax areas then the prior corresponding period. Cardno Interim Financial Report

14 Notes to the Consolidated Interim Financial Statements 5. DIVIDENDS PAID OR PROVIDED FOR (a) During the half-year, the Company paid dividends as follows: Cents per share Total Amount $ 000 Franked / Unfranked Date of payment 30 June 2014 Final Dividend , % Franked 10 October 2014 For comparison: 30 June 2013 Final Dividend , % Franked 11 October 2013 (b) Subsequent to reporting date Since 31 December 2014 the Directors have declared the following dividend: Cents per share Total Amount $ 000 Franked / Unfranked Date of payment 2015 Interim Dividend , % Franked 7 April 2015 For comparison: 2014 Interim Dividend , % Franked 7 April 2014 The financial effect of the 2015 interim dividend has not been brought to account in the Group s financial statements for the half-year ended 31 December 2014 and will be recognised in subsequent financial reports. 6 LOANS AND BORROWINGS (CURRENT) 31-Dec Jun14 $ 000 $ 000 Lease liabilities 1,851 1,944 Hire purchase liabilities Bank loans 8,448 1,148 10,348 3,149 7 LOANS AND BORROWINGS (NON-CURRENT) Lease liabilities 2,493 3,548 Hire purchase liabilities - 40 Bank loans* 355, , , ,927 * On 15 August 2014, the Group closed its first long term note of US$150.0 million in the US Private Placement debt market. The tranches issued include US$50.0 million with a 7 year term maturing on 15 August 2021 and US$100.0 million with a 10 year term maturing on 21 August Simultaneously, the Group issued fixed to floating USD interest rate swaps matching the tranches and elected to fair value hedge the interest rate risk in accordance with AASB139. The proceeds from the long term note were used to repay a portion of the Group s existing bank debt. On the 15 December 2014, the Group also completed a one year extension of its existing five-year revolving bank debt facilities of US$330.0 million. This extension increases the maturity of existing facilities until December 2019 and resulted in reallocation of borrowings of A$118.1 million across debt providers. As at 31 December 2014, Cardno has bank loans and long term notes totalling A$359.2 million (June 2014: A$300.5 million). Funding available to Cardno from undrawn facilities is A$248.0 million as at 31 December 2014 (June 2014: A$72.1 million). 12 Cardno Interim Financial Report 2015

15 Notes to the Consolidated Interim Financial Statements 9. ISSUED CAPITAL OF CARDNO LIMITED Half-year ended 31-Dec-14 No. of shares $ Dec Jun-14 $ 000 $ SHORT TERM PROVISIONS Employee benefits 30,822 28,024 Legal provision 3,901 4,157 34,723 32,181 Movements in legal provision: Balance at 1 July 4,157 9,629 Increase through merger acquisitions - 93 Provision made during the half-year 587 1,143 Provision used during the half-year (477) (1,922) Provision reversed during the half-year (679) (4,794) Effect of foreign exchange Balance 31 December 3,901 4,157 The Group recognises a provision for legal claims not covered by the Groups professional indemnity policy and as at 31 December an estimate of the potential impact of these claims has been provided for. Year ended 30-Jun-14 No. of shares $ 000 Balance at the beginning of the period 162,627, , ,726, ,374 Shares issued during the period: > Dividend reinvestment scheme 666,727 4, ,488 5,658 > Shares issued for cash (net of transaction costs) 818,536 5,232 15,077,784 92,966 > Employee Tax Exempt Share Acquisition Plan ,039 2,255 > Employee share based payments - 1,133-4,790 > Own shares issued (i) 250,000 1,328 2,600,000 17,832 Balance at the end of the period 164,362, , ,627, ,875 (i) Shares issued 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. During the half year, 245,831 (2014:1,374,435) shares delivered on the exercise of Performance Options were sold from shares held in trust by the Cardno Limited Performance Equity Plan Trust and recognised in the Group s reserve for own 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 proceeds 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. Cardno Interim Financial Report

16 Notes to the Consolidated Interim Financial Statements 10. EARNINGS PER SHARE 31-Dec Dec-13 (a) Basic earnings per share $ 000 $ 000 Profit attributable to ordinary shareholders 31,503 43,131 Weighted average number of ordinary shares No. No. Issued ordinary shares at 1 July 162,627, ,726,327 Effect of shares issued for cash consideration 1,075, ,864 Weighted average number of ordinary shares at 30 June 163,703, ,632,191 Basic earnings per share (cents per share) (b) Diluted earnings per share $ 000 $ 000 Profit attributable to ordinary shareholders (diluted) 31,503 43,131 Weighted average number of ordinary shares (diluted) No. No. Weighted average number of ordinary shares at 31 December 163,703, ,632,191 Effect of Performance Options and Performance Rights on issue 4,990,188 3,821,580 Weighted average number of ordinary shares (diluted) at 31 December 168,693, ,453,771 Diluted earnings per share (cents per share) 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. 11. CONTINGENT LIABILITIES As at the date of this report, there is no current litigation or pending or threatened litigation which would not be covered by insurance or has not already been provided for in the financial statements of the Group, or which is likely to have a material effect on the financial performance of the Group. Cents Cents Cents Cents 14 Cardno Interim Financial Report 2015

17 Notes to the Consolidated Interim Financial Statements 12. BUSINESS COMBINATIONS Half-year ended 31 December 2014 There have been no acquisitions during the period 1 July 2014 to 31 December Half-year ended 31 December 2013 (a) Subsidiaries acquired Country of Incorporation Principal Activity Effective Acquisition Date Haynes Whaley Associates Inc USA Structural Engineering 8 October 2013 In the Group s Americas segment, a subsidiary, Cardno Haynes Whaley Inc was established to acquire the business assets of Haynes Whaley Associates Inc, a 100 person structural engineering firm headquartered in Houston, Texas with additional offices in Reston, Virginia and Austin, Texas. The acquisition of Haynes Whaley Associates Inc (HWA) enhances the Group s structural engineering capabilities across a broad range of commercial, public and institutional clients. The acquired business contributed revenue and net profit after tax (NPAT) to the Group for the half year ended 31 December 2013 as follows: Revenues Contributed ($) NPAT Contributed ($) Haynes Whaley Associates Inc 5,630, ,128 If the acquisition had occurred on 1 July 2013, the Group s revenue and NPAT for the half-year would have been $638,869,932 and $43,677,578 respectively. (b) Purchase consideration Americas HWA $ 000 Cash 17,654 Deferred settlement 3,604 Contingent consideration 2,385 Total 23,643 Deferred and contingent purchase considerations Purchase consideration of HWA includes deferred settlement of US$3,400,000 which is payable 24 months after completion. Cardno Limited has also agreed to pay the selling shareholders of HWA additional consideration of US$2,000,000 if the acquiree s earnings before interest, tax, depreciation and amortisation (EBITDA) on a stand alone basis over the period 1 November 2013 to 31 October 2014 is US$4,800,000 or more. This amount has been included in the purchase consideration based on estimates of the acquiree s financial performance over the earnout period. Where the normalised EBITDA is between US$4,350,000 and US$4,800,000 the payment will be pro-rated. Where the normalised EBITDA is US$5,500,000 or more, then the selling shareholders will be entitled to an additional payment of US$250,000. Acquisition of ordinary shares in Cardno Limited At the time of acquisition, the vendors of HWA were required to use a portion of the cash consideration paid to subscribe for ordinary shares in Cardno Limited. A summary of the number and fair value of ordinary shares issued is set out on the following page: Cardno Interim Financial Report

18 Notes to the Consolidated Interim Financial Statements 12. BUSINESS COMBINATIONS continued Half-year ended 31 December 2013 continued (b) Purchase consideration continued Shares subscribed in Cardno Limited Fair Value of Shares Issued Shares Issue Date ($) ($) Haynes Whaley Associates Inc 3,418, October 2013 The Fair value of the ordinary shares issue for each acquisition was based on the 10 day volume weighted average price (VWAP). (c) Assets acquired and liabilities assumed at the date of acquisition Americas HWA $ 000 Cash - Receivables 7,645 Property, plant and equipment 168 Inventories 488 Deferred revenue (424) Intangible assets 2,637 Creditors & borrowings (1,214) Provisions (514) Fair value of net identifiable assets acquired* 8,786 (d) Goodwill arising on acquisition Americas HWA $ 000 Consideration transferred 23,644 Less: fair value of net identifiable assets acquired (8,786) Goodwill arising on acquisition 14,858 The goodwill recognised in relation to the acquisitions is attributable to the skills and technical talent of the employees of the acquisition and the synergies expected to be achieved from integrating the businesses into the Group s existing operations. Goodwill is not expected to be deductible for tax. (e) Net cash outflow on acquisition of subsidiaries 2013 $ 000 Cash consideration paid 17,654 Cash balance acquired - Outflow of cash 17, Cardno Interim Financial Report 2015

19 Notes to the Consolidated Interim Financial Statements 13. OPERATING SEGMENTS Half-Year Ended 31 December 2014 Professional Services Australia & New Zealand Professional Services Americas Emerging Markets Other Segments $ 000 $ 000 $ 000 $ 000 $ 000 Segment revenue Fees from services and sale of goods 145, ,736 51,677 6, ,416 Fees from recoverable expenses 26,950 95,968 60, ,431 Inter-segment revenue (572) - (728) - (1,300) Revenue from external customers 172, , ,360 6, ,547 Other revenue 125 1, ,259 Total segment revenue 172, , ,361 6, ,806 Other income 1, ,485 Segment result Reportable segment result before tax, net financing and corporate costs 16,557 22,783 4,339 2,720 46,399 Total Half-Year Ended 31 December 2013 Professional Services Australia & New Zealand Professional Services Americas Emerging Markets Other Segments $ 000 $ 000 $ 000 $ 000 $ 000 Segment revenue Fees from services and sale of goods 177, ,080 43,227 5, ,350 Fees from recoverable expenses 28,349 82,834 54, ,208 Inter-segment revenue (239) - (430) - (669) Revenue from external customers 205, ,914 97,608 5, ,889 Other revenue ,549 Total segment revenue 205, ,667 98,187 5, ,438 Other income 1, ,996 Segment result Reportable segment result before tax, net financing and corporate costs 29,636 28,676 2,029 1,879 62,220 The following summary describes the operations in each of Cardno s reportable segments: > Professional Services Americas provides consulting engineering, planning, surveying, landscape architecture and environmental services in that region. > Professional Services Australia and New Zealand provides consulting engineering, planning, surveying, landscape architecture, environmental services, electrical engineering and geotechnical services in that region. > Emerging Markets manages aid projects on behalf of unilateral and multilateral government agencies and private clients. > Other Segments provides consulting engineering in the Middle East and provision of software sales and services globally. Total Cardno Interim Financial Report

20 Notes to the Consolidated Interim Financial Statements 13. OPERATING SEGMENTS continued Reconciliations of reportable segment revenues, profit or loss, assets and liabilities Consolidated 31-Dec Dec-13 $ 000 $ 000 Reportable segment result before net financing and corporate costs 46,399 62,220 Interest received Other income 5,735 3,214 Finance costs (5,397) (4,061) Corporate costs (2,751) (3,592) Profit before income tax 44,300 58,361 Income tax expense (12,797) (15,230) Profit for the half-year 31,503 43, SUBSEQUENT EVENTS The Board has declared an interim dividend of 13 cents per share (19.0 cents pcp) franked to 100 per cent to be paid on 7 April 2015 to all shareholders registered on 20 March Cardno Interim Financial Report 2015

21 Directors Declaration The Directors of the Company declare that: 1. The financial statements and notes, as set out on pages 6 to 18, are in accordance with the Corporations Act 2001 and: (a) (b) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and give a true and fair view of the financial position of the Group as at 31 December 2014 and of its performance for the period ended on that date; 2. In the Directors opinion there are reasonable grounds to believe that Cardno Limited will be able to pay its debts as and when they come due and payable. Dated at Brisbane on the 16th day of February Signed in accordance with a resolution of the Directors. JOHN MARLAY Chairman Cardno Interim Financial Report

22 Independent Auditor s Review Report ABCD Independent auditor s review report to the members of Cardno Limited We have reviewed the accompanying half-year financial report of Cardno Limited (the Company), which comprises the consolidated statement of financial position as at 31 December 2014, consolidated interim statement of financial performance, consolidated interim statement of comprehensive income, consolidated interim statement of changes in equity and consolidated interim statement of cash flows for the half-year ended on that date, notes 1 to 14 comprising a summary of significant accounting policies and other explanatory information and the directors declaration of the Group comprising the Company and the entities it controlled at the half-year s end or from time to time during the half-year. Directors responsibility for the half-year financial report The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group s financial position as at 31 December 2014 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As auditor of the Company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 20 Cardno Interim Financial Report 2015

23 Independent Auditor s Review Report continued ABCD Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Cardno Limited is not in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the Group s financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations KPMG Mitchell Petrie Partner Brisbane 16 February 2015 Cardno Interim Financial Report

24 Corporate Directory Board of Directors Chairman John Marlay Directors Anthony Barnes Tonianne Dwyer Elizabeth Fessenden Trevor Johnson Ian Johnston Grant Murdoch Managing Director (Acting) and Chief Financial Officer Graham Yerbury Company Secretary Michael Pearson Registered office Cardno Limited ABN Level 11, North Tower Green Square 515 St Paul s Terrace Fortitude Valley QLD 4006 Australia Phone Fax cardno@cardno.com Share Registry Computershare Investor Services Pty Limited 117 Victoria Street West End QLD 4101 Phone (within Australia) (outside Australia) Auditors KPMG Level 16, Riparian Plaza 71 Eagle Street Brisbane QLD 4000 Phone Fax Lawyers McCullough Robertson Lawyers Level 11, Central Plaza Two 66 Eagle Street Brisbane QLD 4000 Phone Fax Kirkland & Ellis LLP 300 North LaSalle Chicago, Illinois USA Phone Fax Bankers HSBC Bank Australia Limited Commonwealth Bank of Australia Westpac Banking Corporation Standard Chartered Bank 22 Cardno Interim Financial Report 2015

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26 Registered office Cardno Limited ABN Level 11, North Tower Green Square 515 St Paul s Terrace Fortitude Valley QLD 4006 Australia Phone Fax cardno@cardno.com