Cardno Limited UBS Emerging Companies Conference April 2013 - Sydney Presenters: Andrew Buckley, Managing Director Graham Yerbury, CFO
Cardno Overview and Highlights Financial Review Strategy and Acquisitions Outlook Cardno s vision is to be a world leader in the provision of professional services to improve the physical and social environment Slide 2
80 Cardno Overview 60 Cardno (ASX:CDD) is a professional infrastructure and environmental services company, with specialist expertise in the development and improvement of physical and social infrastructure for communities around the world. Cardno s team includes leading professionals who plan, design, manage and deliver sustainable projects and community programs. Cardno is an ASX200 company and has 141.6m shares on issue and a market capitalisation of around $1b. Full Year Half Year 40 20 2006 2007 2008 2009 2010 2011 2012 2013 1,200 1,000 800 Cardno was founded in 1945 in Brisbane, Australia and has grown to have nearly 8000 staff in over 290 offices working on projects in 85 countries. NET PROFIT AFTER TAX A$ Millions GROUP REVENUE A$ Millions Full Year Half Year 600 400 200 Since listing Cardno has delivered 8 consecutive years of record NPAT. Slide 3 2006 2007 2008 2009 2010 2011 2012 2013
The Cardno Business Model Cardno delivers high quality professional infrastructure and environment services to both Public and Private sector clients at every stage of a project or operations life cycle. Our global reach and breadth of professional expertise allows Cardno to deliver a full range of services wherever our clients operate. We have chosen to grow both organically and by acquisition seeking out and expanding our services and global footprint into complementary markets. We have chosen to maintain our focus on small projects as well as major projects, and regional offices as well as capital cities which sets us apart from the competition. Our diversity of clients, professional services, projects and geography strengthens Cardno s ability to deliver consistent performance across a range of economic outturns. Appraise Select Define Slide 4 Execute Operate Decommission
Global Coverage Slide 5
Core Business Segments (Revenue YTD 31 December 2012) Americas & Software Revenue: $303m Australia & NZ Revenue: $214m International Development Assistance Revenue: $82m Buildings Buildings Emerging Market Services Land Land Health & HIV/Aids Coastal and Ocean Coastal and Ocean Law and Justice Environment Environment Education Emerging Markets Emerging Markets Natural Resource Management Management Services Management Services Financial Sector Resources, Mining and Energy Resources, Mining and Energy Tourism Sector Transportation Transportation Water Water Defence Defence Slide 6
Diversified revenue stream FEE REVENUE BY OPERATING SEGMENT (PROFORMA) HY13 FEE REVENUE BY GEOGRAPHIC REGION (PROFORMA) HY13 International Development Assistance 8% UK & Africa 1% Australia & NZ 41% Australia & NZ 41% America's 53% America's & Software 51% Asia Pacific 5% Slide 7
Diversified revenue stream (cont d) FEE REVENUE BY MARKET SECTOR (PROFORMA) HY13 3.9% 10.4% FEE REVENUE BY CLIENT (PROFORMA) HY13 Buildings 7.6% 1.2% Coastal & Ocean 13.1% 29.3% Environment 15.1% Aid agency 5.8% Developer Emerging Markets 41.0% 10.6% 2.1% 8.1% 8.0% 0.7% 6.8% Management Services Resources, Mining and Energy Transportation 21.7% Land 7.6% 6.9% Government owned corporation Government - Federal Government - Local Government - State Other clients Water Contractor/Service provider Resources, mining & energy Slide 8
Cardno s underlying dynamics Strong geographic and sector diversification lowers risk and maximises growth Consistent growth of profits over eight years since listing in 2004 Successful cross-selling and organic growth Consistently strong dividend payout Strong critical mass of professional IP world-wide Successful Mergers and Acquisition strategy Robust forward project pipeline (WIH) $655m as at December 2012 Slide 9
Safety discipline remains strong Cardno has made significant progress in developing a strong Zero Harm culture across the company and we will continue to focus on driving our safety metrics down to zero. Cardno Lost Time Injury Frequency Rate (LTIFR) at the end of the December: 1.31 per million man-hours 0.26 per two hundred thousand person-hours - US equivalent Slide 10
Financial Review HY13
Half Year Highlights Record first half profit of $40.1m up by 11.1% on previous corresponding period (pcp). Record EBITDA of $69.6m up 11.3% on pcp. Earnings per share 28.9 cents. Dividend maintained at 18 cents, 70% franked. Strong operating cash flow of $40.0 million. Strong balance sheet - net debt / equity: 25% Increased first half profit in difficult market conditions: contribution from new merger partners organic revenue growth of existing businesses Slide 12
Half Year Highlights (cont d) Organic revenue growth for the half year is 7.6% on pcp after normalising for the additional week in December HY12. Diversification via acquisitions has continued in FY13: Mining and energy sector in the USA (Cardno MM&A) Environmental sector in the USA (Cardno EM-Assist & Cardno ChemRisk) Surveying practice in Australia (Cardno Hard & Forester) Infrastructure engineering in South America (Cardno Caminosca) Construction materials testing in Western Australia (Cardno Geotech) Slide 13
Half Year Financial Results As at 31 December 2012 HY13 $000's HY12 Change Comment $000's Revenue from operations 599,923 445,526 34.7% Fee revenue 446,710 323,383 38.1% EBITDA 69,555 62,520 EBITDA margin (%) 15.6% 19.3% Net profit before tax 55,857 52,067 7.3% Net profit after tax 40,143 36,120 11.1% Basic earnings per share (cents) Net operating cash flow 11.3% 28.87 32.74-11.8% 40,034 47,276-15.3% Slide 14 Strong increase, 7.6% organic plus acquisitions Margins down due to difficult markets and one-off impacts EPS impacted by capital raising, lower margins Strong cash flow but down on pcp
Operating Segment Performance Australia & NZ Fee revenue ($000's) HY13 HY12 186,790 156,288 27,299 21,967 214,089 178,255 Recoverable expenses ($000's) Total revenue ($000's) EBIT ($000's) 29,862 27,889 Fee revenue margin 16.0% 17.8% HY13 HY12 222,846 130,279 79,811 66,734 302,657 197,013 EBIT ($000's) 31,007 25,330 Fee revenue margin 13.9% 19.4% Americas & Software Fee revenue ($000's) Recoverable expenses ($000's) Total revenue ($000's) Slide 15 Commentary Organic growth strong particularly in CMT and electrical engineering businesses Margins down due to soft markets and restructuring costs, but still strong Commentary Revenue up due to acquisitions and organic growth, although the US Federal elections and the impact of the oil spill, as well as Hurricane Sandy impacted organic growth Margins were down due to addition of Cardno ATC, weather & US elections
Operating Segment Performance IDA HY13 HY12 Fee revenue ($000's) 37,074 38,141 Recoverable expenses ($000's) 45,362 30,341 Total revenue ($000's) 82,436 68,482 EBIT ($000's) 2,241 2,846 Fee revenue margin 6.0% 7.5% Commentary Revenue flat Project pipeline remains strong Europe is weak but expected to improve Slide 16
Performance History 1,200 1,000 800 GROUP REVENUE ($A millions) 80 Full Year 60 Half Year 600 2006 50 40 Half Year 20 200 60 Full Year 40 400 70 NET PROFIT AFTER TAX ($A millions) 2007 2008 2009 2010 2011 2012 2013 EARNINGS PER SHARE (Diluted) 2006 80 A$ Cents per share Full Year 60 Half Year 2007 2008 2009 2010 2011 2012 2013 2012 2013 OPERATING CASH FLOW ($A millions) Full Year Half Year 40 30 20 20 10 0 0 2006 2007 2008 2009 2010 2011 2012 2013 Slide 17 2006 2007 2008 2009 2010 2011
Strategy and Acquisitions
Cardno Strategy 2010 2015 Strategic theme is : One Cardno, One Vision Cardno uses a 5 year Strategic Planning cycle Focus of the plan is to: Grow Cardno significantly through to 2015 Increase benefits from ongoing integration Foster cross selling Optimise overhead costs Aim for audacious growth targets Increase our global profile Slide 19
Key Strategic Elements Cross Selling Underpins organic growth Selling to clients who need our services Based on complementary nature of M&A partners and existing businesses M&A Strategy Strategic fit Price discipline Transitional integration Slide 20
Key Strategic Elements Line Management Structure Clear responsibility and accountability Transparent P&L management Easy introduction of M&A partners Geographic and Market Sector Diversity Pick the growth markets No reliance on single cyclical markets Shift focus when some markets are better than others Slide 21
Cross Selling Examples Australia & New Zealand Ichthys Project Cardno s Water and Environment team working on this project were able to utilise services from Cardno BEC (high level data management), Cardno ENTRIX (high level statistical analysis, major environmental project monitoring and delivery), and Cardno Spectrum Survey (laser scanning of sediments). By utilising this broad range of our services, Cardno was able to deliver better outcomes to our client. The Defence Base Engineering Assessment Project (BEAP) Cardno has been awarded a significant component of the Base Engineering Assessment Program for the Department of Defence involving the assessment of engineering services at seven bases in NSW, Victoria and Tasmania. Winning this project has combined the expertise of several Cardno divisions including Queensland & NT, Victoria & New Zealand, NSW and Cardno BEC. Slide 22
Cross Selling Examples Australia & New Zealand Burrup Tan Project Cardno Bowler is providing geotechnical engineering interpretation of Plate Bearing tests done by Cardno Geotech WA for the Burrup Tan Project in the Pilbara. This cross sell started on day 1 of the merger and will go on for 14 months. Cross Selling Examples Americas & Software CBRE Government Facility Measurements CB Richard Ellis (who is acting as managing agent) awarded Cardno ATC a project to provide building measurements (for space and utilization calculations) for the US Federal Government. This project involves 12 locations in 10 states and will utilise the architectural expertise of Cardno TEC in interpreting facility CAD drawings. Slide 23
Cross Selling Examples Americas & Software Clark County Water Reclamation District Cardno WRG holds an on-call contract with the Clark County Water Reclamation District (CCWRD) in Nevada. CCWRD recently awarded Cardno a project to complete designation, potholing, and survey services for 80,000 feet of electrical and gas lines. Cardno WRG, Cardno ENTRIX and Cardno TBE all combined to secure this project, made easier due to the co-location of these divisions in one office in Las Vegas. Guam Field Services Project Based on a strong US relationship, Cardno ERI recently secured a new Master Service agreement with ExxonMobil to expand our relationship into the Australia and Asia Pacific region. ExxonMobil sought Cardno s services for projects in Guam. Cardno ERI, Cardno AUS and Cardno TEC personnel all combined to secure this project to assist the client with environmental monitoring and remediation in Guam. Slide 24
Merger & Acquisition Strategy Business Unit & Division Structure competitive advantage to attract merger partners Growth and Diversification Objective Complementary businesses with new geographical and/or skills coverage and good cultural fit Minimal overlap with existing businesses Focus on retention of staff Effective acquisition process with robust due diligence Focus on adding value through cross selling and organic growth Continuous Integration of New Partners Brand Integration Accounting and job cost integration Focus on knowledge sharing and cross sell Successful track record Potential cost synergies Operating systems Slide 25
Recent Acquisitions Cardno MM&A (July 2012) Cardno MM&A is a 180 person mining, energy and environmental consulting firm headquartered in Bluefield, Virginia USA. Cardno EM-Assist (July 2012) Cardno EM-Assist is a 150 person environmental services and compliance management firm, headquartered near Sacramento, California, USA. Cardno BTO (October 2012) Cardno BTO is a 20 person water and wastewater design business based in Wellington, New Zealand. Cardno Hard & Forester (October 2012) Cardno Hard & Forester is a 50 person survey firm based in Sydney, NSW. Slide 26
Acquisition of ChemRisk, LLC Cardno ChemRisk (December 2012) A 95 person human health & environmental risk consulting firm headquartered in San Francisco, California, USA. Specialises in understanding the hazards posed by chemicals in foods, soil, sediment, air, water and medical devices. Focus on occupational health and safety, product sustainability, consumer product safety, and contaminated site evaluations. Highly complementary to our environmental services in the US. Slide 27
Acquisitions of Geotech Materials Testing Services Cardno Geotech (February 2013) A 200 person construction materials testing (CMT) firm based in Western Australia. Specialises in providing CMT services throughout Western Australia. Strong client base on major mining projects, LNG projects, and government infrastructure projects. Strengthens the Cardno Bowler Division and expands Cardno s CMT offering into WA. Highly strategic partner for Cardno in high growth market. Slide 28
Acquisition of Caminosca S.A. Cardno Caminosca A 400 person engineering consulting firm headquartered in Quito, Ecuador. One minor regulatory approval still being finalised, control has been exercised since December 2012. Specialises in engineering for hydropower, oil & gas, mining, roads, water supply and sewerage, urban development, airports and stormwater. Highly strategic partner for Cardno in high growth market in South America. Slide 29
Outlook
2013 Outlook Market conditions remain difficult in Australia, with continued growth in our services to the resource sector offset by flat conditions in the other sectors of the economy US outlook is brighter, with economic growth forecast to improve, environmental sector is still strong and there are some signs of improvement in the residential development sector Mining and gas projects remain active and are yielding strong returns for Cardno Overall improving market in the Americas, offsets broadly flat conditions in Australia Strong balance sheet and M&A pipeline support Cardno growth aspirations Slide 31
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. Projects 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. Slide 32