RBS Morgans Queensland Institutional Conference. Andrew Buckley, Managing Director

Transcription

1 RBS Morgans 2011 Queensland Institutional Conference Presenter: Andrew Buckley, Managing Director

2 Presentation > Highlights > Operations and Segment Review > Significant Projects > Strategy > Outlook Cardno s vision is to be a world leader in the provision of professional services to improve the physical and social environment

3 2011 Highlights Cardno s growing profile Engineering News Record (ENR): One of the world s leading engineering publications Cardno debuted at number 35 on the 2011 ENR Top 200 International Design Firms Cardno on the front cover of the July edition of ENR CardnoexpectedtobeatornearthetopoftheZweig White Letter Hot Firm List. Coverage is positive for clients, investors and staff.

4 2011 Highlights > Record profit of $58.8m up 56% despite difficult conditions > Record EBITDA of $100.2m up 81.2% > EPS up 44% to 56 cents > Dividend record 34 cents, 70% franked > Strong cash flow $74m up 57% > $49m capital raising in the first half > Strong 1H 2011 reflective of Gulf of Mexico oil spill contribution > Second half impacted by stronger AUD and wet weather/cyclones, but remained robust > Strong organic revenue growth of 18% over the previous year > Three acquisitions strengthen environmental, mining and oil and gas capabilities > $516m - down on pcp but up in constant currency terms.

5 Cardno s underlying dynamics > Geographic and market sector diversification lowers risk and maximises growth > Consistent growth of profits and shareholder returns > 2011 FY seventh consecutive record profit and EPS growth > 7 year shareholder returns + 600% > Consistent strong dividend growth delivering 34 cents this year > Strong critical mass of professional IP world-wide > Successful M & A s = successful cross-selling + increased organic growth

6 7th consecutive growth year GROUP REVENUE NET PROFIT AFTER TAX EARNINGS PER SHARE (Basic) A$ millions A$ Millions A$ Cents per share

7 Operations and Segment Review

8 Operating Segment Performance Australia & NZ FY10 FY11 Fee revenue ($000's) 209, ,365 Recoverable expenses ($000's) 10,146 26,022 Total revenue 220, ,387 EBIT 34,285 34,021 Fee revenue margin 16.33% 14.77% Commentary Organic growth strong in first half but reduced in second half Second half impacted by floods, cyclones and wet weather Margins improving over 16% in second half Cardno BEC and Cardno Roadtest added Improving conditions expected especially in Queensland and Western Australia.

9 Operating Segment Performance Americas & Software FY10 FY11 Fee revenue ($000's) 72, ,617 Recoverable expenses ($000's) 42, ,701 Total revenue 114, ,318 EBIT 11,065 51,806 Fee revenue margin 15.36% 20.11% Commentary Very strong first half with emergency response on oil spill Second half slower but still strong Oil spill work continuing Broader organic growth across the business Energy, Oil and Gas are strong Environmental consulting growing

10 Operating Segment Performance IDA FY10 FY11 Fee revenue ($000's) 95,044 83,704 Recoverable expenses ($000's) 45,964 46,844 Total revenue 141, ,548 EBIT 4,009 4,175 Fee revenue margin 4.22% 4.99% Commentary Revenue down, but half of the drop relates to currency New management in place Growth expected through 2012FY Macro conditions still positive with planned doubling of spend in U.S. and Australia by 2015 However, U.S. growth in spending expected to be delayed

11 Core Businesses > Globally integrated professional services business with more than 4,300 people in 160 offices spanning projects in over 85 countries > Approximately 85% of staff professionals and fee earning personnel > Primary disciplines of diverse planning, surveying, engineering and management services, environmental sciences, CMT and social infrastructure delivery > Focus on developing / improving physical and social infrastructure for private and public sectors > Focus on Environmental Consulting markets is delivering strong growth > FY11 acquisitions to add approximately $15m EBIT in FY12

12 Expanding Globally

13 Diversified revenue streams REVENUE BY OPERATING SEGMENT (PROFORMA) REVENUE BY GEOGRAPHIC REGION (PROFORMA) 15% 3% 33% Professional Services Australia &NZ Professional Services America's & Software 39% Australia & NZ Asia Pacific America's 51% International Development Assistance 56% 2% UK & Africa

14 Diversified revenue streams NET REVENUE BY MARKET SECTORS FY2011 (PROFORMA) REVENUE BY CLIENT FY2011 (PROFORMA) 18.5% 8.2% 12.1% 2.7% 1.1% 7.8% 1.0% 13.6% 35.1% BULDINGS COASTAL & OCEAN ENVIRONMENT EMERGING MARKETS MANAGEMENT SERVICES RESOURCES, MINING AND ENERGY TRANSPORTATION LAND WATER 6% 7% 9% 1% 12% 6% 10% 7% 41% AID AGENCY CONTRACTOR/SERVICE PROVIDER DEVELOPER RESOURCES, MINING AND ENERGY GOVERMENT OWNED CORPORATION GOVERNMENT FEDERAL GOVERNMENT LOCAL GOVERNMENT STATE OTHER CLIENTS

15 Cardno s competitive strengths > High retention of acquisition principals drives sustainable growth > Business unit and division structure is attractive to merger partners > Successful track record of cross selling services to generate organic growth > Diversity of earnings across business sectors, clients and geographic locations mitigates risk and optimises growth opportunities > Focus on maintaining balanced mix between short-term smaller projects and larger long-term projects > Strong balance sheet to fund growth > Significant strengthened presence in high growth global environmental services and mining and resources sector

16 Recent Acquisitions Cardno JFNew (2011) A 150-person US consulting firm with specialist expertise in natural resources management, environmental permitting, habitat restoration, mitigation banking, native plant materials, and cultural resources consulting. Cardno JFNew is based in the Great Lakes area of the US and has 8 offices and a 130 acre nursery. Cardno JF New is highly complementary to Cardno ENTRIX and is a business unit of Cardno ENTRIX. The acquisition was effective January 2011 with annual revenue of around US$18m and EBITDA of US$2.7m. Cardno JFNew s key personnel are committed to staying with the business. Cardno Roadtest (2011) A 60 person construction materials testing and geotechnical engineering firm based in Central Queensland with offices in Rockhampton, Emerald, Gladstone and the Whitsundays. Roadtest is a highly strategic partner to help continue the growth of our construction materials testing and geotechnical engineering capabilities across Australia and internationally. Cardno Roadtest will become part of Cardno Bowler, which was acquired in The acquisition was effective May 2011 with annual revenue of around $8m and EBIT of $3.5m. Cardno Roadtest increases Cardno s exposure to the work flowing from the extensive gas and coal developments under way or proposed in Central Queensland. Cardno Roadtest is undertaking work on the Gladstone LNG plant on Curtis Island and is also working on the expansion of the Curragh North Coal mine. Key personnel will remain with the business.

17 Recent Acquisitions Cardno BEC (2011) Cardno BEC is a 100 person electrical engineering firm based in Perth, with offices in Brisbane and Tanzania. The acquisition was effective June 2011 with annual revenue around $35m and an expected FY12 EBIT of $9.0m. Cardno BEC has been established since 1996 and provides electrical engineering services ranging from feasibility studies through project design, to construction, commissioning and operations. The company provides services to the mining, mineral processing, industrial, petro-chemical and utility sectors. Cardno BEC has proven capability across all aspects of electrical design, instrumentation, power systems, power generation/transmission and distribution, control and communications systems with an expert team of engineers, technicians, programmers, draftspersons and site support staff. Cardno BEC has carried out project work throughout Australia, Asia, Africa, Europe and North & South America primarily in mineral processing plants including gold, copper and iron ore. Major clients include BHP Billiton, Rio Tinto, Mineral Deposits, Newcrest, Fortescue Metals Group, Barrick Gold, Outotec and Regis. Cardno BEC s principals are all committed to staying with the business.

18 Significant Projects

19 Legacy way Tunnel Project A 4.6km long, AU$1.5billion tunnel project will transform the Queensland capital city of Brisbane by linking the city s western and inner northern suburbs. Constructed by Transcity JV (Acciona, BMD and Ghella) for Brisbane City Council, the design for the Legacy Way Tunnel is made up of a Design Alliance, with Cardno contributing a third of the design resources, including key staff in the Civil, Traffic, Hydrology, Structural, Environment, Geotechnical and M&E teams. Construction of Legacy Way began in April 2011 and will continue until December 2014.

20 The Government of Indonesia is committed to ensuring global accessibility to education for all children, particularly in remote regions, through the Basic Education Program. Cardno Emerging Markets is partnering with AusAID and the Government of Indonesia to support the improvement of education standards across six provinces in Indonesia through the Basic Education Program (BEP). The program includes construction or refurbishment of schools, providing asset and contract management support and increased capacity throughout the education sector in Indonesia.

21 Lihir Island Million Ounce Upgrade, BEC Engineering the 2011 acquisition of BEC Engineering, a business which delivers electrical engineering services to the mining and resources industry, offers broad opportunities for blending their considerable skills and specialist expertise with other Cardno operations globally.

22 Gold Coast Rapid Transit project, Queensland, Australia (artists impression) Cardno is providing multi disciplinary services to McConnell Dowell for Stage 1 of the Gold Coast s major 13 kilometre light rail corridor. As Queensland s first light rail system, the Gold Coast Rapid Transit project will provide residents with a world class public transport network which will generate a number of social, environmental and economic benefits for the city.

23 Big Creek Hydroelectric Power System (Client: Southern California Edison): Cardno ENTRIX is under contract to Southern California Edison to manage all FERC relicensing and environmental studies for the Big Creek Hydroelectric System in Northern California. The project features 7 FERC licenses, 9 powerhouses, 6 major impoundments, over 95 miles of river systems, and pump storage with generating capacity of 1,000 MW. Cardno ENTRIX services include strategic regulatory management, environmental resource baseline studies, hydrologic modeling, aquatic biology monitoring, recreational planning, habitat restoration, regulatory agency negotiations and GIS mapping.

24 Keystone and Keystone XL Pipelines (Client: US Department of State and TransCanada): Cardno ENTRIX is the prime contractor for the preparation of two third party EIS s for the US Department of State and TransCanada Keystone Crude Oil Pipeline System. The project features 1,702 miles of new, 36 inch diameter pipeline (327 miles in Canada and 1,375 miles in U.S.) with capacity for 900,000 barrels per day. Cardno ENTRIX is preparing two Environmental Impact Statements (EIS) and Presidential Permits for international border crossing under the direction of Department of State and Department of Energy.

25 RC01 Ore Reclaimer at Rio Tinto s Cape Lambert Site, Western Australia: Cardno BEC is a business which delivers electrical engineering services to the mining and resources industry. Cardno BEC has carried out the control system programming for optimisation of the RC01 Ore Reclaimer at Rio Tinto s Cape Lambert Site.

26 Pilot stormwater harvesting system: Cardno has undertaken the design and documentation for a world first pilot stormwater harvesting system that will provide the equivalent of 20 Olympic swimming pools of harvested water per year for two Melbourne parks. The Biofilta system solves the problem of harvesting stormwater in urban environments where space is a premium by capturing stormwater underground. Biofilta Pty Ltd was launched in 2010 and in conjunction with Cardno, won the Victorian Stormwater Excellence Award for its innovative approach.

27 Strategy Growth, cross selling and integration

28 Strategy > Combine organic growth and M & A s to become world leader in infrastructure > Build recurring revenue streams through cross selling > Focus on strengthening core disciplines through strategic acquisitions and organic growth > Sustain historically high retention of principals > Foster / encourage high employee shareholding ( 50%) to incentivise performance > Maintain risk-adverse balance between major and smaller projects > Continued diversification strategy both geographical and market sectors

29 M & A Strategy > Complementary businesses with strong performance > Historically pay realistic multiples > Tried and tested acquisition process with robust due diligence > Acquisitions must be immediately earnings accretive > Target businesses which add to and strengthen core competencies > Integrate and implement systems improvements to drive efficiencies > Cross-sell services and leverage organic growth

30

31 Strategy One Cardno, One Vision > Cardno operates on a 5 year Strategic Planning cycle > Current plan is the plan > Theme of the current plan is: One Cardno, One Vision > The focus is to continue to: Grow Cardno significantly through to 2015 Increase benefits from ongoing integration Foster cross selling Cut overhead costs Aim for audacious growth targets Broadly increase our profile

32 Strategy Cross selling > Cross selling involves one part of Cardno using their access to a client to sell another Cardno service > Incentive is to: Improve / strengthen client relationships Increase returns for both business units Increase overall Cardno performance (all managers are shareholders) > Main strategy is to increase knowledge of the breadth of services > Most Cardno clients need a range of infrastructure services > There are many examples of successful cross selling across Cardno

33 Strategy Case Study Knowledge Sharing Knowledge sharing underpins cross selling Cardno Intranet incorporates Knowledge Bank Cardno management conferences are held regularly with international managers attending Cardno operates a trade show at the managers conference encouraging all managers to develop their knowledge of our services

34 Strategy Cross selling examples Gold Coast Light Rail > Cardno team initially involved in: Services relocation design Traffic management Landscape architecture > Further cross sold services include: Utilities location work for Cardno AUS Structural review work Environmental services Marine Structures advice Building Services scope for Cardno ITC > Potential for future cross selling as required by client (MacDow)

35 Strategy Cross selling examples Kalamazoo River - U.S.A. > Kalamazoo River and Talmadge Creek in Michigan suffered environmental damage > Cardno J.F. New leads Cardno work on this restoration project > Cardno J.F. New has further leveraged Cardno Entrix involvement > Cardno J.F. New erosion control and river bank ecological restoration > Cardno ENTRIX Damage assessment and geomorphological studies and hydraulic modeling

36 Strategy Cross selling examples South America Petrochemical Site Remediation > Cardno ERI has led the Cardno Team on remediation of retail sites in Ecuador and Colombia > Cardno ENTRIX has provided the local presence allowing us to win the work > Cardno ENTRIX is providing local support from Quito, Ecuador > Cardno TBE is providing utilities location work

37 Strategy Integration of M&A Partners > Brand Co-brand initially Shift goodwill towards Cardno Drop the co-branding in 3-5 years. > Systems New partners immediately adopt authority levels and risk management systems. Management reporting is rigorous from day one. Accounting systems are generally adopted within 12 months. After 3 years the partner has been integrated into Cardno s business structure. After 5 years the business becomes largely indistinguishable from the rest of Cardno.

38 Strategy Integration Case Studies Cardno Lawson Treloar Australia > Lawson Treloar was acquired in 2005FY bringing increased costal, ocean and water modeling skills > Co-branded Cardno Lawson Treloar on day one > Integrated to Cardno systems in first year > Business units (Brisbane and Sydney) moved to regional reporting in first year and fully integrated after 5 years > Co-brand dropped after 5 years > Neil Lawson (31 years service) is now Regional Operations Manager (South East Australia and NZ Region) > Doug Treloar (31 years service) is now Senior Principal Coastal Engineering

39 Strategy Integration Case Studies Cardno ERI U.S.A. > ERI was acquired in 2010FY bringing environmental remediation skills to Cardno > Co-branded Cardno ERI in 2011FY > Integrated to Cardno risk management immediately after acquisition > Moving onto Cardno accounts systems now > Move to Cardno brand - 3 years? > Bob Kroeger now Americas Regional Operations Manager > All key Principals still on board > Extensive cross selling is underway

40 Outlook Cardno s vision is to be a world leader in the provision of professional services

41 2012 Growth drivers > Environmental services market is growing strongly > Mining, energy, oil and gas are also growing strongly > Public sector infrastructure projects remain active > Private sector development remains flat but will deliver future growth > IDA expenditure flat but will grow towards 2015 > M & A pipeline remains strong and competitively priced

42 2012 Outlook > Global market conditions continue to improve but slower than expected > Project pipeline of $516m in early FY12 > Additional growth via organic expansion and acquisitions which further strengthen core competencies > Well positioned with strong cash and low gearing > Strong pipeline of potential M & A opportunities in North America and Australia > Returns from US environmental acquisitions continue to be strong > Increased focus on mining and resources will further aid growth

43 Cardno s vision is to be a world leader in the provision of professional services to improve the physical and social environment.