Ferret's Stock to Watch: CARDNO LIMITED 08:44, Wednesday, May 02, 2007
A COMPANY ON THE EXPANSION TRAIL TAKES OUT 11 SINCE LISTING
Sydney - Wednesday - May 2: (RWE Aust Business News) ****************************************************
OVERVIEW ********
Cardno Ltd (ASX:CDD) has been one of Ferret's favourites since its listing in 2004 because every time it's been mentioned the stock has risen.
The company yesterday reported further expanding its physical infrastructure services discipline base via the acquisition of S.P.L.A.T., a Brisbane and Gold Coast based landscape architecture, urban design and environmental management consultancy.
The acquisition of S.P.L.A.T. to form Cardno S.P.L.A.T. is expected to contribute $4 million in revenue annually and be EPS positive.
Cardno S.P.L.A.T. will add a new dimension to Cardno's multi-disciplinary professional services by offering landscape architecture and expanded environmental and urban design services.
In the past calendar year, the company has increased business expansion at every opportunity.
It is being reflected in the results for the December half of 2006, released on February 20.
Cardno announced that revenues for the period were $111.1 million, up 23.8 per cent from $89.7 million for the previous corresponding period.
Net profit for the half-year was $8.3 million compared with $7.1 million (up 16.4 per cent).
It is expected that there will be less seasonality in the current year compared with previous years.
The Board has resolved to pay an interim fully franked dividend of 10c per share, 11.1 per cent higher than last year.
The dividend was paid on April 13.
On November 16 directors announced the implementation of a dividend reinvestment plan.
The outlook for Cardno remains bright as it continues to have good prospects for expanding the business through organic growth and acquisitions, says managing director Andrew Buckley.
In its last major acquisition, Cardno bought Perth-based structural engineers, Saraceni Engineering Group.
The acquisition further strengthens Cardno's presence and capability in Western Australia increasing staff numbers in the state to around 100.
Mr Buckley said the Saraceni Engineering Group was a welcome addition to Cardno as it enhanced the skills of the existing Western Australian team.
"Saraceni Engineering is renowned for handling complex and difficult structural solutions and the business has built its reputation around lightweight structural design," Mr Buckley said.
"This is our eleventh acquisition since listing in May 2004 and the second in Western Australia within 12 months."
Cardno's expansion strategy ensures that added capacity and resourcing is delivered in growing markets such as Western Australia.
The Saraceni addition will allow Cardno to offer more services to existing clients and also for Saraceni Engineering Group clients.
The new firm, to be known as Cardno Saraceni, and its eight staff will add significant structural capability to Cardno's operations in Western Australia.
Saraceni Engineering Group was established by Frank Saraceni in 1990.
John King, Cardno's Western Australian division manager, said the purchase of Saraceni Engineering Group presented a great opportunity to join with an experienced structural team with significant future work commitments.
"Saraceni are currently designing four multi-storey buildings in Perth's CBD including Raine Square a 27-level landmark commercial and retail complex," said Mr King.
Major clients include Woolworths, Coles Myer, Saville, Diploma Pro-Build.
Saraceni's significant previous projects include the Boeing 737 hangar complex at Perth Domestic Airport, Warwick Cinema Complex, Stirling Shopping Centre, the Woolworths development in Perth's Hay Street Mall and facility buildings for two gas plants in Pakistan.
SHARE PRICE MOVEMENTS *********************
Shares of Cardno yesterday rose 2c to $5.67. Rolling high for the year is $6.58 and low $4.10. Dividend is 20c to yield 3.53 per cent. EPS is 31.1c while p/e ratio is 18.23. The company has 52.7 million shares on issue with a market cap of 299.2 million.
Another important acquisition which should be reflected in the current half is Grogan Richards Consulting Engineers reported on December 18.
Grogan Richards is a 110-person Melbourne-headquartered civil, structural, hydraulic, traffic and transportation consulting engineering business.
The acquisition further strengthens Cardno's growing national presence and in particular, focuses on growing Cardno's capabilities in Victoria.
Grogan Richards also brings to the group additional Brisbane-based staff within their Queensland office.
The Grogan Richards addition increases Cardno's staff numbers to around 1,600, consolidating Cardno's position as one of the largest professional services infrastructure consultancies in Australia.
The new Victorian firm, to be known as Cardno Grogan Richards, is expected to contribute around $16 million per year in turnover and be EPS positive.
Founded in 1979, Grogan Richards has been involved in many signature engineering projects in Australia, including the Queen Victoria Centre for the Grollo Group, Waterfront City within Melbourne's Docklands for ING, several shopping centre projects for the Westfield Group, the Queensland Investment Corporation, Colonial First State and Spotlight, and Sydney Airport Traffic Infrastructure Study, as well as large master planned developments such as the 2,300-lot development Lakeside Pakenham for Delfin Lend Lease.
Grogan Richards's client base includes builders, developers, shopping centre owners and managers, local government, government departments, architects, manufacturers, retailers, town planners and the legal profession.
Mr Buckley said the acquisition will significantly increase Cardno's presence in the Victorian market and allow the company to continue to grow its business.
"With the addition of Grogan Richards, Cardno will have much stronger representation in the Victorian marketplace - boosting engineering staff numbers and providing increased capability to serve Victorian clients needs," he said.
"This will allow Cardno to offer more services to our existing client base.
"Likewise Grogan Richards's clients will be able to benefit from accessing the resources of a global business.
"Cardno will establish a separate Victorian division," he added.
The acquisition is being funded by a mix of cash and shares and key Grogan Richards staff will become shareholders in Cardno and remain active in the company.
BACKGROUND **********
Cardno Ltd was listed on the Australian Stock Exchange on May 20, 2004.
It is an integrated professional services provider, locally delivering the specialist advice necessary to create or improve the physical and social infrastructure that underpins communities around the world.
The company team comprises leading advisers who plan, design and deliver sustainable projects or community programs around the world.
From its foundations as a civil engineering consultancy, Cardno has expanded to also include management and environmental services as well as project management of international development assistance programs.
The original engineering practice from which the Cardno group has evolved commenced operations in Queensland in 1945 as Cardno & Davies.
This partnership worked largely in the civil engineering consulting services market, and achieved a reputation for its expertise and experience.
The core business at that time was providing engineering services to the public and private sectors for the development of the state's infrastructure.
In 1999 the Cardno & Davies group merged with McMillan, Britton & Kell Pty Ltd, a New South Wales-based consulting practice with origins dating to 1936, to form Cardno MBK.
Since this merger, the business has grown from strength to strength, through the acquisition of local practices and organic growth of its existing operations.
New members in the Cardno group have been selected based on their geographic region and professional discipline offered.
The main mergers and acquisitions that have contributed to forming the current Cardno group are:
* January 2007 Cardno Saraceni;
* December 2006 Cardno Grogan Richards, September 2006 Cardno Stanwill, June 2006 Cardno Gilbert Rose, April 2006 Cardno Forbes Rigby;
* December 2005 Cardno Ullman & Nolan - adding geotechnical & civil engineers, September 2005 Cardno Agrisystems - adding UK-based aid development company, August 2005 Cardno Eppell Olsen - adding traffic and transportation specialists, May 2005 Cardno Acil - adding ACIL Australia;
* October 2004 Cardno Lawson Treloar - adding Lawson and Treloar, October 2004 Cardno BSD - adding BSD Consulting Engineers, April 2004 Cardno Alexander Browne - adding Alexander Browne Cambridge, February 2004 Cardno Young - adding Young Consulting Engineers;
* November 2003 Cardno Taylors - adding Taylors Engineers;
* November 2001 Cardno CCS - adding Colefax Clayton Smith, July 2001 Cardno Willing - adding Willing & Partners (and XP Software), April 2001 Cardno BLH - adding Boubli Lepagier Hastings; and
* July 1999 Cardno MBK - merging Cardno & Davies and McMillan, Britton & Kell.
(20min delay)