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Cardno Limited 2012 Full -Year Results

Presentation

Presenters: Andrew Buckley, Managing Director

Jeff Forbes, CFO

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

Cardno Overview and Highlights

Financial Review

Strategy and Acquisitions

Projects

Outlook

Appendix

Cardno Limited – 2012 Full Year Results Presentation 2

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Cardno Overview

> 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 listed on the ASX and, has around 139 million

shares on issue and has a market capitalisation around $1.1

billion.

> Cardno was founded in 1945 in Brisbane, Australia and has

grown to have around 7,500 staff in over 270 offices working

on projects in 85 countries.

> Since listing Cardno has delivered 8 consecutive years of

record NPAT and Earnings Per Share (EPS) growth.


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Cardno 2012 FY Highlights > Record NPAT of $74.2m up 26.1% for FY2012, despite variable conditions

> Record EBITDA of $128.7m up 28.5%

> Record EPS of 61.73 cents up 9.7%

> Record dividend of 36 cents, 70% franked

> Strong cash flow of $72.6m

> Major acquisition of ATC - 29th February 2012

> $112m capital raising in February - oversubscribed

> Cardno debt facilities restructured in December 2011, with limit increased to A$265m and term

extended. Maintains balance sheet strength and flexibility for future growth.

> Strong full year results flowing from:-

• Organic growth of the business

• Contribution from new merger partners

• Contribution from the environmental businesses in the U.S.

• Improving performance across the business


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Cardno 2012 FY Highlights (cont’d)

> Organic revenue growth of 7.1% after normalising for the emergency response in the

Gulf of Mexico

> Acquired MM&A and EM-Assist announced 3rd July 2012

> Admitted to S&P ASX200 Index as at 15th June 2012

> Announced transition of Chairman from John Massey to John Marlay after annual

results

> Appointed Ms. Tonianne Dwyer to the Board continuing Board evolution

> Cardno’s strategy and vision is to continue to grow and become a world leader in the

provision of professional services to improve the physical and social environment


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> Strong geographic and sector diversification lowers risk and maximises growth

> Record profit and EPS growth every year since listing in 2004

> Consistent growth in shareholder returns

> Strong dividend growth

> Successful cross-selling + organic growth

> Successful M & A strategy

> Critical mass of high level professional expertise world-wide

> Robust forward project pipeline (WIH) $671m as at June 2012

Cardno’s underlying dynamics


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Financial Review

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2012 Full Year Financial Results as at 30 June 2012


FY2012

$m

FY2011

$m

%

Change

Revenue from operations 965.8 831.2 16.2%

Fee revenue 715.3 573.6 24.7%

EBITDA 128.7 100.2 28.5%

EBITDA margin (%) 18.0% 17.5%

Net profit before tax 105.0 84.3 24.6%

Net profit after tax 74.2 58.8 26.2%

Basic earnings per share (cents) 61.73 56.29 9.7%

Net operating cash flow 72.6 73.5 -1.2%

EBITDA interest coverage 21X 27X

Dividends per share (cents) 36 34 5.9%

Total assets 958.7 681.6

Total liabilities 409.9 324.4

Total equity 548.9 357.2 For

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8 Year Performance History


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OPERATING CASH FLOW

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Dec-09 Jun-10 Dec-10 Jun-11 Jun-12

WORK IN HAND

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Diversified revenue streams


39%

5%

54%

2%

FEE REVENUE BY GEOGRAPHIC REGION (PROFORMA) FY 2012

Australia & NZ

Asia Pacific

America's

UK & Africa

39%

52%

9%

FEE REVENUE BY OPERATING SEGEMENT(PROFORMA) FY 2012

Professionalservices Australia& NZ

Professionalservices America's& Software

InternationalDevelopmentassistance

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Diversified revenue streams (cont’d)


8% 1%

40%

9% 2%

9%

16%

10% 5%

FEE REVENUE BY MARKET SECTOR (PROFORMA) FY 2012

Buildings

Coastal & Ocean

Environment

Emerging Markets

Management Services

Resources, Miningand EnergyTransportation

Land

Water

6%

15%

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7% 8%

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28%

FEE REVENUE BY CLIENT (PROFORMA) FY 2012

Aid agency

Contractor/ServiceproviderDeveloper

Government ownedcorporationGovernment - Federal

Government - Local

Government - State

Other clients

Resources, mining &energyF

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Operating Segment Performance – Australia & NZ

Commentary

• organic growth strong particularly in QLD/WA &

CMT businesses.

• acquisitions performing well.

• margins up due to new business mix and

stronger conditions.


Australia & NZ FY12 FY11

Fee revenue ($m) 324.0 230.4

Recoverable expenses ($m) 41.5 26.0

Total revenue ($m) 365.5 256.4

EBIT ($m) 55.9 34.0

Fee revenue margin 17.3% 14.8%

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Operating Segment Performance – Americas & Software

Commentary

• FY12 continues to benefit from the oil spill

project, plus organic growth and acquisitions.

• margins down, pcp margins related to

emergency response phase.

• environmental sector remains strong and

conditions elsewhere improving.


Americas & Software FY12 FY11

Fee revenue ($m) 317.7 257.6



EBIT ($m) 49.2 51.8


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Operating Segment Performance – IDA

Commentary

• EBIT up due to project wins and improved

performance.

• fee revenue down due to change in contract

model.

• margins up due to cost reduction.

• Project pipeline remains strong.


IDA FY12 FY11

Fee revenue ($m) 74.2 83.7



EBIT ($m) 5.4 4.2


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Core Businesses

> Global professional services business with around 7,500 people in around 270

offices spanning projects in over 85 countries.

> 85% of staff are professionals and technical staff.

> Primary disciplines of 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.

> Environmental consulting markets continue to deliver strong performance.


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Expanding Globally


Where Cardno has worked

Cardno offices

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Strategy & Acquisitions

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> Combine organic growth and M & A to become a world leader in our industry.

> Build recurring revenue streams and organic growth through cross selling.

> Focus on strengthening core disciplines through strategic acquisitions and organic

growth.

> Sustain historically high retention of principals.

> Foster/encourage employee shareholding to incentivise performance and align

interests of employees and shareholders.

> Maintain risk-adverse balance between major and smaller projects.

> Continue diversification strategy – both geographical and market sectors.

Cardno Strategy


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“One Cardno, One Vision”

> Cardno uses a 5 year Strategic Planning cycle

> 2010-2015 plan theme is: “One Cardno, One Vision”

> 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

• Broadly increase our profile

Cardno Strategy


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Merger & Acquisition Strategy

Business Unit & Division Structure – competitive advantage to attract merger partners

• Brand Integration

• Accounting and job cost integration

• Focus on knowledge sharing and cross sell

• Successful track record

• Potential cost synergies

• Operating systems

• 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

Growth and Diversification Objective

Continuous Integration of New Partners

Cardno’s Merger and Acquisition strategy works


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“Cross selling”

> Cross selling involves one part of Cardno using their access to a client to sell another Cardno service

> Incentive to:

• Improve / strengthen client relationships

• Increase returns for both business units

• Increase overall Cardno performance (all managers are shareholders)

> Strategy to increase knowledge of the breadth of Cardno services capability

> Cardno clients need a range of infrastructure services

> Many successful cross selling examples across Cardno

> Improve organic growth

Strategy


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Integration of M&A Partners

> Cardno Brand

• Co-brand initially

• Shift goodwill towards Cardno

• Drop the co-branding in 3-5 years.

> Systems

• New partners immediately adopt Cardno authority levels and risk management

systems

• Management reporting is rigorous from day one

• Accounting systems – target adopted within 12 months

• Partner has been integrated into Cardno’s business structure after 3 years

• Business becomes largely indistinguishable from the rest of Cardno after 3-5 years

Strategy


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Acquisition of ATC


> 1,600 person leading environmental consulting company in the USA providing services including environmental consulting and services, building sciences, geotechnical, construction materials testing and other consulting services.

> Expected to contribute annually around US$130m in revenue and US$16m in EBITDA. Cardno has acquired ATC for US$106m.

> Strong strategic fit with Cardno operating model and growth strategy.

> Increased leverage to growing USA economy.

> Attractive and growing market segment with the USA environmental industry expected to grow with increased regulation and enforcement.

> Strengthens Cardno’s environmental offering and presence as well as increased diversification to new sectors in the USA.

> ATC funded in part through underwritten placement and rights issue.

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Acquisition of Marshall Miller & Associates (MM&A)

> 180 person mining, energy and environmental consulting firm headquartered in Bluefield,

Virginia, USA

> Full purchase price is US$31m, including 10% earn out (12 months) and 9% deferred

payment (18 months).

> Expected to contribute US$33m in revenue and US$5.5m in EBITDA in FY13.

> Provides Cardno with strong capability in mining engineering, complementing Cardno BEC’s

electrical skills for that market.

> Provides capability in carbon consulting, expected to be a strong growth market globally.

> Environmental capability fits with other U.S. operations such as Cardno ERI.

> MM&A delivers projects for clients internationally including Australia.

> Expected to provide many cross selling opportunities.


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Acquisition of EM-Assist

> 150 person environmental services and compliance management firm, headquartered near

Sacramento, California, USA

> Full purchase price is US$14.25m, including 10% earn-out (12 months) and 9% deferred

payment (18 months).

> Expected revenue contribution is US$15m with US$2.8m expected EBITDA in FY13.

> Provides Cardno with expertise in environmental work for the U.S. Air Force (and other DOD

clients).

> Adds more specialist skills in environmental compliance and monitoring.

> Complements Cardno TEC and enables further cross-sell.

> Further strengthens public sector client base.

> Reports through Cardno TEC.


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Other Recent Acquisitions Cardno Lane Piper (September 2011)

Cardno Lane Piper is a 40 person environmental and geotechnical engineering firm based in Melbourne, Australia. The

acquisition is expected to contribute approximately $6.5 million in annual revenue and $1.2 million in annual EBIT in

FY12. Cardno Lane Piper has become part of Cardno ERI and was effective September 2011.

Cardno Geotech Solutions (October 2011)

Cardno Geotech Solutions is a 22 person geotechnical engineering, environmental and construction materials testing

firm based in Newcastle, New South Wales. The acquisition will add revenues of around $2 million per annum.

Cardno TEC (October 2011)

Cardno TEC is a 330 person full service environmental and engineering consulting firm headquartered in

Charlottesville, Virginia, with 15 mainland U.S. offices and 5 off-shore offices including Hawaii, Guam, Germany,

Belgium and Italy, founded in 1990. Cardno TEC is expected to contribute annually around US$52 million in revenue

and US$7.2 million in EBITDA. Cardno TEC’s backlog at acquisition was in excess of US$70 million which was an all

time high.

Cardno HRP (November 2011)

Cardno HRP is a 62 person town planning consultancy based in Brisbane, Queensland and includes the subsidiary

Chenoweth Environmental Planning & Landscape Architecture (CEPLA) business. Cardno HRP is expected to

contribute approximately $11 million in annual revenue and $3 million in annual EBIT.


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Indicative Projects

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Cardno MM&A: Cardno MM&A provided technical services to Alpha Natural Resources in support of their acquisition of Massey Energy Company. The services included an audit of SEC-compliant coal resources and coal reserves; a review of end-of-mine closure (reclamation) liabilities; and general environmental due diligence. Subsequently, Cardno MM&A was engaged to update Alpha’s statement of coal reserves for public reporting as of year-end 2011.

Cardno MM&A: Cardno MM&A was hired to prepare a definitive feasibility study for the Duchess Paradise Project for Rey Resources. It is a Greenfield coal mining prospect in Western Australia that will produce a low-energy, high-volatility B bituminous coal for Asia and India.

Cardno MM&A: Cardno MM&A was hired to conduct all engineering, social and environmental impact, and geological studies for development of Daning & Gaohe Coal Projects , which are located in the Shanxi Province of China. The Daning mine consists of a longwall mine that produces approximately 4 million tonnes per year and represents a capital investment of approximately $200 million. The Gaohe mine represents a $400 million capital investment.


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Cardno EM-Assist: Cardno EM-Assist assessed a potentially contaminated Naval Auxiliary Air Station (NAAS) located on the Monterey Peninsula Airport in Monterey, CA and in a neighbourhood with active public usage, and complete any necessary remedial activities. Cardno EM-Assist delivered full project lifecycle services from preliminary assessments to long-term operations and maintenance.

Cardno EM-Assist: Cardno EM-Assist provide technical and environmental management support services to Hill Air Force Base, an Air Force Materiel Command base located in northern Utah. Cardno EM-Assist helped to reduce hazardous waste program costs by 29% without reducing base industrial production

Cardno EM-Assist: Cardno EM-Assist developed training courseware including web-based training courses and 213 rapid learning objects with Level II and some Level III interactivity. EM-Assist used a variety of content development tools and loaded the courseware in both Camp Pendleton’s e-learning management system (EM-Assist’s LMS) , which hosts only environmental training, and the Marine Corps’ MarineNet, the repository for all training across the Marine Corps.


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Cardno BEC: Cardno BEC (Cardno’s electrical engineering business), is involved in a A$22M project upgrade of the electrical and controls system infrastructure for Rio Tinto’s iron ore mines Tom Price, Paraburdoo and Channar in Western Australia’s Pilbara region.


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Gold Coast Rapid Transit project, Queensland, Australia (artists impression) – Cardno provides 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 project will provide a world-class public transport network generating general social, environmental and economic benefits for the city.


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Cardno Emerging Markets Regions (EMR) - Australia-Africa Partnerships Facility: Cardno launched AusAID’s largest project in Africa, to engage all 54 countries in the continent to advance sustainable, country-led development with specialists and volunteers working alongside and mentoring government officials; facilitating partnerships between Australian and African organisations; conducting training programs; providing grant funding for activities implemented by NGOs; and sponsoring joint research.


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Cardno ENTRIX: Keystone and Keystone XL Pipelines (Client: US Department of State and TransCanada) - Cardno ENTRIX is the prime contractor delivering two Environmental Impact Statements (EIS) and Presidential Permits for international border crossing under the direction of Department of State and Department of Energy. The Keystone crude oil pipeline 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.


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Cardno ATC: Maynard H. Jackson, Jr. International Terminal Hartsfield Jackson Atlanta International Airport Atlanta A new 1.2M square foot terminal and concourse building on the east side of the existing airport. The US$1.6 billion project includes 12 new international gates, new customs areas, new ticketing counters, extension of the Automated People Mover (APM) system to connect with the remainder of the airport, a new parking deck, and new access roads to connect with Interstate 75.


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Cardno ATC: New York City Transit Authority - On-Call Term Contract, Planned and Emergency Response Hazardous Waste Management. Cardno ATC provides staffing and oversight during hazardous material removal projects and emergency response work orders, from the contractor mobilization of the project site, during the abatement operation, through final clean-up and certification of completion. Cardno ATC ensures that the abatement work is performed in compliance with technical specifications.


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Cardno TEC: EIS for Guam and CNMI Military Relocation: A high-profile EIS for largest DoD construction program in NAVFAC Pacific AOR. This is a US$26 Million NEPA document. Dozens of supporting engineering studies including: Berthing Study, Dredging Study, Utilities, Cultural Surveys and Coral Reef Impact Study.


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Outlook

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Outlook > Cardno’s global market conditions are variable and improving slower than expected

> U.S. economy improving

> Australian economic growth bolstered by resources and energy

> Project pipeline (WIH) of $671m at 30 June 2012

> Growth via both organic expansion and acquisitions - strengthens Cardno’s core

competencies

> Cardno has strong cash flow and a strong position ready for further growth

> ATC and EM-Assist increase exposure to US environmental market

> MM&A increases mining and resources focus which will add to Cardno BEC and further

add to growth

> Strong pipeline of attractive M & A opportunities


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Appendix

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Operating Segment Performance – Australia & NZ

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23%

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ANZ FEE REVENUE BY MARKET SECTOR (PROFORMA) FY 2012

Buildings

Coastal & Ocean

Environment

Emerging Markets

Management Services

Resources, Mining andEnergyTransportation

Land

Water

0%

25%

16%

4% 0%

8% 6%

26%

15%

ANZ FEE REVENUE BY CLIENT (PROFORMA ) FY 2012

Aid agency



Government - Local

Government - State

Other clients

Resources, mining &energy

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Operating Segment Performance – Americas & Software

3% 0%

73%

0% 3% 1%

13%

2%

5%

NASW FEE REVENUE BY MARKET SECTOR (PROFORMA) FY 2012

Buildings

Coastal & Ocean

Environment

Emerging Markets

Management Services

Resources, Mining andEnergy

Transportation

Land

Water

0% 9%

8% 0% 9%

9%

10% 13%

42%

NASW FEE REVENUE BY CLIENT (PROFORMA ) FY 2012

Aid agency



Government - Local

Government - State

Other clients

Resources, mining &energy

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“Cardno’s vision is to be a world leader

in the provision of professional services

to improve the physical and social environment.”


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sona

l use

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y

for personal use only - asx · > global professional services business with around 7,500 people...

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