Cardno (CDD) Results

By Jason Fittler

This is one of my favorite stocks, I expect to see this company do well from the current government infrastructure spend.

Below is a review of their results for the 2009 year. As such I would look to buy this stock for the long term and hold for the dividends.

Revenue - A$515.8m in revenue was reported, up 29.3% on the 2008 which was $399m and in line with expectations.

Net Profit After Tax (NPAT) - Normalised NPAT of A$34.2m was reported, up 24.4% on the pcp 2008 which was A$27.5m above our expectation of A$32.4m.

Difference to our forecast: Margins lower than forecast but offset by lower debt and, in particular, lower tax costs. CDD effective tax rate was just 18.9%, we had forecast full 30% corp tax rate.

Earning Per Share was 43.82cps versus 41.0cps in 2008 - up 6%.

Operating cash flow was strong, increasing to A$38.59m from A$32.6m in 2008 and higher than forecast (A$32m).

Balance Sheet - cash and equivalents are $65.8m, net debt is A$19.25m and gearing is 7.2%.

Operational Comment - Performance in FY08 was affected by tougher conditions in some sectors (which resulted in subdued activity, project deferrals and delays - with private sector activity more affected than Government works and International Development) the strong AUD (which has a negative translation effect on the overseas operations) and $3.0m in one-off restructuring costs.

Dividend - A fully franked final dividend of 14cps was declared above our forecast of 13cps. This takes the full year dividend to 28cps and represents a payout ratio of 64%.

Outlook - There are some positive signs for improved market conditions in 2010 - these include recent project wins. Cardno will continue its strategy of growth via acquisition and its strong balance sheet will enable this.

Investment view

  • solid result although margin contraction needs further investigation. However, we do note that this period will probably be the some of the toughest it will experience and should represent a margin trough.
  • operating conditions will remain fairly tough over the next 6 months.

Please call me on 07 4771 4577 if you would like more information on Cardno (CDD).