Embattled construction and engineering company Cardno Limited (ASX:CDD) has announced details of its strategic review, which management believes will help Cardno to return to profitable growth.
In an announcement to the ASX, Cardno states that the Board has approved to implement the outcomes of a Strategic Review that “will put the Company on track to return to profitable growth with top quartile EBITDA margins.”
In August 2015 Cardno announced a net loss of $145m for FY15 which was mainly due to a non-cash impairment charge of nearly $200m in relation to its US and Ecuadorian business. The net operating profit excluding the one-off costs was $50.3m which is a 35% decrease compared to FY14.
What are the Details of Cardno’s Strategic Review?
CEO and Managing Director Richard Wankmuller has reviewed Cardno’s global operations which has resulted in three primary tasks that will form the base for the new strategic direction of the business. The main areas to focus on are finance, operations and investments.
Financially the Company will aim to reduce net debt and improve earnings. Short to medium-term incentives will reduce working capital by A$60m by the end of the calendar year and by $20m in overhead costs annually.
As part of the review Cardno will also optimise and improve the operational structure of the business by expanding into strong areas and divesting other parts of the business that are not core to the Company’s future. Richard Wankmuller considers the environmental market in Australia as well as the engineering services sector in the US as “areas of strong potential growth”.
Investments are built around a 10-point plan with the aim to outperform the rest of the industry. By focusing on the 10 most effective strategies, clients and opportunities Cardno aims to drive sustainable growth.
Proportional Takeover Bid by Crescent
In September Cardno shareholders were notified about a proportional takeover bid by Crescent Capital Investments under which Crescent would acquire up to 60% of Cardno shares and effectively take control. Management recommended shareholder to reject the offer which valued CDD shares at $3.15 per share. Management mainly believes that the offer is “opportunistic” as it seeks to exploit CDD’s recent share price weakness.
Author: Simon Herrmann
Oct 12, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.