Cardno’s turnaround continues as it delivers on guidance

By Trevor Hoey. Published at Aug 20, 2018, in Features

Name: Cardno Limited (ASX:CDD)

Market Capitalisation: $650 million

Opening Share Price: $1.40

Cardno, a professional infrastructure and environmental services consultancy group has recorded EBITDA of $56.2 million for FY18, representing a year-on-year increase of 27.7%.

One of the key takeaways in terms of the company’s financial performance was the substantial growth in operating cash flow which increased to $45.7 million.

This was in line with guidance issued in February, and arguably represents a return to delivering on expectations after the group encountered challenges across its market segments in recent years.

While Cardno’s shares have performed well ahead of this result, increasing circa 20% since mid-July, the consensus 12 month price target of $1.80 suggests there could be more upside to come, particularly if it is perceived to have turned the corner.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

The company continues to face headwinds in some of its areas of operation.

Americas up, Asia-Pacific down

The Americas Engineering and Environmental division performance continued to improve with EBITDA margins expanding from 1.6% to 4.8%.

While this remains below industry average, the division is building positive momentum.

Of course it remains a speculative stock and investors should seek professional financial advice if considering this stock for their portfolio.

The Asia Pacific Engineering division’s EBITDA margins declined from 10.9% to 7.5% driven by the continued wind down of a number of major projects in early fiscal 2018, as well as “project clean up” in APAC North.

The division restructured in the second half with the aim of creating a solid platform for growth going forward.

While management didn’t provide fiscal 2019 guidance, the rhetoric regarding the group’s outlook was positive.

Chairman, Michael Alscher said, “Having completed the company’s restructure, we are now entering a phase of stability and our focus is shifting to incremental growth driven by organic initiatives, business optimisation and disciplined, conservatively funded ‘on-strategy’ accretive acquisitions.”

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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