The warnings keep coming. Engineering contractor and project manager Cardno (CDD) has downgraded FY15 profit guidance to $48-51m, the mid point of which implies a decline of 37% on FY14. Second half profit looks likely to be half that of the first half.
Engineering contractor and project manager Cardno (CDD) has warned that first half operating profit will be weak, down around 25% at the mid point of latest guidance, compared with the first half of FY14. The major reason for the downgrade stems from the rolling off of resources work which, as yet, has not been countered by an expected ramp-up in infrastructure spending. Moreover, starting dates for new projects in the Americas have been delayed and costs to integrate new businesses, notably PPI, have been higher. On the infrastructure side, management remains confident that increased spending will assist the bottom line in the second half. Most brokers are inclined to wait and see just how much assistance that does provide.
Cardno (CDD) has secured a major acquisition, opening up new areas of operations. PPI Technology Services is an oil and gas field services consultant based in Houston, Texas. This is the company’s largest acquisition to date and brokers believe it offers significant value.
Cardno’s first half update included a profit guidance reduction to $27-31m from a previous $35m. Several factors contributed to the downgrade but an earnings decline from resources-related work in Aust was the main culprit, the broker notes. Management expects a stronger second half but did not provide specific guidance. The broker has cut its FY15 profit forecast by 25%.
Target $5.50 (was $6.97). The broker has taken the hatchet to its forecasts, cutting FY13-14 EPS by 10% and 11%, with the price target also coming off. Macquarie blamed a deterioration in Australian end market conditions combined with cutbacks to US defense spending.