It's actually been Construction Sciences for quite some time and only become a "portfolio" company under the Wankmuller rule. The unusual bit here it I would have immediately thought it was ripe for sell off as it's quite a different business, except the reasoning for the separation was CS was being weighed down by Overheads from greater Cardno. Another "genius" acquisition. The Holcim is work not even on any agenda within the company.
I can't deny my German roots and I've done some research on past Cardno Strategy and management practice to try and get to the root to the problems they have experienced. Would you believe I'm using them as a test case in my doctorate, it's just such an interesting tale. I've been fortunate enough to personally know a number of ex and current Cardno people and they have been generous enough to contribute to my studies.
Cardno’s growth over the past 15 years was been built predominantly off the back of acquisitions, with the firm spending close to a $1 Billion on over 50 separate merger companies. In recent times a number of these acquisitions have had substantial impairments with write downs totaling nearly $500 Million. It’s not a enviable record and one that has to have stained the governance and culture of previous administrations.
After the Buckley decade, the CEO Michael Renshaw developed a plan to grow Cardno into a global top 20 engineering firm by 2020. His ambitions centered on having 25,000 staff. As a consequence of the acquisition practices (No doubt of which he was a key player) he was left without the ability to raise the necessary debt to see his plan through to completion. Of course his premature tenure of didn't help.
I actually think in consulting you either grow or die so I like his plan but I doubt he had the right people around him and he some huge cultural reform and baggage to manage.
If ever you want to understand why this company was headed in the wrong direction look at this video
Combining back office functions from the various acquisitions would seem to be normal and one of the main reasons for a merger. So why wouldn't you do it? Well, when you set it up all your back office in Colorado, a destination that doesn’t normally pop up on the top 10 list of locations to establish a back office group your not thinking clearly. Would you believe this folly actually increased overhead costs (as opposed to the planned reduction). Talk about poor execution of a reasonable idea. Now where are the back office functions? With the various separate business with almost no synergies.
The October 2015 Strategic Review contained a number of important reforms. One of which, was the establishment of the “Value Centre” in the Philippines, which targeted 20% of back office work and 10% of Engineering work within a 3 to 5 year period. In rough terms over 400 Staff would be re-deployed to the Philippines. This one has been silent for a while and I suspect Crescent are still considering this one.
At the same October 2015 update to Shareholders the then CEO – Richard Wankmuller outlined a 10/10/10 strategy. Effectively the company would focus on 10 geographic areas that afford the right economic environment to sell and cross sell our wide range of services. The firm would focus on 10 key multinational clients that fit our portfolio criteria and to whom “we can provide seamless engineering and environmental services and within the 10 geographic areas and 10 key clients we will always have 10 strategic opportunities”.
Another dead plan.
Now we have Crescent, what are their plans? At least we have stability and I doubt they will repeat the stupidity of the past but I'm not sure they have the imagination to take the company forward.
The usual applies DYOR, I'm still a share holder and think despite the firms best efforts to implode it has to be time for some sort of positive cycle, but the work of Crescent is not done yet. I've some confidence in the future and am looking forward to the release of the full year results.
CDD Price at posting:
$1.23 Sentiment: Hold Disclosure: Held
(20min delay)
