John Marlay and his comrades on the Cardno board have clearly decided the time for growth by acquisition has gone and they need a better operations person at the helm to try to lift earnings.
Marlay was unwilling to go into details on just why Michael Renshaw was shown the door yesterday but no one is hiding the fact the decision was prompted by the board, not the outgoing chief.
If more earnings cuts were planned they would have presumably come yesterday ahead of the planned release date of February 17 for the half-year results.
Back in November the company said earnings would be 30 per cent lower than year-ago returns at somewhere between $27 million and $31m.
This is a company that prides itself on its acquisitive history with the annual report noting last year it chalked up its 50th merger since listing a decade earlier with revenues climbing from $65 million on listing and earnings before interest and tax of $6.9m to $1.3 billion and $115.2m respectively.
January seems to be decision-making time at Cardno with long-running boss Andrew Buckley stepping down this time last year after a stunningly successful 16 years at the helm of the engineering services group.
Buckley was a civil engineer by background while Renshaw had a commercial background including a stint with the Queensland state government.
If Buckley was the M & A king then Renshaw was certainly the deal-maker. But it seems Marlay and the board would instead prefer to have a clean-up person at the helm to better integrate the past deals and grow the business the old-fashioned way.
The news has hit the company’s stock price hard with the scrip falling again today to a new 52-week low of $2.60 a share before recovering a touch to be trading at $2.66 by late morning, down from a high of $7.34 in May last year.
Renshaw, who ran the fast expanding US business, has 251,605 shares, a touch more than the 39 owned by interim chief Graham Yerbury.
The market is obviously a lot tougher with the resources slowdown but Cardno’s revenue stream comes from a wide variety of sources, ranging from the 2018 Commonwealth Games on the Gold Coast to the Waikanae water treatment plant in New Zealand.
In his note in the 2014 annual report Renshaw talked up the “record level of secured work, a solid pipeline of future opportunities, a robust balance sheet and strong cash flow”.
All of which hold today, according to Marlay.
What has changed then to prompt Renshaw’s departure other than a marked change at board level?