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Cardno Limited and its Controlled Entities for the year ended 30 June 2010 

## 33. FINANCIAL RISK MANAGEMENT CONTINUED 

## Market risk continued 

## Group sensitivity 

At 30 June 2010, if interest rates had changed by -/+ 50 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been $397,000 higher/lower (2009: $45,000 higher/lower), mainly as a result of lower/higher interest expense on variable bank loans partially offset by higher/lower interest income from cash and cash equivalents. There have been no changes in the underlying assumptions from the previous year. 

## Fair values 

The carrying values of financial assets and liabilities approximate their fair values due to their relatively short term nature. 

## Capital risk management 

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. 

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 

The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders. 

## 34. BUSINESS COMBINATIONS 

## Year ended 30 June 2010 

(a) During the year the Group acquired 100% of the net assets of ITC Group with an effective date of 1 January 2010 and Australian Underground Services Pty Ltd (AUS) with an effective date of 1 April 2010. 

ITC is an Australian based services consulting engineering firm with offices in five Australian States and Territories with around 100 staff. AUS is an Australian based utility detection and mapping services firm with around 30 staff based in Victoria. 

The acquired businesses contributed revenues of $9,840,744 and net profit after tax (NPAT) of $1,457,039 to the Group for the year. If the acquisitions had occurred on 1 July 2009 revenue and NPAT for the Group would have been $489,280,901 and $38,696,379 respectively. 

## Details of acquisitions 

<img src='content_image/272308.jpg'>

At the time of purchase the vendors of ITC Group subscribed for shares in Cardno Limited to the value of $5,801,549 and the vendors of Australian Underground Services Pty Ltd (AUS) subscribed for shares in Cardno Limited to the value of $1,498,038. The fair value of the ordinary shares issued was based on the 10 day volume weighted average price (VWAP) for AUS of Cardno Limited shares and the 30 day VWAP for ITC Group of Cardno Limited shares. The fair value price was $4.16 for the purchase of shares by vendors of ITC Group issued 11 February 2010 and $3.99 for the purchase of shares by vendors of Australian Underground Services Pty Ltd issued 14 May 2010. 

