Annual Report
For the year ended 30 June 2016
Lodged with the ASX under the Listing Rule 4.3A
3P Learning Limited ABN 50 103 827 836
Dear Shareholders,
The past year has been one of significant challenge and change for 3P
Learning Limited. On 1 June we welcomed Rebekah O’Flaherty to our
Board and as Managing Director and Chief Executive Officer of the
company. Rebekah brings to 3P Learning deep experience in global
technology companies with particular expertise
in consumer
engagement and product and market development. We expect
Rebekah to lead and foster the development of a customer focused
and high performance culture in our key markets around the world.
During the year, revenue increased in all regions and products and we
increased our market share in key markets. Whilst it was re-assuring to
achieve positive growth during the year, our earnings did not live up to
our expectations and the company has a substantial amount of work to
do to build a globally competitive online education business.
Our investment in Learnosity delivered results ahead of expectations.
We expect substantial global demand for online assessments which will
strengthen Learnosity’s position as a global leader in this specialist
niche of the Education Technology market.
The strategic priorities put in place by the CEO, her Executive
Leadership Team and your Board are to:
strengthen the product portfolio
develop a scalable digital sales platform
implement a global operating model
With Rebekah’s leadership, and a reinvigorated 3P team, we feel
confident that 3P will build upon its strengths and firmly establish its
place on a global stage.
I would like to extend a personal thank you to my fellow Directors for
their significant contribution during the year and in particular during
the leadership transition. Having a strong and committed Board
enabled these changes to take place and at the same time ensure
business continuity.
Finally, I would like to thank every member of the 3P team for their
hard work and dedication as well as our customers and shareholders
for their continued support.
Yours sincerely,
Samuel Weiss
Chairman, 3P Learning Limited
Dear Shareholders,
I am delighted to share with you my first report as CEO and Managing
Director of 3P Learning Limited and the results for the year ended 30 June
2016.
Year in review
Key Financial Information
A$M (unless stated)
Revenue
Underlying Core EBITDA
Underlying Net Profit after Tax
Total Licences (Million)
ARPU (A$)
Learnosity – Revenue (€’000)
FY16
49.3
13.3
5.3
5.65
8.48
8.2
FY15
Pro Forma
44.8
16.9
10.8
5.31
8.33
5.4
Variation
%
10%
-21%
-51%
6%
2%
52%
EMEA delivered 14% constant currency revenue growth with a 10%
increase in licences. The Americas, achieved 19% constant currency revenue
growth and 14% licence growth, and the region is now cash flow break
even. We signed new district agreements including Chicago, the 4th largest
US school district, as well as Houston. In our key Australia and New Zealand
market, we increased both our market share and customer retention in the
primary segment year over year.
The year ahead
3P has key strengths to succeed in the increasingly competitive education
technology sector. We have a highly talented team who have strong insight
into innovating products that are both engaging and academically
rigorous. This is evidenced by our industry awards and the 5.6 million
students in over 17,000 schools across the world who use our products
every day.
Building on these strengths our focus this year, one of transition, will be in
3 key areas:
1. strengthen our product portfolio, with a focus on our flagship
Mathletics product and expanding our literacy offering
2. develop a more scalable sales model, including laying the
foundations to digitize all aspects of our business
3. move to a global operating model to deliver efficiency and
effectiveness
While executing in these areas, we expect to deliver revenue growth ahead
of cost growth in all markets and products in financial year 2017. We have
the right team in place to execute our plans and in turn put 3P in a
stronger position to accelerate sustainable global growth.
It is a real privilege to be leading such an extraordinary team of people and
I feel entirely accountable to them, as well as our shareholders and
customers who have placed their confidence in 3P Learning.
Rebekah O’Flaherty
CEO and Managing Director, 3P Learning Limited
3P Learning Limited
Directors' report
30 June 2016
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of 3P Learning Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2016.
Directors
The following persons were directors of 3P Learning Limited during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Samuel Weiss
Roger Amos
Claire Hatton
Rebekah O’Flaherty (appointed on 1 June 2016)
Timothy Power (resigned on 11 January 2016)
Principal activities
During the financial year the principal continuing activities of the Group consisted of developing, sales and marketing of
online educational programs to schools and parents of school-aged students. There was no significant change in the
nature of these activities during the year.
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2016
$'000
2015
$'000
Final dividend declared for the year ended 30 June 2015 of 1.8 cents per ordinary share
(2014: $82.73 per pre-IPO ordinary share)
2,428
12,500
There were no dividends recommended or declared for the year ended 30 June 2016.
Previous year
As part of the capital restructure and listing of the Company, pre-IPO shareholders were entitled to a dividend of
$12,500,000 which was declared on 2 June 2014 and paid on 9 July 2014.
Operating and financial review
The profit for the Group after providing for income tax and non-controlling interest amounted to $3,632,000 (30 June 2015:
$4,085,000).
A reconciliation of earnings before interest, tax, depreciation and amortisation ('EBITDA') to statutory profit before tax for
the year is as follows:
1
3P Learning Limited
Directors' report
30 June 2016
Underlying core EBITDA*
Depreciation and amortisation expense
Interest income
Finance costs
Underlying profit before income tax expense**
Income tax expense
Underlying profit after income tax expense***
Professional fees for initial public offering
Tax benefit
Restructuring costs
Tax benefit
Net profit after income tax expense for the year
Non-controlling interest
Profit attributable to owners of 3P Learning Limited
Consolidated
2016
$'000
2015
$'000
13,326
(5,064)
148
(649)
7,761
(2,476)
5,285
-
-
(2,231)
596
3,650
(18)
3,632
16,814
(3,062)
566
(20)
14,298
(3,588)
10,710
(9,368)
2,810
-
-
4,152
(67)
4,085
*
**
Underlying Core EBITDA represents earnings before interest, tax, depreciation and amortisation plus share of profits
of associates accounted for using the equity method, excluding professional fees for initial public offering and
restructuring costs.
Underlying profit before income tax expense represents reported profit before income tax expense of the Group,
excluding professional fees for initial public offering and restructuring costs.
*** Underlying profit after income tax expense represents reported profit after income tax expense of the Group,
excluding professional fees for initial public offering and restructuring costs.
Underlying Information, including this reconciliation to net profit after income tax expense, has been provided in order to
meet the demands from users of the financial reports for information to better understand aspects of the Group’s
performance. The directors believe that underlying profit after income tax expense is the most appropriate measure of the
maintainable earnings of the Group and thereby best reflects the core drivers of, and ongoing influences upon, those
earnings. For this reason, the impact of professional fees for initial public offering and restructuring costs is excluded from
the measurement of underlying profit after income tax expense.
Revenue
Total revenue for the year ended 30 June 2016 was $49,264,000 (30 June 2015: $44,247,000). All segments and all
licence products showed modest growth. Licence numbers for the Group grew 6.2% from 5.3 million to 5.7 million.
Performance
The profit for the Group after providing for income tax and non-controlling interest amounted to $3,632,000 (30 June 2015:
$4,085,000).
Australia and New Zealand (‘ANZ’) and Europe, Middle East and Africa (‘EMEA’) showed improved underlying core
EBITDA performance which contributed to the profit for the Group after providing for income tax and non-controlling
interest. This was offset by increased investment into Americas and corporate functions.
Depreciation and Amortisation expenses in the current year increased by $2,002,000 to $5,064,000 which was the result of
the accumulation of capitalised product development and software assets.
2
3P Learning Limited
Directors' report
30 June 2016
Net interest expense in the current year was $501,000 compared to a net interest income of $546,000 for the previous
year. This was driven by the long term borrowings taken out during the year and the reduction in cash and cash
equivalents.
One-off restructuring costs of $2,231,000 relating to the leadership transition and transactions costs associated with the
investment in Learnosity Holdings Limited impacted the current year. These transaction costs on investment were offset by
the share of profit recognised during the year from Learnosity.
In the previous year performance was impacted by one-off professional fees for initial public offering of $9,368,000.
Segment review
Segment review for the year is as follows:
ANZ
Americas
EMEA
Total Revenue
Segment underlying core EBITDA is as follows:
ANZ
Americas
EMEA
Total EBITDA
2016
$'000
2015
$'000
Change
$'000
Change
%
30,791
5,846
12,627
49,264
29,543
4,443
10,261
44,247
1,248
1,403
2,366
5,017
4%
32%
23%
11%
2016
$'000
2015
$'000
Change
$'000
Change
%
15,231
(4,039)
2,134
13,326
17,915
(1,999)
898
16,814
(2,684)
(2,040)
1,236
(3,488)
(15%)
102%
138%
(21%)
ANZ
Performance saw modest revenue growth of 4% to $30,791,000 driven by licence growth and price increases. Underlying
core EBITDA declined by 15% to $15,231,000. Corporate costs make up a significant part of ANZ’s costs and during the
year further investment was made into development of product, corporate systems, including the implementation of a new
CRM system, and into the transition from on-premises server based product delivery to cloud based product delivery.
Americas
Revenue in Americas grew 32% to $5,846,000 driven by licence growth of 14% during the year. EBITDA declined
$2,040,000 as the segment was impacted by the strategic investment in the sales force and increased inter-segment
royalty payments on revenue growth.
EMEA
Operational performance grew in EMEA with revenue up 23% to $12,627,000 driven by 10% licence growth. EBITDA was
up 138% to $2,134,000 due to revenue contribution less growth in inter-segment royalties.
The Group has net assets of $43,549,000 (30 June 2015: $33,142,000) which was a result of new equity issued in relation
to Learnosity acquisition as detailed in the 'Significant changes in the state of affairs below', and profits for the financial
year, off-set by additional borrowings of $11,500,000.
The online K-12 education industry is a fast moving industry and the rate of technological change and competition is
increasing. The risk associated with the market requires management to continually focus on innovation and change to
keep pace with competitors and new entrants to the market. The Group invested $10,076,000 (30 June 2015: $8,160,000)
in product development and this level of investment is expected to continue to remain competitive. The current carrying
value of product development assets is $17,941,000 (30 June 2015: $11,848,000).
3
3P Learning Limited
Directors' report
30 June 2016
The material business risks faced by the Group that are likely to have an effect on the financial prospects of the Group are
outlined below:
Competition risks: The Group operates in a highly competitive industry and there are a large number of participants
targeting the K-12 segment, many with significant resources and capital.
Distribution rights to Reading Eggs Product risks: The Group does not own the intellectual property rights to Reading Eggs
and Reading Eggspress.
Technology and intellectual property risks: The Group’s technology platforms and systems may be disrupted which could
affect the Group’s reputation, ability to generate income and financial performance.
Economic risks: In particular, the Group is exposed to a number of macro risks potentially impacting its economic
sustainability.
Exchange rate risk: Volatility in exchange rates can impact the Group’s ability to maintain or grow margins, However, to a
significant extent the Group’s business currently enjoys natural hedges: the revenue that the Group obtains in a particular
foreign currency closely matches the expenses it incurs in that currency (such as the British Pound). The Board believes
that natural hedges presently mitigate any exchange rate volatility risk for the Group to an economically acceptable level.
Significant changes in the state of affairs
Investment in associates
On 9 September 2015, the Group acquired an initial 23.07% interest in Learnosity Holdings Limited (www.learnosity.com) a
provider of SaaS Assessment tools, based in Dublin, Ireland for a total cost of $27,875,000. On this date the Group also
entered into an option to purchase an additional 16.93%. The Group exercised this option on 19 January 2016 for a
consideration of $20,529,000. Cash consideration of $33,748,000 was paid up to 30 June 2016 and a further $6,092,000 is
accrued and will be paid subsequent to the end of the financial year.
Consideration paid was settled by the issuance of 4,108,527 shares in the Company. This included 2,292,649 shares
issued on 7 December 2015 and 1,816,878 shares issued on 31 March 2016, which are both held in escrow for a period of
12 months from their respective issue dates.
Long term borrowings
During the financial year, the Group entered into a new banking facilities agreement with HSBC bank including a working
capital facility for $20,000,000 and a bank guarantee and other ancillary facility for $2,000,000. As at 30 June 2016, the
Group had used $11,500,000 of the working capital facility and $1,839,000 of the bank guarantee and other ancillary
facility.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 24 August 2016, the Group increased the HSBC banking facilities agreement including the working capital facility from
$20,000,000 to $30,000,000 and maintained the bank guarantee and other ancilliary facility for $2,000,000.
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Group’s growth is expected to be supported by the continuing shift of consumers seeking more engaging and interactive
online learning resources and resources with proven academic rigour.
The Group expects to focus on its core products by increasing their functionality, adding additional content and enhancing
the user experience. The Group also expects to establish a scalable sales and operational model to support its growth in
student licences and home licences in both existing and potential new territories.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
4
3P Learning Limited
Directors' report
30 June 2016
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Samuel Weiss
Independent Non-Executive Chairperson
AB, MS, FAICD
Significant experience as a senior executive and as a non-executive director in
education, technology and consumer products companies in Australia, North
America, Europe and Asia.
Chairman of Altium Limited (ASX: ALU) and Surfstitch Group Limited (ASX: SRF).
Other current directorships:
Former directorships (last 3 years): Non-Executive Director of iProperty Group Limited (ASX: IPP), Oroton Group Limited
(ASX: ORL) and Breville Group Limited (ASX: BRG) and Chairman of Ensogo Limited
(ASX: E88)
Member of the Nomination and Remuneration Committee and the Audit and Risk
Committee
306,508 ordinary shares
Special responsibilities:
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Rebekah O’Flaherty
Chief Executive Officer (appointed on 1 June 2016)
B.Ec., MBA, GAICD
Extensive experience in technology, digital, product development, sales, marketing
and distribution across Asia Pacific, Europe and United States gained over 12 years
with Hewlett Packard, Telstra and most recently Origin Energy.
None
Other current directorships:
Former directorships (last 3 years): None
None
Interests in shares:
None
Interests in options:
500,000 performance rights
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Roger Amos
Independent Non-Executive Director
FCA, FAICD
Over 35 years of experience in finance, business and accounting. Previously a
partner at the international accounting firm KPMG for 25 years.
Non-Executive Director of REA Group Limited (ASX: REA), Chairman of Tyrian
Diagnostics Limited (ASX: TDX) and Deputy Chairman of Enero Group Limited (ASX:
EGG)
Former directorships (last 3 years): Non-Executive Director of Austar United Communication Limited (ASX: AUN)
Special responsibilities:
Member of the Nomination and Remuneration Committee and Chairman of the Audit
and Risk Committee
31,992 ordinary shares
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Claire Hatton
Independent Non-Executive Director
BSc, MBA, MAICD
Over 20 years of global experience in strategy, sales, marketing and operations.
Significant experience in the digital and technology market. Previously held senior
roles at Google, Travelport and Zuji.com.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Nominations and Remuneration Committee and Member of the Audit and
Risk Committee
31,000 ordinary shares
Interests in shares:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
5
3P Learning Limited
Directors' report
30 June 2016
Company secretary
Ms. Stephanie Belton (LLB, MBA) was appointed General Counsel of the Group in March 2016 and as company secretary
on 22 April 2016. She has over 20 years' corporate and commercial experience in Australia and the UK.
Mr. Jonathan Kenny resigned as company secretary on 22 April 2016.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2016, and the number of meetings attended by each director were:
Full Board
Attended
Held
Nomination and
Remuneration Committee
Attended
Held
Audit and Risk Committee
Attended
Held
Samuel Weiss
Roger Amos
Claire Hatton
Timothy Power*
10
10
10
5
10
10
10
7
5
5
5
1
5
5
5
4
5
5
5
1
5
5
5
3
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
*
Timothy Power attended the Nomination and Remuneration Committee and Audit and Risk Committee meetings as
an observer.
Rebekah O'Flaherty was appointed to the Full Board on 1 June 2016. No Board meetings were held during the period from
1 June to 30 June 2016.
6
3P Learning Limited
Directors' report
30 June 2016
Letter from the Chair of the Nominations and Remunerations Committee
Dear Shareholder,
Last year, at the Company’s Annual General Meeting, we received a “first strike” against the 2015 remuneration report in
that more than 25% of votes cast by those entitled to vote voted against the report.
As part of our response to this vote, we have consulted with a number of institutional investors and with proxy advisors, in
order to better understand the reasons for the strike vote.
The purpose of my letter to you is to set out the changes that we have made to our remuneration policies and practices and
to explain how they have been applied in determining our compensation plans. The principal concerns identified in regard to
the 2015 remuneration report included:
Compensation of the Chief Executive Officer;
Terms and conditions of the Company’s long term incentive plan; and
Board composition.
Compensation of the Chief Executive Officer
In January 2016, our long time Chief Executive Officer, Timothy Power resigned. The Company entered into a commercial
negotiation with Tim about the final payment to him that recognised the length and impact of his tenure and did not exceed
the limit to be paid under the Corporations Act 2001 without shareholder approval. The following table sets out the
compensation paid to Tim in respect of the years ended 30 June 2016 and 30 June 2015.
Short-term benefits
Salary
$
STI
plan
$
IPO
bonus *
$
Termination
benefits
$
Post-
employment
benefits**
$
Long
term
employee
benefits
$
LTI
plan
$
Total
$
Performance
related
%
LTIP
%
T Power (Former Chief Executive Officer resigned 11 January 2016)
2016
2015
254,433 225,000
-
438,524
30,000
98,288
- 1,046,245
411,525 100,000 6,828,750
-
29,577
98,539 100,000 7,568,391
N/A
-
94%
1%
* The one off cash bonus paid in 2015 was detailed in the Initial Public Offering (‘IPO’) prospectus, issued by the Company on 19 June
2014. The bonus was awarded for work done prior to the IPO and was pre-committed by the prior owners of the Company. The bonus
was paid in July 2014, and so was required to be included in the Company’s remuneration report for 2015.
** Amounts comprised of superannuation only.
In April 2016, the Company announced the appointment of Rebekah O’Flaherty as Chief Executive Officer. Rebekah joined
the Company on 1 June 2016 and the remuneration report includes full details of Rebekah’s salary and benefits package,
including share-based benefits all of which are subject to shareholder approval. Rebekah is a seasoned global technology
industry executive with significant experience leading change, the transformation of customer experience and the creation of
digital platforms.
In instructing the international executive search for the new Chief Executive Officer, the Board offered a salary package
which reflected the evolution and the increased complexity of the Company since its IPO in 2014, and which recognised the
skill set required to transform the Company and restore shareholder value.
7
3P Learning Limited
Directors' report
30 June 2016
The content and structure of Rebekah’s remuneration package was benchmarked against the market and is of the level
required to secure an executive of Rebekah’s experience and ability. In addition, the key remuneration elements set out
below are designed to address the increased risk in joining the Company at a time of transition and transformation and to
partially compensate for any element of guaranteed remuneration forgone by Rebekah.
Rebekah O'Flaherty fixed remuneration
(including compulsory superannuation
contributions)
Rebekah O'Flaherty
at risk remuneration
1. Short term
incentive:
2. Long term
incentive:
3. Special long term
incentive:
$610,000 per annum.
50% of annual fixed remuneration, subject to the Board's assessment of
Rebekah’s achievement of applicable performance targets in accordance
with the Company's short term incentive plan (‘STIP’). If an Event (as
defined in the long term incentive (‘LTI’) plan) occurs in any financial year,
Rebekah will be entitled to receive payment of the target STI amount for the
relevant year.*
50% of annual fixed remuneration, subject to shareholder approval.
Subject to shareholder approval, 400,000 performance rights under the LTI
plan subject to the following conditions:
a) Where the volume weighted average price (‘VWAP’) of the Company's
ordinary shares for the period of 60 consecutive days after the date of
release of the Company's annual results for the period ended 30 June 2019
is:
i) Less than $3.95, none of the performance rights will vest;
ii) Greater than $3.95 per share, 50% of the performance rights will vest;
iii) Greater than $4.45 per share, 75% of the performance rights will vest;
and
iv) Greater than $5.70 per share, 100% of the performance rights will vest.
b) any shares issued on vesting of any performance right shall be placed in
escrow for a period of 12 months from the date of vesting.
4. Further long term
incentive:
Provided Rebekah remains in the role of Chief Executive Officer until 1
September 2019, she shall, subject to shareholder approval, receive an
additional award of 100,000 performance rights under the terms of the LTI
plan.
* This provision recognises the increased likelihood of an Event during the current period of transformation and change and facilitates the
full engagement of the CEO in completing the Event process.
The terms of the special long term incentive award (paragraph 3 above), were based on the Company’s share price at the
time of Rebekah’s appointment and are specifically designed to drive substantial revenue and earnings growth and enhance
shareholder value. This award continues to operate as a strong incentive, notwithstanding recent movements in share price,
and is complimentary to the other elements of Rebekah’s remuneration package.
Upon joining the Company, Rebekah was required to forfeit an element of share-based remuneration that would have been
paid had she not left her former employer. The further long term incentive (paragraph 4 above) is designed to compensate
Rebekah for the loss of this equity award and is subject to a time based hurdle only.
We are very grateful to Jonathan Kenny, our Chief Financial Officer, who served as interim Chief Executive Officer from 11
January 2016 to 31 May 2016. Jonathan did an excellent job in a very challenging time for the Company and not only
steadied the business but also stepped up to make key strategic decisions. Jonathan’s salary increased over this period
only from $388,000 to $450,000 (inclusive of superannuation). In recognition of his exemplary performance, and to retain
him as a key leader of our Company, Jonathan was granted 300,000 shares on 19 February 2016, subject to time based
vesting dates as follows:
a)
b)
c)
as to an initial 100,000 shares, 15 September 2016;
as to the next 100,000 shares, 15 September 2017; and
as to the final 100,000 shares, 15 September 2018.
8
3P Le
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9
3P Learning Limited
Directors' report
30 June 2016
Remuneration report (audited)
This remuneration report for the year ended 30 June 2016 outlines the director and executive remuneration arrangements
for the Group in accordance with the Corporations Act 2001 and its Regulations. For the purposes of this report, key
management personnel (‘KMP’) are defined as those persons having authority and responsibility for planning, directing and
controlling the activities of the Group, directly or indirectly, including all directors, whether executive or non-executive. The
disclosures in the remuneration report have been audited.
The Company has not engaged any remuneration consultants to advise on remuneration policy or the structure or level of
executive remuneration.
The remuneration report is presented under the following headings:
Overview of 3P Learning remuneration policy;
Details of senior executive remuneration structure;
Non-executive directors’ remuneration;
Service agreements;
Share-based compensation
Additional disclosure relating to key management personnel
Overview of 3P Learning remuneration policy
The Nomination and Remuneration Committee (‘NRC’) is responsible for the remuneration arrangements for its directors
and senior executives and for reviewing and approving key employment policies and practices. The performance of the
Group depends on the quality of its directors and executives. The Company’s remuneration philosophy is to attract, motivate
and retain high performance and high quality personnel.
The Group's executive reward framework is founded on the objectives of:
driving growth and profitability;
aligning executive rewards with achievement of strategic objectives and the delivery of shareholder value; and
providing competitive remuneration packages that recognise both individual and organisational performance
The NRC has structured an executive remuneration framework that is market competitive, is designed to retain and motivate
the Company’s leadership team and sets a standard for transparency and good corporate governance.
The determination of non-executive director and executive remuneration is separate.
Details of senior executive remuneration structure
The senior executive remuneration structure has three key components stated below, including what the Board has agreed
is the optimal mix between fixed and “at risk” components for the Chief Executive Officer and senior executives. Details for
each of the individual components are as follows:
Fixed annual remuneration
Short term incentive
Long term incentive
Fixed salary set by reference to
appropriate benchmark information and
experience of individuals
Includes superannuation and salary-
sacrifice non-monetary benefits
25 - 50% of fixed remuneration
25 - 50% of fixed remuneration
Annual cash incentive
Grant of premium options
12 month period
Targets linked to group performance
3 year performance period
Performance hurdles linked to revenue
and EPS growth
Executive remuneration
Fixed remuneration
The objective for fixed remuneration is to provide a base level of compensation appropriate to the senior executive’s role,
responsibilities and experience.
Fixed remuneration is determined with reference to available market data including benchmarks, the scope of the role and
the qualifications and experience of the individual. The NRC have re-aligned fixed remuneration to ensure consistency of
application and market parity.
Fixed remuneration includes base salary, non-monetary benefits, superannuation and other statutory components such as
long service leave.
10
3P Learning Limited
Directors' report
30 June 2016
Fixed remuneration is reviewed annually by the NRC, based on individual and business unit performance, the overall
performance of the Group, and comparable market remuneration. Superannuation in excess of the concessional
contribution cap is provided as cash salary.
Senior executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor
vehicle benefits) where it does not create any additional costs for the Group and provides additional value to the executive.
The fixed remuneration for the Chief Executive Officer is reviewed annually by the NRC, for approval by the Board, following
consideration of her performance against her annual KPIs.
Performance based remuneration
The performance based remuneration components for senior executives align reward with the achievement of annual and
longer term objectives of the Group, and the optimisation of shareholder value over the short and long term.
The performance based components comprise a STI plan and a LTI plan, each of which is designed to link to key elements
of the Group business plan and budget.
Executive remuneration
Details of remuneration paid to the current and former executives, for the years ended 30 June 2016 and 30 June 2015, are
set out below:
Short-term benefits
Salary
$
STI plan
$
Current executives
IPO
bonus
$
Termin-
ation
benefits
$
Post-
employment
benefits
$
R O'Flaherty (Chief Executive Officer appointed 1 June 2016)
Long
term
employee
benefits
$
LTI
plan*
$
Total
$
Perform-
ance
related
%
LTIP
%
2016
48,333
-
-
-
2,500
-
3,457
54,290
-
-
J Kenny (Chief Financial Officer and Interim Chief Executive Officer from 11 January 2016 to 31 May 2016)
2016
377,802
-
-
2015
357,530
75,000
300,000
-
-
30,000
30,000
- 138,142
545,944
-
-
- 75,000
837,530
55%
9%
Former executive
T Power (Former Chief Executive Officer resigned 11 January 2016)
2016
254,433
225,000
-
438,524
30,000
98,288
-
1,046,245
N/A
-
2015
411,525
100,000
6,828,750
-
29,577
98,539 100,000
7,568,391
94%
1%
* The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of
awards that are likely to vest and the expired portion of the vesting period.
11
3P Learning Limited
Directors' report
30 June 2016
Short term incentives
What is the STI and who participates?
The remuneration of the Group’s senior executives is linked to the Company’s short term annual performance through a
cash based STI. The Group STI program is designed to deliver sustainable performance and continued growth by retaining
talent and rewarding performance. The key objectives of the STI program are to:
drive and reward outstanding performance against annual strategic financial and operational performance
objectives;
promote effective management of capital, in the short, medium and long term;
position the Company to over achieve in future years;
emphasise and reward team and Company performance outcomes;
provide competitive and motivating reward opportunities;
create a clear and transparent link between performance and rewards with minimum subjectivity; and
be simple to administer and easily understood.
What are the performance measures?
Financial performance measures are set for each senior executive based on profit and revenue targets. These targets are in
turn derived from the Company’s business plan and budget as the NRC considers this to be the best way to ensure the aims
of the business plan and budget are met.
Currently, the Company’s STI Plan does not include non-financial performance objectives. As part of the ongoing
development of the Company’s remuneration framework, the NRC will consider non-financial measures that are within the
sphere of influence of the individual and are aligned with the Company’s overall business goals.
The performance measures are as follows:
Performance measure
Revenue
EBITDA
Executive allocation
50%
50%
Why were these performance measures chosen?
The Board considers the financial measures to be appropriate as they are aligned with the Group’s objective of delivering
profitable growth and, improved shareholder returns.
The Group operates in the fast moving and rapidly changing global environment of education technology in which a large
number of companies, individuals, startups and even global technology giants like Amazon and Google are trying to
establish themselves as credible suppliers to schools for education services. Today, no one company has significant market
share, or a perceived advantage to any other. The Board believes that the Group is capable of achieving a market leading
position in the countries in which it operates if management is incentivised to deliver both rapid growth in revenue and
consistent growth in earnings.
What is the amount the executives can earn?
Financial measure – level of performance
Below Threshold (i.e. <90% of Target)
Target
Above Target (i.e. > 100% of Target)
* Pro-rata payment made between these points
% of Target incentive
award*
0%
100%
Up to 160%
When are the performance conditions tested?
Performance conditions are tested and incentive payments under the STI plan are determined by the NRC after the
approval and release of the Company’s annual results in August.
12
3P Learning Limited
Directors' report
30 June 2016
STI for the 2016 financial year
The target STI opportunity for the financial year ended 30 June 2016 was up to an amount equal to 25% of the senior
executive’s fixed remuneration (up to 50% in the case of the Chief Executive Officer and Chief Financial Officer).
There were 12 participants in the STI incentive payments for FY16 and 3 achieved their targets for the year. For FY16 a
total of $105,347 was paid for STI awards.
The former Chief Executive Officer, Tim Power, received an STI payment of $225,000 as part of his final payment
negotiated on commercial terms with the Company.
Long term incentives
The LTI plan has been modified this year in light of feedback both from the Company’s shareholders and from the review of
the Company’s remuneration framework. The objective is to link the long term reward for senior executives with the creation
of shareholder value through the allocation of equity awards which are subject to specific performance conditions.
The key changes to the plan for 2016 are as follows:
a revenue based hurdle is included in the plan, in addition to an EPS hurdle;
participants in the plan have been restricted to the new senior executive team comprising the Chief Executive Officer
and her direct reports; and
the equity vehicle under the plan has changed from performance rights to options to be issued at a premium to the
VWAP at the time of issue (premium options)
The revenue hurdle has been chosen to reward participants for increasing the rate of growth for the Company especially in
international markets. This hurdle is complemented by the EPS hurdle, which ensures that there is also focus on
shareholder value.
The senior executive team, which includes a number of new leaders, has been tasked with driving significant growth for
shareholders. The choice of premium options as the equity vehicle under the plan is in recognition of the high growth nature
of online education and its fragmented early stage state in global markets. This should maximise the opportunity for the
senior executive team to benefit from that growth in a way that is consistent with providing value for shareholders.
What are the objectives of the LTI?
The key objectives of the LTI program are to:
align executive performance with shareholder return;
drive and reward outstanding performance against three year strategic financial and operational performance
objectives;
emphasise and reward senior executives for long term Company performance outcomes;
provide competitive reward opportunities that motivate participants; and
create a clear and transparent link between long term performance and rewards with minimum subjectivity.
Who are the participants of the LTI?
The Chief Executive Officer and her five direct reports are eligible to participate in the LTI plan.
What is the amount that executives can earn?
Beneficiaries under the LTI plan can earn an amount equal to a percentage of their annual fixed remuneration in the range
of 25%-50%.
How is the LTI grant determined?
Grants will be made in September 2016 after the 30 June 2016 financial statements have been finalised. The vesting date
will be three years after the grant date, following the approval of the financial results for FY19. Any premium options which
do not meet the performance conditions at the end of the performance period will lapse.
Awards will take the form of premium options. Each option represents a conditional right to acquire one share in the
Company on exercise by payment of an exercise price determined by the Board during a limited exercise period.
For the purpose of the FY17 grant under the LTI plan, the exercise price will be set at a premium of 43% to the Company’s
share price on the date of grant. The life of the grant is four years.
13
3P Learning Limited
Directors' report
30 June 2016
The number of options to be granted will be determined by dividing the dollar award value by the value of an option at the
time of grant (based on a two week VWAP of the Company’s shares at that time).
What are the performance conditions?
The performance conditions for the year ending 30 June 2017 grant are based on the following:
50% of award to be tested based on compound annual growth in revenue; and
50% of award to be tested based on compound annual growth in EPS.
Each performance condition is tested following finalisation of the annual financial results for the year ending 30 June 2019
(performance period).
The financial hurdles are independent of each other. One can be achieved without the other hitting threshold.
What vesting schedules apply?
During the financial year, the Board reviewed the award schedule in light of the Company’s historical financial performance
and the three year revenue and EBIT growth forecasts. The Board approved challenging threshold, target and stretch
growth rates (using FY16 as the base) in respect of both the revenue and EPS hurdles, which are based on the Company’s
strategic plan and are reflective of the Company’s growth objectives. Both hurdles require double digit growth at the
threshold level for any award to occur.
The following award schedule applies to both performance hurdles:
Performance level
Below threshold
Threshold
Target
Stretch
The Board has chosen to offer significant incentive opportunity if the Senior Executive team can substantially increase the
rate of growth in revenue and EPS as the Board believes this is in the interest of the Senior Executive team and
shareholders alike. The target hurdle has been set to be stretching but achievable and the stretch target to be particularly
ambitious.
% of options awarded
0%
80%
100%
150%
Performance conditions and disclosure of targets
The Board considers the combination of revenue and EPS hurdles an appropriate balance to ensure that ‘top line’ growth is
pursued over the long term, whilst growth in earnings is maintained.
In particular, the revenue hurdle has been adopted in light of the Group’s desire to accelerate growth to achieve national and
international expansion. The Board has selected EPS as a performance measure because it provides a relevant indicator of
shareholder value and provides a clear target to drive and motivate senior executive performance.
The publication of prospective revenue and EPS targets for future performance periods would require the disclosure of price
sensitive information. Accordingly, the Company will not disclose prospective targets but will disclose historic targets and the
Company’s performance against those targets.
Premium options may lapse in the event that the relevant performance conditions are not met. In addition, premium options
may be forfeited if a ”claw back” event occurs during the performance period. A claw back event includes circumstances
where a senior executive has engaged in fraud, dishonesty or gross misconduct, where the financial results that led to the
equity award are subsequently shown to be materially misstated, or where the behaviour of a senior executive brings the
Company into disrepute or impacts the Company’s long term financial strength.
LTI for the 2016 financial year
The relevant EPS target threshold for awards under the LTI plan in the financial year ended 30 June 2016 was 8.19 cents
against an actual underlying EPS figure of 3.87 cents*.
No awards were made under the LTI plan for the financial year ended 30 June 2016, other than the awards made to
Rebekah O’Flaherty on her appointment to the role of Chief Executive Officer, which are subject to shareholder approval at
the 2016 AGM and the award to Jonathan Kenny in relation to his role as Interim Chief Executive Officer.
*Underlying EPS is calculated as Underlying profit after income tax expense of $5,285,000 (as defined in the Operating Financial Review
of the Directors’ Report) divided by 136,650,228 being the weighted average number of shares as disclosed in Note 37.
14
3P Learning Limited
Directors' report
30 June 2016
Non-executive directors' remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of the
directors. Non-executive directors' fees and payments are reviewed annually by the NRC. The Chairman's fees are
determined independently to the fees of other non-executive directors based on comparative roles in the external market.
The Chairman is not present in any discussions relating to determination of his own remuneration.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The most recent determination was at the 2014 Annual General Meeting where the shareholders approved the
aggregate remuneration be fixed at $650,000 per annum. Board and committee fees, as well as statutory superannuation
contributions made on behalf of the non-executive directors, are included in the aggregate fee pool.
The table below shows the structure and level of non-executive director fees for the financial year ended 30 June 2016.
These will remain the same for financial year ending 30 June 2017.
Fee applicable
Board
Audit and Risk Committee
Nominations and Remuneration Committee
Chair
$
150,000
20,000
20,000
Member
$
75,000
10,000
10,000
Details of the remuneration for the Chairman and independent non-executive directors for the financial years ended 30 June
2016 and 30 June 2015 are set out in the table below.
Name
S Weiss (Chairman)
R Amos
C Hatton
Total
Fees and
allowances
$
176,333
181,153
105,000
105,673
98,667
95,608
380,000
382,434
2016
2015
2016
2015
2016
2015
2016
2015
IPO bonus
$
Post-
employment
benefits
$
-
100,000
-
50,000
-
50,000
-
200,000
16,752
17,248
9,975
10,061
9,373
9,103
36,100
36,412
Total
$
193,085
298,401
114,975
165,734
108,040
154,711
416,100
618,846
Service agreements
Non-executive directors do not have fixed term contracts with the Company. On appointment to the Board, all non-
executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
summarises the Board policies and terms, including compensation. Non-executive directors retire by whichever is the
longer period: the third annual general meeting following their appointment or the third anniversary date of appointment,
but may then be eligible for re-election.
Remuneration and other terms of employment for executives are formalised in employment agreements. The Chief
Executive Officer and Chief Financial Officer do not have a fixed term contract with the Company. Details of the
employment agreements are as follows:
15
3P Learning Limited
Directors' report
30 June 2016
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Rebekah O’Flaherty
Chief Executive Officer
1 June 2016
Open ended
Rebekah will receive a fixed annual remuneration of $610,000, inclusive of statutory
superannuation. Rebekah will be eligible to receive an annual short term incentive
with a target STI of 50% of her fixed annual remuneration, as determined by the
Board for each financial year ending after 30 June 2016. Payment of the cash bonus
will depend on the Group’s performance and Rebekah’s achievement of certain key
performance indicators or at the discretion of the Board. As part of a long term
incentive package and subject to shareholder approval, Rebekah may be entitled to
receive an equity based award under the LTI plan with a value equivalent to 50% of
her fixed annual remuneration, commencing 1 July 2016. Further, subject to
shareholder approval, as part of her appointment package, Rebekah will receive an
award of up to 400,000 performance rights under the LTI plan subject to specific
long term performance indicators. In addition, provided that Rebekah remains in the
role of Chief Executive Officer until 1 September 2019, subject to shareholder
approval, she will receive an additional award of 100,000 performance rights under
the terms of the LTI plan. Either party may terminate the employment contract by
giving six months’ notice in writing. The Company may terminate Rebekah’s
employment contract by making a payment in lieu of notice. In the event of serious
misconduct or other specific circumstances warranting summary dismissal, the
Company may terminate Rebekah’s employment contract immediately by notice in
writing and without payment in lieu of notice. Upon the termination of Rebekah’s
employment contract, she will be subject to a restraint of trade period of 12 months.
The Company may elect to reduce the restraint of trade period, or eliminate the
period in its entirety. The enforceability of the restraint clause is subject to all usual
legal requirements.
Jonathan Kenny
Interim Chief Executive Office and Chief Financial Officer
1 July 2014
Open ended
Jonathan will receive annual fixed remuneration of $388,000 plus statutory
superannuation. Jonathan will be eligible to receive an annual short term incentive
with a target STI of 50% of his fixed annual remuneration, as determined by the
Board. Payment of the cash bonus will depend on the Group’s performance and
Jonathan’s achievement of certain key performance indicators or at the discretion of
the Board. As part of a long term incentive package Jonathan may be entitled to
receive an equity based award under the LTI plan with a value equivalent to 50% of
his fixed annual remuneration. On 19 February 2016, it was determined that 300,000
ordinary shares were to be issued to Jonathan as a retention and reward bonus in
acknowledgement of his increased responsibilities and ongoing contributions to the
Group as Interim Chief Executive Office. The first issue date will be 15 September
2016, and subsequent to that 100,000 shares will be issued in 2017 and 2018,
subject to continued employment at that time. The Board may, at its absolute
discretion, elect to issue some or all of these shares, regardless of the vesting dates.
Either party may terminate the employment contract by giving six months’ notice in
writing. The Company may terminate Jonathan’s employment contract by making a
payment in lieu of notice. In the event of serious misconduct or other specific
circumstances warranting summary dismissal,
terminate
Jonathan’s employment contract immediately by written notice and without payment
in lieu of notice. Jonathan’s employment contract also contains a post-employment
restraint of trade period of up to 18 months. The Company may elect to reduce the
restraint of trade period, or eliminate the period in its entirety. The enforceability of
the restraint clause is subject to all usual legal requirements.
the Company may
16
3P Learning Limited
Directors' report
30 June 2016
Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2016 are set out below:
Name
Date
Shares
Issue price
$
Jonathan Kenny
Timothy Power
1 October 2015
1 October 2015
30,000
40,000
$2.50
$2.50
75,000
100,000
Options
There were no options over ordinary shares issued to directors or other key management personnel as part of
compensation that were outstanding as at 30 June 2016, aside from the performance rights disclosed above pertaining to
Rebekah and Jonathan (the former being subject to shareholder approval at the Annual General Meeting).
In accordance with the terms of their employment agreements, an award of premium options to each of Rebekah and
Jonathan will be considered in respect of FY17. In the event such award is made to Rebekah, it will be submitted for
shareholder approval at the Annual General Meeting.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Samuel Weiss
Roger Amos
Claire Hatton
Jonathan Kenny
Timothy Power *
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the end of
the year
130,400
17,500
25,000
118,100
3,036,472
3,327,472
-
-
-
30,000
40,000
70,000
176,108
14,492
6,000
-
-
196,600
-
-
-
-
(3,076,472)
306,508
31,992
31,000
148,100
-
(3,076,472)
517,600
*
Disposals/other represent disposals of 465,500 shares during the period and 2,610,972 shares held at resignation date.
This concludes the remuneration report, which has been audited.
17
3P Learning Limited
Directors' report
30 June 2016
Shares under option
There were no unissued ordinary shares of 3P Learning Limited under option outstanding at the date of this report.
Shares under performance rights
Unissued ordinary shares of 3P Learning Limited under performance rights at the date of this report are as follows:
Grant date
19/02/2016
19/02/2016
19/02/2016
01/06/2016
01/06/2016
Expiry date
15/09/2017
15/09/2018
15/09/2019
01/09/2019
*
Exercise
price
Number
under rights
$0.00
$0.00
$0.00
$0.00
$0.00
100,000
100,000
100,000
100,000
400,000
800,000
*
60 days after the date of release of the Company's annual results for the year ended 30 June 2019.
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate
in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of 3P Learning Limited issued on the exercise of options during the year ended 30 June
2016 and up to the date of this report.
Shares issued on the exercise of performance rights
There were no ordinary shares of 3P Learning Limited issued on the exercise of performance rights during the year ended
30 June 2016 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has
been made to indemnify Ernst & Young during the financial year and up to the date of this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 28 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
18
3P Learning Limited
Directors' report
30 June 2016
The directors are of the opinion that the services as disclosed in note 28 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Ernst & Young
There are no officers of the Company who are former partners of Ernst & Young.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Report) Instrument 2016/191,
dated 24 March 2016, and consequently the amounts in this report have been rounded off to the nearest thousand dollars,
or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Ernst & Young continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Samuel Weiss
Chairman
25 August 2016
Sydney
19
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of 3P Learning
Limited
As lead auditor for the audit of 3P Learning Limited for the financial year ended 30 June 2016, I declare
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of 3P Learning Limited and the entities it controlled during the financial
year.
Ernst & Young
Lisa Nijssen-Smith
Partner
25 August 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
3P Learning Limited
Contents
30 June 2016
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of 3P Learning Limited
Shareholder information
Corporate directory
22
23
24
25
26
66
67
69
71
21
3P Learning Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2016
Revenue
Share of profits of associates accounted for using the equity method
Other income
Expenses
Employee benefits expense
Depreciation and amortisation expense
Professional fees
Technology costs
Marketing expenses
Occupancy expenses
Restructuring expenses
Administrative expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of 3P Learning Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of 3P Learning Limited
Consolidated
Note
2016
$'000
2015
$'000
5
6
7
7
7
8
49,264
44,247
480
1,044
-
1,657
(23,738)
(5,064)
(2,356)
(2,583)
(3,060)
(2,281)
(2,231)
(3,296)
(649)
(19,337)
(3,062)
(10,750)
(1,207)
(2,289)
(1,914)
-
(2,395)
(20)
5,530
4,930
(1,880)
(778)
3,650
4,152
85
120
205
-
(919)
(919)
3,855
3,233
18
3,632
3,650
18
3,837
3,855
67
4,085
4,152
67
3,166
3,233
Basic earnings per share
Diluted earnings per share
Cents
Cents
37
37
2.66
2.66
3.04
3.04
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
22
3P Learning Limited
Statement of financial position
As at 30 June 2016
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax
Other
Total current assets
Non-current assets
Royalty receivable
Investments accounted for using the equity method
Available-for-sale financial assets
Plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Income tax
Provisions
Deferred revenue
Finance lease payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred revenue
Finance lease payable
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to the owners of 3P Learning Limited
Non-controlling interest
Total equity
Consolidated
Note
2016
$'000
2015
$'000
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
4,281
7,980
48
24
12,333
80
48,884
6,607
1,216
23,917
5,881
86,585
30,886
8,677
-
630
40,193
145
-
6,607
965
17,242
7,600
32,559
98,918
72,752
10,745
313
-
2,036
28,423
9
41,526
11,500
549
1,754
40
13,843
7,392
-
1,997
2,324
23,924
38
35,675
-
875
3,060
-
3,935
55,369
39,610
43,549
33,142
33,951
7,382
2,160
43,493
56
25,113
7,035
956
33,104
38
43,549
33,142
The above statement of financial position should be read in conjunction with the accompanying notes
23
3P Learning Limited
Statement of changes in equity
For the year ended 30 June 2016
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
earnings
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2014
2,352
7,954
(3,129)
-
-
-
-
4,085
(919)
(919)
-
4,085
87
67
-
67
7,264
4,152
(919)
3,233
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 22)
Dividends paid to non-controlling interest
22,761
-
-
-
-
-
-
(116)
22,761
(116)
Balance at 30 June 2015
25,113
7,035
956
38
33,142
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
earnings
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2015
25,113
7,035
956
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 22)
Share-based payments (note 38)
Dividends paid (note 24)
-
-
-
8,838
-
-
-
205
205
-
142
-
3,632
-
3,632
-
-
(2,428)
38
18
-
18
-
-
-
33,142
3,650
205
3,855
8,838
142
(2,428)
Balance at 30 June 2016
33,951
7,382
2,160
56
43,549
The above statement of changes in equity should be read in conjunction with the accompanying notes
24
3P Learning Limited
Statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes refunded/(paid)
Consolidated
Note
2016
$'000
2015
$'000
59,467
(45,397)
148
(359)
(2,206)
54,940
(35,506)
599
(78)
1,301
Net cash from operating activities
35
11,653
21,256
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payment for previous year's business combinations
Payments for investments
Payments for investments in associates
Payments for plant and equipment
Payments for intangibles
Proceeds from disposal of plant and equipment
Proceeds from release of holding deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowing
Dividends paid
Dividends paid to non-controlling interest
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
-
(495)
(1,318)
(33,748)
(912)
(11,382)
1
500
(1,062)
-
(5,308)
-
(327)
(8,475)
5
1,702
(47,354)
(13,465)
-
-
17,500
(6,000)
(2,404)
-
23,500
(11,741)
-
(260)
(12,500)
(116)
9,096
(1,117)
(26,605)
30,886
-
6,674
24,442
(230)
Cash and cash equivalents at the end of the financial year
9
4,281
30,886
The above statement of cash flows should be read in conjunction with the accompanying notes
25
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 1. General information
The financial statements cover 3P Learning Limited as a Group consisting of 3P Learning Limited (the 'Company' or 'parent
entity') and its subsidiaries (collectively referred to as the 'Group'). The financial statements are presented in Australian
dollars, which is 3P Learning Limited's functional and presentation currency.
3P Learning Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 18, 124 Walker Street
North Sydney NSW 2060
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 August 2016. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the Group.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Net current asset deficiency
As at 30 June 2016, the Group was in a net current liability position of $29,193,000 (2015: net current asset of $4,518,000)
of which $6,092,000 relates to future payments in relation to Learnosity and $28,423,000 (2015: $23,924,000) is deferred
revenue which will be recognised as income in the next financial year with no further cash outflows to the Group. Further
there is $8,500,000 available of the working capital debt facility. Accordingly, the financial statements continue to be
prepared on a going concern basis.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention except for certain financial instruments
that are measured at revalued amounts or fair values, as detailed in the accounting policies in this note.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 32.
26
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of 3P Learning Limited as at
30 June 2016 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is 3P Learning Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured. A number of
recognition criteria must also be met before revenue is recognised.
27
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Mathletics, Spellodrome and IntoScience licence revenues
The Group recognises revenue pursuant to software licence agreements upon the provision of access to its customers of
the Group’s intellectual property as it exists at any given time during the period of the license. Revenue is therefore
recognised over the duration of the agreement or for as long as the customer has been provided access, when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable.
Reading Eggs products licence revenue
The Group recognises commission revenue pursuant to a distribution agreement when it sells a third party’s online
products to customers which provides these customers with access to the third party’s intellectual property as it exists at
any given time. Revenue from the sale of Reading Eggs products is recorded on a net basis when the online product is
sold, consistent with an agency relationship.
Sponsorship income
Revenue is recognised in relation to sponsorship amounts provided by various external parties when the Company
becomes entitled to the benefit and all of its obligations have been fulfilled.
Translation fee
Revenue is recognised in relation to translation of educational programs to the local language of the customer base upon
completion of the translation.
Sale of workbooks
Revenue is recognised in relation to workbook materials sold to schools and students, on sale of the items.
Copyright licence fee
Revenue is recognised in relation to copyright agency fees upon becoming entitled to compensation being at a time when
the Group’s materials and resources are reproduced by third parties.
Interest
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Deferred revenue
Deferred revenue is recognised on all customer contracts where appropriate as revenue is recorded over the contract
duration.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
28
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
3P Learning Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group
continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate
taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax
consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Research and development rebate
Research and development rebate are credited against tax payable and are not treated as revenue.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30-60 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables.
Other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any provision for
impairment.
29
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the Group's exposure to variability in cash flows that is attributable to particular risks
associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of
the gain or loss on the hedging instrument is recognised in other comprehensive income through the cash flow hedges
reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of
equity and included in the measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each
hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer
expected to occur, the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
Associates
Associates are entities over which the Group has significant influence but not control or joint control. Investments in
associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the
associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive
income. Investments in associates are carried in the statement of financial position at cost plus post-acquisition changes in
the Group's share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from
associates reduce the carrying amount of the investment.
When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured
long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the associate.
The Group discontinues the use of the equity method upon the loss of significant influence over the associate and
recognises any retained investment at its fair value. Any difference between the associate's carrying amount, fair value of
the retained investment and proceeds from disposal is recognised in profit or loss.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets, principally equity securities, that are either
designated as available-for-sale or not classified as any other category. After initial recognition, fair value movements are
recognised in other comprehensive income through the available-for-sale reserve in equity. Cumulative gain or loss
previously reported in the available-for-sale reserve is recognised in profit or loss when the asset is derecognised or
impaired.
30
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or
group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a
breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable
data indicating that there is a measurable decrease in estimated future cash flows.
Available-for-sale financial assets are considered impaired when there has been a significant or prolonged decline in value
below initial cost. Subsequent increments in value are recognised in other comprehensive income through the available-
for-sale reserve.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their
expected useful lives as follows:
Furniture & fittings
Computer equipment
Office equipment
three to seven years
three to five years
three to five years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at
inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease
term.
Group as a lessee
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
31
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Internally generated intangible assets, excluding capitalised development costs, are not capitalised and an expense is
recognised in the statement of comprehensive income in the year in which the expenditure is incurred.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Product development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or
sell the asset; the Group has sufficient resources; and intent to complete the internal development and their costs can be
measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected
benefit, being their finite useful lives of five years.
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite useful life of three years.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite useful life of between one to three years.
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite useful life of three years.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
32
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Employee benefits expected to be settled within 12 months of the reporting date are measured at the amounts expected to
be paid when the liabilities are settled.
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months of the reporting date are measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
33
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
34
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of 3P Learning Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Report) Instrument 2016/191,
dated 24 March 2016, and consequently the amounts in this report have been rounded off to the nearest thousand dollars,
or in certain cases, the nearest dollar.
Comparatives
Comparatives in the statement of profit or loss and other comprehensive income have been realigned to current year
presentation. There has been no effect on the profit for the year.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2016. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
35
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 2. Significant accounting policies (continued)
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The Group expects to adopt this standard from 1 July 2018 but the impact of its adoption is yet to be
assessed.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will
adopt this standard from 1 July 2018 and the adoption of this standard is not expected to have a material impact for the
Group.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases. The Group will adopt this standard from 1
July 2019 and the impact of its adoption will be that operating leases, such as those detailed in note 30, will be brought
onto the statement of financial position with a corresponding liability.
36
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on
the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of
disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Product development costs
The Group capitalises development costs for a project in accordance with the accounting policy. Initial capitalisation of
costs is based on management’s judgement that technological and economic feasibility is confirmed. In determining the
amounts to be capitalised, as with the nature of Software-as-a-Service delivery model, key judgement is required in
determining whether incremental product enhancements will provide additional future economic benefit.
37
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into geographic operating segments: Australia & New Zealand ('ANZ'), America, Canada and
South America ('Americas') and Europe, Middle-East and Africa ('EMEA'). These operating segments are based on the
internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision
Makers ('CODM') in assessing performance and in determining the allocation of resources. There is no aggregation of
operating segments.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information reported to the CODM is on a quarterly basis.
The CODM does not regularly review segment assets and segment liabilities. Refer to statement of financial position for
assets and liabilities.
Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Major customers
There are no major customers that contributed more than 10% of revenue to the Group.
Operating segment information
Consolidated - 2016
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA*
Depreciation and amortisation
Interest revenue
Finance costs
Share of profits of associates
Restructuring expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
ANZ
$'000
Americas
$'000
EMEA
$'000
Total
$'000
30,615
176
30,791
5,835
11
5,846
12,608
19
12,627
14,751
(4,039)
2,134
49,058
206
49,264
12,846
(5,064)
148
(649)
480
(2,231)
5,530
(1,880)
3,650
*
EBITDA is after inter-segment royalty expense incurred by Americas segment of $2,324,000 and EMEA segment of
$4,582,000.
38
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 4. Operating segments (continued)
Consolidated - 2015
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA*
Depreciation and amortisation
Interest revenue
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
ANZ
$'000
Americas
$'000
EMEA
$'000
Total
$'000
29,511
32
29,543
4,443
-
4,443
10,261
-
10,261
8,547
(1,999)
898
44,215
32
44,247
7,446
(3,062)
566
(20)
4,930
(778)
4,152
*
EBITDA for ANZ segment includes IPO costs of $9,368,000. EBITDA is after inter-segment royalty expense incurred
by Americas segment of $1,772,000 and EMEA segment of $3,612,000.
Note 5. Revenue
Licence fees
Sponsorship income
Sale of workbooks
Copyright licence fees
Other
Net commission revenue
Revenue
Note 6. Other income
Net foreign exchange gain
Interest
Other
Other income
Consolidated
2016
$'000
2015
$'000
39,799
683
-
1,724
233
6,825
35,123
1,079
128
1,563
198
6,156
49,264
44,247
Consolidated
2016
$'000
2015
$'000
615
148
281
537
586
534
1,044
1,657
39
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Fixtures and fittings
Computer equipment
Office equipment
Total depreciation
Amortisation
Product development
Patents and trademarks
Customer contracts
Software
Total amortisation
Total depreciation and amortisation
Professional fees includes the following:
Professional fees for initial public offering
Other professional fees
Total professional fees
Finance costs
Interest and finance charges paid/payable
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Consolidated
2016
$'000
2015
$'000
164
421
32
617
3,983
103
138
223
4,447
5,064
-
2,356
142
475
20
637
2,087
149
168
21
2,425
3,062
9,368
1,382
2,356
10,750
649
20
1,395
1,201
2,655
2,021
40
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 8. Income tax expense
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Research and developments rebates recognised
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease in deferred tax assets (note 16)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non-deductible expenses
Impact of foreign tax rate
Other tax offsets
Current year tax benefit not recognised
Research and developments rebates recognised
Prior year tax losses derecognised
Adjustments recognised for prior year deferred tax
Other
Income tax expense
Amounts credited directly to equity
Deferred tax assets (note 16)
Note 9. Current assets - cash and cash equivalents
Cash at bank and in hand
Short-term deposits
41
Consolidated
2016
$'000
2015
$'000
749
1,719
(588)
1,880
3,355
132
(2,709)
778
1,719
132
5,530
1,659
71
(385)
314
869
2,528
(588)
-
-
(60)
1,880
4,930
1,479
196
(147)
-
-
1,528
(2,709)
447
1,398
114
778
Consolidated
2016
$'000
2015
$'000
-
(317)
Consolidated
2016
$'000
2015
$'000
4,219
62
10,215
20,671
4,281
30,886
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Prepayments
Consolidated
2016
$'000
2015
$'000
7,098
(20)
7,078
230
672
902
7,980
7,522
(18)
7,504
238
935
1,173
8,677
Impairment of receivables
The Group has recognised a loss of $52,000 (2015: $18,000) in profit or loss in respect of impairment of receivables for the
year ended 30 June 2016.
The ageing of the impaired receivables provided for above are as follows:
0ne to three months overdue
Three to six months overdue
Over six months overdue
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
2016
$'000
2015
$'000
3
10
7
20
Consolidated
2016
$'000
2015
$'000
18
52
(50)
20
-
3
15
18
-
18
-
18
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $1,791,000 as at 30 June
2016 ($1,722,000 as at 30 June 2015).
The ageing of the past due but not impaired receivables are as follows:
1 to 12 months overdue
Consolidated
2016
$'000
2015
$'000
1,791
1,722
42
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 11. Current assets - other
Term deposits
Other deposits
Other current assets
Note 12. Non-current assets - investments accounted for using the equity method
Investment in Learnosity Holdings Limited
Refer to note 34 for further information on interests in associates.
Consolidated
2016
$'000
2015
$'000
16
8
-
24
516
8
106
630
Consolidated
2016
$'000
2015
$'000
48,884
-
On 9 September 2015, the Group acquired an initial 23.07% interest in Learnosity Holdings Limited (www.learnosity.com) a
provider of SaaS Assessment tools, based in Dublin, Ireland for a total cost of $27,875,000. On this date the Group also
entered into an option to purchase an additional 16.93%. The Group exercised this option on 19 January 2016 for a
consideration of $20,529,000. Cash consideration of $33,748,000 was paid up to 30 June 2016 and a further $6,092,000 is
accrued and will be paid subsequent to the reporting date.
Consideration paid was settled by the issuance of 4,108,527 shares in the Company. This included 2,292,649 shares
issued on 7 December 2015 and 1,816,878 shares issued on 31 March 2016, which are both held in escrow for a period of
12 months from their respective issue dates.
Note 13. Non-current assets - available-for-sale financial assets
Unlisted ordinary shares - 17.2% interest in Desmos Inc.
6,607
6,607
Refer to note 26 for further information on fair value measurement.
Consolidated
2016
$'000
2015
$'000
43
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 14. Non-current assets - plant and equipment
Furniture & fittings - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2016
$'000
2015
$'000
1,510
(753)
757
3,499
(3,161)
338
268
(147)
121
1,216
1,033
(596)
437
3,211
(2,752)
459
186
(117)
69
965
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2014
Additions
Disposals
Additions through business combinations
Exchange differences
Write off of assets
Transfers in/(out)
Depreciation expense
Balance at 30 June 2015
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2016
Furniture
and fittings
$'000
Computer
equipment
$'000
Office
equipment
$'000
Total
$'000
491
55
-
-
37
(4)
-
(142)
437
448
(2)
38
(164)
757
784
223
-
-
4
(17)
(60)
(475)
459
302
(6)
4
(421)
338
47
49
(5)
2
-
(4)
-
(20)
69
162
(67)
(11)
(32)
121
1,322
327
(5)
2
41
(25)
(60)
(637)
965
912
(75)
31
(617)
1,216
Property, plant and equipment secured under finance leases
Refer to note 30 for further information on property, plant and equipment secured under finance leases.
44
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 15. Non-current assets - intangibles
Goodwill - at cost
Product development - at cost
Less: Accumulated amortisation
Patents and trademarks - at cost
Less: Accumulated amortisation
Customer contracts - at cost
Less: Accumulated amortisation
Software - at cost
Less: Accumulated amortisation
Consolidated
2016
$'000
2015
$'000
4,414
4,654
24,683
(6,742)
17,941
3,074
(2,982)
92
316
(276)
40
1,861
(431)
1,430
14,605
(2,757)
11,848
3,074
(2,879)
195
370
(172)
198
561
(214)
347
23,917
17,242
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2014
Additions
Additions through business
combinations
Exchange differences
Transfers in/(out)
Amortisation expense
Balance at 30 June 2015
Additions
Exchange differences
Amortisation expense
Goodwill
$'000
Product
development
$'000
Patents and
trademarks
$'000
Customer
contracts
$'000
Software
$'000
Total
$'000
3,012
-
1,578
64
-
-
4,654
-
(240)
-
5,775
8,160
-
-
-
(2,087)
11,848
10,076
-
(3,983)
337
7
-
-
-
(149)
195
-
-
(103)
92
-
-
354
12
-
(168)
198
-
(20)
(138)
-
308
-
-
60
(21)
347
1,306
-
(223)
9,124
8,475
1,932
76
60
(2,425)
17,242
11,382
(260)
(4,447)
40
1,430
23,917
Balance at 30 June 2016
4,414
17,941
45
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 15. Non-current assets - intangibles (continued)
Impairment testing for goodwill
Goodwill acquired through business combinations have been allocated to the following cash-generating units ('CGUs'):
CGU1: ANZ
CGU2: EMEA
Consolidated
2016
$'000
2015
$'000
3,012
1,402
4,414
3,012
1,642
4,654
The recoverable amount of each CGU is determined based on value-in-use calculations which require the use of
assumptions. The calculations use cash flow projections based on business plan, prior to any future restructuring to which
the Group is not yet committed, approved by management covering a five year period. Cash flows beyond the five year
period are extrapolated using the estimated growth rates stated below.
The following key assumptions were used in the discounted cash flow model for the different CGUs:
a. Pre-tax discount rate: CGU1: ANZ 10.98% and CGU2: EMEA 11.48%.
b. Projected growth rate of 3% beyond five year period for all CGUs.
c. Increase in operating costs and overheads based on current levels adjusted for inflationary increases.
For the financial year ended 30 June 2016, the recoverable amount of net assets for all CGUs are greater than the carrying
value of the assets and therefore, the goodwill is not considered to be impaired.
Sensitivity
As disclosed in note 3, management have made judgements and estimates in respect of impairment testing of goodwill.
Should these judgements and estimates not occur the resulting carrying amounts of assets may decrease.
For all CGUs, any reasonable change in the key assumptions on which the recoverable amount is based would not cause
the CGU’s carrying amount to exceed its recoverable amount.
46
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 16. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Accrued expenses
Deferred Revenue
IPO costs
Royalty asset
Intangibles
Unrealised foreign exchange fluctuation
Plant and equipment
Deferred tax asset
Movements:
Opening balance
Charged to profit or loss (note 8)
Credited to equity (note 8)
Closing balance
Consolidated
2016
$'000
2015
$'000
707
1,075
6,200
2,094
882
(5,153)
15
61
597
871
5,146
2,824
1,004
(2,793)
36
(85)
5,881
7,600
7,600
(1,719)
-
5,881
7,415
(132)
317
7,600
Unused tax losses of $869,000 have not been recognised as a deferred tax asset as at 30 June 2016. There is no expiry
date on these tax losses.
Note 17. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Deferred consideration on investments
Goods and service tax
Other payables
Refer to note 25 for further information on financial instruments.
Note 18. Current liabilities - derivative financial instruments
Consolidated
2016
$'000
2015
$'000
1,281
2,640
5,779
735
310
10,745
1,209
3,559
1,299
1,022
303
7,392
Consolidated
2016
$'000
2015
$'000
Forward foreign exchange contracts - cash flow hedges
313
-
Refer to note 25 for further information on financial instruments.
Refer to note 26 for further information on fair value measurement.
47
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 19. Current liabilities - provisions
Employee benefits
Lease make good
Contingent consideration
Consolidated
2016
$'000
2015
$'000
1,232
510
294
2,036
1,377
452
495
2,324
Employee benefits
Employee benefits comprise of provisions for annual leave and current long service leave. Where an obligation is
presented as current, the Group does not have an unconditional right to defer settlement.
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the Group at the
end of the respective lease terms.
Contingent consideration
The provision represents contingent consideration payable on acquisition of business. It is measured at the present value
of the estimated liability.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2016
Carrying amount at the start of the year
Additional provisions recognised
Amounts transferred from non-current
Amounts used
Unused amounts reversed
Carrying amount at the end of the year
Note 20. Non-current liabilities - borrowings
Bank loans
Refer to note 25 for further information on financial instruments.
During the year, the Group entered into the following banking facilities with HSBC Bank:
• Working capital facility of $20,000,000
• Bank guarantee and other ancillary facility for $2,000,000
Lease make
good
$'000
Contingent
consideration
$'000
452
105
-
-
(47)
510
495
-
294
(495)
-
294
Consolidated
2016
$'000
2015
$'000
11,500
-
The facilities are subject to variable interest rate, which is based on bank bill swap rate ('BBSY'), plus a margin. The
banking facilities mature on 4 September 2018. The banking facilities are secured by fixed and floating charge over the
Group's assets.
The Group increased its working capital facility after the reporting date, as detailed in note 39.
48
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 20. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans - working capital facility
Bank guarantee and ancillary facility
Used at the reporting date
Bank loans - working capital facility
Bank guarantee and ancillary facility
Unused at the reporting date
Bank loans - working capital facility
Bank guarantee and ancillary facility
Note 21. Non-current liabilities - provisions
Employee benefits
Contingent consideration
Employee benefits
Employee benefits represents provision for long service leave.
Consolidated - 2016
Carrying amount at the start of the year
Amounts transferred to current
Carrying amount at the end of the year
49
Consolidated
2016
$'000
2015
$'000
11,500
-
Consolidated
2016
$'000
2015
$'000
20,000
2,000
22,000
11,500
1,839
13,339
8,500
161
8,661
-
-
-
-
-
-
-
-
-
Consolidated
2016
$'000
2015
$'000
549
-
549
581
294
875
Contingent
consideration
$'000
294
(294)
-
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 22. Equity - issued capital
Ordinary shares - fully paid
139,034,170 134,814,660
33,951
25,113
Consolidated
2016
Shares
2015
Shares
2016
$'000
2015
$'000
Movements in ordinary share capital
Details
Date
Shares
$'000
Balance
Transfer class B shares into ordinary shares
Share split
Issuance of shares on Initial Public Offering ('IPO')
Share issue transaction costs, net of tax
1 July 2014
10 July 2014
10 July 2014
14 July 2014
Balance
Issue of shares
Issue of shares under Dividend Reinvestment Plan
Issue of shares
Issue of shares
30 June 2015
1 October 2015
22 October 2015
7 December 2015
31 March 2016
83,785
67,317
125,263,558
9,400,000
-
134,814,660
100,000
10,983
2,292,649
1,815,878
2,352
-
-
23,500
(739)
25,113
250
24
4,940
3,624
Balance
30 June 2016
139,034,170
33,951
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
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 Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding.
The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
As the Company is by its nature a growth company, the Board has not adopted any dividend policy in respect of future
periods and may look to retain capital generated by the Group’s business to reinvest in its growth.
The capital risk management policy remains unchanged from the 30 June 2015 Annual Report.
50
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 23. Equity - reserves
Foreign currency reserve
Acquisition reserve
Hedging reserve - cash flow hedges
Share-based payment reserve
Consolidated
2016
$'000
2015
$'000
30
(798)
85
8,065
7,382
(90)
(798)
-
7,923
7,035
Foreign currency reserve
The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign
operations to Australian dollars.
Acquisition reserve
The reserve resulted from the acquisition of non-controlling interests in a subsidiary. The acquisition of non-controlling
interest is not a business combination but is an equity transaction between owners. Accordingly, the difference between
consideration paid and identifiable net assets of the non-controlling interest has been accounted for in the acquisition
reserve.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined
to be an effective hedge.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2014
Foreign currency translation
Balance at 30 June 2015
Foreign currency translation
Net change in fair value of cash flow hedges
Share based payments
Balance at 30 June 2016
Foreign
currency
reserve
$'000
Acquisition
reserve
$'000
Hedging
reserve
$'000
Share based
payment
reserve
$'000
Total
$'000
(798)
-
(798)
-
-
-
(798)
-
-
-
-
85
-
85
7,923
-
7,923
-
-
142
8,065
7,954
(919)
7,035
120
85
142
7,382
829
(919)
(90)
120
-
-
30
51
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 24. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2016
$'000
2015
$'000
Final dividend declared for the year ended 30 June 2015 of 1.8 cents per ordinary share
(2014: $82.73 per pre-IPO ordinary share)
2,428
12,500
There were no dividends recommended or declared for the year ended 30 June 2016.
Previous year
As part of the capital restructure and listing of the Company, pre-IPO shareholders were entitled to a dividend of
$12,500,000 which was declared on 2 June 2014 and paid on 9 July 2014.
Franking credits
Consolidated
2016
$'000
2015
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
877
2,126
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
●
●
●
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Note 25. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk.
The Board of directors have overall responsibility for the establishment and oversight of the risk management framework.
The Board has established an Audit and Risk Committee, which is responsible for managing risk. The committee reports to
the Board of Directors on its activities.
Risk management processes are established to identify and analyse the risks faced by the Group, to analyse the risk
exposure of the Group and appropriate procedures, controls and risk limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group’s activities.
The Audit and Risk Committee, oversees how management monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the
Group.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
52
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 25. Financial instruments (continued)
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
In order to protect against exchange rate movements, the Group entered into forward foreign exchange contracts. These
contracts hedge highly probable forecast cash flows for the ensuing financial year.
The maturity, settlement amounts and the average contractual exchange rates of the Group's outstanding forward foreign
exchange contracts at the reporting date were as follows:
Buy US dollars
Maturity:
0 - 3 months
3 - 6 months
Sell
Australian
dollars
2016
$'000
Average
exchange
rates
2016
1,929
4,198
0.7037
0.7008
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities (unhedged) at the
reporting date were as follows:
Consolidated
US dollars
Euros
Pound Sterling
Canadian dollars
Other currencies
Assets
Liabilities
2016
$'000
2015
$'000
2016
$'000
2015
$'000
1,207
195
77
89
453
2,021
1,157
478
506
325
377
2,843
64
5
-
-
262
331
1,388
5
12
-
804
2,209
The Group had net assets denominated in foreign currencies of $1,690,000 (assets $2,021,000 less liabilities $331,000) as
at 30 June 2016 (2015: $634,000 (assets $2,843,000 less liabilities $2,209,000). Based on this exposure, had the
Australian dollar weakened by 10%/strengthened by 10% (2015: weakened by 10%/strengthened by 10%) against these
foreign currencies with all other variables held constant, the Group's profit before tax for the year would have been
$169,000/$169,000 lower (2015: $63,000 higher/$ 63,000 lower). The percentage change is the expected overall volatility
of the significant currencies, which is based on management's assessment of reasonable possible fluctuations.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from its borrowings and term deposits. Borrowings and term deposits issued at
variable rates expose the Group to interest rate risk.
53
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 25. Financial instruments (continued)
As at the reporting date, the Group had the following variable rate borrowings and cash balances:
Consolidated
Bank loans
Short term deposits
Net exposure to cash flow interest rate risk
2016
2015
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
3.75%
7.98%
-
2.68%
11,500
(78)
11,422
Balance
$'000
-
(21,187)
(21,187)
An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below.
An official increase/decrease in interest rates of 50 (2015:50) basis points would have an adverse/favourable effect on
profit before tax of $57,000 (2015: $107,000 favourable/adverse) per annum. The percentage change is based on the
expected volatility of interest rates using market data and analysts forecasts.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net
of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The Group does not hold any collateral.
The majority of schools pay upfront and the nature of the customer base has a low impact on the Group's credit risk
exposure.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast
cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans - working capital facility
Bank guarantee and ancillary facility
Consolidated
2016
$'000
2015
$'000
8,500
161
8,661
-
-
-
54
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 25. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2016
Non-derivatives
Non-interest bearing
Trade and other payables
Other payables
Deferred consideration
Contingent consideration
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Derivatives
Forward foreign exchange
contracts net settled
Total derivatives
Consolidated - 2015
Non-derivatives
Non-interest bearing
Trade and other payables
Other payables
Deferred consideration
Contingent consideration
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
-
-
1,281
310
5,779
294
-
-
-
-
-
-
-
-
3.75%
431
1,885
10,068
7.40%
16
8,111
52
1,937
-
10,068
-
313
313
-
-
-
-
-
-
-
-
-
-
-
-
-
1,281
310
5,779
294
12,384
68
20,116
313
313
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
-
-
5.41%
1,209
303
1,299
495
44
3,350
-
-
-
294
-
294
-
-
-
-
-
-
-
-
-
-
-
-
1,209
303
1,299
789
44
3,644
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above. The Group may repay debt when cash is sufficiently available.
55
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 26. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2016
Assets
Ordinary shares available-for-sale
Total assets
Liabilities
Contingent consideration
Forward foreign exchange contracts
Total liabilities
Consolidated - 2015
Assets
Ordinary shares available-for-sale
Total assets
Liabilities
Contingent consideration
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
-
-
-
-
-
-
-
-
6,607
6,607
6,607
6,607
-
313
313
294
-
294
294
313
607
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
6,607
6,607
6,607
6,607
789
789
789
789
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature. The carrying value of borrowings approximate their fair value.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Ordinary shares - available-for-sale
The fair values of the unquoted ordinary shares have been estimated using a discounted cash flow method. The valuations
requires management to make certain assumptions about the inputs, including forecast cash flows, growth rate and
discount rate. The probabilities of the various estimates within the range can be reasonably assessed and are used in
management’s estimate of fair value for these unquoted equity instruments.
Contingent consideration arising on business combinations
The fair value is determined using the discounted cash flow method. Significant unobservable valuation inputs in relation to
contingent consideration includes assumed cash billing earnings before interest, tax, depreciation and amortisation and
discount rate.
Derivatives - forward foreign exchange contracts
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use
of observable market data where it is available and relies as little as possible on entity specific estimates.
56
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 26. Fair value measurement (continued)
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2014
Additions
Exchange differences
Balance at 30 June 2015
Payments
Balance at 30 June 2016
Available-
for-sale
$'000
Contingent
consideration
$'000
Total
$'000
-
6,607
-
6,607
-
6,607
-
(759)
(30)
(789)
495
(294)
-
5,848
(30)
5,818
495
6,313
The level 3 assets and liabilities unobservable inputs and sensitivity are as follows:
Description
Unobservable inputs
Range
(weighted average)
Sensitivity
Available-for-sale
Growth rate
3%
Weighted average cost
of capital
20.8%
0.25% change would increase/decrease fair
value by $85,000.
0.5% change would increase/decrease fair value
by $264,000
Note 27. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Consolidated
2016
$
2015
$
1,285,568
98,600
98,288
438,524
141,599
8,655,239
95,989
273,539
-
-
2,062,579
9,024,767
57
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 28. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Ernst & Young, the auditor of the
Company:
Audit services - Ernst & Young
Audit or review of the financial statements
Other services - Ernst & Young
Tax services
Other services
Consolidated
2016
$
2015
$
303,500
227,800
56,924
123,182
103,500
-
180,106
103,500
483,606
331,300
Note 29. Contingencies
The Group has given bank guarantees as at 30 June 2016 of $1,839,000 (2015: $1,315,000) for merchant facility and
operating leases.
Note 30. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Lease commitments - finance
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Consolidated
2016
$'000
2015
$'000
1,725
3,973
5,698
807
1,276
2,083
16
52
68
(19)
49
44
-
44
(6)
38
Operating lease commitments includes contracted amounts for commercial leases under non-cancellable operating leases
expiring within one to seven years with, in some cases, options to extend. The leases have various escalation clauses. On
renewal, the terms of the leases are renegotiated.
Finance lease commitments includes contracted amounts for various plant and equipment under finance leases expiring
within one to five years. Under the terms of the leases, the Group has the option to acquire the leased assets for
predetermined residual values on the expiry of the leases.
58
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 31. Related party transactions
Parent entity
3P Learning Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 33.
Associates
Interests in associates are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2016
$
2015
$
Payment for other expenses:
Annual strategy meeting and membership fees paid to Coraggio Pty Ltd, whilst a director
related entity*
-
43,417
ClickView technology was provided by ClickView Pty Limited, a director related entity for no consideration. This ceased to
be a related entity on 11 January 2016.
Initial public offering costs
Professional fees included IPO costs and lead manager fees paid to Macquarie Capital (Australia) Limited amounting to
$Nil (2015: $9,983,000). Macquarie Group Limited and its related bodies corporate had a significant influence in the Group
until the sale of their shares following the IPO.
Agreement with Learnosity
On 1 January 2016 the Group entered into an agreement with Learnosity Limited Holdings ('Learnosity') to licence the
Learnosity Assessment Software for the period 1 January 2016 to 31 December 2020. Under the agreement no licence fee
is payable until 1 July 2017.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
2016
$
2015
$
-
11,539
Current payables:
Trade payables to Coraggio Pty Ltd, a director related entity*
*The entity ceased to be a related party with effect from 25 March 2015.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
59
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves
Retained earnings
Total equity
Parent
2016
$'000
2015
$'000
6,749
(1,753)
6,749
(1,753)
Parent
2016
$'000
2015
$'000
2,188
7,003
78,390
35,897
6,006
32,894
33,951
8,150
3,395
3,387
3,787
25,113
7,923
(926)
45,496
32,110
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to its subsidiaries as at 30 June 2016 and 30 June 2015.
Contingent liabilities
The parent entity has given bank guarantees as at 30 June 2016 of $1,839,000 (2015: $nil) for merchant facility and
operating leases.
Capital commitments - Plant and equipment
The parent entity had no capital commitments for plant and equipment as at 30 June 2016 and 30 June 2015.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
60
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 33. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
3P Learning Australia Pty Limited
Into Science Pty Ltd
3P International Holdings Pty Ltd
3P Learning Pty Limited
3P Learning Limited
3P Learning Inc.
3P Learning Canada
Mathletics LLP
Note 34. Interests in associates
Principal place of business /
Country of incorporation
Ownership interest
2015
2016
%
%
Australia
Australia
Australia
New Zealand
United Kingdom
United States
Canada
India
100%
100%
100%
100%
100%
100%
100%
60%
100%
100%
100%
100%
100%
100%
100%
60%
Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are
material to the Group are set out below:
Name
Principal place of business /
Country of incorporation
Ownership interest
2015
2016
%
%
Investment in Learnosity Holdings Limited*
Ireland
40.00%
-
*
Strategic investment by the Group, entity involved in providing SaaS Assessment tools.
61
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 34. Interests in associates (continued)
Summarised financial information
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Summarised statement of profit or loss and other comprehensive income
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive income
Total comprehensive income
Reconciliation of the Group's carrying amount
Opening carrying amount
Additions in Associates
Share of profit after income tax
Closing carrying amount (refer note 12)
Contingent liabilities
Share of contingent liabilities not recognised as liability as at 30 June 2016 $Nil.
Commitments
Share of commitments not recognised as liability as at 30 June 2016 $Nil.
62
Investment
in Learnosity
Holdings
Limited
2016
$'000
5,916
624
6,540
6,492
6,492
48
10,623
(8,727)
1,896
(136)
1,760
-
1,760
-
48,404
480
48,884
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 35. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share of profit - associates
Share-based payments
Foreign exchange differences
Interest received - non cash
Net loss on disposal of plant and equipment
Other revenue -non cash
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in income tax refund due
Decrease/(increase) in deferred tax assets
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Increase in derivative liabilities
Increase/(decrease) in provision for income tax
Increase/(decrease) in employee benefits
Increase/(decrease) in other provisions
Increase in other operating liabilities
Consolidated
2016
$'000
2015
$'000
3,650
4,152
5,064
(480)
142
349
(108)
74
(615)
762
(48)
1,719
106
(1,964)
398
(1,997)
(177)
(437)
5,215
3,062
-
-
(614)
(45)
25
(457)
(1,452)
-
(296)
(322)
8,289
-
1,910
8
1,241
5,755
Net cash from operating activities
11,653
21,256
Note 36. Non-cash investing and financing activities
Consolidated
2016
$'000
2015
$'000
250
24
8,564
8,838
-
-
-
-
Consolidated
2016
$'000
2015
$'000
3,650
(18)
3,632
4,152
(67)
4,085
Shares issued under employee share plan
Shares issued under dividend reinvestment plan
Shares issued in relation to investment in associates
Note 37. Earnings per share
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of 3P Learning Limited
63
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 37. Earnings per share (continued)
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
136,650,228 134,479,886
Options over ordinary shares
117,213
-
Weighted average number of ordinary shares used in calculating diluted earnings per share 136,767,441 134,479,886
Number
Number
Basic earnings per share
Diluted earnings per share
Note 38. Share-based payments
Cents
Cents
2.66
2.66
3.04
3.04
Retention and reward bonus
On 19 February 2016, it was determined that 300,000 ordinary shares are to be issued to Mr. Jonathan Kenny as a
Retention and Reward bonus in acknowledgement of his increased responsibilities and ongoing contributions to the Group
as interim chief executive officer over a period of three years. The first issue of 100,000 shares will be on 15 September
2016, and subsequent to that 100,000 shares will be issued in 2017 and 2018, subject to continued employment at that
time.
Special long term incentives
On 1 June 2016, as stipulated in the ASX announcement released on 11 April 2016, the Group granted to Ms. Rebekah
O’Flaherty, subject to shareholder approval, a specific award of up to 400,000 performance rights under the long term
incentive plan, subject to the following conditions:
a) where the volume weighted average price of the Company's ordinary shares for the period of 60 consecutive days after
the date of release of the Company's annual results for the year ended 30 June 2019 is:
i) less than $3.95 per share, none of the performance rights will vest;
ii) greater than $3.95 per share, 50% of the performance rights will vest;
iii) greater than $4.45 per share, 75% of the performance rights will vest; or
iv) greater than $5.70 per share, 100% of the performance rights will vest.
b) any shares issued on vesting of any performance rights shall be placed in escrow for a period of 12 months from the
date of vesting.
Further long term incentives
On 1 June 2016, as stipulated in the ASX announcement released on 11 April 2016, the Group granted to Ms. Rebekah
O’Flaherty, subject to shareholder approval, an additional award of up to 100,000 performance rights which is subject to
Ms O’Flaherty remaining in the role of Chief Executive Officer until 1 September 2019.
The share-based payment expense for the year was $142,000 (2015: $nil).
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
19/02/2016
19/02/2016
19/02/2016
01/06/2016
01/06/2016
15/09/2017
15/09/2018
15/09/2019
*
01/09/2019
Share price Exercise
at grant date
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
$1.41
$1.41
$1.41
$0.71
$0.71
$0.00
$0.00
$0.00
$0.00
$0.00
40.00%
40.00%
40.00%
40.00%
40.00%
-
-
-
-
-
2.25%
2.25%
2.25%
2.25%
2.25%
$1.410
$1.410
$1.410
$0.003
$0.710
*
60 days after the date of release of the Company's annual results for the year ended 30 June 2019.
64
3P Learning Limited
Notes to the financial statements
30 June 2016
Note 39. Events after the reporting period
On 24 August 2016, the Group increased the HSBC banking facilities agreement including the working capital facility from
$20,000,000 to $30,000,000 and maintained the bank guarantee and other ancilliary facility for $2,000,000.
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
65
3P Learning Limited
Directors' declaration
30 June 2016
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2016 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Samuel Weiss
Chairman
25 August 2016
Sydney
66
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor's report to the members of 3P Learning Limited
Report on the financial report
We have audited the accompanying financial report of 3P Learning Limited, which comprises the
statement of financial position as at 30 June 2016, the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the statement of cash flows for the year
then ended, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors' declaration of the consolidated entity comprising the company and the
entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2
Opinion
In our opinion:
a.
the financial report of 3P Learning Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 10 to 17 of the directors' report for the year
ended 30 June 2016. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of 3P Learning Limited for the year ended 30 June 2016,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Lisa Nijssen-Smith
Partner
Sydney
25 August 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
3P Learning Limited
Shareholder information
30 June 2016
The shareholder information set out below was applicable as at 5 August 2016.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
PASCAL EDUCATIONAL SERVICES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
VIBURNUM FUNDS PTY LTD VF STRATEGIC EQUITIES FUND AC
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
KATHERINE PIKE
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RYANNABEL PTY LTD
GAVIN FRANCIS COONEY
TIMOTHY POWER
NETWEALTH INVESTMENTS LIMITED
BOND STREET CUSTODIANS LIMITED
WENDY BECKETT
ALBURY'S OWN PTY LTD
MR KEI YAN CHENG
MUTUAL APPRECIATION SOCIETY PTY LIMITED
69
Number
of holders
of ordinary
shares
Number
of holders
of options
over
ordinary
shares
556
930
420
404
50
2,360
-
-
-
-
-
2
2
-
Ordinary shares
Number held
27,036,232
19,804,146
13,695,000
12,840,833
9,118,161
6,312,642
5,684,662
5,439,150
4,614,906
2,381,376
2,347,163
2,048,390
1,815,878
1,390,972
1,100,980
550,000
519,248
332,000
284,280
260,903
117,576,922
% of total
shares
issued
19.45
14.24
9.85
9.24
6.56
4.54
4.09
3.91
3.32
1.71
1.69
1.47
1.31
1.00
0.79
0.40
0.37
0.24
0.20
0.19
84.57
3P Learning Limited
Shareholder information
30 June 2016
Unquoted equity securities
Share options over ordinary shares
Performance rights over ordinary shares
Substantial holders
Substantial holders in the Company are set out below:
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
PASCAL EDUCATIONAL SERVICES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
300,000
500,000
1
1
Ordinary shares
Number held
27,036,232
19,804,146
13,695,000
12,840,833
9,118,161
% of total
shares
issued
19.45
14.24
9.85
9.24
6.56
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Ordinary shares
Ordinary shares
Expiry date
07/12/2016
31/03/2017
Number
of shares
2,292,649
1,815,878
4,108,527
70
3P Learning Limited
Corporate directory
30 June 2016
Directors
Samuel Weiss - Independent Non-Executive Chairman
Rebekah O’Flaherty - Chief Executive Officer
Roger Amos - Independent Non-Executive Director
Claire Hatton - Independent Non-Executive Director
Company secretary
Stephanie Belton
Registered office
Principal place of business
Share register
Auditor
Solicitors
3P Learning Limited
Level 18, 124 Walker Street
North Sydney NSW 2060
Head office telephone: 1300 850 331
3P Learning Limited
Level 18, 124 Walker Street
North Sydney NSW 2060
Head office telephone: 1300 850 331
The Registrar
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Share registry telephone: 1300 554 474
Ernst & Young
200 George Street
Sydney NSW 2000
King & Wood Mallesons
Level 61
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Stock exchange listing
3P Learning Limited shares are listed on the Australian Securities Exchange (ASX
code: 3PL)
Website
http://www.3plearning.com/
Corporate Governance Statement
Corporate governance statement which was approved at the same time as the
Annual Report can be found at http://www.3plearning.com/CGS/
71
3P Learning Ltd
Level 18, 124 Walker Street
North Sydney, NSW 2060
T: 1300 850 331
F: 1300 762 165
customerservice@3plearning.com.au