Annual Report
For the year ended 30 June 2017
3P Learning Limited ABN 50 103 827 836
A message from the Chairman and CEO
Dear Fellow Shareholders
Last year we set three strategic priorities for 3P Learning Limited. These were to:
•
strengthen the maths and literacy product portfolio
• develop a scalable sales and marketing platform
• globalise our operating model.
We are pleased to report that our execution against these three priorities has
delivered strong results in Financial Year 2017. We are on track to build the
foundation for 3P Learning to deliver sustainable and accelerated growth in the
balance of this year and into Financial Year 2019.
Year in review
Key Financial Information
A$M (unless stated)
Revenue
Underlying Core EBITDA
Underlying Net Profit after Tax
Statutory Net Profit after Tax
Underlying Earnings Per Share (cents)
Net Debt
FY2017
FY2016
Variation %
52.5
16.0
6.3
(7.3)
(5.11)
6.2
49.3
13.3
5.3
3.7
2.66
7.2
6%
20%
19%
(297%)
(292%)
(14%)
During the year, we met our commitment to you to grow our revenues faster than our
cost base.
Group Revenue grew by 6%, and on a constant currency basis was 11% higher than
Financial Year 2016. Our APAC region (including our home market of Australia)
increased revenue by 3%, EMEA grew by 3% and the Americas was 31% higher than
the prior year. On a constant currency basis EMEA grew by 19% and the Americas by
33%. In all regions we saw improved EBITDA, licence renewals, Average Revenue Per
User (ARPU) and a reduction in the cost to acquire new users. The Americas region
is now profitable.
Encouragingly, we delivered a 20% increase in underlying core EBITDA while we
simultaneously made positive movements in key areas to support our strategic
priorities such as investments in our product portfolio, marketing automation,
UserVoice and Service Cloud. These were all designed to improve revenue, customer
experience and retention — at the same time reducing operating cost.
As reported in our First Half Financial Year 2017 results, we concluded a strategic
review of IntoScience and our technology assets and investments, resulting in a one-
off non-cash write down after tax of $12.0M. Underlying NPAT was up 19% year over
year and we ended the year with net debt at $6.2M.
The key to a high performance organisation is in its culture and its people. During the
year we partnered with the Great Place to Work Institute to benchmark our cultural
performance against the best companies nationally and internationally. We were
most encouraged by our employees’ responses and have kicked off a series of Great
Place to Work initiatives based on insight from the survey in relation to our strengths
and opportunities.
The year ahead
Our strategic priorities remain unchanged in Financial Year 2018 and by staying
focused on these priorities we expect 3P Learning to be in a position to profitably
scale growth globally. We remain committed to another year of delivering revenue
growth faster than cost growth.
3P Learning expects to accelerate profitability and revenue growth in Financial Year
2019 by focusing on the launch of our literacy product range, Mathletics upsells and
add-on sales opportunities, geographic expansion largely using variable cost third
party partners who have strong market knowledge, and existing go to market assets.
We will look to improve retention through increased student engagement, digitisation,
data and analytics and an improved customer experience.
Thank you
We both want to say a heartfelt thank you to the extraordinary team at 3P Learning
located in offices around the world, each of whom has contributed to the success
not only of our Company during the year, but also in helping children achieve their
own potential and more. Our colleagues on the Board have provided exceptional
support and leadership during this year of transition and we are grateful to them for
always being prepared to ‘go the extra mile’. Finally, we are deeply appreciative of the
support from our shareholders and schools, teachers, education administrators,
parents and students who place their confidence in 3P Learning.
Thank you.
Yours sincerely,
Samuel Weiss
Chairman
Rebekah O’Flaherty
CEO and Managing Director
3P Learning Limited
Directors' report
30 June 2017
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 2017.
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 (Chairman)
Rebekah O’Flaherty
Roger Amos
Claire Hatton
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
Current year
There were no dividends paid, recommended or declared during the current financial year.
Previous year
A final dividend was declared on 26 August 2015 for the year ended 30 June 2015 of 1.8 cents per ordinary share totalling
$2,428,000 and was paid on 22 October 2015 to shareholders registered on 8 October 2015.
Operating and financial review
Business overview
The Group is a global online education provider with e-learning programs for mathematics, spelling, literacy, reading and
science. Our resources are fully aligned with over a dozen international curricula, are designed to reduce teacher workload
and make learning fun. We have over 240 educators, engineers, product designers and other personnel based in 11
countries, servicing schools in more than 100 countries.
Today we are trusted by over 5.5 million students in over 17,000 schools across the world. Our mission is to create a place
where students, families and teachers love learning.
Financial review
The performance of the Group was impacted following a strategic review of the business that resulted in significant
restructuring costs and the non-cash write-down of certain intangible technology assets. This led to a loss for the Group
after providing for income tax and non-controlling interest amounted to $7,106,000 (30 June 2016: profit of $3,632,000).
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3P Learning Limited
Directors' report
30 June 2017
A reconciliation of earnings before interest, tax, depreciation and amortisation ('EBITDA') to statutory profit after tax for the
year is as follows:
Consolidated
2017
$'000
2016
$'000
Profit/(loss) attributable to owners of 3P Learning Limited
(7,106)
3,632
Non-controlling interest
Net profit after income tax expense for the year
Non-cash impairment expense
Tax benefit on impairment expense
Non-cash loss on sale
Restructuring costs
Tax benefit on restructuring costs
Underlying profit after income tax expense*
Income tax expense
Underlying profit before income tax expense**
Depreciation and amortisation expense
Interest income
Finance costs
Underlying core EBITDA***
Share of profits of associates
Adjusted EBITDA****
(155)
(7,261)
15,285
(3,386)
134
1,869
(314)
6,327
18
3,650
-
-
-
2,231
(596)
5,285
2,112
2,476
8,439
6,474
(26)
1,074
7,761
5,064
(148)
649
15,961
(703)
13,326
(480)
15,258
12,846
*
**
Underlying profit after income tax expense represents reported profit after income tax expense of the Group,
excluding restructuring costs, impairment expense, non-cash loss on sale and the tax impact of these items.
Underlying profit before income tax expense represents reported profit before income tax expense of the Group,
excluding restructuring costs, impairment expense and non-cash loss on sale.
*** Underlying core EBITDA represents earnings before interest, tax, depreciation and amortisation, excluding
restructuring costs, impairment expense and non-cash loss on sale.
**** Adjusted EBITDA represents earnings before interest, tax, depreciation and amortisation, excluding restructuring
costs, impairment expense, non-cash loss on sale and share of profits of associates.
The directors have provided adjusted EBITDA, underlying core EBITDA, underlying profit before income tax expense and
underlying profit after income tax expense (‘Underlying Information’) after careful consideration of the requirements and
guidelines contained in ASIC’s Regulatory Guide 230 Disclosing non-IFRS financial information. 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 restructuring costs is excluded from the measurement of underlying profit after income tax expense.
Revenue
Total revenue for the year ended 30 June 2017 was $52,455,000 (30 June 2016: $49,264,000). Each of the geographic
segments showed modest growth, reflecting our success to increase average revenue per user ('ARPU') by 4% across the
Group.
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3P Learning Limited
Directors' report
30 June 2017
Performance
The loss for the Group after providing for income tax and non-controlling interest amounted to $7,106,000 (30 June 2016:
profit of $3,632,000).
All three of the Group’s segments improved their sales revenue due to modest ARPU growth which was created from a
focus on driving profitable revenue. Adjusted EBITDA performance in all segments improved due to revenue growth and
cost management, particularly around employee costs.
Depreciation and amortisation expenses in the current year increased by $1,410,000 to $6,474,000. This was the result of
the accumulation of capitalised product development and a change in effective life from five years to three years to reflect
the increasing velocity of technological change.
Net interest expense in the current year was $1,048,000 compared to $501,000 for the previous year. This was driven by a
higher average net debt balance and higher weighted-average interest rate during the current year when compared to the
previous year.
Following a strategic review of all technology assets, a non-cash impairment charge of $11,288,000 was made in the
current year to address the carrying value of capitalised product development.
A non-cash impairment charge of $3,997,000 and a loss on sale of $134,000 was recorded on the sale of Desmos Inc.
One-off restructuring costs of $1,869,000 relating to the cessation of our development operations in Pune, India and the
consolidation of the real estate footprint in the Americas and APAC segments were recognised in the current year. The
Group's headcount declined from 338 to 242 during the year. In the prior year, one-off restructuring costs of $2,231,000
relating to the leadership transition and transactions costs associated with the investment in Learnosity Holdings Limited
were recorded.
Segment review
Segment revenue for the year is as follows:
APAC
Americas
EMEA
Total Revenue
2017
$'000
2016
$'000
Change
Change
$'000
%
31,819
7,664
12,972
52,455
30,791
5,846
12,627
49,264
1,028
1,818
345
3,191
3%
31%
3%
6%
Segment adjusted EBITDA (excluding share of profits of Associates) is as follows:
APAC
Americas
EMEA
Total Adjusted EBITDA
2017
$'000
2016
$'000
Change
Change
$'000
%
15,117
(2,874)
3,015
15,258
14,751
(4,039)
2,134
12,846
366
1,165
881
2,412
2%
(29%)
41%
19%
APAC segment
The performance saw revenue growth of 3% to $31,819,000 driven by licence growth of 1% and ARPU growth of 2%.
Adjusted EBITDA improved 2% to $15,117,000 due to revenue growth.
Americas segment
Revenue in Americas grew 31% to $7,664,000 driven by ARPU growth. Adjusted EBITDA improved $1,165,000 due to
revenue contribution less growth in inter-segment royalties and operating cost containment to only 3% increase.
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3P Learning Limited
Directors' report
30 June 2017
EMEA segment
EMEA recorded revenue growth of 3%, largely due to ARPU growth which occurred in Australian Dollars despite a
significant depreciation of the British Pound against the Australian Dollar. Adjusted EBITDA increased 41% to $3,015,000
due to revenue contribution less growth in inter-segment royalties and favourable impacts on costs from the depreciation of
British Pound against the Australian Dollar during the year.
The Group has net assets of $34,407,000 (30 June 2016: $43,549,000) which have declined from the previous year due to
the loss on total comprehensive income for the financial year.
As at 30 June 2017, the Group was in a net current liability position of $24,958,000 (2016: $29,193,000) of which
$28,928,000 (2016: $28,423,000) is deferred revenue which is expected to be recognised as income in the next financial
year with no further cash outflows to the Group. Further, there is $20,500,000 available of the working capital debt facility.
Accordingly, the financial statements continue to be prepared on a going concern basis.
Material Business Risks
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 who may develop new technologies that could affect our business model. The
Group invested $9,339,000 (30 June 2016: $11,382,000) in intangibles, including product development and software and
this level of investment is expected to continue to remain competitive.
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 3rd Party Product risks: The Group does not own the intellectual property rights to Reading Eggs,
Reading Eggspress and Mathseeds.
Technology: The Group’s technology platforms and systems may be disrupted which could affect the Group’s reputation,
ability to generate income and financial performance. As a technology-focused business, managing security and taking
care of the customer and student data is essential.
Change to school funding risk: The K-12 market is driven by our customers’ ability to fund investment into technology. A
decline in school funding could result in declined demand for our products.
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
On 24 August 2016, the Group amended the HSBC bank loan facilities agreements from $20,000,000 to $30,000,000.
Divestments
On 25 May 2017, the Group disposed of its 17.2% stake in Desmos Inc.,(https://www.desmos.com) a US based, graphic
calculator application business for total proceeds of $2,551,000.
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
No matter or circumstance has arisen since 30 June 2017 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.
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3P Learning Limited
Directors' report
30 June 2017
Likely developments and expected results of operations
The 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 in mathematics and literacy by increasing their functionality, adding
additional content and enhancing the user experience. The Group also expects to continue establishing its scalable sales
and operational model to support its growth 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.
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 Oroton Group Limited (ASX: ORL), Breville Group Limited
Special responsibilities:
Interests in shares:
(ASX: BRG) and Chairman of Ensogo Limited (ASX: E88)
Member of the Nomination and Remuneration Committee and Member of the Audit
and Risk Committee
526,508 ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Rebekah O’Flaherty
Chief Executive Officer
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
Special responsibilities:
None
Interests in shares:
2,015,419 options
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 Contango
Asset Management Limited (ASX: CGA) and Deputy Chairman of Enero Group
Limited (ASX: EGG)
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Member of the Nomination and Remuneration Committee and Chairman of the Audit
and Risk Committee
61,743 ordinary shares
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3P Learning Limited
Directors' report
30 June 2017
Name:
Title:
Qualifications:
Experience and expertise:
Claire Hatton
Independent Non-Executive Director
BSc, MBA, GAICD
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.
None
Other current directorships:
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.
Company secretary
Mr Jonathan Kenny (AICD, MBA, B.Econ) was appointed as company secretary on 2 September 2016. Jonathan has over
20 years' experience in finance and operations roles for ASX listed and multinational corporations. His broad industry
experience includes publishing, software, property development, data and analytics. Previously Jonathan was chief
financial officer of ASX listed RP Data and Bravura Solutions.
Ms Stephanie Belton resigned as company secretary on 2 September 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 2017, and the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Samuel Weiss
Rebekah O’Flaherty*
Roger Amos
Claire Hatton
9
9
9
9
9
9
9
9
2
-
2
2
2
-
2
2
5
-
5
5
5
-
5
5
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
*
Rebekah O’Flaherty attended the Nomination and Remuneration Committee and Audit and Risk Committee meetings
as an observer.
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3P Learning Limited
Directors' report
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Letter from the Chair of the Nomination and Remuneration Committee
Dear Shareholder,
The purpose of this introductory letter to the 2017 Remuneration Report is to set out the progress that we have made since
last year and to clearly articulate our remuneration policies, how they have been applied in determining our compensation
plans and how they support our company strategy and culture.
This has been a year of strategy implementation for 3P Learning Limited. Our Chief Executive Officer, Rebekah O’Flaherty,
is leading the process to put in place our plans to restore the underlying value in 3P Learning Limited and to become a
global market leader in K-12 online education.
Our strategic priorities remain to:
•
•
•
strengthen our product portfolio,
develop scalable sales and marketing, and
globalise our operating model.
Each is supported by a robust people and culture strategy. Remuneration is a key component ensuring that we attract and
retain top talent with the skills that we need to deliver our strategy and to align incentives to create shareholder value.
Remuneration
Last year we made some significant changes to our Long Term Incentive (LTI) Plan. We believe our remuneration
framework of a mixture of fixed compensation, coupled with grants under the Short Term Incentive (STI) Plan and LTI Plan,
provides the best motivation for our Executive team to increase the velocity of our growth and build shareholder value. After
this year’s review of our remuneration plans, your Board has decided to maintain both the STI and LTI Plans with no
changes.
Consistent with FY17, our STI Plan has two key hurdles; Revenue and Underlying core EBITDA. We believe these are the
most appropriate measures to tie performance to growth and profitability. These measures will continue to apply for grants
with respect to FY18.
Rebekah O’Flaherty joined 3P Learning as Chief Executive Officer on 1 June 2016. The Remuneration Report includes full
details of Rebekah’s salary and benefits package, including all share based benefits that were approved by shareholders
last year. Rebekah’s remuneration package was benchmarked against the market and incentivises her to transform 3P
Learning in the medium term.
Rebekah’s first 12 months were concentrated on the first part of our three year strategic plan to restore underlying value,
and to position us as a global market leader in K-12 online education. She has been focused on leading change in our
products and how we sell them, the transformation of our customer experience, and the digitisation of our platforms to
ensure they are fit for purpose as we scale.
Jonathan Kenny, our Chief Financial Officer, who took on the role of interim Chief Executive Officer for 3P Learning from
January to June 2016, has also taken on the responsibility for globalising our systems and processes. As disclosed last
year, we extended a retention and reward grant to Jonathan in February 2016, in recognition of his performance as interim
CEO and his ongoing contribution to the Group. Full details are available in the Remuneration Report.
Diversity and inclusion
Diversity and inclusion are important for 3P Learning Limited. This year the Board set a target of 50% gender diversity at a
Board level, senior leadership team level and as an aggregate globally across the organisation. We’re proud to be able to
say that we have achieved this target today with women comprising 50% of our Board, 53% of our senior leadership team
and 51% of our employees aggregated globally as at 30 June 2017. During this financial year we also carried out and acted
upon a pay equity review to ensure there is no inherent bias in our rewards system. We believe diversity shouldn’t stop at
gender, and our next area of focus will be on encouraging diversity of thinking, in its broader sense.
We conducted the Great Place to Work survey for the first time, and received positive results which highlighted that
employees rated highly that ‘they belonged and could be themselves’. However, as we think about our Workplace of the
Future, we believe there is more that we can do around flexibility, accessibility, global engagement and finding, attracting
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3P Learning Limited
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30 June 2017
and retaining in demand skills. Your Board believes that this is a critical factor in our ability to build an adaptable, innovative
and fast moving global education technology company.
Governance changes
Our Chairman, Samuel Weiss, will be up for re-election at this year’s Annual General Meeting (AGM). Sam is a Non-
Executive Director (‘NED’) and chairman of three ASX listed companies, which some proxy advisors consider to be the
equivalent of six Board positions. We have no doubt that Sam has the time and energy to give 3P Learning his priority and
we are confident that he is not over extended.
We have reviewed the composition of our Board and believe that the Company will be better served with a broader set of
Director skills. In the medium term we plan to increase the size of our Board from four to five (NED’s & CEO) whilst
considering over the longer term another member to bring us to six. We started this process during the past financial year.
We have published our Board Skills Matrix and plan to appoint a Board member who compliments our skills and will provide
diverse viewpoints that benefit our thinking.
As a consequence of reviewing our Board composition we will ask for approval from shareholders to increase the NED
Remuneration Pool at our 2017 Annual General Meeting to give us the flexibility to appoint up to two new Board Directors.
Our business is at an important point in its evolution and we believe we have put the right foundations and strategy in place
to restore the underlying value in 3P Learning and aggressively grow the business to be a global market leader in K-12
online education. 3P Learning and I welcome your feedback so we can continue to evolve our remuneration and governance
framework.
Yours sincerely
___________________________
Claire Hatton
Chair of the Nominations and Remuneration Committee
24 August 2017
Sydney
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3P Learning Limited
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Remuneration report (audited)
This remuneration report for the year ended 30 June 2017 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:
•
•
•
•
•
•
•
Letter from the Chair of the Nomination and Remuneration Committee (not audited);
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 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 based on objectives to:
•
•
•
drive growth and profitability;
align executive rewards with achievement of strategic objectives and the delivery of shareholder value; and
provide 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
• Fixed salary set by reference to
•
appropriate benchmark information
and experience of individuals
Includes superannuation and
salary-sacrifice non-monetary
benefits
Executive remuneration
Short term incentive
• 25 - 50% of fixed remuneration
• Annual cash incentive
• 12 month period
• Targets linked to group
performance
Long term incentive
• 25 - 50% of fixed remuneration
• Grant of options
• 3 year performance period
• Performance hurdles linked to
revenue and EPS growth
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.
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30 June 2017
Fixed remuneration includes base salary, non-monetary benefits, superannuation and other statutory components such as
long service leave.
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. Further information about the performance measures for the STI and LTI plan can
be found in subsequent sections of this remuneration report. The table below shows the Company’s performance history
against these financial measures since the IPO in 2014.
Financial Year
Revenue ($m)
Underlying core EBITDA ($m)
EPS (cents)
2014
36
13
4.03
2015
44
17
3.04
2016
49
13
2.66
2017
52.5
16.0
(5.11)
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3P Learning Limited
Directors' report
30 June 2017
Executive remuneration
Details of remuneration paid to the current and former executives, for the years ended 30 June 2017 and 30 June 2016, are
set out below:
Current executives
Salary STI plan
$
$
Post employment
benefits
LTI plan and
additional
incentives*
$
$
Total
$
Performance
related
%
R O'Flaherty (Chief Executive Officer appointed 1 June 2016)
2017 576,667
331,444
2016
48,333
-
33,333
2,500
189,269
1,130,713
36%
3,457
54,290
-
J Kenny (Chief Financial Officer and Interim Chief Executive Officer from 11 January 2016 to 31 May 2016)
2017 358,000
210,820
2016 377,802
-
30,000
30,000
456,723**
1,055,543
37%
138,142
545,944
-
LTIP
%
17%
6%
43%
25%
Former executive
Salary STI plan
Termination
benefits
Post
employment
benefits
Long term
employee
Performance
benefits LTI plan*
Total
related LTIP
$
$
$
$
$
$
$
%
%
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
-
* 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.
** Further information about Jonathan Kenny’s incentives are detailed in the sections entitled ‘long term incentives’ and
‘additional incentives’ below.
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.
11
3P Learning Limited
Directors' report
30 June 2017
The performance measures are as follows:
Performance measure
Revenue
Underlying core 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. <95% 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.
STI for the 2017 financial year
The target STI opportunity for the financial year ended 30 June 2017 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 four participants in the STI program for FY17 and four achieved their targets for the year. For FY17, a total of
$667,234 will be paid for STI awards. Payment will be made after the release of the financial results for FY17.
Specific information relating to the STI payable to the Chief Executive Officer and Chief Financial Officer for FY17 is set out
below:
Executive
Chief Executive Officer
Chief Financial Officer
Actual STI payment
$331,444
$210,820
% of Target STI payable
109%
109%
These payments are based on the following STI metrics for FY17:
Performance measure
Revenue
Underlying core EBITDA
FY17 – At Target
$53,000,000
$14,000,000
12
3P Learning Limited
Directors' report
30 June 2017
Long term incentives
As foreshadowed in last year’s report, changes to the LTI plan were made in 2016 following feedback from the Company’s
shareholders and a review of the Company’s remuneration framework. The objective of the LTI plan 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 made to the plan were as follows:
•
•
a revenue based hurdle was included in the plan, in addition to an EPS hurdle;
participants in the plan were restricted to the senior executive team comprising the Chief Executive Officer and her
direct reports; and
the equity vehicle under the plan was changed from performance rights to options.
•
The revenue hurdle was 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 has been tasked with driving significant growth for shareholders. The choice of 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 direct reports are eligible to participate in the LTI plan. As at 30 June 2017, the Chief
Executive Officer had four direct reports.
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?
Awards take the form of options. Each option represents a conditional right to acquire one share in the Company on
exercise by payment of an exercise price. Options do not carry a right to vote or to dividends.
Grants are made in September of each year, following finalisation of the 30 June financial statements, are subject to pre-
defined performance conditions and have a 3 year vesting (performance) period.
Any options which do not meet the performance conditions at the end of the performance period will lapse.
Cessation of employment, Change of Control and Clawback
Options may lapse in the event that the relevant performance conditions are not met. In addition, if the relevant employee
resigns or is dismissed, all unvested options are forfeited. If an employee leaves for any other reason the Board may
determine the number of options which will lapse or be retained. Options may also 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. If a change of control event occurs, the Board has discretion to determine whether
options will vest or lapse.
2017 LTI Award
The exercise price of options granted in FY17 was set at a premium of 43% to the Company’s share price on the date of
grant. The life of the FY17 grant is four years.
13
3P Learning Limited
Directors' report
30 June 2017
The number of options granted was determined by dividing the dollar award value by the value of an option at the time of
grant (based on a two week volume weighted average price (‘VWAP’) of the Company’s shares at that time).
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?
The Board approved challenging threshold, target and stretch growth rates 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
% of options awarded
0%
80%
100%
150%
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.
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. The hurdles for the options granted in FY17 will be disclosed in August 2019
after the applicable performance period.
Additional incentives
As outlined in last year’s remuneration report, as part of the remuneration package negotiated with Rebekah when she
joined as Chief Executive Officer on 1 June 2016, Rebekah received an award of performance rights, which were subject to
shareholder approval at the 2016 Annual General Meeting.
Those performance rights were issued during the financial year, and include:
(1) 400,000 performance rights under the LTI plan which are subject to specific long term performance indicators:
a) where the 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; and
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.
(2) 100,000 performance rights under the terms of the LTI plan which are subject to Rebekah remaining in the role of Chief
Executive Officer until 1 September 2019.
14
3P Learning Limited
Directors' report
30 June 2017
Additionally, in recognition of Jonathan’s increased responsibilities and ongoing contributions to the Group as Interim Chief
Executive Officer during FY16, and in lieu of incentive payments with respect to FY16, it was determined that 300,000
ordinary shares and a cash bonus of $194,000 were to be issued to Jonathan as a retention and reward bonus subject to
continued employment. The first issue of shares was on 15 September 2016, and subsequent allotments of 100,000 shares
will be made in September 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. The cash bonus was paid in August
2017.
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 have not been granted or issued equity as part of their remuneration, and there is no
current intention to do so. To preserve independence and impartiality, non-executive directors do not receive performance
related compensation and are not eligible to participate in the Company’s equity incentive plan.
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.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The most recent determination was in 2014, prior to the IPO of the Company, when shareholders set the
aggregate remuneration at $650,000 per annum. Directors’ fees also were set before the July 2014 IPO and have not been
changed since then.
As mentioned in the Letter from the Chair of the Nomination & Remuneration Committee at the outset of the Remuneration
Report, the Board is in the midst of an evaluation of the Board composition and compensation.
Approval will be sought from shareholders at the 2017 Annual General Meeting to increase the aggregate fee pool to
$900,000 per annum to provide flexibility to appoint additional board members in the medium to long term as well as to
accommodate any potential change in Directors’ fees as a consequence of the compensation review. 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 (exclusive of superannuation) for the financial
year ended 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
2017 and 30 June 2016 are set out in the table below.
Name
S Weiss (Chairman)
R Amos
C Hatton
Total
2017
2016
2017
2016
2017
2016
2017
2016
Fees and
allowances
$
170,000
Post-employment
benefits
$
16,150
176,333
105,000
105,000
105,000
98,667
380,000
380,000
16,752
9,975
9,975
9,975
9,373
36,100
36,100
15
Total
$
186,150
193,085
114,975
114,975
114,975
108,040
416,100
416,100
3P Learning Limited
Directors' report
30 June 2017
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 as at 30 June 2017 are as follows:
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. 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. 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.
16
3P Learning Limited
Directors' report
30 June 2017
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Jonathan Kenny
Chief Financial Officer
1 July 2014
Open ended
Jonathan will receive annual fixed remuneration of $388,000 inclusive of 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. 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, the
Company may 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.
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 2017 are set out below:
Name
Date
Shares
Issue price
$
Jonathan Kenny
15 September 2016
100,000
$1.41
141,000
17
3P Learning Limited
Directors' report
30 June 2017
Options
Details of options issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2017 are set out below. No NEDs hold options, and no options have been granted since the end of the
reporting period. The options were provided at no cost to the recipients. Details of the performance hurdles are included
in the Long Term Incentive section of this Remuneration Report. No options lapsed or were exercised during the financial
year ended 30 June 2017.
Name
Number
Grant Date
Rebekah O’Flaherty
2,015,419
21 Nov 2016*
Jonathan Kenny
1,281,938
2 Sept 2016
Accounting
fair value
$0.395*
$0.247
Exercise
Price
$1.256
$1.256
Vesting Date
Expiry Date
2 Sept 2019
2 Sept 2020
2 Sept 2019
2 Sept 2020
* Options were granted on 2 September 2016, subject to shareholder approval. The options were subsequently issued to
Rebekah on 21 November 2016 following the 2016 AGM. Consequently, the grant date for accounting purposes is 21
November 2016, and the accounting fair value for Rebekah’s options was determined on 21 November 2016.
The accounting fair value for Jonathan’s options was determined on 2 September 2016 being the grant and issue date of
those options.
Performance Rights
Details of performance rights issued to directors and other key management personnel as part of compensation during
the year ended 30 June 2017 are set out below. No NEDs hold performance rights, and no performance rights have been
granted since the end of the reporting period. The performance rights were provided at no cost to the recipient. Details of
the applicable hurdles to vesting are outlined earlier in this Remuneration report. No performance rights lapsed or were
exercised during the financial year ended 30 June 2017.
Name
Number
Grant Date
Accounting
fair value
Expiry Date
Rebekah O’Flaherty
100,000
400,000
21 Nov 2016*
21 Nov 2016*
$0.710*
$0.003*
1 Sept 2019
60 days after release of FY19 results
* Performance Rights were granted on 1 June 2016, subject to shareholder approval. The performance rights were
subsequently issued to Rebekah on 21 November 2016 following the 2016 AGM. The grant date for accounting purposes
is 21 November 2016, and the accounting fair value was determined on 21 November 2016.
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
Balance at the
start of the year
Received as part
of remuneration
Additions
Disposals
/other
Balance at the
end of the year
306,508
32,070
31,000
148,100
517,678
-
-
-
100,000
100,000
220,000
29,673
-
-
-
-
-
-
249,673
-
526,508
61,743
31,000
248,100
867,351
18
3P Learning Limited
Directors' report
30 June 2017
Other share based holdings
The number of performance rights and options 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:
Balance at the
start of the year
Granted during
the year
Vested
Expired/
forfeited
Balance at the
end of the year
Rebekah O’Flaherty Options
Performance Rights
Jonathan Kenny
Options
-
-
-
2,015,419
500,000
1,281,938
-
-
-
-
-
-
2,015,419
500,000
1,281,938
This concludes the remuneration report, which has been audited.
19
3P Learning Limited
Directors' report
30 June 2017
Shares under option
Unissued ordinary shares of 3P Learning Limited under option at the date of this report are as follows:
Grant date
02/09/2016
21/11/2016
Expiry date
02/09/2020
02/09/2020
Exercise
price
Number
under option
$1.26
$1.26
2,334,525
2,015,419
4,349,944
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
21/11/2016
Expiry date
02/09/2020
Exercise
price
Number
under rights
$0.00
500,000
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
2017 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 2017 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.
20
3P Learning Limited
Directors' report
30 June 2017
Non-audit services
Details of the amounts paid or payable of $63,000 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.
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 Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument 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
24 August 2017
Sydney
21
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 2017, 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
24 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
3P Learning Limited
Contents
30 June 2017
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
24
25
26
27
28
68
69
75
77
23
3P Learning Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
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
Administrative expenses
Operating profit
Finance costs
Restructuring costs
Loss on disposal of available for sale financial assets
Impairment of assets
Profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Profit/(loss) after income tax (expense)/benefit 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/(loss) 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
Note
Consolidated
2017
$'000
2016
$'000
5
6
7
7
7
7
8
52,455
49,264
703
67
480
429
(25,026)
(6,474)
(1,775)
(2,755)
(1,959)
(2,502)
(3,221)
(23,738)
(5,064)
(2,356)
(2,583)
(3,060)
(2,281)
(2,681)
9,513
8,410
(1,074)
(1,869)
(134)
(15,285)
(649)
(2,231)
-
-
(8,849)
5,530
1,588
(1,880)
(7,261)
3,650
(85)
(2,273)
(2,358)
85
120
205
(9,619)
3,855
(155)
(7,106)
18
3,632
(7,261)
3,650
(155)
(9,464)
18
3,837
(9,619)
3,855
Cents
Cents
Basic earnings per share
Diluted earnings per share
39
39
(5.11)
(5.11)
2.66
2.66
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
24
3P Learning Limited
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
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
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 profits/(accumulated losses)
Equity attributable to the owners of 3P Learning Limited
Non-controlling interest
Total equity
Note
Consolidated
2017
$'000
2016
$'000
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
3,287
6,056
1,481
939
11,763
41
46,624
-
1,070
16,058
7,785
71,578
4,281
7,308
48
696
12,333
80
48,884
6,607
1,216
23,917
5,881
86,585
83,341
98,918
5,632
-
2,151
28,928
10
36,721
9,500
268
2,415
30
12,213
10,745
313
2,036
28,423
9
41,526
11,500
549
1,754
40
13,843
48,934
55,369
34,407
43,549
34,092
5,360
(4,946)
34,506
(99)
33,951
7,382
2,160
43,493
56
34,407
43,549
The above statement of financial position should be read in conjunction with the accompanying notes
25
3P Learning Limited
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits
$'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
-
-
-
3,632
205
205
-
142
-
-
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
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits/(accu
mulated
losses)
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2016
33,951
7,382
2,160
56
43,549
Loss after income tax benefit 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)
-
-
-
-
(7,106)
(155)
(7,261)
(2,358)
-
-
(2,358)
(2,358)
(7,106)
(155)
(9,619)
141
-
(141)
477
-
-
-
-
-
477
Balance at 30 June 2017
34,092
5,360
(4,946)
(99)
34,407
The above statement of changes in equity should be read in conjunction with the accompanying notes
26
3P Learning Limited
Statement of cash flows
For the year ended 30 June 2017
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 paid
Note
Consolidated
2017
$'000
2016
$'000
59,757
(42,788)
26
(1,099)
(1,161)
59,467
(45,397)
148
(359)
(2,206)
Net cash from operating activities
36
14,735
11,653
Cash flows from investing activities
Payment for previous year's business combinations
Payments for investments
Payments for investments in associates
Payments for derivatives
Payments for plant and equipment
Payments for intangibles
Proceeds from disposal of plant and equipment
Proceeds from release of security deposits
Proceeds from disposal of available for sale financial assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(294)
-
(5,876)
(398)
(364)
(9,339)
-
-
2,551
(495)
(1,318)
(33,748)
-
(912)
(11,382)
1
500
-
(13,720)
(47,354)
18,500
(20,509)
-
17,500
(6,000)
(2,404)
(2,009)
9,096
(994)
4,281
(26,605)
30,886
Cash and cash equivalents at the end of the financial year
9
3,287
4,281
The above statement of cash flows should be read in conjunction with the accompanying notes
27
3P Learning Limited
Notes to the financial statements
30 June 2017
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 24 August 2017. 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 or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended 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 or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Net current asset deficiency
As at 30 June 2017, the Group was in a net current liability position of $24,958,000 (2016: $29,193,000) of which
$28,928,000 (2016: $28,423,000) is deferred revenue which is expected to be recognised as income in the next financial
year with no further cash outflows to the Group. Further, there is $20,500,000 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.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of 3P Learning Limited as at
30 June 2017 and the results of all subsidiaries for the year then ended.
28
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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.
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.
29
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Third party licence revenue
The Group recognises commission revenue pursuant to a distribution agreement when it sells a third party’s online
products to customers which provide 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 and Mathseeds 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.
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.
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.
30
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 14-30 days or
if later, the licence start date.
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.
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.
31
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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.
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.
32
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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
two to three 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.
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.
33
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 life of three years. The useful life changed from 5 years in the first half of the year to 3 years
from 1 January 2017.
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 include direct incremental costs of establishing a customer contract such as sales commissions.
Customer contracts are amortised over the period in which the related benefits are expected to be realised, being the
customer contract period.
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.
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.
34
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 is measured at fair value on grant date. Fair value is determined using the Binomial
option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price
at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate
for the of the option, together with non-vesting conditions that do not determine whether the Group receives the services
that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is 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.
35
3P Learning Limited
Notes to the financial statements
30 June 2017
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.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
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.
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.
36
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument 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 2017. 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.
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 and the adoption of this standard is not
expected to have a material impact for the Group.
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 expects
to adopt this standard from 1 July 2018 and is undertaking a comprehensive review of the implementation impact of AASB
15. The Group has not reached a determination as to the impact of this accounting standard and has not determined
whether the retrospective method or cumulative effect method will be adopted.
37
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 expects to 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.
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.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using a Binomial model taking into
account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities
within the next annual reporting period but may impact profit or loss and equity.
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.
38
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 3. Critical accounting judgements, estimates and assumptions (continued)
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.
Investments accounted for using the equity method
The Group assesses the recoverable amount of its equity-accounted investments when objective evidence of impairment is
identified. In assessing the recoverable amount, assumptions are made about the growth prospects of the investment and
in determining the discount rate used to calculate the net present value of future cash flows when a discounted cash flow
model is used.
Estimation of useful lives of capitalised product development
Capitalised product development is depreciated over its useful life. The actual lives of the assets are assessed annually
and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation,
product life cycles and maintenance programmes are taken into account.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into geographic operating segments: Asia-Pacific ('APAC' formerly '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 adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, excluding restructuring
costs, impairment expense, non-cash loss on sale and share of profits of associates). 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 monthly 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.
39
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 4. Operating segments (continued)
Operating segment information
Consolidated - 2017
Revenue
Sales to external customers
Total revenue
Adjusted EBITDA*
Share of profits of associates
Depreciation and amortisation
Interest revenue
Finance costs
Other non-cash expenses - impairment expenses and loss on
sale of investments
Other cash expenses - restructuring expenses
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
APAC
$'000
Americas
$'000
EMEA
$'000
Total
$'000
31,819
31,819
7,664
7,664
12,972
12,972
15,117
(2,874)
3,015
52,455
52,455
15,258
703
(6,474)
26
(1,074)
(15,419)
(1,869)
(8,849)
1,588
(7,261)
*
Adjusted EBITDA is after inter-segment royalty expense incurred by Americas segment of $2,793,000 and EMEA
segment of $4,616,000.
Consolidated - 2016
Revenue
Sales to external customers
Total revenue
Adjusted EBITDA*
Share of profits of associates
Depreciation and amortisation
Interest revenue
Finance costs
Restructuring expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
APAC
$'000
Americas
$'000
EMEA
$'000
Total
$'000
30,791
30,791
5,846
5,846
12,627
12,627
14,751
(4,039)
2,134
49,264
49,264
12,846
480
(5,064)
148
(649)
(2,231)
5,530
(1,880)
3,650
*
Adjusted EBITDA is after inter-segment royalty expense incurred by Americas segment of $2,324,000 and EMEA
segment of $4,582,000.
40
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 5. Revenue
Licence fees
Sponsorship income
Sale of workbooks
Copyright licence fees
Other revenue
Net commission revenue
Revenue
Note 6. Other income
Interest
Other income
Other income
Consolidated
2017
$'000
2016
$'000
42,063
409
49
2,198
211
7,525
39,799
683
-
1,724
233
6,825
52,455
49,264
Consolidated
2017
$'000
2016
$'000
26
41
67
148
281
429
41
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 7. Expenses
Profit/(loss) 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
Impairment of assets
Available for sale financial assets
Intangibles - product development
Total impairment of assets
Finance costs
Interest and finance charges paid/payable
Net foreign exchange loss
Net foreign exchange loss/(gain)
Rental expense relating to operating leases
Minimum lease payments
Employee benefits expense:
Salaries and wages
Bonus and commission
Share based payments
Superannuation
Total employee benefits expense
42
Consolidated
2017
$'000
2016
$'000
191
189
40
420
5,340
92
40
582
164
421
32
617
3,983
103
138
223
6,054
4,447
6,474
5,064
3,997
11,288
15,285
-
-
-
1,074
649
109
(615)
2,147
1,395
18,022
3,997
477
2,530
19,134
1,807
142
2,655
25,026
23,738
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 8. Income tax expense/(benefit)
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Research and developments rebates recognised
Adjustments in respect of current income tax of previous year
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Decrease/(increase) in deferred tax assets (note 16)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Profit/(loss) before income tax (expense)/benefit
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
Tax losses derecognised
Research and developments rebates recognised
Other
Consolidated
2017
$'000
2016
$'000
1,826
(1,904)
(982)
(528)
809
1,719
(588)
(60)
(1,588)
1,880
(1,904)
1,719
(8,849)
5,530
(2,655)
1,659
1,396
(391)
(112)
1,114
570
(78)
(982)
(528)
71
(385)
314
869
-
2,528
(588)
(60)
Income tax expense/(benefit)
(1,588)
1,880
Note 9. Current assets - cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
43
Consolidated
2017
$'000
2016
$'000
3,287
-
4,219
62
3,287
4,281
Consolidated
2017
$'000
2016
$'000
6,061
(207)
5,854
7,098
(20)
7,078
202
230
6,056
7,308
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 10. Current assets - trade and other receivables (continued)
Impairment of receivables
The Group has recognised a loss of $259,000 (2016: $52,000) in profit or loss in respect of impairment of receivables for
the year ended 30 June 2017.
The ageing of the impaired receivables provided for above are as follows:
One 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
Unused amounts reversed
Closing balance
Consolidated
2017
$'000
2016
$'000
-
27
180
207
3
10
7
20
Consolidated
2017
$'000
2016
$'000
20
305
(72)
(46)
207
18
52
(50)
-
20
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $390,000 as at 30 June
2017 ($1,791,000 as at 30 June 2016).
The ageing of the past due but not impaired receivables are as follows:
1 to 12 months overdue
Over 12 months overdue
Note 11. Current assets - other
Prepayments
Term deposits
Other deposits
44
Consolidated
2017
$'000
2016
$'000
253
137
390
1,791
-
1,791
Consolidated
2017
$'000
2016
$'000
916
15
8
939
672
16
8
696
3P Learning Limited
Notes to the financial statements
30 June 2017
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.
Note 13. Non-current assets - available-for-sale financial assets
Unlisted ordinary shares
Refer to note 26 for further information on fair value measurement.
Consolidated
2017
$'000
2016
$'000
46,624
48,884
Consolidated
2017
$'000
2016
$'000
-
6,607
On 25 May 2017, the Group sold its investment interest of 17.2% in Desmos Inc for the total consideration of $2,551,000.
The loss on disposal of available-for-sale financial assets and impairment is recognised in the statement of profit or loss.
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
2017
$'000
2016
$'000
1,420
(816)
604
2,378
(2,023)
355
231
(120)
111
1,510
(753)
757
3,499
(3,161)
338
268
(147)
121
1,070
1,216
45
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 14. Non-current assets - plant and equipment (continued)
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 2015
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2016
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2017
Computer
Furniture
and fittings equipment
Office
equipment
$'000
$'000
$'000
Total
$'000
437
448
(2)
38
(164)
757
99
(39)
(22)
(191)
604
459
302
(6)
4
(421)
338
233
(18)
(9)
(189)
355
69
162
(67)
(11)
(32)
121
32
-
(2)
(40)
111
965
912
(75)
31
(617)
1,216
364
(57)
(33)
(420)
1,070
Property, plant and equipment secured under finance leases
Refer to note 30 for further information on property, plant and equipment secured under finance leases.
Note 15. Non-current assets - intangibles
Consolidated
2017
$'000
2016
$'000
4,558
4,414
33,314
(12,079)
(11,288)
9,947
3,083
(3,074)
9
428
(316)
112
2,446
(1,014)
1,432
24,683
(6,742)
-
17,941
3,074
(2,982)
92
316
(276)
40
1,861
(431)
1,430
16,058
23,917
Goodwill - at cost
Product development - at cost
Less: Accumulated amortisation
Less: Impairment
Patents and trademarks - at cost
Less: Accumulated amortisation
Customer contracts - at cost
Less: Accumulated amortisation
Software - at cost
Less: Accumulated amortisation
46
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 15. Non-current assets - intangibles (continued)
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 2015
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2016
Additions
Exchange differences
Impairment of assets
Amortisation expense
Goodwill
$'000
Product
development
$'000
Patents and Customer
contracts
$'000
trademarks
$'000
Software
$'000
Total
$'000
4,654
-
(240)
-
4,414
-
144
-
-
11,848
10,076
-
(3,983)
17,941
8,634
-
(11,288)
(5,340)
195
-
-
(103)
92
9
-
-
(92)
9
198
-
(20)
(138)
40
112
-
-
(40)
112
347
1,306
-
(223)
1,430
584
-
-
(582)
17,242
11,382
(260)
(4,447)
23,917
9,339
144
(11,288)
(6,054)
1,432
16,058
Balance at 30 June 2017
4,558
9,947
Impairment testing for goodwill
Goodwill acquired through business combinations have been allocated to the following cash-generating units ('CGUs'):
CGU1: APAC
CGU2: EMEA
Consolidated
2017
$'000
2016
$'000
3,012
1,546
3,012
1,402
4,558
4,414
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: APAC 10.25% and EMEA 8.75% (2016: APAC 10.98% and EMEA 11.48%).
b. Operating cash flow projections are extracted from the most recent approved strategic plans or forecasts that relate to
the existing asset base. For each CGU, the cash flow projections for a five-year period have been determined based on
expectations of future performance. Key assumptions in the cash flows include sales volume growth and the costs of doing
business. These assumptions are based on expectations of market demand and operational performance. Cash flow
projections are based on risk-adjusted forecasts allowing for estimated changes in the business, the competitive trading
environment, legislation and economic growth.
c. Increase in operating costs and overheads based on current levels adjusted for inflationary increases.
For the financial year ended 30 June 2017, 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.
47
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 15. Non-current assets - intangibles (continued)
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.
Impairment of product development assets
During the year ended 30 June 2017, the new leadership team of the Group has undertaken a strategic review with the first
priority of the plan to strengthen the product portfolio with a focus on Maths and Literacy. As a result, a decision was made
to withdraw from further development and sales of IntoScience. This led to the redesign of the technological platform which
underpins Mathletics and Spellodrome, and to convert content into the more contemporary technology of HTML5 from
Adobe Flash.
As a result, an impairment of $11,288,000 for APAC product development assets has been recorded during the year ended
30 June 2017. The impairment loss represents the difference between the assets carrying amount and its recoverable
amounts, being the value in use.
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
Credited/(charged) to profit or loss (note 8)
Closing balance
Consolidated
2017
$'000
2016
$'000
75
1,110
7,014
1,293
802
(2,705)
183
13
707
1,075
6,200
2,094
882
(5,153)
15
61
7,785
5,881
5,881
1,904
7,600
(1,719)
7,785
5,881
Tax losses of $570,000 have been derecognised during the year ended 30 June 2017.
Deferred tax assets of $2,633,000 (2016: $869,000) for unused tax losses have not been recognised as at 30 June 2017.
There is no expiry date on these tax losses.
The deferred tax liability in relation to the intangibles includes a tax benefit of $3,386,000 on the impairment recognised
during the year ended 30 June 2017.
48
3P Learning Limited
Notes to the financial statements
30 June 2017
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
2017
$'000
2016
$'000
1,704
3,212
-
679
37
1,281
2,640
5,779
735
310
5,632
10,745
Consolidated
2017
$'000
2016
$'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.
Note 19. Current liabilities - provisions
Employee benefits
Lease make good
Other provisions
Contingent consideration
Consolidated
2017
$'000
2016
$'000
1,255
396
500
-
1,232
510
-
294
2,151
2,036
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.
Other provisions
Other provisions represents redundancy, onerous lease, professional fees and related costs. The provision represents
present value of the estimated termination costs.
49
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 19. Current liabilities - provisions (continued)
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2017
Carrying amount at the start of the year
Payments
Additional provisions recognised
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.
Lease make
good
$'000
Contingent
Other
consideration provisions
$'000
$'000
510
(114)
-
396
294
(294)
-
-
-
-
500
500
Consolidated
2017
$'000
2016
$'000
9,500
11,500
The Group has the following banking facilities with HSBC Bank:
• Facility A - Acquisition and general corporate facility of $20,000,000, maturing on 24 August 2019;
• Facility B - General corporate facility of $10,000,000, maturing on 28 February 2018; and
• Facility C - Bank guarantee and other ancillary facility for $2,000,000, maturing on 24 August 2019.
The facilities are subject to variable interest rate, which is based on bank bill swap rate ('BBSY'), plus a margin. The
banking facilities are secured by fixed and floating charge over the Group's assets.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Consolidated
2017
$'000
2016
$'000
9,500
11,500
50
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 20. Non-current liabilities - borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans - acquisition and general corporate facility
Bank guarantee and ancillary facility
Lease liability
Used at the reporting date
Bank loans - acquisition and general corporate facility
Bank guarantee and ancillary facility
Lease liability
Unused at the reporting date
Bank loans - acquisition and general corporate facility
Bank guarantee and ancillary facility
Lease liability
Note 21. Non-current liabilities - provisions
Employee benefits
Employee benefits
Employee benefits represents provision for long service leave.
Note 22. Equity - issued capital
Consolidated
2017
$'000
2016
$'000
30,000
2,000
40
32,040
9,500
1,766
40
11,306
20,500
234
-
20,734
20,000
2,000
49
22,049
11,500
1,839
49
13,388
8,500
161
-
8,661
Consolidated
2017
$'000
2016
$'000
268
549
Ordinary shares - fully paid
139,134,170 139,034,170
34,092
33,951
Consolidated
2017
Shares
2016
Shares
2017
$'000
2016
$'000
51
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 22. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
$'000
Balance
Issue of shares
Issue of shares under Dividend Reinvestment Plan
Issue of shares
Issue of shares
1 July 2015
1 October 2015
22 October 2015
7 December 2015
31 March 2016
134,814,660
100,000
10,983
2,292,649
1,815,878
Balance
Issue of shares
Balance
30 June 2016
15 September 2016
139,034,170
100,000
30 June 2017
139,134,170
34,092
25,113
250
24
4,940
3,624
33,951
141
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 2016 Annual Report.
52
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 23. Equity - reserves
Foreign currency reserve
Acquisition reserve
Hedging reserve - cash flow hedges
Share-based payment reserve
Consolidated
2017
$'000
2016
$'000
(2,243)
(798)
-
8,401
30
(798)
85
8,065
5,360
7,382
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 2015
Foreign currency translation
Net investment hedge
Share based payments
Balance at 30 June 2016
Foreign currency translation
Net change in fair value of cash flow hedges
Share based payments
Transfer to issued capital on exercise of
options
Foreign
currency
reserve
$'000
Acquisition
reserve
$'000
Hedging
reserve
$'000
Share based
payment
reserve
$'000
Total
$'000
(90)
120
-
-
30
(2,273)
-
-
-
(798)
-
-
-
(798)
-
-
-
-
-
-
85
-
85
-
(85)
-
-
-
7,923
-
-
142
8,065
-
-
477
7,035
120
85
142
7,382
(2,273)
(85)
477
(141)
(141)
8,401
5,360
Balance at 30 June 2017
(2,243)
(798)
53
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 24. Equity - dividends
Dividends
Current year
There were no dividends paid, recommended or declared during the current financial year.
Previous year
A final dividend was declared on 26 August 2015 for the year ended 30 June 2015 of 1.8 cents per ordinary share totalling
$2,428,000 and was paid on 22 October 2015 to shareholders registered on 8 October 2015.
Franking credits
Consolidated
2017
$'000
2016
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
784
877
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.
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 cash flow forecasting.
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.
From time to time the Group enters into forward foreign exchange contracts to protect against exchange rate movements
on significant contracts with highly probable forecast cash flows.
54
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 25. Financial instruments (continued)
There were no outstanding forward foreign exchange contracts as at 30 June 2017. The maturity, settlement amounts and
the average contractual exchange rates of the Group's outstanding forward foreign exchange contracts during the
comparative year 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
2017
$'000
2016
$'000
Liabilities
2017
$'000
2016
$'000
301
141
227
187
51
907
1,207
195
77
89
453
2,021
31
5
-
-
-
36
64
5
-
-
262
331
The Group had net assets denominated in foreign currencies of $871,000 (assets $907,000 less liabilities $36,000) as at
30 June 2017 (2016: $1,690,000 (assets $2,021,000 less liabilities $331,000). Based on this exposure, had the Australian
dollar weakened by 10%/strengthened by 10% (2016: weakened by 10%/strengthened by 10%) against these foreign
currencies with all other variables held constant, the Group's loss before tax for the year would have been $87,000
lower/$87,000 higher (2016: Group's profit before tax would have been $169,000higher/$169,000 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.
As at the reporting date, the Group had the following variable rate borrowings and short term deposits:
Consolidated
Bank loans
Short term deposits
Net exposure to cash flow interest rate risk
2017
2016
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
4.41%
-
9,500
-
9,500
3.75%
7.98%
11,500
(78)
11,422
55
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 25. Financial instruments (continued)
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 (2016:50) basis points would have an adverse/favourable effect on loss
before tax of $48,000 (2016: $57,000) 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 - acquisition and general corporate facility
Bank guarantee and ancillary facility
Consolidated
2017
$'000
2016
$'000
20,500
234
20,734
8,500
161
8,661
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 - 2017
Non-derivatives
Non-interest bearing
Trade and other payables
Other payables
Interest-bearing - variable
Bank loans
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
-
-
1,704
37
-
-
-
-
4.41%
419
419
9,563
7.40%
16
2,176
35
454
-
9,563
-
-
-
-
-
1,704
37
10,401
51
12,193
56
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 25. Financial instruments (continued)
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
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
Other than bank loans, 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, and this may occur earlier
than contractually disclosed above.
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
There were no assets and liabilities measured at fair value as at 30 June 2017.
Consolidated - 2016
Assets
Ordinary shares available-for-sale
Total assets
Liabilities
Contingent consideration
Forward foreign exchange contracts
Total liabilities
There were no transfers between levels during the financial year.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
-
6,607
6,607
6,607
6,607
-
313
313
294
-
294
294
313
607
57
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 26. Fair value measurement (continued)
The carrying amounts of trade and other receivables and trade and other payables 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
require 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.
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 2015
Payments
Balance at 30 June 2016
Losses recognised in profit or loss
Impairment of investments
Disposals
Payments
Exchange differences
Balance at 30 June 2017
Available-
for-sale
$'000
Contingent
consideration
$'000
6,607
-
6,607
(134)
(3,997)
(2,551)
-
75
-
(789)
495
(294)
-
-
-
294
-
-
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
58
Consolidated
2017
$
2016
$
1,856,931
99,433
194,000
-
451,992
1,285,568
98,600
98,288
438,524
141,599
2,602,356
2,062,579
3P Learning Limited
Notes to the financial statements
30 June 2017
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
2017
$
2016
$
324,777
303,500
50,000
13,000
56,924
123,182
63,000
180,106
387,777
483,606
Note 29. Contingencies
The Group has given bank guarantees as at 30 June 2017 of $1,766,000 (2016: $1,839,000) for merchant facility and
operating leases.
Note 30. Commitments
Lease commitments - operating payable
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Lease commitments - finance payable
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
Lease commitments - operating receivable
Committed at the reporting date but not recognised as assets, receivables:
Within one year
One to five years
More than five years
59
Consolidated
2017
$'000
2016
$'000
1,755
6,815
1,595
1,725
3,973
-
10,165
5,698
16
35
51
(11)
40
511
2,186
535
3,232
16
52
68
(19)
49
-
-
-
-
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 30. Commitments (continued)
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 may be renegotiated.
Finance lease commitments include 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.
Commitments do not include onerous leases already provided for.
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
Agreement with Learnosity
On 1 January 2016 the Group entered into an agreement with Learnosity Limited ('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
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
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.
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
Parent
2017
$'000
2016
$'000
(9,191)
6,749
(9,191)
6,749
60
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 32. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
Parent
2017
$'000
2016
$'000
18,828
2,188
99,484
78,390
53,221
6,006
62,990
32,894
34,092
8,401
(5,999)
33,951
8,150
3,395
36,494
45,496
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and its Australian subsidiary are parties to a deed of cross guarantee under which each company
guarantees the debts of the others. No deficiencies of assets exist with the subsidiary. Refer to note 35 for further details.
Contingent liabilities
The parent entity has given bank guarantees as at 30 June 2017 of $1,766,000 (2016: $1,839,000) 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 2017 and 30 June 2016.
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.
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 Limited
3P Learning Limited
3P Learning Inc.
3P Learning Canada Limited
Mathletics LLP
Principal place of business /
Country of incorporation
Ownership interest
2016
2017
%
%
Australia
Australia
Australia
New Zealand
United Kingdom
United States
Canada
India
61
100%
100%
100%
100%
100%
100%
100%
60%
100%
100%
100%
100%
100%
100%
100%
60%
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 34. Interests in associates
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
2016
2017
%
%
Investment in Learnosity Holdings Limited*
Ireland
40.00%
40.00%
*
Strategic investment by the Group, entity involved in providing SaaS Assessment tools.
Summarised financial information
Investment in Learnosity
Holdings Limited
2016
2017
$'000
$'000
11,015
547
5,916
624
11,562
6,540
8,890
6,492
8,890
6,492
2,672
48
16,797
(13,918)
2,879
(1,136)
10,623
(8,727)
1,896
(136)
1,743
1,760
56
-
1,799
1,760
48,884
-
703
(2,963)
-
48,404
480
-
46,624
48,884
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
Exchange differences
Closing carrying amount (refer note 12)
Contingent liabilities
Share of contingent liabilities not recognised as liability as at 30 June 2017 $Nil (2016: $Nil).
Commitments
Share of commitments not recognised as liability as at 30 June 2017 $Nil (2016: $Nil)
62
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 35. Deed of cross guarantee
On 15 June 2017, the following entities entered into a deed of cross guarantee under which each company guarantees the
debts of the others:
3P Learning Limited (holding entity)
3P Learning Australia Pty Ltd
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial
statements and directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no
other parties to the deed of cross guarantee that are controlled by 3P Learning Limited, they also represent the 'Extended
Closed Group'.
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial
position of the 'Closed Group'.
Statement of profit or loss and other comprehensive income
Revenue
Share of profits of associates accounted for using the equity method
Other income
Employee benefits expense
Depreciation and amortisation expense
Professional fees
Technology costs
Marketing expenses
Occupancy expenses
Administrative expenses
Operating profit
Finance costs
Impairment of assets
Restructuring costs
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Retained profits at the beginning of the financial year
Loss after income tax benefit
Retained profits at the end of the financial year
63
2017
$'000
36,789
703
4,259
(14,428)
(5,741)
(1,001)
(2,634)
(940)
(1,017)
(2,685)
13,305
(1,073)
(12,500)
(1,079)
(1,347)
478
(869)
-
(869)
2017
$'000
13,509
(869)
12,640
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 35. Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Non-current assets
Investments accounted for using the equity method
Other financial assets
Plant and equipment
Intangibles
Deferred tax
Total assets
Current liabilities
Trade and other payables
Income tax
Provisions
Deferred revenue
Finance lease payable
Non-current liabilities
Borrowings
Provisions
Deferred revenue
Finance lease payable
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
64
2017
$'000
1,227
4,691
12
5,930
46,624
16,899
635
11,965
5,551
81,674
87,604
3,529
247
1,319
20,412
10
25,517
9,500
268
119
30
9,917
35,434
52,170
34,092
5,438
12,640
52,170
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 36. Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax (expense)/benefit for the year
(7,261)
3,650
Consolidated
2017
$'000
2016
$'000
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
Finance cost - non-cash
Impairment of assets
Net loss on disposal of investments
Change in operating assets and liabilities:
Decrease 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
Decrease in provision for income tax
Decrease in employee benefits
Increase/(decrease) in other provisions
Increase in other operating liabilities
6,474
(703)
477
813
-
57
-
83
15,285
134
1,291
(1,433)
(1,904)
(244)
666
-
-
(258)
92
1,166
5,064
(480)
142
349
(108)
74
(615)
-
-
-
762
(48)
1,719
106
(1,964)
398
(1,997)
(177)
(437)
5,215
Net cash from operating activities
14,735
11,653
Note 37. Non-cash investing and financing activities
Shares issued under employee share plan
Shares issued under dividend reinvestment plan
Shares issued in relation to investment in associates
Consolidated
2017
$'000
2016
$'000
141
-
-
141
250
24
8,564
8,838
Note 38. Share-based payments
The share-based payment expense for the year was $477,000 (2016: $142,000).
An equity incentive plan has been established by the Group, whereby the Group may, at the discretion of the Nomination
and Remuneration Committee, grant performance rights and options over ordinary shares in the Company ('awards') to
certain key management personnel and employees of the Group. The awards are issued for nil consideration and are
granted in accordance with performance guidelines established by the Nomination and Remuneration Committee.
65
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 38. Share-based payments (continued)
Set out below are summaries of options/awards granted during the year:
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted*
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
02/09/2016
21/11/2016
02/09/2020
02/09/2020
$1.26
$1.26
-
-
-
3,432,258
2,015,419
5,447,677
-
-
-
(1,097,733)
-
(1,097,733)
2,334,525
2,015,419
4,349,944
*
2,015,419 options were granted to the CEO on 2 September 2016, subject to shareholder approval at the 2016
Annual General Meeting. These Options were subsequently issued on 21 November 2016 (which is the grant date for
accounting purposes). Further information is available in the Remuneration Report.
Outstanding options/awards vested and exercisable as at 30 June 2017: Nil.
The weighted average share price during the financial year was $0.9986. The weighted average remaining contractual life
of options/awards outstanding at the end of the financial year was 3.18 years.
Set out below are summaries of performance rights granted under the plan:
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted*
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
21/11/2016
02/09/2020
$0.00
-
-
500,000
500,000
-
-
-
-
500,000
500,000
*
500,000 performance rights were granted to the CEO on 1 June 2016, subject to shareholder approval at the 2016
Annual General Meeting. These performance rights were subsequently issued on 21 November 2016 (which is the
grant date for accounting purposes).
Performance rights vested and exercisable as at 30 June 2017 Nil (2016: Nil). The weighted average remaining contractual
life of performance rights outstanding at the end of the financial year was 2.46 years (2016: 3.46 years).
For the options/awards 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
Share price Exercise
at grant date
price
Expected
volatility*
Dividend
Risk-free
Fair value
yield
interest rate at grant date
02/09/2016
21/11/2016
02/09/2020
02/09/2020
$0.92
$1.12
$1.26
$1.26
55.00%
55.00%
-
-
1.51%
1.82%
$0.247
$0.395
*
The expected volatility is 55% for the first two years and 35% for the years thereafter.
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.
The first issue of 100,000 shares was made on 15 September 2016, and subsequent tranches of 100,000 shares will be
issued in September 2017 and 2018, subject to continued employment at that time. The shares are issued at nil
consideration.
66
3P Learning Limited
Notes to the financial statements
30 June 2017
Note 39. Earnings per share
Profit/(loss) after income tax
Non-controlling interest
Consolidated
2017
$'000
2016
$'000
(7,261)
155
3,650
(18)
Profit/(loss) after income tax attributable to the owners of 3P Learning Limited
(7,106)
3,632
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
139,113,348 136,650,228
Options over ordinary shares
-
117,213
Weighted average number of ordinary shares used in calculating diluted earnings per share 139,113,348 136,767,441
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(5.11)
(5.11)
2.66
2.66
As the Group is in a loss position in 2017, share based incentive plans did not affect the diluted earnings per share
calculation as potential ordinary shares will be treated as dilutive when, and only when, their conversion to ordinary shares
would decrease earnings per share or increase loss per share from continuing operations.
Note 40. Events after the reporting period
No matter or circumstance has arisen since 30 June 2017 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.
67
3P Learning Limited
Directors' declaration
30 June 2017
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
2017 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed
of cross guarantee described in note 35 to the financial statements.
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
24 August 2017
Sydney
68
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 shareholders of 3P Learning Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of 3P Learning Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at
30 June 2017, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the
financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a) Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017
and of its consolidated financial performance for the year ended on that date, and
b) Complying with Australian Accounting Standards and the Corporations Regulations 2001
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Valuation of intangible assets
Why significant
How our audit addressed the key audit matter
Intangible assets (goodwill and capitalised
development costs) represent 18% of the Group’s
total assets at 30 June 2017.
As disclosed within Note 3 and 15 to the financial
report, the assessment of the impairment of
goodwill and other intangible assets incorporated
significant judgments and estimates, specifically
concerning factors such as forecast cashflows,
discount rates and terminal growth rates. These
estimates and assumptions are impacted by the
future performance, market and economic
conditions.
This was considered a key audit matter due to the
material balance of the intangible assets and the
significance of the judgments involved in
estimating future cash flows.
In performing our audit procedures, we:
►
►
►
►
►
►
►
Assessed whether the methodology and model
used by the Group to test for impairment met the
requirements of Australian Accounting Standard -
AASB 136 Impairment of Assets
Tested the mathematical accuracy of the cash
flow models including the consistency of relevant
data with the Board approved 2018 budget
Considered the historical reliability of the Group’s
cash flow forecasting process
Assessed the external inputs and assumptions
within the cash flow forecasting model,
specifically the discount rates, terminal growth
rates and cash flow assumptions and
benchmarked them against market observable
data
Performed sensitivity analysis on the discount
rates, terminal growth rates and EBIT forecasts
for the relevant CGU’s of the Group
Assessed the adequacy of the financial report
disclosures contained in Note 15, and
Considered whether development projects were
still expected to deliver sufficient positive
economic benefits to the business upon their
completion
As impairment testing relies upon business valuation
principles, we involved our valuation specialists who
compared the valuation assumptions against external
benchmarks.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Capitalisation of development costs
Why significant
How our audit addressed the key audit matter
As disclosed Notes 2 and 15 to the financial
statements, the Group capitalises product
development costs upon meeting the criteria set out in
Australian Accounting Standard - AASB 138 Intangible
Assets. Capitalised development costs amount to $9.9
million as at 30 June 2017. As disclosed in Note 2 to
the financial report, the Group amortises these
development costs over a period of three years.
Due to the magnitude of this balance and the
judgments and estimates involved in determining
which costs may be capitalised throughout the life of
the project and determining the useful life of the
asset, this was considered to be a key audit matter.
In performing our audit procedures, we:
►
►
►
►
Tested whether the model used was mathematically
accurate
Assessed the assumptions used and estimates made
in capitalising development costs
Assessed whether the useful life of development costs
is appropriate
Tested on a sample basis, costs capitalised to
underlying evidence including employment contracts,
payroll reports and invoices from external suppliers to
assess the nature and eligibility of development costs
for capitalisation as an intangible asset under
Australian Accounting Standards, and
►
Considered the adequacy of the financial report
disclosures contained in Notes 2 and 15
Investment in Learnosity Holdings Limited
Why significant
How our audit addressed the key audit matter
The Group has an equity investment in Learnosity
Holdings Limited (Learnosity). The investment is
accounted for using the equity method of accounting
as disclosed in note 2 to the financial report.
The investment in Learnosity represents 56% of the
Group’s total assets at 30 June 2017. The Group’s
share of the profit of the associate for the year ended
30 June 2017 was $0.7m.
Due to the magnitude of this balance this was
considered to be a key audit matter.
The Director’s assessed whether any indicators of
impairment existed at 30 June 2017 which may
suggest the carrying value of the joint venture is in
excess of its recoverable amount.
In performing our audit procedures, we:
►
►
►
►
►
►
Considered whether the use of the equity method of
accounting is appropriate
Recalculated the share of associates profits for the
period using the equity method of accounting
Assessed whether the share of associates profits for
the period was sourced from audited financial
information of Learnosity
Evaluated the Group’s assessment of accounting
policies used by Learnosity and whether they are
consistent with those of the Group
Considered the existence of any indicators of
impairment of the carrying value of the investment,
and
Considered the adequacy of the financial report
disclosures contained in Notes 34
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Information other than the financial report and auditor’s report
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2017 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
► Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 19 of the directors' report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of 3P Learning Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
Lisa Nijssen-Smith
Partner
Sydney
24 August 2017
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 2017
The shareholder information set out below was applicable as at 4 August 2017.
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS (NZ) LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
MS KATHRYN PIKE
BNP PARIBAS NOMINEES PTY LTD
MUTUAL APPRECIATION SOCIETY PTY LIMITED
ALBURY'S OWN PTY LTD
MR KEI YAN CHENG
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
MR JONATHAN CLAUDE KENNY
OTTERPAW PTY LTD
ATARUKA PTY LTD
75
Number
of holders
of options
over
Number
of holders
of ordinary ordinary
shares
shares
503
802
355
365
33
2,058
-
-
-
-
-
4
4
-
Ordinary shares
% of total
Number held
46,479,027
27,884,513
11,570,408
7,578,343
5,781,307
5,417,912
4,101,485
4,027,425
3,365,963
1,647,760
930,196
773,594
718,685
480,903
332,000
284,280
274,538
248,100
235,000
200,000
shares
issued
33.41
20.04
8.32
5.45
4.16
3.89
2.95
2.89
2.42
1.18
0.67
0.56
0.52
0.35
0.24
0.20
0.20
0.18
0.17
0.14
122,331,439
87.94
3P Learning Limited
Shareholder information
30 June 2017
Unquoted equity securities
Share options over ordinary shares
Performance rights over ordinary shares
Substantial holders
Substantial holders in the Company are set out below:
Viburnum Funds Pty Ltd
National Nominees Ltd ACF Australian Ethical Investment Ltd
FIL Limited
Salt Funds Management Limited
Wilson Asset Management Group
Schroder Investment Management Australia Ltd
Milford Asset Management Ltd
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
4,349,944
500,000
4
1
Ordinary shares
% of total
Number held
17,648,479
12,508,023
11,368,228
9,152,417
8,904,460
8,565,155
6,997,867
shares
issued
12.68
8.99
8.17
6.58
6.40
6.16
5.03
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.
Options and performance rights
Options and performance rights carry no voting rights.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Ordinary shares
Expiry date
15/09/2017
Number
of shares
100,000
76
3P Learning Limited
Corporate directory
30 June 2017
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
Jonathan Kenny
Registered office and
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
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
found at http://www.3plearning.com/investors/
Financial Statements can be
governance/
77
3P Learning Ltd
Level 18, 124 Walker Street
North Sydney, NSW 2060
T: 1300 850 331
F: 1300 762 165
customerservice@3plearning.com.au