2018 Annual Report
3P Learning Limited
ABN 50 103 827 836
www.3plearning.com
A message from the Chairman and CEO
Dear Fellow Shareholders,
The education technology sector continues to experience tailwinds with internet in
schools growing, the proliferation of lower cost devices and mobile penetration all set
to grow this sector to US$252Bn globally by 2020. Against this backdrop, 3P Learning
completed year 2 of its 3-year strategic plan which had its focus on strengthening our
product portfolio and building a scalable sales and marketing platform to profitably
grow the business globally.
We are pleased to report that execution against that plan is on track and already
showing evidence of its benefits. In Financial Year 2018, group revenue grew by 6% and
Underlying Core EBITDA grew by 23% reflecting continued cost management as well as
annualised benefits of establishing a more scalable and efficient operating model. The
revenue result reflects our first full year impact of our withdrawal from IntoScience as
we strategically reset the business to focus on maths and literacy.
Key Financial Information
A$M (unless stated)
Revenue
Underlying Core EBITDA
Underlying Core Net Profit after Tax
FY2018
FY2017
Variation %
55.4
19.6
7.1
52.5
16.0
6.3
6%
23%
13%
Statutory Net Profit after Tax
(18.7)
(7.3)
(156%)
Underlying Earnings Per Share (cents)
Cash / Net Debt
4.7
23.0
4.4
(6.2)
7%
471%
APAC revenue grew by 8%, EMEA was flat but in line with our expectation given reduced
educational expenditure in the UK. Revenue in the Americas grew by 4% following a
year of transition but that region is now poised for stronger and more profitable
growth in FY19 and beyond. We will elaborate on the USA a little later.
Licence growth was impacted by our focus on profitable revenue growth, especially in
the USA market where we addressed unprofitable product bundling, as well as the
non-renewal of legacy and low ARPU contracts in the Middle East. All regions
expanded ARPU and the Americas region made a strong EBITDA contribution.
Underlying Core NPAT was up 13% year on year and we ended the year debt free as
signaled at the start of the financial year, but now with $23M cash on hand following
the sale of Learnosity.
Importantly, we were able to drive both top line and bottom line growth while
continuing to invest in our strategic plan. More specifically, as the graph below shows,
we made $6.9M in incremental investments against our strategic priorities and at the
same time removed $8.6M of cost as well as enjoying the benefits of a more efficient
operating model.
We also made significant investments in the most important ingredient to 3P’s success
and that is the wonderful people that make up 3P Learning. Throughout FY18 we
invested in improved benefits, better market benchmarking for salaries, ‘love learning’
development plans, stronger career progression opportunities, the introduction of a
company wide bonus as well as 3 additional days off per year for our people to focus
on their individual passion and purpose.
We also completed our second year of participating in the Great Place to Work®
Institute global survey and we saw key improvements in the focus areas we identified
last year as well as an overall increase in employee engagement and our company
ranking. One of the exciting initiatives in our people agenda has been the refresh and
relaunch of our company values. We wanted our values to really capture the spirit of
who we are – quirky, playful, fun and grounded in our purpose of ‘inspiring a love of
learning’.
The year ahead
In Financial Year 2019, we expect another modest year of revenue growth but with sales
growth momentum in the latter part of FY19 and into FY20 and beyond. Growth will be
fueled by product, customer and geographic expansion as well as improvement in
retention.
In terms of regional performance our expectation is that APAC will see continued
revenue growth ahead of cost growth with the benefits of reduced cost of acquiring
customers (CAC).
In EMEA, we expect education spending to stabilise and improvements in the market.
Following a year of transition, we expect the Americas, and specifically the USA, to be
poised for growth in the latter part of FY19 with improved product and investment in
strategic sales people. We expect that margins may contract but that region will
continue to make an overall contribution to the group.
Thank you
Once again, we both want to say a heartfelt thank you to the extraordinary team at 3P
Learning, each of whom has contributed to the success, not only of our Company
during the year, but also in helping children all over the world achieve their own
potential. Our colleagues on the Board have provided exceptional support and
leadership during this year and we are more than grateful to them.
Finally, we are deeply appreciative of the support from our shareholders, 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 2018
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 2018.
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 (Chief Executive Officer)
Roger Amos
Claire Hatton
Mark Lamont (appointed on 1 March 2018)
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
There were no dividends paid, recommended or declared during the current or previous financial year.
Operating and financial review
Business overview
The Group is a global leader in online education with e-learning programs covering mathematics, spelling, literacy, reading
and phonics. Our resources are fully aligned with over a dozen international curricula, reduce teacher workload and make
learning fun. We have over 250 educators, engineers, product designers and other personnel based in seven countries,
servicing schools in more than 100 countries.
Today we are trusted by over 5 million students in over 16,500 schools across the world. Our mission is to create a place
where students, families and teachers love learning.
Financial review
The loss for the Group after providing for income tax and non-controlling interest amounted to $18,688,000 (30 June 2017:
loss $7,106,000).
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3P Learning Limited
Directors' report
30 June 2018
Operating and financial review (continued)
A reconciliation of adjusted earnings before interest, tax, depreciation and amortisation ('Adjusted EBITDA') to statutory
profit after tax for the year is as follows:
Consolidated
2018
$'000
2017
$'000
Profit/(loss) attributable to owners of 3P Learning Limited
(18,688)
(7,106)
Non-controlling interest
Net profit/(loss) 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
Reduction in the United States of America tax rate
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****
5
(18,683)
-
-
25,259
-
-
489
7,065
(155)
(7,261)
15,285
(3,386)
134
1,869
(314)
-
6,327
3,621
2,112
10,686
8,439
8,285
(23)
624
19,572
(567)
6,474
(26)
1,074
15,961
(703)
19,005
15,258
* 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 expenses 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 profit 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, one-off non-cash losses and one-off non-cash expenses are excluded from the measurement
of underlying profit after income tax expense.
Revenue
Total revenue for the year ended 30 June 2018 was $55,367,000 (30 June 2017: $52,445,000). Each of the geographic
segments showed modest growth, reflecting an increase in average revenue per user ('ARPU') of 9% across the Group.
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3P Learning Limited
Directors' report
30 June 2018
Operating and financial review (continued)
Performance
The loss for the Group after providing for income tax and non-controlling interest amounted to $18,688,000 (30 June 2017:
loss $7,106,000).
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 in employee costs.
Depreciation and amortisation expenses in the current year increased by $1,811,000 to $8,285,000. This was the result of
the accumulation of capitalised product development and capitalised customer contracts.
Net interest expense in the current year was $601,000 compared to $1,048,000 for the previous year. This was caused by
a lower average net debt balance and a lower weighted-average interest rate during the current year when compared to
the previous year. The debt was fully repaid as at 30 June 2018.
A non-cash loss on sale of $25,259,000 was recorded on the sale of Learnosity Holdings Limited during the year ended 30
June 2018. In the prior year a loss on sale of $134,000 and a non-cash impairment charge of $3,997,000 was recorded on
the sale of Desmos Inc.
In the previous year, following a strategic review of all technology assets, a non-cash impairment of $11,288,000 was
made to address the carrying value of capitalised product development.
In the previous year 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.
Segment review
Segment revenue for the year is as follows:
APAC
Americas
EMEA
Total Revenue
2018
$'000
2017
$'000
Change
Change
$'000
%
34,361
7,996
13,010
55,367
31,819
7,664
12,972
52,455
2,542
332
38
2,912
8.0%
4.3%
0.3%
5.6%
Segment adjusted EBITDA (excluding share of profits of associates) is as follows:
APAC
Americas
EMEA
Total Adjusted EBITDA
2018
$'000
2017
$'000
Change
Change
$'000
%
17,520
(1,828)
3,313
19,005
15,117
(2,874)
3,015
15,258
2,403
1,046
298
3,747
15.9%
(36.4%)
9.9%
24.6%
APAC segment
Modest revenue growth of 8% to $34,361,000 was driven by ARPU growth of 6%, an increase in copyright licence fees of
$854,000. Adjusted EBITDA improved 15.9% to $17,520,000 due to revenue growth and cost management.
Americas segment
Revenue in Americas grew 4.3% to $7,996,000 driven by ARPU growth of 6%. Adjusted EBITDA improved $1,046,000 due
to revenue contribution, less growth in inter-segment royalties and operating cost management.
EMEA segment
EMEA recorded revenue growth of 0.3%, largely due to ARPU growth of 10%. Adjusted EBITDA increased 9.9% to
$3,313,000 due to revenue contribution, less growth in inter-segment royalties and operating costs management.
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3P Learning Limited
Directors' report
30 June 2018
Operating and financial review (continued)
The Group has net assets of $19,008,000 (30 June 2017: $34,407,000) which have declined from the previous year due to
the $25,259,000 non-cash loss on sale of Learnosity Holdings Limited and its impact on total comprehensive income.
As at 30 June 2018, the Group was in a net current liability position of $3,956,000 (2017: $24,627,000) of which
$25,958,000 (2017: $28,928,000) 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 $20,000,000 (2017: $20,500,000) available 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 $9,716,000 (30 June 2017: $9,218,000) in 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.
Privacy and Data Security: As a technology-focused business, managing information security and safe guarding 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
Divestments
On 25 May 2018, the Group sold its investment interest of 40% in Learnosity Holdings Limited, an assessment software
business (https://www.learnosity.com), for total consideration of $24,896,000 subject to completion adjustments and
foreign exchange impacts.
The Group announced the discontinuation of its development operations in Pune, India in the previous year and
subsequently divested its 60% interest in Mathletics LLP (India) during the reporting period (November 2017). Mathletics
LLP (India) was the legal entity used for the Pune based development operations. The contribution of Mathletics LLP
(India) to the Group’s profit/loss from ordinary activities during the reporting period was a profit of $5,000 (30 June 2017:
loss of $155,000).
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 2018 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 2018
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 and develop products in new subject areas. The Group also expects to
establish a scalable sales and operational model to support its growth in both existing and 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) - Director since January 2007.
Other current directorships:
Former directorships (last 3 years): Non-Executive Director of Oroton Group Limited (ASX: ORL) - from June 2003 to
November 2015; Breville Group Limited (ASX: BRG) - from March 2008 to November
2015; Chairman of Ensogo Limited (ASX: E88) - Director from December 2013 to
October 2016 and Surfstitch Group Limited (ASX: SRF) - from July 2016 to August
2017.
Member of the Nomination and Remuneration Committee and Member of the Audit
and Risk Committee
526,508 ordinary shares
Special responsibilities:
Interests in 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:
4,659,928 options
Interests in options:
Interests in rights:
500,000 performance 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) - since July 2006,
Chairman of Contango Asset Management Limited (ASX: CGA) - Director since
November 2017 and Deputy Chairman of Enero Group Limited (ASX: EGG) - Director
since November 2008.
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Chairman of the Audit and Risk Committee and Member of the Nominations and
Remuneration Committee
61,743 ordinary shares
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3P Learning Limited
Directors' report
30 June 2018
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:
Name:
Title:
Qualifications:
Experience and expertise:
Mark Lamont
Independent Non-Executive Director
BA., Dip Ed
Deep experience in the global education and EdTech sectors with particular expertise
in technology and internet applications for education, international markets and
strategic planning. Previously held roles with myinternet Ltd and Follett Corporation.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Member of the Audit and Risk Committee and Member of the Nominations and
Remuneration Committee
None
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
Ms Marta Kielich (B.Com, LLB, AAICD, FGIA) was appointed as company secretary on 8 December 2017. Marta joined the
Group in November 2016 and has over 10 years’ experience in legal, regulatory and company secretariat roles in ASX
listed companies, including with Origin Energy and the Australian Securities Exchange.
Mr Jonathan Kenny resigned as company secretary on 8 December 2017.
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 2018, 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
Mark Lamont
9
9
9
9
3
9
9
9
9
3
4
4
4
4
1
4
4
4
4
1
5
5
5
5
1
5
5
5
5
1
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
30 June 2018
Letter from the Chair of the Nomination and Remuneration Committee
Dear Fellow Shareholder
The purpose of this introductory letter to the 2018 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.
Fiscal 2018 has been the second year of the implementation of our strategic plan. Our Chief Executive Officer, Rebekah
O’Flaherty, is leading the process to improve the underlying value in 3P Learning Limited and to become a global market
leader in K-12 online education.
Our strategic priorities are to:
•
•
•
strengthen our product portfolio,
develop a scalable sales and marketing platform, and
globalise our operating model.
Each is supported by a robust people and culture strategy.
Invest in our people
We’re investing in making 3P Learning a Great Place to Work® (GPTW) and our second year of participation with the
GPTW Institute’s global survey saw improvements in several key areas identified last year and an overall increase. In 2019
we will continue this investment, especially with the establishment of 3P University, a customised program of learning &
development resources focused on the skills required for our future which will enhance the digital and data capability of our
people.
Remuneration
Remuneration is a key component of our people strategy to ensure that we attract and retain top talent with the skills that we
need to deliver our plans and to align incentives to create shareholder value.
In 2016 we made some significant changes to our long term incentive (LTI) plan, and after a comprehensive review this
year, we believe that our remuneration framework, comprising a mix of fixed compensation, and a performance based short
term incentive (STI) and LTI, provide the right incentives for our Executive team to deliver our strategy and maximise
shareholder value.
Consistent with the prior reporting period, our STI plan has two key hurdles; Revenue and EBITDA. We believe these are
the most appropriate measures to tie performance to growth and profitability and will apply for grants with respect to FY19.
Grants of options to the senior executive team under the LTI plan also have two financial hurdles; revenue and EPS,
measures that reflect the Company’s desire to accelerate top line growth and shareholder value.
Your Board believes that the best way to align our Leadership Team with the expectations of shareholders for capital
appreciation is to create an “owner operator” culture with significant share incentives for outstanding performance and long
term commitment to the Company. We plan to review our current LTI Plan to consider how best to instill an ‘owner operator’
environment and will keep you apprised of our progress.
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. In addition to options and performance rights granted under the Company’s LTI Plan that are
subject to a substantial increase in shareholder value, Rebekah was offered an additional 100,000 performance rights which
are time based to compensate her for the loss of share grants from her former employer.
Over the last 24 months Rebekah has led the transformation of 3P Learning Limited's core global operational systems,
delivered important product improvements and significantly improved the profitability of the business. The divestment of
Learnosity was an important milestone for the Company, allowing us to focus on our core business, eliminate debt and
deliver $23M cash to invest in growth. This year hasn't been without its challenges though with our mission to switch from
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3P Learning Limited
Directors' report
30 June 2018
Flash to HTML taking three months longer than we planned impacting renewals in the short term, and the complexity of
building scale in the USA taking more adaptation across product and sales than was anticipated. Your Board has seen that
Rebekah's ability to pivot, adapt and take difficult decisions has had a positive impact on 3P Learning Limited and its ability
to deliver our strategy.
Jonathan Kenny, our Chief Financial Officer, took on the role of interim Chief Executive Officer for 3P Learning from January
to June 2016. As disclosed in 2016, we extended a retention and reward grant of 300,000 shares to Jonathan in February
2016, in recognition of his performance as interim CEO and his ongoing contribution to the Group. These shares are subject
to time based vesting dates:
•
•
•
100,000 were issued on 15 September 2016
100,000 were issued on 15 September 2017; and
100,000 are due to be issued on 15 September 2018.
Diversity and Inclusion
Diversity and inclusion is central to who we are at 3P Learning. Last year the Board set an aggressive target of 50% gender
diversity at a Board and senior leadership team level as well as in aggregate across the organisation globally. At an
aggregrated level women comprised 56% of our employees globally as at 30 June 2018. At a senior leadership team level
41% were female as at 30 June 2018 which is slightly behind our target. This is due to a number of factors including the
relatively small number of employees captured by our definition of senior leadership (17 in FY18), which has resulted in a
decrease from 53% female at the end of FY17, as we reorganised and flattened our organisation structure and had a
number of position vacancies at the ‘senior leadership team’ level as at 30 June 2018. Diversity, in its broadest sense, forms
part of the Company’s assessment of candidates for all roles, including those senior leadership roles where vacancies
existed as at 30 June.
Additionally, we have carried out a pay equity review to ensure there is no inherent bias in our rewards system. As noted
earlier, this year we conducted the Great Place to Work survey for the second time, and again received positive results
which highlighted that employees rated highly that “they belonged and could be themselves”.
Governance Changes
At this year’s Annual General Meeting (AGM), Mark Lamont, who joined our Board on 1 March 2018, will stand for election &
I will stand for reelection. Both our profiles and credentials can be found in the Annual Report, our Corporate Governance
Statement and will be supplemented by further information in the Notice of Meeting which will be distributed to shareholders
later in the year.
After reviewing the composition of our Board last year we decided that the Company would be better served with a broader
set of Director skills, particularly related to Education and Education Technology experience. We have published our Board
Skills Matrix and after the appointment of Mark Lamont, who has already made a significant contribution, we feel confident
that we have the right skills represented.
Our business is at an important point in its evolution and we believe the right foundations and strategy are in place to restore
the underlying value in 3P Learning and 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 Nomination and Remuneration Committee
16 August 2018
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3P Learning Limited
Directors' report
30 June 2018
Remuneration report (audited)
This remuneration report outlines the remuneration arrangements and outcomes for the key management personnel (‘KMP’)
for the financial year ended 30 June 2018 (‘FY18’). It has been prepared and audited against the disclosure requirements of
the Corporations Act 2001 and its Regulations.
The remuneration report is presented under the following headings:
•
•
•
•
•
•
•
•
Letter from the Chair of the Nomination and Remuneration Committee (not audited)
People covered by the Remuneration Report
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
People covered by the Remuneration Report
The KMP of the Group are 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 people listed in
the table below are the individuals who have been determined to be KMP during the financial year.
Name
Non-Executive Directors (NEDs)
Samuel Weiss
Roger Amos
Claire Hatton
Mark Lamont
Executive Director
Rebekah O’Flaherty
Other KMP
Jonathan Kenny
Position and/or Board Committees
Term as KMP
Independent Chairman
Independent Director
Independent Director
Independent Director
Chief Executive Officer
Chief Financial Officer
Full year
Full year
Full year
From 1 March 2018
Full year
Full year
Although focused on the remuneration arrangements and outcomes for the KMP listed in the table above, this report also
outlines information about the remuneration policy and arrangements for the Group’s senior executive team more broadly.
The term ‘Executive KMP’ is a reference to the Executive Director plus Other KMP. The term ‘senior executives’ is a
collective reference to Executive KMP plus non-KMP members of the senior executive team.
Overview of 3P Learning remuneration policy
The Nomination and Remuneration Committee (‘NRC’) is responsible for developing, reviewing, making recommendations
and providing assistance and advice to, the Board on the remuneration arrangements for the Company’s directors and
senior executives and in relation to key employment policies and practices. The performance of the Group depends on the
quality of its directors and senior executives. The Company’s remuneration philosophy is to attract, motivate and retain high
performance and high quality personnel.
The Group's senior executive reward framework is based on objectives to:
• drive growth and profitability;
• align senior 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 remuneration framework, and any potential changes to that framework, are assessed based on the following guiding
principles:
• aligned to long term value creation
•
•
• motivating to executives
• explicitly encourages more executive ownership of the Company.
fair for all stakeholders
simple to understand and administer
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3P Learning Limited
Directors' report
30 June 2018
The NRC and the Board have structured a senior 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.
The Company has not engaged any remuneration consultants to advise on remuneration policy or the structure or level of
executive remuneration.
Executive remuneration policy and 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 in FY18 are as follows:
Fixed
Variable or “At Risk” Performance Based
Fixed remuneration
Attracts and retains high performance talent
Short term incentive (STI)
Rewards current year performance
Long term incentive (LTI)
Rewards longer term sustainable performance
• Fixed salary set by reference
to appropriate benchmark
information and experience of
individuals
Includes superannuation and
salary-sacrifice non-monetary
benefits
•
• 25 - 50% of fixed
remuneration
• Annual cash incentive
• 12 month period
• Targets linked to group
performance – revenue and
core underlying EBITDA
• 25 - 50% of fixed
remuneration
• Grant of options
• 3 year performance period
• Performance hurdles linked to
group performance - revenue
and EPS growth
Executive remuneration
Fixed remuneration
The objective of 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.
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 ‘at risk’ 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.
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The table below shows the Company’s performance history against these financial measures since the IPO in 2014.
2018
Financial Year
55.4
19.6
(13.42)
Revenue ($m)
Underlying core EBITDA ($m)
EPS (cents)
52.5
16.0
(5.11)
49
13
2.66
44
17
3.04
36
13
4.03
2017
2015
2016
2014
Executive remuneration
Details of statutory remuneration (Australian Accounting Standards (“AAS”)) for Executive KMP, for the years ended 30
June 2018 and 30 June 2017, are set out below:
Executive KMP
Post employment
benefits
(Superannuation)
Accounting
Value of LTI
awards and
additional
incentives**
Total
Remuneration
Performance
related
$
$
$
%
Salary
$
Cash
STI*
$
R O'Flaherty (Chief Executive Officer)
2018 585,000
331,168
2017 576,667
331,444
J Kenny (Chief Financial Officer)
2018 363,000
210,644
2017 358,000
210,820
25,000
33,333
25,000
30,000
83,888
1,025,056
189,269
1,130,713
89,235
687,879
456,723***
1,055,543
40%
46%
44%
63%
Equity
Based
%
8%
17%
13%
25%
*Cash STI is physically paid after the end of the financial year to which it relates, but is allocated to the earning year.
**LTI is that portion of the accounting value of LTI equity granted or to be granted for the current and prior periods attributable to the reporting period, and reflects the expected
vesting outcome. 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.
In line with general market practice a (non-AAS) presentation of pay with respect to the reporting period is provided below,
to give shareholders a more informative picture of actual remuneration outcomes.
Salary
Cash STI*
Post employment
benefits
(Superannuation)
LTI plan and
additional
incentives vested
Total
Remuneration Equity Forfeited
$
$
$
R O'Flaherty (Chief Executive Officer)
2018
2017
585,000
331,168
576,667
331,444
25,000
33,333
$
-
-
$
941,168
941,444
J Kenny (Chief Financial Officer)
2018
2017
363,000
210,644
358,000
210,820
25,000
30,000
106,000**
704,644
295,500**
894,320
$
-
-
-
-
* Cash STI is physically paid after the end of the financial year to which it relates, but is allocated to the earning year.
** Further information about Jonathan Kenny’s incentives are detailed in the sections entitled ‘Long term incentives’ and ‘Additional Incentives’ below. The cash basis values
these share based payments as the market value of the shares on the relevant vesting date.
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3P Learning Limited
Directors' report
30 June 2018
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 senior executives based on profit and revenue targets. These targets are in turn
derived from the Company’s business plan and budget as the Board 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. The performance measures are as follows:
Performance measure
Revenue
Underlying core EBITDA
Weighting
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, start-ups and even global technology giants like Amazon and Google are trying to
establish themselves as credible suppliers to schools for education services. The Board believes that the Group is capable
of achieving a market leading position in the countries in which it operates if senior executives are incentivised to deliver
both rapid growth in revenue and consistent growth in earnings.
What is the amount senior 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 after the approval and
release of the Company’s full year results in August.
STI for the 2018 financial year
The target STI opportunity for the financial year ended 30 June 2018 was an amount equal to 25% of the senior executive’s
fixed remuneration (or 50% in the case of the Chief Executive Officer and Chief Financial Officer).
There were four senior executive participants in the STI program for FY18 (the CEO and three other C-level senior
executives) and a total of $714,887 will be paid to those senior executives as STI awards relevant to the FY18 period.
Payment will be made after the release of the financial results for FY18.
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3P Learning Limited
Directors' report
30 June 2018
Specific information relating to the STI payable to the Chief Executive Officer and Chief Financial Officer for FY18 is set out
below:
Executive KMP
Chief Executive Officer
Chief Financial Officer
Actual STI payment
$331,168
$210,644
% of Target STI payable
109%
109%
These payments are based on the following STI metrics for FY18:
Performance measure
FY18 – At Target
FY18 Performance
Revenue
Underlying core EBITDA
$56,500,000
$16,500,000
$55,400,000
$19,600,000
*Based on the metrics outlined under “What is the amount senior executives can earn?” on the previous page
% of Target
Incentive Award*
80%
137%
Weighting
50%
50%
Long term incentives
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 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 other C-level senior executives are eligible to participate in the LTI plan. As at 30 June
2018, there were 4 participants in the plan.
What are the performance measures?
Financial performance measures are set for grants of options to senior executives. To date, all grants of options under the
LTI plan have performance conditions based on revenue and EPS targets. The revenue hurdle was chosen to reward
participants for increasing the rate of growth for the Company. This hurdle is complemented by the EPS hurdle, which
ensures that there is also focus on shareholder value.
Performance measure
Revenue
EPS
Weighting
50%
50%
The financial hurdles are independent of each other. One can be achieved without the other hitting threshold.
What is the amount that senior executives can earn?
Participants under the LTI plan can earn an ‘at target’ amount equal to a percentage of their annual fixed remuneration in
the range of 25% - 50%. The number of options awarded depends on the fair value of an option at the time of the award
13
3P Learning Limited
Directors' report
30 June 2018
What are the key terms of the award?
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 August or 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.
2018 LTI Award
The exercise price of options granted in FY18 was set at a premium of 43% to the Company’s share price on the date of
grant. The options expire four years after the grant date, or earlier if the performance conditions are not satisfied.
The number of options granted was determined by dividing the dollar award value by the value of the 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 grants made during the year ending 30 June 2018 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 will be tested following finalisation of the annual financial results for the year ending 30 June
2020 (performance period).
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.
The following award schedule applies to both performance hurdles:
Performance level
Below threshold
Threshold
Target
Stretch
% of options awarded that
vest
0%
80%
100%
150%
The Board has chosen to offer significant incentive opportunity if senior executives 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
commercially 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 FY18 will be disclosed
in August 2020 after the applicable performance period.
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3P Learning Limited
Directors' report
30 June 2018
The first grant of options under the Company’s LTI plan were made in FY17 (with performance conditions to be tested at the
end of FY19) and consequently, none of the options on issue have vested or been forfeited based on performance
conditions.
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 ended 30 June 2017, 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.
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 two issues of shares occurred on 15 September 2016 and 15 September 2017, and a
subsequent allotment of 100,000 shares will be made in September 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. 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 2017 when shareholders set the aggregate remuneration at $900,000 per
annum. Board and committee fees, as well as statutory superannuation contributions made on behalf of the non-executive
directors, are included in the aggregate fee pool. During the reporting period, an additional non-executive director was
appointed to the Board, and as foreshadowed in the Company’s 2017 Notice of Annual General Meeting, changes to
Directors’ fees were made following a compensation review.
The table below shows the structure and level of non-executive director fees (exclusive of superannuation) for the financial
years ended 30 June 2017 and 30 June 2018.
Fee applicable
Board
Audit and Risk Committee
Nominations and Remuneration Committee
Chair ($)
Member ($)
185,000
150,000
20,000
20,000
20,000
20,000
95,000
75,000
10,000
10,000
10,000
10,000
FY
2018
2017
2018
2017
2018
2017
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3P Learning Limited
Directors' report
30 June 2018
Details of the remuneration for the Chairman and independent non-executive directors for the financial years ended 30 June
2018 and 30 June 2017 are set out in the table below.
Name
S Weiss (Chairman)
R Amos
C Hatton
M Lamont*
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
*Mark Lamont joined the Board on 1 March 2018.
Fees and
allowances
$
205,000
Post-employment
benefits
$
19,475
170,000
125,000
105,000
125,000
105,000
38,333
-
493,333
380,000
16,150
11,875
9,975
11,875
9,975
3,642
-
46,867
36,100
Total
$
224,475
186,150
136,875
114,975
136,875
114,975
41,975
-
540,200
416,100
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 2018 are as follows:
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3P Learning Limited
Directors' report
30 June 2018
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Rebekah O’Flaherty
Chief Executive Officer
1 June 2016
Open ended
Rebekah will receive a fixed annual remuneration of $610,000, inclusive of statutory
superannuation. Rebekah will be eligible to receive an annual short term incentive
with a target STI of 50% of her fixed annual remuneration, as determined by the
Board. 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.
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.
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3P Learning Limited
Directors' report
30 June 2018
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 2018 are set out below:
Name
Date
Shares
Issue price $
Jonathan Kenny
15 September 2017
100,000
$1.41
141,000
Further information is available under the ‘Additional Incentives’ section of this report.
Options
Details of options issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018 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 2018.
Name
Number
Grant Date
Accounting
fair value
Exercise
Price
Vesting Date**
Expiry Date
Rebekah O’Flaherty
2,644,509
9 Nov 2017*
$0.331*
$1.424
Jonathan Kenny
1,682,081
31 August
2017
$0.173
$1.424
31 August
2020
31 August
2020
31 Aug 2021
31 Aug 2021
*Options were granted on 31 August 2017, subject to shareholder approval. The options were subsequently issued to Rebekah on 9 November 2017 following the 2017 AGM.
Consequently, the grant date for accounting purposes is 9 November 2017, and the accounting fair value for Rebekah’s options was determined on 9 November 2017. The
accounting fair value for Jonathan’s options was determined on 31 August 2017 being the grant and issue date of those options.
**This is an approximate vesting date. Performance conditions are tested after finalisation of the FY20 full year financial results.
Performance Rights
No new performance rights were issued to directors or other key management personnel as part of compensation during
the year ended 30 June 2018 and no performance rights have been granted since the end of the reporting period. No
performance rights lapsed or were exercised during the financial year ended 30 June 2018. NEDs do not hold
performance rights.
For further information about performance rights on issue, please refer to the ‘Additional Incentives’ section of this report.
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3P Learning Limited
Directors' report
30 June 2018
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:
Balance at the
start of the year
Received as part
of remuneration
Additions
Disposals
/other
Balance at the
end of the year
Ordinary shares
Non-Executive Directors
Samuel Weiss
Roger Amos
Claire Hatton
Mark Lamont*
Executive KMP
Rebekah O’Flaherty
Jonathan Kenny
*Mark Lamont joined the Board on 1 March 2018.
526,508
61,743
31,000
-
-
-
-
-
-
-
248,100
867,351
100,000
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
526,508
61,743
31,000
-
-
348,100
967,351
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
2,015,419
2,644,509
Jonathan Kenny
Performance
Rights
Options
500,000
-
1,281,938
1,682,081
-
-
-
-
-
-
4,659,928
500,000
2,964,019
This concludes the remuneration report, which has been audited.
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3P Learning Limited
Directors' report
30 June 2018
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
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
31/08/2017
09/11/2017
Expiry date
02/09/2020
02/09/2020
31/08/2021
31/08/2021
Exercise
price
Number
under option
$1.26
$1.26
$1.42
$1.42
2,334,525
2,015,419
3,063,221
2,644,509
10,057,674
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the Company or of any other body corporate.
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
21/11/2016
Expiry date
01/09/2019
14/10/2019
Exercise
price
Number
under rights
$0.00
$0.00
100,000
400,000
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
2018 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 2018 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 2018
Non-audit services
Details of the amounts paid or payable of $56,500 to the auditor for non-audit services provided during the financial year by
the auditor are outlined in note 25 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 25 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
16 August 2018
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 2018, 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
16 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
3P Learning Limited
Contents
30 June 2018
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
66
67
72
74
23
3P Learning Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
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 investments
Impairment of assets
Loss before income tax (expense)/benefit
Note
Consolidated
2018
$'000
2017
$'000
5
55,367
52,455
31
6
7
7
7
12
7
567
104
703
67
(24,820)
(8,285)
(1,020)
(3,512)
(2,011)
(2,437)
(2,643)
(25,026)
(6,474)
(1,775)
(2,755)
(1,959)
(2,502)
(3,221)
11,310
9,513
(624)
-
(25,259)
-
(1,074)
(1,869)
(134)
(15,285)
(14,573)
(8,849)
Income tax (expense)/benefit
8
(4,110)
1,588
Loss after income tax (expense)/benefit for the year
(18,683)
(7,261)
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
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
-
2,908
(85)
(2,273)
2,908
(2,358)
(15,775)
(9,619)
5
(18,688)
(155)
(7,106)
(18,683)
(7,261)
5
(15,780)
(155)
(9,464)
(15,775)
(9,619)
Cents
Cents
Basic earnings per share
Diluted earnings per share
35
35
(13.42)
(13.42)
(5.11)
(5.11)
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 2018
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
Plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Finance lease payable
Income tax payable
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Deferred revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of 3P Learning Limited
Non-controlling interest
Total equity
Note
Consolidated
2018
$'000
2017
$'000
9
10
8
11
12
13
14
8
15
8
16
17
18
19
20
23,014
4,649
183
1,929
29,775
43
-
926
18,386
5,960
25,315
3,287
6,056
1,481
939
11,763
41
46,624
1,070
16,058
7,785
71,578
55,090
83,341
5,671
12
766
1,324
25,958
33,731
777
18
1,556
2,351
5,632
10
-
1,820
28,928
36,390
599
9,530
2,415
12,544
36,082
48,934
19,008
34,407
34,233
8,485
(23,710)
19,008
-
34,092
5,360
(4,946)
34,506
(99)
19,008
34,407
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 2018
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits
$'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 19)
Share-based payments (note 34)
-
-
-
-
(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
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits/(accu
mulated
losses)
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2017
34,092
5,360
(4,946)
(99)
34,407
Profit/(loss) 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 19)
Share-based payments (note 34)
Transactions with non-controlling interest
-
-
-
-
(18,688)
2,908
-
2,908
(18,688)
141
-
-
(141)
358
-
-
-
(76)
Balance at 30 June 2018
34,233
8,485
(23,710)
5
-
5
-
-
94
-
(18,683)
2,908
(15,775)
-
358
18
19,008
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 2018
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
2018
$'000
2017
$'000
58,782
(43,856)
23
(707)
(230)
59,757
(42,771)
26
(1,099)
(1,161)
Net cash from operating activities
33
14,012
14,752
Cash flows from investing activities
Payment for previous year's business combinations
Payments for investments in associates
Payments for derivatives
Payments for plant and equipment
Payments for intangibles
Proceeds from disposal of available for sale financial assets
Proceeds from disposal of investment in associates
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
-
-
-
(269)
(9,777)
-
24,896
(294)
(5,876)
(398)
(364)
(9,339)
2,551
-
14,850
(13,720)
13,500
(23,010)
18,500
(20,509)
(9,510)
(2,009)
19,352
3,287
375
(977)
4,281
(17)
Cash and cash equivalents at the end of the financial year
9
23,014
3,287
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 2018
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 16 August 2018. 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 2018, the Group was in a net current liability position of $3,956,000 (2017: $24,627,000) of which
$25,958,000 (2017: $28,928,000) 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 $20,000,000 (2017: $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.
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 29.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of 3P Learning Limited as at
30 June 2018 and the results of all subsidiaries for the year then ended.
28
3P Learning Limited
Notes to the financial statements
30 June 2018
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 licence. 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 2018
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, Mathseeds and Wordflyers products is recorded on a net basis when
the online product is sold, consistent with an agency relationship.
Sponsorship revenue
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 includes the unearned portion of existing billings relating to licence revenues; commission revenue on
long term customer agreements on third party products; and unfulfilled obligations pursuant to sponsorship agreements.
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 2018
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.
31
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
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.
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.
32
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Internally generated intangible assets, excluding capitalised development costs, are not capitalised and an expense is
recognised in the statement of comprehensive income in the year in which the expenditure is incurred.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Product development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or
sell the asset; the Group has sufficient resources; and intent to complete the internal development and their costs can be
measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected
benefit, being their finite useful life of three years.
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite useful life of three years.
Customer contracts
Customer contracts 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 is not subject to amortisation and is 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.
33
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Employee benefits expected to be settled within 12 months of the reporting date are measured at the amounts expected to
be paid when the liabilities are settled.
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months of the reporting date are measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
high quality 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 term 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.
34
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
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.
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.
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of 3P Learning Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in 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, and the statement of financial position
have been realigned to current year presentation. There has been no effect on the profit for the year.
35
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
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 2018. 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 will adopt this standard from 1 July 2018 and the adoption of this standard will not 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 will
adopt this standard from 1 July 2018, using the transitional modified retrospective method as detailed in paragraph C3(b)
of the standard. The impact assessment of this standard is substantially complete and based on the work performed to the
date of this report, no material impact is expected on the financial statements of the Group from adopting this standard.
36
3P Learning Limited
Notes to the financial statements
30 June 2018
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. The Group will continue to assess the potential effect of AASB 16 on its consolidated financial
statements.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the IASB and is applicable for annual reporting periods on or after
1 January 2020. The Australian equivalent is yet to be published. The application of the new definition and recognition
criteria may result in future amendments to several accountings standards. Furthermore, entities who rely on the
conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise
dealt with under Australian Accounting Standards may need to revisit such policies. The Group is yet to assess its impact.
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.
37
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Product development costs
The Group capitalises development costs for a project in accordance with the accounting policy. Initial capitalisation of
costs is based on management’s judgement that technological and economic feasibility is confirmed. In determining the
amounts to be capitalised, as with the nature of Software-as-a-Service delivery model, key judgement is required in
determining whether incremental product enhancements will provide additional future economic benefit.
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'), United States of 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, loss on sale of investments 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.
38
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 4. Operating segments (continued)
Operating segment information
Consolidated - 2018
Revenue
Sales to external customers
Total revenue
Adjusted EBITDA*
Share of profits of associates
Depreciation and amortisation
Interest revenue
Finance costs
Loss on disposal of investments
Loss before income tax expense
Income tax expense
Loss after income tax expense
APAC
$'000
Americas
$'000
EMEA
$'000
Total
$'000
34,361
34,361
7,996
7,996
13,010
13,010
17,520
(1,828)
3,313
55,367
55,367
19,005
567
(8,285)
23
(624)
(25,259)
(14,573)
(4,110)
(18,683)
*
Adjusted EBITDA is after inter-segment royalty expense incurred by Americas segment of $2,950,000 and EMEA
segment of $4,617,000.
Consolidated - 2017
Revenue
Sales to external customers
Total revenue
Adjusted EBITDA*
Share of profits of associates
Depreciation and amortisation
Interest revenue
Finance costs
Impairment expenses and loss on disposal 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.
39
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 5. Revenue
Licence fees
Sponsorship revenue
Sale of workbooks
Copyright licence fees
Other revenue
Net commission revenue
Revenue
Note 6. Other income
Interest
Miscellaneous income
Other income
Consolidated
2018
$'000
2017
$'000
43,018
166
50
3,052
602
8,479
42,063
409
49
2,198
211
7,525
55,367
52,455
Consolidated
2018
$'000
2017
$'000
23
81
104
26
41
67
40
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 7. Expenses
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 (gain)/loss
Rental expense relating to operating leases
Minimum lease payments
Employee benefits expense:
Salaries and wages
Bonus and commission
Equity settled share based payments
Superannuation
Total employee benefits expense
41
Consolidated
2018
$'000
2017
$'000
157
223
40
420
6,407
8
407
1,043
191
189
40
420
5,340
92
40
582
7,865
6,054
8,285
6,474
-
-
-
3,997
11,288
15,285
624
1,074
(67)
109
1,965
2,147
18,432
3,307
358
2,723
18,022
3,997
477
2,530
24,820
25,026
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 8. Income tax
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
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
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
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
Unrecognised capital losses
Impact of foreign tax rate
Other tax offsets
Current year tax benefit not recognised
Tax losses and offsets derecognised
Reduction in the United States of America tax rate
Adjustments in respect of current income tax of previous year
Income tax expense/(benefit)
Tax losses not recognised relating to various tax jurisdictions
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at statutory tax rates
Consolidated
2018
$'000
2017
$'000
1,738
1,825
547
1,826
(1,904)
(1,510)
4,110
(1,588)
1,825
(1,904)
(14,573)
(8,849)
(4,372)
(2,655)
113
7,124
(532)
-
666
75
489
3,563
547
151
1,245
(391)
(112)
1,114
570
-
(78)
(1,510)
4,110
(1,588)
Consolidated
2018
$'000
2017
$'000
38,874
10,763
10,513
3,878
Unrecognised tax benefits includes $8,398,000 unused capital gains loss on disposal of investments (2017: $1,245,000).
42
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 8. Income tax (continued)
Deferred tax asset
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
Research and development credits
Deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss
Closing balance
Income tax refund receivable
Income tax refund receivable
Provision for income tax
Provision for income tax
Note 9. Current assets - cash and cash equivalents
Cash at bank and in hand
Short-term deposits
43
Consolidated
2018
$'000
2017
$'000
140
666
5,532
563
940
(3,592)
(10)
10
1,711
75
1,110
7,014
1,293
802
(2,705)
183
13
-
5,960
7,785
7,785
(1,825)
5,881
1,904
5,960
7,785
Consolidated
2018
$'000
2017
$'000
183
1,481
Consolidated
2018
$'000
2017
$'000
766
-
Consolidated
2018
$'000
2017
$'000
8,142
14,872
3,287
-
23,014
3,287
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Consolidated
2018
$'000
2017
$'000
4,567
(67)
4,500
6,061
(207)
5,854
149
202
4,649
6,056
Impairment of receivables
The Group has recognised a loss of $105,000 (2017: $259,000) in profit or loss in respect of impairment of receivables for
the year ended 30 June 2018.
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
2018
$'000
2017
$'000
15
33
19
67
-
27
180
207
Consolidated
2018
$'000
2017
$'000
207
122
(245)
(17)
67
20
305
(72)
(46)
207
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $539,000 as at 30 June
2018 ($390,000 as at 30 June 2017).
The ageing of the past due but not impaired receivables are as follows:
1 to 12 months overdue
Over 12 months overdue
Refer to note 22 for further information on financial instruments.
44
Consolidated
2018
$'000
2017
$'000
526
13
539
253
137
390
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 11. Current assets - other
Prepayments
Term deposits
Other deposits
Withholding tax credits
Note 12. Non-current assets - investments accounted for using the equity method
Investment in Learnosity Holdings Limited
Refer to note 31 for further information on interests in associates.
Consolidated
2018
$'000
2017
$'000
1,495
15
8
411
1,929
916
15
8
-
939
Consolidated
2018
$'000
2017
$'000
-
46,624
On 25 May 2018, the Group sold its 40% interest in Learnosity Holdings Limited for total consideration of $24,896,000
subject to completion adjustments and foreign exchange impacts. The loss on disposal of investments amounting to
$25,259,000 is recognised in the statement profit or loss.
Note 13. 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
2018
$'000
2017
$'000
1,532
(993)
539
2,521
(2,254)
267
281
(161)
120
1,420
(816)
604
2,378
(2,023)
355
231
(120)
111
926
1,070
45
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 13. 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 2016
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2018
Computer
Furniture
and fittings equipment
Office
equipment
$'000
$'000
$'000
Total
$'000
757
99
(39)
(22)
(191)
604
87
(2)
7
(157)
539
338
233
(18)
(9)
(189)
355
133
(1)
3
(223)
267
121
32
-
(2)
(40)
111
49
(2)
2
(40)
120
1,216
364
(57)
(33)
(420)
1,070
269
(5)
12
(420)
926
Property, plant and equipment secured under finance leases
Refer to note 27 for further information on property, plant and equipment secured under finance leases.
Note 14. Non-current assets - intangibles
Consolidated
2018
$'000
2017
$'000
4,535
4,558
41,893
(29,775)
12,118
3,145
(3,083)
62
913
(769)
144
3,584
(2,057)
1,527
33,314
(23,367)
9,947
3,083
(3,074)
9
428
(316)
112
2,446
(1,014)
1,432
18,386
16,058
Goodwill - at cost
Product development - at cost
Less: Accumulated amortisation and 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 2018
Note 14. 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 2016
Additions
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2017
Additions
Exchange differences
Amortisation expense
Goodwill
$'000
Product
development
$'000
Patents and Customer
contracts
$'000
trademarks
$'000
Software
$'000
Total
$'000
4,414
-
144
-
-
4,558
-
(23)
-
17,941
8,634
-
(11,288)
(5,340)
9,947
8,578
-
(6,407)
92
9
-
-
(92)
9
61
-
(8)
62
40
112
-
-
(40)
112
463
(24)
(407)
1,430
584
-
-
(582)
1,432
1,138
-
(1,043)
23,917
9,339
144
(11,288)
(6,054)
16,058
10,240
(47)
(7,865)
144
1,527
18,386
Balance at 30 June 2018
4,535
12,118
Impairment testing for goodwill
Goodwill acquired through business combinations has been allocated to the following cash-generating units ('CGUs'):
CGU1: APAC
CGU2: EMEA
Consolidated
2018
$'000
2017
$'000
3,012
1,523
3,012
1,546
4,535
4,558
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 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 10.50% and EMEA 10.10% (2017: APAC 10.25% and EMEA 8.75%).
(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) Terminal growth rate at 3% (2017: 3%).
For the financial year ended 30 June 2018, the recoverable amount of net assets for all CGUs is greater than the carrying
value of the assets and therefore, the goodwill is not considered to be impaired.
Sensitivity
As disclosed in note 3, management have made judgements and estimates in respect of impairment testing of goodwill.
Should these judgements and estimates not occur the resulting carrying amounts of assets may decrease.
For all CGUs, any reasonable change in the key assumptions on which the recoverable amount is based would not cause
the CGU’s carrying amount to exceed its recoverable amount.
47
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 15. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Goods and service tax
Other payables
Refer to note 22 for further information on financial instruments.
Note 16. Current liabilities - provisions
Employee benefits
Lease make good
Property related and other provisions
Consolidated
2018
$'000
2017
$'000
1,879
3,500
71
221
1,704
3,212
679
37
5,671
5,632
Consolidated
2018
$'000
2017
$'000
1,209
48
67
1,255
220
345
1,324
1,820
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.
Property related and other provisions
The provision represents redundancy, onerous lease and storage costs. The provision represents the present value of the
estimated termination costs.
Note 17. Non-current liabilities - provisions
Employee benefits
Lease make good
Property related and other provisions
Consolidated
2018
$'000
2017
$'000
264
353
160
777
268
176
155
599
Employee benefits
Employee benefits represents provision for long service leave.
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.
48
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 17. Non-current liabilities - provisions (continued)
Property related and other provisions
The provision represents the present value of the estimated costs, net of any sub-lease revenue, that will be incurred until
the end of the lease terms where the obligation is expected to exceed the economic benefit to be received.
Consolidated - 2018
Carrying amount at the start of the year
Additional provisions recognised
Payments
Exchange differences
Unused amounts reversed
Carrying amount at the end of the year
Note 18. Non-current liabilities - borrowings
Bank loans
Lease liability
Refer to note 22 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Lease liability
Property
related and
other
provisions
$'000
Lease make
good
$'000
396
-
-
5
-
401
500
101
(340)
(5)
(29)
227
Consolidated
2018
$'000
2017
$'000
-
18
18
9,500
30
9,530
Consolidated
2018
$'000
2017
$'000
-
30
30
9,500
40
9,540
Assets pledged as security
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial
position, revert to the lessor in the event of default.
The bank loan facilities are subject to variable interest rates, which are based on the bank bill swap rate ('BBSY'), plus a
margin. The banking facilities consist of a $20,000,000 bank loan and a $2,000,000 bank guarantee that each mature on
24 August 2019. The banking facilities are secured by fixed and floating charges over the Group's assets.
49
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 18. 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 19. Equity - issued capital
Consolidated
2018
$'000
2017
$'000
20,000
2,000
30
22,030
-
1,777
30
1,807
20,000
223
-
20,223
30,000
2,000
40
32,040
9,500
1,766
40
11,306
20,500
234
-
20,734
Consolidated
2018
Shares
2017
Shares
2018
$'000
2017
$'000
Ordinary shares - fully paid
139,234,170 139,134,170
34,233
34,092
Movements in ordinary share capital
Details
Balance
Issue of shares
Balance
Issue of shares
Balance
Date
Shares
$'000
1 July 2016
15 September 2016
139,034,170
100,000
30 June 2017
15 September 2017
139,134,170
100,000
33,951
141
34,092
141
30 June 2018
139,234,170
34,233
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.
50
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 19. Equity - issued capital (continued)
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 2017 Annual Report.
Note 20. Equity - reserves
Foreign currency reserve
Acquisition reserve
Share-based payment reserve
Consolidated
2018
$'000
2017
$'000
665
(798)
8,618
(2,243)
(798)
8,401
8,485
5,360
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 are
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.
51
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 20. Equity - reserves (continued)
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 2016
Foreign currency translation
Net investment hedge
Share based payments
Transfer to issued capital on exercise of
options
Balance at 30 June 2017
Foreign currency translation
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
30
(2,273)
-
-
-
(2,243)
2,908
-
-
(798)
-
-
-
-
(798)
-
-
-
85
-
(85)
-
-
-
-
-
-
-
8,065
-
-
477
7,382
(2,273)
(85)
477
(141)
(141)
8,401
-
358
5,360
2,908
358
(141)
(141)
8,618
8,485
Balance at 30 June 2018
665
(798)
Note 21. Equity - dividends
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Franking credits
Consolidated
2018
$'000
2017
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
199
784
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 22. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency 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 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.
52
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 22. Financial instruments (continued)
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.
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
2018
$'000
2017
$'000
Liabilities
2018
$'000
2017
$'000
16,488
151
405
30
116
17,190
301
141
227
187
51
907
-
-
-
-
-
-
31
5
-
-
-
36
The Group had net assets denominated in foreign currencies of $17,190,000 (assets $17,190,000 less liabilities $Nil) as at
30 June 2018 (2017: $871,000 (assets $907,000 less liabilities $36,000). Based on this exposure, had the Australian dollar
weakened by 10%/strengthened by 10% (2017: 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 $1,719,000
lower/$1,719,000 higher (2017: $87,000 lower/$87,000 higher). The percentage change is the expected overall volatility of
the significant currencies, which is based on management's assessment of reasonable possible fluctuations.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from its borrowings and term deposits. Borrowings and term deposits issued at
variable rates expose the Group to interest rate risk.
53
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 22. Financial instruments (continued)
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
2018
2017
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
-
1.75%
-
(14,872)
(14,872)
4.41%
-
9,500
-
9,500
An analysis of bank loans by remaining contractual maturities is shown in 'liquidity and interest rate risk management'
below.
An official increase/decrease in interest rates of 50 (2017:50) basis points would have an favourable/adverse effect on loss
before tax of $74,000 (2017: adverse/favourable effect on loss before tax of $48,000) 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
2018
$'000
2017
$'000
20,000
223
20,223
20,500
234
20,734
54
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 22. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade 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
-
-
7.40%
1,879
221
16
2,116
-
-
20
20
-
-
-
-
-
-
-
-
1,879
221
36
2,136
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
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 23. Fair value measurement
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.
55
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 24. 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
Share-based payments
Note 25. Remuneration of auditors
Consolidated
2018
$
2017
$
1,969,439
96,867
-
173,124
1,856,931
99,433
194,000
451,992
2,239,430
2,602,356
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
People advisory services
Consolidated
2018
$
2017
$
357,930
324,777
50,000
6,500
50,000
13,000
56,500
63,000
414,430
387,777
Note 26. Contingencies
The Group has given bank guarantees as at 30 June 2018 of $1,777,000 (2017: $1,766,000) for merchant facility and
operating leases.
56
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 27. 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
Representing:
Lease liability - current
Lease liability - non-current (note 18)
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
Consolidated
2018
$'000
2017
$'000
1,776
6,914
31
1,755
6,815
1,595
8,721
10,165
16
20
36
(6)
30
12
18
30
16
35
51
(11)
40
10
30
40
555
2,225
-
511
2,186
535
2,780
3,232
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 office equipment under finance leases expiring within
one to three 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 28. Related party transactions
Parent entity
3P Learning Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Associates
Interests in associates are set out in note 31.
57
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 28. Related party transactions (continued)
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2018
$
2017
$
Payment for other expenses:
Other expenses paid to associate - Licencing fee for the use of the Learnosity Assessment
Software*
425,000
-
*The entity ceased to be a related party with effect from 25 May 2018.
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 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Parent
2018
$'000
2017
$'000
(35,087)
(9,191)
(35,087)
(9,191)
58
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 29. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payment reserve
Accumulated losses
Total equity
Parent
2018
$'000
2017
$'000
37,814
18,828
65,960
99,484
63,854
53,221
64,195
62,990
34,233
8,618
(41,086)
34,092
8,401
(5,999)
1,765
36,494
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 32 for further details.
Contingent liabilities
The parent entity has given bank guarantees as at 30 June 2018 of $1,777,000 (2017: $1,766,000) 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 2018 and 30 June 2017.
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 30. 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
2017
2018
%
%
Australia
Australia
Australia
New Zealand
United Kingdom
United States
Canada
India
59
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
60%
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 31. 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
2017
2018
%
%
Investment in Learnosity Holdings Limited*
Ireland
-
40.00%
*
Entity involved in providing SaaS Assessment tools.
On 25 May 2018, the Group sold its 40% interest in Learnosity Holdings Limited for total consideration of $24,896,000.
Summarised financial information (up to the date of sale 25 May 2018)
Investment in Learnosity
Holdings Limited
2017
2018
$'000
$'000
-
-
-
-
-
-
11,015
547
11,562
8,890
8,890
2,672
17,056
(15,638)
16,797
(13,918)
1,418
-
2,879
(1,136)
1,418
1,743
-
56
1,418
1,799
46,624
567
(2,158)
(20,137)
(24,896)
48,884
703
(2,963)
-
-
-
46,624
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
Share of profit after income tax
Exchange differences
Loss on disposal of investments adjusted for exchange differences
Proceeds from disposal of investments
Closing carrying amount (refer note 12)
Contingent liabilities
Share of contingent liabilities not recognised as liability as at 30 June 2018 $Nil (2017: $Nil).
60
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 31. Interests in associates (continued)
Commitments
Share of commitments not recognised as liability as at 30 June 2018 $Nil (2017: $Nil)
Note 32. 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 on disposal of investments
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
Loss after income tax (expense)/benefit
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
61
2018
$'000
2017
$'000
39,205
567
1,626
(15,149)
(7,753)
(827)
(3,388)
(1,005)
(1,164)
(1,772)
36,789
703
4,259
(14,428)
(5,741)
(1,001)
(2,634)
(940)
(1,017)
(2,685)
10,340
13,305
(621)
(5,426)
-
(25,259)
(20,966)
(290)
(1,073)
(12,500)
(1,079)
-
(1,347)
478
(21,256)
(869)
-
-
(21,256)
(869)
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 32. Deed of cross guarantee (continued)
Equity - retained profits/(accumulated losses)
Retained profits at the beginning of the financial year
Loss after income tax (expense)/benefit
2018
$'000
2017
$'000
12,640
(21,256)
13,509
(869)
Retained profits/(accumulated losses) at the end of the financial year
(8,616)
12,640
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
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
Finance lease payable
Income tax payable
Provisions
Deferred revenue
Non-current liabilities
Provisions
Borrowings
Deferred revenue
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
62
2018
$'000
2017
$'000
21,243
6,319
141
411
28,114
-
11,469
521
14,203
4,185
30,378
1,227
4,691
-
12
5,930
46,624
16,899
635
11,965
5,551
81,674
58,492
87,604
4,173
12
-
1,078
18,325
23,588
522
18
129
669
3,529
10
247
1,319
20,412
25,517
268
9,530
119
9,917
24,257
35,434
34,235
52,170
34,233
8,618
(8,616)
34,092
5,438
12,640
34,235
52,170
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 33. Cash flow information
Reconciliation of loss after income tax to net cash from operating activities
Loss after income tax (expense)/benefit for the year
Adjustments for:
Depreciation and amortisation
Share of profit - associates
Share-based payments
Foreign exchange differences
Net loss on disposal of plant and equipment
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
Decrease/(increase) in income tax refund due
Decrease/(increase) in deferred tax assets
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase in provision for income tax
Decrease in employee benefits
Increase/(decrease) in other provisions
Increase/(decrease) in other operating liabilities
Consolidated
2018
$'000
2017
$'000
(18,683)
(7,261)
8,285
(567)
358
(106)
5
-
-
25,259
1,405
1,298
1,825
(990)
(1,098)
1,168
(50)
(268)
(3,829)
6,474
(703)
477
813
57
83
15,285
134
1,291
(1,433)
(1,904)
(244)
683
-
(258)
92
1,166
Net cash from operating activities
14,012
14,752
Non-cash investing and financing activities
Shares issued under employee share plan
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2016
Net cash used in financing activities
Balance at 30 June 2017
Net cash used in financing activities
Balance at 30 June 2018
Note 34. Share-based payments
Consolidated
2018
$'000
2017
$'000
141
141
Finance lease
payable
$'000
Bank
loans
$'000
Total
$'000
11,549
(2,009)
9,540
(9,510)
11,500
(2,000)
9,500
(9,500)
-
30
49
(9)
40
(10)
30
The share-based payment expense for the year was $358,000 (2017: $477,000).
63
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 34. Share-based payments (continued)
An equity incentive plan has been established by the Group, whereby the Group may, at the discretion of the Board, 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 Board.
Set out below are summaries of options/awards granted under the plan:
2018
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
31/08/2017
09/11/2017
02/09/2020
02/09/2020
31/08/2021
31/08/2021
$1.26
$1.26
$1.42
$1.42
2,334,525
2,015,419
-
-
4,349,944
-
-
3,704,081
2,644,509
6,348,590
-
-
-
-
-
-
-
(640,860)
-
2,334,525
2,015,419
3,063,221
2,644,509
(640,860) 10,057,674
Weighted average exercise price
$1.26
$1.42
$0.00
$1.42
$1.35
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
Weighted average exercise price
$0.00
$1.26
$0.00
$1.26
$1.26
Outstanding options/awards vested and exercisable as at 30 June 2018: Nil (2017: Nil).
The weighted average share price during the financial year was $1.286 (2017: $0.9986). The weighted average remaining
contractual life of options/awards outstanding at the end of the financial year was 2.74 years (2017: 3.18 years).
Set out below are summaries of performance rights granted under the plan:
2018
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
21/11/2016
01/09/2019
14/10/2019
$0.00
$0.00
100,000
400,000
500,000
-
-
-
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
21/11/2016
21/11/2016
01/09/2019
14/10/2019
$0.00
$0.00
-
-
-
100,000
400,000
500,000
-
-
-
-
-
-
-
-
-
100,000
400,000
500,000
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
100,000
400,000
500,000
Performance rights vested and exercisable as at 30 June 2018 Nil (2017: Nil). The weighted average remaining contractual
life of performance rights outstanding at the end of the financial year was 1.27 years (2017: 2.27 years).
64
3P Learning Limited
Notes to the financial statements
30 June 2018
Note 34. Share-based payments (continued)
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
31/08/2017
09/11/2017
31/08/2021
31/08/2021
$0.99
$1.30
$1.42
$1.42
35.00%
35.00%
-
-
2.13%
2.04%
$0.173
$0.331
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is
indicative of future trends, which may not necessarily be the actual outcome.
Retention and reward bonus
On 19 February 2016, it was determined that 300,000 ordinary shares were 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 two tranches of 100,000 shares were made on 15 September 2016 and 15 September 2017, and the last tranche
of 100,000 shares will be issued in September 2018, subject to continued employment at that time. The shares are issued
at nil consideration.
Note 35. Earnings per share
Loss after income tax
Non-controlling interest
Consolidated
2018
$'000
2017
$'000
(18,683)
(5)
(7,261)
155
Loss after income tax attributable to the owners of 3P Learning Limited
(18,688)
(7,106)
Weighted average number of ordinary shares used in calculating basic earnings per share
139,213,348 139,113,348
Weighted average number of ordinary shares used in calculating diluted earnings per share 139,213,348 139,113,348
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(13.42)
(13.42)
(5.11)
(5.11)
As the Group is in a loss position, 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 36. Events after the reporting period
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
65
3P Learning Limited
Directors' declaration
30 June 2018
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
2018 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 32 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
16 August 2018
Sydney
66
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor's report to the 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
2018, the consolidated statement of profit or loss and other 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 2018 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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.
Valuation of intangible assets
Why significant
How our audit addressed the key audit matter
Intangible assets (goodwill and capitalised
development costs) represent 33% of the Group’s
total assets at 30 June 2018.
As disclosed within Note 3 and 14 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 cash flows, 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 2019 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, and
Assessed the adequacy of the financial report
disclosures contained in Note 14
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 14 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
$11.9 million as at 30 June 2018. 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:
►
►
►
►
►
Assessed the Group’s policy for capitalisation of
development costs for compliance with
AASB138 Intangible Assets
Tested the operating effectiveness of controls over
the processes and procedures related to the
capitalisation of development costs
Tested on a sample basis, costs capitalised to
underlying evidence including timesheets,
employment contracts, payroll reports and invoices
from external suppliers to assess the nature,
eligibility and accuracy of development costs for
capitalisation
Assessed whether the useful life of development costs
is appropriate and whether the amortisation charge
during the reporting period is reasonable, and
Considered the adequacy of the financial report
disclosures contained in Notes 2 and 14
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2018 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report and Corporate Governance Statement 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, with the exception of the Remuneration Report and
our related assurance opinion.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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.
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 2018.
In our opinion, the Remuneration Report of 3P Learning Limited for the year ended 30 June 2018,
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
16 August 2018
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 2018
The shareholder information set out below was applicable as at 9 July 2018.
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
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
NETWEALTH INVESTMENTS LIMITED
NEWECONOMY COM AU NOMINEES PTY LIMITED
MUTUAL APPRECIATION SOCIETY PTY LIMITED
MR JONATHAN CLAUDE KENNY
MS KATHRYN PIKE
MR KEI YAN CHENG
BOND STREET CUSTODIANS LIMITED
OTTERPAW PTY LTD
MATTHEW CHARLES GOODSON & DIANNA DAWN PERRON
COLENEW PTY LIMITED
MRS DENISE ANN QUINN
MAPTEK PTY LIMITED
MR PETER WALTERS
72
Number
of holders
of options
Number
of holders
of ordinary ordinary
shares
shares
over
470
596
273
271
32
1,642
-
-
-
-
-
4
4
-
Ordinary shares
% of total
Number held
61,180,934
35,576,041
10,710,176
6,375,793
3,334,489
2,994,391
1,520,963
980,534
546,084
480,903
348,100
323,594
284,280
273,307
235,000
200,000
191,000
184,331
183,371
148,953
shares
issued
43.94
25.55
7.69
4.58
2.39
2.15
1.09
0.70
0.39
0.35
0.25
0.23
0.20
0.20
0.17
0.14
0.14
0.13
0.13
0.11
126,072,244
90.53
3P Learning Limited
Shareholder information
30 June 2018
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
Smallco Investment Manager Limited
FIL Limited
Schroder Investment Management Australia Ltd
Sterling Equity Pty Ltd
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
10,057,674
500,000
4
1
Ordinary shares
% of total
Number held
17,648,479
16,545,397
13,267,891
12,900,241
10,259,693
7,333,165
shares
issued
12.68
11.88
9.53
9.27
7.37
5.27
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.
Restricted securities
Class
Ordinary shares
Expiry date
15/09/2018
Number
of shares
100,000
73
3P Learning Limited
Corporate directory
30 June 2018
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
Mark Lamont - Independent Non-Executive Director
Company secretary
Marta Kielich
Registered office and
Principal place of business
Share register
Auditor
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
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
Financial Statements can be found at http://www.3plearning.com/investors/
governance/
74
3P Learning Ltd
Level 18, 124 Walker Street
North Sydney, NSW 2060
T: 1300 850 331
F: 1300 762 165
customerservice@3plearning.com.au