Asanko Gold Inc.
Annual Report 2018

Plain-text annual report

ACADEMIES AUSTRALASIA GROUP LIMITED ANNUAL REPORT 2018 ACN 000 003 725 ACADEMIES AUSTRALASIA GROUP LIMITED ANNUAL REPORT 2018 CONTENTS Page Report of the Chairman and the Group Managing Director Directors’ Report Information on the Directors and Company Secretaries Information on Senior Executives Remuneration Report - Audited Corporate Governance Statement Auditors’ Independence Declaration Consolidated Financial Statements Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes Directors’ Declaration Independent Audit Report Additional Information for Listed Companies Corporate Information Glossary - 1 - 2 5 8 10 11 13 14 15 16 17 18 19 51 52 57 59 60 REPORT OF THE CHAIRMAN AND THE GROUP MANAGING DIRECTOR Dear Shareholder Your Board is delighted to present your Company’s results for FY18. While FY17 showed a spectacular turnaround from the results of FY16, FY18 saw even further improvement. Indeed, FY18 recorded the best results in AKG’s 110-year history! - EBITDA - Earnings before tax $7.46 million $6.12 million The management team is to be commended for the 42% increase on FY17’s earnings before tax (FY17: $4.31 million). After adjusting for gains on investment (FY18: $1.58 million, FY17: $0.99 million), FY18’s earnings before tax are $1.22 million or 37% more than that in FY17. After adding back $1.06 million (FY17: $0.84 million) for restructure and non-recurring costs, FY18’s earnings before tax are $5.60 million (FY17: $4.16 million). Our business environment Consistent with the concern we expressed in last year’s report, compared to FY17, revenue from our domestic business declined $5.75 million (30%) to $13.37 million. The experience of our 3 colleges with VSL approval, BMC, RBT and STA, reflected the sector experience in FY18: the VSL scheme is not as attractive as the VET Fee Help scheme that it replaced. We also note that TAFE in Victoria is offering certain courses to domestic students for free. And that Navitas Limited has decided to close or divest a significant operation in Australia because ‘changes to the vocation education funding rules in Australia have impacted the economic viability of the business’. These developments are being monitored. STA is in the same business. Again, in line with our views conveyed in last year’s report, the contribution of international education to Australia’s economy in FY18 hit a record $32 billion (FY17: $28 billion). Overall, our group of 12 colleges registered on CRICOS (AAHB, AAI, AAPoly, ACT, AIHS, AOE, CBC, CSF, DE, LLI, SBC and STA) did well. Revenue from international business grew by $8.59 million to $47.91 million – a strong 22% increase from that in FY17. This was far greater than the sector growth of 14%. FY18 improvements on FY17 EBITDA Profit from ordinary activities before tax Profit from ordinary activities after tax - Revenue from ordinary activities - - - - Net assets - Net cash at 30 June Up 5% ($2.84 million) to $61.28 million Up 16% ($1.02 million) to $7.46 million Up 42% ($1.81 million) to $6.12 million Up 46% ($1.41million) to $4.45 million Up 8% ($2.58 million) to $36.86 million Up 35% ($3.35 million) to $12.97 million - Total borrowings Down $4.3 million to $1.29 million - 2 - Borrowings We are particularly pleased to have reduced total borrowings to $1.29 million, now representing just 17% of FY18 EBITDA (FY17: 87% of EBITDA). This equates to - - a 92% ($14.18 million) decrease from the high of $15.47 million at the end of FY15, or a 77% decrease from the outstanding borrowings at the end of FY17. Dividend For FY18, an interim dividend of 1.5 cents per share (fully franked) was paid (FY17: Nil) – of which 1.0 cent was a special dividend. A final dividend of 1.0 cent per share (fully franked) will be paid in October 2018 (FY17: 0.5 cent, fully franked). It is the Board’s intention to, generally, adopt a dividend payout ratio of 75%. Outlook We do not see a bed of roses. None of the negative issues we raised in the FY16 and FY17 reports has gone away. Australia is still strong in the area of international education which is the second largest export sector, after minerals. But, surely there is a need for a long-term road map outlining national targets, to facilitate better coordination amongst all the participants and address issues that have nagged the sector for a long time. Last year we thought it futile to expect long term plans from a ruling party hanging on to government by the slimmest of majorities. Recent developments, especially the impending by-election, disappointingly point to more short- termism. And comments from politicians calling for a cap on international student numbers and a smaller migration programme (which seem to get more coverage than the government paper that says that only 40% of students take up their work rights and only 16% of students stay as migrants), are not at all encouraging to serious investors in the international education sector. As for the domestic sector, business will be more challenging if funding continues to be more restrictive and if competitors offer courses for free. Notwithstanding these frustrations, we will press on. Education is a laudable activity. The thousands of graduates who return home each year are excellent ambassadors. You do not forget your teachers, and the friends you made while studying in one of the best countries in the world. We have the resources, infrastructure and experience to continue to focus on providing quality education. We are committed. The Board have a substantial interest in AKG. Strategic direction and priorities for FY19 and FY20 The acquisition of Spectra Training and its related problems led to a period of poor performance across the group over FY15 and FY16. AKG's domestic operations have been markedly streamlined over the last few years. The focus has now moved to our strength, international education, where FY18 revenue growth was very strong. International operations now constitute 78% of total revenue. The group's focus for FY19 will be on: - - - Further growth of international operations Further improving financial discipline and implementing cost savings initiatives Paying off borrowings There are no immediate plans to pursue any acquisitions. - 3 - Shares There were two significant changes to our share capital since the latter part of FY17. On completion of the 2017 Rights Issue, there were 126,754,079 shares. This went up to 131,754,079 upon exercise of the 5,000,000 options on 1 January 2018. On 22 August 2018, following the buy-back and cancellation of 4,139,612 shares, there are now 127,614,467 shares on issue. The Board thanks the substantial number of shareholders who voted in favour of the motion at the EGM. The votes in favour were more than 3 times the number against. Acknowledgement The Board would like to thank all shareholders, students, clients, partners, associates and all other stakeholders for their loyalty and support. And to all members of management and staff, we sincerely thank you too. You can be proud that you produced record results. We know that it was not easy. Dr John Lewis Schlederer Chairman 5 September 2018 Christopher Elmore Campbell Group Managing Director and CEO - 4 - 110th ANNUAL DIRECTORS’ REPORT Your Directors present their report on Academies Australasia Group Limited (the Company) and its controlled entities (jointly the Group) for the year ended 30 June 2018. DIRECTORS The names of Directors in office at any time during, or since the end of, the financial year are: Dr John Lewis Schlederer Christopher Elmore Campbell Chiang Meng Heng Gabriela Del Carmen Rodriguez Naranjo Sartaj Hans All Directors have all been in office since the start of the financial year to the date of this report. Details on the Directors and Company Secretaries are set out on pages 8 and 9. PRINCIPAL ACTIVITY The principal activity of the Group during the financial year was the provision of training and education services. CONSOLIDATED RESULT Consolidated result The consolidated profit of the Group for the financial year, after providing for income, amounted to $4,454,000 (2017:$3,041,000). REVIEW OF OPERATIONS Revenue from operating activities increased by 5% to $61,120,000 (2017: $58,289,000). Profit from ordinary activities before income tax increased by 42% to $6,120,000 (2017: $4,306,000). Dividends A fully franked dividend of 0.5 cents per share ($634,000) was paid on 8 November 2017. A fully franked dividend of 1.5 cents per share ($1,976,000) was paid on 28 February 2018. This included a 1.0 cent one-off special dividend in recognition of the profit made from the sale of the investment in RedHill Education Limited. The Directors have announced the payment of a fully franked dividend of 1.0 cents per share ($1,276,000) to be paid on 19 October 2018. - 5 - SIGNIFICANT CHANGES IN STATE OF AFFAIRS There were no significant changes in the Company’s state of affairs during the financial year. SALE OF INVESTMENT In November 2017, the Company sold its $331,000 investment in RedHill Limited for $4,581,000. The investment had been marked to market previously, recording an unrealised gain of $2,723,000 recognised in prior financial years. Following the sale, the remaining realised gain on sale of $1,527,000 was recognised. (2017: $994,000 unrealised gain). EXERCISE OF OPTIONS On 1 January 2018, Andrew Low, Underwriter to the June 2017 Rights Issue, exercised the 5 million options over unissued shares that he held. The exercise price was at 15 cents a share. EVENTS AFTER THE REPORTING DATE Following approval at an Extraordinary General Meeting convened for the purpose, the Company bought back and cancelled 4,139,612 shares at the price of 35 cents per share. After that cancellation the total shares on issue was reduced to 127,614,467. There were no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The Chairman’s and the Group Managing Director’s Report (Pages 2 to 4) addresses the Group’s outlook. ENVIRONMENTAL ISSUES The Group’s operations are not subject to any significant environmental legislation. INDEMNIFICATION AND INSURANCE OF OFFICERS The Company’s constitution provides an indemnity to officers of the Company. The Company is required to pay all costs, losses and expenses that an officer may incur by reason of any contract entered into or act or thing done by them in the discharge of their duties except where they act dishonestly. The Company has paid an insurance premium amounting to $23,000 in respect of a directors and officers liability insurance policy covering the directors’ and officers’ liabilities as officers of the Company. - 6 - OPTIONS There are no other options over unissued share capital. ROUNDING OF AMOUNTS The Director’s report is presented in Australian Dollars and rounded to the nearest thousand dollars in accordance with Instrument 2016/191. - 7 - INFORMATION ON DIRECTORS AND COMPANY SECRETARIES as at the date of this report Dr John Lewis Schlederer Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities Non-executive Director, appointed 21 August 2009 (9 years 1 month), Chairman since 1 January 2014 (4 years 7 months). B.Sc. (Hons), Grad. Diploma, PhD. More than 20 years teaching experience at University of New South Wales and TAFE NSW and many years in business. 7,977,000 shares (6.25%) Chairman of the Board. Chairman of the Remuneration Committee. Member of the Audit and Risk Committee. None Christopher Elmore Campbell Group Managing Director and Chief Executive Officer, appointed 1 Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities Chiang Meng Heng Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities July 1996 (22 years 3 months). B.Soc.Sci. (Hons), FFin, FAICD, FCIS, FSCA. Experience in mergers and acquisitions and more than 19 years’ experience in managing educational institutions. Previous positions include senior appointments with the Monetary Authority of Singapore and an international bank in Australia. Director, Asia Society Australia. Director, ACPET (20 March 2012 to 25 September 2017) 16,815,195 shares (13.18%) Member of the Remuneration Committee. None. Non-executive Director, appointed 15 February 2000 (18 years 7 months). BBA (Hons). Previous positions include Treasurer, Citibank NA, Singapore and Hong Kong; Adviser & Head, Banking Supervision, Monetary Authority of Singapore; EVP, Overseas Union Bank Ltd including secondments as Executive Director, International Bank of Singapore Ltd and President, Asia Commercial Bank Ltd; Managing Director, First Capital Corporation Ltd; Executive Director, Far East Organization and Group Managing Director, Lim Kah Ngam Ltd. Member of Singapore Parliament for 4 terms from 1985 to 2001. 51,185,961 shares (40.11%) Member of the Audit and Risk Committee and Remuneration Committee. None. - 8 - Gabriela Del Carmen Rodriguez Naranjo Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities Sartaj Hans Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities COMPANY SECRETARIES Directorships educational Executive Director, appointed 21 October 2013 (4 years 11 months). Alternate Director, May 2011 to December 2013 (2 years 7 months), (Alternate to Neville Thomas Cleary (Retired 31 December 2013)). B. Comp.Sci, B.Sci. Sys. Eng. Joined the Group in April 2001. More than 15 years’ experience in managing acquisitions, marketing, curriculum development and lecturing. Director, COPHE from 17 May 2017. 80,549 shares (0.06%) Group Chief Operating Officer from 15 August 2017. Joint Company Secretary from 14 September 2016. None compliance, institutions, experience regulatory including Independent, Non-executive Director, appointed 19 October 2016 (1 year 11 months) B.E. Honours (Electronics) Experience in information technology and superannuation at BT Financial Group, the wealth management arm of Westpac. A pivotal role in the development of Goulbourn Health Hub, a medical facilities project in Goulbourn. Many years experience in managing investments and financial affairs in private family companies. 708,096 shares (0.55%) Chairman of the Audit and Risk Committee (Appointed 19 October 2016). None Stephanie Noble Qualifications Experience Other Responsibilities Appointed 27 November 2006 BA (Hons) Accounting, FCCA (UK), CPA (Australia). More than 10 years as Company Secretary of Academies Australasia Group Limited. Group Finance Manager Gabriela Del Carmen Rodriguez Naranjo Appointed 14 September 2016 See Information on Directors. - 9 - MEETINGS OF DIRECTORS Director Dr John Lewis Schlederer Christopher Elmore Campbell Chiang Meng Heng Gabriela Del Carmen Rodriguez Naranjo Sartaj Hans Directors’ Meetings Audit and Risk Committee Remuneration Committee A 4 4 4 4 4 B 4 4 4 4 4 A 2 2 2 2 2 B 2 2 2 2 2 A 1 1 1 - - B 1 1 1 - - A - Number of meetings held during the time the Director held office during the period B - Number of meetings attended INFORMATION ON SENIOR EXECUTIVES Christopher Elmore Campbell Group Managing Director and Chief Executive Officer See Information on Directors. Gabriela Del Carmen Rodriguez Naranjo Group Chief Operating Officer (since 15 August 2017) See Information on Directors. Stephanie Noble Group Finance Manager See Information on Company Secretaries. Esther Teo Qualifications Experience Melinda Burgess Qualifications Experience Chief Executive Officer of AAPoly MBA, GradDipMgmt. 30 years’ senior management experience in Singapore and Australia, including roles in retail, information technology, strategic business planning and supply chain management. 10 years of tertiary teaching, curriculum design and education management. Director, Strategic Operations (Resigned 15 September 2017). B.A, GradDipAgedServMgmt, DipQualityAuditing. 20 years’ experience in the VET sector, managing operations in RTOs. Founder STA. Previous experience includes Case Management, Aged and Community Care Management and Aged Care Accreditation. - 10 - REMUNERATION REPORT – AUDITED Remuneration Policies The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Group Managing Director and Chief Executive Officer, Senior Executives and the Directors themselves. This role also includes responsibility for share option schemes, performance incentive packages, superannuation entitlements, retirement and termination entitlements, fringe benefit policies and professional indemnity and liability insurance policies. Remuneration levels are set to attract appropriately qualified and experienced directors and senior executives. During the year, the members of the Remuneration Committee were Dr John Lewis Schlederer, Chiang Meng Heng and Christopher Elmore Campbell. All executives receive a fixed base salary, which is based on factors such as market factors and experience, and superannuation (as required by law). Executives may sacrifice part of their salary towards superannuation. The Company does not have an employee share option plan. All remuneration paid to Directors and Executives is valued at the cost to the Company and expensed. Non-executive Directors’ remuneration comprises fixed fees. The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by shareholders at the Annual General Meeting. The amount approved at the 2009 Annual General Meeting is $250,000 per annum. Fees for Non-executive Directors are not linked to the performance of the Group. Directors and Senior Executives Details of the Directors and Senior Executives holding office at any time during the financial year are set out on pages 8 to 10. a. Remuneration 30 June 2018 Directors and Senior Executives Short-term employee benefits Bonus Cash, salary and commissions Non- monetary benefits Post- employment benefits Superannuation Total Dr John Lewis Schlederer Christopher Elmore Campbell Chiang Meng Heng Gabriela Del Carmen Rodriguez Naranjo Sartaj Hans Stephanie Noble Esther Teo Melinda Burgess (to 15 September 2017) $000s $000s $000s $000s $000s 30 430 32 207 40 167 151 51 1,108 - - - 10 - 10 - - 20 - - - - - - - - - 25 20 3 20 4 16 25 5 55 450 35 237 44 193 176 56 118 1,246 - 11 - 30 June 2017 Directors and Senior Executives Short-term employee benefits Bonus Cash, salary and commissions Non- monetary benefits Post- employment benefits Superannuation Total $000s $000s $000s $000s $000s Dr John Lewis Schlederer Christopher Elmore Campbell Chiang Meng Heng Gabriela Del Carmen Rodriguez Naranjo Sartaj Hans from 19 October 2016 Bill Say Mui Foo to 17 October 2016 Stephanie Noble Chris Grundy to 9 December 2016 Esther Teo Melinda Burgess Ingeborg Loon to 30 June 2017 24 371 32 182 18 17 145 95 135 162 176 1,357 - - - - - - - - - - - - - - - - - - - - - - - - 35 79 3 17 2 2 14 30 35 15 15 59 450 35 199 20 19 159 125 170 177 191 247 1,604 None of the remuneration paid to any Director or Senior Executive is tied to any specific performance condition. b. Options issued as part of remuneration for the year ended 30 June 2018 The Group has no employee share plan. No options were granted as part of remuneration. c. Employment contracts of Senior Executives The employment conditions of all Senior Executives are formalised in written contracts of employment. Generally, the employment contracts stipulate a one-month notice period. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Christopher Elmore Campbell has a fixed term contract of employment which expires on 31 December 2020. - 12 - AUDITORS’ INDEPENDENCE DECLARATION The Auditor’s Independence Declaration for the year ended 30 June 2018 appears on page 14. It forms part of the Directors’ Report for the year ended 30 June 2018. NON-AUDIT SERVICES The Board of Directors, in accordance with advice from the Audit and Risk Committee, is satisfied that the provision of non-audit services by the external auditors, Pilot Partners, during the year is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditors’ independence for the following reasons:  All non-audit services are reviewed and approved by the Audit and Risk Committee.  The nature of services provided does not compromise the general principles relating to audit independence. The following fees were paid or payable for non-audit services to the external auditors during the year ended 30 June 2018:  Taxation services  Other services $66,000 $43,000 (2017:$60,000) (2017:$271,000) CORPORATE GOVERNANCE STATEMENT The Company’s Corporate Governance Statement and its Key to Disclosures, Corporate Governance Council Principles and Recommendations (ASX Appendix 4G) are provided to ASX together with the Company’s Annual Report. The Corporate Governance Statement is on the Company’s website: www.academies.edu.au Signed in accordance with a resolution of the Board of Directors pursuant to section 298 (2)(a) of the Corporations Act 2001. Dr John Lewis Schlederer Director 5 September 2018 Christopher Elmore Campbell Director - 13 - . . . . . ,., . U DERS CTZ0 307COFTH CORPORATZO S ,CT 002 AC DE IES UsTR L SIAGRouPu ITED I declare that to the best of my knowledge and belief, during the Year ended 30 June 201.8, there have been: no contraventions of the auditor's independence requirements as set out in the Corporat/bns Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. \::^^@\ ~^^: ^,^ 11 0T PARTNER Chartered Accountants I C S Partner igned on ';^ ^::I^:^^^^2018 Level IO I Eagle Street Brisbane Qld 4000 ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2018 Note 2018 $000s 2017 $000s Revenue from continuing operations Student acquisition and teaching costs Gross profit Personnel expenses Premises expenses Other administration expenses Restructure and non-recurring costs Realised gain on investments Unrealised gain on investments Other income Earnings before interest, depreciation and amortisation Depreciation and amortisation expense Loss on disposal of assets Interest paid Interest received Profit before income tax Income tax expense Profit for the year Other comprehensive income: Exchange differences on translating foreign controlled entities Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit attributable to: Owners of the parent entity Non-controlling interests Total comprehensive income attributable to: Owners of the parent entity Non-controlling interests Earnings per share (cents per share) Basic Diluted Dividends per share (cents) The accompanying notes form part of these financial statements. - 15 - 2 3 3 3 3 3 2 4 7 7 8 61,120 (26,522) 34,598 (14,303) (9,396) (3,962) 6,937 (1,061) 5,876 1,527 - 53 7,456 (1,005) (10) (432) 111 6,120 (1,666) 4,454 13 13 4,467 4,270 184 4,454 4,283 184 4,467 3.3 3.3 2.0 58,289 (24,233) 34,056 (14,298) (9,124) (4,408) 6,226 (836) 5,390 - 994 54 6,438 (1,440) (39) (753) 100 4,306 (1,265) 3,041 (18) (18) 3,023 2,855 186 3,041 2,837 186 3,023 3.7 3.7 0.0 ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2018 Note 2018 2017 $000s $000s Current Assets Cash and cash equivalents Trade and other receivables Other current assets Investments Total Current Assets Non-Current Assets Trade and other receivables Plant and equipment Deferred tax assets Intangible assets Total Non-Current Assets Total Assets Current Liabilities Tuition fees in advance (Deferred income) Trade and other payables Current tax liabilities Borrowings Provisions Total Current Liabilities Non-Current Liabilities Borrowings Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Share capital Share option reserve Accumulated losses Foreign currency translation reserve Non-controlling interests Total Equity The accompanying notes form part of these financial statements. 9 10 11 12 10 14 15 16 17 17 4 18 19 18 19 20a - 16 - 12,968 8,155 5,496 - 26,619 2,180 6,717 4,014 32,973 45,884 72,503 19,125 4,643 2,367 1,087 2,443 29,665 201 5,779 5,980 35,645 36,858 43,515 - (7,088) 68 363 36,858 10,488 10,550 6,249 3,054 30,341 2,586 7,159 2,953 32,966 45,664 76,005 19,156 7,669 621 2,893 2,242 32,581 2,698 6,448 9,146 41,727 34,278 42,677 88 (8,748) 55 206 34,278 ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2018 Ordinary Shares Share Option Reserve Retained Profits Reserves Non - Controlling Interests Total $000s $000s $000s $000s $000s $000s (8,748) 4,270 - 4,270 - - - (2,610) (7,088) 55 - 13 13 - - - - 206 184 34,278 4,454 - 13 184 4,467 - - (27) 750 - (27) - (2,610) 68 363 36,858 (11,603) 2,855 73 - 114 186 25,088 3,041 - (18) - (18) 2,855 (18) 186 - - - - (8,748) - - - - 55 - - (77) (17) 206 3,023 6,173 88 (77) (17) 34,278 Year ended 30 June 2017 42,677 88 Profit for the period Exchange differences on translating foreign operations Total comprehensive income for the year Issue share capital Share option Acquisition of subsidiaries (Note 13) Dividend paid - - - 750 88 - - Balance at 30 June 2018 43,515 Year ended 30 June 2016 36,504 Profit for the period Exchange differences on translating foreign operations Total comprehensive income for the year Issue share capital Share option Acquisition of subsidiaries Dividend proposed - - - 6,173 - - - Balance at 30 June 2017 42,677 The accompanying notes form part of these financial statements. - - - - (88) - - - - - - - - 88 - - 88 - 17 - ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 June 2018 Note 2018 $000s 2017 $000s Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Dividend received Interest received Finance costs Income taxes paid 63,327 (58,339) 48 111 (432) (981) 60,200 (53,317) - 100 (631) (199) Net cash provided by (used in) operating activities 24a 3,734 6,153 Cash Flows from Investing Activities Proceeds from sale of plant & equipment Purchase of plant & equipment Proceeds from sale of investment Net cash on acquisition/disposal of subsidiaries Net cash provided by (used in) investing activities Cash Flows from Financing Activities Dividends paid Proceeds from borrowings Repayment of borrowings Proceeds from share issue Net cash provided by (used in) financing activities Net increase in cash held Net cash at the beginning of the financial year Net cash at the end of the financial year 9 - (429) 4,581 819 4,971 (2,610) - (3,497) 750 (5,357) 3,348 9,620 12,968 35 (965) - (21) (951) - 780 (5,455) 3,435 (1,240) 3,962 5,658 9,620 The accompanying notes form part of these financial statements. - 18 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report includes the consolidated financial statements of Academies Australasia Group Limited and controlled entities (the Group). Details of the parent entity can be found in Note 28. Academies Australasia Group Limited is a listed public company, incorporated and domiciled in Australia. The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards which set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated. The financial statements were authorised for adoption on 5 September 2018. New, revised or amending Accounting Standards and Interpretations The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are mandatory for the current reporting period. Except for the early-adoption of AASB 15 ‘Revenue from Contracts with Customers’, (Note 1(o)), no other new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have been adopted early. AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019). When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new Standard include: - recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets); - depreciation of right-to-use assets in line with AASB 116: ‘Property, Plant and Equipment’ in profit or loss and unwinding of the liability in principal and interest components; - variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date; - by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account for all components as a lease; and - additional disclosure requirements. - 19 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. During the course of the year work has been completed to quantify the impact of the change. Based on the current leases held in the portfolio, and which will continue to be held by the Group at the date of application of the standard, the Group has initially estimated the following impact on the financial statements for the year ended 30 June 2020. Consolidated Statement of Financial Position ($000’s) Increase in Right of Use Assets Increase in Lease Liabilities (Current) Increase in Lease Liabilities (Non- Current) Decrease of Lease Incentives Recognised Increase in Deferred Tax Asset Cumulative Impact on Retrospective Application of Standard to Opening Retained Earnings DR 18,012 CR 2,713 1,870 1,653 Consolidated Statement of Comprehensive Income ($000’s) DR CR Increase in Depreciation Expense Increase in Interest Expense Decrease in Premises Expenses Profit Before Tax Increase / (Reduction) 3,477 1,216 34 3,539 20,709 4,727 Bases of preparation The financial report has been prepared on the accruals basis and is based on historical costs, modified by the revaluation of certain non-current assets, financial assets and financial liabilities, for which the fair value basis of accounting has been applied. The financial report is presented in Australian Dollars and rounded to the nearest thousand dollars in accordance with Instrument 2016/191. - 20 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounting Policies Basis of consolidation a. The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Academies Australasia Group Limited) and all its subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it 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 over the entity. A list of the subsidiaries is provided in Note 13. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non- controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. Business combinations b. Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisiton method, unless it is a combination involving entities or businesses under common control. The business combination is accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. - 21 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and cash equivalents c. Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of one month or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. Trade and other receivables d. Trade and other receivables include amounts due from customers for services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 10 for further information on the determination of impairment losses. e. Financial instruments Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement Financial assets at fair value through profit or loss i. Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. - 22 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Loans and receivables ii. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. Available-for-sale investments iii. Available-for-sale investments are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with any re-measurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. Available-for-sale financial assets are classified as non-current assets when they are expected to be sold after 12 months from the end of the reporting period. All other available-for-sale financial assets are classified as current assets. Financial Liabilities iv. Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method. Fair value Fair value is the price the Group would receive to sell an asset in an orderly transaction between independent, knowledgeable and willing parties at measurement date. The only financial asset or liability carried at fair value is investments. Fair value is determined by a number of market and observable factors, including quoted prices, market activity levels, the financial position and performance of the investment and the relative size of the Group’s shareholding. They are categorised as a Level 1 in the fair value hierarchy of the Accounting Standards (market inputs are used to determine fair value). Financial guarantees Where material, financial guarantees are issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 15: ‘Revenue from Contracts with Customers’. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 15. The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on: - 23 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) - - - the likelihood of the guaranteed party defaulting in a year period; the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and the maximum loss exposed if the guaranteed party were to default. Interest borrowing costs Interest payable costs are recognised as expenses in the period in which they are incurred. Leases f. Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the Group, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Operating lease rental payments are recognised on a straight line basis over the lease term and contingent rental payments are recognised in the period when incurred. Assets receivable under lease incentives are recognised when the Group has a contractual right to them and they can be reliably estimated. Where applicable, specific categories of assets received under such arrangements are recognised in the appropriate asset heading and accounted for in accordance with the Group’s applicable accounting policy for that asset. Lease incentives under operating leases are recognised as a liability and amortised as a reduction in rent on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which the economic benefits from the leased asset are consumed. Leasehold Improvements and plant and equipment g. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. - 24 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation h. The depreciable amount of all fixed assets including capitalised lease assets is depreciated on a straight-line or a diminishing value basis over their useful lives to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Leasehold improvements Plant and equipment Leased plant and equipment Depreciation Rate 12.5 – 22.5% 5 – 40% 5 – 25% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. Goodwill i. Goodwill is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess of the sum of: - - - the consideration transferred any non-controlling interest; and the acquisition date fair value of any previously held equity interest over the acquisition date fair value of net identifiable assets acquired. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest. - 25 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) i. Goodwill (continued) The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net asets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes of these financial statements disclosing the business combination. Under the full goodwill method, the fair value of the non-controlling interest is detemined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Intangible assets j. Intangible assets include course development costs and other intangible assets. Course development costs are capitalised where they can be related to the development of an identifiable and separable resource and which yields particular streams of future economic benefits. They are only capitalised when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. These capitalised costs are amortised over their useful lives starting from the time the development of a particular resource is complete and available for use. The period of amortisation is up to 5 years. Impairment of assets k. At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Collectibility of trade debtors is reviewed on an ongoing basis. Debts are written off when they are known to be uncollectible. A provision for doubtful debts is raised where some doubt as to collection exists and is the difference between the total amount owing and the amount expected to be recovered. - 26 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Trade and other payables l. Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Provisions and employee benefits m. Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Issued capital n. Ordinary shares are classified as equity, and are recognised at the fair value of the consideration received by the company. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Revenue o. With effect from 1 July 2014, the consolidated entity early-adopted the new Accounting Standard AASB 15 ‘Revenue from Contracts with Customers’. This Standard applies to annual reporting periods beginning on or after 1 January 2017 and it may be applied to annual reporting periods beginning on or after 1 January 2015. The consolidated entity, in adopting the new AASB 15, changed its basis for recognising income in accordance with that standard. The change followed analysis of the Group’s contracts with its customers, the rights and obligations emanating from those contracts and the possible risks associated with receiving payments for revenue generating contractual services provided by the Group. In making its assessments, the Group formed its opinion for the appropriate accounting based on its business judgement and careful consideration of the customer contract. Each contract was broken down into performance obligations and revenue to be recognised as those performance obligations are completed. - 27 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) o. Revenue (continued) Revenue is recognised over the period of tuition, upon completion of specific performance obligations of each of the contracts. No revenue is recognised prior to a student commencing the tuition phase of delivery. As all student contracts are for the provision of tuition, income for tuition is recognised as training is provided. Payment terms vary from contract to contract but in most cases cash is received prior to the performance obligation being delivered. International students in particular are required to pay some level of tuition in advance. Monies received in advance are held as unearned income and recognised as revenue as the performance obligations are satisfied. The unearned income (tuition fees in advance) at 30 June 2017 has been recognised as revenue in FY18 (net of any refunds paid). Generally, the Group’s obligations in respect of refunds cease after the course commences. Revenue derived from the provision of education services is measured at the fair value of consideration received or receivable to the extent that economic benefits will flow to the Group and the revenue can be reliably measured. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue is recognised when the right to receive a dividend has been established. Rental revenue is recognised on a straight line accrual basis over the term of the lease. All revenue is stated net of the amount of goods and services tax (GST). p. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. Income tax q. The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. - 28 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) q. Income tax (continued) Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Academies Australasia Group Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The Group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. Foreign currency transactions and balances r. Foreign currency transactions are translated into Australian currency (the functional currency) using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Foreign Group Companies The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: - - - assets and liabilities are translated at year-end exchange rates prevailing at the end of the financial year; income and expenses are translated at average rates for the period; and retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of comprehensive income. Earnings per share s. Basic earnings per share are calculated as net profit attributable to members of the parent divided by the weighted average number of ordinary shares. - 29 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) t. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. u. Critical accounting estimates and judgements The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. These estimates and judgements are considered significant items of revenue and expenses relevant in explaining the financial performance. Key Estimates – Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Further details on the key estimates used in impairment can be found in Note 16. No impairment has been recognised in respect of goodwill for the year ended 30 June 2018. Key Estimates – Revenue The extent to which performance obligations have been satisfied in respect of revenue is estimated as per the revenue policy (Note 1(o)). v. Segment reporting An operating segment is a component of an entity - that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) - whose operating results are regularly reviewed by the entity’s Board to make decisions about resources to be allocated to the segment and assess its performance for which discrete financial information is available - The Company has only one operating segment: Education. - 30 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 2. REVENUE Operating activities Services revenue Non-operating activities Rent received Dividend received 3. PROFIT FOR THE YEAR Student acquisition and teaching costs - Teaching costs - Acquisition costs - Teaching materials Personnel costs - Wages and Salaries - Superannuation - Payroll Tax - Other Premises - Rental - Electricity - Cleaning - Other Other administration expenses - Other administration expenses - Bad and doubtful debts Restructure and non-recurring costs - Costs of personnel now retrenched, including redundancies - Costs of premises now vacated, including make-good payments - Provision for impairment of receivables - 31 - 2018 $000s 2017 $000s 61,120 58,289 5 48 53 54 - 54 14,260 10,118 2,144 26,522 11,443 1,204 786 870 14,303 8,270 336 462 328 9,396 3,897 65 3,962 540 8 513 1,061 14,933 7,417 1,883 24,233 11,594 1,329 837 538 14,298 8,037 323 441 323 9,124 4,349 59 4,408 637 199 - 836 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 4. INCOME TAX EXPENSES a. The components of tax expense comprise: Current tax Deferred tax b. The prima facie tax on profit from ordinary activities before tax is reconciled to income tax as follows: Tax payable on profit from ordinary activities before tax at 30% Add/(less): Tax effect of: Permanent differences Assumption of tax balances of controlled entities Income tax expense attributable to the entity The effective tax rate is 27.2% (2017: 29.4%) c. Current tax payable for the year reconciles as follows: Opening provision Add: Current year provision Less: Tax paid Closing provision 2018 $000s 2017 $000s (2,727) 1,061 (1,666) (759) (506) (1,265) 1,836 1,292 (58) (112) 1,666 621 2,727 (981) 2,367 (47) 20 1,265 61 759 (199) 621 5. EXECUTIVE DIRECTORS AND OTHER SENIOR EXECUTIVES COMPENSATION a. Details of Executive Directors and other Senior Executives have been set out in Information on Directors and in Information on Senior Executives on pages 8 to 10. b. Remuneration for Senior Executives has been included in the Remuneration Report section of the Directors’ Report. Shareholdings c. Number of shares in the Company held by Executive Directors, Senior Executives and parties related to them: Shareholdings: Executive Directors and Senior Executives Balance 1 July 2017 Purchased * Purchased off market Balance 30 June 2018 Christopher Elmore Campbell Gabriela Rodriguez Naranjo 15,666,666 336,593 811,936 16,815,195 80,549 - - 80,549 * Shares purchased on market via the Australian securities Exchange. - 32 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 6. AUDITORS’ REMUNERATION Remuneration of the auditors of the parent entity for: - Auditing and reviewing the financial report - Taxation services - Due diligence and other services Remuneration of other auditors of subsidiaries for: - Auditing and reviewing the financial report - Taxation services - Other services 7. EARNINGS PER SHARE Basic (cents per share) Diluted (cents per share) 2018 $000s 2017 $000s 260 66 43 369 34 1 - 35 3.3 3.3 238 60 271 569 25 2 5 32 3.7 3.7 Weighted average number of ordinary shares used in calculation of basic earnings per share 129,233,531 77,059,769 a. The share options of 5,000,000 have been included in estimating the fully diluted earnings per share for 2017. b. The earnings amount used was $4,270,000 (2017: $2,855,000), being profit on ordinary activities after tax attributable to owners of the parent entity. 8. DIVIDENDS Distributions recognised 2018 $000s 2017 $000s Year ended 30 June 2018: interim ordinary dividend of 1.5 cents per share, fully franked, which included a one-off special dividend of 1.0 cent (2017: Nil) Year ended 30 June 2017: final ordinary dividend of 0.5 cents per share, fully franked, paid in 2018 (2016: Nil) a. Dividends proposed or declared but not recognised in the financial statements: Proposed fully franked ordinary dividend of 1.0 cent per share (2017: fully franked 0.5 cents) 1,976 634 2,610 - - - 1,276 634 b. Balance of franking account at year end adjusted for franking credits arising from payment of income tax 2,787 3,020 - 33 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 9. CASH AND CASH EQUIVALENTS Cash at bank and on hand 12,968 10,488 2018 $000s 2017 $000s There is no overdraft balance at 30 June 2018 (2017: $868,000) (Note 18). The net cash position is $12,968,000 (2017: $9,620,000) Included in the above amounts are tuition fees held in Tuition Protection Scheme (TPS) accounts in Australia. As at 30 June 2018, the Group held $8,502,000 (2017: $8,721,000) in TPS accounts. (In 2012 the Education Services for Overseas Student Act 2000 (“ESOS Act”) was amended to provide additional protection for international students studying in Australia. With effect from 1 July 2013, the Group is required to maintain, in Australia, separate bank accounts (TPS accounts) for prepaid fees received from international students prior to commencement of their course. Once the students commence their course, the funds may be transferred from the TPS accounts to operating cash reserves. At all times, the Group must ensure that there are sufficient funds in the TPS accounts to repay any prepaid tuition fees to international students who have not yet commenced their course. Fees paid by students who have commenced their course are deposited directly to operating cash reserves. All fees received, whether deposited to TPS or Group cash reserves are initially accounted for as unearned income, being subject to the Group’s revenue recognition policy). 10. TRADE AND OTHER RECEIVABLES CURRENT Trade receivables Less provision for impairment Other receivables Receivable from the sale of Premier Fasteners Lease incentives NON-CURRENT Lease incentives 2018 $000s 2017 $000s 6,682 (588) 6,094 1,654 - 407 8,155 2,180 2,180 8,251 (104) 8,147 1,059 937 407 10,550 2,586 2,586 - 34 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 10. TRADE AND OTHER RECEIVABLES (continued) 2018 $000s 2017 $000s TOTAL Trade receivables Less provision for impairment Other receivables Receivable from the sale of Premier Fasteners Lease incentives a. The ageing analysis of trade receivables is as follows: 0 -30 days 31- 60 days – not impaired * 61- 90 days – not impaired * Over 90 days – not impaired * Past due and impaired 6,682 (588) 6,094 1,654 - 2,587 10,335 1,377 651 448 3,618 588 6,682 8,251 (104) 8,147 1,059 937 2,993 13,136 2,012 1,074 335 4,726 104 8,251 * These are debtors that are past due for which no collateral is held and for which no provision for doubtful debts has been made as there has not been a significant change in credit quality and the directors believe that the amounts are still recoverable. b. The Group has an exposure to credit risk in Singapore and Australia given the Group’s operations in those countries. For FY18, an amount of $624,000 is included in trade and other receivables in respect of the business operations in Singapore. All other receivables of the Group are exposures in Australia. 11. OTHER ASSETS CURRENT Prepayments and accrued income Security deposits 12. INVESTMENTS CURRENT Shares in Listed Corporations - 35 - 2018 $000s 2017 $000s 5,024 472 5,496 5,712 537 6,249 - - 3,054 3,054 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 13. CONTROLLED ENTITIES Country of Incorporation Percentage Owned/Controlled 2018 2017 Academies Australasia Group Limited (Ultimate Parent Entity) Subsidiaries (controlled directly or indirectly) ACA Investment Holdings Pte. Limited Academies Australasia (Management) Pty Limited Academies Australasia College Pte. Limited Academies Australasia Institute Pty Limited Academies Australasia Polytechnic Pty Limited Academies Australasia Pty Limited Academy of English Pty Limited AKG Investment Holdings Pty Limited AKG2 Investment Holdings Pty Limited AKG3 Investment Holdings Pty Limited AKG4 Investment Holdings Pty Limited AKG5 Investment Holdings Pty Limited AKG6 Investment Holdings Pty Limited AKG7 Investment Holdings Pty Limited AMC Training Pty Limited AMI Education Pty Limited Australian College of Technology Pty Limited Australian Institute of Professional Studies Pty Limited Australian International High School Pty Limited Australian Trades Institute Pty Limited Benchmark Resources Pty Limited T/A Benchmark College Centre for Australian Education Pte. Limited Clarendon Business College Pty Limited Academies Australasia Hair and Beauty T/A Brisbane School of Hairdressing, Gold Coast School of Hairdressing, Brisbane School of Beauty and Brisbane School of Barbering CLB Training & Development Pty Limited as trustee for the CLB Unit Trust T/A Spectra Training Discover English Pty Limited International College of Capoeira Pty Limited T/A College of Sports & Fitness Humanagement Pty Limited T/A Print Training Australia Kreate Pty Limited T/A RuralBiz Training Language Links International Pty Limited Live. Laugh. Learn. Pty Limited Newco CLB Training & Development Pty Limited Skilled Placements Pty Limited Supreme Business College Pty Limited Transformations – Pathways to Competence and Developing Excellence Pty Limited T/A Skills Training Australia Vostro Institute of Training Australia Pty Limited Singapore Australia Singapore Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Singapore Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 67.54 100 75 75 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 75 75 100 100 100 100 100 100 - 36 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 13. CONTROLLED ENTITIES (continued) Acquisition of Controlled Entities On 15 January 2018, AKG3 Investment Holdings Pty Limited acquired a further 16.54% of the issued capital of International College of Capoeira Limited T/A College of Sports & Fitness. The purchase was satisfied by the payment of $118,125 in cash. The Group now owns 67.54%. Purchase consideration - cash Net assets Share acquired (16.54%) Goodwill Non-Controlling Interest Share acquired Loans converted to capital (note 26) 383 $000 Fair Value 118 (63) 55 (63) 36 (27) 14. PLANT AND EQUIPMENT 2018 $000s 2017 $000s Plant and equipment At cost Accumulated depreciation Leasehold improvements At cost Accumulated amortisation Leased plant and equipment Capitalised leased assets Accumulated depreciation Total plant & equipment 5,556 (3,924) 1,632 8,718 (3,756) 4,962 379 (256) 123 6,717 5,408 (3,623) 1,785 8,626 (3,341) 5,285 289 (200) 89 7,159 - 37 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 14. PLANT AND EQUIPMENT (continued) Year ended 30 June 2018 $000s $000s Plant and equipment Leasehold improvements Balance at the beginning of the year Additions Disposals Depreciation expense Net foreign currency difference arising on translation of financial statements of foreign operations Carrying amount at the end of the year Year ended 30 June 2017 Balance at the beginning of the year Additions Disposals Depreciation expense Net foreign currency difference arising on translation of financial statements of foreign operations Carrying amount at the end of the year 1,785 247 (10) (392) 5,285 75 - (405) 2 7 1,632 4,962 1,907 332 (47) (405) 4,323 1,770 (26) (766) (2) (16) 1,785 5,285 15. DEFERRED TAX ASSETS / LIABILITIES Leased plant and equipment $000s 89 90 - (56) - 123 63 74 - (48) - 89 Total $000s 7,159 412 (10) (853) 9 6,717 6,293 2,176 (73) (1,219) (18) 7,159 2018 $000s 2017 $000s Deferred Tax Asset 4,014 2,953 The deferred tax asset is made up of the following estimated tax benefits: Temporary differences: -deferred tax assets -deferred tax liabilities 4,962 (948) 4,014 4,677 (1,724) 2,953 - 38 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 15. DEFERRED TAX ASSETS (continued) Deferred Tax Assets Provisions Unearned income Other Deferred Tax Liabilities Plant & equipment Investments Prepayments and other Opening Balance $000s 777 3,217 683 4,677 (245) (817) (662) (1,724) Charged To Income $000s 264 7 14 285 (292) 817 251 776 Closing Balance $000s 1,041 3,224 697 4,962 (537) - (411) (948) Total 2,953 1,061 4,014 Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(q) occur: Tax losses: -operating losses 16. INTANGIBLE ASSETS Goodwill at cost Accumulated impairment losses Net carrying value Course development costs Accumulated amortisation Net carrying value Other at cost 2018 $000s 2017 $000s 398 446 32,753 (382) 32,371 2,099 (1,540) 559 43 32,973 32,694 (382) 32,312 1,992 (1,388) 604 50 32,966 - 39 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 16. INTANGIBLE ASSETS (continued) Year ended 30 June 2018 Balance at the beginning of the year Foreign exchange AAC Rebranding costs amortisation Acquisition additional 16.54% CSF Course development costs acquisition Course development costs amortisation Balance at the end of the year Year ended 30 June 2017 Balance at the beginning of the year Foreign exchange AAC Rebranding costs amortisation Acquisition additional 24% RBT Course development costs acquisition Course development costs amortisation Balance at the end of the year Goodwill $000s 32,312 4 - 55 - - 32,371 32,284 (7) - 35 - - 32,312 Course Development Costs $000s Other Total $000s $000s 604 - - - 107 (152) 559 583 - - - 242 (221) 604 50 - (7) - - - 43 57 - (7) - - - 50 32,966 4 (7) 55 107 (152) 32,973 32,924 (7) (7) 35 242 (221) 32,966 The recoverable amount of each cash-generating unit is determined based on value in use calculations based upon 5 year forecasting. The model includes a sensitivity analysis allowing for a range of growth rates. The following assumptions were used in the value in use calculations: Growth rate Discount rate Terminal Multiple 2.5% 10% 2.5 The growth rate is a long-term average growth rate. The discount rate used reflects entity and market specific factors Assuming that the Group achieves its budget for FY19, impairment would be triggered if: the discount rate were to exceed 16.7%; or the growth rate were to be minus 16.3%; or the terminal value were to be less than 1.2. Impairment would also be triggered in FY19 if the Group does not achieve certain minimum cash flows which are in line with those achieved in FY18. - 40 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 17. TRADE AND OTHER PAYABLES CURRENT Unsecured Liabilities Tuition fees in advance (Deferred income) Trade payables Sundry payables and accrued expenses 18. BORROWINGS CURRENT Secured Liabilities – Interest Bearing Cash Advance Facilities Overdraft Lease purchase Unsecured Liabilities – Interest Bearing Other loans Unsecured Liabilities – Non - Interest Bearing Other loans TOTAL CURRENT NON-CURRENT Secured Liabilities – Interest Bearing Cash Advance Facilities Lease purchase a. Total current and non-current secured liabilities: Cash Advance Facilities Overdraft Lease purchase b. Total current and non-current unsecured liabilities: Director’s loans Other loans - 41 - Note 2018 $000s 2017 $000s 19,125 551 4,092 23,768 19,156 2,592 5,077 26,825 18a 18a 18a 18a 18a 18a 18a 27 27 21, 27 27 27 1,000 - 69 1,069 - - 18 1,895 868 39 2,802 73 73 18 1,087 2,893 123 78 201 1,123 - 147 1,270 - 18 18 2,623 75 2,698 4,518 868 114 5,500 73 18 91 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 18. BORROWINGS (continued) c. The carrying amounts of non-current assets pledged as security are: Floating charge over assets Plant and equipment 2018 $000s 2017 $000s 45,270 123 45,393 43,796 89 43,885 d. The cash advance facilities are secured by a floating charge over the assets of the parent entity and its wholly owned subsidiaries (other than those in Note 22). e. The lease purchase borrowings are additionally secured on the leased asset. The leases are due for repayment in 2020. The major bank facilities comprise Bank overdraft, Cash Advance Facilities and Bank Guarantees Bank overdraft facilities are arranged with the general terms and conditions being set and agreed annually. Interest rates are variable and subject to adjustment. The Group’s utilisation of bank facilities as at 30 June 2018 is shown in Note 24b. 19. PROVISIONS CURRENT Employee entitlements Lease incentives NON-CURRENT Employee entitlements Lease incentives TOTAL Employee entitlements Lease incentives 2018 $000s 1,579 864 2,443 1,343 4,436 5,779 2,922 5,300 8,222 2017 $000s 1,381 861 2,242 1,143 5,305 6,448 2,524 6,166 8,690 - 42 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 20. SHARE CAPITAL a. Issued Share Capital 2018 Share number 2018 2017 $000s Share number 2017 $000s Ordinary shares fully paid 131,754,079 43,515 126,754,079 42,677 Ordinary share capital Balance at the beginning of the financial year 126,754,079 42,677 75,362,979 36,504 Ordinary share issue 23 August 2016, part settlement 3rd tranche purchase STA Pro-rata non-renounceable Rights Issue on 23 June 2017 Exercise 5,000,000 options over unissued shares 1 January 2018 - - - - 800,000 200 50,591,100 5,973 5,000,000 838 - - Balance at the end of the financial year 131,754,079 43,515 126,754,079 42,677 b. Share Option Reserve Share options - - 5,000,000 88 i. Shares disclosure. Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At a shareholders meeting each ordinary share is entitled to one vote when a poll is called. Otherwise, each shareholder has one vote on a show of hands. The number of shares authorised is equal to the number of shares issued. Shares have no par value. ii. Capital Management. Management controls the capital of the Group in order to maintain an acceptable debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There were no changes in the Group’s capital management procedures during the year. - 43 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 21. LEASING COMMITMENTS Lease purchase commitments Payable – minimum lease payments Not later than one year Later than one year but not later than five years Minimum lease payments Less future finance charges Present value of minimum lease payments Note 2018 $000s 2017 $000s 77 85 162 (15) 147 41 80 121 (7) 114 18a At the end of the lease periods the lessor’s charges over the plant and equipment cease, leaving the assets the unencumbered property of the Group. Operating Lease commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements: Not later than one year Later than one year but not later than five years Later than five years 2018 $000s 6,231 16,251 15,760 38,242 2017 $000s 7,257 20,202 19,521 46,980 The Group leases property under operating leases expiring from 1 year to 11 years. Lease payments comprise a base amount plus an incremental rental, based on either movement in the Consumer Price Index or minimum percentage increase criteria. Lease incentives have been recognised in accordance with the Group’s accounting policies. 22. CONTINGENT LIABILITIES Contingent Liabilities Corporate Guarantee There is a corporate guarantee between wholly-owned Group companies as security for bank facilities in effect during the year. This guarantee does not include: Academies Australasia College Pte. Limited Academies Australasia Hair and Beauty Pty Limited AKG6 Investment Holdings Pty Limited AMC Training Pty Limited Centre for Australian Education Pte. Limited Humanagement Pty Limited International College of Capoeira Pty Limited Kreate Pty Limited Language Links International Pty Limited - 44 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 23. SEGMENT REPORTING Business segments The Company has determined that it has only one operating segment: Education. Geographical information The Group operates in Australia and Singapore. The revenues and non-current assets of the Group for the year ended 30 June 2018 are as follows: Geographic Location Revenues from External Customers Non-current assets $000s Australia 57,285 45,463 A$000s Singapore 3,835 421 Accounting Policies Segment revenues and expenses are those directly attributable to the segments. 24. CASH FLOW INFORMATION a. Reconciliation of cash flow from operations with profit after income tax Profit after income tax 4,454 3,041 2018 $000s 2017 $000s Non-cash flows in profit Amortisation Depreciation Net loss on disposal of plant and equipment Write-downs to recoverable amounts Realised gain on investments Unrealised gain on investments Unrealised foreign exchange movement Changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in other current assets (Increase)/decrease in intangibles (Increase)/decrease in deferred tax assets Increase/(decrease) in trade and other payables Increase/(decrease) in tax payables Increase/(decrease) in provisions Cash flow from operations 448 557 10 578 (1,527) - (1) 1,286 753 7 (1,061) (3,048) 1,746 (468) 3,734 987 453 39 59 - (994) 8 1,656 (1,686) 119 506 2,053 559 (647) 6,153 - 45 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 24. CASH FLOW INFORMATION (continued) b. Borrowing arrangements with banks Total Facilities Cash advance facilities available Amount utilised Overdraft facility available Amount utilised 2018 $000s 2017 $000s 1,373 (1,123) 250 1,000 - 1,000 6,139 (4,518) 1,621 1,000 (868) 132 The major facilities are summarised as follows: Bank overdrafts Bank overdraft facilities are arranged with the general terms and conditions being set and agreed annually. Interest rates are variable and subject to adjustment. Cash Advance Facilities The facility expires on 31 May 2020. 25. EVENTS AFTER THE BALANCE SHEET DATE Following approval at an Extraordinary General Meeting convened for the purpose, the Company bought back and cancelled 4,139,612 shares at the price of 35 cents per share. After that cancellation the total shares on issue was reduced to 127,614,467. There were no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. 26. RELATED PARTY TRANSACTIONS Directors’ transactions with the Company and the Group Details of Directors’ remuneration are set out in the Remuneration Report on pages 11 and 12. Directors are reimbursed for expenses incurred by them on behalf of the Group. Directors’ loans In September 2015 the shareholders of CSF, a 51% (now 67.54%) owned subsidiary of the Company, extended loans totalling $150,000 to the subsidiary. The minority shareholders, Messrs Julio Chaves and Andre Cerutti, who at that time were directors of the subsidiary, each extended loans of $36,750, their share of the $150,000. On 10 January 2018, 50% of the loans extended were converted to share capital. The balance of the loans were repaid during 2018. Interest on the loans paid to these Directors during the financial year amounted to $2,661. All the loans by Directors noted above incurred interest at the prevailing ANZ Bank rate applicable to the Company’s secured overdraft facility. Other loans of $18,000 disclosed in Note 18(b) comprise dividends payable as at 30 June 2018 to a director of RBT, a 75% owned subsidiary of the Company. The director is also the non-controlling shareholder of that subsidiary. No interest is accrued or payable on this loan. - 46 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 26. RELATED PARTY TRANSACTIONS (continued) Directors’ and specified executives’ relevant interests in shares See Directors’ Report on pages 8 to 9. Other related party transactions Transactions between the Company and controlled entities comprise loans, management fees and interest and are eliminated on consolidation. 27. FINANCIAL INSTRUMENTS Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks, investments, accounts receivable and payable, loans to and from subsidiaries, bills and leases. The main purpose of non-derivative financial instruments is to raise finance for operations. i. Treasury Risk Management Senior management meets on a regular basis to review currency and interest rate exposure and to evaluate treasury management strategies where relevant, in the context of the most recent economic conditions and forecasts. ii. Financial Risks The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. Foreign currency risk The Group is exposed to foreign currency risk on its purchase of products and the sale of training and education courses to international students and on the translation of its foreign subsidiaries. The Group had not hedged foreign currency transactions as at 30 June 2018. Senior management continues to evaluate this risk on an ongoing basis. Liquidity risk is managed by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained, where possible. Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. In the education business, credit risk is minimised by, generally, collecting tuition fees in advance - 47 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 27. FINANCIAL INSTRUMENTS (continued) Interest rate risk The interest rate risk has been managed by the Group by reducing and in most cases eliminating interest bearing debt. Stand by facilities has been set with a combination of fixed and floating rate possibilities. There is no set policy as to the mix of interest rate exposures. The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Note Weighted Floating Fixed interest maturing in: Non- Interest bearing 1 year or less 1 to 5 years interest rate Total $000s $000s $000s $000s $000s average interest rate 0.95% 12,968 Year ended 30 June 2018 Financial assets Cash and cash equivalents 9 Trade and other receivables Financial liabilities Trade and other payables Bank bills Lease purchase agreements Other loans 10 17 18 18 18 Year ended 30 June 2017 Financial assets Cash and cash equivalents Investments Trade and other receivables 9 12 10 Financial liabilities Trade and other payables Bank bills Overdraft Lease purchase agreements Other loans 17 18 18 18 3.66% 7.54% 1.19% 3.69% 7.12% 5.75% - - - - 1,000 69 1,069 - - - - - - - - 123 78 201 - - - - - 12,968 - - - - - 10,488 - - 10,488 - - - - - - - 1,895 868 - 2,623 - 39 75 73 2,875 - 2,698 - 48 - - 12,968 7,748 7,748 7,748 20,716 4,643 - - 18 4,661 4,643 1,123 147 18 5,931 - 3,054 10,488 3,054 10,143 13,197 10,143 23,685 7,669 - - - 18 7,687 7,669 4,518 868 114 91 13,260 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 27. FINANCIAL INSTRUMENTS (continued) iii. Net fair values of financial assets and liabilities The carrying amounts of financial assets and liabilities approximate their net fair value. iv. Sensitivity Analysis The following table illustrates sensitivity analysis to the Group’s exposure to changes in interest rates. The table indicates the estimated impact on how profit and equity values reported at the end of the reporting period would have been affected by changes in the interest rate that management considers reasonably possible. 2018 +/- 2% in interest rates 28. PARENT INFORMATION Profit $ 124 Equity $ 124 The following information has been extracted from the books of the parent and has been prepared in accordance with Australian Accounting Standards STATEMENT OF FINANCIAL POSITION 2018 $000s 2017 $000s Assets Current assets Non-current assets Total Assets Liabilities Current Liabilities Non-current liabilities Total Liabilities Equity Share capital Share option reserve Retained earnings Total Equity STATEMENT OF COMPREHENSIVE INCOME Total profit Total comprehensive income 37,817 5,012 42,829 2,618 949 3,567 43,515 - (4,253) 39,262 3,571 3,571 35,777 3,943 39,720 1,372 796 2,168 42,677 88 (5,213) 37,552 (720) (720) - 49 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018 29. COMPANY DETAILS The registered office and principal place of business of Academies Australasia Group Limited is: Level 6, 505 George Street Sydney NSW 2000 Australia Principal places of business of AKG colleges: NEW SOUTH WALES VICTORIA Academies Australasia Institute Academy of English Australian College of Technology Australian International High School Clarendon Business College Supreme Business College Level 6, 505 George Street Sydney, NSW 2000 Benchmark College 140 Henry Street, Penrith, NSW 2750 Academies Australasia Polytechnic Spectra Training Vostro Institute Level 7, 628 Bourke Street Melbourne,VIC 3000 Discover English 247 Collins Street, Melbourne, VIC 3000 Skills Training Australia Level 2, 2 Capital City Boulevard Knox Ozone, Wantirna, South VIC 3152 College of Sports & Fitness 12 Wentworth Avenue, Darlinghurst, NSW 2010 SOUTH AUSTRALIA RuralBiz Training 46 Wingewarra Street, Dubbo, NSW 2830 Print Training Australia Unit 17, 169 Unley Road, Unley, SA 5061 QUEENSLAND WESTERN AUSTRALIA Brisbane School of Hairdressing Brisbane School of Beauty Brisbane School of Barbering Queen Adelaide Building 90-112 Queen Street Mall Brisbane, QLD 4000 Gold Coast School of Hairdressing Pivotal Point Tower, 3/2 Nerang Street Southport, QLD 4215 Language Links 120 Roe Street, Perth, WA 6003 SINGAPORE Academies Australasia College 45 Middle Road, Singapore 1889954 - 50 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES DIRECTORS DECLARATION The Directors of the Company declare that: 1. the financial statements and notes, set out on pages 15 to 50, are in accordance with the Corporations Act 2001 and (i) comply with Accounting Standards which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and (ii) give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year ended on that date of the Company and consolidated group; 2. The Chief Executive Officer and Group Finance Manager have each declared that: (i) the financial records of the Company and the consolidated group for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001; (ii) the financial statements and notes for the financial year comply with Accounting Standards; and (iii) the financial statements and notes for the financial year give a true and fair view; and 3. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Company and wholly-owned subsidiaries identified in Note 13, but excluding those in Note 22, have entered into a deed of cross guarantee under which the Company and its subsidiaries guarantee the debts of each other. At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed. This declaration is made in accordance with a resolution of the Board of Directors. Dr John Lewis Schlederer Director 5 September 2018 Christopher Elmore Campbell Director - 51 - PILOT PARTNERS Chartered Accountants Level 10. Waterfront Place I Eagle St. Brisbane 4000 PO Box 7095 Brisbane 4001 Queensland Australia P +61730231300 F +61732291227 pilotpartners. coin. au . . . . , . . . . .. . ... . ,. .. . .. . . We have audited the financial report of Academies AUStralasia Group Limited ('the Company" and its subsidiaries (**the Group")), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the Year then ended, and 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 . giving a true and fair view of the Group's financial position as at 30 June 201.8 and of its financial performance for the Year then ended; and (Ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 . B SISFOROP1 10 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 re ort. W independent of the Group in accordance with the auditor independence re uirements of the Corporat/bns Act 2001 and the ethical requirements of the Accountin Professional and Ethical Standards Board's APES 11.0 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A member . . exia International ABN 60 0536B7769 Pilotis a registered trade mark licensed to Pilot Partners I Liability limited by a scheme approved under Professional Standards Le Isletion Nexia International is a worldwide network of independent accounting and consulting firms. 52 KEY AUDIT ATTERS Key audit matters are those matters that, in our professional judgement, were of most i nifi significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Goodwill and Impairment Reason for si nificance: The impairment assessment made by the Group over its goodwill balances is a key audit matter as it incorporates significant judgements in respect of factors such as forecast cash flows, growth rates and economic and operational assumptions. Goodwill comprises a significant portion of the Groups total assets. How our audit addressed the matter: Our audit considered whether the methodology and principles applied by the Grou to their discounted cash flow impairment model met the requirements of AASB 1.36 Impairment of Assets. Using our understanding of the nature of the Group's business and the environment which it operates in, we assessed and tested the assumptions and methodologies used in the Group's discounted cash flow model. In doing so: We assessed the basis for the Group's cash flow forecasts including consideration of the historical accuracy of previous estimates; We compared the discount rate, growth rates and other economic assumptions to available external data; We assessed the appropriateness of using a single Cash Generating Unit (CGU) as a basis for consideration of goodwill impairment; and We performed sensitivity analysis and evaluated whether a reasonable chan e in assumptions could cause the carrying amount of the CGU to exceed its recoverable amount. We also considered the adequacy of the financial report disclosures in re ard to those assumptions disclosed in Note 1.6 of the financial report. . o Revenue Recognition Reason for si nificance: Revenue recognition is a key audit matter due to the high volume of transactions, its significance to profit and the judgement required in recognising revenue from contracts with customers. The Group has one distinct category of revenue, being revenue from providin tuition services to customers. Revenue from services is recognised over the period of tuition, upon completion of specific performance obligations of each contract. As all customer contracts are for the provision of tuition, income for tuition is recognised as training is provided. How our audit addressed the matter: Our audit work included selecting sufficient items for testing to satisf ourselves that revenue was recognised in accordance with the revenue recognition policy. This was done by agreeing total revenue due to be recognised over the period of tuition to course fee listings, sighting cash receipts and recalculating revenue and unearned income to ensure that recognition and cut-off were appropriate. Substantive anal tical review procedures were also performed, comparing current Year revenue recognition to the prior Year taking into consideration movements in key revenue drivers, such as student numbers. Further testing was completed to verify the mathematical accuracy of the spreadsheets used to assist in determining the recognition of revenue. Finally we reviewed the adequacy of the financial report disclosures to ensure compliance with AASB 15 Revenue from Contracts with Customers. Trade and Other Receivables Reason for si nificance: The collection of trade and other receivables as a significant impact on the rou 's operating cash flow, and overall financial performance. Consideration of the recoverability of Trade and Other Receivables is also an areas that requires 'ud ement in respect of the risk associated with individual debtor's not meeting their a merit obligations. How our audit addressed the matter: Our work involved ensuring the underlying receivables records reconciled to the general ledger. Receivable's ledgers were reviewed for transactions unusual in nature. We assessed whether the debtor's balances were recoverable, and whether any allowances for impairment of receivables are appropriate. . . Where appropriate, individual receivable amounts were verified collection after Year end. to subsequent cash Analytical procedures were performed over Trade and Other Receivables to identif any unusual or unexpected fluctuations in the balances. OTHER INFOR ATION The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the Year ended 30 June 2018, but does not include the financial report and our auditor's re orb thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibilit is to read the other information and, in doing so, consider whether the other information is material I inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be material Iy misstated. If, based on the work we have performed, 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. RESPO SIBILITIES OF THE DIRECTORS FOR THE F1 A CIAL REPORT The directors of the Company are responsible for the preparation of the financial re ort 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 abilit of the Group to continue as a going concern, disclosing, as applicable, matters related 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 has no realistic alternative but to do so. AUDITOR'S RESPONSIBILITIES FOR THE UDIT OF THE F1 ANCIAL REPORT Our objectives are to obtain reasonable assurance about whether the financial re orL 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 hi h 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. . o Misstatements can arise from fraud or error and are considered material if, individual I or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: htt : WWW. auasb. ov. au Home. as x. This description forms part of our auditor's report. REPORT O THE REMU ERATIO REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 1.1 to 1.2 of the directors' report for the Year ended 30 June 201.8. In our opinion, the Remuneration Report of Academies AUStralasia Group Limited, for the Year ended 30 June 201.8 complies with section 300A of the CorporationsAct2001. 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. \ ^..,..\^ PAR R Chartered Accountants ^"/^/* R Partner Signe O n ^ ^^^52. .^Q-\~'\\0:2. .^ 201.8 Level 1.0 I Eagle Street Brisbane Qld 4000 ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. SUBSTANTIAL HOLDERS Ordinary Shares The relevant interests of substantial shareholders as at 31 August 2018 were: Shareholder No. of Shares Held % Mr Chiang Meng Heng a Andrew Low b Mr Christopher Elmore Campbell c Jilcy Pty Ltd Dr John Lewis Schlederer d Eng Kim Low Raphael Geminder e 51,185,961 17,326,981 16,815,195 15,410,195 7,977,000 7,648,232 6,601,910 40.11 13.58 13.18 12.08 6.25 5.99 5.17 a Includes 7,648,232 shares held by Eng Kim Low b 12,326,981 held by Andrew Low and 5,000,000 held by Paris Pushkin Pty Ltd c Includes 15,410,195 shares held by Jilcy Pty Ltd and 1,395,000 shares held by Bankura Pty Ltd d Includes 5,715,000 shares held by J&B Schlederer Pty Ltd and 2,262,000 shares held by Schlederer Nominees Pty Ltd e 4,006,396 held by BB&M Holdings Pty Limited and 2,595,514 held by Kin Group Pty Limited VOTING RIGHTS Ordinary Shares At 31 August 2018 there were 423 holders of the ordinary shares of the Company. The voting rights attaching to the ordinary shares, set out in Articles 69 and 70 of the Company’s constitution, are: Article 69 “Subject to these Articles and any rights or restrictions for the time being attached to any class or classes of shares: (a) at meetings of members or classes of members each member entitled to attend and vote may attend and vote in person or by proxy, or attorney and (where the member is a body corporate) by representative; (b) on a show of hands, every Member present has 1 vote; (c) on a poll, every Member present has: (i) 1 vote for each fully paid share; …….” Article 70 “Where more than 1 joint holder votes, the vote of the holder, whose name appears first in the register of members shall be accepted to the exclusion of the others.” - 57 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES 20 LARGEST SHAREHOLDERS AS AT 31 AUGUST 2018 Registered Name No. Shares % 1 Mr Chiang Meng Heng 2 3 4 5 6 7 8 9 10 11 12 13 14 Jilcy Pty Ltd Andrew Low Eng Kim Low J&B Schlederer Pty Ltd Paris Pushkin Pty Ltd JP Morgan Nominees Australia Limited BB&M Holdings Pty Limited Kin Group Pty Limited RTO Solutions Pty Ltd Schlederer Nominees Pty Ltd Sargoda Pty Ltd Cheeky Boys Pty Ltd HSBC Custody Nominees (Australia) Limited National Nominees Limited Bankura Pty Ltd 15 16 17 MK & MP Investments Pty Ltd 18 Mrs Gail Leslie Storey 19 Mr Sartaj Hans 20 Mr Nicholas William Marlin 43,537,729 15,410,195 12,326,981 7,648,232 5,715,000 5,000,000 4,221,425 4,006,396 2,595,514 2,475,441 2,262,000 1,833,334 1,559,934 1,306,821 981,579 963,334 677,135 634,335 619,762 513,000 34.12 12.08 9.66 5.99 4.48 3.92 3.31 3.14 2.03 1.94 1.77 1.44 1.22 1.02 0.77 0.75 0.53 0.50 0.49 0.40 114,288,147 89.56 HOLDING RANGE (SHAREHOLDERS) AS AT 31 AUGUST 2018 Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 + No. Holders 64 125 59 115 60 423 Total No. Shares 37,542 350,292 471,884 4,490,162 122,264,587 127,614,467 % 0.03 0.27 0.37 3.52 95.81 100.00 UNMARKETABLE PARCELS AS AT 31 AUGUST 2018 Minimum $500 parcel at $0.33 per unit Minimum Parcel Size No. Holders 1,516 80 Units 58,360 . - 58 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES CORPORATE INFORMATION DIRECTORS Dr John Lewis Schlederer Christopher Elmore Campbell Chiang Meng Heng Gabriela Del Carmen Rodriguez Naranjo Sartaj Hans COMPANY SECRETARIES Stephanie Noble Gabriela Del Carmen Rodriguez Naranjo REGISTERED OFFICE Academies Australasia Group Limited Level 6, 505 George Street Sydney NSW 2000 Australia Telephone: (02) 9224 5555 Facsimile: (02) 9224 5550 Email: companysecretary@academies.edu.au Web Site: www.academies.edu.au SHARE REGISTRAR Computershare Investor Services Pty Limited GPO Box 2975 Melbourne, VIC 3001 Australia Telephone: +61 (03) 9415 4000 Toll Free (Australia only) 1300 855 080 SECURITIES EXCHANGE The Company is listed on the Australian Securities Exchange. The Home Exchange is Sydney. ASX Code: AKG - 59 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES GLOSSARY AAC AAHB AAI AAPoly AASB ACPET ACT AIHS AKG AOE ASX BMC Board CBC Academies Australasia College Pte. Limited Academies Australasia Hair and Beauty Pty Limited Academies Australasia Institute Pty Limited Academies Australasia Polytechnic Pty Limited Australian Accounting Standards Board or a numbered Standard issued by it Australian Council for Private Education and Training Australian College of Technology Pty Limited Australian International High School Pty Limited ASX code for Academies Australasia Group Limited – The Company Academy of English Pty Limited Australian Securities Exchange Benchmark Resources Pty Limited - trading as Benchmark College The Board of Directors of Academies Australasia Group Limited Clarendon Business College Pty Limited Company Academies Australasia Group Limited (ACN 000 003 725) - the parent company COPHE Council of Private Higher Education Corporations Act Corporations Act 2001 (Cth) CRICOS Commonwealth Register of Institutions and Courses for Overseas Students CSF DE International College of Capoeira Pty Limited - trading as College of Sports & Fitness Discover English Pty Limited Directors Board of Directors of AKG EBITDA Earnings before interest, taxation, depreciation and amortisation EGM EPS Extraordinary General Meeting Earnings per share FY14 to FY19 Financial Year to 30 June 2014 to Financial Year to 30 June 2019 respectively Group GST AKG and all its subsidiaries Goods and Services Tax - 60 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES GLOSSARY LLI RBT RTO SBC Shares SPT STA Language Links International Pty Limited Kreate Pty Limited – trading as RuralBiz Training Registered Training Organisation Supreme Business College Pty Limited Fully paid ordinary shares in the Company CLB Training & Development Pty Limited as trustee for the CLB Unit Trust - trading as Spectra Training Transformations – Pathways to Competence and Developing Excellence Pty Limited - trading as Skills Training Australia TAFE Technical and Further Education TPS VET VOS VSL Tuition Protection Scheme Vocational Education and Training Vostro Institute of Training Australia Pty Limited Vet Student Loans - 61 - 

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