Asanko Gold Inc.
Annual Report 2020

Plain-text annual report

ACADEMIES AUSTRALASIA GROUP LIMITED ANNUAL REPORT 2020 ACN 000 003 725 ACADEMIES AUSTRALASIA GROUP LIMITED ANNUAL REPORT 2020 CONTENTS Page Report of the Chairman and the Group Managing Director and CEO Directors’ Report Information on the Directors and Company Secretaries Information on Senior Executives Remuneration Report - Audited Corporate Governance Statement Auditor’s 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 Auditor’s Report Additional Information for a Company listed on the ASX Corporate Information Glossary - 1 - 2 4 7 9 9 11 12 13 14 15 16 17 47 48 53 55 56 REPORT OF THE CHAIRMAN AND THE GROUP MANAGING DIRECTOR AND CEO Dear Shareholder We are delighted to present your Company’s results for FY20 and to add our comments to the Directors’ Report. There are several reasons that makes this a pleasant task. - Notwithstanding the worst market conditions we can remember, arising from the COVID-19 pandemic that struck in the second half, we improved on our performance in FY19 – making it three successive records in our 112-year history. [See ‘EBITDA after adjustment for significant items’ on page 4 of this report and page 2 of the FY19 Annual Report]. - There was a sharp deterioration in the outlook for student enrolments after our February promise of an interim dividend in March. We honoured that promise. - We have declared a final dividend matching the March dividend, that will be paid this month. - Your Company continues to be debt-free. - Your Company started FY21 with a strong balance sheet and $16.9 million in cash - about 13% higher than the cash position a year earlier. That said, we hasten to add a note of caution. COVID-19 continues to be destructive. The economy, and business opportunities, may deteriorate further. While there are promising signs of a vaccine being developed it is not at all clear how long that would take. Your Board deliberated about the final dividend. The Company has no immediate need for the $1.74 million that the dividend would cost. Given the very low bank deposit rates your Board took the view that the better approach would be to pay the dividend and leave it to shareholders to use or invest the proceeds as they see fit. Of course, if the Company requires funds to address any unforeseen circumstances, and, there is a rights issue, shareholders would have the opportunity to participate too. Destination Australia Scholarships Academies Australasia Institute was pleased to be awarded 15 Destination Australia Scholarships for the study of agriculture courses in Armidale, NSW. These two-year scholarships were subsequently divided into 30 one- year scholarships. While we could have filled these scholarships, COVID-19 and the restrictions on foreign entry led to the need to defer start dates. It is hoped that the Federal Government will acknowledge the impact of COVID-19 on the exercise and extend the participation deadlines. AAPoly We are pleased to report that AAPoly’s registration as a Higher Education Provider was renewed for the maximum of seven years. This college is being restructured, refreshed and strengthened with significant new appointments: Sylvija Dobson as Chief Executive Officer, Professor Paul Watters as Academic Dean, Dr Jean- Marie Ip as Associate Dean (Student Experience), Dr Sunny Vinnakota as Associate Dean (Education) and Professor Gary O’Donovan as Chair of the Academic Board. - 2 - Priorities for FY21 - Preparing for additional higher education courses. - Further improving financial discipline and implementing cost savings measures. Acknowledgements The Board acknowledges and appreciates the loyalty and support of all shareholders, students, clients, partners, associates and other stakeholders. Thank you. We know that FY20 was a particularly difficult year for management and staff. To be able to produce a record performance is truly commendable. The Board thanks you too. Dr John Lewis Schlederer Chairman 4 September 2020 Christopher Elmore Campbell Group Managing Director and CEO - 3 - 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 2020. 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 been in office from the start of the financial year to the date of this report. Details on the Directors and Company Secretaries are set out on pages 7 and 8. PRINCIPAL ACTIVITY The principal activity of the Group during the financial year was the provision of training and education services. CONSOLIDATED RESULT Previous corresponding period numbers have been restated after application of the AASB 16 Leases standard and a voluntary change in policy in respect to trade receivables. The consolidated profit of the Group for the financial year, after providing for income tax, amounted to $3,961,000 (2019 Restated: $4,443,000). REVIEW OF OPERATIONS Revenue from services decreased by 10% to $59,694,000 (2019: $66,056,000). The following table presents EBITDA after adjustment for significant items. EBITDA Premises outgoing expenses related to prior years Redundancies, termination and one-off costs Income written off or refunded $000s FY19 FY20 Adjusted 13,613 283 46 510 13,530 (180) 136 812 EBITDA after adjustment for significant items 14,452 14,298 +1.1% - 4 - [Notes ‘EBITDA’ and ‘significant item’ are not terms prescribed by the Australian Accounting Standards (‘AAS’). The Directors consider that ‘EBITDA after adjustment for significant items’ provides a better understanding of the underlying performance of the business.] Dividends A fully franked dividend of 2.37 cents per share ($3,024,000) was paid on 11 October 2019. A fully franked dividend of 1.365 cents per share ($1,742,000) was paid on 26 March 2020. The Directors have announced the payment of a fully franked dividend of 1.365 cents per share ($1,742,000) to be paid on 25 September 2020. SIGNIFICANT CHANGES IN STATE OF AFFAIRS There were no significant changes in the Company’s state of affairs during the financial year. COVID-19 PANDEMIC About 80% of the Group’s students (representing about 80% of revenue) are from overseas. The closing of Australia’s borders since 20 March 2020 has been the main cause of the fall in revenue compared to FY19. COVID-19 restrictions on people movement have also negatively affected the training of domestic students. It is relevant to note that most of the Group’s business is in New South Wales and Victoria – two states which have been most affected by the pandemic. To minimise disruption arising from the restrictions imposed because of COVID-19, most courses were converted to on-line delivery from April 2020. COVID-safe plans incorporating features like social distancing, hygiene procedures, visitor registration and reporting have been established. There is no clear view or estimate of the future impact of COVID-19 on the business of the Group at this time. It does not seem likely that the borders will open prior to 2021. In FY20 certain companies in the Group qualified for a total of $2,175,000 under the first Australian Government JobKeeper Payment scheme. AAC qualified for a similar type of support of $281,000 from the Singapore Government. The results also include rental assistance amounting to $347,000. EVENTS AFTER THE REPORTING DATE Other than the COVID-19 pandemic including the lockdown in Metropolitan Melbourne imposed since August 2020, there were no 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. - 5 - FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES Please refer to the Report of the Chairman and the Group Managing Director and CEO (Page 2 and 3). 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 $27,000 in respect of a directors and officers liability insurance policy covering the directors’ and officers’ liabilities as officers of the Company. 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. - 6 - INFORMATION ON DIRECTORS AND COMPANY SECRETARIES Dr John Lewis Schlederer Qualifications Experience Interest in Shares Special Responsibilities Directorships held in other listed entities Non-executive Director, appointed 21 August 2009. Chairman since 1 January 2014. 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. 9,645,182 shares (7.56%) 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. B.Soc.Sci. (Hons), FFin, FAICD, FCIS, FSCA. Experience in mergers and acquisitions and more than 20 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. 18,283,848 shares (14.33%) Member of the Remuneration Committee. None. Non-executive Director, appointed 15 February 2000. 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. - 7 - 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 Deputy Group Managing Director and Group Chief Operating Officer. Appointed Executive Director, 21 October 2013. Alternate Director, 10 May 2011 to 31 December 2013, (Alternate to Neville Thomas Cleary (Retired 31 December 2013)). Appointed Chief Operating Officer on 15 August 2017 and Deputy Group Managing Director on 1 January 2019. B. Comp.Sci, B.Sci. Sys. Eng. Joined the Group in April 2001. More than 19 years’ experience managing in curriculum acquisitions, marketing, development and lecturing. Director, IHEA from 17 May 2017. Deputy Chairman of IHEA since 29 May 2019. 93,449 shares (0.07%) Group Chief Operating Officer from 15 August 2017. Joint Company Secretary from 14 September 2016. None compliance, institutions, educational experience regulatory including Independent, Non-executive Director, appointed 19 October 2016. B.E. Honours (Electronics) Experience in information technology and superannuation at BT Financial Group, the wealth management arm of Westpac. Played a pivotal role in the development of Goulburn Health Hub, a medical facilities project in Goulburn. Many years experience in managing investments and financial affairs in private family companies. 813,929 shares (0.64%) 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 13 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. - 8 - 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 6 6 6 6 6 B 6 6 6 6 6 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 Deputy Group Managing Director and Group Chief Operating Officer. See Information on Directors. 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. - 9 - 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 7 to 8. a. Remuneration 30 June 2020 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 $000s $000s $000s $000s $000s 43 425 40 304 65 877 - - - - - - - - - - - - 25 25 4 25 6 85 68 450 44 329 71 962 30 June 2019 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 $000s $000s $000s $000s $000s 36 422 36 261 45 800 - - - - - - - - - - - - 26 28 3 25 4 86 62 450 39 286 49 886 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 2020 The Group has no employee share plan. No options were granted as part of remuneration. c. Employment contracts of Executives The employment conditions of all 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. With respect to senior executives, the expiry date of Christopher Elmore Campbell’s fixed term contract of employment has been extended to 31 December 2021. Gabriela Del Carmen Rodriguez Naranjo’s fixed term contract of employment also expires on 31 December 2021. - 10 - AUDITORS’ INDEPENDENCE DECLARATION The Auditor’s Independence Declaration for the year ended 30 June 2020 appears on page 12. It forms part of the Directors’ Report for the year ended 30 June 2020. 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 2020: • Taxation services • Other services $42,000 $3,000 (2019: $36,000) (2019: $27,000) 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 4 September 2020 Christopher Elmore Campbell Director - 11 - AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 ACADEMIES AUSTRALASIA GROUP LIMITED I declare that to the best of my knowledge and belief, during the year ended 30 June 2020, there have been: i. no contraventions of the auditor’s independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. PILOT PARTNERS Chartered Accountants DANIEL GILL Partner Signed on 4 September 2020 Level 10 1 Eagle Street Brisbane Qld 4000 -12- ABN 60 063 687 769 Pilot is a registered trade mark licensed to Pilot Partners Liability limited by a scheme approved under Professional Standards LegislationNexia International is a worldwide network of independent accounting and consulting firms.PILOT PARTNERSChartered AccountantsLevel 10, Waterfront Place 1 Eagle St. Brisbane 4000PO Box 7095 Brisbane 4001 Queensland AustraliaP +61 7 3023 1300F +61 7 3229 1227pilotpartners.com.au ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2020 Note e 2 3 3 3 3 3 2 3 3 4 7 7 8 Revenue from services Student acquisition and teaching costs Gross profit Personnel expenses Premises expenses Other administration expenses Restructure and non-recurring costs Other income Earnings before interest, depreciation and amortisation Depreciation and amortisation expenses Loss on disposal of assets Finance costs Interest income 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. - 13 - 2020 $000s 59,694 (27,408) 32,286 (14,173) (3,784) (3,142) 11,187 (395) 10,792 2,821 2019 Restated $000s 66,056 (29,191) 36,865 (14,067) (4,005) (3,886) 14,907 (1,377) 13,530 - 13,613 13,530 (6,812) (10) (1,697) 123 5,217 (1,256) (5,759) - (1,513) 149 6,407 (1,964) 3,961 4,443 (48) (48) 3,913 3,662 299 3,961 3,614 299 3,913 2.87 2.87 3.735 50 ) 50 )) 4,493 4,350 93 4,443 4,400 93 4,493 3.39 3.39 2.3 ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2020 Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Plant and equipment Right of use assets 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 Lease liabilities Provisions Total Current Liabilities Non-Current Liabilities Borrowings Lease liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Share capital Accumulated losses Foreign currency translation reserve Non-controlling interests Total Equity Note 9 10 11 13 14 15 16 17 17 4 18 19 18 19 20 2020 $000s 16,904 3,700 2,548 23,152 5,457 35,602 5,038 32,813 78,910 102,062 17,431 5,012 - - 5,329 2,865 30,637 - 37,349 474 37,823 68,460 33,602 42,066 (9,125) 70 591 33,602 2019 Restated $000s 1/7/2018 Restated $000s 14,996 4,286 2,930 22,212 6,026 23,015 5,854 32,850 67,745 89,957 18,390 3,651 534 - 4,558 2,749 29,882 - 25,117 424 25,541 55,423 34,534 42,066 (8,021) 118 371 34,534 12,968 5,418 4,305 22,691 6,717 24,961 6,022 32,973 70,673 93,364 16,388 4,103 2,367 1,087 4,633 1,579 30,157 201 27,153 1,343 28,697 58,854 34,510 43,515 (9,436) 68 363 34,510 The accompanying notes form part of these financial statements. - 14 - ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2020 Ordinary Shares Retained Profits Reserves Non - Controlling Interests Total $000s $000s $000s $000s $000s Year ended 1 July 2019 original 42,066 (5,315) Impact of adoption of new accounting standard Restated balance 1 July 2019 Profit for the period Exchange differences on translating foreign operations Total comprehensive income for the year Dividend paid - 42,066 - - - - Balance at 30 June 2020 42,066 (2,706) (8,021) 3,662 - 3,662 (4,766) (9,125) Year ended 1 July 2018 original 43,515 (7,088) Impact of adoption of new accounting standard Restated balance 1 July 2018 Profit for the period restated Exchange differences on translating foreign operations Total comprehensive income for the year Share buy back and cancellation Dividend paid Balance at 30 June 2019 restated - 43,515 - - - (1,449) - 42,066 (2,348) (9,436) 4,350 - 4,350 - (2,935) (8,021) 107 11 118 - (48) (48) - 70 68 - 68 - 50 50 - - 118 375 37,233 (4) 371 299 (2,699) 34,534 3,961 - (48) 299 (79) 591 3,913 (4,845) 33,602 363 36,858 - 363 93 - 93 - (85) 371 (2,348) 34.510 4,443 50 4,493 (1,449) (3,020) 34,534 The accompanying notes form part of these financial statements. - 15 - ACADEMIES AUSTRALASIA GROUP LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2020 Note 2020 $000s 2019 Restated $000s Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Interest received Finance costs Income taxes paid 63,825 (48,056) 123 (1,697) (1,524) Net cash provided by (used in) operating activities 23a 12,671 Cash Flows from Investing Activities Proceeds from sale of plant & equipment Purchase of intangible assets Purchase of plant & equipment Net cash provided by (used in) investing activities Cash Flows from Financing Activities Dividends paid Repayment of borrowings Lease payments Share buy back and cancellation - (176) (321) (497) (4,915) - (5,351) - 69,853 (52,072) 149 (1,513) (3,626) 12,791 2 (75) (205) (278) (2,968) (1,270) (4,798) (1,449) Net cash provided by (used in) financing activities (10,266) (10,485) Net increase in cash held Net cash at the beginning of the financial year Net cash at the end of the financial year 9 1,908 14,996 16,904 2,028 12,968 14,996 The accompanying notes form part of these financial statements. - 16 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 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 27. 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 4 September 2020. 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. AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019). The Group has adopted the new accounting standard AASB16 Leases from 1 July 2019. The standard replaces AASB 117 Leases and for lessees eliminates the classification of operating leases and finance leases. The Group previously classified property leases as operating or finance leases based on whether the lease transferred significantly all of the risks and benefits incidental to ownership of the underlying asset to the Group. Under AASB 16, except for short-term leases and leases of low-value assets, right of use assets and lease liabilities are recognised in the statement of financial position. The Group recognises a right of use asset and a lease liability at the commencement of the lease. The right of use asset is initially measured at cost less any lease incentives. The right of use asset is subsequently depreciated using the straight line method from the commencement date to the end of the lease term. The right of use asset is reviewed for any impairment. The lease liability is initially measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rates as at 1 July 2018. The Group excludes short term leases with less than 12 months tenure and leases relating to low value assets from the above recognition. These lease payments are recognised as an expense on a straight line basis over the lease term. The Group has applied the full retrospective restatement approach, under which all comparatives are restated, as well as the opening balance of the previous period. The comparative information at 30 June 2019 and 1 July 2018 is restated. - 17 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) The adjustments to the Consolidated Statement of Financial Position are as follows ($000s): 30 June 2019 1 July 2018 Increase in right of use assets - property Increase in lease liabilities (current) Increase in lease liabilities (non- current) Decrease of lease incentives recognised Increase in deferred tax assets Cumulative impact on retrospective application of standard to opening retained earnings Decrease in non-controlling interest Increase in foreign currency translation reserve 23,015 (4,558) (25,117) 2,012 1,949 2,706 4 (11) 24,961 (4,633) (27,153) 2,469 2,008 2,348 - - Amounts recognised in the Consolidated Statement of Comprehensive Income are as follows ($000s): Reporting Period Previous Period Increase in depreciation expense Increase in interest expense Decrease in premises expense Decrease in other income Reduction in profit before tax Decrease/increase in income tax expense Reduction in profit after tax Profit attributable to non-controlling interests Profit attributable to members of the parent entity 5,736 1,566 (6,630) 155 (827) 123 (704) (10) (694) 4,640 1,262 (5,750) 147 (299) (63) (362) (4) (358) Amounts recognised in the Consolidated Statement of Cash Flows ($000s): Reporting Period Previous Period Cash flows from operating activities Reduction in receipts from customers Reduction in payments to suppliers and employees Increase in finance costs - interest Cash flows from financing activities Increase in repayment of lease liability (155) 7,072 (1,566) 5,351 5,351 (147) 6,207 (1,262) 4,798 4,798 - 18 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) CHANGES IN ACCOUNTING POLICY Trade receivables/unearned income and prepaid/accrued student acquisition costs The Group had been recognising a trade receivable when an invoice was raised at course enrolment, and tuition fees remained unpaid. An equal and opposite amount was recognised under the ‘Tuition fees in advance (deferred income) account’. There was a corresponding treatment for student acquisition costs: a student acquisition cost was accrued as a liability but because it was not due until the course commences, it was recognised as a prepaid asset. There was no net impact on net assets and no impact on profit until course commencement. The Group reviewed and changed this policy on trade receivables. A trade receivable is now only recognised when an invoice is raised at course enrolment, the tuition fees remain unpaid and the amount is earned (course delivered). As a result, the unearned portion of the invoice amount is removed from the debtor as well as from the ‘Tuition fees in advance (deferred income) account’. The accrued and corresponding prepaid student acquisition cost amounts have been removed. This change, which took effect from 1 July 2019, facilitated a clearer position of the Group’s trade receivables. The change in accounting policy resulted in the restatement of trade and other receivables, tuition fees in advance (deferred income), other assets and trade and other payables for 30 June 2019 and 1 July 2018. There is no impact on net assets or profit and loss. The Group believes that the change in the accounting policy is unlikely to affect the economic decisions of users of this financial report. The restatement amounts are as follows: $000s 30 June 2019 1 July 2018 Decrease in trade receivables Decrease in tuition fees in advance Decrease in other current assets Decrease in trade and other payables (2,270) 2,270 (514) 514 (2,737) 2,737 (540) 540 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. - 19 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 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 12. 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. - 20 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 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. Financial instruments e. Recognition and Initial Measurement All financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. Financial Assets – Classification and subsequent measurement On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: – it is held within a business model whose objective is to hold assets to collect contractual cash flows; and – its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by- investment basis. All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. - 21 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial liabilities – Classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the amount of the consideration received and receivable is recognised in profit and loss. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. 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. There are no financial assets or liabilities carried at 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: - - - 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. - 22 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Interest borrowing costs Interest payable costs are recognised as expenses in the period in which they are incurred. Right of use assets and lease liabilities f. The Group’s lease portfolio includes property and equipment. The Group has adopted AASB 16 Leases using the full retrospective restatement approach from 1 July 2019, recognising right of use assets (ROUA) and an equivalent lease liability at the commencement of the lease. The ROUA is initially measured at cost less any lease incentives and the lease liability is measured as the present value of the remaining future lease payments discounted at the Group’s incremental borrowing rate at the date of initial application. A depreciation charge against the leased ROUA replaces the straight line expense payment and an interest expense is recognised against the lease liability. Lease payments are no longer recognised as operating cash flows, but as financing cash flows in the Statement of Cash Flows. AASB 16 eliminates the distinction between operating and finance leases and brings all leases except short term and low value onto the Statement of Financial Position. The Group recognises a ROUA, representing its right to use the underlying assets and a corresponding lease liability representing its obligation to make future lease payments. The Group recognises a ROUA and lease liability at the commencement date of the lease. ROUA are initially measured at cost (present value of the lease liability) and subsequently at cost less any accumulated depreciation, impairment losses and adjustments for re-measurement of the lease liability. The ROUA are depreciated using the straight line method from the commencement date to the end of the lease term. Short term leases (with a term of less than 12 months) and leases of low value assets are not recognised as ROUA and corresponding lease liability. Lease payments on these assets are expensed to the profit and loss account as incurred. The lease liabilities are initially measured as the present value of future lease payments expected to be paid over the lease term, discounted using the Group’s incremental borrowing rate. The lease liability is re-measured if the future estimated lease payments change as a result of rate changes or the likelihood of exercise of extension. The lease liabilities are subsequently increased by the interest cost on the lease liability and decreased by the lease payments. 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. - 23 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 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 – 67% 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. 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. - 24 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 and other receivables and contract assets are reviewed on an ongoing basis. Debts are written off when they are known to be uncollectible. An allowance for expected credit losses 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. The Group also applies the AASB 9 simplified model of recognising lifetime expected credit losses for receivables as these items do not have a significant financing component. An expected credit loss allowance is recognised for the total expected loss from possible default events that may arise over the expected life of the financial asset. Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument. Recognition of expected credit losses in financial statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. The Group has applied the expected credit loss model based on lifetime expected loss allowance for contract assets. - 25 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 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. 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. Generally, the Group’s obligations in respect of refunds cease after the course commences. - 26 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 Taxation 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. 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 Taxation 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. - 27 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. t. Comparative figures When required by Accounting Standards, comparative figures have been restated 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 2020. 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)). - 28 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Key Estimates- Recoverability of Receivables The extent to which receivables are recoverable is used in estimating any allowance for expected credit losses. Factors considered include: - - - - - the aging profile of receivables; the recognition of a corresponding deferred income liability; the nature of the debtor (e.g. government, business or individual); subsequent recovery of the receivable after date; and prior history. Key Assumptions-COVID-19 Pandemic In assessing going concern, impairment of goodwill and recoverability of receivables, the following key assumptions have been made: the borders will remain closed until 2021; and - - Australian Government assistance continues until 27 September 2020. The key issues that may trigger the impairment of goodwill are included in Note 16. Other information and the Company’s response to the COVID-19 pandemic is in the Directors’ Report. 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; and for which discrete financial information is available. - The Company has only one operating segment: Education. - 29 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 2. REVENUE Operating activities Revenue from services Non-operating activities Rent received Government assistance Landlord assistance 3. PROFIT FOR THE YEAR Student acquisition and teaching costs - Teaching costs - Acquisition costs - Teaching materials Personnel expenses - Wages and salaries - Jobkeeper top up payments - Superannuation - Payroll tax - Other Premises expenses - Rental - Outgoings - 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 - Premises expenses - outgoings backdated - Provision for impairment of receivables Depreciation and Amortisation expenses - Depreciation plant and equipment - Amortisation of intangible assets - Depreciation of right of use assets Finance costs - Interest and bank facility fees - Interest recognised on lease liability - 30 - 2020 $000s 2019 Restated $000s 59,694 66,056 18 2,456 347 2,821 15,571 9,903 1,934 27,408 11,551 311 1,014 569 728 14,173 1,306 1,302 301 496 379 3,784 3,142 - 3,142 31 283 81 395 349 727 5,736 6,812 131 1,566 1,697 - - - - 15,712 10,850 2,629 29,191 11,560 - 1,159 813 535 14,067 1,793 1,007 338 496 371 4,005 3,881 5 3,886 136 - 1,241 1,377 397 722 4,640 5,759 251 1,262 1,513 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 4. INCOME TAX EXPENSE a. The components of tax expense comprise: Current tax Deferred tax 2020 $000s (440) (816) (1,256) 2019 Restated $000s (1,793) (171) (1,964) 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 1,565 1,922 (42) (267) 1,256 (47) 89 1,964 The effective tax rate is 24% (2019: 30.7%) c. Current tax payable for the year reconciles as follows: Opening provision Add: Current year provision Less: Tax paid Closing provision 534 440 (1,524) (550) 2,367 1,793 (3,626) 534 5. DIRECTORS AND SENIOR EXECUTIVES COMPENSATION a. Details of Directors and Senior Executives, including remuneration, have been set out on pages 7 to 10. b. Shareholdings Number of shares in the Company held by Senior Executives and parties related to them: Shareholdings: Executive Directors and Senior Executives Balance 1 July 2019 Purchased on ASX Balance 30 June 2020 Christopher Elmore Campbell Gabriela Del Carmen Rodriguez Naranjo 17,750,000 80,549 533,848 12,900 18,283,848 93,449 - 31 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 6. AUDITORS’ REMUNERATION Remuneration of the auditors of the parent entity for: - Auditing and reviewing the financial report - Taxation services - 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) 2020 $000s 2019 $000s 307 42 3 352 45 4 26 75 2.87 2.87 307 36 27 370 39 10 - 49 Restated 3.39 3.39 Weighted average number of ordinary shares used in calculation of basic earnings per share 127,614,467 128,215,561 The earnings amount used was $3,662,000 (2019 Restated: $4,350,000), being profit on ordinary activities after tax attributable to owners of the parent entity. 8. DIVIDENDS PER SHARE Distributions recognised: Year ended 30 June 2020: interim ordinary dividend of 1.365 cents per share, fully franked (2019: 1.3 cents per share) Year ended 30 June 2019: final ordinary dividend of 2.37 cents per share, fully franked, paid in 2020 (2019: 1.0 cent) Dividends proposed or declared but not recognised in the financial statements: Proposed fully franked ordinary dividend of 1.365 cents per share (2019: fully franked 2.37 cents) 2020 $000s 2019 $000s 1,742 1,659 3,024 4,766 1,276 2,935 1,742 3,024 Balance of franking account at year end adjusted for franking credits arising from payment of income tax 4,362 4,951 - 32 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 9. CASH AND CASH EQUIVALENTS Cash at bank and on hand 2020 2019 $000s $000s 16,904 14,996 There is no overdraft balance at 30 June 2020 (2019: NIL). The net cash position is $16,904,000 (2019: $14,996,000) Included in the above amounts are tuition fees held in TPS accounts in Australia. As at 30 June 2020, the Group held $13,596,000 (2019: $12,019,000) 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 allowance for expected credit losses Contract assets Accrued income - JobKeeper Payment scheme Other receivables 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 $000s 977 (41) 936 1,840 726 198 3,700 798 33 17 88 41 977 Restated $000s 1,166 (96) 1,070 3,021 - 195 4,286 612 146 110 202 96 1,166 * 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. - 33 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 10. TRADE AND OTHER RECEIVABLES (continued) b. The Group has an exposure to credit risk in Singapore and Australia given the Group’s operations in those countries. For FY20, an amount of $47,000 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. c. Allowance for expected credit losses at the start of the year Movement in expected credit losses Allowance for expected credit losses at the end of the year 2020 $000s 2019 $000s 96 (55) 41 588 (442) 96 d. The following factors were considered when assessing credit losses, receivables and contract assets: i. A review was performed during the year and credit losses were recognised as impairments ii. Government debtors are assessed as low risk iii. Significant amounts of debtors were recovered after the year end iv. Other than SPT, historical levels of bad debts have been low Allowance for expected credit losses Trade receivables Contract assets Sub-total Colleges at which credit losses have already been written off Lower risk government debtors Sub- total Allowance for credit losses Credit Loss % 11. OTHER CURRENT ASSETS Prepayments Security deposits Current tax assets $000s 977 1,840 2,817 (213) (2,300) 304 Restated $000s 1,166 3,021 4,187 (1,104) (2,327) 756 (41) (96) 13.5% 12.7% 1,498 500 550 2,548 2,418 512 - 2,930 - 34 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 12. CONTROLLED ENTITIES 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 Country of Incorporation Percentage Owned/Controlled 2020 2019 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 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 67.54 100 100 67.54 100 75 75 100 100 100 100 100 100 100 75 75 100 100 100 100 100 100 - 35 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 13. PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Leasehold improvements At cost Accumulated amortisation 2020 $000s 2019 $000s 6,295 (4,813) 1,482 8,787 (4,812) 3,975 6,131 (4,591) 1,540 8,769 (4,283) 4,486 Total plant & equipment 5,457 6,026 Year ended 30 June 2020 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 2019 Balance at the beginning of the year Additions Disposals Transfers between categories Depreciation expense Net foreign currency difference arising on translation of financial statements of foreign operations Carrying amount at the end of the year Total $000s 6,026 321 (10) (877) (3) 5,457 6,717 206 (2) - (923) 28 6,026 Plant and equipment Leasehold improvements Leased plant and equipment $000s 4,486 21 - (528) (4) 3,975 4,962 25 - - (526) 25 4,486 $000s - - - - - - 123 - - (123) - - - $000s 1,540 300 (10) (349) 1 1,482 1,632 181 (2) 123 (397) 3 1,540 - 36 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 14. RIGHT OF USE ASSETS Right of use assets At cost Accumulated depreciation Balance at the beginning of the year Additions Depreciation expense Net foreign currency difference arising on translation of financial statements of foreign operations Carrying amount at the end of the year 2020 $000s 2019 Restated $000s 52,212 (16,610) 35,602 44,209 (21,194) 23,015 23,015 18,358 (5,736) (35) 35,602 24,961 2,395 (4,640) 299 23,015 15. DEFERRED TAX ASSETS / LIABILITIES Deferred Tax Asset 5,038 5,854 The deferred tax asset is made up of the following estimated tax benefits: Temporary differences: - - - deferred tax assets deferred tax liabilities losses 16,071 (11,098) 65 5,038 13,020 (7,166) - 5,854 Deferred Tax Assets Provisions Unearned income Lease liabilities Other Deferred Tax Liabilities Plant & equipment Right of use assets Prepayments and other Losses Total Opening Balance $000s 979 3,047 8,296 698 13,020 (191) (6,348) (627) (7,166) - Charged To Income $000s 24 (942) 4,009 (40) 3,051 27 (3,886) (73) (3,932) 65 Closing Balance $000s 1,003 2,105 12,305 658 16,071 (164) (10,234) (700) (11,098) 65 5,854 (816) 5,038 - 37 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 15. DEFERRED TAX ASSETS / LIABILITIES (continued) 2020 $000s 2019 $000s 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 (operating) losses 389 389 16. INTANGIBLE ASSETS Goodwill at cost Accumulated impairment losses Net carrying value Course development costs and capitalised licences Accumulated amortisation Net carrying value Other at cost Year ended 30 June 2020 Balance at the beginning of the year Rebranding costs amortisation Course development costs and capitalised licences additions Course development costs and capitalised licences amortisation Balance at the end of the year Year ended 30 June 2019 Balance at the beginning of the year Foreign exchange AAC Rebranding costs amortisation Course development costs acquisition Course development costs amortisation Balance at the end of the year 32,758 (382) 32,376 2,344 (1,927) 417 32,758 (382) 32,376 2,175 (1,736) 439 20 35 32,813 32,850 Course Development Costs and capitalised licences $000s Other Total $000s $000s 439 - 169 (191) 417 559 - - 76 (196) 439 35 (7) - (8) 20 43 - (8) - - 35 32,850 (7) 169 (199) 32,813 32,973 5 (8) 76 (196) 32,850 Goodwill $000s 32,376 - - - 32,376 32,371 5 - - - 32,376 - 38 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 16. INTANGIBLE ASSETS (continued) Goodwill is assessed by management at the cash generating unit level. The recoverable amount of the cash-generating unit is determined based on a value in use calculation using cash flow projections covering five years. Cash flows beyond the five year period are estimated using a terminal value calculated under standard valuation principles incorporating a long term growth rate. The following assumptions were used in the value in use calculations: Revenue Growth FY21 -5% Revenue Growth FY22-FY25 NIL EBITDA Margin (post AASB 16) 20.0% Pre-tax Discount Rate Long Term Growth Rate 7.9% 1.0% An impairment would be triggered if any one of the key assumptions (with all other assumptions held constant) set out below applies over a 5-year period: • Revenue growth rate is minus 4.1% or lower. • Pre-tax discount rate exceeds 11.9%. • EBITDA margin is less than 17.6%. • Long term growth rate is minus 1.3% or lower. 17. TRADE AND OTHER PAYABLES CURRENT Unsecured Liabilities Tuition fees in advance (Deferred income) Trade payables Payable to the Australian Taxation Office* Sundry payables and accrued expenses * Fully paid 18. LEASE LIABILITIES Balance at beginning of year Additions – new leases Lease payments Net foreign currency difference arising on translation of financial statements of foreign operations Balance at end of year - 39 - 2020 $000s 17,431 1,137 1,297 2,578 22,443 29,675 18,358 (5,351) (4) 2019 Restated $000s 18,390 425 397 2,829 22,041 31,785 2,395 (4,798) 293 42,678 29,675 ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 18. LEASE LIABILITIES (continued) Current Non-current Total Lease liability – undiscounted Less than one year One to five years More than five years Total undiscounted lease liabilities at end of year 2020 $000s 5,329 37,349 42,678 6,896 24,119 18,898 49,913 2019 Restated $000s 4,558 25,117 29,675 5,707 16,550 12,504 34,761 a. Short-term lease payments expensed to the profit and loss account in the year $1,306,000 (2019: $1,793,000) (Note 3) b. The numbers above do not include the lease signed on 1 July 2020 for the RBT premises in Dubbo. 19. PROVISIONS CURRENT Employee entitlements NON-CURRENT Employee entitlements 2,865 2,749 474 424 20. SHARE CAPITAL Issued Share Capital 2020 Share number 2020 2019 $000s Share number 2019 $000s Ordinary shares fully paid 127,614,467 42,066 127,614,467 42,066 Ordinary share capital Balance at the beginning of the financial year 127,614,467 42,066 131,754,079 43,515 Buy back and cancellation of 4,139,612 shares - - (4,139,612) (1,449) Balance at the end of the financial year 127,614,467 42,066 127,614,467 42,066 - 40 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 20. SHARE CAPITAL (continued) 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 ensures 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. 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. 21. 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 22. 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 2020 are as follows: Geographic Location Revenues from External Customers Non-current assets $000s Australia 54,306 73,561 $000s Singapore 5,388 5,349 Accounting Policies Segment revenues and expenses are those directly attributable to the segments. - 41 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 23. CASH FLOW INFORMATION a. Reconciliation of cash flow from operations with profit after income tax 2020 $000s 2019 Restated $000s Profit after income tax 3,961 4,443 Non-cash flows in profit Amortisation Depreciation Net loss on disposal of plant and equipment Write-downs to recoverable amounts 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 b. Borrowing arrangements with banks Total Facilities Overdraft facility available Amount utilised The major facility is the bank overdraft. 727 6,085 12 81 (13) 1,231 720 12 816 (43) (1,084) 166 12,671 722 5,037 - 1,246 5 1,629 (367) 7 171 1,480 (1,833) 251 12,791 1,000 - 1,000 1,000 - 1,000 Bank overdraft Bank overdraft facilities are arranged with the general terms and conditions. Interest rates are variable and subject to adjustment. The bank overdraft and commercial card facilities are due for review on 21 September 2020. There was nothing outstanding in respect to these facilities at 30 June 2020. 24. EVENTS AFTER THE BALANCE SHEET DATE Other than the COVID-19 pandemic including the lockdown in Metropolitan Melbourne imposed since August 2020, there were no 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. - 42 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 25. RELATED PARTY TRANSACTIONS Directors’ transactions with the Company and the Group Details of Directors’ remuneration are set out in the Remuneration Report on pages 9 and 10. Directors are reimbursed for expenses incurred by them on behalf of the Group. Directors’ and specified executives’ relevant interests in shares See Directors’ Report on pages 7,8 and 31. Other related party transactions Transactions between the Company and controlled entities comprise loans, management fees and interest and are eliminated on consolidation. 26. 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 meet 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 2020. Senior management continues to evaluate this risk on an ongoing basis. 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. Interest rate risk The interest rate risk has been managed by the Group by reducing and in most cases eliminating interest bearing debt. 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: - 43 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 26. FINANCIAL INSTRUMENTS (continued) Note Weighted average interest rate Floating interest rate Fixed interest maturing in: 1 year or less Fixed interest maturing in: 1 to 5 years Non- Interest bearing Total $000s $000s $000s $000s $000s Year ended 30 June 2020 Financial assets Cash and cash equivalents 9 Trade and other receivables Contract assets Financial liabilities Trade and other payables Lease liabilities 10 11 17 18 Year ended 30 June 2019 Financial assets Cash and cash equivalents Trade and other receivables Contract assets 9 10 11 Financial liabilities Trade and other payables Lease liabilities 17 18 2.71% 16,904 - - 16,904 - - - - - - - - - - - - 5,329 5,329 - 37,349 37,349 1.03% 14,996 - - 14,996 - - - - - - - - - - - - 4,558 4,558 - 25,117 25,117 - 16,904 1,134 1,840 2,974 5,012 - 5,012 1,134 1,840 19,878 5,012 42,678 47,690 - 14,996 1,265 3,021 4,286 3,651 - 3,651 1,265 3,021 19,282 3,651 29,675 33,326 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. 2020 +/- 2% in interest rates Profit $’000 Equity $’000 346 346 - 44 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 27. PARENT INFORMATION 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 2020 $000s 2019 $000s Assets Current assets Non-current assets Total Assets Liabilities Current Liabilities Non-current liabilities Total Liabilities Equity Share capital Retained earnings Total Equity STATEMENT OF COMPREHENSIVE INCOME Total profit Total comprehensive income 39,361 4,004 43,365 1,716 - 1,716 42,066 (417) 41,649 6,500 6,500 35,534 4,848 40,382 2,127 22 2,149 42,066 (3,833) 38,233 3,355 3,355 - 45 - ACADEMIES AUSTRALASIA GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 28. 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 - 46 - 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 13 to 46, 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 2020 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 12, but excluding those in Note 21, 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 4 September 2020 Christopher Elmore Campbell Director - 47 - INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ACADEMIES AUSTRALASIA GROUP LIMITED OPINION 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 2020, 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: (i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. BASIS FOR OPINION We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We 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. -48- ABN 60 063 687 769 Pilot is a registered trade mark licensed to Pilot Partners Liability limited by a scheme approved under Professional Standards LegislationNexia International is a worldwide network of independent accounting and consulting firms.PILOT PARTNERSChartered AccountantsLevel 10, Waterfront Place 1 Eagle St. Brisbane 4000PO Box 7095 Brisbane 4001 Queensland AustraliaP +61 7 3023 1300F +61 7 3229 1227pilotpartners.com.au KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most 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. Reason for significance Risk of impairment of goodwill and intangible assets Goodwill assets comprise a significant portion of the Group’s total assets. intangible and The impairment assessment made by the Group over its goodwill and intangible assets relies upon significant judgements in respect of factors such as forecast cash flows, growth rates and operational assumptions. economic and How our audit addressed the matter considered whether Our audit the methodology and principles applied by the Group in their discounted cash flow model met the requirements of AASB 136 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: (a) We assessed the basis for the Group’s expected future performance, including consideration of historical performance; (b) We compared the discount rate to available external data; (c) We assessed growth rates against recent historical rates performance; (d) We assessed the basis for terminal values and long-term growth rates against generally-accepted techniques and relevant external data; (e) We performed sensitivity analysis and evaluated whether a reasonable change in assumptions could cause the carrying amount of the CGU to exceed its recoverable amount; and (f) We also considered the adequacy of the financial report disclosures in regard to those assumptions. Initial application of AASB 16 Leases The Group has applied the new accounting standard AASB 16 Leases from 1 July 2019 using the full retrospective restatement method. Our audit work included reviewing the methodology and assumptions included in -49- The application of the new standard has significantly impacted the current year results of the Group, as well as adjustments to prior period retained earnings. The Group has also exercised significant judgements in respect of factors such as discount rates and option periods. the calculation performed by the Group in accordance with AASB 16 Leases. In doing so: (a) We verified the lease calculation to the lease agreements held by the Group; (b) We compared the discount rate to available external data; (c) We assessed the basis for including or excluding option periods on various leases in the Group; (d) We reviewed low value or short term leases and the reasonableness of their exclusion from the calculation;and (e) We reviewed the adequacy of the in report financial accordance with the standard. disclosures Impact of COVID-19 The global COVID-19 pandemic has caused significant disruptions to many businesses, including those in the education sector. The virus has had a significant impact on the Group in the year ended 30 June 2020 due to the Australian border closures and other restrictions since March 2020. Government’s Our audit work included assessing the impact of COVID-19 on the Group’s financial report for the current year, including the various concessions obtained, and reviewing the Group’s expectations and plans in relation to the future impact on financial reports of the Group in subsequent years. In doing so: (a) We made enquiries of management to understand the impact, actual and expected, on the concessions obtained; the Group and (b) We performed analytical procedures to confirm our understanding of the impact on the financial report; (c) We assessed the reasonableness of balances affected by concessions by reconciliations and perusal comparison supporting with documentation and our understanding of the relevant rules; of (d) We reviewed budgets and impairment assessments and performed sensitivity analysis to evaluate the reasonableness of management assumptions and judgements; and -50- (e) We reviewed the adequacy of the disclosures in the financial report in relation to COVID-19. OTHER INFORMATION 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 2020, but does not include the financial report and our auditor’s report 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 responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORT The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability 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 AUDIT OF THE FINANCIAL REPORT Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. -51- the A further description of our responsibilities for the audit of the financial report is located at at: http://www.auasb.gov.au/Home.aspx. This description forms part of our auditor’s report. Assurance Standards Auditing website Board and REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 9 to 10 of the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Academies Australasia Group Limited, for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. PILOT PARTNERS Chartered Accountants DANIEL GILL Partner Signed on 4 September 2020 Level 10 1 Eagle Street Brisbane Qld 4000 -52- ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR A COMPANY LISTED ON THE ASX 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 1 September 2020 were: Shareholder No. of Shares Held % Mr Chiang Meng Heng a Mr Christopher Elmore Campbell b Jilcy Pty Ltd Andrew Low c Dr John Lewis Schlederer d Eng Kim Low 51,185,961 18,283,848 16,202,030 15,317,535 9,645,182 7,648,232 40.11 14.33 12.70 12.00 7.56 5.99 a Includes 7,648,232 shares held by Eng Kim Low b Includes 16,202,030 shares held by Jilcy Pty Ltd and 1,481,818 shares held by Bankura Pty Ltd c Includes 2,990,554 shares held by Paris Pushkin Pty Ltd and 1,009,091 shares held by Mutual Trust Pty Limited. d 6,400,000 shares held by J&B Schlederer Pty Ltd and 3,245,182 shares held by Schlederer Nominees Pty Ltd VOTING RIGHTS Ordinary Shares At 1 September 2020 there were 513 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.” - 53 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR A COMPANY LISTED ON THE ASX 20 LARGEST SHAREHOLDERS AS AT 1 SEPTEMBER 2020 Registered Name No. Shares % Jilcy Pty Ltd Andrew Low Eng Kim Low J&B Schlederer Pty Ltd National Nominees Limited Schlederer Nominees Pty Ltd Paris Pushkin Pty Ltd Netwealth Investments Limited Kin Group Pty Limited Adroit By Nature Pty Ltd Bankura Pty Ltd Cheeky Boys Pty Ltd Citicorp Nominees Pty Limited Salvage Pty Ltd 1 Mr Chiang Meng Heng 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Mr Christian James Haustead 17 Mutual Trust Pty Limited 18 Mr Sartaj Hans 19 MK & MP Investments Pty Ltd 20 Mrs Gail Leslie Storey 43,537,729 16,202,030 11,317,890 7,648,232 6,400,000 4,171,170 3,245,182 2,990,554 2,931,719 2,595,514 1,883,439 1,481,818 1,473,817 1,261,060 1,178,351 1,100,000 1,009,091 700,595 677,135 634,335 34.12 12.70 8.87 5.99 5.02 3.27 2.54 2.34 2.30 2.03 1.48 1.16 1.15 0.99 0.92 0.86 0.79 0.55 0.53 0.50 112,439,661 88.11 HOLDING RANGE (SHAREHOLDERS) AS AT 1 SEPTEMBER 2020 Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 + No. Holders 63 172 66 153 59 513 Total No. Shares 35,365 487,303 529,746 5,578,926 120,983,127 127,614,467 % 0.03 0.38 0.42 4.37 94.80 100.00 UNMARKETABLE PARCELS AS 1 SEPTEMBER 2020 Minimum $500 parcel at $0.265 per unit 1,887 96 Minimum Parcel Size No. Holders Units 83,324 - 54 - 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 - 55 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES GLOSSARY AAC AAHB AAI AAPoly AASB 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 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 College Subsidiary company of AKG that is licensed to operate as an education institution Company Academies Australasia Group Limited (ACN 000 003 725) - the parent company Corporations Act Corporations Act 2001 (Cth) 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 EPS FVTPL FVOCI Earnings per share Fair value through profit and loss Fair value through other comprehensive income FY18 to FY25 Financial Year to 30 June 2018 to Financial Year to 30 June 2025 respectively - 56 - ACADEMIES AUSTRALASIA GROUP LIMITED AND CONTROLLED ENTITIES GLOSSARY Group GST IHEA LLI OCI RBT ROUA SBC Shares SPT STA AKG and all its subsidiaries Goods and Services Tax Independent Higher Education Australia (Previous name: Council of Private Higher Education – COPHE) Language Links International Pty Limited Other Comprehensive Income Kreate Pty Limited – trading as RuralBiz Training Right of Use Assets 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 Tuition Protection Scheme Vocational Education and Training Vostro Institute of Training Australia Pty Limited - 57 - 

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