evolve
edu ca ion grou p
t
Annual
Report
2016
evolve
edu ca ion grou p
t
PO BOX 105843 - Auckland City 1143
Level 2, 54 Fort Street - Auckland CBD
Phone: +64 9 377 8700
evolveeducation.co.nz
Vision
and Values
Vision
Evolve Education’s vision is to be a leading provider of early
childhood education in New Zealand. Our vision is rooted
in the firm conviction (and irrefutable evidence) that early
childhood learning has a profound impact on a child’s future
health, development and wellbeing. We are committed to
delivering the best possible outcomes for Kiwi children and
their families.
As professional early childhood educators, we strive to act
with integrity in all situations. We seek to model the highest
moral and ethical standards to the children, treating them
with kindness and fairness always. We understand the need to
protect their dignity and to develop their self-esteem, talents
and skills because they represent the future of our nation and
world. As we observe them growing in skills and comment
positively on their achievements, we motivate them to do the
best they can. The work proudly displayed on the walls and in
their portfolios is proof of this.
Our holistic approach sets us apart from our competitors
because we understand the value of integrating existing
operators into our business model. Through further
consolidation and continuity of the provision of childcare
services, we are well-placed to meet the diverse needs of
thousands of families here in New Zealand.
Values
Leadership
We support effective and professional leadership, and
mentor our educators to be engaged, involved and
empowered. We encourage staff development so that
our educators can achieve their highest professional
and personal potential.
Respect
We protect the rights of all children, and act with
professional integrity towards them. We strive to foster
a culture that is based on respect, not only for the
children and their teachers but also for the childcare
sector as a whole.
Equality
We strive to ensure that all children and their parents
have equal access to our services. We act fairly
towards every child and value his or her uniqueness.
Communication
We believe it is important to communicate regularly
and effectively with the families of our children. It
is also the key to our operational success, both
strategically and personally.
This Annual Report is signed for and on behalf of the Board
of the Company by:
Norah Barlow
Chair
28 June 2016
Alistair Ryan
Director
28 June 2016
Company
Profile
Evolve Education Group is a leading provider of high-quality, multifaceted Early Childhood Education (ECE) services in New
Zealand. Established in 2014, Evolve has built a solid foundation through the acquisition of leading ECE brands including 106
ECE centres, Porse and Au Pair Link. Offering both centre-based and home-based ECE, Evolve’s priority is to ensure every child
gets the full attention and support they need in their early years.
Contents
05
Business
Profiles
19
06
Chair
Report
23
Engaging with
Families and
Communities
Investing
in Our
People
76
Corporate
Governance
and Statutory
Information
88
Shareholder
Information
08
CEO
Report
25
Growing
Our Centre
Portfolio
91
Subsidiary
Company
Directors
11
Financial and
Operational
Snapshot
28
Board
Profiles
93
Corporate
Directory
13
A Foundation
of Quality
31
Financial
Statements
17
Leaders in
Health and
Wellbeing
74
Independent
Auditor’s
Report
Evolve Education Group Limited / 3
Annual Report 2016 / 4
Business
Profiles
Early Childhood Education (ECE) Centres
Evolve Education operates 106 ECE centres and employs
approximately 2,000 staff nationwide under a number of
leading ECE brands.
Catering for approximately 70 children on average, Evolve
ECE centres have separate, age-appropriate areas for indoor
and outdoor play. A wide range of learning activities allows
children to explore and learn based on their interests.
Evolve ECE centres also offer a variety of education
philosophies including Reggio Emilia and Montessori.
Home-based ECE
•
Porse in-home care
PORSE currently provides home-based care and
education for approximately 5,000 children.
Founded in 1994, PORSE has provided education support
in homes as New Zealand’s largest and longest serving
home-based ECE provider. PORSE Nannies provide
one-to-one care for children in their parents’ home, while
PORSE Educators care for up to four children in their
own homes, which are set up as dedicated in-home
childcare environments.
With 200 staff working across most communities in New
Zealand, and supported by a National Support Office,
Porse is the market leader for quality home-based ECE
with well-established practices.
• Au Pair Link
Au Pair Link has been placing international au pairs with
New Zealand host families since 2006, providing quality
in-home care and education for young children.
As a live-in form of childcare, Au Pair Link’s au pairs
provide one-on-one education and care in the place
where learning really begins – the child’s home.
Au Pair Link was the first au pair agency to be licensed
by the New Zealand Ministry of Education, and has since
grown to be the largest au pair agency in New Zealand.
Through tailored and individual learning experiences,
Au Pair Link’s priority is to provide the best possible
outcomes for children, families and their au pairs.
ECE Training
•
PORSE Education & Training
PORSE Education & Training provides quality education
in order to nurture respectful relationships between adults
and children, and be responsive to the demands of
learners within the ECE industry.
As a registered category 1 Private Training Establishment,
PORSE Education & Training is accredited to offer New
Zealand Qualifications Framework unit standards at levels
3, 5 and 6 that focus on Early Childhood Education and
Care.
•
For Life Education & Training
For Life Education & Training is an organisation focused
on empowering and supporting all people to consciously
be in relationship with others.
With the latest scientific research in early brain develop-
ment and attachment theory informing programme
development, For Life aims to walk alongside all parents,
caregivers and teachers to offer training in early
childhood education with the aim to grow healthy, happy
and resilient children.
Evolve Education Group Limited / 5
Chair
Report
Chair
report
Norah
Barlow
Annual Report 2016 / 6
Norah
Barlow
In the year ahead we will continue to invest in centres and
people to meet the needs of our families and shareholders.
Along with investing in our existing centres and facilities
to extend and enhance the learning and development
environment, we will be focused on seeking development
opportunities as part of our acquisitions programme.
This has started already with the acquisition of five early-
stage, purpose-built centres on 31 March – including a prime
location in the new urban development of Pegasus Town
detailed later in the report.
One of the changes we have made during the year has been
to bring the majority of the acquisition processes in-house.
We see this step as extending our early knowledge of the
new centres, and being complementary to the development
processes.
We have enhanced engagement with our customers, the
families and carers of our children, through the roll out of
online communication platform Storypark enabling teachers
and families to share children’s progress and activities. I am
one of the many happy recipients of Storypark, receiving
stories of my grandson at play and learning that I would not
otherwise be privileged to be part of.
We continue to see a strong requirement for preschool
education and care of our children and do not see this
diminishing.
With the diversity of our portfolio, Evolve is well-placed to
cater for all requirements, whether this be at the child's home
with a nanny through Au Pair Link, at an educator’s home
through PORSE in-home child care or in one of our many
ECE centres around New Zealand.
I want to thank the ongoing support of our shareholders. It
has been pleasing to see strengthening in our New Zealander
shareholder base (64.4% at 31 March) reflecting the increasing
recognition of ECE as an investment class.
Finally, I would like to thank all of our staff who every day
make the lives of our children and their families better.
Norah Barlow
Chair
Evolve Education Group Limited
The last financial year has been one of establishment and
consolidation of Evolve Education Group as a strong, long-
term business. This business started as an amalgamation
of a multitude of different ownerships, different education
philosophies, and many different types of buildings. We have
finished the year edging forward in our total consolidation of
the group.
Our medium term vision is to create the one Evolve, and we
have successfully started that process this year.
We have already consolidated the many systems and
processes into one common platform across all of our
early childhood education centres (ECE centres). We have
established a strong regional structure led by a team of very
highly qualified and experienced managers and their staff to
ensure localised management.
We are looking forward to further integration of our centres
and home-based ECE now that we are in operational control
of all parts of the business. This will see better synergies for
both management and parents as we look at the overall
preschool proposition for children and movement between the
different services.
This year we will also establish a brand plan that incorporates
the Evolve presence.
Investment in our teachers and leaders is at the core of our
business. This year we have implemented strong professional
development initiatives including hosting our first leadership
development conference to inspire future leaders, followed by
a wider programme of conferences and seminars to continue
to develop our teachers and staff.
Over time we would like Evolve to be seen as an employer of
choice because of quality well-resourced environments, robust
processes, professional development and career opportunities.
While consolidating our initial portfolio of centres and
home care businesses, we have also continued to grow.
The acquisitions made in 2016 have grown our portfolio by
20% to a total of 106 centres. While in the first year these
are not earnings accretive with the costs associated with
acquisition, we are confident that we have purchased well,
and that these acquisitions will lead to increased revenue and
profitability as they operate with us for the full year.
We are also pleased that our home-based ECE businesses
performed well during the year. However, it should be noted
that the earn-out payment which would have been paid
should the home support business achieve the 12 months
forecast to December 2015, was not required to be paid. This
one off item is included in these financial results.
While most of our centres performed very well on their first
full year with us, some did underperform to our expectations
– an inevitable issue for a nationwide operator which has
acquired groups of centres - and one we are putting
significant effort into correcting. This may mean however, that
in the future we look to divest certain assets that are not able
to meet our overall criteria.
Evolve Education Group Limited / 7
CEO
Report
Alan
Wham
Annual Report 2016 / 8
Evolve Education Group has had a strong performance in its
first full establishment year.
We have delivered the business model outlined in our
prospectus. That is, to establish a high-quality portfolio of
ECE businesses, drive efficiencies from scale, deliver high
quality ECE to the children in our care and grow our business
through acquisitions.
We have acquired 21 ECE centres beyond the initial portfolio,
providing a nationwide platform of 106 ECE centres.
Integrating these businesses over 18 months has been a
successful and challenging journey and the learnings we
have captured mean we are well placed to ensure that new
acquisitions perform better, quicker.
Total income for the year totalled $138.9m of which 80% is
sourced from ECE centres and 18.3% from the home-based
ECE businesses. Statutory net profit after tax was $15.6m for
the year inclusive of both $1.8m acquisition and integration
expenses relating to the new centres acquired and $1.3m of
earn-out provision reversed as mentioned previously in the
Chair’s report. Reported net profit after tax compares to a
Prospectus forecast of $16.6m (as issued in November 2014)
which assumed no business acquisitions and payment of the
earn-out amounts. Costs were well managed in both the ECE
centres and home-based ECE businesses during the year.
At the heart of delivering outstanding ECE for the children
entrusted to us, is the quality, passion and professionalism of
our teachers and support staff. At the end of March 2016,
we employed over 2,200 New Zealanders, of whom 90% are
based in our ECE centres. As you would expect, over 80%
of all our employees hold undergraduate and postgraduate
qualifications.
Strong organisational culture and leadership are key
constituents of the operational and financial performance
expected by our shareholders and stakeholders as well as
allowing the company to accommodate further growth.
Growth Strategy
Our growth strategy has two key pillars. The first is driving
organic growth off existing centres and home-based services.
This requires strong and capable leadership and teamwork
within each centre and home-based network. The culture
we adopt must focus on the children, engagement with the
families and development of our people. We will continue to
invest in centres to enhance the environments and ensure
centres and home-based services are well resourced with
learning material. If we do all of these things well our
occupancy will grow through word of mouth and our financial
performance will follow.
Opportunities to leverage scale also exist within our home-
based businesses, Porse and Au Pair Link, which are working
to develop common processes and to enable au pairs to be
extended into the Porse-licensed geography. Porse’s focus for
the forthcoming year is to re-engage with talented educators
to ensure a sufficiently broad pool of educators to match all
families seeking quality home-based services and extend their
client base.
The second pillar for growth is extending our centre portfolio
through acquisitions. Our mandate is to acquire high-quality
environments preferably in new, purpose-built centres. In
our existing portfolio our centres have an average licensed
capacity of 70 child places, which is higher than the industry
average. Our plans extend beyond acquiring existing centres
to working with development partners to establish new
leasehold centre developments. This should present a lower
entry cost than acquiring a fully-occupied centre and a
mechanism to ensure our portfolio performs well in the long
term and is more resilient to competition.
Evolve has the means to implement this growth with adequate
headroom in its funding arrangements. Our bank debt facilities
of $90 million, comprise an acquisition facility of $60 million
and a working capital facility of $30 million.
Environment and Outlook
The sector remains highly fragmented with a lot of smaller
ECE centres, many based in converted houses. We expect
further consolidation of the market will continue through
larger, purpose-built environments being developed. This
provides an opportunity for Evolve to access these new
developments.
The ECE environment remains positive. Demand is driven by
population growth particularly in the Auckland region. With
this, parents rely on the support for ECE to enable both
parents to work.
We are pleased to see the Government’s ongoing
commitment and funding support for the sector underpinned
by a goal of 98% of children having had some level of pre-
school education. The 2016 Government Budget confirmed
$397 million over the next four years to meet the growing
demand for early childhood education and provide places for
a further 14,000 children.
Our occupancy levels remain strong. The average occupancy
for our centre portfolio finished the 31 March 2016 year at
87%, the same level we started the year before. The dip
through late December and January however reduced the
year average to 85.3%. The development of new websites for
many acquired centres assisted the post-Christmas enrolment
period and we continue to see a steady flow of enquiries
through these websites.
We have established three-monthly family surveys for every
centre to evaluate our services against our customers’ needs
and expectations. The feedback will allow us to improve our
services, respond to concerns and recognise our staff for their
role in meeting with families and carers to discuss their child’s
development and engaging with their community.
We have developed a solid foundation both to grow and
to deliver on our commitment to children, families as well as
shareholders in the year ahead.
Alan Wham
Chief Executive Officer
Evolve Education Group Limited
Evolve Education Group Limited / 9
Annual Report 2016 / 10
Financial and Operational
Snapshot
2016 Financial Summary
Dividends
Total dividend of 4.76 cents per share (fully
imputed) in respect of the year ended 31
March 2016
Capacity
•
•
Total licensed capacity in centres: 7,158
places
Total licensed capacity in home-based
ECE: 7,200 places
Porse & Au Pair Link
Market-leading home-based ECE
businesses, with quality systems and strong
curriculum support
Year ended 31 March 2016:
•
•
•
Total income of $138.9m
Statutory net profit after tax of $15.6m
EBITDA before acquisition and
integration expenses of $26.5m1
As at 31 March 2016:
• Debt drawn $45.9m
• Net debt $7.2m2
• Debt facilities available $44.1m
Acquisitions
106 ECE centres as at 31 March 2016 with 20
centres acquired in the last financial year
ERO Audits
Over 90% of ECE centres and 80% of home-
based ECE licences have been audited
by the Education Review Office and are
considered well placed to promote positive
learning outcomes for children:
•
9 ECE centres received 4-year review
cycles
• Over 90% of ECE centres received
3-year review cycles
Growth Forecast
•
Investing in professional development
and developing centre management
Solid platform for future growth
•
•
Funding in place for acquisition
• Centre development and acquisition
opportunities key to growth
(1) Earnings before interest, tax, depreciation and amortisation (EBITDA) is a non-GAAP financial measure and is not prepared in accordance with NZ IFRS. This measure
is intended to supplement the NZ GAAP measures presented in the Company’s financial statements, should not be considered in isolation and is not a substitute for those
measures. EBITDA before acquisition and integration costs is reconciled on pages 47 and 69 of this annual report and as highlighted on those pages includes the reversal
of earnout provisions of $1.35m.
(2) Net debt is defined as bank borrowings drawn less cash and cash equivalents.
Evolve Education Group Limited / 11
Annual Report 2016 / 12
A Foundation
of Quality
As an early childhood education provider, our service and
success is built on our commitment to high quality educational
outcomes for the children in our care.
Exceptional Outcomes
The quality of education in our centres and home-based ECE
licences is recognised with our outstanding Education Review
Office (ERO) reports.
ERO is an independent external evaluation agency that
provides assurance to the Government about the quality and
effectiveness of schools and early childhood services.
ERO evaluates the processes and practices in an early
childhood service, looking primarily at how well placed a
service is to promote positive learning outcomes for all
children and to sustain a process of ongoing improvement.
The review is robust and transparent, assessing key areas
such as policies and systems that promote stability in staffing,
leadership and management, quality of curriculum, approach
to diversity and a self-review process that demonstrates the
service is likely to sustain high-quality performance.
The reports help ECE services improve and advance and,
depending on the evaluation, the centre will be given an
accreditation for review in four different categories ranging
from a four-year review (the best possible outcome, meaning
a centre is very well placed to promote positive learning
outcomes); a three-year review meaning it is well-placed,
followed by two years and then reviews on an agreed basis.
Nine of Evolve’s early childhood centres have received four-
year review cycles, and over 90% of Evolve early childhood
centres have received Education Review Office evaluations
with three-year review periods – testament to the exceptional
education and care they provide.
60 Porse licences and 12 Au Pair Link licences were reviewed
by ERO over the last year, finding both services well placed
to promote positive learning outcomes for children. The
remaining licences will be reviewed in the next year.
Parents can search for ERO reviews for individual ECE centres
on the Education Review Office’s website www.ero.govt.nz.
New Initiatives for PORSE Education & Training
PORSE Education & Training has been a leading provider of
quality training in early childhood education and child mental
health for more than 16 years. Its evidence-based workshops
and programmes are delivered sector-wide to support high
learning outcomes for learners, children and families.
Recently, a new initiative, the Nanny Intern Programme, has
had national success. The programme supports Government
goals and priorities to engage youth in training opportunities
in transition from secondary to tertiary and industry
environments.
A benchmark for quality for nannies, the programme
addresses a market gap in the provision of genuine career
pathways and training relevant to nannying in New Zealand.
During 2016, PORSE will support over 100 nanny interns and
training families nationwide through this programme.
During the last financial year PORSE has also continued
to embrace online learning using innovative web-based
platforms to make its programmes and courses accessible
to learners anywhere in the world. This includes the National
Certificate in Early Childhood Education & Care as well as
other short programmes and workshops.
In addition to a national contract for the delivery of the
Incredible Years Programme to trained early childhood
teachers, PORSE has received Ministry of Education
Strengthening Early Learning Opportunities (SELO) funding
contracts around the country. This cements PORSE’s strong
relationship with the Ministry of Education as a provider of
quality learning and training.
PORSE is also continuing to grow its presence in the
parenting space, partnering with parents to offer useful,
targeted and real life training to support them with transitions,
milestones and behaviours. This is a key area of focus for
development in the future.
Evolve Education Group Limited / 13
Annual Report 2016 / 14
A Foundation
of Quality
Little World Early Childhood Centre
4-year ERO Review Cycle
Little World in Auckland’s Mount Albert caters for 60 children
up to school age in two adjacent buildings.
ERO has recognised the centre’s ongoing improvement and
refinement, offering a consistently high standard of quality
care and education.
Little World also fosters biculturalism through opportunities for
children to become familiar with te reo and tikanga Māori as
they play and teachers’ everyday use of te reo Māori.
Comments from the latest ERO review:
“Children at Little World are confident and love learning.
Centre leadership is highly effective. Programmes are
thoughtfully developed to promote the Te Whāriki and
Reggio Emilia approaches which form the basis of the
centre’s philosophy. Children’s learning journeys are very
well documented in portfolios that also reflect their cultural
backgrounds.”
Leaps and Bounds Ellerslie
4-year ERO Review Cycle
Providing education and care for up to 100 children, Leaps
and Bounds Ellerslie is recognised for its exceptional
leadership and management and the high-level of
collaboration between teachers, parents and children.
The centre’s programme and environment encourages children
to be creative and self-motivated, with opportunities to
explore and experiment with natural resources in uncluttered
indoor and outdoor spaces.
Comments from the latest ERO review:
“Ongoing improvements have enhanced children’s learning
experiences and contribute to a centre that is focused on
providing a valuable service to families. Teachers know
children and their families well, and mutually respectful
interactions are evident. Children are treated as capable
learners and teachers provide many opportunities for children
to revisit their learning.”
Evolve Education Group Limited / 15
Annual Report 2016 / 16
Leaders in Health
and Wellbeing
Leadership in Promoting Health and Wellbeing in
Early Childhood Education
Au Pair Link has been recognised as a leader in the
promotion of health and wellbeing in the early childhood
education sector – the first New Zealand company to win the
Flourishing Pa-Harakeke Healthy Heart Award at a national
level across all 14 licences.
The Heart Foundation award recognises excellence in the
sector in promoting healthy food and physical activity among
the whānau, tamariki and educators.
Achieving the award nationally is a powerful validation of Au
Pair Link’s consistently high standards.
“We are committed to providing information, education and
support to our au pairs, whānau and tamariki to establish
good eating habits from an early age, which is at the core of
our programmes,” says Cherilynn Buckingham, Au Pair Link’s
Education Services Manager.
Au Pair Link impressed the judges with its innovative health
and nutrition promoting initiatives: the ‘Kiwi Kai Cookbook’,
and an array of online tools and resources, learning
destinations and sites for sharing of ideas and aspirations,
further enhancing collaboration to support wellbeing.
Au Pair Link also provides professional learning opportunities
in a variety of ways, including introducing New Zealand food
and healthy eating habits to new au pairs in its orientation
programme.
Au Pair Link has implemented the Kitchen Club for Au Pair
Link whānau, to support educators in increasing their skills
in the kitchen and empowering busy whānau to put healthy
meals on the table.
Healthy movement is promoted through initiatives such as
GrooveLink classes incorporating music, stories and movement
with explorations of numeracy, literacy, physical development,
social interactions and musical appreciation. The MoveLink
class brings a more holistic approach to keeping healthy
encouraging physical exploration, teamwork and relaxation.
Leading the Way in Workplace Health and Safety
PORSE is now leading the way in workplace health and
safety in the early childhood education sector.
PORSE has achieved ACC’s primary rating for Workplace
Safety Management Practices meaning all its systems
and processes are in place to support staff in relation to
workplace health and safety.
It is one of only two childcare services in New Zealand to
have achieved the primary rating accreditation, marking
PORSE as a safety-first organisation.
The voluntary programme assesses businesses’ health and
safety management practices against audit standards that
provide a framework for building successful and sustainable
health and safety practices.
ACC Relationship Manager Nathan Meo says the rating
demonstrates PORSE’s commitment to the wellbeing of its
employees, customers, suppliers and visitors.
“We want to support businesses to reduce the number of
accidents and injuries in their workplaces. PORSE has met the
audit standards and we look forward to helping them further
achieve their health and safety objectives”.
Meeting the ACC programme standards means the business
also receives the financial benefits of a levy reduction.
First Aid Training
Over 150 Evolve centre staff
have completed first aid
training to ensure centres
can confidently address any
accidental situations that may
arise.
Free Flu Vaccines
Free flu vaccines have also
been offered to all staff.
Evolve Education Group Limited / 17
Annual Report 2016 / 18
Engaging with
Families and
Communities
Local Communities
When more than 250 people turn up for dinner at a small
early childhood centre, you know you’re doing something
right.
Inviting large numbers of guests into the centre is business as
usual for Paddingtons Early Childhood Centre on Farnborough
Drive in Hamilton. The centre is well-known and loved for its
tradition of fun and creative activities engaging families and
getting children involved in the community.
The recent summer Night Gala, which attracted hundreds of
locals to enjoy food and craft stalls, is just one example.
As Centre Manager Angela Maseyk says, “it’s about
continuously offering activities that celebrate our children and
families”.
Paddingtons has a full calendar of events, activities and
excursions ranging from celebrating its cultural diversity
including annual Diwali festivities where Indian parents come
bearing food, a Japanese Girls Day – not to mention a Dads
and Boys Night – and staging yearly theatre productions.
Then there’s the community focus, from taking children out on
weekly excursions from Nature Class at the local arboretum
and weekly soccer lessons down at the park to tree planting
at the zoo.
And it’s working. The centre is “chocka block”, operating at
between 97% to 110% of its occupancy licence for 68 children.
Angela also uses the activities as an opportunity to promote
the centre with flyers and branded items such as Paddingtons
drink bottles for parents and Paddingtons t-shirts for children,
proudly tagged "Hero in Training".
Engagement is maximised through sharing and posting on
the online communications platform, Storypark, keeping keen
parents involved in near real-time of their children’s day.
“Our parents love it. They understand the time and effort
involved in organising activities. Sometimes they talk about
events for weeks.”
Paddingtons have every reason to pride themselves on
having close relationships with their whanau, knowing it
creates the best outcomes for our children.
Evolve Education Group Limited / 19
Engaging with Families
and Communities
Online Communities
It takes a community to raise a child, and Storypark, an online portfolio and family communication platform, helps support this
process through enabling the people in a child’s life to empower their learning.
Storypark not only greatly enhances teaching and communication with families, but enables parents and the wider family to be
involved in their child’s learning and understand their strengths and interests.
Through Storypark, Evolve ECE Centres Provided
Over
95,000
Learning
stories
Visit our Centre Websites
For Approximately
11,600
Family
members
And Over
8,600
Children
In 2015, individual websites were created for each ECE centre brand, allowing better engagement with their target audiences and
online communities. You can visit them at www.evolveeducation.co.nz.
Over
Over
55
Websites
12,000
Visitors a
month
500
Enrolment
enquiries
a month
Evolve Education Group Limited / 21
Image
Annual Report 2016 / 22
Investing in
Our People
A Learning Community
One of the most significant benefits of being part of the
Evolve Education Group is the opportunity for educators and
managers to learn and share with their peers, tapping into a
powerful learning community.
This process is supported by a number of formal professional
development initiatives. In the last year, Evolve Education
held an inspirational leadership day for 100 centre managers,
teacher enrichment days for 185 teachers across the country
and regular cluster meetings for Evolve centre managers
nationwide, focusing on their individual needs.
Evolve Inaugural Manager’s Conference
More than 100 managers from ECE centres nationwide
attended the first Evolve Manager’s Conference in September
2015, a stimulating day of workshops and speakers. With the
theme “Building for our children’s futures”, the conference
was designed to empower centre managers to lead more
effectively.
Nationwide Cluster Groups
A powerful form of peer-based professional development,
national cluster groups bring teachers together to share and
learn from each other around identified needs and issues.
Evolve educators are supported through these regular group
learning and support sessions with six-weekly regional cluster
groups. As well as giving teachers a forum to discuss best
practice and build a pool of shared knowledge, clusters also
provide a space for standardising processes and procedures
across Evolve centres.
Not only do the clusters develop network connections and
sharing, they also provide a cost-effective way for centres to
get new ideas, initiatives and solutions without the need to
call on external advisors.
South Island Teachers Enrichment
More than 90 delegates from around the South Island
attended the two-day Teachers Enrichment event in March
this year exploring the theme of "Intentional Teaching".
The programme allowed staff from different centres to meet
for the first time, with opportunities for them to share and
learn from each other, and exposed educators to cutting-
edge thinking in effective and intentional teaching. Expert
speakers included Dr Jackie Blunt of the Brainwaves Trust and
facilitated workshops allowed attendees to deeply explore the
learnings.
Delegates also attended an open-day at Nature’s Play Early
Learning Centre near Christchurch, allowing them to see the
Reggio Emilia approach in practice in the centre.
The open day was a huge success, both for the learning
opportunity it provided, and the massive following it
engendered when photos were uploaded to the centre’s
Facebook page, followed by likes and shares in the tens of
thousands – all over the world.
A similar event was held in Auckland for the northern region
and a third will be held during 2016 for the middle region.
Teacher Feedback
“Evolve is taking children’s learning
seriously and they are willing to invest in
it – great!”
Teacher feedback; South Island Teacher
Enrichment Day.
Manager Feedback
“This was one of the best professional
learning workshops I have attended
and it left me feeling inspired to achieve
greatness.”
Feedback from Evolve Manager’s
Conference.
South Island
Teacher Feedback
“This was a really great opportunity and
a worthwhile experience. It was good
to have other team members from our
centre attend - good team building. A
very inspiring and motivating weekend.
Thank you.”
Feedback from South Island Teachers
Enrichment.
Evolve Education Group Limited / 23
Annual Report 2016 / 24
Growing Our
Centre Portfolio
As a growth company, Evolve is clear on the strategies
needed to achieve growth and secure the company’s long
term performance. The key focus is on acquiring quality ECE
centres, both within existing regional clusters of centres and
in areas of high demand. A quality environment is an enabler
of high-quality early childhood education services as well as
being more resilient to competition. There are a number of
ways by which Evolve will access quality centres and grow
its portfolio including acquisition of existing centre operations,
expansion of existing centres as well as undertaking leasehold
centre developments.
Over the last financial year, Evolve has added 20 centres
to its portfolio, including Nature’s Play, a popular nature-
themed centre in Pegasus Town, a new urban town under
development northeast of Christchurch. This acquisition
included the right to lease a second ECE centre in the town
and an opportunity for Evolve to work with developers to
set up a centre in a new town. This provides Evolve with
the opportunity to expand its capability and grow with the
community.
Evolve has also acquired five early-stage, purpose-built
Lollipops centres to grow and develop, drawing on the
expertise and knowledge of the internal team in establishing
successful operations in brand new centres. Investing in
quality, early-stage centres is not only cost effective but
provides Evolve with an opportunity to take a role in their
evolution, ensuring centres are created with sustainable,
enduring appeal. Evolve will continue to access this quality
of centre through establishing partnerships with developers
to deliver new leasehold centre developments in the coming
year.
Green Bay Early Childhood Centre Expansion
When Evolve acquired Green Bay Early Children Centre it was
licenced for 27 children with no under twos.
“We’re always looking to make the best of the centres we
acquire and we could see Green Bay had room to grow and
develop,” says Rachel Nottingham, Business Acquisition and
Property Manager.
As part of the acquisition, the landlord agreed to enhance
the centre with the addition of new purpose-built buildings, a
new playground and improved facilities.
Green Bay is now licenced for 75 children ensuring the
community is well-served for children from babies to five
years. The project provided valuable learning in how to
enhance centres without disruption to families and the
community as well as preserving the health and safety of staff
and children.
Evolve Education Group Limited / 25
Annual Report 2016 / 26
Growing Our
Centre Portfolio
Lollipops Takanini
Lollipops Educare located in Conifer
Grove, Takanini nurtures a family-oriented
environment with a Reggio Emilia-inspired
focus.
Lollipops Swanson
Lollipops Educare Swanson is a new
centre with a warm, family-orientated
environment, with facilities and activities
designed so children learn through play
and are encouraged to be inspired by
nature.
Lollipops Newton
Lollipops Educare Newton is a new,
purpose-built centre where children are
a unique part of a wonderful, family
oriented environment.
Evolve Education Group Limited / 27
Board
Profiles
Evolve Education has an experienced and balanced Board with a diverse range of skills, including industry and business
knowledge, financial management and corporate governance experience. The Board currently comprises an Independent Chair,
two Independent Non-Executive Directors, one Non-Executive Director, and one Executive Director, being the Chief Executive
Officer.
Norah
Barlow
Chair
(Independent)
BCA, CA
Appointed as Director
13 November 2014
Alan
Wham
Chief Executive Officer
(Non-Independent)
BPharm
Appointed as Director
13 November 2014
Norah is an accountant by profession, operating her own
partnership for a number of years, prior to becoming the
Group Accountant, and then CEO of NZX and ASX listed
Summerset Group. Norah retired from that role in April 2014
but remained on the Board as a non-executive Director until
April 2016.
Norah is now a professional director and holds a number of
directorships, including Methven Limited, Cigna Life Insurance
New Zealand Limited, Careerforce and Vigil Monitoring
Limited in New Zealand, and Estia Health Limited and
Ingenia Communities Limited in Australia. Norah is Chair of
the National Science Challenge ‘Ageing Well’. In 2014 she was
awarded an ONZM for services to business.
Norah is a member of Evolve Education’s Audit and Risk
Committee.
Alan was appointed as Chief Executive Officer of Evolve
Education Group in September 2014. Alan was CEO of
Pharmacybrands Limited (now Green Cross Health Limited)
from late 2003 to mid-2013. The Pharmacybrands business
was transformed during this period by consolidation through
mergers and acquisitions, raising capital, delivering significant
synergies and enhancing the performance of pharmacy and
medical centre acquisitions.
Alan’s early career spanned 15 years in senior executive
positions with 3M in New Zealand, the United Kingdom and
Australia. He was Managing Director for 3M Pharma in
Australia and Regional Director for Asia Pacific and Africa
before returning to New Zealand in late 2003.
Alan has undertaken a range of governance roles and
remains an advisor to Windhaven Investments.
Annual Report 2016 / 28
Board
Profiles
Mark
Finlay
Non-Executive Director
(Non-Independent)
BEd
Appointed as Director
13 November 2014
Greg
Kern
Non-Executive Director
(Independent)
BCom, CA,
GradDip in Applied
Finance and Investment
Appointed as Director
20 May 2014
Alistair
Ryan
Non-Executive Director
(Independent)
MCom, CA
Appointed as Director
13 November 2014
Mark has 15 years experience in New Zealand early
childhood education. He was a founder and Managing
Director of the Lollipops Educare Group. Lollipops Educare is
a respected ECE provider in New Zealand having developed
and managed more than 40 ECE Centres over the past
decade. Mark brings in-depth operational experience in the
ECE services industry to the Board.
Mark is a member of Evolve Education’s Remuneration and
People Committee.
Greg is the Managing Director of Kern Group, a corporate
advisory firm based in Queensland, Australia. Greg is a
chartered accountant, a registered company auditor, and a
member of the Institute of Internal Auditors and a member
of the Financial Services Institute of Australasia. Greg recently
led the sale of education company, Aspire2 Group Limited to
Archer Capital in New Zealand.
Greg is Chair of Evolve Education’s Remuneration and People
Committee and a member of Evolve Education’s Audit and
Risk Committee.
Alistair is an experienced company director and corporate
executive. He is currently Chairman of NZX-listed investment
companies Kingfish Limited, Barramundi Limited and Marlin
Global Limited, a Director and Audit and Risk Committee
Chair of listed company Metlifecare Limited, a board member
and Chair of the Audit and Risk Committee of the New
Zealand Racing Board, and a Director of private companies
Christchurch Casinos Limited and Lewis Road Creamery
Limited. Alistair is also a member of the FMA-appointed
Auditor Regulation Advisory Group.
Alistair retired from NZX and ASX-listed SKYCITY
Entertainment Group Limited as Chief Financial Officer in
June 2011 after a 16-year career with the company, which
began just prior to its opening and stock exchange listing in
February 1996.
Alistair is the Chair of Evolve Education’s Audit and Risk
Committee and a member of its Remuneration and People
Committee
Evolve Education Group Limited / 29
Image
Annual Report 2016 / 30
Evolve Education
Group Limited
Financial Statements for the Year Ended 31 March 2016
The Directors have pleasure in presenting the Financial Statements of Evolve Education Group
Limited for the year ended 31 March 2016.
The Financial Statements presented are signed for and on behalf of the Board and were
authorised for issue on 23 May 2016.
Norah Barlow
Chair
23 May 2016
Alistair Ryan
Director
23 May 2016
Evolve Education Group Limited / 31
Consolidated Statement of
Comprehensive Income
For the year ended 31 March 2016
$’000
Revenue
Other income
Share of profit of equity accounted joint venture
Total income
Expenses
Employee benefits expense
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Integration expenses
Initial listing expenses
Depreciation
Amortisation
Other expenses
Total expenses
Note
4
4, 10
5
5
4, 10
4
8
11
5
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
137,379
1,352
204
138,935
(74,793)
(17,474)
(15,232)
(1,204)
(871)
-
(1,687)
(470)
(4,922)
(116,653)
32,940
518
123
33,581
(20,013)
(4,384)
(3,659)
(5,033)
(1,494)
(1,308)
(302)
(137)
(3,524)
(39,854)
Profit/(loss) before net finance expense and tax
22,282
(6,273)
Finance income
Finance costs
Net finance expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax attributed to the owners
of the Company
Other comprehensive income
Total comprehensive income/(loss) attributed to
the owners of the Company
Earnings per share
Basic (and diluted) earnings per share
(expressed as cents per share)
5
5
6
159
(1,255)
(1,096)
191
(1,853)
(1,662)
21,186
(7,935)
(5,544)
(123)
15,642
(8,058)
-
-
15,642
(8,058)
18
8.8
(12.9)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying
notes. Further to those notes and in relation to the comparative balances, the Company was incorporated on
20 May 2014 and the comparative period is from the date of incorporation to 31 March 2015. During part of this
period the Company was preparing to list and as a result earned no revenue but incurred costs to enable it to
successfully commence operations as a listed entity on 5 December 2014 on the NZX and ASX.
Annual Report 2016 / 32
Profit/(loss) before net finance expense and tax
22,282
(6,273)
Note
4
4, 10
4, 10
5
5
4
8
11
5
6
5
5
Share of profit of equity accounted joint venture
Employee benefits expense
Building occupancy expenses
Direct expenses of providing services
$’000
Revenue
Other income
Total income
Expenses
Acquisition expenses
Integration expenses
Initial listing expenses
Depreciation
Amortisation
Other expenses
Total expenses
Finance income
Finance costs
Net finance expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax attributed to the owners
of the Company
Other comprehensive income
Total comprehensive income/(loss) attributed to
the owners of the Company
Earnings per share
Basic (and diluted) earnings per share
(expressed as cents per share)
137,379
1,352
204
138,935
(74,793)
(17,474)
(15,232)
(1,204)
(871)
-
(1,687)
(470)
(4,922)
(116,653)
32,940
518
123
33,581
(20,013)
(4,384)
(3,659)
(5,033)
(1,494)
(1,308)
(302)
(137)
(3,524)
(39,854)
159
(1,255)
(1,096)
191
(1,853)
(1,662)
21,186
(7,935)
(5,544)
(123)
15,642
(8,058)
-
-
15,642
(8,058)
18
8.8
(12.9)
Consolidated Statement of
Movements in Equity
For the year ended 31 March 2016
$’000
Balance as at 20 May 2014
Note
Loss for the period
Other comprehensive income for the period
Total comprehensive loss
Issue of share capital on IPO (net of costs) for cash
Issue of shares related to share based payments
Issue of shares related to business combinations
Balance as at 31 March 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Dividends paid
16
16
16
16
16
17
ISSUED
SHARE
CAPITAL
RETAINED
EARNINGS/
(ACCUMULATED
LOSSES)
TOTAL
-
-
-
-
119,941
775
36,210
-
-
(8,058)
-
(8,058)
-
-
-
(8,058)
-
(8,058)
119,941
775
36,210
156,926
(8,058)
148,868
-
-
-
489
(51)
-
15,642
-
15,642
-
-
(4,215)
15,642
-
15,642
489
(51)
(4,215)
Balance as at 31 March 2016
157,364
3,369
160,733
The above Consolidated Statement of Movements in Equity should be read in conjunction with the accompanying
notes. Further to those notes and in relation to the comparative balances, the Company was incorporated on 20
May 2014 and the comparative period is from the date of incorporation to 31 March 2015. During part of this period
the Company was preparing to list and as a result earned no revenue but incurred costs to enable it to successfully
commence operations as a listed entity on 5 December 2014 on the NZX and ASX.
Evolve Education Group Limited / 33
Consolidated Statement of
Financial Position
As at 31 March 2016
$’000
Current assets
Cash and cash equivalents
Assets held for sale (investment in equity accounted joint venture)
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Investment in equity accounted joint venture
Deferred tax asset
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Funding received in advance
Employee entitlements
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Retained earnings/(Accumulated losses)
Total equity
AS AT
31 MARCH 2016
AS AT
31 MARCH 2015
Note
7
9
8
9
6
11
13
14
15
19
16
38,624
1,605
1,313
41,542
5,502
-
786
190,857
197,145
4,610
-
1,087
5,697
5,054
1,521
450
168,525
175,550
238,687
181,247
8,413
1,286
16,318
6,072
32,089
45,865
45,865
10,968
674
15,646
5,091
32,379
-
-
77,954
32,379
160,733
148,868
157,364
3,369
160,733
156,926
(8,058)
148,868
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Further to those notes and in relation to the comparative balances, the Company was incorporated on 20 May
2014 and the comparative period is from the date of incorporation to 31 March 2015. During part of this period the
Company was preparing to list and as a result earned no revenue but incurred costs to enable it to successfully
commence operations as a listed entity on 5 December 2014 on the NZX and ASX.
Annual Report 2016 / 34
Consolidated Statement of
Cash Flows
For the year ended 31 March 2016
$’000
Cash flows from operating activities
Receipts from customers (including
Ministry of Education funding)
Dividends received
Payments to suppliers and employees
Taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for purchase of businesses
Cash acquired from purchase of businesses
Payments for software, property, plant and equipment
Interest received
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Interest paid on borrowings
Bank borrowings drawn
Bank borrowings repaid
Dividends paid
Pre-listing funding received
Pre-listing funding repaid
Net cash flows from financing activities
Note
20
10
16
17
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
136,779
121
(113,525)
(4,484)
18,891
(23,708)
-
(2,296)
159
(25,845)
-
(51)
(1,166)
141,790
(95,925)
(3,680)
-
-
40,968
37,117
-
(34,107)
(478)
2,532
(130,445)
15,523
(240)
191
(114,971)
132,317
(12,376)
(1,853)
10,000
(10,000)
-
704
(1,743)
117,049
77,954
32,379
Net cash flows
34,014
4,610
160,733
148,868
Cash and cash equivalents at beginning of period
4,610
-
Cash and cash equivalents at end of period
38,624
4,610
Assets held for sale (investment in equity accounted joint venture)
Non-current assets
Property, plant and equipment
Investment in equity accounted joint venture
$’000
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Deferred tax asset
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Funding received in advance
Employee entitlements
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
38,624
1,605
1,313
41,542
5,502
-
786
190,857
197,145
8,413
1,286
16,318
6,072
32,089
45,865
45,865
4,610
-
1,087
5,697
5,054
1,521
450
168,525
175,550
10,968
674
15,646
5,091
32,379
-
-
238,687
181,247
Note
7
9
8
9
6
11
13
14
15
19
16
Retained earnings/(Accumulated losses)
Total equity
157,364
3,369
160,733
156,926
(8,058)
148,868
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Further to those notes and in relation to the comparative balances, the Company was incorporated on 20 May
2014 and the comparative period is from the date of incorporation to 31 March 2015. During part of this period the
Company was preparing to list and as a result earned no revenue but incurred costs to enable it to successfully
commence operations as a listed entity on 5 December 2014 on the NZX and ASX.
Evolve Education Group Limited / 35
Index to Notes to the Consolidated Financial Statements
Note
Title
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Reporting entity
Basis of preparation
Significant accounting policies
Segment information
Disclosure of items in the Consolidated Statement of Comprehensive Income
Taxation
Cash and cash equivalents
Property, plant and equipment
Group information
Business combinations
Intangible assets
Impairment testing of goodwill and intangible assets with indefinite lives
Trade and other payables
Funding received in advance
Employee entitlements
Issued capital
Capital management
Earnings per share (EPS)
Financial assets and liabilities
Reconciliation of profit/(loss) after tax to net operating cash flows
Commitments and contingencies
Related party transactions
Auditor’s remuneration
Comparison to prospective financial information (PFI)
Events after the reporting period
Page
37
37
40
46
48
50
51
52
53
54
55
56
58
59
59
59
60
61
61
63
63
64
67
68
73
Annual Report 2016 / 36
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 1. Reporting Entity
Going Concern
Evolve Education Group Limited (the “Company”) is
a company incorporated in New Zealand, registered
under the Companies Act 1993 and listed on the
NZX Main Board (“NZX”) and the Australian Stock
Exchange (“ASX”). The Company is a FMC Reporting
Entity in terms of Part 7 of the Financial Markets
Conduct Act 2013 (“the Act”). The registered office
is located at Level 2, 54 Fort Street, Auckland, New
Zealand.
The consolidated financial statements (the “Group
financial statements”) have been prepared in
accordance with the requirements of the NZX and
ASX listing rules. The Group financial statements are
for the Evolve Education Group Limited Group (the
“Group”). The Group financial statements comprise the
Company and its subsidiaries, including its investments
in joint arrangements. In accordance with the Act,
separate financial statements for the Company are not
required to be prepared.
The Group’s principal activities are to invest in the
provision and management of a high quality early
childhood education service which gives parents and
caregivers the option of which service best suits their
child’s learning and care needs (see Note 4, Segment
Information). Information on the Group’s structure is
provided in Note 9.
2. Basis of Preparation
Statement of Compliance
These Group financial statements have been prepared
in accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). The External
Reporting Board’s pronouncement Standard XRB
A1: Accounting Standards Framework establishes a
for-profit tier structure and outlines which suite of
accounting standards entities in different tiers must
follow. The Group is a Tier 1 reporting entity. The
Group financial statements comply with New Zealand
equivalents to International Financial Reporting
Standards (“NZ IFRS”) and other applicable Financial
Reporting Standards, as appropriate for profit-oriented
entities. These financial statements also comply with
International Financial Reporting Standards (“IFRS”)
and IFRS Interpretations Committee interpretations.
The financial statements for the year ended 31 March
2016 were approved and authorised for issue by the
Board of Directors on 23 May 2016.
The financial statements have been prepared on a
going concern basis. From time to time and mainly
due to funding received in advance from the Ministry
of Education and employee entitlements the current
liabilities may exceed current assets. The Group has
funding arrangements in place (as per Note 19) with
its bank to meet all its current obligations. Accordingly,
the preparation of the financial statements on a going
concern basis is appropriate.
Basis of Measurement
The financial statements are prepared on the basis of
historical cost with the exception of certain items for
which specific accounting policies are identified, as
noted below.
Functional and Presentation Currency
These financial statements are presented in New
Zealand Dollars ($) which is the Group’s presentation
currency. Unless otherwise stated, financial information
has been rounded to the nearest thousand dollars
($’000s).
Comparative Period
As the Company was incorporated on 20 May
2014 the comparative period is from the date of
incorporation to 31 March 2015. During part of this
period the Company was preparing to list and as a
result earned no revenue but incurred costs to enable
it to successfully commence operations as a listed
entity on 5 December 2014 on the NZX and ASX.
Certain comparatives have been reclassified to ensure
consistency with the current period reporting.
Estimates and Judgements
The preparation of financial statements requires
management to make judgements, estimates and
assumptions that affect the application of policies and
the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on
an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised and in any future periods affected.
Information about significant areas of estimation
uncertainty and critical judgements required in the
application of accounting policies are described
below.
Evolve Education Group Limited / 37
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 2. Basis of Preparation (continued)
Goodwill and other indefinite life intangible assets
Business combinations
As discussed in note 3(a), business combinations are
initially accounted for on a provisional basis. The fair
value of assets acquired, liabilities and contingent
liabilities assumed are initially estimated by the Group
taking into consideration all available information
at the reporting date. Fair value adjustments on the
finalisation of the business combination accounting
is retrospective, where applicable, to the period the
combination occurred and may have an impact on
the assets and liabilities, depreciation and amortisation
reported.
Identification and valuation of intangible assets
acquired
As part of the accounting for business combinations
the Group reviews each acquisition on a case by
case basis to determine the nature and value of
any intangible assets acquired. Different factors are
considered including market presence of the acquired
entity, the existence of any specialised or developed
assets (for example, software and training materials),
and the nature and longevity of the acquired entity’s
customer-base. Following this assessment the Group
determines if the value of the intangible assets
acquired can or should be allocated between fixed
life or indefinite life intangible assets and goodwill.
Once identified the Group assesses how the intangible
assets are to be valued and this requires the use of
judgement as follows:
•
•
Brand valuations require an assessment of the
appropriate valuation methodology and in the
case of the Group the expected life of the brand
names, the forecast sales for comparable branded
services if available or, if not, branded sales for
“proxy” industries, an appropriate royalty rate
and discount factors to be applied to the forecast
royalty stream.
Fixed life intangible assets (for example, software
and customer lists) require an assessment of
the appropriate valuation methodology and
depending on the methodology adopted the
Group must make assessments including likely
replacement costs, estimated useful lives of the
assets, relevance of customer databases to the
Group and the price the Group is willing to pay
per customer/contact.
The Group tests annually, or more frequently if events
or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible
assets have suffered any impairment, in accordance
with the accounting policy stated in notes 3(h) and 3(l)
below. The recoverable amounts of cash-generating
units have been determined based on value-in-use
calculations. These calculations require the use of
assumptions, including estimated discount rates based
on the current cost of capital and growth rates of
the estimated future cash flows. Further detail on the
assumptions applied are included in Note 12.
Identification of Cash Generating Units
In order to complete the impairment review referred
to above the Group must identify the individual cash
generating units (“CGUs”) that best represents the
smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. Goodwill
in particular does not generate cash flows in its own
right and therefore it must be allocated to a CGU for
goodwill impairment testing purposes. Identifying CGUs
requires judgement and must be at the lowest level to
minimise the possibility that impairments of one asset
or group will be masked by a high-performing asset.
The Group has considered all factors and assessed
that the operating segments identified at Note 4 best
represent the CGUs for impairment testing purposes.
Measurement of contingent consideration
Contingent consideration arising from business
combinations is initially measured at fair value at the
acquisition date. Subsequently, the Group re-assesses
the likelihood of settling the contingent consideration
and this involves an assessment of whether the
underlying criteria for payment will be achieved. Any
movements in the value of contingent consideration is
subsequently recognised in the Consolidated Statement
of Comprehensive Income (refer Notes 4 and 10).
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible
temporary differences only if the Group considers it is
probable that future taxable amounts will be available
to utilise those temporary differences and losses (refer
Note 6).
Annual Report 2016 / 38
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 2. Basis of Preparation (continued)
New Standards and Interpretations Not Yet
Adopted
The Group has adopted all applicable Accounting
Standards and Interpretations issued by the External
Reporting Board (‘XRB’) that are mandatory for the
current reporting period.
A number of new standards, amendments to standards
and interpretations have been approved but are not
yet effective and have not been adopted by the
Group for the year ended 31 March 2016. The financial
statement impact of adoption of these standards
and interpretations has not yet been quantified by
management. These will be applied when they become
mandatory. The significant standards are:
NZ IFRS 9: Financial Instruments
NZ IFRS 9: ‘Financial Instruments’ was issued in
September 2014 as a complete version of the
standard. NZ IFRS 9 replaces the parts of NZ IAS
39 that relate to the classification and measurement
of financial instruments, hedge accounting and
impairment. NZ IFRS 9 requires financial assets to be
classified into two measurement categories; those
measured as at fair value and those measured at
amortised cost. The determination is made at initial
recognition. The classification depends on the entity’s
business model for managing its financial instruments
and the contractual cash flow characteristics of
the instrument. For financial liabilities, the standard
retains most of the NZ IAS 39 requirements. The main
change is that, in cases where the fair value option
is taken for financial liabilities, the part of a fair value
change due to an entity’s own credit risk is recorded
in other comprehensive income rather than the
income statement, unless this creates an accounting
mismatch. The new hedge accounting model more
closely aligns hedge accounting with risk management
activities undertaken by companies when hedging their
financial and non-financial risks. NZ IFRS 9 introduces
a new expected credit loss model for calculating
the impairment of financial assets. The standard is
effective for reporting periods beginning on or after 1
January 2018.
NZ IFRS 15: Revenue from Contracts with Customers
NZ IFRS 15 addresses recognition of revenue from
contracts with customers. It replaces the current
revenue recognition guidance in NZ IAS 18: Revenue
and NZ IAS 11: Construction Contracts and is
applicable to all entities with revenue. It sets out a
five step model for revenue recognition to depict the
transfer of promised goods or services to customers
in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those
goods and services. This standard is effective for
periods beginning on or after 1 January 2018.
NZ IFRS 16: Leases
NZ IFRS 16, ‘Leases’, which replaces the current
guidance in IAS 17, was published by the International
Accounting Standards Board (IASB) in January 2016.
The standard is yet to be issued by the New Zealand
Accounting Standards Board (NZASB). Under NZ
IFRS 16, a contract is, or contains, a lease if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. The new standard includes guidance
and illustrative examples on assessing whether a
contract contains a lease, a service or both. Under IAS
17, the Company as a lessee was required to make a
distinction between a finance lease (on balance sheet)
and an operating lease (off balance sheet). NZ IFRS
16 now requires the Company as a lessee to recognise
a lease liability reflecting future lease payments and a
‘right-of-use asset’ for virtually all lease contracts. The
IASB has included an optional exemption for certain
short-term leases (generally, those with a term of 12
months or less) and leases of low-value assets (such as
leases of tablets and personal computers, small items
of office furniture and telephones but not, for example,
leases of cars); however, this exemption can only be
applied by lessees. To measure a lease, the lease term
and lease payments must be established. Specifically,
the lease term now includes extension periods if it
is reasonably certain the entity will extend the lease,
while lease payments now include certain variable
payments that depend on an index or rate (such
as CPI increases) and purchase options which are
reasonably certain to be exercised. The standard can
be applied early, but only in conjunction with NZ IFRS
15, ‘Revenue from Contracts with Customers’, otherwise,
the mandatory effective date is for periods beginning
on or after 1 January 2019.
Evolve Education Group Limited / 39
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
3. Significant Accounting Policies
The accounting policies set out below have been
applied consistently in these financial statements, and
have been applied consistently by Group entities.
(a)
Basis of Consolidation
Business combinations
Business combinations are accounted for using the
acquisition method as at the acquisition date, which
is the date on which control is transferred to the
Group. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power over the entity.
In assessing control, the Group takes into consideration
potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date
as:
•
•
the fair value of the consideration transferred;
less
the net recognised amount (generally fair
value) of the identifiable assets acquired, the
liabilities assumed and any non-controlling
interest in the acquiree.
When the excess is negative, a bargain purchase
gain is recognised immediately in the Consolidated
Statement of Comprehensive Income.
Consideration transferred does not include amounts
related to the settlement of pre-existing relationships.
Such amounts generally are recognised in profit and
loss.
Transaction costs, other than those associated with
the issue of debt or equity securities, that the Group
incurs in connection with a business combination are
expensed as incurred.
Any contingent consideration payable is measured
at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not
re-measured and settlement is accounted for within
equity. Otherwise, subsequent changes in the fair value
of the contingent consideration are recognised in
profit or loss.
Business combinations are initially accounted for on a
provisional basis. The Group retrospectively adjusts the
provisional amounts recognised and also recognises
additional assets or liabilities during the measurement
Annual Report 2016 / 40
period, based on new information obtained about the
facts and circumstances that existed at the acquisition
date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition
or (ii) when the acquirer receives all the information
possible to determine fair value.
Subsidiaries
Subsidiaries are entities controlled by the Group.
The financial statements of subsidiaries are
included in the consolidated financial statements
from the date that control commences until the
date that control ceases.
Investments in joint ventures (equity accounted
investees)
Joint ventures are those entities over whose activities
the Group has joint control, established by contractual
agreement and requiring unanimous consent for
strategic financial and operating decisions.
Investments in joint ventures are accounted for using
the equity method and are recognised initially at cost.
The cost of the investment includes transaction costs.
The consolidated financial statements include
the Group’s share of the profit or loss and other
comprehensive income of equity accounted investees,
after adjustments to align the accounting policies with
those of the Group, from the date that joint control
commences until the date that joint control ceases.
When the Group’s share of losses exceeds its interest
in an equity accounted investee, the carrying amount
of the investment, including any long-term investments
that form part thereof, is reduced to zero, and the
recognition of further losses is discontinued except to
the extent that the Group has an obligation or has
made payments on behalf of the investee.
Loss of control
On the loss of control, the Group derecognises
the assets and liabilities of the subsidiary, any non-
controlling interests and the other components of
equity related to the subsidiary. Any surplus or deficit
arising on the loss of control is recognised in the
Consolidated Statement of Comprehensive Income.
If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value
at the date that control is lost. Subsequently it is
accounted for as an equity-accounted investee or as
an available-for-sale financial asset depending on the
level of influence retained.
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
3. Significant Accounting Policies
(continued)
Assets held for sale
Non-current assets, or disposal groups comprising
assets and liabilities, that are expected to be
recovered primarily through sale or distribution rather
than through continuing use, are classified as held for
sale. Immediately before classification as held for sale,
the assets, or components of a disposal group, are re-
measured in accordance with the Group’s accounting
policies. Thereafter generally the assets, or disposal
group, are measured at the lower of their carrying
amount and fair value less cost to sell. Impairment
losses on initial classification as held for sale and
subsequent gains or losses on re-measurement are
recognised in profit or loss. Gains are not recognised
in excess of any cumulative impairment loss.
Once classified as held for sale, intangible assets
and property, plant and equipment are no longer
amortised or depreciated, and any equity-accounted
investee is no longer equity accounted.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the
consolidated financial statements.
(b)
Determination of Fair Values
A number of the Group’s accounting policies and
disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities.
Fair values have been determined for measurement
and / or disclosure purposes based on the following
methods. When applicable, further information about
the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
Intangible assets
(d)
The fair value of brands acquired in a business
combination is based on the discounted estimated
royalty payments that have been avoided as a
result of the brand being owned (“relief from royalty
method”). The fair value of customer relationships
acquired in a business combination is determined
using the notional price per customer methodology.
Software acquired in a business combination is
determined using an estimate of replacement cost.
Syllabus material acquired in a business combination is
determined using the market elimination method.
The fair value of other intangible assets is based on
the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
(c)
Revenue
Revenues are recognised when the amount of revenue
can be reliably measured, it is probable that the future
economic benefits will flow to the Group, and specific
criteria have been met for each of the Group’s
activities as described below. In all cases, the Group
assesses revenue arrangements against specific criteria
to determine if it is acting as the principal or agent in
a revenue transaction. In an agency relationship only
a portion of the revenue received on the Group’s own
account is recognised as revenue.
Ministry of Education funding
Ministry of Education funding is recognised initially as
funding received in advance and is then recognised in
the Consolidated Statement of Comprehensive Income
over the period childcare services are provided.
Income receivable from the Ministry of Education
by way of a wash-up payment is recognised as an
asset, and is netted off against the income received in
advance.
Childcare fees
Fees paid by government (childcare benefit) or parents
are recognised as and when a child attends, or was
scheduled to attend, a childcare facility or receives
home-based care.
Education income
Revenue from the provision of tertiary education is
recognised when the service has been rendered.
Interest income
Interest income is recognised in the Consolidated
Statement of Comprehensive Income using the
effective interest method.
Income Tax
Tax expense
Tax expense comprises current and deferred tax.
Current tax and deferred tax is recognised in the
Consolidated Statement of Comprehensive Income
except to the extent that it relates to a business
combination, or items recognised directly in equity or
in other comprehensive income.
Evolve Education Group Limited / 41
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 3. Significant Accounting Policies
(continued)
Current tax
Current tax is the expected tax payable or receivable
on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is
not recognised for:
•
•
•
temporary differences on the initial recognition
of assets or liabilities in a transaction that is not
a business combination and that affects neither
accounting nor taxable profit or loss,
temporary differences arising on the initial
recognition of goodwill; and
temporary differences related to investments in
subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse
in the foreseeable future.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date.
(g)
In determining the amount of current and deferred
tax the Group takes into account the impact of
uncertain tax positions, if any, and whether additional
taxes and interest may be due. The Group believes
that its accruals for tax liabilities are adequate for
all open tax years based on its assessment of many
factors, including interpretations of tax law and prior
experience.
Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes
levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend
to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised for unused
tax losses, tax credits and deductible temporary
Annual Report 2016 / 42
differences, to the extent that it is probable that future
taxable profits will be available against which they can
be utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is
no longer probable that the related tax benefit will be
realised.
(e)
Foreign Currency Transactions
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency
at the exchange rate at that date.
Foreign exchange gains and losses resulting from
the settlement of the above are recognised in the
Consolidated Statement of Comprehensive Income.
Foreign exchange gains and losses that relate to
borrowings and cash and cash equivalents are presented
in the Consolidated Statement of Comprehensive Income
within finance costs.
(f)
Dividends
The Group recognises a liability to make cash distributions
to equity holders of the parent when the distribution
is authorised and the distribution is no longer at the
discretion of the Company. As per company law in New
Zealand, a distribution is authorised when it is approved
by the directors. A corresponding amount is recognised
directly in equity.
Property, Plant and Equipment
Recognition and measurement
Items of property, plant and equipment are stated at cost,
less accumulated depreciation and impairment losses.
Any gain or loss on disposal of an item of property, plant
and equipment (calculated as the difference between the
net proceeds from disposal and the carrying amount of
the item) is recognised in the Consolidated Statement of
Comprehensive Income.
Depreciation
Depreciation is charged based on the cost of an asset
less its residual value. Depreciation is charged to the
Consolidated Statement of Comprehensive Income on a
straight line basis over the estimated useful lives of each
item of property, plant and equipment. Leased assets are
depreciated over the shorter of the lease term and their
useful lives. Useful lives as at balance date were:
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 3. Significant Accounting Policies
(continued)
Plant and equipment 4 years
4 years
Office furniture & fittings
4 years
Leasehold improvements
5 years
Motor vehicles
lower of its fair value and the present value of
the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance
with the accounting policy applicable to that asset.
Other leases are operating leases and are not
recognised in the Consolidated Statement of Financial
Position.
The depreciation methods, useful lives and residual
values are reviewed at the reporting date and
adjusted if appropriate.
(j)
Financial Instruments
Non-derivative financial assets
(h)
Intangible Assets
Goodwill
Goodwill initially represents amounts arising on
acquisition of a business and is the difference between
the cost of acquisition and the fair value of the net
identifiable assets acquired.
Goodwill is subsequently measured at cost less
accumulated impairment losses. Goodwill is allocated
to cash-generating units and is not amortised but is
reviewed at each balance date to determine whether
there is any objective evidence of impairment (refer to
(l) Impairment).
Other intangible assets
Other intangible assets that are acquired by the
Group and have finite and indefinite useful lives are
measured at cost less accumulated amortisation and
accumulated impairment losses, as appropriate. Other
intangible assets have been amortised on a straight-
line basis over their estimated useful lives:
Software
Training syllabus
Customer lists
Brand names
Subsequent expenditure
4 years
4 years
4 years
Indefinite life
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in the
Consolidated Statement of Comprehensive Income as
incurred.
(i)
Leased Assets
Leases in terms of which the Group assumes
substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the
leased asset is measured at an amount equal to the
The Group initially recognises loans and receivables
on the date that they are originated.
Financial assets and liabilities are offset and the
net amount presented in the statement of financial
position when, and only when, the Group has a legal
right to offset the amounts and intends either to settle
on a net basis or to realise the asset and settle the
liability simultaneously.
Loans and receivables
Loans and receivables are financial assets with fixed
or determinable payments that are not quoted in an
active market. Such assets are recognised initially at
fair value plus any directly attributable transaction
costs. Subsequent to initial recognition loans and
receivables are measured at amortised cost using
the effective interest method, less any impairment
losses. They are included in current assets, except for
maturities greater than 12 months after the end of the
reporting period; these are classified as non-current
assets.
Loans and receivables comprise cash and cash
equivalents and trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand,
deposits held at call with banks and bank overdrafts.
In the Consolidated Statement of Financial Position
bank overdrafts are shown within borrowings in current
liabilities.
Non-derivative financial liabilities
The Group initially recognises financial liabilities on the
date that they are originated. The Group derecognises
a financial liability when its contractual obligations are
discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities
into the other financial liabilities category. Financial
liabilities comprise borrowings, bank overdrafts, and
trade and other payables.
Evolve Education Group Limited / 43
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
3. Significant Accounting Policies
(continued)
Trade and other payables
Trade and other payables are obligations to pay for
goods or services that have been acquired in the
ordinary course of business from suppliers. They are
classified as current liabilities if payment is due within
one year or less. If not, they are presented as non-
current liabilities.
Trade and other payables are recognised initially at
fair value and subsequently measured at amortised
cost using the effective interest method.
(k)
Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary
shares and share options are recognised as a
deduction from equity, net of any tax effects.
(l)
Impairment
Non-derivative financial assets
A financial asset not carried at fair value through the
Consolidated Statement of Comprehensive Income
is assessed at each reporting date to determine
whether there is objective evidence that it is impaired.
A financial asset is impaired if there is objective
evidence of impairment as a result of one or more
events that occurred after the initial recognition of the
asset, and that the loss event(s) had an impact on the
estimated future cash flows of that asset that can be
estimated reliably.
(m)
Objective evidence that financial assets are impaired
includes default or delinquency by a debtor and
adverse changes in the payment status of debtors.
Non-financial assets
The carrying amounts of the Group’s non-financial
assets, other than deferred tax assets, are reviewed at
each reporting date to determine whether there is any
indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated.
Goodwill and indefinite-lived intangible assets are
tested annually for impairment. An impairment loss
is recognised if the carrying amount of an asset or
its related cash-generating unit (CGU) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less costs
Annual Report 2016 / 44
to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset or CGU. For the purpose
of impairment testing, assets that cannot be tested
individually are grouped together into the smallest
group of assets that generates cash inflows from
continuing use that are largely independent of the
cash inflows of other assets or CGUs. Subject to an
operating segment ceiling test, CGUs to which goodwill
has been allocated are grouped so that the level
at which impairment testing is performed reflects
the lowest level at which goodwill is monitored for
internal management purposes. Goodwill acquired in a
business combination is allocated to groups of CGUs
that are expected to benefit from the synergies of the
combination.
An impairment loss in respect of goodwill is not
reversed. For other assets, an impairment loss is
reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that
would have been determined, net of depreciation
or amortisation, if no impairment loss had been
recognised.
Employee Benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-
monetary benefits and annual leave are recognised in
respect of services provided by employees up to the
reporting date and measured based on the expected
date of settlement.
Expenses for non-accumulating sick leave are
recognised when the leave is taken and are measured
at the rates paid or payable.
The liabilities for wages and salaries and annual
leave expected to be settled within 12 months of the
reporting date are measured at the amounts expected
to be paid when the liabilities are settled.
Defined contribution plan (KiwiSaver)
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution
pension plans are recognised as an employee benefit
expense in profit or loss in the periods during which
services are rendered by employees.
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 3. Significant Accounting Policies
(continued)
(n)
Expenses
Operating lease payments
Payments made under operating leases are
recognised in the Consolidated Statement of
Comprehensive Income on a straight-line basis over
the term of the lease. Lease incentives received
are recognised in the Consolidated Statement of
Comprehensive Income over the lease term as an
integral part of the total lease expense.
(p)
Segment Reporting
An operating segment is a component of an entity
that engages in business activities from which it
may earn and incur expenses, whose operating
results are regularly reviewed by the entity’s Chief
Operating Decision Maker to make decisions about
resources to be allocated to the segment and assess
its performance, and for which discrete financial
information is available. The Chief Operating Decision
Maker, who is responsible for allocating resources
and assessing performance of the Group, has been
identified as the Chief Executive Officer.
Finance expenses
(q)
Earnings Per Share
Finance expenses comprise interest expense on
borrowings, pre-listing funding and establishment fees.
All borrowing costs are recognised in the Consolidated
Statement of Comprehensive Income using the
effective interest method.
Offer costs
Certain costs have been incurred in relation to the
issue of shares including the initial listing of the Group.
These costs are directly attributable to the Group
issuing equity instruments and include amounts paid
to legal, accounting and other professional advisers.
These costs have been accounted for as a deduction
from equity.
(o)
Consolidated Statement of Cash Flows
The following are the definitions of the terms used in
the Consolidated Statement of Cash Flows
• Cash includes cash on hand, bank current
accounts and any bank overdrafts.
•
•
Investing activities are those activities relating to
the acquisition, holding and disposal of businesses,
property, plant and equipment and of investments.
Financing activities are those activities that result
in changes in the size and composition of the
equity structure of the Group. This includes both
equity and debt not falling within the definition
of cash. Dividends paid and financing costs are
included in financing activities.
• Operating activities include all transactions and
other events that are not investing or financing
activities.
Basic and diluted earnings per share
Basic and diluted earnings per share is calculated
by dividing the profit attributable to the owners of
the Company by the weighted average number
of ordinary shares outstanding during the financial
period.
(r)
Share Based Payments
Certain senior management and independent directors
of the Company received remuneration in the form
of share-based payment transactions, whereby
employees render services as consideration for equity
instruments (equity-settled transactions). The cost of
equity-settled transactions with employees is measured
by reference to the fair value at grant date.
The cost of equity-settled transactions is recognised,
together with a corresponding increase to the share
based payments reserve within equity, over the period
in which the performance and/or service conditions
are fulfilled. The cumulative expense recognised for
equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the
vesting period has expired and the best estimate of
the number of equity instruments that will ultimately
vest. The expense or credit for a period represents the
movement in cumulative expense recognised as at the
beginning and end of that period.
(s)
Goods and Services Tax
All amounts are shown exclusive of Goods and
Services Tax (GST) including items disclosed in the
Consolidated Statement of Cash Flows, except for
trade receivables and trade payables that are stated
inclusive of GST.
Evolve Education Group Limited / 45
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
any other body of accounting standards and the
Groups’ calculation of this measure may differ from
similarly titled measures presented by other companies.
This measure is intended to supplement the NZ
GAAP measures presented in the Group’s financial
information.
EBITDA excluding acquisition and integration costs
(and in the case of the previous period initial listing
related costs) reflects a number of adjustments that
are separately identified to enable the business
to be reported on exclusive of these items. These
adjustments may be defined as:
• Acquisition expenses – in acquiring the
businesses and net assets in Note 10 the Group
incurred certain expenses directly related to
those acquisitions including agents’ commissions,
legal fees, financing fees and financial, tax and
operational due diligence fees.
•
Integration expenses – costs associated with the
integration of the businesses acquired including
the employment costs of the Group’s acquisition
and integration team and third party costs
establishing, for example, IT and communications
with the Group and the transfer of employment/
payroll records to the Group’s payroll provider.
•
Initial listing costs – relate to NZX and ASX initial
listing costs (in 2015).
Other than the items noted above, EBITDA includes
increases or decreases to amounts provided for
contingent consideration.
The Group’s corporate and management costs
including certain financing income and expenditure
and taxation that are managed on a Group basis are
not allocated to operating segments.
4. Segment Information
The Group has two reportable operating segments, as
described below, which were identified as the strategic
business-models the Group would initially invest in
within the wider teacher-led early childhood education
(ECE) industry in New Zealand. The Group operates
entirely within New Zealand.
Each segment offers parents and caregivers the
choice about the type of service in which they think
their child or children will flourish. Each segment is
managed separately. For each of the segments,
the Group’s Chief Executive Officer (the “CEO” and
Chief Operating Decision Maker) reviews internal
management reports at least on a monthly basis. The
following summary describes the operations in each of
the Group’s reportable segments:
ECE Centres – generally purpose built facilities that
offer all day or part-day early childhood services, and
Home-based ECE – involves an educator providing
services to a small group of children in a home setting
and is supported by a registered teacher coordinator
who oversees the children’s learning progress.
No operating segments have been aggregated to
form the above reportable operating segments. The
Group accounting policies are applied consistently to
each reporting segment.
Other operations include ECE Centre Management,
a non-reportable segment, whereby the Group
provides management and back-office expertise to
early childhood education centres but it does not
own the centre. This activity does not meet any of
the quantitative thresholds for determining reportable
segments in 2016 (and 2015) and as such it has been
included as an unallocated amount. Unallocated
amounts also represent other corporate support
services, acquisition and integration costs.
Information regarding the results of each reportable
segment is included below. Performance is measured
based on NZ GAAP measures of profitability and
in relation to the Group’s segments, segment profit
before income tax. In addition to GAAP measures of
profitability, the Group also monitors its profitability
using non-GAAP financial measures (that is, earnings
before interest, tax, depreciation and amortisation
(“EBITDA”)) and EBITDA excluding certain items, as
described below and as included in the internal
management reports that are reviewed by the Group’s
CEO. EBITDA is not defined by NZ GAAP, IFRS or
Annual Report 2016 / 46
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 4. Segment Information (continued)
31 March 2016
Total revenue
Other income
Share of profit of equity accounted joint venture
Total income
ECE
Centres
$’000
Home-based
ECE
$’000
110,848
-
204
111,052
25,431
-
-
25,431
Unallocated
$’000
Consolidated
$’000
1,100
1,352
-
2,452
137,379
1,352
204
138,935
Operating expenses
(83,484)
(22,426)
(6,511)
(112,421)
EBITDA before acquisition and integration expenses
27,568
3,005
(4,059)
26,514
Acquisition expenses
Integration expenses
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
-
-
27,568
(1,152)
(61)
26,355
-
-
-
3,005
(478)
(209)
2,318
-
(1,204)
(871)
(6,134)
(57)
(200)
(6,391)
(1,096)
(1,204)
(871)
24,439
(1,687)
(470)
22,282
(1,096)
Reportable segment profit/(loss) before tax
26,355
2,318
(7,487)
21,186
Total assets
Total liabilities
182,101
(25,068)
16,933
(9,170)
39,653
(43,716)
238,687
(77,954)
Other disclosures
Investment in joint venture (held for sale)
1,605
-
-
1,605
Included within Total Revenue is revenue from the Ministry of Education totalling $93.6m for the year (2015: $22.2m).
Other income relates to the reversal of a contingent consideration provision of $1.35m (2015: $0.5m) arising from the
December 2014 acquisitions of the home-based ECE businesses (refer Note 10).
Evolve Education Group Limited / 47
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 4. Segment Information (continued)
Period
31 March 2015
Total revenue
Other income
Share of profit of equity accounted joint venture
Total income
ECE
Centres
$’000
Home-based
ECE
$’000
Unallocated
$’000
Consolidated
$’000
24,626
-
123
24,749
7,928
-
-
7,928
386
518
-
904
32,940
518
123
33,581
Operating expenses
EBITDA before acquisition, integration and initial
listing costs/expenses
(19,311)
(7,163)
(5,106)
(31,580)
5,438
765
(4,202)
2,001
Acquisition expenses
Integration expenses
Initial listing costs
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
-
-
-
5,438
(156)
(20)
5,262
-
-
-
-
765
(138)
(54)
573
(71)
(5,033)
(1,494)
(1,308)
(12,037)
(8)
(63)
(12,108)
(1,591)
(5,033)
(1,494)
(1,308)
(5,834)
(302)
(137)
(6,273)
(1,662)
Reportable segment profit/(loss) before tax
5,262
502
(13,699)
(7,935)
Total assets
Total liabilities
Other disclosures
Investment in joint venture
159,429
(18,284)
16,332
(9,605)
5,486
(4,490)
181,247
(32,379)
1,521
-
-
1,521
5. Disclosure of Items in the Consolidated Statement of
Comprehensive Income
Other expenses
$’000s
Included in other expenses are:
Audit fees
Directors’ fees
Other items
Total other expenses
Note
23
22
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
194
385
4,343
4,922
245
137
3,142
3,524
Other items includes corporate and head office costs not already disclosed separately. They include travel expenses,
legal costs not relating to the acquisition of businesses in Note 10, consultancy costs and general office expenses.
Annual Report 2016 / 48
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
5. Disclosure of Items in the Consolidated Statement of
Comprehensive Income (continued)
Building occupancy expenses
Building occupancy expenses of $17.5m (2015: $4.4m) include $16.1m (2015: $4.2m) of expenditure in relation to
minimum operating lease payments.
Employee benefits expense
$’000s
Wages and salaries
Kiwisaver contributions
Payments to agency contractors
Share-based payments expense
Other
Total employee benefits expense
Net finance expense
$’000s
Interest received
Bank deposits
Total interest received
Interest expense
Interest on acquisition facility borrowings
Interest on other bank borrowings
Unwind of discount relating to contingent consideration
Interest on other borrowings
Other
Total interest expense
Net finance expense
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
70,258
1,615
883
-
2,037
74,793
18,556
438
202
550
267
20,013
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
159
159
(904)
(215)
(134)
-
(2)
(1,255)
191
191
-
(102)
-
(1,748)
(3)
(1,853)
(1,096)
(1,662)
Evolve Education Group Limited / 49
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 6. Taxation
Income tax expense
The major components of income tax expense for the period are:
$’000s
Current income tax:
Current income tax expense
Prior year adjustments
Deferred tax:
Relating to origination and reversal of temporary differences
Prior year adjustments
Total income tax expense
Reconciliation of income tax expense
Income tax expense may be reconciled to accounting profit as follows:
$’000
Profit/(loss) before tax
At statutory income tax rate of 28%
Non-assessable income and non-deductible expenses for tax purposes:
Contingent consideration re-measurement
Non-deductible expenses
Non-recurring non-deductible expenses
Prior year adjustments
Total income tax expense
Effective income tax rate
Deferred tax
Deferred tax relates to the following:
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
6,112
(359)
5,753
(218)
9
(209)
5,544
186
-
186
(63)
-
(63)
123
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
21,186
5,932
(379)
4
337
(350)
5,544
26.17%
(7,935)
(2,222)
(145)
141
2,349
-
123
(1.55%)
31 MARCH 2015
31 MARCH 2016
CONSOLIDATED
STATEMENT
OF COMPREHENSIVE
INCOME
CONSOLIDATED
STATEMENT
OF FINANCIAL
POSITION
CONSOLIDATED
STATEMENT
OF COMPREHENSIVE
INCOME
ARISING FROM
ACQUISITION
OF
BUSINESSES
CONSOLIDATED
STATEMENT
OF FINANCIAL
POSITION
$’000
Property, plant and equipment
Intangible assets
Employee entitlement provisions
Other timing differences
Deferred tax benefit
Net deferred tax assets
(58)
21
(35)
135
63
1,391
(1,602)
500
161
450
(305)
7
337
170
209
127
-
-
-
127
1,213
(1,595)
837
331
786
Annual Report 2016 / 50
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 6. Taxation (continued)
Imputation credits
Imputation credits available for use in subsequent reporting periods is $5,054,461 (2015: $478,150), including
imputation credits that will arise from the payment of the amount of the provision for income tax. No dividends are
provided for or receivable at balance date that would affect the available imputation credits at balance date.
Other taxation matters
The Company, in conjunction with the home-based ECE sector, is in discussion with the Inland Revenue Department
(“IRD”) on the GST status of home-based care delivery. The IRD has challenged Porse’s treatment in respect of
payments made to Porse home-based educators who are acting as independent contractors. The Company has
taken advice and believes that its current GST treatment is appropriate and that the matter can be resolved
satisfactorily.
7. Cash and Cash Equivalents
$’000
Cash at banks and on hand
Short-term deposits
Total cash and cash equivalents
31 MARCH 2016
31 MARCH 2015
1,914
36,710
38,624
2,025
2,585
4,610
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for
varying periods of between one day and 3 months, depending on the immediate cash requirements of the Group,
and earn interest at the respective short-term deposit rates.
$’000
Property, plant and equipment
Intangible assets
Employee entitlement provisions
Other timing differences
Deferred tax benefit
Net deferred tax assets
(58)
21
(35)
135
63
1,391
(1,602)
500
161
450
(305)
7
337
170
209
127
-
-
-
127
1,213
(1,595)
837
331
786
Evolve Education Group Limited / 51
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 8. Property, Plant and Equipment
Note
10
31 MARCH 2016
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Disposals
Closing balance
Depreciation and impairment
Opening balance
Depreciation charge for period
Disposals
Closing balance
PLANT AND
EQUIPMENT
OFFICE
FURNITURE
AND FITTINGS
LEASEHOLD
IMPROVEMENTS
MOTOR
VEHICLES
WORK IN
PROGRESS
TOTAL
202
55
-
(6)
251
(2)
(59)
12
(49)
4,303
800
586
(265)
5,424
(159)
(1,417)
58
(1,518)
584
577
-
(205)
956
(38)
(135)
-
(173)
152
260
-
(95)
317
(1)
(76)
-
(77)
13
153
205
-
371
-
-
-
-
5,254
1,845
791
(571)
7,319
(200)
(1,687)
70
(1,817)
Net book value
202
3,906
783
240
371
5,502
31 MARCH 2015
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Disposals
Closing balance
Depreciation and impairment
Opening balance
Depreciation charge for period
Disposals
Closing balance
PLANT AND
EQUIPMENT
OFFICE
FURNITURE
AND FITTINGS
LEASEHOLD
IMPROVEMENTS
MOTOR
VEHICLES
WORK IN
PROGRESS
TOTAL
-
21
181
-
202
-
164
4,232
(93)
4,303
-
(2)
-
(2)
-
(245)
86
(159)
-
45
539
-
584
-
(38)
-
(38)
-
-
199
(47)
152
-
(17)
16
(1)
-
10
23
(20)
13
-
-
-
-
-
240
5,174
(160)
5,254
-
(302)
102
(200)
Net book value
200
4,144
546
151
13
5,054
Annual Report 2016 / 52
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 9. Group Information
Information about subsidiaries
The consolidated financial statements of the Group include:
Name
Evolve Education Group 1 Limited
Principal Activities
ECE centre owner
Evolve Education Group 2 Limited
ECE centre owner
Evolve Education Group 3 Limited
ECE centre owner
Evolve Education Group 4 Limited
ECE centre owner
Evolve Education Group 5 Limited
ECE centre owner
Evolve Education Group 6 Limited
Non-trading
Evolve Management Group Limited
Investment company
ECE Management Limited
Management services
Lollipops Educare Holdings Limited
Investment company
Country of
Incorporation
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
Lollipops Educare Limited
Evolve corporate office
NZ
Lollipops Educare Centres Limited
ECE centre owner
Lollipops Educare (Hastings) Limited
ECE centre owner
Lollipops Educare (Birkenhead) Limited
ECE centre owner
Evolve Home Day Care Limited
Investment company
Au Pair Link Limited
Home-care provider
Porse In-Home Childcare (NZ) Limited
Home-care provider
Porse Franchising (NZ) Limited
Porse Education & Training (NZ)
Limited
For Life Education & Training (NZ)
Limited
Provides services to
Porse franchisees
Education and training
provider
Education and training
provider
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
Balance
Date
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
Equity
Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
31 March
100%
31 March
100%
During the year the balance date of Porse In Home Childcare (NZ) Limited, Porse Franchising (NZ) Limited, Porse
Education & Training (NZ) Limited For Life Education & Training (NZ) Limited was changed from 31 December to 31
March. These financial statements includes the results of operations for the year ended 31 March 2016.
Asset held for sale – Investment in joint venture
The consolidated financial statements of the Group include:
Name
Lollipops Educare (Halfmoon Bay)
Limited
Principal Activities
ECE centre owner
Country of
Incorporation
NZ
Balance
Date
31 March
Equity
Interest
50%
Evolve Education Group Limited / 53
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
9. Group Information (continued)
The carrying value of the investment in the joint venture is $1,605,000 (2015: $1,521,000) representing the initial
investment in the joint venture plus the Group’s share of the joint venture’s profits less dividends received since
acquisition and up to the time the asset was reclassified as held for sale.
As at 31 March 2016, the investment has been treated as an asset held for sale as the Company is in negotiations
for the sale of its 50% interest with expectations the sale will be concluded by 30 June 2016 and the asset has been
reclassified as a current asset in the Consolidated Statement of Financial Position. The Group’s management is of
the view that no impairment or fair value adjustments are required at balance date. Disposal costs of $30,000 have
been provided.
10. Business Combinations
The Group was established to acquire a group of centrally-owned and managed ECE providers. This was achieved
by acquiring the assets of or shares in a number of owned ECE centres, home-based ECE providers and other
related entities up to and including 31 March 2015. By 31 March 2015 the Group consisted of 86 ECE centres and 2
home-based ECE providers.
As disclosed in the Consolidated Statement of Cash Flows, $23.7m was paid in respect of the acquisition of
businesses during the year, as follows:
•
The Group acquired 20 ECE centres from several separate vendors, for a combined purchase price of $22.3m
(net of purchase price adjustments). Of this, $22.1m was paid in cash by balance date. Of the 20 centres
acquired, 5 were purchased from interests of a related party as disclosed at Note 22. Net liabilities acquired
was $0.2m resulting in goodwill on acquisition of $22.4m. Total acquisition costs incurred during the year were
$1.2m and these are included in the Consolidated Statement of Comprehensive Income and cash flows from
operating activities in the Consolidated Statement of Cash Flows. No cash was acquired. A summary of the net
liabilities acquired is included in the table below.
•
The remaining $1.6m paid relates primarily to completion payments to the vendors of the home-based ECE
businesses acquired in December 2014.
Assets and liabilities acquired and consideration paid
Assets
Other current assets
Property, plant and equipment
Deferred tax
Liabilities
Funding received in advance
Employee entitlements
Other current liabilities
Total identifiable net liabilities at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Purchase consideration
Cash paid
Cash payable relating to retentions
Total consideration
Annual Report 2016 / 54
$’000
131
791
127
1,049
(1,183)
(24)
(25)
(1,232)
(183)
22,447
22,264
22,149
115
22,264
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
10. Business Combinations (continued)
The goodwill of $22.4m predominantly comprises the future earnings potential of the acquired ECE centres and the
value expected from continuing to bring together a group of ECE Centres and home-based ECE providers under
one centrally managed group. Goodwill is allocated to each of the segments identified at Note 4, as appropriate.
The total identifiable net liabilities above are provisional and are subject to the completion of purchase price
adjustments.
At balance date the acquisitions have contributed revenue of $11.0m and net profit after tax of $0.7m to the Group’s
results before allowing for upfront acquisition and integration expenses. As the acquisitions were made at different
times during the year it is anticipated these acquisitions would have contributed revenue of $19.4m and net profit
after tax of $1.4m (excluding upfront and non-recurring acquisition costs of $1.2m and integration costs of $0.7m) had
they all been acquired on 1 April 2015.
Contingent consideration
As part of the purchase agreement with the previous owners of the Home-based ECE businesses acquired
contingent consideration was agreed. At 31 March 2015 $1.6m had been provided in respect of this. At balance
date the amount provided is nil, with the balance either being settled or reversed to the Consolidated Statement of
Comprehensive Income for amounts no longer considered payable (note 4).
11. Intangible Assets
Note
10
31 MARCH 2016
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Completion adjustments
Disposals
Closing balance
Amortisation and
impairment
Opening balance
Amortisation for period
Disposals
Closing balance
CUSTOMER
LISTS
SYLLABUS
MATERIAL
MANAGEMENT
CONTRACTS
SOFTWARE
BRANDS
GOODWILL
TOTAL
301
-
-
-
-
301
(25)
(75)
-
(100)
200
-
-
-
-
200
(17)
(50)
-
(67)
372
-
-
-
-
372
(31)
(93)
-
(124)
964
506
-
-
(13)
1,457
4,787
-
-
-
-
162,038
-
22,447
(139)
-
4,787 184,346
(64)
(252)
1
(315)
-
-
-
-
-
-
168,662
506
22,447
(139)
(13)
191,463
(137)
(470)
1
(606)
Net book value
201
133
248
1,142
4,787 184,346
190,857
Subsequent to the initial provisional recognition of the fair value of net assets acquired the Group has identified
items requiring adjustment to those initial values and these have been referred to as completion adjustments above.
Evolve Education Group Limited / 55
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
11. Intangible Assets (continued)
31 MARCH 2015
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Closing balance
Amortisation and
impairment
Opening balance
Amortisation for period
Closing balance
CUSTOMER
LISTS
SYLLABUS
MATERIAL
MANAGEMENT
CONTRACTS
SOFTWARE
BRANDS
GOODWILL
TOTAL
Note
-
-
301
301
-
(25)
(25)
-
-
200
200
-
-
372
372
-
492
472
964
-
-
4,787
4,787
-
-
162,038
162,038
-
492
168,170
168,662
-
(17)
(17)
-
(31)
(31)
-
(64)
(64)
-
-
-
-
-
-
-
(137)
(137)
Net book value
276
183
341
900
4,787
162,038
168,525
12. Impairment Testing of Goodwill and Intangible Assets With
Indefinite Lives
Goodwill and brands acquired through business combinations with indefinite lives have been allocated, for
impairment testing, to the cash generating units (“CGUs”) below, which are also the main operating segments. Brands
are also assessed for impairment separately.
31 MARCH 2016
$’000
ECE
CENTRES
HOME-BASED
ECE
ECE
MANAGEMENT
TOTAL
Goodwill
Brands with indefinite useful lives
173,080
3,104
10,600
1,683
666
-
184,346
4,787
31 MARCH 2015
$’000
ECE
CENTRES
HOME-BASED
ECE
ECE
MANAGEMENT
TOTAL
Goodwill
Brands with indefinite useful lives
150,858
3,104
10,545
1,683
635
-
162,038
4,787
The Group performed its annual impairment test at balance date.
ECE Centres and Home-based ECE Providers - Goodwill
The recoverable amount of the ECE Centres and Home-based ECE provider CGUs was $238.4m (2015: $219.1m)
at balance date. It has been determined based on a value in use calculation using cash flow projections from
the Group’s financial forecasts approved by senior management and the Board covering a five year period. The
pre-tax discount rate applied to cash flow projections is 15.4% (2015: 16%) and cash flows beyond the five-year
period are extrapolated using a 2% (2015: 2%) terminal growth rate that is not inconsistent with the long term growth
rate experienced industry-wide. As the recoverable value was in excess of the carrying value management did not
identify an impairment for these CGU’s.
Annual Report 2016 / 56
For the year ended 31 March 2016Notes to the Consolidated Financial Statements
12. Impairment Testing of Goodwill and Intangible Assets With
Indefinite Lives (continued)
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
The calculation of value in use for both CGU’s is most sensitive to the following assumptions:
• Operating earnings
• Discount rates
• Growth rates used to extrapolate cash flows beyond the forecast period
Operating earnings – operating earnings is a function of revenue (received from the Ministry of Education and
parents/caregivers) which in turn is based on occupancy. Revenue is assumed to grow by 1% (2015: 2%) per annum
on average and assumes the Ministry of Education continues to support early childhood education to the value of
approximately 65% of total revenue earned. If the Government reduces its funding it could lead to an increased
requirement of parents and caregivers to make up the difference. Also affecting operating earnings are centre
wages and other operating expenses such as operating lease costs. Expenses are forecast to grow by 0.5% (2015:
2%) which is currently consistent with the inflation rate projections in New Zealand. If Government funding was to
decrease management would need to initiate appropriate responses to maintain profitability.
The following summarises the effect of a change in the above “base” growth assumptions of 1% revenue growth and
0.5% expense growth:
1. Revenue and expense
growth 0%
2. Revenue growth 1%,
expense growth 1%
3. Revenue growth 0%,
expense growth 1%
4. Revenue decline 1%,
0% expense growth
ECE CENTRES
HOME-BASED ECE
Recoverable amount > Carrying value
Recoverable amount > Carrying value
Recoverable amount > Carrying value
Recoverable amount > Carrying value
Recoverable amount < Carrying value
Recoverable amount < Carrying value
Recoverable amount < Carrying value
Recoverable amount < Carrying value
Discount rates – discount rates represent the current market assessment of the risks specific to each CGU, taking into
account the time value of money and individual risks of the underlying assets that have not been incorporated in
the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its
operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account
both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors
using the capital asset pricing model. The cost of debt is based on the interest-bearing borrowings the Group is
obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are
evaluated annually based on publicly available market data. Adjustments to the discount rate are made to factor
in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. A rise in the
pre-tax discount rates to 17.5% (2015: 22%) and 20% (2015: 32%) would lead to an impairment in the ECE Centre and
Home-based ECE CGU’s respectively, assuming the growth rates referred to above remained the same.
Growth rate estimates – rates are based on current inflation rates in New Zealand and forecast or assumed
increase in revenues from parents/caregivers and the Government. Management are not aware of any information
to suggest that the growth assumptions are at risk. Should terminal growth be between 0% and 1% instead of the 2%
assumed, the recoverable value will still exceed carrying value for both CGUs.
Evolve Education Group Limited / 57
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 12. Impairment Testing of Goodwill and Intangible Assets With
Indefinite Lives (continued)
ECE Centres and Home-based ECE Providers - Brands
The recoverable amount of the ECE Centres and Home-based ECE brands was $5.6m (2015: $4.8m) at balance date.
It has been determined based on the discounted estimated royalty payments that have been avoided as a result of
the brands being owned (“relief from royalty method”) using revenue projections from the Group’s financial forecasts
approved by senior management and the Board covering a 12-month period. The pre-tax discount rate applied to
cash flow projections is 15.4% (2015: 16%) and cash flows beyond the one year period are extrapolated using a 2%
(2015: 2%) terminal growth rate that is not inconsistent with the long term growth rate experienced industry-wide. As the
recoverable value was in excess of the carrying value management did not identify an impairment for these brands.
The calculation of relief from royalty for both brands is most sensitive to the following assumptions:
Revenue – as above, revenue is received from the Ministry of Education and in the case of ECE Centres parents/
caregivers. A reduction in ECE centre revenue of greater than 25% will cause the recoverable value to be less than the
carrying value of the ECE Centre brand value. A reduction in Home-based ECE revenue greater than 3.3% could lead
to an impairment in the Home-based ECE brand.
Royalty rate – the relief from royalty method assumes a royalty rate of 1%. Reductions of more than 0.2% may lead to
an impairment in the ECE Centre brand and any reduction below 1% could lead to an impairment in the Home-based
ECE brand, all other assumptions remaining unchanged.
Discount rates – the assumptions relating to discount rates are discussed above. Assuming all other assumptions remain
constant an increase in the pre-tax discount to 18.75% and 15.8% could result in an impairment of the ECE and Home-
based ECE brands respectively.
Growth rate estimates – terminal growth rates have been discussed above. In terms of the ECE Centres terminal growth
will need to be less than 0% (with all other assumptions remaining unchanged) before the recoverable value of the
brand becomes lower than its carrying value. A terminal growth rate of less than 1.7% could result in an impairment of
the Home-based ECE brand.
13. Trade and Other Payables
$’000
Trade payables
Amounts accrued in respect of contingent consideration
Amounts accrued in respect of business combinations
Goods and services tax
Other payables
Total trade and other payables
31 MARCH 2016
31 MARCH 2015
838
-
115
4,652
2,808
8,413
1,832
1,638
1,057
3,737
2,704
10,968
Terms and conditions of the above financial liabilities:
Trade payables are non-interest bearing and are normally settled within 60-day terms
•
• Contingent consideration is payable between April 2015 and December 2015 (Note 10)
• Other payables are non-interest bearing and have an average term of 2 months
Annual Report 2016 / 58
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 14. Funding Received in Advance
Represents Ministry of Education funding received in advance net of amounts owing but not received. The amount
is shown as a current liability consistent with the period the funding covers. Funding is received three times per year
on 1 March, 1 July and 1 November. Each funding round includes 75% of the estimated funding for the four months
ahead. At 31 March 2016 funding received in advance relates to April to June 2016. Funding receivable relates to the
remaining 25% of funding, adjusted for any changes in occupancy levels, in respect of February and March 2016.
$’000
Funding received in advance
Funding receivable
Total funding received in advance
15. Employee Entitlements
$’000s
Employee leave provisions
Accrued wages and salaries
Other
Total employee entitlements
16. Issued Capital
Authorised shares
31 MARCH 2016
31 MARCH 2015
20,216
(3,898)
16,318
18,668
(3,022)
15,646
31 MARCH 2016
31 MARCH 2015
2,812
2,930
330
6,072
2,582
2,272
237
5,091
Ordinary shares authorised, issued
and fully paid
Opening balance
Ordinary shares issued:
On incorporation
Issue of shares following share split (31
October 2014)
Issue of shares to certain Directors and
employees (31 October 2014)
Issue of shares (14 November 2014)
Share based payment (4 December 2014)
Issue of shares arising from business
combination (4 December 2014)
Issue of shares following initial public
offering (4 December 2014)
Issue of shares in relation to dividend
reinvestment plan (“DRP”)
Less share issue costs relating to shares
issued under DRP (18 December 2015)
Less share issue costs incurred relating to
the initial public offering
Closing balance
31 MARCH 2016
31 MARCH 2016
31 MARCH 2015
31 MARCH 2015
Number
$’000
Number
$’000
177,082,724
156,926
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,200
4,999,200
1,250,000
1,855,707
449,438
-
-
-
550
-
225
36,209,901
36,210
132,317,278
132,317
493,294
-
489
(51)
-
-
-
-
-
177,576,018
-
157,364
-
177,082,724
(12,376)
156,926
Evolve Education Group Limited / 59
For the year ended 31 March 2016Notes to the Consolidated Financial Statements Group’s dividend reinvestment plan, share issue costs
and taxation the cash paid dividend was $3.7m.
Subsequent to balance date the Board approved a
fully imputed final dividend of $4.2m or 2.38 cents per
share for the year ended 31 March 2016. The dividend
is due for payment on 20 June 2016 (refer Note 25).
Financial Covenants
The Group’s capital management, amongst other
things, aims to ensure that it meets its financial
covenants attached to any interest bearing loans and
borrowings that define capital structure requirements.
Breaches in meeting the financial covenants could
permit the bank to immediately call loans and
borrowings. There have been no breaches in the
financial covenants of any interest-bearing loans and
borrowings in the current or prior period.
16. Issued Capital (continued)
At balance date of the shares issued:
•
•
•
•
•
•
36,209,901 (2015: 36,209,901) are issued to the
vendors of the Lollipops Educare acquisition,
including 21,347,382 (2015: 21,347,382) to interests of
Mark Finlay, a director of the Company.
2,347,247 (2015: 2,296,121) are issued to Kern Group
NZ Limited, an entity related to Greg Kern, a
director of the Company.
2,285,369 (2015: 2,285,369) are issued to Wraith
Capital Group NZ Limited.
2,285,369 (2015: 2,285,369) are issued to Stuart
and Gillian James as trustees of the S.B. James
Superannuation Fund (a former related party).
1,032,595 (2015: 1,250,000) are issued to directors
and senior management identified at Note 22.
449,438 (2015: 449,438) are issued to Hayes
Knight Business Services (QLD) Pty Limited (or its
nominees) in consideration for the provision of
management assistance in connection with the
acquisition of certain ECE centres.
17. Capital Management
The Board’s policy is to maintain a strong capital
base so as to maintain investor, creditor and market
confidence and to sustain future development of
the business. Capital consists of share capital and
accumulated profits of the Group as well as cash and
cash equivalents. The Board of Directors monitors
the return on capital as well as the level of cash and
dividends to ordinary shareholders.
The Group manages its capital structure and makes
adjustments in light of changes in economic conditions
and the requirements of any financial covenants. To
maintain or adjust the capital structure, the Group may
adjust the dividend payment to shareholders, return
capital to shareholders or issue new shares.
Dividend Policy
The dividend policy of the Group is to pay dividends
between 40% and 60% of net profit after tax in
respect of the preceding half year period subject to
the discretion of the Board.
During the year the Company declared and paid an
interim dividend of $4.2m or 2.38 cents per share, fully
imputed. After adjustments for shares issued under the
Annual Report 2016 / 60
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 18. Earnings Per Share (EPS)
Basic and diluted EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following
reflects the income and share data used in the basic and diluted EPS computations:
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
Profit/(loss) attributed to ordinary equity holders of the parent ($’000s)
15,642
(8,058)
Weighted average number of ordinary shares for basic and diluted EPS
177,222,895
62,392,887
Basic (and diluted) earnings per share (expressed as cents per share)
8.8
(12.9)
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting
date and the date of authorisation of these financial statements.
19. Financial Assets and Liabilities
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s
overall level of financial risk is minimal and risk management is carried out by senior finance executives and the
Board of Directors.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group’s main interest rate risk arises from short-term and long-term borrowings. Borrowings issued at variable
rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair
value interest rate risk.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash
and cash equivalents as well as the use of loans. At balance date the Group had drawn $45.9m of the Group’s
$90.0m lending facilities exposing the Group to interest rate risk. Exposure to interest rate risk is reduced to an
insignificant level as the borrowings are repaid typically in the short term at the Company’s discretion.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying
amount, net of any provision for impairment of those assets, as disclosed in the Consolidated Statement of Financial
Position and Notes to the Consolidated Financial Statements. The Group has no significant credit risk exposure. The
Standard & Poors credit ratings of the banks where the Group holds cash are all AA- (source: www.rbnz.govt.nz).
Evolve Education Group Limited / 61
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 19. Financial Assets and Liabilities (continued)
Liquidity risk
Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents)
and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and
liabilities.
Financing arrangements
The Group’s financing arrangements comprise the following facilities:
•
Senior revolving facility - provided by ASB totalling $30.0 million for general corporate and working capital
purposes. The facility expires on 30 April 2019 (but is able to be extended by 12 months on each anniversary of
the financing arrangements with ASB’s consent),
• Acquisition facility - provided by ASB totalling $60.0 million for funding of future acquisitions. It expires on 30
April 2019 (but is able to be extended by 12 months on each anniversary of the financing arrangements with
ASB’s consent), and
•
Lease guarantee facility - provided by ASB for $3.0 million for bonds required for certain leasehold properties.
The facilities are secured by way of a first ranking general security agreement over all present and future shares
and assets and undertakings of the Group, together with an all obligations cross guarantee and indemnity.
Amounts drawn against the senior revolving and acquisition facilities are:
$’000
Facility Limits
Senior revolving facility
Acquisition facility
Total lending facilities
Utilisation
Senior revolving facility
Acquisition facility
Total borrowings
Total unused facilities
31 MARCH 2016
31 MARCH 2015
30,000
60,000
90,000
20,000
25,865
45,865
30,000
60,000
90,000
-
-
-
44,135
90,000
Remaining contractual maturities
The contractual maturity for the Group’s financial instrument liabilities (that is, trade payables) is disclosed at Note
13 and in terms of bank borrowings, above. The contractual maturities are based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the financial liabilities are required to be paid.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities presented represent a reasonable approximation of fair
value.
Annual Report 2016 / 62
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 20. Reconciliation of Profit/(Loss) After Tax to Net Operating Cash Flows
$’000
Profit/(loss) after tax
Adjustments for:
Depreciation and amortisation
Share-based payments
Contingent consideration adjustments
Expenses paid on behalf of the Group
Net finance expense
Deferred tax
Share of profits in joint venture
Other non cash items
Changes in operating assets and liabilities:
Working capital movements:
Increase/(decrease) in funding received in advance
(Increase)/decrease in other current assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in current income tax liabilities
Increase/(decrease) in employee entitlements
Other items:
Business combination completion payment classified
as investing
Change in contingent consideration provided classified
as investing
Net cash flows from operating acivities
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
15,642
(8,058)
2,157
-
(1,352)
-
1,275
(336)
(204)
1,139
(511)
(226)
(2,837)
612
957
439
775
(518)
1,040
1,662
(450)
(21)
-
2,674
1,023
5,032
674
955
937
(1,057)
1,638
18,891
(1,638)
2,532
The other items specified above relate to accruals classified as working capital on the Consolidated Statement of
Financial Position but as they relate to the acquisition of businesses they are investing activities for the purposes of
the Consolidated Statement of Cash Flows.
21. Commitments and Contingencies
Operating lease commitments – Group as lessee
The Group has entered into commercial leases on its premises. Future minimum rentals payable under non-
cancellable leases at balance date are:
$’000
Within one year
After one year but not more than five years
More than five years
Total
31 MARCH 2016
31 MARCH 2015
17,429
48,848
33,015
99,292
14,612
49,099
38,491
102,202
Evolve Education Group Limited / 63
For the year ended 31 March 2016Notes to the Consolidated Financial Statements Related party transactions arising during the year:
•
Transactions between the Company and its
Directors’, members of its key management and
certain employees can be summarised as follows:
• Directors’ remuneration - The Directors’ fees
pool is currently $500,000 per annum (plus
GST, if any), with the amount of fees paid
during the period disclosed in the table below.
The Directors’ are also entitled to be paid for
reasonable travel, accommodation and other
expenses incurred by them in connection with
their attendance at Board or Shareholder
meetings, or otherwise in connection with the
Group’s business. Alan Wham, the Group’s
Chief Executive Officer, does not receive
directors’ fees but does receive a salary and
this is included in the compensation of key
management personnel table below. In FY2015
Mark Finlay had a consultancy agreement with
the Group, with the $40,000 fees associated
with this included in the table below. This
arrangement ended in the current year with
no further amounts paid. Norah Barlow, Alan
Wham and Alistair Ryan received share based
payments in FY15, with the amount paid to Alan
Wham being included in the key management
personnel table below. A summary of Directors’
remuneration follows:
21. Commitments and Contingencies
(continued)
Bank Guarantees
$2,362,980 (2015: $2,042,000) of the lease guarantee
facility disclosed at Note 19 has been utilised.
There are no other material commitments or
contingencies.
22. Related Party Transactions
Parent entity
Evolve Education Group Limited is the parent entity.
Identity of Related Parties
Related parties of the Group are:
•
The Board of Directors, comprising Norah Barlow,
Alistair Ryan, Mark Finlay, Greg Kern and Alan
Wham.
• Certain senior executives of the Group, including
•
•
Alan Wham as Chief Executive Officer.
Kern Group (Paddington) Pty Limited and Kern
Group NZ Limited, companies associated with
Greg Kern.
LEP Limited, LEDC Limited, LEP Construction
Limited, Birkenhead Properties Limited, LEP1
Limited, LEDC1 Limited and Wildfire Consultants
Limited, companies associated with Mark Finlay.
• Wraith Capital Group NZ Limited, one of the
Company’s shareholders.
Related party relationships that ceased during the
year or in the prior period are:
•
•
•
Russell Daly resigned as director on 13 November
2014.
The Group’s Remuneration and People Committee
has defined key management. Consequently,
various members of the senior management
team included as related parties in 2015 are not
regarded as key management under the current
definition and it has been assumed this change
took effect on 1 April 2015.
Stuart Bruce James and Gillian Doreen James as
trustees of the S.B. James Superannuation Fund,
one of the Company’s shareholders, ceased being
related parties on 5 December 2014.
• On 31 December 2015 Jenny Yule ceased as Chief
Executive Officer of the Porse group and as such
ceased being a related party from that date.
Annual Report 2016 / 64
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 22. Related Party Transactions (continued)
$’000s
Norah Barlow
Alistair Ryan
Mark Finlay
Greg Kern
Total Directors Remuneration
$’000s
Norah Barlow
Alistair Ryan
Mark Finlay
Greg Kern
Russell Daly
Total Directors Remuneration
DIRECTORS
FEES
OTHER
YEAR
31 MARCH 2016
135
90
80
80
385
$’000
135
90
80
80
385
-
-
-
-
-
DIRECTORS
FEES
OTHER
PERIOD
31 MARCH 2015
51
34
26
26
-
137
63
63
40
-
-
166
$’000
114
97
66
26
-
303
• Directors’ indemnity and insurance – the Company has entered into a Deed of Indemnity and Access by
Deed Poll under which it has granted indemnities in favour of, and maintains insurance for, its present and
future directors’ (and directors’ of related companies) and certain employees of the Company, in each
case to the extent permitted by the Companies Act 1993, the Securities Act 1978 and the Financial Markets
Conduct Act 2013.
• Other transactions with parties related to the Directors’ of the Group: –
•
• On 31 March 2016 the Group acquired 5 Lollipops centres from LEDC Limited, a company that Mark
Finlay is a director of and shareholder in, for $5,787,000 net of purchase price adjustments of which
$5,687,000 was paid prior to balance date and a further $100,000 remains payable. The financial
impact of these acquisitions is included in disclosures at Note 10.
LEP Limited is the landlord of the Group’s head office and it is the landlord of six of the Lollipops
Educare Owned ECE Centres including 3 centres acquired during the year. Rent of $739,000 (2015:
$220,620) has been paid by the Group to LEP Limited during the period. A further commitment to
make future rent payments of $3,154,000 (2015: $4,834,000) over the next 2 to 7 years (depending on
the term of each lease) is included in Note 21. Certain properties ceased being owned by LEP Limited
during the period.
Following completion of the Lollipops Educare Acquisition in 2015, the Company became party to a
centre management agreement whereby the Group initially managed five ECE Centres for LEP Limited
and its related companies. Revenue earned from the management of these centres was $140,525
(2015: $23,354).
•
• Heath Finlay and Anna Finlay, the brother and sister-in-law respectively of Mark Finlay, were centre
directors at two centres owned by the Group. This employment relationship ended during the year. In
addition, Heath Finlay is a shareholder in the Company via his interest in the Heath Finlay Investment
Trust.
Evolve Education Group Limited / 65
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 22. Related Party Transactions (continued)
• Acquisition related costs paid to Wraith Capital Group NZ Limited of $239,000 (2015: nil) and Kern Group
of $230,000 (2015: nil) in respect of centre acquisitions in the current and prior period. At balance date
$7,750 was due to each party.
• Compensation of key management personnel of the Group:
Short-term employee benefits
Share-based payment transactions
Total compensation paid to key management personnel
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
$’000
$’000
813
-
813
1,285
475
1,760
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
• Other transactions with employees of the Group – rent of $242,000 (2015: $102,960) was paid to entities related
to Jenny Yule, the former Chief Executive Officer of the Porse group.
• Shareholding interests of Directors and key management of the Company are:
Shareholder
Mark Finlay
Kern Group NZ Limited
Alan Wham
Vivek Singh
Norah Barlow
Alistair Ryan
Other senior management
31 MARCH 2016
31 MARCH 2015
No of shares
21,347,382
2,347,247
562,304
306,711
81,790
81,790
-
24,727,224
No of shares
21,347,382
2,296,121
550,000
300,000
80,000
80,000
240,000
24,893,503
Shares were issued to Mark Finlay as partial settlement of the initial Lollipops acquisition in December 2014. The
shares issued to Alan Wham, Vivek Singh, Norah Barlow, Alistair Ryan and other senior management (in respect of
the prior period comparative) were issued pursuant to the share-based payment plan. The shares fully vested in
the period ended 31 March 2015. During the year Norah Barlow, Alistair Ryan, Greg Kern, Alan Wham and Vivek
Singh increased their shareholdings via electing to receive shares under the Group’s dividend reinvestment plan.
As referred to above, the definition of key management was confirmed during the year and consequently certain
members of the senior management team ceased being regarded as “key” for reporting purposes.
Related party transactions arising during the prior period:
The following transactions with persons or entities related to the Group arose as part of the Company’s initial public
offering (“IPO”) and acquisition of the initial portfolio of ECE centre acquisitions in the previous period:
•
•
ERA Education Management Pty Limited (“ERA”), a company related to a former shareholder of the Company,
received AUD$1,000,000, representing funding disclosed in Note 20 from S.B. James Superannuation Fund (see
below). The funds were held on behalf of the Group in an AUD bank account by ERA and were used to pay
AUD$900,000 of the Group’s creditors for expenses recognised in the Consolidated Statement of Comprehensive
Income. The remaining balance of the ERA AUD bank account was repaid to the Company prior to 31 March 2015.
Kern Group (Paddington) Pty Ltd (a company of which Greg Kern is a director and shareholder) received
AUD$1,000,000 in their capacity as financial advisers to the Company in relation to the IPO. This amount is included
in the share issue costs in Note 16.
Annual Report 2016 / 66
For the year ended 31 March 2016Notes to the Consolidated Financial Statements Short-term employee benefits
Share-based payment transactions
Total compensation paid to key management personnel
$’000
$’000
813
-
813
1,285
475
1,760
22. Related Party Transactions (continued)
• Wraith Capital Group NZ Limited received AUD$300,000 for the provision of consultancy services to the
•
Company in connection with the acquisition of the initial portfolio of ECE centres. This amount is included in the
acquisition costs in the Consolidated Statement of Comprehensive Income.
The Group entered into various loan agreements with Stuart Bruce James and Gillian Doreen James as trustees
of the S.B. James Superannuation Fund, Kern Group NZ Limited and with Wraith Capital Group NZ Limited.
The lenders agreed to provide unsecured loans to the Company of AUD$1,600,000 in aggregate (being
AUD$1,200,000 from Stuart Bruce James and Gillian Doreen James as trustees of the S.B. James Superannuation
Fund, AUD$200,000 from Kern Group NZ Limited and AUD$200,000 from Wraith Capital Group NZ Limited).
The loans were repaid in December 2014. In addition to the obligation to repay the loans, the Group paid an
additional AUD$1,600,000 (NZ$1,748,000) in aggregate by way of interest following the successful listing and this
is included in interest on other borrowings at Note 5.
23. Auditor’s Remuneration
During the period the following fees were paid or payable for services provided by the Group’s auditor,
PricewaterhouseCoopers, and to the previous auditors of the Company’s subsidiaries Porse In Home Childcare (NZ)
Limited, Porse Franchising (NZ) Limited, Porse Education & Training (NZ) Limited and For Life Education & Training (NZ)
Limited (the “PORSE Group”), Gardiner Knobloch:
YEAR
31 MARCH 2016
PERIOD
31 MARCH 2015
$’000
Audit services:
Audit of Group consolidated financial statements
Audit of special purpose financial statements as
at 31 August 2014
Fees paid to PricewaterhouseCoopers
Audit of financial statements of PORSE Group as
at 31 December 2014
Fees paid to Gardiner Knobloch
Total audit services
Other services provided by PricewaterhouseCoopers:
Due diligence services
Integration services
Taxation services
Consultancy services
Total other services
175
-
175
19
19
194
-
-
54
15
69
230
15
245
-
-
245
523
1,444
55
-
2,022
Total fees paid to PricewaterhouseCoopers for the year ended 31 March 2016 were $244,000 (2015: $2,267,000).
The audit of the special purpose financial statements was a condition of listing in December 2014.
Fees paid in respect of due diligence services relate to the listing of the Company and Group in the prior period.
The integration services relate to the subsequent integration requirements (for example, creating new employment
contracts, centralising supplier relationships) of the acquired businesses. These fees were incurred relevant to the
listing and immediately subsequent to listing, as set out in the Company’s Prospectus and Investment Statement.
Taxation services relate to compliance services and general tax advice.
Consultancy services relate to advice regarding executive remuneration.
Evolve Education Group Limited / 67
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI)
Consolidated Statement of Comprehensive Income
Revenue
Other income
Share in equity accounted investees profit
Total income
Expenses
Employee expenses
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Integration expenses
Depreciation
Amortisation
Other expenses
Total expenses
Results from operating activities
Net finance expense
Net profit before tax
Income tax expense
ACTUAL
31 MARCH 2016
PROSPECTUS
FORECAST
31 MARCH 2016
$’000
$’000
137,379
1,352
204
138,935
(74,793)
(17,474)
(15,232)
(1,204)
(871)
(1,687)
(470)
(4,922)
(116,653)
136,221
-
272
136,493
(72,474)
(16,082)
(16,560)
-
-
(1,520)
(418)
(5,672)
(112,726)
22,282
23,767
(1,096)
(674)
21,186
23,093
(5,544)
(6,466)
Net profit after tax attributed to the owners of the Company
15,642
16,627
Other comprehensive income
-
-
Total comprehensive income attributed to the owners of the Company
15,642
16,627
The mix and number of centres is different from that assumed in PFI due to the ongoing programme of acquiring
new ECE centres. Consequently, revenue and expenses include the effect of the new centre acquisitions. Expenses
also include acquisition and integration costs related to new centre acquisitions. Interest costs include interest on
debt funding incurred in relation to the acquisition of new centres. PFI assumed there would be no acquisitions over
and above the initial portfolio.
Annual Report 2016 / 68
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI) (continued)
Non-GAAP measures – EBITDA excluding acquisition and integration expenses
$’000
Net profit after tax
Net finance expense
Tax expense
Earnings before interest and tax (EBIT)
Depreciation
Amortisation
ACTUAL
31 MARCH 2016
PROSPECTUS
FORECAST
31 MARCH 2016
15,642
1,096
5,544
22,282
1,687
470
16,627
674
6,466
23,767
1,520
418
EBITDA including acquisition and integration costs
24,439
25,705
Acquisition expenses
Integration expenses
Total adjustments
1,204
871
2,075
-
-
-
EBITDA excluding acquisition and integration costs
26,514
25,705
Non-GAAP measures – Net profit after tax excluding acquisition and integration expenses
$’000
Net profit after tax
Acquisition expenses
Integration expenses (net of tax)
Total adjustments
ACTUAL
31 MARCH 2016
PROSPECTUS
FORECAST
31 MARCH 2016
15,642
16,627
1,204
627
1,831
-
-
-
Net profit after tax excluding acquisition and integration costs
17,473
16,627
Net profit after tax in the tables above includes the reversal of a $1.35m contingent consideration provision as
discussed at Notes 4 and 10.
Evolve Education Group Limited / 69
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI) (continued)
Consolidated Statement of Movements in Equity
ACTUAL
$’000
Balance at 31 March 2015
Profit for the period
Other comprehensive income for the period
Total comprehensive income
Dividends paid
Issue of share capital (net of costs)
CONTRIBUTED
EQUITY
(ACCUMULATED
LOSSES)/RETAINED
EARNINGS
TOTAL
156,926
(8,058)
148,868
-
-
-
-
438
15,642
-
15,642
(4,215)
-
15,642
-
15,642
(4,215)
438
Balance as at 31 March 2016
157,364
3,369
160,733
PROSPECTUS FORECAST
$’000
Balance at 31 March 2015
Profit for the period
Other comprehensive income for the period
Total comprehensive income
Dividends paid
Issue of share capital (net of costs)
CONTRIBUTED
EQUITY
(ACCUMULATED
LOSSES)/RETAINED
EARNINGS
TOTAL
156,945
(9,498)
147,447
-
-
-
-
489
16,627
-
16,627
(4,154)
-
16,627
-
16,627
(4,154)
489
Balance as at 31 March 2016
157,434
2,975
160,409
Annual Report 2016 / 70
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI) (continued)
Consolidated Statement of Financial Position
$’000s
Current assets
Cash and cash equivalents
Assets held for sale (investment in equity accounted joint venture)
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Investments in equity accounted joint venture
Deferred tax asset
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Funding received in advance
Employee entitlements
Lease liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Deferred tax liability
Borrowings
Finance lease liability
Total non-current liabilities
Total liabilities
Net Assets
Equity
Issued shared capital
Retained earnings
Total Equity
ACTUAL
31 MARCH 2016
PROSPECTUS
FORECAST
31 MARCH 2016
$’000
$’000
38,624
1,605
1,313
41,542
5,502
-
786
190,857
197,145
39,318
-
2,908
42,226
4,901
2,104
-
163,386
170,391
238,687
212,617
8,413
1,286
16,318
6,072
-
-
32,089
-
45,865
-
45,865
8,513
2,161
13,326
5,299
682
868
30,849
1,340
20,000
19
21,359
77,954
52,208
160,733
160,409
157,364
3,369
160,733
157,434
2,975
160,409
The higher debt reflects the funding of 20 acquisitions during the year which were not forecast. The increase in
intangibles, funding received in advance and employee entitlements reflects the additional centres acquired during
the year (in addition to the effect of acquisitions in the prior period).
Evolve Education Group Limited / 71
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI) (continued)
The asset held for sale relates to the Group’s investment in a joint venture. The investment has been reclassified from
“Investments in equity accounted joint venture” (as per the prospectus forecast above) to “Assets held for sale” (as
outlined at Note 9).
Trade receivables is lower compared to PFI due to debtors days outstanding being significantly lower than assumed
in the PFI. Other current liabilities, as per the PFI, have been reclassified to trade and other payables above.
Current income tax liabilities include tax receivable relating to the prior period.
The deferred tax asset is caused by the recognition of acquisition provisions for employee entitlements and fair value
adjustments relating to property, plant and equipment acquired.
Consolidated Statement of Cash Flows
$’000s
Cash flows from operating activities
Receipts from customers (including Ministry of Education funding)
Dividends received
Payments to suppliers and employees
Taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for purchase of businesses
Payments for software, property, plant and equipment
Interest received
Net cash flows from investing activities
Cash flows from financing activities
Share issue costs
Interest paid on borrowings
Bank borrowings drawn
Bank borrowings repaid
Dividends paid
Net cash flows from financing activities
ACTUAL
31 MARCH 2016
PROSPECTUS
FORECAST
31 MARCH 2016
$’000
$’000
136,779
121
(113,525)
(4,484)
18,891
(23,708)
(2,296)
159
(25,845)
(51)
(1,166)
141,790
(95,925)
(3,680)
40,968
137,489
-
(109,786)
(4,608)
23,095
(1,140)
(764)
-
(1,904)
-
(540)
-
-
(4,155)
(4,695)
Net cash flows
34,014
16,496
Cash and cash equivalents at beginning of period
4,610
22,822
Cash and cash equivalents at end of period
38,624
39,318
Annual Report 2016 / 72
For the year ended 31 March 2016Notes to the Consolidated Financial Statements 24. Comparison to Prospective Financial Information (PFI) (continued)
Payments to suppliers and employees includes payments relating to the acquisition and integration costs which were
not forecast. Payments for property, plant and equipment include expenditure deferred from the prior period.
The PFI assumed $20m of borrowings as at 31 March 2015, however this was only drawn in the current year. The
remaining borrowings relate to current year centre acquisitions. Payments for the purchase of businesses has been
discussed above under the heading Consolidated Statement of Financial Position.
25. Events After the Reporting Period
Dividend
On 23 May 2016 the Board approved the payment of a fully imputed final dividend of $4.2m or 2.38 cents per share
in respect of the year ended 31 March 2016. The dividend is payable on 20 June 2016.
Acquisitions
During April 2016 the Group acquired a further two ECE centres for consideration of $1.25m net of purchase price
adjustments. The acquisition is a continuation of the Group’s strategy to form a nationwide group of centrally-
owned and managed early childhood education providers. The goodwill acquired comprises the value of expected
synergies arising from the acquisitions including those that occurred during the reporting period.
A summary of the provisional net assets acquired is below. Acquisition costs of approximately $0.1m were incurred.
Assets
Other current assets
Property, plant and equipment
Liabilities
Funding received in advance
Employee entitlements
Other current liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Purchase consideration
Cash
Cash payable relating to retentions
Total consideration
$’000
16
84
100
(102)
-
(4)
(106)
(6)
1,256
1,250
1,210
40
1,250
In addition to the above the Group has entered into an agreements for the acquisition of a further two ECE
centres for $4.7m total consideration. At the date of signing these financial statements, one of the agreements is
unconditional and due for settlement in June 2016 and the other is conditional.
Evolve Education Group Limited / 73
For the year ended 31 March 2016Notes to the Consolidated Financial Statements Independent Auditor’s Report
to the shareholders of Evolve Education Group Limited
Report on the Financial Statements
We have audited the Group financial statements of Evolve Education Group Limited (the
“Company”) on pages 31 to 73, which comprise the statement of financial position as at 31
March 2016, the statement of comprehensive income, the statement of movements in equity and
the statement of cash flows for the year then ended, and the notes to the financial statements
that include a summary of significant accounting policies and other explanatory information for
the Group. The Group comprises the Company and the entities it controlled at 31 March 2016 or
from time to time during the financial year.
Directors’ Responsibility for the Consolidated Financial Statements
The Directors are responsible on behalf of the Company for the preparation and fair
presentation of these consolidated financial statements in accordance with New Zealand
Equivalents to International Financial Reporting Standards and for such internal controls as the
Directors determine are necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with International Standards on Auditing
(New Zealand). These standards require that we comply with relevant ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor’s judgement, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal controls relevant to the Company’s preparation
and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
We are independent of the Group. Our firm carries out other services for the Group in the areas
of other audit related assurance and non-assurance services, tax and executive remuneration
advisory services. The provision of these other services has not impaired our independence.
Annual Report 2016 / 74
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent Auditor’s Report
Evolve Education Group Limited
Opinion
In our opinion, the consolidated financial statements on pages 31 to 73 present fairly, in all
material respects, the financial position of the Group as at 31 March 2016, and its financial
performance and cash flows for the year then ended in accordance with New Zealand
Equivalents to International Financial Reporting Standards.
Restriction on Use of our Report
This report is made solely to the Company’s shareholders, as a body, in accordance with the
Companies Act 1993. Our audit work has been undertaken so that we might state those matters
which we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than
the Company and the Company’s shareholders, as a body, for our audit work, for this report or
for the opinions we have formed.
Chartered Accountants
23 May 2016
Auckland
Evolve Education Group Limited / 75
Corporate Governance
Evolve Education Group Limited (the “Company”) is a New
Zealand based and incorporated owner and provider of
early childhood education services whose fully paid ordinary
shares are listed on the NZX Main Board and ASX. The
Company trades under the ticker EVO on both the NZX and
ASX.
The Company is not subject to Chapters 6, 6A, 6B and 6C of
the Australian Corporations Act 2001 (Cth). The acquisition of
securities in the Company may be limited under New Zealand
law by the Takeovers Code (which restricts the acquisition of
control rights of more than 20% of the Company other than
via a takeover offer under the Code) or the effect of the
Overseas Investment Act 2005 (which restricts the acquisition
of New Zealand assets by overseas persons).
The Company’s Board is committed to upholding the
highest standards in corporate governance, business
behaviour and accountability in order to promote investor
confidence. Consistent with this, the Board has adopted
the Corporate Governance Best Practice Code set out
in the NZX Listing Rules, and, from listing, has approved
various corporate governance policies and charters.
These corporate governance policies and charters reflect
the principles and recommendations outlined in the third
edition of the Corporate Governance Principles and
Recommendations issued by the ASX Corporate Governance
Council (“Recommendations”) and are broadly consistent with
the New Zealand Financial Markets Authority’s Corporate
Governance in New Zealand – Principles and Guidelines.
To promote high standards of corporate governance and
ethical business conduct, the Company has a clear vision,
a set of overarching values, and a range of key policies
and procedures to guide the actions of the Company, its
Board, Senior Management and its employees in all areas
of the business. Many of these policies and guidelines are
foundational and work to fully implement these is ongoing.
Copies of key policies are available on the Company’s
website (www.evolveeducation.co.nz).
On 31 May 2016, the Company changed its listing category
on the ASX to that of an ASX Foreign Exempt Listing and,
as a result, it is exempt from complying with the majority
of the ASX Listing Rules. Instead the Company is required
to primarily comply with the NZX Listing Rules as its home
exchange, including in relation to corporate governance. The
Company has, however continued to report its approach to
governance against the eight fundamental principles of the
ASX Recommendations as set out in this section. Other than
as noted in this corporate governance section, the Company
has not departed from the Recommendations.
Annual Report 2016 / 76
Principle 1 – Lay Solid Foundations for Management
and Oversight
A listed entity should establish and disclose the respective
roles and responsibilities of its board and management and
how their performance is monitored and evaluated.
Role of the Board
The Board has ultimate responsibility for ensuring that the
Company is properly managed and to protect and enhance
Shareholders’ interests. The Board’s key responsibilities include
setting and overseeing the execution of the Company’s
strategy and supervising management in the operation of
the Company’s business. In addition to this, the Board is
responsible for:
• monitoring the financial performance of the Company,
including approving its dividend policies and financial
forecasts;
•
approving transactions relating to acquisitions and
divestments and capital expenditure above delegated
authority limits;
• monitoring the Company’s compliance and risk
management systems;
•
•
•
•
providing a specific governance focus on risks relating
to the Company’s physical operations, health and safety
policy, and risk mitigation programmes;
adopting reporting and disclosure policies and
procedures, and monitoring the integrity of such
procedures;
establishing and overseeing succession plans for Senior
Management; and
providing timely and complete communications to
Shareholders.
Board Charter
The Board has adopted a Board Charter which is to be
read in conjunction with the constitution of the Company,
the Companies Act 1993, the NZX Listing Rules and the ASX
Listing Rules as they apply to entities listed in the ASX Foreign
Exempt category.
The Board Charter specifies that the Board is the ultimate
decision-making body of the Company and is responsible for
setting the tone which determines the culture to permeate
the Company’s relationships with Shareholders, investors,
employees, customers, suppliers and the local and business
communities. Further, the Board is responsible for setting the
strategic direction of the Company and it is responsible for
selecting a Senior Management team which is charged with
Corporate Governance and Statutory Information operating the business. The Board also advises, oversees and counsels Senior Management, and is ultimately responsible for
monitoring the performance of the Company on behalf of all Shareholders.
The Board Charter provides guidance on a number of other areas for the Board, including values, Board responsibilities and
delegated authorities, responsibilities of individual Directors, conflicts of interest, independent advice and compliance with laws
and policies.
Delegation
The Board has delegated authority for the operations and administration of the Company to the Chief Executive Officer
(“CEO”), assisted by Senior Management. The CEO manages the Company in accordance with the strategy, plans and
delegations approved by the Board.
The Board will ensure that at all times it has implemented appropriate procedures to assess Senior Management’s performance.
All policies and delegated limits of authority are reviewed on a regular basis.
Diversity Policy
The Company has adopted a diversity policy which obliges the Board to set measurable objectives in achieving diversity,
including gender diversity. The Board is establishing appropriate measurable objectives for 2016/17, and will report the
Company’s progress against these measurable objectives in future annual reports. The Company is committed to being an
inclusive workplace that embraces and values diversity while always upholding the principle of meritocracy.
The Board believes that embracing diversity in its workforce contributes to the achievement of its corporate objectives
(including optimising financial performance in a competitive labour market) and enhances its reputation. It assists the Company
to recruit and retain the right people from a diverse pool of talented candidates, which in turn should assist the Company to:
• make more informed and innovative decisions, drawing on the wide range of ideas, experiences, approaches and
perspectives that employees from diverse backgrounds, with differing skill sets, bring to their roles; and
•
better represent the diversity of its stakeholders and markets.
In order to have a properly-functioning diverse workplace, discrimination, harassment, vilification and victimisation will not be
tolerated within the Company.
Gender Diversity
As noted above, the Board is responsible for monitoring the Company’s performance in meeting objectives set out in the
Diversity Policy. Information relating to the current representation of female employees of the Company, including holding senior
executive positions and on the Board is as follows:
Position
Board
Senior Executives (including Executive Directors)
Company-wide
As at 31 March 2015
Women
Men
1 (20%)
4 (50%)
>95%
4 (80%)
4 (50%)
<5%
As at 31 March 2016
Women
1 (20%)
4 (50%)
>92.5%
Men
4 (80%)
4* (50%)
<7.5%
* Senior Management includes the CEO and employees who report directly to the CEO. As at 31 March 2016 the Senior
Management team consists of nine positions. At that date the position of Chief Operating Officer is vacant and not included in
the above table.
At balance date the Group employs 2,099 women which represents 92.5% of the workforce (comparative information is not
available).
Performance Management
The Board has established a Remuneration and People Committee (formerly Governance and Remuneration Committee)
which is responsible for evaluating the performance of the CEO, and makes recommendations to the Board in relation to
remuneration and incentive arrangements for the CEO.
Evolve Education Group Limited / 77
Corporate Governance and Statutory Information During the reporting period, a formal review of the Senior
Management team performance was undertaken by the
CEO. The CEO’s conclusions and recommendations were then
reviewed by the Remuneration and People Committee, and
were taken into consideration when setting remuneration and
incentive arrangements for the Senior Management team.
The performance of the Company’s CEO and Senior
Management is measured against set criteria including
the Company’s financial performance, the Company’s
accomplishment of its strategic objectives and other non-
quantitative objectives as determined by the Board and
Remuneration and People Committee at the beginning of the
year.
Principle 2 – Structure of the Board to Add Value
A listed entity should have a board of an appropriate size,
composition, skills and commitment to enable it to discharge
its duties effectively.
Composition of the Board
The Company’s constitution provides for the Board to consist
of a minimum of three Directors and a maximum of eight
Directors. The current composition of the Board and details
of the skills, qualifications, experience, expertise and special
responsibilities of each current Director is disclosed under the
Board of Director profiles above.
Selection and Role of Chairperson
The Chair of the Board will be appointed by the Directors
from time to time, and the terms of office will be at the
Board’s discretion. The Chair must be an Independent Director.
The role and responsibilities of the Chair include:
•
•
providing leadership to the Board and to the Company;
ensuring the efficient organisation and conduct of the
Board;
Director Independence
The Company’s constitution specifies the minimum number of
Independent Directors to be two or, if there are eight or more
Directors, three or one-third of the total number of directors.
Norah Barlow, Greg Kern and Alistair Ryan are Independent
Directors, within the meaning of the NZX Listing Rules and
the Recommendations. Mark Finlay and Alan Wham are not
independent within the meaning of the NZX Listing Rules and
the Recommendations.
With regard to the NZX Listing Rules:
• Mark Finlay is not considered independent given his
shareholding in the Company on completion of the initial
public offering;
• Alan Wham is currently CEO of the Company and is
therefore not independent.
While the Board believes that all boards need to exercise
independent judgement, it also recognises that the need
for independence is to be balanced with the need for
relevant skills, industry experience and a workable board
size. The Board believes that it has recruited Directors with
the skills, experiences and characters necessary to discharge
the Board’s duties, and that the appointment of additional
Independent Directors is not warranted at this time.
Conflicts of Interest
The Company’s Conflict of Interest Policy provides guidance
regarding the impartial conduct of Directors, and identifying
and impartially managing any conflicts of interest. Where
a Director has a conflict of interest, the Director is obliged
to disclose their conflict to the Board, and enter it in the
interests register, in accordance with the Board Charter. The
Conflict of Interest Policy also addresses the extent to which
an interested Director may participate in and be present at
meetings when the conflict matter is being dealt with.
• monitoring Board performance annually;
Nomination and Appointment
•
•
•
•
facilitating Board discussions to ensure core issues facing
the Company are addressed;
briefing all Directors in relation to issues arising at Board
meetings;
facilitating the effective contribution and on-going
development of all Directors;
promoting consultative and respectful relations
between Board members and between the Board and
management; and
•
chairing Board and shareholder meetings.
The procedures for the appointment and removal of Directors
are ultimately governed by the Company’s constitution. The
Board has established a Remuneration and People Committee
(formerly the Governance and Remuneration Committee)
whose role is to identify and recommend to the Board
individuals for nomination as members of the Board taking
into account such factors as it deems appropriate, including
experience, qualifications, judgement and the ability to work
with other Directors.
The Board recognises the importance of succession planning
and this is being considered by the Board and Remuneration
and People Committee.
Annual Report 2016 / 78
Corporate Governance and Statutory Information Board Committees
Board Access to Information and Advice
The Board has established two sub-committees to assist with
the execution of the Board’s responsibilities – the Audit and
Risk Committee and the Remuneration and People Committee.
These committees review and analyse detailed information,
policies and strategies which fall within their areas of
responsibility and, where appropriate, make recommendations
to the full Board. The Committees do not take action or make
decisions on behalf of the Board unless specifically authorised
to do so by the Board.
The Board has not separately constituted a Nomination
Committee because the duties and responsibilities that are
normally delegated to a Nomination Committee have been
delegated to the Remuneration and People Committee.
The Board may establish additional committees of Directors
as required.
• Audit and Risk Committee
The Audit and Risk Committee is responsible for
overseeing the risk management, treasury, insurance,
accounting and audit activities of the Company,
reviewing the adequacy and effectiveness of internal
controls, reviewing the performance of external auditors,
reviewing the consolidated financial statements, and
making recommendations on financial and accounting
policies.
The current members of the Audit and Risk Committee
are Alistair Ryan (Chair), Norah Barlow and Greg Kern.
• Remuneration and People Committee
The Remuneration and People Committee is
responsible for considering new appointments to the
Board, overseeing management succession planning,
establishing employee incentive plans, reviewing and
approving remuneration arrangements for employees,
recommending to the Board the remuneration of
Directors and seeing that the Company and the Board
have in place, and follow, policies, procedures and
practices with the objective that all laws, rules and
requirements applicable to the Company and the
Directors are complied with.
The current members of the Remuneration and People
Committee are Greg Kern, Mark Finlay and Alistair Ryan.
Norah Barlow ceased being a member of the
Remuneration and People Committee and was replaced
by Greg Kern with the changes effective from June 2016.
The Company Secretary of the Company is directly
accountable to the Board through the Chair on all matters to
do with the proper functioning of the Board.
All Directors have access to the Senior Management team
to discuss issues or obtain information on specific areas in
relation to items to be considered at Board meetings or
other areas as considered appropriate. Key executives and
managers are invited to attend and participate in appropriate
sessions at Board meetings. Directors have unrestricted access
to the Company’s records and information.
Directors are entitled to have access to external auditors,
without management present to seek explanations or
additional information and to seek independent professional
advice with the Chair’s consent, which will not be
unreasonably withheld or delayed, and which will be at
the Company’s expense to assist them carrying out their
responsibilities.
Director Education
All Directors are responsible for ensuring that they remain
current in understanding their duties as Directors.
Directors’ Share Ownership
The Company’s Securities Trading Policy and Guidelines detail
the Company’s policy on, and rules for dealing in shares and
other securities in the Company. The Securities Trading Policy
and Guidelines applies regardless of whether the Company’s
securities are quoted on NZX or ASX and fundamentally
provides that insider trading is prohibited at all times. The
policy applies to all Directors, officers and employees of the
Company, with further more specific and stringent rules also
applying to trading in the Company’s securities by Directors
and certain senior employees, or employees performing
certain functions. The policy also prescribes certain ‘black-
out’ periods in which it is not permissible, subject to a limited
number of exceptions, for any officer or employee of the
Company to deal in the Company’s securities.
The table of Directors’ shareholdings is included in the
Disclosures section below.
Indemnities and Insurance
The Company has entered into a Deed of Indemnity and
Access by Deed Poll under which it has granted indemnities in
favour of, and maintains insurance for, its present and future
Directors (and Directors of related companies) and certain
employees of the Company, in each case to the extent
permitted by the Companies Act 1993.
Evolve Education Group Limited / 79
Corporate Governance and Statutory Information Board and Committee Meetings
The Board has established a regular schedule of board and committee meetings in order to carry out its obligations under its
Board Charter. A summary of the Directors’ attendances at each of the Board and Committee meetings between 1 April 2015
and the date of approving the financial statements (that is, 23 May 2016), as compared to the number of scheduled meetings
and teleconferences (in brackets) is shown in the table below.
Norah BarIow
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Board
18 (18)
18 (18)
17 (18)
17 (18)
18 (18)
Audit and Risk
Committee
Remuneration and
People Committee
5 (5)
-
4 (5)
5 (5)
-
5 (5)
5 (5)
-
5 (5)
-
Principle 3 – Act Ethically and Responsibly
A listed entity should act ethically and responsibly.
Code of Conduct
The Board recognises the need to observe the highest standards of corporate practice and business conduct. Accordingly, the
Board has adopted a formal Code of Conduct to be followed by all Directors, Senior Management and employees. The key
aspects of this code are to:
•
•
•
•
act with honesty, integrity and fairness and in the best interests of the Company and in the reasonable expectations of
Shareholders;
act in accordance with all applicable laws, regulations, policies and procedures;
have responsibility and accountability for individuals for reporting and investigating reports of unethical practices; and
use the Company’s resources and property properly.
Principle 4 – Safeguard Integrity in Corporate Reporting
A listed entity should have formal and rigorous processes that independently verify and safeguard the integrity of its corporate
reporting.
Risk management
Identification and mitigation of the Company’s risks are priorities for the Board. The Board is responsible for overseeing the
risk-management and compliance systems put in place by the Company’s management. The Audit and Risk Committee’s
role in assisting the Board is detailed in the Audit and Risk Committee Charter, which is available on the Company’s website
(www.evolveeducation.co.nz).
The objectives of the Audit and Risk Committee are to assist the Board in fulfilling its responsibilities relating to risk management
and internal control, financial reporting, legislative and NZX and ASX Listing Rule compliance, internal policies and industry
standards, the external and internal audit functions, tax management, treasury management, and includes, among other things:
•
•
•
promoting a culture of compliance;
providing a forum for communication between the Board and Senior Management in relation to audit and compliance
matters affecting the Company; and
reviewing and commenting on Senior Management’s plans for managing the material financial and reporting risks faced by
the Company.
In performing its duties, the Committee will maintain effective working relationships with the Board, management, and external
and internal auditors. The profiles of Committee members is disclosed under the section “Board Profiles” on page 28 and the
number of Committee members and attendance records is disclosed above.
Annual Report 2016 / 80
Corporate Governance and Statutory Information The Audit and Risk Committee reports to the Board annually
(and has done so in respect of the year ended 31 March
2016). Furthermore, the Board, before it approves the financial
statements for a particular financial period, requires that it
receives a declaration from the CEO and CFO, that, in their
opinion, the financial records of the Company have been
properly maintained and that the financial statements comply
with New Zealand accounting standards and give a true
and fair view of the financial position and performance of
the Company and that their opinion has been formed on the
basis of a sound system of risk management and internal
control which is operating effectively. The Board confirms that
it received such a declaration in respect of the year ended 31
March 2016.
The Audit and Risk Committee is also responsible for
considering the independence of the external auditor
and any potential conflicts of interest. The Audit and Risk
Committee reviews policies for the provision of non-audit
services by the external auditor and, where applicable, the
framework for pre-approval of audit and non-audit services.
Under the Audit and Risk Committee Charter, the Committee
is responsible for recommending the appointment and
assessing the performance of the external auditor. Further
information about the non-audit services provided during
the year ended 31 March 2016 is set out in the financial
statements included in this annual report.
In combination with the establishment of the Audit and Risk
Committee, the Board has approved a Risk Management
Policy because the Company views effective risk management
as key to achieving and maintaining its operational and
strategic objectives. The Risk Management Policy is available
on the Company’s website (www.evolveeducation.co.nz).
Principle 5 – Make Timely and Balanced Disclosure
A listed entity should make timely and balanced disclosure
of all matters concerning it that a reasonable person would
expect to have a material effect on the price or value of its
securities.
Shareholder communications
The Board recognises the importance of keeping investors
informed by communicating information in a timely, clear and
accurate way, whether positive or negative.
The Company is committed to providing a high standard of
communication to its Shareholders so that they have sufficient
information to make informed assessments of the Company’s
value and prospects. The Board has adopted a Shareholder
Communications Policy to promote effective communication
with Shareholders and encourage effective participation at
general meetings.
The Shareholder Communications Policy requires the Company
to:
•
•
•
ensure its website (www.evolveeducation.co.nz) is
maintained and updated within a reasonable timeframe;
ensure shareholder communications are distributed in
accordance with the Companies Act 1993 and the NZX
Listing Rules and the ASX Listing Rules as they apply to
entities listed in the ASX Foreign Exempt category; and
ensure it will use available channels and technologies to
communicate widely and promptly to shareholders.
The Shareholder Communications Policy outlines specific
requirements and guidelines relating to the communication
of and access to the Company’s annual meetings including
access to the external auditor, annual report, share registry
access, communication of full-year and half-year results,
corporate governance, media releases, and investor and
analyst briefings.
The Board has adopted a Continuous Disclosure Policy
to seek to ensure that timely and balanced disclosures
are communicated to the market in accordance with the
Company’s continuous disclosure obligations under the NZX
and ASX Listing Rules. The Company changed its ASX listing
category from a Standard Listing to an ASX Foreign Exempt
Listing effective from the commencement of trading on 31
May 2016. As an ASX Foreign Exempt Listing, the Company
is required to immediately provide ASX with all of the
information that it provides to NZX that is, or is to be, made
public.
Both the Shareholder Communications Policy and Continuous
Disclosure Policy can be found on the Company’s website
(www.evolveeducation.co.nz).
Principle 6 – Respect the Rights of Security Holders
A listed entity should respect the rights of its security holders
by providing them with appropriate information and facilities
to allow them to exercise those rights effectively.
The Company’s Shareholder Communications Policy (as
referred to under Principle 5) is designed to ensure that
communications with Shareholders and all other stakeholders
are managed efficiently.
The Company currently keeps shareholders informed through:
•
•
•
•
the annual report;
the interim report;
the annual meeting of shareholders;
disclosure to the NZX and ASX in accordance with the
Evolve Education Group Limited / 81
Corporate Governance and Statutory Information Company’s Shareholder Communications Policy and
Continuous Disclosure Policy; and
•
the Investor Announcements section on the Company
website.
The Chair, CEO and CFO are the points of contact for
shareholders and analysts.
The Board considers the annual report to be an essential
opportunity for communicating with shareholders. The
Company publishes its annual and interim results and reports
electronically on the Company’s website. Investors may also
request a hard copy of the annual report by contacting
the Company’s share registrar, Link Market Services Limited.
Contact details for the registrar appear at the end of this
report.
The Company considers the annual meeting to be a valuable
element of its communications programme. The Chair will
provide an opportunity for shareholders to raise questions
for their Board. The Chair may ask the CEO and any relevant
manager of the Company to assist in answering questions
if required. The Company’s external auditors will also attend
the annual meeting, and are available to answer questions
relating to the conduct of the external audit and the
preparation and content of the auditor’s report.
Principle 7 – Recognise and Manage Risk
A listed entity should establish a sound risk management
framework and periodically review the effectiveness of that
framework.
The Company views effective risk management as key to
achieving and maintaining its operational and strategic
objectives.
The Directors of the Company are responsible for reviewing
and ratifying the risk management structure, processes
and guidelines which are to be developed, maintained and
implemented by management. The active identification of
risks and implementation of mitigation measures is also the
responsibility of management.
The Board has delegated certain activities to the Audit and
Risk Committee and has adopted a Risk Management Policy
(as referred to under Principle 4 above).
The Audit and Risk Committee is responsible for ensuring
there are adequate policies in relation to risk management,
compliance and internal control systems. They monitor the
Company’s risk management by overseeing management’s
actions in the evaluation, management, monitoring and
reporting of material operational, financial, compliance and
strategic risks.
Annual Report 2016 / 82
During the reporting period, the Audit and Risk Committee
conducted a review of the effectiveness of the Company’s
risk management and internal control processes, including the
Company’s risk management plan framework, and deemed
that it is operating effectively.
Senior Management must report on risk management at each
meeting of the Board and the Audit and Risk Committee.
The Company does not have an internal audit function, but
through the steps outlined above the Board ensures the
Company is reviewing, evaluating and continually improving
the effectiveness of its risk management and internal control
processes.
The Company considers that it does not currently have any
material exposure to environmental, economic or social
sustainability risks.
Health and safety
As a leading provider of early childhood education the
safety of our employees and children is paramount. As is
best practice appropriate governance structures have been
established at the Board level to ensure that matters such
as health and safety risk both for staff and our children is
effectively governed and managed. Improving our health and
safety performance is important to us and for this reason the
Board has adopted lead and lag measures that will allow the
Company to monitor and effect proactive improvements for
the successful implementation of new standards on process
safety, and achieving a reduction in the rate of injuries.
Further, a group wide Health and Safety Management system
which accommodates all aspects of the Company’s health
and safety requirements has been developed and is being
implemented.
Principle 8 – Remunerate Fairly and Responsibly
A listed entity should pay director remuneration sufficient
to attract and retain high quality directors and design its
executive remuneration to attract, retain and motivate high
quality senior executives and to align their interests with the
creation of value for security holders.
The Board has a Remuneration and People Committee (as
referred to in Principle 1 above and under Director and
Employee Remuneration below). One of that Committee’s
principal functions is to oversee the remuneration strategies
and policies of the Company.
The Company distinguishes the structure of non-executive
Directors’ remuneration from that of executive Directors.
Corporate Governance and Statutory Information Director and Employee Remuneration
Overall Remuneration Philosophy
The Board is committed to an executive remuneration
framework that is focused on achieving a high performance
culture and linking executive pay to the achievement of the
Company strategy and business objectives which, ultimately,
create sustainable long-term value for shareholders.
As part of ensuring that management is motivated to create
and deliver sustainable Shareholder wealth, the Board utilises
a Remuneration and People Committee which operates
under the delegated authority of the Board. The role and
membership of the Committee is set out above.
The Committee ensures that rewards for executives are
strongly aligned with the Company’s performance. The
Company is committed to ensuring clarity and transparency
about its remuneration policy and practice.
The objectives of the Committee are to:
•
•
•
•
establish a clear framework for oversight and
management of the Company’s remuneration structures,
policies, procedures and practices;
consider and recommend new appointments to the
Board and oversee management succession planning;
fairly and responsibly reward Directors and Senior
Management and other employees of the Company
having regard to the performance of the Company, the
performance of these officers and employees and the
general external pay environment; and
implement policies, procedures and practices for the
Company and Board to ensure compliance with all
laws, rules and regulations which are applicable to the
Company and the Directors, including the Companies Act
1993 (Companies Act), the Constitution, the NZX Listing
Rules and the ASX Listing Rules as they apply to entities
listed in the ASX Foreign Exempt category.
The number of committee meetings and attendance records
of committee members is specified on page 80.
The performance of all Directors and Senior Management
is reviewed periodically in accordance with the terms of the
Remuneration and People Committee Charter. As discussed
above, during the reporting period, the performance of
Senior Management was reviewed and, this being the first
full year of operations, the performance of Directors will be
conducted during June and July 2016.
In its annual report, meeting documents, ASX and NZX
announcements and on its website, the Company has
provided fulsome disclosure in relation to the skills,
experience and diversity of its Board and as such it does
not consider that a separate ‘skills matrix’ (as suggested by
Recommendation 2.2) will enhance the Company’s disclosure
in relation to these matters.
The Board does not consider it necessary, in light of the
size of the Board and relatively low turnover of Directors,
to have a separate induction program for new Directors (as
suggested by Recommendation 2.6). All new Directors will of
course be given sufficient support from the Board in order to
familiarise themselves with the Company and its governance
protocols.
Director Remuneration
Norah Barlow, as Chairperson, receives $135,000 per annum.
The non-executive Directors each receive $80,000 per annum.
Alistair Ryan, as Chairperson of the Audit and Risk Committee,
receives an additional $10,000 per annum. Alan Wham as
CEO does not receive additional remuneration in his capacity
as a Director. The Directors’ fees currently total $385,000 per
annum.
However, the Company has set the Director fee pool
for all Directors at $500,000 per annum in aggregate in
order to accommodate the appointment of an additional
director if required and to allow further payments to be
made to Directors should additional work be required. The
Directors are also entitled to be paid for reasonable travel,
accommodation and other expenses incurred by them in
connection with their attendance at Board or Shareholder
meetings, or otherwise in connection with the Company’s
business.
Executive Remuneration
The Company’s total remuneration policy for the Senior
Management team provides the opportunity for them to be
paid, where performance merits, at the market median for
equivalent market-matched roles. In determining an executive’s
total remuneration, external benchmarking is undertaken
to ensure comparability and competitiveness, along with
consideration of an individual’s performance, skills, expertise
and experience.
The Remuneration and People Committee reviews and
approves annual performance appraisal outcomes for all
members of the Senior Management team reporting to
the CEO and utilises market information and trends when
considering and confirming remuneration arrangements.
External benchmarking may be conducted independently,
to provide industry specific data to assist the Remuneration
and People Committee in approving appropriate levels of
remuneration for these executives.
Evolve Education Group Limited / 83
Corporate Governance and Statutory Information The annual remuneration review process requires “one over one” approval. This means that approval of the Board is required
for any changes to the CEO’s remuneration, on recommendation by the Remuneration and People Committee. Further,
recommendations from the CEO in relation to remuneration of the Senior Management team require Remuneration and People
Committee approval.
Total executive remuneration may incorporate fixed and variable components. Executive remuneration may contain any or all of
the following:
•
•
•
•
fixed remuneration;
performance-based remuneration;
equity-based remuneration; and
termination payments.
The Company is considering the adoption of a performance share rights long-term executive incentive scheme for the CEO and
its Senior Management.
CEO Remuneration
The CEO has a base salary of $450,000 per annum (gross) and is entitled to the use of a mobile telephone, laptop and car
park. The Company reimburses the CEO for any expenses reasonably incurred by him in the performance of his duties under his
employment agreement. There is no prescribed limit on the expenses that can be reimbursed to the CEO, but all expenses must
be incurred in accordance with expense policies authorised by the Board. Alan Wham was also issued 550,000 Shares in the
Company in 2015.
Director Remuneration Statement
The Company’s Directors holding office during the year ended 31 March 2016 are listed below. Pursuant to section 211(f) of the
Companies Act 1993, the total amount of remuneration and other benefits received by each Director during the year ended 31
March 2016 are provided below.
($000’s)
Norah BarIow
Alistair Ryan
Greg Kern
Mark Finlay
Alan Wham
Total
Directors Fees
Cash Salary and
Other Payments
Total
135
90
80
80
-
385
-
-
-
-
508
508
135
90
80
80
508
893
Directors of Subsidiary Companies
The remuneration of employees acting as Directors of subsidiaries is disclosed in the relevant banding of remuneration set out
under the heading “Employee Remuneration” below. During the year ended 31 March 2016 employees did not receive additional
remuneration for acting as Directors of subsidiary companies.
Employee Remuneration
The number of employees or former employees (including employees holding office as Directors of subsidiaries, but not
including the CEO who is a Director of the Company) who received remuneration and other benefits (including share-based
payments) valued at or exceeding $100,000 during the year ended 31 March 2016 are specified below.
Annual Report 2016 / 84
Corporate Governance and Statutory Information Remuneration Band
$100,001 - $110,000
$110,001 - $120,000
$120,001 - $130,000
$130,001 - $140,000
$140,001 - $150,000
$150,001 - $160,000
$160,001 - $170,000
$170,001 - $180,000
$180,001 - $190,000
$200,001 - $210,000
$300,001 - $310,000
$320,001 - $330,000
$500,001 - $510,000
Total
Total
5
4
3
1
1
1
1
1
2
1
1
1
1
23
In the case of businesses acquired, the analysis above relates to remuneration and benefits paid from the date the Company
acquired those businesses.
Disclosure of Directors’ Interests
Section 140(1) of the New Zealand Companies Act 1993 requires a director of a company to disclose certain interests. Under
subsection (2) a director can make disclosure by giving a general notice in writing to the company of a position held by a
director in another named company or entity. Details of directors’ general disclosures entered in the relevant interests register
for the Company during the year to 31 March 2016 are as follows:
Director
Position
Company
Norah BarIow
Director
Director/Shareholder
(ceased 31 July 2015)
Trustee
Appointee
Member
Careerforce
Cooks Global Foods Limited
Pataka Foundation Trust
Allied Health, Science & Technical Workforces Governance Group
Governance Board, Aging Well, National Health Sciences
Mark Finlay
Director and indirect shareholder
Director (ceased 13 August 2015)
LEDC1 Limited
Lollipops Educare Halfmoon Bay Ltd
There were no entries in the interests register for Alistair Ryan, Alan Wham or Greg Kern during the year.
Disclosure of Directors’ Interests in share transactions
Directors disclosed the following acquisitions and disposals of relevant interests in shares during the year ended 31 March 2016:
Norah Barlow:
•
Issue of 1,790 shares by the Company on 18 December 2015 under the Company’s dividend reinvestment plan.
Mark Finlay:
• Nil
Greg Kern:
•
Issue of 51,126 shares by the Company to Kern Group NZ Limited on 18 December 2015 under the Company’s dividend
reinvestment plan.
Evolve Education Group Limited / 85
Corporate Governance and Statutory Information •
Issue of 252 shares by the Company to Gregory James
Kern on 18 December 2015 under the Company’s
dividend reinvestment plan.
Alistair Ryan:
•
Issue of 1,790 shares by the Company on 18 December
2015 under the Company’s dividend reinvestment plan.
Alan Wham:
is primarily regulated by the NZX, complies with the NZX
Listing Rules, and is exempt from complying with most of
the ASX Listing Rules (based on the principle of substituted
compliance).
Dividend Policy
Dividends and other distributions with respect to the Shares
are made at the discretion of the Board and depend on a
number of factors, including:
•
Issue of 12,304 shares by the Company on 18 December
2015 under the Company’s dividend reinvestment plan.
Disclosure of Directors’ Interests in Shares
•
•
current profitability;
current and medium-term capital expenditure
requirements;
Directors disclosed the following relevant interests in Shares as
at 31 March 2016:
• working capital requirements;
Director
Norah Barlow
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Number of Shares in which a
relevant interest is held
81,790
21,347,382
2,347,247
81,790
562,304
Of the shares held by Mark Finlay:
•
•
20,138,542 ordinary shares were issued to Mark Finlay
and Geoffrey Hosking as trustees of the Mark Finlay
Investment No.2 Trust, and
1,208,840 fully-paid ordinary Shares were issued to Mark
Finlay and Mark Dobson Trustee Company Limited as
trustees of the HR Finlay Family Trust.
Mark Finlay is a beneficiary of the Mark Finlay Investment
No.2 Trust but is not a beneficiary of the HR Finlay Family
Trust.
Of the shares held by Greg Kern:
•
2,336,495 ordinary shares were issued to Kern Group NZ
Limited, and
•
10,752 shares were issued to Gregory James Kern
Company Disclosures
Stock Exchange Listings
The Company is listed on both the New Zealand and
Australian stock exchanges. ASX approved a change in
the Company’s ASX admission category from a Standard
Listing to an ASX Foreign Exempt Listing, effective from the
commencement of trading on 31 May 2016. The Company
continues to have a full listing on the NZX Main Board, and
the Company’s shares are still listed on the ASX. The Company
Annual Report 2016 / 86
•
current capital structure, having regard to the risks
presented by short and medium term economic and
market conditions and estimated financial performance;
and
•
available imputation credits.
The current intention of the Board is to pay dividends on a
half-yearly bases of between 40% and 60% of net profit after
tax in respect of the preceding half-year period.
The payment of dividends is not guaranteed and the
Company’s dividend policy may change. No guarantee can
be given about future dividends or the level of imputation
of such dividends (if any) as these matters will depend upon
future events including the profitability, growth opportunities,
and financial and taxation position of the Company, and the
Board’s discretion.
In respect of the year ended 31 March 2016, a final and fully
imputed dividend of 2.38 cents per share was paid on 20
June 2016 to all shareholders on the company’s register at
the close of business on 8 June 2016. The company’s Dividend
Reinvestment Plan (announced in November 2015) applied
to this final dividend with no discount. The closing date for
electing to participate in the Dividend Reinvestment Plan for
this final dividend was 5.00pm (New Zealand time) on 9 June
2016. Full details of the company’s Dividend Reinvestment
Plan are available on the Company’s website at www.
evolveeducation.co.nz. This brings the total dividend paid in
respect of the year ended 31 March 2016 to 4.76 cents per
share, fully imputed, following the payment of an interim
dividend on 18 December 2015.
Net Tangible Assets
The Company’s net tangible assets as at 31 March 2016 were
($0.17) per share (31 March 2015 ($0.11) per share).
Corporate Governance and Statutory Information Corporate Governance
and Statutory Information
be comparable to the regulation of the issue of new
securities under the ASX Listing Rules.
• A waiver from listing rule 15.7 to the extent necessary
to permit the Company to permit announcements
simultaneously to both ASX and NZX.
• A waiver from listing rules 15.13, 15.13A and 15.13B
to the extent necessary to permit the Company to
divest shareholders of less than a minimum holding in
accordance with the requirements of the NZX Listing
Rules and the procedures set out in the Company’s
constitution.
Annual Meeting
The Company’s Annual Meeting of Shareholders will be held
in Auckland on 25 August 2016 at 2 pm. A notice of Annual
Meeting and Proxy Form will be circulated to Shareholders in
July 2016.
Donations
The Company made donations of $6,980 during the year
ended 31 March 2016.
Credit Rating
The Company has no credit rating.
NZX and ASX Waivers
The Company did not rely upon any waiver granted by NZX
Limited during the year ended 31 March 2016.
As part of its application to list on the ASX, the Company
applied for and was granted waivers from the ASX Listing
Rules that are standard for a New Zealand company listed
on both the NZX Main Board and the ASX. The Company
relied on these waivers for the period ending 31 March 2016:
• A waiver from listing rule 6.10.3 to the extent necessary
to permit the Company to set the “specified time” to
determine whether a shareholder is entitled to vote
at a shareholders’ meeting in accordance with the
requirements of the relevant New Zealand legislation.
• A waiver from listing rule 7.1 to the extent necessary to
permit the Company to issue more than 15% of its shares
without shareholder approval on the following conditions:
•
•
•
The Company remains subject to, and complies with,
the NZX Listing Rules of NZX Limited (“NZX”) with
respect to the issue of new securities.
The Company certifies to ASX on an annual basis (on
or about 30 June each year) that it remains subject
to, has complied with, and continues to comply with,
the NZX Listing Rules with respect to the issue of new
securities.
If the Company becomes aware of any changes to
the application of the NZX Listing Rules with respect
to the issue of new securities, or that the Company
is no longer in compliance with the NZX Listing Rules
with respect to the issue of new securities, it must
immediately advise ASX.
• Without limiting ASX’s right to vary or revoke its decision
under listing rule 18.3, ASX reserves the right to revoke the
waiver from listing rule 7.1 above if:
•
•
the Company fails to comply with any of the above
conditions; or
there are changes to the NZX Listing Rules in
respect of the issue of new securities such that, in
ASX’s opinion, the regulation of the issue of new
securities under those NZX Listing Rules ceases to
Evolve Education Group Limited / 87
Corporate Governance and Statutory Information
Shares on Issue
The total number of ordinary shares on issue as at 31 March 2016 and at 31 May 2016 was 177,576,018. Each share confers on
its holder the right to attend and vote at a meeting of Evolve Education, including the right to cast one vote in a poll on any
resolution.
Analysis of Shareholding at 31 May 2016
Size of holding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Number of
Shares
Holding
Quantity %
Number of
Shareholders
53
218
244
492
55
%
4.99%
20.53%
22.98%
46.32%
5.18%
34,663
792,522
2,029,993
15,109,187
159,609,653
1,062
100.00%
177,576,018
Twenty Largest Shareholders at 31 May 2016
The 20 largest shareholders of fully paid ordinary shares as at 31 May 2016 were:
Name
New Zealand Central Securities Depository Limited
Mark Finlay & Geoffrey Hosking
Citicorp Nominees Pty Limited
National Nominees Limited
Forsyth Barr Custodians Ltd
Russell Thompson & Geoffrey Hosking
Scottfin ECE Limited
JPMorgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Brispot Nominees Pty Ltd
Kern Group NZ Limited
Wraith Capital Group NZ Limited
Stuart Bruce James & Gillian Doreen James
HSBC Custody Nominees (Australia) Limited A/C 3
CS Fourth Nominees Pty Limited
UBS Nominees Pty Ltd
Investment Custodial Services Limited
Mark Finlay & Mark Dobson Trustee Company Limited
RBC Investor Services Australia Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Leveraged Equities Finance Limited
Total - twenty largest shareholders
Total number of shares on issue
Annual Report 2016 / 88
Number of
Shares
46,276,925
20,138,542
15,139,141
14,241,902
9,720,726
8,257,069
6,605,450
5,831,995
3,990,923
3,487,772
2,336,495
2,285,369
2,285,369
2,272,724
2,073,776
1,896,598
1,215,196
1,208,840
1,044,069
844,813
833,090
151,986,784
177,576,018
0.02%
0.45%
1.14%
8.51%
89.88%
100.00%
% of Shares
26.06%
11.34%
8.53%
8.02%
5.47%
4.65%
3.72%
3.28%
2.25%
1.96%
1.32%
1.29%
1.29%
1.28%
1.17%
1.07%
0.68%
0.68%
0.59%
0.48%
0.47%
85.60%
Name
National Nominees New Zealand
Accident Compensation
HSBC Nominees (New Zealand)
BT NZ Unit Trust Nominees Ltd
Guardian Nominees No 2 Ltd
Citibank Nominees (NZ) Ltd
New Zealand Permanent Trustees
BNP Paribas Nominees NZ
JPMorgan Chase Bank
Cogent Nominees Limited
Public Trust RIF Nominees
Tea Custodians Limited
Cogent Nominees (NZ) Limited
New Zealand Permanent Trustees
Private Nominees Limited
Total - shares held by NZCSD
Name
Evolve Education Group Limited*
Geoffrey Hosking**
Mark Finlay***
Milford Asset Management Limited
Regal Funds Management Pty Limited
Westpac Banking Corporation
Paradice Investment Management Pty Limited
Total
Total number of shares on issue
Number of Shares
Held by NZCSD
% of NZCSD
18,666,484
8,612,685
7,683,843
2,277,339
2,191,544
1,365,535
1,330,000
1,289,317
1,046,178
702,611
449,244
354,013
249,899
50,000
8,233
Number of
Shares
44,765,446
28,395,611
21,347,382
16,249,648
14,700,870
11,687,874
10,505,000
147,651,831
177,576,018
Shares
40.34%
18.61%
16.60%
4.92%
4.74%
2.95%
2.87%
2.79%
2.26%
1.52%
0.97%
0.76%
0.54%
0.11%
0.02%
% of Shares
25.21%
15.99%
12.02%
9.15%
8.28%
6.58%
5.92%
83.15%
46,276,925
100.00%
Shareholder Information * New Zealand Central Securities Depository Limited (NZCSD) provides a custodian depository service that allows electronic
trading of securities to its members and does not have a beneficial interest in these shares. As at 31 May 2016, the
shareholdings in the Company held through NZCSD were:
Name
National Nominees New Zealand
Accident Compensation
HSBC Nominees (New Zealand)
BT NZ Unit Trust Nominees Ltd
Guardian Nominees No 2 Ltd
Citibank Nominees (NZ) Ltd
New Zealand Permanent Trustees
BNP Paribas Nominees NZ
JPMorgan Chase Bank
Cogent Nominees Limited
Public Trust RIF Nominees
Tea Custodians Limited
Cogent Nominees (NZ) Limited
New Zealand Permanent Trustees
Private Nominees Limited
Total - shares held by NZCSD
Substantial Shareholders
Number of Shares
Held by NZCSD
% of NZCSD
Shares
18,666,484
8,612,685
7,683,843
2,277,339
2,191,544
1,365,535
1,330,000
1,289,317
1,046,178
702,611
449,244
354,013
249,899
50,000
8,233
40.34%
18.61%
16.60%
4.92%
4.74%
2.95%
2.87%
2.79%
2.26%
1.52%
0.97%
0.76%
0.54%
0.11%
0.02%
46,276,925
100.00%
According to notices given under Section 293 of the Financial Markets Conduct Act 2013, the following persons were substantial
shareholders in the ordinary shares of the Company (being the only class of quoted voting products) at balance date in
respect of the number of shares set opposite their names.
Name
Evolve Education Group Limited*
Geoffrey Hosking**
Mark Finlay***
Milford Asset Management Limited
Regal Funds Management Pty Limited
Westpac Banking Corporation
Paradice Investment Management Pty Limited
Total
Total number of shares on issue
Number of
Shares
44,765,446
28,395,611
21,347,382
16,249,648
14,700,870
11,687,874
10,505,000
147,651,831
177,576,018
% of Shares
25.21%
15.99%
12.02%
9.15%
8.28%
6.58%
5.92%
83.15%
According to notices given under ASX Listing Rule 4.10.4, the following persons were substantial shareholders in the Company at
31 May 2016 being a date on or after the entity’s balance date and not more than 6 weeks before the annual report is given
to ASX.
Evolve Education Group Limited / 89
Shareholder Information Name
Evolve Education Group Limited*
Geoffrey Hosking**
Mark Finlay***
Milford Asset Management Limited
Regal Funds Management Pty Limited
Westpac Banking Corporation
Paradice Investment Management Pty Limited
Total
Total number of shares on issue
*Refer Restricted Securities below.
Number of
Shares
44,765,446
28,395,611
21,347,382
16,249,648
14,700,870
11,687,874
10,505,000
147,651,831
177,576,018
% of Shares
25.21%
15.99%
12.02%
9.15%
8.28%
6.58%
5.92%
83.15%
** Geoffrey Hosking as trustee of the Mark Finlay Investment No. 2 Trust together with the other trustee (Mark Finlay) are the
registered holders and beneficial owners of 20,138,542 shares. Geoffrey Hosking as trustee of the 111 Investment Trust together
with the other trustee (Russell Thompson) are the registered holders and beneficial owners of 8,257,069 shares.
***Mark Finlay as trustee of the Mark Finlay Investment No. 2 Trust together with the other trustee (Geoffrey Hosking) are the
registered holders and beneficial owners of 20,138,542 shares. Mark Finlay as trustee of the HR Finlay Family Trust together with
the other trustee (Mark Dobson Trustee Company Limited) are the registered holders and beneficial owners of 1,208,840 shares.
Restricted Securities
44,765,446 shares, representing 25.21% of the total shares on issue, are subject to escrow arrangements whereby the respective
shareholders have agreed not to sell, transfer or otherwise dispose of their Shares until at least the day that is two years after
the date of commencement of quotation and trading of shares on the NZX Main Board (being 5 December 2014). See pages
60 - 61 of Evolve Education’s Investment Statement dated 14 November 2014 for further information.
Shareholders Holding Less Than a Marketable Parcel
As at 31 May 2016 based on the market price of A$0.885, there were five holders that held less than a marketable parcel of
A$500 of Evolve Education shares under the ASX Listing Rules.
Annual Report 2016 / 90
Shareholder Information Subsidiary Company
Directors
The following persons held office as Directors of the Company’s subsidiaries during the year ended 31 March 2016 or, in the
case of acquired subsidiaries, from the date of acquisition:
Company Name
Evolve Group 1 Limited
Evolve Group 2 Limited
Evolve Group 3 Limited
Evolve Group 4 Limited
Evolve Group 5 Limited
Evolve Group 6 Limited
Evolve Management Group Limited
ECE Management Limited
Lollipops Educare Holdings Limited
Lollipops Educare Limited
Lollipops Educare Centres Limited
Lollipops Educare (Hastings) Limited
Lollipops Educare (Birkenhead) Limited
Directors
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Mark Finlay
Vivek Singh
Alan Wham
Mark Finlay
Vivek Singh
Alan Wham
Mark Finlay
Vivek Singh
Alan Wham
Mark Finlay
Vivek Singh
Alan Wham
Mark Finlay
Russell Warren Thompson
Vivek Singh (appointed 29 October 2015)
David Smith (appointed 29 October 2015, ceased 24 March 2016)
Alan Wham (appointed 29 October 2015)
Evolve Education Group Limited / 91
Subsidiary Company
Directors
Lollipops Educare (Halfmoon Bay) Limited (50%)
Evolve Home Day Care Limited
Au Pair Link Limited
Porse In-home Childcare (NZ) Limited
Porse Franchising (NZ) Limited
Porse Education & Training (NZ) Limited
For Life Education & Training (NZ) Limited
Mark Finlay (ceased 13 August 2015)
Kristin Colthurst
Alan Wham (appointed 13 August 2015)
Greg Kern (ceased 1 October 2015)
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Vivek Singh
David Smith (ceased 24 March 2016)
Alan Wham
Vivek Singh
Alan Wham
Jenny Lee Yule (ceased 1 December 2015)
Vivek Singh
Alan Wham
Jenny Lee Yule (ceased 1 December 2015)
Vivek Singh
Alan Wham
Jenny Lee Yule (ceased 1 December 2015)
Vivek Singh
Alan Wham
Jenny Lee Yule (ceased 1 December 2015)
Disclosure of Subsidiary Directors Interests
Section 140(1) of the New Zealand Companies Act 1993 requires a director of a company to disclose certain interests. Under
subsection (2) a director can make disclosure by giving a general notice in writing to the company of a position held by a
director in another named company or entity.
In addition to the directorships in the Company and in fellow subsidiary companies (as applicable) referred to above, there
were no directors’ general disclosures entered in the relevant interests register for the Company’s subsidiaries during the year to
31 March 2016.
Annual Report 2016 / 92
Corporate
Directory
Evolve Education Group
Limited Registered Office
Level 2
54 Fort Street
Auckland 1010
New Zealand
Phone: +64 9 377 8700
Australian Share Registrar
Link Market Services Limited
Level 12
680 George Street
Sydney, New South Wales 2000
Phone: +61 1300 554 474
Contact Details in Australia
C/- Minter Ellison Rudd Watts
Banker and Lender
ASB Bank Limited
12 Jellicoe Street
Level 40, Governor Macquarie Tower
Auckland 1140
1 Farrer Place
Phone: +64 9 337 4819
Sydney, New South Wales 2000
Phone: +61 2 9921 8888
Directors
Norah Barlow (Chair)
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Senior Management Team
Alan Wham – Chief Executive Officer
Vivek Singh – Chief Financial Officer
and Company Secretary
Rachel Nottingham – Acquisitions
and Property Manager
Allan McGilvray – General Manager,
People and Capability
Paul Matthews – Chief Information Officer
Paula Hawkings – General Manager,
Lollipops Educare
Kerry Henderson – Acting General
Manager, Porse
Casey Muraahi – General Manager,
Au Pair Link
Solicitors
Chapman Tripp
Level 35, ANZ Centre
23 – 29 Albert Street
Auckland 1010
Phone: +64 9 357 9000
Auditor
PricewaterhouseCoopers
188 Quay Street
Auckland 1142
Phone: +64 9 355 8000
New Zealand Share Registrar
Link Market Services Limited
Level 11, Deloitte Centre
80 Queen Street
Auckland 1010
Phone: +64 9 375 5998
Evolve Education Group Limited / 93
evolve
edu ca ion grou p
t
Annual
Report
2016
evolve
edu ca ion grou p
t
PO BOX 105843 - Auckland City 1143
Level 2, 54 Fort Street - Auckland CBD
Phone: +64 9 377 8700
evolveeducation.co.nz
Annual Report 2016 / 94