Annual Report 2017
Contents
Evolve Story
Vision & Values
Chairman’s Report
CEO’s Report
Board Profile
Investing in Our People
Centre Business Update
Parent & Whanau Engagement
Education Quality in Our Centres
Consolidation of All Our Centre Brands
PORSE
Au Pair Link
2
4
6
8
10
12
14
17
18
20
26
28
Financial & Operational Highlights
31
Financial Statements
Independent Auditor’s Report
33
71
Corporate Governance & Statutory Information
76
Shareholder Information
Subsidiary Company Directors
Corporate Directory
91
93
95
Evolve Education Group Annual Report 2017 | 1
Evolve Story
Remember as a child the excitement of a new discovery? The irrepressible sense of hope and possibility, that the world
was a mystery and an adventure to explore? Remember that freedom?
We do.
That thrill of discovery, recalling the magic of the world through a child’s point of view, is the ethos that runs through
every touchpoint in the Evolve Education Group.
Whether we’re nurturing young minds in one of our centres, or educating in-home, we share a common objective -
capturing that sense of unbridled possibility. Shaping this possibility for our children by helping nurture happy, caring,
independent-thinking, purposeful souls to be their best is our ultimate goal.
We pride ourselves on being welcoming and respecting the rich diversity of culture, tradition, people and circumstance
that Evolve children represent. These influences are vital to us, part of our lifeblood, just as their whanau are part of
our wider family.
Respect is at the heart of our interaction with our children. Every child is an individual with a voice, every child will
respond to some learning styles better than others. We understand that, and offer a variety of teaching methods and
philosophies to help any child flourish, whether it’s in one of our high quality centres, or in-home.
We are proud to count some of New Zealand’s most trusted early childhood professionals among our numbers. These
educators have a deep and genuine passion for helping children realise their potential. Through ongoing vocational
guidance, we invest in their futures too, to help them to continue to deliver industry-leading teaching and care.
Every parent who entrusts their child to our care can be sure that their child’s safety, happiness and personal development
is going to be at the forefront of everything we do.
But more than that, as a leader in early childhood education (ECE) in New Zealand, it’s vital that our parents and
children feel our passion to support and celebrate their children’s learning, and that we share their thrill at those
moments of understanding and inspiration.
Our delight is the ability to equip our children with the knowledge and skills to face their next challenges with confidence,
and embrace a life-long learning journey.
Evolve. The joy of learning lives here.
2 | Evolve Education Group Annual Report 2017
Evolve Education Group Annual Report 2017 | 3
Evolve Education Group Annual Report 2016 | 1 Vision and Values
Evolve Education Group is comprised of 126 Early
Childhood Education centres across New Zealand, as
well as the PORSE and Au Pair Link networks.
Nurture
Our Values
Family values are our high ground
Our Vision
Evolve will be acclaimed and respected as an authority
within ECE. Proud owners of superior, well-resourced
learning centres and high quality ‘at home’ education
services. Evolve children are identifi able for their love
of learning, and age appropriate life skills.
Evolve will be admired as the undisputed leaders in
early childhood education, recognised practitioners and
advocates for best practice within the ECE industry,
and as a result, staff view Evolve as the premier ECE
employer of choice.
Our new brand:
bright, uplifting and irrepressible
We wanted our new logo to embody the irrepressible
sense of hope and thrill of discovery of the world through
the eyes of a child. Capturing the beginning of change;
the evolving young mind is entranced by a world fi lled
with light and movement. A logo that carries a sense
of wonder, and is broad enough to speak to the diverse
ECE communities across New Zealand that the Evolve
Education Group serves.
Our logo now represents our passion for learning,
for illumination, our quest for those bright points of
inspiration, whether they’re new ideas or the passionate
individuals delivering fresh insight and innovation. Our
Evolve bubbles give it an eff ervescent and optimistic
feel.
Bright, uplifting and irrepressible, it’s a logo that
delivers on the personifi cation of our promise: ‘The joy
of learning lives here’.
4 | Evolve Education Group Annual Report 2017
The right learning environment
Evolve is a nurturing environment.
For our children: we teach, observe and monitor,
ensuring they are happy, stimulated and engaged. With
their well-being nurtured, they are free to expand their
minds and express themselves.
For our staff : it’s about providing the opportunity to
fulfi l their potential.
Respect
Every child, each other, and our planet
We respect our childrens’ culture, ethnicity, personality
and individuality. We teach and show respect, and our
children respect one other. We extend this respect
to our planet by connecting with the natural world
and fostering love and a custodial attitude to the
environment we live in.
Sustainability
Aligning the three P’s
Our people, our planet, our profi t. We must look after
our people and our planet to ensure our profi tability This
message resonates with our people, and is inextricably
linked to our alignment with our ‘New Zealandness’ and
the promotion of clean, green and healthy values.
Community
Stronger together
us:
is
Our wider
stakeholders,
supporters, partners.
staff ,
We welcome them into our family and their support
makes us stronger, we’re all on the same team.
community
family,
important
to
Passion
We have a mission
We are passionate about quality ECE. We’re fully
engaged. We stand on our principles and our sights are
fi rmly fi xed on great outcomes for our children.
It’s why we exist, and nothing less will do.
Ethics and Integrity
Trust is everything
Parents are trusting us with the most precious thing
in their lives - their children. It’s a privilege that we
honour with the highest standards of ethical behaviour,
and honesty and transparency in our interactions. If we
don’t have this, we have nothing.
Evolve Education Group Annual Report 2017 | 5
Evolve Education Group Annual Report 2016 | 1 Alistair Ryan
Chairman’s Report
Welcome to the 2017 Annual Report, covering Evolve’s
second full year of operations since listing in December
2014.
2017 - Summary
During the 2017 year, the Evolve Group expanded its
operational footprint, delivered revenues in excess of
$150m, a robust net profi t after tax (NPAT) of $15.9m,
and announced a fully imputed full year dividend of 5
cents per share. This is a satisfactory result for our
second year and provides a good foundation on which to
continue our growth path.
The company is up and running well, with key
operational, management and acquisition processes now
well-established.
Financial Performance
Whilst revenues and underlying EBITDA increased (by
10.2% and 4.1% respectively), it is fair to say that we
would have liked to have seen more of an uplift in
year two bottom line (NPAT of $15.9m) over year one
(NPAT of $15.6m). However, when the company’s profi t
performance is broken down into its key elements and
non-recurring items are identifi ed, robust underlying
improvements are evident, which provides a good level
of confi dence as we move into our third full year as a
listed company.
Board Composition
On behalf of the board, I would like to acknowledge
Norah Barlow’s contribution as Chair of the company
since listing. As shareholders will be aware, Norah’s
other commitments have meant that she has decided
to step aside as Chair, eff ective 1 June 2017, but we are
very pleased that Norah will contribute to the company
and the board as a continuing director.
We have added executive and governance expertise
to the board with the appointment of Grainne Troute,
appointed 1 May 2017. In accordance with NZX listing
rules, Grainne will stand for election at this year’s annual
meeting in July. Grainne has extensive corporate and
operational executive experience (McDonalds, SKYCITY)
and governance capability in the listed environment
(SKYCITY, Summerset Holdings, Tourism Holdings).
Grainne will add signifi cant strength and diversity to
overall board composition and eff ectiveness and will
chair the Remuneration and People Committee.
Following my appointment as Board Chair, Greg Kern
6 | Evolve Education Group Annual Report 2017
has taken over chair responsibility for the Audit and Risk
Committee.
Related Parties
In addition to Alan Wham, Managing Director and
CEO, Mark Finlay completes our board complement.
Mark is our most experienced board member in early
childhood operations and property development. We
see a greater emphasis on new, purpose-built centres
in good locations as we move the company forward.
Mark’s expertise, knowledge, and delivery capability are
therefore important to the company. However, we are
also very mindful of the related party relationship that
exists between Mark and the company and the important
protocols that need to be in place in order to meet
good governance requirements, at the same time as
fulfi lling our obligations to best achieve the company’s
growth aspirations. This related party intersection is
a challenging area for the board and one we need to
get right and manage carefully, with full transparency.
Related party transactions for the year ended 31 March
2017 are set out at Note 23 of the fi nancial statements.
Acquisitions, Developments and Performance
It is fair to say that, during the last two years, we
are generally pleased with the performance of our
acquisitions, but also that some have disappointed.
In a couple of cases, vendor behaviour, subsequent to
reaching a sale agreement, has been unsatisfactory and
not in the spirit or intent of the transaction agreed to.
In others, subsequent performance has been sluggish
and has taken longer than expected to reach expected
levels.
In addition, the vendor market is generally well aware
that Evolve is looking to acquire centres and vendor
expectations have, in many cases, grown beyond our
willingness to pay. Put simply, we are not willing to pay
more than a certain price level for acquisitions and,
if none are available at the right pricing, then we are
prepared to be patient to ensure acquisitions are of
good quality and will add value to our portfolio.
Accordingly, our strategy is looking to move more
onto the new, purpose-built path with a potentially
reducing emphasis on acquisitions as part of the overall
growth mix. Acquisition of existing operations results
in immediate cash fl ow benefi t, whereas new centres
take time to build and develop, then take time to build
occupancy and reputation, but are likely to deliver
better medium to longer term returns.
The half-yearly reporting timeframes and requirements
for listed companies are not particularly amenable to
a newly-listed company looking to engage in a medium
term growth strategy, and the lead times for new centre
development and establishment are more demanding of
capital funding for the establishment phase. However,
we are confident that an increased emphasis on new
developments (potentially reducing the proportion
of acquisitions), coupled with the increased service
and curriculum delivery able to be achieved through
economies of scale, will create the best value outcome
for shareholders in the years ahead.
2017 has been a year of consolidation and growth as
we build towards enhanced economies of scale and
a stronger, more established business model. Since
listing, we have been integrating and building the
business operations and strengthening our curriculum
and service delivery.
Evolve’s initial centres (as at IPO) have performed to
expectations, as have the majority of our subsequent
acquisitions, although a number have struggled to
sustain their performance levels in the post-acquisition
phase. These underperforming centres are the focus
of ongoing management attention, either to get back
to performance levels previously achieved, or if that
is not able to be achieved, then for divestment to
be considered so that our capital can be re-deployed
elsewhere.
In-Home Education
Early childhood education centres are the core of our
business with in-home care as a smaller component of
the overall operation. We have experienced reducing
revenues in this sector but have been able to maintain
earnings through a rigorous approach to costs. But this
cost reduction approach cannot continue indefinitely
and we must ensure revenues can be turned around.
In addition, we are engaged with IRD in a continuing
debate about the GST status of in-home providers
and have noted this as a contingency in our financial
statements (Note 22). Negotiations to achieve a
resolution of this matter in the best interests of
shareholders are continuing. The company is not able
to predict what the outcome of this process might be,
but we remain confident, based on expert advice, that
our position is correct.
ECE Environment and Government Support
We believe the prospects for the early childhood sector
(and therefore for Evolve) are very promising, with strong
underlying fundamentals. However, despite government
support for the early childhood initiative and its place
in the social and economic fabric, we continue to be
disappointed that government has not, in recent years,
continued to provide funding rate increases for the
sector at least in line with inflation. Continuing Ministry
of Education funding support is essential to the success
of the sector and will be in the best interests of New
Zealanders across the social spectrum.
The early childhood education sector has seen a range
of changes over the last 12 months. The Government
is in the process of amending the legislation governing
child entry at school. The proposed “cohort entry”
would allow children to start school at the beginning of
each term, enhancing their transition by allowing new
entrants to start school together. This will typically
mean that some students may start school slightly
earlier and others slightly later than their fifth birthday.
We will continue to work closely with parents through
our “ready for school” programmes to achieve the best
outcome for parents and children as this new entry
process evolves.
Purpose and Intent
We are here for our families, children, teachers and
shareholders. We are providing a strong curriculum-
based education for our children and a valuable service
to the New Zealand community, at the same time as
delivering good results for our shareholders. Balancing
these objectives is not an easy task but the board is
pleased with how the company is achieving this.
Acknowledgement
I wish to acknowledge all of our Evolve teachers,
managers and support staff who collaborate tirelessly
to achieve excellent results and are helping to create
an organisation of good standing and respect in the
New Zealand early childhood sector. To all our people,
thank you for your efforts in building the success of our
company.
Annual Meeting
We look forward to meeting shareholders at the annual
meeting on 17 August.
Alistair Ryan
Board Chair
Evolve Education Group Annual Report 2017 | 7
Evolve Education Group Annual Report 2016 | 1 Alan Wham
CEO’s Report
Evolve Education Group has delivered another solid
result for the year ended 31 March 2017.
This annual report reflects the engagement and
aspirations of our educators that ensures we deliver
high quality early childhood education (ECE). Our role
is to enable and support our teachers and leaders
through best practise and robust operating procedures.
Results
Group revenue for the year grew 10.2% to $151.4m,
and underlying EBITDA of $27.6m was up 4.1%.
Our centre revenue was $126.5m, up 14.1% on last
year and underlying EBITDA was up 12.4% to $31.0m.
The licensed child places in centres grew to 8,274
because of 15 new centres acquired in the year to 31
March 2017. Total centres numbered 121 at the end
of March.
Post the year end an additional 6 centres were
acquired and settled on 16th June 2017. This is a group
purchase that will add a further 531 licensed places.
One Westport centre that was acquired as part of
a group purchase in the initial portfolio (2015) was
divested.
Our total centre numbers at the end of June 2017
will be 126. This includes our first development
centre that has been operating for five months and is
meeting planned occupancy growth. We opened our
second development in May 2017 and have a further
two properties completing construction for opening
this financial year. We have the mapping tools to track
competitor centre developments through resource
and building consents. This mapping tool provides the
licenced capacity of each ECE provider and overlays
the age demographics of 0-5 years. This allows us to
ensure demand is greater than capacity.
The growth of our centres was driven by a combination
of organic growth and new acquisitions made in FY16
and FY17. The original portfolio of 84 centres has
performed solidly. As a result, these centres added
organic growth of $1.2 million of EBITDA* in this
reporting period.
Consolidation of the Evolve centre brands will be
rolled out in the coming months with differentiated
curriculum and enhanced focus on professional
development and learning quality for our children.
Teaching staff and management have been engaged in
defining the curricula and brands we believe are right
8 | Evolve Education Group Annual Report 2017
for our communities. Elsewhere in this report, we
describe the uniqueness of each brand, the teaching
philosophy, and the commitments we make to families.
Realising Scale Benefits
Most pleasing to see this year is that Evolve is continuing
to realise the benefits of scale. Scale enables a focus
on quality education, engaged teaching and quality
environments. Exceeding family expectations will lift
occupancy for our ECE centres as a result of word of
mouth.
Scale allows us to have a dedicated curriculum team
with a goal to continually enhance practice and
learning outcomes for all our children. This team will
establish a structure and clear focus on areas such as
group planning and evaluation to document learning
and outcomes. They will facilitate professional
development and ensure expectations for sharing
learning stories with families and for community
events in each centre.
We know that if we do this well, we will have great
relationships with parents and retain quality teaching
staff.
Likewise, our family survey results remain strong with
families citing care and nurturing, child enjoyment
and a good learning environment as the top indicators
for ECE centres.
Scale also underpins the brand change for our centres.
This includes investment in a new digital marketing
strategy which is very important for new parents and
families searching online. Compared to the inefficiency
of 60+ different online brands, our new consolidated
brand approach will enable families to easily find
Evolve centres, enrol online and book tours. This is
all tracked and monitored such that we can measure
our outcomes.
Healthy Eating
Evolve has an emphasis on healthy eating in all our
centres. With many centres participating in the Heart
Foundation healthy eating programme which ensures
meal plans and nutritional guidelines are met. Evolve
Education has won three Gold awards, six Silver awards
and six Bronze awards from the Heart Foundation in
2017.
We will continue to build awareness around healthy
meal options and are actively working with our food
partners to develop meal plans along the healthy
heart guidelines.
Home-Based Sector
Porse arranges nannies to undertake ECE in the family
home as well as arrange child enrolments in the home
of educators.
Au Pair Link relies on supply of au pairs, primarily
from Europe, having the highest availability during
the Northern Hemisphere summer break. On the
quality front the Education Review Office (ERO) has
provided a four year review for 10 of the Au Pair
licences. This is the highest rating an ECE service can
achieve.
Acquisitions
While the centre acquisition market remains bullish
we maintain our mandate for purpose built centres
with high occupancy and larger licensed capacity.
Due diligence processes are now in-house to ensure
detailed insights are gained early in the process and
clear objectives are identified for integration. This
high engagement with the vendor at the outset and
personal contact is made early with staff, families
and the community.
The purpose of this high engagement strategy is to
mitigate the risk of any occupancy drop that can
occur with change of ownership.
Our acquisition funding at the end of June 2017
includes $10 million of retained cash and $3.6 million
of the remaining acquisition facility. This funding is
sufficient to cover our acquisitions and developments
through this financial year.
Our People
Evolve’s leadership team has been enhanced during
the last year with the appointment of key executives.
Fay Amaral, Chief Operations Officer, has a strong
background in the education sector, acquisition
integration and brand management. Fay has made
significant strides in enhancing the engagement with
centre staff, teaching outcomes and emphasising the
importance of family and community interaction with
teachers. Stephen Davies joined as Chief Financial
Officer in mid 2016. Both are good leaders and have
enhanced our senior executive capability.
My thanks to all our staff for their continued
commitment and efforts. We are a large group of
ECE professionals numbering more than 2,600,
the majority being qualified teachers. Retaining
our staff through new career pathways, additional
employment benefits, professional development and
peer support are some of the areas we wish to make
work seamlessly for our team members.
Thank you also to our investors for your continued
support.
Alan Wham
Chief Executive Officer
1EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and adjusted for acquisition and integration costs. 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 Evolve Group financial statements, should not
be considered in isolation and is not a substitute for those measures.
Evolve Education Group Annual Report 2017 | 9
Evolve Education Group Annual Report 2016 | 1 Board Profi le
Evolve Education has an experienced and balanced Board with a diverse range of skills, including industry and
business knowledge, fi nancial management and corporate governance experience. The Board currently comprises
an Independent Chair, two Independent Non-Executive Directors, two Non-Executive Directors, and one Executive
Director, being the Chief Executive Offi cer.
Alistair Ryan
Chairperson
(Independent)
MCom, CA.
Appointed as Director
13 November 2014
Norah Barlow
Non-Executive Director
(Independent)
BCA, CA.
Appointed as Director
13 November 2014
Mark Finlay
Alistair is an experienced company director and corporate executive. He is currently
Chairman of NZX listed investment companies Kingfi sh 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’s Audit
Oversight Committee.
Alistair retired from NZX and ASX-listed SKYCITY Entertainment Group Limited as Chief
Financial Offi cer 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 a member of Evolve Education’s Audit and Risk Committee.
Norah is the Managing Director and CEO of Estia Health Limited, an ASX listed
company providing aged care in 68 homes through 4 States in Australia. Norah is
an accountant by profession, having operated 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 remaining on the Board
as a non-executive Director until 2016, when she was appointed to Estia. Norah is
also a Ministerial appointee to the National Advisory Council for the Employment of
Women. In 2014 she was awarded an ONZM for services to business.
Norah is a member of both Evolve Education’s Remuneration and People Committee
and the Audit and Risk Committee.
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.
Non-Executive Director
(Non-Independent)
BEd.
Appointed as Director
13 November 2014
10 | Evolve Education Group Annual Report 2017
Greg Kern
Greg is the Managing Director of Kern Group, a corporate advisory fi rm based in Queensland,
Australia. Greg is a chartered accountant, a registered company auditor, a member
of the Institute of Internal Auditors and the Australian Institute of Company Directors.
Kern Group acted as the lead adviser of the successful listing of Affi nity Education Group
Limited in Australia. Greg was a promoter of the listing of Evolve Education Group Limited
and Affi nity Education Group Limited.
Greg is Chair of Evolve Education’s Audit and Risk Committee.
Non-Executive Director
(Non-Independent)
BCom, CA,GradDip in Applied
Finance and Investment
Appointed as Director
20 May 2014
Gráinne Troute
Gráinne has extensive experience as a corporate executive and in board and
charitable trust governance roles.
She is currently a director of NZX-listed companies Tourism Holdings Limited and
Summerset Group Holdings Limited. She was General Manager, Corporate Services at
SKYCITY Entertainment Group for 8 years and earlier held senior executive roles at
McDonald’s Restaurants for 14 years, for the last three of which she was Managing
Director, New Zealand.
Gráinne also served for many years as a trustee and chair in the not-for-profi t sector,
including having been Chair of Ronald McDonald House Charities NZ for fi ve years.
Gráinne is Chair of Evolve Education’s Remuneration and People Committee.
Alan was appointed as Chief Executive Offi cer of Evolve Education with eff ect from 1
September 2014. Alan was CEO of Pharmacybrands Limited (now Green Cross Health
Limited) from late 2003 to mid-2013.
Alan has been active in governance and advisory roles across the broader health arena,
including the governance group for the $370m Community Pharmacy Services Agreement.
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 Pacifi c and Africa before returning to New Zealand in late
2003.
Alan has led the formation of Evolve with a focus on quality education, professional and
leadership development, building a strong team and a robust business.
Evolve Education Group Annual Report 2017 | 11
Evolve Education Group Annual Report 2016 | 1
Non-Executive Director
(Independent)
GradDipBusStuds (HRM)
CMInstD.
Appointed as Director
1 May 2017
Alan Wham
Chief Executive Offi cer
(Non-Independent)
BPharm.
Appointed as Director
13 November 2014
Investing in Our People
Our business is a people business. Critical to success is having an engaged workforce that can make a difference to the
development of the children in our care. To ensure that we attract and retain the best people in our industry, we will
continue to proactively invest in our people.
All staff are involved in professional appraisal and performance development. This supports our approach to continuous
improvement, as well as raising the quality of learning for children. Our approach to professional development is
designed to move the whole team forward as well as strengthening and leveraging the attributes of individuals. This
approach allows both team-based and individual development so that personal and business outcomes can compliment
each other.
We actively invest in team leadership and development days at all levels of the business. This involves reaching our
staff at all ends of the country. This work includes providing mentorships, coaching support days for home-based staff,
leadership development for centre management staff, and skills development in critical areas such as marketing and
people management for all staff. Career paths have been developed and are being refined for both qualified and non-
qualified staff. Our approach values on-the-job learning, as well as formal education development, together with
effective mentoring and coaching of our staff as they develop.
Each of our Early Childhood Education Centres extends the brand and Evolve’s approach to teaching and learning. Our
approach encourages relevance, innovation, and development for our staff and the children within the professional
framework established groupwide. Retention and valuing our staff are key drivers for Evolve even amidst the scarcity of
ECE trained educators and professionals. Evolve continues to invest in additional support and extended training, such
as: first aid, supporting teacher registration costs, leveraging our scale advantages to provide discount arrangements for
our staff in banking, health care, and other areas of benefit for staff.
Health and Safety
The Evolve Education Group places paramount importance on health, safety, and wellness. The Company has establised
a group wide Health and Safety Steering Group that provides input for policy assessment and formulation, ongoing
process improvements and incident tracking.
The Steering Group has established an infrastructure and technology platform for better reporting, and root cause
analysis, that will enable the business to better understand, prevent and manage key organisational, and business-
specific risks in this area. We also provide staff access to Employee Assistance Program (EAP) services to provide them
with the support and counsel as required.
Evolve is committed to attracting the best educators and teachers across New Zealand.
12 | Evolve Education Group Annual Report 2017
Evolve Education Group Annual Report 2017 | 13
Evolve Education Group Annual Report 2016 | 1 Centre Business Update
The focus in the centres has been to lift the overall focus on education, operational processes, quality engagement and
educator’s professional growth and leadership. Within the last year, the centre support structure has been improved
to ensure alignment with the values, vision and goals for the company. Our centres are supported with operational
leadership and guidance, as well as our professional teaching and learning development management team. This team
ensures that the commercial goals are attained through continuous focus on the core purpose for Evolve. This is achieved
through the provision of high quality care and learning for each child at every stage.
The multiple centre brands have been consolidated into five distinct brands Each is clearly differentiated with specific
learning philosophies. This will allow Evolve to improve its’ digital presence and establish measurable engagement
online.
Evolve has also introduced a customer relationship management (CRM) platform - Childcare CRM into the centre business
to ensure a more efficient process for families to enquire, book centre visits and enrol with us. The system also enhances
workflows and is fully integrated with the support systems in the centres.
The scale that Evolve offers now has improved supplier arrangements, procurement efficiencies and ultimately increased
professional support to the centres across New Zealand. Evolve has implemented a fully customised HR support system
- MyPeople which ensures that processes, policies and procedures in engaging staff, managing staff and support are
consistently applied.
The centre business has grown, with 15 new centres being acquired, and three new developments contracted. The
first of these, in Pegasus, Christchurch was opened October 2016, and is performing well with occupancy steadily
growing. Due diligence procedures have been improved and brought in-house. The integration process during- and post-
acquisition has been streamlined and is managed through the operations leadership to minimize risk and disruption.
Looking ahead, it is anticipated that the business objectives and management strategies around operational excellence,
service, learning and care will continue to lift Evolve’s performance and positioning in New Zealand. Evolve is entrenching
the centres as highly functioning places of learning where the “joy of learning” can be tangibly felt and experienced by
all our children, their families and the wider community.
14 | Evolve Education Group Annual Report 2017
Evolve Education Group Annual Report 2017 | 15
Evolve Education Group Annual Report 2016 | 1 16 | Evolve Education Group Annual Report 2017
Parent and Whanau Engagement
Evolve centres focus on parent and family engagement to ensure each child’s progress and learning stories are
communicated. Exposing parents to our learning process ensures that they see and feel quality provision and lifting
each child’s potential at every developmental stage.
Evolve conducted its second parent survey in November 2016 yielding a Net Promoter Score* of +38, up 1 point since
June 2016, off a base of 2590 respondents. Interestingly, parents who had enrolled a child since the first iteration of
the survey (June 2016) had a higher NPS overall (+51). This would suggest improvements in learning and care within the
centres is visible.
The top three key areas for positive promoter scores in the centres are staff being caring and nurturing, child enjoyment
and the centre providing a good learning environment. It is a key goal for Evolve to continue to improve operationally to
deliver increased satisfaction amongst parents and families through parent feedback. Overall, most of our families and
parents place great value on care as well as learning outcomes. The survey indicates that parents are mostly content
with this.
Our research suggests that a positive experience is strongly based on parents’ need to feel like their child is both cared
for and educated according to their unique potential and needs. Evolve is seeking to ensure positive engagement with
our centres through continuous focus on best practice child-to-teacher ratios, catering to each child’s individual needs,
communicating about each child’s weekly activities or learning via personal engagement and Storypark.
Evolve will continue to focus on developing parent, family and community engagement in each centre - valuing the
specific cultural nuances across all our locations.
*Net Promoter Score is an industry standard metric that gauges the satisfaction and loyalty of customers. It is a widely adopted measure, used across the
majority of the Fortune 500 companies. The Evolve score of +38 is regarded as good. A score above +50 is regarded as excellent on the scale.
Evolve Education Group Annual Report 2017 | 17
Evolve Education Group Annual Report 2016 | 1 Education Quality in Our Centres
The teaching and curriculum management structures
are now in place ensuring increased focus on core
developmental learning strategies, teacher practice,
and leading curricula by extending Te Whāriki (Te Whāriki
is a curriculum guideline first published in 1996, revised
in 2017 by the New Zealand Ministry of Education. It
outlines the curriculum that the Ministry requires every
early childhood service in NZ to follow if it is to retain
its licence to operate, care for and educate children.)
for all our centres. The focus on each developmental
stage ensures the curriculum offered is developmentally
appropriate and is critical to lifting quality of learning
and care in each of our centres, as well as aligning
ourselves with best practice and the latest research
in early childhood education. This is achieved through
a focused strategic plan for the next three years to
develop distinct frameworks for learning outcomes
across all age groups, stages of development and key
areas such as literacy and numeracy. In time, there will
also be a programme developed to enhance children’s
social competence and resilience, which is proven to be
a vital requirement for improving long term outcomes
for children well into adulthood.
The teaching and learning team are also involved in
redesigning policy and systems for monitoring and
improving quality at centre level. This ensures that we
are doing what we say we do and this makes it evident
to families attending our centres. This will focus on
aspects such as effective educational mentoring to
improve teacher practice, and high quality internal
evaluation which focuses on documenting the continual
improvement of outcomes for children at each service.
It is a key goal for Evolve to ensure that all our families
have the comfort of knowing that each child has a
positive and enhancing learning experience aligned with
their individual potential.
There is increased engagement with whanau, with a
clear focus on provision of superior quality learning,
care and differentiated experiences through the newly
positioned centre brands.
Our Learning Pillars
Each of our brands has a distinct learning philosophy
that is based on Te Whaariki and extended with specific
frameworks per brand along with global best practice for
early childhood development. These will set expectations
for the learning programme provided in each centre,
and are deliberately different for each brand, allowing
parents to choose a philosophy of learning which is best
suited to their own. Along with the overall focus, we
18 | Evolve Education Group Annual Report 2017
are also developing a very specific curriculum for school
readiness, run across all our centres to ensure that
every child that reaches school-going age is prepared,
confident and ready to face the challenges and new
chapter on their learning journey.
Each Brand’s Teaching Philosophy
Our brand Active Explorers has been developed on an
enquiry-based learning philosophy to increase problem
solving and creative thinking. The practice encourages
seeking out solutions, curiosity, experimentation and
active learning.
Lollipops has a philosophy centred on the principles
of Ako (reciprocal learning between teacher & child)
and experiential based learning philosophy, inspired by
Reggio Emilia. Learning is child-led with inspirational
and varied provocation stations that lead to creative
exploration by every child.
Pascals, focuses on learning extension, experiential
and enquiry based learning philosophy in centres of
excellence further inspired by leading research in ECE.
Thrive Montessori is grounded in the widely practiced
Montessori philosophy, with extensive engagement with
each learner structured across accepted milestones but
anchored on the foundation of Te Whaariki.
Learning Adventures is a community brand, inspiring
curiosity through inspiration and guidance, blended
learning philosophy anchored in the community. There
will be a higher focus on participation, health and social
development and parenting support.
Our Teaching Team
We have structured the team to now include four teaching
and learning development managers across New Zealand
to lift the practice and learning outcomes for all our
children. The focus for this team is to further develop
a team of fully certificated, skilled practitioners, with
experience of facilitation and communication to extend
the curriculum goals and guidelines for Evolve. They
will be active researchers in particular areas to enable
them to remain current and up-to-date with legislation
and to feed this to the broader team. Our teaching
and learning development team will ensure that this is
structured and clear frameworks are developed. We aim
to support all our teaching staff on planning, assessment
and evaluation, model best practice and complete
observations to support teacher appraisal processes. We
actively monitor and facilitate professional development
on all aspects of teaching and learning to ensure that
there is consistency in delivery across all our services.
Evolve Education Group Annual Report 2017 | 19
Evolve Education Group Annual Report 2016 | 1 Consolidation of All Our Centre Brands
The Evolve Education group is bringing all it’s centre’s together under fi ve diff erent
brands to ensure quality, consistency and optimal communication with our communities,
families and staff .
Each brand has a distinct positioning to ensure diff erentiation and our ability to cater
to individual needs and philosophies of learning.
Active Explorers
New Zealand’s future leaders in the arts,
sciences and commerce? Active Explorers may
well be their springboard to great things.
comparing her fi ndings with an image on a screen. Tablets
and insects; a fusion of nature and technology; expanding
young minds.
Welcome to the home of ‘what if?’ explorers, enabled by
passionate professionals who champion creative thinking.
This is where great ideas live. Active Explorers has a
vibrant hum that tells us this is a place where the love
of learning is genuinely lived out; and these children are
loving it. We nurture and celebrate enquiring minds here;
if you think outside the box, you’re in the right place.
So it’s with well-founded conviction that we say Active
Explorers is the perfect start for the innovators and
entrepreneurs of tomorrow. These are confi dent children,
learning to challenge, not just accept.
Take a look at the array of projects pinned to the wall;
discoveries gleaned from fi eld trips to local museums and
conservation centres. Or the displays constructed from the
latest nature walk. These colourful and informed projects
are borne of inspired thinking by children mastering the
foundation skills they will draw on for a lifetime.
Our parents and whā nau get this, and welcoming their
support is unconditional. We love those ‘hey Dad, did you
know?’ moments as a child shares that day’s discovery.
together,
Family and Active Explorers
broadening the childrens’ perspective of a world that
we’re all helping to prepare them for.
supporting
In a nature science space, another little girl is mastering
mathematics by counting the legs on bugs, and she’s
We’re loving learning, loving life!
20 | Evolve Education Group Annual Report 2017
Lollipops
Like a family barbeque on a black sand
children develop resilient and confi dent personalities.
beach in summer, or a road trip through the
South Island’s Southern Alps, Lollipops is a
quintessentially Kiwi experience.
Lollipops embodies the unspoken but palpable freedom
that is the enshrined right of being a child growing up
in New Zealand. This unique New Zealandness is the
experience of growing up in a special country where
culture, inclusion and tolerance of diff erences go hand in
hand with the joy of exploration of our natural abundance,
fuelled by irrepressible intellectual curiosity.
Our family-orientated and purpose-designed centres feel
like the loving home our children left this morning. We
have rugs on our wooden fl oors, and the framed artwork
on the walls embraces natural tones to help create an
impression of harmony. It’s also an environment that
positively embraces parents as an integral part of the
learning process, even when both parents might be
working full time. Being practical and fl exible enough to
include busy parents underscores Lollipops as an extension
of the family.
These words capture the experiential learning environment
that defi nes Lollipops, a place where children learn self-
empowerment, fi nding their own solutions by doing
practical things. We grow gardens, pick fl owers for the
lunch table and even light the lunchtime candles. Daily
rituals such as these, together with play-based learning and
‘natural’ environment-based encounters, help Lollipops
A Lollipops child goes on a learning journey that ensures
they are happy, stimulated and engaged – it’s an
environment where they are free to expand their minds
and express themselves. This is the place where learning
comes naturally, Kiwi style.
Wonder, Explore, Learn. Three words that neatly sum us
up.
Evolve Education Group Annual Report 2017 | 21
Evolve Education Group Annual Report 2016 | 1
Consolidation of All Our Centre Brands
Thrive Montessori
Montessori is a visionary teaching philosophy
that is as vital and contemporary today as it
ever was, taking children on a life-long love
of learning pathway.
We encourage children to be independent, creative,
inquisitive and caring through play and performing practical
tasks they love. Whether they are setting the table for
lunch or growing plants in the gardens, they embrace the
opportunity to engage in purposeful endeavour.
Maria Montessori’s teaching principles have nurtured a
love of learning in children for over a hundred years; it’s a
legacy of excellence that seems even more relevant today.
In a world that off ers so many distractions, and entices
children to grow up with unmeasured haste, nurturing
learning skills in harmony and with grace and purpose is
invaluable.
These are the developing skills in a child that our parents see
happening every week, and we welcome their involvement
in that exciting process. Parents are a vital part of our
Montessori community; we believe that they are integral
to educating their children, and that openness promotes
a genuine connection between the family and the centre,
leading to wonderful outcomes for the children.
As a leading practitioner of Montessori methodology, we’re
committed to helping children to be socially, academically
and emotionally well-developed learners who are ready
for life’s challenges. In beautiful centres equipped with
carefully chosen Montessori materials children thrive on
a learning pathway inspired by passionate educators who
foster independent learning as they guide each child to
the next level at that child’s pace.
You can identify a Thrive Montessori child by their
courageous love of learning and an ability to ‘hit the ground
running’ when they reach school age. They are equipped
with the skills they need through learning in a place of
harmony, where children blossom in an atmosphere of
calm, absorbed concentration and respectful interaction.
This sensory-based learning experience has given them the
ability to thrive as they grow.
22 | Evolve Education Group Annual Report 2017
Pascals
These exceptional centres redefi ne Evolve’s
commitment to the very best of ECE; they are
markers for excellence, research-led centres
of innovation that raise the bar for early
childhood education.
same values. These centres are beautiful; light, airy, well-
designed and furnished spaces, where children can play
in nature, read in the library, or work on a project in the
science area, using all the creative thinking and problem
solving skills their teachers support and encourage them
to employ.
Pascals is the realization of a vision of excellence; a bold
trailblazer who dares to dream, and our commitment to
extraordinary early childhood education. This is where
research-driven innovation and experience come together
to fi nd new ways of delivering the highest quality learning.
This is where teachers learn and are mentored to realise
their potential, and for the children, where exceptional is
the norm.
We draw inspiration from the 17th century child prodigy,
mathematician, physicist, inventor, writer and philosopher
Blaise Pascal. His was an inspirational story of knowledge
seeking and investigation. Cross the threshold into a Pascals
centre and you enter a world that’s energized by those
At Pascals, we thrive on personal growth and knowledge
sharing; we actively seek out and forge meaningful
relationships with local schools and museums. The
children visit conservation centres, we encourage rich and
diverse connections within their communities to further
open voraciously enquiring young minds. Then we let
them interpret those interactions and discoveries in their
own way. They learn about the world and build informed
insights by being a part of it.
By elevating early childhood education to a new level,
Pascals nurtures the outstanding citizens of tomorrow. This
is where our thought-leaders of the future will begin their
learning journey.
Evolve Education Group Annual Report 2017 | 23
Evolve Education Group Annual Report 2016 | 1
Consolidation of All Our Centre Brands
Learning Adventures
Learning Adventures are plugged right into the
heart of the communities they serve; this is a
warm, caring environment where the childrens’
well-being comes fi rst and ready-for-life
confi dence follows.
We embrace this pivotal position; Learning Adventures has
a big heart and warm welcoming smile for everyone in all
communities, embracing diversity, and we know we make
a diff erence.
What does that look like in practice? It begins with
respect. For people, culture, background. We live it and
we teach it. You’ll fi nd love and warmth in abundance at
Learning Adventures. A nurturing, welcoming home-away-
from-home is what all our centres aspire to be. That’s our
starting point.
We welcome parents and whā nau to the centre at all
times, involving them as much as we can. We enjoy
sharing family recipes, and teaching the tamariki how to
make our food. Heritage and knowing the oral traditions
and practices that guide who we are, are fostered and
encouraged.
From there, we lead adventurous learning and play; we
dig gardens and make space ships; we visit Marae and
aged-care centres, we broaden experiences and minds.
Some of our centres have a van that off ers a daily pick-
up and drop-off service to ensure every child has the
opportunity to participate.
The rewards for us are fantastic. We teach children who
have a voracious appetite to learn, they are adventurous
knowledge-seekers who can become independent, self-
reliant and caring, with a strong sense of their community.
We call this ‘ready-for-life confi dence’; it’s exactly what
our children need to be ready for the challenges they’ll
face. From the hushed circle at reading time, to the mini-
boot camps they love, they’re experiencing our unique
promise – ‘Go on an adventure. You’re safe!’
Learning Adventures is where we come together, and the
children learn to be confi dent adventurers, with a strong
connection to Aotearoa.
24 | Evolve Education Group Annual Report 2017
Evolve Education Group Annual Report 2017 | 25
Evolve Education Group Annual Report 2016 | 1 PORSE
Vision and Values
The PORSE Philosophy
With more than 21 years of experience and learning
behind PORSE, we believe in nurturing and educating
children within secure, stimulating and positive in-home
environments while fostering consistent, connected
and supportive relationships between the children,
their Educators and their parents. The PORSE approach
to home-based childcare is based on experience and
research around the importance of play, learning and
development through close child-adult relationships,
allowing children to grow and explore with confidence.
PORSE is an acronym and supports how we advocate for
care and education for children under our umbrella. It
stands for:
P – Play
O – Observe
R- Relate
S – Support
E – Evaluate and Extend
The PORSE Vision
Expanding the hearts, minds and wellbeing of a nation
through nurturing childcare in-home.
The PORSE Mission
To have all people in New Zealand schooled in nurturing
and educating children in their care.
Programme Statement
The PORSE Programme is family directed, using in-home
and community learning settings, guided by the New
Zealand Early Childhood Curriculum, Te Whaariki.
Business Profile
Home-based ECE
PORSE currently arranges home-based care and education
for over 4,000 children and is New Zealand’s largest
and longest serving home-based ECE operator. Nannies
provide one-to-one care for children in their parents’
home, while Educators care for up to four children in
their own homes, which are set up as dedicated in-home
26 | Evolve Education Group Annual Report 2017
childcare environments. With close to 200 staff working
across most communities in New Zealand PORSE is the
market leader for quality home-based ECE with well-
established practices.
PORSE Education & Training
PORSE Education & Training (PE&T) 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.
PE&T 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.
Over 2016 a key focus for PE&T has been extending
our programmes into an online environment to enable
greater reach to a greater audience. Over 2016 our
Level 3 National Certificate in ECE was rolled out which
enabled greater access to our Level 3 programme in the
more rural and remote communities.
For Life
For Life Education & Training provides parents and
caregivers with ongoing education and training support
that is strengths-based and focused on a strong vision for
all children to be wired up for life through nurturing and
loving relationships. Again, over 2016 a key focus was
to grow our reach by introducing more online learning
opportunities.
A Foundation of Quality
Highest accolade for PORSE Education & Training
PORSE Education & Training has been recognised as one
of the top tertiary providers in New Zealand after a
recent external and evaluative review in 2016 lead by
the New Zealand Qualifications Authority (NZQA).
PORSE Education & Training was awarded a ‘highly
confident’ rating by the NZQA.
The result places PORSE in the top 22 per cent of tertiary
providers in the country, with a Category One status.
This four-yearly assessment is mandatory for tertiary
training providers to assure a high standard of compliance
and quality in areas of educational performance and
capability in self-assessment.
It is a stamp of quality and ensures our learners can
be certain they are getting quality education through
PORSE.
Well placed to promote positive outcomes for children
PORSE has had 60 of its licences reviewed by the
Education Review Offi ce over 2015 and 2016. ERO has
confi rmed that PORSE is well placed to promote positive
outcomes for children across New Zealand.
Quality communication with parents
PORSE is committed to helping educators, families and
communities work together in providing the best learning
opportunities and outcomes for our precious tamariki.
Over 2016 we introduced Storypark – an online tool that
records and communicates children’s individual learning
as it happens. Through Storypark we are strengthening
the communication and connection for each child’s
learning journey between educators, families and our
staff . The electronic portfolio of children’s learning and
development creates an easier path for nurturing life-
long learning and allows for increased family engagement
and smoother transitions for when children move from
ECE to primary school.
Quality Partnerships
PORSE has been working closely with Au Pair Link, our
sister-based organisation within Evolve, to support our
businesses to grow and maintain our respective market
leads and extend the ability for families to have Au Pairs
across the most of New Zealand.
PORSE also provided a lot of support with key strategic
partnerships across New Zealand and we’re proud to
support Parents Centre, Multiples New Zealand and the
Nappy Lady.
Evolve Education Group Annual Report 2017 | 27
Evolve Education Group Annual Report 2016 | 1
deliver a consistent and high standard of home-based
early childhood education.
The Au Pair Link Wellington ERO report states, “Children
are introduced to a wide range of learning experiences
within and outside the home. Well considered, high
quality resources and regular excursions further
enhance these opportunities. Te Whāriki, the early
childhood curriculum, strongly underpins the service’s
curriculum.”
Au Pair Link provides weekly playgroups and outings
for children and their au pairs to further develop the
children’s interests and experiences. Au pairs are
empowered through their monthly home visits from
their Programme Manager who is a qualifi ed teacher
where they monitor and support their practices. They
receive personalised educational resources, professional
learning and individual guidance.
This year, Au Pair Link has the Canterbury ERO reviews
and they are fully confi dent for a positive result. The
team will be able to exemplify the diff erent ways
children are supported in their early learning and how
they continue to provide innovative quality programmes,
service and support. The result will be announced later
in 2017 and will be found on ERO’s website.
Au Pair Link
This year marks Au Pair Link’s 10 year anniversary and
the team is celebrating the achievements of their recent
Education Review Offi ce reports from Auckland, Taranaki
and Wellington, Waikato and Bay of Plenty in which they
received the highest level of achievement. Au Pair Link
is a proven leader within its industry with a strong focus
on high quality home-based early childhood education
curriculum.
The Education Review Offi ce (ERO) evaluates and reports
on the education and care of children in early childhood
services. The organisation reports on how well the
early childhood provider is placed to promote positive
learning outcomes for children with the highest result
being “Very well placed”.
Receiving “Very well placed” means that ERO will hold
the next review in four years as they judge that the
provider is already in a very good position to deliver
quality education and care. The team at Au Pair Link
couldn’t be prouder with this result.
“We’re committed to the delivery of a quality early
childhood education curriculum where children are
encouraged to extend their interests and their families
and au pairs play an integral part of the process. We
take pride in being leaders in the fi eld and we are
continually improving our services. People often think
that because au pairs come from the other side of the
world that they would struggle to implement our New
Zealand ECE curriculum, however we equip them with
all the training and support they need to do just this.
It’s great to see that the Education Review Offi ce agrees
that this is the case” says Casey Muraahi, Au Pair Link’s
General Manager.
Au Pair Link has developed their curriculum and teaching
philosophy throughout their 10 years of service. Working
with families, experienced au pairs and ongoing
professional development has allowed Au Pair Link to
28 | Evolve Education Group Annual Report 2017
Evolve Education Group Annual Report 2017 | 29
Evolve Education Group Annual Report 2016 | 1 30 | Evolve Education Group Annual Report 2017
Financial and Operational Highlights
Revenue
Underlying
EBITDA*
Full Year
Dividend
10.2%
4.1%
5.0 cps
Staff
Employed
2630
2017
2316
2016
Centre
License
Places
8274
2017
7162
2016
(4.76 cps 31 March 2016)
Number of
Centres
121
March 2017
105
March 2016
Group Revenue FY17
$151.4m
0.6%
15.9%
Group Revenue FY16
$137.4m
0.8%
18.5%
83.5%
80.7%
ECE Centres
Home-based ECE
Other
ECE Centres
Home-based ECE
Other
*EBITDA is earnings before interest, tax, depreciation and amortisation and also excludes acquisition and integration
costs.
Evolve Education Group Annual Report 2017 | 31
Evolve Education Group Annual Report 2016 | 1
32 | Evolve Education Group Annual Report 2017
Evolve Education Group Limited
Financial Statements
For the Year Ended 31 March 2017
The Directors have pleasure in presenting the Financial Statements of Evolve Education Group Limited, for the year
ended 31 March 2017.
The Financial Statements presented are signed for and on behalf of the Board and were authorised for issue on 22 May
2017.
________________________
Norah Barlow
Chair
22 May 2017
________________________
Alistair Ryan
Director
22 May 2017
Evolve Education Group Annual Report 2017 | 33
Evolve Education Group Annual Report 2016 | 1
Consolidated Statement of Comprehensive Income
$'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
Depreciation
Amortisation
Other expenses
Total expenses
YEAR
YEAR
31 MARCH 2017
31 MARCH 2016
151,439
137,379
184
1,352
-
204
151,623
138,935
(83,283)
(20,332)
(15,859)
(714)
(624)
(2,027)
(602)
(4,558)
(74,793)
(17,474)
(15,232)
(1,204)
(871)
(1,687)
(470)
(4,922)
(127,999)
(116,653)
Note
4
5
5
4, 10
4
4, 8
4, 11
5
Profit before net finance expense and income tax
23,624
22,282
Finance income
Finance costs
Net finance expense
Profit before income tax
Income tax expense
5
5
6
104
159
(1,366)
(1,262)
(1,255)
(1,096)
22,362
21,186
(6,489)
(5,544)
Profit after income tax attributed to the owners
of the Company
15,873
15,642
Other comprehensive income
-
-
Total comprehensive income attributed to the
owners of the Company
15,873
15,642
Earnings per share
Basic (and diluted) earnings per share
(expressed as cents per share)
19
8.9
8.8
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying
notes.
34 | Evolve Education Group Annual Report 2017
FOR THE YEAR ENDED 31 MARCH 2017
Consolidated Statement of Movements in Equity
$'000
Balance as at 31 March 2015
Total comprehensive income
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Dividends paid
Balance as at 31 March 2016
Total comprehensive income
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Executive share based payment
Dividends paid
ISSUED
SHARE
CAPITAL
RETAINED
EARNINGS/
(ACCUMULATED
LOSSES)
TOTAL
156,926
(8,058)
148,868
-
489
(51)
-
15,642
15,642
-
-
(4,215)
489
(51)
(4,215)
157,364
3,369
160,733
-
15,873
15,873
655
(12)
99
-
-
-
-
(8,677)
655
(12)
99
(8,677)
Note
16
16
18
16
16
16
18
Balance as at 31 March 2017
158,106
10,565
168,671
The above Consolidated Statement of Movements in Equity should be read in conjunction with the accompanying notes.
Evolve Education Group Annual Report 2017 | 35
Evolve Education Group Annual Report 2016 | 1FOR THE YEAR ENDED 31 MARCH 2017
Consolidated Statement of Financial Position
$'000
Current assets
Cash and cash equivalents
Assets held for sale
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Intangible assets
Total non-current assets
AS AT
AS AT
31 MARCH 2017
31 MARCH 2016
Note
7
4,095
38,624
-
1,605
1,924
1,313
6,019
41,542
8
6
11
5,742
5,502
840
786
212,121
190,857
218,703
197,145
Total assets
224,722
238,687
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
Total equity
13
10,376
8,413
841
1,286
14
15
18,052
16,318
6,582
6,072
35,851
32,089
20
20,200
45,865
20,200
45,865
56,051
77,954
168,671
160,733
16
158,106
157,364
10,565
3,369
168,671
160,733
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
36 | Evolve Education Group Annual Report 2017
FOR THE YEAR ENDED 31 MARCH 2017
Consolidated Statement of Cash Flows
$'000
Cash flows from operating activities
Receipts from customers (including
Ministry of Education funding)
Dividends received
Payments to suppliers and employees
Taxes paid
YEAR
31 MARCH
2017
YEAR
31 MARCH
2016
Note
151,889
136,779
-
121
(123,229)
(113,525)
(6,329)
(4,438)
Net cash flows from operating activities
21
22,331
18,937
Cash flows from investing activities
Payments for purchase of businesses
Receipts from sale of joint venture
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
Net cash flows from financing activities
Net cash flows
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
10
(21,678)
(23,708)
1,628
-
(1,872)
(2,296)
104
159
(21,818)
(25,845)
16
16
18
7
7
655
489
(12)
(1,343)
(51)
(1,166)
198,340
141,790
(224,005)
(8,677)
(95,925)
(4,215)
(35,042)
40,922
(34,529)
34,014
38,624
4,610
4,095
38,624
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Evolve Education Group Annual Report 2017 | 37
Evolve Education Group Annual Report 2016 | 1FOR THE YEAR ENDED 31 MARCH 2017
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
Dividends
Earnings Per Share (EPS)
Financial Assets and Liabilities
Reconciliation of Profit After Tax to Net Operating Cash Flows
Commitments and Contingencies
Related Party Transactions
Auditor’s Remuneration
Events After the Reporting Period
Page
39
39
42
51
53
54
55
56
57
57
59
59
62
62
62
62
63
63
64
64
66
67
67
70
70
38 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 1.
Reporting Entity
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. 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 2017 were approved and authorised for issue by the Board of
Directors on 22 May 2017.
Going Concern
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 20) 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).
Evolve Education Group Annual Report 2017 | 39
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 2.
Basis of Preparation (continued)
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.
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 intangibles 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, 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.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting
policy stated in 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.
40 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 2.
Basis of Preparation (continued)
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 CGU’s for impairment testing
purposes.
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).
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 period ended 31 March 2017. 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.
Evolve Education Group Annual Report 2017 | 41
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 2.
Basis of Preparation (continued)
NZ IFRS 16: Leases
NZ IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. It was
issued in February 2016. 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.
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.
42 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
3.
Significant Accounting Policies (continued)
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 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.
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.
Evolve Education Group Annual Report 2017 | 43
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 3.
Significant Accounting Policies (continued)
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
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
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.
44 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 3.
Significant Accounting Policies (continued)
(d) 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.
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.
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 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.
Evolve Education Group Annual Report 2017 | 45
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 3.
Significant Accounting Policies (continued)
(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.
(g) 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:
Plant and equipment
Office furniture & fittings
Leasehold improvements
Motor vehicles
4 years
4 years
4 years
5 years
The depreciation methods, useful lives and residual values are reviewed at the reporting date and adjusted if
appropriate.
(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
4 years
4 years
4 years
Indefinite life
46 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
3.
Significant Accounting Policies (continued)
Subsequent expenditure
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 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.
(j) Financial Instruments
Non-derivative financial assets
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 Annual Report 2017 | 47
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 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.
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 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.
48 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 3.
Significant Accounting Policies (continued)
(m) 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 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.
(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.
Finance expenses
Finance expenses comprise interest expense on borrowings and establishment fees. All borrowing costs are recognised
in the Consolidated Statement of Comprehensive Income using the effective interest method.
Share issue costs
Certain costs have been incurred in relation to the issue of shares. 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.
Evolve Education Group Annual Report 2017 | 49
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 3.
Significant Accounting Policies (continued)
(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.
(q) Earnings Per Share
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 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.
50 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 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 2017 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 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 reflects a number of adjustments that are separately identified
to enable the business to be reported on exclusive of these items. These adjustments are 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.
EBITDA also 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.
Evolve Education Group Annual Report 2017 | 51
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
4.
Segment Information (continued)
31 Marc h 2017
Total revenue
Other income
Total inc ome
ECE
Centres
$'000
126,495
24
126,519
Home-based
ECE
$'000
24,060
-
24,060
Unalloc ated Consolidated
$'000
884
160
1,044
$'000
151,439
184
151,623
Operating expenses
EBITDA before ac quisition and integration expenses
(95,542)
30,977
(21,449)
2,611
(7,041)
(5,997)
(124,032)
27,591
Acquisition expenses
Integration expenses
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
-
-
30,977
(1,715)
(60)
29,202
-
-
-
2,611
(249)
(244)
2,118
-
(714)
(624)
(7,335)
(63)
(298)
(7,696)
(1,262)
(714)
(624)
26,253
(2,027)
(602)
23,624
(1,262)
Reportable segment profit/(loss) before tax
29,202
2,118
(8,958)
22,362
Total assets
Total liabilities
204,561
(22,491)
16,819
(10,369)
3,342
(23,191)
224,722
(56,051)
Included within Total Revenue is revenue from the Ministry of Education totalling $104.5m for the year (2016:
$93.6m).
Other income includes $160k from the reversal of a contingent consideration provision relating to the acquisition
of an ECE centre in 2015.
52 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
4.
Segment Information (continued)
31 Marc h 2016
Total revenue
Other income
Share of profit of equity accounted joint venture
Total inc ome
ECE
Centres
$'000
110,848
-
204
111,052
Home-based
ECE
$'000
25,431
-
-
25,431
Unalloc ated Consolidated
$'000
1,100
1,352
-
2,452
$'000
137,379
1,352
204
138,935
Operating expenses
EBITDA before ac quisition and integration expenses
(83,484)
27,568
(22,426)
3,005
(6,511)
(4,059)
(112,421)
26,514
Acquisition expenses
Integration expenses
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
Reportable segment profit/(loss) before tax
Total assets
Total liabilities
-
-
27,568
(1,152)
(61)
26,355
-
26,355
182,101
(25,068)
-
-
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)
2,318
16,933
(9,170)
(7,487)
39,653
(43,716)
21,186
238,687
(77,954)
Other income relates to the reversal of a contingent consideration provision of $1.35m arising from the December
2014 acquisitions of the home-based ECE businesses.
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
24
23
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
205
385
3,968
4,558
210
385
4,327
4,922
Other items includes corporate and support 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.
Building occupancy expenses
Building occupancy expenses of $20.3m (2016: $17.5m) include $18.6m (2016: $16.1m) of expenditure in relation to
minimum operating lease payments.
Evolve Education Group Annual Report 2017 | 53
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
5.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
(continued)
Employee benefits expense
$'000s
Wages and salaries
Kiwisaver contributions
Payments to agency contractors
Other
Total employ ee benefits expense
Net finance expense
$'000s
Interest rec eived
Bank deposits
Total interest rec eived
Interest expense
Interest on acquisition facility borrowings
Unwind of discount relating to contingent consideration
Other
Total interest expense
Net financ e expense
6.
Taxation
Income tax expense
The major components of income tax expense for the period are:
$'000s
Current inc ome tax:
Current income tax expense
Prior year adjustments
Deferred tax:
Relating to origination and reversal of temporary differences
Prior year adjustments
Total inc ome tax expense
54 | Evolve Education Group Annual Report 2017
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
78,078
1,946
1,029
2,230
83,283
70,258
1,615
883
2,037
74,793
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
104
104
(1,366)
-
-
(1,366)
159
159
(1,119)
(134)
(2)
(1,255)
(1,262)
(1,096)
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
6,609
(184)
6,425
(106)
170
64
6,489
6,112
(359)
5,753
(218)
9
(209)
5,544
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
6.
Taxation (continued)
Reconciliation of tax expense
Tax expense may be reconciled to accounting profit as follows:
$'000
Profit/(Loss) before inc ome 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
Prior year adjustments
Total inc ome tax expense
Effective income tax rate
Deferred tax
Deferred tax relates to the following:
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
22,362
6,261
-
242
(14)
6,489
29.02%
21,186
5,932
(379)
341
(350)
5,544
26.17%
31 MARCH 2017
31 MARCH 2016
Consolidated
Arising from
Consolidated
Consolidated
Arising from
Consolidated
Statement of
Acquisition
Statement
Statement of
Acquisition
Statement
Comprehensive
of
of Financial
Comprehensive
of
of Financial
Income
Businesses
Position
Income
Businesses
Position
(48)
66
58
(140)
(64)
118
-
-
-
118
1,283
(1,529)
895
191
840
(305)
7
337
170
209
127
-
-
-
127
1,213
(1,595)
837
331
786
$'000
Property, plant and equipment
Intangible assets
Employee entitlement provisions
Other timing differences
Deferred tax (expense)/benefit
Net deferred tax assets
Imputation credits
Imputation credits available for use in subsequent reporting periods is $9,053,076 (2016: $5,054,461), 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.
7.
Cash and Cash Equivalents
$'000
Cash at banks and on hand
Short-term deposits
Total c ash and c ash equivalents
31 MARCH 2017 31 MARCH 2016
1,968
2,127
4,095
1,914
36,710
38,624
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.
Evolve Education Group Annual Report 2017 | 55
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
8.
Property, Plant and Equipment
31 Marc h 2017
$'000
Cost
Opening balance
Additions/Transfers
Acquisition of businesses
Disposals
Closing balanc e
Note
10
Deprec iation and impairment
Opening balance
Depreciation charge for period
Disposals
Closing balanc e
Office
Plant and
Furniture
Leasehold
Motor
Work in
Equipment
and Fittings
Improvements
Vehicles
Progress
Total
251
92
90
(5)
428
(49)
(94)
1
(142)
5,424
655
466
(321)
6,224
(1,518)
(1,502)
264
(2,756)
956
1,100
19
(111)
1,964
(173)
(364)
73
(464)
317
44
21
(171)
211
(77)
(67)
143
(1)
371
(137)
44
-
278
7,319
1,754
640
(608)
9,105
-
-
-
-
(1,817)
(2,027)
481
(3,363)
Net book value
286
3,468
1,500
210
278
5,742
31 Marc h 2016
$'000
Cost
Opening balance
Additions
Acquisition of businesses
Disposals
Closing balanc e
Deprec iation and impairment
Opening balance
Depreciation charge for period
Disposals
Closing balanc e
Office
Plant and
Furniture
Leasehold
Motor
Work in
Equipment
and Fittings
Improvements
Vehicles
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
56 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
9.
Group Information
Information about subsidiaries
The consolidated financial statements of the Group include:
Name
Principal Activities
Country of
Incorporation
Balance
Date
Equity
Interest
Evolve Education Group 1 Limited
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
Lollipops Educare Limited
Evolve corporate office
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
Porse Franchising (NZ) Limited
Porse Education & Training (NZ) Limited
For Life Education & Training (NZ) Limited
10. Business Combinations
Home-care provider
Provides services to Porse
franchisees
Education and
provider
Education and
provider
training
training
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
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
31 March
31 March
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
During the 12 months ended 31 March 2017 the Group acquired 15 ECE centres from several separate vendors,
for a combined purchase price of $21.9m (net of purchase price adjustments). Of this, $21.7m was paid in cash
by balance date. Net assets acquired was $0.1m resulting in goodwill on acquisition of $21.7m. Total acquisition
costs incurred during the year were $714k 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 assets acquired is included in the following table.
Evolve Education Group Annual Report 2017 | 57
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 10. Business Combinations (continued)
Assets and liabilities ac quired and c onsideration paid
Assets
Other current assets
Property, plant and equipment
Deferred tax
Liabilities
Funding received in advance
Other current liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purc hase c onsideration transferred
Purc hase c onsideration
Cash paid
Cash payable relating to retentions
Total c onsideration
$'000
91
640
118
849
(698)
(18)
(716)
133
21,748
21,881
21,678
203
21,881
The goodwill of $21.7m 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 under one centrally managed group.
Goodwill is allocated to each of the segments identified at Note 4, as appropriate.
The total identifiable net assets above are provisional and are subject to the completion of purchase price
adjustments.
At balance date the acquisitions have contributed revenue of $7.2m and a net profit after tax of $0.5m to the
Group’s results before allowing for upfront acquisition and integration expenses but after interest on the purchase
price. As the acquisitions were made at different times during the year it is anticipated these acquisitions would
have contributed revenue of $17.1m and a net profit after tax of $1.5m (excluding upfront and non-recurring
acquisition costs of $0.7m and integration costs of $0.6m, but including interest on the purchase price) had they all
been acquired on 1 April 2016.
58 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
11.
Intangible Assets
Note
10
31 Marc h 2017
$'000
Cost
Opening balance
Additions
Acquisition of businesses
Closing balanc e
Amortisation and
Opening balance
Amortisation for period
Closing balanc e
Customer Sy llabus Management
Lists
Material Contrac ts
Softw are Brands Goodw ill
Total
301
-
-
301
200
-
-
200
372
-
-
372
1,458
118
-
1,576
4,787
-
-
4,787
184,346
-
21,748
206,094
191,464
118
21,748
213,330
(100)
(75)
(175)
(67)
(50)
(117)
(124)
(93)
(217)
(316)
(384)
(700)
-
-
-
-
-
-
(607)
(602)
(1,209)
Net book value
126
83
155
876
4,787
206,094
212,121
31 Marc h 2016
$'000
Cost
Opening balance
Additions
Acquisition of businesses
Completion adjustments
Disposals
Closing balanc e
Amortisation and
Opening balance
Amortisation for period
Disposals
Closing balanc e
Customer Sy llabus Management
Lists
Material Contrac ts
Softw are Brands Goodw ill
Total
Note
301
-
-
-
-
301
(25)
(75)
-
(100)
200
-
-
-
-
200
(17)
(50)
-
(67)
372
-
-
-
-
372
(31)
(93)
-
(124)
964
507
-
-
(13)
1,458
(65)
(252)
1
(316)
4,787
-
-
-
-
4,787
162,038
-
22,447
(139)
-
184,346
168,662
507
22,447
(139)
(13)
191,464
-
-
-
-
-
-
(138)
(470)
1
(607)
Net book value
201
133
248
1,142
4,787
184,346
190,857
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 Marc h 2017
$'000
ECE
Centres
Home-based
ECE
ECE
Management
Total
Goodwill
Brands with indefinite useful lives
194,828
3,104
10,600
1,683
666
-
206,094
4,787
Evolve Education Group Annual Report 2017 | 59
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
12.
Impairment Testing of Goodwill and Intangible Assets With Indefinite Lives
(continued)
31 Marc h 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
The Group performed its annual impairment test at balance date.
ECE Centres and Home-based Care Providers - Goodwill
The recoverable amount of the ECE Centres and Home-Based ECE Provider CGUs was $253.3m (2016: $238.4m) at
balance date. The assessment has been approved by the Board and determined by management based on a value in
use calculation using cash flow projections, along with financial forecasts covering a five year period. The pre-tax
discount rate applied to cash flow projections is 15.4% (2016: 15.4%) and cash flows beyond the five-year period
are extrapolated using a 2% (2016: 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.
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 through the forecast period
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. ECE revenue is assumed to grow by 1% (2016: 1%) per
annum on average, with Home-Based ECE revenue assumed to grow by 0.7% (2016: 1%) per annum on average. It is
assumed the Ministry of Education continues to support early childhood education to the value of approximately 67%
of ECE revenue earned and 90% of Home-Based ECE revenue earned. If the Government reduces its funding it could
lead to the 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 1% (2016: 0.5%) 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 0.7% to 1% revenue
growth and 1% expense growth
ECE CENTRES
HOME-BASED ECE
1. Revenue and expense growth 0%
No impairment
2. Revenue growth 1%, expense growth 1%
No impairment
3. Revenue growth 0%, expense growth 1%
No impairment
4. Revenue growth -1%, expense growth 0%
Impairment
No impairment
No impairment
No impairment
No impairment
60 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
12.
Impairment Testing of Goodwill and Intangible Assets With Indefinite Lives
(continued)
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% (2016: 17.5%) and 25.0% (2016: 20%) would lead to an impairment in the ECE Centre and
Home-care Centre 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.
ECE Centres and Home-based ECE Providers – Brands
The recoverable amount of the ECE Centres and Home-based ECE brands was $5.5m (2016: $5.6m) at balance
date. The assessment has been approved by the Board and determined by management 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 covering a 12-month period. The pre-tax
discount rate applied to cash flow projections is 15.4% (2016: 15.4%) and cash flows beyond the one year period
are extrapolated using a 2% (2016: 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 17% 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 2% could
lead to an impairment in the Home-based ECE brand.
Royalty rate – the relief from royalty method assumes a royalty rate of 1%. Any reduction in the rate below 0.8%
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 18.1% and 15.7% could lead to 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 0.2% (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 1.9% could result in
an impairment of the Home-based ECE brand.
Evolve Education Group Annual Report 2017 | 61
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017 13. Trade and Other Payables
$'000
Trade payables
Amounts accrued in respect of business combinations
Goods and services tax
Other payables
Total trade and other pay ables
14. Funding Received in Advance
31 MARCH 2017 31 MARCH 2016
877
203
5,324
3,972
10,376
838
115
4,652
2,808
8,413
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 2017 funding received in advance relates to April to June 2017. Funding receivable relates to
the remaining 25% of funding, adjusted for any changes in occupancy levels, in respect of February and March 2017.
$'000
Funding received in advance
Funding receivable
Total funding rec eived in advanc e
15.
Employee Entitlements
$'000s
Employee leave provisions
Accrued wages and salaries
Other
Total employ ee entitlements
16.
Issued Capital
Authorised shares
31 MARCH 2017 31 MARCH 2016
21,853
(3,801)
18,052
20,216
(3,898)
16,318
31 MARCH 2017 31 MARCH 2016
2,999
3,363
220
6,582
2,812
2,930
330
6,072
Ordinary shares authorised, issued and fully paid
Opening balance
Ordinary shares issued:
Issue of shares in relation to dividend reinvestment
plan ("DRP")
Less share issue costs relating to shares issued
under DRP
Executive share based payment
Closing balanc e
31 MARCH 2017
31 MARCH 2016
Number
$'000
Number
$'000
177,576,018
157,364
177,082,724
156,926
702,238
655
493,294
-
(12)
-
489
(51)
-
178,278,256
99
158,106
-
177,576,018
-
157,364
62 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
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 available 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 current dividend policy of the Group is to pay dividends between 40% and 60% of net profit after tax in respect
of the preceding period subject to the discretion of the Board.
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.
18. Dividends
Dividends paid during the year
Interim dividend for the year ended 31 March 2017
Final dividend for the year ended 31 March 2016
Interim dividend for the year ended 31 March 2016
2.50
2.38
2.38
4,451
4,226
8,677
4,215
4,215
2017
Cents
2016
Cents
2017
$'000
2016
$'000
Policies
Dividends are paid in cash in accordance with the dividend policy of the Group. The dividends paid were fully
imputed.
Supplementary dividends
Supplementary dividends of $0.6m (2016: $0.3m) were paid to shareholders not tax resident in New Zealand of
which the Company received a foreign investor tax credit entitlement.
Dividend reinvestment plan
Under the Company’s dividend reinvestment plan, holders of ordinary shares may elect to reinvest the net proceeds
of cash dividends payable or credited to acquire further fully paid ordinary shares in the Company. In respect of the
year ended 31 March 2017, 702,238 shares with a total value of $0.7m were issued in lieu of cash dividends (2016:
$0.5m).
Evolve Education Group Annual Report 2017 | 63
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
19.
Earnings Per Share (EPS)
Basic and diluted EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following
reflects the income and share data used in the basic and diluted EPS computations:
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
Profit attributed to ordinary equity holders of the parent ($'000s)
15,873
15,642
Weighted average number of ordinary shares for basic and diluted EPS
178,007,882
177,222,895
Basic (and diluted) earnings per share (expressed as cents per share)
8.9
8.8
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.
20. 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 currently 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 $20.2m (2016: $45.9m) of the
Group’s $90.0m lending facilities exposing the Group to interest rate risk. Exposure to interest rate risk is reduced
as the borrowings are typically partially repaid 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).
64 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
20. 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 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
Fac ility Limits
Senior revolving facility
Acquisition facility
Total lending fac ilities
Utilisation
Senior revolving facility
Acquisition facility
Total borrow ings
Total unused fac ilities
31 MARCH 2017 31 MARCH 2016
30,000
60,000
90,000
-
20,200
20,200
30,000
60,000
90,000
20,000
25,865
45,865
69,800
44,135
During the year ended 31 March 2017 the terms of the Acquisition facility were amended to allow the company to
temporarily apply surplus cash against drawings under the facility, to ensure efficient use of cash during the working
capital cycle. Cash applied against the facility is available to be redrawn.
Evolve Education Group Annual Report 2017 | 65
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
20. Financial Assets and Liabilities (continued)
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.
21. Reconciliation of Profit After Tax to Net Operating Cash Flows
$'000
Profit after tax
Adjustments for:
Depreciation and amortisation
Contingent consideration adjustments
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 activities
YEAR
31 MARCH
2017
YEAR
31 MARCH
2016
15,873
15,642
2,629
-
1,262
(54)
-
96
2,157
(1,352)
1,096
(336)
(204)
1,364
1,036
(611)
2,035
(445)
510
-
-
22,331
(511)
(226)
(2,837)
612
957
937
1,638
18,937
66 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
22. 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:
Within one year
After one year but not more than five years
More than five years
Total
Guarantees
31 MARCH 2017 31 MARCH 2016
$'000
$'000
20,500
62,004
51,179
133,683
17,429
48,848
33,015
99,292
$2,325,915 (2016: $2,362,980) of the lease guarantee facility disclosed at Note 20 has been utilised.
Taxation
Porse In-home Childcare (NZ) Limited (“PIHCL”), a wholly owned subsidiary of the Company, is in discussion with
the Inland Revenue Department (“IRD”) on the GST status of home-based care delivery, as are other operators in
the home-based ECE sector. The IRD has challenged PIHCL’s treatment in respect of payments made to home-based
educators and nannies. PIHCL, based on its own view, supported by expert legal and tax advice, remains confident
that its treatment of GST in respect of home-based educators and nannies is correct. PIHCL will continue to engage
with the IRD to understand the basis of its position in an endeavour to negotiate a resolution of this matter in the
best interests of the shareholders.
The assessment of the carrying value of home-based ECE intangible assets has been undertaken on this basis and the
continuing application of the current GST treatment is a key assumption and judgement in determining the value in
use of the home-based ECE cash generating unit.
23. 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, Gráinne Troute
(appointed 1st May 2017) 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.
Evolve Education Group Annual Report 2017 | 67
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
23. Related Party Transactions (continued)
Related party relationships that ceased during the year or in the prior period are:
•
•
•
•
Acquisition related costs paid to Wraith Capital Group NZ Ltd (2016: $239,000) and Kern Group (2016: $230,000).
Greg Kern continues to be related through his directorship of the company.
Payments for consultancy services to Mark Finlay (2016: $40,000). Mark Finlay continues to be a related party
through his directorship of the company.
Rents paid to interests of Jenny Yule former Chief Executive Officer of Porse Group (2016: $242,000). Jenny
Yule ceased to be a related party on 31 December 2015.
Vivek Singh ceased to be key management personnel in June 2016.
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. A summary of Directors
remuneration follows:
$'000s
Norah Barlow
Alistair Ryan
Mark Finlay
Greg Kern
Total Direc tors Remuneration
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
135
90
80
80
385
135
90
80
80
385
• 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:
• LEP Limited is the landlord of the Group’s head office and it is the landlord of six of the groups ECE
centres. Rent of $1,161,000 (2016: $739,000) has been paid by the Group to LEP Limited during the
period. A further commitment to make future rent payments of $3,942,000 (2016: $3,154,000) over the
next 2 to 6 years (depending on the term of each lease) is included in Note 21.
• Management fee income from centres related to Mark Finlay of $72,698 (2016: $140,525).
• Shares issued pursuant to the company’s dividend reinvestment plan to Alan Wham (27,214 shares
valued at $25,857), Alistair Ryan and Norah Barlow (3,959 shares each valued at $3,762 each) and Greg
Kern (561 shares valued at $534).
68 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
23. Related Party Transactions (continued)
•
Compensation of key management personnel of the Group:
Short-term employee benefits
Total c ompensation paid to key management personnel
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
$'000
$'000
865
865
813
813
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related
to key management personnel.
•
Shareholding interests of Directors and key management of the Company are:
Shareholder
Mark Finlay
Kern Group NZ Limited & Gregory Kern
Vivek Singh
Alan Wham
Norah Barlow
Alistair Ryan
2017
No of shares
2016
No of shares
21,347,382
2,347,808
321,555
589,518
85,749
85,749
24,777,761
21,347,382
2,347,247
306,711
562,304
81,790
81,790
24,727,224
During the year Norah Barlow, Alistair Ryan, Alan Wham increased their shareholdings via electing to receive shares
under the Group’s dividend reinvestment plan.
Related party transactions arising during the prior period:
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.
Evolve Education Group Annual Report 2017 | 69
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
24. Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the Group’s auditor,
PricewaterhouseCoopers and the Porse Group’s predecessor auditor, Gardiner Knoblich:
Y EAR
Y EAR
31 MARCH 2017 31 MARCH 2016
175
30
205
-
-
205
43
8
51
150
41
191
19
19
210
54
15
69
$'000
Audit servic es:
Audit of Group consolidated financial statements
Porse assurance engagements
Fees paid to Pric ew aterhouseCoopers
Audit of financial statements of PORSE Group as at
31 December 2014
Fees paid to Gardiner Knobloc h
Total audit servic es
Other servic es provided by Pric ew aterhouseCoopers:
Taxation services
Consultancy services
Total other servic es
Taxation services relate to compliance services and general tax advice.
Consultancy services relate to advice regarding executive remuneration.
25.
Events after the reporting period
Dividend
On 22 May 2017 the Board approved a fully imputed final dividend of $4.5m or 2.5 cents per share in respect of the
year ended 31 March 2017. The dividend is payable on 21 June 2017.
Acquisition
The Group has entered into an agreement for the acquisition of six ECE centres for $8.0m total consideration. At
the date of signing these financial statements the agreement is unconditional and due for settlement in June 2017.
70 | Evolve Education Group Annual Report 2017
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2017
Independent auditor’s report
To the shareholders of Evolve Education Group Limited
The consolidated financial statements comprise:
the statement of financial position as at 31 March 2017;
the statement of comprehensive income for the year then ended;
the statement of movements in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements of Evolve Education Group Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 31 March 2017, its financial performance and its cash flows for the year
then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of other audit related assurance and non-
assurance services, tax compliance and executive remuneration advisory services. The provision of
these other services has not impaired our independence as auditor of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Evolve Education Group Annual Report 2017 | 71
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall group materiality: $1.1 million, which represents 5% of profit before
tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We agreed with the Audit and Risk Committee that we would report to them
misstatements identified during our audit above $111,000 as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
We have one key audit matter: goodwill impairment assessment.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Goodwill impairment assessment
The assessment of goodwill includes significant judgement.
As disclosed in Note 12 of the financial statements,
We considered management’s identification of CGUs by gaining an
the Group balance sheet includes goodwill of $206.1
understanding of the business, how it is managed, and how the balance
million which relates to business acquisitions
arising in the current and prior years. Of that
balance, $194.8 million relates to ECE Centres and
$10.6 million relates to Home-based ECE
businesses.
To assess the ongoing carrying value of the goodwill
that arose on acquisition of the businesses,
management performs an annual impairment
review of each cash generating unit (CGU) using a
‘value in use’ basis. This was an audit area of focus
due to the fact that the assessment is complex and
judgmental in nature.
Management’s calculations included the following
key estimates and assumptions:
Management determined that the CGUs are
consistent with their operating segments,
represented by ECE Centres and Home-based
ECE.
Expected future trading results are based on
management’s forecasts.
As described in note 22, the assessment of the
carrying value of the Home-based ECE CGU has
been undertaken on the basis of the continuing
application of the current GST treatment adopted
by management.
A pre-tax discount rate of 15.4%.
Per annum revenue growth of 1% and 0.7% for
ECE Centres and Home-based ECE, respectively.
1% expense growth across both CGUs.
A long term growth rate of 2%.
The impairment assessment completed by
management and approved by the Directors
calculated the value of each CGU as higher than the
carrying value of applicable net assets and no
impairment was identified.
Management determined that the model was most
sensitive to a possible scenario where revenue
declined by 1% with no decrease in expenses.
sheet balances and results are reported to management and the
Directors.
We tested management’s value in use calculations including the inputs
and mathematical accuracy of the models and comparison to the
relevant net assets value of the CGUs.
We also assessed key estimates and assumptions made by management
and our audit procedures included the following:
We gained an understanding of the business process applied by
management in determining whether there are any indicators of
impairment in the value of goodwill and indefinite life intangible
assets.
We obtained an understanding of management’s forecasting and
budgeting process and reviewed the past years actual performance
against budget performance to determine the rigour and accuracy of
the budgeting process.
We reviewed the independent expert advice received by management
in respect of the ongoing discussions with the Inland Revenue
Department on the GST status of the Home-Based ECE. We note that
the advice is consistent with the approach adopted by management
when forecasting its future cash flows for the value in use calculation.
We considered the reasonableness of key assumptions in the cash
flow forecast with reference to the historical performance of the
Group, in particular revenue growth, expense growth and terminal
We performed sensitivity analysis over the key assumptions
growth rates.
including:
o decreasing the revenue growth rates;
increasing the expense growth rates;
increasing the discount rate;
o
o
o decreasing the long term growth rate;
and determined if this indicated any impairment of the carrying value
of goodwill.
We engaged our internal independent expert who compared the
terminal growth rates and discount rates used by management
against those used by similar market participants and determined
that the rates were within a reasonable range.
We reviewed the disclosure in the financial statements for compliance
with the requirements of NZ accounting standards.
The results of our procedures were consistent with the conclusions of
management.
PwC
72 | Evolve Education Group Annual Report 2017
PwC
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall group materiality: $1.1 million, which represents 5% of profit before
tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We agreed with the Audit and Risk Committee that we would report to them
misstatements identified during our audit above $111,000 as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
We have one key audit matter: goodwill impairment assessment.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Goodwill impairment assessment
The assessment of goodwill includes significant judgement.
As disclosed in Note 12 of the financial statements,
the Group balance sheet includes goodwill of $206.1
million which relates to business acquisitions
arising in the current and prior years. Of that
balance, $194.8 million relates to ECE Centres and
$10.6 million relates to Home-based ECE
businesses.
To assess the ongoing carrying value of the goodwill
that arose on acquisition of the businesses,
management performs an annual impairment
review of each cash generating unit (CGU) using a
‘value in use’ basis. This was an audit area of focus
due to the fact that the assessment is complex and
judgmental in nature.
Management’s calculations included the following
key estimates and assumptions:
Management determined that the CGUs are
consistent with their operating segments,
represented by ECE Centres and Home-based
ECE.
Expected future trading results are based on
management’s forecasts.
As described in note 22, the assessment of the
carrying value of the Home-based ECE CGU has
been undertaken on the basis of the continuing
application of the current GST treatment adopted
by management.
A pre-tax discount rate of 15.4%.
Per annum revenue growth of 1% and 0.7% for
ECE Centres and Home-based ECE, respectively.
1% expense growth across both CGUs.
A long term growth rate of 2%.
The impairment assessment completed by
management and approved by the Directors
calculated the value of each CGU as higher than the
carrying value of applicable net assets and no
impairment was identified.
Management determined that the model was most
sensitive to a possible scenario where revenue
declined by 1% with no decrease in expenses.
We considered management’s identification of CGUs by gaining an
understanding of the business, how it is managed, and how the balance
sheet balances and results are reported to management and the
Directors.
We tested management’s value in use calculations including the inputs
and mathematical accuracy of the models and comparison to the
relevant net assets value of the CGUs.
We also assessed key estimates and assumptions made by management
and our audit procedures included the following:
We gained an understanding of the business process applied by
management in determining whether there are any indicators of
impairment in the value of goodwill and indefinite life intangible
assets.
We obtained an understanding of management’s forecasting and
budgeting process and reviewed the past years actual performance
against budget performance to determine the rigour and accuracy of
the budgeting process.
We reviewed the independent expert advice received by management
in respect of the ongoing discussions with the Inland Revenue
Department on the GST status of the Home-Based ECE. We note that
the advice is consistent with the approach adopted by management
when forecasting its future cash flows for the value in use calculation.
We considered the reasonableness of key assumptions in the cash
flow forecast with reference to the historical performance of the
Group, in particular revenue growth, expense growth and terminal
growth rates.
We performed sensitivity analysis over the key assumptions
including:
o decreasing the revenue growth rates;
increasing the expense growth rates;
o
o
o decreasing the long term growth rate;
increasing the discount rate;
and determined if this indicated any impairment of the carrying value
of goodwill.
We engaged our internal independent expert who compared the
terminal growth rates and discount rates used by management
against those used by similar market participants and determined
that the rates were within a reasonable range.
We reviewed the disclosure in the financial statements for compliance
with the requirements of NZ accounting standards.
The results of our procedures were consistent with the conclusions of
management.
PwC
PwC
Evolve Education Group Annual Report 2017 | 73
Who we report to
This report is made solely to the Company’s shareholders, as a body. 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.
The engagement partner on the audit resulting in this independent auditor’s report is Richard Day.
For and on behalf of:
Chartered Accountants
22 May 2017
Auckland
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on other information. At the time of our audit, there was
no other information available to us.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of our auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
PwC
74 | Evolve Education Group Annual Report 2017
PwC
Who we report to
This report is made solely to the Company’s shareholders, as a body. 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.
The engagement partner on the audit resulting in this independent auditor’s report is Richard Day.
For and on behalf of:
Chartered Accountants
22 May 2017
Auckland
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on other information. At the time of our audit, there was
no other information available to us.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of our auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
PwC
PwC
Evolve Education Group Annual Report 2017 | 75
Corporate Governance and Statutory Information
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 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 are broadly consistent with the
New Zealand Financial Markets Authority’s Corporate Governance in New Zealand – Principles and Guidelines (the
“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. 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.
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.
•
•
•
76 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
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 Chief Executive Officer who is charged
with operating the business. The Board also advises, oversees and counsels the CEO, 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,
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 for the assessment of 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 and 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, dishonesty,
inappropriate behaviour and victimisation will not be tolerated within the Company.
Evolve Education Group Annual Report 2017 | 77
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
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 Management (including Executive
Directors)
Company-wide
As at 31 March 2016
Men
4 (80%)
Women
1 (20%)
4 (50%)
>92.5%
4 (50%)
<7.5%
As at 31 March 2017
Men
4 (80%)
Women
1 (20%)
3 (43%)
>96.5%
4* (57%)
<3.5%
*Senior management includes the CEO and employees who report directly to the CEO. As at 31 March 2017 the senior
management team consists of seven positions.
At balance date the Group employs 2,406 women which represents 96.5% of the workforce (FY16: 2,099 women which
represented 92.5% of the workforce).
Performance Management
The Board has established a Remuneration and People 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.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 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.
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.
providing leadership to the Board and to the Company;
ensuring the efficient organisation and conduct of the Board;
The role and responsibilities of the Chair include:
•
•
• monitoring Board performance annually;
•
facilitating Board discussions to ensure core issues facing the Company are addressed;
78 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
•
•
•
•
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.
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, Gráinne Troute, 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 Guidelines.
With regard to the NZX Listing Rules and the indicators of independence set out in the Guidelines:
• Mark Finlay is not considered independent given his shareholding in the Company on completion of the initial public
offering; and
• 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 (to ensure the Board is comprised of a
majority of 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.
Nomination and Appointment
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 considered by the Board and Remuneration and
People Committee on an ongoing basis.
Evolve Education Group Annual Report 2017 | 79
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
Board Committees
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 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 Greg Kern (Chair appointed 19 May 2017), Norah
Barlow and Alistair Ryan (Chair until 19 May 2017). The Board is of the belief that the Audit and Risk Committee is
appropriately constituted having regard to the scale and complexity of the Company’s business and the particular
expertise and experience of each current member.
• 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 Gráinne Troute (Chair appointed 19 May
2017), Mark Finlay, and Norah Barlow. (Greg Kern Chair until 19 May 2017)
Board Access to Information and Advice
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 in carrying out their responsibilities.
Director Education
Directors are responsible for ensuring that they remain current in understanding their duties as directors.
80 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
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 apply regardless of whether the
Company’s securities are quoted on NZX or ASX and 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.
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 2017 and the date of approving the financial statements (that is, 22 May 2017), as compared to the number of
scheduled meetings (in brackets) is shown in the table below.
Norah Barlow
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Gráinne Troute
Board
10 (10)
10 (10)
10 (10)
10 (10)
10 (10)
2 (2)
Audit and Risk Committee
Remuneration and People
Committee
5 (5)
-
5 (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; and
use the Company’s resources and property properly.
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Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
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
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 10 and the number of Committee members and attendance records is disclosed on page 81.
Before the Board approves the financial statements for a particular financial period, 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 2017.
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 2017 is set out in note 24 of 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).
82 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
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.
Evolve Education Group Annual Report 2017 | 83
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
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 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.
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 meeting
will provide an opportunity for shareholders to raise questions about the governance, operations, and management
of the Company. 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 a primary responsibility of management.
The Board has delegated certain activities to the Audit and Risk Committee and has adopted a Risk Management Policy.
The Audit and Risk Committee is responsible for ensuring there are adequate policies in relation to risk management,
compliance and internal control systems. The committee monitors 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.
During the reporting period, the Audit and Risk Committee conducted regular assessments of the effectiveness of the
Company’s risk management and internal control processes, including the Company’s risk management plan framework.
Management reports 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.
84 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
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 for staff, contractors and our children is effectively governed and managed. The Board has
adopted measures that will allow the Company to monitor and affect proactive identification of risks and events to
ensure continuous improvement, and ultimately, a reduction in the rate of accidents. A group wide Health and Safety
Management system which accommodates all aspects of the Company’s health and safety requirements has been
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.
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 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 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
Evolve Education Group Annual Report 2017 | 85
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
(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 81.
The performance of all directors and senior management is reviewed periodically in accordance with the terms of the
Remuneration and People Committee Charter.
Director Remuneration
The Chairperson receives $135,000 per annum. The non-executive directors each receive $80,000 per annum. The Chair
of the Audit and Risk Committee and Remuneration and People 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 $475,000 per annum.
However, the Company has set the Director fee pool for all directors at $500,000 per annum in aggregate to allow
further payments to be made to directors should additional work be required and allow for some level of increase and
for Committee work, if appropriate. 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.
The annual remuneration review process requires “one over one” approval (approval from a higher authority than
the person or committee recommending the remuneration). 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.
86 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
The Company has adopted a performance share rights long-term executive incentive scheme for the CEO and the 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.
Director Remuneration Statement
The Company’s directors holding office during the year ended 31 March 2017 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 2017 are provided below.
($000’s)
Norah Barlow
Alistair Ryan
Greg Kern
Mark Finlay
Alan Wham
Total
Directors’ Fees
Cash Salary and
Other Payments
Total
135
90
80
80
-
385
-
-
-
-
450
450
135
90
80
80
450
835
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 2017 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 2017 are specified below.
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
$190,001 - $200,000
$230,001 - $240,000
Total
Total
2
1
1
2
2
1
3
1
1
14
In the case of businesses acquired, the employee remuneration details above relates to remuneration and benefits paid
from the date the Company acquired those businesses.
Evolve Education Group Annual Report 2017 | 87
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
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 2017 are as follows:
Director
Norah Barlow
Position
Non-executive Director/Shareholder
(ceased 29 April 2016)
Director
Trustee
Company
Summerset Group Holdings Limited
Merseyside Holdings Limited
Kensington Trust
Mark Finlay
Director and Indirect Shareholder
LEP 1 Limited
Director and Indirect Shareholder
LEP 2 Limited
Director and Shareholder
Pink Beluga Limited
Director and Shareholder
25 Broadway (2014) Limited
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 2017:
Norah Barlow:
•
•
Issue of 2,013 shares by the Company on 20 June 2016 under the Company’s dividend reinvestment plan.
Issue of 1,946 shares by the Company on 21 December 2016 under the Company’s dividend reinvestment plan.
Mark Finlay:
• Nil
Greg Kern:
•
•
Issue of 285 shares by the Company on 20 June 2016 under the Company’s dividend reinvestment plan.
Issue of 276 shares by the Company on 21 December 2016 under the Company’s dividend reinvestment plan.
Alistair Ryan:
•
•
Issue of 2,013 shares by the Company on 20 June 2016 under the Company’s dividend reinvestment plan.
Issue of 1,946 shares by the Company on 21 December 2016 under the Company’s dividend reinvestment plan.
Alan Wham:
•
•
Issue of 13,837 shares by the Company on 20 June 2016 under the Company’s dividend reinvestment plan.
Issue of 13,377 shares by the Company on 21 December 2016 under the Company’s dividend reinvestment plan.
88 | Evolve Education Group Annual Report 2017
Corporate Governance and Statutory Information
Disclosure of Directors’ Interests in Shares
Directors disclosed the following relevant interests in Shares as at 31 March 2017:
Director
Norah Barlow
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Number of Shares in which a
relevant interest is held
85,749
21,347,382
2,347,808
85,749
589,518
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
11,313 shares were issued to Gregory 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
remain listed on the ASX. The Company 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:
current and anticipated profitability;
current and medium-term capital expenditure requirements;
•
•
• working capital requirements;
•
current capital structure, having regard to the risks presented by short and medium term economic and market
conditions and estimated financial performance;
available imputation credits; and
solvency requirements.
•
•
Evolve Education Group Annual Report 2017 | 89
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
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.
For the financial year ended 31 March 2017, the Company authorised the following dividends:
•
•
an interim dividend of 2.50 cents per share paid on 21 December 2016; and
a final dividend of 2.50 cents per share paid on 21 June 2017.
The last date for the receipt of an election notice to participate in the Company’s dividend reinvestment plan is 5:00pm
on the business day following the record date for a dividend.
Net Tangible Assets
The Company’s net tangible assets as at 31 March 2017 were ($0.25) per share (31 March 2016 ($0.17) per share). Due
to the nature of the Company’s business, intangible assets are a major component of total assets. Accordingly the net
assets per security is considered a more useful measure and as at 31 March 2017 it was $0.95 (2016: $0.91).
Donations
The Company made donations of $2,671 during the year ended 31 March 2017 (31 March 2016 $6,980).
Credit Rating
The Company has no credit rating.
NZX and ASX Waivers
On 9 December 2016, NZX Regulation granted Evolve a waiver from NZX Main Board Listing Rule 8.1.7 in respect of the
Evolve Group Performance Share Rights Plan (the Plan) to allow Evolve to change the number of underlying securities
under the Plan in certain circumstances. The waiver was granted on the conditions that:
•
•
the Plan is submitted to NZX Regulation for approval under Listing Rules 6.1.1 and 6.1.2(e); and
if it is necessary to make an adjustment to the number of underlying securities under the Plan, then:
•
Evolve will provide NZX Regulation with at least 10 Business Days’ notice prior to the adjustment that sets out
a description of the circumstances giving rise to the adjustment, the proposed adjustment to the share rights,
and a copy of advice from an independent party that the adjustment is fair and reasonable to Evolve and its
shareholders; and
the directors of Evolve certify to NZX Regulation that they are satisfied with the advice from the independent
party and, in their opinion, the proposed amendment to the share rights is fair and reasonable to Evolve and
its shareholders.
•
Annual Meeting
The Company’s Annual Meeting of shareholders will be held in Auckland on 17 August 2017 at 2 pm. A notice of Annual
Meeting and Proxy Form will be circulated to shareholders in July.
90 | Evolve Education Group Annual Report 2017
Shareholder Information
Analysis of Shareholding at 29 May 2017
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
Number of
Shareholders
%
Shares
Holding
Quantity
%
0.03%
0.60%
1.42%
7.81%
7.80%
25.22%
25.06%
36.91%
62,281
1,068,937
2,534,828
13,931,242
98
317
315
464
63
5.01%
160,680,968
90.13%
1,257
100.00%
178,278,256
100.00%
Twenty Largest Shareholders at 29 May 2017
The 20 largest shareholders of fully paid ordinary shares as at 29 May 2017 were:
Name
New Zealand Central Securities Depository Limited
Mark Finlay & Geoffrey Hosking
Citicorp Nominees Pty Limited
National Nominees Limited
Forsyth Barr Custodians Ltd
JBWERE (Nz) Nominees Limited
Leveraged Equities Finance Limited
Scottfin Ece Limited
HSBC Custody Nominees (Australia) Limited
Brispot Nominees Pty Ltd
Russell Thompson & Geoffrey Hosking
FNZ Custodians Limited
J P Morgan Nominees Australia Limited
UBS Nominees Pty Ltd
Mark Finlay & Mark Dobson Trustee Company Limited
Investment Custodial Services Limited
Custodial Services Limited
Kevin Glen Douglas & Michelle Mckenney Douglas
JBWERE (Nz) Nominees Limited
Alan Wham
Total - twenty largest shareholders
Total number of shares on issue
Number of
Shares
49,676,218
20,138,542
14,172,810
12,283,943
9,592,150
8,668,933
6,008,035
5,605,450
5,134,055
4,835,608
3,257,069
2,981,670
2,095,399
1,692,861
1,208,840
1,072,680
1,040,000
785,000
712,153
589,518
151,550,934
178,278,256
% of
Shares
27.86%
11.30%
7.95%
6.89%
5.38%
4.86%
3.37%
3.14%
2.88%
2.71%
1.83%
1.67%
1.18%
0.95%
0.68%
0.60%
0.58%
0.44%
0.40%
0.33%
85.01%
* 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 29 May
2017, the shareholdings in the Company held through NZCSD were:
Evolve Education Group Annual Report 2017 | 91
Evolve Education Group Annual Report 2016 | 1
Shareholder Information
Name
NATIONAL NOMINEES NEW ZEALAND LIMITED
HSBC NOMINEES (NEW ZEALAND) LIMITED
ACCIDENT COMPENSATION CORPORATION
GUARDIAN NOMINEES NO 2 LIMITED
BNP PARIBAS NOMINEES NZ LIMITED
JPMORGAN CHASE BANK
CITIBANK NOMINEES (NZ) LIMITED
TEA CUSTODIANS LIMITED
HSBC NOMINEES (NEW ZEALAND) LIMITED
PRIVATE NOMINEES LIMITED
Total - shares held by NZCSD
Number of
Shares
% of NZCSD
Held by NZCSD
Shares
15,829,185
10,320,936
9,204,930
4,976,794
4,219,977
2,349,038
1,741,694
783,711
241,720
8,233
31.86%
20.78%
18.53%
10.02%
8.49%
4.73%
3.51%
1.58%
0.49%
0.02%
49,676,218
100.00%
Substantial Shareholders
According to notices given under 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 the balance date
in respect of the number of shares set opposite their names.
Name
Geoffrey Hosking*
Mark Finlay**
Milford Asset Management Limited
Regal Funds Management Pty Limited
Westpac Banking Corporation
Paradice Investment Management Pty Limited
Salt Funds Management Limited
Accident Compensation Corporation
Total number of shares on issue
Number of
Shares
23,395,611
% of
Shares
13.12%
21,347,382
11.97%
14,560,808
8.17%
14,700,870
8.25%
13,692,696
7.68%
10,505,000
5.89%
10,747,762
6.03%
9,655,000
5.42%
178,278,256
* 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 3,257,069
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.
92 | Evolve Education Group Annual Report 2017
Subsidiary Company Directors
The following persons held office as Directors of the Company’s subsidiaries during the year ended 31 March 2017 or, in
the case of acquired subsidiaries, from the date of acquisition:
Company Name
Directors
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
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Vivek Singh (ceased 8 July 2016)
David Smith (ceased 24 March 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Rachel Nottingham (appointed 11 July 2016)
Alan Wham
Mark Finlay
Vivek Singh (ceased 8 July 2016)
Alan Wham
Mark Finlay
Vivek Singh (ceased 8 July 2016)
Alan Wham
Mark Finlay
Vivek Singh (ceased 8 July 2016)
Alan Wham
Evolve Education Group Annual Report 2017 | 93
Evolve Education Group Annual Report 2016 | 1 Subsidiary Company Directors
Lollipops Educare (Hastings) Limited
Lollipops Educare (Birkenhead) Limited
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
Vivek Singh (ceased 8 July 2016)
Alan Wham
Vivek Singh (ceased 8 July 2016)
Alan Wham
Kristin Colthurst
Alan Wham (ceased 13 June 2016)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
Vivek Singh (ceased 8 July 2016)
Alan Wham
Rachel Nottingham (appointed 11 July 2016, ceased 15
February 2017)
Stephen Davies (appointed 17 February 2017)
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 2017.
94 | Evolve Education Group Annual Report 2017
Corporate Directory
Evolve Education Group Limited Registered Office
Level 2
54 Fort Street
Auckland 1010
New Zealand
Phone: +64 9 377 8700
Solicitors
Chapman Tripp
Level 35, ANZ Centre
23 – 29 Albert Street
Auckland 1010
Phone: +64 9 357 9000
Contact Details in Australia
C/- Minter Ellison Rudd Watts
Level 40, Governor Macquarie Tower
1 Farrer Place
Sydney, New South Wales 2000
Phone: +61 2 9921 8888
Directors
Alistair Ryan (Chair, since 1 June 2017)
Norah Barlow (Chair, until 31 May 2017)
Mark Finlay
Greg Kern
Gráinne Troute (appointed 1 May 2017)
Alan Wham
Senior Management Team
Fay Amaral – Chief Operating Officer
Stephen Davies – Chief Financial Officer
Kerry Henderson – General Manager, Porse
Paul Matthews – Chief Information Officer
Allan McGilvray – General Manager, People and Capability
Casey Muraahi – General Manager, Au Pair Link
Alan Wham – Chief Executive Officer
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
Australian Share Registrar
Link Market Services Limited
Level 12
680 George Street
Sydney, New South Wales 2000 Phone: +61 1300 554 474
Banker and Lender
ASB Bank Limited
12 Jellicoe Street
Auckland 1140
Phone: +64 9 337 4819
Evolve Education Group Annual Report 2017 | 95
Evolve Education Group Annual Report 2016 | 1
At Evolve Education Group we support sustainable practices. In selecting print paper stocks for we ensure paper is
milled from sustainable forestry and/or post consumer material. The paper stocks used for the Annual Report 2017 are
FSC certified from the paper mill. Our printers have a sustainability policy and equipment utilised in the production
of this document meet best standard in terms of water & power conservation and utilise environmentally responsible
consumables.
96 | Evolve Education Group Annual Report 2017
PO BOX 105843 - Auckland City 1143
Level 2, 54 Fort Street - Auckland CBD
Phone: + 64 9 377 8700
evolveeducation.co.nz