Annual Report 2018
Contents
Evolve’s Story
Vision & Values
Our Culture Statement
Chair’s Report
Operational Review
CEO’s Letter
Operational Highlights
Board Profile
Investing in Our People
Centre Business Update
Education Quality in Our Centres
Childcare Options Provided by Evolve
Financial Statements
Independent Auditor’s Report
2
4
5
6
8
10
13
14
16
18
20
22
25
67
Corporate Governance & Statutory Information
72
Shareholder Information
Subsidiary Company Directors
Corporate Directory
89
91
93
Evolve Education Group Annual Report 2018 | 1
Evolve’s 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.
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 2018
Evolve Education Group Annual Report 2018 | 3
Evolve Education Group Annual Report 2016 | 1 Vision and Values
Evolve Education Group is comprised of 129 ECE centres
across New Zealand, as well as the PORSE and Au Pair
Link networks.
Our Vision:
Evolve will be acclaimed and respected as an authority
within ECE. Proud owners of superior, well-resourced
learning centres and high quality ‘in 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
ECE, recognised practitioners and advocates for best
practice within the ECE industry, and as a result, staff
will view Evolve as the premier ECE employer of choice.
Our Evolve brand:
bright, uplifting and irrepressible
We wanted our 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 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’.
Our Values:
Family values are our high ground
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.
Nurture
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 another. We extend this respect
to our planet by connecting with the natural world and
fostering love and stewardship to the environment we
live in.
Sustainability
Our critical pillars
Economic and
social development, as well as
environmental protection are 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 by 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.
4 | Evolve Education Group Annual Report 2018
Our Culture Statement
Within our walls, we live the values Evolve stands for, and we champion those across the ECE industry.
For our children and each other, that’s about respecting individuality, recognising our children as people, hearing their
voice, allowing them to feel valued and understood. That goes for our day-to-day interactions with each other too.
Genuine respect is at the heart of our organisation.
So we celebrate individual achievements, remember birthdays, laud the effort that goes above and beyond; we care
about each other.
We encourage our young enquiring minds, we share their joy of discovery, and bolster their confidence to explore and
learn more.
We are a collaborative team, wherever possible sharing our knowledge across the Evolve Group, leveraging our diverse
skills, supporting our pioneering spirit in the pursuit of improvement.
Evolve Education Group Annual Report 2018 | 5
Evolve Education Group Annual Report 2016 | 1 Alistair Ryan
Chair’s Report
Dear Shareholders,
Over the past year, Evolve Education has continued to pursue its
vision of being a highly regarded and respected authority within
New Zealand’s early childhood education (ECE) sector, through
the operation of superior, well-resourced learning centres and
high quality ‘in-home’ education services. While we have made
good progress in a number of areas towards this vision, the past
The board has a clear understanding of what needs to be done
to achieve success; the appointment of Rosanne as our CEO is
the fi rst step in strengthening the enterprise and making it more
robust in what will continue to be a challenging environment.
All of this will take some time to turnaround and rebuild and
we respectfully ask for some patience from shareholders as the
board and management take on the tasks ahead of us.
year has proved diffi cult for the company, with a change of
Evolve remains a strong long-term investment proposition.
CEO mid-year and an environment that has provided signifi cant
We are New Zealand’s second largest ECE operator with 129
challenge and headwind.
Ministry of Education funding was frozen at the same levels
as applied three years ago in an environment where our cost
base (rents, salaries and wages) came under infl ationary
pressure, coupled with an increasing challenge in terms of
centres, most of which are performing well. Our centres are
well-located, well-built and we have some excellent managers
and teachers working for us throughout the country. We put our
families and children fi rst and we know that this is the driving
force behind quality services and a successful business over
teacher availability, particularly in Auckland. Small movements
time.
in revenues (through lower occupancy rates, for instance)
The board wishes to thank the staff of Evolve for their
have magnifi ed impacts on earnings as it takes time to adjust
commitment and professionalism over the past year. We
the cost base to refl ect these movements. Rents continue to
particularly recognise the eff orts of our 2,290 employees
apply unchanged and staffi ng ratios cannot adjust easily to
who help us to deliver the highest quality education for our
small changes in attendance levels. At the same time, Evolve,
children, and positive outcomes for our families and broader
as a relatively new organisation, has needed to invest in
communities. It is through their dedication that we are able to
infrastructure to relieve the burden on centre management
strive towards our vision of being New Zealand’s leading early
in respect of recruitment, property management and other
childhood educator.
overhead type tasks unrelated to the direct provision of
Financial Result
learning services to children, while also ensuring that Ministry
of Education requirements are met and exceeded.
The past fi nancial year has seen marginal reductions in
occupancies across a signifi cant number of centres in our
network, while at the same time, other centres have been able
to increase occupancies. We are encouraged that assistance to
those centres which are having diffi culty maintaining occupancies
should be able to improve their fi nancial performance but this
is proving to be a task that requires consistent focus and is not
achieved overnight.
We are very pleased to be welcoming Rosanne Graham as Chief
Executive Offi cer from 2 July. Rosanne has an excellent skill
set and a high level of energy and enthusiasm for tackling our
revenue and operational challenges and for improving our
corporate infrastructure to allow staff to focus on their core
roles and to make Evolve a highly regarded place to work. The
enthusiasm of satisfi ed and motivated teachers then rubs off
on parents and children who will prefer our centres over the
alternatives.
The board wishes to acknowledge and thank Mark Finlay for
his sterling eff orts as CEO between September last year and
now. Mark fi lled in at short notice following the resignation of
Alan Wham and has got to grips well with the key issues and
challenges facing the company. We are fortunate that we will
be able to continue to tap into Mark’s considerable experience
in ECE as Mark will continue to work with Evolve on an advisory
basis.
6 | Evolve Education Group Annual Report 2018
Net profi t after tax and before non-recurring items for the
fi nancial year ended 31 March 2018 was $12.0 million. This was
in-line with guidance provided in February, but lower than our
forecast at the annual shareholders’ meeting (August 2017) of
$14 million to $15 million. This compares with $15.9 million
recorded in the prior year. In addition, we recorded non-
recurring expense items of $16.2 million after tax in the year,
and this resulted in a net loss after tax of $4.2 million.
Non-recurring items were the cost of the settlement reached
with the Inland Revenue Department on the historical PORSE
GST issue ($3.0 million), and the after-tax impairment expense
of $13.2 million relating to the home-based division and the
closure of one ECE centre.
Earnings included $0.5 million of start-up losses on three new
development centres, two of which commenced operations
during the year.
Total revenue of $159 million increased by $7.3 million or 4.8%
on the prior year. This was driven by new centre acquisitions
and the development of new centres, partly off set by a decline
in enrolments in both Centres and Home-Based divisions.
Occupancy in the Centres division was 2% lower, on average, on
a comparable basis, and enrolments in the Home-Based division
were also lower than the prior year.
Government Funding
In the May 2018 Budget, the Government announced a 1.6%
increase for ECE centre universal funding, beginning in January
2019. This was a welcome increase, given that funding has been
fixed for the past four years, although we were disappointed that
there was no recovery of the four years of backlog. Government
The results for 2018 included an impairment charge of $12.9
million reflecting the write off of the non-current assets
(primarily intangible assets) of the Home-Based division. This
was due principally to the decline in enrolments since PORSE
was acquired which have reduced the revenue and profitability
of that division.
funding is an important revenue stream for our industry and our
A further $1.0 million of goodwill associated with the Centres
parents and teaching staff. We are encouraged that the new
division was written off following the merger of two centres.
Government has recognised that the early childhood sector has
Strategy & Outlook
been underfunded for some time and is signalling an intention
to provide better support in the future. It is clearly in New
Zealand’s best interests to have an early childcare education
system that is appropriately funded and is able to attract and
retain qualified and talented teachers.
Dividend
The final dividend for the year was 2.0 cents per share,
compared with 2.5 cents per share paid as a final dividend in
the 2017 financial year. This brings the total dividend for the
2018 financial year to 4.5 cents per share compared with 5.0
cents per share for the prior year. The dividend will be fully
imputed for New Zealand taxation purposes and will be paid
on 28 June 2018. We have been able to pay a dividend, despite
recording a net loss for the year, due to the non-cash nature
of the impairment expense. The total dividend represents a
payout ratio of 67% of net profit after tax before non-recurring
items.
Balance Sheet
We have continued to maintain a conservative balance sheet
with the underlying gearing ratio, expressed as Net Debt to
EBITDA, of 1.24 times as at 31 March 2018. Following the year-
end our core debt facility was renewed to provide a $70 million
acquisition facility and $25 million working capital facility
through to April 2022, representing an overall increase of $5
While the 2018 financial year has proved to be a challenging
one for Evolve, our goals remain largely unchanged from those
that were established at the time of the company’s formation:
•
•
•
•
To be leader in the strong demand ECE sector in New
Zealand,
To achieve the competitive benefits of a large-scale
operator in a fragmented industry,
To continue to expand through the measured acquisition
of centres, and
To undertake new purpose-built, purpose-located centre
developments.
In undertaking these activities, our aim is to maintain a
level of profitability that provides a strong flow of funds for
reinvestment in the business, whilst maintaining a 40%-60%
dividend return to shareholders.
We remain confident that the Evolve management team can
improve the performance of the business in the medium term
but full maturity of our service offering will take several years
to be fully achieved. Driving enrolments and lifting overall
centre occupancy remain the key drivers for the business.
We will continue our focus on attracting and retaining qualified
teachers, as this is a critical element in maintaining high quality
ECE services, enrolments and occupancy levels.
million in funding lines. $60 million of the acquisition facility
For the 2019 financial year, we have identified a number of key
has been utilised to date, leaving $10 million available for
milestones which we will be looking to achieve as we build a
acquisitions over and above retained cash.
stronger business for the future:
Settlement of PORSE GST Issue
During the year we finalised agreement with the Inland Revenue
Department (IRD) in respect of various historical taxation
matters relating to the PORSE in-home childcare business. The
settlement agreement required Evolve to pay $3.0 million to
IRD and has ensured that all current areas of discussion are
•
•
•
•
•
Lifting overall occupancy from 78% to 79%,
Opening four new development centres,
Reversing the recent trend of rises in the ratio of staff
costs to revenue,
Improving employee engagement and retention, and
Turning around (or divesting) the centres that are currently
closed off. Payment of the settlement amount was funded by
trading unprofitably.
Evolve’s existing cash reserves.
Review of Asset Carrying Values
Evolve currently has $207 million of intangible assets on its
balance sheet, mainly comprising goodwill arising from ECE
centre acquisitions. These assets are tested for impairment
twice a year.
Alistair Ryan
Board Chair
Evolve Education Group Annual Report 2018 | 7
Evolve Education Group Annual Report 2016 | 1 Operational Review
Centres
Evolve had a total of 129 centres in operation as at 31 March
2018, up from 121 at the end of the prior year.
In the first half of the year seven centres were acquired and,
in addition, two new centres were developed and opened with
occupancy rates lifting in line with the business plan.
We have seen growth in the number of competing new centres
being brought into the market by property developers and this
has impacted occupancy in some areas. Scaling back our centre
acquisition programme has enabled us to focus on endeavouring
to lift the performance of our existing portfolio. One centre was
merged with another subsequent to balance date, to address
persistent low occupancy challenges of both sites. The others
We have adopted a cautious approach to centre acquisitions and
have been reviewed, the causes of low occupancy pin-pointed,
no new centres were acquired in the second half of the year.
and remediation plans have been initiated.
After several years of significant growth through the acquisition
of ECE centres, we have been consolidating our operations.
Acquiring existing ECE centres requires management attention
following each transaction and the growth through acquisition of
existing centres has stretched management resources at times.
While we remain open to further acquisitions, vendor pricing
expectations remain inflated, although have shown some signs
of reducing. We expect that the acquisition market will re-set
and this should allow further opportunities for expansion in the
medium term.
In the meantime, we have continued to see good opportunities
to invest in the development of new centres in selected
geographies where the demand profile is strong. In the past
eighteen months we have developed and opened 3 new centres.
With these new developments, we are able to ensure that they
are well-located, purpose-built facilities that are attractive to
parents and teachers alike. While newly developed centres take
longer to come on stream than they generate positive returns
We have a number of initiatives in train which we are confident
will lift performance in the medium to long term. We have
established a central enrolments team to co-ordinate the
enrolment process and ensure that all leads are followed up.
This team handles all in-bound enquiries for our ECE centres,
and offers a seamless, consistent level of service for enrolment
enquiries. We are ensuring that we price competitive in areas
of high competition. Coupled with this we have increased
investment in a coordinated digital marketing strategy.
Home-based
The market for home-based ECE services continued to attract
new participants. Consequently, while both PORSE and Au Pair
Link hold segment-leading positions, enrolment levels declined
15% in 2018 over the year. It was not possible to maintain
EBITDA through cost savings in the face of the 15% reduction
in revenues and EBITDA declined to $0.9 million in 2018 versus
$2.6 million in 2017.
more quickly as there is no goodwill payment. The early results
We have commenced a sale process for the PORSE in-home
from our own centre developments have been encouraging.
childcare business. This decision follows a strategic review of
Two of the three centres have exceeded 50% occupancy and are
PORSE and its fit with Evolve’s core activity of centre-based
anticipated to generate a monthly profit imminently.
ECE. The review has shown that the two businesses are serving
In the 2019 financial year we will be developing and opening
a further four centres in Papakura, Mt Wellington, Helensville
and Napier.
Key to the development of new centres is a strong brand
strategy. We have rationalised the many brands we had
quite different and distinct markets, with limited overlap
between the two activities. Consequently, potential synergies
between centre-based and home-based ECE have been limited.
PORSE accounts for less than 5% of Evolve earnings. We will
retain ownership of our other home-based business, Au Pair
Link, which serves a different market and is trading well.
down to seven, and new brand signage has now been rolled
out across most centres. Each of our seven brands has clear
Costs
points of differentiation and a distinctive learning philosophy.
In the 2018 financial year, wages as a percentage of revenue,
Underpinning each is a commitment to delivering what families
on a like for like basis, increased from 51.4% to 53.8% as we
want: quality ECE through caring and nurturing staff and a good
held required staffing levels despite the reduction in occupancy
learning environment that lifts child enjoyment every day.
in anticipation of higher enrolments. Cost margins have been
Occupancy
Overall, occupancy was 2% lower compared with a year ago,
and this had a negative impact on our earnings performance.
There was a wide disparity in the performance of the company’s
centres around the country. More than half of our ECE centres
continued to have occupancy levels in excess of 80%, but
14 centres had occupancy rates below 60%, and 11 centres
generated an operating loss totaling $0.5 million in the 2018
financial year.
8 | Evolve Education Group Annual Report 2018
impacted by the lack of any increase in Government per
child funding for ECE and rising employee and facility costs,
which have in turn been further compounded by a shortage of
qualified early childhood educators in some regions.
In the year ahead, we will be working to re-balance costs
back to our historical levels. We will also be evaluating and
implementing a teacher rostering system that is easy to use and
configured to the requirements of a multi-centre New Zealand
ECE group. In addition, we are seeking to improve management
of our existing internal pool of relieving staff and will use Staff
Sync software to provide improved reliever options to centre
managers, thereby reducing the need to use expensive agency-
provided staff.
People and Culture
Our success depends fundamentally on the engagement
and retention of our teaching staff and centre management
teams. As a scale operator, Evolve has a unique opportunity to
differentiate itself as an employer in the ECE sector and thus
improve retention and build engagement. Over the coming
year we will be targeting specific actions to lift employee
engagement, including:
•
Further developing a targeted professional and career
development programme
for centre managers and
teachers,
•
Using our scale to improve the working experience of
our teachers and centre managers. We will establish a
property maintenance management function to assume
this responsibility on behalf of our centre staff,
•
Providing greater support from the corporate office around
functions such as recruitment and staff deployment, and
building capex, repairs and maintenance, and
•
Improving the quality and focus of internal communications.
Mark Finlay
CEO
(until 2 July 2018)
Evolve Education Group Annual Report 2018 | 9
Evolve Education Group Annual Report 2016 | 1 Rosanne Graham
CEO’s Letter
I am delighted to have been appointed CEO of Evolve Education Group and am greatly looking forward to taking up the
role in July.
Evolve takes the responsibility of educating our young children very seriously. ECE nurtures children’s growth and
development and sets them up for future success in the schooling system. It also enables parents to entrust their
children to us, safe in the knowledge that they are being cared for by highly trained, caring, professional educators in
well-resourced facilities.
As one of the largest operators in ECE in New Zealand, Evolve is able to provide a consistent, high-quality learning
experience for all young children. In addition, I believe that the company has a real point of diff erence to off er its staff ,
through providing them with the best opportunities in the industry for personal development and career advancement.
In joining Evolve, I can see a clear opportunity to build on the foundation that exists today and to grow a strong,
resilient, future-focused organisation.
My success will be measured by the satisfaction of all of our stakeholders, but it all starts with the children and families
that we serve and the positive engagement of our staff .
Rosanne Graham
CEO
(eff ective 2 July 2018)
10 | Evolve Education Group Annual Report 2018
Evolve Education Group Annual Report 2018 | 11
Evolve Education Group Annual Report 2016 | 1 12 | Evolve Education Group Annual Report 2018
Operational Highlights
Revenue
4.8%
Centre
License
Places
9,178
March 2018
8,274
March 2017
Number of
Centres
129
March 2018
121
March 2017
Group Revenue FY18
$159.0m
0.3%
12.9%
Group Revenue FY17
$151.4m
0.6%
15.9%
86.8%
83.5%
ECE Centres
Home-based ECE
Other
ECE Centres
Home-based ECE
Other
Evolve Education Group Annual Report 2018 | 13
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, and corporate governance experience. The Board currently comprises an independent Chair
and four independent non-executive Directors.
Alistair Ryan
Chair
(Independent)
MCom, FCA.
Appointed as Director
13 November 2014
Norah Barlow
Non-Executive Director
(Independent)
BCA, CA.
Appointed as Director
13 November 2014
Anthony Quirk
Non-Executive Director
(Independent)
BCA (Hons), INFINZ (Fellow),
AFA.
Appointed as Director
2 August 2017
14 | Evolve Education Group Annual Report 2018
Alistair is an experienced company Director and corporate executive. In addition
to Evolve, he is currently Chair of Kingfi sh Limited, Barramundi Limited and Marlin
Global Limited. Other current board positions include Kiwibank Limited, Metlifecare
Limited, and Christchurch Casinos Limited. Alistair is also a member of FMA’s Audit
Oversight Committee.
Alistair was a senior executive of SKYCITY Limited from pre-opening (1995) until
he retired as CFO in June 2011. Prior to SKYCITY, Alistair was a Corporate Services
Partner with international accounting fi rm EY, in Auckland.
Alistair is a member of Evolve’s Audit and Risk Committee.
Norah is the Managing Director and CEO of Estia Health Limited, an ASX listed
company providing aged care 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.
Anthony is an experienced fi nancial services sector professional with over 30 years
executive experience in the sector. He now has a varied portfolio of governance
interests with an emphasis on areas that improve communities.
In addition to Evolve Education Group Anthony is currently a Director of the NZ
Local Government Funding Agency and Milford Asset Management. He is also Chair
of New Zealand Water Polo, Deputy Chair of Compass Housing NZ (a social housing
organisation) and a Trustee on the Graeme Dingle Foundation Board in Wellington.
Anthony was previously a Director and Chair of the Institute of Finance Professionals
and is a Fellow of that organisation.
Anthony is Chair of Evolve Education’s Audit and Risk Committee.
Lynda Reid
Non-Executive Director
(Independent)
ONZM, BA, TTC.
Appointed as Director
2 August 2017
Gráinne Troute
Non-Executive Director
(Independent)
GradDipBusStuds (HRM)
CMInstD.
Appointed as Director
1 May 2017
As former CEO of St Cuthbert’s College in Auckland, Lynda adds strong technical,
social and business diversity to the Evolve board. In addition to excellent sector
expertise coupled with robust executive leadership and governance experience.
As St Cuthbert’s CEO, Lynda was involved with a wide range of stakeholder groups,
people and organisations including the school board, parents, teachers, students,
Ministry of Education and the education community generally, and commercial
organisations.
Lynda is an Offi cer of the New Zealand Order of Merit (2017) and a recipient of the
Independent Schools of New Zealand Distinguished Service Award (2016), along with
many other distinguished service awards and recognitions, and regular membership
of important sector forums.
Lynda is a member of the Remuneration and People Committee.
Gráinne has extensive experience as a corporate executive and in board and
charitable trust governance roles.
She is currently a Director of Investore Property Limited, 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.
Evolve Education Group Annual Report 2018 | 15
Evolve Education Group Annual Report 2016 | 1
Investing in Our People
Our staff are passionate about their work with children and they love what they do. 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. It is our goal to support
our team values and culture at centre level, continuing to develop a high degree of encouragement and camaraderie.
Each of our ECE 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 safeguarding children
training, professional development to support strategic goals, 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.
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 complement
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, head teacher training days, coaching support days
for home-based staff, leadership development for centre management staff, and skills development in critical areas
such as social competency and people management. 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.
Health and Safety
Evolve places paramount importance on health, safety, and wellness. The Company has established 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 enables the business to better understand, prevent and manage key organisational, and business-specific
risks. We also provide staff access to Employee Assistance Programme (EAP) services to provide them with support and
counsel as required.
Policy reviews are continuous, ensuring we are up to date with the latest requirements and best practice, as well as staff
input to ensure ongoing improvement.
16 | Evolve Education Group Annual Report 2018
Evolve Education Group Annual Report 2018 | 17
Evolve Education Group Annual Report 2016 | 1 Centre Business Update
Three and a half years on, the focus remains to embed high quality teaching practice, strong policies and processes to
support staff and to entrench a positive staff culture in all the centres. The core driver in the centres has been to lift
the focus on quality learning environments and practice, operational processes and quality engagement. In FY19, we are
shifting to further lift our professional support to teacher learning and career growth, as well as leadership. Within the
last year, the centre support structure continued to be improved and extended, 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 the centres continue to strive
to be sustainable across all areas, through continuous focus on the core purpose, and positive quality outcomes for
children. This is achieved through the provision of high quality care and learning for each child at every developmental
stage and to each child’s potential.
The past year has seen an evolution of the brand strategy into a more deeply embedded cultural positioning around
brands, or kaupapas. Our kaupapas are the essence and life force of what we do in each centre, with distinct philosophies
and cultures, embraced and supported in each individual service, alongside a core value system and curriculum designed
for each kaupapa.
Evolve has recently introduced a family enrolment team to further assist centres with enrolments from web and phone
enquiries. This is the next key step post-establishing the digital presence and establishing measurable engagement
online. Childcare CRM continues to be used across the centres to ensure a more efficient process for families to enquire,
book centre visits and enrol with Evolve. The system also enhances workflows and is fully integrated with the support
systems in the centres.
We continue to seek ways to improve the benefits that come with scale and reach. 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 further with the acquisition of six Little Wonders centres in the South Island. There was
also the acquisition of Lollipops Paraparaumu, a well-performing purpose-built centre with strong community support
in Kapiti.
Three new development centres have opened in the past 12 months. Active Explorers Kaiapoi opened in June 2017 in
the Canterbury region. Lollipops Lynfield opened in January 2018, and Active Explorers Papakura opened in May 2018.
Both new Auckland centres opened to strong interest and enrolments. Developments continue to expand, with four new
centres, including Active Explorers Papakura, planned to open over the course of FY19.
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
its 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.
18 | Evolve Education Group Annual Report 2018
Evolve Education Group Annual Report 2018 | 19
Evolve Education Group Annual Report 2016 | 1 Education Quality in Our Centres
Evolve centres employ well over a thousand qualified
teachers, who are deeply engaged with the purpose
of providing positive
learning environments and
outcomes for all the children in our care. The teaching
and curriculum management structure is embedded
with clear processes in place, ensuring focus on core
developmental learning strategies, teacher practice,
and leading curricula by extending Te Whāriki for all
our centres. 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 license to operate, care for and
educate children.
The focus on each developmental stage ensures the
curriculum offered is developmentally appropriate and
is critical to lifting the quality of learning and care in
each of our centres, as well as aligning ourselves with
best practice and the latest research in ECE. 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. FY19
goals include a focus on infancy and the early years and
school readiness. In addition, we will be developing and
rolling out a programme 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 has redesigned the
policy and systems for monitoring and improving quality
at centre level. This ensures that we are doing what we
say we do and 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 centre. Our centres focus on each
child’s developmental and learning stage and aim
to communicate with whanau and parents as to their
progress and enjoyment through Storypark and in one to
one engagements.
All Evolve centres use Storypark which is a safe and easy-
to-use platform that helps teachers and families record
and share children’s learning and development. 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 kaupapas (brands).
Our Learning Pillars
Each of our brands has a distinct learning philosophy
that is based on Te Whāriki 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 kaupapa, allowing
parents to choose a philosophy of learning which is best-
suited to their own. Along with the overall focus, we are
developing a specific curriculum for school readiness,
run across all our centres to ensure that every child will
be prepared, confident and ready to face the challenges
and new chapter on their learning journey.
Each Kaupapa’s Teaching Philosophy
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 and 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.
Little Earth 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 Whāriki.
Learning Adventures is a community kaupapa, inspiring
curiosity through inspiration and guidance, blended
learning philosophy anchored in the community with a
focus on participation, health and social development
and parenting support.
Little Wonders is a family-centric kaupapa, with the
focus on learning through play. By offering a wide
range of open-ended resources which value children’s
independent choices and provide provocations to entice
creative play, children are encouraged to express and
20 | Evolve Education Group Annual Report 2018
explore their working theories.
Little Lights has Christian values and beliefs woven into
all aspects of daily interactions and learning.
Our Teaching Team
We have structured the team to 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 in 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
that 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 seeks to continuously improve and deliver high
quality learning and care to all children throughout
the centres. In support of this objective we will work
to further extend the teaching and learning team with
curriculum champions.
Evolve Education Group Annual Report 2018 | 21
Evolve Education Group Annual Report 2016 | 1 Childcare Options Provided by Evolve
Enquiry-based learning
Our Active Explorers centres are a group of family-orientated, high quality vibrant and
stimulating ECE centres where creative thinking is celebrated through enquiry-based
learning.
Here the love of learning is genuinely lived out. The busy, vibrant hum that greets you
when you enter an Active Explorers learning centre tells you you’re in a place where
children are engaged and absorbed and loving it.
Find us online: www.activeexplorers.co.nz
or on Facebook: @ActiveExplorers
Community-based learning
Learning Adventures are community-based, value-orientated ECE centres. These
centres off er a warm, caring environment where children’s well-being comes fi rst.
Here the children are loved and nurtured, and learning is adventurous and experiential.
These centres are a vital link in the communities they serve, places where we respect
the diversity of children, backgrounds and ethnicity, and where whanau are very
welcome.
Learning Adventures is where we come together, and the children learn to be confi dent
adventurers, with a strong connection to Aotearoa.
Find us online: www.learningadventures.co.nz
or on Facebook: @learningadventuresnz
Montessori-based learning
Our warm and welcoming Little Earth Montessori centres follow the teaching principles
of Maria Montessori, helping nurture learners who are socially, academically and
emotionally well-developed and ready for life’s challenges.
Each of our centres is an appealing, purpose-built environment. We support our highly
qualifi ed teachers by resourcing each centre with high quality, carefully selected
Montessori materials that support our children’s holistic learning experience.
Find us online: www.littleearth.co.nz
or on Facebook: @LittleEarthMontessoriNZ
Christian philosophy
At Little Lights our Christian philosophy forms the foundation of who we are and what
we do. Christian values and beliefs are woven into all aspects of our daily interactions
and learning. We aim to create a caring and fun environment where each child feels
secure, loved and respected.
Find us online: www.littlelights.co.nz
22 | Evolve Education Group Annual Report 2018
Partnership-based learning
Little Wonders welcomes you and your child to what we trust will be an extension
of your home. By working together we provide an environment that promotes quality
childcare and education. We take great pride in our high quality care, facilities and the
positive outcomes we generate for children.
Our childcare centres provide excellent facilities, quality educational equipment and
programmes and well-qualifi ed and caring teaching staff .
Find us online: www.littlewonders.nz
or on Facebook: @Littlewondersnz
Child-led learning
Lollipops is a family-centred brand. These are high quality centres, with a natural
theme. This is a uniquely New Zealand experience where your children blossom in
partnership with our dedicated teachers, learning through Ako principles.
Ako is inspired by the ‘Reggio’ teaching philosophy, which has the natural
development of a child as its key pillar. With Reggio, children must have some
control over the direction of their learning in partnership with their teacher and be
able to learn through experiences observation and exploration, rather than simply
receive instruction. It’s a relationship of mutual respect.
Find us online: www.lollipopseducare.co.nz
or on Facebook: @LollipopsEducare
Research-led learning
Pascals are inspirational places of learning for your child. These are Evolve’s centres
of excellence, where we implement and lead research into best practice ECE. Pascals
pioneers the very best enquiry-based learning; here we nurture our innovators and
thinkers of tomorrow!
Pascals uses the internationally acclaimed and forward thinking New Zealand early
education curriculum Te Whariki as the basis for our interaction and teaching.
Find us online: www.pascalselc.co.nz
or on Facebook: @Pascalselc
The joy of learning lives here.
Evolve Education Group Annual Report 2018 | 23
Evolve Education Group Annual Report 2016 | 1
24 | Evolve Education Group Annual Report 2018
Evolve Education Group Limited
Consolidated Financial Statements
For the Year Ended 31 March 2018
The Directors present the Consolidated Financial Statements of Evolve Education Group Limited, for the year
ended 31 March 2018
The Consolidated Financial Statements presented are signed for and on behalf of the Board and were authorised for
issue on 28 May 2018
________________________
Alistair Ryan
Chair
28 May 2018
________________________
Anthony Quirk
Chair of Audit and Risk Committee
28 May 2018
Evolve Education Group Annual Report 2018 | 25
Evolve Education Group Annual Report 2016 | 1 Consolidated Statement of Comprehensive Income
$'000
Revenue
Other income
Total income
Expenses
Employee benefits expense
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Integration expenses
Depreciation
Amortisation
Impairment expense
PORSE GST settlement
Other expenses
Total expenses
Profit before net finance expense and income tax
Finance income
Finance costs
Net finance expense
(Loss)/ Profit before income tax
Income tax expense
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
158,953
151,439
-
184
158,953
151,623
(92,173)
(22,961)
(18,070)
(102)
(39)
(2,622)
(619)
(13,890)
(3,000)
(4,118)
(82,675)
(20,332)
(16,467)
(714)
(624)
(2,027)
(602)
-
-
(4,558)
(157,594)
(127,999)
1,359
23,624
47
(1,641)
(1,594)
104
(1,366)
(1,262)
(235)
22,362
(3,978)
(6,489)
Note
5
5
11
11
9
12
9, 12,13
6
5
5
5
5
7
(Loss)/ Profit for the year
(4,213)
15,873
Other comprehensive income
-
-
Total comprehensive (loss)/income attributed to the
owners of the Company
Earnings per share
(4,213)
15,873
Basic (and diluted) earnings per share (cents)
20
(2.4)
8.9
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
26 | Evolve Education Group Annual Report 2018
FOR THE YEAR ENDED 31 MARCH 2018
Consolidated Statement of Movements in Equity
$'000
As at 31 March 2016
ISSUED
SHARE
CAPITAL
RETAINED
(DEFICIT)/
EARNINGS
TOTAL
Note
157,364
3,369
160,733
Total comprehensive income
-
15,873
15,873
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Executive share based payment
Dividends paid
As at 31 March 2017
Total comprehensive loss
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Dividends paid
As at 31 March 2018
17
17
17
19
17
17
19
655
(12)
99
-
-
-
-
655
(12)
99
(8,677)
(8,677)
158,106
10,565
168,671
-
(4,213)
(4,213)
1,058
(15)
-
-
-
1,058
(15)
(8,926)
(8,926)
159,149
(2,574)
156,575
The above Consolidated Statement of Movements in Equity should be read in conjunction with the accompanying notes.
Evolve Education Group Annual Report 2018 | 27
Evolve Education Group Annual Report 2016 | 1FOR THE YEAR ENDED 31 MARCH 2018
$'000
Current assets
Cash and cash equivalents
Current income tax receivable
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Funding received in advance
PORSE GST settlement payable
Employee entitlements
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Retained (deficit)/earnings
Total equity
Note
8, 22
9
7
12
14
15
6
16
AS AT
AS AT
31 MARCH 2018
31 MARCH 2017
5,362
552
1,788
7,702
4,095
-
1,924
6,019
8,586
1,636
207,170
217,392
5,742
840
212,121
218,703
225,094
224,722
10,019
-
17,864
1,500
6,836
36,219
10,376
841
18,052
-
6,582
35,851
21, 22
32,300
32,300
20,200
20,200
68,519
56,051
156,575
168,671
17
159,149
(2,574)
158,106
10,565
156,575
168,671
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
28 | Evolve Education Group Annual Report 2018
Consolidated Statement of Financial PositionAS AT 31 MARCH 2018
Consolidated Statement of Cash Flows
$'000
Cash flows from operating activities
Receipts from customers (including
Ministry of Education funding)
Payments to suppliers and employees
PORSE GST settlement
Taxes paid
Interest received
Net cash flows from operating activities
Cash flows from investing activities
Payments for purchase of businesses
Payments for release of retentions
Receipts from sale of joint venture
Receipts from sale of business
Payments for software, property, plant and equipment
Net cash flows from investing activities
Cash flows from financing activities
Share issue costs
Interest paid on borrowings
Bank borrowings drawn
Bank borrowings repaid
Dividends paid
Net cash flows from financing activities
Net cash flows
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
Note
159,186
(137,219)
(1,500)
(6,198)
47
14,316
151,889
(123,114)
-
(6,329)
104
22,550
(9,892)
(21,678)
(203)
-
100
(5,630)
(15,625)
(115)
1,628
-
(1,872)
(22,037)
(15)
(1,641)
117,500
(12)
(1,343)
198,340
(105,400)
(224,005)
(7,868)
2,576
(8,022)
(35,042)
1,267
(34,529)
4,095
38,624
5,362
4,095
6
23
11
17
22
22
19
22
8
8
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Evolve Education Group Annual Report 2018 | 29
Evolve Education Group Annual Report 2016 | 1FOR THE YEAR ENDED 31 MARCH 2018
Index to Notes to the Consolidated Financial Statements
Note
Title
Page
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
26
27
Reporting Entity
Basis of Preparation
Significant Accounting Policies
Segment Information
Disclosure of Items in the Consolidated Statement of Comprehensive Income
PORSE GST Settlement
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
Net Debt Reconciliation
Reconciliation of (Loss)/Profit After Tax to Net Operating Cash Flows
Commitments and Contingencies
Related Party Transactions
Auditor's Remuneration
Events After the Reporting Period
31
31
35
44
46
47
48
49
50
51
51
53
54
57
57
57
58
58
58
59
59
61
62
62
63
65
66
30 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018 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 Group’s principal activities are to invest in the provision and management of a high quality ECE service which
currently 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 10.
2.
Basis of Preparation
Statement of Compliance
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.
These Group financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). 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 2018 were approved and authorised for issue by the Board of
Directors on 28 May 2018.
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 21) 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 functional and presentation
currency. Unless otherwise stated, financial information has been rounded to the nearest thousand dollars ($’000).
Evolve Education Group Annual Report 2018 | 31
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
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 intangible assets acquired can or should be allocated between fixed life or
indefinite life intangible assets and goodwill. Once identified the Group assesses how the intangible assets are to be
valued and this requires the use of judgement as follows:
•
•
Brand valuations require an assessment of the appropriate valuation methodology and in the case of the
Group the expected life of the brand names, the forecast sales for comparable branded services if available
or, if not, branded sales for “proxy” industries, an appropriate royalty rate and discount factors to be applied
to the forecast royalty stream.
Fixed life intangible assets (for example, software, 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/contract.
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 13.
32 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
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 represent 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 7).
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 2018. The Group’s assessment and
expected impact of these Standards is set out below:
NZ IFRS 9: Financial Instruments
Nature of change
NZ IFRS 9 addresses the classification, measurement and recognition of financial assets and liabilities. The standard
introduces new rules for hedge accounting and a new impairment model for financial assets. The NZ IFRS 9
impairment requirements are based on an expected credit loss model, replacing the incurred loss methodology
under the current standard (NZ IAS 39).
Potential impact
•
•
•
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only
affect the accounting for financial liabilities that are designated at fair value through profit or loss and the
Group does not have any such liabilities.
The new hedge accounting rules are not applicable given the Group does not have any hedging
relationships.
The Group intends to apply the simplified approach to recognise lifetime expected credit losses for its trade
receivables. Based on the assessment undertaken to date, the Group anticipates that only parental debtors
(held at amortised cost) will be impacted. It is anticipated that the application of the expected credit loss
model will result in an immaterial transition adjustment that will be recognised in opening retained earnings
as permitted by the standard. It is not expected that there will be an impact to future earnings as a result
of implementation of IFRS 9.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are
expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in
the year of the adoption of the new standard.
Date of adoption
NZ IFRS 9 is effective for reporting periods beginning on or after 1 January 2018. The Group will apply the new
rules from 1 April 2018 (i.e. effective for the financial year ending 31 March 2019), with the practical expedients
permitted under the standard.
Evolve Education Group Annual Report 2018 | 33
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
2.
Basis of Preparation (continued)
New Standards and Interpretations Not Yet Adopted (continued)
NZ IFRS 15: Revenue from Contracts with Customers
Nature of change
NZ IFRS 15 replaces the current revenue recognition guidance in NZ IAS 18 Revenue which covers contracts for the
sale of goods and services and NZ IAS 11 Construction Contracts.
The new standard is based on the principle that revenue is recognised to depict the transfer of promised goods and
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 . The standard permits either a full retrospective or a modified retrospective
approach for the adoption.
Potential impact
Management are currently completing their assessment of the impact of this standard. The assessment to date
has focused on segregating the different revenue streams that exist within the Group. Based on the assessment
performed to date, the Group expects adoption of the new standard to have the following impact:
•
•
No impact on ECE Centre Ministry of Education funding or Childcare fees (refer note 3(c) for description of
the current accounting for revenue streams).
Management are assessing the full impact of the new standard on its Home-Based ECE revenue streams,
specifically education income. However, given the nature of these revenue streams, it is expected that
there will be no significant impact on the consolidated financial statements from the adoption of NZ IFRS
15. Management are still reviewing the appropriate classification within the Consolidated Statement of
Comprehensive Income of certain Home-Based revenue streams.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are
expected to change the nature and extent of the Group’s disclosures.
Date of adoption
NZ IFRS 15 is effective for reporting periods beginning on or after 1 January 2018. The Group intends to adopt
the standard for the year ended 31 March 2019 using the modified retrospective approach. This means that the
cumulative impact of the adoption (if any) will be recognised in retained earnings as of 1 April 2018 and that
comparatives will not be restated.
NZ IFRS 16: Leases
Nature of change
NZ IFRS 16 replaces all existing lease requirements in NZ IAS 17 Leases. It will result in almost all leases, where the
Group is a lessee, being recognised in the Consolidated Statement of Financial Position, as the distinction between
operating and finance leases is removed. Under the new standard, a lessee is required to recognise a lease liability
reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The income statement
will also be impacted by the recognition of an interest expense and a depreciation expense and the removal of the
current rental expense currently recognised within ‘building occupancy expenses’.
The standard includes two recognition exemptions for lessees, short-term (those with a term of 12 months or less)
and low-value leases (such as leases of laptops).
Potential impact
The standard will affect the accounting for the Group’s operating leases. As at the reporting date, the Group has
non-cancellable operating lease commitments of $139m, see note 24. The Group is in the process of identifying the
current operating lease contracts that will be in the scope of NZ IFRS 16 at transition by reviewing and analysing
the terms of these contracts. The Group has not quantified the effect of the new standard, however the following
impacts are expected:
•
the total assets and liabilities on the Consolidated Statement of Financial Position will increase with a
decrease in total net assets, due to the reduction of capitalised asset being on a straight-line basis whilst the
liability is reduced by the principal amount of repayments. Net current assets will show a decrease due to an
element of the liability being disclosed as current liability;
34 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
2.
Basis of Preparation (continued)
New Standards and Interpretations Not Yet Adopted (continued)
NZ IFRS 16: Leases (continued)
Potential impact (continued)
•
interest expense will increase due to the unwinding of the effective interest rate implicit in the lease. Interest
expense will be greater earlier in a lease life due to the higher principal value causing profit variability over
the course of a lease’s life. This effect may be partially mitigated due to number of leases held in the Group
at different stages of the lease’s term; and
•
operating cash flows will be higher as repayment of the principal portion of all lease liabilities will be
classified as financing activities. There will be no cash effect on the Group and the change is for financial
reporting purposes only.
Date of adoption
NZ IFRS 16 is effective for reporting periods beginning on or after 1 January 2019. At this stage, the Group intends
to adopt the simplified transition approach in the year ending 31 March 2020.
3.
Significant Accounting Policies
The accounting policies set out below have been applied consistently in these consolidated 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 of the identifiable assets acquired, the liabilities assumed, measured at fair value
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 Consolidated Statement of Comprehensive Income.
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.
Evolve Education Group Annual Report 2018 | 35
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
3.
Significant Accounting Policies (continued)
(a) Basis of Consolidation (continued)
Business combinations (continued)
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Business combinations are initially accounted for on a provisional basis. The Group retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement 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.
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.
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.
36 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
3.
Significant Accounting Policies (continued)
(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 method. 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 as the service is rendered.
Interest income
Interest income is recognised in the Consolidated Statement of Comprehensive Income using the effective interest
method.
Evolve Education Group Annual Report 2018 | 37
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
3.
Significant Accounting Policies (continued)
(d) Taxation
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.
38 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018 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:
Buildings
Plant and equipment
Office furniture & fittings
Leasehold improvements
Motor vehicles
50 years
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. Work in progress is not depreciated until the asset is available for use.
(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:
Customer lists
Syllabus material
Management contracts
Software
Brands
4 years
4 years
4 years
4 years
Indefinite life
Evolve Education Group Annual Report 2018 | 39
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
3.
Significant Accounting Policies (continued)
(h) Intangible Assets (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 Consolidated 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, included in other
current assets.
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, trade and other payables and PORSE GST settlement payable.
40 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
3.
Significant Accounting Policies (continued)
(j) Financial Instruments (continued)
Non-derivative financial liabilities (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 profit and loss 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-life 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, refer to note 13.
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.
Evolve Education Group Annual Report 2018 | 41
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
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.
• Operating activities include all transactions and other events that are not investing or financing activities.
•
•
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.
42 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
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 receive 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, included within other current assets, and trade payables
that are stated inclusive of GST.
(t) Comparative balances
Comparative balances within the Consolidated Statement of Comprehensive Income, Consolidated Statement of
Cash Flows and its related notes have been reclassified to conform with changes in presentation and classification
adopted in the current period. The impact of these changes were not material.
Evolve Education Group Annual Report 2018 | 43
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
4.
Segment Information
The Group has two reportable operating segments, as described below, which are the strategic business models
the Group invests in within the early childhood education (“ECE”) industry in New Zealand. The Group operates
entirely within New Zealand. Each segment is managed separately. For each of the segments, the Group’s Chief
Executive Officer (“CEO” and the “Chief Operating Decision Maker”) reviews internal management reports at least
on a monthly basis. The following summary describes the current 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 independent educator delivering 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 Management, a non-reportable segment, whereby the Group provides management
and back-office expertise to ECE centres but it does not own the centre. This activity does not meet any of the
quantitative thresholds for determining reportable segments and as such it has been included as an unallocated
amount. Unallocated amounts also represent other corporate support services, acquisition and integration costs.
The Group’s corporate and management costs include certain financing income and expenditure and taxation that
are managed on a Group basis and are not allocated to operating segments.
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 underlying EBITDA,
as described below and as included in the internal management reports that are reviewed by the Group’s CEO.
EBITDA is not defined by NZ GAAP, IFRS or any other body of accounting standards and the Groups’ calculation of
this measure may differ from similarly titled measures presented by other companies. This measure is intended to
supplement the NZ GAAP measures presented in the Group’s financial information.
Underlying EBITDA reflects a number of adjustments that are defined as:
•
•
•
Acquisition expenses – in acquiring the businesses and net assets in Note 11 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 – third party costs associated with the integration of the businesses acquired. In 2017,
they included the employment costs of the Group’s acquisition and integration team. As fewer centres have
been acquired in 2018, no employment costs have been allocated to integration expenses for this year.
Material non-recurring items – one off or non recurring in nature. These are items that have not occurred
in the recent years and are not forecast to occur in the future, such as impairment expense and PORSE GST
settlement.
44 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
4.
Segment Information (continued)
31 March 2018
Revenue
Total income
Operating expenses
Underlying EBITDA
Acquisition expenses
Integration expenses
Material non-recurring items:
PORSE GST Settlement
Impairment expense
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
ECE
Centres
Home-
based ECE
Unallocated
Consolidated
Note
$'000
$'000
$'000
$'000
137,999
20,558
137,999
20,558
396
396
158,953
158,953
(109,994)
(19,677)
28,005
881
(7,651)
(7,255)
(137,322)
21,631
-
-
-
-
(102)
(39)
(102)
(39)
6
-
(3,000)
9,12,13
(957)
(12,933)
-
-
27,048
(15,052)
(7,396)
9
12
(2,373)
(60)
24,615
-
(173)
(218)
(15,443)
-
(76)
(341)
(7,813)
(1,594)
(3,000)
(13,890)
4,600
(2,622)
(619)
1,359
(1,594)
Reportable segment profit/(loss) before tax
24,615
(15,443)
(9,407)
(235)
Total assets
Total liabilities
218,364
3,289
3,441
225,094
(22,947)
(9,289)
(36,283)
(68,519)
Included within Revenue is revenue from the Ministry of Education totalling $108.0m for the year (2017: $104.5m).
Evolve Education Group Annual Report 2018 | 45
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
4.
Segment Information (continued)
31 March 2017
Total revenue
Other income
Total income
Operating expenses
Underlying EBITDA
Acquisition expenses
Integration expenses
EBITDA
Depreciation
Amortisation
Earnings before interest and tax
Net finance expense
ECE
Centres
Home-
based ECE
Unallocated
Consolidated
Note
$'000
$'000
$'000
$'000
126,495
24,060
24
-
884
160
151,439
184
126,519
24,060
1,044
151,623
(95,542)
(21,449)
30,977
2,611
(7,041)
(5,997)
(124,032)
27,591
-
-
-
-
(714)
(624)
(714)
(624)
30,977
2,611
(7,335)
26,253
9
12
(1,715)
(60)
(249)
(244)
29,202
2,118
-
-
(63)
(298)
(7,696)
(1,262)
(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
16,819
3,342
224,722
(22,491)
(10,369)
(23,191)
(56,051)
Other income for the year ended March 2017 includes $160k from the reversal of a contingent consideration provision
relating to the acquisition of an ECE centre in 2015.
5.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
Other expenses
$'000
Included in other expenses are:
Audit fees
Directors’ fees
Other items
Total other expenses
Note
26
25
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
213
479
3,426
4,118
205
385
3,968
4,558
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 11, consultancy costs and general office
expenses.
46 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
5.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
(continued)
Building occupancy expenses
Building occupancy expenses of $23.0m (2017: $20.3m) include $21.1m (2017: $18.6m) of expenditure in relation to
minimum operating lease payments.
Employee benefits expense
$'000
Wages and salaries
Kiwisaver contributions
Payments to agency contractors
Other employee benefits expense
Total employee benefits expense
Net finance expense
$'000
Interest received
Bank deposits
Total interest received
Interest expense
Interest on borrowings
Total interest expense
Net finance expense
6.
PORSE GST Settlement
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
87,078
2,205
1,612
1,278
92,173
78,078
1,946
1,029
1,622
82,675
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
47
47
(1,641)
(1,641)
(1,594)
104
104
(1,366)
(1,366)
(1,262)
During the year the Group reached formal agreement with the Inland Revenue Department (IRD) in respect of
various taxation matters relating to the Group’s wholly owned PORSE In Home Childcare business (PORSE).
The settlement agreement with the IRD requires PORSE to pay $3.0 million to the IRD and ensures that all current
areas of discussion between IRD and the Group are closed off.
The Group previously reported this matter as a contingent liability as at 31 March 2017, then recorded a $3.0
million provision in the Consolidated Statement of Financial Position in its interim report for the six months ended
30 September 2017. $1.5m of the total amount payable has been paid as at 31 March 2018, with the remaining
balance due in the year to 31 March 2019.
Evolve Education Group Annual Report 2018 | 47
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
7.
Taxation
Income tax expense
The major components of income tax expense for the period are:
$'000
Current income tax:
Current income tax expense
Prior year adjustments
Deferred tax:
Relating to origination and reversal of temporary differences
Prior year adjustments
Total income tax expense
Reconciliation of tax expense
Tax expense is reconciled to accounting profit as follows:
$'000
Profit before income tax
At statutory income tax rate of 28%
Non-assessable income and non-deductible expenses for tax purposes:
Impairment of goodwill
PORSE GST settlement
Non-deductible expenses
Prior year adjustments
Total income tax expense
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
4,988
(214)
4,774
(943)
147
(796)
3,978
6,609
(184)
6,425
(106)
170
64
6,489
YEAR
YEAR
31 MARCH 2018
31 MARCH 2017
(235)
(66)
3,236
840
35
(67)
3,978
22,362
6,261
-
-
242
(14)
6,489
48 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
7.
Taxation (continued)
Deferred tax
Deferred tax relates to the following:
$’000
Property, plant and equipment
Intangible assets
Employee entitlement provisions
Other timing differences
Deferred tax benefit/ (expense)
Net deferred tax assets
Imputation credits
31 MARCH 2018
31 MARCH 2017
Consolidated
Statement of
Comprehensive
Income
Arising from
Aquisition of
Businesses
Consolidated
Statement of
Financial
Position
Consolidated
Statement of
Comprehensive
Income
Arising from
Aquisition of
Businesses
Consolidated
Statement of
Financial
Position
80
587
26
103
796
-
-
-
-
-
1,363
(942)
921
294
1,636
(48)
66
58
(140)
(64)
118
-
-
-
118
1,283
(1,529)
895
191
840
Imputation credits available for use in subsequent reporting periods is $11,111,764 (2017: $9,053,076), 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.
8.
Cash and Cash Equivalents
$'000
Cash at banks and on hand
Short-term deposits
Total cash and cash equivalents
AS AT
AS AT
31 MARCH 2018
31 MARCH 2017
3,647
1,715
5,362
1,968
2,127
4,095
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 2018 | 49
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
9.
Property, Plant and Equipment
31 March 2018
Land
Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
Note
$’000
Cost
Opening balance
Additions/Transfers
Acquisition of businesses
11
Disposals
Closing Balance
Depreciation and impairment
Opening balance
Depreciation charge for period
Disposals
Impairment expense
13
Closing balance
-
-
453
7,796
1,939
313
278
10,779
725
2,195
-
-
-
-
208
66
(12)
689
1,301
642
(93)
54
(68)
(117)
17
-
93
5,228
-
-
762
(290)
725
2,195
715
9,034
3,226
213
371
16,479
-
-
-
-
-
-
(165)
(4,332)
(444)
(18)
(148)
(1,763)
(636)
-
-
5
-
63
9
(174)
(166)
(96)
(57)
68
(39)
(18)
(308)
(6,206)
(1,237)
(124)
-
-
-
-
-
(5,037)
(2,622)
145
(379)
(7,893)
Net book value
725
2,177
407
2,828
1,989
89
371
8,586
In the current year, $2.9m of centre land and buildings were acquired. The land and buildings were previously leased by
the Group for centre operational purposes.
31 March 2017
Land
Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
Note
$’000
Cost
Opening balance
Additions/Transfers
Acquisition of businesses
Disposals
Closing Balance
Depreciation and impairment
Opening balance
Depreciation charge for period
Disposals
Closing balance
Net book value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
276
6,996
931
419
371
8,993
92
90
(5)
655
1,100
466
19
44
21
(321)
(111)
(171)
(137)
1,754
44
-
640
(608)
453
7,796
1,939
313
278
10,779
(72)
(3,094)
(153)
(172)
(94)
(1,502)
(364)
1
264
73
(165)
(4,332)
(444)
(67)
143
(96)
-
-
-
-
(3,491)
(2,027)
481
(5,037)
288
3,464
1,495
217
278
5,742
A $1.6m reclassification adjustment between cost and accumulated depreciation has been made to the opening balances
in the comparative period. There is no impact to the overall net book value of property, plant and equipment.
50 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
10. 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
11. Business Combinations
Home-care provider
Provides services to PORSE
franchisees
Education
provider
Education
provider
training
training
and
and
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
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
31 March
100%
31 March
31 March
31 March
100%
100%
100%
31 March
100%
31 March
100%
31 March
100%
During the 12 months ended 31 March 2018 the Group acquired 7 ECE centres from several separate vendors, for
a combined purchase price of $9.9m. Total net assets acquired were $1.0m resulting in goodwill on acquisition
of $8.9m. Total acquisition costs incurred during the period were $102k and these are included in the Statement
of Comprehensive Income and cash flows from operating activities in the 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 2018 | 51
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018 11. Business Combinations (continued)
Asset and liabilities acquired and consideration paid
Assets
Other current assets
Property, plant and equipment
Software
Funding receivable
Liabilities
Employee entitlements
Other current liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Purchase consideration
$'000
7
762
3
398
1,170
(15)
(118)
(133)
1,037
8,855
9,892
9,892
The goodwill of $8.9m predominantly comprises the future earnings potential of bringing together a group of ECE
centres under one centrally managed group. Goodwill is allocated to each of the segments identified at Note 13, as
appropriate.
At balance date, the acquisitions have contributed revenue of $7.2m and a net profit after tax of $465k to the
Group’s results before allowing for upfront acquisition expenses and integration costs. As the acquisitions were
made at different times during the year it is anticipated these acquisitions would have contributed revenue of
$9.5m and a net profit after tax of $665k (excluding upfront and non-recurring acquisition costs of $102k and
integration expenses of $39k, but including interest on the purchase price) had they all been acquired on 1 April
2017.
52 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
12.
Intangible Assets
31 March 2018
$’000
Cost
Opening balance
Additions
Acquisition of businesses
11
Disposals
Closing Balance
Amortisation and impairment
Opening balance
Amortisation for period
Disposals
Impairment expense
13
Closing balance
Net book value
31 March 2017
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
Note
301
200
372
1,576
4,787
206,094
213,330
-
-
-
-
-
-
-
-
-
402
3
-
-
-
-
-
402
8,855
8,858
(81)
(81)
301
200
372
1,981
4,787
214,868
222,509
(175)
(117)
(217)
(75)
-
(27)
(50)
-
(33)
(93)
-
-
(700)
(401)
-
-
-
-
-
-
-
(1,209)
(619)
-
(212)
(1,683)
(11,556)
(13,511)
(277)
(200)
(310)
(1,313)
(1,683)
(11,556)
(15,339)
24
-
62
668
3,104
203,312
207,170
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
Note
301
200
372
1,458
4,787
184,346
191,464
-
-
-
-
-
-
118
-
-
-
-
118
21,748
21,748
Closing Balance
301
200
372
1,576
4,787
206,094
213,330
Amortisation and impairment
Opening balance
Amortisation for period
Disposals
Closing balance
Net book value
(100)
(75)
-
(67)
(50)
-
(124)
(93)
-
(316)
(384)
-
(175)
(117)
(217)
(700)
-
-
-
-
-
-
-
-
(607)
(602)
-
(1,209)
126
83
155
876
4,787
206,094
212,121
Evolve Education Group Annual Report 2018 | 53
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018 13.
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 operating segments. Brands
are also assessed for impairment separately.
31 March 2018
$’000
Goodwill
Brands with indefinite useful lives
31 March 2017
$’000
Goodwill
ECE
Centres
Home-based
ECE
ECE
Management
Total
202,646
3,104
-
-
666
203,312
-
3,104
ECE
Centres
Home-based
ECE
ECE
Management
Total
194,828
10,600
666
206,094
Brands with indefinite useful lives
3,104
1,683
-
4,787
Impairment expense
In the current year the Group recognised an impairment expense of $13.9m.
The expense recognised the full impairment of Home-based ECE’s brands ($1.6m), goodwill ($10.6m), other intangible
assets ($0.3m) and property, plant and equipment ($0.4m), totalling $12.9m and was calculated using the value
in use basis (using a discount rate of 15.4%). Declining enrolments have reduced the revenue and profitability of
this division since the date of acquistion by the Group. Subsequent to year end the Company decided to commence
a sales process for the PORSE business unit, which comprises the majority of the Home-based ECE division. It is
anticipated that some part of the impaired asset value may be recovered upon completion of a successful sales
process.
In addition, an impairment of $1.0m was recognised in respect of the ECE Centres division. Prior to year end, the
Group decided to close the operation of a centre.
ECE Centres - Goodwill
The Group performed its annual impairment test at balance date. The recoverable amount of a cash generating unit
(CGU) is determined based on value-in-use calculations which require the use of assumptions. The calculations use
cash flow projections based on financial budgets covering a five year period.
54 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
13.
Impairment Testing of Goodwill and Intangible Assets With Indefinite Lives (continued)
Key assumptions used in value in use calculations
The key “base” assumptions used in the calculation of value in use for ECE Centres are:
•
•
•
•
Revenue growth through the forecast period
Expense growth through the forecast period
Discount rates
Growth rates used to extrapolate cash flows beyond the forecast period
The table below sets out the key assumptions for ECE Centres:
Revenue growth attributable to price (% per annum on average)
Revenue growth attributable to increase in enrolment (% per annum on average)
Total revenue growth (% per annum on average)
Expense growth (% per annum on average)
Pre-tax discount rates (%)
Long term growth rate (%)
31 MARCH 2018
31 MARCH 2017
Centres
Centres
1.5%
0.7%
2.2%
2.1%
15.4%
2.0%
1.0%
1.0%
15.4%
2.0%
Revenue - Revenue is received from the Ministry of Education and parents/caregivers, which in turn is based on
occupancy. It is assumed the Ministry of Education continues to support ECE to the value of approximately 65% of
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. If Government funding was to decrease, management would need to
initiate appropriate responses to maintain profitability. The assumptions reflect the impact of future increases in
funding as announced by the Government.
Expenses - The estimate of percentage growth in expenses includes the weighted average of expected increase in
wages and other operating expenses such as operating lease costs. Management forecasts other expenses based on
the current structure of business, adjusting for inflationary increases and expected increases in occupancy but not
reflecting any further cost savings measures.
Pre-tax discount rates – The discount rates represent the current market assessment of the risks specific to the
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 the cost of 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.
Long term growth rate – This rate is based on current inflation rates in New Zealand and forecast or assumed
increase in revenues from parents/caregivers and the Government. The rate used is not inconsistent with the long
term growth rate experienced industry-wide. Management are not aware of any information to suggest that the
growth assumptions are at risk.
Evolve Education Group Annual Report 2018 | 55
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
13.
Impairment Testing of Goodwill and Intangible Assets With Indefinite Lives (continued)
Sensitivity to changes in key assumptions
ECE Centres - Goodwill
The recoverable amount of the ECE centres CGU is $211m (2017: $234m). This exceeds the carrying amount of the
CGU as at 31 March 2018 by $7.9m (2017: $39.1m)
The most sensitive assumption in the calculation of value in use for the ECE Centres CGU is revenue growth.
The following summarises the effect of a change in the revenue “base” assumptions, with all other assumptions
remaining constant:
$’000
Enrolment growth +0.5% above base
Enrolment growth -0.5% under base
Price growth +0.5% above base
Price growth -0.5% below base
ECE Centres - Brands
Headroom/
(Impairment)
25,800
(3,480)
33,170
(16,972)
The recoverable amount of the ECE Centres was $4.7m (2017: $3.7m) at balance date. The increase in headroom is
primarily attributable to an increase in the number of centres trading under the Lollipops brand. The assessment is
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% (2017: 15.4%) and cash flows beyond
the one year period are extrapolated using a 2% (2017: 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 ECE Centres brands is most sensitive to the following assumptions:
•
•
•
•
Revenue growth - as above, revenue is received from the Ministry of Education and parents/caregivers.
Royalty rate - the relief from royalty method assumes a royalty rate of 1%.
Discount rates – the assumptions relating to discount rates are discussed above.
Long term growth rate – terminal growth rates have been discussed above.
The recovery amount of brands will equal its carrying amount if any one of the key assumptions change to the
following, under the assumption that all other factors remain constant:
Revenue growth (% per annum on average)
Royalty rate (% per annum on average)
Pre-tax discount rates (%)
Long term growth rate (%)
56 | Evolve Education Group Annual Report 2018
-34.50%
0.70%
22.30%
-2.80%
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
14. Trade and Other Payables
$’000
Trade payables
Amounts accrued in respect of business combinations
Goods and services tax payable
Other payables
Total trade and other payables
AS AT
31 MARCH 2018
AS AT
31 MARCH 2017
1,506
-
5,550
2,963
877
203
5,324
3,972
10,019
10,376
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amount of trade and
other payables are considered to be same as their fair values, due to their short term nature.
15. Funding Received in Advance
Represents Ministry of Education funding received in advance net of amounts owing but not received. The amount is
shown as a current liability consistent with the period the funding covers. Funding is received three times per year
on 1 March, 1 July and 1 November. Each funding round includes 75% of the estimated funding for the four months
ahead. At 31 March 2018 funding received in advance relates to April to June 2018. Funding receivable relates to
the remaining 25% of funding, adjusted for any changes in occupancy levels, in respect of February and March 2018.
$’000
Funding received in advance
Funding receivable
Total funding received in advance
16.
Employee Entitlements
$’000
Employee leave provisions
Accrued wages and salaries
Other employee entitlements
Total employee entitlements
AS AT
31 MARCH 2018
AS AT
31 MARCH 2017
21,474
(3,610)
17,864
21,853
(3,801)
18,052
AS AT
31 MARCH 2018
AS AT
31 MARCH 2017
3,069
3,547
220
6,836
2,999
3,363
220
6,582
Evolve Education Group Annual Report 2018 | 57
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
17.
Issued Capital
Authorised shares
Ordinary shares authorised, issued and fully paid
Opening balance
Ordinary shares issued:
31 MARCH 2018
31 MARCH 2017
Number
$’000
Number
$’000
178,281,256
158,106 177,579,018
157,364
Issue of shares in relation to dividend reinvestment plan
(“DRP”)
Less share issue costs relating to shares issued under DRP
Executive share based payment
1,179,340
1,058
702,238
-
-
(15)
-
-
-
655
(12)
99
Closing balance
179,460,596
159,149
178,281,256
158,106
18. 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 deficits/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. The specific covenants
relating to financial ratios the Group is required to meet are:
• Gearing ratio (i.e. net debt to EBITDA)
•
Fixed cover charges ratio (i.e. EBIT plus lease expense to lease expenses plus net interest)
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.
19. Dividends
Dividends paid during the year
Interim dividend for the year ended 31 March 2018
Final dividend for the year ended 31 March 2017
Interim dividend for the year ended 31 March 2017
Final dividend for the year ended 31 March 2016
58 | Evolve Education Group Annual Report 2018
2018
2017
Cent per share
Cent per share
2018
$’000
2017
$’000
2.50
2.50
5.00
4,455
4,471
8,926
2.50
2.38
4.88
4,451
4,226
8,677
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
19. Dividends (continued)
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 $0.4m (2017: $0.6m) were paid to shareholders not tax resident in New Zealand on
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 2018, 1,179,340 shares with a total value of $1.1m were issued in lieu of cash dividends (2017:
$0.7m).
20.
Earnings Per Share (EPS)
Basic and diluted EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following
reflects the income and share data used in the basic and diluted EPS computations:
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
(Loss)/Profit attributed to ordinary equity holders of the parent ($’000s)
(4,213)
15,873
Weighted average number of ordinary shares for basic and diluted EPS
178,948,343
178,007,882
Basic (and diluted) earnings per share (expressed as cents per share)
(2.4)
8.9
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting
date and the date of authorisation of these financial statements.
21. 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.
Evolve Education Group Annual Report 2018 | 59
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
21. Financial Assets and Liabilities (continued)
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 effective interest rate for the current year is 4.06% (2017: 4.42%). An increase or
decrease of ±1% in interest rates will result in a ±$405K (2017: ±$309K) effect on profit/ loss before tax.
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 $32.3m (2017: $20.2m) of the
Group’s $90.0m lending facilities exposing the Group to interest rate risk. Exposure to interest rate risk is reduced
by applying surplus cash against borrowings until such time that the cash is required. This significantly reduces the
company’s average drawn debt balance during the year.
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).
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. Subsequent to balance date, this facility has been amended and
extended to 30 April 2022 (Note 27).
• Acquisition facility - provided by ASB totalling $60.0 million for funding of future acquisitions. It expires on 30
April 2019. Subsequent to balance date, this facility has been amended and extended to 30 April 2022 (Note
27).
•
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. The Group was in
compliance with all bank covenants during the period.
60 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
21. Financial Assets and Liabilities (continued)
Amounts drawn against the senior revolving and acquisition facilities are:
$’000
Facility Limits
Senior revolving facility
Acquisition facility
Total lending facilities
Utilisation
Senior revolving facility
Acquisition facility
Total borrowings
Total unused facilities
AS AT
31 MARCH 2018
AS AT
31 MARCH 2017
30,000
60,000
90,000
-
32,300
32,300
30,000
60,000
90,000
-
20,200
20,200
57,700
69,800
The terms of the acquisition facility allow the Group 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 in this
manner is available to be redrawn.
Remaining contractual maturities
The contractual maturity for the Group’s financial instrument liabilities (that is, trade payables) is disclosed at Note
14 and in terms of bank borrowings, above. The contractual maturities are based on the undiscounted cash flows of
financial liabilities based on the expiry of the facility.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities presented represent a reasonable approximation of fair
value.
22. Net Debt Reconciliation
This sets out an analysis of net debt movement for the current year:
$’000
Net debt as at 1 April 2017
Bank borrowings drawn
Bank borrowings repaid
Cash flows
Net debt as at 31 March 2018
Cash and cash
equivalents
Borrowings due
after 1 year
Total
4,095
-
-
1,267
5,362
(20,200)
(117,500)
105,400
-
(16,105)
(117,500)
105,400
1,267
(32,300)
(26,938)
Net debt as defined in the financial covenants (note 18) also includes any amounts utilised under the Group’s lease
guarantee facility (note 24).
Evolve Education Group Annual Report 2018 | 61
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
23. Reconciliation of (Loss)/Profit After Tax to Net Operating Cash Flows
$’000
(Loss)/Profit after tax
Adjustments for:
Depreciation and amortisation
Impairment expense
Loss on disposal
Finance expense
Deferred tax
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 receivables
Increase/(decrease) in current income tax liabilities
Increase/(decrease) in PORSE GST settlement payable
Increase/(decrease) in employee entitlements
Other items:
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
(4,213)
15,873
3,241
13,890
134
1,641
(796)
(188)
136
(357)
(552)
(841)
1,500
254
2,629
-
-
1,366
64
1,734
(611)
1,963
-
(445)
-
510
Business combination payment classified as investing
Net cash flows from operating activities
467
14,316
(533)
22,550
24. Commitments and Contingencies
Operating lease commitments – Group as lessee
The Group has entered into commercial leases on its premises, motor vehicles and IT equipment. Future minimum
rentals payable under non-cancellable leases at balance date are:
$’000
Within one year
After one year but not more than five years
More than five years
Total
Guarantees
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
21,224
63,583
53,880
20,500
62,004
51,179
138,687
133,683
$2,385,870 (2017: $2,325,915) of the lease guarantee facility disclosed in Note 21 has been utilised.
62 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
25. 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, Gráinne Troute (appointed 1st May 2017),
Anthony Quirk (appointed 2nd August 2017), Lynda Reid (appointed 2nd August 2017) and Mark Finlay (ceased
his directorship 17th August 2017).
• Mark Finlay was appointed Chief Executive Officer on 1st November 2017 and had been acting in this capacity
since 25th August 2017.
•
LEP Limited, LEDC Limited, LEP Construction Limited, LEP1 Limited, LEP2 Limited, LEDC1 Limited, Little
Wonders Childcare (Aoraki) Limited, Little Wonders Childcare (Timaru) Limited, Little Wonders Childcare
(Cromwell) Limited, Little Wonders Childcare (St Kilda) Limited, Little Wonders Childcare (Roslyn) Limited,
Little Wonders Childcare (Oamaru) Limited, and Wildfire Consultants Limited, companies that are all associated
with Mark Finlay.
Related party transactions and related party relationships that have ceased during the current year or in the
prior year are:
• Greg Kern ceased his directorship on 17th August 2017.
•
Kern Group (Paddington) Pty Limited and Kern Group NZ Limited, companies associated with Greg Kern.
• Alan Wham resigned as Chief Executive Officer on 15th September 2017.
•
Shares issued pursuant to the Company’s dividend reinvestment plan to Alan Wham (2018: 14,056 shares valued
at $13,714, 2017: 27,214 shares valued at $25,857)
•
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. Mark
Finlay, the Group’s Chief Executive Officer, no longer receives directors’ fees following his cessation of his
directorship on 17th August 2017.
$’000
Alistair Ryan
Norah Barlow
Gráinne Troute
Anthony Quirk
Lynda Reid
Greg Kern
Mark Finlay
Total Directors' Remuneration
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
128
90
82
56
53
37
33
479
90
135
-
-
-
80
80
385
Evolve Education Group Annual Report 2018 | 63
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
25. Related Party Transactions (continued)
Related party transactions arising during the year (continued):
• 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:
• Companies associated with Mark Finlay are the landlord of the Group’s head office and fourteen of the
Group’s ECE centres. Rent of $2,208,000 (2017: $1,161,000 relating to six ECE centres and the head
office) has been paid by the Group to the companies associated with Mark Finlay during the period.
To facilitate the acquisition of six centre businesses in the year ended 31 March 2018, Mark Finlay and
associated interests, acquired the premises out of which these businesses operate and lease these
premises to the Group. A further commitment to make future rent payments of $24,235,000 (2017:
$3,942,00) over the next 2 to 12 years (depending on the term of each lease) is included in Note 24.
• Management fee income received from centres related to Mark Finlay of $17,500 (2017: $72,698).
•
Fees for services other than rent paid to various companies related to Mark Finlay were $68,872 (2017:
$74,516).
• Dividends of $1,067,000 (2017: $1,042,000) were paid to Mark Finlay.
•
Shares were issued pursuant to the company’s dividend reinvestment plan to Alan Wham (14,056 shares
valued at $13,714), Alistair Ryan and Norah Barlow (4,641 shares each valued at $4,038 each).
• On 1 September 2017, the Group acquired one centre from LEDC Limited, a company that Mark Finlay
is a director of and shareholder in, for $1,600,000.
• As at balance date, the Group had committed to the lease of two new development centres where
LEP2 Limited, a company associated to Mark Finlay, will be the landlord.
• Compensation of key management personnel of the Group:
$’000
Short-term employee benefits
Total compensation paid to key management personnel
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
1,000
1,000
865
865
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
64 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
25. Related Party Transactions (continued)
Related party transactions arising during the year (continued):
•
Shareholding interests of Directors and key management of the Company are:
Units of shares
Mark Finlay
Norah Barlow
Alistair Ryan
Kern Group NZ Limited & Gregory Kern
Alan Wham
Vivek Singh
AS AT
31 MARCH 2018
AS AT
31 MARCH 2017
21,347,382
21,347,382
90,390
90,390
-
-
-
85,749
85,749
2,347,808
589,518
321,555
21,528,162
24,777,761
During the year Norah Barlow and Alistair Ryan increased their shareholdings via electing to receive shares
under the Group’s dividend reinvestment plan.
26. Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the Group’s auditor,
PricewaterhouseCoopers:
$’000
Audit services:
Audit of Group consolidated financial statements
PORSE assurance engagements
Total audit services
Other services provided by PricewaterhouseCoopers:
Taxation compliance services
Consultancy services
Total other services
YEAR
31 MARCH 2018
YEAR
31 MARCH 2017
183
30
213
40
-
40
175
30
205
43
8
51
In the prior year, consultancy services relate to advice regarding executive remuneration.
Evolve Education Group Annual Report 2018 | 65
Evolve Education Group Annual Report 2016 | 1Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
27.
Events After the Reporting Period
Dividend
On 28 May 2018 the Board approved a fully imputed final dividend of $3.6m or 2.0 cents per share in respect of the
year ended 31 March 2018. The dividend is payable on 28 June 2018.
Sale of PORSE
Subsequent to balance date, the Company decided that it will commence a sale process for the Company’s wholly-
owned PORSE in-home childcare and training business.
Financing Arrangements
Subsequent to balance date the terms of the financing arrangements provided by ASB were amended. The key
changes are as follows:
•
•
•
The Senior Revolving facility totalling $30.0m was amended to $25.0m.
The Acquisition facility totalling $60.0m was amended to $70.0m.
The expiry date of the facilities was extended from 20 April 2019 to 30 April 2022.
CEO Appointment
On 27 May 2018 Roseanne Graham was appointed to the position of Chief Executive Officer of the Company, replacing
Mark Finlay at a date to be agreed.
66 | Evolve Education Group Annual Report 2018
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 MARCH 2018
Independent auditor’s report
T o the shareholders of Evolve Education Group Limited
T he consolidated fi nancial statements comprise:
•
the consolidated statement of fi nancial position as at 31 March 2018;
•
•
•
•
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of movements in equity for the year then ended;
the consolidated statement of cash fl ows for the year then ended; and
the notes to the consolidated fi nancial statements, which include signifi cant accounting policies.
Our opinion
In our opinion, the consolidated fi nancial statements of Evolve Education Group Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the fi nancial
position of the Group as at 31 March 2018, its fi nancial performance and its cash fl ows 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 fi nancial
statements section of our report.
W e believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for
our opinion.
W e 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 fulfi lled our other ethical responsibilities in
accordance with these requirements.
Ou r fi rm carries out other services for the Group in the areas of other audit related assurance
engagements, agreed procedures over prudential fi nancial reporting and tax compliance 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 2018 | 67
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the fi nancial
statements are free from material misstatement.
Overall group materiality: $1.0 million, which represents approximately 5% of
a 3-year average profi t before tax adjusted for impairment and the Porse GST
settlement in the year ended 31 March 2018.
We chose profi t 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. We have excluded impairment losses recognised and the
one-off Porse GST settlement, as these are non-recurring items that are not
part of normal business operations. We applied a 3-year average of profi t
before tax due to the volatility experienced in the Group’s earnings over
this time, arising from acquisition activity and fl uctuations in operational
performance.
W e have determined that there is only one key audit matter being the
impairment assessment of goodwill.
Materiality
The scope of our audit was infl uenced 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 fi nancial 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 eff ect of misstatements, both
individually and in aggregate on the consolidated fi nancial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated fi nancial
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 suffi cient work to enable us to provide an
opinion on the consolidated fi nancial 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 matter
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in
our audit of the consolidated fi nancial statements of the current year. These matters are addressed
in the context of our audit of the consolidated fi nancial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
PwC
68 | Evolve Education Group Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of goodwill
As disclosed in Note 12, the Group has
goodwill of $203.3 million as at 31 March
2018, which was recognised on business
acquisitions in the current and prior years.
Of this balance, $202.6 million relates to the
ECE Centres cash-generating unit (CGU).
During the year, the Group fully impaired
the goodwill balance of $10.6 million in
the Home-based ECE business due to
underperformance and a continued decline
in child enrolments for this CGU.
Our audit focused on assessing the carrying
value of the goodwill in the ECE Centres
CGU due to the judgements and estimates
that are involved in determining whether
the recoverable amount of the CGU exceeds
the carrying value of the CGU’s assets and
liabilities. In determining the recoverable
amount management use a discounted cash
fl ow model on a value-in-use basis.
M anagement considers the recoverable
amount calculations are most sensitive to
the following key assumptions:
• Revenue growth from enrolment and
price changes through the forecast
period;
• Expense growth through the forecast
period;
• Discount rate; and
• Growth rates used to extrapolate cash
fl ows beyond the forecast period.
R efer to note 13 of the consolidated fi nancial
statements where impairment testing of
goodwill is discussed, including the impact
on the recoverable amount from small
changes in the enrolment and price growth
assumptions.
The assessment of goodwill involves signifi cant
judgement.
We tested management’s value-in-use calculations
including the inputs and mathematical accuracy of the
model and compared it to the relevant net asset value of
the CGU.
We also assessed the key estimates and assumptions
made by management as follows:
• G ained an understanding of the business process
applied by management in determining whether
there are any indicators of impairment in the value
of goodwill;
• O btained an understanding of management’s
forecasting and budgeting process and reviewed
the past years' actual performance against budget
performance to determine the rigor and accuracy of
the budgeting process;
• Wh ere appropriate, we understood the key changes
between the performance for the year to 31 March
2018 and the budget for the year ending 31 March
2019, in particular key movements in revenue
and expenses. We considered these based on: past
performance; subsequent changes that have been
made within the business; and the increased levels
of ECE funding announced by the New Zealand
Government on 17 May 2018, eff ective from 1
January 2019;
• Re viewed management’s sensitivity analysis over
the key assumptions and also considered alternative
possible scenarios and their potential impact;
• E ngaged our internal valuation expert to assess
the terminal growth rates and discount rates used
against those used by similar market participants
and determine whether the rates were within a
reasonable range, and
• Con sidered whether the disclosures in the
consolidated fi nancial statements were in
compliance with the requirements of the accounting
standards.
Bas ed on the results of our procedures we have nothing
to report.
PwC
Evolve Education Group Annual Report 2018 | 69
Information other than the fi nancial statements and auditor’s report
T he Directors are responsible for the annual report. Our opinion on the consolidated fi nancial
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 the other information. At the time of our audit, there
was no other information available to us.
I n connection with our audit of the consolidated fi nancial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated fi nancial 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 this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
Re sponsibilities of the Directors for the consolidated fi nancial statements
Th e Directors are responsible, on behalf of the Company, for the preparation and fair presentation
of the consolidated fi nancial 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 fi nancial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated fi nancial 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.
Aud itor’s responsibilities for the audit of the consolidated fi nancial statements
Our objectives are to obtain reasonable assurance about whether the consolidated fi nancial
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 infl uence
the economic decisions of users taken on the basis of these consolidated fi nancial statements.
A fur ther description of our responsibilities for the audit of the fi nancial statements is located at the
External Reporting Board’s website at:
https: //www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This d escription forms part of our auditor’s report.
PwC
70 | Evolve Education Group Annual Report 2018
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.
T he engagement partner on the audit resulting in this independent auditor’s report is Richard Day.
For and on behalf of:
Chart ered Accountants
28 Ma y 2018
Auckland
PwC
Evolve Education Group Annual Report 2018 | 71
Corporate Governance and Statutory Information
Corporate Governance
Evolve Education Group Limited (the “Company”) is a New Zealand based and incorporated owner and provider of ECE
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 and complied with
the Corporate Governance Code set out in the NZX Listing Rules except as noted below under Principle 3, and, from
listing, has approved various corporate governance policies and charters.
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 – Code of Ethical Behaviour
Recommendation 1.1: The board should document minimum standards of ethical behaviour to which the issuer’s
directors and employees are expected to adhere.
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.
Recommendation 1.2: An issuer should have a financial product dealing policy which applies to employees and directors.
Share Ownership
The Company’s Securities Trading Policy details the Company’s policy on, and rules for, dealing in shares and other
securities in the Company. The Securities Trading Policy applies 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.
72 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory Information
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 page 87.
Principle 2 – Board Composition and Performance
Recommendation 2.1: The Board and issuer should operate under a written charter which sets out the roles and
responsibilities of the board. The board charter should clearly distinguish and disclose the respective roles and
responsibilities of the board and management.
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.
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.
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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.
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.
Recommendation 2.2: Every issuer should have a procedure for the nomination and appointment of directors to the
board.
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.
The role and responsibilities of the Chair include:
•
providing leadership to the Board and to the Company;
•
ensuring the efficient organisation and conduct of the Board;
• monitoring Board performance annually;
•
•
•
•
facilitating Board discussions to ensure core issues facing the Company are addressed;
briefing all directors in relation to issues arising at Board meetings;
facilitating the effective contribution and on-going development of all directors;
promoting consultative and respectful relations between Board members and between the Board and management;
and
•
chairing Board and shareholder meetings.
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, Lynda Reid, Anthony Quirk, Gráinne Troute and Alistair Ryan are independent directors, within the meaning
of the NZX Listing Rules.
74 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory Information
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.
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 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.
Recommendation 2.3: An issuer should enter into written agreements with each newly appointed director establishing
the terms of their appointment.
On appointment, each new director signs a written agreement that outlines the terms of their appointment. The
agreement covers: expected time commitments, the role of the Board, remuneration, independence requirements,
disclosure requirements, shareholding qualification requirements, confidentiality obligations, indemnity and insurance
provisions, intellectual property rights and cessation of appointment.
Evolve also has written agreements with executives that set out the terms of their employment.
Recommendation 2.4: Every issuer should disclose information about each director in its annual report or on its
website, including a profile of experience, length of service, independence and ownership interests.
Evolve’s Director biographies can be found on page 14.
Evolve Director ownership interests can be found on page 87 of this annual report.
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Recommendation 2.5: An issuer should have a written diversity policy which includes requirements for the board or a
relevant committee of the board to set measurable objectives for achieving diversity (which, at a minimum, should
address gender diversity) and to assess annually both the objectives and the entity’s progress in achieving them. The
issuer should disclose the policy or a summary of it.
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.
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*
Company-wide
As at 31 March 2018
Men
2 (40%)
Women
3 (60%)
3 (43%)
>96%
4 (57%)
<4%
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 2018 the senior
management team consisted of seven positions.
At balance date the Group employs 2,187 women which represents 96% of the workforce (FY17: 2,406 women which
represented 96.5% of the workforce).
Recommendation 2.6: Directors should undertake appropriate training to remain current on how to best perform their
duties as directors of an issuer.
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.
76 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory 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 and sector
issues.
Recommendation 2.7: The board should have a procedure to regularly assess director, board and committee performance.
The Chair discusses individual performance with directors, while the Board and Board sub-committees self-evaluate their
performance against their charter responsibilities, with a commitment to identifying any opportunities for improvement.
Recommendation 2.8: The Chair and the Chief Executive should be different people
The positions of Chair and Chief Executive of Evolve are held by different people.
Principle 3 – 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.
Recommendation 3.1: An issuer’s audit committee should operate under a written charter. Membership on the audit
committee should be majority independent and comprise solely of non-executive directors of the issuer. The chair of
the audit committee should not also be the chair of the board.
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 Norah Barlow, Anthony Quirk (Chair appointed October 2017)
and Alistair Ryan. 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.
Recommendation 3.2: Employees should only attend audit committee meetings at the invitation of the audit committee.
Under the Audit & Risk Committee Charter, the Chief Executive, Chief Financial Officer and other employees attend
committee meetings by invitation.
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Recommendation 3.3: An issuer should have a remuneration committee which operates under a written charter
(unless this is carried out by the whole board). At least a majority of the remuneration committee should
be independent directors. Management should only attend remuneration committee meetings at the invitation of the
remuneration committee.
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.
Under the Remuneration and People Committee charter, the CEO, other executive staff, or such other parties may be asked
to attend any meeting of the Committee as considered necessary to provide appropriate information, explanation and
assistance as required. No individual employee is permitted to be present when their performance and/or remuneration
arrangements are being discussed. The Committee may ask any party to withdraw from any part of any meeting.
The current members of the Remuneration and People Committee are Gráinne Troute (Chair appointed 19 May 2017),
Lynda Reid, and Norah Barlow. (Greg Kern Chair until 19 May 2017).
Recommendation 3.4: An issuer should establish a nomination committee to recommend director appointments to the
board (unless this is carried out by the whole board), which should operate under a written charter. At least a majority
of the nomination committee should be independent directors.
Evolve does not have a separate nomination committee as its functions are carried out by the full Board in line with the
responsibilities under the Evolve Board Charter. The procedures for director removals and appointments are governed
by the company’s constitution and the requirements of the NZX Listing Rules.
Recommendation 3.5: An issuer should consider whether it is appropriate to have any other board committees as
standing board committees. All committees should operate under written charters. An issuer should identify the
members of each of its committees, and periodically report member attendance.
The board does not consider it necessary to have any other standing board committees.
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, 28 May 2018), as compared to the number of
scheduled meetings that each Director was eligible to attend (in brackets) is shown in the table below.
Norah Barlow
Mark Finlay
Greg Kern
Alistair Ryan
Alan Wham
Gráinne Troute
Anthony Quirk
Lynda Reid
78 | Evolve Education Group Annual Report 2018
Board
12 (12)
4 (4)
4 (4)
12 (12)
4 (4)
11 (11)
8 (8)
8 (8)
Audit and Risk Committee
Remuneration and People
Committee
5 (5)
-
2 (2)
5 (5)
-
-
3 (3)
-
3 (3)
1 (1)
1 (1)
-
-
2 (2)
-
2 (2)
Corporate Governance and Statutory Information
In addition to scheduled Board meetings, the Board also held other meetings and teleconferences to discuss other
company matters as required.
Recommendation 3.6: The board should establish appropriate protocols that set out the procedure to be followed if
there is a takeover offer for the issuer including any communication between insiders and the bidder. It should disclose
the scope of independent advisory reports to shareholders. These protocols should include the option of establishing
an independent takeover committee, and the likely composition and implementation of an independent takeover
committee.
In the event of a takeover, the board may form a subcommittee, comprised of non-interested directors which will have
the authority to make biding decisions in respect of the process, including:
•
•
•
retaining legal and financial advisers,
appointing an independent adviser for the purposes of the Takeovers Code, and
approving any announcements or communications relating to the potential transaction.
Evolve is in the process of adopting more formal takeovers protocol to document this and expects to be able to confirm
full compliance as at 31 March 2019.
Principle 4 – Reporting and Disclosure
Recommendation 4.1: An issuer’s board should have a written continuous disclosure policy.
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.
Recommendation 4.2: An issuer should make its code of ethics, board and committee charters and the policies
recommended in the NZX Code, together with any other key governance documents, available on its website.
Key governance documents are available to investors and stakeholders on Evolve’s website. They include the Continuous
Disclosure Policy, Conflicts of Interest Policy, Trading Policy and Guidelines, Diversity Policy, Risk Management Policy,
Shareholders Communications Policy, Dividend Policy and Board and Committee Charters.
Recommendation 4.3: Financial reporting should be balanced, clear and objective. An issuer should provide non-
financial disclosure at least annually, including considering material exposure to environmental, economic and social
sustainability risks and other key risks. It should explain how it plans to manage those risks and how operational or
non-financial targets are measured.
Evolve publishes audited interim and full-year financial statements that are prepared in accordance with relevant
financial standards.
Each year, non-financial information is disclosed in the annual report. Material risks are discussed (including how those
risks are managed and how non-financial targets are measured) and are also covered in this Corporate Governance
Statement (see Principle 6).
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In addition to interim and full-year financial statements, and annual reporting, Evolve regularly publishes investor
presentations, including six-monthly result announcements. These presentations provide readers with regular updates
on the progress against Evolve’s strategy, areas of the company’s environmental, social and governance performance
and longer-term sector developments.
The Company considers that it does not currently have any material exposure to environmental, economic or social
sustainability risks.
Principle 5 – Remuneration
Recommendation 5.1: An issuer should recommend director remuneration to shareholders for approval in a transparent
manner. Actual director remuneration should be clearly disclosed in the issuer’s annual report.
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.
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.
Director Remuneration Statement
The Company’s directors holding office during the year ended 31 March 2018 are listed below. Pursuant to section 21(1)(f)
of the Companies Act 1993, the total amount of remuneration and other benefits received by each Director during the
year ended 31 March 2018 are provided below.
($000’s)
Alistair Ryan
Norah Barlow
Gráinne Troute
Anthony Quirk
Lynda Reid
Greg Kern
Mark Finlay
Alan Wham
Total
Directors’ Fees
Cash Salary and
Other Payments
Total
128
90
82
56
53
37
33
-
479
-
-
-
-
-
-
-
718
718
128
90
82
56
53
37
33
718
1,197
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 2018 employees did not
receive additional remuneration for acting as directors of subsidiary companies.
80 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory Information
Recommendation 5.2: An issuer should have a remuneration policy for remuneration of directors and officers, which
outlines the relative weightings of remuneration components and relevant performance criteria.
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
(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 78.
The performance of all directors and senior management is reviewed periodically in accordance with the terms of the
Remuneration and People Committee Charter.
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.
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Total executive remuneration may incorporate fixed and variable components. Executive remuneration may contain any
or all of the following:
•
•
•
•
fixed remuneration;
performance-based remuneration;
equity-based remuneration; and
termination payments.
The Company has adopted a performance share rights long-term executive incentive scheme for the CEO and the senior
management.
Recommendation 5.3: An issuer should disclose the remuneration arrangements in place for the CEO in its annual
report. This should include disclosure of the base salary, short term incentives and long term incentives and the
performance criteria used to determine performance based payments.
CEO Remuneration
Alan Wham held the position of CEO and Managing Director until 15 September 2017. He had a base salary of $450,000
per annum (gross) and was entitled to the use of a mobile telephone, laptop and car park. Mr Wham received a payment
of $451,625 at the end of his employment. Mr Wham received a short term incentive payment of $25,000 and was
granted a long term incentive to a value of $110,000 which lapsed upon cessation of his employment. Mark Finlay held
the position of CEO from 15 September 2017 and was entitled to the use of a mobile telephone, laptop and car park. As
a substantial shareholder in the Company Mr Finlay elected to have nil base salary during the period to 31 March 2018.
Subsequent to this date Mr Finlay’s base salary is $320,000 per annum with no short or long term incentive. 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.
Employee Remuneration
The number of employees or former employees (including employees holding office as directors of subsidiaries, but not
including Alan Wham who was 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 2018 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
$180,001 - $190,000
$200,001 - $210,000
$230,001 - $240,000
$280,001 - $290,000
Total
Total
3
2
1
2
1
1
1
1
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.
82 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory Information
Principle 6 – Risk Management
Recommendation 6.1: An issuer should have a risk management framework for its business and the issuer’s board should
receive and review regular reports. A framework should also be put in place to manage any existing risks and to report
the material risks facing the business and how these are being managed.
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.
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.
Recommendation 6.2: An issuer should disclose how it manages its health and safety risks and should report on their
health and safety risks, performance and management.
As a leading provider of ECE 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 7 – Auditors
Recommendation 7.1: The board should establish a framework for the issuer’s relationship with its external auditors.
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 2018 is set out in note 26 of the financial statements included in this annual report.
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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).
Recommendation 7.2: The external auditor should attend the issuer’s Annual Meeting to answer questions from
shareholders in relation to the audit.
Evolve’s external auditor is invited to the annual shareholder meetings. The Chair of the Board announces the auditor’s
attendance and shareholders can ask questions of them should they wish.
Recommendation 7.3: Internal audit functions should be disclosed.
The company has not established an internal audit function.
Principle 8 – Shareholder Rights and Relations
Recommendation 8.1: An issuer should have a website where investors and interested stakeholders can access financial
and operational information and key corporate governance information about the issuer.
Key investor information can be found at www.evolveeducation.co.nz/investor-relations/investor-information.
Recommendation 8.2: An issuer should allow investors the ability to easily communicate with the issuer, including
providing the option to receive communications from the issuer electronically.
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 Company’s Shareholder Communications Policy is designed to ensure that communications with shareholders and all
other stakeholders are managed efficiently.
84 | Evolve Education Group Annual Report 2018
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.
Recommendation 8.3: Shareholders should have the right to vote on major decisions which may change the nature of
the company in which they are invested
Evolve is committed to timely and balanced disclosure, which includes advising shareholders on any major decisions.
Evolve follows the mandatory listing rule requirements relating to change in the essential nature of the business,
including major transactions under the Companies Act 1993.
Recommendation 8.4: Each person who invests money in a company should have one vote per share of the company they
own equally with other shareholders.
Evolve conducts voting at its annual shareholder meetings by way of poll and on the basis of one share, one vote.
Recommendation 8.5: The board should ensure that the annual shareholders notice of meeting is posted on the issuer’s
website as soon as possible and at least 28 days prior to the meeting.
Evolve’s Notice of Meeting will be made available at least 28 days prior to the meeting.
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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 2018 are as follows:
Director
Anthony Quirk
Position
Director
Chairman
Trustee
Deputy Chairman
Director
Gráinne Troute
Director
Director
Alistair Ryan
Director-ceased
Director-ceased
Director
Company
Milford Asset Management
New Zealand Water Polo
Graeme Dingle Foundation Wellington Board
Compass Housing New Zealand
New Zealand Local Government Funding Agency
Tourism Holdings Limited
Summerset Group Holdings Limited
Lewis Road Creamery Limited
New Zealand Racing Board
Kiwibank Limited
There were no entries in the Interests Register for Norah Barlow and Lynda Reid 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 2018:
Norah Barlow:
•
Issue of 2,045 shares by the Company on 21 June 2017 under the Company’s dividend reinvestment plan.
•
Issue of 2,596 shares by the Company on 20 December 2017 under the Company’s dividend reinvestment plan.
Alistair Ryan:
•
Issue of 2,045 shares by the Company on 21 June 2017 under the Company’s dividend reinvestment plan.
•
Issue of 2,596 shares by the Company on 20 December 2017 under the Company’s dividend reinvestment plan.
Alan Wham:
•
Issue of 14,056 shares by the Company on 21 June 2017 under the Company’s dividend reinvestment plan.
Greg Kern:
•
Sale of 2,286,495 shares in the Company on 25 May 2017.
Anthony Quirk, Gráinne Troute, and Lynda Reid:
• Nil
86 | Evolve Education Group Annual Report 2018
Corporate Governance and Statutory Information
Disclosure of Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares as at 31 March 2018:
Director
Norah Barlow
Alistair Ryan
Number of Shares in which a
relevant interest is held
90,390
90,390
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.
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.
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 2018, the Company authorised the following dividends:
•
•
an interim dividend of 2.50 cents per share paid on 20 December 2017; and
a final dividend of 2.00 cents per share to be paid on 28 June 2018.
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 2018 were ($0.29) per share (31 March 2017 ($0.25) 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 2018 it was $0.87 (2017: $0.95).
Evolve Education Group Annual Report 2018 | 87
Evolve Education Group Annual Report 2016 | 1 Corporate Governance and Statutory Information
Donations
The Company made donations of $2,732 during the year ended 31 March 2018 (31 March 2017 $2,671).
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 31 July 2018 at 3 pm.
88 | Evolve Education Group Annual Report 2018
Shareholder Information
Analysis of Shareholding at 30 April 2018
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
122
354
328
591
85
8.24
23.92
22.16
39.94
75,427
1,121,059
2,632,871
18,053,950
5.74
157,577,289
Holding
Quantity
%
0.04
0.62
1.47
10.07
87.80
1,480
100
179,460,596
100.00
Twenty Largest Shareholders at 30 April 2018
Name
New Zealand Central Securities Depository Limited
Leveraged Equities Finance Limited
FNZ Custodians Limited
JBWERE (Nz) Nominees Limited
Forsyth Barr Custodians Limited
Scottfin Ece Limited
Mark Finlay & Geoffrey Hosking
Brispot Nominees Pty Ltd
Merrill Lynch (Australia) Nominees Pty Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Russell Thompson & Geoffrey Hosking
UBS Nominees Pty Ltd
FNZ Custodians Limited
Custodial Services Limited
Mark Finlay & Mark Dobson Trustee Company Limited
JBWERE (Nz) Nominees Limited
Millar Capital Fund Limited
Kevin Glen Douglas & Michelle Mckenney Douglas
Alan Hugh Wham & Fiona Elizabeth Wham & Hauraki Independent Tr
Svcss Ltd
Total - twenty largest shareholders
Total number of shares on issue
Number of
Shares
% of
Shares
53,518,163
22,619,257
13,639,773
10,089,202
8,874,031
6,105,450
4,938,542
4,835,608
2,473,866
2,316,349
2,178,028
1,942,069
1,692,861
1,660,754
1,550,000
1,208,840
982,431
800,000
785,000
603,574
29.82
12.60
7.60
5.62
4.94
3.40
2.75
2.69
1.38
1.29
1.21
1.08
0.94
0.93
0.86
0.67
0.55
0.45
0.44
0.34
142,813,798
179,460,596
79.58%
Evolve Education Group Annual Report 2018 | 89
Evolve Education Group Annual Report 2016 | 1
Shareholder Information
New Zealand Central Securities Depository Limited (NZCSD) provides a custodian depository service that allows electronic
trading of securities to its members and does not have a beneficial interest in these shares. As at 30 April 2018, the
shareholdings in the Company held through NZCSD were:
Name
HSBC NOMINEES (NEW ZEALAND) LIMITED
JPMORGAN CHASE BANK
ACCIDENT COMPENSATION CORPORATION
NATIONAL NOMINEES NEW ZEALAND LIMITED
BNP PARIBAS NOMINEES NZ LIMITED
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
15,564,165
11,042,964
8,469,274
8,436,956
6,839,130
2,109,310
852,228
138,982
65,154
29.08
20.63
15.83
15.76
12.78
3.94
1.59
0.26
0.13
53,518,163
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**
Regal Funds Management Pty Limited
National Australia Bank Limited
Paradice Investment Management Pty Limited
Salt Funds Management Limited
Accident Compensation Corporation
Total number of shares on issue
Number of
Shares
23,395,611
21,347,382
29,827,904
13,162,417
10,505,000
19,649,333
9,298,562
179,460,596
% of
Shares
13.12
11.97
16.62
7.30
5.89
10.95
5.18
* 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.
90 | Evolve Education Group Annual Report 2018
Subsidiary Company Directors
The following persons held office as Directors of the Company’s subsidiaries during the year ended 31 March 2018 or, in
the case of acquired subsidiaries, from the date of acquisition:
Company Name
Evolve Group 1 Limited
Evolve Group 2 Limited
Evolve Group 3 Limited
Evolve Group 4 Limited
Evolve Group 5 Limited
Evolve Group 6 Limited
Evolve Management Group Limited
ECE Management Limited
Lollipops Educare Holdings Limited
Lollipops Educare Limited
Lollipops Educare Centres Limited
Lollipops Educare (Hastings) Limited
Lollipops Educare (Birkenhead) Limited
Evolve Home Day Care Limited
Au Pair Link Limited
Directors
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 31 August 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Evolve Education Group Annual Report 2018 | 91
Evolve Education Group Annual Report 2016 | 1 Subsidiary Company Directors
PORSE In-home Childcare (NZ) Limited
PORSE Franchising (NZ) Limited
PORSE Education & Training (NZ) Limited
For Life Education & Training (NZ) Limited
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 2017)
Alan Wham (ceased 15 September 2017)
Stephen Davies
Fay Amaral (appointed 26 June 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 2018.
92 | Evolve Education Group Annual Report 2018
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)
Anthony Quirk (appointed 2 August 2017)
Lynda Reid (appointed 2 August 2017)
Gráinne Troute (appointed 1 May 2017)
Senior Management Team
Mark Finlay – Chief Executive Officer
Stephen Davies – Chief Financial Officer
Paul Matthews – Chief Information Officer
Fay Amaral – Chief Operating Officer
Kerry Henderson – General Manager, PORSE
Morgan Holyoake - General Manager, Au Pair Link
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
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Evolve Education Group Annual Report 2016 | 1