ANNUAL REPORT 2019
This Annual Report of Evolve Education Group Limited is dated
21 June 2019 and is signed by the Board of Directors by:
Norah Barlow
Acting Chair of the Board
Gráinne Troute
Contents
About Evolve
Chair’s Report
Chief Executive’s Report
Our Vision
Our People
Educational Quality in our Centres
Centre Operations
Board Profile
Senior Management Team
Financial Statements
Independent Auditor’s Report
Corporate Governance &
Statutory Information
Shareholder Information
Corporate Directory
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3
4
6
7
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10
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13
15
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82
86
“The Evolve Group has supported the
centre well by providing a number of new
initiatives and improved systems and
practices that promote positive outcomes
for children. The centre has a good
framework to ensure internal evaluation is
happening at all levels. The strategic plan
gives a clear direction for the future and
alignment can be seen through all internal
evaluation processes.”
Education Review Office (ERO)
1
About Evolve Education Group
A snapshot of Evolve’s New Zealand network
as at 31 March 2019
Number of early childhood centres 128
Number of licensed child care places 9,218
Number of staff 2,244
Average number of children
per centre
74
Average annual mature centre
occupancy for FY19
76.5%
Average centre lease term c.18 years
New Zealand early childhood
education sector by market share
Best Start 7%
Provincial 2%
Evolve 4%
Barnardos 1%
Kindercare 2%
Other 84%
Evolve is one of New Zealand’s leading providers of
early childhood education. The organisation operates
centre-based early childhood education facilities
throughout New Zealand under brands that include
Lollipops, Active Explorers, Learning Adventures,
Little Earth Montessori, Little Lights, Little Wonders
and Pascals. More than 85% of Evolve’s centres are
well-established in their communities, serving 50 or
more children and their families.
The communities we serve –
number of centres by region
51
6
9
5
1
9
6
2
13
4
15
1
6
2
[Source: Education Counts ECE
Directory. Note: ECE market share by
number of licensed places]
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Alistair Ryan
Chair
Evolve Education Group Limited
(until 15 June 2019)
Chair’s Report
Welcome to Evolve’s fifth annual report. We are
reporting on what has been a year of considerable
change and development for Evolve Education Group.
In July 2018, Rosanne Graham commenced as CEO.
Her initial focus was to refresh the senior management
team and to develop a turnaround plan for the New
Zealand business. That new executive team is now
in place and is implementing the plan which involves
considerable re-investment in the organisation.
In November 2018 Anthony Quirk and Lynda Reid
retired from the board and were replaced by Chris
Scott and Chris Sacre. Chris Scott had acquired
the 19% shareholding previously held by interests
associated with Mark Finlay, former director and then
CEO, in August 2018.
Chris Scott and Chris Sacre bring extensive knowledge
and expertise of the early childcare and education
sector to the board and specific expertise relating
to the Australian sector which will, following the
company’s capital raising completed in June 2019,
allow Evolve to investigate the Australian opportunity
alongside its New Zealand operations.
The company’s recapitalisation by way of a 4.4:1
accelerated rights entitlement offer was announced
in early May 2019 and completed in early June, raising
$63.5 million of additional equity. The rights issue was
designed as an AREO (accelerated rights entitlement
offer) to ensure all shareholders were treated equally.
The new capital raised has been deployed to reduce
bank debt with $30m repaid to ASB Bank. $25m will
be invested in the acquisition of 10-12 existing childcare
centres in Australia, with further acquisitions subject to
the results achieved in the initial phase. Chris Scott and
Chris Sacre will identify the acquisition opportunities
for board review and approval and will act as executive
directors of the Australian operating subsidiary. The
balance of the capital raise will be applied to increased
working capital and the costs of the issue.
The initial phase in Australia broadens the strategic
options of the business and offers an opportunity to
boost earnings concurrently with the New Zealand
turnaround effort. The initial phase will involve the
acquisition of up to 12 centres and Evolve will prove
up the Australian expansion over the course of FY20.
This phase will be led by Chris Sacre and Chris Scott,
who will be supported by a team of professionals, all
of whom have extensive Australian childcare sector
experience.
The successful completion of the capital raise places
the company on a much improved footing for the
future and the board acknowledges the support of
existing and new shareholders in supporting the
company’s recapitalisation.
As signalled in our offer announcement, I am retiring
from the board on 15 June. I have considered this
role a significant responsibility and am pleased that
the company has the capital and the plan to address
the issues facing the business and to move positively
forward into its next (recovery and expansionary) phase.
The recruitment for a new Chair has inevitably been
somewhat on hold pending the conclusion of the
capital raise but the board is now moving to conclude
an appointment as soon as practicable. In the
meantime, the board is grateful to Norah Barlow for
agreeing to fill in as Acting Chair on a short-term basis
until the new Chair is appointed.
As outlined in the information provided in support
of the rights offer, Evolve NZ still has a lot of hard
work to do to improve its financial results, and the
year ahead will be one of continued re-investment
and operational improvement which the Board is
confident will lead to improved financial results
heading into FY21 and beyond.
The Board wishes to acknowledge the contribution of
Lynda and Anthony during their respective tenures.
On behalf of the board, my thanks to shareholders
for your support of the capital raise and to the team
at Evolve for your hard work and commitment to
change and improvement as Evolve seeks to best
serve children and families throughout New Zealand
and, at the same time, to develop a successful
operation in Australia.
3
Rosanne Graham
Chief Executive Officer
Evolve Education Group Limited
CEO’s Report
The financial year ending 31 March, 2019, has been
a significant one for Evolve Education Group.
It has marked the beginning of our re-investment
programme to address issues that have been
holding back the business from reaching its full
potential as New Zealand’s leading provider of
early childhood education.
I joined Evolve in July last year, and shortly thereafter
outlined the challenges facing the business. We then
developed a turnaround plan to address these issues. In
the second half of the year, we have made considerable
progress on the implementation of the plan towards
transforming and rejuvenating our organisation.
What the turnaround plan addresses
The turnaround plan was developed to address
falling occupancy across Evolve’s nationwide network
of early childhood centres, which is impacting our
financial performance. As at year end we had 123
mature centres, compared to 126 at the end of the last
financial year. These centres served 8,825 licensed
places for children, compared to 8,929 the year
before. Our average annual occupancy was 76.5%
compared to 78.6% for the FY18 financial year. With
lower occupancy, our costs rise in a relative sense: our
ratio of annual employee expenses to revenue was
56.1%, compared to 54.6% the previous year, and our
ratio of annual rent expenses to revenue was 15.4%
compared to 14.4% for FY18. Our underlying EBITDA
margin for our mature centres in FY19 was 17.3%
compared to 20.8% a year prior.
With a fixed cost network like ours, any fall in
occupancy has a significant impact, so our priority
is to arrest this decline, and then work towards
rebuilding occupancy back to at least the industry
average, and beyond this as our centres become first
choice destinations for families seeking quality early
childhood education for their children. The upside
is that, as we improve our performance and build a
solid platform, the business is as capable of strong
positive growth from a fixed cost base, providing an
opportunity to provide significantly improved returns.
Progress on the NZ business turnaround plan
The turnaround plan has a three-year execution
timeframe. We are now well into our initiatives to
establish a sound and sustainable operational platform
to halt the decline in occupancy and then start to
rebuild it. Once we have done this, we can move to
growing from this base, using our new platform to
achieve greater scale and improved earnings.
In November, 2018 and February, 2019, we welcomed
Kirsten Long, General Manager Centre Operations and
Karen Shields, General Manager Quality Assurance
& Professional Learning, to our executive leadership
team. This completed the refresh of our senior
management team (see page 13), having appointed
new General Manager of People & Talent, Bev Davies,
and General Manager of Marketing, Ru Wilkie, in the
first half of the year. As we move to the next level of
organisational improvement, we are continuing to
invest in our people to ensure we have the skills and
capabilities we need.
Key Areas of focus
We have four key areas of focus to deliver on our eight
strategic goals.
Areas of focus
Strategic goals
People
Retaining staff – reducing
turnover levels
Delivery of
quality services
Investing in the support
office operations
Delivering the highest
quality outcomes for our
children
Retaining children and
families
Property
Lifting the presentation and
appeal of Evolve’s centres
Improving the portfolio of
centres
Marketing
Growing revenue from the
existing base
Attracting new families
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 People
Marketing
Our organisation is very much a people business. We
will deliver the best service to children and families if
our people feel recognised, rewarded and valued. In
terms of our people focus, our plan identifies three key
areas: capacity, capability and culture. Capacity means
ensuring we have all the people we need to deliver the
quality and range of services we require. Capability
addresses the range of skills and experience that we
need, from teachers, to those who run and support the
facilities, to specialist resources we deploy to create
great ECE facilities. Culture highlights our efforts to
foster a strong and positive culture of success so that
the outcomes we achieve for our children and families
are second to none, and this in turn improves our
organisational performance. We have completed a
people strategy and engaged a number of internal and
external providers to deliver professional training and
education to our people.
Delivering a quality service
New Zealand’s Te Whariki curriculum for early
childhood education provides a world class platform
for the work we undertake. Evolve is lifting its focus to
invest in all aspects of the curriculum so that we can
deliver this in the best possible way, to engage children
in our care and to achieve positive outcomes for our
children and families. We are reviewing our priority
areas for quality assurance and professional learning
and implementing a centre blueprint to support
consistent high performance across all our centres. We
have introduced a real time customer survey tool, and
we have begun training nationally on engagement and
retention. Centres that are experiencing high customer
turnover have been identified and are being supported
to implement strategies to reduce turnover.
Property
To offer a high-quality early childhood education
service, we need great facilities and premises for our
teachers and our children. Investing in our facilities
is a priority under our plan to provide a platform for
the great work that our teachers and educators do
every day. We have expanded our property team to
support a centralised, more professional, repairs and
maintenance capability as well as improved lease
management and capital expenditure planning and
delivery. More than 30 centres have been re-painted.
We have made considerable progress on improving
our portfolio, with significant upgrades planned to the
portfolio over the next three years.
As we build this quality platform, we need to
communicate what Evolve has to offer families. We
need to be child and family focused in terms of how we
go to market. This means understanding and meeting
the needs of individual communities from Invercargill to
Warkworth (and many places in between). Our centres
are deeply embedded in these communities, and we
need this local community focus in everything we
do. This year we have redesigned and updated all 128
centre websites and introduced digital marketing with
a pleasing increase in enquiries to our contact centre.
We have also focused on basic marketing priorities like
improved signage as well as optimising advertising,
strengthening direct sales engagement with centres
and working to improve conversion rates at each point
of the customer journey.
Re-focusing the business – divestment
In what has been a year of consolidation and
investment, a major focus has been rationalising
our portfolio of assets to re-focus the business on
early childhood education centres. This has meant
divestment of our assets in the home care space –
Porse and Au Pair Link – as well as the sale of ECE
Management. We have also identified five centres for
divestment of which one sale was completed in the
financial year, and one sale was completed following
the financial year, with marketing ongoing for the
remaining centres.
The year ahead
While we have forecast a lower EBITDA in the coming
financial year, we do expect to see our investment
beginning to achieve results in terms of organisational
performance, including stemming our decline in
occupancy, and starting to rebuild occupancy levels to
fuller potential. Our focus will continue to be executing
phase one of our plan to ensure we have the people
and facilities to deliver the highest quality outcomes
for children.
My thanks to all our staff at Evolve already on this
journey, working hard to fulfil the enormous potential
of this organisation in setting up future generations of
children to reach their full potential in life.
5
Our Vision
Every staff member
excelling so that every child
fulfils their potential
Our Values
Belonging
Nurturing
Learning
Respectful
Playful
Our Mission
Understand the needs and aspirations
of our children and families and exceed
their expectations.
Provide a healthy, happy, safe and
inclusive environment for all our children
and staff.
Create an environment and team culture
that supports every staff member to excel
and feel valued for their achievements.
Contribute to the development and
success of the communities that we serve.
Take a leadership position in the ECE
sector for delivering the highest quality
early childhood education.
Deliver value to all Evolve stakeholders
by growing a strong and sustainable
organisation.
6
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Our People
Evolve is a people business, and this is very clearly
articulated in our new vision; every staff member
excelling so that every child fulfils their potential.
Some of the priority workstreams underpinning the
People Strategy have been completed, and others are
underway. Significant achievements to date include:
• The review and rebuild of the Senior Leadership
Team (SLT), and the building of strong connections
between SLT, business operations and individual
centre teams.
• The review and strengthening of the shared
services teams within Evolve’s Support Office, and
particularly the property team, the marketing team,
the people and talent team (including the central
careers team), and the quality assurance team.
• The development and launch of Evolve’s new
vision, mission and values, which has given the
organisation a clear focus and strong operational
direction – this work will now continue on
throughout the organisation to centre level.
• The development of a range of professional
development programmes for staff, including
leadership development programmes.
• A review of Evolve’s performance appraisal system,
with training to support the effective rollout of an
improved process across the organisation.
Building on this initial work, the ongoing
implementation of the People Strategy will continue
to strengthen Evolve as an employer with one clear
objective – to establish ourselves as the leading ECE
career destination in New Zealand.
We know that one of the key decision-making factors
for parents choosing ECE services is the centre team –
the people who bring the vision, values and practices
to life for our children and families.
Our staff come to work every day to make a positive
difference in the lives of the children who attend our
centres. Therefore, FY19 has seen Evolve invest heavily
in our people. We have developed a People Strategy, a
key foundation document outlining Evolve’s Employee
Value Proposition (EVP); what we offer our people in
return for the commitment and dedication they bring
to their roles each day.
One of the many advantages of being an Evolve staff
member is the support and expertise available to all
our centre staff, by a team of ECE specialists within the
support office. There are also a wide range of career
development opportunities for centre staff to grow
and develop the skill set required to support a number
of centres, or to pursue a career in the professional
learning and quality assurance team.
In order to stay relevant and competitive in the face of
nationwide teacher shortages, Evolve needs a strong
EVP to attract and retain the highest calibre of talent.
Evolve’s People Strategy is a three-year plan, based
around the achievement of five key people goals:
• Valuing our people
• Growing capability and confidence
• Building careers
• Transforming our culture
• Being easy to work with and for
7
Educational Quality in our Centres
If children are secure and happy, they’ll learn and
develop to their full potential. Evolve centres are
more than just childcare. Our children enjoy a well
prepared, carefully designed curriculum encompassing
Te Whāriki 2017, New Zealand’s early childhood
curriculum. From this holistic base, we bring learning
to life under the guidance of well trained teachers
and open ended play. We encourage a lifelong love of
learning, setting children up for school and beyond.
Professional learning, passionate teachers
Our teachers are passionate and committed. We take
pride in providing exceptional professional development
and learning opportunities, ensuring staff have
outstanding skills and are kept up-to-date with the latest
research and new Ministry of Education requirements.
Most of our teaching staff hold early childhood
education degrees, and all staff are Police checked.
Curriculum
The educational theories that form the basis of our
curriculum delivery include:
• Te Whāriki - New Zealand’s early childhood
curriculum
• Howard Gardner’s ‘Theory of Multiple Intelligences’
• The principles of Pikler and RIE (Resources for
Infant Educarers)
• The principles of Ako (reciprocal learning between
teacher and child)
• Experiential based learning inspired by Reggio
Emilia
• Enquiry based learning to strengthen problem
solving and creative thinking
• Extended project work for older children
• Montessori philosophy - extensive engagement
with each learner is structured across accepted
milestones but anchored on the foundation of
Te Whāriki
We partner with parents and children on their learning
journey, teaching skills for life through experience and
play. Problem solving, determination and empathy
are interwoven with the essential building blocks
of literacy and numeracy - all within a caring and
encouraging environment.
“Teachers have positive,
sensitive and responsive
relationships with children and their
whānau. Families are welcomed and
children have a strong sense of belonging
in the centre. Children are confident
explorers and make independent choices
about their play. They use their
experiences and the resources
provided to build on their imaginative
play to develop their creativity.”
ERO
During FY19, Evolve centres have focused on
further implementation of the revised Te Whāriki
ECE curriculum. Teachers partner with parents to
document children’s learning, and we share this
journey electronically through StoryPark, an online
tool enabling parents to share their child’s experiences
and extend their learning at home.
Striving for excellence and continuous
improvement
Continuous improvement is provided through
leadership from experienced Centre Managers,
support staff, Area Managers, Regional Managers
and the Executive Team.
We strive for ratios better than the minimum standards
outlined by the Ministry of Education, and group
sizes that optimise quality for individual age groups.
Qualified teachers are supported by administration
and additional staff as required.
The development of a Quality Assurance and
Professional Learning team has given teachers extra
support and a new focus on curriculum and teaching
and learning. This team has been strengthened with
new provision for six positions nationally and will
provide targeted centre support to ensure children
achieve optimal learning outcomes. The appointment of
two Quality Assurance Managers will ensure consistent
practices and quality across all Evolve centres.
Transitions into the centre, between rooms and school
readiness are stages that children are well prepared
for and centres continue to evaluate to ensure this is
shared with parents/whanau.
Bicultural practice is celebrated, and children recognise
the importance of Te tiri o Waitangi and our cultural
heritage. Environments reflect our bicultural heritage,
equipment and displays enhance who we are and
celebrate cultural diversity. Evolve regularly evaluates
strategies that further support centres in this area.
Meanwhile, strong links with our communities and
families ensure ongoing consultation on key policy
development and better understanding of our unique
centre communities. Staff reflect and evaluate regularly
to make sure planning and development responds to the
needs of children and best captures learning progress.
8
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Case Study
The Clark family – Active Explorers Leeston
The teachers at Active Explorers Leeston feel like family to Tess and Craig Clark, busy parents to Harper (5) and
Frankie (2). In fact, the special connection their family has forged with the centre team runs deeper than most.
“As a family we have developed a bond
that will last forever,” says Tess. “For
example, one of the teachers who
taught Harper and then Frankie when
they were in the nursery, also taught
me at playcentre when I was their age!
I feel like this continuity is very special
and unique.”
The couple enrolled Harper at the
centre when she was 8 months old, and
they have never looked back.
“At the time we chose Active Explorers
Leeston because of their age intake and
educational programme. I was heading
back to work part-time, and they took
children under 2 which was perfect.”
It was an excellent decision.
“The teachers and carers were
incredible and nurtured all aspects of
Harper’s development right through
from 8 months to when she turned 5.
They gave her the social and academic
foundations and tools that she would
need going forward in a fun, interactive
and effective way.”
After this positive experience,
enrolling Frankie was “a no brainer”.
She started at the centre when she was
6 months old and is now almost 3.
“Frankie loves it. She loves sitting
around the kai table and eating with
her friends. She’s always got some kind
of role play dress ups going on, and
she’s always singing a new song that
she’s learnt. It’s definitely a weight
off our chests knowing she is sorted
and happy and that her social and
educational needs are being met.”
The Clark’s are strong advocates of the
centre’s educational programme which
encourages children to be themselves
and learn in a way that is best for them.
“This is noticeably seen in the many
learning activities that are always set
up and being offered every morning
when we arrive.”
Tess has now embarked on full-time
study and adds that the support the
centre has provided their family has
been invaluable.
“They’ve been so helpful and
accommodating in making sure it
works for us and our girls. Knowing
our children are being provided with a
safe learning environment where their
own individual needs and personalities
are being nurtured has given us the
peace of mind to be able to go to work,
upskill and attend full-time study.
“It means the world to know that both
our kids are getting an experience on
par to what they would be getting at
home with us, with the added bonus of
socialisation and creating special bonds
with their Kaiako.”
9
Centre Operations
Our ongoing commitment to achieve the highest
quality outcomes for our children has seen Evolve
Education Group cement its position as a leader in
early childcare education.
This year, we were voted New Zealand’s most
trusted kindergarten provider in the Reader’s Digest
Trusted Brands awards, testament to the great work
being carried out by the 2000-plus staff within our
organisation, across more than 120 centres.
Evolve’s vision is to ensure every staff member excels
so that every child fulfils their potential – and FY19
has seen us work tirelessly to bring this vision to life.
We know that the only way to achieve the very best
outcomes for our children and families is to attract
high calibre people and develop them to their full
potential. Over the past year we’ve recruited a large
number of passionate and dedicated staff who share
our vision and who, like us, strive to deliver unrivalled
care and education to children all over the country.
We have a new management team, and new Area
Managers focussed on supporting our centres.
Professional development opportunities have been
bolstered, with the introduction of a range of external
and internal PD modules that support the educational
and business performance of our teams and centres.
A key focus at Centre Manager level aims to enhance
customer service and boost engagement and positive
and proactive communication with families.
In addition, we have introduced a real time survey
tool to find out how families feel about our service to
determine what steps can be made to improve our
offer. This work has been supported by a reinvigorated
family enrolments team, who are an excellent first
point of contact, and who strive to understand each
family’s needs to ensure they are matched with the
most suitable centre.
Over the last 12 months Evolve’s increased marketing
focus on individual centres has seen the development
of customised plans based on specific needs,
refreshed websites, and upgraded centre presentation
including new signage and uniforms. We have invested
in specific centres to improve the environment for our
children and our people, and will continue to do so to
increase centre appeal for existing and new families.
The year ahead will see the organisation
strengthening the leadership capabilities of our Area
and Centre Managers through targeted external
workshops, and engaging external expertise around
internal evaluation and self-assessment and planning.
This aims to complement our internal training modules
around appraisals.
We are also adding to Evolve’s existing portfolio of
high quality early learning centres. Early in 2019 we
launched a new development centre in Helensville
under our Active Explorers brand, and plans are
currently underway for the opening of a state-of-the-
art centre in Mt Wellington.
10
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Board Profile
Norah Barlow
Non-Executive Director
(Independent)
Acting Chair from
15 June 2019. BCA, CA.
Appointed as Director
13 November 2014
Norah is the CEO of Heritage Lifecare Limited which
provides aged care in New Zealand. 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. 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.
Alistair Ryan
Chair (Independent)
MCom, FCA. Appointed
as Director 13 November
2014. Retired 15 June 2019
Alistair is an experienced company director and
corporate executive. He is currently Chairman of
NZX listed investment companies Kingfish Limited,
Barramundi Limited and Marlin Global Limited, a
Director and Audit and Risk Committee Chair of listed
company Metlifecare Limited. Alistair is a member of
the FMA’s Audit Oversight Committee.
Alistair retired as Chair of Evolve on 15 June 2019.
Chris Sacre
As at 31 March 2019:
Non-Executive Director
(Independent)
As at date of Annual
Report: Executive Director
(Non-Independent)
Appointed 28 November
2018
Chris Sacre is widely regarded and respected within
the childcare industry. Chris developed a passion for
the industry in early 2007 when he provided financial
consultative services, as an Advisory Manager for
PricewaterhouseCoopers to G8 Education (formally
Early Learning Services) in the lead up to the public
listing. After successfully floating the company in
2007, Chris joined G8 Education as Chief Financial
Officer. During his time with G8 Education, Chris was
instrumental to the growth of the company with over
400 childcare acquisitions, raising over $500 million in
capital and increasing market cap. from $4 million to
$1.3 billion.
Chris is a member of both Evolve Education’s
Remuneration and People Committee and the Audit
and Risk Committee.
11
Chris Scott
As at 31 March 2019:
Non-Executive Director
(Non-Independent)
As at date of Annual
Report: Executive Director
(Non-Independent)
Appointed 28 November
2018
Gráinne Troute
Non-Executive Director
(Independent)
GradDipBusStuds (HRM)
CMInstD. Appointed as
Director 1 May 2017
Chris Scott has over 37 years experience in senior
management positions. He has spent over 35 years
in business in Singapore where he founded a number
of successful businesses. Chris founded S8 Limited
which listed on the ASX in 2001. S8 was an integrated
travel Company that acquired 36 businesses over a
5 year period and was capitalised at $700 million. S8
Limited was the subject of a successful takeover bid in
late 2006.
Chris was the Founder and, from 2010 to 2016, the
Managing Director of ASX listed G8 Education which
evolved into Australia’s largest listed early education
and child care provider. During this period, the G8
Education Limited portfolio grew from 38 to over 500
pre school education centres in Australia (plus 20 in
Singapore). Chris was also instrumental in raising over
$500 million in equity capital and more than $500
million in debt (including Singapore dollar bonds). G8
Education market capitalisation grew from $4 million
in 2010 to a peak of approximately $1.9 billion
Gráinne has extensive experience as a corporate
executive and in board and charitable trust
governance roles.
She is currently a director of NZX-listed companies
Tourism Holdings Limited and Summerset Group
Holdings Limited. She was General Manager,
Corporate Services at SKYCITY Entertainment Group
for 8 years and earlier held senior executive roles at
McDonald’s Restaurants for 14 years, for the last three
of which she was Managing Director, New Zealand.
Gráinne also served for many years as a trustee and
chair in the not-for-profit sector, including having
been Chair of Ronald McDonald House Charities NZ
for five years.
Gráinne is Chair of Evolve Education’s Remuneration
and People Committee.
12
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Senior Management Team
Rosanne Graham
Chief Executive Officer
Rosanne is a senior executive with strong strategic and people leadership
experience in the private education and telecommunication sectors. She is the
Chair (previously Managing Director) of Ignite Colleges and prior to that was
the CEO of private training provider New Zealand Management Academies
(NZMA). The results Rosanne has delivered through her work in tertiary
education demonstrate her ability to develop clear business programmes, build
effective teams, drive improvements, create value and most importantly, deliver
high quality education outcomes.
Prior to entering the education sector, Rosanne ran a consultancy
business focussed on strategy and issues management and held
senior telecommunications roles with Clear Communications and the
Telecommunications Authority of Singapore, where she gained significant
experience in strategy, government relations and competition law. She joined
Evolve as CEO in July 2018.
Bev Davies
General Manager of People and Talent
Bev’s key focus is effective people strategies - both leading and facilitating
the creation of them and practically bringing them to life so they make a
meaningful and sustainable difference to organisations and the people who
work in them. She is highly skilled at delivering innovative and impactful people
strategies that help shape workplace cultures and achieve exceptional results.
Directly prior to joining Evolve, Bev was the General Manager People and
Capability for the Auckland Kindergarten Association, and she spent ten years
as Director Human Resources and Organisational Development for New Zealand
Management Academies (NZMA). Before moving into this field, she gained
extensive experience in executive level research roles and senior marketing
communications roles, all of which serve her well in the world of HR, OD and L&D.
Stephen Davies
Chief Financial Officer
A Chartered Accountant and experienced CFO, Stephen has held senior roles
across KPMG (Scotland and Auckland), Rank Group and Metroglasstech.
Stephen joined Evolve in September 2016. He is experienced in all aspects of
operational and corporate financial management.
Kirsten Long
General Manager Centre Operations
Kirsten joined Evolve as General Manager Centre Operations in November 2018,
driven by the opportunity to deliver exceptional outcomes for children through
an empowered, highly functional team and streamlined systems and processes.
A results-driven performer with a wealth of operations, sales and marketing
expertise, Kirsten is focused on delivering to Evolve’s three year plan.
She held senior leadership roles in the manufacturing and tourism sectors before
moving into education in 2014 to better support growth opportunities for adults.
13
Paul Matthews
Chief Information Officer
Paul has three decades of IT experience and significant expertise in all aspects
of strategic planning, systems integration, implementation and support. For
the past 16 years he has been a CIO/IT Manager and Senior Leadership Team
member for organisations including Avis Budget Group, Hyundai Motors NZ,
PORSE In Home Childcare NZ and now, Evolve Education Group. He is highly
skilled at leading and supporting teams to improve delivery and service levels
across all areas of an organisation.
Karen Shields
GM Quality Assurance and Professional Learning
As a highly respected education professional, Karen has provided input at the
highest levels in early learning in New Zealand. A former kindergarten teacher
and fully registered teacher, she joined Evolve from the Counties Manukau
Kindergarten Association, where she held the roles of General Manager,
and more recently Chief Executive Officer. The Association operates both
kindergartens and early learning education and care centres. Prior to this, Karen
was a Senior Advisor with the Ministry of Education, where she was involved in
the recently released Strategic Plan for ECE.
Ru Wilkie
General Manager Marketing
Ru has been a successful strategic marketing and sales consultant for 16
years, primarily in the corporate and medium to large organisation space,
including Telecom (now Spark), Vodafone and New Zealand Post. Over the past
nine years she has worked predominantly in the education sector, using her
significant expertise to grow student enrolment numbers, drive sales and boost
business outcomes.
She led the rebrands for NZMA and Aspire2’s newly acquired business,
created the Ignite Colleges brand from its inception, and has developed
and implemented impactful sales and marketing strategies across both the
domestic and international businesses of these organisations. She joined the
team at Evolve in 2018.
14
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Evolve Education Group Limited
Consolidated Financial Statements
15
Evolve Education Group Limited
Consolidated Financial Statements
For the Year Ended 31 March 2019
The Directors present the Consolidated Financial Statements of Evolve Education Group Limited, for the year
ended 31 March 2019
The Consolidated Financial Statements presented are signed for and on behalf of the Board and were authorised
for issue on 27 May 2019
Alistair Ryan
Chair
27 May 2019
Norah Barlow
Chair of Audit and Risk Committee
27 May 2019
16
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2019
$’000
Revenue
Expenses
Employee benefits expense
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Integration expenses
Depreciation
Amortisation
Impairment expense
Other expenses
Total expenses
Note
6
7
7
11, 5a
14, 5a
14, 15
7
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
137,177
138,395
(83,518)
(23,521)
(13,528)
-
-
(2,680)
(377)
(107,139)
(4,278)
(80,341)
(21,848)
(12,284)
(102)
(39)
(2,449)
(401)
(957)
(3,171)
(235,041)
(121,592)
(Loss)/Profit before net finance expense and income tax
(97,864)
16,803
Finance income
Finance costs
Net finance expense
(Loss)/Profit before income tax
Income tax expense
7
7
9
143
(2,908)
(2,765)
47
(1,641)
(1,594)
(100,629)
15,209
(1,770)
(4,372)
(Loss)/Profit after income tax from continuing operations
(102,399)
10,837
Profit/(Loss) after income tax from discontinued operations
5a
845
(15,050)
(Loss) after income tax attributable to the
shareholders of the Company
(101,554)
(4,213)
Other comprehensive income
-
-
Total comprehensive (loss) attributable to the
shareholders of the Company
(101,554)
(4,213)
Earnings per share
Cents
Cents
Basic (and diluted) (loss)/earnings per share from continuing
operations
Basic (and diluted) (loss)/earnings per share attributable to the
shareholders of the Company
22
22
(31.7)
(31.4)
3.4
(1.3)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
17
Consolidated Statement of Movements in Equity
FOR THE YEAR ENDED 31 MARCH 2019
ISSUED SHARE
CAPITAL
RETAINED
(DEFICIT)/
EARNINGS
TOTAL
$’000
As at 31 March 2017
Note
158,106
10,565
168,671
Total comprehensive (loss)
-
(4,213)
(4,213)
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Dividends paid
As at 31 March 2018
Change in accounting policy
As at 1 April 2018 (restated)
Total comprehensive (loss)
Shares issued under Dividend Re-investment Plan
Share issue costs relating to shares issued
Dividends paid
19
19
21
2
19
19
21
1,058
(15)
-
-
-
(8,926)
1,058
(15)
(8,926)
159,149
(2,574)
156,575
-
(203)
(203)
159,149
(2,777)
156,372
-
(101,554)
(101,554)
457
(8)
-
-
-
457
(8)
(3,590)
(3,590)
As at 31 March 2019
159,598
(107,921)
51,677
The above Consolidated Statement of Movements in Equity should be read in conjunction with the
accompanying notes.
18
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Consolidated Statement of Financial Position
AS AT 31 MARCH 2019
$’000
Current assets
Cash and cash equivalents
Current income tax receivable
Other current assets
Total current assets
Assets classified as held for sale
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Funding received in advance
PORSE GST settlement payable
Borrowings
Employee entitlements
Total current liabilities
Note
10, 24
5b
11
9
14
16
17
8
23, 24
18
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
25,274
1,229
2,387
28,890
5,362
552
1,788
7,702
672
-
5,824
2,145
98,610
106,579
8,586
1,636
207,170
217,392
136,141
225,094
10,294
12,625
-
30,000
5,952
58,871
10,019
17,864
1,500
-
6,836
36,219
Liabilities classified as held for sale
5b
234
-
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Retained (deficit)/earnings
23, 24
25,359
25,359
32,300
32,300
84,464
68,519
51,677
156,575
19
159,598
(107,921)
51,677
159,149
(2,574)
156,575
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
19
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 MARCH 2019
$’000
Note
Cash flows from operating activities
Receipts from customers (including Ministry of Education
funding)
Payments to suppliers and employees
PORSE GST settlement paid
Income tax 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 businesses
Cash balances transferred with businesses sold
Receipts from sale of land and buildings
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 increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
8
25
13
5a
11
19
24
24
21
24
10
10
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
148,320
159,186
(136,526)
(137,219)
(1,090)
(3,259)
118
7,563
-
-
2,617
(6,580)
3,370
(3,565)
(4,158)
(8)
(3,411)
92,247
(1,500)
(6,198)
47
14,316
(9,892)
(203)
100
-
-
(5,630)
(15,625)
(15)
(1,641)
117,500
(69,188)
(105,400)
(3,133)
16,507
(7,868)
2,576
19,912
1,267
5,362
4,095
25,274
5,362
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
20
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
Index to Notes to the Consolidated Financial Statements
Note Title
Page
1.
2.
3.
4.
5.
6.
7.
8.
9.
Reporting Entity
Basis of Preparation
Significant Accounting Policies
Segment Information
Discontinued Operations and Non-current Assets Held for Sale
Revenue
Disclosure of Items in the Consolidated Statement of Comprehensive Income
Porse GST Settlement
Taxation
10.
Cash and Cash Equivalents
11.
Property, Plant and Equipment
12.
13.
14.
15.
16.
17.
18.
19.
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
20.
Capital Management
21.
Dividends
22.
Earnings Per Share (EPS)
23.
Financial Assets and Liabilities
24.
Net Debt Reconciliation
25.
Reconciliation of (Loss) After Tax to Net Operating Cash Flows
26.
Commitments and Contingencies
27.
Related Party Transactions
28.
Auditor's Remuneration
29.
Events After the Reporting Period
22
22
28
36
40
42
43
44
44
45
46
47
47
48
49
52
52
52
53
53
54
54
55
57
58
58
59
61
61
21
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
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 principal activities of the Company and its subsidiaries (the “Group”) are to invest in the provision
and management of high quality early childhood education centres. (See Note 4, Segment Information).
Further information on the Group’s structure is provided in Note 12.
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 2019 were approved and authorised for issue by the
Board of Directors on 27 May 2019.
Going Concern
The financial statements have been prepared on a going concern basis. From time to time, mainly due
to funding received in advance from the Ministry of Education and employee entitlements, the Group’s
current liabilities may exceed its current assets. The Group has a funding arrangement in place (refer Note
23) with its bank to meet all its current obligations.
As noted in the Interim Financial Report for the six months ended 30 September 2018, the Group revised
its debt facilities with ASB Bank Limited (ASB) in November 2018. This revision provided for relaxed
financial covenants for the quarterly reporting periods through to September 2019. The revision also
required the Group to agree a capital management strategy with ASB by 1 March 2019. In line with the
capital management strategy, a fully underwritten $63.5 million capital raise was launched on 8 May 2019.
In accordance with the capital raise timetable, $30.5m of proceeds were received from the Institutional
Entitlement Offer and $29m repaid to the bank on 17 May 2019. The remaining $33.0 million retail offer,
once complete, is expected to be received by 6 June 2019.
Subsequent to year end, the debt facilities were further renegotiated with ASB, which included some
resetting of the financial covenants through to the end of the facility term.
Following completion of the capital raise, repayment of $29m of the acquisition facility and renegotiation
of the funding facility, the material uncertainties in relation to the Group’s ability to comply with financial
covenants noted in the interim financial report for the six months ended 30 September 2018 have
been addressed. The Directors forecast full compliance with the banking covenants. Accordingly, the
preparation of the financial statements on a going concern basis is appropriate.
22
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
Basis of Measurement
The financial statements are prepared on the basis of historical cost with the exception of certain items for
which specific accounting policies are identified, as noted below.
Functional and Presentation Currency
These financial statements are presented in New Zealand Dollars ($) which is the Company’s functional
currency and Group’s presentation currency. Unless otherwise stated, financial information has been
rounded to the nearest thousand dollars ($’000).
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 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.
23
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
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). 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 15.
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. As
goodwill does not generate cash flows in its own right and therefore it must be allocated to a CGU or
group of CGUs 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 groups of CGUs for impairment testing purposes.
Onerous leases
Provision is made for the assessed future liability in respect of property leases where the future lease costs
will not be covered by future cash inflows generated from use of the leased property. Provision is made
for the present value of anticipated future cash inflows and outflows up to the point of expiry of the lease
(refer Notes 5a and 16).
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 9).
24
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group
There were two new standards adopted during the year ended 31 March 2019:
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).
Impact from the adoption of the new standard on 1 April 2018:
• There is no impact on the Group’s accounting for financial liabilities. 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 applied the simplified approach as permitted by NZ IFRS 9 to measure expected credit
losses (ECL) for its trade receivables (parental debtors). This approach uses a lifetime expected loss
allowance on the Group’s parental debtors (measured at amortised cost). To measure the expected
credit losses, parental debtors are grouped based on shared credit risk characteristics and the days
past due. The application of the expected credit loss model has resulted in an increase of $203k
to the opening impairment provision, which has been recognised in opening retained earnings as
at 1 April 2018 as permitted by the standard. It is not expected that there will be a material impact
to future earnings as a result of implementation of NZ IFRS 9. The Group’s parental debtors and
impairment provision are included in “other current assets” in the Consolidated Statement of
Financial Position.
NZ IFRS 15: Revenue from Contracts with Customers
Nature of change
NZ IFRS 15 replaces the previous 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.
Impact from the adoption of the new standard on 1 April 2018:
• ECE Centres - No impact on measurement of childcare fees (refer Note 3(c) for accounting
policies).
• Home-based ECE - The adoption of NZ IFRS 15, using the modified retrospective approach, has
given rise to the reclassification of an immaterial rebate from operating expenses to revenue.
The reclassification resulted in a decrease to revenue and operating expenses of $290k in the
year ended 31 March 2019 (2018: $434k), with no impact to net profit and retained earnings. This
reclassification is reflected in Note 5a - discontinued operations.
25
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
New Standards and Interpretations Not Yet Adopted
The Group has adopted all applicable Accounting Standards and Interpretations issued by the External
Reporting Board (‘XRB’) that are mandatory for the current reporting period.
There are certain new standards, interpretations and amendments to existing IFRS that have been
approved, but are not yet effective, and have not been adopted by the Group for the year ended 31 March
2019. The assessment and expected impact of those that are relevant to the Group are set out below:
NZ IFRS 16: Leases
Nature of change
NZ IFRS 16 replaces all existing lease accounting 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 Consolidated Statement of Comprehensive Income
will also be impacted by the replacement of the rental expense currently recognised within building
occupancy expenses by an interest expense on lease liabilities, and depreciation expense on the ‘right-
of-use asset’’.
The standard includes two recognition exemptions for lessees: short-term leases (those with a term of
12 months or less) and low-value leases.
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 $131.6m (see Note 26). During the year,
work has progressed regarding:
• Collating and validating the Group’s portfolio of lease agreements
• Identifying the lease contracts that will be within the scope of NZ IFRS 16
• Sourcing and implementing an IT system solution to record and calculate the NZ IFRS 16 impact;
and
• Calculating an incremental borrowing rate used to discount lease assets and liabilities.
The Group currently intends to adopt the simplified transition approach under IFRS 16, and will not
restate comparative amounts for the period prior to first adoption.
Given the complexity of the judgments and calculations involved, finalisation of the impact of the
standard is subject to the following:
• Final validation of the system generated calculations
• Finalisation of judgements and subsequent movements in the incremental borrowing rates
(interest rates)
• Any new lease contracts entered into by the Group
• Consideration of tax implications, including deferred tax
• Any changes to existing lease contracts; and
• Change in management’s judgement to exercise rights of renewals under lease arrangements.
26
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
New Standards and Interpretations Not Yet Adopted (continued)
NZ IFRS 16: Leases (continued)
Management’s process to date has focused on property leases, representing 98% of the Group’s total
lease portfolio. The potential impact is expected to be material to the Consolidated Statement of
Financial Position on the date of adoption (being 1 April 2019). Under the simplified transition method,
the following impacts are estimated upon transition in respect of property leases:
• under the simplified method, it is estimated that on adoption a right of use asset of approximately
$218m will be recognised, and a lease liability of approximately $217m.
The impact on the Consolidated Statement of Comprehensive Income for the year ending 31 March
2020 under the simplified transition method is estimated to resulted in:
• a decrease in building occupancy expenses (rental expense) of approximately $21m, replaced with
a depreciation expense of approximately $13.8m and interest expense of approximately $13.3m
due to the unwinding of the effective interest rate implicit in the lease, resulting in an increase in
EBITDA. Interest expense is expected to be greater earlier in a lease’s life due to the higher lease
liability on which interest is calculated. This effect may be partially mitigated due to the number of
leases held by the group, at varying stages of the lease terms; and
• operating cash flows will be higher as repayment of lease liabilities will be classified as financing
activities. There will be no change in the cash position of the Group as a result of adopting NZ IFRS 16.
Date of adoption
NZ IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. This standard
will therefore be effective for the year ending 31 March 2020.
NZ IFRS 3: Business Combinations - definition of a business
Nature of the change
The amendments clarify the definition of a business, with the objective of assisting entities to
determine whether a transaction should be accounted for as a business combination or as an asset
acquisition.
The amendments clarify that to be considered a business, an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that together significantly contribute to the
ability to create outputs. It narrows the definitions of a business and of outputs by focusing on goods
and services provided to customers and by removing the reference to an ability to reduce costs. It also
removes the assessment of whether market participants are capable of replacing any missing inputs or
processes and continuing to produce outputs.
In addition, an entity can apply an optional “concentration test” that, if met, eliminates the need for
further assessment. Under this optional test, where substantially all of the fair value of gross assets
acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not
represent a business.
Potential impact
The guidance might result in more acquisitions being accounted for as asset acquisitions and affect
related accounting. It would also affect the accounting for disposal transactions.
27
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
2.
Basis of Preparation (continued)
NZ IFRS 3: Business Combinations - definition of a business (continued)
Date of adoption
The amendments to NZ IFRS 3 described above is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
1 January 2020 and to asset acquisitions that occur on or after the beginning of that period. The
amendments will therefore be effective for the year ending 31 March 2021.
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.
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 if the related initial accounting is
incomplete by the end of the reporting period. 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.
28
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
(a)
Significant Accounting Policies (continued)
Basis of Consolidation (continued)
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 within one year, 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.
(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 values of other intangible assets acquired in a business combination are based on the discounted
cash flows expected to be derived from the use and eventual sale of the assets.
29
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
(c)
Significant Accounting Policies (continued)
Revenue
Revenues are recognised when the Group satisfies its performance obligations by providing early
childhood education services to customers.
Ministry of Education (“MOE”) funding
MOE funding relates to funding provided under the Education Act 1989 to eligible early childhood services
subject to certain conditions so that they may provide early childhood education. It is recognised initially
as funding received in advance and is then recognised in the Statement of Comprehensive Income over
the period to match costs incurred in providing childcare services for which the funding in intended to
compensate. This funding from the MOE is presented separately from the related costs of providing
services in the Statement of Comprehensive Income. Income receivable from the MOE by way of a wash-
up payment is recognised as an asset, and is netted off against the income received in advance. There are
no unfulfilled conditions or contingencies attached to the funding.
Childcare fees
The Group provides early childhood education services for children’s various learning and care needs.
Revenue from childcare fees are recognised as and when a child attends, or was scheduled to attend, a
childcare facility. The performance obligation is satisfied over time as the child simultaneously receives
and consumes the benefit.
Interest income
Interest income is recognised in the Consolidated Statement of Comprehensive Income using the effective
interest method.
(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.
30
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
Significant Accounting Policies (continued)
(d)
Taxation (continued)
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,
taxable temporary differences arising on the initial recognition of goodwill; and
temporary differences related to investments in subsidiaries 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.
(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.
31
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
Significant Accounting Policies (continued)
(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
50 years
4 years
Office furniture & fittings
4 years
Leasehold improvements
4 years
Motor vehicles
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, or groups of 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 3.(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
Subsequent expenditure
Subsequent expenditure, including expenditure on internally generated goodwill and brands, is recognised
in the Consolidated Statement of Comprehensive Income as incurred.
32
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
(i)
Significant Accounting Policies (continued)
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 financial assets on trade date, being the date on which the Group commits
to purchase or sell the asset. It classifies financial assets based on its business model for managing such
financial assets and the contractual terms of cash flows. The Group determines all financial assets during
the reporting periods presented are measured at amortised cost.
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.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely
payments of principal and interest, are recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, financial assets 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 which are classified as non-current
assets.
Financial assets at amortised cost 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 and trade and other payables.
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.
33
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
Significant Accounting Policies (continued)
(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
The Group uses a lifetime expected loss allowance for all trade and other receivables. To measure the
expected credit losses, it is estimated based on the degree of aging of the receivable beyond the date
it was due to be paid and any negative change in the customers’ ability to pay. The expected loss rates
are based on the payment profiles of revenue and the corresponding historical credit losses experienced
within the period. The historical loss rates are adjusted to reflect current and forward-looking information
on macroeconomic factors affecting the ability of the customer to settle the receivable. The amount of the
expected credit loss is recognised in the Consolidated Statement of Comprehensive Income.
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
further 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 15.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs
of disposal. 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.
(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.
34
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
Significant Accounting Policies (continued)
(n)
Expenses
Operating lease payments
Payments made under operating leases are recognised in the Consolidated Statement of Comprehensive
Income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the
Consolidated Statement of Comprehensive Income over the lease term as an integral part of the total
lease expense.
Direct costs of providing services
These are costs incurred in the provision of services by the Group’s early childhood education centres,
other than employee and property costs. The major components are classroom teaching materials,
cleaning, food supplies and building operating costs. These costs are recognised in the Statement of
Comprehensive Income as incurred.
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 are 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.
(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.
35
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
3.
(r)
Significant Accounting Policies (continued)
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 in the Consolidated Statement of Financial Position.
(t)
Comparative balances
Comparative balances within the Consolidated Statement of Comprehensive Income, Consolidated
Statement of Financial Position and Consolidated Statement of Cash Flows and their related notes have
been reclassified to conform with changes in presentation and classification adopted in the current year.
The impact of these changes are not material.
The prior year comparative amounts in the Consolidated Statement of Comprehensive Income have
been restated to present the results of discontinued operations as a single amount. Further analysis of
discontinued operations are presented in Note 5a.
4.
Segment Information
During the year, the Group had two reportable operating segments, as described below. 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 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.
As detailed in Note 5a, the Home-based ECE businesses have been sold during the current financial year.
This segment meets the definition of a discontinued operation for the year ended 31 March 2019.
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 operation was
sold during the year, with settlement on 28 March 2019. This operation did 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.
36
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
4.
Segment Information (continued)
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.
• Acquisition expenses – in acquiring the businesses and net assets in the year ended 31 March 2018
(Note 13) 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.
No employment costs have been allocated to integration expenses for the current or prior year.
• Material non-recurring items – one off or non-recurring in nature. These are items that have not
occurred in recent years or are not forecast to occur in the future, such as impairment expense,
gains or losses on the sale of businesses and the PORSE GST settlement
37
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
4.
Segment Information (continued)
31 MARCH 2019
ECE Centres
Home-based
ECE
(Discontinued)
Unallocated
Consolidated
$’000
Revenue
Note
$’000
$’000
$’000
$’000
136,825
13,003
352
150,180
Operating expenses
Underlying EBITDA
(113,850)
(12,425)
22,975
578
(10,648)
(10,296)
(136,923)
13,257
Material non-recurring items:
Gain on sale of assets
(Loss)/gain on sale and closure
of businesses
Onerous lease expense
Impairment expense
EBITDA
Depreciation
Amortisation
Earnings before interest and
income tax
Net finance expense
Reportable segment profit/
(loss) before income tax
293
(275)
(385)
(107,139)
(84,531)
(2,582)
-
(87,113)
-
5a
14,15
11
14
7
-
1,612
(1,201)
-
989
(15)
(56)
918
-
-
20
-
-
(10,276)
293
1,357
(1,586)
(107,139)
(93,818)
(98)
(377)
(2,695)
(433)
(10,751)
(96,946)
(2,765)
(2,765)
(87,113)
918
(13,516)
(99,711)
Less: profit before income tax
from discontinued operations
5a
(Loss) before income tax from
continuing operations
(918)
(100,629)
Total assets
Total liabilities
109,537
(25,006)
-
-
26,604
(59,458)
136,141
(84,464)
Included within Revenue is revenue from the Ministry of Education totalling $102.0m for the year
(2018: $108.0m), of which $90.4m (2018: $89.9m) relates to continuing operations.
Total assets within the Unallocated segment are primarily cash and cash equivalents. Total liabilities within
the Unallocated segment are primarily borrowings. This is reflective of the Group managing financing
activities centrally rather than allocating this to operating segments.
38
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
4.
Segment Information (continued)
31 MARCH 2018
ECE Centres
Home-based
ECE
(Discontinued)
Unallocated
Consolidated
$’000
Revenue
Note
$’000
$’000
$’000
$’000
137,999
20,124
396
158,519
Operating expenses
Underlying EBITDA
Acquisition expenses
Integration expenses
Material non-recurring items:
PORSE GST Settlement
Impairment expense
8
11,14,15
EBITDA
Depreciation
Amortisation
Earnings before interest and
income tax
Net finance expense
Reportable segment profit/
(loss) before income tax
Less: loss before income tax
from discontinued operations
Profit before income tax from
continuing operations
11
14
7
5a
(109,994)
(19,243)
28,005
881
(7,650)
(7,254)
(136,887)
21,632
-
-
-
(957)
27,048
(2,373)
(60)
-
-
(102)
(39)
(102)
(39)
(3,000)
(12,933)
(15,052)
(173)
(218)
-
-
(7,395)
(76)
(341)
(3,000)
(13,890)
4,601
(2,622)
(619)
24,615
(15,443)
(7,812)
1,360
-
-
(1,594)
(1,594)
24,615
(15,443)
(9,406)
(234)
15,443
15,209
Total assets
Total liabilities
218,364
(22,947)
3,289
(9,289)
3,441
(36,283)
225,094
(68,519)
39
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
5.
a)
Discontinued Operations and Non-current Assets Held for Sale
Discontinued operations
In April 2018, the Group announced its intention to commence a sale process for the businesses within the
home-based ECE operating segment. The Home-based ECE operating segment meets the definition of a
discontinued operation under NZ IFRS 5: Non-current Assets Held for Sale and Discontinued Operations.
On 14 November 2018, an unconditional sale agreement was entered into for 100% of the shares in the
four PORSE in-home childcare and training companies, with consideration received on 3 December 2018.
On 31 October 2018 a sale agreement for the business and assets of Au Pair Link Limited (APL) went
unconditional, with settlement occurring on 31 January 2019.
These disposals represent all of the businesses of the Home-based ECE operating segment, enabling the
Group to now concentrate on its core business of centre-based early childhood education.
Financial information presented is for the period to 30 November 2018 for PORSE and to 31 January 2019
for APL.
The profit/(loss) for the year from the discontinued operation is analysed as follows:
$’000
Revenue
Depreciation
Amortisation
Impairment expense
Porse GST settlement
Operating expenses
(Loss) before income tax
Income tax (expense)/benefit
(Loss) after income tax
Gain on sale of the discontinued operation after income tax
Profit/(loss) after income tax from the discontinued operation
Basic (and diluted) earnings/(loss) per share from discontinued
operations (cents per share)
Note
8
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
13,003
(15)
(56)
-
-
(13,626)
(694)
(73)
(767)
1,612
845
0.3
20,124
(173)
(218)
(12,933)
(3,000)
(19,243)
(15,443)
393
(15,050)
-
(15,050)
(4.7)
The cash flow for the year from the discontinued operation is analysed as follows:
$’000
Operating activities
Net cash flows from operating activities
Investing activities
Receipts from sale of businesses
Payments for software, property, plant and equipment
Cash transferred with businesses sold
Net cash flows from investing activities
Net increase in cash generated by the discontinued operation
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
4,950
763
2,550
(249)
(6,580)
(4,279)
671
-
(206)
-
(206)
557
40
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
5.
a)
Discontinued Operations and Non-current Assets Held for Sale (continued)
Discontinued operations (continued)
The gain on disposal of the discontinued operation is analysed as follows:
$’000
Cash consideration receivable
Working capital adjustment payable
Carrying value of net assets sold
Costs of disposals
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Onerous lease expense
Net gain on disposal of the discontinued operation
YEAR
31 MARCH 2019
2,550
(117)
(581)
(240)
1,612
-
1,612
(1,201)
411
As part of the disposal of PORSE, Evolve retained the lease of the office formerly used as the PORSE
head office. An onerous lease provision has been established for the assessed future liability through
to the end of the lease term. This is included within the onerous lease provision within trade and other
payables (refer Note 16).
The carrying amounts of assets and liabilities of PORSE at the date of sale were:
$’000
Cash and cash equivalents
Other current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total Assets
Trade and other payables
Funding received in advance
Current income tax liability
PORSE GST settlement payable
Employee entitlements
Total Liabilities
The carrying amounts of the divested assets of APL at the date of sale were:
$’000
Other current assets
Property, plant and equipment
Intangible assets
Total Assets
30 NOVEMBER
2018
6,580
230
97
332
102
7,341
(2,035)
(3,325)
(158)
(410)
(1,030)
(6,958)
31 JANUARY
2019
23
49
126
198
41
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
5.
b)
Discontinued Operations and Non-current Assets Held for Sale (continued)
Assets and liabilities held for sale
During the first half of the year the Group classified six centres and an ancillary business, ECE
Management Limited, as held for sale. One centre and ECE Management were sold during the second
half of the year, and one centre has been closed. The assets and liabilities held for sale at 31 March 2019
relate to the remaining four ECE centres. These operations do not meet the definition of a discontinued
operation.
A goodwill impairment expense of $3.9m, (see Note 14), being the difference between the carrying value
and fair value less cost to sell of the six ECE centres and ECE Management has been recognised in the
year to 31 March 2019.
A loss on the sales of one centre and ECE Management, and closure of one centre, totalling $0.3m has
been included within other expenses in the year to 31 March 2019.
The following assets and liabilities were classified as held for sale:
AS AT 31 MARCH 2019
$’000
Property, plant and equipment
Deferred tax assets
Intangible assets
Assets classified as held for sale
Trade and other payables
Funding received in advance
Liabilities classified as held for sale
6. Revenue
ECE centres
266
37
369
672
(3)
(231)
(234)
The Group has adopted NZ IFRS 15: Revenue from contracts with customers from 1 April 2018 which
resulted in changes in accounting policies. However, there were no measurement adjustments apart from
a reclassification of an immaterial rebate from operating expenses to revenue in the discontinued Home-
based ECE operations, as described in Note 2. There was no impact on opening retained earnings. Refer to
Note 3(c) for specific accounting policies.
$’000
Revenue from continuing operations:
Childcare fees
Other revenue
Total revenue from contracts with customers
MOE funding
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
46,079
652
46,731
90,446
47,964
513
48,477
89,918
Total revenue from continuing operations
137,177
138,395
42
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
7. 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
28
27
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
247
472
3,559
4,278
213
479
2,479
3,171
Other items includes corporate and support office costs not already disclosed separately. They include
travel and legal costs not relating to the acquisition of businesses (refer Note 13), consultancy costs and
general office expenses.
Building occupancy expenses
Building occupancy expenses of $23.5m (2018: $21.8m) include $21.5m (2018: $20.0m) 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
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
77,735
1,961
2,416
1,406
83,518
75,826
1,918
1,604
993
80,341
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
143
143
47
47
(2,908)
(2,908)
(1,641)
(1,641)
(2,765)
(1,594)
43
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
8.
Porse GST Settlement
During the prior year the Group reached formal agreement with the Inland Revenue Department (IRD) in
respect of various taxation matters relating to the Group’s then wholly owned PORSE In Home Childcare
business (PORSE).
The settlement agreement with the IRD required PORSE to pay $3.0 million to the IRD in monthly
instalments, and ensured that all then- current areas of discussion between IRD and the Group were
closed off.
$1.5m of the total amount payable had been paid by 31 March 2018. The Group had paid a further $1.1m by
the date of sale of PORSE (refer Note 5a).
9.
Taxation
Income tax expense
The major components of income tax expense on continuing operations for the year 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 on continuing operations
Reconciliation of tax expense
Tax expense is reconciled to accounting profit as follows:
$’000
(Loss)/profit before income tax from continuing operations
At the statutory income tax rate of 28%
Non-assessable income and non-deductible expenses for tax purposes:
Impairment of goodwill
Non-deductible expenses
Prior year adjustments
Total income tax expense on continuing operations
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
2,359
73
2,432
(516)
(146)
(662)
1,770
5,411
(272)
5,139
(868)
101
(767)
4,372
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
(100,629)
(28,176)
29,999
20
(73)
1,770
15,209
4,258
268
17
(171)
4,372
44
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
9.
Taxation (continued)
Deferred tax
Deferred tax relates to the following:
31 MARCH 2019
31 MARCH 2018
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement
of Financial
Position
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement
of Financial
Position
26
(62)
126
572
662
1,430
(913)
823
805
2,145
80
587
26
74
767
1,363
(942)
921
294
1,636
$’000
Property, plant and equipment
Intangible assets
Employee entitlement provisions
Other temporary differences
Deferred tax benefit
Net deferred tax assets
The movement on net deferred tax assets includes amounts from both continuing and discontinued
operations.
Imputation credits
Imputation credits available for use in subsequent reporting periods are $11.3m (2018: $11.1m), 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.
10. Cash and Cash Equivalents
$’000
Cash at banks and on hand
Short-term deposits
Total cash and cash equivalents
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
572
24,702
25,274
3,647
1,715
5,362
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 three months, depending on the immediate cash
requirements of the Group, and earn interest at the relevant short- term deposit rates.
Refer to Note 23 for details of changes in bank facility terms that have impacted the amount of short-term
deposits held.
45
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
11.
Property, Plant and Equipment
31 MARCH 2019
$’000
Cost
Opening balance
Additions/Transfers
Note
Classified as held for sale
5b
Disposal of businesses
Disposals
Closing balance
Depreciation and impairment
Opening balance
Depreciation for the year
Classified as held for sale
5b
Disposal of businesses
Disposals
Closing balance
Net book value
Land
Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
725
2,195
-
-
-
-
-
-
(725)
(2,195)
715
203
(55)
(26)
831
9,034
3,226
838
1,765
(228)
(192)
(281)
(385)
(105)
6,968
4,220
(6)
(2,484)
-
-
-
-
(18)
(308)
(6,206)
(1,237)
(124)
(180)
(1,478)
(1,008)
(29)
25
151
3
2,349
131
381
36
18
10
103
-
-
(450)
(5,081)
(1,697)
381
1,887
2,523
213
27
(16)
(42)
(54)
128
7
42
25
(79)
49
371
16,479
613
3,446
-
-
-
(580)
(2,917)
(3,297)
984
13,131
-
-
-
-
-
-
(7,893)
(2,695)
314
2,775
192
(7,307)
984
5,824
In the current year, centre land and buildings with a book value of $2.9m were sold for $3.3m, resulting in a
gain on sale of $0.4m, included within other operating expenses.
Note
31 MARCH 2018
$’000
Cost
Opening balance
Additions/Transfers
Acquisition of businesses
Disposals
Closing balance
Depreciation and impairment
Opening balance
Depreciation for the year
Disposals
Impairment expense
15
Closing balance
Net book value
Land
Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
-
-
725
2,195
-
-
-
-
453
208
66
(12)
7,796
1,939
313
278
10,779
689
642
(93)
1,301
54
17
-
(68)
(117)
93
5,228
-
-
762
(290)
725
2,195
715
9,034
3,226
213
371
16,479
-
(165)
(4,332)
(18)
(148)
(1,763)
-
-
5
-
63
(174)
(166)
(444)
(636)
9
(96)
(57)
68
(39)
(18)
(308)
(6,206)
(1,237)
(124)
-
-
-
-
-
(5,037)
(2,622)
145
(379)
(7,893)
725
2,177
407
2,828
1,989
89
371
8,586
-
-
-
-
-
-
-
-
-
-
-
-
-
Depreciation for the year includes amounts for both continuing and discontinued operations.
46
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
12. 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
Evolve ECEM Limited
(formerly 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 (Evolve) Limited
(formerly Au Pair Link Limited) **
Home-care provider
Porse In Home Childcare (NZ) Limited *
Home-care provider
Porse Franchising (NZ) Limited *
Porse Education & Training (NZ) Limited *
For Life Education & Training (NZ) Limited *
Provides services to
Porse franchisees
Education and training
provider
Education and training
provider
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
31 March
100%
* the four Porse companies were sold with effect from 3 December 2018 (refer Note 5).
** the assets and operations of these businesses were sold during the year, these companies are being
wound down (refer Note 5).
13. Business Combinations
During the 12 months ended 31 March 2019 the Group has not acquired any business operations.
In the prior year to 31 March 2018, the Group acquired seven ECE centres from several separate
vendors, for a combined purchase price of $9.9m. There were no material adjustments upon finalisation
of these acquisitions.
47
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
14.
Intangible Assets
31 MARCH 2019
$’000
Cost
Opening balance
Additions
Note
Classified as held for sale
5b
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
301
200
372
1,981
4,787
214,868
222,509
-
-
-
-
-
-
-
149
-
-
-
-
(369)
149
(369)
(1,888)
(1,683)
(11,118)
(15,049)
Disposal of businesses
(160)
(200)
Closing balance
141
-
372
242
3,104
203,381
207,240
Amortisation and impairment
Opening balance
Amortisation expense
Disposal of businesses
Impairment expense:
15
Assets held for sale
ECE centres
Closing balance
Net book value
Goodwill classified as
held for sale
5b
Note
31 MARCH 2018
$’000
Cost
Opening balance
Additions
Acquisition of businesses
Disposal of businesses
(277)
(200)
(310)
(1,313)
(1,683)
(11,556)
(15,339)
(24)
160
-
-
(141)
-
-
-
200
-
-
-
-
-
(62)
(347)
-
-
(433)
-
1,638
1,683
10,600
14,281
-
-
(372)
-
-
-
-
(22)
220
-
-
-
(3,850)
(3,850)
(103,289)
(103,289)
(108,095)
(108,630)
3,104
95,286
98,610
-
-
369
369
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
301
200
372
1,576
4,787
206,094
213,330
-
-
-
-
-
-
-
-
-
402
3
-
-
-
-
-
402
8,855
8,858
(80)
(80)
Closing balance
301
200
372
1,981
4,787
214,869
222,510
Amortisation and impairment
Opening balance
(175)
(117)
(217)
Amortisation expense
(75)
(50)
(93)
(700)
(401)
-
-
-
-
(1,209)
(619)
Impairment expense:
15
Discontinued operations
ECE centres
Closing balance
Net book value
(27)
-
(33)
-
-
-
(212)
(1,683)
(10,600)
(12,555)
-
-
(957)
(957)
(277)
(200)
(310)
(1,313)
(1,683)
(11,557)
(15,340)
24
-
62
668
3,104
203,312
207,170
Amortisation expense includes amounts for both continuing and discontinued operations.
48
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
15.
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 groups of cash generating units (“CGUs”) below, which are also the operating
segments. Brands are also assessed for impairment separately.
31 MARCH 2019
$’000
Goodwill
Brands with indefinite useful lives
31 MARCH 2018
$’000
Goodwill
Brands with indefinite useful lives
Impairment expense
ECE
Centres
Home-based
ECE
ECE
Management
Total
95,286
3,104
-
-
-
-
95,286
3,104
ECE
Centres
Home-based
ECE
ECE
Management
Total
202,646
3,104
-
-
666
-
203,312
3,104
In the year ended 31 March 2018 the Group fully impaired the brands ($1.6m), goodwill ($10.6m), other
intangible assets ($0.3m) and property, plant and equipment ($0.4m) of the Home-based ECE businesses.
These businesses were sold during the current year (refer Note 5a).
As identified in Note 5b, six ECE centres and an ancillary business, ECE Management, were classified as
held for sale during the current year. A goodwill impairment expense of $3.9m has been recognised in
relation to these assets, leaving a recoverable amount of $0.4m. One centre and ECE Management have
subsequently been sold, and one centre closed, resulting in a loss on sale of $0.3m (refer Note 5b).
The remaining ECE centres cash generating unit (CGU) goodwill balance of $198.6m has been tested for
impairment as at 31 March 2019.
Declining enrolments in the 2019 financial year has reduced the current level of profitability of the portfolio
of centres. Despite an improvement in the base assumptions used in the calculation of the value in use
for ECE centres, overall the recoverable amount of the CGU has declined. As a result an impairment of
$103.3m has been recognised in respect of the ECE centres CGU in the consolidated financial statements
for the year ended 31 March 2019.
The recoverable amount of the ECE centres CGU as at 31 March 2019, $91.6m, 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.
The recoverable amount of the ECE centres CGU is lower than the carrying value of goodwill and brands
as the recoverable amount includes a negative working capital component.
49
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
15.
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 2019
Centres
31 MARCH 2018
Centres
2.5%
0.8%
3.3%
1.8%
15.4%
2.0%
1.5%
0.7%
2.2%
2.1%
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 early childhood
education to the value of approximately 66% (2018: 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 increase 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 group of CGUs, 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 industry segment the Group is engaged in, 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 takes in to account borrowing rates for both the Group and the market. The overall discount
rate is independent of the Group’s capital structure and the way the Group might finance the purchase of
a business. 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.
50
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
15.
Impairment Testing of Goodwill and Intangible Assets With Indefinite Lives (continued)
Sensitivity to changes in key assumptions
ECE Centres – Goodwill
The most sensitive assumption in the calculation of value in use for the ECE Centres CGU is revenue
growth. The following summarises the impairment expense that would have been required had the noted
changes in the “base” assumptions been made, with all other assumptions remaining constant:
$’000
Base assumption
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)
(103,289)
(78,574)
(127,186)
(79,001)
(126,773)
The recoverable amount of the ECE Centres was $4.4m (2018: $4.7m) at balance date. The decrease is
primarily attributable to a slight decline in financial performance of the 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% (2018: 15.4%) and cash flows beyond the one year period are extrapolated using a 2% (2018: 2%)
terminal growth rate that is not inconsistent with the long-term growth rate experienced industry-wide. As
the recoverable value is in excess of the carrying value, there is no impairment of this brand.
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 are discussed above.
The recoverable 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 (%)
-29.0%
0.7%
20.8%
-1.7%
51
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
16. Trade and Other Payables
$’000
Trade payables
Goods and services tax payable
Onerous lease provision
Other payables
Total trade and other payables
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
339
4,243
1,531
4,181
10,294
1,506
5,550
-
2,963
10,019
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 the same as their fair value, due to their short-term nature.
Of the onerous lease provision of $1.5m, $1.1m relates to the office formally used as the Porse Head office
(refer Note 5a).
17.
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 2019 funding received in advance relates to April to June
2019. Funding receivable relates to the remaining 25% of funding, adjusted for any changes in occupancy
levels, in respect of February and March 2019.
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
15,971
(3,346)
12,625
21,474
(3,610)
17,864
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
2,654
3,012
286
5,952
3,069
3,547
220
6,836
$’000
Funding received in advance
Funding receivable
Total funding received in advance
18. Employee Entitlements
$’000
Employee leave provisions
Accrued wages and salaries
Other employee entitlements
Total employee entitlements
52
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
19.
Issued Capital
Authorised shares
Ordinary shares authorised,
issued and fully paid
Opening balance
Ordinary shares issued:
Issue of shares in relation to
dividend reinvestment plan ("DRP")
Less share issue costs relating to
shares issued under DRP
31 MARCH 2019
31 MARCH 2018
Number
$’000
Number
$’000
179,457,596
159,149
178,278,256
158,106
820,961
457
1,179,340
1,058
-
(8)
-
(15)
Closing balance
180,278,557
159,598
179,457,596
159,149
20. 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,
accumulated net earnings/deficits of the Group, as well as available cash and cash equivalents and
borrowings. 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
of the preceding period, but at the Board’s discretion based on the Group’s available financial resources.
Financial Covenants
The Group’s capital management policy, amongst other things, aims to ensure that it meets its financial
covenants attached to any interest bearing loans and borrowings that support 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 of the financial covenants could permit the lender to immediately call loans and borrowings.
There have been no breaches of the financial covenants of any interest-bearing loans and borrowings in
the current or prior period.
53
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
21. Dividends
Interim dividend for the year ended 31 March 2019
Final dividend for the year ended 31 March 2018
Interim dividend for the year ended 31 March 2018
Final dividend for the year ended 31 March 2017
2019
2018
2019
2018
Cents
per share
Cents
per share
$’000
$’000
-
2.00
2.00
-
3,590
3,590
2.50
2.50
5.00
4,455
4,471
8,926
Policies
Dividends are paid in cash in accordance with the dividend policy of the Group. Dividends paid during the
current and prior period have been fully imputed.
Supplementary dividends
Supplementary dividends of $0.1m (2018: $0.4m) were paid to shareholders who are not tax resident in
New Zealand, for 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 2019, 820,961 shares with a total value of $0.5m were
issued in lieu of cash dividends (2018: 1,179,340 shares with a total value of $1.1m).
22. 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 Company by the weighted average number of ordinary shares outstanding during
the year. The number of shares outstanding for the current and prior year are adjusted for the effect of the
rights issue in May 2019 (refer Note 29). The following reflects the income and share data used in the basic
and diluted EPS computations:
$’000
(Loss)/profit after income tax from continuing operations ($'000s)
(Loss) after income tax attributable to the shareholders of the
Company ($'000s)
(102,399)
(101,554)
10,837
(4,213)
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
Weighted average number of ordinary shares for basic and diluted EPS
323,504,713
321,474,643
Basic (and diluted) EPS from continuing operations (cents per share)
Basic (and diluted) EPS attributable to the shareholders of the
Company (cents per share)
(31.7)
(31.4)
3.4
(1.3)
There have been no other transactions involving ordinary shares or potential ordinary shares during the
current or prior year. Refer to Note 29 for details of transactions involving ordinary shares after 31 March 2019.
54
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
23. 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 not significant and risk management is carried out by senior finance
executives and the Board of Directors.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk.
Price risk
The Group is not currently exposed to any significant price risk.
Interest rate risk
The Group’s main interest rate risk arises from borrowings. Borrowings issued at variable rates expose
the Group 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 6.0% (2018: 4.06%). The effect
of an increase or decrease of ±1% in interest rates on the cash flow interest rate risk will result in a
±$485K (2018: ±$405K) movement on profit or 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
$55.4m (2018: $32.3m) of the Group’s $63.9m (2018: $90.0m) lending facilities exposing the Group
to interest rate risk. Exposure to interest rate risk is reduced by applying surplus cash against the
revolving facility until such time that the cash is required. Any remaining cash after the revolving facility
is reduced to zero is invested in term deposits. This reduces the company’s average drawn net 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.
55
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
23. Financial Assets and Liabilities (continued)
Financing arrangements
The Group’s financing arrangements comprise the following facilities:
• Senior revolving facility – provided by ASB totalling $8.5 million for general corporate and working
capital purposes. The facility expires on 30 April 2022.
• Acquisition facility – provided by ASB totalling $55.4 million for funding of acquisitions. The facility
expires on 30 April 2022. As described in Note 29, $29.0m of this facility was repaid on 17 May 2019,
and the facility reduced by this amount.
In the first part of the year, the terms of the acquisition facility allowed the Group to temporarily
apply surplus cash against drawings under the facility to ensure efficient use of cash. From
December onwards, surplus cash cannot be applied in this manner and is instead held on deposit
until required.
• Lease guarantee facility – provided by ASB for $2.5 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.
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 unused facilities
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
8,500
55,359
63,859
-
55,359
55,359
8,500
30,000
60,000
90,000
-
32,300
32,300
57,700
Remaining contractual maturities
The contractual maturity for the Group’s financial instrument liabilities (that is, trade payables) is
disclosed in Note 16. $29.0m of bank borrowings were repaid on 17 May, with a further $1.0m expected
to be repaid by 30 June 2019. The remaining principal amount ($25.4m) is repayable in April 2022.
Interest payments on net debt are projected to be $1.0m in the year ending 31 March 2020, $0.8m in
the year ending 31 March 2021 and $0.7m in the year ending 31 March 2022.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities presented represent a reasonable
approximation of fair value.
56
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
24. Net Debt Reconciliation
Movements on net debt comprise:
31 MARCH 2019
$’000
Cash and cash
equivalents
Borrowings due
within one year
Borrowings due
after one year
Total
Net debt as at 1 April 2018
5,362
Bank borrowings drawn
Bank borrowings repaid
Reclassified as current liability
Cash flows
Net debt as at 31 March 2019
31 MARCH 2018
$’000
Net debt as at 1 April 2017
Bank borrowings drawn
Bank borrowings repaid
Cash flows
Net debt as at 31 March 2018
-
-
-
19,912
25,274
-
-
-
(30,000)
-
(32,300)
(92,247)
69,188
30,000
-
(30,000)
(25,359)
(26,938)
(92,247)
69,188
-
19,912
(30,085)
Cash and cash
equivalents
Borrowings due
within one year
Borrowings due
after one year
Total
4,095
-
-
1,267
5,362
-
-
-
-
-
(20,200)
(117,500)
105,400
-
(32,300)
(16,105)
(117,500)
105,400
1,267
(26,938)
Net debt as defined in the financial covenants (Note 20) also includes any amounts utilised under the
Group’s lease guarantee facility (Note 26).
57
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
25. Reconciliation of (Loss) After Tax to Net Operating Cash Flows
$’000
(Loss) after income tax
Adjustments for non cash items:
Depreciation and amortisation
Impairment expense
(Gain)/loss on disposal of property, plant and equipment
(Gain)/loss on sale and closure of businesses
Deferred tax
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
(101,554)
(4,213)
3,128
107,139
(293)
(1,357)
(509)
3,241
13,890
134
-
(796)
Adjustments for items classified as investing or financing activities:
Finance expense
2,908
1,641
Working capital movements relating to operating activities:
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
less business combination payment classified as investing
(1,683)
(1,474)
2,721
(519)
-
(1,090)
146
-
(188)
136
(357)
(552)
(841)
1,500
254
467
Net cash flows from operating activities
7,563
14,316
Working capital movements are adjusted to reflect the disposal of discontinued operations.
26. 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 2019
YEAR
31 MARCH 2018
22,248
63,504
45,892
131,644
21,224
63,583
53,880
138,687
$2.3m (2018: $2.4m) of the lease guarantee facility disclosed in Note 23 has been utilised.
58
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
27. Related Party Transactions
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, retired 28 November 2018), Lynda Reid (appointed
2nd August 2017, retired 28 November 2018), Chris Scott (appointed 28 November 2018) and Chris
Sacre (appointed 28 November 2018).
• J47 Pty Limited, a company associated with Chris Scott.
• The following companies are all associated with Mark Finlay (refer below for relationships): 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.
Related party relationships that have ceased during the current year or in the prior year are:
• Anthony Quirk ceased his directorship on 28th November 2018.
• Lynda Reid ceased her directorship on 28th November 2018.
• Greg Kern ceased his directorship on 17th August 2017.
• Alan Wham resigned as Chief Executive Officer on 15th September 2017.
• Mark Finlay was appointed Chief Executive Officer on 1st November 2017, having been acting in this
capacity since 25th August 2017, and resigned from this role on 2nd July 2018. All amounts for the year
ended 31 March 2019 disclosed below relate to the period 1 April 2018 to 2 July 2018 at which point
Mark Finlay ceased to be a related party. He ceased to be a director on 17th August 2017.
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.
$’000
Alistair Ryan
Norah Barlow
Gráinne Troute
Anthony Quirk
Lynda Reid
Chris Scott
Chris Sacre
Greg Kern
Mark Finlay
Total Directors' Remuneration
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
135
80
90
60
53
27
27
-
-
472
128
90
82
56
53
-
-
37
33
479
59
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
27. 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 13 of the
Group’s ECE centres. Rent of $647,738 (2018: $2,208,000 relating to 14 ECE centres and the head
office) has been paid by the Group to the companies associated with Mark Finlay during the period.
• Management fee income received from centres related to Mark Finlay was $0 (2018: $17,500).
• Payments for services other than rent paid to companies related to Mark Finlay were $3,691 (2018:
$68,872).
• Payments to Wildfire Consulting for CEO services provided by Mark Finlay were $80,000 (2018: $0)
• Payments for capital expenditure to companies related to Mark Finlay were $45,646 (2018: $0)
• Dividends of $426,000 (2018: $1,067,000) were paid to Mark Finlay and associated parties.
• On 8 August 2018, J47 Pty Limited acquired 34,186,061 shares.
• Shares were issued pursuant to the Company’s dividend reinvestment plan to Alistair Ryan and Norah
Barlow. 3,022 shares each valued at $1,682 each. (2018: 4,641 shares each valued at $4,038 each).
• Compensation of key management personnel of the Group:
$’000
Short-term employee benefits
Total compensation paid to key management personnel
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
809
809
1,000
1,000
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
• Shareholding interests of Directors and key management of the Company are:
Units of shares
Norah Barlow
Alistair Ryan
Mark Finlay
Chris Scott
AS AT
31 MARCH 2019
AS AT
31 MARCH 2018
93,412
93,412
90,390
90,390
-
21,347,382
34,186,061
34,372,885
-
21,528,162
During the year Norah Barlow and Alistair Ryan increased their shareholdings via electing to receive
shares under the Group’s dividend reinvestment plan.
The shareholding of Mark Finlay is not disclosed at 31 March 2019, as he is not a related party at this date.
60
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2019
28. Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the Group’s auditor,
PricewaterhouseCoopers:
$’000
Assurance services:
Audit and review of the consolidated financial statements
Porse assurance engagements
Total assurance services
Other services provided by PricewaterhouseCoopers:
Taxation compliance services
Other non-assurance services
Total other services
YEAR
31 MARCH 2019
YEAR
31 MARCH 2018
237
10
247
33
18
51
183
30
213
40
-
40
Other non-assurance services are primarily an agreed-upon procedures service in respect of the working
capital calculation for a prior acquisition.
29. Events After the Reporting Period
Director changes
The Company announced on 8 May that Alistair Ryan will retire as Chair, effective 15 June 2019, and that
Norah Barlow intends to retire and not seek re-election at the Company’s 2019 Annual Meeting.
Capital raising
On 8 May 2019, the Company announced a fully underwritten capital raising, raising $63.5 million through
a fully underwritten 4.4 for 1 pro rata accelerated rights entitlement offer at $0.08 per share.
The funds will be applied to repay $30 million of bank borrowings by the end of June 2019, a permanent
reduction of the acquisition facility, to fund an initial phase of Australian expansion ($25 million), to provide
working capital ($5 million) and meet the costs of the offer ($3.5 million).
$29 million of net proceeds from the institutional element of the raise were received on 17 May 2019, and
repaid to the bank, representing 381,791,638 shares issued, with the balance expected from the retail
element of the raise by 6 June 2019.
61
the consolidated statement of financial position as at 31 March 2019;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of financial position as at 31 March 2019;
the consolidated statement of movements in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of movements in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Independent auditor’s report
To the shareholders of Evolve Education Group Limited
Independent auditor’s report
We have audited the consolidated financial statements which comprise:
To the shareholders of Evolve Education Group Limited
•
•
We have audited the consolidated financial statements which comprise:
•
•
•
•
•
•
•
•
Our opinion
In our opinion, the accompanying consolidated financial statements of Evolve Education Group
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects,
Our opinion
the financial position of the Group as at 31 March 2019, its financial performance and its cash flows for
In our opinion, the accompanying consolidated financial statements of Evolve Education Group
the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects,
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
the financial position of the Group as at 31 March 2019, its financial performance and its cash flows for
the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Basis for opinion
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
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
Basis for opinion
further described in the Auditor’s responsibilities for the audit of the consolidated financial
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
statements section of our report.
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
statements section of our report.
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
our opinion.
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
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
accordance with these requirements.
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Our firm carries out other services for the Group in the areas of assurance services, taxation
accordance with these requirements.
compliance and other non-assurance services. The provision of these other services has not impaired
our independence as auditor of the Group.
Our firm carries out other services for the Group in the areas of assurance services, taxation
compliance and other non-assurance 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
62
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 2019
63
PwC 2 Our audit approach Overview An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Overall Group materiality: $0.7 million, which represents approximately 5% of a 3-year average of profit before income tax adjusted to exclude impairment losses. Given the volatility experienced in profit before income tax over the last 3 years and the significant impact the impairment loss has on profit before income tax, in our judgement, a 3-year average of profit before income tax adjusted for impairment losses provides a more stable basis for calculating materiality. We have determined that there are two key audit matters: • Compliance with financial covenants • Impairment assessment of goodwill Materiality The scope of our audit was influenced by our application of materiality. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole. Audit scope We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and our application of materiality. As in all of our audits, we also addressed the risk of management override of internal controls including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Compliance with financial covenants
As described in note 2 to the consolidated
financial statements, the Group’s facilities
with ASB Bank Limited require certain
financial covenants to be complied with.
To meet these financial covenants, the
debt facilities were revised to
accommodate relaxed financial covenants
during the term of the facility. The Group
was also required to agree a capital
management strategy with the bank to
reduce borrowings. For these reasons, we
have considered this as an area of focus.
To address the risk of non-compliance with the
financial covenants and conditions included in the
amended banking facility arrangement, we
reperformed the Group’s calculations of compliance
with financial covenants at each compliance date
during the year.
We obtained the Group’s forecast compliance
assessment for the next 12 months from the date of the
approval of the consolidated financial statements and
performed the following audit procedures:
• agreed the cash flow forecast to the forecast
approved by the Board;
Subsequent to year end, the Group further
renegotiated its debt facilities with the
bank and repaid $29.0 million of its
borrowings from the proceeds raised from
the Institutional Entitlement Offer.
•
reperformed the Group’s calculation of compliance
with financial covenants at each compliance date;
• performed sensitivity analysis on the forecast
covenant compliance calculation to assess the level
of forecasting risk; and
The Directors have determined that the
Group expects to fully comply with its
financial covenants.
•
considered the status of the capital raise and its
impact on the forecast compliance assessment by
calculating the effect on available headroom.
We have no matters to report.
64
PwC
3
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of goodwill
As at 31 March 2019, the Group has
goodwill of $95.7 million relating to the
ECE Centres cash-generating unit (CGU).
During the year, the Group recognised an
impairment of $107.1 million due to the
underperformance of the ECE CGU and a
continued decline in child enrolments for
this CGU.
This was an area of focus 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.
A discounted cash flow model on a value-
in-use basis was used to determine the
recoverable amount.
Management considers the following
being key assumptions to the recoverable
amount calculation:
•
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 flows beyond the forecast
period.
To address the risk of impairment of goodwill, our
audit procedures included the following:
• Gained an understanding of the business process
applied by the Group in determining whether
there are any indicators of impairment;
• Obtained an understanding of the Group's
forecasting and budgeting process to understand
the basis of the assumptions and operational
improvements planned within FY20;
Reviewed the past year's actual performance
against the cash flow forecast used in the
impairment model to determine the achievability
of assumptions used to develop the model;
Tested management's value-in-use calculation
and the mathematical accuracy of the model;
Reviewed management's sensitivity analysis over
the key assumptions and also considered
alternative possible scenarios and their potential
impact;
Engaged our internal valuation expert to assess
the terminal growth rate and discount rate used
against those used by similar market participants
and to determine whether the rates were within a
reasonable range, and
Considered whether the disclosures in the
consolidated financial statements were in
compliance with the requirements of the
accounting standards.
Based on the results of our procedures we have
nothing to report.
Refer to note 15 of the consolidated
financial statements where the
impairment testing of goodwill is
discussed, including sensitivities to
changes in certain assumptions.
PwC
4
65
Information other than the consolidated financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not and will
not express any form of assurance conclusion on the other information. At the time of our audit, there
was no other information available to us.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
66
PwC
5
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
67
PwC 6 Who we report to This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed. The engagement partner on the audit resulting in this independent auditor’s report is Indumin Senaratne (Indy Sena). For and on behalf of: Chartered Accountants 27 May 2019 Auckland 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 furthermore specific and stringent rules
also applying to trading in the Company’s securities by directors and certain senior employees, or employees
performing certain functions.
68
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 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 80.
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.
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.
69
Corporate Governance and Statutory Information
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.
As at 31 March 2019, Norah Barlow, Chris Sacre, Gráinne Troute and Alistair Ryan (retired 15 June 2019) were
independent directors, within the meaning of the NZX Listing Rules.
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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
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 pages 11-12.
Evolve Director ownership interests can be found on page 80 of this annual report.
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.
71
Corporate Governance and Statutory Information
Gender Diversity
As noted above, the Board is responsible for monitoring the Company’s performance in meeting objectives
set out in the Diversity Policy. Information relating to the current representation of female employees of the
Company, including holding senior executive positions and on the Board is as follows:
Position
Board
Senior Management*
Company-wide
As at 31 March 2019
As at 31 March 2018
Women
Men
Women
Men
2
5
(40%)
(71%)
>96.0%
3
2
(60%)
(29%)
<4.0%
3
3
(60%)
(43%)
>96.0%
2
4
(40%)
(57%)
<4.0%
*Senior management includes the CEO and employees who report directly to the CEO. As at 31 March 2019 the
senior management team consisted of seven positions.
At balance date the Group employs 2,151 women which represents 96% of the workforce (FY18: 2,187 women
which represented 96% 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.
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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
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 members of the Audit and Risk Committee as at 31 March 2019 were Norah Barlow, (Chair appointed
November 2018) Chris Sacre and Alistair Ryan (retired 15 June 2019). Grainne Troute joined the committee on
15 June 2019. The Board is of the belief that the Audit and Risk Committee was appropriately constituted as at
31 March 2019 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.
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), Chris Sacre, and
Norah Barlow.
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.
73
Corporate Governance and Statutory Information
Board and Committee Meetings
The Board has established a regular schedule of board and committee meetings in order to carry out its
obligations under its Board Charter. A summary of the directors’ attendances at each of the scheduled Board
and Committee meetings between 1 April 2018 and the date of approving the financial statements (that is,
27 May 2019), as compared to the number of scheduled meetings that each Director was eligible to attend as a
member (in brackets) is shown in the table below.
Norah Barlow
Alistair Ryan
Chris Scott
Gráinne Troute
Anthony Quirk
Lynda Reid
Chris Sacre
Board
11
11
3
11
8
8
3
(11)
(11)
(3)
(11)
(8)
(8)
(3)
Audit and Risk
Committee
Remuneration and
People Committee
3
3
2
1
(3)
(3)
-
-
(2)
-
(1)
3
(4)
-
-
(4)
-
(2)
(2)
4
2
2
In addition to scheduled Board meetings, the Board also held other meetings and teleconferences to discuss
other company matters as required, including the capital raising.
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 binding 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.
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.
74
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 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).
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 Chairs of the Audit and Risk Committee and Remuneration and People Committee each receive an additional
$10,000 per annum. The directors’ fees currently total $472,000 per annum.
The Director fee pool for all directors is $500,000 per annum in aggregate. 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 2019 are listed below. Pursuant to
section 211(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 2019 are provided below.
($000’s)
Alistair Ryan
Norah Barlow
Gráinne Troute
Anthony Quirk
Lynda Reid
Chris Scott
Chris Sacre
Total
Directors’ Fees
Total
135
80
90
60
53
27
27
472
135
80
90
60
53
27
27
472
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 2019
employees did not receive additional remuneration for acting as directors of subsidiary companies.
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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 74.
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 where necessary to ensure comparability
and competitiveness, along with consideration of an individual’s performance, skills, expertise and experience.
The Remuneration and People Committee reviews and approves annual performance appraisal outcomes for
all members of the senior management team reporting to the CEO and utilises market information and trends
when considering and confirming remuneration arrangements. External benchmarking may be conducted
independently, to provide industry specific data to assist the Remuneration and People Committee in approving
appropriate levels of remuneration for these executives.
The annual remuneration review process requires “one over one” approval (approval from a higher authority than
the person or committee recommending the remuneration). This means that approval of the Board is required
for any changes to the CEO’s remuneration, on recommendation by the Remuneration and People Committee.
Further, recommendations from the CEO in relation to remuneration of the senior management team require
Remuneration and People Committee approval.
Total executive remuneration may incorporate fixed and variable components. Executive remuneration may
contain any or all of the following:
•
fixed remuneration;
• performance-based remuneration;
• equity-based remuneration; and
•
termination payments.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
A performance share rights long-term executive incentive scheme for the CEO and the senior management team
is currently under review to ensure that it is optimised.
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
Mark Finlay held the position of CEO until 2 July 2018. He had a base salary of $320,000 per annum (gross) and
was entitled to the use of a laptop and carpark. Rosanne Graham held the position of CEO from 2 July 2018. She
has a base salary of $450,000 per annum (gross) and is entitled to the use of a mobile telephone, laptop and
carpark. A short term incentive scheme of up to 30% of gross salary is provided under which scheme the Board
approved a recognition payment of $100,000 for Ms Graham in respect of 2019.
Employee Remuneration
The number of employees or former employees (including employees holding office as directors of subsidiaries,
who received remuneration and other benefits (including share-based payments) valued at or exceeding
$100,000 during the year ended 31 March 2019 are specified below.
Remuneration Band
$100,001 - $110,000
$110,001 - $120,000
$120,001 - $130,000
$150,001 - $160,000
$190,000 - $200,000
$220,000 - $230,000
$310,000 - $320,000
$350,000 - $360,000
$390,000 - $400,000
Total
Total
4
1
2
1
1
1
1
1
1
13
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.
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.
77
Corporate Governance and Statutory Information
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 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 2019 is set out in note 28 of the financial statements included
in this annual report.
In combination with the establishment of the Audit and Risk Committee, the Board has approved a Risk
Management Policy because the Company views effective risk management as key to achieving and maintaining
its operational and strategic objectives. The Risk Management Policy is available on the Company’s website
(www.evolveeducation.co.nz).
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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
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.
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.
79
Corporate Governance and Statutory Information
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.
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 2019 are as follows:
Director
Position
Company
Norah Barlow
Director – ceased
Methven Limited
Director – ceased
Aged Care Guild Limited
Director – ceased
Cigna Life Insurance NZ Limited
Director
Director
Heritage Lifecare Limited
Investore Property Group
Director-ceased
Christchurch Casinos Limited
Gráinne Troute
Alistair Ryan
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 2019:
Norah Barlow:
•
Issue of 3,022 shares by the Company on 28 June 2018 under the Company’s dividend reinvestment plan.
Alistair Ryan:
•
Issue of 3,022 shares by the Company on 28 June 2018 under the Company’s dividend reinvestment plan.
Chris Scott:
• Purchase of 34,186,061 shares.
Anthony Quirk, Gráinne Troute, Chris Sacre and Lynda Reid:
• Nil
Disclosure of Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares as at 31 March 2019:
Director
Norah Barlow
Alistair Ryan
Chris Scott
Number of Shares in which
a relevant interest is held
93,412
93,412
34,186,061
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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019
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 2019, the Company authorised nil dividends.
Net Tangible Assets
The Company’s net tangible assets as at 31 March 2019 were ($0.27) per share (31 March 2018 ($0.29) 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 2019 it was $0.29 (2018: $0.87).
Donations
The Company made donations of $3,351 during the year ended 31 March 2019 (31 March 2018 $2,732).
Credit Rating
The Company has no credit rating.
NZX and ASX Waivers
On 8 May 2019, NZX Regulation granted Evolve a waiver from the following NZX Listing Rules in respect of the
4.4 for 1 accelerated rights entitlement offer announced by Evolve on 8 May 2019 (the Offer):
• Waiver from NZX Listing Rule 7.11.1 which allowed Evolve to allot the new shares under the institutional
entitlement offer six business days after the close of the institutional entitlement offer.
• Waiver from NZX Listing Rule 9.2.1, to the extent that NZX Listing Rule 9.2.1 would otherwise require prior
shareholder approval for any of Chris Sacre or his associated persons to act as a sub-underwriter of the Offer
and receive sub-underwriting fees under a sub-underwriting agreement.
Evolve also relied on the NZX class waiver to accelerated entitlement offers, dated 13 June 2017, in respect of the
Offer. It is noted that the Offer occurred after Evolve’s balance date, but the waivers have been included in this
Annual Report for completeness.
Annual Meeting
The Company’s Annual Meeting of shareholders will be held in Auckland on 18 September 2019 at 10 am.
81
Shareholder Information
Analysis of Shareholding at 6 June 2019
Ranges
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
Shareholders
%
Number of
Shares
Holding
Quantity %
102
251
226
695
500
5.75
14.15
12.74
39.18
28.18
56,141
800,727
1,799,941
26,767,566
944,079,618
1,774
100.00
973,503,993
0.01
0.08
0.18
2.75
96.98
100.00
Twenty Largest Shareholders at 6 June 2019
Name
New Zealand Central Securities Depository Limited
J47 Pty Ltd
National Nominees Limited
Upton124 Pty Ltd
HSBC Custody Nominees (Australia) Limited
JBWere (NZ) Nominees Limited
FNZ Custodians Limited
Brispot Nominees Pty Ltd
UBS Nominees Pty Ltd
Forsyth Barr Custodians Limited
Mrs Juwarseh Scott
Opm Super Co Pty Ltd
J P Morgan Nominees Australia Pty Limited
Leveraged Equities Finance Limited
Merrill Lynch (Australia) Nominees Pty Limited
Custodial Services Limited
Great Glennie Holdings Pty Ltd
Geosine Pty Ltd
BNP Paribas Nominees Pty Ltd
Heath Richard Finlay & Mark Clayton Finlay &
Mark Dobson Trustee Company Limited
Total - twenty largest shareholders
Total number of shares on issue
Number of
Shares
210,950,179
184,604,729
% of
Shares
21.67
18.96
42,020,940
38,180,000
37,707,881
27,161,341
26,763,571
25,420,172
23,766,587
19,078,074
14,990,000
13,662,000
12,336,054
11,153,987
10,622,443
8,370,000
7,948,275
7,001,994
6,850,000
5,400,000
4.32
3.92
3.87
2.79
2.75
2.61
2.44
1.96
1.54
1.40
1.27
1.15
1.09
0.86
0.82
0.72
0.70
0.55
733,988,227
973,503,993
75.39
82
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 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 6 June 2019, the shareholdings in the Company held through NZCSD were:
Name
JPMorgan Chase Bank
Accident Compensation Corporation
HSBC Nominees (New Zealand) Limited
BNP Paribas Nominees NZ Limited
National Nominees New Zealand Limited
Tea Custodians Limited
Citibank Nominees (NZ) Ltd
Public Trust Forte Nominees Limited
Private Nominees Limited
Total - shares held by NZCSD
Substantial Shareholders
Number of
Shares
Held by NZCSD
103,740,869
49,610,325
25,972,122
15,300,325
10,591,167
3,344,026
1,786,191
600,000
5,154
% of NZCSD
Shares
49.18
23.52
12.31
7.25
5.02
1.59
0.85
0.28
0.00
210,950,179
100.00%
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 31 March
2019 in respect of the number of shares set opposite their names.
Name
J47 Pty Ltd
Regal Funds Management
Salt Funds Management Limited
UBS Group AG
National Australia Bank Limited
Total number of shares on issue
Number of
Shares
34,186,061
29,827,904
17,637,808
10,855,800
19,261,709
180,278,557
% of
Shares
18.96%
16.55%
9.78%
6.02%
10.68%
83
Subsidiary Company Directors
The following persons held office as Directors of the Company’s subsidiaries during the year ended 31 March
2019 or, in the case of acquired subsidiaries, from the date of acquisition:
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
Evolve ECEM Limited
Lollipops Educare Holdings Limited
Lollipops Educare Limited
Lollipops Educare Centres Limited
Lollipops Educare (Hastings) Limited
Lollipops Educare (Birkenhead) Limited
84
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
EVOLVE EDUCATION GROUP ANNUAL REPORT 2019 Evolve Home Day Care Limited
Au Pair (Evolve) Limited
PORSE In-home Childcare (NZ) Limited
PORSE Franchising (NZ) Limited
PORSE Education & Training (NZ) Limited
For Life Education & Training (NZ) Limited
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Rosanne Graham (appointed 10 August 2018)
Paul Matthews (appointed 31 August 2018)
Stephen Davies
Fay Amaral (ceased 10 August 2018)
Stephen Davies (ceased 3 December 2018)
Rosanne Graham (ceased 3 December 2018)
Paul Matthews (ceased 3 December 2018)
Fay Amaral (ceased 9 August 2018)
Stephen Davies (ceased 3 December 2018)
Rosanne Graham (ceased 3 December 2018)
Paul Matthews (ceased 3 December 2018)
Fay Amaral (ceased 9 August 2018)
Stephen Davies (ceased 3 December 2018)
Rosanne Graham (ceased 3 December 2018)
Paul Matthews (ceased 3 December 2018)
Fay Amaral (ceased 9 August 2018)
Stephen Davies (ceased 3 December 2018)
Rosanne Graham (ceased 3 December 2018)
Paul Matthews (ceased 3 December 2018)
Fay Amaral (ceased 9 August 2018)
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 2019.
85
Solicitors
Chapman Tripp
Level 35, ANZ Centre
23–29 Albert Street
Auckland 1010
Phone: +64 9 357 9000
Auditor
PricewaterhouseCoopers
188 Quay Street
Auckland 1142
Phone: +64 9 355 8000
New Zealand Share Registrar
Link Market Services Limited
Level 11, Deloitte Centre
80 Queen Street
Auckland 1010
Phone: +64 9 375 5998
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
Corporate Directory
Evolve Education Group Limited
Registered Office
Level 2
54 Fort Street
Auckland 1010
New Zealand
Phone: +64 9 377 8700
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) retired 15 June 2019
Norah Barlow (Acting Chair)
Chris Sacre (appointed 28 November 2018)
Chris Scott (appointed 28 November 2018)
Gráinne Troute
Senior Management Team
Rosanne Graham Chief Executive Officer
Bev Davies
Stephen Davies
Kirsten Long
Paul Matthews
Karen Shields
GM People and Talent
Chief Financial Officer
GM Centre Operations
Chief Information Officer
GM Quality Assurance and
Professional Learning
GM Marketing
Ru Wilkie
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2019