More annual reports from Evolution:
2020 ReportPeers and competitors of Evolution:
China Distance Education Holdings LimitedANNUAL
REPORT 2
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2
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This Annual Report of Evolve Education Group Limited is dated
10 August 2020 and is signed by the Board of Directors by:
Hamish Stevens
Chair of the Board
Chris Scott
Managing Director
Contents
About Evolve Education Group
Chair’s Report
Managing Director’s Report
Our Vision
Our People
Property
Board Profile
Senior Management Team
Financial Statements
Independent Auditor’s Report
Corporate Governance and Statutory Information
Shareholder Information
Subsidiary Company Directors
Corporate Directory
2
4
5
6
7
9
10
12
15
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80
96
98
99
1
About Evolve
Education Group
A snapshot of
Evolve’s Australian
network as at 31 March 2020
Number of early childhood centres 10
Number of licensed child care places 911
Number of staff 248
Average annual mature
centre occupancy for FY20
73%
Average centre lease term c.29 years
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. In the second half
of 2019, Evolve launched its
expansion into Australia with the
acquisition of 10 centres.
A snapshot of
Evolve’s New Zealand
network as at 31 March 2020
Number of early childhood centres 117
Number of licensed child care places 8,708
Number of staff 2,173
Average annual mature
centre occupancy for FY20
72%
Average centre lease term c.17 years
2
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 1
6
The communities we serve –
number of centres by region
3
50
5
8
4
1
6
5
2
12
4
5
15
3
Chair’s
Report 2020
Hamish Stevens
Chair
Evolve Education Group Limited
Welcome to Evolve’s sixth annual report.
The past year has been a year of significant
change for the Company. In September 2019,
a new board and management team was put
in place and the board now comprises long-
term operators from the early childcare and
education sectors – Chris Scott, Chris Sacre
and Adrian Fonseca. Experienced directors Kim
Campbell and Hamish Stevens also joined the
board. Alistair Ryan, Norah Barlow and Grainne
Troute retired from the Board during the year.
CEO Roseanne Graham left the company in
September 2019, and she has been replaced
by Managing Director Chris Scott and New
Zealand CEO Tim Wong. Both Chris and Tim
have extensive ECE ownership and operational
experience. The company is fortunate to have
such capable and committed leadership now
in place to lead the business through these
unprecedented times.
Covid-19 has unfortunately had an impact on
the sector in both New Zealand and Australia
with falling attendance prior to government
restrictions and a complete closure of all NZ
centres during alert level 4 in March and April
2020. Following the removal of restrictions,
attendance has increased but parental health
concerns, an increased number of people
working from home, and economic uncertainty
for many families means attendance within the
sector is not yet back to pre-Covid-19 levels.
Company turnarounds take time and Covid-19
has further impacted on this task, however we
are confident that the people and resources
are now in place to achieve meaningful
improvements in financial performance. Our
forecasting shows returns to shareholders
continuing to improve over the next three years,
assuming that Covid-19 is brought under control.
The board wishes to acknowledge the
contribution of Alistair, Norah, Grainne and
Roseanne during their respective tenures.
MD Chris Scott will expand on the specific
initiatives undertaken in his report.
In June 2019 Evolve raised $63m in a capital
rights issue and in December 2019 the
Company successfully raised a further $19m
in an institutional placement. This allowed the
company to retire debt and undertake the
acquisition of ten centres in Australia. It also
places the company on a stronger financial
footing and provides the board with the time
and resources to implement its New Zealand
turn-around strategy.
In this regard, I assure you that you have
a committed and hard-working board and
senior management team. I particularly wish to
acknowledge the efforts and experience of our
Managing Director Chris Scott who has brought
a strong focus on operational excellence, and
our NZ CEO Tim Wong who brings a wealth of
experience and insight within the sector.
I also want to acknowledge the substantial
contributions made by the dedicated
employees at our centres. Day after day they
greet, teach and care for the many children who
attend our centres. It is through their dedication
and the support of our many families that we
can be confident Evolve continues to have a
bright future.
4
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Managing
Director's Report
Chris Scott
Managing Director
Evolve Education Group Limited
Financial Year Ended 31 March 2020.
First half of year
Last year’s annual report made reference to the
fact that the financial performance of Evolve
had declined significantly throughout FY19.
This decline was related largely to average
occupancy falling from above 80% in FY17
to 78.6% in FY18 and then 76.5% in FY19.
The decline continued in FY20 with average
occupancy throughout FY20 being 71.9%.
The Company outlined a three-year plan to
address this issue which was developed and
put into place in late 2018. Unfortunately, by
July 2019, occupancy was continuing to decline
and head office costs were rising rapidly.
This situation was not sustainable and the
Company’s balance sheet was not sufficiently
robust to continue on this path.
The Company decided that further structural
change was required.
Second half of year
The second half of FY20 saw significant change:
a) The Board was refreshed with three directors
who have significant experience in the child
care sector.
b) The Support Office was streamlined and
made more responsive to the needs of centres
and centre managers with a significant
reduction in head office costs.
c) The $63m equity raise in June 2019 was
supplemented by a $19m placement
in December 2019 which significantly
strengthened the Company’s balance sheet
and allowed the commencement of the
Australia growth strategy.
d) Changes were implemented to improve
occupancy together with more flexible and
responsive centre rostering.
e) Ten centres were acquired in Australia in line
with the Australian expansion plan.
By 26 March 2020 (when the Covid-19 alert
level 4 lockdown took effect in NZ), the
declining trend in occupancy had been reversed
and centre wages to revenue had fallen from
60% to 57%.
The measures implemented in the second half
of FY20 led to FY20 underlying EBITDA coming
in at $8.2m1 – ahead of the $6m to $6.5m
which had been anticipated in November 2019.
Significant progress had been made in restoring
the Company to financial health.
Covid-19 update
The Evolve operating environment in both
New Zealand and Australia has changed
dramatically since the end of the financial year
due to Covid-19.
However, both the New Zealand and Australian
governments supported the child care sector
strongly since the advent of Covid-19 with both
governments offering support in the forms of
wage subsidies and continuation of funding.
Accordingly, while earnings since 1 April 2020
have been affected, the Company’s earnings
and cash flow have been positive throughout
this period.
Since Covid-19 restrictions were lifted in
New Zealand, occupancy has continued to rise.
Occupancy was 60.1% in early June 2020 and was
68.8% in mid July 2020. In Australia, the parent
fee subsidy scheme and the Covid-19 lockdown
in Melbourne announced by the Victorian State
Government on 2 August 2020 mean sustainable
occupancy and attendance trends will not be
apparent until October 2020, at the earliest.
In summary, FY20 has been a year of change
and considerable progress in restoring the
Company to financial health. While the impact
of Covid-19 at the very end of the year has
delayed this process, the Evolve team is fully
committed to continuing the positive changes
that were instigated prior to this event.
1 Please refer to page 43 (note 4 of Consolidated Financial Statements)
5
This is our...
Vision
Creating centres that
parents want their
children to be at and
children want to stay
at because our people
love what they do and
where they work.
Values
Belonging
Nurturing
Learning
Respectful
Playful
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 2020 Our people
Our people are central to everything we do
at Evolve, to prioritise and deliver world-class
early childhood education and care services to
all our families.
The past 12 months have seen changes in focus
across the organisation, to support and enable
our centre teams to do their best work. And
for our people to feel supported and valued
through this journey.
There has been an increase in the collaborative
forums established across our operations
structure to ensure our nation-wide network
of Centre Managers, supported by their Area
Managers, are able to connect regularly, discuss
relevant topics and issues, share learnings and
new ideas as well as strengthen relationships
throughout the organisation at the centre level.
I chose a career as a professional
registered ECE teacher due to the magic
of the early childhood years.
Children are so uniquely wonderful,
and I relish being a part of their
learning journeys through these
formative years.
KIM
I am very proud to call myself an Early
Childhood teacher. This career path is very
close to my heart as I am inspired by my
grandmother who has worked in this field for
over 37 years. Improving outcomes for learners
is what drives me to be a better version of
myself every day. I am extremely lucky
to say that being an Early Childhood
teacher and making a difference in
children’s lives is my passion.
WENDY
In late 2019, under the new leadership of the
Managing Director and the NZ CEO, Evolve
undertook a review of its Support Office, which
saw a reduction in headcount and a refining of the
role of the Shared Services functions within the
organisation. In conjunction with this, a stronger
emphasis was placed on ensuring those senior
leaders that are closest to our families – our Area
Managers – are empowered and supported to
make the very best decisions for our families, and
the centres they lead – and do this quickly.
The number of Area Manager positions across
the organisation was increased, resulting in a
decrease in the number of centres each manager
was responsible for; enabling them to spend
more in-depth time working alongside and with
their Centre Managers and Teams to prioritise
activities and actions that are relevant and
meaningful, and that drive improved outcomes
for children.
Our new NZ CEO, who also leads the operations
team, has spent a significant part of the past year
visiting and meeting with Centre Managers and
their teams, as well as parents, throughout the
country, to ensure there is a clear line of sight
over what our families want and need from us, so
that we are better able to meet and exceed these.
The Head of HR works closely with the NZ CEO
in this priority work, and the People and Talent
Team have focussed on key activities from the
Evolve People Strategy. Some of these include:
• A continuing focus on professional
development, including, as required, targeted
coaching for leaders
•
Investing in the capability and confidence
of operational leaders in key areas of HR,
including recruitment, payroll, performance
and development
7
• Refining key people processes, to ensure
they are increasingly fit for purpose, and they
deliver the outcomes we are looking for
• The establishment and administration
of Evolve’s Health, Safety and Wellbeing
Committee, with a clear purpose, mandate
and responsibilities.
With the advent of Covid-19, 2020 has been a
challenging year for people globally.
Every employer in New Zealand has had to face
operational considerations never dealt with before
– an entirely new territory for which there was no
map. And whilst challenging, this also provided an
opportunity for real leadership to come to the fore
– which it did, at all levels of the organisation.
For the Board and the Senior Management
team, this was taking an early decision to
continue to pay our people their full salaries
during the lockdown period. We were able to
sustain this approach through this time with the
help of the Wage Subsidy.
For our extraordinary centre staff – this was
continuing to go to extreme lengths to become
and remain connected with their tamariki and
whānau throughout this uncertain time – their
innovation and creativity in supporting families
and children came to the fore, and we are
immensely proud of them.
And for our Support Office teams – it was
stepping up and helping our entire organisation
to successfully operate remotely in a very short
space of time; and then transition back into full
on-site operations.
Like many organisations, we are now navigating
the challenges of the past few months and
putting plans in place to enable our organisation
to strengthen and flourish into the future – and
we will do it together.
I chose early childhood as a profession
as to me it is far more than just a job. It is
one of the most important and rewarding
careers. I am lucky enough to have the chance
to make a difference in the lives of such special
wee treasures, our youngest people, and help
set them up for a lifelong love of learning.
I love sparking their inquisitive minds to
make discoveries, sharing in their wonder,
supporting, guiding, and challenging
them as well as celebrating in their
success, not to mention having so
much fun every day.
FABIENNE
I love to focus on the term whanaungatanga
where there is a sense of family connection that
you can feel when you walk into my environment.
The relationships I have with whānau and our
tamariki are so special; these connections have
enabled a sense of belonging where whānau love
to contribute. I am passionate about papatuanuku
and the natural based element that comes along
with that. I choose to be an ECE teacher as I have
a passion for working with young children and
watching them learn and achieve; this is one
of the most heart-warming benefits of my
job. Every day is unique through creating
beautiful, entertaining and engaging
environments.
NICOLE
8
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Property
The focus for the Property team in New Zealand
for the past year has been to enhance our
existing centres. This is in conjunction with the
expansion into Australia with the acquisition of 10
centres and the set up of the Australian support
office in Queensland.
The New Zealand based development focus
included the ongoing maintenance of the
centres and upgrade of appliances and heating
sources. Many centres have had the addition of
new shade sails as well as turf upgrades.
Key Projects that have been carried out
during the year are:
Learning Adventures Warkworth
• Replacement of carpet and vinyl
•
Interior painting
• Playground reconfiguration and
new soft fall turf
Active Explorers Ashburton
• Replacement of carpet and vinyl
•
Interior painting
• Reconfiguration of internal areas
for better use of space
Lollipops Hazeldean
• Replacement of carpet
•
Interior painting
• New soft fall throughout outdoor spaces
As a result of the revamp of the New Zealand
Support Office in late 2019, the outsourced
property helpdesk was discontinued and
successfully moved in house, thus enabling a
faster and better coordinated response.
The full reopening of centres in New Zealand
in May 2020 after the Covid-19 lockdown
period provided the opportunity to conduct a
professional clean and sanitisation across all the
centres. This specific cleaning protocol included
a Chemical Fogging process as recommended
by the World Health Organisation. Additionally,
all centres were equipped with an infrared
thermometer to welcome our family and whānau
back with confidence.
LOLLIPOPS
HAZELDEAN
ACTIVE
EXPLORERS
ASHBURTON
LEARNING
ADVENTURES
WARKWORTH
AUSTRALIAN
CENTRES
9
Board Profile
Hamish Stevens
Independent Director and Chair of the Board
Appointed 29 July 2019
Hamish has held independent directorships on several boards
since 2010 and is currently Chair of Pharmaco NZ and East Health
Services, a director of NZX-listed Marsden Maritime Holdings,
Pacific Radiology Group and Counties Power. Hamish is also the
independent Chair of the Waikato Regional Council Risk and
Assurance Committee. Prior to his governance career Hamish held
senior finance positions with Heinz Watties, Tip Top Ice Cream and
DB Breweries. Hamish is a qualified Chartered Accountant.
Chris Scott
Managing Director and Executive Director (Non-Independent)
Appointed 28 November 2018
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's market capitalisation grew
from $4 million in 2010 to a peak of approximately $1.9 billion.
10
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Chris Sacre
Non-Independent Director
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.
Kim Campbell
Appointed 19 September 2019: Independent Director
Chair of Remuneration and People Committee
Kim Campbell attended the University of Canterbury completing a
Bachelor of Arts majoring in Geography.
Kim was the CEO of the Employers & Manufacturers Association.
Kim is currently a Director of Douglas Pharmaceuticals, Chair
of the ASB Showgrounds, Chair of EMH Trade Ltd and Chair of
Auckland Manufacturers Association.
Adrian Fonseca
Appointed 19 September 2019: Independent Director
Chair of Audit and Risk Committee
Adrian Fonseca attended the University of Melbourne completing
a Bachelor of Laws (Hons) and Bachelor of Commerce.
Adrian practised as a banking and finance lawyer at global firms
Allens and Ashurst before spending 17 years in investment banking in
Sydney, Singapore and London with Macquarie Bank, Deutsche Bank
and Barclays Bank. In his last role Adrian was head of a Strategic
Solutions and Financing Team at Deutsche Bank in Singapore.
Adrian is currently the Founder and Managing Director of Oxanda
Education – a large Australian early learning centre owner/
operator with centres across NSW (including Western Sydney),
Victoria and Queensland. Adrian is a Board Member and Deputy
Chairman of the GWS Giants AFL Club and Deputy Chairman of
the GWS Giants Foundation.
Adrian is married with three children and very passionate about
the early education needs of children and heavily involved in
community groups relating to children.
11
Senior Management
Timothy Wong
Chief Executive Officer (New Zealand)
Timothy has held senior leadership roles in both listed and unlisted
companies over the past twenty-five years. He has an MBA and
Bachelor of Commerce from the University of Queensland and
is a fellow of AICD. Prior to joining Evolve Education, he was the
Managing Director of Creative Garden Early Learning Centres and
Cubby Care Early Learning Centres throughout Australia. Tim is
committed to his vision for the ECE sector, especially early years
education and the quality of care.
Edmund Mah
Group CFO
Edmund is an experienced CFO and General Manager who has
extensive experience in various industries in large corporates, small
and medium sized enterprises (SMEs) as well as start-ups. Prior to
joining Evolve, Edmund was the General Manager (with full profit
& loss responsibility) of an Auckland based company which has
grown by leaps and bounds to be a market leader in its industry.
Edmund has also held senior finance leadership roles in a large
public listed multinational group, Keppel, which is headquartered
in Singapore, and has significant international experience.
Edmund has an MBA from the University of Strathclyde and
a Bachelor of Economics from the University of Adelaide. He
is a Fellow CPA (Australia) and has attended the Executive
Development Program at the Wharton School.
Matt Veal
Group Financial Controller
Matt has been Group Financial Controller since May 2019, having
previously contracted for Evolve to facilitate the divestment of
the Porse and Au Pair Link businesses. A qualified Chartered
Accountant, Matt initially worked in audit for Coopers & Lybrand in
Bristol, before moving to Auckland.
Matt has broad experience of finance, management and
governance, having previously held senior leadership roles with
Southern Cross Health Society and Fidelity Life Assurance. He has
also been involved in the start-up sector and is Deputy Chair of the
Board of Glendowie College.
12
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Bev Davies
Head 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.
Jenny Aldous
Head of Project Team
Jenny joined Evolve late last year and Heads the Project Team
with a key focus on the administration, marketing and other key
projects to support systems and process improvement.
Prior to joining Evolve, Jenny was with the Auckland Kindergarten
Association for 12 years, most recently in senior, special project
roles. Her career began in the banking and finance sector, working
for ANZ for a number of years, so Jenny comes to us with more
than 20 years’ experience in project management.
Henry Blundell
Head of Property
Henry’s role as Head of Property sees him manage the property
strategy for Evolve, including all matters related to the acquisition,
development, divestment, lease renewals and maintenance works
required by the business, and ensure the provision of effective and
efficient support for centres and all centre requests.
Henry has an architectural background then moved to work
in the property industry for some of New Zealand’s biggest
property companies including Harcourts, Ray White and Barfoot
& Thompson.
Tomas Stehlik
IT Manager
Tomas is an experienced IT Manager with a strong analytical and
technical skillset across the information technology landscape.
With over a decade of experience in managing all aspects of
IT systems and services within the ECE sector, Tomas is at the
forefront of Evolve’s digital transformation efforts, focusing on
automation and process streamlining across all areas of the
business. He joined Evolve in November 2015.
13
14
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Evolve Education Group Limited
Consolidated Financial Statements
15
Evolve Education Group Limited
Consolidated Financial Statements
For the Year Ended 31 March 2020
The Directors present the Consolidated Financial Statements of Evolve Education Group Limited,
for the year ended 31 March 2020.
The Consolidated Financial Statements presented are signed for and on behalf of the Board and were
authorised for issue on 26 June 2020.
Hamish Stevens
Chair
26 June 2020
Adrian Fonseca
Chair of Audit and Risk Committee
26 June 2020
16
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2020
Note
6
6
7
7
13
5a, 11, 18c
5a , 14
11, 14, 15, 18a
7
7
2, 7
8
5a
$’000
Childcare fees
NZ Ministry of Education funding
Expenses
Employee benefits expenses
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Depreciation
Amortisation
Impairment expenses
Other expenses
Total expenses
Profit/(Loss) before net finance costs and income tax
Finance income
Finance costs
Net finance costs
(Loss) before income tax
Income tax benefit/(expense)
(Loss) after income tax from continuing operations
Profit after income tax from discontinued operations
(Loss) after income tax attributable to the shareholders
of the Company
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Total comprehensive (loss) attributable to the
shareholders of the Company
Earnings per share
Basic (and diluted) (loss)/earnings per share from
continuing operations
Basic (and diluted) (loss)/earnings per share attributable
to the shareholders of the Company
23
23
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
54,408
86,199
140,607
(89,804)
(2,992)
(14,783)
(668)
(13,848)
(161)
(12,341)
(4,294)
46,731
90,446
137,177
(83,518)
(23,521)
(13,528)
–
(2,680)
(377)
(107,139)
(4,278)
(138,891)
(235,041)
1,716
(97,864)
439
(19,585)
(19,146)
143
(2,908)
(2,765)
(17,430)
(100,629)
4,130
(1,770)
(13,300)
(102,399)
–
845
(13,300)
(101,554)
(1,174)
–
(14,474)
(101,554)
Cents
(1.4)
Cents
(26.0)
(1.4)
(25.8)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
17
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 MARCH 2020
ISSUED
SHARE
CAPITAL
FOREIGN
CURRENCY
TRANSLATION
RESERVE
RETAINED
(DEFICIT)/
EARNINGS
TOTAL
$’000
As at 31 March 2018
Note
Change in accounting policy
As at 1 April 2018 (restated)
(Loss) after income tax
Other comprehensive income
Shares issued under Dividend
Re–investment Plan
Share issue costs relating to
shares issued
Dividends paid
20
20
22
159,149
–
159,149
–
–
457
(8)
–
As at 31 March 2019
159,598
Change in accounting policy
2
–
As at 1 April 2019 (restated)
159,598
–
–
–
–
–
–
–
–
–
–
–
–
(1,174)
(2,574)
156,575
(203)
(203)
(2,777)
156,372
(101,554)
(101,554)
–
–
–
–
457
(8)
(3,590)
(3,590)
(107,921)
51,677
(14,803)
(14,803)
(122,724)
36,874
(13,300)
–
–
(13,300)
(1,174)
78,378
(Loss) after income tax
Other comprehensive income
Issue of ordinary shares for
cash, net of transaction costs
–
–
20
78,378
–
As at 31 March 2020
237,976
(1,174)
(136,024)
100,778
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
18
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Consolidated Statement of Financial Position
FOR THE YEAR ENDED 31 MARCH 2020
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
$’000
ASSETS
Current assets
Cash and cash equivalents
Current tax assets
Other current assets
Total current assets
Assets classified as held for sale
Non–current assets
Property, plant and equipment
Right–of–use assets
Deferred tax assets
Intangible assets
Total non–current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Funding received in advance
Borrowings
Lease liabilities
Employee entitlements
Total current liabilities
Liabilities classified as held for sale
Non–current liabilities
Borrowings
Lease liabilities
Total non–current liabilities
Total liabilities
Net assets
EQUITY
Issued share capital
Foreign currency translation reserve
Retained (deficit)/earnings
Total equity
Note
9, 25
10
5b
11
18a
8
13, 14, 15
16
17
25
18b
19
5b
25
18b
20
39,048
1,381
13,761
54,190
25,274
1,229
2,387
28,890
–
672
6,783
178,238
11,926
117,082
314,029
5,824
–
2,145
98,610
106,579
368,219
136,141
19,173
11,804
–
10,495
6,330
47,802
10,294
12,625
30,000
–
5,952
58,871
–
234
17,666
201,973
219,639
25,359
–
25,359
267,441
84,464
100,778
51,677
237,976
(1,174)
(136,024)
100,778
159,598
–
(107,921)
51,677
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 2020
$’000
Note
Cash flows from operating activities
Receipts from childcare fees
NZ Ministry of Education funding
Payments to suppliers and employees
Income taxes paid
Interest received
Net cash flows from operating activities
Cash flows from investing activities
Payments for purchase of businesses
Proceeds from sale of businesses
Cash balances transferred with businesses sold
Proceeds from sale of land and buildings
Payments for software, property, plant and equipment
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Share issue costs
Interest paid on borrowings
Proceeds from borrowings
Repayment of borrowings
Lease interest payments
Lease principal repayments
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
26
13
5a
11
20
20
25
25
7
22
25
9
9
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
54,998
85,378
51,342
96,978
(117,125)
(137,616)
–
439
23,690
(21,441)
596
–
–
(4,516)
(25,361)
83,097
(4,719)
(1,842)
–
(38,000)
(16,904)
(6,187)
–
15,445
13,774
25,274
(3,259)
118
7,563
–
2,617
(6,580)
3,370
(3,565)
(4,158)
–
(8)
(3,411)
92,247
(69,188)
–
–
(3,133)
16,507
19,912
5,362
39,048
25,274
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
20
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
Index to Notes to the Consolidated Financial Statements
Note
Title
Page
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
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
Taxation
Cash and Cash Equivalents
Other Current Assets
Property, Plant and Equipment
Group Information
Business Combinations
Intangible Assets
Impairment
Trade and Other Payables
Funding Received in Advance
Right-of-use Assets and Lease Liabilities
Employee Entitlements
Issued Capital
Capital Management
Dividends
Earnings Per Share (EPS)
Financial Assets and Liabilities
Net Debt Reconciliation
Reconciliation of (Loss) After Tax to Net Operating Cash Flows
Commitments and Contingencies
Related Party Transactions
Auditor’s Remuneration
Events After the Reporting Period
22
22
32
42
45
47
48
49
50
51
51
53
53
55
56
61
61
62
63
63
64
64
65
65
68
69
69
70
72
73
21
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
1.
Reporting Entity
Evolve Education Group Limited (the “Company”) is a company incorporated in New Zealand (“NZ”),
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
1010, 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. During the current period the Group
has expanded its operations to Australia (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 “for-profit” 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 2020 were approved and authorised for issue by the
Board of Directors on 26 June 2020.
Going Concern
The financial statements have been prepared on a going concern basis.
A capital management strategy was agreed with the provider of debt facilities, ASB Bank Limited (“ASB”),
in March 2019. In line with this strategy, a capital raising of $63.4 million pre-costs was completed in June
2019. Proceeds from this raise were used to repay $30 million to ASB by June 2019.
In the interim financial statements to 30 September 2019, the Group disclosed a material uncertainty with
regard to going concern. Subsequently, in December 2019 the Group completed a private placement
raising A$18.9 million pre-costs. This enabled repayment of a further $8 million to ASB in February 2020.
The Group’s operating cash flow remained positive for the financial year.
The Board has considered the impact of Covid-19 on the financial position of the Group. This is
commented on in more detail in Notes 2(a) and 30. While operations have been curtailed as a result of the
Government responses in both New Zealand and Australia, the supportive actions of both Governments
have significantly offset these negative effects. All Evolve centres in New Zealand have been open in line
with the conditions attached to alert levels 3 and 2. All centres in Australia have remained open, in line with
conditions set by the Australian Government. Accordingly, the short-term financial position of the Group
has not been materially impacted by Covid-19.
22
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
Going Concern (continued)
The longer-term effects of Covid-19 are not clear at the present point in time. Acknowledging this inherent
uncertainty, and the likely adverse impacts on economic conditions in both New Zealand and Australia,
these financial statements have been prepared based on currently available information and the Board’s
best estimates. A number of scenarios were considered, reflecting a range of outcomes potentially
resulting from the aftermath of Covid-19.
Key assumptions underpinning the going concern assessment include:
• no further committed acquisitions of centres
• no adverse changes in Covid-19 alert levels or increased restrictions on operations
• occupancy above 70%
• no dividend payments in the forecast period
• continued funding from both the New Zealand and Australian Governments
This assessment indicates that the Group will be able to either continue to meet bank covenants, or repay
the bank loan, and have sufficient cash to discharge its liabilities as they fall due.
Having regard to all of the above, the Board has concluded that it is appropriate that these financial
statements are prepared on a going concern basis, while acknowledging the uncertainties in forecasting in
the current environment.
The Board acknowledges that such uncertainties do not represent material uncertainties in relation to
going concern.
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
Items included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (“the functional currency”). The
consolidated 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.
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 sale
23
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
Estimates and Judgements (continued)
(a) Covid-19
The rapid global rise of Covid-19 has had a significant impact on global economies and financial markets
and asset prices have fluctuated and in some cases materially changed. The pandemic and the response
to it by the Governments of both New Zealand and Australia had only a minimal impact on the Group’s
underlying results up to 31 March 2020 as level 4 alert lockdown only took effect towards the end of
March. The effects have been taken into account for assessments of impairment. The impacts since the
reporting date are greater, with the closure of centres in New Zealand during the level 4 alert. Receipt
of the Government wage subsidy (refer Note 7) enabled the Group to retain all staff on full pay for the
duration of the 12-week subsidy period. The NZ Ministry of Education has maintained its funding at full
levels throughout the current funding period to 30 June 2020, including a 2.3% increase in subsidy rates
from 1 July 2020. The Group’s centres in New Zealand re-opened with limited capacity on 29 April 2020
under Covid-19 alert level 3. The Group’s centres in New Zealand were able to resume operating with full
licenced capacity on 14 May 2020 when the country moved to Covid-19 alert level 2. No parental childcare
fees were charged during alert levels 4 or 3, but have resumed upon the move to level 2.
In Australia, the Government’s Early Childhood Education and Care Relief (ECECR) package and
JobKeeper payment ensured that the Group’s centres continued operating throughout. Under the ECECR
Package, the Australian Government made weekly payments directly to early childhood education and
care services in lieu of the Child Care Subsidy (CCS) and Additional Childcare Subsidy (ACCS) from 6
April 2020 to 28 June 2020. The weekly payment amount is essentially 50% of the total fees charged
by a service during the fortnight commencing 17 February 2020 (reference fortnight). Under the ECECR
package, families are not charged fees. On 8 June 2020, the Australian Government announced that the
ECECR package will be extended until 12 July 2020. From 13 July 2020, CCS and ACCS will recommence
with the introduction of a number of new Government measures to support providers and families through
this period. In addition to CCS, the Government will pay child care services a Transition Payment of 25% of
their fee revenue (based on the reference fortnight) from 13 July to 27 September 2020. JobKeeper will
cease on 20 July 2020.
While there is uncertainty about the longer term impact of Covid-19 on both economies, the Board
appreciates that the NZ Ministry of Education and Australian Government have been very supportive
of the early learning services sectors and the role of early childhood education in the community.
Accordingly, the Board is of the view that the Group is well placed to build on attendance levels at its
NZ centres on the assumption that the Covid-19 alert level is not raised again, and continue to at least
maintain attendance at the Australian centres.
The key components of the financial statements specifically impacted by Covid-19 are impairment of
intangible assets (refer Notes 13, 14 and 15), right-of-use assets (refer Note 18) and property, plant and
equipment (refer Note 11). These areas rely upon forecasts of future profitability as a basis for the carrying
value of assets, and potential impairment. To reflect the uncertainty as at 31 March 2020, forecasts
have been scaled back from previous levels for the purpose of financial reporting. More detail on the
sensitivities of assumptions is provided in Note 15.
(b) 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.
24
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
(c) 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
(e.g. 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.
Goodwill was acquired in the current year in relation to the acquisition of centres in Australia.
(d) Impairment assessments
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether assets have suffered any impairment, in accordance with the accounting policy stated in Notes
3(h) and 3(m). Where impairment indicators exist, for annual goodwill and indefinite useful life intangible
assets’ impairment testing, the recoverable amounts of cash-generating units have been determined.
This requires the use of key assumptions and estimates which require judgement. Further detail on the
assumptions applied are included in Note 15.
(e) Identification of Cash Generating Units
In order to complete the impairment assessments referred to above, the Group must identify 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. 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 adopted the following:
• New Zealand – Individual ECEs are identified as CGUs. These CGUs have been tested for impairment
where an indicator exists. Indefinite useful life intangible assets in New Zealand have not been allocated
to individual ECEs and therefore the impairment assessment is performed for the New Zealand group
of CGUs which is the same as the New Zealand operating segment.
• Australia – Individual ECEs are identified as CGUs. These CGUs have been tested for impairment where
an indicator exists. Goodwill in Australia has been allocated to four groups of CGUs. Refer to Note 15
for further information.
(f) Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences. Forecasts prepared for the
purpose of impairment testing (refer Notes 2(a) and 15) indicate future taxable amounts will be available to
utilise these temporary differences. The deferred tax assets are therefore considered to be recoverable.
New and Amended Standards Adopted by the Group
NZ IFRS 16: Leases
The Group has adopted NZ IFRS 16: Leases retrospectively from 1 April 2019, but has not restated
comparatives for the 2019 reporting period, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 April 2019. The new accounting policies are disclosed in
Note 3.
On adoption of NZ IFRS 16, the Group recognised lease liabilities in relation to leases which had previously
been classified as ‘operating leases’ under the principles of NZ IAS 17: Leases. These liabilities were
measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate as at 1 April 2019. The lessee’s weighted average incremental borrowing rate applied to the
lease liabilities on 1 April 2019 was 8.65%.
25
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group (continued)
NZ IFRS 16: Leases (continued)
Measurement of lease liabilities
$’000
Operating lease commitments disclosed as at 31 March 2019
Discounted using the lessee's incremental borrowing rate
at the date of initial application
Add: Adjustments as a result of different treatment of extension
and termination options
Less: Low-value and short-term leases not recognised as liabilities
Lease liabilities recognised as at 1 April 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Measurement of right-of-use assets
131,644
91,807
100,212
(2,178)
189,841
5,805
184,036
189,841
The associated right-of-use assets for leases were measured using the modified retrospective approach
and applied retrospectively from 1 April 2019 as if the NZ IFRS 16 standard had always been applied.
The recognised right-of-use assets relate to the following types of assets:
$’000
Properties
Motor vehicles
Total right-of-use assets
Adjustments recognised on adoption of NZ IFRS 16
The effect of adopting NZ IFRS 16 is as follows:
$’000
Assets
Right-of-use assets
Deferred tax assets
Total assets
Liabilities
Lease liabilities
Other payables
Total liabilities
Equity
Retained earnings
Total adjustment to equity
26
AS AT
1 APRIL 2019
167,643
359
168,002
AS AT
1 APRIL 2019
168,002
5,725
173,727
189,841
(1,311)
188,530
(14,803)
(14,803)
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group (continued)
NZ IFRS 16: Leases (continued)
Adjustments recognised on adoption of NZ IFRS 16 (continued)
Increase/(decrease)
$’000
Revenue
Expenses
Building occupancy expenses
Direct expenses of providing services
Depreciation
Impairment expense
Remeasurement adjustments (Other expenses)
Total expenses
Profit before net finance costs and income tax
Finance income
Finance costs
Net finance costs
(Loss) before income tax
(i)
Impact on earnings per share
YEAR
31 MARCH 2020
–
(22,141)
(205)
11,543
7,840
(916)
(3,879)
3,879
–
16,904
16,904
(13,025)
Earnings per share decreased by 1.0 cents per share for the year ended 31 March 2020 as a result of
the adoption of NZ IFRS 16.
(ii) Practical expedients applied
In applying NZ IFRS 16 for the first time, the Group has used the following practical expedients
permitted by the standard:
•
•
•
•
reliance on previous assessments of whether leases are onerous as a proxy for impairment testing;
the accounting for operating leases with a remaining lease term of less than 12 months as at
1 April 2019 as short–term leases;
the exclusion of initial direct costs for the measurement of the right–of–use assets at the date of
initial application; and
the use of hindsight in determining the lease term where the contract contains options to extend
or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of
initial application. Instead, for contracts entered into before the transition date the Group relied on its
assessment made applying NZ IAS 17 whether an arrangement contains a lease.
27
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group (continued)
NZ IFRS 16: Leases (continued)
Adjustments recognised on adoption of NZ IFRS 16 (continued)
The following tables shows the effect of adopting NZ IFRS 16 on the Consolidated Statement
of Comprehensive Income and Consolidated Statement of Financial Position for the year ended
31 March 2020.
NZ IFRS 16: Leases – Impact on Consolidated Statement of Comprehensive Income
$’000
Childcare fees
NZ Ministry of Education funding
Expenses
Employee benefits expense
Building occupancy expenses
Direct expenses of providing services
Acquisition expenses
Depreciation
Amortisation
Impairment expenses
Other expenses
Total expenses
YEAR 31
MARCH 2020
YEAR 31
MARCH 2020
YEAR 31
MARCH 2020
YEAR 31
MARCH 2019
Statutory
NZ IFRS 16
Adjustment
Pre-NZ
IFRS 16
Pre-NZ IFRS
16 (Statutory)
54,408
86,199
140,607
(89,804)
(2,992)
(14,783)
(668)
–
–
–
–
(22,141)
(205)
–
(13,848)
11,543
(161)
(12,341)
(4,294)
–
7,840
(916)
54,408
86,199
46,731
90,446
140,607
137,177
(89,804)
(25,133)
(14,988)
(668)
(2,305)
(161)
(4,501)
(5,210)
(83,518)
(23,521)
(13,528)
–
(2,680)
(377)
(107,139)
(4,278)
(138,891)
(3,879)
(142,770)
(235,041)
(Loss)/Profit before net finance costs
and income tax
1,716
(3,879)
(2,163)
(97,864)
Finance income
Finance costs
Net finance costs
439
(19,585)
(19,146)
–
16,904
16,904
439
(2,681)
(2,242)
143
(2,908)
(2,765)
(Loss)/Profit before income tax
(17,430)
13,025
(4,405)
(100,629)
Income tax expense
4,130
(3,647)
483
(1,770)
(Loss)/Profit after income tax from
continuing operations
Profit/(Loss) after income tax from
discontinued operations
(13,300)
9,378
(3,922)
(102,399)
–
–
–
845
(Loss)/Profit after income tax attributable
to the shareholders of the Company
(13,300)
9,378
(3,922)
(101,554)
Other comprehensive income
Items that may be reclassified to
profit or loss
Exchange differences on translation of
foreign operations
Total comprehensive (Loss)/Profit
attributable to the shareholders of the
Company
28
(1,174)
–
(1,174)
–
(14,474)
9,378
(5,096)
(101,554)
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group (continued)
NZ IFRS 16: Leases (continued)
Adjustments recognised on adoption of NZ IFRS 16 (continued)
NZ IFRS 16: Leases – Impact on Consolidated Statement of Financial Position
$’000
ASSETS
Current assets
Cash and cash equivalents
Current tax assets
Other current assets
Total current assets
Assets classified as held for sale
Non–current assets
Property, plant and equipment
Right–of–use assets
Deferred tax assets
Intangible assets
Total non–current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Funding received in advance
Borrowings
Lease liabilities
Employee entitlements
Total current liabilities
Liabilities classified as held for sale
Non–current liabilities
Borrowings
Lease liabilities
YEAR 31
MARCH 2020
YEAR 31
MARCH 2020
YEAR 31
MARCH 2020
YEAR 31
MARCH 2019
Statutory
NZ IFRS 16
Adjustment
Pre–NZ
IFRS 16
Pre–NZ IFRS
16 (Statutory)
39,048
1,381
13,761
54,190
–
6,783
–
–
–
–
–
–
178,238
(178,238)
11,926
117,082
(9,401)
–
314,029
(187,639)
39,048
1,381
13,761
54,190
25,274
1,229
2,387
28,890
–
672
6,783
–
2,525
117,082
126,390
5,824
–
2,145
98,610
106,579
368,219
(187,639)
180,580
136,141
19,173
11,804
–
10,495
6,330
47,802
–
17,666
(144)
–
–
(10,495)
–
(10,639)
–
–
19,029
11,804
–
–
6,330
37,163
10,294
12,625
30,000
–
5,952
58,871
–
234
17,666
25,359
201,973
(201,973)
–
–
Total non–current liabilities
219,639
(201,973)
17,666
25,359
Total liabilities
Net assets
EQUITY
Issued share capital
Foreign currency translation reserve
Retained (deficit)/earnings
Total equity
267,441
(212,612)
54,829
84,464
100,778
24,973
125,751
51,677
237,976
(1,174)
(136,024)
100,778
–
(19)
24,992
24,973
237,976
(1,193)
159,598
–
(111,032)
(107,921)
125,751
51,677
29
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group (continued)
NZ IFRS 16: Leases (continued)
The Group’s leasing activities and how these are accounted for
The Group leases childcare centres, motor vehicles and office equipment. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants, but leased assets may not be used as security for borrowing purposes.
Prior to 1 April 2019, leases of property, vehicles and office equipment were classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) were charged to
the statement of comprehensive income on a straight-line basis over the period of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset with a corresponding liability at the date
at which the leased asset is available for use by the Group. Each lease payment is allocated between
repayment of the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease
term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of the following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
•
•
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising
that option.
The lease payments are discounted using the lessee’s incremental borrowing rate, being the rate that the
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
•
•
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• any restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-
line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets consist of office equipment.
30
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
2.
Basis of Preparation (continued)
New Standards and Interpretations Not Yet Adopted
The Group has adopted all applicable Financial Reporting 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
2020. The assessment and expected impact of those that are relevant to the Group are set out below:
NZ IFRS 3: Business Combinations – definition of a business
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 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.
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.
The amendments to NZ IFRS 3 described above are 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 December 2020 (refer Note 30).
There are no other new standards, amendments or interpretations that are not yet effective that are
applicable to the Group.
31
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies
The accounting policies set out below have been applied consistently in these consolidated financial
statements, and have been applied consistently by all 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.
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 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.
32
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(a) Basis of Consolidation (continued)
Assets held for sale (continued)
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.
(c) Revenue
Revenues are recognised when the Group satisfies its performance obligations by providing early
childhood education services to customers.
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. Australian Government funding relates to fees paid under the Child Care Subsidy
and are recognised when there is reasonable assurance that the funding will be received. Australian
Government funding is received in arrears. The performance obligations are satisfied over time as the
child simultaneously receives and consumes the benefits.
33
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(c) Revenue (continued)
Ministry of Education New Zealand (“MOE NZ”) funding
MOE NZ 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 NZ is presented separately from the related costs of providing
services in the Statement of Comprehensive Income. Income receivable from the MOE NZ by way of a
reconciliation 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.
(d) Taxation
Tax expense
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in the
Consolidated Statement of Comprehensive Income except to the extent that it relates to a business
combination, or items recognised directly in equity or in other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect
of previous years.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is
not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss,
• 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.
34
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(e) Foreign Currency Translation
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies
at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they
relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of
the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of
comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in
the statement of comprehensive income, on a net basis, within other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair value gain or loss.
Group companies
The results and financial position of foreign operations that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
• assets and liabilities are translated at the closing rate on the reporting date
• income and expenses are translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions), and
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign
entities, and of borrowings and other financial instruments designated as hedges of such investments, are
recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming
part of the net investment are repaid, the associated exchange differences are reclassified to profit or
loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at the closing rate.
(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. Under
Company Law in New Zealand, a distribution is authorised when it is approved by the Directors. A
corresponding amount is recognised directly in equity.
35
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
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 to 10 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 Note 3(m) –
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
4 years
4 years
Management contracts
4 years
Software
Brands
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.
36
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(i) Leases
As explained in Note 2, the Group has changed its accounting policy for leases where the Group is the
lessee. The impacts of the new policy are described in Note 2.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred,
and lease payments made at or before the commencement date less any lease incentives received. The
recognised right-of-use assets are depreciated on a straight-line basis over the shorter of useful life and
the lease term.
Impairment of right-of-use assets
Right-of-use assets are reviewed at each reporting date to determine whether there is any indication of
impairment. The assessment is conducted as described in Note 3(m).
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments
(including in substance fixed payments) less any lease incentives receivable and variable lease payments
that depend on an index or a rate. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating a
lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments
that do not depend on an index or a rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the
lease commencement date as the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if
there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a
change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short term leases of properties (i.e.
those leases that have a lease term of 12 months or less from the date of transition).
The Group applies the low-value assets recognition exemption to leases of office equipment that are
considered of low value ($10,000 or less). Lease payments on short-term leases and leases of low-value
assets are recognised as expense on a straight-line basis over the lease term.
Determining the lease term of contracts with renewal options
The Group determines the lease term as being the non-cancellable term of the lease, together with any
periods covered by an option to extend the lease if it is reasonably certain to be exercised, less any
periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
37
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(i) Leases (continued)
Determining the lease term of contracts with renewal options (continued)
The Group has the option, under some of its leases, to lease the assets for additional terms. The Group
applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. It
considers all relevant factors that create an economic incentive for it to exercise the renewal. After the
commencement date, the Group reassesses the lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to exercise (or not to exercise) the option
to renew. Assuming the exercise of a right of renewal results in an increase in both the lease liability and
right-of-use asset.
Previous policy
Until 31 March 2019, leases in which a significant portion of the risks and rewards of ownership were not
transferred to the Group as lessee were classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line
basis over the period of the lease. No leases were previously classified as finance leases.
(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 de-
recognises 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, lease liabilities and trade and other payables.
38
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(j) Financial Instruments (continued)
Trade and other payables
Trade and other payables are obligations to pay for goods or services that have been acquired in the
ordinary course of business from suppliers. They are classified as current liabilities if payment is due within
one year or less. If not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
(k) Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from equity, net of any tax effects.
(l) Reserves
Foreign Currency Translation Reserves
Exchange differences arising on translation of the foreign controlled entities are recognised in other
comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to the consolidated statement of comprehensive income when the net investment is disposed of.
(m) 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 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.
39
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(n) 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
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.
The Group contributes to Kiwisaver in New Zealand and superannuation funds in Australia.
(o) Expenses
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 costs
Finance costs comprise interest expense on borrowings and establishment fees, as well as the interest
calculated on lease liabilities. All borrowing costs are recognised in the Consolidated Statement of
Comprehensive Income using the effective interest method.
(p) 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. Lease payments are included as
a financing activity.
40
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
3.
Significant Accounting Policies (continued)
(q) 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 Managing Director.
(r) 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.
(s) Share Based Payments
Certain senior managers formerly received remuneration in the form of share-based payment
transactions, whereby employees rendered 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.
(t) 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.
41
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
4.
Segment Information
During the previous year ended 31 March 2019, the Group had two reportable operating segments,
as described below. The Group operated entirely within New Zealand. Each segment was managed
separately. For each of the segments, the Group’s Managing Director (“Group MD” and the “Chief
Operating Decision Maker”) reviewed 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.
The Home-based ECE businesses was sold during the previous year ended 31 March 2019. This segment
met the definition of a discontinued operation (refer Note 5a). Following the disposal, the management of
ECE Centres became the only reportable operating segment.
However, during the current year ended 31 March 2020, the Group acquired ten childcare centres across
Queensland and Victoria, Australia (refer Note 13). As a result of the acquisition of these centres, the
Group now reports operating segments by geographical location, namely New Zealand and Australia.
Other operations included ECE Management, a non-reportable segment, through which the Group
provided management and back-office expertise to ECE centres it did not operate. This operation was
sold during the previous year ended 31 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.
As a result of these changes in the composition of the Group, segmental results are now presented on a
geographical rather than product basis. The prior period has not been restated as the change in segments
has arisen from the disposal of the Home-based ECE business in the previous period, and acquisition of
Australian ECE centres in the current period, rather than a reorganisation of ongoing businesses.
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.
The Group accounting policies are applied consistently to each reporting segment.
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 MD and Board. EBITDA and underlying EBITDA are not defined
by NZ GAAP, IFRS or any other body of accounting standards and the Group’s calculation of this measure
may differ from similarly titled measures presented by other companies.
Underlying EBITDA excludes the effects of NZ IFRS 16: Leases, gains and losses on the sale or closure
of businesses, acquisition and integration costs, impairment losses (or reversals of impairment losses),
restructuring costs and non-operational items.
The above items can be driven by factors other than those that impact the underlying performance of the
business. Underlying EBITDA excludes the impact of these items to allow the Group MD to measure the
financial performance trends of the underlying businesses from period to period and enable necessary
decision-making.
42
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
4.
Segment Information (continued)
The segment information for the years ended 31 March 2019 and 2020 is presented in the following tables:
31 March 2020
Childcare fees
NZ Ministry of Education
funding
Operating expenses
Underlying EBITDA
NZ IFRS 16
rental expense adjustment
NZ IFRS 16
remeasurement gains
Non-underlying or
non-operational items:
Restructuring costs
(Loss)/Gain on sale or closure
of businesses
Other items
Acquisition costs
6
7
13
New Zealand
ECE centres
Australia
ECE centres
Support and
Corporate
functions
Consolidated
Note
$’000
$’000
$’000
$’000
44,752
9,656
86,199
–
130,951
9,656
–
–
–
54,408
86,199
140,607
(114,181)
16,770
(8,493)
1,163
(9,699)
(132,373)
(9,699)
8,234
20,821
1,251
203
22,275
916
–
(1,477)
–
–
–
–
–
(89)
(668)
–
916
(1,011)
(1,011)
–
(1,477)
(114)
–
–
(203)
(668)
(12,341)
Impairment expenses
11,14,15,18
(6,903)
(5,438)
EBITDA
Depreciation
Amortisation
Earnings before interest and
income tax
30,127
(3,781)
(10,621)
15,725
11, 18
14
(13,153)
–
(648)
–
(47)
(161)
(13,848)
(161)
16,974
(4,429)
(10,829)
1,716
Net finance costs
7
(15,516)
(1,388)
(2,242)
(19,146)
Reportable segment profit/
(loss) before income tax
Less: profit before income tax
from discontinued operations
(Loss) before income tax from
continuing operations
1,458
(5,817)
(13,071)
(17,430)
5a
–
–
–
–
(17,430)
Total assets
Total liabilities
270,529
61,288
36,402
368,219
(181,358)
(66,700)
(19,383)
(267,441)
Total assets within the support and corporate functions segment are primarily cash and cash
equivalents. Total liabilities within the support and corporate functions segment are primarily
borrowings. This is reflective of the Group managing financing activities centrally rather than allocating
this to operating segments.
43
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
4.
Segment Information (continued)
Home-based
ECE
(Discontinued)
Support and
Corporate
functions
ECE centres
Consolidated
Note
$’000
$’000
$’000
$’000
46,379
1,155
90,446
11,548
–
300
6
136,825
13,003
–
–
352
352
47,534
101,994
652
150,180
(113,850)
(12,425)
(10,648)
(136,923)
22,975
578
(10,296)
13,257
31 March 2019
Childcare fees
NZ Ministry of Education
funding
Other
Operating expenses
Underlying EBITDA
Non-underlying or
non-operational items:
Gain on sale of assets
(Loss)/gain on sale and closure
of businesses
Impairment expense –
intangible assets
EBITDA
Depreciation
Amortisation
Earnings before interest and
income tax
Net finance costs
Reportable segment profit/
(loss) before income tax
Less: (loss) before income tax
from discontinued operations
(Loss) before income tax from
continuing operations
Onerous lease expense
5a
(385)
(1,201)
14, 15
(107,139)
–
293
(275)
–
1,612
–
20
–
–
293
1,357
(1,586)
(107,139)
11
14
7
5a
(84,531)
989
(10,276)
(93,818)
(2,582)
–
(15)
(56)
(98)
(377)
(2,695)
(433)
(87,113)
918
(10,751)
(96,946)
–
–
(2,765)
(2,765)
(87,113)
918
(13,516)
(99,711)
(918)
(100,629)
Total assets
Total liabilities
109,537
(25,006)
–
–
26,604
136,141
(59,458)
(84,464)
44
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
5.
Discontinued Operations and Non-current Assets Held for Sale
(a) Discontinued operations
There are no discontinued operations or assets held for sale during the current year ended 31 March 2020.
During the previous year ended 31 March 2019, the Group divested all of the businesses of the Home-
based ECE operating segment, enabling the Group to concentrate on its core business of centre-based
early childhood education.
Financial information presented is for the period to 30 November 2018 for the four PORSE companies
(PORSE), and to 31 January 2019 for Au Pair Link Limited (APL).
The profit/(loss) for the previous year ended 31 March 2019 from the discontinued operation is analysed
as follows:
$’000
Revenue
Depreciation
Amortisation
Operating expenses
(Loss) before income tax
Income tax expense
(Loss) after income tax
Gain on sale of the discontinued operation after income tax
Profit after income tax from the discontinued operation
Basic (and diluted) earnings/(loss) per share
from discontinued operations (cents per share)
YEAR
31 MARCH 2019
13,003
(15)
(56)
(13,626)
(694)
(73)
(767)
1,612
845
0.2
The cash flow for the previous year ended 31 March 2019 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
4,950
2,550
(249)
(6,580)
(4,279)
671
45
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
5.
Discontinued Operations and Non-current Assets Held for Sale (continued)
(a) 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 sale agreement of the PORSE companies, the Group retained the lease of the office
formerly used as the PORSE head office. An onerous lease provision was established in the previous
period for the assessed future liability through to the end of the lease term. This was included within the
onerous lease provision within trade and other payables (refer Note 16). With the adoption of NZ IFRS 16:
Leases from 1 April 2019, the remaining onerous lease liability is now incorporated in the right-of-use asset.
The carrying amounts of assets and liabilities of PORSE at the date of sale were:
30 NOVEMBER
2018
6,580
230
97
332
102
7,341
(2,035)
(3,325)
(158)
(410)
(1,030)
(6,958)
$’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
46
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
5.
Discontinued Operations and Non-current Assets Held for Sale (continued)
(a) Discontinued operations (continued)
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
31 JANUARY
2019
23
49
126
198
(b) Assets and liabilities held for sale
There were four centres held for sale as at 31 March 2019. Of these, one centre was closed, another two
sold and the remaining centre withdrawn from sale during the year ended 31 March 2020. No additional
assets were classified as held for sale during the year. As a result, there are no assets held for sale as at 31
March 2020.
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)
$’000
Revenue from continuing operations:
Childcare fees
Other revenue
Total revenue from contracts with customers
NZ Ministry of Education funding
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
54,408
–
54,408
86,199
46,079
652
46,731
90,446
140,607
137,177
47
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
7.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
Other Expenses
$’000
Included in other expenses are:
Audit fees
Directors' fees
NZ IFRS 16 remeasurement adjustments
Other items
Total other expenses
Note
29
28
2
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
410
415
(916)
4,385
4,294
247
472
–
3,559
4,278
Other items includes corporate and support office costs not already disclosed separately.
Building occupancy expenses
In the previous period, building occupancy expenses of $23.5 million included $21.5 million of expenditure
in relation to minimum operating lease payments. For the current period, lease payments are now
accounted for under NZ IFRS 16 (refer Note 18). The remaining building occupancy costs comprise rates
and insurance.
Employee benefits expense
$’000
Wages and salaries
Kiwisaver contributions
Superannuation fund contributions
Payments to agency contractors
Share-based payment
Government wage subsidy
Other employee benefits expense
Total employee benefits expense
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
82,899
1,959
510
4,795
18
(801)
424
89,804
77,735
1,961
–
2,416
–
–
1,406
83,518
As the NZ ECE centres had to close during level 4 of the Covid-19 response, and had much reduced
attendance during level 3, no revenue from parental fees was earned during this period. The Group
therefore met all the qualification criteria for the Government wage subsidy scheme. A total subsidy of
$12.0 million was received in early April, covering the period from 26 March to 17 June. The subsidy has
been recognised as a deduction from employee benefits expense on a straight-line basis over the period
the subsidy covers. The Group has continued to pay all employees in full during this period. The Group has
not applied for the wage subsidy extension as it does not meet the new criteria.
48
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
7.
Disclosure of Items in the Consolidated Statement of Comprehensive Income (continued)
Net finance costs
$’000
Interest received
Bank deposits
Total finance income
Interest expense
Interest on borrowings
Interest on lease liabilities
Total finance costs
Net finance costs
8.
Taxation
Income tax expense
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
Note
439
439
(2,681)
(16,904)
(19,585)
143
143
(2,908)
–
(2,908)
(19,146)
(2,765)
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 (benefit)/expense on continuing operations
Reconciliation of tax expense
Tax expense is reconciled to accounting profit as follows:
$’000
(Loss) before income tax from continuing operations
At the statutory income tax rate of 28%
Non-assessable income and non-deductible expenses
for tax purposes:
Difference in overseas tax rate
Impairment of goodwill
Non-deductible expenses
Prior year adjustments
Total income tax expense on continuing operations
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
541
(660)
(119)
(4,074)
63
(4,011)
(4,130)
2,359
73
2,432
(516)
(146)
(662)
1,770
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
(17,430)
(4,880)
(100,629)
(28,176)
(116)
1,197
266
(597)
(4,130)
–
29,999
20
(73)
1,770
49
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
8.
Taxation (continued)
Deferred tax
Deferred tax relates to the following:
31 MARCH 2020
31 MARCH 2019
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement of
Financial
Position
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement of
Financial
Position
117
(4)
(3,567)
7,485
218
(238)
4,011
1,558
(893)
(50,681)
60,301
1,053
588
11,926
26
(62)
–
–
126
572
662
1,430
(913)
–
–
823
805
2,145
$’000
Property, plant and equipment
Intangible assets
Right–of–use assets
Lease liabilities
Employee entitlement provisions
Other temporary differences
Deferred tax benefit
Net deferred tax assets
Net deferred tax assets increased to $11.9 million at 31 March 2020 primarily as a result of the adjustment
on adoption of NZ IFRS 16 of $5.7 million (refer to Note 2) and the overall amount charged to profit or loss
of $4.0 million.
The movement on net deferred tax assets in the previous period included amounts from both continuing
and discontinued operations.
Imputation credits
Imputation credits available for use in subsequent reporting periods are $11.3 million (2019: $11.3 million),
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 that would affect the available imputation credits at 31
March 2020. There are not yet any Australian franking credits available.
9.
Cash and Cash Equivalents
$’000
Cash at banks and on hand
Short–term deposits
Total cash and cash equivalents
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
15,064
23,984
39,048
572
24,702
25,274
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 24 for details of amendments to bank facility terms during the year, and Note 20 for
changes in share capital, which have impacted the amount of cash and cash equivalents held.
50
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
10. Other Current Assets
$’000
Trade receivables
Government wage subsidy receivable
Prepayments and sundry receivables
Total other current assets
Note
7
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
1,138
12,009
614
13,761
293
–
2,094
2,387
The NZ Government wage subsidy was received in early April.
11.
Property, Plant and Equipment
31 March 2020
Land Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
$’000
Cost
Opening balance
Additions/Transfers
Acquisition of
businesses
Reclassified as no
longer held for sale
Disposals
Closing balance
Depreciation and
impairment
Opening balance
Depreciation for
the year
Reclassified as no
longer held for sale
Impairment expense
Disposals
Closing balance
Net book value
Note
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
831
6,968
4,220
128
984
13,131
361
772
2,406
96
827
4,462
–
205
–
42
79
238
–
–
–
–
205
359
(75)
(341)
(367)
(96)
(641)
(1,520)
1,159
7,683
6,497
128
1,170
16,637
(450)
(5,081)
(1,697)
(79)
–
(7,307)
(203)
(786)
(1,299)
(17)
–
(2,305)
(19)
(35)
(108)
(27)
45
(79)
281
(333)
–
–
–
(162)
(70)
(509)
76
27
–
429
(654)
(5,700)
(3,361)
(69)
(70)
(9,854)
505
1,983
3,136
59
1,100
6,783
51
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
11.
Property, Plant and Equipment (continued)
31 March 2019
Land
Buildings
Plant and
Equipment
Office
Furniture
and Fittings
Leasehold
Improve-
ments
Motor
Vehicles
Work in
Progress
Total
Note
$’000
Cost
Opening balance
Additions/Transfers
Classified as held for sale
5b
Disposals
Closing balance
Depreciation and
impairment
Opening balance
Depreciation for
the year
Classified as held for sale
5b
Disposals
Closing balance
Net book value
725
2,195
715
9,034
3,226
213
371
16,479
–
–
–
–
203
(55)
838
1,765
27
613
3,446
(228)
(281)
(16)
–
(580)
(725) (2,195)
(32)
(2,676)
(490)
(96)
– (6,214)
–
–
831
6,968
4,220
128
984
13,131
–
–
–
–
–
–
(18)
(308)
(6,206)
(1,237)
(124)
– (7,893)
–
–
18
–
–
(180)
(1,478)
(1,008)
(29)
– (2,695)
25
13
151
2,452
131
417
7
67
–
–
314
2,967
(450)
(5,081)
(1,697)
(79)
– (7,307)
381
1,887
2,523
49
984
5,824
In the previous year ended 31 March 2019, centre land and buildings with a book value of $2.9 million were
sold for $3.3 million, resulting in a gain on sale of $0.4 million, included within other operating expenses.
There were no land and buildings owned or sold during the current year. Disposals arise either when
individual assets are no longer required or become obsolete, or when a centre has been closed or sold.
Depreciation for the previous period included amounts for both continuing and discontinued operations.
52
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
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
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
NZ
31 March
31 March
31 March
31 March
31 March
31 March
31 March
100%
100%
100%
100%
100%
100%
100%
31 March
100%
31 March
31 March
31 March
31 March
31 March
31 March
100%
100%
100%
100%
100%
100%
31 March
100%
Evolve Early Education Pty Ltd
ECE centre owner
Australia
31 March
100%
* the assets and operations of these businesses were sold during the previous year ended 31 March 2019,
and these companies have been wound down (refer Note 5).
Porse In Home Childcare (NZ) Limited, Porse Franchising (NZ) Limited, Porse Education and Training (NZ)
Limited and For Life Education & Training (NZ) Limited were sold on 3 December 2018 (refer Note 5).
13. Business Combinations
During the year ended 31 March 2020, the Group acquired ten ECE centres from four separate vendors
across Queensland and Victoria, Australia, for a total consideration of $21.6 million. Total net liabilities
acquired were $0.9 million resulting in goodwill on acquisition of $22.5 million. No cash was acquired.
There have been no material adjustments to the provisional values of these acquisitions. A summary of the
net liabilities acquired is included in the following table.
53
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
13. Business Combinations (continued)
Assets and liabilities acquired and consideration paid
Assets
Property, plant and equipment
Liabilities
Employee entitlements
Other current liabilities
Total identifiable net liabilities at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Purchase consideration
Cash paid
Contingent consideration
Total consideration
$’000
205
205
(705)
(396)
(1,101)
(896)
22,542
21,646
21,441
205
21,646
The goodwill of $22.5 million predominantly comprises the future earnings potential of bringing together
a group of ECE centres under one centrally managed group. Goodwill is allocated to each of the group of
CGUs identified in Note 2(e), as appropriate.
Assessment of the businesses acquired did not identify any separable intangible assets other than
goodwill.
Acquisitions from related parties are disclosed in Note 28.
As at 31 March 2020, the acquisitions have contributed revenue of $9.7 million and a net profit before tax
of $0.3 million to the Group’s results before allowing for upfront acquisition expenses of $0.7 million and
impairment expenses.
Refer to Note 15 regarding testing for impairment. An impairment expense of $5.4 million has been
recognised at 31 March 2020.
Contingent Consideration
As part of the purchase agreements with previous owners, a portion of the consideration was determined
to be contingent, based on the performance of the acquired businesses.
The following table outlines the additional amounts payable to the previous owners if the specified
performance conditions are met.
31 March 2020
Conditions
Acquisition of 7 centres
12 months performance hurdles based on EBIT
Total potential
contingent
consideration
payable
Carrying
value
$’000
$’000
1,950
1,950
205
205
54
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
13. Business Combinations (continued)
Movement in Contingent Consideration
A reconciliation of the fair value of the contingent consideration liability is provided below.
Contingent consideration for new acquisitions
Total contingent consideration payable as at 31 March 2020
AS AT
31 MARCH 2020
$’000
205
205
14.
Intangible Assets
31 March 2020
$’000
Cost
Opening balance
Additions
Note
Acquisition of businesses
Closing balance
Amortisation and impairment
Opening balance
Amortisation expense
Impairment expense
15
Closing balance
Net book value
31 March 2019
$’000
Cost
Opening balance
Additions
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
141
–
–
141
(141)
–
–
(141)
–
–
–
–
–
–
–
–
–
–
372
1,338
3,104
203,381
208,336
–
–
54
–
–
–
–
54
22,571
22,571
372
1,392
3,104
225,952
230,961
(372)
(1,118)
–
–
(161)
–
–
–
–
(108,095)
(109,726)
–
(161)
(3,992)
(3,992)
(372)
(1,279)
– (112,087) (113,879)
–
113
3,104
113,865
117,082
Customer
Lists
Syllabus
Material
Management
Contracts
Software
Brands
Goodwill
Total
Note
301
200
372
3,077
4,787
214,868
223,605
Classified as held for sale
5b
Disposal of businesses
(160)
(200)
–
–
–
–
–
–
–
149
–
–
–
–
(369)
149
(369)
(1,888) (1,683)
(11,118)
(15,049)
Closing balance
141
–
372
1,338
3,104
203,381
208,336
Amortisation and impairment
Opening balance
(277)
(200)
(310)
(2,409) (1,683)
(11,556)
(16,435)
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
(24)
160
–
–
(141)
–
–
–
(62)
(347)
–
–
(433)
200
–
1,638
1,683
10,600
14,281
–
–
–
–
–
–
–
–
–
–
–
(3,850)
(3,850)
(103,289)
(103,289)
(372)
(1,118)
– (108,095) (109,726)
–
–
220
3,104
95,286
98,610
–
–
369
369
Amortisation expense includes amounts for both continuing and discontinued operations.
55
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
15.
Impairment
Impairment assessment of CGUs excluding indefinite useful life intangible assets
The impairment assessment of CGUs concluded that an impairment indicator existed as a result of
Covid-19 prevention measures imposed by the government as described in Note 2. The CGUs were tested
for impairment by calculating the recoverable amount. CGUs which were loss-making were fully impaired.
A total of $8.3 million was calculated as an impairment and recorded in profit or loss. The discount rate
used to perform the assessment was a pre-tax rate of 13.9%. The calculated impairment was allocated to
the following asset classes by reportable segment:
31 March 2020
$’000
Impairment expense – right-of-use assets
Impairment expense – property, plant and equipment
New Zealand
Australia
Total
6,393
509
6,902
1,447
–
1,447
7,840
509
8,349
Impairment assessment of indefinite useful life intangible assets
31 March 2020
$’000
Goodwill
Brands with indefinite useful lives
31 March 2019
$’000
Goodwill
Brands with indefinite useful lives
New Zealand
New Zealand
Australia
Total
95,286
18,579
113,865
3,104
–
3,104
98,390
18,579
116,969
NZ ECE
Centres
Home-based
ECE
Total
95,286
3,104
98,390
–
–
–
95,286
3,104
98,390
The New Zealand indefinite useful life intangible assets balance of $98.4 million has been tested for
impairment as at 31 March 2020.
The recoverable amount of the group of NZ CGUs to which indefinite useful life intangible assets has been
allocated was determined using a value-in-use discounted cash flow methodology using Board approved
cash flow forecasts covering a five-year period. Forecasts have been revised to reflect the uncertainty
arising from the Covid-19 pandemic and its aftermath.
No impairment has been recognised in the year ended 31 March 2020, however reasonably possible
changes in the key assumptions could result in an impairment.
Australia
The carrying amount of the four Australian CGUs including a goodwill balance of $22.6 million has also
been tested for impairment at 31 March 2020.
The recoverable amount of the four groups of Australian CGUs to which goodwill has been allocated was
determined using a value-in-use discounted cash flow methodology. In view of the short trading history,
acquisition forecasts were used as a basis for the five-year forecast period. These forecasts were adjusted to
reflect the uncertainty arising from the Covid-19 pandemic and its aftermath, and approved by the Board.
An impairment of goodwill of $4.0 million has been recognised in the year ended 31 March 2020, leaving a
carrying value of $18.6 million.
56
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
15.
Impairment (continued)
NZ ECE Centres – Goodwill
Key assumptions used in value-in-use calculations
The key “base” assumptions used in the calculation of value-in-use for NZ ECE Centres are:
• Revenue growth through the forecast period
• Wages 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 NZ Centres:
Revenue growth attributable to parental fee pricing
(% per annum on average)
Revenue growth attributable to MOE funding rates
(% per annum on average)
Revenue growth attributable to increase in occupancy
(% per annum on average)
Total revenue growth (% per annum on average)
Wages growth (% per annum on average)
Pre-tax discount rates (%)
Long-term growth rate (%)
31 MARCH 2020
NZ Centres
31 MARCH 2019
NZ Centres
0.4%
1.4%
0.1%
1.9%
1.4%
13.9%
1.5%
1.4%
1.1%
0.8%
3.3%
1.8%
15.4%
2.0%
Revenue – Price: Revenue is received from the NZ Ministry of Education and parents/caregivers. It is
assumed the Ministry of Education NZ continues to support early childhood education to the value of
approximately 66% (2019: 66%) of ECE revenue earned. If the NZ Government were to reduce its funding
of the sector, this would lead to an increased requirement for parents and caregivers to make up the
difference. If NZ Government funding were to decrease, the Group would need to initiate appropriate
responses to maintain profitability. The assumptions reflect the impact of future increases in funding that
have been announced by the NZ Government (2.3% from 1 July 2020 and a further 1.6% from 1 January
2021), with subsequent annual increases in line with past experience (1.6% per year). In recognition of the
economic challenges likely to be faced by parents due to the Covid-19 pandemic, no increase in parental
fees has been assumed until July 2021. Thereafter prices are assumed to increase by 1.6% per year, in line
with wage increases.
Revenue – Occupancy: Occupancy refers to the number of full-time equivalent children attending
centres. A number of initiatives were put in place during the second half of the year to reverse the trend
of declining occupancy. These involved both attracting new children as well as retaining existing ones and
optimising their attendance. The focus on occupancy has redoubled with the re-opening of centres after
the level 4 closure. However, occupancy projections used for impairment testing have been scaled back
from the Group’s expected level of 80% by 2025, due to the uncertainty regarding the impact of Covid-19.
This projection assumes occupancy only regains its 2020 level of 72% by 2025. If occupancy were not to
meet this level, the Group would need to initiate appropriate responses to maintain profitability.
Wages: Wages are assumed to increase at 1.6% per year, starting January 2021, based on historic wage
increases.
57
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
15.
Impairment (continued)
Key assumptions used in value in use calculations (continued)
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 increases in revenues from parents/caregivers and the Government. The rate has been reduced
in the current period to reflect low inflation expectations and the uncertainty arising from Covid-19.
Adoption of NZ IFRS 16: Leases
The adoption of NZ IFRS 16: Leases from 1 April 2019 has been incorporated into the value-in-use
calculation. Principally the right-of-use asset is now included in the carrying value of the CGU, as well as
the intangible assets. A lease replacement cost, representing the present value of lease payments beyond
the current lease term, is deducted from the recoverable amount. However, lease payments built in to the
right-of-use asset are now excluded from the recoverable amount.
Sensitivity to changes in key assumptions
The most sensitive assumption in the calculation of value-in-use for the NZ ECE Centres CGU is revenue
growth, followed by wage costs. The following summarises the amounts by which the key assumptions
would need to change, with all other assumptions remaining constant, for the recoverable amount to equal
the carrying amount:
$'000
Base assumption
Occupancy
Childcare fee growth
Ministry of Education funding growth
Wages growth
Pre-tax discount rate
Long-term growth rate
Headroom/
(Impairment)
4,521
-0.55%
-0.78%
-0.35%
0.53%
0.14%
-0.19%
58
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
15.
Impairment (continued)
Key assumptions used in value in use calculations (continued)
The following summarises the impairment or headroom that would have resulted had the noted changes in
the “base” assumptions been made, with all other assumptions remaining constant:
$'000
Base assumption
Occupancy at 65% at the end of the period
Occupancy at 70% at the end of the period
Occupancy at 75% at the end of the period
MOE funding rate growth +1.0% above base
MOE funding rate growth -1.0% below base
Childcare fees growth +1.0% above base
Childcare fees growth -1.0% below base
Wages growth +1.0% above base
Wages growth -1.0% below base
Headroom/
(Impairment)
4,521
(46,458)
(10,044)
26,369
24,232
(14,773)
16,348
(7,004)
(16,104)
24,537
Australian ECE Centres – Goodwill
Key assumptions used in value in use calculations
The key “base” assumptions used in the calculation of value-in-use for the Australian ECE Centres CGUs are:
• Revenue growth through the forecast period
• Wages 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 Australian ECE centres CGUs:
$'000
Revenue growth attributable to price (% per annum on average)
Revenue growth attributable to increase in occupancy (% per annum on average)
Total revenue growth (% per annum on average)
Wages growth (% per annum on average)
Pre-tax discount rates (%)
Long-term growth rate (%)
Headroom/
(Impairment)
2.0%
0.0%
2.0%
2.0%
14.3%
1.5%
59
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
15.
Impairment (continued)
Australian ECE Centres – Goodwill (continued)
Sensitivity to changes in key assumptions
The most sensitive assumption in the calculation of value-in-use for is revenue growth, followed by wage
costs. Revenue growth will be achieved through pricing, as occupancy is not assumed to grow, given the
centres currently have good occupancy levels. The following summarises the amounts by which the key
assumptions would need to change, with all other assumptions remaining constant, for the recoverable
amount to equal the carrying amount:
$'000
Base assumption
Revenue growth
Wages growth
Pre-tax discount rate
Long-term growth rate
Headroom/
(Impairment)
(3,992)
2.65%
-4.70%
-1.03%
1.29%
The following summarises the impairment or headroom that would have resulted had the noted changes in
the “base” assumptions been made, with all other assumptions remaining constant:
$'000
Base assumption
Revenue growth +2.0% above base
Revenue growth -5.0% below base
Wages growth +2.0% above base
Wages growth -2.0% below base
Headroom/
(Impairment)
(3,992)
(572)
(18,111)
(6,554)
(2,050)
The changes used are based on an assessment of reasonably-likely variations in the assumptions.
The negative revenue growth scenario was selected as a possible outcome of a prolonged and severe
downturn resulting from Covid-19.
60
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
16. Trade and Other Payables
$’000
Trade payables
Goods and services tax payable
Onerous lease provision
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
Note
504
3,642
–
11,208
3,819
19,173
339
4,243
1,531
–
4,181
10,294
Wage subsidy relating to the following financial year
7
Other payables
Total trade and other payables
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.
The onerous lease provision related to the office formerly used as the Porse Head office (refer Note 5a).
This has now been incorporated in the right-of-use asset (refer Note 18).
17. Funding Received in Advance
Funding from NZ Ministry of Education
Represents NZ 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 a year on 1 March, 1 July and 1 November. Each funding round includes 75% of the estimated
funding for the four months ahead, as well as payment of the remaining 25% payable for the previous
funding period, adjusted for any changes in occupancy and other criteria. At 31 March 2020 funding
received in advance relates to April to June 2020. Funding receivable relates to the remaining 25% of
funding, adjusted for any changes in occupancy and other criteria, in respect of February and March 2020.
$’000
Funding received in advance
Funding receivable
Total funding received in advance
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
14,956
(3,152)
11,804
15,971
(3,346)
12,625
61
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
18. Right-of-use Assets and Lease Liabilities
The right-of-use assets and lease liabilities have arisen upon adoption of NZ IFRS 16: Leases from 1 April
2019. Refer Notes 2 and 3 for further information.
(a) Right-of-use assets
$’000
Adjustment on adoption of NZ IFRS 16
Additions
Depreciation and impairment
Closing net book value
Cost
Accumulated depreciation
Impairment expense
As at 31 March 2020
Leased
properties
Leased motor
vehicles
Total
167,643
29,192
(18,875)
177,960
196,835
(11,035)
(7,840)
177,960
359
104
(185)
278
463
(185)
–
278
168,002
29,296
(19,060)
178,238
197,298
(11,220)
(7,840)
178,238
Included in accumulated depreciation is a reversal of $0.3 million for lease termination.
(b) Lease liabilities
$’000
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
10,495
201,973
212,468
5,805
184,036
189,841
(c) Amounts recognised in the statement of comprehensive income
The statement of comprehensive income shows the following amounts relating to leases:
$’000
Depreciation expense of right-of-use assets
Properties
Motor vehicles
Interest expense (included in finance cost)
Expense relating to short-term leases (included in building
occupancy expenses)
Expense relating to leases of low-value assets that are not shown
above as short-term leases (included in Direct expenses of
providing services)
The total cash outflow for leases during the year was $23.1 million.
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
11,358
185
11,543
16,904
171
270
–
–
–
–
–
–
62
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
18. Right-of-use Assets and Lease Liabilities (continued)
(d) Impairment testing of right-of-use assets
As detailed in Notes 3(i) and 3(m), non-financial assets including right-of-use assets are reviewed annually
for indicators of impairment. Where there is an indicator of impairment, the carrying value of the asset is
compared to its recoverable amount. Refer to Note 15. An impairment expense of $7.8 million has been
recognised at 31 March 2020.
19. Employee Entitlements
$’000
Employee leave provisions
Accrued wages and salaries
Other employee entitlements
Total employee entitlements
20.
Issued Capital
Authorised shares
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
3,159
2,897
274
6,330
2,654
3,012
286
5,952
Ordinary shares authorised, issued
and fully paid
Opening balance
Ordinary shares issued:
Issue of shares,
net of transaction costs
Issue of shares in relation to dividend
reinvestment plan (“DRP”)
Less share issue costs relating to
shares issued under DRP
31 MARCH
2020
31 MARCH
2020
31 MARCH
2019
31 MARCH
2019
Number
$'000
Number
$'000
180,278,557
159,598
179,457,596
159,149
938,325,436
78,378
–
–
–
–
–
820,961
–
–
457
(8)
Closing balance
1,118,603,993
237,976
180,278,557
159,598
The Group concluded a pro rata accelerated rights entitlement offer capital raise in June 2019, issuing an
additional 793,225,436 shares, with proceeds of $63.4 million being received. The capital raise comprised
a placement of $30.5 million to eligible institutional shareholders and $32.9 million to eligible retail
shareholders. Incremental directly attributable issue costs of $3.8 million were incurred and have been
netted off against the proceeds of the capital raising.
In December 2019, the Group completed another capital raising through placement to institutional
shareholders, issuing an additional 145,000,000 shares, with proceeds of A$18.9 million being received.
Incremental directly attributable issue costs of $0.9 million were incurred and have been netted off against
the proceeds of the capital raising.
The net proceeds of the capital raisings were utilised by the Group to pay down bank borrowings, fund
the acquisition of ECE centres for expansion in Australia and provide increased flexibility to implement
performance improvements in New Zealand.
On 8 November 2019, share-based payment of $18,000 comprising 100,000 ordinary shares of the
Company were allotted to a former Chief Executive Officer of the Group under the terms of the Group’s
share based payment scheme.
63
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
21. 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.
22. Dividends
Dividends paid during the current year
No dividend was paid during the year ended 31 March 2020.
Dividends paid during the previous year
Final dividend for the year ended 31 March 2018
2019
Cents per share
2019
$’000
2.00
2.00
3,590
3,590
Policies
Dividends are paid in cash in accordance with the dividend policy of the Group. Dividends paid during the
previous year were fully imputed.
Supplementary dividends
In 2019, supplementary dividends of $0.1 million 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 previous year ended 31 March 2019, 820,961 shares with a total value of $0.5
million were issued in lieu of cash dividends.
64
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
23. Earnings Per Share (EPS)
Basic and diluted EPS amounts are calculated by dividing the profit for the year attributable to ordinary
equity holders of the Company by the weighted average number of ordinary shares outstanding during
the year. The number of shares outstanding for the current and previous years are adjusted for the effect
of the share issues during the current year (refer Note 20). The following reflects the income and share
data used in the basic and diluted EPS computations:
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
(Loss)/profit after income tax from continuing operations ($'000s)
(13,300)
(102,399)
(Loss) after income tax attributable to the shareholders
of the Company ($'000s)
(13,300)
(101,554)
Weighted average number of ordinary shares for
basic and diluted EPS
924,079,125
393,168,819
Basic (and diluted) EPS from continuing operations
(cents per share)
Basic (and diluted) EPS attributable to the shareholders
of the Company (cents per share)
(1.4)
(1.4)
(26.0)
(25.8)
24. 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 New Zealand operations is not exposed to any significant foreign currency risk, other than from the
Australian operations acquired during the current year.
The Group now has operations in Australia and is exposed to foreign currency risk associated with the
Australian dollar (“AUD”). Foreign currency risk arises from future commercial transactions and from
recognised assets and liabilities denominated in a currency that is not the Company’s functional currency.
The foreign currency risk associated with the Australia operations is managed through a natural hedge as
the cash flows from the Australian operations are denominated in Australian dollars.
The carrying amount of the Group’s financial assets and liabilities that are denominated in other foreign
currencies are set out below.
$'000
Cash and cash equivalents
Funding receivable
Other current assets
Trade payables
Employee entitlements
AS AT
31 MARCH 2020
AUD
1,708
328
368
(652)
(1,382)
370
65
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
24. Financial Assets and Liabilities (continued)
Market risk (continued)
Foreign currency risk (continued)
During the year, the following foreign currency related amounts were recognised in other comprehensive
income.
$'000
Translation of foreign operations
Sensitivity
AS AT
31 MARCH 2020
AUD
1,174
As shown in the table above, as at 31 March 2020, the Group has financial assets and liabilities that are
denominated in AUD. However, these AUD financial assets and liabilities are denominated in the functional
currency of the foreign subsidiary. Any translation gains or losses arising from changes in NZD/AUD
exchange rates are recognised in the foreign currency translation reserve not profit or loss.
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 7.7% (2019: 6.0%). The effective interest
rate has increased in the current year as a result of inclusion of remeasurement losses arising from the
adoption of NZIFRS 9: Financial Instruments (refer Note 25). The effect of an increase or decrease of ±1%
in interest rates on the cash flow interest rate risk will result in a ±$284,000 (2019: ±$485,000) 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 $17.4
million (2019: $55.4 million) of the Group’s $17.4 million (2019: $63.9 million) lending facilities exposing the
Group to interest rate risk. Exposure to interest rate risk is reduced by investing surplus cash in on-call
savings accounts or term deposits.
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- (sources: www.rbnz.govt.nz and Standard & Poors).
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.
66
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
24. Financial Assets and Liabilities (continued)
Market risk (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 is currently undrawn. The facility expires on 30 April 2022.
• Acquisition facility – provided by ASB totalling $55.4 million at the beginning of the year for funding of
acquisitions. A total of $38.0 million of this facility was repaid during the year, and the facility reduced
to $17.4 million. The facility expires on 30 April 2022.
• Lease guarantee facility – provided by ASB for $2.5 million for guarantees required for certain
leasehold properties.
• Lease guarantee facility – provided by NAB for A$1.4 million for guarantees required for certain
leasehold properties in Australia. This facility is cash-backed by a term deposit held with NAB.
The ASB 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 throughout the current and previous
periods. Refer to Note 25 for details of amendments to the facilities during the current period.
Amounts drawn against the senior revolving and acquisition facilities are:
$'000
Facility Limits
Senior revolving facility
Acquisition facility
Total lending facilities
Utilisation
Acquisition facility
Total utilised
Total unused facilities
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
8,500
17,359
25,859
17,359
17,359
8,500
8,500
55,359
63,859
55,359
55,359
8,500
Remaining contractual maturities
The contractual maturity for the Group’s financial instrument liabilities (that is, trade payables) is disclosed
in Note 16. The acquisition facility was reduced during the year by repayment of $38.0 million. The
remaining principal amount ($17.4 million) is repayable in April 2022. Interest payments on borrowings
are projected to be $0.75 million in the year ending 31 March 2021 and $0.75 million in the year ending 31
March 2022.
Lease liabilities of $212.5 million are now recognised (refer Notes 2 and 18). Including renewal rights
expected to be exercised, the maturities of these leases are spread over the period to November 2054.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities presented represent a reasonable
approximation of fair value.
67
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
25. Net Debt Reconciliation
Movements on net debt comprise:
31 March 2020
$’000
Cash and cash
equivalents
Borrowings
Lease
liabilities
Total
Net debt as at 1 April 2019
25,274
(55,359)
–
(30,085)
Adoption of NZ IFRS 16 (Note 18)
Bank borrowings repaid
Modification loss
Additions
Interest on lease liabilities
Repayment of lease liabilities
Other movements on lease liabilities
Cash flows
Net debt as at 31 March 2020
Due within one year
Due in more than one year
–
–
–
–
–
–
–
13,774
39,048
39,048
–
(189,841)
(189,841)
38,000
(307)
–
–
–
–
–
–
–
(43,953)
(16,828)
22,814
15,340
–
38,000
(307)
(43,953)
(16,828)
22,814
15,340
13,774
(17,666)
(212,468)
(191,086)
–
(10,495)
28,553
–
(17,666)
(201,973)
(219,639)
39,048
(17,666)
(212,468)
(191,086)
Certain terms of the borrowing facilities were renegotiated and amended in May 2019. $30 million of the
loan was repaid by 30 June 2019, certain covenant conditions were revised, and acquisitions of centres
in Australia up to $25 million were permitted. The changes to the terms were not considered substantial,
and as a result a modification loss of $0.3m was recognised within finance costs. The carrying value of
the bank facility has also been adjusted at the date of modification by the same amount. This modification
loss is amortised over the remaining term of the loan, so that the carrying value at the end of the term
represents the actual amount repayable.
Net debt as defined in the financial covenants (Note 21) includes any amounts utilised under the Group’s
lease guarantee facility (Note 24) and net funding in advance from the NZ Ministry of Education (Note 17),
but excludes lease liabilities (Note 18).
31 March 2019
$’000
Net debt as at 1 April 2018
Bank borrowings drawn
Bank borrowings repaid
Cash flows
Net debt as at 31 March 2019
Due within one year
Due in more than one year
Cash and cash
equivalents
Borrowings
Lease
liabilities
5,362
–
–
19,912
25,274
25,274
–
25,274
(32,300)
(92,247)
69,188
–
(55,359)
(30,000)
(25,359)
(55,359)
Total
(26,938)
(92,247)
69,188
19,912
(30,085)
(4,726)
(25,359)
(30,085)
–
–
–
–
–
–
–
–
68
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
26. Reconciliation of (Loss) After Tax to Net Operating Cash Flows
$'000
(Loss) after income tax
Adjustments for non cash items:
Depreciation and amortisation
Employee benefits expense – share-based payments
Impairment expense
(Gain)/loss on disposal of property, plant and equipment
Remeasurement of lease liabilities
(Gain)/loss on sale and closure of businesses
Deferred tax
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
(13,300)
(101,554)
14,009
18
12,341
144
(916)
483
(9,781)
3,128
–
107,139
(293)
–
(1,357)
(509)
Adjustments for items classified as investing or financing activities:
Finance costs
19,585
2,908
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 PORSE GST settlement payable
Increase/(decrease) in employee entitlements
Net cash flows from operating activities
(821)
(10,751)
12,453
(152)
–
378
23,690
(1,683)
(1,474)
2,721
(519)
(1,090)
146
7,563
Working capital movements in the previous year were adjusted to reflect the disposal of discontinued
operations.
27. Commitments and Contingencies
Operating lease commitments – Group as lessee
Commercial leases of property and motor vehicles are accounted for under NZIFRS 16 from 1 April 2019.
Future minimum rentals of office equipment not subject to NZIFRS 16 at 31 March 2020 are:
$’000
Within one year
After one year but not more than five years
More than five years
Total
Guarantees
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
370
338
–
708
22,248
63,504
45,892
131,644
A total of $2.3 million (2019: $2.3 million) of the lease guarantee facility disclosed in Note 24 has been utilised.
For the Australian operation, a total of $1.2 million (2019: $0) of bank lease guarantees have been utilised.
Contingencies
There are no material contingent liabilities at 31 March 2020.
69
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
28. Related Party Transactions
Identity of Related Parties
Related parties of the Group are:
• The Board of Directors comprising Hamish Stevens (appointed 29 July 2019), Adrian Fonseca
(appointed 19 September 2019), Chris Scott, Chris Sacre, Kim Campbell (appointed 19 September 2019),
Alistair Ryan (retired 15 June 2019), Norah Barlow (retired 19 September 2019) and Grainne Troute
(retired 6 September 2019).
• On 16 August 2019, Chris Scott was appointed as Managing Director and Chris Sacre was appointed as
Australia Country Manager. Both were appointed as Directors on 28 November 2018.
• On 3 October 2019, Timothy Wong was appointed as Chief Executive Officer of the New Zealand
operations of the Group.
• J47 Pty Limited, a company of which Chris Scott is the sole director and shareholder.
• Upton124 Pty Limited, a company of which Chris Sacre is a director.
• Sovana Child Care Pty Limited, a company of which Adrian Fonseca is the sole director and
shareholder, and is a trustee of Sovana Child Care Trust.
• Lai Wong Pty Limited, a company of which Timothy Wong has the ability to control.
Related party relationships that have ceased during the current year or in the
prior year are:
• Alistair Ryan ceased his directorship on 15 June 2019.
• Norah Barlow ceased her directorship on 19 September 2019.
• Grainne Troute ceased her directorship on 6 September 2019.
• Anthony Quirk ceased his directorship on 28th November 2018.
• Lynda Reid ceased her directorship on 28th November 2018.
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 Board has
elected to take a 16.7% reduction in Directors’ fees, effective from December 2019, as a contribution
to the Group’s efforts to improve profitability. 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
Hamish Stevens
Chris Scott
Chris Sacre
Kim Campbell
Adrian Fonseca
Alistair Ryan
Norah Barlow
Grainne Troute
Anthony Quirk
Lynda Reid
Total Directors' Remuneration
70
YEAR
31 MARCH 2020
YEAR
31 MARCH 2019
78
75
75
43
38
28
40
38
–
–
415
–
27
27
–
–
135
80
90
60
53
472
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
28. 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:
• During the year, J47 Pty Limited increased its shareholdings from 34,186,061 shares to
209,820,113 shares.
• During the year, Upton 124 Pty Limited acquired 65,026,654 shares in the Company.
• During the year, Sovana Child Care Trust acquired 17,250,000 shares in the Company.
• During the year, Lai Wong Pty Limited acquired 7,000,000 shares in the Company.
• During the year, Kim Campbell acquired 30,000 shares in the Company.
•
On 13 September 2019, the Group completed the acquisition of a childcare centre in Melbourne,
Australia from Sovana Child Care Pty Limited for a total purchase price of A$2.9 million. This was
prior to Adrian Fonseca becoming a Director and acquiring shares in the Company on 19 September
2019. Subsequent to that in October 2019, the Group completed the acquisition of another childcare
centre in Melbourne, Australia from Sovana Child Care Pty Limited for an initial purchase price of
AU$2.45 million. A further A$0.4m is potentially payable if specified performance criteria are met.
Sovana provides an Operations personnel who visits these two centres occasionally for a period of 12
months commencing from the completion dates of the acquisitions. This service is provided free of
charge by Sovana and the value to the Group has been determined by the Board to be not material.
• In November 2019, the Group completed the acquisition of five childcare centres across Queensland
and Victoria, Australia from companies in which Timothy Wong is a minority shareholder, for a
total initial consideration of $A7.65 million. A further A$1.5m is potentially payable if specified
performance criteria are met.
• Compensation of key management personnel of the Group:
$’000
Short-term employee benefits
Share-based payments
Total compensation paid to key management personnel
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
1,624
18
1,642
809
–
809
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
71
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
28. Related Party Transactions (continued)
Related party transactions arising during the year (continued):
• Shareholding interests of Directors and key management of the Company are:
Units of shares
Chris Scott
Chris Sacre
Adrian Fonseca
Kim Campbell
Norah Barlow
Alistair Ryan
Timothy Wong
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
209,820,113
34,186,061
65,026,654
17,250,000
30,000
–
–
7,000,000
–
–
–
93,412
93,412
–
299,126,767
34,372,885
29. 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
AS AT
31 MARCH 2020
AS AT
31 MARCH 2019
410
–
410
43
7
50
237
10
247
33
18
51
Other non-assurance services in the current year relate to benchmarking of Directors’ fees, and in the
previous year were primarily an agreed-upon procedures service in respect of the working capital
calculation for a prior acquisition.
72
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 MARCH 2020
30. Events After the Reporting Period
Change of Balance Date
On 6 April 2020, NZ Inland Revenue approved the Group’s application to change its balance date from
31 March to 31 December. The change is to align the Group’s balance date to its international investors,
retail shareholders and financial institutions. It will take effect after the end of the current year ended 31
March 2020.
Covid-19 impact
As discussed in Note 2, the rapid rise of Covid-19 has had a significant global impact. While the short-
term financial position of the Group has not been materially impacted, there remains inherent uncertainty
regarding the longer-term impact. At the time of approving these financial statements, there are no known
material adverse impacts on the Group.
73
74
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 75
76
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 77
78
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 79
Corporate Governance and Statutory Information
Corporate Governance
Evolve Education Group Limited (the “Company”) is a New Zealand incorporated owner and provider
of ECE services in New Zealand and Australia, 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
more specific and stringent rules also applying to trading in the Company’s securities by directors and
certain senior employees, or employees performing certain functions.
80
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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 94.
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 for
protecting and enhancing 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.
81
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 directors, three.
As at 31 March 2020, Hamish Stevens, Adrian Fonseca and Kim Campbell 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.
82
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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 and director attendance at board meetings.
Evolve’s Director biographies can be found on pages 10-11.
Evolve Director ownership interests can be found on page 93 of this annual report.
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 2019 and the date of approving the
financial statements (that is, 26 June 2020), 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
Chris Sacre
Hamish Stevens
Kim Campbell
Adrian Fonseca
Board
Audit and Risk
Committee
Remuneration and
People Committee
3
1
10
2
10
9
7
7
(3)
(1)
(10)
(2)
(10)
(9)
(7)
(7)
2
1
–
–
3
4
3
4
(2)
(1)
–
–
(3)
(5)
(3)
(4)
1
1
–
1
1
1
1
1
(1)
(1)
–
(1)
(1)
(1)
(1)
(1)
83
Corporate Governance and Statutory Information
In addition to scheduled Board meetings, the Board also held other meetings and teleconferences to
discuss other Company matters as required.
Recommendation 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 and Inclusion Policy and is committed to being an inclusive
workplace that embraces and values diversity while always upholding the principle of meritocracy.
The Board believes that embracing diversity in its workforce contributes to the achievement of its
corporate objectives (including optimising financial performance in a competitive labour market) and
enhances its reputation. It assists the Company to recruit and retain the right people from a diverse
pool of talented candidates, which in turn should assist the Company to:
• make more informed and innovative decisions, drawing on the wide range of ideas, experiences,
approaches and perspectives that employees from diverse backgrounds, with differing skill sets,
bring to their roles; and
• better represent the diversity of its stakeholders and markets.
In order to have a properly-functioning diverse workplace, discrimination, harassment, vilification,
dishonesty, inappropriate behaviour and victimisation will not be tolerated within the Company.
Gender Diversity
As noted above, the Board is responsible for monitoring the Company’s performance in meeting
objectives set out in the Diversity and Inclusion 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 2020
As at 31 March 2019
Women
Men
Women
Men
0
2
(0%)
5
(100%)
(29%)
5
(71%)
>96%
<4%
2
5
3
2
(40%)
(71%)
>96%
(60%)
(29%)
<4%
*Senior management includes the CEO NZ, CFO and employees who report directly to the CFO. As at
31 March 2020 the senior management team consisted of seven positions.
At 31 March 2020 the Group employed 2,096 women which represents 96% of the workforce (FY19:
2,151 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.
84
EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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: A majority of the Board should be independent directors.
A majority of the Evolve Board are independent directors.
Recommendation 2.9: An issuer should have an independent chair of the board. If the chair is not
independent, the chair and the CEO should be different people.
The chair of Evolve is an independent director, and is separate to the CEO.
Principle 3 – Board Committees
The Board has established two sub-committees to assist with the execution of the Board’s
responsibilities – the Audit and Risk Committee and the Remuneration and People Committee.
These committees review and analyse detailed information, policies and strategies which fall within
their areas of responsibility and, where appropriate, make recommendations to the full Board.
The Committees do not take action or make decisions on behalf of the Board unless specifically
authorised to do so by the Board.
The Board may establish additional committees of directors as required.
Recommendation 3.1: An issuer’s audit committee should operate under a written charter.
Membership on the audit committee should be majority independent and comprise solely of
non-executive directors of the issuer. The chair of the audit committee should be an independent
director and not 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 Chair of Evolve’s Audit and Risk Committee is an independent Director and is not the Chair
of the Board.
The members of the Audit and Risk Committee as at 31 March 2020 were Adrian Fonseca (Chair),
Hamish Stevens and Kim Campbell. The Board is of the belief that the Audit and Risk Committee
was appropriately constituted as at 31 March 2020 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.
85
Corporate Governance and Statutory Information
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 Kim Campbell (Chair), Hamish
Stevens and Adrian Fonseca.
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.
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. The Board 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.
Evolve has adopted a Takeover Response Policy.
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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2020 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, Conflict of Interest Policy, Securities Trading Policy and
Guidelines, Diversity and Inclusion Policy, Risk Management Policy, Shareholder Communications
Policy, Dividend Policy, Takeover Response Policy and Board and Committee Charters.
Recommendation 4.3: Financial reporting should be balanced, clear and objective. An issuer should
provide non-financial disclosure at least annually, including considering environmental, economic
and social sustainability factors and practices. It should explain how operational or non-financial
targets are measured. Non-financial reporting should be informative, include forward looking
assessments, and align with key strategies and metrics monitored by the board.
Evolve publishes interim and audited full-year financial statements that are prepared in accordance
with relevant financial reporting 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 $475,000 per annum.
With effect from 1 December 2019, the Board elected to take a 16.7% reduction in Directors’ fees, as a
contribution to the Group’s efforts to improve profitability.
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.
87
Corporate Governance and Statutory Information
Director Remuneration Statement
The Company’s directors holding office during the year ended 31 March 2020 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 2020 are provided below.
($000’s)
Alistair Ryan
Norah Barlow
Gráinne Troute
Hamish Stevens
Kim Campbell
Adrian Fonseca
Chris Scott
Chris Sacre
Total
Directors’
Fees
Total
28
40
38
78
43
38
75
75
28
40
38
78
43
38
75
75
415
415
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 2020 employees did not receive additional remuneration for acting as directors of subsidiary
companies.
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 83.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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 Managing Director
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 remuneration of direct reports of
the Managing Director, on recommendation by the Remuneration and People Committee. Further,
recommendations from the Managing Director in relation to remuneration of other members 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.
There is currently no performance share rights long-term executive incentive scheme in place for the
senior management team.
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
Rosanne Graham held the position of CEO from 2 July 2018 until 23 August 2019. She had a base
salary of $450,000 per annum (gross) and was entitled to the use of a mobile telephone, laptop
and carpark. A short-term incentive scheme of up to 30% of gross salary was provided, under which
scheme the Board approved a recognition payment of $100,000 for Ms Graham in respect of 2019. In
November 2019, 100,000 shares (valued at $18,000) were awarded to Ms Graham under the terms of
the share-based long-term executive incentive scheme previously in place.
Timothy Wong has held the position of CEO NZ from 3 October 2019. He has a base salary of
$300,000, and is entitled to the use of a rental apartment, mobile telephone and laptop.
Chris Scott has been Managing Director since 26 August 2019. He has received no remuneration
(other than Director’s Fees) for this role.
89
Corporate Governance and Statutory Information
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 and
termination payments) valued at or exceeding $100,000 during the year ended 31 March 2020 are
specified below.
Remuneration Band
$100,001 – $110,000
$110,001 – $120,000
$120,001 – $130,000
$130,001 – $140,000
$200,001 – $210,000
$210,001 – $220,000
$270,001 – $280,000
$570,001 – $580,000
$780,001 – $790,000
Total
Total
10
2
1
2
1
2
1
1
1
21
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. An issuer should report the material risks
facing the business and how these are being managed.
The Company views effective risk management as key to achieving and maintaining its operational
and strategic objectives. The directors of the Company are responsible for reviewing and ratifying
the risk management structure, processes and guidelines which are to be developed, maintained
and implemented by management. The active identification of risks and implementation of
mitigation measures is a primary responsibility of management.
The Board has delegated certain activities to the Audit and Risk Committee and has adopted a Risk
Management Policy.
The Audit and Risk Committee is responsible for ensuring there are adequate policies in relation to
risk management, compliance and internal control systems. The committee monitors the Company’s
risk management by overseeing management’s actions in the evaluation, management, monitoring
and reporting of material operational, financial, compliance and strategic risks.
Management reports on risk management at each meeting of the Board and the Audit and Risk
Committee.
The Company does not have an internal audit function, but through the steps outlined above, the
Board ensures the Company is reviewing, evaluating and continually improving the effectiveness of
its risk management and internal control processes.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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
proactively identify 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 2020 is set out in note 29 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.
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 meeting. 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.
91
Corporate Governance and Statutory 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.
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, Managing Director 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.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
Recommendation 8.3: Shareholders should have the right to vote on major decisions which may
change the nature of the issuer 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: If seeking additional equity capital, issuers of quoted equity securities
should offer further equity securities to existing equity security holders of the same class on a pro
rata basis, and on no less favourable terms, before further equity securities are offered to other
investors.
A pro rata issue of securities is Evolve’s preferred approach to raising equity capital. A full pro rata
offer was completed in May and June 2019. A placement was completed in December 2019. This
method was chosen as a quicker method for funding potential centre acquisitions in Australia. The
number of shares issued was less than the permitted 15% of shares previously on issue.
Recommendation 8.5: The board should ensure that the notices of annual or special meetings
are posted on the issuers website as soon as possible and at least 20 working days prior to the
meeting.
Evolve’s Notice of Meeting will be made available at least 20 working 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 a 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 2020 are as follows:
Director
Position
Company
Hamish Stevens
Director
Pacific Radiology Group Limited
Chair
East Health Services Limited (and related companies)
Director
Marsden Maritime Holdings Limited (and related companies)
Chair
Chair
Chair
Director
Pharmaco NZ Limited (and related companies)
The Kennedy’s Limited
Risk and Assurance Committee, Waikato Regional Council
Western Sydney Football Club Limited (GWS Giants AFL Club)
(and related companies)
Director
Oxanda Education Pty Limited (and related companies)
Adrian Fonseca
Kim Campbell
Director
Douglas Pharmaceuticals Limited (and related companies)
Director
EMH Trade Limited
Chair
Auckland Manufacturers Association
Director
Blackwood Bay Investments Limited
Chair
Chair
Chair
ASB Showgrounds
Pathways to Employment Trust
Living Green Limited (Auckland)
93
Corporate Governance and Statutory Information
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 2020:
Kim Campbell:
Purchase of 30,000 shares.
Chris Scott:
Purchase of an additional 175,634,052 shares.
Adrian Fonseca:
Purchase of 17,250,000 shares.
Chris Sacre:
Purchase of 65,026,654 shares.
Alistair Ryan, Gráinne Troute, Norah Barlow and
Hamish Stevens:
Nil
Disclosure of Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares as at 31 March 2020:
Director
Kim Campbell
Adrian Fonseca
Chris Sacre
Chris Scott
Number of Shares in which
a relevant interest is held
30,000
17,250,000
65,026,654
209,820,113
Indemnities and Insurance
The Company has entered into a Deed of Indemnity and Access by Deed Poll under which it has granted
indemnities in favour of, and maintains insurance for, its present and future directors (and directors of
related companies) and certain employees of the Company, in each case to the extent permitted by the
Companies Act 1993.
Company Disclosures
Stock Exchange Listings
The Company is listed on both the New Zealand and Australian stock exchanges. ASX approved a
change in the Company’s ASX admission category from a Standard Listing to an ASX Foreign Exempt
Listing, effective from the commencement of trading on 31 May 2016. The Company continues to have
a full listing on the NZX Main Board, and the Company’s shares remain listed on the ASX. The Company
is primarily regulated by the NZX, complies with the NZX Listing Rules, and is exempt from complying
with most of the ASX Listing Rules (based on the principle of substituted compliance).
Dividend Policy
Dividends and other distributions with respect to the Shares are made at the discretion of the Board
and depend on a number of factors, including:
• current and anticipated profitability;
• current and medium-term capital expenditure requirements;
• working capital requirements;
• current capital structure, having regard to the risks presented by short and medium term economic
and market conditions and estimated financial performance;
• available imputation credits; and
• solvency requirements.
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EVOLVE EDUCATION GROUP ANNUAL REPORT 2020
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 2020, the Company has not authorised any dividends.
Net Tangible Assets
The Company’s net tangible assets as at 31 March 2020 were ($0.01) per share (31 March 2019 ($0.26)
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 2020 it was $0.09 (2019: $0.29).
Donations
The Company made donations of $2,559 during the year ended 31 March 2020 (31 March 2019 $3,351).
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.
Annual Meeting
The Company’s Annual Meeting of shareholders will be held in Auckland on 23 September 2020 at 10 am.
95
Shareholder Information
Analysis of Shareholding at 17 July 2020
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
Investors
Securities
% Issued Capital
130
302
314
996
723
2465
66,135
997,374
2,497,919
40,951,315
1,074,091,250
1,118,603,993
0.01
0.09
0.22
3.66
96.02
100.00
Twenty Largest Shareholders at 17 July 2020
Name
J47 Pty Ltd
HSBC Custody Nominees (Australia) Limited
Upton124 Pty Ltd
National Nominees Limited
New Zealand Central Securities Depository Limited
A & J Online Investments Pty Ltd
Citicorp Nominees Pty Limited
JBWere (NZ) Nominees Limited
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