ANNUAL
REPORT
31 DECEMBER 2021
This Annual Report of Evolve Education Group Limited is dated
30 March 2022 and is signed by the Board of Directors by:
Hamish Stevens
Chris Scott
Chair of the Board
Managing Director
Contents
About Evolve Education Group
2
Chair’s Report
4
Managing Director’s Report
5
Our Vision
6
Our Families
7
Our Centres
8
Board Profile
10
Senior Management
12
Financial Statements
15
Independent Auditor’s Report
64
Corporate Governance and Statutory Information
68
Shareholder Information
84
Subsidiary Company Directors
86
Corporate Directory
87
1
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 2021, Evolve continued its expansion into
Australia with the acquistion of 13 centres. The
Australian centres operate under brands that
include Cubby Care, Little Zebra and Carlton House.
Number of early
childhood centres 109
Number of licensed
child care places 7945
Number of staff 1748
Average 2021
centre occupancy 69%
Average remaining
centre lease term 13 years
Number of early
childhood centres 23
Number of licensed
child care places 2085
Number of staff 678
Average 2021
centre occupancy 80%
Average remaining
centre lease term 26 years
A snapshot of Evolve’s
New Zealand network
as at 31 December 2021
A snapshot of Evolve’s
Australian network
as at 31 December 2021
About Evolve
Education Group
2
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
46
5
7
5
4
4
12
2
1
1
1
1
3
15
5
4
4
4
8
The communities we serve –
number of centres by region
3
Welcome to Evolve’s eighth annual report covering
the year ended 31 December 2021.
As noted in last year’s report we changed our
balance date in 2020 from March to December. As
a result, much of our financial performance outlined
in the financial statements is compared with the
9 months to 31 December 2020. The Managing
Director’s report which outlines our financial
performance also provides comparisons with the 12
month proforma result to 31 December 2020.
The highlight of the past year has been the
continued successful execution of our Australian
growth strategy where we now have a total of
23 centres, an increase of 13 since the beginning
of the year. This strategy was embarked upon in
2019 and while it had been interrupted by Covid-19
we recommenced this in early 2021. Australian
underlying EBITDA has subsequently doubled
from 2020 to 2021, providing strong earnings and
cashflow from this part of the business.
The Board acknowledges the efforts of our
Australian team not only in identifying great
locations but also ensuring we have integrated the
centres well into the Evolve family. The Company’s
overall cash position remains strong and should
allow us to take advantage of further Australian
acquisition opportunities over the coming year.
Unfortunately, our New Zealand business has been
impacted directly by the government Covid-19
mandated closures and restrictions particularly in
the Auckland region during the year. This resulted
in a substantial fall in parent revenue. While we
endeavoured to pull back operating costs during
this period, the uncertainty around the timing of
the restrictions meant that we still faced a large
reduction in earnings.
The Board’s decision to keep all staff on full pay
during the Auckland closures was the right call and
we are grateful for the ongoing commitment and
dedication of our teachers in getting us through
this period.
Unfortunately, the impact of closed borders and
teacher shortages has had a detrimental effect on
New Zealand centre occupancy, but we believe this
is reversable once Covid restrictions are lifted. The
Managing Director’s report refers to our ongoing
commitment to New Zealand centre redevelopment
and innovation.
However, the company will continue to review its
New Zealand centre portfolio to ensure we are
operating in the best locations and deploying
our capital efficiently. Currently six New Zealand
centres have been identified for divestment.
The Board wishes to acknowledge the truly
valuable contributions made by our staff over the
period. The commitment of our employees across
our 132 centres and support offices in New Zealand
and Australia has been a key determinant of our
resilience.
I would also like to thank our wonderful families
that have continued supporting us through this
challenging period and wish to reiterate the
commitment of the Board during this time. Our
number one priority will always be to provide
your children with a secure, safe, and stimulating
environment.
While 2021 was a disrupted year, it has nevertheless
demonstrated that we have the resilience, flexibility,
and resources in place to respond to the challenges
in the current environment. Going forward, we
will be continuing our focus on driving innovative
programmes and operational efficiencies in New
Zealand as well as pursuing our growth strategy in
Australia.
I would like to thank our shareholders for their
support over the years. Unfortunately, the impact
of Covid-19 on our business has required us to
conserve financial resources and as a result we
have elected to delay the recommencement of
shareholder dividends. The board is hopeful that as
we return to more stable conditions, we will be able
to address this.
We look forward to seeing you at the annual
meeting in June 2022.
Hamish Stevens
Chair
Chair’s
Report
4
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Financial Year Ended 31 December 2021
Staying focused during a period of disruption
and uncertainty
The 12 months to 31 December 2021 was another
year disrupted by lockdowns and restrictions
caused by the Covid-19 pandemic. These disruptions
impacted our operations, especially our centres in
New Zealand. Centres in Auckland were closed under
Covid-19 alert level 4 from 18 August to 21 September
2021. Centres in the rest of New Zealand were closed
from 18 August 2021 to 31 August 2021. Parent fees
were not charged when centres were closed.
Auckland centres were allowed to operate with
limited capacity during Covid-19 alert level 3 (15
February – 17 February; 28 February – 6 March;
and 22 September – 2 December 2021). Centres
in the rest of New Zealand operated with similar
mandated restrictions from 1 September – 7
September 2021. Parent fees were charged only
for children who attended during alert level 3. Loss
of parent fees due to alert level lockdowns and
restrictions amounted to over $6m.
A change in the eligibility threshold by the New
Zealand Government meant that Evolve did not
qualify for wage subsidies in 2021 (unlike 2020).
Despite the above, Evolve decided to stay focused
as a responsible employer and early childhood
education (ECE) provider, retaining all staff and
paying them in full.
In Australia, almost all of our centres remained open
throughout 2021. Business continuity payments
were received for centres which were in lockdown
for more than 7 days between 23 August and 31
August 2021.
Despite the Covid-19 related disruptions, Evolve
continued its long term expansion strategy in
Australia. We balanced the need to be cautious
given the lockdowns in New Zealand, disruptions
in Australia and making selective acquisitions
which were attractive and earnings accretive
from day one. This, together with the solid
contribution from the first ten centres, resulted
in a significant contribution from our Australian
segment in financial year 2021 which mitigated
the disappointing results in New Zealand (for the
reasons mentioned above).
For the financial year ended 31 December 2021,
Evolve recorded a net profit (after tax) of $0.7m
(pro-forma 12 months to 31 December 2020: net
loss of $1.73m).
Underlying EBITDA, which is a key non-GAAP
measure used by the Board and Management of
Evolve to measure operating performance, was
$12.6m for the financial year ending 31 December
2021 (pro-forma 12 months to 31 December 2020:
$18.1m).
Striving to be the ECE provider of choice
We continue to focus on our back to basics
approach with an emphasis on quality education
and care. In 2021 we introduced value added,
enrichment programmes at our centres. We worked
with external facilitators to deliver science and music
& dance programmes at our centres. Although
these were disrupted by lockdowns, we intend to
re-introduce these enrichment programmes when
public health measures allow in 2022.
When centres were closed in New Zealand during
Covid-19 alert level 4, our teachers continued to
engage with children and families through online
platforms.
The Board approved a $4.5m centre upgrade
programme and although works were disrupted by
lockdowns, we have resumed these where possible
under the current covid protection framework.
Australian expansion strategy
Evolve acquired 13 centres in Australia during the
12 months ended 31 December 2021. The acquired
centres contributed revenue of $19.7m and net
profit before tax of $6.0m to the Group’s results.
The Group continues to look for acquisition
opportunities in Australia, however these will
have to be at prices which make sense and are
sustainable.
Looking ahead
The Group will continue to focus on improving
the performance of centres in New Zealand and
be on the look-out for acquisition opportunities in
Australia. With a healthy cash position ($47.6m as at
31 December 2021) and positive net cash flow from
operating activities, Evolve remains well placed to
ride out the uncertainties brought about by Covid-19
and to resume its Australian acquisition strategy.
Chris Scott
Managing Director
Managing
Director's Report
5
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.
Learning
Respectful
Playful
Nurturing
Understand the needs and aspirations
of our children and families and exceed
their expectations.
Create an environment and team culture
that supports every staff member to excel
and feel valued for their achievements.
Take a leadership position in the ECE
sector for delivering the highest quality
early childhood education.
Provide a healthy, happy, safe and
inclusive environment for all our children
and staff.
Contribute to the development and
success of the communities that we serve.
Deliver value to all Evolve stakeholders
by growing a strong and sustainable
organisation.
Vision
Values
Mission
Belonging
This is our...
6
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Our Families
Kitiwah has been an amazing place for both our
girls since the first day they started. All of the staff
have always been so professional, friendly and it’s
nice to come in and see their smiling faces. Our
eldest daughter always looks forward to going.
We are amazed at how much we have seen her
confidence grow since she started and we love
seeing the friendships she has made.
Nicquel, Nicole, Abby and Hallie
Kitiwah Place, Queensland
I just wanted to give thanks to all the educators
and staff of Cubby Care Mooroobool for taking
care of my son. We enrolled him into Cubby Care
Mooroobool when he was 12 months old and he has
just graduated after being there for 4 years. Ishmyal
has learnt so much over the years, I am forever
grateful and cannot thank you all enough.
As a parent, I entrusted my son to the staff at
Cubby Care every day, and I am grateful for the
loving care and guidance he received. There was
so much for my son to do. He was learning new
things every day. The programs are structured, and
the educators give the children the attention and
affection they require. The communication between
educators and parents is excellent. I would highly
recommend Cubby Care Mooroobool to everyone.
Natasha | Cubby Care Mooroobool, Queensland
Our two boys absolutely love Kitiwah. Our three
year old son is learning so much and amazes us
everyday with all the things he learns. He is so
happy and always asks in the morning, “Is it Daycare
day today?”. The staff are lovely and are always
so welcoming and great with communication. I
am grateful for the loving care and guidance the
boys always receive from the staff. The facilities
are always clean, tidy and organised. I can’t fault
the service we have had there over the last 2 and a
half years. I always recommend it to anyone who is
looking for a wonderful place to send their children.
Nick, Sophie, Arlen and Finn
Kitiwah Place, Queensland
Moreton Drive ELC has become part of our family
for 4+ years now with all 3 of our children going
through the centre at some point. Our eldest began
when the centre opened, he was 18 months old
and has recently graduated from the Kindy there.
We have experienced all the rooms at the centre
and they are outstanding from the nursery end to
the kindergarten. The staff go above and beyond
and have bonded with not only the kids but us
as parents too. They educate each child as an
individual, focusing on each child’s strengths (we
have experienced this with our children being so
different themselves). Our kids loved being dropped
off every day and would come home explaining all
the fun activities they did during the day. We have
been so lucky in finding such a beautiful centre
which we not only trust but has wonderful, new
resources for the children as well. Moreton Drive
ELC has played a huge role in the development of
our children and we highly recommend the centre.
Nathan and Kim | Moreton Drive ELC, Queensland
7
Our
Centres
Little Zebra
Australia
Cubby Care
Condon
Gracemere
Beenleigh
Beenleigh
Gracemere
8
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
New Zealand
Enrichment Programmes
Active Explorers - educating and caring in lockdown
Little Earth Montessori
Lollipops
Waiwhetu
Kapiti
Little Scientists
Enriching tamariki's growth through exploration
and play, this science-based programme fosters
children's natural curiosity and helps them
become critical thinkers and confident learners.
Heydeeho
Children learn the concepts of beat, rhythm,
tempo, pitch and dynamics in a play-based
environment using an array of instruments.
9
Board Profile
Chris Scott
Managing Director and Executive Director (Non-Independent)
Chris Scott has over 39 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.
Hamish Stevens
Independent Director and Chair of the Board
Hamish has held independent directorships on several boards since
2010 and is currently Chair of Pharmaco NZ and East Health Services,
a director of Marsden Maritime Holdings, Northport, Radius Residential
Care and Counties Energy. 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 and is a
Chartered Fellow of the Institute of Directors.
10
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Kim Campbell
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, Director of
EMH Trade Ltd, Chair of Auckland Manufacturers Association and a
Director of New Image International Limited.
Adrian Fonseca
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 early
education and heavily involved in community groups relating
to children.
Chris Sacre
Non-Independent Director
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 capitalisation from $4 million to $1.3 billion.
Chris is a member of Evolve Education’s Audit and Risk Committee.
11
Senior Management
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 publicly 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. Edmund is a CFA charterholder.
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 in 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 Chair of the Board of Glendowie College.
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.
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.
12
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Jenny Aldous
Head of Project Team
Jenny joined Evolve in 2019 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
Head of IT
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 DECEMBER 2021
Evolve Education Group Limited
Consolidated Financial Statements
15
Evolve Education Group Limited
Consolidated Financial Statements
For the 12 months ended 31 December 2021
The Directors present the Consolidated Financial Statements of Evolve Education Group Limited,
for the 12 months ended 31 December 2021.
The Consolidated Financial Statements presented are signed for and on behalf of the Board and were
authorised for issue on 28 February 2022.
Hamish Stevens
Chair
28 February 2022
Adrian Fonseca
Chair of Audit and Risk Committee
28 February 2022
16
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Consolidated Statement of Comprehensive Income
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Note
$’000
$’000
Childcare fees
5
51,754
28,187
Government funding
5
106,205
74,452
Total revenue
157,959
102,639
Expenses
Employee benefits expenses
6
(97,441)
(53,985)
Building occupancy expenses
(2,661)
(2,053)
Direct expenses of providing services
(17,889)
(10,487)
Acquisition expenses
(1,020)
–
Depreciation
10, 18c
(14,698)
(10,870)
Amortisation
14
(64)
(60)
Impairment reversal
10, 15, 18a
-
17
Other expenses
6
(2,498)
(2,282)
Total expenses
(136,271)
(79,720)
Profit before net finance costs and income tax
21,688
22,919
Finance income
6
230
146
Finance costs
6, 18c
(20,446)
(12,703)
Net finance costs
(20,216)
(12,557)
Profit before income tax
1,472
10,362
Income tax expense
7
(731)
(2,792)
Profit after income tax attributable to the shareholders
of the Company
741
7,570
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
(401)
1,158
Total comprehensive income attributable to the
shareholders of the Company
340
8,728
All amounts are from continuing operations
Earnings per share
Cents
Cents
Basic and diluted earnings per share attributable to the
shareholders of the Company
23
0.5
5.4
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 12 MONTHS ENDED 31 DECEMBER 2021
ISSUED
SHARE
CAPITAL
FOREIGN
CURRENCY
TRANSLATION
RESERVE
RETAINED
(DEFICIT)/
EARNINGS
TOTAL
Note
$’000
$’000
$’000
$’000
As at 1 April 2020
237,976
(1,174)
(136,024)
100,778
Profit after income tax
-
-
7,570
7,570
Other comprehensive income
-
1,158
-
1,158
As at 31 December 2020
237,976
(16)
(128,454)
109,506
As at 1 January 2021
237,976
(16)
(128,454)
109,506
Profit after income tax
-
-
741
741
Other comprehensive income
-
(401)
-
(401)
Issue of ordinary shares for
cash, net of transaction costs
20
22,038
-
-
22,038
As at 31 December 2021
260,014
(417)
(127,713)
131,884
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
18
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2021
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
Note
$’000
$’000
ASSETS
Current assets
Cash and cash equivalents
8, 25
47,579
59,139
Trade and other receivables
9
3,121
2,507
Total current assets
50,700
61,646
Assets classified as held for sale
11
2,976
-
Non-current assets
Property, plant and equipment
10
7,604
7,102
Right-of-use assets
18a
184,082
170,938
Deferred tax assets
7
14,061
13,022
Intangible assets
14, 15
160,493
117,697
Term deposits
5,101
4,066
Total non-current assets
371,341
312,825
Total assets
425,017
374,471
LIABILITIES
Current liabilities
Trade and other payables
16
11,526
7,124
Funding received in advance
17
7,743
4,639
Current tax liabilities
1,787
2,014
Lease liabilities
18b
7,702
8,028
Employee entitlements
19
9,087
6,827
Total current liabilities
37,845
28,632
Liabilities classified as held for sale
11
4,446
-
Non-current liabilities
Borrowings
25
36,216
36,137
Lease liabilities
18b
214,626
200,196
Total non-current liabilities
250,842
236,333
Total liabilities
293,133
264,965
Net assets
131,884
109,506
EQUITY
Issued share capital
20
260,014
237,976
Foreign currency translation reserve
(417)
(16)
Retained deficit
(127,713)
(128,454)
Total equity
131,884
109,506
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
19
Consolidated Statement of Cash Flows
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Note
$’000
$’000
Cash flows from operating activities
Receipts from childcare fees
51,754
28,187
Receipts from government funding
109,606
67,287
Government grants received
(Wage subsidy & JobKeeper)
276
14,668
Payments to suppliers and employees
(118,384)
(84,014)
Acquisition costs
(1,981)
-
Income taxes paid
(2,611)
(491)
Interest received
230
146
Net cash flows from operating activities
26
38,890
25,783
Cash flows from investing activities
Payments for purchase of businesses
13
(37,882)
(205)
Proceeds from sale of businesses
-
100
Proceeds from sale of property, plant and equipment
75
90
Payments for software, property, plant and equipment
(3,270)
(2,313)
Transfer to term deposits
(1,035)
(4,066)
Net cash flows from investing activities
(42,112)
(6,394)
Cash flows from financing activities
Proceeds from issues of shares
20
23,521
–
Share issue costs
20
(1,483)
–
Proceeds from issue of notes
25
-
36,804
Note issue costs
25
(216)
(1,364)
Interest paid on borrowings
(2,787)
(428)
Repayment of bank borrowings
25
-
(17,359)
Lease interest payments
6, 25
(17,417)
(12,361)
Lease principal repayments
(8,066)
(5,622)
Net cash flows from financing activities
(6,448)
(330)
Net (decrease)/ increase in cash and cash equivalents
25
(9,670)
19,059
Cash and cash equivalents at the beginning of the year
8, 25
59,139
39,048
Foreign currency translation adjustment
(1,890)
1,032
Cash and cash equivalents at the end of the year
8, 25
47,579
59,139
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
20
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
Index to Notes to the Consolidated Financial Statements
Note
Title
Page
1.
Reporting Entity
22
2.
Basis of Preparation
22
3.
Significant Accounting Policies
25
4.
Segment Information
34
5.
Revenue
37
6.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
38
7.
Taxation
39
8.
Cash and Cash Equivalents
41
9.
Trade and Other Receivables
41
10.
Property, Plant and Equipment
41
11.
Assests Held for Sale
42
12.
Group Information
43
13.
Business Combinations
43
14.
Intangible Assets
45
15.
Impairment
46
16.
Trade and Other Payables
50
17.
Funding Received in Advance
50
18.
Right-of-use Assets and Lease Liabilities
51
19.
Employee Entitlements
52
20.
Issued Capital
53
21.
Capital Management
53
22.
Dividends
54
23.
Earnings Per Share (EPS)
54
24.
Financial Assets and Liabilities
54
25.
Net Debt Reconciliation
58
26.
Reconciliation of Profit After Tax to Net Operating Cash Flows
59
27.
Commitments and Contingencies
59
28.
Related Party Transactions
60
29.
Auditor's Remuneration
62
30.
Events After the Reporting Period
62
21
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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 New Zealand Exchange (“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 15, 16
Kingston 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 (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
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 12 months ended 31 December 2021 were approved and authorised for
issue by the Board of Directors on 28 February 2022.
Going Concern
The financial statements have been prepared on a going concern basis.
The Board has considered the impact of Covid-19 on the financial position of the Group. This is
commented on in more detail in Note 2(a).
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.
Underlying EBITDA and operating cash flow for the Group remained positive for the period. Forecasts
indicate that the Group will have sufficient cash to discharge its liabilities as they fall due.
Having regard to 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 the current environment.
Basis of Measurement
The Group 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.
These Group financial statements have been prepared for the 12 month period ended 31 December 2021.
The comparatives reflect the previous financial reporting period being the 9 month period to 31 December
2020.
22
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
2.
Basis of Preparation (continued)
Functional and Presentation Currency
Items included in the Group 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 Group 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.
(a) Covid-19
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
Government of New Zealand resulted in closure of centres in New Zealand when the country was in alert
level 4. No parental childcare fees were charged during this time. All Australian centres remained opened
throughout Covid-19 lockdowns however occupancy has not yet returned to pre-pandemic levels.
The NZ Ministry of Education maintained its funding throughout the year, including an increase in subsidy
rates of approximately 1.6% from 2021. The Group did not qualify for the NZ wage subsidy scheme in the
current year however all staff were retained on full pay.
As part of the recovery package for child care services in Victoria, Australia, 6 centres received 25%
payment of fee revenue between 28 September 2020 and 31 January 2021. In August 2021, the Australian
Government introduced Business Continuity Payments (BCP) for child care services that were in
lockdown for more than 7 days between 23 August 2021 and 31 October 2021. This was calculated as 25%
of fee revenue from a reference fortnight and was paid in fortnightly instalments. There were no further
government measures beyond 31 October 2021.
While there is uncertainty about the longer term impact of Covid-19 on both economies, 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. The Board acknowledges occupancy may
be affected in the long term as working habits change and more parents are taking the option of working
from home.
The key components of the financial statements specifically impacted by Covid-19 are impairment of
intangible assets, right-of-use assets, and property, plant and equipment. These areas rely upon forecasts
of future profitability as a basis for the carrying value of assets, and therefore potential impairment. More
detail on the sensitivities of assumptions is provided in Note 15.
(b) 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 assets excluding indefinite useful life intangible
assets, and annually for indefinite useful life intangible assets, the recoverable amounts of cash-generating
units ("CGUs") or group of CGUs 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.
23
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
2.
Basis of Preparation (continued)
Estimates and Judgements (continued)
(c) 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:
Individual Early Childhood Education centres ("ECEs") are identified as CGUs. These CGUs have been tested
for impairment where an indicator exists. Indefinite useful life intangible assets have not been allocated to
individual ECEs and therefore the impairment assessment is performed for the New Zealand and Australian
group of CGUs which is the same as the New Zealand and Australian operating segment. Refer to Note 15 for
further information.
(d) Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences. Forecasts prepared for the
purpose of impairment testing (refer Notes 2(b) and 15) indicate future taxable amounts will be available
to utilise these temporary differences. The deferred tax assets are therefore considered to be recoverable.
(e) Right-of-use assets and lease liabilities
The lease term is the non-cancellable period of a lease, together with periods covered by an option
(available to the lessee only) to extend or terminate the lease if the lessee is reasonably certain to
exercise/not to exercise that option. In determining the lease term, the Group considers all facts
and circumstances that create an economic incentive to exercise/not exercise an option. This may
include the profitability of a centre, existence of large penalties for early termination, the incurrence of
significant maintenance costs in meeting early return obligations or consideration as to whether leasehold
improvements still carry significant value. Such assessment is reviewed if a significant event or change in
circumstances occurs which affects this assessment and is within the control of the Group. Refer to Notes
3(i) and 18.
(f) 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.
(g) 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.
24
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
2.
Basis of Preparation (continued)
New and Amended Standards Adopted by the Group
There are no new standards, amendments or interpretations that have been adopted or are not yet
effective that are applicable.
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.
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.
25
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(a) Basis of Consolidation (continued)
Assets held for sale
Non-current assets, or disposal groups (ECE centres) 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.
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.
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. The performance obligations are satisfied over time as the child simultaneously receives
and consumes the benefits.
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 childcare services are provided. 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.
26
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(c) Revenue (continued)
Australian Government funding
Australian Government funding relates to fees paid under the Child Care Subsidy and are recognised over
time when there is reasonable assurance that the funding will be received. Australian Government funding
is received in arrears.
(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.
27
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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 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.
28
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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:
Plant and equipment
4 to 10 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
4 years
Management contracts
4 years
Software
4 years
Brands
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.
29
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(i) Leases
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 an 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. The
weighted average incremental borrowing rate applied to the lease liabilities is 8.49% (2020: 8.14%).
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.
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.
30
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(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 purchasing or selling 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, term deposits 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.
Non-derivative financial liabilities
The Group initially recognises financial liabilities on the date that they are originated. The Group
derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Financial
liabilities comprise borrowings, lease liabilities and trade and other payables.
Trade and other payables
Trade and other payables are obligations to pay for goods or services that have been acquired in the
ordinary course of business from suppliers. They are classified as current liabilities if payment is due
within one year or less. If not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
(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.
31
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(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.
(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
The Group contributes to Kiwisaver in New Zealand and superannuation funds in Australia for employees.
These are defined contribution plans. 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.
32
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(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 laibilities. All borrowing costs are recognised in the Consolidated Statement of
Comprehensive Income using the effective interest method.
Government grants and subsidies
Government grants and subsidies which compensate the Group for expenses incurred are recognised in
the Statement of Comprehensive Income on a straight-line basis over the period in which the related costs
are recognised. Grants and subsidies are reported on a net basis in the same line as the related expense.
(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.
(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 ("Group MD").
(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.
33
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
3.
Significant Accounting Policies (continued)
(s) Goods and Services Tax
All amounts are shown exclusive of Goods and Services Tax (GST) including items disclosed in the
Consolidated Statement of Cash Flows, except for trade receivables, included within other current assets,
and trade payables that are stated inclusive of GST in the Consolidated Statement of Financial Position.
(t) Comparative balances
Comparative balances within Note 4 (Segment Information) have been reclassified to conform with
changes in presentation and classification adopted in the current year. The impact of these changes are
not material.
4.
Segment Information
The Group acquired thirteen childcare centres in Australia (2020: nil), bringing the total number of Australian
centres to twenty three (refer Note 13). The Group reports operating segments by geographical location,
namely New Zealand and Australia.
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, operating expenses, 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 the Board. Operating expenses, 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.
Operating expenses and 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. Operating expenses and 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.
34
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
4.
Segment Information (continued)
New Zealand
ECE centres
Australia
ECE centres
Support and
Corporate
functions
Consolidated
12 MONTHS TO
31 DECEMBER 2021
Note
$’000
$’000
$’000
$’000
Childcare fees
36,185
15,569
-
51,754
Government funding
77,760
28,445
-
106,205
Total revenue
5
113,945
44,014
-
157,959
Operating expenses
(104,125)
(31,920)
(9,318)
(145,363)
Underlying EBITDA
9,820
12,094
(9,318)
12,596
NZ IFRS 16
rental expense adjustment
20,781
4,437
217
25,435
NZ IFRS 16
remeasurement gains
6
986
-
-
986
Adjusted for:
Loss on sale or closure of
businesses
(914)
-
-
(914)
Acquisition costs
-
(1,020)
-
(1,020)
Bond costs
-
-
(216)
(216)
Foreign currency loss
-
-
(158)
(158)
Termination benefit
6
-
-
(259)
(259)
EBITDA
30,673
15,511
(9,734)
36,450
Depreciation
10,18
(12,059)
(416)
(2,223)
(14,698)
Amortisation
14
-
-
(64)
(64)
Earnings before interest and
income tax
18,614
15,095
(12,021)
21,688
Net finance costs
6
(12,619)
(4,789)
(2,808)
(20,216)
Profit/(Loss) before
income tax from continuing
operations
5,995
10,306
(14,829)
1,472
Total assets
65,384
129,435
230,198
425,017
Total liabilities
(117,783)
(113,495)
(61,855)
(293,133)
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.
35
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
4.
Segment Information (continued)
New Zealand
ECE centres
(restated)
Australia
ECE centres
Support and
Corporate
functions
(restated)
Consolidated
9 MONTHS TO
31 DECEMBER 2020
Note
$’000
$’000
$’000
$’000
Childcare fees
24,550
3,637
-
28,187
Government funding
62,137
12,315
-
74,452
Total revenue
5
86,687
15,952
-
102,639
Operating expenses
(69,844)
(10,371)
(6,733)
(86,948)
Underlying EBITDA
16,843
5,581
(6,733)
15,691
NZ IFRS 16
rental expense adjustment
15,674
2,092
217
17,983
NZ IFRS 16
remeasurement gains
6
355
-
46
401
Adjusted for:
Loss on sale or closure of
businesses
(211)
-
-
(211)
Acquisition costs
-
(32)
-
(32)
Impairment reversal
10,15,18
-
-
17
17
EBITDA
32,661
7,641
(6,453)
33,849
Depreciation
10,18
(9,483)
(255)
(1,132)
(10,870)
Amortisation
14
-
-
(60)
(60)
Earnings before interest
and income tax
23,178
7,386
(7,645)
22,919
Net finance costs
6
(9,915)
(2,446)
(196)
(12,557)
Profit/(Loss) before
income tax from continuing
operations
13,263
4,940
(7,841)
10,362
Total assets
240,725
59,131
74,615
374,471
Total liabilities
(135,307)
(80,368)
(49,290)
(264,965)
36
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
4.
Segment Information (continued)
Reconciliation of total expenses and operating expenses
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Total expenses per Statement of Comprehensive Income
136,271
79,720
Less:
Depreciation
(14,698)
(10,870)
Amortisation
(64)
(60)
NZ IFRS 16 rental expense adjustment
25,435
17,983
NZ IFRS 16 remeasurement gains
986
401
Adjusted for:
Loss on sale or closure of businesses
(914)
–
Acquisition costs
(1,020)
(211)
Bond costs
(216)
–
Foreign currency loss
(158)
(32)
Termination benefit
(259)
17
Operating expenses
145,363
86,948
5.
Revenue
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Childcare fees
51,754
28,187
NZ Ministry of Education funding
77,760
62,137
Australian Child Care Subsidy
28,445
12,315
Total revenue
157,959
102,639
37
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
6.
Disclosure of Items in the Consolidated Statement of Comprehensive Income
Other expenses
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Note
$’000
$’000
Included in other expenses are:
Audit fees
29
182
170
Directors' fees
28
475
305
NZ IFRS 16 remeasurement adjustments
(986)
(401)
Other items
2,827
2,208
Total other expenses
2,498
2,282
Other items includes corporate and support office costs not already disclosed separately.
Employee benefits expense
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Wages and salaries
90,316
64,017
KiwiSaver contributions
1,807
1,393
Superannuation fund contributions
1,949
773
Payments to agency contractors
2,083
652
New Zealand government wage subsidy
-
(10,959)
Australian JobKeeper payment
(276)
(2,908)
Termination benefit
259
-
Other employee benefits expense
1,303
1,017
Total employee benefits expense
97,441
53,985
Termination benefit
Timothy Wong resigned as Chief Executive Officer of the New Zealand operations of the Group on 30
March 2021. Under the terms of his contract, he received 1.25 million share options exercisable at A$1.20
per share, expiring 31 December 2023. The fair value of the share options is included in employee benefits
expense and employee entitlements within liabilities. No share options have been exercised as at 31
December 2021.
38
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
6.
Disclosure of Items in the Consolidated Statement of Comprehensive Income (continued)
Net finance costs
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Note
$’000
$’000
Interest received
Bank deposits
230
146
Total finance income
230
146
Interest expense
Interest on borrowings
(3,029)
(342)
Interest on lease liabilities
18c
(17,417)
(12,361)
Total finance costs
(20,446)
(12,703)
Net finance costs
(20,216)
(12,557)
7.
Taxation
Income tax expense
The major components of income tax expense for the year are:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Current income tax:
Current income tax expense
2,391
3,919
Prior year adjustments
-
(60)
2,391
3,859
Deferred tax:
Relating to origination and reversal of temporary differences
(1,660)
(1,112)
Prior year adjustments
-
45
(1,660)
(1,067)
Total income tax expense on continuing operations
731
2,792
39
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
7.
Taxation (continued)
Reconciliation of tax expense
Tax expense is reconciled to accounting profit as follows:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Profit before income tax from continuing operations
1,472
10,362
At the statutory income tax rate of 28%
412
2,901
Non-assessable income and non-deductible expenses
for tax purposes:
Difference in overseas tax rate
72
48
Non-deductible expenses/(non-assessable income)
247
(142)
Prior year adjustments
-
(15)
Total income tax expense
731
2,792
Deferred tax
Deferred tax relates to the following:
31 DECEMBER 2021
31 DECEMBER 2020
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement of
Financial
Position
Consolidated
Statement of
Comprehensive
Income
Consolidated
Statement of
Financial
Position
$’000
$’000
$’000
$’000
Property, plant and equipment
49
1,639
75
1,633
Intangible assets
9
(875)
8
(885)
Right–of–use assets
(4,860)
(52,843)
2,454
(48,634)
Lease liabilities
5,754
63,682
(1,608)
59,159
Employee entitlement provisions
509
1,780
209
1,273
Other temporary differences
(205)
274
(71)
476
Tax losses carried forward
404
404
-
-
Deferred tax benefit
1,660
1,067
Net deferred tax assets
14,061
13,022
Deferred tax assets are expected to be utilised by the reversal of taxable temporary differences as well as
the generation of taxable profits by the Group.
Deferred tax assets of $0.6 million has been classified as held for sale at 31 December 2021.
Imputation credits
Imputation credits available for use in subsequent reporting periods are $12.0 million (2020: 11.8 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
December 2021. There are no Australian franking credits available.
40
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
8.
Cash and Cash Equivalents
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$’000
$’000
Cash at banks and on hand
6,948
32,596
Short–term deposits
40,631
26,543
Total cash and cash equivalents
47,579
59,139
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.
9.
Trade and Other Receivables
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$’000
$’000
Trade receivables
1,687
1,076
Prepayments and sundry receivables
1,434
1,431
Total trade and other receivables
3,121
2,507
10.
Property, Plant and Equipment
31 December 2021
Plant and
Equipment
Office Furniture
and Fittings
Leasehold
Improvements
Motor
Vehicles
Work in
Progress
Total
Note
$’000
$’000
$’000
$’000
$’000
$’000
Cost
Opening balance
1,431
7,925
8,711
115
291
18,473
Additions/Transfers
877
780
1,810
37
3,153
6,657
Disposals/Transfers
(53)
(197)
(130)
(90)
(3,123)
(3,593)
Classified as held
for sale
11
(44)
(337)
(180)
-
(1)
(562)
Closing balance
2,211
8,171
10,211
62
320
20,975
Depreciation and
impairment
Opening balance
(794)
(5,978)
(4,546)
(71)
-
(11,389)
Depreciation for
the year
(484)
(625)
(1,664)
(3)
-
(2,776)
Disposals
36
181
89
53
-
359
Classified as held
for sale
11
24
300
104
-
-
428
Closing balance
(1,218)
(6,122)
(6,017)
(21)
-
(13,378)
Foreign exchange
movements
1
2
4
-
-
7
Net book value
994
2,051
4,198
41
320
7,604
41
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
10 . Property, Plant and Equipment (continued)
31 DECEMBER 2020
Plant and
Equipment
Office Furniture
and Fittings
Leasehold
Improvements
Motor
Vehicles
Work in
Progress
Total
Note
$’000
$’000
$’000
$’000
$’000
$’000
Cost
Opening balance
1,159
7,683
6,497
128
1,170
16,637
Additions/Transfers
320
526
2,289
3
1,556
4,694
Disposals/Transfers
(48)
(284)
(75)
(16)
(2,435)
(2,858)
Closing balance
1,431
7,925
8,711
115
291
18,473
Depreciation and
impairment
Opening balance
(654)
(5,700)
(3,361)
(69)
(70)
(9,854)
Depreciation for
the year
(182)
(570)
(1,241)
(7)
-
(2,000)
Impairment reversal
15
8
47
31
-
70
156
Disposals
34
245
25
5
-
309
Closing balance
(794)
(5,978)
(4,546)
(71)
-
(11,389)
Foreign exchange
movements
-
7
11
-
-
18
Net book value
637
1,954
4,176
44
291
7,102
Disposals arise either when individual assets are no longer required or become obsolete, or when a centre
has been closed or sold.
11.
Assets Held for Sale
Assets and liabilities held for sale
During September 2021 the Group classified six centres as held for sale. Several conditional offers were
received however no centres were sold prior to 31 December 2021 therefore the assets and liabilities held
for sale at 31 December 2021 relate to all six centres. These operations do not meet the definition of a
discontinued operation.
AS AT
31 DECEMBER 2021
$’000
Prepayments
9
Property, plant and equipment
134
Deferred tax assets
617
Right of use asset
2,216
Assets classified as held for sale
2,976
Funding received in advance
(296)
Lease liabilities
(4,150)
Liabilities classified as held for sale
(4,446)
42
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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 Management Group Limited
Investment Company
NZ
31 December
100%
Lollipops Educare Holdings Limited
Investment company
NZ
31 December
100%
Lollipops Educare Centres Limited
ECE centre owner
NZ
31 December
100%
Evolve Early Education Pty Ltd
ECE centre owner
Australia
31 December
100%
On 1 August 2021, Evolve ECEM Limited and Evolve Management Group Limited amalgamated to become
Evolve Management Group Limited; and Au Pair (Evolve) Limited, Evolve Group 1 Limited, Evolve Group 2
Limited, Evolve Group 3 Limited, Evolve Group 4 Limited, Evolve Group 5 Limited, Evolve Group 6 Limited,
Evolve Home Day Care Limited, Lollipops Educare (Birkenhead) Limited, Lollipops Educare (Hastings)
Limited, Lollipops Educare Limited and Lollipops Educare Centres Limited amalgamated to become
Lollipops Educare Centres Limited.
13.
Business Combinations
During the year ended 31 December 2021, the Group acquired thirteen ECE centres from eight separate
vendors across Australia, for a total consideration of $42.1 million. Total net liabilities acquired were $0.8
million resulting in goodwill on acquisition of $42.9 million. No cash was acquired. Each of the business
combinations were immaterial on an individual centre basis. 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. There were no business combinations in the nine months ending 31 December 2020.
Assets and liabilities acquired and consideration paid
$’000
Assets
Property, plant and equipment
276
Right-of-use assets
27,458
27,734
Liabilities
Employee entitlements
(757)
Other current liabilities
(300)
Lease liabilities
(27,458)
(28,515)
Total identifiable net liabilities at fair value
(781)
Goodwill arising on acquisition
42,854
Purchase consideration transferred
42,073
Purchase consideration
Cash paid
34,959
Contingent consideration
7,167
Retentions
(53)
Total consideration
42,073
43
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
13.
Business Combinations (continued)
The goodwill of $42.9 million predominantly comprises the future earnings potential of bringing together a
group of ECE centres under one centrally managed group.
Assessment of the businesses acquired did not identify any separable intangible assets other than
goodwill.
As at 31 December 2021, the centres acquired at various points during the year have contributed revenue
of $19.7 million and a net profit before tax of $6.0 million to the Group’s results before allowing for
acquisition expenses of $1.0 million.
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 December 2021
TOTAL POTENTIAL
CONTINGENT
CONSIDERATION
PAYABLE
CARRYING VALUE
CONDITIONS
$’000
$’000
Acquisition of 6 centres
Performance hurdles based on EBITDA
4,463
3,283
The potential contingent consideration payable in cash is based on a probability assessment determining
the likelihood of payout at year end and recognised in the carrying value.
Movement in Contingent Consideration
A reconciliation of the fair value of the contingent consideration liability is provided below.
12 MONTHS TO
31 DECEMBER 2021
$’000
Financial liability for contingent consideration as at 1 January 2021
-
Contingent consideration recognised during the year
7,167
Contingent consideration paid
(2,923)
Fair value adjustments
(961)
Total contingent consideration payable as at 31 December 2021
3,283
44
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
14.
Intangible Assets
31 December 2021
Software
Brands
Goodwill
Other
Total
$’000
$’000
$’000
$’000
$’000
Cost
Opening balance
767
3,104
225,952
513
230,336
Additions
84
-
-
-
84
Acquisitions of businesses
-
-
42,854
-
42,854
Closing balance
851
3,104
268,806
513
273,274
Amortisation and impairment
Opening balance
(683)
-
(112,087)
(513)
(113,283)
Amortisation expense
(64)
-
-
-
(64)
Disposals
-
-
-
-
-
Closing balance
(747)
-
(112,087)
(513)
(113,347)
Foreign exchange movement
-
-
566
-
566
Net book value
104
3,104
157,285
-
160,493
31 December 2020
Software
Brands
Goodwill
Other
Total
$’000
$’000
$’000
$’000
$’000
Cost
Opening balance
1,392
3,104
225,952
513
230,961
Additions
31
-
-
-
31
Disposals
(656)
-
-
-
(656)
Closing balance
767
3,104
225,952
513
230,336
Amortisation and impairment
Opening balance
(1,279)
-
(112,087)
(513)
(113,879)
Amortisation expense
(60)
-
-
-
(60)
Disposals
656
-
-
-
656
Closing balance
(683)
- (112,087)
(513) (113,283)
Foreign exchange movement
-
-
644
-
644
Net book value
84
3,104
114,509
-
117,697
45
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
15.
Impairment
Impairment assessment of CGUs excluding indefinite useful life intangible assets
The impairment assessment of CGUs was performed as at 31 December 2021. The various CGUs were
tested by calculating the recoverable amount. The recoverable amount of each CGU exceeded their
carrying value therefore no impairment expense has been recognised in the current year. The discount
rate used to perform the assessment was a pre-tax rate of 11.4% (2020: 13.9%).
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$’000
$’000
Impairment expense – right-of-use assets
-
139
Impairment reversal – property, plant and equipment
-
(156)
-
(17)
Impairment assessment of indefinite useful life intangible assets
The New Zealand and Australia indefinite useful life intangible assets balances of $98.4 million and $62.0
million have been tested for impairment as at 31 December 2021. Impairment of goodwill cannot be
reversed in subsequent years.
The recoverable amount of the group of NZ and Australian CGUs, to which indefinite useful life intangible
assets have 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 December 2021.
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$’000
$’000
Goodwill
157,285
114,509
Brands with indefinite useful lives
3,104
3,104
160,389
117,613
Foreign exchange movement of $0.6 million was recognised during the year.
46
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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:
31 DECEMBER
2021
New Zealand
31 DECEMBER
2020
New Zealand
Revenue growth attributable to parental fee pricing
(% per annum on average)
3.0%
2.4%
Revenue growth attributable to MOE funding rates
(% per annum on average)
1.4%
1.1%
Revenue growth attributable to increase in occupancy
(% per annum on average)
1.7%
0.8%
Total revenue growth (% per annum on average)
6.1%
4.3%
Wages growth (% per annum on average)
4.6%
4.7%
Pre-tax discount rates (%)
11.0%
11.1%
Long-term growth rate (%)
1.5%
1.5%
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% (2020: 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 (3.8% from 1 January 2022), with subsequent annual
increases in line with past experience (1.6% per year). Parental fees are assumed to increase by 5% from 1
March each year. As discussed in note 2a, no parental fees were charged during alert levels 4 or 3 in 2021.
This has increased the revenue growth attributable to parental fee pricing over the forecast period.
Revenue – Occupancy: Occupancy refers to the number of full-time equivalent children attending centres.
A number of initiatives are in place to increase occupancy, involving both attracting new children as well
as retaining existing ones and optimising their attendance. There has been a focus on improving the
quality of education provided, increased investment in the physical amenities of centres, targeted local
advertising, and closure or sale of poor performing centres.
Wages: Wages are assumed to increase by 5% from 1 April 2022 then by 3% per year.
47
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
15.
Impairment (continued)
NZ ECE Centres – Goodwill (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 into 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.
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:
Headroom/
(Impairment)
$'000
Base assumption
39,349
Occupancy
-0.78%
Childcare fee growth
-2.16%
Ministry of Education funding growth
-1.25%
Wages growth
1.22%
Pre-tax discount rate
1.19%
Long-term growth rate
-2.04%
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:
Headroom/
(Impairment)
$'000
Base assumption
39,349
Occupancy at 70% at the end of the forecast period
1,373
Occupancy at 65% at the end of the forecast period
(25,373)
MOE funding rate growth +0.5% above base
55,835
MOE funding rate growth -0.5% below base
23,159
Childcare fees growth +1.0% above base
58,971
Childcare fees growth -1.0% below base
20,391
Wages growth +1.0% above base
9,383
Wages growth -1.0% below base
68,259
Occupancy is required to decrease to 69.7% at the end of the forecast period, with all other assumptions
remaining constant, for the recoverable amount to equal the carrying amount.
48
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
15.
Impairment (continued)
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:
31 DECEMBER
2021
Australia
31 DECEMBER
2020
Australia
Revenue growth attributable to price (% per annum on average)
3.0%
5.7%
Revenue growth attributable to increase in occupancy
(% per annum on average)
5.6%
0.0%
Total revenue growth (% per annum on average)
8.6%
5.7%
Wages growth (% per annum on average)
9.1%
8.8%
Pre-tax discount rates (%)
12.5%
11.9%
Long-term growth rate (%)
1.5%
1.5%
Revenue: Revenue growth attributable to increase in occupancy of 5.6% disclosed in the table above
relates to the new centres acquired during the year. Excluding this, we have not assumed any growth in
occupancy.
Wages: Excluding the effects of new centres acquired during the year, wages are assumed to increase at
an average of 3.0% per year. 2020 wages growth of 8.8% disclosed in the table above includes the effects
of the government wage subsidy received. Excluding this, wages were assumed to increase at an average
of 3.5% per year.
Sensitivity to changes in key assumptions
The most sensitive assumption in the calculation of value-in-use 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:
Headroom/
(Impairment)
$'000
Base assumption
51,745
Revenue growth
-10.27%
Wages growth
19.22%
Pre-tax discount rate
4.80%
Long-term growth rate
-7.20%
49
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
15.
Impairment (continued)
Australian ECE Centres – Goodwill (continued)
Sensitivity to changes in key assumptions (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:
Headroom/
(Impairment)
$'000
Base assumption
51,745
Revenue growth +5.0% above base
76,938
Revenue growth -5.0% below base
26,552
Wages growth +5.0% above base
38,287
Wages growth -5.0% below base
65,203
The changes used are based on an assessment of reasonably-likely variations in the assumptions.
16.
Trade and Other Payables
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$'000
$'000
Trade payables
1,048
1,807
Goods and services tax payable
3,776
2,850
Other payables
6,702
2,467
Total trade and other payables
11,526
7,124
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.
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. Due to Covid-19, the
Group instead received 90% of estimated funding on 1 November 2021. At 31 December 2021 funding
received in advance relates to January and February 2022. Funding receivable relates to the remaining
10% of funding, adjusted for any changes in occupancy and other criteria, in respect of November and
December 2021.
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$'000
$'000
Funding received in advance
10,940
8,942
Funding receivable
(3,197)
(4,303)
Total funding received in advance
7,743
4,639
50
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
18.
Right-of-use Assets and Lease Liabilities
(a) Right-of-use assets
31 December 2021
Leased
properties
Leased motor
vehicles
Total
$'000
$'000
$'000
Opening net book value
170,714
224
170,938
Additions
29,961
413
30,374
Disposals
(151)
-
(151)
Depreciation and impairment
(11,700)
(222)
(11,922)
Lease remeasurements
(2,708)
-
(2,708)
Classified as held for sale
(2,216)
-
(2,216)
Foreign exchange movements
(233)
-
(233)
Closing net book value
183,667
415
184,082
Cost
218,897
638
219,535
Accumulated depreciation
(29,017)
(223)
(29,240)
Accumulated Impairment
(6,213)
-
(6,213)
As at 31 December 2021
183,667
415
184,082
Included in accumulated depreciation is a reversal of $0.8 million for lease termination.
31 December 2020
Leased
properties
Leased motor
vehicles
Total
$'000
$'000
$'000
Opening net book value
177,960
278
178,238
Additions
2,045
98
2,143
Depreciation and impairment
(8,857)
(152)
(9,009)
Lease remeasurements
(1,908)
-
(1,908)
Foreign exchange movements
1,474
-
1,474
Closing net book value
170,714
224
170,938
Cost
198,030
547
198,577
Accumulated depreciation
(19,283)
(323)
(19,606)
Accumulated Impairment
(8,033)
-
(8,033)
As at 31 December 2020
170,714
224
170,938
(b) Lease liabilities
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$'000
$'000
Current lease liabilities
7,702
8,028
Non-current lease liabilities
214,626
200,196
Total lease liabilities
222,328
208,224
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. As at 31 December 2021,
the Group's leases had a weighted average remaining lease term of 19.4 years (2020: 18.6 years).
51
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
18.
Right-of-use Assets and Lease Liabilities (continued)
(c) Amounts recognised in the statement of comprehensive income
The statement of comprehensive income shows the following amounts relating to leases:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$'000
$'000
Depreciation charge of right-of-use assets
Properties
11,700
8,718
Motor vehicles
222
152
11,922
8,870
Interest expense (included in finance cost)
17,417
12,361
Expense relating to short-term leases
(included in building occupancy expenses)
125
252
Expense relating to leases of low-value assets that are not
shown above as short-term leases (included in direct expenses
of providing services)
96
110
The total cash outflow for leases during the year was $25.5 million (2020: $18.0 million).
(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.
19.
Employee Entitlements
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$'000
$'000
Employee leave provisions
5,381
4,328
Accrued wages and salaries
3,258
2,162
Termination benefit
259
-
Other employee entitlements
189
337
Total employee entitlements
9,087
6,827
52
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
20.
Issued Capital
Authorised shares
31 DECEMBER 2021
31 DECEMBER 2020
Number
$'000
Number
$'000
Ordinary shares authorised,
issued and fully paid
Opening balance
139,825,639
237,976
1,118,603,993
237,976
Issue of ordinary shares, net of
transaction costs
19,723,845
22,038
–
–
Share consolidation
-
-
(978,778,354)
–
Closing balance
159,549,484
260,014
139,825,639
237,976
The Group completed an institutional share placement in April 2021, issuing an additional 19,723,845
shares, with proceeds of $23.5 million being received. Directly attributable issue costs of $1.5 million were
incurred and have been netted off against the proceeds of the capital raising.
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.
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:
Senior secured notes
•
Gearing ratio (i.e. core debt to equity)
•
Fixed cover charges ratio (i.e. EBITDA to total interest including lease payments)
•
Total leverage ratio (i.e. debt less cash to EBITDA)
•
Debt leverage ratio (i.e. debt less lease liabilities to underlying EBITDA)
Breaches of the financial covenants could permit the lender to immediately call loans and borrowings. The
Group was in compliance with all covenants throughout the current and previous years.
53
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
22. Dividends
Dividends paid during the current year
No dividend was paid during the year ended 31 December 2021 (2020: Nil).
Policies
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.
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.
23.
Earnings Per Share (EPS)
Basic and diluted EPS amounts are calculated by dividing the profit or loss 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 periods are adjusted
for the effect of the share issue during the current year (refer Note 20). The following reflects the
income and share data used in the basic and diluted EPS computations:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Profit after income tax attributable to the shareholders of the
Company ($'000s)
741
7,570
Weighted average number of ordinary shares for basic and diluted
EPS
154,037,615
140,902,195
Basic and diluted EPS attributable to the shareholders of the
Company (cents per share)
0.5
5.4
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.
54
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
24.
Financial Assets and Liabilities (continued)
Market risk
Foreign currency risk
The Group 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.
AS AT 31
DECEMBER 2021
AUD $'000
Cash and cash equivalents
23,224
Term deposit
2,451
Other current assets
1,249
Trade payables
(4,376)
Borrowings
(34,119)
(11,571)
Sensitivity
As shown in the table above, as at 31 December 2021, 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 within equity, and not profit or loss.
Price risk
The Group is not currently exposed to any significant price risk.
Interest rate risk
The weighted average effective interest rate for the current year is 8.3% (2020: 3.7%). The effective
interest rate has increased as a result of A$35 million, five year senior secured notes issued in December
2020 with a fixed interest rate of 7.5% per annum. The Group's main interest rate risk arises from
borrowings however as they are currently fixed, the Group is not exposed to interest rate fluctuations.
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. Exposure to interest rate risk is reduced by
investing surplus cash in on-call savings accounts or term deposits.
55
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
24.
Financial Assets and Liabilities (continued)
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.
Financing arrangements
The Group’s financing arrangements comprise the following facilities:
• Senior secured notes ("notes") – A$35 million five year notes issued on 4 December 2020 with a fixed
interest rate of 7.50% per annum, payable quarterly in arrears. The notes 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.
• Lease guarantee facility – provided by ASB for $2.5 million for guarantees required for certain
leasehold properties. This facility is cash-backed by a term deposit held with ASB.
• Lease guarantee facility – provided by NAB for A$2.5 million for guarantees required for certain
leasehold properties in Australia. This facility is cash-backed by a term deposit held with NAB.
Deed of Cross Guarantee
Evolve Education Group Limited (the parent entity) has entered into a Deed of Cross Guarantee with the
effect that the Company guarantees debts in respect of Evolve Early Education Pty Ltd, the Australian
subsidiary.
Evolve Early Education Pty Ltd has been granted relief from the requirement to prepare a
Financial Report and Directors’ Report Under ASIC Legislative Instrument 2016/785 (As Amended)
issued by the Australian Securities and Investments Commission. Evolve Early Education Pty is
considered a member of the closed group.
56
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
24.
Financial Assets and Liabilities (continued)
Liquidity risk (continued)
Remaining contractual maturities
The contractual maturity for the Group’s financial instrument liabilities (that is, trade payables) is
disclosed in Note 16. The principal amount (A$35 million) of the notes is repayable in December 2025
and interest payments are A$2.625 million per annum. Future borrowings payments at 31 December 2021
were as follows:
Within 1 year
1-5 years
After 5 years
Total
$'000
$'000
$'000
$'000
31 December 2021
Repayment of bank borrowings
2,787
45,508
-
48,295
Finance charges
(3,040)
(9,039)
-
(12,079)
Net present values
(253)
36,469
-
36,216
31 December 2020
Repayment of bank borrowings
2,797
48,487
-
51,284
Finance charges
(3,032)
(12,115)
-
(15,147)
Net present values
(235)
36,372
-
36,137
As at year end, the Group has a lease liabilities balance of $222.3 million (refer Note 18b). Including renewal
rights expected to be exercised, the maturities of these leases are spread over the period to December
2064. The lease liabilities are secured by the related underlying assets. Future lease payments at 31
December 2021 were as follows:
Within 1 year
1-5 years
After 5 years
Total
$'000
$'000
$'000
$'000
31 December 2021
Lease payments
25,634
100,292
356,818
482,744
Finance charges
(17,932)
(66,154)
(176,330)
(260,416)
Net present values
7,702
34,138
180,488
222,328
31 December 2020
Lease payments
24,019
92,893
314,370
431,282
Finance charges
(15,991)
(58,486)
(148,581)
(223,058)
Net present values
8,028
34,407
165,789
208,224
Fair value of financial instruments
The carrying value of financial assets and financial liabilities presented represent a reasonable
approximation of fair value.
57
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
25.
Net Debt Reconciliation
Movements on net debt comprise:
31 December 2021
Cash and cash
equivalents
Borrowings
Lease
liabilities
Total
$'000
$'000
$'000
$'000
Net debt as at 1 January 2021
59,139
(36,137)
(208,224)
(185,222)
Borrowings repaid
-
2,787
-
2,787
Interest on borrowings
-
(3,020)
-
(3,020)
Additions
-
-
(27,871)
(27,871)
Interest on lease liabilities
-
-
(17,417)
(17,417)
Repayment of lease liabilities
-
-
25,483
25,483
Other movements on lease laibilities
-
-
1,372
1,372
Transferred to held for sale
-
-
4,150
4,150
Cash flows
(9,670)
-
-
(9,670)
Foreign exchange movements
(1,890)
154
179
(1,557)
Net debt as at 31 December 2021
47,579
(36,216)
(222,328)
(210,965)
Due within one year
47,579
(253)
(7,702)
39,624
Due in more than one year
-
(35,963)
(214,626)
(250,589)
47,579
(36,216)
(222,328)
(210,965)
31 December 2020
Cash and cash
equivalents
Borrowings
Lease
liabilities
Total
$'000
$'000
$'000
$'000
Net debt as at 1 April 2020
39,048
(17,666)
(212,468)
(191,086)
Notes issued, net of transaction costs
–
(35,440)
–
(35,440)
Bank borrowings repaid
–
17,359
–
17,359
Amortisation of modification loss
–
307
–
307
Additions
–
–
(1,153)
(1,153)
Interest on lease liabilities
–
–
(12,361)
(12,361)
Repayment of lease liabilities
–
–
17,983
17,983
Other movements on lease liabilities
–
–
1,318
1,318
Cash flows
19,059
–
–
19,059
Foreign exchange movements
1,032
(697)
(1,543)
(1,208)
Net debt as at 31 December 2020
59,139
(36,137)
(208,224)
(185,222)
Due within one year
59,139
(232)
(8,028)
50,879
Due in more than one year
–
(35,905)
(200,196)
(236,101)
59,139
(36,137)
(208,224)
(185,222)
58
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
26.
Reconciliation of Profit After Tax to Net Operating Cash Flows
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$'000
$'000
Profit after income tax
741
7,570
Adjustments for non cash items:
Depreciation and amortisation
14,762
10,930
Impairment reversal
-
(17)
Gain on disposal of property, plant and equipment
(13)
(10)
Remeasurement of lease liabilities
(987)
(401)
Gain on sale of businesses
-
(62)
Deferred tax
(1,660)
(1,067)
Foreign currency loss
158
-
Fair value remeasurement of earnouts
(961)
-
Share options granted
259
-
Adjustments for items classified as investing or financing activities:
Finance costs
20,446
12,703
Working capital movements relating to operating activities:
Increase/(decrease) in funding received in advance
3,401
(7,165)
(Increase)/decrease in other current assets
(624)
11,254
Increase/(decrease) in trade and other payables
4,401
(12,049)
(Decrease)/increase in current income tax payables
(226)
3,395
Increase in employee entitlements
2,260
497
Other items:
Business combination earnouts classified as investing
(3,283)
205
Bond costs classified as investing
216
-
Net cash flows from operating activities
38,890
25,783
Working capital movements are adjusted to include assets held for sale.
27.
Commitments and Contingencies
Operating lease commitments – Group as lessee
Future minimum rentals of office equipment not subject to NZ IFRS 16 at 31 December 2021 are:
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
$'000
$'000
Within one year
612
210
After one year but not more than five years
2,150
213
Total
2,762
423
Capital commitments
Estimated capital commitments for centre upgrade projects not yet completed at 31 December 2021 and
not provided for were $0.3 million.
59
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
27.
Commitments and Contingencies (continued)
Guarantees
For the New Zealand operation, a total of $2.4 million (2020: $2.3 million) of the lease guarantee facility
disclosed in Note 24 has been utilised.
For the Australian operation, a total of A$2.5 million (2020: A$1.2 million) of bank lease guarantees has
been utilised.
Contingencies
There are no material contingent liabilities not already disclosed as at 31 December 2021.
28.
Related Party Transactions
Identity of Related Parties
Related parties of the Group are:
• The Board of Directors comprising Hamish Stevens, Adrian Fonseca, Chris Scott, Chris Sacre,
and Kim Campbell.
•
J 47 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.
•
Vasona Pty Limited, a company of which Adrian Fonseca is a director and sole shareholder.
Related party transactions that have ceased during the year:
•
Timothy Wong resigned as Chief Executive Officer of the New Zealand operations of the Group on
30 March 2021.
Related party transactions arising during the year:
• Transactions between the Company and its Directors, members of its key management and certain
employees can be summarised as follows:
•
Directors’ remuneration – The Directors’ fees pool is currently $500,000 per annum (plus GST, if
any), with the amount of fees paid during the period disclosed in the table below. The Directors are
also entitled to be paid for reasonable travel, accommodation and other expenses incurred by them
in connection with their attendance at Board or Shareholder meetings, or otherwise in connection
with the Group’s business.
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$'000
$'000
Hamish Stevens
135
86
Chris Scott
80
50
Chris Sacre
80
50
Kim Campbell
90
56
Adrian Fonseca
90
63
Total Directors' Remuneration
475
305
60
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
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.
•
Compensation of key management personnel of the Group:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
Note
$'000
$'000
Short-term employee benefits
662
514
Termination benefit
6
259
-
Total compensation paid to key management personnel
921
514
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
Shareholding interests of Directors and key management of the Company:
AS AT 31
DECEMBER 2021
AS AT 31
DECEMBER 2020
Units of shares
Chris Scott
26,227,514
26,227,514
Chris Sacre
8,128,332
8,128,332
Adrian Fonseca
2,156,250
2,156,250
Kim Campbell
3,750
3,750
Timothy Wong (resigned 30 March 2021)
-
875,000
36,515,846
37,390,846
61
Notes to the Consolidated Financial Statements
FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
29.
Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the Group’s auditor,
Grant Thornton:
12 MONTHS TO
31 DECEMBER
2021
9 MONTHS TO
31 DECEMBER
2020
$'000
$'000
Assurance services:
Audit and review of the consolidated financial statements
180
170
Other assurance engagements
2
-
Total assurance services
182
170
30.
Events After the Reporting Period
Sale of Centre
In February 2022, unconditional sale and purchase contracts were entered to sell two ECE centres in New
Zealand. Settlement is expected to take place in March 2022. Both centres were classified as held for sale
at year end.
Covid-19
As discussed in Note 2a, 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.
62
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Hamish Stevens
Chair
28 February 2022
Adrian Fonseca
Chair of Audit and Risk Committee
28 February 2022
Directors’ Declaration
In the Directors’ opinion:
a)
the financial statements and notes set out on pages 17 to 62 are in accordance with NZ IFRS and
give a true and fair view, in all material respects, of the consolidated entity’s financial position as at
31 December 2021 and of its performance for the financial year ended on that date; and
b)
at the date of this declaration, there are reasonable grounds to believe that the members of the
closed Group will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in note 24.
Note 2 confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of the Directors.
63
Independent Auditor’s Report
Grant Thornton New Zealand Audit Limited
L4, Grant Thornton House
152 Fanshawe Street
PO Box 1961
Auckland 1140
T +64 9 308 2570
www.grantthornton.co.nz
To the Shareholders of Evolve Education Group Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Evolve Education Group Limited on pages 17 to 63 which comprise
the consolidated statement of financial position as at 31 December 2021, and the consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Evolve
Education Group Limited as at 31 December 2021 and its financial performance and cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) issued by the New
Zealand Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) issued by the New
Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners
(including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional
Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our firm carries out other assurance assignments for the Group. The firm has no other interest in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
64
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Why the audit matter is significant
How our audit addressed the key audit matter
Impairment of non-financial assets
As at 31 December 2021, the Group had the following
non-financial assets:
• Goodwill of $157.3m (note 14);
• Brands of $3.1m (note 14);
• Right-of-use-assets of $184.1m (note 18); and
• Property, plant and equipment of $7.7m (note10).
The accounting standards require non-financial assets
with a finite useful life to be assessed for indicators of
impairment or whether there is an indication that
previously recognised impairment losses no longer exist
on an annual basis. The Group has performed an
evaluation of these indicators and identified specific
assets or cash generating units (“CGU”) which require an
impairment assessment. The Group has also performed
an impairment assessment for infinite useful life assets
such as goodwill and brands which are required to be
tested for impairment on an annual basis.
In relation to the impairment assessments performed, no
impairments were recognised in the financial statements.
We included the impairment of non-financial assets as a
key audit matter due to the high level of judgement
required in determining the value of the recoverable
amounts of assets or CGUs and the degree of audit effort
in completing our audit.
To address the risk associated with impairment of assets, the
following audit procedures were carried out:
•
Updated our understanding, evaluated and validated
management’s impairment assessment process;
•
Assessed the reasonability of management’s assessment
of indicators of impairment for finite life non-financial
assets.
•
Assessed the reasonability of the methodology used by the
Group based on industry / market practice;
•
Obtained management’s value-in-use calculations, tested
the mathematical accuracy of the underlying calculations
and agreed them to the Board approved budgets;
•
Compared historical actual results to those budgeted to
assess the quality of management’s forecasts;
•
Engaged auditor’s valuation expert to:
o
Assess reasonableness of key assumptions used
in the calculations by discussing with
management and evaluated management’s basis
for determining such assumptions;
o
Assist in the assessment of reasonableness of
management’s judgements by determining a point
estimate;
•
Tested the sensitivity analysis prepared by management to
ascertain that adverse changes to key assumptions would
not cause, individually or in aggregate, the carrying amount
to exceed the recoverable amount; and
•
Reviewed consolidated financial statement disclosure to
determine their compliance with the requirements of the
accounting standards.
Revenue recognition – Ministry of Education New
Zealand
The Group has recognised revenue of $77.8m (note 5)
from the Ministry of Education in New Zealand.
Revenue from the Ministry of Education in New Zealand
is a key focus area due to the high volume of transactions
occurring and its significance to operations.
This is a Key Audit Matter due to the following:
•
Funding received from Ministry of Education
New Zealand (MOE NZ) is regulated under the
Education Act 1989 which contains numerous
complex requirements to determine the eligibility
of funds;
•
The complexity involved in collating and
summarising the information from manual
To address the risk associated with revenue recognition, the
following audit procedures were carried out:
•
Updated our understanding of management’s processes
and policies related to revenue recognition.
•
Visited a sample of centres across the country to confirm
consistency of internal controls in relation to revenue.
•
Reviewed revenue recognition policies for appropriateness
and compliance with NZ IFRS 15 and respective
disclosures.
•
Performed predictive analytical procedures using recorded
hours of child attendance and prescribed fee structures to
determine the accuracy of the revenue recognised.
•
Selected a sample of transactions and inspected
supporting documentation, cash received and assessed
65
Why the audit matter is significant
How our audit addressed the key audit matter
timesheets and other records across a large
number of centres.
whether all criteria related to government funding has been
met before being recognised as revenue.
Other Information
The annual report is expected to be made available to us after the date of this auditor’s report. Our opinion on the
consolidated financial statements does not cover the other information and we do not and will not express any form of audit
opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to report that
fact.
Directors’ responsibilities for the Consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial
statements in accordance with New Zealand equivalents to International Financial Reporting Standards issued by the New
Zealand Accounting Standards Board, and for such internal control as the Directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located on the External
Reporting Board’s website at: https://www.xrb.govt.nz/standards/assurance-standards/auditing-standards/auditors-
responsibilities/audit-report-1/
Grant Thornton New Zealand Audit Limited
Ryan Campbell
Auckland
28 February 2022
66
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
67
Corporate Governance
Evolve Education Group Limited (the “Company”) is a New Zealand incorporated owner and provider of
early childhood education 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.
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 81.
Corporate Governance and Statutory Information
68
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Principle 2 – Board Composition and Performance
Recommendation 2.1: The board of an 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 Managing Director who is charged with operating the business.
The Board also advises, oversees and counsels the MD, 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 Managing
Director, assisted by senior management. The MD manages the Company in accordance with the strategy,
plans and delegations approved by the Board.
The Board will ensure that, at all times, it has implemented appropriate procedures for the assessment
of senior management’s performance. All policies and delegated limits of authority are reviewed on a
regular basis.
69
Performance Management
The Board has established a Remuneration and People Committee which is responsible for evaluating
the performance of the MD, and makes recommendations to the Board in relation to remuneration and
incentive arrangements for the MD.
The performance of the Company’s MD 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 December 2021, 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.
Corporate Governance and Statutory Information
70
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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.
Director biographies can be found on pages 10-11.
Director ownership interests can be found on page 81 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 January 2021 and the date of approving the financial
statements (that is, 28 February 2022), 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.
Board
Audit and Risk
Committee
Remuneration and
People Committee
Hamish Stevens
14
(14)
–
–
5
(5)
Chris Scott
14
(14)
–
–
–
–
Chris Sacre
14
(14)
4
(5)
–
–
Kim Campbell
14
(14)
4
(5)
5
(5)
Adrian Fonseca
14
(14)
5
(5)
5
(5)
In addition to scheduled Board meetings, the Board also held other meetings and teleconferences to
discuss other Company matters as required.
71
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 gender representation of
employees of the Company, including holding senior executive positions and on the Board is as follows:
As at 31 December 2021
As at 31 December 2020
Position
Women
Men
Women
Men
Board
0
(0%)
5
(100%)
0
(0%)
5
(100%)
Senior Management*
2
(29%)
5
(71%)
2
(29%)
5
(71%)
Company-wide
96%
4%
96%
4%
*Senior management includes the Managing Director, CFO and employees who report directly to the CFO.
As at 31 December 2021, the senior management team consisted of seven positions.
Recommendation 2.6: Directors should undertake appropriate training to remain current on how to best
perform their duties as directors of an issuer.
Board Access to Information and Advice
All directors have access to the senior management team to discuss issues or obtain information on specific
areas in relation to items to be considered at Board meetings or other areas as considered appropriate. Key
executives and managers are invited to attend and participate in appropriate sessions at Board meetings.
Directors have unrestricted access to the Company’s records and information.
Directors are entitled to have access to external auditors, without management present, to seek
explanations or additional information and to seek independent professional advice with the Chair’s consent,
which will not be unreasonably withheld or delayed, and which will be at the Company’s expense, to assist
them in carrying out their responsibilities.
Director Education
Directors are responsible for ensuring that they remain current in understanding their duties as directors
and sector issues.
Corporate Governance and Statutory Information
72
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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 not the CEO or Managing Director.
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 December 2021 were Adrian Fonseca (Chair), Hamish
Stevens, Chris Sacre and Kim Campbell. The Board is of the belief that the Audit and Risk Committee was
appropriately constituted as at 31 December 2021 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 Managing Director, Chief Financial Officer and other
employees attend Committee meetings by invitation.
73
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 MD, 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.
Corporate Governance and Statutory Information
74
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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 and longer-term sector developments.
The impacts of Covid-19 have been discussed in note 2a of the financial statements included in this
annual report. The Company considers that it does not currently have any other material exposures 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 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.
75
Director Remuneration Statement
The Company’s directors holding office during the period ended 31 December 2021 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 December 2021 are provided below.
($000’s)
Directors’ Fees
Total
Hamish Stevens
135
135
Chris Scott
80
80
Chris Sacre
80
80
Kim Campbell
90
90
Adrian Fonseca
90
90
Total
475
475
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 period ended
31 December 2021, 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 71.
The performance of all directors and senior management is reviewed periodically in accordance with the
terms of the Remuneration and People Committee Charter.
Corporate Governance and Statutory Information
76
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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 no performance share rights or long-term executive incentive scheme in place for the current
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.
Remuneration
Timothy Wong held the position of CEO NZ from 3 October 2019 to 30 March 2021. He had a base salary of
$300,000 and was entitled to the use of a rental apartment, car, mobile telephone, and laptop. Under the
terms of his contract, Mr Wong was granted 1,250,000 share options, exercisable at AUD $1.20 per share,
expiring 31 December 2023. No share options were exercised as at 31 December 2021.
Chris Scott has been Managing Director since 26 August 2019. He has received no remuneration (other
than Director’s Fees) for this role.
77
Employee Remuneration
The number of employees or former employees, who received remuneration and other benefits valued at
or exceeding $100,000 during the 12 months ended 31 December 2021 are specified below.
Remuneration Band
Total
$100,000 – $110,000
9
$110,001 – $120,000
7
$120,001 – $130,000
2
$130,001 – $140,000
3
$140,001 – $150,000
1
$160,001 – $170,000
2
$180,001 – $190,000
1
$200,001 – $210,000
1
$210,001 – $220,000
1
$310,001 – $320,000
1
Total
28
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.
Corporate Governance and Statutory Information
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EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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 early childhood education, the safety of our employees and children is paramount.
As is best practice, appropriate governance structures have been established at the Board level to ensure
that matters such as health and safety risk for staff, contractors and our children is effectively governed
and managed. The Board has adopted measures that will allow the Company to monitor and 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 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.
79
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.
Recommendation 8.3: Quoted equity security holders 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.
Corporate Governance and Statutory Information
80
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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.
Evolve completed an institutional share placement in April 2021, issuing an additional 19,723,845 ordinary
shares to new and existing investors.
Recommendation 8.5: The board should ensure that the notices of annual or special meetings are posted
on the issuer’s 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 period to 31 December 2021
are as follows:
Director
Position
Company
Hamish Stevens
Chair
East Health Services Limited (and related companies)
Director
Marsden Maritime Holdings Limited (and related companies)
Director
Pharmaco NZ Limited (and related companies)
Chair
The Kennedy’s Limited
Director
Counties Energy Limited (and related companies)
Director
Radius Residential Care Limited
Chris Scott
Director &
Shareholder
J 47 Pty Limited
Chris Sacre
Director &
Shareholder
Toddle Enterprises Group Pty Limited
Director
19 Lindisfarne Road Huntfield Heights Pty Limited
Director
Bardon Operations Pty Limited
Director
Bowen Hills Medical Employment Pty Limited
Director
Bowen Hills Medical Operations Pty Limited
Director
CCC Solutions Pty Limited
Director
CCLP Consulting Pty Limited
Director
Childcare Pro Pty Limited
Director
Early Years Employment Pty Limited
Director
Eden Academy Isle of Capri Pty Limited
Director
Eden Academy Operations Pty Limited
Director
ELC Operations Australia Pty Limited
Director
Elwood Operations Pty Limited
Director
High Street ELC Pty Limited
Director
IChildcare-Software Pty Limited
Director
Keysborough CCC Pty Limited
Director
Kidsoft IP Pty Limited
Director
Kidsoft Operations Pty Limited
Director
Leopold ELC Pty Limited
Director
Mackay Medical Properties Pty Limited
81
Director
Position
Company
Chris Sacre
(continued)
Director
Magicaso Pty Limited
Director
Morningside Childcare Operations Pty Limited
Director
Morningside Childcare Pty Limited
Director
Sacre Finance Pty Limited
Director
Sacre Investments No. 2 Pty Limited
Director
Triple 2 Options 1 Pty Limited
Director
Truganina Operations Pty Limited
Director
West Pymble Group CCC Pty Limited
Director
Yarracray Pty Limited
Director
Amice ELC Pty Limited
Director
Childs Road Mill Park Pty Limited
Director
CSRP Operations Pty Limited
Director
Little Seeds Education Pty Limited
Kim Campbell
Director
Douglas Pharmaceuticals Limited (and related companies)
Director
EMH Trade Limited
Chair
Auckland Manufacturers Association
Director
Blackwood Bay Investments Limited
Director
New Image International Limited
Chair
Pathways to Employment Trust
Chair
Advisory Board, Living Green Limited (Auckland)
Adrian Fonseca
Chair
Revenue Committee, Western Sydney Football Club Limited (GWS
Giants AFL Club) (and related companies)
Director &
Shareholder
Oxanda Education Pty Limited (and related companies)
Director &
Shareholder
Toddle Enterprises Group Pty Limited
Director &
Shareholder
Vasona Pty Limited
Member
The Australian Ballet Foundation Board
Disclosure of Directors’ Interests in share transactions
There were no acquisitions or disposals of relevant interests in shares during the period ended
31 December 2021
Disclosure of Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares as at 31 December 2021:
Director
Number of Shares in which a
relevant interest is held
Chris Scott
26,227,514
Chris Sacre
8,128,332
Kim Campbell
3,750
Adrian Fonseca
2,156,250
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.
Corporate Governance and Statutory Information
82
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
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 several factors, including:
•
current and anticipated profitability;
•
current and medium-term capital expenditure requirements;
•
working capital requirements;
•
current capital structure, having regard to the risks presented by short and medium term economic and
market conditions and estimated financial performance;
•
available imputation credits; and
•
solvency requirements.
The payment of dividends is not guaranteed and the Company’s dividend policy may change. No
guarantee can be given about future dividends or the level of imputation of such dividends (if any) as these
matters will depend upon future events including the profitability, growth opportunities, and financial and
taxation position of the Company, and the Board’s discretion.
For the financial period ended 31 December 2021, the Company has not authorised any dividends.
Net Tangible Assets
The Company’s net tangible assets as at 31 December 2021 was ($0.18) per share (31 December 2020:
($0.05) per share, restated). 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 December 2021 it was $0.83 (31 December 2020: $0.69, restated).
Donations
The Company made donations of $1,343 during the year ended 31 December 2021 (9 months to 31
December 2020: $1,103).
Credit Rating
The Company has no credit rating.
NZX and ASX Waivers
The Company did not rely on any waivers in the current year.
Annual Meeting
The Company’s Annual Meeting of shareholders will be held in Auckland on 27 June 2022 at 10 am.
83
Analysis of Shareholding at 1 March 2022
Ranges
Investors
Securities
% Issued Capital
1 to 1,000
555
225,350
0.14%
1,001 to 5,000
622
1,569,196
0.98%
5,001 to 10,000
290
2,188,722
1.37%
10,001 to 100,000
593
19,620,182
12.30%
100,001 and Over
141
135,946,034
85.21%
Total
2201
159,549,484
100.00%
Twenty Largest Shareholders at 1 March 2022
Name
Number of
Shares
% of
Shares
Citicorp Nominees Pty Limited
20,310,454
12.73%
J 47 Pty Ltd*
19,227,514
12.05%
National Nominees Limited
9,529,234
5.97%
Upton124 Pty Ltd
7,772,563
4.87%
HSBC Custody Nominees (Australia) Limited
5,325,840
3.34%
J P Morgan Nominees Australia Pty Limited
5,309,738
3.33%
BNP Paribas Noms Pty Ltd
4,615,779
2.89%
New Zealand Central Securities Depository Limited
3,375,068
2.12%
A & J Online Investments Pty Ltd
3,154,534
1.98%
BNP Paribas Nominees Pty Ltd
3,039,838
1.91%
NGE Capital Limited
2,350,000
1.47%
Vasona Pty Ltd
2,156,250
1.35%
Portman Trading Pty Ltd
2,058,500
1.29%
Broadgate Investments Pty Ltd
1,899,323
1.19%
BNP Paribas Noms(NZ) Ltd
1,853,238
1.16%
Opm Super Co Pty Ltd
1,707,750
1.07%
Mr Duncan Fraser Forrest &
1,376,994
0.86%
Mrs Kimberley Yin
1,330,000
0.83%
JBWere (NZ) Nominees Limited
1,201,102
0.75%
Glenelg Farm Pty Ltd
1,106,334
0.70%
Total - twenty largest shareholders
98,700,053
61.86%
Total number of shares on issue
159,549,484
100.00%
Shareholder Information
84
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
New Zealand Central Securities Depository Limited (NZCSD) provides a custodian depository service
that allows electronic trading of securities to its members and does not have a beneficial interest in these
shares. As at 1 March 2022, the shareholdings in the Company held through NZCSD were:
Name
Number of
Shares Held by
NZCSD
% of NZCSD
Shares
Accident Compensation Corporation
2,256,702
66.86%
BNP Paribas Nominees NZ Limited
791,127
23.44%
Citibank Nominees (NZ) Ltd
247,119
7.32%
BNP Paribas Nominees NZ Limited
59,283
1.76%
BNP Paribas Nominees (NZ) Limited
20,834
0.62%
HSBC Nominees (New Zealand) Limited
2
0.00%
JPMorgan Chase Bank
1
0.00%
Total – shares held by NZCSD
3,375,068
100.00%
Substantial Shareholders
According to notices given under the Financial Markets Conduct Act 2013, the following persons were
substantial shareholders in the ordinary shares of the Company (being the only class of quoted voting
products) at 1 March 2022 in respect of the number of shares set opposite their names.
Name
Number of
Shares
% of
Shares
Citicorp Nominees Pty Limited
20,310,454
12.73%
J 47 Pty Ltd*
19,227,514
12.05%
National Nominees Limited
9,529,234
5.97%
Total number of shares on issue
159,549,484
*J 47 Pty Ltd is the beneficial owner of an additional 7,000,000 shares held under nominee shareholdings.
85
The following persons held office as Directors of the Company’s subsidiaries during the period ended
31 December 2021.
Evolve Group 1 Limited*
Timothy Wong (ceased 30 March 2021)
Hamish Stevens (appointed 4 March 2021)
Evolve Group 2 Limited*
Evolve Group 3 Limited*
Evolve Group 4 Limited*
Evolve Group 5 Limited*
Evolve Group 6 Limited*
Evolve Management Group Limited
Evolve ECEM Limited*
Lollipops Educare Holdings Limited
Lollipops Educare Limited*
Lollipops Educare Centres Limited
Lollipops Educare (Hastings) Limited*
Lollipops Educare (Birkenhead) Limited*
Evolve Home Day Care Limited*
Au Pair (Evolve) Limited*
Evolve Early Education Pty Ltd
Chris Sacre
Chris Scott
*On 1 August 2021, Evolve ECEM Limited and Evolve Management Group Limited amalgamated to become
Evolve Management Group Limited; and Au Pair (Evolve) Limited, Evolve Group 1 Limited, Evolve Group 2
Limited, Evolve Group 3 Limited, Evolve Group 4 Limited, Evolve Group 5 Limited, Evolve Group 6 Limited,
Evolve Home Day Care Limited, Lollipops Educare (Birkenhead) Limited, Lollipops Educare (Hastings)
Limited, Lollipops Educare Limited and Lollipops Educare Centres Limited amalgamated to become
Lollipops Educare Centres Limited.
Subsidiary Company Directors
86
EVOLVE EDUCATION GROUP ANNUAL REPORT DECEMBER 2021
Evolve Education Group Limited
Registered Office/ Support Office
Level 15
16 Kingston Street
Auckland 1010
New Zealand
Phone: +64 9 377 8700
Evolve Early Education
Support Office Australia
Suite 4, 2481 Gold Coast Highway,
Mermaid Beach,
Queensland 4218
Australia
Phone: +61 7 532 25245
Directors
Hamish Stevens (Chair)
Chris Scott (Managing Director)
Chris Sacre
Kim Campbell
Adrian Fonseca
Senior Management Team
Chris Scott (Managing Director)
Edmund Mah (Group CFO)
Matt Veal (Group Financial Controller)
Bev Davies (Head of People and Talent)
Jenny Aldous (Head of Projects)
Tomas Stehlik (Head of IT)
Henry Blundell (Head of Property)
Solicitors
Chapman Tripp
Level 34, PWC Tower
15 Customs Street West
Auckland 1010
Phone: +64 9 357 9000
Auditor
Grant Thornton
Level 4, Grant Thornton House
152 Fanshawe Street
Auckland 1010
Phone: +64 9 308 2570
New Zealand Share Registrar
Link Market Services Limited
Level 30, PWC Tower
15 Customs Street West
Auckland 1010
Phone: +64 9 375 5998
Australian Share Registrar
Link Market Services Limited
Level 12
680 George Street
Sydney, New South Wales 2000
Phone: +61 1300 554 474
Banker
ASB Bank Limited
12 Jellicoe Street
Auckland 1010
Phone: +64 9 337 4819
Corporate Directory
87