2020 ANNUAL REPORT
ABOUT US
G8 EDUCATION LIMITED (ASX:GEM) IS A LEADING PROVIDER OF
QUALITY CARE AND EDUCATION SERVICES ACROSS AUSTRALIA
THROUGH A RANGE OF WELL‑RESPECTED AND RECOGNISED BRANDS.
At G8 Education we are proud to be helping to shape the lives and minds of the tens of
thousands of children attending our network of early learning centres every day.
We know that the first five years of a child’s life are critical to their future learning and
development. That’s why we have delivered an Education Strategy that will support
children to meet their potential through innovative and evidence-based early learning
teaching methods. Our indoor and outdoor educational spaces are age-appropriate and
designed to engage and support children to discover, grow and learn. Plus, our passionate
and dedicated people support and celebrate each child’s individual talents and strengths
through meaningful interactions, experiences and relationships, creating life-long impacts.
G8 Education Limited (ABN 95 123 828 553)
NAMEG8 EDUCATION LIMITED — 2020 ANNUAL REPORT ABOUT US
01
THE 1ST
FIVE
YEARS
of a child’s life
are critical
That’s why we have delivered an
Education Strategy that will support
children to meet their highest potential
TABLE OF CONTENTS
SECTION ONE
02 Strategic Report
02 Our Business
04 Chair’s Report
06 CEO and Managing Director’s Report
10
2020 Achievements
12 Our Strategic Direction
16 Material Risks
20 Sustainability Report
26 Directors’ Report
26 Board of Directors
32 Key Operational Information
34 Remuneration Report
SECTION TWO
52 Financial Report
SECTION THREE
110 Shareholder Information
112 Corporate Directory
SECTION ONE 02
OUR BUSINESS
G8 Education is the leading for-profit early education provider in
Australia, with over 46,000 children attending our services in any given
week and over 9,500 team members educating and caring for those
children. This scale is broadly three times greater than our nearest
for-profit competitors. We believe that we have a real opportunity to
use our scale advantage to provide a differentiated offer to our families,
centred on the quality of education and care, breadth of offer and
through the provision of a highly engaging experience for our families.
We also believe that our scale affords us the opportunity to provide a
market-leading employment offer, with our engaged and capable team
members reinforcing the quality and experience for our families.
TOTAL CENTRES BY BRAND
Casa Bambini
Early Education Centre
11
11
5
19
81
44
27
Figures are as at 31 December 2020
41
25
16
11
16
33
9
Kinder Haven
22
3
9
5
6
21
57
472total centres
in Australia
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 03
AUSTRALIA’S
LARGEST
Listed Early Childhood
Education & Care Provider
Licensed places 8k+
39k+
Early childhood
educators
46k
Children
per week
Western
Australia
38 Centres
764 TMS
Queensland
74 Centres
1676 TMS
28
New South
Wales
182 Centres
3049 TMS
South Australia
28 Centres
644 TMS
Victoria
141 Centres
3238 TMS
ACT
9 Centres
217 TMS
9,588
total Team Members (TMS)
Figures are as at 31 December 2020
STRATEGIC REPORTSECTION ONE 04
CHAIR’S REPORT
Dear Shareholders,
On behalf of the Board, I am pleased to
present the G8 Education Limited 2020
Annual Report.
OPERATING ENVIRONMENT
The 2020 year was dominated by the
COVID-19 pandemic, an unprecedented
period for the communities in which we
operate, our people and the economy.
At G8 Education, our focus during
these extraordinary times was in two
primary areas:
– Our top priority being the safety and
wellbeing of our team, and the children
and families that attend our centres; and
– Business continuity, specifically our cash
flow, liquidity and balance sheet.
MARK JOHNSON
Chair
In our 2019 full-year results presentation
in February, we flagged the early impact
of COVID-19 on attendance levels at
our centres. This impact accelerated
rapidly over the succeeding weeks as
the Government escalated measures to
slow the rate of virus infection. By late
March, attendances across the sector
were approximately half the level of those
experienced in prior years, placing the
viability of the sector at risk.
Recognising this risk, the Federal
Government announced an initial
sector-specific relief package on 2 April,
providing all sector participants with
certainty of revenue to enable centres
to remain open during the peak of the
pandemic. That initial relief package was
reviewed and updated with a transition
phase package of support announced by
the Government on 8 June, with further
specific relief packages being provided
to counter lockdown measures in Victoria
in the second half of the year. These relief
packages reinforced the essential role our
sector plays in the economy, in addition to
the important role we play in the cognitive,
social and emotional development of
Australian children.
Following the announcement of the
Government’s initial sector relief package,
we raised $301 million via an underwritten
institutional and retail entitlement offer.
This capital raising provides G8 Education
and its subsidiaries (the Group) with
the liquidity and financial flexibility to
withstand a prolonged period of economic
downturn as well as allowing G8 to
pursue any sensible opportunities that
may emerge from this challenging period.
The Board also made the difficult but
prudent decision to delay the payment of
the Group’s CY19 final divided to October
2020, to provide more flexibility to deal
with the unfolding pandemic, along with
reducing Director fees and the salary of the
Executive Leadership Team by 20% for a 6
month period.
NAMEG8 EDUCATION LIMITED — 2020 ANNUAL REPORT 05
It was pleasing to see sector occupancy
levels recover a large portion of their
shortfall in the second half of the year as
the economy rebounded from the lockdown
measures that were undertaken early in
2020. More importantly, the incidence
of COVID-19 infections was very low
throughout the G8 Education network,
which is a testament to the skill, discipline
and care of the team. On behalf of the
Board, I would like to sincerely thank
every member of the G8 Education team
for their tireless efforts in supporting our
children, families and communities through
this period.
FINANCIAL PERFORMANCE
The financial performance of the Group
in 2020 was significantly impacted by
the COVID-19 operating environment,
with Government relief subsidies partially
offsetting the impacts on occupancy of
lockdown measures.
Our statutory earnings were impacted
by the non-cash impairment charge
(discussed below), with the Group reporting
a statutory Net Loss After Tax (NLAT) loss
of $187m. On an underlying basis,1 Net
Profit After Tax (NPAT) was $60 million,
down 11.3% on 2019. Cash flow generation
continued to be strong, with $189.6 million
in operating cash flows being generated.
The Group’s syndicated bank debt facility
was re-structured during 2020, with
covenants being amended to reflect
COVID-19 conditions. In February 2021 the
expiry date of facilities were extended to
2023 through a sustainability-linked loan
that focusses on centre quality and team
safety. This increased tenor, coupled with
the proceeds of the capital raising, ensures
the Group has all the capital that is required
to deliver its current strategy.
During the year, the Group reviewed
the impacts of the COVID-19 operating
environment on forecast future cash
flows, to take account of the expected
prolonged economic recovery. This review
resulted in a non-cash impairment charge
of $237.5 million post-tax being taken
against a number of the Group’s assets.
The impairment is non-cash in nature and
will have no impact on the Company’s debt
facilities or compliance with its banking
covenants. It also provides the Group
with more flexibility with respect to how it
manages those underperforming assets.
STRATEGIC PERFORMANCE
The constraints on capital and operating
expenditures that were in place for much of
2020 delayed some of the planned strategic
initiatives, such as the refurbishments
of our centre network. Pleasingly,
excellent progress was made in two of
our key strategic focus areas, being the
implementation of high quality learning
environments and team member safety.
Starting with safety, the Group reduced
its Lost Time Injury Frequency Rate for
team members by 47%. From a child safety
viewpoint, we leveraged our partnership
with Bravehearts to jointly develop an
enhanced child safety program, with the
first two of a number of modules being
completed in 2020.
The team displayed agility to deliver
enhanced learning environments in 94
centres in 2020, building on the initial pilot
group of 13 that were completed in 2019.
Overall results were encouraging, with the
centres showing positive uplift in terms of
quality, family feedback and occupancy.
REMEDIATION PROGRAM
Disappointingly, in late 2020 as part of the
implementation of G8 Education's new
rostering platform the Group identified that
certain team members had been underpaid.
While those affected team members will
receive back payments with interest, the
Board is disheartened that this occurred
and is focused on ensuring that updated
systems and processes are implemented to
ensure compliance with the various awards
applicable to the business. The impact of
the employee underpayments has been fully
provided for in the Group’s CY20 full year
results and via prior period restatements.
BOARD RENEWAL
Finally, I wanted to provide an update on
G8 Education's Board. In May 2020, Brian
Bailison retired from his position as Non-
Executive Director of G8 Education. Mr
Bailison was a Director of G8 Education for
10 years and retired in accordance with G8
Education's Board succession plans. On
behalf of the Board, I want to thank Brian for
his long-term contributions during a period
of significant transformation and wish him
the greatest success for the future.
The Board appointed Peter Trimble as
Non-Executive Director in May 2020,
following an extensive non-executive
director search and recruitment
process. Peter’s significant financial, risk
management and strategic expertise
across several industries, coupled with his
extensive corporate experience, will be
extremely valuable to the Board.
In closing, I would like to thank all G8
Education team members for their fantastic
contributions throughout 2020, in what
was an extremely challenging environment.
Their passion, dedication and skill make all
of us very proud. I would also like to thank
you, our shareholders, for your continued
commitment and support.
1. Unaudited, Non-IFRS (pre AASB16 lease standard, acquisition, establishment and divestment costs;
and excluding impairment).
Mark Johnson
Chair
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STRATEGIC REPORTSECTION ONE
06
CEO AND MANAGING DIRECTOR’S REPORT
Dear Shareholders,
In 2020, the G8 Education team displayed
agility, resilience and skill to overcome the
immensely challenging COVID-19 operating
environment to make good progress in a
number of strategic focus areas.
COVID‑19 RESPONSE
Our predominant focus during the
year was responding to the COVID-19
pandemic. Once we became aware of the
initial COVID-19 impact, we implemented
a cross-functional COVID-19 response
team and plans to ensure the health and
safety of our team, children and families
as well as the continuity of operations.
People-focused initiatives included
expanding hygiene and safety measures
across all of our centres and support
offices and implementing ‘work-from-home’
arrangements where possible. Regular
communication with our team and families
was a core element of our response
program, including information in relation
to hygiene, social distancing awareness
and wellbeing initiatives.
GARY CARROLL
CEO and Managing Director
NAMEG8 EDUCATION LIMITED — 2020 ANNUAL REPORT 07
For our families, we provided access to
online learning and information platforms to
assist parents who were caring for children
at home and to keep them engaged with
our centre community.
Turning now to the measures we
implemented to ensure business continuity,
we adopted a three-pronged approach.
Firstly, we established an appropriate
governance structure to steer us through
the pandemic featuring daily COVID-19
team meetings that allowed us to monitor
the ever-changing landscape and adapt
our near term COVID-19 response plan.
Secondly, we ensured that we had the
liquidity and financial flexibility to survive a
prolonged downturn, with our equity capital
raising, completed with the support of our
lenders, being at the centre of this area
as well as continued stress-testing of our
Balance Sheet, P&L and liquidity position
across a range of scenarios. Lastly, we
implemented measures to bring our capital
and operating expenditures in line with the
COVID-19 trading environment.
Given the heightened uncertainty as to
the duration of the lockdowns and the
ultimate impact on the broader economy,
we deferred non-critical projects thereby
reducing our capital expenditure in
2020 from $40 million to $30 million. We
also identified cost savings through the
optimisation of wages, removal of non-
essential spend and by engaging with our
landlords to reduce rental costs during the
peak of the pandemic. I am pleased to say
that our total cost savings were in line with
the target outlined when we completed our
equity capital raising in April 2020.
I often say that you learn a lot about
people during a crisis. In this sense,
I am immensely proud of the entire
G8 Education team and how they
collectively responded to the COVID-19
challenge. Our centre-based teams were
in the front line of our COVID-19 response,
providing continuous care to children and
families throughout the COVID-19 period,
displaying courage and service in a time of
great uncertainty. In addition to the online
learning platforms that were developed
by our Education and Marketing teams,
our centre teams provided personalised
support to our family communities, such
as cooked meals for families, take home
packs for children and aged care pen
pal activities.
I would also like to acknowledge the work
during 2020 of Government and health
authorities across the regions in which we
operate. The Government’s swift response
to support the sector was tremendous and
succeeded in ensuring the viability of the
sector during the peak of the health crisis.
The working relationship with Governments
at all levels has also been excellent, with
a level of openness and collaboration that
greatly assisted us in navigating such an
unprecedented period.
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STRATEGIC REPORTSECTION ONE
08
CEO AND MANAGING DIRECTOR
PEOPLE PROGRAM
Our strategic focus from a team member
perspective is to provide a compelling
employment offer, covering career
pathways and training, as well as market-
leading benefits, reward and recognition
programs. As part of a values-based,
purpose-driven culture, these programs
will enable us to recruit and retain highly
capable and engaged team members.
During 2020, the Group focused its People
Program in two areas – career pathways
and training; and implementing scaleable
people processes and systems. From a
training and career pathway perspective,
the Education team rolled out a number of
new programs to develop pedagogy and
practice standards throughout the network,
from learning environment guidelines and
training to specific orientation and training
for the Group’s Early Childhood Teachers.
The Group’s vocational study and bachelor
programs were enhanced during 2020, with
more than 750 team members participating
in vocational (Certificate III and Diploma)
studies and 167 team members currently
enrolled in Bachelor study programs
throughout the G8 Education network.
The Group made good progress in
developing its new, scaleable people
management platform, covering all
aspects of people management such
as recruitment, onboarding, rostering,
performance management etc. Recruitment
activities were centralised during 2020,
resulting in significant reductions in the
time to fill centre-based roles. During the
year, G8 Education utilised the forecasting
engine within its new roster platform
to assist in rostering during the volatile
COVID-19 period with promising results.
In late 2020, the Group undertook a
thorough review of award compliance
as part of the implementation of its new
roster platform. This review highlighted a
number of areas of unintentional non-
compliance with award requirements, and
a remediation program was commenced in
December 2020 to ensure that all relevant
current and past employees are repaid
all amounts owed to them as a result
of such non-compliance. Remediation
payments are expected to be substantially
completed by July 2021. On behalf of the
Board and executive leadership, I would like
to sincerely apologise to team members
affected by our non-compliance.
CENTRE NETWORK
PERFORMANCE
From a network optimisation perspective,
in 2020 we:
– completed the construction of our
previously committed greenfield pipeline,
with nine new centres being opened
in 2020
– closed or divested 6 centres
– exited all Singapore operations.
This brought our total number of centres
as at 31 December 2020 to 472 in Australia.
These centres provide a total combined
licenced capacity of more than 39,000
places. Our activities in this area improved
network quality and provided a source of
material earnings growth in future years as
the greenfield portfolio matures.
Occupancy was significantly impacted by
the prevailing COVID-19 environment in
2020. During the second half of the year,
occupancy recovered from being around
10% below 2019 levels to finish December
approximately 5% below the prior year.
Government subsidies partially offset this
occupancy shortfall, resulting in underlying
Group earnings before interest and tax
("EBIT") (pre-AASB16) of $105.2 million,
11.9% below last year. The Group’s ability
to convert earnings before interest, tax,
depreciation and amortisation (“EBITDA”)
to cash remained strong with over 140%
cash conversion in 2020, generating
operating cash inflows of $189.6 million.
The Group reported a statutory NLAT
loss of $187m, which was impacted by the
non-cash impairment charge taken during
the year.
OUTLOOK FOR 2021
The market environment is expected to
be challenging in 2021, with uncertainty
in relation to employment conditions as
Government employment subsidies are
wound back in Q1 of 2021. In addition, the
supply of new centres continued in 2020,
with further supply growth being expected
in 2021. The Group is preparing to respond
to any ongoing challenges in the market
environment by continuing to roll out the
initiatives and capabilities that have been
developed in prior years. Specific focus
areas include continued investment in
team and child safety programs, applying
practice support programs and enhanced
learning environments across the network
and implementation of our new people
management platform.
We continue to believe there are
significant organic and acquisition growth
opportunities for the Group. Our strategic
pathway to sustainable growth contains the
following key elements:
– Driving occupancy in existing centres
through development of a differentiated
offer focused on quality and education,
value, as well as customer experience.
To facilitate this, the Group will continue
to invest in improving asset and
curriculum quality, while also developing
new products for existing and new
centres that deliver enhanced value
to our families and better utilise our
existing assets;
– Being the employer of choice by
engaging and developing our team
through a series of initiatives such
as enhanced professional and
leadership training and innovative
remuneration, benefits and recognition
frameworks; and
– Continuing to grow our network of early
learning centres through measured
acquisition and greenfield development.
This strategy, supported by a passionate
and capable team, will leave us well placed
to deliver sustainable value to children,
families and our shareholders in the years
ahead. In closing, I would like to thank
all of our fantastic team members for their
dedication, courage and skill during an
unprecedented and challenging 2020.
As a result of the collective team effort,
we have the people, financial flexibility
and processes in place to ensure that
we emerge from the COVID-19 environment
as a stronger, better business.
Yours sincerely,
Gary Carroll
CEO and Managing Director
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 09
STRATEGIC REPORTSECTION ONE 10
2020 ACHIEVEMENTS
167 team
members currently
enrolled in
Bachelor study
programs throughout
the G8 Education
network
First Steps
induction program
established
for new centre
managers
NEW ROSTERING SYSTEM
– Initial pilot was successfully completed
EDUCATION AND CHILD SAFETY
– Design of G8 practice statements to frame educational practice across
– Plans underway for full roll‑out across the centre network
the network
– The system will automate certain award compliance and improve
– Continuing commitment to ensuring every child in our centres is safe
visibility to mitigate any future risk of award non‑compliance
– Continued evolvement and roll‑out of the Child Protection Program
developed in partnership with Bravehearts
IMPROVEMENT PROGRAM
– Expansion of Improvement Program in 2020 covering 94 centres,
focussed on building capable and engaged centre teams, strong
learning environments and improved work routines, family
communications and centre tour experience
– 2019 pilot centres tracking in line with expectations in terms
of occupancy improvement, team engagement and other key metrics
DIFFERENTIATION
AND INNOVATION
– Partnered with Parent TV to provide high quality bite‑sized expert video
content to support families in their parenting role
– Launched Creative Cubby, a new online portal, to enable centre
managers to easily develop materials they need to market their centre
– Participating in Apple education research project
FINANCIAL AND OPERATIONAL
PERFORMANCE HIGHLIGHTS
– Underlying EBIT 1 $105.2m
– Underlying EBIT 1 margin of 13.4%
– Recovery of LFL occupancy to 69.2%
– Rostering efficiency benefits captured
– Improvement in quality (centres meeting or exceeding the NQF)
from 81% in 2019 to 85% in 2020
– Strong balance sheet, cash positive
– Refinance of sustainability‑linked loan facilities completed resulting
in reduced finance costs and increased average debt expiry
NETWORK OPTIMISATION
AND GROWTH
– Completion of Singapore sale
– Divestment of previously impaired centres on track with active
negotiations ongoing to exit underperforming centres
– Revamped approach to identifying attractive greenfield opportunities
based on location and market appeal and to significantly reduce the
capital outlay per new centre
1. Underlying and non-IFRS financials (pre AASB 16 lease standard, acquisition, establishment and divestment costs; and excluding impairment)
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
11
Improved Centre
Quality
– 85%
‘meeting’ or
‘exceeding’ NQF
Portfolio
optimisation
on track and new
greenfield model
adopted
More than
750 team members
enrolled
in Traineeships
(Cert III and Diploma)
BUILD AND SUPPORT THE TEAM
– Growing and supporting our centre managers and educators
– Creation of a facilitated orientation learning series for new
– 167 team members currently enrolled in Bachelor study programs
Early Childhood Teachers
throughout the G8 Education network
– Introduction of centralised recruitment resulting in reduction in time
– More than 750 team members currently enrolled in Traineeships (Cert III
to fill roles
and Diploma)
– Continued benefits to team members offering online and in‑store
– First Steps induction program established for new centre managers
– Development of Educational Leader Toolkit in partnership with Lady
discounts from over 400 retailers
– Lost time injury reduction of 47%
Gowrie Queensland
EFFECTIVE RESPONSE TO COVID‑19 AND OTHER COMMUNITY DEVASTATING EVENTS
– During the COVID‑19 pandemic over 2,165 suspected cases were
managed and greater than 17,500 enquiries supported
– A number of tools were created to support home learning, including
the "At Home" series and Community Cubby a content hub spanning
learning, nutrition and physical activity
– 90% of G8 families indicated that they were satisfied with the timeliness
of COVID‑19 actions
– Cloud base technology enterprise systems enabled support office teams
to rapidly move to remote working to ensure continuity of service to the
centre network
– During the bushfire emergency, G8 Education designed and rolled
out Bushfire Relief Packages to support affected families and team
members as well as offering free care to families directly involved in
fighting the fires
STRATEGIC REPORTSECTION ONE
12
OUR STRATEGIC DIRECTION
G8’s more recent strategic focus has been on securing scale advantages
through integrating onto a single set of systems (eg Xplor for CCS, rostering etc),
improving the performance of centres to lift quality and building and supporting
team members through a leading career pathway program and learning and
development programs. A significant amount of foundation research work has also
been completed on the family customer experience that strongly positions G8 to
lead the way on creating a differentiated early learning and care offering. Having
neared the conclusion of this part of the strategic journey, the opportunity was
taken to refresh the strategic direction through to 2023 as outlined below.
PURPOSE
OUR REASON FOR BEING
Creating the foundations
for learning for life
VISION
WHAT WE WANT TO BE
KNOWN FOR
To be a best-in-class early
childhood educator that’s
the first choice for parents
to care for their child
STRATEGIC OBJECTIVES
WHAT WE WILL
ACHIEVE
% Quality
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m
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n
t
Creating the
foundations for
learning for life
75% N P S
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FULFILL
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SUPPORT
and build
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DELIVER
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DRIVE
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NAMEG8 EDUCATION LIMITED — 2020 ANNUAL REPORT
13
STRATEGIC REPORTSECTION ONE 14
STRATEGIC OBJECTIVES
ce t h
ra
b
m
E
e
n a tural w
a
y
t
o
l
e
a
r
n
FULFILL
children’s learning
potential
m is t h
a
e
t
r
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O
e
h e art – an
d
d
SUPPORT
and build
the team
e
l
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v
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r
s
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a
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A
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DELIVER
operational
excellence
KEY PROGRAMS
KEY PROGRAMS
KEY PROGRAMS
Team & child safety
People pathways
Improvement program
Our priority is to be a Child and
Team Safe organization, with a safety
first culture
Delivery of system and efficiency
improvements across recruitment, people
services (policies and procedures),
rostering and payroll
Dedicated support and investment to
elevate the quality and experience in
all centres
Education program
People program
Delivering consistent high quality
programming, embedded practice and
collaborative partnerships
Building strong foundations to grow,
support and attract a strong and
capable team
KEY MEASURES
KEY MEASURES
KEY MEASURES
Child tenure
Employee engagement
Occupancy
Child safety
Centre manager turnover
Quality
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
15
e m
W
a k e i t
w ork for f
a
m
i
l
i
e
s
CREATE
differentiation
&
r
a
i
s
e the bar i n
e sector
h
t
,
b l e
a ttractiv
e
g
r
o
w
t
h
stain a
u
S
DRIVE
profitable growth
KEY PROGRAMS
KEY PROGRAMS
Network growth & optimisation
Create differentiation
Creating a high quality and profitable
network of well located centres
across Australia
Reimagining the childcare experience
through design, technology,
engagement, products and services
Finance management system
An integrated finance and procurement
system that streamlines work effort and
improves governance
KEY MEASURES
KEY MEASURES
EBIT
Net Promoter Score (NPS)
EBIT margin
Innovation pilots
STRATEGIC REPORTSECTION ONE
16
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 17
MATERIAL RISKS
G8 Education identifies and manages risks in accordance with the Group’s Risk Management Framework, which is based on ISO
31000:2018 Risk Management – Guidelines. The Group has, through the application of the Risk Management Framework, identified
material strategic, operational and financial risks which could adversely affect achievement of the Group’s growth strategy.
G8 Education is firmly dedicated to meeting the duty of care that it owes to its team members, children attending its centres and other
stakeholders in the conduct of its business; and its commitment to robust risk management is part of this dedication.
RISK
MITIGATING ACTIVITIES
1. Pandemic (impact of COVID-19)
There is a high level of uncertainty with regards to how
the COVID-19 pandemic will evolve both internationally
and domestically, along with corresponding responses
from governments, our families, and the broader
community. Along with macro-economic impacts
(discussed below) COVID-19 could give rise to sporadic
or prolonged lockdowns which impact attendance
and occupancy at G8 Education’s centres, changes
in customer demand and disruption to availability of
team members.
2. Safety, health and well-being
It is imperative that the Group maintain safe business
environments and work practices to protect the
wellbeing of children, team members, families,
contractors and other people who visit our centres.
We care about physiological and psychological safety
and are committed to creating a safe learning and
working environment where everyone arrives home
free from injury and illness.
Injuries or safety concerns affecting our children, team
members, families, or other people who visit our centres
may negatively impact the reputation of our business
and could result in physical harm, regulatory action and/
or penalties.
– During 2020 we implemented increased infection control measures, hygiene
practices and amended centre routines across the network.
– Our Group engages directly with Government bodies with regards to sector
viability, subsidy models and support in response to the pandemic.
– We established a pandemic/COVID-19 management team and associated
processes to ensure swift and agile response and the support to teams where
required due to the pandemic.
– Our Group has a suite of policies that address various aspects of both team and
child safety and health, including interactions with children, conduct, physical
environments, procedures, recruitment and reporting. We require all team
members to complete mandatory training with respect to child safety and health
on an annual basis.
– Our educators must have a “Working with Children Check” and our Recruitment
Policy and Processes seek to ensure the best educators are engaging with the
children in our care.
– Our Board is provided with at least monthly updates regarding child protection
and safety and our Group’s Audit & Risk Management Committee and People &
Culture Committee are provided with at least quarterly updates to monitor the
effectiveness of the implementation of the Safety and Health policies, standards,
plans, risk program, processes, resources and compliance.
– We continue to invest to improve quality and safety, address risks and develop a
safety culture across our business.
3. Strategic execution
The successful delivery of our Group’s strategic plan is
critical to enable our Group to effectively leverage its
scale advantage. This requires building and maintaining
organisational capability in relation to planning,
resourcing and execution of key projects.
– Our Board provides oversight of the delivery, progress against plan, key resourcing,
capability and critical dependencies for our Group’s strategy.
– We have dedicated project and change management capabilities that assist with
project delivery and evaluating the impact of change on our operations to ensure
key initiatives are effectively embedded.
4. Competition
The early learning sector remains competitive with
new supply consistently entering the market. This
environment creates both opportunities and risks that
may impact business performance within the local
markets in which we operate.
– Our Executive Leadership Team regularly review key market trends, price points
across competitors, promotions and marketing activity along with our Group’s
occupancy, wages, strategic initiative benefits and costs.
– Our business intelligence and performance reporting systems provide visibility
of operating driver performance at centre level, enabling decisions to be made on
a timely basis in response to changing local market conditions.
STRATEGIC REPORTSECTION ONE 18
MATERIAL RISKS continued
RISK
MITIGATING ACTIVITIES
5. Governance, ethics, legal and compliance
We operate in a complex regulatory environment
and are subject to a wide and diverse range of laws
and regulations regarding matters such as children’s
education and care service standards, employment,
health and safety, privacy, anti-bribery and corruption,
competition, corporate conduct and ASX listing rules.
We must comply with these obligations to ensure the
longevity and success of our business.
We also operate in an environment where we may
periodically be a party to legal proceedings and litigation
which could have financial impacts and negatively
impact our business and reputation.
Industrial Relations
6.
Failure by an employer to comply with relevant
employment laws or awards can lead to potential
regulatory investigations or enforcement actions or
other civil or criminal fines or penalties. As disclosed on
8 December 2020, the Group identified underpayments
of overtime and some allowances to former and current
team members, in breach of the applicable awards,
and self-reported the underpayments to the Fair Work
Ombudsman. The Remediation Program necessitated
by these underpayments is ongoing and the Group
continues to liaise with the Fair Work Ombudsman in
relation to the oversight and investigation of these issues.
7. Changes to regulatory environment
Regulatory changes to the early learning sector may
have an adverse impact on the way we manage and
operate our centres and on our financial performance.
The introduction of new legislation or regulations, or
changes in Government funded child care subsidy levels
may adversely impact our financial performance and
future prospects.
8. Economic Conditions & Sustainability
Economic conditions, including but not limited to
the unemployment rates, birth rates, lower female
workforce participation, lower household income and
wealth or deterioration of market conditions in the areas
surrounding our centres may impact the occupancy
levels at our centres.
G8 Education’s business may be impacted by the long-
term effects of climate change, which include rising
average temperatures as well as increased severity/
regularity of extreme weather events, changes to global
policy and government regulations.
– We maintain a Compliance and Regulatory Support Guide along with a suite of
Corporate Governance Policies, Whistleblower Policy, Delegation of Authority and
Contract Signing Process and Code of Conduct to assist with management of legal
and regulatory compliance.
– We have a capable Legal, Quality & Risk team in place who specialise in
compliance and regulatory risk within the childcare industry.
– We engage with external legal experts with respect to continuous disclosure
obligations and other material legal matters.
– We implement an incident notification and escalation process with a centralised
dedicated compliance team to lodge notifications with regulatory authorities.
– Mandatory training is in place for Regional Managers, Area Managers and
Centre managers.
– We have established updated rostering principles.
– Our time and attendance system has reconfigured work rules.
– We are on track for the implementation of the new rostering platform which
will automate certain compliance controls and systems.
– We have established increased supervision and oversight.
– The sector continues to enjoy strong bipartisan Government support as evidenced
by increases to child care subsidy levels in mid-2018 and relief packages
throughout the COVID-19 crisis.
– Our Group maintains productive working relationships at both Federal and State
Government levels providing our Group with early visibility of pending regulatory
changes and enabling us to prepare and respond to such change.
– Our Group undertakes detailed supply demand modelling in relation to existing
and new centre investments to ensure forecast social and economic drivers are
factored into any investment decisions.
– We completed a sustainability materiality assessment in 2020 and are focused on
continually improving our response to the key areas identified, and achievement of
the sustainability targets set.
– We entered into a sustainability linked loan in early 2021 that focusses on the
Group’s commitment to and achievement of improved centre quality and team
member safety.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 19
RISK
MITIGATING ACTIVITIES
9. Financial, treasury and insurance
The management of liquidity to make payments to
team members and suppliers in particular, and the
management of capital and availability of funding,
are important requirements to support our business
operations and growth.
10. Cyber and Emerging Technology Risks
The protection of the personal information of our families
and team members is paramount. A major data or
information security breach has the potential to result in
unauthorised access, disclosure, loss and/or misuse of
family, supplier, team member and company information
which may cause significant business and reputational
damage, adverse regulatory and financial impacts and
legal proceedings.
11. Systems and Information Management
The ongoing confidentiality, integrity and availability/
continuity of our core business systems is critical to our
day-to-day operations and ongoing success. We must
ensure that information is relevant, available and to a
quality that can support good business decisions.
12. Organisational structure, culture and capability
Our team members are key to the success of our
business and it is critical that we can attract, retain and
motivate appropriately skilled and trained team members
that meet the existing or future education and care
needs of our families.
There is a risk that we may not be able to execute
upon the business strategy as a result of inefficient
and misaligned organisational structures and/or
organisational capability, inappropriate culture and
values environments and a lack of agility in our people to
manage and grow the business.
– We have a Board approved Treasury Policy which governs the management of
our treasury risks, including liquidity, funding, interest rates, the use of derivatives
and counterparty risk. These risks are managed day to day by our Group
Finance function.
– We have medium term bank funding facilities in place with a syndicate of lenders
and manage these facilities to ensure availability of cash and committed debt
facilities to meet our forecasted liquidity and capital requirements.
– We have an insurance program in place to reduce risk exposure for insurable risks.
– Our cyber security team is responsible for managing our information security
management system (ISMS) covering cyber, privacy and business continuity
planning. This includes monitoring, assessing and continuing to enhance our
information and physical security to keep pace with increasing threats, with
monthly reporting to our Board on the implementation and success of the ISMS.
– How we collect, use, secure, manage and monitor data and our key systems
is governed through our Group Cyber Security, Privacy, Acceptable Use of
Information Systems Policy and associated standards.
– We invest in our technology infrastructure, applications and review our IT recovery
plans to enhance our offsite backup and recovery capabilities.
– Our Group’s requires active team members to complete mandatory information
and security management training at least annually.
– We partner with leading cyber security firms to continuously monitor developments
in relation to cyber threats and resulting remedial actions.
– Our Group has a reporting framework with Steerco, Business Transformation Office
(BTO) Framework, delegation of authority and budgeting process to manage these
risks and ensure that management systems are aligned with strategy.
– We ensure that our key operating systems are hosted by proven providers with
high availability and fault tolerance and low failure risk.
– Our Group has a dedicated recruitment team focused on finding and employing
the right talent to ensure the people entering our business meet the needs of each
individual role.
– Our Bachelor Scholarship program and G8 Family and Team Member Benefits
programs are in place to attract and retain good people. Those programs subsidise
early learning for our team and provide direct sponsorship and scholarships
to enable our team members to undertake further education and study. These
programs and the development of our people are supported by a dedicated
Learning and Development team who provide ongoing training and leadership
development to ensure our team members maintain our standards and develop
their careers.
– We have a structured talent management framework covering workforce planning,
succession planning and performance management to ensure a pipeline of talent
for key roles.
– Team member engagement surveys are regularly conducted to understand and
help us respond to the needs of our team members.
STRATEGIC REPORTSECTION ONE 20
SUSTAINABILITY REPORT
EMBRACING
CHANGE
Sustainability‑linked
loan that focusses on
centre quality and team
member safety
As the largest listed early education
provider in Australia, G8 Education strives
to achieve best practice in social, ethical,
environmental and commercial business
performance across all of its operations.
We recognise our responsibility to have a
profoundly positive impact on the future
of our most valuable and vulnerable
members of society and are committed to
creating environments where children and
families can feel safe, included and are able
to thrive.
2020 was a year like no other. It highlighted
how critically important the essential
services offered by G8 Education are to
our stakeholders, and we endured in the
face of adversity by working together in
new and innovative ways to support our
children, families, communities, employees
and investors.
During 2020, G8 Education began the
process of revising its sustainability strategy
by undertaking a materiality assessment to
identify and understand the most material
areas of focus for long-term value creation
for our stakeholders. This materiality
assessment has shaped the contents of
this report and will guide G8 Education’s
strategic sustainability initiatives and
commitments moving forward.
Over the next 12 months the materiality
assessment will be used to implement an
enhanced reporting framework to clearly
demonstrate and monitor achievements
as a responsible and sustainable business.
By implementing effective sustainability
strategies, measures and governance
practices that are aligned with the
sustainability topics that are most material
to G8 Education we can maximise
long-term value for our stakeholders and
achieve our vision of being Australia’s
best-in-class early childhood educator
that is the first choice for parents to care
for their child.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT SUSTAINABILITY REPORT
21
MATERIALITY
ASSESSMENT
This materiality assessment is a
fundamental step towards G8 Education
understanding how to leverage
sustainability performance to provide
long-term value to all stakeholders.
Regular materiality assessments will be
completed and there is an intention to
expand the scope to include key industry
stakeholders. By identifying and prioritising
the topics most significant to our business
and applying those learnings to our risk
management framework, we proactively
manage material economic, social and
environmental risks identified by our
stakeholders and make more informed
decisions that better reflect their needs and
expectations of our business.
During the year Ernst & Young were
engaged as an independent consultant to
conduct a materiality assessment designed
to understand the most material issues
to G8 Education. The following research
methods were used to conduct the
materiality assessment:
– desktop assessment and
analysis of relevant internal and
external documentation;
– a review of media and peer
activities across Australia, as well as
global megatrends;
– engagement with G8 Education’s
stakeholders to discuss material topics,
covering short, medium and long-
term perspectives;
– in-depth interviews with seven
internal stakeholders and one external
stakeholder, including members of G8
Education’s Board; and
– a validation workshop with relevant
business representatives to confirm and
prioritise the most significant topics and
areas of focus.
SECTION ONE 22
SUSTAINABILITY PILLARS
The material topics identified in the materiality assessment were grouped against four sustainability pillars:
V E RNAN
C
E
G O
Governance‑related matters:
Sustainable governance and risk management
Ethical practises and transparent disclosure
Sustainable earnings
Advocacy
COVID-19 response
Compliance
Data privacy
U R PEOPL
E
O
I C E QUA
L
I
T
Y
SER V
UR E N V IRON
M
E
N
T
O
Quality‑related matters:
Workforce‑related matters:
Environmental‑related matters:
Education, service delivery & quality
Diversity & inclusion
Environmental footprint
Property maintenance & resources
Talent management development & retention
Environmental stewardship
Technology & innovation
Employee health & safety
Family experience & engagement
Access to care & education
Children health & safety
Community contribution & impact
Reconciliation
GOVERNANCE
Governance is the overarching pillar,
representing half of G8’s top material
topics also reflecting how critical strong
governance is to G8 Education’s success.
Stakeholders have increasingly high
expectations in relation to financial
performance, governance issues and
risk management, as well as ethical
practices and reporting in the current
COVID-19 context, and want to ensure
that management is kept accountable
for improving sustainability performance
through transparent disclosures. We
must demonstrate ethical practices and
decision-making throughout all levels of our
organisation in order to succeed.
SERVICE QUALITY
Child health and safety is a key focus as
well as curriculum delivery and family
experience and engagement. Service
Quality is G8 Education’s core business and
is directly linked to our families’ satisfaction
with our services and centre occupancy
driving financial returns.
OUR PEOPLE
Our People and the culture of our teams are
what create and maintain our reputation.
As a people-focused business, employee
health and safety, talent management,
development and retention drive the
success of G8 Education. It is critical that
we retain and invest in values-driven team
members who are committed to the best
interest of children under our care.
OUR ENVIRONMENT
Climate change is one of the defining
issues of our time, and the natural disasters
of 2020 have highlighted the ongoing risk
and importance of responding to climate
change in Australia and around the world.
G8 Education plays an important role in
educating our children on the impacts
of climate change and the importance of
reducing our environmental footprint. We
are monitoring which potential risks and
opportunities are most material to us in the
context of our environmental footprint, our
environmental stewardship and climate
change generally, which will inform our
strategic and policy adjustments to best
mitigate risk and seize opportunities
moving forward.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT SUSTAINABILITY REPORT
23
MATERIALITY MATRIX
The materiality assessment identified 20 topics grouped within our four pillars that are most material to our stakeholders. The below
materiality matrix maps the importance of these material topics to stakeholders against their business impact. Large dots represent short-
term priorities whereas smaller dots, while still important, form part of G8 Education's long-term sustainability goals. The colours represent
the four pillars.
3.00
2.00
1.00
S
R
E
D
L
O
H
E
K
A
T
S
O
T
E
C
N
A
C
I
F
I
N
G
S
I
0.00
0.00
COVID-19 response
Ethical practices &
transparent
disclosures
Sustainable governance
& risk management
Children health &
safety
Compliance
Sustainable earnings
Environmental footprint
Family experience &
engagement
Community contribution &
impact
Diversity &
inclusion
Technology & innovation
Access to care &
education
Data privacy &
confidentiality
Reconciliation
Advocacy
Property maintenance
& resources
Environmental
stewardship
Talent management,
development &
retention
Education, service
delivery & quality
Employee health &
safety
1.00
2.00
3.00
Long term impact
Short term impact
SIGNIFICANCE TO G8 EDUCATION
Governance
Service Quality
Our People
Our Environment
SECTION ONE
24
WHAT MATTERS MOST?
This table sets out the top five material topics identified via the materiality assessment, along with G8’s response, progress and
commitment moving forward.
PILLAR
Service
Quality
TOPIC DESCRIPTION
Child health and safety
Looking after the physical
and mental health, safety and
wellbeing of the children in
our care is our highest priority.
Getting our culture right
and providing the necessary
training, policies, resources,
infrastructure, spaces and
support services to go beyond
standard occupational health
and safety and optimise
physical and mental health
outcomes for our children.
Governance Compliance
Compliance with Australian
law, industry regulation
and standards for
childcare services.
People
Talent management,
development and
retention
Attracting and retaining
highly capable individuals
with a range of relevant
skills, experiences and
capabilities to support a high
performance and positive
culture within G8 Education.
This includes providing quality
and appropriate training and
remuneration to employees
and promoting high
employee engagement.
TARGET
95% of team
members
complete Child
Safety Training
learning modules
on an annual
basis 1
At least 95%
of all Centres
achieving either
‘meeting’ or
‘exceeding’ the
National Quality
Standards by
31 December
2023
85% employee
engagement
score by 31
December 2023
Centre manager
turnover <15%
RESPONSE
Children and their families are at the heart of everything we do. With
more than 46,000 children across Australia in our care per week, we
are deeply aware that our approach to child protection is able to have
a significant impact. G8 Education is a committed champion in the
development of the safest and most secure environments possible for
children and families.
Various G8 Education policies and documents frame the Children
Health & Safety issue to ensure procedures are in place to keep
children safe from harm. Incidents are reviewed weekly and each centre
has its own risk register, with managers required to complete risk
assessments on a regular basis.
In 2020 we continued our commitment to improving child safety
practices through our partnership with Bravehearts and Ernst & Young
to develop a Child Protection Program that includes comprehensive
training, communications and organisational culture change elements.
Designed to ensure that all children in our centres are safe, and our
Educators are courageous and vigilant in responding to any suspicion
of child abuse or neglect, this program outlines that we can all do our
part to advocate for the safety of the tens of thousands of children who
attend our centres each day.
The G8 Education team embraced an #iwill Statement of Commitment
as a testament to the dedication we all possess in ensuring each child is
protected, safe, and heard.
Compliance is critical to ensure safety, health and wellbeing of children
and to improve their education and development outcomes.
G8 Education implements risk management frameworks, training,
policies and procedures to enable it to comply with national regulations.
We apply best-practice guidelines and meet the ISO31000 Risk
Management Principles and Guidelines.
In 2020 we merged our legal and compliance team under one
consolidated Legal, Quality & Risk team. As well as providing advice
directly at a centre level, this dedicated team is embedded and sits on
strategic projects across the business to advise G8 on compliance with
its legal and regulatory requirements.
G8 Education completed 250 safety and compliance projects in 2020
and is budgeted to improve on this number in 2021.
Building a culture that values, invests in and engages a high performing
workforce is essential to G8 Education’s long-term growth and success.
G8 Education continues to invest in the retention and development
of values-driven team members through its various professional
development opportunities and Bachelor Scholarship program,
investing $2.9m into professional learning and development in 2020.
Key achievements in 2020 included:
– 150 team members currently undertaking Bachelor study programs
throughout the G8 Education network
– Provided Traineeships to more than 650 team members;
– Assessed more than 7,500 Standout Educator Nominations for the
standout educator of the year within G8 Education network
– $16m in child care discounts saved by team members utilising the
G8 Team Member Childcare Benefit Policy
1. Excluding team members on maternity leave, extended unpaid or on workers compensation leave.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT SUSTAINABILITY REPORT
25
PILLAR
TOPIC DESCRIPTION
Governance Sustainable Governance
and Risk Management
Proactively managing and
mitigating material risks and
opportunities to G8 Education
operations, including
sustainability matters within
the organisation. Lead by
the identification and clear
articulation of responsibilities
at the highest levels of
governance at G8 Education.
Ethical practices and
transparent disclosure
High-quality governance,
transparency, communication,
and ethical practices
embedded throughout all
levels of the organisation.
RESPONSE
Good governance is at the heart of any successful business and
supports effective service quality and delivery as well as a safe and
positive organisational culture.
We recognise that the way we do business is critical in order for us
to earn and maintain the respect and trust of not only G8 Education
families but all stakeholders, including our employees, shareholders
and the community. G8 Education’s risk management policy, framework
and Code of Conduct inform our risk management strategy. Enterprise
risks are reviewed monthly by the Board and quarterly by the Audit
and Risk Management Committee to ensure risk management
and initiatives remain current. Each centre has its own risk register
including environment, social, governance and financial risks and risk
assessments are performed by centre managers.
G8 Education and its Board are committed to good corporate
governance practices and comply with the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations (4th
Edition). The Board of Directors guides and monitors the business and
affairs of G8 Education on behalf of the shareholders by whom they
are elected and to whom they are accountable. The Board sees this
commitment as fundamental to the sustainability and performance of its
business and to enhance shareholder value.
There is increasing demand for transparent disclosures and reporting
coming from stakeholders, including investors, especially in the context
of COVID-19.
Compliance and risk management is embedded in our operations.
G8 Education’s whistle-blower policy enables anonymous reporting
without fear of retribution to promote a culture of openness, honesty
and transparency.
G8 Education complies with the ASX Listing Rules with respect to
its continuous disclosure obligations and publishes its Continuous
Disclosure and Shareholder Communication Policy on its website.
Our Code of Conduct and team member induction and training
program are focused on embedding good communication skills and
ethical practices across our day-to-day activities.
TARGET
95% of all active
team members
complete
mandatory
training annually 1
95% of all active
team members
complete
mandatory
training annually 1
100% of all
whistle-blower
reports
investigated
and resolved.
1. Excluding team members on maternity leave, extended unpaid or on workers compensation leave.
SECTION ONE 26
DIRECTORS’ REPORT
BOARD OF DIRECTORS
The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of G8 Education Limited
and the entities it controlled at the end of, or during, the year ended 31 December 2020.
All of the following persons were Directors of G8 Education Limited during the financial year and up to the date of this report
unless otherwise stated.
MARK JOHNSON
B. Comm, FCA, CPA, FAICD
GARY CARROLL
B.Comm (Hons), B.Law (Hons), FCPA
Chair, Independent Non‑Executive Director
Managing Director / Chief Executive Officer
Since 1 January 2016
Since 1 January 2017
Gary Carroll was appointed as Managing Director and CEO
on 1 January 2017, having previously served as Chief Financial
Officer for the Group from 25 July 2016. Prior to joining G8
Education, Gary had over 17 years’ experience in senior
leadership roles across multiple industries, including being
Chief Financial Officer and Chief Supply Chain Officer at Super
Retail Group Limited. Gary holds Bachelor of Commerce (Hons)
and Bachelor of Law (Honours) degrees from the University of
Queensland and is a Fellow of CPA Australia.
Special responsibilities: Nil
Other current listed public Company Directorships: Nil
Former listed public Company Directorships in the last
three years: Nil
Mark Johnson is an experienced Chair and company director
with a diverse portfolio. He is currently a Director of Goodman
Limited, Goodman Funds Management Limited, Coca-Cola
Amatil Limited and several other non-listed company boards.
Prior to embarking on his Board career, Mr Johnson
was the Chief Executive Officer and Senior Partner of
PricewaterhouseCoopers (PwC), one of Australia’s leading
professional services firms, from July 2008 to June 2012.
His former roles include Chair of the PwC Foundation, member
of the Auditing and Assurance Board and Deputy Chair of the
Finance and Reporting Committee at the Australian Institute of
Company Directors.
Special responsibilities: Member of the Audit and Risk
Management Committee, Nomination Committee and People
and Culture Committee
Other current listed public Company Directorships:
– Coca-Cola Amatil Limited (appointed 6 December 2016)
– Goodman Limited (appointed 1 June 2020)
– Goodman Funds Management Limited
(appointed 1 June 2020)
Former listed public Company Directorships in
the last three years: Westfield Corporation Limited
(resigned 8 June 2018)
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 27
PROFESSOR JULIE COGIN
PhD, M. Law, M. Ed, B. Bus, GAICD
SUSAN FORRESTER, AM
BA, LLB (Hons) EMBA, FAICD
Independent Non‑Executive Director
Independent Non‑Executive Director
Since 1 September 2017
Since 1 November 2011
Professor Julie Cogin has worked in the Australian education
system for 30 years. In addition to her non-executive director
responsibilities, Professor Cogin is the Deputy Vice-Chancellor
(Business and Law) and Vice-President at RMIT University,
Australia’s largest multisector university. Professor Cogin also
Chairs the board of RMIT Training Pty Limited and has held a
number of senior academic leadership positions over the last
two decades, including Dean and Head of UQ Business School
at the University of Queensland and Director of the Australian
Graduate School of Management and Deputy Dean, University
of New South Wales.
Professor Cogin has made numerous leadership contributions
while achieving substantial research and education outcomes.
She is a recognised thought leader in strategy implementation,
high performing workplaces and corporate culture, having
authored books and world leading academic articles.
Professor Cogin has received prestigious education awards
at University, National and International levels and delivered
education or consulting engagements for many leading
companies throughout Australia, Asia and in the USA.
Professor Cogin has been engaged as an expert witness in a
number of tribunals and courts of Australia. In 2016, she was
named as one of Australia’s Women of Influence for her work to
address gender imbalance in leadership.
Special responsibilities: Member of the Nomination
Committee and People and Culture Committee
Other current listed public Company Directorships: Nil
Former listed public Company Directorships in the
last three years: Nil
Susan Forrester, AM, is a highly respected and accomplished
professional Company Director with a powerful blend of
management, board and consulting experience across ASX
listed, public and private companies. She draws on more
than 25 years of executive management expertise in large
professional services firms, covering law, finance, HR, business
and governance.
Susan has a proven leadership track record as a CEO and senior
executive in the national professional services and finance
industries. She gained a wealth of experience at the board table
in complex corporate transactions, including private and public
company mergers and acquisitions, industry aggregations and
overseeing successful capital raisings.
On Australia Day 2019, she was awarded a Member (AM) in the
General Division of the Order of Australia for significant service
to business through governance and strategic roles and as an
advocate for women.
Special responsibilities: Chair of the People and Culture
Committee and Member of the Nomination Committee
Other current listed public Company Directorships: Over
the Wire Holdings Ltd (appointed 1 November 2015), Jumbo
Interactive Limited (appointed 1 October 2020) and Plenti Group
Ltd (appointed 1 November 2020)
Former listed public Company Directorships in the last
three years: Xenith IP Group Ltd (resigned 15 August 2019),
Chair – National Veterinary Care Ltd (de-listed on 9 April 2020)
and Viva Leisure Limited (resigned 31 December 2020)
DIRECTORS’ REPORTSECTION ONE 28
DIRECTORS’ REPORT continued
DAVID FOSTER
B.App.Sci, MBA, GAICD, SFFin
PETER TRIMBLE
B.Com FCPA GAICD
Independent Non‑Executive Director
Independent Non‑Executive Director
Since 1 February 2016
Since 13 May 2020
David Foster has had a successful career in financial services
spanning over 25 years, with his last executive role being Chief
Executive Officer of Suncorp Bank, Australia’s 5th largest bank.
Since leaving Suncorp, David has further developed his career as
an experienced Non-Executive Director with a portfolio of Board
roles across a diverse range of industries including financial services,
retailing, local government, education and professional services.
David currently serves as Chair of MotorCycle Holdings Limited and
as Director of Genworth Mortgage Insurance Australia Limited and
Bendigo and Adelaide Bank Limited.
Special responsibilities: Member of Audit and Risk Management
Committee and Chair of Nomination Committee
Other current listed public Company Directorships: MotorCycle
Holdings Limited (appointed 8 March 2015), Genworth Mortgage
Insurance Australia Limited (appointed 30 May 2016) and Bendigo
and Adelaide Bank Limited (appointed 4 September 2019)
Former listed public Company Directorships in the last three
years: Kina Securities Limited (retired 23 May 2018), Thorn Group
Limited (retired 23 October 2019)
Peter Trimble is an experienced senior management and finance
executive of publicly listed companies having held roles at CSR
Limited, Rinker Limited, ABC Learning Limited and Sugar Terminals
Limited. These roles have crossed a diverse range of industries
comprising education, construction materials, manufacturing,
infrastructure and agriculture and includes 12 years of experience
in the USA. He is also an experienced Non-Executive Director of a
number of private companies.
Peter has an extensive background in child care operations, having
joined ABC Learning as Chief Financial Officer immediately prior
to the group going into administration and being a critical part of
the team that managed, restructured and prepared the child care
business for sale. Peter also has a background in governance, risk
management, strategy and planning, merger and acquisitions and
business restructuring and improvement.
Special responsibilities: Chair of the Audit and Risk Management
Committee and Member of the Nomination Committee
(from 20 May 2020)
Other current listed public Company Directorships: Nil
Former listed public Company Directorships in the last three years:
Nil
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 29
MARGARET ZABEL
FAICD, MBA, BMath
Independent Non‑Executive Director
Since 1 September 2017
BRIAN BAILISON
B.Com., B.Acc (Cum Laude), ACA
Independent Non‑Executive Director
25 March 2010 to 20 May 2020
Brian Bailison was an Independent Non-Executive Director from
25 March 2010 to 20 May 2020.
Special responsibilities: Chair of the Audit and Risk Management
Committee and Member of the Nomination Committee
(until 20 May 2020)
Margaret Zabel is a specialist in customer centred business
transformation, brand strategy, innovation, digital communications,
customer experience and change leadership. She has 20 years
senior executive experience working across major companies
and brands in FMCG, food, technology and communications
industries including multinationals, ASX 100 and not-for-profits. Her
previous roles include National Marketing Director Lion Nathan, VP
Marketing for McDonald’s Australia and CEO and Board Director of
The Communications Council. Margaret has also served as a non-
executive board director for the mental health charity R U OK? for
5 years, and is currently a Non-Executive Director on the Board of
Collective Wellness Group and Fairtrade AUNZ.
Special responsibilities: Member of the Nomination Committee.
Member of Audit and Risk Management Committee (until
31 December 2020). Member of People & Culture Committee (from 1
January 2021).
Other current listed public Company Directorships: Nil
Former listed public Company Directorships in the last three
years: Nil
DIRECTORS’ REPORTSECTION ONE 30
DIRECTORS’ REPORT continued
CHIEF EXECUTIVE OFFICER
Gary Carroll was appointed as Managing Director and Chief Executive Officer on 1 January 2017. He is responsible for managing the
external and internal operations of the Group and providing consistent high level advice to the Board on operations, policy and planning.
Gary has over 17 years’ experience in senior leadership roles covering a number of industries.
COMPANY SECRETARY
Tracey Wood was appointed as Company Secretary and General Counsel on 28 May 2018. She is responsible for the Legal, Quality, Risk
Management, Insurance and Company Secretarial functions for the Group.
PRINCIPAL ACTIVITIES
The principal continuing activities of the Group during the year were:
– Operation of early education centres owned by the Group; and
– Ownership of early education centre franchises.
The Group divested its Singapore business (which included all of its early education centre franchises) on 20 October 2020 and no longer
owns or operates any early education centre franchises.
There have been no other significant changes to the Group’s activities during the financial year ended 31 December 2020.
REVIEW OF OPERATIONS
Information on the operations and financial position of the Group and its business strategies and prospects are set out in the Chair’s and
Managing Director’s Reports.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Group during the year were as follows:
– Divested its Singapore business
– Non-cash impairment charge of $237.5 million (after tax) relating to the carrying value of intangible assets (principally goodwill) and the
right to use assets and tangible assets relating to a number of underperforming centres.
– Completed underwritten $301 million equity raising via an institutional placement and retail and institutional entitlement offers.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The Group has completed the extension of its senior syndicated debt facility on 17 February 2021. The refinance included a reduction of
the senior syndicated loan facility to $300.0m, the term loan being converted to a revolver facility and alignment of expiry date to October
2023. There has been no change to the $100.0m subordinated facility.
Otherwise there are no matters subsequent to the end of the financial year to be disclosed.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Group will continue to pursue its objectives of increasing the profitability and the market share of its child care business during the
next financial year. This will be achieved through organic and acquisition led growth.
ROUNDING AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ reports) Instrument 2016/191, relating to the
“rounding off” of amounts in the financial reports. Amounts in the financial statements have been rounded off in accordance with that
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
DIVIDENDS
Dividends declared or paid during the financial year were as follows:
Dividend for the full financial year ended 31 December 2019 of 6.0 cents per share paid on 30 October
2020. (2019: Dividend for the full financial year ended 31 December 2018 of 8.0 cents per share paid on
14 March 2019)
Nil Dividend for the half year ended 30 June 2020. (2019: Dividend for the half year ended 30 June 2019
of 4.75 cents per share paid on 11 September 2019)
Total
2020
$’000
27,611
2019
$’000
36,430
—
21,771
27,611
58,201
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 31
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 December
2020, and the number of meetings attended by each Director were:
M Johnson
G Carroll
J Cogin
S Forrester
D Foster
P Trimble
M Zabel
B Bailison
Full meetings
of Directors
Audit and Risk
Management Committee
Nomination
Committee
People and Culture
Committee
A
34
34
31
34
31
17
34
18
B
34
34
34
34
34
17
34
18
A
4
—
—
—
4
3
4
2
B
4
—
—
—
4
3
4
2
A
4
—
4
4
4
2
4
2
B
4
—
4
4
4
2
4
2
A
6
—
6
6
—
—
—
—
B
6
—
6
6
—
—
—
—
A = Number of meetings attended by member
B = Number of meetings held during the time the Director held office or was a member of the Committee during the year
ENVIRONMENTAL REGULATION
The Group is subject to and complies with environmental
regulations under State Legislation in the management of its
operations. The Group does not engage in activities that have
particular potential for environmental harm.
No environmental incidents have been recorded and the Directors
are not aware of any environmental issues which have had, or are
likely to have, a material impact on the Group’s business.
INSURANCE OF OFFICERS AND AUDITORS
During the year, the Group paid a premium to insure the Directors
and Officers (Managers) of the Company and its controlled entities.
Under the terms of the policy the amount of the premium and the
nature of the liability cannot be disclosed.
The liabilities insured include legal costs that may be incurred
in defending civil or criminal proceedings that may be brought
against the Managers in their capacity as Managers of entities
in the Group alleging a wrongful act, and other payments arising
from liabilities incurred by the Managers in connection with
such proceedings.
This does not include such liabilities that arise from conduct
involving willful breach of duty of the Managers or the improper
use by the Managers of their position or of information to gain
advantage for themselves or someone else or to cause detriment to
the Group.
It is not possible to apportion the premium between the amounts
relating to the insurance against legal costs and those relating to
other liabilities. No insurance premiums or indemnities have been
paid for or agreed by the Group for the current or former auditors.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Group has agreed to indemnify
its auditors, Ernst & Young Australia, as part of the terms of its audit
agreement against claims by third parties arising from the audit (for
an unspecified amount). No payment has been made to indemnify
Ernst & Young during or since the financial year.
Ernst & Young provide an annual declaration of their independence
to the ARM Committee in accordance with the requirements of the
Corporations Act 2001.
DIRECTORS’ REPORTSECTION ONE 32
KEY OPERATIONAL INFORMATION
Number of owned centres at year end
Licence capacity of owned centres at year end
Total Number of employees at year end
Total number of full time equivalent employees at year end
Consolidated Group
472
39,418
9,588
7,417
NON‑IFRS FINANCIAL INFORMATION
The 2020 Annual Report contains certain non-IFRS financial measures of historical financial performance, balance sheet or cash flows
that are used by management and the Directors as the primary measures of assessing the financial performance of the Group. Non-IFRS
financial measures are financial measures other than those defined or specified under all relevant accounting standards and may not be
directly comparable with other companies’ measures but are common practice in the industry in which G8 Education operates. Non-
IFRS financial information should be considered in addition to, and is not intended to be a substitute for, or more important than, IFRS
measures.
The presentation of non-IFRS measures is in line with Regulatory Guide 230 issued by Australian Security and Investments Commission
(ASIC) in December 2011 to promote full and clear disclosure for investors and other users of financial information and minimise the
possibility of being misled by such information. Non-IFRS measures are not subject to audit or review.
The financial performance of the Group for the year resulted in an underlying EBIT 1 of $105.2m (Restated 2019: $119.4m). The underlying
result was impacted by the COVID-19 pandemic’s effect on attendance levels and the temporary changes to the child care sector’s
funding model. The 2020 and restated 2019 underlying EBIT includes amounts expensed for the employee payments remediation
program.
The Directors highlight that underlying earnings have not been adjusted to exclude a number of government incentives received during
the period as such assistance was considered recompense for costs incurred in the year that form part of underlying earnings.
1. Unaudited, Non-IFRS
AASB 16 LEASES IMPACT AND UNDERLYING RESULT (UNAUDITED, NON‑IFRS)
Given the material impact of the accounting standard implemented on 1 January 2019, the Directors have included the following table
which is considered to provide useful and meaningful information to the Group’s stakeholders. This is non-IFRS information which is
unaudited. Having provided this AASB 16 adjustment information for two financial years since implementation of AASB 16 to assist
users in understanding the impact of the accounting standard, in future financial periods this AASB 16 adjustment table will no longer
be provided.
The table below also illustrates the reconciliation of reported net profit / (loss) after tax (“NPAT”) and reported earnings before interest and
tax (“EBIT”) to pre-AASB 16 underlying NPAT and EBIT. For pre-AASB 16 pro forma Balance Sheet and Statement of Cashflows refer to G8
Education’s Investor Presentation released on the ASX on 23 February 2021.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 33
AASB 16 Leases Impact on Consolidated Income Statement (Unaudited, Non-IFRS)
Consolidated Full Year
Revenue
Expenses
Employment costs
Occupancy
Direct costs of providing services
Depreciation
Impairment loss
Other expenses
Finance costs
2020
Statutory
$’000
2020
AASB16
Adjustment 1
$’000
2020
pre-
AASB16
$’000
2019
Restated
Statutory
$’000
2019
AASB16
Adjustment 1
$’000
2019
Restated
pre-AASB16
$’000
788,358
(216)
788,142
922,202
(1,588)
920,614
(422,984)
(7,705)
(77,310)
(91,609)
(275,217)
(50,989)
(66,721)
—
(108,309)
—
70,206
100,250
(1,585)
43,684
(422,984)
(116,014)
(77,310)
(21,403)
(174,967)
(52,574)
(23,037)
(555,841)
(11,752)
(67,632)
(100,117)
—
(39,986)
(75,974)
—
(107,451)
—
78,029
—
(1,576)
45,010
(555,841)
(119,203)
(67,632)
(22,088)
—
(41,562)
(30,964)
Total expenses
(992,535)
104,246
(888,289)
(851,302)
14,012
(837,290)
Profit / (loss) before income tax
Income tax benefit (expense)
(204,177)
17,167
104,030
(31,197)
(100,147)
(14,030)
70,900
(18,881)
12,424
(3,727)
83,324
(22,608)
Profit / (loss) for the year attributable to
members of the parent entity
(187,010)
72,833
(114,177)
52,019
8,697
60,716
Consolidated Full Year
Net Profit / (loss) after income tax (Pre-AASB 16)
Add/(Less) non-operating transactions:
Contingent consideration not paid
Acquisition related expenses²
Borrowing costs expense3,4
(Gain)/loss on disposal of assets/centres
Foreign currency translation (gain)/loss3,4
Impairment loss and non-trading expenses 4
Recognition of tax losses from acquired entities
Underlying net profit after tax
Underlying EPS (cents per share)5
Net Profit / (loss) before income tax (Pre-AASB 16)
Add Finance costs
Add/(Less) non-operating transactions:
Contingent consideration not paid
Acquisition related expenses²
(Gain)/loss on disposal of assets/centres
Foreign currency translation (gain)/loss3
Impairment loss and non-trading expenses
Underlying earnings before interest and tax6
2020
pre-AASB16
$’000
(114,177)
(64)
2,425
—
(9,035)
—
180,878
—
60,027
8.06
(100,147)
22,152
(64)
2,425
(9,035)
—
189,874
105,205
2019
Restated
pre-AASB16
$’000
60,716
(681)
5,088
2,476
4,034
(1,967)
1,442
(3,435)
67,673
13.02
83,324
30,470
(681)
5,088
4,034
(2,810)
—
119,425
1. AASB 16 adjustments include impairment of right of use assets. Pre AASB 16, the assessment of cash generating units may have resulted in a provision for onerous leases and a corresponding
expense. The Group did not make an assessment of onerous leases in the current period for inclusion in the pre-AASB 16 proforma consolidated income statement and instead used the
impairment of the right of use assets amount as a proxy for this pre-AASB 16 approach.
2. Includes stamp duty, legal fees, establishment costs and abandoned acquisition costs
3. These items ceased to be removed from underlying from CY20 onwards following the repayment of the SGD bonds
4. These items have been adjusted for tax
5. 2019 Restated to reflect bonus element included in share issuance
6. Previously reported underlying EBIT for 2019 was $132.5m and underlying NPAT was $76.4m
Refer to note 14 for restatement details.
DIRECTORS’ REPORTSECTION ONE
34
REMUNERATION REPORT
1
2
3
4
5
6
7
8
Introduction from the People and Culture Chair
Sets out the activities of the People & Culture Committee and the
Board and people focussed highlights
Who is Covered
Details of Executive KMP and Non-Executive Directors
Remuneration Governance
Describes the role of the Board and the People and Culture Committee,
and the use of remuneration consultants
Executive KMP Incentives
Our Strategy, Vision and Values that align to Executive KMP incentives
Remuneration Details for 2020
Outlines the principles and strategy applied to executive remuneration
decisions and the framework used to deliver incentives
Executive KMP Equity Interests
Provides details of Executive KMP shareholdings in G8 Education
Employment Agreements
Provides details regarding the contractual arrangements between
G8 Education and Executive KMP
Non‑Executive Director Remuneration
Provides details regarding the fees paid to Non-Executive Directors
SCOPE
This Remuneration Report sets out, in accordance with the relevant Corporations Act 2001 (Corporations Act) and accounting standard
requirements, the remuneration arrangements in place for the key management personnel (Executive KMP) during 2020.
1. INTRODUCTION FROM THE PEOPLE AND CULTURE COMMITTEE CHAIR
Dear Shareholders
On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 31 December 2020.
The purpose of this Report is to set out, in a clear and transparent way, our approach to remunerating Executive KMP, the elements of our
Strategic Remuneration Framework, and remuneration of our Non-Executive Directors.
The Directors believe that our Strategic Remuneration Framework is appropriate for our business and the sector in which we operate, and
allows the Board to balance remuneration outcomes which reward and motivate our Executive KMP whilst reflecting our overall business
performance and delivering value to you, our shareholders.
COVID-19 Impacts
Whilst ‘unprecedented’ has become an overused term, CY20 was a year like no other for our people and our families. After experiencing
drought and bushfires, our people experienced a turbulent year of uncertainty and increased responsibilities for managing and protecting
the health and wellbeing of the children in our care. The pandemic created significant volatility across the commercial operations of
our centres.
During this challenging year, G8 prioritised the health and safety of our children, families and team, which demanded a focus on
education, hygiene, safety practices and wellbeing.
In the face of these challenges, the efforts of our management team and our teams at the front line were extraordinary.
CY20 Non-Compliance with Relevant Awards
During the year, a proactive review of our award and legislative requirements identified inadvertent but systemic noncompliance
issues with relevant industrial awards. This important matter was self-reported to the Fair Work Ombudsman and we are undertaking
a remediation program to ensure all affected team members are paid any amounts owing.
The Board apologises unreservedly to our team and is committed to rectifying this issue in full. To support future compliance, G8 is on
track to deploy its new rostering system mid-year 2021, which will automate award compliance and improve visibility across the network.
CY20 Remuneration Framework Review
The new three-year remuneration framework commenced following a comprehensive review in the prior year. The review resulted in the
introduction of a financial gate as part of the STI redesign and confirmed earnings per share (EPS) as the single earnings-based metric for
the Long-Term Incentive Plan.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 35
CY20 Reward Outcomes – Short Term Incentive Plan (STI)
The minimum financial performance requirements of the Short-Term Incentive Plan were not met as the 90% NPAT gateway was not
achieved. This resulted in no STIs being payable to Executive KMP. The Board and the People and Culture Committee believe this
outcome reflects our performance in 2020.
Notwithstanding that the NPAT gate was not achieved, in terms of the individual component of each Executive KMP’s STI, there was
positive progress in a number of performance areas covering teams, quality and customer and families. These are set out in some detail
in Section 5 of this Report.
Board Remuneration and Gender Balance
At the 2020 AGM the Board did not seek an increase to the aggregate Non-Executive Director fee pool. As was the case in 2020, fees
for Non-Executive Directors will not be changed in 2021. Our Board composition continues to reflect a healthy gender balance, with each
gender now representing 50% of our independent Non-Executive Directors and women representing 42% of the Board.
Board and Management Response to COVID-19 and other issues
Whilst the Board is proud of the way G8 responded to COVID-19, we recognise that failing to meet key financial targets and disclosure
of non-compliance with relevant awards has negatively impacted shareholders’ experience and returns in CY20. However, taking
into account:
– Board and management voluntarily accepted a 20% remuneration reduction for 6 months in 2020;
– Executive KMP will not receive STIs due to failure to achieve the financial gate (set prior to COVID-19 and not retested);
– Directors fees have been frozen for 2 calendar years; and
– The ~24% reduction in LTI eligibility for the CEO in respect of the 2020 grant
The Board has spent significant time considering the response to these issues and believes that sufficient steps have been taken
to recognise the impacts of COVID-19 and the award underpayment issue.
Building a Great Team
During 2020, we further invested in building capability and driving the people strategy across the Group with the appointment of an
experienced Chief People and Transformation Officer. We continue to create a better experience for our families and Centre teams by
the rollout of our updated HR systems, in line with our implementation plans. We are delighted that our team engagement score continues
to improve, currently sitting at 79%.
Looking forward
After a comprehensive review of our Remuneration Framework, the Board has confidence in the integrity of our People Strategy and
Strategic Remuneration Framework and believes it allows the Board to balance rewarding our Executives for performance against agreed
KPIs and recognising the interests of our shareholders, in an uncertain operating environment.
Finally, as I will retire from the Board at the 2021 AGM, after 10 years’ service as a Director, this is my final letter to shareholders. Professor
Julie Cogin, who brings extensive experience in human resource strategy and management will step into the role of Chair of this
Committee and I wish her every success.
In a year that challenged us in so many ways, the Board hopes you find this Report informative and thanks you for your ongoing support.
Susan Forrester
Chair, People and Culture Committee
Brisbane
23 February 2021
DIRECTORS’ REPORTSECTION ONE 36
REMUNERATION REPORT continued
2. WHO IS COVERED BY THE REPORT
Key management personnel
Executive KMP have authority and responsibility for planning, directing and controlling the activities of G8 Education and comprise the
Non-Executive Directors and Executive KMP (being the executive directors and other senior executives named in this report). Details of
the Executive KMP during the year are set out in the table below:
Non-Executive Directors
Mark Johnson
Title /Committees
Chair
– Member, Audit & Risk Management
– Member, Nomination
– Member, People & Culture
Julie Cogin
Director
– Member, Nomination
– Member, People & Culture
Director
– Chair, People & Culture
– Member, Nomination
Director
– Chair, Nomination
– Member, Audit & Risk Management
Director
– New Chair, Audit & Risk Management
– Member, Nomination
Director
– Member, Nomination
– Member, Audit & Risk Management
Retired Director
– Chair Audit & Risk Management
– Member, Nomination
Susan Forrester
David Foster
Peter Trimble
Margaret Zabel
Brian Bailison
Executive Director
Change in 2020
No Change
No Change
No Change
No Change
From 13 May 2020
From 20 May 2020
From 20 May 2020
Until 20 May 2020
Until 20 May 2020
Until 20 May 2020
Gary Carroll
CEO and Managing Director
No Change
Other Executive KMP
Sharyn Williams
Jason Ball
Chief Financial Officer
General Manager Operations
(ceased employment on 2 February 2021)
No Change
No change in 2020
Ceased on 2 February 2021
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 37
3. REMUNERATION GOVERNANCE AT G8 EDUCATION
This section of the Remuneration Report describes the role of the Board and the People and Culture Committee and the use of
remuneration consultants when making remuneration decisions affecting Executive KMP.
Role of the Board and the People and Culture Committee
The Board is responsible for G8 Education’s remuneration strategy
and policies. Consistent with this responsibility, the Board has
established the People & Culture Committee (PCC) which
comprises solely independent Non-executive Directors (NEDs).
The role of the PCC is set out in its Charter, which is reviewed
annually and was last revised and approved by the Board in 2020.
In summary, the PCC’s role is to:
– ensure that the appropriate procedures exist to assess the
remuneration levels of the Chair, NEDs, Executive Directors,
direct reports to the CEO, Board Committees and the Board
as a whole;
– ensure that G8 Education meets the diversity guidelines
and objectives;
– ensure that G8 Education adopts, monitors and applies
appropriate remuneration policies and procedures;
– ensure that reporting disclosures related to remuneration
meet the Board’s disclosure objectives and all relevant legal
requirements;
– develop, maintain and monitor appropriate talent management
programs including succession planning, recruitment,
development, retention and termination policies and procedures
for senior management; and
– develop, maintain and monitor appropriate superannuation
arrangements for G8 Education.
The PCC’s role and interaction with Board and internal and external advisors are further illustrated below:
Reviews, applies judgment and, as appropriate, approves the PCC’s recommendations
The Board
The People & Culture Committee (“PCC”)
The PCC operates under the delegated authority of the Board.
The PCC is empowered to source any internal resources and obtain external independent professional advice
it considers necessary to enable it to make recommendations to the Board on the following:
Remuneration
policy, composition
and quantum
of remuneration
components `for
Executive KMP,
and performance
targets
Remuneration
policy in respect
of NEDs
Talent
management
policies and
practices including
superannuation
arrangements
Design
features of
employee and
executive STI and
LTI plan awards,
including setting of
performance and
other vesting
conditions
External consultants
Internal resources
Further information on the PCC’s role, responsibilities and membership is contained in the Corporate Governance Report set out in the
Corporate Governance section of the G8 Education website.
DIRECTORS’ REPORTSECTION ONE 3838
REMUNERATION REPORT continued
3. REMUNERATION GOVERNANCE AT G8 EDUCATION
Use of remuneration consultants
All proposed remuneration consultancy contracts (within the
meaning of section 206K of the Corporations Act) are subject to
prior approval by the Board or the PCC in accordance with the
Corporations Act.
The Board directly engages external advisors to provide input to
the process of reviewing Executive KMP and NED remuneration.
During the 2020 financial year, Crichton and Associates Pty
Limited (Crichton and Associates) were engaged by the Board
to provide a remuneration benchmark assessment in relation to
the Non-Executive Director and two executive roles. Crichton and
Associates were paid $5,302 (including GST) for these services.
The following arrangements were made to ensure that the
remuneration recommendations have been made free from
undue influence:
– Crichton and Associates received written instructions
from an independent NED on behalf the PCC and were
accountable to the Board;
– During the course of this assignment, Crichton and Associates
received limited input from management. Crichton and
Associates reported its findings, in writing, to the independent
NED and the Board; and
– Either a standard set fee was charged, or a fixed fee
arrangement was agreed in advance directly with the
independent NED on behalf of the PCC.
The Board was satisfied that the limited remuneration
recommendations provided were made free from undue influence
from any member of the Executive KMP. That view was formed
due to the above arrangements being in place, the professional
nature of the remuneration consultant’s business and reputation
and the absence of any reason to suggest otherwise.
In addition to providing remuneration consulting services,
Crichton and Associates also provided services relating to other
aspects of remuneration of the Group’s employees, including ad
hoc advice in respect of the Company’s remuneration framework,
remuneration reporting and proxy advisor engagement. Crichton
and Associates was paid $5,860 (including GST) during 2020, for
these services.
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD
Our Executive KMP remuneration has been designed to support and reinforce G8 Education’s Strategy, Purpose and Values. The at-risk
components of the Executive KMP remuneration are therefore closely linked to the successful execution of the organisation’s strategy.
The strategic remuneration framework which applies to Executive KMP operates over a three (3) year cycle, originally approved from 1
January 2020 and concluding on 31 December 2022.
Our Strategic Priorities
Fulfil
children’s
learning
potential
Deliver
operational
excellence
Support
and build
the team
Drive profitable
growth
Create
differentiation
Our Purpose
Creating the foundations for
learning for life
Our Values
Passion, Innovation, Dedication,
Compassion, Integrity
SHORT TERM
INCENTIVE PLAN (STIP)
The strategic
priorities are
translated into
performance
objectives and KPIs
Net Profit after Tax
is the performance
measure that applies
to over 65% of the
incentive
Measurable performance objectives are
set across all strategic priorities and are
closely aligned to our purpose and values.
This ensures a balanced focus across all key
strategic areas
Our Values are considered as we assess how
performance has been achieved
Our Shareholder Value Proposition
Deliver sustainable double‑digit
growth in earnings for shareholders
LONG TERM
INCENTIVE PLAN (LTIP)
Earnings per Share
Growth over the vesting period
accounts for 100% of the award.
The purpose of the incentive is to
align Executive KMP remuneration
opportunity with shareholder value
and provide retention stimulus
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 3939
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued
The Components of Executive KMP Remuneration at G8 Education
Executive KMP remuneration
G8 Education’s executive remuneration policies are designed to attract, motivate and retain a qualified and experienced group of
executives with complimentary skills.
Fixed remuneration components are determined having regard to the specific skills and competencies of the Executive KMP with
reference to both internal and external relativities, particularly local market and industry conditions. The ‘at risk’ components of
remuneration are strategically directed to encourage management to strive for superior (risk balanced) performance by rewarding the
achievement of targets that are challenging, clearly defined, understood and communicated within the ambit of accountability of the
relevant Executive KMP.
Executive KMP remuneration objectives are exemplified through three categories of remuneration, as illustrated below.
Attract, motivate and retain
executive talent across diverse
geographies
The creation of reward
differentiation to drive
performance values and
behaviours
An appropriate balance
of ‘fixed’ and ‘at risk’
components
Shareholder value creation
through equity components
Total target remuneration (TTR) is set by reference to the relevant geographic market
Fixed
At risk
TOTAL FIXED REMUNERATION
(TFR)
SHORT‑TERM INCENTIVES
(STI)
LONG‑TERM INCENTIVES
(LTI)
TFR is set based on relevant market
relativities, reflecting responsibilities,
performance, qualifications, experience
and geographic location
STI performance criteria are set by
reference to G8 Education’s group earnings
and individual performance targets relevant
to the specific Executive KMP
LTI targets are linked to
G8 Education EPS growth
Remuneration will be delivered as:
Base salary plus any fixed elements
related to local markets, including
superannuation or equivalents
Part cash and part equity
(performance rights). The equity
component will be subject to service
and deferred for one year.
Equity in performance rights. All equity
is held subject to service and performance
for three years from grant date. The equity
is at risk until vesting. Performance is
tested once at the vesting date
Strategic intent and market positioning
TFR will generally be
positioned at the median compared
to relevant market based data
considering expertise and
performance in the role
Performance incentive is directed
to achieving Board approved targets,
reflective of market circumstances.
TFR + STI is intended to be positioned
in the 3rd quartile of the relevant
benchmark comparisons
LTI is intended to reward Executive
KMP for sustainable long-term growth
aligned to shareholders’ interests.
LTI allocation values are intended to
be positioned in the 3rd quartile of the
relevant benchmark comparisons
TOTAL TARGETED REMUNERATION (TTR)
TTR is intended to be positioned in the 3rd quartile compared to relevant market benchmark comparisons.
4th quartile TTR may result if outperformance is achieved. The remuneration structure is designed to
ensure top quartile Executive KMP remuneration is only achieved if G8 Education outperforms.
E
N
O
N
O
I
T
C
E
S
DIRECTORS’ REPORTSECTION ONE
40
REMUNERATION REPORT continued
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued
Remuneration composition mix
G8 Education endeavours to provide an appropriate and
competitive mix of remuneration components balanced between
fixed and at “risk” and paid in both cash and deferred equity.
Remuneration mix 2020
The target mix of remuneration for the CEO and Executive KMP for
2020 resulted in the following remuneration mix:
%
%
%
0
0
0
4
4
4
3
3
3
0
0
0
%
%
%
o
o
o
f
f
f
T
T
T
T
T
T
R
R
R
CEO
CEO
CEO
T R
T R
T R
30% o f T
30% o f T
30% o f T
25
25
25
%
%
%
o
o
o
f
f
f
%
%
%
0
0
0
5
5
5
Executive
Executive
Executive
KMP
KMP
KMP
5
5
5
2
2
2
T
T
T
T
T
T
R
R
R
R
R
R
T
T
T
% of T
% of T
% of T
TFR
STI
LTI
Of the above mix, the amount received by the CEO
in 2020 was as follows:
Position
TFR
Payable
TFR
Paid
STI
Paid
LTI due
to Vest in
2020
2020 LTI Grant
CEO
$840k
0% of
$630k
90%
being
$756k 1
0% of
2018 LTI
grant
vested
76% of 2020 LTI
grant was granted
(value reduction of
$50k) 2
The “at risk” component of the (STI) and (LTI) of this mix represents
the intended remuneration opportunity for these executives
assuming the performance requirements set for each component
are satisfied. The remuneration mix is the same in 2020 as in
2019, with no plans to change the mix in 2021, and ensures
that remuneration is linked to performance and contains at
risk components.
Total target remuneration (TTR)
G8 Education’s approach continues to position Executive KMP at
or around the market median (allowing for a range of 15% either
side of the determined market median level). This positioning
is confirmed regularly by reference to remuneration surveys
and independent benchmark assessments from time to time.
The comparator group used to benchmark Executive KMP
remuneration is ASX listed companies of a similar size.
A description of the 2020 short-term and long-term incentive
schemes are set out below.
Total fixed remuneration (TFR)
G8 Education’s approach continues to position Executive KMP at
or around the market median (allowing for a range of 15% either
side of the determined market median level). This positioning
is confirmed regularly by reference to remuneration surveys
and independent benchmark assessments from time to time.
The comparator group used to benchmark Executive KMP
remuneration is ASX listed companies of a similar size.
A description of the 2020 short-term and long-term incentive
schemes are set out below.
Remuneration – “at Risk”
As illustrated, Executive KMP remuneration is delivered on a
cascading basis, with a material component deferred for one (STI)
and three (LTI) years and awarded as equity. This remuneration
mix is designed to ensure Executive KMP are focused on delivering
results over the short, medium and long term if they are to
maximise their remuneration opportunity. The Board believes this
approach will align Executive KMP remuneration to shareholder
interests and expectations.
The three complementary components of Executive KMP remuneration are ‘earned’ over multiple time ranges.
This is illustrated in the following chart:
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
TFR
FY20
STI cash opportunity
STI equity deferral
LTI
TFR
FY21
STI cash opportunity
STI equity deferral
LTI
TFR
FY22
STI cash opportunity
STI equity deferral
LTI
1. 90% TFR paid equates to 20% fixed remuneration reduction for 6 months.
2. CEO's 2020 LTI grant reduced by ~24% to take into account the Company's share price performance and the value of the performance rights which was determined post the April 2020
institutional capital raising.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
41
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued
Total fixed remuneration explained
Total fixed remuneration (TFR) includes all remuneration
and benefits paid to an Executive KMP calculated on a total
employment cost basis. In addition to base salary, superannuation
and other allowances are included.
Executive KMP TFR is tested regularly for market competitiveness
by reference to appropriate independent and externally sourced
comparable benchmark information, including for comparable
ASX listed companies, and based on a range of size criteria
including market capitalisation, taking into account an executive’s
responsibilities, performance, qualifications, experience and
location.
TFR adjustments, if any, are made with reference to individual
performance, an increase in job role or responsibility, changing
The key aspects are summarised below.
Short-term incentives (STI)
market circumstances as reflected through independent
benchmark assessments or through promotion.
Any adjustments to Executive KMP remuneration are approved by
the Board, based on PCC and CEO recommendations.
Variable (at risk) remuneration explained
Variable remuneration is intended to form a significant
portion of the CEO and other Executive KMP remuneration
opportunity. Apart from being market competitive, the purpose
of variable remuneration is to encourage executives’ behaviours
towards maximising G8 Education’s short, medium and long-
term performance.
Purpose
The STI arrangements at G8 Education are designed to reward executives for the achievement against
annual performance targets set by the Board at the beginning of the performance period. The STI program
is reviewed annually by the PCC and approved by the Board.
All STI awards to the CEO and other Executive KMP are approved by the PCC and Board.
Performance targets
The key performance objectives of G8 Education are directed to achieving Board approved earnings targets
and by the achievement of individual performance KPIs.
Rewarding
performance
Deferral of STI
The structure of the STI performance targets was amended in 2020 such that in addition to financial
performance targets, a financial performance gateway, being a minimum of 90% of budgeted NPAT, was
established which determines the payment pool available in respect of individual KPIs (if they are achieved).
In respect of the individual KPIs, in 2020 there were four individual KPIs split into three areas – Team (2),
Quality (1) and Customer (1). For 2021 these KPI splits and focus areas remains the same - Team (2), Quality
(1) and Customer (1), with the financial performance gateway being a minimum of 90% of budgeted NPAT
also applying to individual KPIs in 2021.
Any anomalies or discretionary elements are approved and validated by the Board.
The STI performance ratings are determined under a predetermined matrix with the Board
determination final.
Effective from 1 January 2017 Board discretion to defer a portion of STI was introduced to reinforce
alignment with shareholder interests. Any deferred grants will be determined at the end of each year and
then held for one year until vesting. This achieves additional retention and alignment of executives with
shareholder interests.
Board discretion may be applied to defer 50% of the STI amount, above a minimum threshold of $100,000.
The equity component will be independently determined based on the gross contract value using G8
Education’s five-day volume weighted average price (VWAP) following the announcement of year end
results in February 2021. That is, based on a Black-Scholes-Merton pricing model without discounting for
service or performance hurdles. The deferred component is granted as service rights.
Once the STI is awarded and service rights have been granted, there are no further performance measures
attached to the rights other than continued tenure for the vesting period (one year).
DIRECTORS’ REPORTSECTION ONE 42
REMUNERATION REPORT continued
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued
Long-term incentives (LTI)
The LTI provides an annual opportunity for Executive KMP and other selected executives (based on their ability to influence and
execute strategy) to receive an equity award deferred for three years, that is intended to align a significant portion of executives’ overall
remuneration to shareholder value over the longer term. All LTI awards remain at risk and subject to ‘claw back’ (forfeiture or lapse)
until vesting and must meet or exceed EPS growth rates over the vesting period.
Purpose
To align Executive KMP remuneration opportunity with shareholder value and provide retention stimulus.
Types of equity
awarded
Time of grant
Time restrictions
LTI is provided under the G8 Education Executive Incentive Plan. See the section below for further details.
Under the G8 Education Employee Incentive Plan, selected senior executives are offered performance rights
(being a nil exercise price right to fully paid ordinary shares of G8 Education Limited), subject to satisfying
the relevant requirements.
All equity grants will be made after the AGM each year but based on values determined in February
following release of the full year results (except for the grant in 2020, which was based on the volume 5-day
volume weighted average price on 21 April 2020 following the Group’s institutional capital raising).
Equity grants awarded to the Executive KMP and other executives are tested against the performance
hurdles set, at the end of three years. If the performance hurdles are not met at the vesting date,
performance rights lapse.
Performance hurdles
and vesting schedule
Equity grants to Executive KMP and other executives are subject to one performance condition, as follows:
Cumulative annual growth in Reported EPS (three years). The hurdles are set. Both were based on relevant
market benchmarks.
Cumulative annual growth in Reported EPS (3 years)
Performance p.a.
< 14 cents
14 cents – 17 cents
> 17 cents
% of equity to vest
0%
50% to 100% pro-rata
100%
Performance rights vest if the time restrictions and relevant performance hurdles are met. The Board
must approve any special provisions, in accordance with Company policies, in the event of termination
of employment or a change of control.
In respect of grants made in 2017, 2018 and 2019, the performance hurdle was compound annual growth in
Reported EPS (3 years) as follows:
Performance p.a.
% of equity to vest
< 10%
10% to 15%
> 15%
0%
50% to 100% pro-rata
100%
Dividends
No dividends are attached to performance rights.
Voting rights
There are no voting rights attached to performance rights.
Retesting
There is no retesting of performance hurdles under G8 Education LTI.
LTI allocation
The size of individual LTI grants for the Executive KMP and other executives is determined in accordance
with the Board approved remuneration strategy mix. The allocation methodology for performance rights
uses a face value basis using the 5-day volume-weighted average price for G8 Education shares traded
following the release of the Groups results for the preceding reporting period (unless circumstances, such
as the equity raising in 2020, lead to another date being more appropriate). The value of performance
rights granted may differ from the accounting valuation shown in the financial statements which considers
probability of vesting and other factors.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 43
4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued
G8 Education Executive Incentive Plan (GEIP)
Equity granted under the short term and long term incentive
schemes is granted by way of performance or service rights issued
in accordance with the GEIP. Shareholders approved the GEIP at
the AGM in June 2020. The Company has established the GEIP to
assist the retention and motivation of executives of G8 Education
(Participants). It is intended that the performance rights will enable
the Company to retain and attract the skilled and experienced
executives and provide them with the motivation to enhance the
success of the Company.
Rights may be offered to Participants selected by the Board. Unless
otherwise determined by the Board, no payment is required for the
grant of rights under the GEIP. Each right is an option to subscribe
for one share. Upon the exercise of a right by a Participant, each
share issued will rank equally with other Shares of the Company.
Review of the GEIP
The GEIP operates over a three year cycle, with the current GEIP
operative for the period from 1 January 2020 and concluding on 31
December 2022 following shareholder approval at the 2020 Annual
General Meeting. The GEIP is therefore due for formal review and
shareholder approval in 2023.
Other remuneration elements and disclosures relevant to Exec-
utive KMP
Claw back
The Board has discretion to claw back incentive payments where
material misconduct is evident. The Claw Back Policy is available
on the G8 Education website.
Hedging and margin lending prohibition
Under the G8 Education Securities Trading Policy and in
accordance with the Corporations Act, equity granted under
G8 Education equity incentive schemes must remain at risk
until vested, or until exercised if performance rights.
It is a specific condition of grant that no schemes are entered into,
by an individual or their associates that specifically protect the
unvested value of performance rights allocated.
G8 Education also prohibits the CEO or other ‘Designated Persons’
(including Executive KMP) providing G8 Education securities in
connection with any margin loan or similar financing arrangement
unless that person has received a specific notice of no objection in
compliance with the policy from the Board.
G8 Education, in line with good corporate governance, has a formal
policy setting down how and when employees of G8 Education
may deal in G8 Education securities.
G8 Education’s Securities Trading Policy is available on the G8
Education website under Investor Centre, Corporate Governance.
DIRECTORS’ REPORTSECTION ONE 44
REMUNERATION REPORT continued
5. REMUNERATION DETAILS FOR 2020
Actual Remuneration Received in 2020
2020 Short Term Incentive Plan outcomes - Financial
The financial target in the 2020 Short Term Incentive Plan was
aligned to our shareholder value proposition providing sustainable
double-digit earnings growth for shareholders.
These financial targets form 87% of the total STI for 2020 for the
CEO/Managing Director and 80% for the other Executive KMP.
The minimum financial performance requirement of the Short-Term
Incentive Plan was not met as the Company fell short of the NPAT
target set by the Board. Accordingly, the financial component of the
STI was not awarded to any Executive KMP.
2020 Short Term Incentive Plan outcomes – individual objectives
The remaining 13% for the CEO/Managing Director and 20% for the
other Executive KMP was determined based on the achievement of
agreed annual objectives, subject to a financial NPAT gate, which as
described earlier are a mix of quantitative and qualitative objectives.
These annual objectives for Executive KMP are intended to ensure
continued focus on strategic priorities and to raise the bar on
performance year on year.
At the outset of 2020, clear performance objectives were set for the
Executive KMP that were critical to the delivery of the 2020 plan
and fundamental to the success of the long-term strategy while
addressing the ongoing challenges of our competitive operating
environment.
The overall assessment of Executive KMP took into account
performance against the achievement of individual objectives and
how the performance was achieved (i.e. through demonstrating
good leadership aligned to our values) which ensures a holistic and
full assessment of performance.
Detailed assessments were prepared by the Managing Director and
discussed with the People and Culture Committee. The Board and
the People and Culture Committee believe that the performance in
2020 has been appropriately reflected in the Short Term Incentive
Plan outcomes.
The table below summarises the 2020 results for Executive KMP against the individual KPI’s.
Objective
groupings
Number of
objectives Objective Areas
Weighting Objective Measure
Actual
Achieved
Awarded
Team
2
CM Voluntary Turnover
25%
CM voluntary rolling turnover
(as at 31 December 2020) < 15%
Team Engagement
25%
Engagement score of 80%
18.8%
79%
Quality
Customer/
Families
1
1
National Quality
Framework Assessment
and Rating
25%
KPI not taken into account
in FY20, due to impact of
COVID-19 and ability for audits
to be completed
KPI not
assessed in
FY20
Customer NPS
25%
Customer NPS score of > 55%
45.9%
—
—
—
—
—
The Executive KMP were not awarded any STI payments in 2020 on the basis that the financial NPAT gateway was not achieved and the
above KPIs were not achieved in full.
Remuneration Received by Executive KMP
During 2020 G8 responded to the challenges presented by COVID-19 by implementing a temporary 20% pay reduction for NEDs,
Executive KMP and non-KMP executives (effective from 3 April to 2 October 2020 for Directors, and from 1 May to 30 October 2020 for
executives). From November 2020 all executive salaries were reinstated to contractual remuneration rates.
The following table sets out the value of the remuneration received by Executive KMP during the year. The figures in this table differ from
those shown in the statutory table later in Section 2 as the statutory table includes an apportioned accounting value for all unvested Long
Term Incentive Plan grants (which remain subject to the satisfaction of performance and service conditions and may not ultimately vest).
The values disclosed in the below table, while not in accordance with the accounting standards, are intended to be helpful for
shareholders in better demonstrating the linkages between performance and the remuneration realised by the Executive KMP.
The table below shows:
– Fixed remuneration
– Short Term Incentive
– Any vesting of Long Term Incentive Plan awards
– Termination Payments
The performance conditions associated with 2018 performance rights requiring EPS growth of more than 10% over 3 years to
31 December 2020 were not achieved and accordingly the performance rights did not vest.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 45
5. REMUNERATION DETAILS FOR 2020 continued
Amount $
G Carroll
S Williams
J Ball
Fixed
Remuneration 1
757,816
414,762
404,645
STI 2
LTI vested 3
Termination
payments
Total actual
remuneration
earned
—
—
—
—
—
—
—
—
—
757,816
414,762
404,645
1. Base Salary, superannuation and non-monetary benefits such as motor vehicle and travel
2. Value of STI paid in respect to 2020 performance
3. Intrinsic value of LTI that vested during the financial year
Relationship between G8 Education performance and Executive KMP remuneration
The performance of the Group and remuneration paid to Executive KMP over the last 5 years is summarised in the table below.
Total revenue
EBIT
Net Profit After Tax
Underlying EBIT (unaudited, Non IFRS)1
Underlying NPAT (unaudited, Non IFRS)1
Underlying EPS (cents)1
Annual dividend per share (cents)
Share price as at 31 December ($)
Total Fixed Remuneration Executive KMP
2016 2
$’000
2017 2
$’000
2018 2
$’000
778,513
160,691
80,265
160,660
93,342
24.68
24.0
3.59
2,297
796,806
150,878
80,581
156,034
92,874
21.80
18.0
3.45
1,816
858,173
132,184
71,831
136,261
79,417
17.54
14.0
2.83
1,712
Restated
2019
$’000
922,202
146,379
52,019
119,425
67,673
13.02
12.75
1.90
1,745
2020
$’000
788,358
(138,341)
(187,010)
105,205
60,027
8.06
—
1.18
1,577
1. As defined on page 33.
2. Prior year numbers have not been restated for AASB16 Leasing Standard nor for Remediation Program underpayments identified in 2020
Fixed Remuneration
Short-term
Post employmentcosts
Dividends
from
Share
Plan
$
Super-
annuation
benefits
$
Termin-
ation
payment
$
Year
2020
2019
2020
2019
2020
2019
TFR
$
736,468
819,215
393,414
437,500
383,297
426,250
2020 1,513,179
2019 1,682,965
G Carroll
S Williams
J Ball
Total
Total
STI
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21,348
20,767
21,348
20,767
21,348
20,767
64,044
62,301
Perform-
ance
Rights 1
Proportion of
total remuneration
Share
based
payment
$
Total
+ share
based
payments
$
Perform-
ance
related
%
Share
Plan
related
%
Total
$
757,816
839,982
414,762
458,267
404,645
447,017
—
—
—
—
—
—
72,993
(77,611)
26,671
(19,426)
26,671
—
830,809
762,371
441,433
438,841
431,316
447,017
— 1,577,223
126,335
1,703,558
— 1,745,266
(97,037)
1,648,229
—
—
—
—
—
—
—
—
9
—
6
—
6
—
7
—
1. The 2018 Performance Rights were cancelled in 2020 as the hurdle was not met.
The Total Fixed Remuneration of Executive KMP is reviewed annually as part of the overall remuneration framework review. Based
upon the Company’s financial results for 2020 there has been no approved increase in base salary for the NEDs for CY2021. The salary
review in respect of Executive KMP will be conducted in June 2021, with effect from 1 July 2021, as the Group aligns all team member
remuneration reviews to a 1 July timeline.
DIRECTORS’ REPORTSECTION ONE
46
REMUNERATION REPORT continued
6. EXECUTIVE KMP EQUITY INTERESTS
The tables below set out the equity interests held by Non-executive Directors (“NEDs”) and Executive KMP.
Report 4
Shares
Directors of G8 Education Limited
Ordinary Shares
M Johnson (Chair)
G Carroll (CEO)
J Cogin
S Forrester, AM
D Foster
P Trimble
M Zabel
Other Executive KMP of G8 Education Limited
Ordinary Shares
S Williams
J Ball
Ownership
type
Balance at the
start of the year
Other changes
during the year
Balance at the
end of the year
Directly
Directly
Directly
Directly
Directly
Directly
Directly
Directly
Directly
75,000
120,000
19,000
51,969
22,976
—
29,000
25,000
54,547
14,000
—
32,127
50,000
—
100,000
174,547
33,000
51,969
55,103
50,000
29,000
35,000
—
30,455
22,000
65,455
22,000
The movement during the reporting period in the number of performance rights over ordinary shares in the Company held directly or
beneficially, by each Executive KMP, including their related parties is as tabled below.
Tranche
Number
Grant Date
Date
2020 Perf. Rights 30-June 2020
2019 Perf. Rights
10-May 19
2018 Perf. Rights 2 20-July 18
2017 Perf. Rights 2 20-July 17
G Carroll
Total
S Williams 2020 Perf. Rights 30-June 2020
2019 Perf. Rights
10-May 19
2018 Perf. Rights 2 20-July 18
2017 Perf. Rights 2 6-Oct 17
2020 Perf. Rights 30-June 2020
2019 Perf. Rights
2018 Perf. Rights
2017 Perf. Rights
10-May 19
20-July 18
22-Jan 18
Total
J Ball 3
Total
Total
Fair Value
at Grant
Date
Balance
at the
start of
the year
Granted
during
the year
Lapsed or
forfeited
during
the year
Balance
at the end
of the year
Value of
Perform-
ance
Rights
granted
in year 1
Financial
year in
which
grant
vests
$
Number
Number
$
Number
$
0.74
3.18
2.39
3.19
0.74
3.18
2.39
3.70
0.74
3.18
2.39
3.42
— 520,000 4
—
—
—
198,119
198,847
142,249
—
—
—
142,249
520,000
198,119
198,847
—
384,800
630,018
475,244
453,774
539,215
520,000
142,249
916,966
1,943,836
—
72,020
77,623
53,629
190,000
—
—
—
—
—
—
53,629
190,000
72,020
77,623
—
140,600
229,023
185,519
198,427
203,272
190,000
53,629
339,643
753,569
—
70,251
74,135
50,359
190,000
—
—
—
—
—
—
50,359
190,000
70,251
74,135
—
140,600
223,398
177,183
172,227
194,745
190,000
50,359
334,386
713,408
937,232
900,000
246,237
1,590,995
3,410,813
Year
2023
2022
2021
2020
2023
2022
2021
2020
2023
2022
2021
2020
1. The Performance Rights are expensed over a three year period in line with the vesting conditions of the Performance Rights (refer Note 31). Plan participants may not enter into
any transaction designed to remove the at-risk aspect of the Performance Rights before they vest. The value at the exercise date for Performance Rights is the Group share price.
2. The 2017 Performance Rights lapsed on 21 February 2020 and the 2018 Performance Rights lapsed on 22 February 2021 as the respective performance hurdles were not met.
3. The Performance Rights held by Jason Ball lapsed on 2 February 2021 upon cessation of his employment.
4. Reduction in FY20 LTI grant for CEO to approximately 75% (reduction value of $50,000)
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
47
7. EMPLOYMENT AGREEMENTS (AUDITED)
The CEO and other Executive KMP operate under employment agreements.
The following sets out details of the employment agreements relating to the CEO and other Executive KMP. The terms for the CEO and all
other Executive KMP are similar but do, on occasion, vary to suit different needs.
Length of contract
The CEO and other Executive KMP are on permanent contracts, which is an ongoing employment contract
until notice is given by either party.
Notice periods
In order to terminate the employment arrangements, the CEO is required to provide G8 Education with twelve
months’ written notice. Other Executive KMP are required to provide G8 Education six months’ written notice.
Resignation
On resignation, unless the Board determines otherwise all unvested STI or LTI benefits are forfeited.
Termination on notice
by G8 Education
G8 Education may terminate employment of the CEO by providing twelve months’ written notice. For other
Executive KMP, the notice period is six months’ written notice. The Company may make payment, based
on total fixed remuneration, in lieu of the notice period.
Death or total and
permanent disability
On death or total and permanent disability, the Board has discretion to allow all unvested STI and LTI benefits
to vest.
Termination for serious
misconduct
G8 Education may immediately terminate employment at any time in the case of serious misconduct,
CEO and other Executive KMP will only be entitled to payment of TFR up to the date of termination.
On termination without notice by G8 Education in the event of serious misconduct:
– all unvested STI or LTI benefits will be forfeited; and
– any employee share scheme instruments provided to the employee on vesting of STI or LTI awards that
are held in trust will be forfeited.
Statutory entitlements
Payment of statutory entitlements of long service leave and annual leave applies in all events of separation.
Post‑employment
restraints
The CEO is subject to post-employment restraints of up to 24 months. All other Executive KMP are subject
to post-employment restraints for up to 12 months.
DIRECTORS’ REPORTSECTION ONE 48
REMUNERATION REPORT continued
8. NON‑EXECUTIVE DIRECTOR (NED) REMUNERATION
NED remuneration
Principle
Comment
Fees are set by
reference to key
considerations
Fees for NEDs are based on the nature of the NEDs’ work and their responsibilities. The remuneration rates
reflect the complexity of G8 Education’s business and the extent of the number of geographical locations
in which G8 Education operates. In determining the level of fees, survey data on comparable companies is
considered. NEDs’ fees are recommended by the PCC and determined by the Board. Shareholders approve
the aggregate amount available for the remuneration of NEDs.
During 2020, the NEDs, CEO and Executive KMP took a 20% remuneration reduction for a period of 6
months, due to the impact of COVID-19.
No increase in NED remuneration is proposed for 2021. There has been no increase since 2018.
Remuneration is
structured to preserve
independence whilst
creating alignment
Aggregate Board
and committee fees
are approved by
shareholders
To preserve independence and impartiality, NEDs are not entitled to any form of incentive payments including
options and the level of their fees is not set with reference to any measure of G8 Education performance.
However, to create alignment between directors and shareholders, the Board has adopted guidelines that
encourages NEDs to hold (or have a benefit in) shares in G8 Education equivalent in value to at least one
year’s base fees. G8 Education does not offer loans to NEDs to fund share ownership.
The total amount of fees paid to NEDs in 2020 is within the aggregate amount approved by shareholders at
the AGM in May 2017 of $1,100,000 per annum including superannuation. No increase to the NED fee pool is
being sought at the 2021 AGM.
NED fees and other benefits explained
Elements
Details
Board fees per annum
Committee fees per annum
Board Chair fee
Board NED Base fee
Audit & Risk Chair fee
Nomination Chair fee
People and Culture Chair fee
Audit & Risk Member fee
Nomination Member fee
People and Culture Member fee
1. 2020 fees are before the 20% reduction in paid remuneration implemented for 6 months due to COVID-19
2. fees include superannuation
2020 1
$
2019 2
$
285,000
140,000
25,000
25,000
25,000
No fee
No fee
No fee
285,000
140,000
25,000
25,000
25,000
No fee
No fee
No fee
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
49
8. NON‑EXECUTIVE DIRECTOR (NED) REMUNERATION continued
Post-employment benefits
Superannuation
Superannuation contributions have been made at a rate of 9.5% of the Board fee which satisfies the
Company’s statutory superannuation contributions. The contribution rate will increase in future years
in line with mandated legislative increases. However, the NED fees are inclusive of superannuation.
Contributions will be limited to the Australian Government’s prescribed maximum contributions limit.
Retirement schemes
There are no retirement schemes in place for NEDs other than Statutory Superannuation.
Other benefits
Equity instruments
NEDs do not receive any performance related remuneration, options, performance rights or shares.
Other fees/benefits
NEDs receive reimbursement for costs directly related to G8 Education business and reimbursement
for up to $1,000 per annum of relevant continued education expenses.
Payments of $3,149 were made to NEDs throughout 2020 for travel allowances. No payments were
made to NEDs during 2020 for extra services or special exertions.
NED total remuneration paid
M Johnson (Chair)
J Cogin
S Forrester
D Foster
P Trimble 1
M Zabel
B Bailison 2
Total
Total
1. Commenced on 13 May 2020
2. Ceased on 20 May 2020
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
Fees
$
236,538
264,215
115,266
127,854
135,848
150,685
135,848
150,685
82,410
115,266
127,854
55,869
150,685
877,045
971,978
Superannuation
benefits
$
20,768
20,767
10,950
12,146
12,906
14,315
12,906
14,315
7,829
10,950
12,146
5,308
14,315
Total
$
257,306
284,982
126,216
140,000
148,754
165,000
148,754
165,000
90,239
126,216
140,000
61,177
165,000
81,617
88,004
958,662
1,059,982
There was no increase to NED fees in 2020, however, there was a 20% reduction for 6 months, due to COVID-19.
Minimum Shareholding Guidelines
The Board has approved minimum shareholding guidelines for NEDs, the CEO and Executive KMP. Under these guidelines, all NEDs are
encouraged to accumulate a minimum shareholding in G8 Education shares equivalent in value to one year’s base fees and all Executive
KMP are encouraged to accumulate a minimum shareholding in G8 Education shares equivalent to one year’s fixed remuneration. The
Board believes that this guideline will ensure alignment with shareholders’ interests.
The guidelines were implemented in January 2017, with NEDs and Executive KMP encouraged to accumulate the recommended holding
over the next five years or from appointment.
DIRECTORS’ REPORTSECTION ONE 50
DIRECTORS’ REPORT
Director’s Tenure
The Directors shall retire from office in accordance with the Constitution of G8 Education and/or the applicable sections of the
Corporations Act. The Board has a policy that in general the maximum term of service for a NED should be approximately ten years.
However, this term may be extended for reasons such as Board or Committee Chairship, providing continuity or a particular capability of
a Non-executive Director.
Corporate Governance
G8 Education is strongly committed to good corporate governance practices and substantially complies with the ASX Corporate
Governance Council’s (CGC) Corporate Governance Principles and Recommendations (Fourth Edition). The Board of directors guides
and monitors the business and affairs of G8 Education on behalf of the shareholders by whom they are elected and to whom they
are accountable. G8 Education’s compliance with the Principles are found in the corporate governance section of our website: www.
g8education.edu.au/investor-information/corporate-governance.
Non-Audit Services
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Group are important. During 2020, G8 Education engaged Ernst & Young to perform non-audit
services. The Board has considered the position and is satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act. The Directors are satisfied the provision
of non-audit services by the auditor, as set out in note 32, did not compromise the auditor independence requirements of the
Corporations Act for the following reasons:
– all non-audit services have been reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor;
and
– none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
Auditors Independence Declaration
A copy of the Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 51.
Auditor
Ernst & Young were appointed as auditor on 25 May 2016 and continue in office in accordance with section 237 of the
Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Gary Carroll
Managing Director
23 February 2021
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT AUDITOR’S INDEPENDENCE DECLARATION LIMITED
to the Directors of G8 Education Limited
51
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of G8 Education
Limited
As lead auditor for the audit of the financial report of G8 Education Limited for the financial year
ended 31 December 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of G8 Education Limited and the entities it controlled during the financial
year.
Ernst & Young
Ric Roach
Partner
23 February 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DIRECTORS’ REPORTSECTION ONE
FINANCIAL REPORT
Financial Report
53. Consolidated Income Statement
53. Consolidated Statement of Comprehensive Income
54. Consolidated Balance Sheet
55. Consolidated Statement of Changes in Equity
56. Consolidated Statement of Cash Flows
57. Notes to the Financial Statements
102. Directors’ Declaration
109. Independent Auditor’s Report
Consolidated Income Statement
For the year ended 31 December 2020
Continuing operations
Revenue
Other income
Total
Expenses
Employment costs
Occupancy
Direct costs of providing services
Depreciation
Impairment loss
Other expenses
Finance costs
Total expenses
Profit / (loss) before income tax
Income tax benefit (expense) 1
Profit / (loss) for the year attributable to members of the parent entity
Basic earnings per share
Diluted earnings per share
53
Consolidated
2020
$’000
Restated
2019
$’000
776,456
11,902
916,622
5,580
788,358
922,202
(555,841)
(422,984)
(11,752)
(7,705)
(67,632)
(77,310)
(100,117)
(91,609)
(275,217) —
(39,986)
(50,989)
(75,974)
(66,721)
(992,535)
(851,302)
(204,177)
17,167
(187,010)
70,900
(18,881)
52,019
Cents
Cents
(25.11)
(25.11)
10.01
10.01
Notes
3
4
5,14
5
1(a)
5
6
8
8
1. Includes income tax benefit associated with impairment loss of $37.7m.
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
Refer to note 14 for details restatement details.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Profit / (loss) for the year
Other comprehensive income, net of income tax
Items that are or may be reclassified to the consolidated income statement:
Exchange differences on translation of foreign operations
Effective portion of changes in fair value of cash flow hedges
Other
Total other comprehensive loss
Total comprehensive income / (loss) for the year
Consolidated
2020
$’000
Restated
2019
$’000
(187,010)
52,019
(8,998)
—
—
(8,998)
672
(1,885)
(131)
(1,344)
(196,008)
50,675
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Refer to note 14 for restatement details.
SECTION TWOFINANCIAL REPORT
54
Consolidated Balance Sheet
As at 31 December 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Current tax asset
Total current assets
Non-current assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Current tax liability
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Other payables
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Consolidated
2020
$’000
Restated
2019
$’000
Notes
18
9
10
11
20
6
16
10
12
20
13
12
19
20
13
21
316,989
17,383
10,268
—
344,640
87,419
468,655
117,104
1,055,242
987
40,603
29,936
11,232
1,938
83,709
103,864
606,219
72,789
1,193,160
5,894
1,729,407
1,981,926
2,074,047
2,065,635
73,892
9,105
2,773
69,435
120,581
54,840
7,148
—
68,482
97,007
275,786
227,477
657
295,139
611,815
16,153
696
387,750
640,655
13,087
923,764
1,042,188
1,199,550
1,269,665
874,497
795,970
1,209,227
22,905
(357,635)
907,255
19,160
(130,445)
874,497
795,970
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Refer to note 14 for restatement details.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
55
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Consolidated
Notes
Con-
tributed
Equity
$’000
Hedging
Reserve
$’000
Cost of
Hedging
Reserve
$’000
Translation
Reserve
$’000
Share
Based
Payment
Reserve
$’000
Profits
Reserve
$’000
Retained
Earnings
$’000
Total
$’000
Balance 1 January 2019
893,567
1,615
270
8,326
Adjustment on adoption of AASB 16
Adjustment on restatement for the
remediation program
14
—
—
—
—
Balance 1 January 2019 (restated)
893,567
1,615
—
—
270
—
—
—
8,326
—
—
131
—
46,188
(56,613) 893,484
—
(70,326)
(70,326)
— (33,350)
— (33,350)
131
—
12,838
(126,939) 789,808
55,525
(3,506)
52,019
Profit for the year
Other comprehensive income
(net of tax)
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners
Contributions of equity, net of
transaction cost
Dividends provided for or paid
Total
Balance 31 December 2019
Balance as at 1 January 2020
Profit / (loss) for the year
Other comprehensive income / (loss)
(net of tax)
Total comprehensive income / (loss)
for the year
Transactions with owners in
their capacity as owners
Contributions of equity, net of
transaction costs and net of tax
Share based payment expense
Dividends provided for or paid
Total
21
22
—
—
—
13,688
—
13,688
907,255
907,255
—
—
—
21
31
22
301,972
—
—
301,972
Balance 31 December 2020
1,209,227
(1,615)
(270)
672
(131)
—
—
(1,344)
(1,615)
(270)
672
(131)
55,525
(3,506)
50,675
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,998
8,998
—
(8,998)
(8,998)
—
—
— (58,201)
—
13,688
— (58,201)
— (58,201)
— (44,513)
—
—
—
—
—
10,162
(130,445) 795,970
10,162
(130,445) 795,970
40,180
(227,190)
(187,010)
—
—
(8,998)
40,180
(227,190) (196,008)
—
—
—
—
—
—
174
—
174
—
—
(27,611)
(27,611)
— 301,972
174
—
(27,611)
—
— 274,535
174
22,731
(357,635) 874,497
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Refer to note 14 for restatement details.
SECTION TWOFINANCIAL REPORT
56
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Income taxes paid
Consolidated
2020
$’000
2019
$’000
Notes
785,430
(515,683)
885
(62,960)
(18,107)
923,056
(670,585)
494
(69,388)
(29,587)
Net cash inflows from operating activities
23
189,565
153,990
Cash flows from investing activities
Payments for purchase of businesses (net of cash acquired)
Payments for purchase of intangible assets
Net proceeds for divestments
Proceeds from the sale of property, plant and equipment
Payments for property plant and equipment
Net cash outflows from investing activities
Cash flows from financing activities
Share issue costs
Dividends paid
Principal elements of lease payments
Repayment of corporate notes
Proceeds from issue of shares
Proceeds from borrowings
Payments of borrowings
Net cash (outflows)/ inflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at the end of the financial year
16
21
22
21
18
(11,300)
(5,464)
7,608
6
(21,451)
(49,506)
—
5,553
—
(39,767)
(30,601)
(83,720)
(11,139)
(19,057)
(58,486)
—
301,215
65,000
(160,004)
(33)
(44,490)
(63,748)
(269,892)
—
295,000
(2,058)
117,529
(85,221)
276,493
40,603
(107)
316,989
(14,951)
55,521
33
40,603
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Index to Notes to the Financial Statements
57
1. Financial Overview
58. Note 1: Material Events During the Reporting Period
60. Note 2: Segment Information
61. Note 3: Revenue
61. Note 4: Other Income
62. Note 5: Expenses
63. Note 6:
Income Tax and Deferred Tax Assets
66. Note 7: Profit for the Year
67. Note 8: Earnings Per Share
68. Note 9: Current Assets – Trade and Other Receivables
69. Note 10: Current and Non-Current Assets – Other
70. Note 11: Non-current Assets – Property, Plant and Equipment
71. Note 12: Current and Non-Current Liabilities – Trade and Other Payables
72. Note 13: Current and Non-Current Liabilities – Provisions
2. Business Combinations, Goodwill & Impairment
73. Note 14: Critical Accounting Estimates, Judgements and Errors
74. Note 15: Business Combinations
76. Note 16: Non-current Assets – Intangible Assets
3. Capital Structure & Financial Risk Management
78. Note 17: Financial Risk Management
82. Note 18: Current Assets – Cash and Cash Equivalents
82. Note 19: Current and Non – Current Liabilities – Borrowings
84. Note 20: Right of Use Assets and Lease Liabilities
87. Note 21: Contributed Equity
88. Note 22: Dividends
89. Note 23: Reconciliation of Cash Flows
4. Group Structure
90. Note 24: Subsidiaries
92. Note 25: Parent Entity Disclosures
93. Note 26: Deed of Cross Guarantee
5. Unrecognised Items
95. Note 27: Commitments
95. Note 28: Contingencies
95. Note 29: Events Occurring after the Balance Sheet Date
6. Other
96. Note 30: Key Management Personnel Disclosures
97. Note 31: Share-based Payments
99. Note 32: Remuneration of Auditors
99. Note 33: Related Party Transactions
100. Note 34: Other Significant Accounting Policies
SECTION TWOFINANCIAL REPORT 58
1. Financial Overview
Note 1: Material events during the reporting period
a) COVID-19 pandemic
December 2019 saw the start of an unfolding event with global health,
social and macroeconomic consequences in the form of the spread
of the COVID-19 pandemic, which in March 2020 was declared
a global pandemic in most countries in the world. Following the
outbreak, the Australian Government applied significant steps to
cope with, and delay, the spread of the pandemic.
The COVID-19 pandemic outbreak had a material impact on the
financial statements of the Group as discussed below.
i) Government assistance
The Group received government assistance during the reporting
period, due to the adverse impact the COVID-19 pandemic had
on its operation. The government assistance the Group received
and the impact on the financial statements is discussed below.
Payments received are presented as revenue in the period they
relate to.
Child Care Relief Package
6 April 2020 – 12 July 2020
The child care relief package was a funding arrangement for the
early childhood education and care sector in response to the
COVID-19 pandemic and its impact on child care enrolments and
attendance. The funding arrangement made child care services
fee-free for families for a period of 14 weeks starting 6 April 2020
until 12 July 2020.
The weekly payment under this government assistance was
approximately 50% of the Group revenue based on the fortnight
preceding 2 March 2020.
Transition Package
13 July 2020 – 27 September 2020
The Child Care Relief Package ceased on 12 July 2020 and the
JobKeeper Subsidy ceased on 20 July 2020. From the 13 July 2020 to
27 September 2020 the Group received Transition Payments equal
to 25% of fee revenue in the relevant reference period used during
the Child Care Relief Package.
On 2 August 2020, in response to increased COVID-19 cases,
regions within the state of Victoria entered into either Stage 3
or Stage 4 lockdowns, for a 6-week period. The Government
increased the transition payment from 25% to 30% for impacted
centres during this period. In addition, a “parent gap waiver” for
COVID-19 related non-attendances was introduced. The waiver
ensured the Group received Child Care Subsidy (CCS) funding
for bookings where there was no attendance, within the lockdown
regions. The Group had 141 centres within these regions.
Recovery Package
28 September 2020 – 31 January 2021
The package included a 25% Recovery Payment until 31 January
2021 for services in Victoria. The fortnightly payment under this
government assistance was based on 25% of the fee revenue in the
relevant reference period used during the Child Care Relief Package.
GAP Fees Waived
13 July 2020 – 31 January 2021
All services in Australia were permitted to waive fees and still
receive CCS payments if they are forced to close on public health
advice until 31 January 2021.
JobKeeper Subsidy
A government grant has been received in the form of financial
support provided by the Federal Government under the JobKeeper
wage subsidy scheme. The scheme was to support businesses
affected by the significant economic impact of the COVID-19
pandemic, for a period of 16 weeks starting 30 March 2020. This
government grant has been recognised as an offset to employment
costs. JobKeeper ceased earlier for child care providers due to the
roll out of the Transition Package.
Since mid-March 2020 actions have been taken to eradicate
the pandemic, which include, among others, restrictions on the
movement of citizens and gatherings, closure of international and
interstate borders and a reduction in the number of employees
attending their workplace.
These steps have had extensive implications on the Australian
economy and businesses across all industries, including that of
the Group. The effects of the consequent economic downturn
as well as the measures introduced by the Federal Government
(and foreign governments) specifically in the child care sector
has had a significant impact on the business of the Group.
The Group is vigilantly managing the impact of this event and
continues to assess the risks on an ongoing basis since, due to its
nature, this is an event that is changing constantly. In the context
of managing the impact of the COVID-19 pandemic, the Group
focused on two primary areas:
– The safety and wellbeing of the Group’s team and the children
and families that attend the Group’s centres; and
– Business continuity, specifically the Group’s cashflow, liquidity
and balance sheet.
Recognising this risk, the Federal Government announced an
initial Child Care Relief Package in April 2020, to support sector
viability and to provide care for families of essential workers and
vulnerable children. That initial relief package was reviewed and
updated with a transition phase package of support for the period
13 July 2020 to 27 September 2020 and a recovery package for the
period 28 September 2020 to 31 January 2021.
Following the announcement of the Government’s initial sector
relief package, the Group raised $301m via an underwritten
institutional and retail entitlement offer. This capital raising
provides the Group with the liquidity and financial flexibility to
withstand a prolonged period of economic downturn and allows
the Group to pursue sensible opportunities that may emerge from
this challenging period.
During the year, the Group completed negotiations with lenders to
adjust covenants through to 31 December 2021. In February 2021,
the Group completed a refinance of its senior debt facilities to
extend the average debt expiry of facilities and reduce the Group’s
finance costs, refer to note 29.
The Group has examined the implications of the COVID-19
pandemic on its financial statements and on the assumptions and
estimates used in preparing the financial statements, as follows:
– The Group examined whether there has been a negative effect
on its results, which may be indicative of signs of impairment of
cash-generating units.
– The Group reviewed and revised the estimated credit risks of
receivables and increased the provision for expected credit
losses where the credit risk has increased.
– The Group reviewed its ability to meet debt facilities’ covenants.
As a result of this review and discussions with the Group’s
lending syndicates, the Group’s debt facilities were amended to
waive or adjust covenants through to December 2021, whilst the
Group operates through the COVID-19 pandemic effected period.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT Note 1: Material events during the reporting period continued
The Group recognised the following government assistance, specific to COVID-19, during the period:
Revenue
Child Care Relief Package, Transition and Recovery Payments
Total
Expenses
JobKeeper subsidy
Total
Net Total
59
Consolidated
2020
$’000
160,270
160,270
102,917
102,917
263,187
ii) Rent concessions
The Group sought rent concessions from lessors of child care centres during the period. The rent concessions received were in various
forms and include one-off rent reductions, rent waivers or deferral of lease payments.
Refer to note 34(g) for impact of rent concessions during the period.
iii) Impairment
During the period, the Group completed a strategic portfolio review. The review considered the additional impacts of the COVID-19 pandemic
operating environment, the risk of delays in economic recovery and subsequent impact on performance. The review involved a detailed
assessment of the Group’s tangible and intangible assets, right of use assets, and the recoverability of trade and other debtors. As a result,
the Group recognised the following impairment loss:
Expenses
Impairment of goodwill and intangible assets 1
Impairment of goodwill associated with assets held for sale
Impairment of right of use assets 2
Impairment of property, plant and equipment 3
Expected credit loss of trade and other receivables
Total
Tax benefit
Post tax
1. Refer to note 16 for impairment of goodwill and intangible assets.
2. Refer to note 20 for impairment of right of use assets.
3. Refer to note 11 for impairment of property, plant and equipment.
Consolidated
2020
$’000
145,285
4,290
101,157
16,823
7,662
275,217
(37,692)
237,525
iv) Capital raising and repayment of borrowings
During the period the Group completed a capital raising of $301.2m ($290.1m net of transaction costs) to provide additional liquidity to
support the continuation of the Group’s operations through the period impacted by the COVID-19 pandemic, while also strengthening the
balance sheet to position the Group for further growth opportunities during the recovery phase. Refer to note 21.
The Group used $95.0m of the funds raised from the capital raising to repay syndicated debt.
b) Employee Payments Remediation Program
During the reporting period, as part of implementing a new Human Resources Information System (“HRIS”) and rostering system,
the Group conducted a review of award and legislative requirements. This review identified inadvertent non-compliance with some
requirements of the Children’s Services Award and the Educational Services (Teachers) Award (collectively “Awards) for a number of the
Group’s team members in Australia. The remediation of these issues, which occurred over the last seven financial years, is estimated to be
a one-off cost before tax of $80.0m and after tax of $56.9m. In order to reflect this in the appropriate periods, an expense of $33.3m after
tax is included in the restatement of opening retained earnings as at 1 January 2019, an expense of $10.6m after tax has been included in
the 2019 financial year, and an expense of $13.0m after tax has been included in the current 2020 financial year. Refer to note 14.
SECTION TWOFINANCIAL REPORT
60
1. Financial Overview
Note 1: Material events during the reporting period continued
c) Sale of Singapore business
During the year the Group sold its subsidiary group operating in Singapore including 17 owned child care centres. The Group received
consideration of $11.9m during the year, including a return of Group cash balances. As a result of the sale, the Group disposed of assets
of $16.2m and liabilities of $6.8m which were classified as held for sale during the year. The Group has also recognised a gain on sale of
$10.3m upon completion, reflecting $8.5m from the realisation of the FX reserve.
d) Going concern
The Group recognised a net loss after tax of $187.0m (of which $242.3m is non-cash impairment loss and non-trading expenses, refer
to note 7), the Directors have concluded that there are reasonable grounds to believe that the going concern basis is appropriate.
Management expects the cash reserves, together with the forecast cash flow generation from operations and the extension of debt
facilities, will allow the Group to overcome the adverse impact of the COVID-19 pandemic, fulfil the Group’s remediation program
obligations and meet its debts for the 12 months from the date of this report. Net current assets were $68.9m as at 31 December 2020.
Debt facilities were refinanced after year end with a maturity in October 2023, refer to note 29.
The assets are likely to be realised, and liabilities are likely to be discharged at the amounts recognised in the financial statements in the
ordinary course of business. As a result, the financial statements have been prepared on a going concern basis.
Note 2: Segment Information
a) Description of segments
The Executive Team (the Chief Operating Decision Maker that makes strategic decisions) considers the business as one Group of centres
and regularly reviews operating results at this level to assist and make decisions about the allocation of resources. The Executive Team
has therefore identified one operating segment, being the management of child care centres. All revenue in this report was derived from
external customers and relates to the single operating segment and the segment disclosure has not altered from the last Annual Report.
31 December 2020
Revenue from external customers
Non-current assets 1
31 December 2019
Revenue from external customers
Non-current assets 1
Timing of revenue recognition
31 December 2020
Revenue recognised at a point in time
Total revenue from contracts with customers
Other revenue
Total revenue
31 December 2019
Revenue recognised at a point in time
Total revenue from contracts with customers
Other revenue
Total revenue
1. Non-current assets exclude deferred tax assets.
Australia
$’000
765,135
1,612,304
Foreign
Country
$’000
Total
$’000
11,321
—
776,456
1,612,304
900,834
1,869,647
15,788
39,490
916,622
1,909,137
Australia
$’000
Foreign
Country
$’000
Total
$’000
760,924
760,924
15,532
11,307
11,307
14
11,321
776,456
15,783
15,783
5
900,398
900,398
16,224
749,617
749,617
15,518
765,135
884,615
884,615
16,219
900,834
15,788
916,622
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 3: Revenue
From continuing operations
Sales revenue
Revenue from child care centres
Government Assistance (refer to note 1(a))
Funding relating to child care operations
Other revenue
Management fee income
Total revenue continuing operations
61
Consolidated
2020
$’000
2019
$’000
600,435
160,270
14,483
775,188
899,521
—
14,660
914,181
1,268
2,441
776,456
916,622
Accounting policy
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of discounts,
refunds and rebates.
Revenue is recognised for the major business activities as follows:
i) Revenue from child care centres
Fees paid by families and/or the Australian Government (Child Care Benefit, Child Care Tax Rebate and Child Care Subsidy) and the
Singapore Government are recognised as and when a child attends a child care service, as under AASB 15 Revenue from Contracts
with Customers this is when the customer has consumed the benefits of this service (satisfies its performance obligation).
Due to the COVID-19 outbreak government assistance was received during the year (refer to note 1(a)(i)).
Revenue received in advance from parents, guardians and government is recognised as deferred income and classified as a current
liability (i.e. contract liability for performance obligations yet to be satisfied).
ii) Funding related to child care operations
Training incentives and additional funding receipts are recognised when there is reasonable assurance that the incentive/receipt will
be received and when the relevant conditions have been met as under AASB 120 Accounting for Government Grants and Disclosure
of Government Assistance.
iii) Management fee income
Fees paid by franchisees are recognised in accordance with the franchise agreement and once the operational support service has been
performed, as this is when the Group transfers control of this service (satisfies its performance obligation) to the franchisee.
Note 4: Other Income
Deferred consideration not payable (refer to note 15)
Gain on sale of centres
Gain on sale of vehicles
Interest
Gain on surrender / termination of leases
Translation gain on revaluation of notes issued in Singapore dollars and hedge FX movement
Total other income
Accounting policy
i) Deferred consideration
Refer to notes 14 and 15.
ii) Interest income
Interest income is recognised using the effective interest method.
Consolidated
2020
$’000
64
10,425
—
884
529
—
11,902
2019
$’000
681
—
7
494
1,588
2,810
5,580
SECTION TWOFINANCIAL REPORT
62
1. Financial Overview
Note 5: Expenses
Profit / (Loss) before income tax includes the following specific expenses:
Depreciation expense
Depreciation expense of property, plant and equipment (refer to note 11)
Amortisation of intangibles (refer to note 16)
Depreciation expense of right-of-use assets (refer to note 20)
Employment costs
Wages and salaries
JobKeeper subsidy (refer to note 1(a))
Post-employment benefits
Share-based payment expense
Finance costs
Interest and finance charges
Interest expense on lease liabilities (refer to note 20)
Foreign exchange loss
Remediation program interest
The above should be read in conjunction with notes 20 and 34.
Refer to note 14 for restatement details.
Consolidated
2020
$’000
Restated
2019
$’000
20,784
17
70,808
91,609
484,999
(102,917)
40,728
174
21,372
—
78,745
100,117
512,284
—
43,688
(131)
422,984
555,841
20,715
43,685
44
2,277
66,721
29,087
44,827
—
2,060
75,974
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 6: Income Tax and Deferred Tax Assets
a) Income tax expense
Current tax
Deferred tax
Under / (over) provision prior year
Income tax expense / (benefit)
Income tax expense / (benefit) is attributable to:
Results from continuing operations
Deferred income tax expense included in income tax expense comprises:
(Increase) / decrease in deferred tax assets
b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit / (loss) from continuing operations before income tax expense
Tax on operations at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income
Adjustments relating to prior year
Entertainment
Deferred consideration not payable
Acquisition and divestment related costs – not deductible
Recognition of losses from previously acquired entities
Recognition of tax benefit from financial instruments
Impairment of Goodwill
Other non-allowable items
Difference in overseas tax rates
Income tax expense / (gain)
Weighted average tax rate
c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting year and not recognised in the
consolidated income statement but directly debited or credited to equity
Net deferred tax – debited directly to equity
Refer to note 14 for restatement details.
63
Consolidated
2020
$’000
Restated
2019
$’000
24,374
(40,974)
(567)
(17,167)
30,599
(11,883)
165
18,881
(17,167)
(17,167)
18,881
18,881
(40,974)
(11,883)
(204,177)
(61,253)
(567)
463
—
232
—
—
43,586
275
97
(17,167)
8.4%
70,900
21,270
165
256
(204)
2,224
(3,435)
(1,031)
—
(287)
(77)
18,881
26.6%
3,342
28,757
SECTION TWOFINANCIAL REPORT
64
1. Financial Overview
Note 6: Income Tax and Deferred Tax Assets continued
Deferred tax asset
The balance comprises temporary differences attributable to:
Employee benefits 1
Share issue transaction costs
Total temporary differences
Other
s40-880 deductions
Provision for expected credit loss
Accrued expenses
Property, plant and equipment
Lease liabilities
Recognised losses transferred in from previously acquired entities
Provisions
Total other
Total deferred tax assets
Deferred tax liability
Buildings
Right of use / make good assets
Prepayments
Total deferred tax liability
Net deferred tax asset
1. Employee Benefits include the tax benefit of $23.1m (2019: $18.8m) arising from the remediation program. Refer to note 14.
Employee
Benefits
$’000
Share Issue
Transaction
Costs
$’000
Lease
liabilities net
of right of
use / make
good assets
$’000
24,310
5,470
—
29,780
4,653
—
34,433
998
(12)
10
996
(1,098)
3,342
3,240
(2,362)
4,152
28,747
30,537
32,942
—
63,479
Restated at 1 January 2019
Charged to the consolidated income statement
Charged directly to equity
At 31 December 2019
Charged to the consolidated income statement
Charged directly to equity
At 31 December 2020
Refer to note 14 for restatement details.
Consolidated
2020
$’000
Restated
2019
$’000
34,433
3,240
37,673
474
1,559
3,034
6,068
204,375
—
6,892
222,404
260,075
29,780
996
30,776
737
594
4,309
—
211,745
3,435
3,225
224,045
254,821
(567)
(140,896)
(1,508)
(211)
(181,208)
(613)
(142,971)
(182,032)
117,104
72,789
Other
$’000
9,203
2,273
—
11,476
4,477
—
15,953
Total
$’000
32,149
11,883
28,757
72,789
40,974
3,342
117,104
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
65
Note 6: Income Tax and Deferred Tax Assets continued
Tax consolidation
i) Members of the tax consolidated group and
iii) Tax related contingencies
At 31 December 2020 there are no tax related contingencies (2019: nil).
Accounting policy
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on the
notional income tax rate for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries operate
and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements.
However, the deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the end of the reporting period
and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.
G8 Education and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the
deferred tax assets and liabilities of these entities are set off in the
consolidated financial statements.
Current and deferred tax is recognised in the consolidated income
statement, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly in
equity, respectively.
the tax sharing agreement
G8 Education and its 100% owned Australian resident subsidiaries
formed a tax consolidated group with effect from 3 December
2007. G8 Education is the head entity of the tax consolidated
group. Members of the tax consolidated group have entered into
a tax sharing agreement that provides for the allocation of income
tax liabilities between the entities should the head entity default on
its tax payment obligations. No amounts have been recognised in
the financial statements in respect of this agreement on the basis
that the possibility of default is remote.
ii) Tax effect accounting by members of the
tax consolidated group
Measurement method adopted under AASB Interpretation 1052
Tax Consolidation Accounting
The head entity and the controlled entities in the tax consolidated
group continue to account for their own current and deferred tax
amounts. The Group has applied the group allocation approach
in determining the appropriate amount of current taxes and
deferred taxes to allocate to members of the tax consolidated
group. The current and deferred tax amounts are measured in a
systematic manner that is consistent with the broad principles in
AASB 112 Income Taxes. The nature of the tax funding agreement
is discussed further below.
In addition to its own current and deferred tax amounts, the head
entity also recognises current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group.
Nature of the tax funding agreement
Members of the tax consolidated group have entered into a tax
funding agreement. Under the funding agreement, the funding
of tax within the Group is based on an acceptable method of
allocation under AASB Interpretation 1052. The tax funding
agreement requires payments to/from the head entity to be
recognised via an inter-entity receivable (payable) which is at
call. To the extent that there is a difference between the amount
charged under the tax funding agreement and the allocation under
AASB Interpretation 1052, the head entity accounts for these as
equity transactions with the subsidiaries.
The amounts receivable or payable under the tax funding agreement
are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial
year. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments.
IFRIC 23 Uncertainty over Income Tax Treatments
The Group applies judgement in identifying uncertainties over
income tax treatments. As the Group operated in a multinational
environment, it assessed whether the Interpretation had an impact
on its consolidated financial statements. Upon adoption of the
Interpretation, the Group considered whether it has any uncertain
tax positions, particularly those relating to transfer pricing. The
Company’s and the subsidiaries’ tax filings in different jurisdictions
include treatment of related party transactions and the taxation
authorities may challenge those tax treatments. The Group
determined, based on its tax compliance and transfer pricing
reviews, that it is probable that its tax treatments (including those
for the subsidiaries) will be accepted by the taxation authorities.
The Interpretation did not have an impact on the consolidated
financial statements of the Group.
SECTION TWOFINANCIAL REPORT 66
1. Financial Overview
Note 7: Profit for the Year
Profit/(loss) for the year includes the following post-tax items that are unusual because of their nature, size or incidence. Underlying earnings
have not been adjusted to exclude a number of government incentives received during the period as such assistance was considered
recompense for costs incurred in the year that form part of underlying earnings.
a) Non-trading items (after tax)
Non-trading expenses
Impairment loss (refer to note 1(a))
Expenses related to legal matters
Acquisition related expenses
Increase in employee provisions
Loss on disposal of assets/centres
Impairment of inventory
Remediation program costs
Total non-trading expenses
Non-trading income
Gain on disposal of assets/centres
Foreign currency translation gain
Gain on divestment of leases
Contingent consideration not paid
Total non-trading income
Net Total
b) Government assistance and rent concessions (after tax)
COVID-19 related income
Child care relief package (refer to note 1(a))
JobKeeper subsidy (refer to note 1(a))
Rent concessions (refer to note 1(a))
Total non-trading income
c) Finance expenses (after tax)
Finance expenses
Foreign currency translation loss
Interest expense on lease liabilities
Interest and finance charges
Remediation program interest
Total finance expenses
Refer to note 14 for restatement details.
Consolidated Post-Tax
2020
$’000
Restated
2019
$’000
237,525
5,850
2,425
1,501
1,307
817
3,767
253,192
10,425
—
370
64
10,859
242,333
112,189
72,042
3,053
187,284
32
30,579
14,500
1,594
46,705
—
—
5,088
—
4,034
—
—
9,122
—
1,967
1,588
681
4,236
4,886
—
—
—
—
—
31,636
20,104
1,442
53,182
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 8: Earnings per Share
a) Basic earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company
b) Diluted earnings per share
Profit/(loss) from continuing operation attributable to the ordinary equity holders of the Company
c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating
basic earnings per share
Diluted earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating
diluted earnings per share
d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share 1
Adjustments for calculations of diluted earnings per share:
Performance rights
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings per share 2
67
Consolidated
2020
CPS
Restated
2019
CPS
(25.11)
10.01
(25.11)
10.01
$’000
$’000
(187,010)
52,019
(187,010)
52,019
Number
Number
744,704,927
519,688,296
1,240,000
—
744,704,927
519,688,296
1. 2019 EPS restated to reflect bonus element included in share issuance.
2. At 31 December 2020, 1.2m performance rights were excluded from the diluted weighted average number of ordinary shares calculation because their effect would have
been anti-dilutive.
Refer to note 14 for restatement details.
Accounting policy
i) Basic earnings per share
Basic earnings per share is calculated by dividing:
– the profit attributable to owners of the Company, excluding
any costs of servicing equity other than ordinary shares
– by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
– the after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares; and
– the weighted average number of additional ordinary shares that
would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
SECTION TWOFINANCIAL REPORT
68
1. Financial Overview
Note 9: Current Assets — Trade and Other Receivables
Trade receivables
Allowance for impairment of trade receivables (refer to note (a) below)
Total
GST receivable
Other debtors 1
Total trade and other receivables
1. Net amount after making allowance for impairment of other receivables $3.3m (2019: nil).
Consolidated
2020
$’000
13,348
(1,918)
11,430
2,428
3,525
17,383
2019
$’000
18,605
(2,063)
16,542
2,145
11,249
29,936
a) Impaired trade receivables
As at 31 December 2020, current trade receivables of the Group were assessed for impairment. Movements in the allowance for expected
credit losses of receivables are as follows:
Opening balance
Allowance for impairment recognised during the year
Receivables written off during the year as uncollectable
Closing balance
Consolidated
2020
$’000
2,063
2,677
(2,822)
1,918
2019
$’000
1,721
1,461
(1,119)
2,063
The creation and release of the provision for impaired receivables has been included in ‘impairment loss’ in the consolidated income
statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovery.
b) Past due but not impaired
As at 31 December 2020, trade receivables of $1.4m (2019: $5.3m) were past due but not impaired. These relate to a number of customers for
whom there is no recent history of default and for which full payment is expected. The ageing analysis of these trade receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Total
Consolidated
2020
$’000
1,376
56
—
1,432
2019
$’000
5,196
2
97
5,294
c) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is considered to approximate their fair value.
For information concerning the credit risk of receivables, refer to note 17.
Accounting policy
A trade receivable is recognised if an amount of consideration that
is unconditional is due from the customer (i.e., only the passage of
time is required before payment of the consideration is due).
Trade receivables that do not contain a significant financing
component or for which the Group has applied the practical
expedient are measured at the transaction price.
Trade receivables represent child care fees receivable from families
(parent fees) and/or the Australian Government.
Under the Child Care Subsidy (CCS), Child Care Benefits are
generally paid weekly in arrears by the Australian Government
based on the actual attendance and entitlement of each child
attending the child care centre.
Parent fees are required to be paid one week in advance. The parent
fees receivable relates to child care fees where amounts are past
due and not paid in advance.
The Group applied the expected credit loss (ECL) model. For trade and
other receivables and deposits on acquisition, the Group has applied
the standard’s simplified approach whereby the loss allowance is
measured at an amount equal to lifetime expected credit losses.
The Group assesses expected credit losses in a way that reflects:
– An unbiased and probability-weighted amount that is
determined by evaluating a range of possible outcomes;
– The time value of money; and
– Reasonable and supportable information that is available without
undue cost or effort at the reporting date about past events,
current conditions and forecast of future economic conditions.
The Group has established a calculation that is based on the
Group’s historic credit loss experience, adjusted for forward-looking
factors specific to the debtors and the economic environment.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 10: Current and Non-Current Assets — Other
Current
Prepayments
Inventory
Deposits
Total other current assets
Non-current
Deposits on acquisitions
Prepayments
Inventory
Deposits
Total other non-current assets
Total other current and non-current assets
69
Consolidated
2020
$’000
8,065
1,526
677
10,268
—
114
—
873
987
11,255
2019
$’000
8,679
1,507
1,046
11,232
2,669
356
1,762
1,107
5,894
17,126
Accounting policy
Deposits on acquisitions relate to deposits made for the purchase of centres. Once settled the amount transferred forms part of the
business combination accounting.
Inventories relate to childcare centre consumables. These are measured at the lower of cost and net realisable value. Any write down in
the value of the inventory due to obsolescence is booked as an expense when the inventory becomes obsolete. Current replacement cost
is the cost the Group would incur to acquire or replace inventories held for distribution at balance date.
SECTION TWOFINANCIAL REPORT
70
1. Financial Overview
Note 11: Non-Current Assets — Property, Plant and Equipment
Buildings
$’000
Vehicles
$’000
Furniture,
fittings and
equipment
$’000
Consolidated
Year ended 31 December 2020
Opening net book amount
Transfer to intangibles (refer to note 16)
Additions through business combinations (refer to note 15)
Additions – other
Disposals
Depreciation charge
Impairment loss (refer to note 1(a))
Effect of foreign exchange changes
Closing net book amount
At 31 December 2020
Cost
Accumulated depreciation and impairment
Net book amount
Consolidated
Year ended 31 December 2019
Opening net book amount
Initial provision
Additions
Disposals
Depreciation charge
Effect of foreign exchange changes
Closing net book amount
At 31 December 2019
Cost
Accumulated depreciation
Net book amount
3,980
268
99,616
(2,568)
190
24,766
(1,218)
(20,544)
(16,786)
(5)
83,451
—
—
(3)
(74)
(37)
—
154
—
—
—
(166)
—
—
3,814
5,189
(1,375)
3,814
1,392
(1,238)
154
202,479
(119,028)
209,060
(121,641)
83,451
87,419
Buildings
$’000
Vehicles
$’000
Furniture,
fittings and
equipment
$’000
Total
$’000
103,864
(2,568)
190
24,766
(1,221)
(20,784)
(16,823)
(5)
87,419
Total
$’000
86,994
1,171
40,897
(3,837)
(21,372)
11
82,617
1,171
40,751
(3,816)
(21,118)
11
99,616
103,864
183,895
(84,279)
190,478
(86,614)
99,616
103,864
Consolidated
2020
$’000
110,417
(55,576)
54,841
2019
$’000
98,999
(37,785)
61,214
3,994
—
146
(3)
(157)
—
3,980
5,189
(1,209)
3,980
383
—
—
(18)
(97)
—
268
1,394
(1,126)
268
a) Leasehold Improvements
Furniture, fittings and equipment includes the following amounts that are leasehold improvements:
Cost
Accumulated depreciation and impairment
Net book amount
b) Non-current assets pledged as security
Refer to note 19 for information on the non-current assets pledged as security by the Company and its controlled entities.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
71
Note 11: Non-Current Assets — Property, Plant and Equipment continued
Accounting policy
Property, plant and equipment are stated at historical cost less depreciation and impairment. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated income
statement during the reporting year in which they are incurred.
Depreciation for vehicles is calculated using the diminishing value method and on other assets calculated using the straight-line method
to allocate their cost net of their residual values, over their estimated lives, as follows:
– Buildings: 40 years
– Vehicles: 3 – 12 years
– Furniture, fittings and equipment: 2 – 15 years
– Leasehold Improvements: 5 – 15 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the consolidated
income statement.
Refer to note 13(b) for accounting policy on make good.
c) Impairment of property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and impairment.
Property, plant and equipment (including leasehold improvements) are tested for impairment as part of the cash generating units (CGU)
to which they relate, usually a child care centre.
During the period, the Group completed a strategic portfolio review. The review considered the additional impacts of the COVID-19
pandemic operating environment, the risk of delays in economic recovery and subsequent impact on performance. As a result of
this review, the Group identified indicators of impairment for CGUs to which property, plant and equipment relate and recognised an
impairment loss, refer to note 1(a)(iii).
Note 12: Current and Non-Current Liabilities — Trade and Other Payables
Trade payables 1
Contingent consideration
Centre enrolment advances
Other payables and accruals 1
Total current
Contingent consideration
Total non-current
Notes
15
15
Consolidated
2020
$’000
18,449
75
1,245
54,123
73,892
657
657
2019
$’000
18,201
797
2,494
33,348
54,840
696
696
1. Trade and other payables are non-interest bearing and are normally settled on 30-day terms.
Accounting policy
These amounts (excluding contingent consideration) represent liabilities for goods and services provided to the Group prior to the end
of the year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months from the reporting date.
SECTION TWOFINANCIAL REPORT
72
1. Financial Overview
Note 13: Current and Non-Current Liabilities — Provisions
Current liabilities
Employee benefits (note (a) below)
Remediation program
Other provisions
Total current
Non-current liability
Employee benefits
Make good provision (note (b) below)
Total non-current
Consolidated
2020
$’000
33,257
80,000
7,324
120,581
4,532
11,621
16,153
Restated
2019
$’000
34,264
62,743
—
97,007
2,338
10,749
13,087
The Group has identified that certain team members should have received additional amounts to payments previously made.
The remediation program is under way and will be completed in the next financial period. At 31 December 2020, there is a provision
to recognise payments for additional agreed hours of work, overtime, allowances, penalties and interest to current and former team
members of an estimated $80.0m. Refer to note 14 for restatement details.
a) Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave, it covers all
unconditional entitlements where employees have completed the required period of service and also those where employees are entitled
to pro-rata payments in certain circumstances. The entire amount of the annual leave provision is presented as current since the Group
does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does
not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
Leave obligations expected to be settled after 12 months
Accounting policy
i) Short term obligations
Liabilities for wages and salaries, including non-monetary benefits
and annual leave expected to be settled wholly within 12 months
of the reporting date are recognised in other payables in respect
of employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are
settled. The liability for annual leave is recognised in the provision
for employee benefits. All other short-term employee benefit
obligations are presented as payables.
ii) Other long-term employee benefit obligations
The liability for long service leave and in particular cases, annual
leave, is recognised in the provision for employee benefits and
measured as the present value of expected future payments
to be made in respect of services provided by employees up
to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary
levels, experience of employee departures and years of service.
Expected future payments are discounted using market yields at
the reporting date on corporate bonds with terms to maturity and
currency that match, as closely as possible, the estimated future
cash outflows.
Consolidated
2020
$’000
3,551
3,551
2019
$’000
4,422
4,422
iii) Share-based payments
Share-based payments made to employees and others providing
similar services, that grant rights over the shares of the parent
entity, G8 Education, are accounted for as equity-settled share-
based payment transactions when the rights over the shares are
granted by G8 Education.
Equity-settled share based-payments with employees and others
providing similar services are measured at the fair value of the
equity instrument at the grant date. Fair value is measured using
the Black-Scholes option pricing model. The expected life used in
the model has been adjusted, based on directors’ best estimates,
for the effects of non-transferability, exercise restrictions, and
behavioural considerations. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Company’s
estimate of shares that will eventually vest. At each reporting
date, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognised in the consolidated income
statement over the remaining vesting period, with corresponding
adjustment to the equity-settled employee benefits reserve.
b) Make good provision
Costs required to return certain leased premises to their original
condition as set out in the lease agreements are recognised as a
provision in the financial statements. The provision has been calculated
as an estimate of future costs and discounted to present value.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
2. Business Combinations, Goodwill & Impairment
73
Note 14: Critical Accounting Estimates, Judgements and Errors
Significant Estimates and Judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and
that are believed to be reasonable under the circumstances.
vi) Leases – estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in
the lease, therefore, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that the
Group would have to pay to borrow over a similar term, and with a
similar security, the funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar economic environment.
The IBR therefore reflects what the Group ‘would have to
pay’, which requires estimation when no observable rates are
available (such as for subsidiaries that do not enter into financing
transactions) or when they need to be adjusted to reflect the terms
and conditions of the lease. The Group estimates the IBR using
observable inputs (such as market interest rates) when available
and is required to make certain entity-specific estimates (such as
the subsidiary’s stand-alone credit rating).
vii) Taxes
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available against
which the losses can be utilised. Management judgement is
required to determine the amount of deferred tax assets that can
be recognised, based upon the likely timing and the level of future
taxable profits, together with future tax planning strategies.
Correction of Prior Period Error
During the reporting period, as part of implementing a new Human
Resources Information System (“HRIS”) and rostering system, the
Group conducted a review of award and legislative requirements.
This review identified inadvertent non-compliance with some
requirements of the Children’s Services Award and the Educational
Services (Teachers) Award (collectively “Awards”) for a number of
the Group’s Team members in Australia.
The remediation of these issues, which occurred over the last
seven financial years, is estimated to be a one-off cash payment
before tax of $80.0m. This is an error and in order to reflect this
in the appropriate periods, $33.3m after tax is included in the
1 January 2019 restatement of opening retained earnings as
required by AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors. The 1 January 2019 current provisions
increased by $47.6m and the deferred tax asset increased by
$14.3m. An expense of $10.6m after tax has been included in the
2019 financial year, and an expense of $13.0m after tax has been
included in the current financial year. Interest incurred on the wage
remediation underpayments have been recognised in the period
which they relate. The expected tax benefit of the remediation of
$23.1m has been recognised within tax expense in the period which
they relate and is included within the Employee Benefits portion of
deferred tax balances.
Critical accounting estimates and judgements have been made
in the calculations as to the number of additional agreed hours of
work, overtime hours, allowance payments and appropriate award
rates. Any adjustments to the estimates will be recognised in the
period the revisions are verified.
The Group makes estimates and assumptions concerning the
future. The resulting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
discussed below.
i) Estimated impairment of goodwill and intangible assets
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated
in note 16. The recoverable amounts of goodwill have been
determined based on value-in-use calculations. These calculations
require the use of assumptions. Refer to note 16 for details of
these assumptions and the potential impact of changes to
these assumptions.
ii) Deferred contingent consideration on acquisition of businesses
The Group includes the fair value of deferred contingent
consideration as a liability for the acquisition of a business where
it expects the earn-out target to be met. This judgement is based
on operational due diligence and knowledge of the business
trading conditions including location, occupancy and profitability
at the time of settlement. Where outside the measurement period
under AASB 3 Business Combinations, if the earn out target is
not met then the amount not paid of the deferred contingent
consideration is taken to the consolidated income statement
as a credit and the corresponding entry against the liability.
iii) Long service leave
The liability for long service leave is recognised as a provision
for employee benefits and measured at the present value of
estimated future payments to be made in respect of services
provided by employees up to the end of the reporting period.
The provision is calculated using expected future increases in
wage and salary rates including related on-costs and expected
settlement dates based on staff turnover history.
iv) Make good provision
Costs required to return certain leased premises to their original
condition as set out in the lease agreements are recognised as
a provision in the financial statements. The provision has been
calculated as an estimate of future costs and discounted to
present value.
v) Leases – determining the lease term of contracts with
renewal and termination options
The Group determines the lease term as 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,
or any periods covered by an option to terminate the lease,
if it is reasonably certain not to be exercised. The Group has
several lease contracts that include extension and termination
options. The Group applies judgement in evaluating whether it is
reasonably certain whether or not to exercise the option to renew
or terminate the lease. That is, it considers all relevant factors
that create an economic incentive for it to exercise either the
renewal or termination. 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 or to terminate
(e.g., construction of significant leasehold improvements).
SECTION TWOFINANCIAL REPORT 74
2. Business Combinations, Goodwill & Impairment
Note 14: Critical Accounting Estimates, Judgements and Errors continued
The error has been corrected by restating each of the affected financial statement line items for the prior years as follows:
Consolidated Balance Sheet Extract
Deferred tax assets
Current provisions
Net assets
Reserves
Total equity
Consolidated Income Statement Extract
Employment costs
Finance costs
Profit / (loss) before income tax
Income tax expense / benefit
Profit / (loss) for the year attributable to members of the parent entity
2019
$’000
Movement
$’000
53,966
(34,264)
839,890
63,080
839,890
18,823
(62,743)
(43,920)
(43,920)
(43,920)
2019
$’000
Movement
$’000
542,801
73,914
86,000
23,411
62,589
13,040
2,060
(15,100)
(4,530)
(10,570)
Restated
2019
$’000
72,789
(97,007)
795,970
19,160
795,970
Restated
2019
$’000
555,841
75,974
70,900
18,881
52,019
Basic and diluted earnings per share for the prior year have also been restated. The amount of the correction for both basic and diluted
earnings per share was a decrease of 2.03 cents per share.
Note 15: Business Combinations
The acquisitions below have increased the Group’s size and are expected to reduce costs per centre through economies of scale.
The goodwill is attributable to the future profitability of the acquired businesses.
During the year, the Group purchased 4 centres as outlined below. Each acquisition was not material:
Number of centres
Purchase consideration
Cash consideration
Total purchase consideration
Assets and liabilities acquired at fair value
Property, plant and equipment
Right of use assets
Lease liabilities
Net identifiable assets/(liabilities) acquired
Goodwill
Total
Revenue and profit / (loss) contribution from the date of acquisition to period end 31 December 2020 1
Revenue
Loss before tax
1. The loss for the period was $2.1m. The centres were not operating prior to acquisition.
Refer to note 14 in the Annual Report 2019 for 2019 Business Combinations disclosure.
Acquisition related expenses of $2.4m (2019: $5.1m) are included in the consolidated income statement.
No goodwill is deductible for tax purposes.
4
$’000
9,931
9,931
139
16,571
(16,571)
139
9,792
9,931
3,143
(2,071)
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 15: Business Combinations continued
During the year accounting adjustments were made to provisional amounts recognised in 2019 as outlined below:
Purchase consideration
Purchase price adjustments
Contingent consideration
Total purchase adjustments
Assets and liabilities acquired at fair value
Property, plant and equipment
Employee benefit liabilities
Net identifiable assets / (liabilities) acquired
Goodwill
Total
75
2019
Adjustments
Australia
$’000
251
36
287
51
—
51
236
287
The above amounts relate to accounting adjustments for assets and liabilities taken on at acquisition date but not finalised at 31 December 2019.
Contingent Consideration
As part of the purchase agreement with previous owners a portion of the consideration was determined to be contingent, based on the
performance of the acquired business.
The following table outlines the additional cash payments to the previous owners upon meeting specified performance conditions:
At 31 December 2020
Acquisition of 1 centre 1
Total potential contingent
consideration payable
$’000
Carrying
value
$’000
Conditions
900
732
19 years occupancy hurdle based on licence capacity
1. The Group has assessed that a portion of this amount should be recorded as current.
Movement in Contingent Consideration
A reconciliation of the fair value of the contingent consideration liability is provided below:
Financial liability for contingent consideration as at 31 December
Write back of contingent consideration to the consolidated income statement for performance
condition not met – other income (refer to note 4)
Increase of contingent consideration to goodwill for performance condition met
Fair value adjustments
Contingent consideration paid
Contingent consideration for new acquisitions
Total contingent consideration payable as at 31 December
Consolidated
2020
$’000
1,493
(64)
—
36
(733)
—
732
2019
$’000
2,687
(681)
693
127
(2,055)
722
1,493
Accounting policy
The acquisition method of accounting is used to account for all
business combinations. Purchase consideration is measured as
the fair value of the assets given, equity instruments issued or
liabilities incurred or assumed at the date of exchange. Where
equity instruments are issued in an acquisition, the fair value of the
instruments is their published market price as at the date of exchange.
Acquisition costs paid by the Company are expensed.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill.
Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified as a financial liability.
Amounts classified as a financial liability that are subsequently not
required to be paid at the end of the earn out period or are
re-estimated during the period are recognised as other income.
SECTION TWOFINANCIAL REPORT
76
2. Business Combinations, Goodwill & Impairment
Note 16: Non-Current Assets – Intangible assets
Opening net book amount
Transfer from PPE (refer to note 11)
Additions
Adjustments in respect of prior year acquisitions
Disposal of centres
Amortisation
Impairment (refer to note 1(a))
Effect of foreign exchange changes
Consolidated 2020
Intellectual
Property
$’000
Software
$’000
3,250
—
—
—
—
—
(3,250)
—
—
2,568
5,464
—
—
(17)
—
—
Goodwill
$’000
1,189,910
—
9,792
236
(10,233)
—
(142,035)
(443)
Total
$’000
1,193,160
2,568
15,256
236
(10,233)
(17)
(145,285)
(443)
Closing net book amount
1,047,227
—
8,015
1,055,242
Cost
Accumulated amortisation and impairment
Net book amount
1,200,314
(153,087)
1,047,227
3,250
(3,250)
8,032
(17)
1,211,596
(156,354)
—
8,015
1,055,242
Opening net book amount
Additions
Adjustments in respect of prior year acquisitions
Disposal of centres
Effect of foreign exchange changes
Closing net book amount
Cost
Accumulated impairment
Net book amount
Consolidated 2019
Intellectual
Property
$’000
Software
$’000
3,250
—
—
—
—
3,250
3,250
—
3,250
—
—
—
—
—
—
—
—
—
Goodwill
$’000
1,131,206
64,877
936
(7,747)
638
1,189,910
1,200,962
(11,052)
1,189,910
Total
$’000
1,134,456
64,877
936
(7,747)
638
1,193,160
1,204,212
(11,052)
1,193,160
The Group divested or closed 6 Australian centres during 2020 (2019: 41) and sold its subsidiary group operating in Singapore
including 17 child care centres. The results of the sale of the Singapore centres and the other divested centres were not material and
therefore did not meet the conditions under AASB 5 Non-current Assets Held for Sale and Discontinued Operations to be disclosed
as discontinued operations. Refer to note 1(c).
Accounting policy
i) Software
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on
a straight-line basis over the period of their expected benefit, being their finite useful life.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
77
Note 16: Non-Current Assets – Intangible assets continued
a) Impairment tests
Goodwill, intellectual property and software are monitored and
tested for impairment on an operating segment level as outlined
in the accounting policy below. The recoverable amount of the
child care centre assets is determined based on value-in-use
calculations. These calculations use cash flow projections based
on budgets for 2021 and then extrapolated using estimated
growth rates. The growth rate does not exceed the long-term
average growth rate for the business. For the purposes of
intangible assets impairment testing, the recoverable amount
is compared to the carrying amount of the assets of the Group,
which aside from goodwill and intellectual property, also includes
the fixed and right of use assets of the child care centres and
working capital.
c) Impairment charge
The assessment of the discount rate calculation is based on the
specific circumstances of the Group and is derived from its weighted
average cost of capital (WACC). The WACC takes into account both
debt and equity. The cost of equity is derived from the expected
return on investment by the Group’s investors. The cost of debt is
based on the interest-bearing borrowings of the Group and the lease
portfolio of the Group.
As disclosed in the Group’s interim financial statements, based
on the carrying values, an impairment loss of $145.3m has been
recognised during the year, as the calculated value in use exceeded
the carrying amount of the net assets.
The Group also completed an assessment of asset carrying values
at year-end and management have determined that no further
Goodwill impairment was required.
Sensitivity
The Group has completed a sensitivity analysis on its
impairment model.
The calculation of value in use is most sensitive to the following
input assumptions:
– Discount rate
– Occupancy % (resulting in a net movement in revenue and costs)
– Terminal growth rate
Key changes to inputs that would result in no head room are:
– An increase of 1.8% in the pre-tax discount rate; or
– A net movement in average occupancy and wages expense
leading to a 13.5% decrease in forecast EBITDA (adjusted for
notional rental payments) in the terminal year.
There would still be head room if the terminal growth rate was
reduced to 0.0%.
b) Key assumptions used for value-in-use calculations
The value-in-use calculation is based on cashflow projections
which are a function of each of the following key assumptions:
occupancy, child care fees and centre expenses.
The Group included in the assumptions an allowance for the
ongoing negative impacts of the COVID-19 pandemic, refer to
note 1(a), and for the remediation program. The Group also made
assumptions, with reference to external economic forecasts, about
long term recovery from COVID-19 and changes in the market as
a result, e.g. unemployment rates.
Occupancy has been impacted by COVID-19 and is expected
to gradually return to pre-COVID-19 levels within the next three
years. Child care fees are based on the current market conditions
plus anticipated annual increases. Centre expenses include the
following key items:
– Centre wages – based on industry award standards and
forecast to increase by the historically established wage
cost as a percentage of revenue which is driven by future
growth in occupancy.
– Centre occupancy expenses – based on current rental
payments and increased by a forecast annual rental
growth percentage; and
– Other child care expenses – driven by historical expenditure
and future occupancy growth.
The anticipated occupancy reflects seasonal factors
and underlying growth in occupancy achieved from the
implementation of the Group’s strategies. Economic occupancy
levels represent the key to financial success for the Group given
the largely fixed cost-base of child care centres.
The impairment model has the following key attributes:
– Pre-tax discount rate of 10% (2019: 10% (12% measured
on a pre-AASB16 Leases basis));
– Full support office costs allocation; and
– Forecast period of 5 years plus a terminal growth calculation
with a growth rate of 2% (2019: 3 years, 2%). The change from
a 3-year to a 5-year forecast period is to account for a forecast
gradual return to pre-COVID-19 market conditions, prior to
calculating terminal growth.
SECTION TWOFINANCIAL REPORT 78
3. Capital Structure & Financial Risk Management
Note 17: Financial Risk Management
The Group’s activities expose it to a variety of financial risks: interest rate risk, credit risk, foreign exchange risk and liquidity risk.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group.
Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different
methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate,
and other risks, and ageing analysis for credit risk under the expected credit loss model.
The risk management of the Group is conducted in a manner consistent with policies approved by the Board. The Board provides
principles for overall risk management, as well as policies covering specific areas, such as, interest rate risk, credit risk, foreign exchange
risk and investment of excess liquidity.
The Group holds the following financial instruments:
2020
Financial assets
Cash and cash equivalents
Trade and other receivables
2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Deposits on acquisitions
2020
Financial liabilities
Trade and other payables
Borrowings
Contingent consideration
Lease liabilities
2019
Financial liabilities
Trade and other payables
Borrowings
Contingent consideration
Lease liabilities
Financial
assets at
fair value
$’000
Financial
assets at
amortised
cost
$’000
Total
$’000
—
—
—
316,989
17,383
316,989
17,383
334,372
334,372
—
—
2,669
2,669
40,603
29,936
—
70,539
Liabilities at
fair value
$’000
Liabilities at
amortised
cost
$’000
40,603
29,936
2,669
73,208
Total
$’000
55,897
295,139
732
681,250
—
—
732
—
732
—
—
1,493
—
55,897
295,139
—
681,250
1,032,286
1,033,018
36,762
387,750
—
709,137
36,762
387,750
1,493
709,137
1,493
1,133,649
1,135,142
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
79
Note 17: Financial Risk Management continued
a) Foreign exchange risk
The Group had operations in Singapore during the year and was exposed to foreign exchange risk associated with the Singapore dollar.
Foreign exchange risk arises from future commercial transactions and from recognised assets and liabilities denominated in a currency
that is not the entity’s functional currency.
The foreign exchange risk associated with the Singapore operations was managed through a natural hedge as the cash flows from the
Singapore operations were denominated in Singapore dollars.
The Group sold its Singapore operations during the year. Refer to note 1(c).
The carrying amounts of the Group’s financial assets and liabilities that are denominated in other foreign currencies are set out below:
Cash and cash equivalents
Trade receivables
Trade payables
2020
SGD
$’000
—
—
—
—
During the year, the following foreign-exchange related amounts were recognised in the consolidated income statement and other
comprehensive income:
2019
SGD
$’000
2,337
1,025
(260)
3,102
2019
$’000
2,810
2,810
2020
$’000
—
—
Amounts recognised in the consolidated income statement
FX gain on settlement of corporate notes included in other income
Accounting policy
i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Australian
dollars, which is G8 Education’s functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the consolidated income
statement except when they are deferred in equity as qualifying cash
flow hedges and qualifying net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are
presented in the consolidated income statement, within finance
costs. All other foreign exchange gains and losses are presented
in the consolidated income statement on a net basis within other
income or other expenses.
Non-monetary items that are measured at fair value in a foreign
currency and 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.
iii) 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 for each balance sheet presented are
translated at the closing rate at the date of that balance sheet
— Income and expenses for each consolidated income statement
and statement of comprehensive income 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.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and are translated at the closing rate.
The Group sold its Singapore operations during the year.
Refer to note 1(c).
SECTION TWOFINANCIAL REPORT
80
3. Capital Structure & Financial Risk Management
Note 17: Financial Risk Management continued
b) Interest rate risk
Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk if the borrowings are carried at fair value.
G8 Education’s fixed and floating borrowing mix is to be monitored by management and reported to the Board on a regular basis (at least
quarterly). Derivative products may be used to manage G8 Education’s interest rate risk profile but any hedging undertaken is subject
to Board approval and will not exceed the level of floating rate exposure. The Group’s borrowings at variable rates are denominated in
Australian dollars only. The Group held no derivatives at 31 December 2020.
The Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate risk as
defined in AASB 9 Financial Instruments, since neither the carrying amount nor the future cash flows will fluctuate because of a change
in market interest rates.
As at the reporting date, the Group had the following variable rate borrowings outstanding:
Syndicated loan facilities
Net exposure to cash flow interest rate risk
An analysis by maturities is provided. Refer to note 17(d).
31 December 2020
31 December 2019
Balance
$’000
Total Loans
%
Balance
$’000
Total Loans
%
247,200
247,200
82%
82%
342,200
342,200
88%
88%
Sensitivity
At 31 December 2020, if interest rates had changed by - 0.25%/+ 0.25% absolute from the year end rates with all other variables held
constant, post-tax result for the year would have been $432,600 higher or $432,600 lower respectively (post-tax profit for the year for 2019:
$598,850 higher or $598,850 lower respectively).
c) Credit risk
Credit risk is managed on a Group basis. Credit risk arises
from cash and cash equivalents, favourable derivative financial
instruments and deposits with banks and financial institutions,
as well as credit exposures to trade and other debtors. For banks
and financial institutions, only independently rated parties with
a minimum rating of ‘A’ are accepted.
d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and marketable securities and the availability of funding
through an adequate amount of committed credit facilities. The
Group manages liquidity risk by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
The maximum exposure to credit risk at the reporting date is the
carrying amount of the financial assets as summarised below.
i) Financing arrangements
Details of financing arrangements are disclosed. Refer to note 19.
Trade debtor credit risk is managed by requiring child care
fees to be paid in advance. Outstanding debtor balances are
reviewed weekly and followed up in accordance with the Group’s
debt collection policy. Credit risk is also minimised by federal
government funding in the form of Child Care Subsidy, the
Federal Government is considered to be a high quality debtor.
Analysis of the ageing of the impaired trade receivables is
performed. Refer to note 9.
ii) Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into
relevant maturity groupings based on the remaining term at the
reporting date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as
the impact of discounting is not significant. For interest rate swaps
the cash flows have been estimated using forward interest rates
applicable at the end of the reporting period.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
81
Note 17: Financial Risk Management continued
Contractual maturities of financial liabilities
Consolidated 2020
0 to 6
months
$’000
6 to 12
months
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
4,186
—
55,897
54,418
5,900
75
—
54,518
11,800
75
—
108,667
320,273
225
—
297,609
Total
contractual
cash flows
$’000
342,159
900
55,897
907,542
>5years
$’000
—
525
—
392,330
Carrying
amount
$’000
300,000
732
55,897
681,250
Non derivative
Syndicated debt facilities
Contingent consideration
Trade and other payables
Lease liabilities
Contractual maturities of financial liabilities
Consolidated 2019
0 to 6
months
$’000
6 to 12
months
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
8,716
722
36,762
56,091
8,716
75
—
55,935
111,797
75
—
111,718
278,107
225
—
318,972
Total
contractual
cash flows
$’000
Carrying
amount
$’000
464,011
1,697
36,762
1,008,516
395,000
1,493
36,762
709,137
>5years
$’000
56,675
600
—
465,800
Non derivative
Syndicated debt facilities
Contingent consideration
Trade and other payables
Lease liabilities
e) Fair value measurements
The fair value of financial assets and financial liabilities (excluding lease liabilities) must be estimated for recognition and measurement or
for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
— quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
— inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2); and
— inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table present the Group’s assets and liabilities measured and recognised at fair value on a recurring basis at 31 December 2020
and 31 December 2019:
At 31 December 2020
$’000
Liabilities
Contingent consideration (refer to note 15)
At 31 December 2019
$’000
Assets
Deposit on acquisitions 1
Liabilities
Contingent consideration (refer to note 15)
1. Deposits on acquisitions are fully refundable.
Level 1
Level 2
Level 3
Total
—
—
732
732
Level 1
Level 2
Level 3
Total
—
—
—
—
2,669
2,669
1,493
1,493
SECTION TWOFINANCIAL REPORT
82
3. Capital Structure & Financial Risk Management
Note 18: Current Assets — Cash and Cash Equivalents
Cash at bank and in hand
Total cash and cash equivalents
Consolidated
2020
$’000
316,989
316,989
2019
$’000
40,603
40,603
Accounting policy
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Note 19: Current and Non-Current Liabilities — Borrowing
Secured
Syndicated debt facilities (a)
Total secured borrowings
Borrowing costs
Total borrowings
2020
2019
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
Total
$’000
—
—
—
—
300,000
300,000
300,000
300,000
(4,861)
(4,861)
295,139
295,139
—
—
—
—
395,000
395,000
395,000
395,000
(7,250)
(7,250)
387,750
387,750
a) Syndicated debt facilities
The Group had $300.0m drawn from the $500.0m syndicated debt facilities as at 31 December 2020. During the period, the Group
used $95.0m of the funds raised from the capital raising to repay syndicated debt. The Group has completed the extension of its senior
syndicated debt facilities on 12 February 2021. Refer to note 29.
b) Fair value
Carrying value is equal to fair value for all borrowings.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Current
Floating charge
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets pledged as security
Non-current
First mortgage
Buildings
Leased property
Floating charge
Other non-current assets
Vehicles, furniture, fittings and equipment
Total non-current assets pledged as security
Total assets pledged as security
Consolidated
2020
$’000
2019
$’000
Notes
18
9
10
11
20
10
11
316,989
17,383
10,268
344,640
3,814
467,828
987
83,605
556,234
900,874
40,603
29,936
11,232
81,771
3,980
604,729
5,894
99,884
714,487
796,258
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 19: Current and Non-Current Liabilities — Borrowing continued
c) Financing arrangements
As at 31 December 2020 the following lines of credit were in place:
Credit standby arrangements
Total facilities
Used at balance date
Unused at balance date
Syndicated debt facilities
Total facilities
Used at balance date
Unused at balance date
Bank guarantee facilities
Total facilities
Used at balance date
Unused at balance date
83
Consolidated
2020
$’000
2019
$’000
500
(464)
36
500
(412)
88
500,000
(300,000)
500,000
(395,000)
200,000
105,000
50,000
(34,793)
15,207
50,000
(36,321)
13,679
The Group maintains a secured facility for the provision of bank guarantees to landlords of premises leased by the Group and syndicated
debt facilities. Refer to note 29.
d) Fair value
The carrying amounts and fair values of borrowings at balance dates are as reflected in the Balance Sheet.
Accounting policy
Measurement
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the
consolidated income statement over the year of the borrowings
using the effective interest method.
Fees paid on the establishment of loan facilities, which are not an
incremental cost relating to the actual draw-down of the facilities,
are capitalised to the loan and expensed on a straight-line basis
over the term of the facilities.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in the consolidated
income statement as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least
12 months after the balance date.
SECTION TWOFINANCIAL REPORT
84
3. Capital Structure & Financial Risk Management
Note 20: Right of Use Assets and Lease Liabilities
a) Right of use assets
Set out below are the carrying amounts of right-of-use assets and movements during the year:
Consolidated
Leased
property
$’000
Leased
vehicle
$’000
As at 31 December 2019
Cost
Accumulated depreciation
Net book amount
Additions through business combinations (refer to note 15)
Additions – other
Disposals
Depreciation charge
Modification to lease terms
Variable lease payments reassessment
Impairment loss (refer to note 1(a))
Effect of foreign exchange changes
Closing net book amount as at 31 December 2020
Cost
Accumulated depreciation and impairment
As at 31 December 2020
682,403
(77,674)
604,729
16,571
9,151
(6,863)
(69,525)
14,498
408
(101,098)
(43)
467,828
712,005
(244,177)
467,828
Total
$’000
685,500
(79,281)
606,219
16,571
9,151
(6,864)
(70,808)
15,178
408
(101,157)
(43)
3,097
(1,607)
1,490
—
—
(1)
(1,283)
680
—
(59)
—
827
468,655
2,987
(2,160)
714,992
(246,337)
827
468,655
Adjustment on adoption of AASB 16 as at 1 January 2019
611,810
1,947
613,757
Consolidated
Leased
property
$’000
Leased
vehicle
$’000
Total
$’000
Additions through business combinations
Additions through make good
Additions – other
Disposals or terminations
Depreciation charge
Modification to lease terms
Variable lease payments reassessment
Effect of foreign exchange changes
Closing net book amount as at 31 December 2019
Cost
Accumulated depreciation and impairment
As at 31 December 2019
b) Lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
76,559
4,755
1,279
(20,287)
(77,138)
132
7,502
117
604,729
682,403
(77,674)
604,729
—
—
206
—
(1,607)
944
—
—
1,490
3,097
(1,607)
1,490
76,559
4,755
1,485
(20,287)
(78,745)
1,076
7,502
117
606,219
685,500
(79,281)
606,219
Consolidated
2020
$’000
69,435
611,815
681,250
2019
$’000
68,482
640,655
709,137
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 20: Right of Use Assets and Lease Liabilities continued
At 31 December 2019
Additions through business combinations (refer to note 15)
Additions — other
Disposals
Accretion of interest
Payments
Modification to lease terms
Variable lease payments reassessment
Effects of exchange rate changes
Closing net book amount as at 31 December 2020
The maturity analysis of lease liabilities are disclosed. Refer to note 17(d) and note 34(g).
Adjustment on adoption of AASB16 as at 1 January 2019
Additions through business combinations
Additions – other
Disposals
Accretion of interest
Payments
Modification to lease terms
Variable lease payments reassessment
Effects of exchange rate changes
Closing net book amount as at 31 December 2019
c) Amounts recognised in profit and loss
The following are the amounts recognised in profit and loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases (included in occupancy expenses)
Expense relating to leases of low-value assets (included in direct costs)
Variable lease (receipts)/payments (included in occupancy and other expenses)
Impairment loss on leases
(Gain) / loss on surrender/termination of leases
(Gain) / loss on sale of assets
85
Total
$’000
709,137
16,571
8,372
(8,064)
43,685
(102,066)
15,880
(2,231)
(34)
681,250
Total
$’000
710,798
76,559
1,485
(26,236)
44,827
(108,575)
1,076
9,084
119
709,137
Consolidated
2020
$’000
70,808
43,685
201
2,415
(3,584)
101,157
(529)
(163)
2019
$’000
78,745
44,827
—
3,206
560
—
(1,588)
(4,957)
Total amount recognised in profit and loss
213,990
120,793
The Group had total cash outflows for leases of approximately $102.2m in 2020 - the principal portion of lease payments totalled $58.5m,
interest payments totalled $43.7m and other payments relating to low-value assets and net variable lease receipts totalled approximately
$1.0m (included in payments to suppliers and employees).
SECTION TWOFINANCIAL REPORT
86
3. Capital Structure & Financial Risk Management
Note 20: Right of Use Assets and Lease Liabilities continued
d) Impairment of right of use assets
Right of use assets are tested for impairment as part of the CGU
to which they relate, usually a child care centre.
Short-term leases and leases of low-value assets
The Group applies the short-term lease exemption to its short-term
leases of property (i.e. those leases that have that have a lease term
of 12 months or less from the commencement date and do not
contain a purchase option).
The Group applies the low-value assets recognition exemption to
leases of office equipment that are considered of low value. 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.
Significant judgement in determining the lease term of contracts
with renewal options
The Group determines the lease term as 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, or
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. That is,
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.
Due to the impact COVID-19 and following a strategic review of the
portfolio, the Group re-assessed the lease term of some leases which
include renewal option. The Group remeasured the lease liability and
adjusted the right of use asset to reflect the change in assessment.
Amendments to AASB 16 COVID-19 Related Rent Concessions
Refer to note 34.
During the period, the Group completed a strategic portfolio review.
The review considered the additional impacts of the COVID-19
pandemic operating environment, the risk of delays in economic
recovery and subsequent impact on performance. As a result of
this review, the Group identified indicators of impairment for CGUs
to which right of use assets relate and recognised an impairment
loss, refer to note 1(a)(iii).
An assessment is made at each reporting date to determine
whether there is an indication that previously recognised
impairment losses no longer exist or have decreased. If such
indication exists, the Group estimates the asset’s or CGU’s
recoverable amount. A previously recognised impairment loss
is reversed only if there has been a change in the assumptions
used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years.
Accounting policy
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.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease
incentives receivable and variable lease payments that depend on
an index or a rate. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses
the incremental borrowing rate at the lease commencement date
as the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the
lease term, a change in the in-substance fixed lease payments or
a change in the assessment to purchase the underlying asset.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 87
Note 21: Contributed Equity
a) Share capital
Ordinary shares fully paid
847,390,315
460,176,931
1,209,227
907,255
Consolidated
Consolidated
2020
No. of Shares
2019
No. of Shares
2020
$’000
2019
$’000
b) Movements in ordinary share capital
Details
31 December 2018 balance
Dividend reinvestment plan
Transaction costs of shares issued
Deferred tax credit recognised directly in equity
31 December 2019 balance
Dividend reinvestment plan
Equity placement
Transaction costs of shares issued
Deferred tax credit recognised directly in equity
31 December 2020 balance
Number of Shares
‘000
$’000
455,380
893,567
4,797
—
—
13,711
(33)
10
460,177
907,255
10,694
376,519
—
—
8,554
301,215
(11,139)
3,342
847,390
1,209,227
c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number
of and amounts paid on shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll
each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
d) Dividend reinvestment plan
The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their
dividend entitlements satisfied by the issue of new ordinary shares. Shares are issued under the plan. The Company advises the market at
the time of announcing the dividend if there will be a discount applied to the market price.
e) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that they can continue to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by
total capital on a pre-lease basis. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’
as per a pre-AASB 16 Leases balance sheet plus net debt.
The gearing ratios at 31 December were as follows on a pre-AASB 16 Leases basis:
Consolidated
Borrowings
Less: cash and cash equivalents
Net debt
Total equity (pre–AASB 16)
Total capital (pre–AASB 16)
Gearing ratio (pre-AASB 16) 1
1. Not meaningful as net debt is <0.
Notes
19
18
2020
$’000
295,139
(316,989)
(21,850)
1,051,405
1,029,555
2019
$’000
387,750
(40,603)
347,147
795,970
1,143,117
Nm
27%
The Directors assess an appropriate level of gearing based on a leverage rate of less than 45% (on a pre—AASB 16 Leases basis).
Accounting policy
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
SECTION TWOFINANCIAL REPORT
88
3. Capital Structure & Financial Risk Management
Note 22: Dividends
a) Ordinary shares
Dividends declared or paid during the financial year were as follows:
Dividends
Financial year 2020
2019 final dividend (paid on 30 October 2020)
Dividend paid during the year ended 31 December 2020
Cash
Dividend reinvestment plan
Dividend paid during the year ended 31 December 2020
Dividends
Financial year 2019
2018 final dividend (paid on 5 April 2019)
2019 interim dividend (paid on 3 October 2019)
Dividend paid during the year ended 31 December 2019
Cash
Dividend reinvestment plan
Dividend paid during the year ended 31 December 2019
CPS
6.0
CPS
8.0
4.75
Total
dividend
$’000
27,611
27,611
19,057
8,554
27,611
Total
dividend
$’000
36,430
21,771
58,201
44,490
13,711
58,201
G8 Education temporarily suspended dividends and its dividend policy as per ASX announcement on 9 April 2020, with the exception of
the CY19 final dividend which was paid on 30 October 2020.
b) Franking credits
Consolidated
Parent Entity
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Franking credits available for subsequent financial years
based on a tax rate of 30% (2019: 30%)
24,144
13,679
24,144
13,679
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for:
— Franking credits that will arise from the payment of the amount of the provision for income tax;
— Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
— Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if the distributable profits of subsidiaries
were paid as dividends.
Accounting policy
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity,
on or before the end of the financial year but not distributed at reporting date.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Note 23: Reconciliation of Cash Flows
Reconciliation of profit after tax to net cash flows from operating activities
Profit / (loss) for the year
Depreciation
Write back of deferred consideration not payable
(Gain) / loss on divestment of leases
Translation gain on revaluation of notes issued in Singapore dollars and hedge FX movement
Net (gain) / loss on sale of assets
Write back of make good costs
Amortised borrowings costs
Lease adjustments
Brokerage and legal fees treated as investing cashflows
Impairments
Non-cash employee benefits expense - share based payments
(Increase)/decrease in deferred tax asset
(Increase)/decrease in trade and other debtors
Increase/(decrease) in trade and other creditors
Increase/(decrease) in contract liabilities
Increase/(decrease) in lease liabilities
Increase/(decrease) in provisions
Increase/(decrease) in provision for income taxes payable
Net exchange differences
Net cash inflows from operating activities
Refer to note 14 for restatement details.
Changes in liabilities arising from financing activities
Opening
balance
1 Jan 2020
$’000
Cash
flows
$’000
Foreign
exchange
movement
$’000
Change
in
fair value
$’000
Considered
interest in
operating
cash flows
$’000
Current lease liabilities
Non current lease liabilities
Non-current interest bearing
loans and borrowings
68,482
640,655
(102,066)
—
387,750
(95,004)
(34)
—
—
69,435
(69,435)
43,685
—
89
Consolidated
2020
$’000
(187,010)
91,609
(64)
(529)
—
(9,118)
(27)
2,398
29
717
275,217
174
3,435
8,676
30,861
1,898
(4,109)
11,119
(35,746)
35
Restated
2019
$’000
52,019
100,117
(681)
(1,588)
(2,810)
4,034
—
3,539
—
970
—
(131)
(7,353)
7,125
(2,535)
(1,369)
—
8,428
(5,768)
(7)
189,565
153,990
New
leases
$’000
1,437
23,505
Other
$’000
(11,504)
17,090
Closing
balance
31 Dec 2020
$’000
69,435
611,815
—
—
—
2,393
295,139
Opening
balance
1 Jan 2019
$’000
Cash
flows
$’000
Foreign
exchange
movement
$’000
Change
in
fair value
$’000
63,584
(108,575)
647,214
—
119
—
68,482
(68,482)
279,566
(269,892)
(11,397)
92,188
292,943
(10,837)
—
—
—
—
—
10,837
Considered
interest in
operating
cash flows
$’000
New
leases
$’000
Other
$’000
Closing
balance
31 Dec 2019
$’000
44,827
—
45
—
—
—
—
78,044
(16,121)
—
—
—
1,723
2,619
—
68,482
640,655
—
387,750
—
Current lease liabilities
Non current lease liabilities
Current interest bearing loans
and borrowing
Non-current interest bearing
loans and borrowings
Derivative liability
SECTION TWOFINANCIAL REPORT
90
4. Group Structure
Note 24: Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy set out. Refer to note 34(b).
Name of Entity
Subsidiaries of Company
Grasshoppers Early Learning Centres Pty Ltd
Togalog Pty Ltd
RBWOL Holding Pty Ltd 1
Ramsay Bourne Holdings Pty Ltd 1
Bourne Learning Pty Ltd
Ramsay Bourne Acquisitions (No.1) Pty Ltd
Ramsay Bourne Acquisitions (No.2) Pty Ltd 1
RBL No. 1 Pty Ltd
Ramsay Bourne Licences Pty Ltd
Sydney Cove Children’s Centre Pty Ltd 1
Sydney Cove Children’s Centre B Pty Ltd 1
Sydney Cove Children’s Centre C Pty Ltd 1
Sydney Cove Property Holdings Pty Ltd 1
World Of Learning Pty Ltd 1
World Of Learning Acquisitions (No.1) Pty Ltd
World Of Learning Acquisitions Pty Ltd
World Of Learning Licences Pty Ltd
G8 KP Pty Ltd
Sterling Early Education Finance Pty Ltd 1
Sterling Early Education Holdings Pty Ltd 1
Woodland Education Operations Pty Ltd 1
Kindy Kids Operations Pty Ltd 1
CG Operations Pty Ltd 1
Kool Kids Operations Pty Ltd 1
North Shore Childcare Pty Ltd 1
Ooorama Operations Pty Ltd 1
Jacaranda Operations Pty Ltd 1
Huggy Bear Operations Pty Ltd 1
Jellybeans Operations Pty Ltd 1
Jellybeans Attadale (Pty Ltd) 1
Jane’s Place Operations Pty Ltd 1
Jolimont Private Education Pty Ltd 1
WTTS Operations Pty Ltd 1
BUI Investments Pty Ltd 1
Derafi Pty Ltd 1
Alfoom Investments Pty Ltd 1
Shemlex Pty Ltd 1
Kindy Kids Village Pty Ltd 1
Kindy Kids Long DayCare and Preschool Pty Ltd 1
Three Little Pigs Pty Ltd 1
A.C.N. 078 042 378 Pty Ltd 1
ES5 Pty Ltd 1
Kindy Patch Unit Trust
Sydney Cove Children’s Centre Unit Trust
Sydney Cove Children’s Centre Unit Trust B
Country of
incorporation
Class of
Shares/Units
2020
%
2019
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
91
Country of
incorporation
Class of
Shares/Units
2020
%
2019
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
—
—
—
—
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Note 24: Subsidiaries continued
Name of Entity
Shemlex Investment Unit Trust
Shemlex Investments Freehold Unit Trust No 1
Morley Perth Unit Trust
Kindy Kids Village Trust
Kindy Kids Long Day Care and Preschool Trust
Adelaide Montessori Pty Ltd 1
GW Concord Pty Ltd 1
GW Chatswood Pty Ltd 1
GW Macquarie Park Pty Ltd 1
GW Brookvale Pty Ltd 1
GW Bronte Pty Ltd 1
GW Katoomba Pty Ltd 1
GW Gladesville Pty Ltd 1
GW Frenchs Forest Pty Ltd 1
GW Prep Holdings Pty Ltd 1
Lane Cove CCC Unit Trust
Lane Cove CCC Pty Ltd 1
Waterloo CCC Unit Trust
Waterloo CCC Pty Ltd 1
GW Chatswood Unit Trust
Homebush CCC Pty Ltd
Homebush CCC Unit Trust
Dendy Street Childcare Pty Ltd
Childcare Saver Pty Ltd
G8 Education Singapore Pte. Ltd. 2
Cherie Hearts Corporate Pte. Ltd. 2
Cherie Hearts Holdings Pte. Ltd. 2
Cherie Hearts @ Gombak Pte. Ltd. 2
Bright Juniors Pte. Ltd. 2
Our Juniors Global Schoolhouse Pte. Ltd. 2
1. These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Legislative Instrument 2016/785 issued by the Australian
Securities and Investment Commission. refer to note 26.
2. The Group sold its Singapore operations during the year. Refer to note 1(c).
The proportion of ownership interest is equal to the proportion of voting power held.
SECTION TWOFINANCIAL REPORT 92
4. Group Structure
Note 25: Parent Entity Disclosures
As at, and throughout the financial year ended 31 December 2020 the parent entity of the Group was G8 Education Limited.
Result of parent entity
Profit / (loss) for the year after tax
Other comprehensive income / (loss)
Total comprehensive income / (loss) for the year
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity of parent entity comprising of:
Contributed equity
Reserves
Accumulated losses
Total equity
Refer to note 14 for restatement details.
Parent entity contingencies
Refer to note 28 for parent entity contingent liabilities.
2020
$’000
Restated
2019
$’000
(172,035)
—
55,525
(2,016)
(172,035)
53,509
338,238
1,612,822
69,308
1,835,127
1,951,060
1,904,435
271,217
792,701
1,063,918
213,108
904,503
1,117,611
1,209,227
22,905
(344,990)
907,255
10,162
(130,593)
887,142
786,824
Parent entity guarantees in respect of the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed. Refer to note 26.
Accounting policy
The financial information for the parent entity, G8 Education, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
i)
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of G8 Education.
ii) Tax consolidation legislation. Refer to note 6.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
93
Note 26: Deed of Cross Guarantee
All subsidiaries identified, refer to note 24, as having 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 are
considered to be in the closed group.
Below is a consolidated statement of comprehensive income for the year ended 31 December 2020 of the closed group:
a) Consolidated statements of comprehensive income
Continuing operations
Revenue
Other income
Total
Expenses
Employment costs
Occupancy
Direct costs of providing services
Depreciation
Impairment loss
Other expenses
Finance costs
Total expenses
Share in profit of subsidiaries
Profit / (loss) before income tax
Income tax benefit (expense)
Profit / (loss) for the year
Effective portion of changes in fair value of cash flow hedges
Total comprehensive income /(loss) for the year
Refer to note 14 for restatement details.
2020
$’000
Restated
2019
$’000
765,135
11,901
900,834
5,572
777,036
906,406
(417,549)
(8,121)
(76,390)
(90,416)
(268,942)
(50,563)
(66,159)
(546,772)
(11,509)
(65,971)
(97,656)
—
(38,174)
(75,680)
(978,140)
(835,762)
(3,210)
—
(204,314)
70,644
17,304
(187,010)
—
(18,881)
51,763
(1,885)
(187,010)
49,878
SECTION TWOFINANCIAL REPORT
94
4. Group Structure
Note 26: Deed of Cross Guarantee continued
b) Balance Sheet
Set out below is a consolidated balance sheet as at 31 December 2020 of the closed group.
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Current tax asset
Total current assets
Non-current assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Current tax liability
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Other payables
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Refer to note 14 for restatement details.
2020
$’000
Restated
2019
$’000
316,989
17,383
10,268
—
344,640
87,419
468,655
117,104
1,055,242
987
38,127
29,025
30,600
2,000
99,752
103,307
601,475
72,789
1,158,970
6,991
1,729,407
1,943,532
2,074,047
2,043,284
73,892
9,105
2,773
69,435
120,581
53,686
6,200
—
66,654
96,930
275,786
223,470
657
295,139
611,815
16,153
696
387,750
637,398
13,087
923,764
1,038,931
1,199,550
1,262,401
874,497
780,883
1,209,227
22,905
(357,635)
907,255
10,162
(136,534)
874,497
780,883
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
95
5. Unrecognised Items
Note 27: Commitments
Capital commitments
There is no capital expenditure unconditionally contracted for at the reporting date but not recognised as a liability.
Note 28: Contingencies
Contingent liabilities
G8 Education has been served with a class action filed by Slater and Gordon in the Supreme Court of Victoria. The claim alleges breaches
of the company’s continuous disclosure obligations between 23 May 2017 and 23 February 2018. The Group is defending the proceedings.
No provision has been recognised in relation to this matter.
Note 29: Events Occurring After the Balance Sheet Date
The following material matter has taken place subsequent to year end:
– The Group completed the extension of its senior syndicated debt facility on 12 February 2021. The refinance included a reduction of the
senior syndicated loan facility to $300.0m, the term loan being converted to revolver and alignment of expiry date to October 2023.
There has been no change to the $100.0m subordinated facility.
SECTION TWOFINANCIAL REPORT 96
6. Other
Note 30: Key Management Personnel Disclosures
a) Directors
The following persons were directors of G8 Education during the financial year:
i) Chair – Independent Non-Executive
– M Johnson
ii) Executive Director
– G Carroll
iii) Independent Non-Executive Directors
– J Cogin
– S Forrester
– D Foster
– P Trimble (appointed 13 May 2020)
– M Zabel
– B Bailison (retired 20 May 2020)
b) Other Key Management Personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly
or indirectly, during the financial year:
Name
Position
– S Williams
Chief Financial Officer
– J Ball
General Manager Operations (ceased employment on 2 February 2021)
c) Key Management Personnel compensation
Short term employee benefits
Post employment benefits
Share based payments 1
Consolidated
2020
$’000
1,513
64
126
1,703
2019
$’000
1,683
62
(97)
1,648
1. Includes the write back of share-based payments expense due to vesting conditions not being met.
The relevant information on detailed remuneration disclosures can be found in the Remuneration Report on 34 to 49.
d) Equity instrument disclosures relating to Key Management Personnel
i) Options provided as remuneration and shares issued on exercise of such options
Refer to note 31 for details of options issued to Key Management Personnel.
ii) Option holdings
Refer to note 31 for details of options issued to Key Management Personnel.
iii) Share holdings
The numbers of shares in the Company held during the financial year by each Director of G8 Education and other Key Management
Personnel of the Group, including their associates, are set out in the Remuneration Report. There were no shares issued during the
reporting year as compensation.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
97
Note 31: Share–based Payments
Expenses arising from share-based transactions
Expenses arising from share-based payment transactions recognised during the year as part of employee benefit expenses were as follows:
Share-based payment expense on shares issued to KMP
1. 2019 Includes the write back of share-based payments expense due to vesting conditions not being met.
Consolidated
2020
$’000
174
2019 1
$’000
(131)
G8 Education Executive Incentive Plan (GEIP)
Shareholders approved the GEIP at the Annual General Meeting (AGM) in May 2017. The Company has established the GEIP to assist the
retention and motivation of executives of G8 Education (Participants). It is intended that the Performance Rights will enable the Company
to retain and attract the skilled and experienced executives and provide them with the motivation to enhance the success of the Company.
Under the Performance Rights, rights may be offered to Participants selected by the Board. Unless otherwise determined by the Board,
no payment is required for the grant of rights under the GEIP. Subject to any adjustment in the event of a bonus issue, each right is an
option to subscribe for one Share. Upon the exercise of a right by a Participant, each Share issued will rank equally with other Shares of
the Company.
Performance Rights (PRs) vest on achievement of the following performance and service conditions by the vesting date.
Performance
Conditions –
Earnings per
Share (EPS)
Compound Annual
Growth Rate (CAGR)
The percentage of Performance Rights that vest for each % EPS CAGR is based on the vesting schedule below:
EPS CAGR
Percentage of Performance Rights that vest
Less than 10%
0%
10% to 15%
> 15%
50% – 100% (pro-rata)
100%
Service Condition
Holders of Performance Rights must be continuously employed by the Company from the Grant Date
to the Vesting Date.
Retesting
Awards are not retested.
Dividend Policy
Holders of Performance Rights are not entitled to receive dividends prior to vesting.
Recently, shareholders approved changes to the GEIP at the General Annual Meeting held on 17 June 2020.
The vesting conditions for the 2020 Grant comprises a cumulative EPS measure rather than a CAGR measure as used for previous Grants.
The 2020 performance rights vest on achievement of the following performance and service conditions by the vesting date.
Performance
Conditions –
Reported (Audited)
Earnings per
Share (EPS)
with a Cumulative
EPS measure
Service Condition
The percentage of Performance Rights that vest for each cent of Cumulative EPS is illustrated in the following table:
Cumulative EPS
Percentage of Performance Rights that vest
Less than 14 cents
0%
14 cents to 17 cents
50% – 100% (pro-rata)
> 17 cents
100%
Holders of Performance Rights must be continuously employed by the Company from the Grant Date
to the Vesting Date.
Retesting
Awards are not retested.
Dividend Policy
Holders of Performance Rights are not entitled to receive dividends prior to vesting.
Following this approval, the Company granted options (2020 Grant) to members of the ELT on 30 June 2020.
In addition, performance conditions of 2017 Grant were not met. The options were forfeited on 1 March 2020.
Performance Rights issued under the plan may not be transferred unless approved by the Board. The table below summarises rights
granted under the plan.
SECTION TWOFINANCIAL REPORT
98
6. Other
Note 31: Share–based Payments continued
Balance at the
start of the year
Grant date
(Number)
Granted during
the year
(Number)
Exercised during
the year
(Number)
Forfeited during
the year
(Number)
Balance at the
end of the year
Unvested at the
end of the year
(Number)
(Number)
20 July 2017
6 October 2017
22 January 2018
20 July 2018
30 January 2019
10 May 2019
30 June 2020
Total
152,386
53,629
50,359
415,059
52,333
452,631
—
—
—
—
—
—
—
1,240,000
1,176,397
1,240,000
—
—
—
—
—
—
—
—
(152,386)
(53,629)
(50,359)
—
(21,806)
(20,876)
—
(299,056)
—
—
—
415,059
30,527
431,755
1,240,000
2,117,341
—
—
—
415,059
30,527
431,755
1,240,000
2,117,341
Unissued ordinary shares of G8 Education under the GEIP at the date of this report are set out in the table below.
Grant date
20 July 2017
6 October 2017
22 January 2018
20 July 2018
30 January 2019
10 May 2019
30 June 2020
Total
Vesting date
1 March 2020
1 March 2020
1 March 2020
1 March 2021
1 March 2021
1 March 2022
1 March 2023
Value of performance
right at grant date
$
Number of
performance
rights
3.19
3.70
3.82
2.39
2.73
2.42
0.74
—
—
—
415,059
30,527
431,755
1,240,000
2,117,341
Expiry date
30 May 2020
30 May 2020
30 May 2020
30 May 2021
30 May 2021
30 May 2022
30 May 2023
Valuation of instruments issued
Value of the financial benefit
In terms of performance rights issued to Key Management Personnel (KMP), the table below lists the inputs used in the model:
Grant date
20 July 2017
6 October 2017
22 January 2018
20 July 2018
30 January 2019
10 May 2019
30 June 2020
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Share price
on grant date
Share price
volatility
Risk
free rate
Time to
maturity
Annual
dividend yield
$3.77
$3.83
$3.82
$2.87
$3.06
$2.83
$0.89
30%
30%
30%
30%
34%
34%
48%
2.31%
2.17%
2.04%
2.09%
1.82%
1.28%
0.26%
2.62 years
2.57 years
2.11 years
2.62 years
2.08 years
2.81 years
2.67 years
6.37%
6.27%
5.45%
7.27%
5.56%
5.79%
6.96%
Model used
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Accounting policy
Share-based compensation benefits are provided to certain
employees via the GEIP.
The fair value of options and Performance Rights are granted
under the GEIP are recognised as an employee benefit expense
with a corresponding increase in equity. The fair value is measured
at grant date and recognised over the period during which the
employees become unconditionally entitled to the options.
For share options and Performance Rights, the fair value at grant
date is determined using a Black Scholes model that takes into
account the exercise price, the term of the option, the vesting and
performance criteria, the impact of dilution, the non-tradeable
nature of the option, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield
and the risk-free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any
non-market vesting conditions (for example, profitability and sale
growth targets). Non-market vesting conditions are included
in assumptions about the number of options that are expected
to become exercisable. At each statement of financial position
date, the entity revises its estimate of the number of options and
performance rights that are expected to become exercisable.
The employee benefit expense recognised each period takes into
account the most recent estimate.
Upon exercise of the options and Performance Rights, the balance
of the share-based payments reserve relating to those options
remains in the share-based payments reserve.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
99
Consolidated
2020
$
537,923
50,000
342,176
2019
$
543,102
—
154,500
930,099
697,602
Note 32: Remuneration of Auditors
During the year, the following fees were paid or payable for services provided by the auditor of the Group:
Fees to the group auditor for auditing the statutory report
Fees for other assurance and agreed-upon-procedure services
Fees for other services
Total Auditor’s remuneration
Note 33: Related Party Transactions
a) Parent entity
The parent entity within the Group is G8 Education.
b) Subsidiaries
Interests in subsidiaries are set out, refer to note 24.
c) Key Management Personnel
For details of transactions that Key Management Personnel and their related entities had with the Group during the year. Refer to note 30.
During the reporting period, the Directors and Key Management Personnel, including the Group’s managing director and CEO, G Carroll,
the Group’s Chief Financial Officer, S Williams and General Manager Operations, J Ball, agreed to 20% reduction to their base fixed
remuneration for a 6-month period, (effective from 3 April to 2 October 2020 for Directors, and from 1 May to 30 October 2020 for
executives). From November 2020 all executive salaries were reinstated to contractual remuneration rates.
The Group receives services from a software provider which became a related party on 13 May 2020, as a result of the appointment of
P Trimble as a director. The services received in the reporting period were made on terms equivalent to those that prevail in arm’s length
transactions. The amount recognised as an expense in the reporting period for the services received was immaterial.
There was nil outstanding at the reporting date in relation to transactions with related parties.
SECTION TWOFINANCIAL REPORT
100
6. Other
Note 34: Other Significant Accounting Policies
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated. The consolidated financial statements
are for the consolidated entity consisting of G8 Education and
its subsidiaries.
a) Basis of preparation
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards (AASB),
Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Board
and the Corporations Act 2001.
The Company is a listed for profit public Company, incorporated
in Australia and operating in Australia and Singapore (disposed
October 2020). The Company’s principal activities are operating
child care centres and ownership of franchised child care centres.
The financial statements were authorised for issue on 23 February
2021. The Company has the power to amend and reissue the
financial report.
Compliance with IFRS
Compliance with AASB ensures that the financial report of G8
Education and the Group complies with International Financial
Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the
historical cost convention as modified, where applicable, by
the measurement at fair value of selected non-current assets,
financial assets and liabilities (including derivative instruments).
b) Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of G8 Education (“Company”
or “parent entity”) as at 31 December 2020 and the results of all
subsidiaries for the year then ended.
G8 Education and its subsidiaries together are referred to in this
financial report as the Group or the consolidated entity.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it 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.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de-consolidated from the
date that control ceases.
Inter-company transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
c) Goods and Services Tax (GST)
Revenues, expenses and assets and liabilities are recognised net
of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as
part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other
receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities which
are recoverable from, or payable to the taxation authority, are
presented as operating cash flows.
d) Rounding amounts
The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ reports) Instrument 2016/191,
relating to the “rounding off” of amounts in the financial reports.
Amounts in the financial statements have been rounded off in
accordance with that Instrument to the nearest thousand dollars,
or in certain cases, the nearest dollar.
e) Going concern
Refer to note 1(d)
f) Reserves
i) Share-based payments
The share-based payments reserve is used to recognise the
expensing of the grant date fair value of options issued to
employees but not exercised.
ii) Translation
Exchange differences arising on translation of the foreign
controlled entities are recognised in other comprehensive income
as described, refer to note 17, and accumulated in a separate
reserve within equity. The cumulative amount is reclassified to
the consolidated income statement when the net investment is
disposed of.
iii) Hedging
The hedging reserve is used to record gains or losses on
hedging instruments in cash flow hedges that are recognised
in other comprehensive income. Amounts are reclassified to
the consolidated income statement when the associated hedge
transaction affects the consolidated income statement.
iv) Profits
The profits reserve comprises the transfer of net profit for the
current and previous years and characterises profits available for
distribution as dividends in future years. Dividends amounting to
$27.6m (2019: $58.2m) were distributed from the profits reserve
during the year.
The amount transferred to profits reserve comprises the transfer from
net profit for the current year for profit making entities within the
Group and characterises profits available for distribution as dividends
in the future years. The restatement for the remediation program has
been adjusted against the profits reserve. Refer to note 14.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 101
Amendments to IAS 1: Classification of Liabilities as
Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to
76 of IAS 1 to specify the requirements for classifying liabilities as
current or non-current. The amendments clarify:
– What is meant by a right to defer settlement
– That a right to defer must exist at the end of the reporting period
– That classification is unaffected by the likelihood that an entity
will exercise its deferral right
– That only if an embedded derivative in a convertible liability
is itself an equity instrument would the terms of a liability not
impact its classification
The amendments are effective for annual reporting periods
beginning on or after 1 January 2023 and must be applied
retrospectively. The Group is currently assessing the impact of
the amendments.
IFRS 9 Financial Instruments
Fees in the ’10 per cent’ test for derecognition of financial liabilities
As part of its 2018-2020 annual improvements to IFRS standards
process the IASB issued amendment to IFRS 9. The amendment
clarifies the fees that an entity includes when assessing whether
the terms of a new or modified financial liability are substantially
different from the terms of the original financial liability. These fees
include only those paid or received between the borrower and the
lender, including fees paid or received by either the borrower or
lender on the other’s behalf. An entity applies the amendment to
financial liabilities that are modified or exchanged on or after the
beginning of the annual reporting period in which the entity first
applies the amendment.
The amendment is effective for annual reporting periods beginning
on or after 1 January 2022 with earlier adoption permitted.
The amendments are not expected to have a material impact
on the Group.
Note 34: Other Significant Accounting Policies continued
g) Accounting standards and interpretations applied
from 1 January 2020
The accounting policies adopted in the preparation of the
consolidated financial report are consistent with those followed
in the preparation of the Group’s annual report for the year ended
31 December 2019, except for the adoption of new standards,
interpretations or amendments effective as of 1 January 2020.
Amendments to AASB 16 COVID-19 Related Rent Concessions
On 28 May 2020, in response to the COVID-19 pandemic, the
International Accounting Standards Board has issued COVID-19
Related Rent Concessions – amendment to AASB 16 Leases
to allow lessees not to account for rent concessions as lease
modifications if they are a direct consequence of COVID-19 and
meet certain conditions.
The amendments introduce an optional practical expedient that
simplifies how a lessee accounts for rent concessions that are
a direct consequence of COVID-19. A lessee that applies the
practical expedient may elect not to assess whether a COVID-19
related rent concession is a lease modifications. A lessee that
makes this election accounts for any change in lease payments
resulting from the COVID-19 related rent concession in the same
way it would account for the change under AASB 16, if the change
were not a lease modification. If the concession is in the form of
a one-off reduction in rent, it will be accounted for as a variable
lease payment and be recognised in profit or loss.
The practical expedient will only apply if:
– the revised consideration is substantially the same or less than
the original consideration;
– the reduction in lease payments relates to payments due on or
before 30 June 2021; and
– no other substantive changes have been made to the terms of
the lease.
The Group applied the practical expedient to all rent concessions
that met the condition.
The Group recognised a gain of $4.1m in profit and loss to reflect
changes in lease payments arising from rent concessions that
meet the conditions of the practical expedient. This amount is
presented as an offset to occupancy expenses.
Standards issued but not yet effective
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Group’s financial statements are disclosed below. The Group
intends to adopt these new and amended standards and
interpretations, if applicable, when they become effective.
SECTION TWOFINANCIAL REPORT 102
Directors’ Declaration
In the Directors’ opinion:
a) the financial statements and notes set out on pages 53 to 101 are in accordance with the Corporations Act 2001, including:
i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2020 and of its performance for
the financial year ended on that date;
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed Group identified
in note 24 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 26.
Note 34(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Gary Carroll
Director
23 February 2021
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT 103
Independent Auditor’s Report
to the Members of G8 Education Limited
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of G8 Education Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of G8 Education Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated balance sheet as at 31 December 2020,
the consolidated income statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended,
notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a. Giving a true and fair view of the consolidated financial position of the Group as at 31 December
2020 and of its consolidated financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
SECTION TWOFINANCIAL REPORT
104
Independent Auditor’s Report
to the Members of G8 Education Limited
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
Impairment of non-current assets including goodwill
Why significant
How our audit addressed the key audit matter
The determination of the recoverable amounts of non-
current assets including property, plant and
equipment, right of use assets and goodwill required
significant judgement by the Group.
Impairment assessments are complex and involve
significant management judgement. These include
judgements and estimates relating to occupancy,
future childcare rate increases and revenues,
anticipated costs, growth rates, forecast capital
expenditure, centres to be exited, and the discount
rate applied. This includes potential impacts of the
COVID-19 pandemic on income and expenses. As
such, impairment testing of goodwill and other non-
current assets was considered to be a key audit
matter.
The Group’s disclosures are included in notes 1a, 11,
16 and 20 to the financial statements, which includes
the key assumptions applied by the Group and
impairment charge of $145.3 million in relation to
goodwill and $118 million in property, plant and
equipment and right of use assets.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Our audit procedures included an evaluation of the following
judgements and assumptions used in the Group’s impairment
assessment:
►
►
►
►
►
►
►
►
►
►
►
Evaluated the Group’s identification cash generating
units (“CGU”) for non-current assets and one CGU for
goodwill, including quantification of the carrying
amount of the CGUs;
Agreed the cash flow forecasts to Board approved
budgets;
Assessed future cash flow assumptions through
comparison with current trading performance,
externally derived data (where applicable), disposals in
the period and inquiry with the Group in respect of its
basis for rate increases, key growth and trading
assumptions;
Assessed discount rate and long-term growth rate
assumptions with involvement from EY valuation
specialists;
Considered whether the Group’s cash flow forecasts
contemplated the potential future impacts of the
COVID-19 pandemic on income and expenses;
Considered management plans for centre closures and
sales and tested the Group’s cash flow forecasts
reflected these plans;
Assessed and performed independent sensitivity
analysis on management’s review of underperforming
assets and held inquiries with the Group’s property
team;
Tested the mathematical accuracy of the impairment
models, including recalculating the recoverable amount;
Considered the market capitalisation of the Group
relative to the recorded net asset amount at 31 May
2020 and 31 December 2020 when impairment of
goodwill was tested;
Performed independent sensitivity analysis over the
impairment model in relation to key assumptions
including occupancy, growth rates, and discount rates;
and
Considered the adequacy of disclosure in notes 1a,
11,16 and 20 to the financial statements regarding the
impairment testing approach, key assumptions and
sensitivity analysis.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Independent Auditor’s Report
to the Members of G8 Education Limited
105
Employee remediation
Why significant
How our audit addressed the key audit matter
The Group has recorded a Provision for Employee
Remediation as both a current year and prior period
accounting matter. A review of G8’s award and
legislative requirements identified inadvertent non-
compliance issues with the Children’s Services Award
and the Educational Services (Teachers) Award in
Australia over the past 6.5 years. The non-compliance
resulted in the underpayment of current and former
employees. The Group intends to remediate this issue
in the next financial period.
The provision for employee remediation was a key
audit matter because of the estimation uncertainty
and judgements used in determining the payroll
shortfall to be used in calculating the provision and
the nature of the matter. The Group used legal
counsel and accounting experts in estimating
underpayments. The provision for the cumulative
amount of additional payroll costs payable to current
and former employees as at 31 December 2020 is
$80.0 million. As outlined in Note 14, the income
statement impact of the provision affects the current
year by $13 million after tax, the comparative
financial year by $10.6 million and opening retained
earnings at 1 January 2019 by $33.4 million.
In assessing the Provision for Employee Remediation, our
procedures included the following:
►
►
►
►
►
►
►
►
Developed an understanding of the non-compliance with
the requirements of the Children’s Services Award and
the Educational Services (Teachers) Award in Australia
and held discussions with management, the Audit & Risk
Management Committee, management’s accounting
experts and the Group’s legal counsel to determine the
nature of the matters and assessed the accounting
treatment was aligned with AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors;
Developed an understanding of the basis for
management’s estimate of the provision, and the
nature of the estimation uncertainty at reporting date;
Assessed the design effectiveness of key controls
implemented by the Group over the accounting for the
payroll remediation provision;
As the Group engaged external experts to assist
management in determining the amount of any
potential underpayment, we considered the
independence, experience and competency of the
Group’s independent experts as well as the results of
their procedures;
Tested the completeness of the expert’s model by
agreeing inputs to supporting documentation for a
sample of employee pay periods;
Tested the mathematical accuracy of the provision
calculation on a sample basis and assessed if it was in
line with the requirements of Australian Accounting
Standards;
Assessed management’s judgements applied in
determining key assumptions including alternate
assumptions considered; and
Assessed the adequacy of the disclosures made in the
financial statements including the restatement of prior
periods and the significant judgements and estimates
adopted by management.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
SECTION TWOFINANCIAL REPORT
106
Independent Auditor’s Report
to the Members of G8 Education Limited
Revenue Recognition
Why significant
How our audit addressed the key audit matter
Revenue is recognised by the Group when the
underlying childcare service has been provided.
Revenue from childcare services, government
assistance and funding for the Group for the financial
year was $775.2 million. Customers are generally
invoiced in advance and adjustments made through
processing of Child Care Subsidy by the Department of
Human Services. Accordingly, there is a risk that
revenue is recognised in the incorrect period.
The Group focuses on revenue as a key performance
measure for executives and it is also a key parameter
by which the performance of the Group is measured.
As a result, we consider revenue to be a key audit
matter.
Refer to note 3 to the financial statements for
disclosure relating to revenue.
Our audit evaluated revenue recognised in accordance with
AASB15 Revenue from contracts with customers. To do
this, we:
►
►
►
►
►
►
►
►
►
Assessed the Group’s identification of the
performance obligations and revenue recognition
under AASB15 and AASB 120 Accounting for
Government Grants and Disclosure;
Assessed the Group’s design effectiveness of key
controls over the recognition of revenue;
Correlated 100% of revenue to accounts receivable
and cash, testing outliers;
Tested a sample of daily revenue to source
documentation;
Tested 100% of government funding from the Early
Childhood Education and Care Relief Package through
to cash receipt and a sample of payments received for
transition relief;
Assessed whether revenue is recognised in the
appropriate financial period by assessing the
completeness of the deferred revenue balance
through testing a sample of parent fees in advance
bookings;
Tested reconciliations relating to revenue recognised
and agreed this to support for Child Care Subsidy;
Assessed journal entries relating to revenue, in
particular those near the year end; and
Assessed the adequacy of the Group’s disclosures in
relation to revenue and related accounting policies.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2020 Annual Report, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Independent Auditor’s Report
to the Members of G8 Education Limited
107
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating 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 Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
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 the Australian Auditing Standards 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 this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
SECTION TWOFINANCIAL REPORT
108
Independent Auditor’s Report
to the Members of G8 Education Limited
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
Independent Auditor’s Report
to the Members of G8 Education Limited
109
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 31
December 2020.
In our opinion, the Remuneration Report of G8 Education Limited for the year ended 31 December
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Ric Roach
Partner
Brisbane
23 February 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
SECTION TWOFINANCIAL REPORT
110
Shareholder Information
The total issued capital of the Company as at 31 December 2020 and as at the date of this annual report is 847,390,315.
The Shareholder information set out below was applicable as at 5 February 2021.
a) Distribution of equity securities
Analysis of number of equity security holders by size of holding is listed below.
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
There were 2,792 holders of less than a marketable parcel of ordinary shares.
b) Quoted equity security holders
Twenty largest quoted equity security holders.
Name
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd (Agency Lending)
HSBC Custody Nominees (Australia) Limited
Netwealth Investments Limited
Citicorp Nominees Pty Limited (Colonial First State Inv)
RAP Investments Pty Limited
HSBC Custody Nominees (Australia) Limited - GSCO ECA
BNP Paribas Nominees Pty Ltd (IB AU Noms Retail)
BNP Paribas Nominees Pty Ltd (Hub24 Custodial Serv)
Mr Riccardo Pisaturo
BNP Paribas Nominees Pty Ltd (IOOF Invmt Mngt Ltd)
Viss Holdings Pty Ltd
Shobra Pty Ltd
CS Third Nominees Pty Limited
CS Fourth Nominees Pty Limited
Mr Craig Graeme Chapman
Class of equity security
Shares
Holders
% Issued
Capital
675,802,245
26,616,783
82,877,220
31,484,263
27,204,104
3,405,700
217
375
3,996
4,150
9,862
6,686
79.75
3.14
9.78
3.72
3.21
0.40
847,390,315
25,286
100.00
Quoted
ordinary shares held
Percentage
of issued shares
186,564,210
146,266,578
122,792,475
87,311,371
31,806,854
19,505,186
7,678,606
5,801,855
5,416,351
2,600,000
2,244,663
1,751,333
1,735,415
1,400,000
1,175,000
1,170,683
1,168,000
1,004,799
1,000,412
1,000,000
629,393,791
22.02
17.26
14.49
10.30
3.75
2.30
0.91
0.68
0.64
0.31
0.26
0.21
0.20
0.17
0.14
0.14
0.14
0.12
0.12
0.12
74.28
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT
111
c) Substantial holders
Substantial holders as at 11 February 2021 in the Company are set out below:
Ordinary Shares
Allan Gray
Sumitomo Mitsui Trust Holdings, Inc.
Dimensional Group
The Vanguard Group, Inc
Number held
Percentage
117,614,533
71,919,183
23,072,573 1
41,842,834
14.06%
8.49%
5.014%
5.001%
1. Substantial holding notice disclosed 11/11/2019 prior to capital raise.
d) Voting rights
The voting rights attached to each class of capital securities are set out below.
i) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share will
have one vote.
ii) Options and performance rights
There are no voting rights attached to options.
iii) Unquoted securities
There are no unquoted securities on issue.
SECTION THREESHAREHOLDER INFORMATION 112
Corporate Directory
Directors
M Johnson, Chair
G Carroll, Managing Director
Prof J Cogin, Non-Executive Director
S Forrester, AM, Non-Executive Director
D Foster, Non-Executive Director
P Trimble, Non-Executive Director
M Zabel, Non-Executive Director
Company Secretary
T Wood
Principal registered business office in Australia
G8 Education Limited is a Company limited by
shares, incorporated, and domiciled in Australia.
It’s registered office and principal place of business is:
159 Varsity Parade,
Varsity Lakes, QLD 4227
Telephone: 07 5581 5300
Facsimile: 07 5581 5311
www.g8education.edu.au
Share registry:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane QLD 4000
Auditor:
Ernst & Young
111 Eagle Street
Brisbane QLD 4001
Lawyers:
Allens Linklaters Lawyers
Level 26, 480 Queen Street
Brisbane QLD 4000
Securities exchange listing:
G8 Education Limited shares are listed on the
Australian Securities Exchange under the ticker code GEM.
G8 EDUCATION LIMITED — 2020 ANNUAL REPORT E
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www.G8education.edu.au
G8 Education Limited (ABN 95 123 828 553)