2022 ANNUAL REPORT G8 EDUCATION LIMITED 2022 ANNUAL REPORT 01 SECTION 1 At G8 Education our purpose is creating the foundations for learning for life. The first five years of a child’s life are critical to their future learning and development. This underpins our commitment to providing quality early learning through our innovative and evidence-based Education Strategy, and our team of passionate and dedicated Educators and Teachers around Australia. Our teams are supported to continue their lifelong learning journeys through sector leading study pathways and professional development – helping bring to life our purpose for each and every child in our care. G8 Education Limited (ASX:GEM) is one of Australia’s largest providers of quality early childhood education and care, with close to 10,000 team members welcoming around 50,000 children into more than 430 services every week. While we operate under 21 centre brands, we are all united by our shared purpose of creating the foundations for learning for life. Led by our purpose, we have grown from a family-owned and operated company with 30 centres in 2007, to now draw on our national scale to create exceptional experiences for our children, families and team. Each day, our dedicated team members nurture children’s independent and curious minds, by creating inclusive, safe learning environments which meet children’s individual needs. We support every child to build a strong sense of identity and are committed to providing children the right to live, play and learn within their culture. At G8 Education we are committed to creating rich learning experiences through which children can thrive. OUR BUSINESS Contents OUR PURPOSE SECTION 1 Acknowledgement of Country IFC Our Purpose 1 Our Business 1 Chair’s Report 2 CEO & Managing Director’s Report 4 2022 Highlights 6 Strategy 8 Material Risks 10 Sustainability Report 14 Directors’ Report 34 Board of Directors 34 Key Operational Information 40 Remuneration Report 41 SECTION 2 Financial Report 62 SECTION 3 Shareholder Information 124 Corporate Directory 126 02 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CHAIR’S REPORT On behalf of the Board, I am pleased to present the G8 Education Limited 2022 Annual Report. With a continued focus on quality and safety, we have achieved significant successes in 2022 delivering benefits for our children, families, teams and communities. Evidence suggests that children who receive high quality early education may be more likely to thrive throughout later schooling, enjoy healthier development, have greater employment opportunities, earn higher wages as adults, and enjoy more productive and fulfilling lives. Overall, this means a more prosperous future for Australia. Our sector continues to face challenges, including cost pressures, affordability challenges and workforce shortages, which limit the care options many Australian families have available to them. We were pleased to join others across the sector in welcoming affordability and accessibility measures included in the Australian Government’s Federal Budget in October 2022. We are also working to support state government reforms that will improve access to kinder and preschool programs for families in New South Wales, Victoria and Queensland from 2023. The success of these national and state government reforms relies heavily on the availability of trained educators and early childhood teachers. Workforce shortages continue to challenge the sector. We have joined with other providers and sector bodies in calling for government to fund an increase in educator wages in a way that won’t see overwhelming cost passed on to families and providers. We remain focused on the issue of workforce shortages as a priority in 2023. Against this challenging sector backdrop, I am incredibly proud of the results G8 Education delivered in 2022 for our children, families, teams and shareholders. We have continued our strong focus on safety and quality, earning recognition as the Queensland Child Protection Week - Child Safe Organisation for 2022, and seeing continual improvement in our National Quality Standards. By the end of 2022, 89% of our centres had earned a ‘Meeting’ or ‘Exceeding’ rating. We also continued our development of an innovative and evidence-based early learning curriculum, as part of our Education Strategy. This strategy includes a focus on nurturing children’s independence and curiosity, championing health and wellbeing, and leveraging technology that is integral for modern learning. To deliver these successes, we overcame a challenging first quarter in which disruption from the COVID-19 Omicron wave and extensive rain and flood events along Australia’s east coast forced temporary, but widespread, closures. Our focus was on supporting the safety and wellbeing of our children, families, teams and broader communities. I am grateful to our teams for the genuine concern and care displayed during these challenges and heartened by the many stories of our teams going above and beyond to support our communities during this time. These events temporarily impacted occupancy and earnings in the first quarter of 2022. Disciplined responses to this difficult external environment mitigated the impact on the Group’s financial performance in 2022 with a strong second half performance resulting in a full year Net Profit After Tax of $36.6 million. Cash flow generation continued to be strong, with $136.8 million in operating cash flows being generated and a share buyback of $34.8 million completed during 2022 up to 31 December 2022. The Group continued to maintain a strong Balance Sheet, with net debt of $91.0 million at the end of 2022 and access to a further $140 million of undrawn bank debt facilities. This balance ensures the Group has sufficient capital to deliver its current strategy. Dividends totalling 2.0 cents per share were declared in respect of the 2022 full year1. As we concluded 2022 we marked a leadership transition from our outgoing Managing Director and CEO Gary Carroll to our incoming Managing Director and CEO Pejman Okhovat. On behalf of the Board, I would like to thank Gary for his exceptional leadership and outstanding contribution over his six years with G8 Education, initially as Chief Financial Officer before taking on the role of Managing Director and CEO in January 2017. Gary has been a steadfast champion of our purpose, while overseeing periods of significant change and challenge for the organisation – including leading the Group through the COVID-19 pandemic. He has been a strong advocate for the sector, in particular driving support to better recognise and elevate the value of the early learning profession. He has executed and delivered solid results through the strategic transformation program and leaves in place strong foundations for the next phase of our journey. 1. In addition to an interim dividend totaling 1.0 cent per share. 03 SECTION 1 CHAIR’S REPORT To that end, the Board and I extend a warm welcome to Pejman as he joins G8 Education. Pejman is an accomplished leader whose three decades in retail give him an exceptional understanding of consumers, and leading large, dispersed teams to deliver excellent results. We know he is delighted to join G8 Education and is committed to continuing our focus on delivering outstanding experiences for our children, families and teams and delivering value for shareholders. Importantly, I would like to thank each and every one of our G8 Education team members for your professional and passionate service in delivering exceptional education and care to our children and families last year. I would like to thank our families for trusting your children’s care and learning to our incredible teams. It is a privilege to be given the opportunity to make a positive impact in the lives of so many Australian children and families. Lastly, thanks also to our shareholders for your ongoing support. Your commitment enables us to continue this positive impact as we pursue our purpose, creating the foundations for learning for life. David Foster Chair 1. Average core occupancy excludes greenfield centres. $36.6m NET PROFIT AFTER TAX 71% CORE OCCUPANCY1 OPERATING CASH FLOW GENERATION $136.8m AND AFTER LEASE PAYMENTS $63.6M 04 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CEO AND MANAGING DIRECTOR’S REPORT It is my privilege to have joined G8 Education in January 2023 as CEO and Managing Director. In presenting this report on behalf of the organisation, I acknowledge the exceptional contribution of outgoing CEO and Managing Director Gary Carroll, in delivering these results for 2022, and establishing G8 Education as the high quality education and care provider it is today. As I look ahead to the next phase of our journey, I am excited to build upon these foundations, as we continue to make a positive and lasting impact in the lives of children and their families across Australia. QUALITY AND SUSTAINABILITY Our purpose at G8 Education is creating the foundations for learning for life. Quality and sustainability are critical to achieving this. In line with our strategy, we have continued to drive quality improvements across our network in 2022. We completed our quality improvement program, marking the end of our centralised delivery of targeted quality support and refreshed resources across our centres. Our focus has now shifted to a new business as usual model designed to sustain and continuously improve service quality as part of our everyday operations. By the end of 2022, 89% of our centres were 'Meeting' or 'Exceeding’ the National Quality Standard, a 3% increase year on year demonstrating a continued uplift in quality performance. We have increased our focus on managing our environmental, social and governance risks and material issues. Child health and safety remains the most significant material issue to our families, our teams and stakeholders. We were pleased to be named the Queensland Child Protection Week - Child Safe Organisation for 2022, acknowledging our commitment to the ongoing journey of creating a child-focused culture that keeps children safe. Critical to this journey has been the appointment of a team member in each centre as a Child Protection Champion. These team members embed practices into their centres by supporting and educating team members and promoting a child safe culture. At G8 Education we are committed to creating safe and inclusive learning environments in which children can thrive. We are proud that through our purpose we can deliver a unique and positive social impact. We piloted a new inclusion program in 2022 which focuses on educational planning and practice, families and communities, complex needs, cultural competence and learning environments through a strength-based perspective and inclusion lens. In 2022 we committed to developing a group-wide Reconciliation Action Plan. This will complement and support the reconciliation journeys many of our centres have already begun. Our environmental commitments included an expansion of our recycling initiatives, with the launch of a nappy recycling pilot in partnership with Kimberley-Clark. We have continued our overall program to set and achieve targeted reductions in Scope 1 and Scope 2 emissions by 2025. PEOPLE PROGRAM Our people bring our purpose to life every day, and it is through our dedicated teams that we deliver outstanding experiences for our children and families. In 2022 we have maintained, as a priority, our strategic focus on attracting, retaining, developing and rewarding our team members as the sector has continued to navigate unprecedented workforce shortages. Career development remains a key pillar of our employee value proposition. Our professional development offerings, combined with our scale, are helping us mitigate sector workforce shortages by ‘growing our own’ talent. It is pleasing to see more than 1,000 team members engaged in our sector leading Study Pathways program in 2022, working towards Certificate III, Diploma, Bachelor and Masters qualifications. Support ranges from financial assistance, mentoring programs and allocated, paid study time. Our sector leading offering was recognised when G8 Education was named Australia’s most attractive employer in Randstad’s Employer Brand Research 2022 survey. During the year we also implemented increased day-to-day support for our Centre Managers, and provided dedicated teacher registration resources for early childhood teachers, while ensuring remuneration remains market-competitive for these roles. We continue to review and refresh our educator offering, including increasing our childcare fee discount to 50% in 2022 and offering our Early Childhood Teachers either two weeks additional leave or higher wages from 2023. We have continued a strong focus on team member wellbeing as part of our safety priority, and pleasingly we saw a significant 20% reduction in mental injury frequency rate in 2022. Through coordinated efforts at a sector, network and local level we reduced our job vacancy levels by 37% as at 31 December 20221. We continue our efforts, alongside sector peers and peak bodies, in calling for government to fund a wage increase for educators in a way that will not see overwhelming costs on to providers and working families. 1. Compared to 31 December 2021. 05 SECTION 1 CEO AND MANAGING DIRECTOR’S REPORT CENTRE NETWORK PERFORMANCE The start of 2022 presented temporary, yet significant challenges, as our network felt the impacts of the COVID-19 Omicron wave and significant rain and flooding along the east coast of Australia. These weather impacts caused devastation in many of our communities as we focused our efforts on supporting directly impacted team members and families. As a result of these events, centre closures were elevated in the first quarter, temporarily impacting occupancy, before we saw a subsequent recovery during the second quarter. Closing occupancy at the end of December 2022 was 71%. Our greenfields program gained momentum after a period of COVID-19 delays, opening 6 new centres in 2022. As part of our previously announced divestment and end of term exits from underperforming or undesirable sites, a total of 16 centres were divested or closed during the year. This brought our total number of centres as at 31 December 2022 to 438. These centres provide a total combined licenced capacity of more than 36,500. Our activities in this area continue to support the dual aim of improving network quality and providing a source of material earnings growth in future years as the greenfield portfolio grows and matures. Overall, our centre network performance resulted in operating Earnings Before Interest and Tax (EBIT) after lease interest of $80.3 million, 0.2% above last year. The Group’s ability to convert Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) to cash remained strong with 94% cash conversion in 2022, generating operating cash flows of $136.8 million. G8 Education has an amazing purpose and I feel very privileged to be in a position where I can support our Educators and Teachers to create the foundations for learning for life for the next generation of Australian children. I believe in the importance of listening, learning and collaborating to ensure we deliver the best possible experiences for our children, families and teams. Pejman Okhovat, CEO and Managing Director OUTLOOK FOR 2023 Demand for high quality education and care is expected to grow following the introduction of the Cheaper Childcare bill and the changes to the Child Care Subsidy from 1 July 2023. Demand drivers such as workforce participation, birth rate and international migration are also forecast to be positive in the coming years. Supply growth constraints are expected to persist in 2023 as the sector continues to face workforce shortages as well as increased construction costs and construction timeframes. Our focus on sustainable growth and returns, remains underpinned by our strategic priorities to: • attract and retain great leaders and teams • deliver high quality education and care for children and families • create differentiation for families and teams. Our strategy, implemented through our talented and dedicated team, will continue to support our commitment to delivering outstanding experiences and outcomes for our children, families and teams. I would like to sincerely thank our dedicated teams across Australia for your passion, commitment and talent. Your dedication to your profession makes a lasting and positive impact on our children and families. Yours sincerely, Pejman Okhovat CEO and Managing Director $106.5m OPERATING EBITDA1 CASH CONVERSION $80.3m OPERATING EBIT1 1. Operating EBITDA excludes non-trading items and Kiddo and is after lease interest. Refer to note 7 of the Financial Report on page 76 for a breakdown of the non-trading items. Operating EBIT excludes non-trading items and Kiddo and is after lease interest and depreciation. 94% 06 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 438 EARLY LEARNING AND EDUCATION CENTRES 48K+ CHILDREN PER WEEK 37K+ LICENSED PLACES ACROSS AUSTRALIA 3,415 NEW TEAM MEMBERS JOINED G8 EDUCATION NAMED Australia's Most Attractive Employer BY RANDSTAD EMPLOYER BRAND RESEARCH SURVEY ENGAGED IN THE STUDY PATHWAYS BACHELOR SCHOLARSHIP PROGRAM 215 TEAM MEMBERS PARTICIPANTS IN OUR STUDY PATHWAYS PROGRAM INCREASED BY 62% 9,808 TEAM MEMBERS 1,064 TEAM MEMBERS ENGAGED IN STUDY PATHWAYS TRAINEESHIPS CERT III AND DIPLOMA OUR FIRST BACHELOR SCHOLARSHIP GRADUATES COMPLETED THEIR STUDIES AND ALL 25 TOOK EARLY CHILDHOOD TEACHER ROLES IN OUR CENTRES Graduates 1. As at 31 December 2022 2022 HIGHLIGHTS 1 8K+ EARLY CHILDHOOD EDUCATORS 07 SECTION 1 2022HIGHLIGHTS1 102 CENTRE MANAGERS ENROLLED IN FIRST STEPS AWARDED A bronze medal IN THE APPRENTICESHIPS- EMPLOYER AWARD CATEGORY AT THE 2022 AUSTRALIAN TRAINING AWARDS Large Employer Finalist AT THE VICTORIAN TRAINING AWARDS $181,031 RAISED THROUGH THE CHILDREN’S HOSPITAL FOUNDATION 42K YOUR WAY FUNDRAISER TO SUPPORT RESEARCH INTO CHILDHOOD BRAIN CANCER ANNOUNCED TWO WEEKS ADDITIONAL PAID ANNUAL LEAVE FOR OUR QUALIFIED EARLY CHILDHOOD TEACHERS FROM 2023 Masters of Teaching SCHOLARSHIP ADDED TO OUR STUDY PATHWAYS PROGRAM Team members say THEIR MANAGER SUPPORTS THEIR EFFORTS TO BALANCE WORK AND PERSONAL LIFE OUT OF4 5 Team members say G8 PROVIDES THE OPPORTUNITY FOR LEARNING AND DEVELOPMENT OUT OF4 5 AWARDED THE ‘COMMITMENT TO CHILD SAFE ORGANISATIONAL PRINCIPLES AWARD’ BY THE QUEENSLAND CHILD PROTECTION WEEK GOLD SPONSOR FOR THE EARLY CHILDHOOD AUSTRALIA CONFERENCE, WITH A THEME THAT CHALLENGED EARLY CHILDHOOD PROFESSIONALS TO BE ‘THOUGHT LEADERS AND POWERBROKERS’ 89% OF OUR CENTRES WERE 'MEETING' OR 'EXCEEDING’ THE NATIONAL QUALITY STANDARD, A 3% INCREASE YEAR ON YEAR SIGNED A SUSTAINABILITY LINKED LOAN WITH KPIS LINKED TO CENTRE QUALITY, EMISSION REDUCTIONS AND RECONCILIATION 08 G8 EDUCATION LIMITED 2022 ANNUAL REPORT STRATEGY REFINED STRATEGIC DIRECTION Our purpose is creating the foundations for learning for life. Through our vision we aspire to achieve positive outcomes for children and families, create a fantastic working environment for our teams, and develop a sector leading reputation for innovative early childhood programs. Sustainability and financial performance underpin our continued ability to pursue our purpose and deliver our vision. Our strategic focus is on achieving stable, engaged teams, which are critical to delivering high quality outcomes for children and great experiences for our families. This will in turn contribute to higher occupancy. To achieve this, we will invest in attracting, retaining and developing great leaders and great teams, who are supported to deliver consistently high quality education and care. We will pursue differentiation through innovation and leverage our scale, to makes us an attractive partner and to introduce sector leading advances in early childhood programs and technology. This includes working with Apple’s education team on a pilot program to use technology devices for teaching and learning with children in the year before formal school begins and extends beyond the centre to help families use technology to guide learning at home. We are also working with a university partner, Queensland University of Technology (QUT), to rollout across our network the ‘RAMSR’ (Rhythm and Movement for Self-Regulation) program to support attention and emotional regulation in young children. Combined, these strategic initiatives will deliver great outcomes for our children, families and teams, and support sustainable progress towards our purpose and vision. Our 2023-25 STRATEGIC PLAN ATTRACT, RETAIN AND DEVELOP GREAT LEADERS AND TEAMS TO ACHIEVE THIS WE WILL: • Positive outcomes for children & families • A great place to work • Renowned for delivering innovative early childhood programs OUR PURPOSE Creating the foundations for learning for life OUR VISION 09 SECTION 1 STRATEGY PROVIDE HIGH QUALITY EARLY LEARNING AND CARE CREATE DIFFERENTIATION FOR TEAMS AND FAMILIES DELIVER SUSTAINABLE RETURNS FOR SHAREHOLDERS 95% QUALITY = STABLE, ENGAGED TEAMS 80% RETENTION = LEAD TO GREAT EXPERIENCES FOR FAMILIES OCCUPANCY & INCREASED 80% OCCUPANCY = DELIVERING HIGH-QUALITY OUTCOMES FOR CHILDREN SUSTAINABILITY & FINANCIAL PERFORMANCE UNDERPIN OUR FUTURE 10 G8 EDUCATION LIMITED 2022 ANNUAL REPORT MATERIAL RISKS 11 SECTION 1 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. Safety, health and well-being It is imperative that the Group maintains 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. • 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 & Education 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. • We continue to invest in our capital works program to improve the physical condition and safety of our network environments. • Well established pandemic/COVID-19 processes and procedures to ensure swift and agile response and support to teams where required due to the pandemic. 2. Organisational access to workforce, 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, ensure ratio compliance, grow occupancy and attain associated Government funding. There is a risk that we may not be able to execute upon the business strategy as a result of workforce shortages, lack of induction and training, organisational capability, inappropriate culture and values environments and a lack of agility in our people to manage and grow the business. • 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 are committed to improving our employee value proposition so that G8 is seen as the employer of choice in the Early Childhood Education sector, and have implemented pay increase and, improved development and support as part of that program. • We have a structured talent management framework covering workforce planning, succession planning and performance management to ensure a pipeline of talent for senior leadership roles. • Team member engagement surveys are regularly conducted to understand and help us respond to the needs of our team members. MATERIAL RISKS 12 G8 EDUCATION LIMITED 2022 ANNUAL REPORT MATERIAL RISKS continued RISK MITIGATING ACTIVITIES 3. 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. • Our information technology 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 in an effort to keep pace with the constantly evolving threat landscape. • Regular updates provided by our Chief Information Officer to the Executive Leadership Team and the Board. • 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 (which includes our Privacy Policy). • Annual information security management training is provided to team members. • We apply a variety of approaches to protect our data from risk including key vendor security assessments, penetration testing, legislative monitoring, cyber threat assessment, reviewing and monitoring industry threat analysis and benchmarking. • We deploy technical security solutions such as identity and access management and other endpoint solutions across our technology infrastructure to address identified cyber risks and to protect against data loss. • We partner with experienced cyber security firms to continuously monitor developments in relation to cyber threats and resulting remedial actions. • We commenced an internal audit on Cyber Security and Data Privacy in December 2022 and will assess the findings and implement the recommendations in our 2023 cyber roadmap. 4. 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 project and change management process that includes evaluation of the impact of change on our operations to ensure key initiatives are effectively embedded. 5. 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. • The sector continues to enjoy strong bipartisan Government support as evidenced by increases to child care subsidy levels announced for implementation in mid-2023 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. 6. 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, the physical environment of the centre, 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. • 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 have an incident notification and escalation process with a centralised dedicated compliance team to lodge notifications with regulatory authorities. • Both an external and internal audit function is in place to provide objective evaluations of effectiveness of the Group’s governance and controls to ensure compliance. 13 SECTION 1 MATERIAL RISKS RISK MITIGATING ACTIVITIES 7. Industrial Relations 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 well progressed and the Group continues to liaise with the Fair Work Ombudsman in relation to these issues. • Mandatory training is in place for Regional Managers, Area Managers and Centre managers. • We have established rostering principles and a workforce planning team to support Centre Managers. • The rollout of our new Human Resource Information System (HRIS) was completed in 2022. The new HRIS automates certain compliance controls and systems and provides improved visibility and transparency to ensure rostering compliance. • We have established increased supervision and oversight of our wage and rostering practices. 8. 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. 9. 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 physical climate risks including damage to or destruction of centres as a result of extreme weather events such as flooding or bush fires, and transition risks including increased expenditure from more expensive grid energy and compliance costs associated with responses to global policy and government regulations. • 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 new sustainability linked facility agreement in December 2022 that focusses on the Group’s commitment to reducing carbon emissions, improving centre quality and developing a Reflect Reconciliation Action Plan. • We support the Task force for Climate-related Financial Disclosures (TCFD) and are making good progress in aligning our climate reporting with its recommendations moving forward. • A climate risk register for identified climate-related risks is maintained. • The progress G8 Education is making against its sustainability targets and initiatives is reported quarterly to the Audit & Risk Management Committee. • We have set targets to reduce our Scope 1 and Scope 2 emissions in line with the Paris Agreement. 10. Financial, treasury and insurance The management of liquidity to make payments to team members and suppliers, and the management of capital and availability of funding, are important requirements to support our business operations and growth. • We have a Board approved Treasury Policy which governs the management of our treasury risks, including liquidity, funding, interest rates 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. 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. • Our Group has a robust reporting 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. MATERIAL RISKS continued 14 G8 EDUCATION LIMITED 2022 ANNUAL REPORT SUSTAINABILITY REPORT Contents 1. OUR SUSTAINABILITY JOURNEY 2. MATERIALITY MATRIX 3. SUSTAINABLE DEVELOPMENT GOALS 4. PILLAR – GOVERNANCE 5. PILLAR – SERVICE QUALITY 6. PILLAR – OUR PEOPLE 7. PILLAR – OUR ENVIRONMENT 15 SECTION 1 SUSTAINABILITY REPORT OUR SUSTAINABILITY JOURNEY Our business exists to deliver on our purpose, creating the foundations for learning for life. We appreciate the long-term success of our business in achieving our purpose is reliant on the well-being of the children in our care, the families in our education community, the team members who provide the education and support, and the natural environment in which we operate. This year’s Sustainability Report continues to be organised around the four sustainability pillars identified in our 2020 materiality assessment: Governance, Service Quality, Our People, and Environment. Each pillar contains sections on select material sustainability topics, each of which includes a discussion on our sustainability approach for the topic, and, where applicable, how performance was measured and assessed in 2022 as well as targets for 2023. GOVERNANCE Strong corporate governance and compliance with Australian law, industry regulation and standards for childcare services underpin our success. At the end of 2022, 89% of our centres were rated as 'Meeting' or 'Exceeding' the National Quality Standards, a 3% increase year on year. SERVICE QUALITY Service quality is our core business. We have robust policies in place to protect our children’s health and safety, and our team members are required to complete mandatory training modules each year. We pride ourselves in the quality of our pedagogical approach, which is play-based and child-led. OUR PEOPLE Addressing unprecedented sector-wide workforce shortages was a priority focus in 2022. Through coordinated efforts at a sector, network and local level, we have reduced our job vacancy levels by 37%1. We have made improvements to our recruitment and retention activities, with career development remaining a key part of our employee value proposition. This was recognised when G8 Education was named Australia’s most attractive employer in Randstad’s Employer Brand Research survey in 2022. We also won a bronze model in the Apprenticeships-Employer Award category at the 2022 Australian Training Awards. These awards reflect the quality of our sector-leading Study Pathways program which continued to grow in 2022, with the addition of a Masters of Teaching scholarship, enabling team members with a Bachelor degree from another field to complete their teacher training. It complements our existing fee-free Diploma, Certificate III and Bachelor study pathways. We also established our fourth university partnership with Edith Cowan University in Western Australia. We remain committed to supporting sector-leading Early Childhood Teacher (ECT) career pathways, launching our inaugural Early Childhood Teacher Roadshow in 2022 and announcing two weeks additional paid annual leave for our qualified ECTs from 2023. We were delighted to bring our Centre Managers, Area Managers and Regional Managers together for the first time since before the pandemic for our national conference. With the theme of ‘Reconnect’ this offered an outstanding opportunity for professional development, recognition and strengthening of our critically important leadership teams. We also commenced a new Area Manager Development Program, designed to strengthen the leadership capabilities of our critically important around centre leaders through a 12-month blended learning curriculum. We continued to introduce new and enhanced benefits and recognition programs across our entire workforce, including a 50% child care fee discount for team members, a formal ‘Years of Service’ recognition program, our Annual Standout Educator Awards, and our Team Saver retail rewards program. Throughout the year, we also placed a strong focus on team member wellbeing as part of our safety priority, and saw a reduction in mental injury frequency rate of 20%. OUR ENVIRONMENT We have undertaken multiple initiatives to start tracking and reducing our impact on the environment. Consistent with our support of the Paris Agreement, we have set targets to reduce our Scope 1 and 2 emissions. We are closely tracking our Scope 1 and 2 emissions and have obtained assurance over our emissions reporting as part of execution of a Sustainability Linked Loan in 2022 that links to three key performance indicators: reducing our carbon emissions, improving our quality and implementation of our reconciliation action plan. As educators, we recognise the important role we can play in instilling positive attitudes towards the environment in the children in our centres, and our curriculum integrates sustainability issues into daily centre life. I am pleased to share our 2022 Sustainability Report. We look forward to continuing our sustainability journey and welcome feedback from our shareholders and other stakeholders. Pejman Okhovat CEO and Managing Director 1. At 31 December 2022 compared to 31 December 2021. 16 G8 EDUCATION LIMITED 2022 ANNUAL REPORT Children health & safety Compliance Talent management, development & retention Education, service delivery & quality Employee health & safety Environmental stewardship Property maintenance & resources Technology & innovation Governance Service Quality Our People Our Environment Community contribution & impact Environmental footprint Sustainable earnings COVID-19 response Ethical practices & transparent disclosures Sustainable governance & risk management Access to care & education SIGNIFICANCE TO G8 EDUCATION 3.00 2.00 1.00 0.00 0.00 1.00 2.00 3.00 SIGNIFICANCE TO STAKEHOLDERS Long term impact Short term impact Data privacy & confidentiality Diversity & inclusion Family experience & engagement Reconciliation Advocacy MATERIALITY MATRIX The materiality assessment completed in 2020 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 considerations. The colours represent the four pillars. 17 SECTION 1 SUSTAINABILITY REPORT SUSTAINABLE DEVELOPMENT GOALS The United Nations Sustainable Development Goals (SDGs) were established in 2015 and set a global agenda for sustainable development through 2030. The 17 SDGs are a call to action to address the world’s most pressing economic, environmental and social issues. G8 Education’ business and approach to sustainability touches on numerous SDGs as outlined below and highlighted in the various reporting topics for each of our four sustainability pillars. Our sustainability targets aim to support the SDGs and we intend to report against the SDGs when possible. 18 G8 EDUCATION LIMITED 2022 ANNUAL REPORT REPORTING TOPIC Compliance, Sustainable governance and risk management, and Ethical practices and transparent disclosure PILLAR – GOVERNANCE G8 Education is committed to good corporate governance practices and complies with the Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition). The Board of Directors guide and monitor 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 is found in the corporate governance section of our website: www.g8education.edu.au/investor-information/corporate-governance. The Board believes compliance with G8 Education’s corporate governance and risk management policies, as well as relevant federal and state regulations, is critical to our success. All team members are required to complete mandatory compliance training on child safety and information security on an annual basis, and performance against the National Quality Framework is monitored closely by the Board. In 2022 we engaged an external expert to review the Group’s compliance framework. Further improvements to the compliance framework will be made in 2023, including investment in digitisation and automation of reporting and additional training for support functions and centre teams. HOW PERFORMANCE IS MEASURED PERFORMANCE Enterprise Risk Management Framework (ERM) including number of times ERM reviewed by the Board; number of times full ERM framework reviewed ✓ERM reviewed at 12 Board meetings ✓ERM reviewed at all Audit & Risk Management Committee Meetings ✓Annual Risk Workshop conducted by the Audit & Risk Management Committee Active team members who have completed annual Child Protection Training FY22 (TARGET) FY21 82% (95%) 92% G8 Education recognises the importance of responsibly managing its fiscal responsibilities to stakeholders in an ethical, sustainable and transparent manner and that a sustainable earnings stream is necessary to achieve its purpose and strategic goals. In 2022, G8 Education continued to invest in its centres through enhancements to learning environments, centre manager development and weekly work routines. The centralised Improvement Program is complete with the program rolled out across the network including refreshed educational resources in each centre. We are now taking a ‘Business As Usual’ approach focused on sustaining and continuously improving centre quality, supported by the efforts of the around centre "Field Support” teams. REPORTING TOPIC Sustainable earnings 19 SECTION 1 SUSTAINABILITY REPORT REPORTING TOPIC Advocacy PILLAR – GOVERNANCE continued AUSTRALIAN CHILDCARE ALLIANCE (ACA) The ACA works on behalf of early learning service providers to ensure families and their children have an opportunity to access affordable, high quality early learning services throughout Australia. It has extensive experience in the fields of early learning, training and management and works with Federal and State Governments, regulatory authorities and other stakeholders to ensure that families are supported into the future with a sustainable, affordable and viable sector. EARLY CHILDHOOD AUSTRALIA (ECA) ECA has been a voice for young children since 1938. ECA is the peak early childhood advocacy organisation, acting in the interests of young children, their families and those in the early childhood field. ECA advocates to ensure quality, social justice and equity in all issues relating to the education and care of children aged birth to eight years. THE EARLY LEARNING AND CARE COUNCIL OF AUSTRALIA (ELACCA) Internally, ELACCA works to strengthen quality among ELACCA member services and to create an ambitious vision for the early learning sector. Externally, ELACCA works with governments, public sector agencies and research organisations to contribute ELACCA’s vast knowledge and experience to the development of good public policy for early learning and care in Australia. G8 Education believes in being an advocate for children and in advocating the importance of early childhood education to government, sector and the community. Our efforts to raise awareness of the positive impact of early learning and to build further recognition of the early childhood education profession continued in 2022, and we joined sector-wide discussions with government focused on improving affordability of care, increasing educator wages and supporting greater access to quality early learning and care for children with complex needs. The Board of G8 Education has approved the Company's membership of the following organisations: In 2022 G8 Education's primary advocacy activities centred around its involvement as a member of the Board of ELACCA. During 2022, ELACCA’s advocacy activities focused on: • Ensuring the health and safety of children and educators during the COVID-19 outbreaks in 2022; • Improving the equity and access to early education for all Australian children. In this respect, it was pleasing to note the Government increased the base entitlement to Child Care Subsidy for indigenous children from 24 to 36 hours per fortnight from September 2022; and • Responding to the workforce shortages in the sector through government funded increased wages for educators and an increased intake of migrant teachers. In addition to its ELACCA activities, G8 Education’s own advocacy activities included: • Providing a pre-Budget submission and meeting with various Ministers to propose improvements in child care subsidy for in-home care to improve affordability for families and changes to the tax system to encourage employers to provide early learning cost support as part of salary packaging; and • Participating in discussions with Government, peak bodies and other large sector providers in relation to the potential for multi-employer bargaining to be implemented in the sector, alongside a material wage increase for educators that is funded by Government. WE ADVOCATED FOR IMPACT AT THE 2022 ECA NATIONAL CONFERENCE G8 Education was proud to be the Gold Sponsor of the 2022 Early Childhood Australia (ECA) National Conference in Canberra. Under the theme, Passion to Power: Our future profession, we connected with others in the sector to plan for a future in which the societal impact and leadership of our profession is more widely recognised. “At a time when our sector is facing unprecedented workforce shortages it has never been more important to bring people together to inspire, learn and align in our response to these challenges,” said Gary Carroll, G8 Education CEO as he spoke at the conference. 20 G8 EDUCATION LIMITED 2022 ANNUAL REPORT PILLAR – GOVERNANCE continued We are committed to carrying out business fairly, honestly and ethically and we recognise the important impact we can have by ensuring that suppliers from whom we procure goods and services align with our commitments. Our supply chain is complex with a procurement spend of approximately $228 million with around 1,789 direct suppliers. Our procurement practices are established to ensure that we do not select providers of services or goods on the basis of price alone, but select suppliers based on various criteria including a review of policies and practices related to ESG. We have a robust contract execution process in place, pursuant to which all procurement agreements must be reviewed by the Legal team irrespective of quantum or term. During 2022, our largest suppliers by spend provided the following goods and services: • Property and maintenance (including commercial cleaners, gardeners, and repair and maintenance workers) • Centre resources (including food, nappies and office supplies) • Educational resources (including arts, crafts and teaching aids) • Technology services (including software licences and IT services) • People costs (including agency and casual recruitment and education development) In addition, during this year we have invested in a “procure to pay” system which we anticipate will be implemented in early 2023. We expect this new system to help reduce our modern slavery risks by improving visibility and implementing further controls over our vendor engagement process. HUMAN RIGHTS Our Code of Conduct confirms that G8 is committed to supporting and promoting human rights that benefit all our stakeholders including our families, employees, shareholders, investors and the communities in which we live and operate. In addition, we oppose all forms of modern slavery and are committed to ensuring such practices do not exist within our operations or supply chain. We recognise and seek to ensure that our practices align with the United Nations Universal Declaration of Human Rights and the United Nations Principles on Business and Human Rights. Please see our Modern Slavery Statement for more details on the actions we have taken to date to address the modern slavery risks in our operations and supply chain: https://g8education.edu.au/wp-content/uploads/2022/12/FY2021-GEM-Modern-Slavery-Statement.pdf REPORTING TOPIC Human Rights and Supply Chain 21 SECTION 1 SUSTAINABILITY REPORT PILLAR – GOVERNANCE continued G8 Education understands the importance of its privacy and data protection responsibilities. Regular updates on cyber security and data protection are provided by our Chief Information Officer to the Executive Leadership Team and the Board. Annual mandatory information security training is provided to team members, along with supplementary training and education on topics such as phishing. G8 Education recognises that the constantly evolving threat landscape for cyber security makes cyber security awareness vital for Directors and senior executives. Professor Julie Cogin completed a Graduate Diploma in Cyber Security in 2022 and other Board members attended external cyber security training, seminars or workshops. G8 Education's privacy policy (available on our website) describes the type of information we collect and how we use that information. We do not sell personal information to third parties and we allow individuals the opportunity to participate in how their personal information is used in accordance with the Australian Privacy Principles. We apply a variety of approaches to protect our data from risk including key vendor security assessments, legislative monitoring, cyber threat assessment, penetration testing, reviewing and monitoring industry threat analysis and benchmarking. We also deploy technical security solutions such as identity and access management and other endpoint solutions across our technology infrastructure to address identified cyber risks and to protect against data loss. G8 Education's external audit considers cyber security in its identification and assessment of risk of material misstatement of the financial report. The Company also commenced an internal audit on Cyber Security and Data Privacy in December 2022 and will assess the findings and implement the recommendations in its 2023 cyber roadmap. Privacy and cyber security remain a high-risk area and we are focussed on building our capability to be better prepared to respond in the ever-changing threat landscape. HOW PERFORMANCE IS MEASURED PERFORMANCE FY22 FY21 Number of reportable data breaches1 0 1 Percentage of data breaches involving personally identifiable information (PII) 0 100% Number of students affected 0 <100 REPORTING TOPIC Privacy and Cyber Security 1. Data breaches reported to the Office of the Australian Information Commissioner (OAIC) 22 G8 EDUCATION LIMITED 2022 ANNUAL REPORT REPORTING TOPIC Child Health and Safety PILLAR – SERVICE QUALITY CHILD PROTECTION POLICY The best interest and wellbeing of children is the primary consideration for G8 Education. G8 Education is committed to ensuring the safety, protection and wellbeing of children by providing child friendly environments where all children are respected, valued and encouraged to reach their full potential. To support this commitment, G8 Education has developed the Child Protection Policy, which sets out G8 Education’s approach to the on-going provision of a child safe organisation where children and young people are in a safe and harmonious environment during their care. This policy provides the framework for our approach to the National Principles for Child Safe Organisations. A copy of the Child Protection Policy can be found here: https://g8education.edu.au/about-us/sustainability/ CHILD PROTECTION STATEMENT OF COMMITMENT All team members and volunteers have a legal and ethical obligation to act in order to protect any child who is at risk of abuse or neglect. G8 Education has developed the Child Protection Statement of Commitment, which is applicable to all team members, including leaders, volunteers and others who may represent G8 Education in any capacity. The purpose of this Child Protection Statement of Commitment is to outline expected daily behaviours, interactions and conduct of team members required to support children, prohibit any form of child abuse or neglect and ensure mandatory reporting obligations are met. A copy of the Child Protection Statement of Commitment can be found here: https://g8education.edu.au/about-us/sustainability/ CHILD FOCUSSED COMPLAINTS SYSTEM G8 Education has a child focussed complaints system which includes: • Having accessible policies for receiving, responding to and investigating complaints of child harm or abuse which prioritises the safety and wellbeing of children. • Responding effectively to concerns or complaints where harm is caused to a child by another child. • Having processes in place for reporting to external authorities, record keeping and information sharing to ensure G8 Education meets its reporting requirements, employment law and privacy obligations. • Providing information to team members on the complaints process, their roles and responsibilities, and reporting and privacy obligations when responding to children who disclose abuse. G8 RECOGNISED AS LEADING CHILD SAFE ORGANISATION In September 2022 G8 Education was awarded the Queensland Child Protection Week - Child Safe Organisation Award. The award recognises G8 Education's commitment to embedding child safe practices across its organisation including appointing Child Protection Champions in every centre across Australia. The Morcombe Foundation commended G8 Education on its achievement while visiting Community Kids Yandina 1 during Child Protection Week. “Congratulations on being awarded Child Safe Organisation for 2022, it is very well deserved. We know you would have worked hard to obtain this award,” said Bruce Morcombe OAM. 23 SECTION 1 SUSTAINABILITY REPORT PILLAR – SERVICE QUALITY continued RECONCILIATION ACTION PLAN We acknowledge the Traditional Owners of the Lands across Australia and pay our respect to the Elders past, present and emerging. We support reconciliation with Aboriginal and Torres Strait Islander peoples. As a sign of our commitment to the reconciliation movement, we have begun developing a corporate Reflect Reconciliation Action Plan (RAP) and will seek accreditation of this first stage RAP in 2023. This will complement and support the reconciliation journeys many of our centres have already begun. A RAP Committee has been established to drive the implementation of our RAP, chaired by G8 Education’s Head of Education. The RAP Committee has monthly scheduled meetings in 2023 to ensure progress and will report to the Board via the Audit & Risk Management Committee. We look forward to sharing our progress in due course. COMMUNITY CONTRIBUTION The start of 2022 presented incredible challenges as the COVID-19 omicron wave and extensive flooding impacted communities across Australia. Our centres play a critical role in our communities. We are proud of the way our teams have supported our children, families and each other as we navigated flood and COVID-19 impacts, including centre closures, reopenings and support for those directly affected. In particular, our teams rallied behind the community of Lismore in northern New South Wales, donating books and raising emergency funds, which were matched by G8, following devastating floods. Our team also rose to the challenge of supporting the Children’s Hospital Foundation 42K Your Way fundraiser. We raised an incredible $181,031 against our target of $150,000, to support research into childhood brain cancer. Our teams walked, rolled, danced and skipped to compete the 42 kilometre challenge in August, forming a community partnership of which we are incredibly proud. REPORTING TOPIC Community Contribution & Impact 24 G8 EDUCATION LIMITED 2022 ANNUAL REPORT EDUCATION STRATEGY In 2022 we continued to implement the ongoing education strategy to lift quality across the network and improve outcomes for children, families, communities and team. A new Education Strategy for 2023-2025 was developed drawing on national and international research and insights and building on the positive work to date. We also established a new Education Advisory Committee that will commence in 2023 to provide thought leadership, advice and guidance to the Early Learning and Education Team and Board of G8 Education. Children's learning, development and wellbeing has been disrupted by the pandemic in recent years. In response, to support children's improved executive function, oral language, self-regulation and physical activity, an evidence based program has been sourced through the Queensland University of Technology, named Rhythm and Movement for Self-Regulation (RAMSR)1. Initial professional learning commenced in 2022 at the Early Childhood Teacher roadshows with strong positive feedback. This program will continue to be implemented in 2023 and beyond. The digital technologies pilot continued in 2022 in some Queensland centres. This partnership with Apple's Education team continues to evolve and highlight the importance of strengthening digital literacies of teachers, educators, children and families. Supporting children and families with e-safety is an important focus of the program and children learn about being digital citizens and how ipads can be used as a learning tool for multiple purposes. This program is only operating in the year prior to school. In 2023 there are plans to expand the project interstate to a larger cohort of G8 Education's network. There has been very positive feedback from participating children, families and team members. A small cohort of G8 Education team members were fortunate to visit the Australian Research Council Centre of Excellence for the Digital Child at the Queensland University of Technology to further enhance learning and collaboration. This included early childhood teachers participating in the pilot. Embedding quality is an important focus of the Education Strategy and strengthening centre based leadership teams to drive continuous improvement. Professional learning for Educational leaders to empower their work within centres is an important focus area. The Education team continued to play a key role in supporting Early Childhood Teachers with teacher registration/accreditation and understandings of the Australian Professional Standards for Teachers. Programs will be expanding in 2023 including the ongoing work to support our future teacher workforce currently studying through our Bachelor Scholarship Programs. EDUCATIONAL APPROACH Collaborating and partnering with families and communities remains a key focus of our approach and understanding the importance of `place' and `context'. Team are supported and encouraged to understand their local community context, drawing on the Australian Early Childhood Development Census (AEDC) data amongst other information to inform program planning and support children's lifelong learning outcomes. Additional learning opportunities were offered in 2023 to support inclusion and wellbeing including ongoing work with BeYou, a national wellbeing initiative of the Federal Government. The Education strategy and educational approach at G8 Education supports the importance of working in strengths-based ways and embedding relevant curriculum frameworks and guidelines. The Approved Learning Frameworks for early learning and outside school hours care have been reviewed and updated in 2022 and will be released in 2023 with an expected increased focus on reconciliation, inclusion, sustainability and leadership and teamwork. These are all key focus areas within our Education strategy and team will be supported in 2023 to understand and embed the updated changes. REPORTING TOPIC Education, Service Delivery and Quality 1. Williams et al., (2021). Rhythm and Movement for Self-Regulation (RAMSR) 2020 - 2021. RCT and follow-up. Research Brief. PILLAR – SERVICE QUALITY continued 25 SECTION 1 SUSTAINABILITY REPORT REPORTING TOPIC Education, Service Delivery and Quality PERFORMANCE AGAINST THE NATIONAL QUALITY FRAMEWORK Consistent with our commitment to high-quality education and care, G8 Education has set a long-term target of 95% of centres meeting or exceeding the NQF. To meet these targets, G8 Education will continue its investment in educational programming and practice support, the recruitment and retention of team members, resources, physical environment and technology. At the end of 2022, 89% of G8 Education centres are rated as ‘Meeting' or 'Exceeding’ the National Quality Standards representing a 3% improvement year on year. HOW PERFORMANCE IS MEASURED PERFORMANCE FY25 TARGET FY22 FY21 % of centres that are meeting or exceeding NQF 95% 89% 86% % of centres that were assessed during the reporting period as meeting or exceeding NQF 87% 92% PILLAR – SERVICE QUALITY continued 26 G8 EDUCATION LIMITED 2022 ANNUAL REPORT PILLAR – OUR PEOPLE G8 Education acknowledges the well-publicised labour shortages in the early childhood education sector, and we are not immune to the challenges of the tight labour market. G8 Education uses labour hire agencies to respond to acute staff shortages to keep our centres open and meet service standards. Whilst we saw an increase in the use of agency labour in 2022, we are targeting a reduction in 2023. We have made improvements to our recruitment and retention activities, with career development remaining a key pillar of our employee value proposition. This was recognised when G8 Education was named Australia’s most attractive employer in Randstad’s Employer Brand Research survey in 2022. We also won a bronze model in the Apprenticeships-Employer Award category at the 2022 Australian Training Awards. REPORTING TOPIC Talent Management, Development and Retention G8 Education has a multi-pronged strategy to address chronic staff shortages and increase employee retention. At the public policy level, we have worked with industry bodies to lobby governments for action to address sector- wide labour shortages. At the G8 Education level, actions undertaken in 2022 included: • Increased investment in induction procedures for Early Childhood Teachers and new Centre Managers • Providing study pathways, professional development programs (see Talent development over page), management leadership programs and paid professional development days • Increasing remuneration for key roles • Enhancing flexible employment and rostering practices • Offering wellbeing programs to support mental health • Providing mentoring programs to Early Childhood Teachers and Centre Managers • Expanding team member benefits and rewards including increasing team member discounts to 50% • Formal ‘Years of Service’ recognition program • Annual Standout Educator Awards • Team Saver retail rewards program G8 Education is committed to providing a fair wage for all employees and we have invested heavily in our Human Resources Information Systems to ensure award compliance. We advocate for improved working conditions for the early childhood education sector, including meeting with various Ministers and providing pre-budget submissions to petition for Government support for increased wages for educators in 2022. 27 SECTION 1 SUSTAINABILITY REPORT Playful Innovation championed at National ECT Roadshow Our inaugural National ECT Roadshow saw over 500 of our Early Childhood Teachers come together across five capital cities to collaborate with sector-leading researchers and professionals, including learning practical skills to be able to implement QUT’s RAMSR (Rhythm and Movement for Self-Regulation) program. “I think what is special about the RAMSR program is we know what incredible benefits it has for children, but it also supports Educator and Teacher wellbeing by promoting the importance of ‘play’ for adults,” said Ali Evans, G8 Education’s Head of Early Learning and Education. PILLAR – OUR PEOPLE continued TALENT DEVELOPMENT G8 Education provides various opportunities for our employees to upgrade their skills and grow with the company. All team members have access to G8 Education’s Learning Lounge, an online learning portal with more than 100 short courses. Most of these courses are focussed on pedagogy and practices, with others covering topics such as compliance and safety, people and culture, and operations. All new Centre Managers participate in the First Steps onboarding and induction program which is designed to equip them with the skills and knowledge needed to feel confident in their role, ensuring they are set up for success from their first day. Centre Managers spend up to four weeks being trained and supported by a specialised Certified Trainer. This support continues throughout their first six months with regular check- in calls, deep-dive workshops and further training offered if required. Centre educators have multiple study pathways available to them to develop their skills, including through our four university partnerships. The Vocational Study Pathways Program is G8 Education's national traineeship program offering Certificate III and Diploma qualifications in Early Childhood Education. Delivered in partnership with key Registered Training Organisations and supporting stakeholders, the program provides 'earn while you learn' opportunities for entry level roles (Certificate III) as well as upskilling opportunities for both new and existing team members (Diploma). In addition, the Bachelor Scholarship Program is a dedicated program delivered in partnership with sector leading universities to support Diploma qualified team members to study degrees focused on prior-to-school settings and graduate as the next generation of Early Childhood Teachers. We were pleased to supplement our sector leading Study Pathways program with the addition of a Masters of Teaching Scholarship in 2022 which allows team members with a Bachelor degree from another field to complete their teacher training. G8 Education also offers a Teaching for Tomorrow program for Early Childhood Teachers. This exclusive professional development program is delivered in partnership with Semann & Slattery to support Early Childhood Teachers with their ongoing development in both pedagogy and practice. Aligned to G8 Education's Development Framework for Teachers, the suite of initiatives explores emerging practice trends and challenging contexts whilst also providing professional development credits for required Teacher Registration. We remain committed to supporting sector-leading Early Childhood Teacher (ECT) career pathways, launching our inaugural Early Childhood Teacher Roadshow in 2022 and announcing two weeks additional paid annual leave for our qualified ECTs from 2023. We were delighted to bring our Centre Managers, Area Managers and Regional Managers together for the first time since before the pandemic for our national conference. With the theme of ‘Reconnect’ this offered an outstanding opportunity for professional development, recognition and strengthening of our critically important leadership teams. We also commenced a new Area Manager Development Program, designed to strengthen the leadership capabilities of our critically important around centre leaders through a 12-month blended learning curriculum. 28 G8 EDUCATION LIMITED 2022 ANNUAL REPORT PILLAR – OUR PEOPLE continued HOW PERFORMANCE IS MEASURED PERFORMANCE New employees and employee turnover GENDER FY22 # NEW HIRES Female 3153 Male 179 Non-binary 83 Total 3,415 % Female 92.3% Total employee turnover rates FY22 FY21 Voluntary 33.9% 27.8% Involuntary 1.6% 1.5% Centre Manager voluntary turnover rate FY25 TARGET FY22 FY21 15% 19.1% 21.3% Total number of employees by employment contract, by gender CATEGORY AS AT 31/12/22 AS AT 31/12/21 Female 9,396 9,730 Permanent 7,331 (78.0%) 7,625 (78.4%) Temporary 334 (3.6%) 325 (3.3%) Casual 1,731 (18.4%) 1,780 (18.3%) Male 347 316 Permanent 263 (75.8%) 247 (78.2%) Temporary 21 (6.1%) 22 (6.9%) Casual 63 (18.2%) 47 (14.9%) Non-Binary 65 — Permanent 35 (53.8%) — Temporary 4 (6.2%) — Casual 26 (40.0%) — Total 9,808 10,046 Percentage of employees on a permanent contract, by state/territory STATE AS AT 31/12/22 AS AT 31/12/21 ACT 81.0% 83.4% NSW 73.2% 74.4% NT ND 100% QLD 75.5% 75.4% SA 79.9% 80.1% VIC 80.9% 83.5% WA 84.1% 75.2% Total 77.8% 78.4% 29 SECTION 1 SUSTAINABILITY REPORT PILLAR – OUR PEOPLE continued HOW PERFORMANCE IS MEASURED PERFORMANCE FY22 FY21 Number of employees that took parental leave 288 279 Number of employees that took parental leave and returned to work after taking parental leave 14 12 Number of employees that took parental leave, returned to work after taking parental leave and remained employed as at the end of the financial year 5 9 FY25 TARGET FY22 FY21 Employee Engagement Score 80% 75% 77% New centre managers enrolled in First Steps program 102 72 Number of active students in traineeships 1,064 850 Number of current students in Bachelor Scholarship Program 215 234 REPORTING TOPIC Diversity and Inclusion G8 Education respects, values and celebrates the diversity of its team members, children, families and other stakeholders. We are committed to supporting a diverse and inclusive workforce and recognise that our team members create and maintain our unique culture. To that end, G8 Education has developed several policies to support diversity and inclusion amongst our stakeholders. DIVERSITY, INCLUSION AND BELONGING POLICY G8 Education’s Diversity, Inclusion and Belonging Policy has been created to ensure fairness, equity and a sense of belonging for all team members. This policy assists team members in understanding their rights and responsibilities regarding workplace discrimination, harassment, bullying, and equal employment opportunities. This policy also outlines G8 Education’s diversity objectives in relation to gender, age, cultural background and ethnicity. It includes requirements for the Board to establish measurable objectives for achieving diversity and equity and for the Board to assess annually both the objectives and the company’s progress in achieving them. At the end of 2021, the Board set measurable objectives for gender diversity for 2022, which are detailed below: • To maintain at least equal female to male representation for Non-Executive Directors on the Board. • To maintain at least equal female to male representation on the Executive Leadership Team, excluding the Chief Executive Officer. Performance against these targets is set out on page 30. A copy of the Diversity, Inclusion and Belonging Policy can be found here: https://g8education.edu.au/about-us/sustainability/ ANTI-BIAS, INCLUSION AND CULTURAL DIVERSITY CENTRE POLICY G8 Education’s Anti-Bias, Inclusion and Cultural Diversity Centre Policy is guided by the Early Years Learning Framework, national law, national regulations and the National Quality Standard, which provide clear guidelines for appropriate practices and those practices that must not be condoned. At G8 Education, discrimination is not accepted. We believe that every child has the right to develop fully as an individual and be treated equally regardless of their race, gender, colour, appearance, ethnicity, religion, disability, impairment, socioeconomic status or national origin. A copy of the Anti-Bias, Inclusion and Cultural Diversity Centre Policy can be found here: https://g8education.edu.au/about-us/sustainability/ 30 G8 EDUCATION LIMITED 2022 ANNUAL REPORT PILLAR – OUR PEOPLE continued REPORTING TOPIC Diversity and Inclusion ABORIGINAL AND TORRES STRAIT ISLANDER CULTURE AWARENESS POLICY G8 Education endeavours to support every child in building a strong sense of their identity i.e. who they are and where they belong. We provide children the right to their identity and to live and learn within their culture. We believe this is especially important for Aboriginal and Torres Strait Island children whose distinctive culture and lifestyle have in the past been threatened and undermined by dominant cultures. Our centres aim to foster children’s positive self-esteem and to preserve their own culture and personal identity. It is with this aim that we educate all children of not only the things that make them unique but also those things that make them similar to establish an appreciation of diversity. A copy of the Aboriginal and Torres Strait Islander Culture Awareness Policy can be found here: https://g8education.edu.au/about-us/sustainability/ GENDER PAY EQUITY G8 Education believes in equal pay for equal work and strives to eliminate gender pay gaps across the organisation. During 2022 we reduced the gender pay gap across like-for-like roles from 4.7% to 3.9%. The year-over-year reduction can be attributable to several factors, including: • Carving out a centralised pool from the 2022 remuneration review budget to address market adjustments and identified gender pay disparities • Validating and addressing identified gender pay disparities in identical roles across support office functions • Continuing the focus on educating managers on internal relativity (including gender pay issues) when benchmarking newly created roles Gender pay gap is based on like-for-like role analysis, which removes roles which are solely occupied by either men or women, and helps to normalise the effect of gender representation with women comprising the vast majority of the workforce at G8 Education (96.6%) and more broadly in the Early Childhood Education sector. HOW PERFORMANCE IS MEASURED PERFORMANCE FY23 TARGET FY22 FY21 Non-Executive Director gender diversity as at 31 December 2022 At least 50% female 66.7% female 66.7% female Executive Leadership Team1 gender diversity as at 31 December 2022 At least 50% female 71.4% female 50% female Gender pay gap LOCATION FY22 FY21 In network (3.6)% (3.8)% All G8 Education 3.9% 4.7% 1. Excluding the Chief Executive Officer 31 SECTION 1 SUSTAINABILITY REPORT PILLAR – OUR PEOPLE continued G8 Education is committed to the health and safety of all employees and strives to have injury free workplaces. G8 Education’s Health and Safety Policy outlines the company’s approach to health and safety. The Company works to eliminate hazardous practices and behaviour, which could cause accidents, injuries or illness to employees, contractors, visitors and the general public. G8 Education follows established hazard identification and risk management practices as per its documented safety management system. In addition, all team members are provided with training on the following Occupational Health and Safety matters: • Health and Safety General induction • Manual handling • Emergency management • Kitchen safety • First aid • Bullying and harassment • Mental wellbeing • Injury management and Return to work • Excursion risk management • Transitions and separations • Emotion Coaching for Children • Teaching through trauma G8 Education also promotes the general health and well- being for our employees. Team members have access to free confidential Employee Assistance Program, under which employees have access to psychological counselling and nutritional counselling. In addition, the company runs step challenges that encourage employees to stay active, provides team members access to free flu vaccinations, and offers discounted gym memberships. Throughout the year, we placed a strong focus on team member wellbeing as part of our safety priority, and saw a 20% reduction in our mental injury frequency rate. REPORTING TOPIC Employee Health and Safety REMEDIATION PROGRAM In December 2020 G8 Education announced that, following a proactive review of its award and legislative requirements, it had identified inadvertent noncompliance issues with relevant awards, which were self-reported to the Fair Work Ombudsman. A remediation program has been underway since that time to ensure that all affected team members are paid in full. The Group has paid remediation program costs totalling approximately $38 million to date. G8 Education continues to engage with the Fair Work Ombudsman in connection with the matter. MULTI-EMPLOYER BARGAINING New industrial relations legislation passed through Parliament in 2022 has paved the way for multi-employer bargaining processes to commence across the Early Childhood Education sector. G8 Education has been working collaboratively with unions, peak bodies and employers to commence the planning process in relation to multi-employer bargaining. We look forward to sharing our progress in due course. REPORTING TOPIC Labour Relations HOW PERFORMANCE IS MEASURED PERFORMANCE Workers covered by an occupational health and safety management system FY22 FY21 100% 100% LTIFR Main types of injuries were contusions, wounds and musculoskeletal injuries (sprains and strains) FY221 FY21 5.54 5 1. Target is 6 32 G8 EDUCATION LIMITED 2022 ANNUAL REPORT PILLAR – OUR ENVIRONMENT CLIMATE GOVERNANCE G8 Education’s Board is ultimately responsible for overseeing climate-related risks and opportunities. The Board has delegated oversight to the Audit and Risk Management Committee within our Enterprise Risk Management Framework. A climate risk register for identified climate-related risks is maintained and G8 Education's progress against its sustainability targets and initiatives is reported to the Audit and Risk Management Committee. CLIMATE STRATEGY AND RISK MANAGEMENT During the year the Board conducted a risk workshop which included a session on climate risk to identify and assess the physical and transition risks and opportunities that could potentially impact the operational and/or financial performance of the business. The primary physical risks identified were disruptions to centre operations, damage to or destruction of centres as a result of extreme weather events such as flooding or bush fires, and increased energy usage to keep centres cool during hotter weather. The primary transition risks identified were increased expenditures from more expensive grid energy and compliance, and negative reputational and/ or financial impacts from failing to achieve emissions targets. Some significant opportunities were also identified: a material reduction in energy costs through the implementation of a network solar solution, and attraction and retention of team members who are passionate about sustainability and who want to work for a company that cares about environmental, social and governance matters, including active management of climate related risks. G8 Education’s scope 1 and 2 emissions are predominantly made of fleet emissions and grid energy (electricity and gas) consumption requirements. Additionally, some sites have bottled LPG to meet their energy consumption requirements, and some sites have solar panels installed to reduce reliance on the grid. We have identified several initiatives to reduce our emissions, including: • reducing the number of vehicles in our bus fleet; • installing solar panels at our Varsity Lakes support office, and • implementing a solar solution for renewable energy across our network (currently approximately 10-15 centres have solar panels installed on-site). Other initiatives that may be considered in the future include integrating sustainable building design principles for new builds and switching petrol based fleet vehicles from petrol to hybrid. Aside from our emissions reductions initiatives, G8 Education is committed to responsibly managing our direct environmental impacts through improving our waste management and recycling, managing water use and sources, and making our business practices sustainable for the future. In July 2022 we were proud to expand our involvement in recycling initiatives with the launch of The Nappy Loop nappy recycling pilot in partnership with Kimberly-Clark Australia. We are exited to contribute to this partnership and the positive environmental impact it can make. CLIMATE METRICS AND TARGETS Climate change is one of the most significant long-term challenges facing our future. We support the Paris Agreement to limit global average temperature rise to well below 2°C and have set our Scope 1 and Scope 2 emissions targets to align with this scenario. The National Greenhouse and Energy Reporting (NGER) method used to calculate G8 Education's Scope 2 emissions aligns with the 'location-based' method for Scope 2 Accounting method under the World Resource Institute (WRI) Greenhouse Gas Protocol. We are closely tracking our Scope 1 and 2 emissions and have obtained assurance over our emissions reporting as part of execution of a Sustainability Linked Loan (SLL) in 2022. The SLL incentivises a reduction in carbon emissions as one of three key performance indicators, the other two being improvement in quality and implementation of our reconciliation action plan. G8 Education currently has limited visibility on its Scope 3 emissions. This is an area under investigation, and we hope to report more in future reporting periods. REPORTING TOPIC Environmental footprint and stewardship 88% REDUCTION IN NUMBER OF ANNUAL REPORTS PRINTED (2022 VS 2018) 65.6% E-COMMUNICATIONS PREFERENCE FOR SHAREHOLDERS IN 2022 VS 23.9% IN 2018 33 SECTION 1 SUSTAINABILITY REPORT PILLAR – OUR ENVIRONMENT continued CASE STUDY National Standout Educator for Sustainability: Juliet Davis Juliet Davis from Great Beginnings Secret Harbour was this year recognised at G8’s National Standout Educator for Sustainability as part of our annual awards. Juliet has implemented a Sustainability Management Plan for the centre which focusses on reducing energy, water and food waste by incorporating sustainable practices into their program. “It is so incredibly rewarding to educate these young minds and teach them the importance of caring for our planet and all of the fascinating creatures that live alongside us,” said Juliet Davis, Educator at Great Beginnings Secret Harbour. ENVIRONMENTAL STEWARDSHIP G8 Education integrates environmental stewardship concepts directly into our curriculum, providing our children with educational opportunities around the importance of being responsible and sustainable citizens for the future. HOW PERFORMANCE IS MEASURED PERFORMANCE Number of centres ‘Meeting or Exceeding’ NQS Element QA3 including 3.2.3 (the service cares for the environment and supports children to become environmentally responsible) FY22 FY21 centres assessed centres assessed as ‘meeting’ or ‘exceeding’ QA3 centres assessed as ‘meeting’ or ‘exceeding’ QA3 centres assessed centres assessed as ‘meeting’ or ‘exceeding’ centres assessed as ‘meeting’ or ‘exceeding’ 83 82 96% 65 60 95% FY22 FY21 FY20 FY19 Scope 1 emissions 306,960 kg CO2 351,762 kg CO2 358,559 kg CO2 490,094 kg CO2 Scope 1 emissions intensity 185gm CO2/km 217 gm CO2/km 221 gm CO2/km 223 gm CO2/km Energy usage in joules 60,286,904 MJ1 61,092,132 MJ Scope 2 emissions 11,761,701 kg CO2-e1 12,026,123 kg CO2-e 1. This does not include any bottled LPG that any of centres may currently use or consumption met by on-site solar generation. 34 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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 2022. 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. DAVID FOSTER B.APP.SCI, MBA, GAICD, SFFIN CHAIR SINCE 29 NOVEMBER 2021 INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 1 FEBRUARY 2016 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 Director of Bendigo and Adelaide Bank Limited and Star Entertainment Group Limited. He is also a Non-Executive Director of Australian Reinsurance Pool Corporation. Special responsibilities: • Member of Audit and Risk Management Committee • Member of the People, Culture & Education Committee • Member of the Nomination Committee • Member of the Property Committee Other current listed public Company Directorships: Bendigo and Adelaide Bank Limited (appointed 4 September 2019), Star Entertainment Group Limited (appointed 15 December 2022). Former listed public Company Directorships in the last three years: Genworth Mortgage Insurance Australia Limited (retired 31 March 2022), MotorCycle Holdings Limited (retired 23 December 2022) PEJMAN OKHOVAT B.BUSINESS STUDIES (HONS) MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER SINCE 3 JANUARY 2023 Pejman Okhovat joined G8 Education as CEO and Managing Director in January 2023. Prior to joining the Group, Pejman has held senior leadership positions across a number of well-known retail organisations in Australia and internationally, including as the Managing Director of BIG W, Chief Executive Officer of NZX-listed retailer The Warehouse and as a senior leader at UK retailers Marks and Spencer, Sainsburys and ASDA/Walmart. He has extensive experience in leading large teams within geographically dispersed networks, with a strong focus on customer service, business transformation and delivering value for all stakeholders. Pejman is committed to continuing G8 Education's purpose- led approach to delivering meaningful societal impact through quality early childhood education delivered through a passionate and capable team of educators and support team. He holds a BA Hons in Business Studies from Leeds Business School, with further executive education at Babson College (USA) and INSEAD (Singapore). Special responsibilities: Nil Other current listed public Company Directorships: Nil Former listed public Company Directorships in the last three years: Nil DIRECTORS' REPORT 35 SECTION 1 DIRECTORS' REPORT PROFESSOR JULIE COGIN PHD, M. LAW, M. ED / HRM, GRAD. DIP. CYBER SECURITY, B. BUS, GAICD INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 1 SEPTEMBER 2017 Professor Julie Cogin has worked in the Australian education sector for more than 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, with more than 100,000 students. In this role she is accountable for financial, people, legal and student experience outcomes in Australian, Vietnam, Singapore and China. Professor Cogin chairs the board of RMIT Training Pty Limited, is a Non-Executive Director for the Digital Finance Cooperative Research Centre 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, 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, corporate culture and executive remuneration, 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. Professor Cogin is a member of Chief Executive Women (CEW). Special responsibilities: • Chair of the People, Culture & Education Committee • Member of the Nomination Committee Other current listed public Company Directorships: Nil Former listed public Company Directorships in the last three years: Nil DEBRA SINGH INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 29 NOVEMBER 2021 Debra has over 30 years retail experience in C-suite roles across business transformation, general management, retail operations, change management and human resources. Debra was the first woman to run a trading division at Woolworths where she spent 11 years working across supermarkets, operations and consumer electronics. Over the past 8 years, Debra was CEO of Fantastic Furniture and Group CEO of Greenlit Brands Household Goods. Debra is also a Non-Executive Director on the Shaver Shop and The Kids Cancer Project boards. Special responsibilities: • Chair of the Nomination Committee • Member of the People, Culture & Education Committee Other current listed public Company Directorships: Shaver Shop Group Limited (appointed 2 September 2020) Former listed public Company Directorships in the last three years: Nil DIRECTORS' REPORT continued 36 G8 EDUCATION LIMITED 2022 ANNUAL REPORT TONI THORNTON1 B.A POLSCI EC, GRADCERT APPFIN, LLM EG INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 29 NOVEMBER 2021 Toni Thornton has worked in corporate finance agencies for more than 15 years. She brings a strategic commercial focus to the G8 Education Board, having previously held senior positions with JBWere, Goldman Sachs JBWere and NAB. Current directorships include Star Entertainment Group Limited, CS Energy (including Chair of the Finance Risk and Assurance Committee) and Millovate Pty Ltd as well as being a Founding Director of the private childcare enterprise Habitat Early Learning. Toni was previously a Board Member of South Bank Corporation, boutique developer Devcorp and the Gallipoli Medical Research Foundation. Toni has more than 10 years’ experience in audit at board level, is a licensed real estate agent and during her time at Goldman Sachs JBWere, was a responsible executive with the ASX holding both derivative and RG146 accreditation. She has also completed an Accelerated Executive Management program through AGSM (The Australian School of Business), the Goldman Sachs JBWere Non-Profit Leadership Program and the Goldman Sachs Executive Director Leadership Program. Toni holds a Master of Law in Enterprise Governance through Bond University. During her time with a leading global investment bank, Toni gained significant strategic advisory experience with prominent Queensland listed companies, large private companies and Profit-for-Purpose groups including a number of Queensland’s major hospital groups. Special responsibilities: • Member of the Audit & Risk Management Committee • Member of the Nomination Committee • Member of the Property Committee Other current listed public Company Directorships: Star Entertainment Group Limited (subject to regulatory approvals) Former listed public Company Directorships in the last three years: Nil PETER TRIMBLE B.COM FCPA GAICD INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 13 MAY 2020 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 childcare 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 childcare 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 • Member of the Nomination Committee • Member of the Property Committee Other current listed public Company Directorships: Nil Former listed public Company Directorships in the last three years: Nil DIRECTORS' REPORT continued 1. Full name Antonia Thornton 37 SECTION 1 DIRECTORS' REPORT MARGARET ZABEL MBA, BMATH, GAICD INDEPENDENT NON-EXECUTIVE DIRECTOR SINCE 1 SEPTEMBER 2017 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 Boards of Select Harvests, The Reject Shop, Collective Wellness Group and Fairtrade AUNZ. Special responsibilities: • Chair of the Property Committee1 • Member of the Nomination Committee • Member of People, Culture & Education Committee Other current listed public Company Directorships: The Reject Shop (appointed 4 June 2021), Select Harvests (appointed 1 Oct 2022) Former listed public Company Directorships in the last three years: Nil GARY CARROLL B.COMM (HONS), B.LAW (HONS), FCPA MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER 1 JANUARY 2017 TO 31 DECEMBER 2022 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 15 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 (Honours) and Bachelor of Law (Honours) degrees from the University of Queensland and is a Fellow of CPA Australia. He has also held the position of Co-Chair of the Early Learning and Care Council of Australia since 2018. Special responsibilities: Nil Other current listed public Company Directorships: Nil Former listed public Company Directorships in the last three years: Nil DIRECTORS' REPORT continued 1. Property Working Group was formalised as a Committee of the Board - “Property Committee" from 1 January 2022 38 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CHIEF EXECUTIVE OFFICER Pejman Okhovat was appointed as Managing Director and Chief Executive Officer on 3 January 2023. 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. Prior to joining the Group, Pejman has held senior leadership positions across a number of well-known retail organisations in Australia and internationally, including as the Managing Director of BIG W, Chief Executive Officer of NZX-listed retailer The Warehouse and as a senior leader at UK retailers Marks and Spencer, Sainsburys and ASDA/Walmart. He has extensive experience in leading large teams within geographically dispersed networks, with a strong focus on customer service, business transformation and delivering value for all stakeholders. COMPANY SECRETARY Tracey Wood was appointed as company secretary and general counsel on 28 May 2018 and holds the role of Chief Legal, Quality and Risk Officer. Tracey holds Master of Laws (with High Distinction), Bachelor of Laws (Hons), Bachelor of Arts (Psychology) (Hons) degrees and a Graduate Diploma in Applied Corporate Governance. 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 • Operation of in-home childcare and specialised NDIS segments for children. There have been no significant changes to the Group’s activities during the financial year ended 31 December 2022. REVIEW OF OPERATIONS Information on the operations and financial position of the Group and its business strategies and prospects are set out on pages 2 to 9, including the Chair's Report, CEO & Managing Director's Report, FY22 Highlights and Strategy sections. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Group during the year were as follows: • Gary Carroll ceased as Managing Director and CEO effective 31 December 2022. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR The following material matters have taken place subsequent to year end: • Effective 3 January 2023, Pejman Okhovat was appointed Managing Director and CEO. • The Group completed the share buy-back program in January 2023. Over the period of the share buy-back program between April 2022 and January 2023 there were a total of 37.9 million shares repurchased for $40.0 million (including transaction costs). • 1,267,740 performance rights were issued to Pejman Okhovat under the Employee Incentive Plan (GEIP) on 20 February 2023. • On 21 February 2023 the Board declared a 2.0 cent fully franked dividend in relation to the 2022 financial year to be paid on 6 April 2023. • A non-cash share capital reduction totalling $271.5 million was resolved by the Board on 21 February 2023 in accordance with section 258F of the Corporations Act 2001. The transaction is wholly contained within equity and involves no reduction to net assets or the number of shares on issue. The purpose and effect of this transaction is to improve balance sheet presentation through the offset of historical losses with recorded capital contributions in order to more closely reflect the net equity of the Group. 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 childcare business during the next financial year. This will be achieved through organic and acquisition led growth, including through greenfield establishments. 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. In certain instances 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 tenth of a million dollars. DIRECTORS' REPORT continued 39 SECTION 1 DIRECTORS' REPORT DIVIDENDS Dividends declared or paid during the financial year were as follows: 2022 $'000 2021 $'000 Dividend for the full financial year ended 31 December 2021 of 3.0 cents per share paid on 1 April 2022 (2021: Nil Dividend for the full financial year ended 31 December 2020) 25,422 — Dividend for the half year ended 30 June 2022 of 1.0 cents per share paid on 7 October 2022 (2021: Nil Dividend for the half year ended 30 June 2021) 8,267 — Total 33,689 — MEETING 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 2022, and the number of meetings attended by each Director were: Full meetings of Directors Audit and Risk Management Committee People, Culture & Education Committee Nomination Committee Property Committee A B A B A B A B A B D Foster 15 15 6 6 6 6 3 3 8 8 G Carroll* 15 15 — — — — — — — — J Cogin 15 15 — — 6 6 3 3 — — D Singh 15 15 — — 6 6 3 3 — — T Thornton 15 15 6 6 — — 3 3 8 8 P Trimble 15 15 6 6 — — 3 3 8 8 M Zabel 15 15 — — 6 6 3 3 8 8 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 * = retired While the above table records Committee member attendance, Directors are invited to and attend all Committee meetings where available. 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 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. The Group's approach with respect to climate governance, strategy and risk management is set out on page 32. 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 wilful 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. DIRECTORS' REPORT continued 40 G8 EDUCATION LIMITED 2022 ANNUAL REPORT DIRECTORS' REPORT continued 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. PERFORMANCE RIGHTS Unissued ordinary shares of G8 Education Limited under the G8 Education Employee Incentive Plan (GEIP) (both Long-Term Incentive Plan and Short-Term Incentive Plan) at the date of this report are set out in the table below. GRANT DATE Vesting date Value of Performance Right at grant date ($) Number of Performance Rights Expiry date 30 June 2020 1 March 2023 0.74 922,533 30 May 2023 28 June 2021 1 March 2024 0.89 1,065,805 31 May 2024 2 September 2021 1 March 2024 0.89 78,713 31 May 2024 14 April 2022 22 February 2023 1.03 257,912 30 June 2023 19 May 2022 1 March 2025 1.01 919,703 31 May 2025 20 February 2023 1 March 2025 n/a1 1,267,740 31 May 2025 Total 4,512,406 1. 1,267,740 performance rights were issued to Pejman Okhovat under the GEIP on 20 February 2023. The rights are yet to be valued using a Black Scholes model. KEY OPERATIONAL INFORMATION CONSOLIDATED GROUP Number of owned centres at year end 438 Licence capacity of owned centres at year end 37,225 Total number of employees at year end 9,808 Total number of full time equivalent employees at year end 8,472 Non-IFRS financial information The 2022 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. Underlying Net Profit After Tax (NPAT) is considered a non-IFRS measure. 2022 Underlying NPAT is calculated as the reported NPAT and adding back post-tax non-trading net expense items totalling $9.1 million, a post-tax borrowing costs write off expense totalling $0.8 million and an effective tax rate adjustment of $1.0 million. Non-trading items include redundancy costs, loss on disposal of assets/ centres and software development expenses. Refer to note 7 of the Financial Report section of this Annual Report for a breakdown of the non-trading items. The Board exercises its discretion in determining whether these items are adjusted for when determining remuneration outcomes. Underlying Earnings Per Share (EPS) is considered a non-IFRS measure. 2022 Underlying EPS is calculated by dividing 2022 Underlying NPAT by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. 41 SECTION 1 DIRECTORS' REPORT REMUNERATION REPORT 42 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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 Key Management Personnel (KMP) during 2022. 1. INTRODUCTION FROM THE PEOPLE, CULTURE AND EDUCATION COMMITTEE CHAIR On behalf of the Board of Directors, I am pleased to present the Remuneration Report for the year ended 31 December 2022. 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 Board believe that the Strategic Remuneration Framework is appropriate for our business and the early learning and care sector. The Framework seeks to balance remuneration outcomes which reward and motivate the Executive KMP with overall business performance and delivering value to our shareholders. COVID-19 IMPACTS The first 4 months of 2022 continued to be impacted by COVID-19, with educators unable to attend work resulting in the need to close rooms and centres. 196 centres were affected by partial or full closure during this time, resulting in significant volatility across the commercial operations in our centres. Again, in the face of these continued challenges, the efforts of our executives and teams at the front line were extraordinary. EDUCATION ADVISORY BOARD From 2023 the PCEC established an Education Advisory Committee to provide thought leadership, advice and guidance to the PCEC, the Board and the Early Learning Education Team of G8 Education. The Education Advisory Committee is overseen by the PCEC and plays a consultative role in the implementation of G8’s Education Strategy. STRATEGIC REMUNERATION FRAMEWORK REVIEW 2022 was the final year of the three-year cycle over which the remuneration framework operates. Details of the framework, including the elements and delivery of remuneration, and incentive plan design principles are outlined in Section 4 of this Report. Following a comprehensive review and acknowledging prior year feedback from proxy advisors, the proposed new framework commences in 2023 and builds on G8 Education's maturity in remuneration practices. It introduces threshold and stretch components to the Short- Term Incentive Plan (STIP), supporting a high-performance culture where there is continued focus on driving incremental improvement in performance. It also incorporates a second performance measure of growth in Total Shareholder Return (TSR) in the Long-Term Incentive Plan (LTIP). This approach strengthens the alignment of executive and shareholder interests and positions G8 Education’s remuneration framework more closely in line with general market practice. We look forward to sharing the details of the proposed new framework in the Notice of Meeting for the 2023 Annual General Meeting and in the 2023 Remuneration Report. Contents 1. INTRODUCTION FROM THE PEOPLE CULTURE AND EDUCATION COMMITTEE1 (PCEC) CHAIR Sets out the activities of the PCEC and the Board and people focused highlights 2. WHO IS COVERED BY THE REPORT Details of Executive KMP and Non-Executive Directors 3. REMUNERATION GOVERNANCE Describes the role of the Board and the PCEC, and the use of remuneration consultants 4. EXECUTIVE KMP REMUNERATION FRAMEWORK Outlines how our Strategy, Vision and Values align to Executive KMP Remuneration 5. REMUNERATION DETAILS FOR EXECUTIVE KMP Outlines the principles and strategy applied to executive remuneration decisions and remuneration received in 2022 6. EQUITY INTERESTS Provides details of Executive KMP and Non-Executive Director shareholdings in G8 Education Limited (G8 Education) 7. EMPLOYMENT AGREEMENTS Provides details regarding the contractual arrangements between G8 Education and Executive KMP 8. NON-EXECUTIVE DIRECTOR REMUNERATION Provides details regarding the fees paid to Non-Executive Directors DIRECTORS' REPORT continued 1. The Board resolved to amend the name of this Committee from "People & Culture Committee" to "People, Culture & Education Committee" on 24 November 2022 REMUNERATION REPORT (AUDITED) 43 SECTION 1 DIRECTORS' REPORT 2022 REWARD OUTCOMES Fixed Remuneration The Chief Financial Officer received an increase to Fixed Remuneration effective from 1 November 2022. This was in recognition of materially increased scope of role. There were no increases to Fixed Remuneration for the CEO and Managing Director or for the Chief Operating Officer. 2022 Short-Term Incentive Plan (STIP) Net Profit After Tax (NPAT) was set as a gate for any payment under the 2022 STIP. As the NPAT gate (set at 90% budget) was achieved, Executive KMP were eligible to receive STI awards. However, NPAT performance was below budget and all but one of the non-financial Key Performance Indicator (KPI) targets were not achieved. In addition, the Board deemed it appropriate to adjust remuneration outcomes under the 2022 STIP downwards considering holistic performance across safety and occupancy results. Section 5 of this Report provides further details of KPI achievement and corresponding STI outcomes for Executive KMP. 2019 and 2020 Long-Term Incentive Plan (LTIP) As disclosed in the 2021 Remuneration Report, the Earnings Per Share (EPS) growth performance conditions under the 2019 LTIP (vesting on 1 March 2022) were not achieved. Consequently the 2019 LTIP lapsed in full, with all rights forfeited. Regarding the 2020 LTIP (due to vest on 1 March 2023), the EPS growth performance conditions were met in full and accordingly it is expected that all rights under the plan will vest for Executive KMP. In the Board's view, the vesting and quantum of awards under these incentive plans appropriately reflects the achievements and performance of G8 Education over the respective performance periods. BOARD REMUNERATION AND GENDER BALANCE At the 2022 AGM the Board did not seek an increase to the aggregate Non-Executive Director fee pool and the fees did not change for the 2022 year. Our Board composition continues to reflect a healthy gender balance, with women representing 67% of our independent Non-Executive Directors. TRANSITION OF CEO AND MANAGING DIRECTOR At the end of 2022, Gary Carroll departed G8 Education in his capacity as CEO and Managing Director. On behalf of the Board, I would like to thank Gary for his outstanding commitment and contribution to G8 Education over the last six years. Gary has overseen a period of significant change through a very challenging operating environment, including most recently during COVID-19. During this time, Gary has been an excellent leader and champion of our purpose, creating the foundations for learning for life. He has executed and delivered solid results with the strategic transformation program while ensuring G8 Education has the right structures and team in place to drive quality outcomes for our children, families, and team members. We are delighted to welcome Pejman Okhovat as G8 Education's new CEO and Managing Director in 2023. Pejman is an accomplished leader, a veteran of the retail and consumer space and has significant experience driving business performance, delivering exceptional consumer outcomes and experiences and leading teams to achieve excellent results. 2022 KEY ACHIEVEMENTS 2022 saw G8 Education recognised externally as Australia’s most attractive employer in Randstad’s Employer Brand Research, with the main highlight being the career progression opportunities available to our team members. Our sector- leading Study Pathways Program ranging from Certificate III Traineeships to the Bachelor Scholarship Program was also recognised as finalists in the Victoria State Training Awards and the Bronze recipient at the Australian Training Awards. We have continued to invest in succession planning and talent management initiatives (attraction, engagement and retention), with our internal graduate program producing its first graduate cohort, and a significant reduction in our Centre Manager turnover over 2022. Further enhancements to our team member value proposition centered on our Centre Managers, Early Childhood Teachers and Educators, which will continue to drive stability in our teams across a challenging talent landscape. LOOKING FORWARD After a comprehensive review of our Strategic Remuneration Framework, the Board has confidence in the integrity of our People Strategy and Remuneration Framework and believes the balance between talent retention and performance against agreed KPIs in an uncertain operating environment has been achieved. 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. Professor Julie Cogin Chair, People, Culture & Education Committee 21 February 2023 REMUNERATION REPORT (AUDITED) continued 44 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 2. WHO IS COVERED BY THE REPORT KEY MANAGEMENT PERSONNEL KMP have authority and responsibility for planning, directing and controlling the activities of G8 Education, directly or indirectly, including any directors (whether executive or otherwise) 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 KMP during the year are set out in the table below: TITLE/COMMITTEES CHANGE IN 2022 NON-EXECUTIVE DIRECTORS David Foster Chair Member, Nomination Member, Audit & Risk Management Member, People, Culture & Education Member, Property1 No Change No Change No Change No Change From 1 January 2022 Peter Trimble Director Chair, Audit & Risk Management Member, Nomination Member, Property1 No Change No Change No Change From 1 January 2022 Julie Cogin Director Chair, People, Culture & Education Member, Nomination No Change No Change No Change Margaret Zabel Director Chair, Property1 Member, Nomination Member, People, Culture & Education No Change From 1 January 2022 No Change No Change Toni Thornton2 Director Member, Nomination Member, Audit & Risk Management Member, Property1 No Change No Change No Change From 1 January 2022 Debra Singh Director Chair, Nomination Member, People, Culture & Education No Change No Change No Change EXECUTIVE DIRECTORS Gary Carroll CEO and Managing Director Until 31 December 2022 Pejman Okhovat CEO and Managing Director From 3 January 2023 OTHER EXECUTIVE KMP Sharyn Williams Chief Financial Officer No Change Malcolm Ashcroft Chief Operating Officer No Change 1. Property Working Group was formalised as a Committee of the Board - “Property Committee" from 1 January 2022. 2. Full name Antonia Thornton REMUNERATION REPORT (AUDITED) continued 45 SECTION 1 DIRECTORS' REPORT 3. REMUNERATION GOVERNANCE AT G8 EDUCATION This section of the Remuneration Report describes the role of the Board and the PCEC and the use of remuneration consultants when making remuneration decisions affecting Executive KMP. ROLE OF THE BOARD AND THE PEOPLE, CULTURE AND EDUCATION COMMITTEE The Board is responsible for G8 Education’s remuneration strategy and policies. Consistent with this responsibility, the Board has established the People, Culture and Education Committee (PCEC) which comprises solely independent Non-Executive Directors (NEDs). The role of the PCEC is set out in its Charter, which is reviewed annually and was last revised and approved by the Board in November 2022. In summary, the PCEC’s role is to: • ensure that 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 requirements as determined by the Australian Securities Exchange (ASX) or other relevant guidelines; • 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 executives; • develop, maintain and monitor appropriate superannuation arrangements for G8 Education; and • oversee the establishment and operation of an Education Advisory Board. The PCEC’s role and interaction with Board and internal and external advisors are further illustrated below: External consultants Internal resources The Board Reviews, applies judgment and, as appropriate, approves the PCEC’s recommendations The People, Culture & Education Committee (“PCEC”) The PCEC operates under the delegated authority of the Board. The PCEC 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 Design features of employee and executive STI and LTI plan awards, including setting of performance and other vesting conditions Talent management policies and practices including superannuation arrangements Remuneration policy in respect of NEDs Further information on the PCEC’s role, responsibilities and membership is contained in the PCEC Charter, which is available on the Corporate Governance section of the G8 Education website. REMUNERATION REPORT (AUDITED) continued 46 G8 EDUCATION LIMITED 2022 ANNUAL REPORT USE OF REMUNERATION CONSULTANTS All proposed remuneration consultancy contracts (within the meaning of section 206K of the Corporations Act 2001) are subject to prior approval by the Board or the PCEC in accordance with the Corporations Act 2001. The Board directly engages external advisors to provide input to the process of reviewing Executive KMP and NED remuneration. During the 2022 financial year, Crichton and Associates Pty Limited (Crichton and Associates) were engaged by the Board to undertake a review of the Strategic Remuneration Framework and provide a remuneration benchmark assessment in relation to the CEO and MD role. Crichton and Associates were paid $16,724 (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 of the PCEC and were accountable to the Board; • During any engagement, 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 PCEC. 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. 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD Executive KMP remuneration has been designed to support and reinforce G8 Education’s Strategy, Purpose and Values. The at-risk components of 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, with 2022 being the final year in the current cycle. Attract, retain and develop the best people to create great teams Provide high quality early learning and care Create differentiation for teams and families The strategic objectives are translated into KPIs Net Profit after Tax acts as a gate for the STIP and has been set as a primary measure, weighted at least 60% of STIP opportunity Measurable performance objectives are set across all strategic objectives 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 Strategic Objectives Our Shareholder Value Proposition Short Term Incentive Plan (STIP) 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 Long Term Incentive Plan (LTIP) Creating the foundations for learning for life Our Purpose Passion, Innovation, Dedication, Compassion, Integrity Our Values Deliver sustainable double-digit growth in earnings for shareholders 3. REMUNERATION GOVERNANCE AT G8 EDUCATION continued REMUNERATION REPORT (AUDITED) continued 47 SECTION 1 DIRECTORS' REPORT 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 complementary 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. Components of variable 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 illustrated below: 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued REMUNERATION REPORT (AUDITED) continued 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 ‘variable’ components Alignment of Executive and Shareholder interests through equity components Total Target Remuneration (TTR) is set by reference to the relevant market comparators Fixed Variable TFR will generally be positioned at or around the median compared to relevant market reference comparator group. The Executive’s expertise and performance in the role is also considered. STI is based on the degree of achievement of Board approved targets. TFR + STI at Target is intended to be positioned in the 3rd quartile of relevant market benchmarks. LTI is intended to reward Executive for sustainable long-term growth aligned to shareholders’ interests. LTI allocation values are intended to be positioned in the 3rd quartile of the relevant market benchmarks. Strategic intent and market positioning Base salary, allowances, superannuation (up to the statutory maximum), and any salary sacrificed components. Part cash and part equity (via performance rights and at the Board’s discretion). Any 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. Performance is tested once with equity at risk until the date of vesting. Remuneration will be delivered as: 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 financial and non-financial objectives tied to strategic priorities. LTI targets are linked to growth in G8 Education’s Earnings Per Share (EPS). Total fixed remuneration (TFR) Short-term incentives (STI) Long-term incentives (LTI) Total target remuneration (TTR) TTR is intended to be positioned in the 3rd quartile compared to relevant market benchmarks. This approach supports competitive total remuneration outcomes for Executives if G8 Education achieves all of its targets. 48 G8 EDUCATION LIMITED 2022 ANNUAL REPORT TARGET REMUNERATION MIX G8 Education endeavours to provide an appropriate and competitive mix of fixed and variable remuneration components paid in cash and equity. The target remuneration mix represents the intended variable remuneration opportunities for Executive KMP assuming all relevant performance requirements are fully satisfied. This is set out for the CEO and Other Executive KMP for 2022 (expressed as a % of Total Target Remuneration, or TTR, for each remuneration element). The remuneration mix is intended to support a high-performance culture at the Executive KMP level, with at least half of TTR tied to variable remuneration components. While the remuneration mix remains unchanged from previous years, there will be material changes from 2023 with the commencement of Pejman Okhovat as the CEO and MD, and the introduction of the proposed new Remuneration Framework. L T I i s 3 0 % o f T T R S T I i s 3 0 % o f T T R T F R i s 4 0 % o f T T R CEO Other Executive KMP L T I i s 2 5 % o f T T R S T I i s 2 5 % o f T T R T F R i s 5 0 % o f T T R HOW TOTAL TARGET REMUNERATION IS DELIVERED Executive KMP remuneration is delivered over several years, with a material portion of total remuneration deferred 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 horizons. This is illustrated in the following chart: FY22 FY23 FY24 FY25 FY26 FY21 TFR TFR STI Cash X Deferred STI^ Cash or Rights Deferral Period X LTI Performance Rights X FY22 TFR TFR STI Cash X Deferred STI^ Cash or Rights Deferral Period X LTI Performance Rights X ^ Triggers if total STI award is above threshold value. Delivery via cash or rights at Board's discretion X Date of payment or vesting of incentive awards 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued REMUNERATION REPORT (AUDITED) continued 49 SECTION 1 DIRECTORS' REPORT TOTAL FIXED REMUNERATION (TFR) Total Fixed Remuneration (TFR) includes all remuneration and benefits paid to Executive KMP calculated on a total employment cost basis. In addition to base salary, superannuation, allowances and any salary sacrificed components are included. 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 target positioning is validated by reference to remuneration surveys and independent benchmark assessments undertaken on a biennial basis, or more regularly as required. Where a market reference peer / comparator group is used, careful consideration is given to relevant ASX-listed organisations selected for inclusion, based on factors such as Market Capitalisation, sector, size and complexity. TFR adjustments, if any, are made with reference to individual performance, an increase in job role or responsibility, changing market circumstances as reflected through independent benchmark assessments or through promotion. Any adjustments to Executive KMP remuneration are approved by the Board, based on PCEC and CEO recommendations (where appropriate). VARIABLE REMUNERATION The key aspects of the STI and LTI Plans are summarised below: SHORT-TERM INCENTIVES (STI) Purpose The STI Plan at G8 Education is designed to reward executives for the achievement of annual performance targets set by the Board at the beginning of the performance period. The STI Plan is reviewed annually by the PCEC and approved by the Board. All STI awards to Executive KMP are approved by the PCEC and Board. Performance targets The key performance objectives under the STI Plan are tied to achievement of Board approved group objectives and performance targets relevant to the specific executive. Net Profit After Tax (NPAT) has been set as a gate for any award under the STI Plan. This means that there is no STI award payable unless a threshold level of NPAT (as approved by the Board) has been met. As a key indicator of G8 Education’s performance, NPAT is also a primary measure under the STI Plan, comprising at least 60% of the overall STI opportunity available to Executive KMP. In 2022 there were five non-financial KPIs across Team, Quality and Customer focus areas. These KPIs were set based on annual targets linked to G8 Education’s strategic priorities. 2022 Scorecard outcomes are further subject to adjustment at the Board’s discretion based on holistic performance, across areas including but not limited to safety and occupancy outcomes. Details of the 2022 Scorecard are set out in Section 5 below. The Board approves the gate, performance measures and targets, and retains absolute discretion in determining the achievement thereof for Executive KMP. Performance Period The STI Plan measures performance over a time horizon of one year, commencing 1 January and ending 31 December. For the 2022 year, the relevant Performance Period is 1 January 2022 to 31 December 2022. Any awards under the Plan are made at the completion of the Performance Period and following the announcement of full-year results. Delivery Generally any award under the STI Plan will be made in cash. However, the Board may defer 50% of any STI award above $100,000, to be delivered in cash or performance rights, at its discretion. Any deferred portion will be determined at the end of the Performance Period and deferred for a period of one year. There are no further performance measures attached to any deferred portion of STI other than continued tenure for the deferral period. This mechanism achieves additional retention of Executive KMP and aligns their interests with those of shareholders. Should the Board apply discretion to award deferred STI in performance rights, the equity allocation will be calculated using G8 Education’s five-day volume weighted average price (VWAP) following the announcement of year end results. 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued REMUNERATION REPORT (AUDITED) continued 50 G8 EDUCATION LIMITED 2022 ANNUAL REPORT LONG-TERM INCENTIVES (LTI) Purpose To align a significant portion of executives’ overall remuneration to the delivery of sustainable shareholder value and provide retention stimulus over the long term Delivery LTI is awarded in equity and provided under the G8 Education Executive Incentive Plan (GEIP). Shareholders approved the GEIP at the 2020 Annual General Meeting, with an intended operating cycle of three years. The GEIP is due for formal review and shareholder approval in 2023. Under the GEIP, selected senior executives (based on their ability to influence and execute strategy) are offered performance rights (one right being a nil exercise price right to one fully paid ordinary share in G8 Education Limited), subject to satisfying the relevant Vesting Conditions. The number of rights granted under the 2022 LTI grant is determined by dividing the executive's LTI target opportunity by the notional value of a Performance Right. The notional value of a Performance Right is calculated using the 5-day Volume Weighted Average Price (VWAP) of one G8 Education Limited share up to and including 1 March 2022. Performance Period The LTI Plan measures performance over a time horizon of three years, commencing 1 January in the year of grant and ending 31 December two years later. For the 2022 LTI grant, the Performance Period is 1 January 2022 to 31 December 2024. Any awards under the Plan are made at Vesting Date (following the announcement of full-year results). LTI is tested against pre-determined performance hurdles at the end of the Performance Period. If the performance hurdles are not met at time of testing, performance rights lapse. There is no holding lock or retesting of awards under the LTI. Vesting Conditions Vesting of the 2022 LTI grant is subject to the Vesting Conditions being met. These comprise a service condition and one performance hurdle. The service condition is continuous employment with G8 Education Limited from the date performance rights are granted until the Vesting Date. The sole performance hurdle for the 2022 LTI grant is the Compound Annual Growth Rate (CAGR) of Reported (audited) Earnings Per Share (EPS) over the Performance Period, subject to adjustment for significant items as determined by the Board in its discretion. The percentage of performance rights that vest for each % of CAGR of EPS is set out in the following table: CAGR of EPS over the three financial years ending 31 December 2024 % of Performance Rights that vest < 10% 0% 10% – 15% 50% to 100% (pro-rata) > 15% 100% In respect of the 2021 LTI grant, the performance hurdle was Cumulative Reported (audited) EPS over the Performance Period, subject to adjustment for significant items as determined by the Board in its discretion. The relevant vesting schedule is as follows: Cumulative EPS over the three financial years ending 31 December 2023 % of Performance Rights that vest < 20 cents 0% 20 cents – 24 cents 50% to 100% (pro-rata) > 24 cents 100% 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued REMUNERATION REPORT (AUDITED) continued 51 SECTION 1 DIRECTORS' REPORT LONG-TERM INCENTIVES (LTI) Vesting Conditions In respect of the 2020 LTI grant, the performance hurdle was Cumulative Reported (audited) EPS over the Performance Period, subject to adjustment for significant items as determined by the Board in its discretion. The relevant vesting schedule is as follows: Cumulative EPS over the three financial years ending 31 December 2022 % of Performance Rights that vest < 14 cents 0% 14 cents – 17 cents 50% to 100% (pro-rata) > 17 cents 100% In respect of the 2019 LTI grant, the performance hurdle was CAGR of Reported (audited) EPS over the Performance Period, subject to adjustment for significant items as determined by the Board in its discretion. The relevant vesting schedule is as follows: CAGR of EPS over the three financial years ending 31 December 2021 % of Performance Rights that vest < 10% 0% 10% to 15% 50% to 100% (pro-rata) > 15% 100% Dividends No dividends are attached to Performance Rights. Voting Rights There are no voting rights attached to Performance Rights. Cessation of Employment In general, when an Executive resigns, is terminated with cause or is terminated in other circumstances involving unacceptable performance or conduct, any Performance Rights which have not vested will be forfeited. In the case of retrenchment or redundancy, Performance Rights will remain on foot on a pro-rata basis and may vest at the end of the relevant Performance Period, subject to satisfaction of the relevant performance hurdles. In the case of termination without cause, death or permanent disability – the number of Performance Rights which vest will be determined by the Board in its sole discretion. Change of Control Where a Change of Control occurs, or in the Board’s opinion will occur, the number of Performance Rights available to be exercised will be determined by the Board in its absolute discretion. OTHER REMUNERATION ELEMENTS AND DISCLOSURES RELEVANT TO EXECUTIVE KMP Clawback The Board has discretion to claw back incentive payments for KMP where material misconduct is evident. The Clawback 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. 4. OUR STRATEGY, VISION AND VALUES AND LINK TO EXECUTIVE KMP REWARD continued REMUNERATION REPORT (AUDITED) continued 52 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 5. REMUNERATION DETAILS FOR EXECUTIVE KMP 2022 SHORT-TERM INCENTIVE PLAN OUTCOMES The NPAT financial target in the 2022 Short-Term Incentive Plan (STIP) is aligned to our shareholder value proposition to deliver sustainable double-digit earnings growth for shareholders. As a key and critical indicator of G8 Education's overall performance, NPAT was set as a gate for any payment under the 2022 STIP. The NPAT KPI comprised 70% of the 2022 STI opportunity for the CEO/ Managing Director and 60% for the other Executive KMP. While the NPAT gate (set at 90% of the Board-approved NPAT budget) was met, the NPAT budget / target was not achieved. This resulted in a partial payment (75%) under the NPAT KPI for Executive KMP. The remaining 30% of STI awards for the CEO/Managing Director and 40% for other Executive KMP was determined based on the achievement of agreed non-financial KPIs. These performance objectives were critical to the delivery of the 2022 plan and fundamental to the success of the long-term strategy, while addressing the ongoing challenges of our competitive operating environment. A robust and holistic assessment of performance was undertaken for Executive KMP, considering both the degree of achievement of these objectives and how this performance was achieved (i.e. through demonstrating visible and positive leadership aligned to our values). Detailed assessments were prepared by the Managing Director (where appropriate) and discussed with the PCEC. The Board applied a small downward adjustment to STI awards when considering safety and occupancy performance during the 2022 year and believes that the resolved STI outcomes appropriately reflect G8 Education's overall performance in 2022. The table below summarises the results for Executive KMP against the 2022 G8 Scorecard. CATEGORY MEASURE DESCRIPTOR TARGET ACHIEVED Financial (Deliver sustainable double-digit earnings growth for shareholders) GATE – Net Profit After Tax (NPAT) Net Profit After Tax has been set as a gate before any STI can be paid ≥ 90% NPAT budget Achieved1 Net Profit After Tax (NPAT) Net Profit After Tax is the sole financial KPI $49.3m NPAT Partially Achieved1 Team (Attract, retain, and develop the best people to create great teams) Centre Manager Voluntary Turnover Centre Managers who voluntarily resign from their employment CM Voluntary Turnover ≤ 19.2% Achieved Early Childhood Teacher Voluntary Turnover Early Childhood Teachers who voluntarily resign from their employment ECT Voluntary Turnover ≤ 38.0% Not Achieved Team Engagement Score Engagement Score measures the commitment of team members to helping G8 achieve its goals Engagement Score ≥ 80% Not Achieved Quality (Provide high quality early learning and care) NQS Assessment & Rating (A&R) Assessment & Rating of centres in relation to the National Quality Standards ≥ 90% of Centres assessed as ‘meeting’ or ‘exceeding’ NQS Not Achieved Customer (Create differentiation for teams and families) Net Promoter Score (NPS) Net Promoter Score measures customer loyalty based on likelihood to recommend G8 NPS ≥ 55 Not Achieved 1. $47.5m Underlying NPAT was achieved against the budget of $49.3m. Based on the outcomes detailed above and the Board's overall adjustment to reflect a holistic view of performance, the CEO and Managing Director was awarded 57% of his total 2022 STIP opportunity, with other Executive KMP awarded 51% of their total STIP opportunity. In accordance with the STIP framework, 50% of STI awards above $100,000 have been deferred until March 2024 for payment. The Board has decided to award the deferred portion of STI in cash, noting the administration involved with issuing equity for relatively small amounts. While G Carroll ceased employment on 31 December 2022, the deferred portion of his STI will be paid in the ordinary course around March 2024. 2020 LONG-TERM INCENTIVE PLAN OUTCOMES The 2020 LTI Plan was tested on 31 December 2022. The Board determined in their assessment that the EPS growth performance conditions were met in full and it is expected that 100% of rights under the Plan will vest on 1 March 2023 for eligible Executive KMP. This translates to the issue of 520,000 shares to G Carroll and 190,000 shares to S Williams. REMUNERATION REPORT (AUDITED) continued 53 SECTION 1 DIRECTORS' REPORT REMUNERATION EARNED BY EXECUTIVE KMP The following table sets out the value of the remuneration earned by Executive KMP during the year. For the avoidance of doubt, remuneration figures in the table include all remuneration earned, but not necessarily received, relating to performance during the period of 1 January to 31 December 2022. The figures in this table differ from those shown in the statutory table as the statutory table includes an apportioned accounting value for all unvested equity 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 during the 2022 financial year. The table below shows: • Total Fixed Remuneration • Short-Term Incentives • Tested Long-Term Incentives • Termination Payments EXECUTIVE KMP $ Fixed Remuneration1 2022 STI–Cash2 2022 STI-Deferred Cash3 2020 LTI4 Termination payments5 Total actual remuneration earned6 G Carroll 840,027 229,017 129,017 577,200 840,000 2,615,261 S Williams 515,027 115,469 15,469 210,900 — 856,865 M Ashcroft 600,027 126,274 26,274 — — 752,575 1. Base salary, superannuation and non-monetary benefits such as motor vehicle, travel and any associated FBT. 2. STI relating to the 2022 Performance Period and payable in cash following announcement of full-year 2022 results. 3. Deferred STI relating to the 2022 Performance Period to be awarded in cash, subject to continued employment by the Executive KMP at March 2024. The Board has exercised discretion to waive the continued service condition for G Carroll, who ceased employment on 31 December 2022. 4. Intrinsic value (based on G8 Education's share price as at 31 December 2022 of $1.11, multiplied by the number of rights vesting) of the 2020 LTI grant due to vest in March 2023. 5. Relates to payment in lieu of 12 months' notice for G Carroll. 6. Does not include for G Carroll the value of the 2021 and 2022 LTI Plans which remain on foot on a pro-rata basis for service provided to 31 December 2022. RELATIONSHIP BETWEEN G8 EDUCATION PERFORMANCE AND KMP REMUNERATION The performance of the Group and remuneration paid to KMP over the last 5 years is summarised in the table below. 20182 $'000 2019 $'000 Restated 20203 $'000 2021 $'000 2022 $'000 Total revenue 858,173 922,202 788,358 878,733 905,224 EBIT 132,184 146,379 (141,141) 118,720 105,635 Net Profit After Tax 71,831 52,019 (188,970) 45,681 36,606 Underlying NPAT (unaudited, Non IFRS)1 79,417 67,673 62,658 39,499 47,487 Underlying EPS (cents)1 17.54 13.02 7.39 4.66 5.69 Annual dividend per share (cents) 14.0 12.75 — — 4.0 Share price as at 31 December ($) 2.83 1.90 1.18 1.11 1.11 Total Fixed Remuneration Executive KMP4 1,631 1,745 1,577 1,900 1,955 Total Variable Remuneration Executive KMP5 82 — — 836 1,430 Total Fees Non-Executive Directors4,6 1,060 1,060 959 1,018 1,082 1. As defined on page 40. 2. Prior year numbers have not been restated for AASB 16 Leases nor for Remediation Program underpayments identified in 2020. 3. The year ended 31 December 2020 has been restated for a change in the Group’s accounting policy for Software as a Service (SaaS) arrangements. 4. TFR for Executive KMP and NED fees in 2020 reflected a 20% reduction for 6 months, due to COVID-19. 5. Includes STI and LTI earned in year (i.e., 2022 includes 2022 STIP over the January – December 2022 performance period; and 2020 LTIP over the January 2020 – December 2022 performance period). 6. NED fees are inclusive of superannuation. 5. REMUNERATION DETAILS FOR EXECUTIVE KMP continued REMUNERATION REPORT (AUDITED) continued 54 G8 EDUCATION LIMITED 2022 ANNUAL REPORT STATUTORY REMUNERATION TABLE Short-term benefits Post- employ- ment benefits Termination benefits1 Long-term benefits/ Share-based payments Total Remun- eration Perform- ance related Share Plan related AMOUNT $ YEAR Base Salary Non- monetary benefits Cash STI Super- annuation benefits Cash Performance Rights2 Cash3 % of Total Remun- eration % of Total Remun- eration G Carroll 2022 815,596 — 229,017 24,430 840,000 238,609 129,017 2,276,669 26% 10% 2021 817,715 — 294,125 22,631 — 339,551 — 1,474,022 43% 23% S Williams 2022 490,596 — 115,469 24,430 — 66,925 7,734 705,155 27% 9% 2021 470,306 — 136,260 22,631 — 106,507 — 735,704 33% 14% M Ashcroft 2022 575,597 — 126,274 24,430 — 19,298 13,137 758,736 21% 3% 2021 477,278 — 137,500 20,377 — 57,909 — 693,064 28% 8% Totals 2022 1,881,790 — 470,760 73,291 840,000 324,832 149,888 3,740,560 25% 9% 2021 1,765,299 — 567,885 65,639 — 503,967 — 2,902,790 37% 17% 1. Termination payment for G Carroll relates to payment in lieu of 12 months’ notice. 2. Long-term performance rights figures include expenses recognised in relation to the 2020 LTI, 2021 LTI, 2022 LTI and 2021 STI plans. As the Board exercised their discretion in regard to some of G Carroll’s rights remaining on foot, the changes were accounted for as a modification under AASB 2 Share Based Payments with the accounting expense accelerated in the year ended 31 December 2022 for all rights which are currently expected to vest that remain on foot as at 31 December 2022. 3. Long-term cash figures relate solely to the 2022 deferred STI awards. For G Carroll, who ceased employment on 31 December 2022, the 2022 deferred STI award has been fully expensed in 2022. 6. KMP EQUITY INTERESTS The tables below set out the equity interests held by Non-Executive Directors (“NEDs”) and Executive KMP. SHARES OWNERSHIP TYPE Balance at the start of the year Changes during the year Balance at the end of the year/ at retirement or termination Directors of G8 Education Limited ORDINARY SHARES D Foster (Chair) Indirectly 78,763 18,937 97,700 G Carroll (CEO)1 Directly 174,547 — 174,547 J Cogin Indirectly 45,000 — 45,000 D Singh Indirectly 50,000 — 50,000 A Thornton Directly 23,150 — 23,150 P Trimble Indirectly 100,000 — 100,000 M Zabel Indirectly 40,000 10,000 50,000 Other Executive KMP of G8 Education Limited ORDINARY SHARES S Williams Indirectly 65,455 — 65,455 M Ashcroft Directly 100,000 — 100,000 1. G Carroll ceased employment as Managing and CEO effective 31 December 2022. 5. REMUNERATION DETAILS FOR EXECUTIVE KMP continued REMUNERATION REPORT (AUDITED) continued 55 SECTION 1 DIRECTORS' REPORT 6. KMP EQUITY INTERESTS continued 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. Number of Rights Value of Rights ($)1 PLAN GRANT DATE Fair Value at Grant Date2 Balance at the start of the year Granted in year Vested in year Lapsed/ forfeited in year Balance at the end of the year Granted in year Vested in year Lapsed/ forfeited in year Year in which grant vests G Carroll3 2022 LTI 19 May 22 $1.01 — 490,886 — 381,426 109,460 495,795 — 385,240 2025 2021 STI 14 Apr 22 $1.03 — 151,259 — — 151,259 155,797 — — 2023 2021 LTI 28 June 21 $0.89 583,406 — — 254,122 329,284 — — 226,169 2024 2020 LTI 30 June 20 $0.74 520,000 — — — 520,000 — — — 2023 2019 LTI4 10 May 19 $2.42 198,119 — — 198,119 — — — 479,448 2022 Total 1,301,525 642,145 — 833,667 1,110,003 651,592 — 1,090,857 S Williams 2022 LTI 19 May 22 $1.01 — 194,795 — — 194,795 196,743 — — 2025 2021 STI 14 Apr 22 $1.03 — 28,253 — — 28,253 29,101 — — 2023 2021 LTI 28 June 21 $0.89 211,833 — — — 211,833 — — — 2024 2020 LTI 30 June 20 $0.74 190,000 — — — 190,000 — — — 2023 2019 LTI4 10 May 19 $2.42 72,020 — — 72,020 — — — 174,288 2022 Total 473,853 223,048 — 72,020 624,881 225,844 — 174,288 M Ashcroft 2022 LTI 19 May 22 $1.01 — 233,755 — — 233,755 236,093 — — 2025 2021 STI 14 Apr 22 $1.03 — 28,899 — — 28,899 29,766 — — 2023 2021 LTI 28 June 21 $0.89 232,906 — — — 232,906 — — — 2024 2020 LTI 30 June 20 $0.74 — — — — — — — — 2023 2019 LTI 10 May 19 $2.42 — — — — — — — — 2022 Total 232,906 262,654 — — 495,560 265,859 — — Grand Total 2,008,284 1,127,847 — 905,687 2,230,444 1,143,294 — 1,265,145 1. Performance Rights are expensed in line with the vesting conditions of the Performance Rights (refer Note 31). 2. Fair value at grant date is calculated independently based on the Black-Scholes-Merton pricing model and using a risk-neutral assumption. 3. The Board exercised their discretion in regard to some of G Carroll's rights. The balance of rights at the end of the year represents the pro-rata awards that remain on foot for G Carroll based on his service to 31 December 2022. These will be tested against the relevant performance conditions in the ordinary course under each plan. 4. Performance rights under the 2019 LTI lapsed in full following testing on 31 December 2021 as the performance hurdles were not met. REMUNERATION REPORT (AUDITED) continued 56 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 7. EMPLOYMENT AGREEMENTS 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, as it pertains to those employed as at 31 December 2022. 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 Unless otherwise agreed, 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 Unless otherwise agreed, 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 any unvested STI and LTI benefits to vest. Termination for serious misconduct Unless otherwise agreed, G8 Education may immediately terminate employment at any time in the case of serious misconduct, 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 6 months. REMUNERATION REPORT (AUDITED) continued 57 SECTION 1 DIRECTORS' REPORT 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 PCEC and determined by the Board. Shareholders approve the aggregate amount available for the remuneration of NEDs. No increase in NED remuneration is proposed for 2023. There has been no increase since 2018. Remuneration is structured to preserve independence whilst creating alignment To preserve independence and impartiality, NEDs are not entitled to any form of variable remuneration including incentive payments or equity awards. NED fees are not set with reference to any measure of G8 Education performance. However, to create alignment between directors and shareholders, the Board has adopted a Minimum Shareholding Guideline 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. Aggregate Board and committee fees are approved by shareholders The total amount of fees paid to NEDs in 2022 is within the aggregate amount approved by shareholders at the AGM in May 2017 of $1,100,000 per annum including superannuation. NED FEES AND OTHER BENEFITS EXPLAINED ELEMENTS DETAILS 20221 $ 20211 $ Board base fees per annum Board Chair 285,000 285,000 Board NED 140,000 140,000 Committee fees per annum Audit & Risk Chair 25,000 25,000 Nomination Chair 25,000 25,000 People, Culture & Education Chair 25,000 25,000 Property Chair 25,000 25,000 Audit & Risk Member No fee No fee Nomination Member No fee No fee People, Culture & Education Member No fee No fee Property Member No fee No fee POST-EMPLOYMENT BENEFITS Superannuation Superannuation contributions are made in line with the legislated Superannuation Guarantee. NED fees are inclusive of superannuation contributions, which have been made at a rate of 10.5% from 1 July 2022 (and 10.0% for the 2021 financial year and up to 30 June 2022). Any 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. Fixed Fees NEDs do not receive any performance-related compensation in cash, options, 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. No payments were made to NEDs during 2022 for travel allowances, extra services or special exertions. 1. NED fees include superannuation. REMUNERATION REPORT (AUDITED) continued 58 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NED TOTAL REMUNERATION PAID YEAR Fees $ Superannuation benefits $ Total $ D Foster (Chair) 2022 260,596 24,430 285,027 2021 159,204 15,544 174,748 M Zabel 2022 149,671 15,329 165,000 2021 150,342 14,658 165,000 J Cogin 2022 149,671 15,329 165,000 2021 142,000 13,865 155,865 P Trimble 2022 149,671 15,329 165,000 2021 150,342 14,658 165,000 T Thornton 2022 126,985 9,833 136,818 2021 9,790 979 10,769 D Singh 2022 149,671 15,326 165,000 2021 11,538 1,154 12,692 Totals 2022 986,265 95,579 1,081,845 20211 623,216 60,858 684,074 1. Total remuneration paid to NEDs during 2021 has been restated to correct an administrative error caused by the 0.5% increase in superannuation on 1 July 2021. 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. END OF REMUNERATION REPORT 8. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION continued REMUNERATION REPORT (AUDITED) continued 59 SECTION 1 DIRECTORS' REPORT DIRECTORS' 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 2022, 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 61. 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. Pejman Okhovat Managing Director 21 February 2023 DIRECTORS' REPORT continued 60 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 61 SECTION 1 DIRECTORS' REPORT AUDITORS INDEPENDENCE DECLARATION A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 2022, 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; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene 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 Kellie McKenzie Partner 21 February 2023 TO THE DIRECTORS OF G8 EDUCATION LIMITED 62 G8 EDUCATION LIMITED 2022 ANNUAL REPORT FINANCIAL REPORT Contents CONSOLIDATED INCOME STATEMENT 63 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 63 CONSOLIDATED BALANCE SHEET 64 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 65 CONSOLIDATED STATEMENT OF CASH FLOWS 66 NOTES TO THE FINANCIAL STATEMENTS 67 DIRECTORS’ DECLARATION 116 INDEPENDENT AUDITOR’S REPORT 117 63 SECTION 2 FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022 Consolidated Notes 2022 $'000 2021 $'000 Continuing operations Revenue 3 901,286 866,336 Other income 4 3,938 12,397 Total 905,224 878,733 Expenses Employment costs 5 (561,466) (537,629) Properties, utilities and maintenance costs (51,225) (48,214) Direct costs (35,148) (33,692) Software development expenses (7,280) (6,901) Depreciation and amortisation 5 (95,286) (88,674) Other expenses (48,772) (44,819) Finance costs 5 (52,357) (53,259) Total expenses (851,534) (813,188) Profit before income tax 53,690 65,545 Income tax expense 6 (17,084) (19,864) Profit for the year attributable to members of the parent entity 36,606 45,681 Cents Cents Basic earnings per share 8 4.39 5.39 Diluted earnings per share 8 4.37 5.37 The above Consolidated Income Statement should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 Consolidated 2022 $'000 2021 $'000 Profit for the year 36,606 45,681 Total comprehensive income for the year 36,606 45,681 The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. CONSOLIDATED INCOME STATEMENT 64 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2022 Consolidated Notes 2022 $'000 2021 $'000 Assets CURRENT ASSETS Cash and cash equivalents 18 37,826 74,131 Trade and other receivables 9 22,530 19,604 Other current assets 10 12,710 12,299 Current tax asset 6 11,294 17,582 Total current assets 84,360 123,616 NON-CURRENT ASSETS Property, plant and equipment 11 136,250 107,458 Right of use assets 20 401,834 441,161 Deferred tax assets 6 102,385 108,089 Intangible assets 16 1,051,614 1,057,494 Investment in an associate 24(b) 932 1,000 Other non-current assets 10 6,196 7,211 Total non-current assets 1,699,211 1,722,413 Total assets 1,783,571 1,846,029 Liabilities CURRENT LIABILITIES Trade and other payables 12 73,421 78,265 Contract liabilities 3(i) 11,234 12,343 Borrowings 19 920 — Lease liabilities 20 81,168 73,207 Provisions 13 85,832 90,098 Total current liabilities 252,575 253,913 NON-CURRENT LIABILITIES Other payables 12 378 6,867 Borrowings 19 127,935 96,055 Lease liabilities 20 503,532 559,651 Provisions 13 15,788 14,832 Total non-current liabilities 647,633 677,405 Total liabilities 900,208 931,318 Net assets 883,363 914,711 Equity Contributed equity 21 1,174,419 1,209,227 Reserves 73,297 65,316 Retained earnings (364,353) (359,832) Total equity 883,363 914,711 The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes. 65 SECTION 2 FINANCIAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 CONSOLIDATED Notes Contributed Equity $'000 Share Based Payment Reserve $'000 Profits Reserve $'000 Retained Earnings $'000 Total $'000 Balance 1 January 2021 1,209,227 174 16,764 (357,635) 868,530 Profit / (loss) for the year — — 47,877 (2,196) 45,681 Total comprehensive income / (loss) for the year — — 47,877 (2,196) 45,681 Transactions with owners in their capacity as owners Share based payment expense 31 — 501 — — 501 Total — 501 — — 501 Balance 31 December 2021 1,209,227 675 64,641 (359,832) 914,711 Balance 1 January 2022 1,209,227 675 64,641 (359,832) 914,711 Profit / (loss) for the year — — 41,127 (4,521) 36,606 Total comprehensive income / (loss) for the year — — 41,127 (4,521) 36,606 Transactions with owners in their capacity as owners Buy back of equity, including transaction costs 21 (34,808) — — — (34,808) Share based payment expense 31 — 543 — — 543 Dividends provided for or paid 22(a) — — (33,689) — (33,689) Total (34,808) 543 (33,689) — (67,954) Balance 31 December 2022 1,174,419 1,218 72,079 (364,353) 883,363 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 66 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 Consolidated Notes 2022 $'000 2021 $'000 Cash flows from operating activities Receipts from customers (inclusive of GST) 897,675 868,519 Payments to suppliers and employees (inclusive of GST) (707,799) (704,854) Interest received 410 81 Interest paid (non-leases) (10,021) (11,233) Interest paid (leases) (38,409) (39,599) Income taxes paid (net of refunds) (5,092) (28,647) Net cash inflows from operating activities 23 136,764 84,267 Cash flows from investing activities Payments for purchase of businesses (net of cash acquired) (75) (2,630) Payments for purchase of intangible assets (1,125) (1,290) Net proceeds / (payments) for divestments 168 (6,980) Proceeds from the sale of property, plant and equipment 217 — Payments for property, plant and equipment (58,482) (41,384) Acquisition of investment in associate 24(b) — (1,000) Net cash outflows from investing activities (59,297) (53,284) Cash flows from financing activities Dividends paid 22 (33,689) — Principal elements of lease payments (73,194) (72,297) Buy back of equity (including transaction costs) 21 (34,808) — Proceeds / (repayments) from borrowings 30,000 (200,000) Borrowing costs paid (2,081) (1,544) Net cash outflows from financing activities (113,772) (273,841) Net decrease in cash and cash equivalents (36,305) (242,858) Cash and cash equivalents at the beginning of the financial year 74,131 316,989 Cash and cash equivalents at the end of the financial year 18 37,826 74,131 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 67 SECTION 2 FINANCIAL REPORT INDEX TO NOTES TO THE FINANCIAL STATEMENTS 1. FINANCIAL OVERVIEW Note 1: Material Events During The Reporting Period 68 Note 2: Segment Information 69 Note 3: Revenue 70 Note 4: Other Income 70 Note 5: Expenses 71 Note 6: Income Tax And Deferred Tax Assets 72 Note 7: Profit For The Year 76 Note 8: Earnings Per Share 77 Note 9: Current Assets – Trade And Other Receivables 78 Note 10: Current And Non-Current Assets – Other 80 Note 11: Non-Current Assets – Property, Plant And Equipment 81 Note 12: Current And Non-Current Liabilities – Trade And Other Payables 82 Note 13: Current And Non-Current Liabilities – Provisions 83 Note 14: Critical Accounting Estimates And Judgements 85 2. BUSINESS COMBINATIONS, GOODWILL & IMPAIRMENT Note 15: Business Combinations 86 Note 16: Non-Current Assets – Intangible Assets 88 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT Note 17: Financial Risk Management 90 Note 18: Current Assets – Cash And Cash Equivalents 93 Note 19: Current And Non-Current Liabilities - Borrowings 93 Note 20: Right Of Use Assets And Lease Liabilities 96 Note 21: Contributed Equity 99 Note 22: Dividends 101 Note 23: Reconciliation Of Cash Flows 102 4. GROUP STRUCTURE Note 24: Interests In Other Entities 103 Note 25: Parent Entity Disclosures 105 Note 26: Deed Of Cross Guarantee 106 5. UNRECOGNISED ITEMS Note 27: Commitments 108 Note 28: Other Matters 108 Note 29: Events Occurring After The Balance Sheet Date 108 6. OTHER Note 30: Key Management Personnel Disclosures 109 Note 31: Share-Based Payments 110 Note 32: Remuneration Of Auditors 113 Note 33: Related Party Transactions 113 Note 34: Other Significant Accounting Policies 114 68 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 1: MATERIAL EVENTS DURING THE REPORTING PERIOD (a) COVID-19 pandemic, flood events and labour shortages The Group continued to play a key role in supporting the broader community and economic recovery during the COVID-19 pandemic, providing continuity of care with protocols in place to ensure the safety of our families and team members. The Group also provided support to families and team members impacted by the Eastern Australia flood events during February to April 2022, through waiving of fees, disaster relief payments and participating in local community support initiatives. The Group reported a statutory net profit after tax of $36.6 million for the year ended 31 December 2022, 19.9% lower than the prior year (2021: $45.7 million). Revenue of $901.3 million for the year ended 31 December 2022 was up 4.0% on the prior year (2021: $866.3 million) driven predominantly by higher average fees. Occupancy levels in the quarter ended 31 March 2022 were impacted by the COVID-19 pandemic (increased Omicron case numbers and isolation requirements) and flood-related centre closures but occupancy levels increased after the first quarter and progressively improved over the remainder of the year, exceeding the prior year in the second half of the year, as COVID-19 restrictions reduced and the economic recovery continued. The Group reported total expenses of $851.5 million for the year ended 31 December 2022, 4.7% higher than the prior year (2021: $813.2 million). Employment costs for the year ended 31 December 2022 of $561.5 million were 4.4% higher than the prior year (2021: $537.6 million), driven by increased wages rates and ongoing sector workforce challenges, including labour shortages and sick leave as a result of COVID-19 and flood-related team member shortages, resulting in additional agency usage throughout the year. During the year, to respond to the challenging environment, the Group successfully implemented a $14 million cost reduction program for the year ended 31 December 2022. Restructuring costs of $2.8 million are included in the year ended 31 December 2022 result (refer note 7). Government assistance in the current year was provided through claiming child care subsidy for COVID-19 and flood related absences. Child care subsidies are recorded as revenue from child care centres. In the prior period, the Group recognised the following one-off government assistance, specific to COVID-19, which was reflected as a separate revenue category in note 3: Consolidated 2022 $'000 2021 $'000 Revenue Business Continuity Payments — 15,960 Child Care Relief Package, Transition and Recovery Payments — 5,303 Total — 21,263 (b) Share buy-back program and dividends The share buy-back program announced in February 2022 commenced during the period, with 33.6 million shares repurchased for a cost, including transaction costs, of $34.8 million to 31 December 2022. Refer to note 21. The Group completed the share buy-back program in January 2023. Over the period of the share buy-back program between April 2022 and January 2023 there were a total of 37.9 million shares repurchased for $40.0 million (including transaction costs). Dividends amounting to $33.7 million (2021: nil) were distributed from the profits reserve during the year. Refer to note 22. (c) Refinance of debt facilities As part of the Group’s capital management strategy, the $100.0 million junior debt facility (subordinated debt) was repaid in full and cancelled in June 2022, by utilising senior syndicated debt, to reduce the overall cost of debt, including the cost of unused capacity. The Group refinanced its senior syndicated debt in December 2022, reducing the facility limits from $350.0 million to $306.0 million. The refinanced syndicated debt facility has $270.0 million in revolving facilities ($192.3 million with an expiry date in December 2025 and $77.7 million with an expiry date in December 2026). The Group had $130.0 million drawn from the $270.0 million syndicated debt facilities as at 31 December 2022. The facility incurs interest at a rate of BBSY plus a margin based on the Group’s leverage ratio. Borrowing costs, relating to the refinancing, of $2.1 million were capitalised to the loan and will be expensed on a straight line basis over the life of the facility. The refinanced syndicated debt facility also has a $36.0 million bank guarantee facility of which $33.6 million was in use as at 31 December 2022. Refer to note 19. 1. FINANCIAL OVERVIEW 69 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 1: MATERIAL EVENTS DURING THE REPORTING PERIOD continued (d) Going concern The Group recognised a net profit after tax of $36.6 million for the year (2021: $45.7 million); current liabilities exceeded current assets by $168.2 million as at 31 December 2022 (2021: $130.3 million). The Directors have concluded that there are reasonable grounds to believe that the going concern basis is appropriate. Management expects the cash reserves and undrawn debt facilities, together with the forecast cash flow generation from operations will allow the Group to fulfil the Group's remediation program obligations and meet its debts for the 12 months from the date of this report. On this basis, the Directors have concluded that there are reasonable grounds to believe that the going concern basis is appropriate. 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 Description of segments The Executive Team (the Chief Operating Decision Maker) 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 relates to the single operating segment in Australia and the segment disclosure has not altered from the last Annual Report. Consolidated 2022 $'000 2021 $'000 Revenue from external customers continuing operations 901,286 866,336 Profit before tax from continuing operations 53,690 65,545 Non-current assets1 at 31 December 1,596,826 1,614,324 1. Non-current assets exclude deferred tax assets. Consolidated TIMING OF REVENUE RECOGNITION 2022 $'000 2021 $'000 Revenue recognised at a point in time 883,509 849,596 Total revenue from contracts with customers 883,509 849,596 Other revenue recognised over time 17,777 16,740 Total revenue 901,286 866,336 70 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 3: REVENUE Disaggregation of revenue Consolidated 2022 $'000 2021 $'000 From continuing operations Sales revenue Revenue from child care centres1 883,509 829,201 Government assistance (refer to note 1(a))2 — 21,263 Funding relating to child care operations 17,777 15,872 Total revenue continuing operations 901,286 866,336 1. Government assistance in the current period was provided through claiming child care subsidy for COVID-19 and flood related absences. Child care subsidies are recorded as revenue from child care centres. 2. In the prior period, the Group recognised one-off government assistance, specific to COVID-19, relating to Business Continuity Payments, Child Care Relief Package and Transition and Recovery Payments. 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 Subsidy) 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). In the prior year due to the COVID-19 outbreak, specific one-off government assistance was received (refer to note 1(a)). Revenue received in advance from parents, guardians and the government is recognised as deferred income and classified as a current liability (i.e. contract liability for performance obligations yet to be satisfied), 31 December 2022: $11.2 million (2021: $12.3 million). (ii) Funding related to child care operations Training incentives and additional funding receipts are recognised in revenue 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. Subsidies to support businesses to take on new apprentices and trainees are recognised as a credit to employment costs (refer note 5). NOTE 4: OTHER INCOME Consolidated 2022 $'000 2021 $'000 Interest 412 83 Gain on sale of centres 266 6,590 Gain on lease modifications1 1,022 3,970 Gain on surrender / termination of leases2 — 1,754 Deferred contingent consideration not payable (note 15(iii))3 6,393 — Goodwill impairment (note 15(iii) and note 16)3 (6,393) — Insurance proceeds 1,132 — Vendor rebates 1,106 — Total other income 3,938 12,397 1. The gain on lease modifications is primarily resulting from the reduction in lease option renewals recognised. 2. 2022 Loss on surrender / termination of leases totalling $1.3 million has been included in ‘other expenses’ in the consolidated income statement. 3. An impairment expense relating to Leor goodwill has been booked and has been taken to the consolidated income statement as a $6.4 million expense in other income (refer note 15(iii) and note 16), but there also was an offsetting fair value adjustment to contingent consideration which has been taken to the consolidated income statement as a $6.4 million credit in other income (refer note 15(iii)). 1. FINANCIAL OVERVIEW 71 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 4: OTHER INCOME continued Accounting policies (i) Interest income Interest income is recognised using the effective interest method. (ii) Gain on sale of centres Gains and losses on disposal are determined by comparing proceeds with the carrying amount. (iii) Gains on lease modifications, surrenders and termination Gains / (losses) from lease modifications are recognised as a result of the remeasurement of the right of use asset and lease liability following the modification of lease agreements and changes in the lease term, following a change in the assessment of whether the Group is reasonably certain or not to exercise an extension option. Gains / (losses) from the surrender / termination of leases are determined by comparing payments with the carrying amount of the right of use asset and lease liability. NOTE 5: EXPENSES Consolidated 2022 $'000 2021 $'000 Profit before income tax includes the following specific expenses: DEPRECIATION AND AMORTISATION Depreciation expense of property, plant and equipment (note 11) 25,742 20,965 Amortisation of intangibles (note 16) 412 140 Depreciation expense of right-of-use assets (note 20) 69,132 67,569 95,286 88,674 EMPLOYMENT COSTS Wages and salaries 514,836 494,738 Boosting Apprenticeship Commencement (BAC) subsidy1 (7,359) (5,179) Training and professional development 8,811 5,128 Post-employment benefits expense 44,635 42,441 Share-based payment expense 543 501 561,466 537,629 FINANCE COSTS Interest expense 9,854 11,205 Borrowing costs expense 3,990 2,455 Interest expense on lease liabilities and make good provision (notes 20(c) and 13(a)) 38,513 39,599 52,357 53,259 1. This subsidy was a time limited intervention to support businesses to take on new apprentices and trainees during the economic recovery from the impacts of COVID-19. From 30 June 2022 this program closed to new entrants. 72 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 6: INCOME TAX AND DEFERRED TAX ASSETS Consolidated 2022 $'000 2021 $'000 (a) Income tax expense Current tax 10,693 8,399 Deferred tax 5,704 11,679 Under / (over) provision current tax prior year 687 (108) Under / (over) provision deferred tax prior year — (106) Income tax expense 17,084 19,864 INCOME TAX EXPENSE IS ATTRIBUTABLE TO: Results from continuing operations 17,084 19,864 17,084 19,864 DEFERRED INCOME TAX EXPENSE INCLUDED IN INCOME TAX EXPENSE COMPRISES: Decrease in deferred tax assets 5,704 11,573 (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense 53,690 65,545 Tax on operations at the Australian tax rate of 30% (2021: 30%) 16,107 19,664 Tax effect of amounts which are not deductible (taxable) in calculating taxable income Adjustments relating to prior year 687 (214) Entertainment 75 66 Acquisition and divestment related costs - not deductible — 336 Deferred contingent consideration not payable (1,918) — Goodwill impairment 1,918 — Other non-allowable items 215 12 Income tax expense 17,084 19,864 Weighted average tax rate 31.8% 30.3% (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 - (credited) / debited directly to equity — — The Group has a current tax asset of $11.3 million as at 31 December 2022 (2021: $17.6 million) which includes approximately $8 million relating to refunds arising in relation to prior years’ adjustments for the Employee Payments Remediation Program (refer to 13(c)). 1. FINANCIAL OVERVIEW 73 SECTION 2 FINANCIAL REPORT NOTE 6: INCOME TAX AND DEFERRED TAX ASSETS continued Consolidated 2022 $'000 2021 $'000 Deferred tax asset THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Employee benefits provisions1 25,398 26,538 Share issue transaction costs 1,339 1,980 Total temporary differences 26,737 28,518 OTHER Business-related costs 814 255 Provision for expected credit loss 1,555 1,612 Accrued expenses 3,027 4,204 Property, plant and equipment 8,445 9,077 Intangibles 1,496 1,700 Lease liabilities 175,410 189,857 Provisions 6,895 6,973 Total other 197,642 213,678 Total deferred tax assets 224,379 242,196 Deferred tax liability Buildings (536) (567) Right of use / make good assets (120,516) (132,624) Prepayments (942) (916) Total deferred tax liability (121,994) (134,107) Net deferred tax asset 102,385 108,089 1. Employee Benefits include the tax benefit of $11.1 million (2021: $12.5 million) arising from the remediation program, refer to note 13(c). 1. FINANCIAL OVERVIEW 74 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 6: INCOME TAX AND DEFERRED TAX ASSETS continued Consolidated DEFERRED TAX CBS1 2020 $'000 CIS2 2021 $'000 CBS1 2021 $'000 CIS2 2022 $'000 CBS1 2022 $'000 Deferred tax relates to the following: Employee benefits provisions 34,433 (7,895) 26,538 (1,140) 25,398 Share issue transaction costs 3,240 (1,260) 1,980 (641) 1,339 Business-related costs 474 (219) 255 559 814 Allowance for expected credit losses 1,559 53 1,612 (57) 1,555 Accrued expenses 3,034 1,170 4,204 (1,177) 3,027 Property, plant and equipment 6,832 2,245 9,077 (632) 8,445 Intangibles 1,794 (94) 1,700 (204) 1,496 Lease liabilities 204,375 (14,518) 189,857 (14,447) 175,410 Provisions 6,892 81 6,973 (78) 6,895 Buildings (567) — (567) 31 (536) Right of use / make good assets (140,896) 8,272 (132,624) 12,108 (120,516) Prepayments (1,508) 592 (916) (26) (942) Net deferred tax expense / (benefit) (11,573) (5,704) Net deferred tax asset / (liability) 119,662 108,089 102,385 1. Consolidated Balance Sheet 2. Consolidated Income Statement Tax consolidation (i) Members of the tax consolidated group and the tax sharing agreement G8 Education Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 3 December 2007. G8 Education Limited 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. 1. FINANCIAL OVERVIEW 75 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 6: INCOME TAX AND DEFERRED TAX ASSETS continued AASB Interpretation 23 Uncertainty over Income Tax Treatments The Group applies judgement in identifying uncertainties over income tax treatments and considers whether it has any uncertain tax positions. The Group determines, based on its tax compliance and reviews, whether it is probable that its tax treatments (including those for the subsidiaries) would be accepted by the taxation authorities. (iii) Tax related contingencies At 31 December 2022 there are no tax related contingencies (2021: 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 Limited 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. 76 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 7: PROFIT FOR THE YEAR Profit for the year includes the following items that are material because of their nature, size or incidence. Consolidated 2022 $'000 2021 $'000 (a) Non-trading items NON-TRADING INCOME Gain on lease modifications 1,022 3,970 Gain on sale of centres 266 6,590 Gain on surrender / termination of leases — 1,754 Impairment reversal1 77 — Total non-trading income 1,365 12,314 NON-TRADING EXPENSES Loss on surrender / termination of leases (1,334) — Divestment / acquisition related expenses (30) (618) Abandoned acquisition expenses — (489) Redundancy costs (2,839) — Loss on disposal of assets / centres (2,859) (5,165) Software development expenses (7,280) (6,901) Total non-trading expenses (14,342) (13,173) Non-trading items (12,977) (859) Income tax benefit 3,893 258 Net non-trading items (9,084) (601) (b) Government assistance and rent concessions COVID-19 RELATED INCOME Child care relief package (refer to note 1(a)) — 21,263 Total non-trading income — 21,263 1. 2022 Net impairment reversal of $0.1 million has been included in ‘other expenses’ in the consolidated income statement. This amount includes $1.2 million of impairment reversal for Right of use assets (note 20(c)) and is offset in part by $1.1 million of impairment expense relating to Plant and Equipment (note 11). 1. FINANCIAL OVERVIEW 77 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 8: EARNINGS PER SHARE Consolidated 2022 Cents 2021 Cents (a) Basic earnings per share Profit attributable to the ordinary equity holders of the Company 4.39 5.39 (b) Diluted earnings per share Profit from continuing operation attributable to the ordinary equity holders of the Company 4.37 5.37 $'000 $'000 (c) Reconciliation of earnings used in calculating earnings per share BASIC EARNINGS PER SHARE Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per share 36,606 45,681 DILUTED EARNINGS PER SHARE Profit attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share 36,606 45,681 Number Number (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 834,742,833 847,390,315 ADJUSTMENTS FOR CALCULATION OF DILUTED EARNINGS PER SHARE: Performance rights 2,820,936 2,568,212 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 837,563,769 849,958,527 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. 78 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 9: CURRENT ASSETS - TRADE AND OTHER RECEIVABLES Consolidated 2022 $'000 2021 $'000 Trade receivables Trade receivables 17,989 16,231 Allowance for expected credit losses (refer to note (a) below) (2,247) (2,244) Total 15,742 13,987 Other receivables GST receivable 2,817 3,177 Other debtors 3,971 2,440 Total trade and other receivables 22,530 19,604 (a) Allowance for expected credit losses The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of revenue over the year ended 31 December 2022 and the corresponding historical credit losses experienced within this period and also in the year ended 31 December 2019 (which was not impacted by the COVID-19 pandemic). The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of families to settle the receivables. The Group has identified the current cost of living and broader community and economic recovery from the COVID-19 pandemic, natural disasters and the unemployment rate to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. On that basis, the allowance for expected credit losses of receivables as at 31 December 2022 was determined as follows: Current and up to 30 days past due $'000 More than 30 days past due $'000 More than 60 days past due $'000 Total $'000 31 December 2022 Expected loss rate 2% 43% 97% 12% Gross carrying amount – trade receivables 15,741 381 1,867 17,989 Allowance for expected credit losses 263 164 1,820 2,247 Movements in the allowance for expected credit losses of receivables are as follows: Consolidated 2022 $'000 2021 $'000 Opening balance 2,244 1,918 Allowance for impairment recognised during the year net of collections 1,452 1,415 Receivables written off during the year as uncollectable (1,449) (1,089) Closing balance 2,247 2,244 The creation and release of the provision for expected credit losses has been included in ‘other expenses’ in the consolidated income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovery. 1. FINANCIAL OVERVIEW 79 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 9: CURRENT ASSETS - TRADE AND OTHER RECEIVABLES continued (b) 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. Any parent fees receivable relate to child care fees not paid in advance and are therefore all considered to be past due. The Group applied the expected credit loss (ECL) model. For trade receivables 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. 80 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 10: CURRENT AND NON-CURRENT ASSETS - OTHER Consolidated 2022 $'000 2021 $'000 Current Prepayments 11,262 10,842 Inventory 1,429 1,438 Deposits 19 19 Total other current assets 12,710 12,299 Non-current Deposits on acquisitions 224 43 Prepayments 4,997 5,948 Deposits 975 1,220 Total other non-current assets 6,196 7,211 Total other current and non-current assets 18,906 19,510 Accounting policy Deposits on acquisitions relate to deposits made for the purchase of centres. Once settled the amount transferred forms part of the acquisition accounting. Inventories relate to childcare centre consumables. These are measured at the lower of cost or 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. Non-current prepayments relate to payments made, more than one year in advance. 1. FINANCIAL OVERVIEW 81 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 11: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT Buildings $'000 Furniture, fittings and equipment2 $'000 Total $'000 Consolidated YEAR ENDED 31 DECEMBER 2022 Opening net book amount 2,676 104,782 107,458 Additions — 58,475 58,475 Disposals — (2,823) (2,823) Impairment expense — (1,118) (1,118) Depreciation charge (128) (25,614) (25,742) Closing net book amount 2,548 133,702 136,250 AT 31 DECEMBER 2022 Cost1 3,690 236,746 240,436 Accumulated depreciation and impairment1 (1,142) (103,044) (104,186) Net book amount 2,548 133,702 136,250 1. At the beginning of the period, assets with a net book value of nil that were no longer in use were disposed of. This reduced the total cost and accumulated depreciation and impairment by $56 million. 2. Furniture, fittings and equipment includes vehicles (net book amount at 31 December 2022 is $17k) which were previously reported separately in this note but due to immateriality have been combined in the table. The prior year (net book amount at 31 December 2021 was $84k) has been presented in the same format as the current year. Buildings $'000 Furniture, fittings and equipment $'000 Total $'000 Consolidated YEAR ENDED 31 DECEMBER 2021 Opening net book amount 3,815 81,060 84,875 Additions — 46,467 46,467 Disposals (992) (1,927) (2,919) Depreciation charge (147) (20,818) (20,965) Closing net book amount 2,676 104,782 107,458 AT 31 DECEMBER 2021 Cost 3,690 240,971 244,661 Accumulated depreciation and impairment (1,014) (136,189) (137,203) Net book amount 2,676 104,782 107,458 (a) Leasehold Improvements Furniture, fittings and equipment includes the following amounts that are leasehold improvements: Consolidated 2022 $'000 2021 $'000 Cost 145,765 133,067 Accumulated depreciation and impairment (52,387) (65,562) Net book amount 93,378 67,505 82 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 11: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT continued (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. (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. The Group reviews annually whether the triggers indicating a risk of impairment exist. As a result of this review, the Group identified indicators of potential impairment for CGUs to which property, plant and equipment relate and tested the carrying values of these CGUs. In addition, management tested the carrying values of CGUs that had been impaired in prior periods for indicators that the impairment may be reversed. A property, plant and equipment impairment expense of $1.1 million was recognised in 2022 (2021: nil). 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 disposed. All other repairs and maintenance are charged to the consolidated income statement during the reporting year in which they are incurred. Depreciation for all assets is 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(d) for accounting policy on make good. NOTE 12: CURRENT AND NON-CURRENT LIABILITIES - TRADE AND OTHER PAYABLES Consolidated Notes 2022 $'000 2021 $'000 Trade payables1 9,647 13,284 Contingent consideration 15 75 75 Centre enrolment advances 240 295 Other payables and accruals1 63,459 64,611 Total current 73,421 78,265 Contingent consideration2 15 378 6,867 Total non-current 378 6,867 1. Trade and other payables are non-interest bearing and are normally settled on 30-day terms. 2. The Group has recognised a financial liability for the fair value of contingent consideration on acquisitions where an earn-out target is expected to be met. Refer to note 15(iii) for further information in relation to the fair value movement. 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. 1. FINANCIAL OVERVIEW 83 SECTION 2 FINANCIAL REPORT NOTE 13: CURRENT AND NON-CURRENT LIABILITIES – PROVISIONS Consolidated 2022 $'000 2021 $'000 Current provisions Employee benefits (note (b)) 42,495 41,613 Remediation program (note (c)) 37,163 41,819 Other provisions 6,174 6,666 Total current provisions 85,832 90,098 Non-current provisions Employee benefits 5,001 5,027 Make good (note (d)) 10,787 9,805 Total non-current provisions 15,788 14,832 (a) Movements in provisions Movements in each class of current provision during the financial year are set out below: Employee benefits $'000 Remediation program $'000 Other provisions $'000 Total $'000 Current Opening balance at 1 January 2022 41,613 41,819 6,666 90,098 Additional provisions recognised 40,720 — — 40,720 Amounts used during the year (39,864) (4,656) (492) (45,012) Reclassification from non-current to current 26 — — 26 Closing balance at 31 December 2022 42,495 37,163 6,174 85,832 Movements in each class of non-current provision during the financial year are set out below: Employee benefits $'000 Make Good $'000 Total $'000 Non-current Opening balance at 1 January 2022 5,027 9,805 14,832 Change in estimate — 1,646 1,646 Interest expense: unwind of discount — 104 104 Amounts used during the year — (768) (768) Reclassification from non-current to current (26) — (26) Closing balance at 31 December 2022 5,001 10,787 15,788 1. FINANCIAL OVERVIEW 84 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 1. FINANCIAL OVERVIEW NOTE 13: CURRENT AND NON-CURRENT LIABILITIES – PROVISIONS continued (b) Amounts not expected to be settled within the next 12 months The current provision for employee benefits includes all accrued annual leave and long service leave expected to be taken or paid within the next 12 months. 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 annual leave, that is recorded as a current employee benefits provision, that is not expected to be taken or paid within the next 12 months: Consolidated 2022 $'000 2021 $'000 Leave obligations expected to be settled after 12 months 4,990 6,139 (c) Employee Payments Remediation Program During 2020, as part of implementing a new Human Resources Information System (“HRIS”) and rostering system, the Group had conducted a review of award and legislative requirements. This review had identified inadvertent non-compliance with some requirements of the Children’s Services Award and the Educational Services (Teachers) Award for a number of the Group’s team members in Australia. The remediation of these issues, which occurred over seven financial years, was estimated to be a one-off cost before tax of $80 million and after tax of $57 million. Payments have been made to current and former team members amounting to approximately $37.8 million to date (2021: $34.2 million to date). The total remediation program cost estimate remains $80 million, with those costs fully provided for in prior reporting periods. (d) 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. Accounting policy (i) Short term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave that could be taken or paid within 12 months of the reporting date are recognised 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 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. (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 Limited, are accounted for as equity-settled share-based payment transactions when the rights over the shares are granted by G8 Education Limited. 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. 85 SECTION 2 FINANCIAL REPORT 1. FINANCIAL OVERVIEW NOTE 14: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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. 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 The Group tests annually whether goodwill is impaired, 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 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. (vi) Leases - Estimating the incremental borrowing rate If the Group cannot readily determine the interest rate implicit in the lease 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 purchase 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) Provisions Employee remediation During a prior reporting period, as part of implementing a new Human Resources Information System (“HRIS”) and rostering system, the Group had conducted a review of award and legislative requirements. This review had identified inadvertent non-compliance with some requirements of the Children’s Services Award and the Educational Services (Teachers) Award for a number of the Group’s team members in Australia, refer note 13(c). The provision is for the remediation of these issues. 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 in which the revisions are verified. Other provisions Critical accounting estimates and judgements have been made in recognising other provisions. There is judgement in determining whether a present obligation as a result of past events existed at balance date, whether it is probable a future outflow will be required to settle those obligations; and whether a reliable estimate can be made of the obligation. 86 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 2. BUSINESS COMBINATIONS, GOODWILL & IMPAIRMENT NOTE 15: BUSINESS COMBINATIONS (i) Current year business combinations During the year ended 31 December 2022, the Group did not purchase any centres via a business combination. (ii) Adjustments to provisional accounting There were no adjustments to provisional accounting during the year ended 31 December 2022. (iii) Contingent Consideration As part of the 2021 Leor Pty Ltd purchase agreement with the previous owner, a portion of the consideration was determined to be contingent, based on the performance of the acquired business. As part of the acquisition accounting in 2021 the Group discounted the maximum earnout per the contract for the time value of money, using a risk adjusted discount rate, which contemplated potential risks in meeting earnout targets. As at 31 December 2022 the current expectation is that the Leor earn out targets will not be met (primarily due to shortages in the labour market). No deferred contingent consideration will be payable and therefore the deferred contingent consideration liability of $6.4 million has been reduced to nil (refer note 4). Further a $6.4 million impairment expense of the Leor goodwill has been recognised as an expense in other income (refer note 4 and note 16). In addition, as part of an historical purchase agreement with the previous owner for 1 centre, 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. Total potential contingent consideration payable $'000 Carrying value $'000 Conditions At 31 December 2022 Acquisition of 1 centre1 675 453 19 years occupancy hurdle based on licence capacity Acquisition of Leor Pty Ltd 7,500 — 3 year hurdle based on EBITDA 1. The Group has assessed that $0.1 million (2021: $0.1 million) 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: Consolidated 2022 $'000 2021 $'000 Opening balance 6,942 732 Interest expense: unwind of discount (21) (108) Contingent consideration paid (75) (75) Contingent consideration fair value adjustment for Leor Pty Ltd (note 4) (6,393) — Contingent consideration recognition for Leor Pty Ltd — 6,393 Total contingent consideration payable as at 31 December 453 6,942 87 SECTION 2 FINANCIAL REPORT 2. BUSINESS COMBINATIONS, GOODWILL & IMPAIRMENT NOTE 15: BUSINESS COMBINATIONS continued Set out below are the carrying amounts of contingent consideration split between current and non-current included in Trade and Other Payables: Consolidated 2022 $'000 2021 $'000 Current 75 75 Non-current 378 6,867 Total contingent consideration payable as at 31 December 453 6,942 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 derived from the Group’s weighted average cost of capital (WACC). 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 or expense. 88 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 16: NON-CURRENT ASSETS – INTANGIBLE ASSETS Consolidated 2022 Goodwill $'000 Software $'000 Total $'000 Opening net book amount 1,054,851 2,643 1,057,494 Additions — 1,125 1,125 Impairment expense1 (6,393) — (6,393) Disposal of centres2 (200) — (200) Amortisation — (412) (412) Closing net book amount 1,048,258 3,356 1,051,614 Cost3 1,190,293 3,838 1,194,131 Accumulated amortisation and impairment3 (142,035) (482) (142,517) Net book amount 1,048,258 3,356 1,051,614 1. Refer below and to note 15(iii). 2. The Group divested or closed 16 centres during the year ended 31 December 2022 (2021: 25). One centre was divested during the year, $0.2 million goodwill balance was attributed to the transaction based on an allocation relative to sale price. No goodwill was attributed to the closed centres. 3. At the beginning of the period, a review of the split between cost / accumulated amortisation and impairment figures was undertaken and this review resulted in a reduction to the cost and accumulated amortisation and impairment figures by $11 million (no change to the net book amount). Consolidated 2021 Goodwill $'000 Software $'000 Total $'000 Opening net book amount 1,047,227 2,034 1,049,261 Additions 8,462 976 9,438 Adjustments in respect of prior year acquisitions 291 — 291 Disposal of centres (1,129) (227) (1,356) Amortisation — (140) (140) Closing net book amount 1,054,851 2,643 1,057,494 Cost 1,207,938 2,713 1,210,651 Accumulated amortisation and impairment (153,087) (70) (153,157) Net book amount 1,054,851 2,643 1,057,494 Accounting policy (i) Software-as-a-Service (SaaS) arrangements SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement. Where costs incurred to configure or customise SaaS arrangements result in the creation of a resource which is identifiable, and where the company has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits, such costs are recognised as a separate intangible software asset and amortised over the useful life of the software on a straight-line basis. The amortisation is reviewed at least at the end of each reporting period and any changes are treated as changes in accounting estimates. (a) Impairment tests Goodwill and software are monitored and tested for impairment on an operating segment level. The recoverable amount of the assets is determined based on value-in-use calculations. These calculations use cash flow projections based on budgets for 2023 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, also includes the fixed and right of use assets of the child care centres and working capital. 2. BUSINESS COMBINATIONS, GOODWILL & IMPAIRMENT 89 SECTION 2 FINANCIAL REPORT NOTE 16: NON-CURRENT ASSETS – INTANGIBLE ASSETS continued (b) Key assumptions used for value-in-use calculations Group excluding Leor value-in-use calculation 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. Occupancy has been impacted by COVID-19 and the Group has made assumptions about long term recovery from COVID-19 and broader economic conditions (e.g. unemployment rates). 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 property 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 Group has considered the impact of inflation and cost of living pressures. 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 11% (2021: 10%); • Full support office costs allocation; and • Forecast period of 5 years plus a terminal growth calculation with a growth rate of 2% (2021: 2%). The assessment of the discount rate calculation is based on the specific circumstances of the Group and is derived from its 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. Leor value-in-use calculation The value-in-use calculation is based on cashflow projections with the key assumption being revenue growth determined by factors such as the availability of labour, industry sector growth and around market share in early intervention and National Disability Insurance Scheme services. The Group has made assumptions about long term recovery from COVID-19 and broader economic conditions. The impairment model has a discount rate which reflects the specific risks relating to the Leor business. The impairment model has a forecast period of 3 years plus a terminal growth calculation. (c) Impairment charge The Group completed an assessment of asset carrying values at year end and management have determined that a $6.4 million impairment expense of the Leor goodwill was required which has been recognised as an expense in other income (refer note 4 and note 15(iii)). Sensitivity The Group has completed a sensitivity analysis on its Group excluding Leor 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 3.0% in the pre-tax discount rate; or • A decrease of approximately 30% in forecast EBITDA driven by a decrease in average occupancy, partially offset by a reduction in wages expense, in the terminal year. There would still be head room if the terminal growth rate was reduced to 0.0%. 2. BUSINESS COMBINATIONS, GOODWILL & IMPAIRMENT 90 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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 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. 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 and investment of excess liquidity. The Group holds the following financial instruments: Financial assets at amortised cost 2022 $'000 2021 $'000 Financial assets Cash and cash equivalents (note 18) 37,826 74,131 Trade receivables (note 9) and deposits (note 10) 16,736 15,226 54,562 89,357 Liabilities at fair value $'000 Liabilities at amortised cost $'000 Total $'000 2022 FINANCIAL LIABILITIES Trade and other payables1 — 57,919 57,919 Borrowings (note 19) — 128,855 128,855 Contingent consideration (note 15) 453 — 453 453 186,774 187,227 2021 FINANCIAL LIABILITIES Trade and other payables1 — 60,799 60,799 Borrowings (note 19) — 96,055 96,055 Contingent consideration (note 15) 6,942 — 6,942 6,942 156,854 163,796 1. Excludes employee related payables 91 SECTION 2 FINANCIAL REPORT 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT NOTE 17: FINANCIAL RISK MANAGEMENT continued (a) Interest rate risk Cash flow and fair value interest rate risk The Group’s main interest rate risk arises from long term borrowings. Borrowings drawn at variable rates expose the Group to cash flow interest rate risk. G8 Education Limited’s fixed and floating borrowing mix is monitored by management and reported to the Board on a regular basis (at least quarterly). The Group had no fixed rate non-current borrowings as at 31 December 2022 (2021: $52.8 million). Derivative products may be used to manage G8 Education Limited’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 2022 (2021: Nil). The Group’s 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: 31 December 2022 31 December 2021 Balance $'000 Total Loans1 % Balance $'000 Total Loans % Syndicated debt facilities 130,000 100% 47,200 47% Net exposure to cash flow interest rate risk 130,000 100% 47,200 47% 1. Excludes ‘Other unsecured borrowings’ which relates to annual insurance premium funding An analysis by maturities is provided. Refer to note 17(c). Sensitivity At 31 December 2022, if interest rates had changed by -1.0%/+1.0% absolute from the year end rates with all other variables held constant, post-tax result for the year would have been $910,000 higher or $910,000 lower respectively (post-tax profit for the year for 2021: if interest rates had changed by -0.25%/+0.25% absolute from the year end rates with all other variables held constant $82,600 higher or $82,600 lower respectively). The Group, as part of the senior syndicated debt facility, has a sustainability linked loan agreement with the Group's lending partners which has a slight interest rate discount if the Group meets certain sustainability related targets. (b) Credit risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to trade receivables. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. 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. 92 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 17: FINANCIAL RISK MANAGEMENT continued (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash 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. (i) Financing arrangements Details of financing arrangements are disclosed. Refer to note 19. (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. Contractual maturities of financial liabilities 0 to 6 months $'000 6 to 12 months $'000 1 to 2 years $'000 2 to 5 years $'000 >5 years $'000 Total contractual cash flows $'000 Carrying amount $'000 Consolidated 2022 NON DERIVATIVE Syndicated debt facilities 3,669 3,689 7,257 137,257 — 151,872 130,000 Other unsecured borrowings 920 — — — — 920 920 Contingent consideration — 75 75 225 300 675 453 Trade and other payables1 57,919 — — — — 57,919 57,919 Lease liabilities 56,817 56,013 105,058 252,403 286,247 756,538 584,700 Consolidated 2021 NON DERIVATIVE Syndicated debt facilities 3,245 3,262 6,418 109,436 — 122,361 100,000 Contingent consideration — 75 2,075 5,725 375 8,250 6,942 Trade and other payables1 60,799 — — — — 60,799 60,799 Lease liabilities 54,798 54,204 108,090 274,198 335,107 826,397 632,858 1. Excludes employee related payables (d) 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: a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); b) 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 c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 93 SECTION 2 FINANCIAL REPORT 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT NOTE 17: FINANCIAL RISK MANAGEMENT continued The following table present the Group’s liabilities measured and recognised at fair value on a recurring basis at 31 December 2022 and 31 December 2021: Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 At 31 December 2022 LIABILITIES Contingent consideration (refer to note 15) — — 453 453 At 31 December 2021 LIABILITIES Contingent consideration (refer to note 15) — — 6,942 6,942 NOTE 18: CURRENT ASSETS - CASH AND CASH EQUIVALENTS Consolidated 2022 $'000 2021 $'000 Cash at bank and in hand 37,826 74,131 Total cash and cash equivalents 37,826 74,131 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 – BORROWINGS Consolidated 2022 $'000 2021 $'000 Current borrowings Other unsecured borrowings1 920 — Total current borrowings 920 — Non-current borrowings Syndicated debt facilities 130,000 100,000 Borrowing costs (2,065) (3,945) Total non-current borrowings 127,935 96,055 Total borrowings 128,855 96,055 1. Current ‘Other unsecured borrowings’ relates to annual insurance premium funding 94 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 19: CURRENT AND NON-CURRENT LIABILITIES – BORROWINGS continued (a) Syndicated debt facilities As part of the Group’s capital management strategy, the $100.0 million junior debt facility (subordinated debt) was repaid in full and cancelled in June 2022, by utilising senior syndicated debt, to reduce the overall cost of debt, including the cost of unused capacity. The Group refinanced its senior syndicated debt in December 2022, reducing the facility limits from $350.0 million to $306.0 million. The refinanced syndicated debt facility has $270.0 million in revolving facilities ($192.3 million with an expiry date in December 2025 and $77.7 million with an expiry date in December 2026). The Group had $130.0 million drawn from the $270.0 million syndicated debt facilities as at 31 December 2022. The facility incurs interest at a rate of BBSY plus a margin based on the Group’s leverage ratio. Borrowing costs, relating to the refinancing, of $2.1 million were capitalised to the loan and will be expensed on a straight lined basis over the life of the facility. The refinanced syndicated debt facility also has a $36.0 million bank guarantee facility of which $33.6 million was used as at 31 December 2022. (b) Fair value Carrying value is approximate to the fair value for all borrowings. (c) Assets pledged as security The carrying amounts of assets pledged as security for the syndicated debt facilities are: Consolidated Notes 2022 $'000 2021 $'000 Current FLOATING CHARGE Cash and cash equivalents 18 37,826 74,131 Trade and other receivables 9 22,530 19,604 Other current assets 10 12,710 12,299 Total current assets pledged as security 73,066 106,034 Non-current FIRST MORTGAGE Buildings 11 2,548 2,676 Leased property1 195,868 202,943 FLOATING CHARGE Other non-current assets 10 6,196 7,211 Furniture, fittings and equipment 11 133,702 104,782 Total non-current assets pledged as security 338,314 317,612 Total assets pledged as security 411,380 423,646 1. The Group has certain centres which are secured by a mortgage over lease and right of entry deed. The mortgage over lease and right of entry deed is signed by the landlord and gives the Group’s lenders, amongst other things, a step in right to use the asset in the event of the Group’s default. 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 95 SECTION 2 FINANCIAL REPORT 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT NOTE 19: CURRENT AND NON-CURRENT LIABILITIES – BORROWINGS continued (d) Financing arrangements As at 31 December 2022 the following lines of credit were in place: Consolidated 2022 $'000 2021 $'000 Credit standby arrangements1 Total facilities 2,500 1,000 Used at balance date (2) (585) Unused at balance date 2,498 415 Syndicated debt facilities Total facilities 270,000 400,000 Used at balance date (130,000) (100,000) Unused at balance date 140,000 300,000 Other unsecured borrowing facilities2 Total facilities 920 — Used at balance date (920) — Unused at balance date — — Bank guarantee facilities Total facilities 36,000 50,000 Used at balance date (33,610) (34,162) Unused at balance date 2,390 15,838 1. Corporate and virtual credit card facilities. 2. Annual insurance premium funding – As at 31 December 2022 $0.9 million remains outstanding. During 2022 there was a draw down of $6.7 million relating to annual insurance premium funding which is being repaid in instalments. The Group maintains a secured facility for the provision of bank guarantees to landlords of premises leased by the Group and syndicated debt facilities. 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 lined basis over the life of the facility. 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 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. 96 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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: Leased property $'000 Leased Vehicle $'000 Total $'000 At 31 December 2021 Cost 748,021 3,451 751,472 Accumulated depreciation and impairment (307,401) (2,910) (310,311) Net book amount 440,620 541 441,161 Additions 13,568 140 13,708 Remeasurement of make-good provision 106 — 106 Disposals (2,104) — (2,104) Depreciation charge (68,271) (861) (69,132) Modification to lease terms 3,203 709 3,912 Variable lease payments reassessment 13,196 (208) 12,988 Impairment reversal 1,195 — 1,195 Closing net book amount as at 31 December 2022 401,513 321 401,834 Cost 758,533 3,286 761,819 Accumulated depreciation and impairment (357,020) (2,965) (359,985) As at 31 December 2022 401,513 321 401,834 Leased property $'000 Leased Vehicle $'000 Total $'000 At 31 December 2020 Cost 712,005 2,987 714,992 Accumulated depreciation and impairment (244,177) (2,160) (246,337) Net book amount 467,828 827 468,655 Additions 10,533 85 10,618 Remeasurement of make-good provision (1,507) — (1,507) Disposals (3,723) (69) (3,792) Depreciation charge (66,782) (787) (67,569) Modification to lease terms 20,146 485 20,631 Variable lease payments reassessment 14,125 — 14,125 Closing net book amount as at 31 December 2021 440,620 541 441,161 Cost 748,021 3,451 751,472 Accumulated depreciation and impairment (307,401) (2,910) (310,311) As at 31 December 2021 440,620 541 441,161 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 97 SECTION 2 FINANCIAL REPORT 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT NOTE 20: RIGHT OF USE ASSETS AND LEASE LIABILITIES continued (b) Lease liabilities Set out below are the carrying amounts of lease liabilities and the movements during the year: Consolidated 2022 $'000 2021 $'000 Current lease liabilities 81,168 73,207 Non-current lease liabilities 503,532 559,651 Total lease liabilities 584,700 632,858 Consolidated 2022 $'000 2021 $'000 Opening balance 632,858 681,250 Additions 12,132 10,593 Disposals (2,716) (17,947) Interest expense: accretion of interest 38,409 39,599 Payments (111,603) (111,859) Modification to lease terms 1,369 17,044 Variable lease payments reassessment 14,251 14,178 Closing balance 584,700 632,858 The maturity analysis of lease liabilities are disclosed. Refer to note 17(c). (c) Amounts recognised in profit and loss The following are the amounts recognised in profit and loss: Consolidated 2022 $'000 2021 $'000 Depreciation expense of right-of-use assets 69,132 67,569 Interest expense on lease liabilities 38,409 39,599 Expense relating to short-term leases (included in properties, utilities and maintenance costs) 220 256 Expense relating to leases of low-value assets (included in direct costs) 1,456 1,810 Variable lease (receipts) / payments (included in properties, utilities and maintenance costs and other expenses) 266 344 Other property outgoing expenses (included in properties, utilities and maintenance costs) 11,933 11,045 Impairment reversal on right of use assets (1,195) — Loss / (gain) on surrender / termination of leases 1,334 (1,754) Gain on lease modification (1,022) (3,970) Gain on sale of assets (266) (7,927) Total amounts recognised in profit and loss 120,267 106,972 The Group had cash outflows for the principal portion of lease payments totalling $73.2 million (2021: $72.3 million) and interest payments totalling $38.4 million (2021: $39.6 million). Payments relating to short-term leases, low-value assets and net variable lease payments totalled approximately $1.9 million (2021: $2.4 million) (included in payments to suppliers and employees). 98 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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. The Group reviews annually whether the triggers indicating a risk of impairment exist. During the period the Group reviewed the CGUs to which the right of use assets relate and tested the carrying values for impairment based upon forecast cashflows, to measure recoverable value in use. The value-in-use calculations are based on cashflow projections which are a function of each of the following key assumptions: occupancy, wages and other centre expenses. Right of use assets impairment losses of $3.7 million were recognised in 2022 (2021: nil impairment loss). In addition, 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. The assessment resulted in the reversal of right of use assets impairment losses during the current period totalling $4.9 million (2021: nil impairment reversal). Net impairment reversal for right of use assets totalled $1.2 million (2021: nil). 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 if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of property (i.e., those leases 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. 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 99 SECTION 2 FINANCIAL REPORT NOTE 21: CONTRIBUTED EQUITY (a) Share capital Consolidated Consolidated 2022 No. of Shares 2021 No. of Shares 2022 $'000 2021 $'000 Ordinary shares fully paid 813,837,307 847,390,315 1,174,419 1,209,227 (b) Movements in ordinary share capital DETAILS No. of Shares '000 $'000 31 December 2020 balance 847,390 1,209,227 31 December 2021 balance 847,390 1,209,227 Share buy-back, including transaction costs net of tax (33,553) (34,808) 31 December 2022 balance 813,837 1,174,419 The share buy-back program announced in February 2022 commenced during the period, with 33.6 million shares repurchased for a cost, including transaction costs, of $34.8 million to 31 December 2022. The Group completed the share buy-back program in January 2023. Over the period of the share buy-back program between April 2022 and January 2023 there were a total of 37.9 million shares repurchased for $40.0 million (including transaction costs). (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, when the plan is not suspended, 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. The Company also advises the market of any changes to dividend reinvestment plan. The dividend reinvestment plan has been temporarily suspended. 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 100 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 21: CONTRIBUTED EQUITY continued (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, buy-back shares off market 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 (excluding lease liabilities) divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity plus net debt. The gearing ratios at 31 December were as follows: Consolidated Notes 2022 $'000 2021 $'000 Borrowings 19 128,855 96,055 Less: cash and cash equivalents 18 (37,826) (74,131) Net debt 91,029 21,924 Total equity 883,363 914,711 Total capital 974,392 936,635 Gearing ratio 9% 2% Accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Costs directly attributable to the buy-back of shares are shown in equity as a deduction, net of tax, along with the payments for the shares. 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 101 SECTION 2 FINANCIAL REPORT NOTE 22: DIVIDENDS (a) Ordinary shares On 22 February 2022 the Board declared a 3.0 cent fully franked dividend in relation to the 2021 financial year which was paid on 1 April 2022. On 24 August 2022 the Board declared a 1.0 cent fully franked dividend in relation to the half-year ended 30 June 2022 which was paid on 7 October 2022. On 21 February 2023 the Board declared a 2.0 cent fully franked dividend in relation to the 2022 financial year to be paid on 6 April 2023. Refer to note 29. Dividends paid during the reporting period were as follows: DIVIDENDS CPS Total dividend $'000 Financial year 2022 2021 final franked dividend (paid in cash on 1 April 2022) 3.0 25,422 2022 interim franked dividend (paid in cash on 7 October 2022) 1.0 8,267 Franked dividends paid during the year ended 31 December 2022 33,689 (b) Franking credits Consolidated Parent Entity 2022 $'000 2021 $'000 2022 $'000 2021 $'000 Franking credits available for subsequent financial years based on a tax rate of 30% (2021: 30%) 29,470 32,427 29,470 32,427 The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: a) Franking credits that will arise from the payment of the amount of the provision for income tax; b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and c) 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. 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 102 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 23: RECONCILIATION OF CASH FLOWS Reconciliation of profit after tax to net cash flows from operating activities Consolidated 2022 $'000 2021 $'000 Profit for the year 36,606 45,681 Depreciation and amortisation 95,286 88,674 Non-cash loss / (gain) on surrender / termination of leases (296) (1,754) Non-cash net loss / (gain) on sale of centres / assets 2,425 (1,425) Borrowing costs expense 3,990 2,455 Non-cash gain on lease modifications (1,022) (3,970) Non-cash employee benefits expense - share based payments 543 501 (Increase)/decrease in deferred tax asset 5,704 11,573 (Increase)/decrease in trade and other debtors (2,926) (2,221) (Increase)/decrease in other current assets (411) (2,031) (Increase)/decrease in current tax assets 6,288 — (Increase)/decrease in non-current assets 1,015 (6,224) Increase/(decrease) in trade and other creditors (5,189) 1,929 Increase/(decrease) in contract liabilities (1,109) 3,238 Increase/(decrease) in provisions (5,060) (31,804) Increase/(decrease) in insurance borrowings 920 — Increase/(decrease) in provision for income taxes payable — (20,355) Net cash inflows from operating activities 136,764 84,267 Changes in liabilities arising from financing activities Opening balance 1 Jan 2022 $'000 Cash flows $'000 Movement to current liability $'000 Considered interest in operating cash flows $'000 New leases $'000 Other $'000 Closing balance 31 Dec 2022 $'000 Current lease liabilities 73,207 (111,603) 81,168 38,409 595 (608) 81,168 Non-current lease liabilities 559,651 — (81,168) — 11,537 13,512 503,532 Current and non-current interest bearing loans and borrowings 96,055 27,918 — — — 4,882 128,855 Opening balance 1 Jan 2021 $'000 Cash flows $'000 Movement to current liability $'000 Considered interest in operating cash flows $'000 New leases $'000 Other $'000 Closing balance 31 Dec 2021 $'000 Current lease liabilities 69,435 (111,859) 73,207 39,599 423 2,402 73,207 Non-current lease liabilities 611,815 — (73,207) — 10,170 10,873 559,651 Current and non-current interest bearing loans and borrowings 295,139 (201,544) — — — 2,460 96,055 3. CAPITAL STRUCTURE & FINANCIAL RISK MANAGEMENT 103 SECTION 2 FINANCIAL REPORT 4. GROUP STRUCTURE NOTE 24: INTERESTS IN OTHER ENTITIES (a) 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 Country of incorporation Class of Shares/Units 2022 % 2021 % Subsidiaries of Company Grasshoppers Early Learning Centres Pty Ltd Australia Ordinary 100 100 Togalog Pty Ltd Australia Ordinary 100 100 RBWOL Holding Pty Ltd1 Australia Ordinary 100 100 Ramsay Bourne Holdings Pty Ltd1 Australia Ordinary 100 100 Bourne Learning Pty Ltd Australia Ordinary 100 100 Ramsay Bourne Acquisitions (No.1) Pty Ltd Australia Ordinary 100 100 Ramsay Bourne Acquisitions (No.2) Pty Ltd1 Australia Ordinary 100 100 RBL No. 1 Pty Ltd Australia Ordinary 100 100 Ramsay Bourne Licences Pty Ltd Australia Ordinary 100 100 Sydney Cove Children’s Centre Pty Ltd1 Australia Ordinary 100 100 Sydney Cove Children’s Centre B Pty Ltd1 Australia Ordinary 100 100 Sydney Cove Children’s Centre C Pty Ltd1 Australia Ordinary 100 100 Sydney Cove Property Holdings Pty Ltd1 Australia Ordinary 100 100 World Of Learning Pty Ltd1 Australia Ordinary 100 100 World Of Learning Acquisitions (No.1) Pty Ltd Australia Ordinary 100 100 World Of Learning Acquisitions Pty Ltd Australia Ordinary 100 100 World Of Learning Licences Pty Ltd Australia Ordinary 100 100 G8 KP Pty Ltd Australia Ordinary 100 100 Sterling Early Education Finance Pty Ltd1 Australia Ordinary 100 100 Sterling Early Education Holdings Pty Ltd1 Australia Ordinary 100 100 Woodland Education Operations Pty Ltd1 Australia Ordinary 100 100 Kindy Kids Operations Pty Ltd1 Australia Ordinary 100 100 CG Operations Pty Ltd1 Australia Ordinary 100 100 Kool Kids Operations Pty Ltd1 Australia Ordinary 100 100 North Shore Childcare Pty Ltd1 Australia Ordinary 100 100 Ooorama Operations Pty Ltd1 Australia Ordinary 100 100 Jacaranda Operations Pty Ltd1 Australia Ordinary 100 100 Huggy Bear Operations Pty Ltd1 Australia Ordinary 100 100 Jellybeans Operations Pty Ltd1 Australia Ordinary 100 100 Jellybeans Attadale (Pty Ltd)1 Australia Ordinary 100 100 Jane's Place Operations Pty Ltd1 Australia Ordinary 100 100 Jolimont Private Education Pty Ltd1 Australia Ordinary 100 100 WTTS Operations Pty Ltd1 Australia Ordinary 100 100 BUI Investments Pty Ltd1 Australia Ordinary 100 100 Derafi Pty Ltd1 Australia Ordinary 100 100 Alfoom Investments Pty Ltd1 Australia Ordinary 100 100 Shemlex Pty Ltd1 Australia Ordinary 100 100 Kindy Kids Village Pty Ltd1 Australia Ordinary 100 100 Kindy Kids Long DayCare and Preschool Pty Ltd1 Australia Ordinary 100 100 Three Little Pigs Pty Ltd1 Australia Ordinary 100 100 A.C.N. 078 042 378 Pty Ltd1 Australia Ordinary 100 100 104 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NAME OF ENTITY Country of incorporation Class of Shares/Units 2022 % 2021 % Subsidiaries of Company (continued) ES5 Pty Ltd1 Australia Ordinary 100 100 Kindy Patch Unit Trust Australia Ordinary 100 100 Sydney Cove Children's Centre Unit Trust Australia Ordinary 100 100 Sydney Cove Children's Centre Unit Trust B Australia Ordinary 100 100 Shemlex Investment Unit Trust Australia Ordinary 100 100 Shemlex Investments Freehold Unit Trust No 1 Australia Ordinary 100 100 Morley Perth Unit Trust Australia Ordinary 100 100 Kindy Kids Village Trust Australia Ordinary 100 100 Kindy Kids Long Day Care and Preschool Trust Australia Ordinary 100 100 Adelaide Montessori Pty Ltd1 Australia Ordinary 100 100 GW Concord Pty Ltd1 Australia Ordinary 100 100 GW Chatswood Pty Ltd1 Australia Ordinary 100 100 GW Macquarie Park Pty Ltd1 Australia Ordinary 100 100 GW Brookvale Pty Ltd1 Australia Ordinary 100 100 GW Bronte Pty Ltd1 Australia Ordinary 100 100 GW Katoomba Pty Ltd1 Australia Ordinary 100 100 GW Gladesville Pty Ltd1 Australia Ordinary 100 100 GW Frenchs Forest Pty Ltd1 Australia Ordinary 100 100 GW Prep Holdings Pty Ltd1 Australia Ordinary 100 100 Lane Cove CCC Unit Trust Australia Ordinary 100 100 Lane Cove CCC Pty Ltd1 Australia Ordinary 100 100 Waterloo CCC Unit Trust Australia Ordinary 100 100 Waterloo CCC Pty Ltd1 Australia Ordinary 100 100 GW Chatswood Unit Trust Australia Ordinary 100 100 Homebush CCC Pty Ltd Australia Ordinary 100 100 Homebush CCC Unit Trust Australia Ordinary 100 100 Dendy Street Childcare Pty Ltd Australia Ordinary 100 100 Childcare Saver Pty Ltd Australia Ordinary 100 100 Murmuration Holdings Pty Ltd Australia Ordinary 100 100 Leor Pty Ltd Australia Ordinary 100 100 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. The proportion of ownership interest is equal to the proportion of voting power held. (b) Interests in associates In November 2021, The Group acquired a 20% interest in Kiddo Group Holdings Pty Ltd (Kiddo) through a share subscription agreement for a total consideration of $1.0 million. Kiddo represents a mobile platform connecting and matching parents with carers to provide in-home care for their children. Kiddo is a private entity that is not listed on any public exchange. The Group recognised a $0.1 million share of loss of an associate in relation to the year ended 31 December 2022. This amount has been included in ‘other expenses’ in the consolidated income statement. The Group has an ‘Investment in an associate’ as at 31 December 2022 of $0.9 million (2021: $1.0 million). Accounting policy An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The Group's interests in associates is accounted for using the equity method in the consolidated financial statements. 4. GROUP STRUCTURE NOTE 24: INTERESTS IN OTHER ENTITIES continued 105 SECTION 2 FINANCIAL REPORT 4. GROUP STRUCTURE NOTE 25: PARENT ENTITY DISCLOSURES As at, and throughout the financial year ended 31 December 2022, the parent entity of the Group was G8 Education Limited. 2022 $'000 2021 $'000 Result of parent entity Profit for the year after tax 41,127 47,878 Other comprehensive income — — Total comprehensive income for the year 41,127 47,878 Financial position of parent entity at year end Current assets 80,546 115,928 Non-current assets 1,596,005 1,624,021 Total assets 1,676,551 1,739,949 Current liabilities 239,888 248,455 Non-current liabilities 533,937 561,941 Total liabilities 773,825 810,396 Total equity of parent entity comprising of: Contributed equity 1,174,419 1,209,227 Reserves 73,297 65,316 Accumulated losses (344,990) (344,990) Total equity 902,726 929,553 Parent entity contingencies Refer to note 28 for parent entity contingent liabilities. 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 a number 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 Limited, 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 Limited. (ii) Tax consolidation legislation - Refer to note 6. 106 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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 years ended 31 December 2022 and 31 December 2021 of the closed group: (a) Consolidated statement of comprehensive income 2022 $'000 2021 $'000 Continuing operations Revenue 901,286 866,336 Other income 3,938 12,397 Total 905,224 878,733 Expenses Employment costs (561,466) (537,629) Properties, utilities and maintenance costs (51,225) (48,214) Direct costs (35,148) (33,692) Software development expenses (7,280) (6,901) Depreciation and amortisation (95,286) (88,674) Other expenses (48,772) (44,819) Finance costs (52,357) (53,259) Total expenses (851,534) (813,188) Profit before income tax 53,690 65,545 Income tax expense (17,084) (19,864) Profit for the year 36,606 45,681 Total comprehensive income for the year 36,606 45,681 4. GROUP STRUCTURE 107 SECTION 2 FINANCIAL REPORT 4. GROUP STRUCTURE NOTE 26: DEED OF CROSS GUARANTEE continued (b) Consolidated balance sheet Set out below is a consolidated balance sheet as at 31 December 2022 of the closed group. 2022 $'000 2021 $'000 Current assets Cash and cash equivalents 37,826 74,131 Trade and other receivables 22,530 19,604 Other current assets 12,710 12,299 Current tax asset 11,294 17,582 Total current assets 84,360 123,616 Non-current assets Property, plant and equipment 136,250 107,458 Right of use assets 401,834 441,161 Deferred tax assets 102,385 108,089 Intangible assets 1,051,614 1,057,494 Investment in an associate 932 1,000 Other non-current assets 6,196 7,211 Total non-current assets 1,699,211 1,722,413 Total assets 1,783,571 1,846,029 Current liabilities Trade and other payables 73,421 78,265 Contract liabilities 11,234 12,343 Borrowings 920 — Lease liabilities 81,168 73,207 Provisions 85,832 90,098 Total current liabilities 252,575 253,913 Non-current liabilities Other payables 378 6,867 Borrowings 127,935 96,055 Lease liabilities 503,532 559,651 Provisions 15,788 14,832 Total non-current liabilities 647,633 677,405 Total liabilities 900,208 931,318 Net assets 883,363 914,711 Equity Contributed equity 1,174,419 1,209,227 Reserves 73,297 65,316 Retained earnings (364,353) (359,832) Total equity 883,363 914,711 108 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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: OTHER MATTERS Class action In 2020, G8 Education Limited was 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, and on this basis no further information is disclosed. NOTE 29: EVENTS OCCURRING AFTER THE BALANCE SHEET DATE The following material matters have taken place subsequent to year end: • Effective 3 January 2023, Pejman Okhovat was appointed Managing Director and CEO. • The Group completed the share buy-back program in January 2023. Over the period of the share buy-back program between April 2022 and January 2023 there were a total of 37.9 million shares repurchased for $40.0 million (including transaction costs). • 1,267,740 performance rights were issued to Pejman Okhovat under the Employee Incentive Plan (GEIP) on 20 February 2023. • On 21 February 2023 the Board declared a 2.0 cent fully franked dividend in relation to the 2022 financial year to be paid on 6 April 2023. • A non-cash share capital reduction totalling $271.5 million was resolved by the Board on 21 February 2023 in accordance with section 258F of the Corporations Act 2001. The transaction is wholly contained within equity and involves no reduction to net assets or the number of shares on issue. The purpose and effect of this transaction is to improve balance sheet presentation through the offset of historical losses with recorded capital contributions in order to more closely reflect the net equity of the Group. 109 SECTION 2 FINANCIAL REPORT 6. OTHER NOTE 30: KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Directors The following persons were directors of G8 Education Limited during the financial year: (i) Chair –Independent Non-Executive • D Foster (ii) CEO and Managing Director • G Carroll (until 31 December 2022) (iii) Independent Non-Executive Directors • J Cogin • D Singh • T Thornton • P Trimble • M Zabel (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 M Ashcroft Chief Operating Officer S Williams Chief Financial Officer (c) Key Management Personnel compensation Consolidated 2022 $'000 2021 $'000 Short term employee benefits1 3,339 3,330 Post employment benefits 169 156 Termination benefits 840 284 Long-term benefits - cash 150 — Share based payments2 325 477 4,823 4,247 1. Includes Non-Executive Directors’ fees 2. 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 pages 52 to 58. (d) Equity instrument disclosures relating to Key Management Personnel Refer to note 31 for details of rights issued to Key Management Personnel. 110 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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: Consolidated 2022 $'000 2021 $'000 Share-based payment expense 543 501 G8 Education Executive Incentive Plan (GEIP) Long Term Incentive Plan (LTIP) Shareholders approved the GEIP at the Annual General Meeting (AGM) in May 2020. The Company has established the GEIP to assist the retention and motivation of executives of G8 Education Limited (Participants). It is intended that the Performance Rights will enable the Company to retain and attract 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) for the 2022 Grant 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)1 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% 50% - 100% (pro-rata) > 15% 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. 1. Subject to adjustment for significant items as determined by the Board in its discretion 6. OTHER 111 SECTION 2 FINANCIAL REPORT 6. OTHER NOTE 31: SHARE–BASED PAYMENTS continued The vesting conditions for the 2020 and 2021 Grants comprised a cumulative EPS measure rather than a CAGR measure as used for the 2022 Grant (and as used for Grants in 2019 and earlier). The Performance Rights of these 2020 and 2021 Grants 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 measure1 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 2020 Grant 2021 Grant Less than 14 cents Less than 20 cents 0% 14 cents to 17 cents 20 cents to 24 cents 50% - 100% (pro-rata) > 17 cents > 24 cents 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. 1. Subject to adjustment for significant items as determined by the Board in its discretion Performance Rights issued under the plan may not be transferred unless approved by the Board. The table below summarises rights granted under the LTIP. GRANT DATE Balance at the start of the year (Number) Granted during the year (Number) Exercised during the year (Number) Forfeited or lapsed during the year (Number) Balance at the end of the year (Number) Unvested at the end of the year (Number) 10 May 2019 340,235 — — (340,235) — — 30 June 2020 990,000 — — (67,467) 922,533 922,533 28 June 2021 1,499,499 — — (433,694) 1,065,805 1,065,805 2 September 2021 78,713 — — — 78,713 78,713 19 May 2022 — 1,360,113 — (440,410) 919,703 919,703 Total 2,908,447 1,360,113 — (1,281,806) 2,986,754 2,986,754 Performance conditions of the 2019 Grant were not met and the rights were forfeited during the year. Certain other performance rights lapsed due to cessation of employment. Mr G Carroll, CEO and Managing Director until 31 December 2022, participated in the 2020 Grant which was tested at the end of 2022. 100% of rights will vest under the 2020 Grant in March 2023, which will result in the issue of 520,000 shares to Mr G Carroll. In recognition of Mr G Carroll’s 6 years’ service to the Group as CEO and Managing Director, the Board exercised its discretion with respect of the 2021 and 2022 Grants (the vesting is to be tested at the end of 2023 and 2024 respectively). Accordingly, Mr G Carroll’s 2021 and 2022 Grants have been left on foot on a pro-rata basis for service provided to 31 December 2022: • 2021 Grant: 329,284 rights remain on foot for service received up to 31 December 2022 and 254,122 rights lapsed as at 31 December 2022 • 2022 Grant: 109,460 rights remain on foot for service received up to 31 December 2022 and 381,426 rights lapsed as at 31 December 2022 As the Directors exercised their discretion in regard to some of Mr G Carroll’s rights remaining on foot, the changes were accounted for as a modification under AASB 2 Share Based Payments with the accounting expense accelerated in the year ended 31 December 2022 for all rights which are currently expected to vest that remain on foot as at 31 December 2022. These rights will be tested against the relevant performance conditions in the ordinary course under each grant. 112 G8 EDUCATION LIMITED 2022 ANNUAL REPORT NOTE 31: SHARE–BASED PAYMENTS continued Short Term Incentive Deferral (STID) The deferred equity short term incentive (or STID) relates to the 2021 Performance Period short term incentive which was partially awarded in rights rather than all in cash, subject to continued employment until February 2023, except in the case of Mr G Carroll (CEO and Managing Director until 31 December 2022). Unvested awards are forfeited if the employee voluntarily ceases employment or is dismissed due to poor performance. Holders of Performance Rights are not entitled to receive dividends prior to vesting. Unless otherwise determined by the Board, no payment is required for the grant of rights relating to the STID. 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 issued under the plan may not be transferred unless approved by the Board. The table below summarises rights granted under the STID. GRANT DATE Balance at the start of the year (Number) Granted during the year (Number) Exercised during the year (Number) Forfeited or lapsed during the year (Number) Balance at the end of the year (Number) Unvested at the end of the year (Number) 14 April 2022 — 257,912 — — 257,912 257,912 Total — 257,912 — — 257,912 257,912 Valuation of instruments issued Value of the financial benefit In terms of Performance Rights issued, the table below lists the inputs used in the Black Scholes model for the LTIP and STID: Grant date Share price on grant date Share price volatility1 Risk free rate Time to maturity Annual dividend yield LTIP Tranche 7 30 June 2020 $0.89 48% 0.26% 2.67 years 6.96% LTIP Tranche 8 28 June 2021 $1.00 56% 0.16% 2.68 years 4.66% LTIP Tranche 9 2 September 2021 $1.01 48% 0.09% 2.49 years 4.89% STID Tranche 10 14 April 2022 $1.07 37% 1.61% 0.9 years 3.83% LTIP Tranche 11 19 May 2022 $1.13 46% 2.80% 2.79 years 4.38% 1. The expected volatility of the Company was determined after considering, the historic share price volatility of the Company and the tendency of volatility to revert to its mean. Accounting policy Share-based compensation benefits are provided to certain employees via the GEIP. The fair value of Performance Rights that 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 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 right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the right, 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 right. The fair value of the rights 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 rights that are expected to become exercisable. At each statement of financial position date, the entity revises its estimate of the number of 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 Performance Rights, the balance of the share-based payments reserve relating to those rights remains in the share-based payments reserve. 6. OTHER 113 SECTION 2 FINANCIAL REPORT 6. OTHER NOTE 32: REMUNERATION OF AUDITORS During the year, the following fees were paid or payable for services provided by the auditor of the Group: Consolidated 2022 $'000 2021 $'000 Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities 525 500 Fees for other services • Transactional and other services 30 143 Total Auditor’s remuneration 555 643 NOTE 33: RELATED PARTY TRANSACTIONS (a) Parent entity The parent entity within the Group is G8 Education Limited. (b) Subsidiaries Interests in subsidiaries are set out in 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. There were no other transactions with related parties during the financial year. There was nil outstanding at the reporting date in relation to other transactions with related parties. 114 G8 EDUCATION LIMITED 2022 ANNUAL REPORT 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 Limited 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. The Company’s principal activities are operating child care centres. The financial statements were authorised for issue on 21 February 2023. 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 Limited 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 contingent consideration). (b) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of G8 Education Limited (“Company” or “parent entity”) as at 31 December 2022 and the results of all subsidiaries for the year then ended. G8 Education Limited 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 tenth of a million dollars. (e) Going concern Refer to note 1(d). 6. OTHER 115 SECTION 2 FINANCIAL REPORT 6. OTHER NOTE 34: OTHER SIGNIFICANT ACCOUNTING POLICIES continued (f) Reserves (i) Share-based payments The share-based payments reserve is used to recognise the expensing of the grant date fair value of rights issued to employees but not exercised. (ii) 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 $33.7 million (2021: nil) 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. (g) Accounting standards and interpretations applied from 1 January 2022 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 2021. Several amendments apply for the first time in 2022, but do not have a significant impact on the consolidated financial statements of the Group. (h) Standards issued but not yet effective The new and amended standards and interpretations that are issued, but not yet effective, that may be relevant to G8 Education Limited 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. Accounting Policies The AASB amended AASB 101 Presentation of Financial Statements to require entities to disclose their material rather than their significant accounting policies. The amendments define what is ‘material accounting policy information’ and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the AASB also amended AASB Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendment to AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors clarifies how companies should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important, because changes in accounting estimates are applied prospectively to future transactions and other future events, whereas changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current period. The amendments to AASB 101 and AASB 108 are applicable for annual periods beginning on or after 1 January 2023 with earlier application permitted. The Group is currently revisiting their accounting policy information disclosures to ensure consistency with the amended requirements. Deferred Tax related to Assets and Liabilities arising from a Single Transaction Amendments to AASB 112 Income Taxes, which narrow the scope of the initial recognition exception under AASB 112, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable temporary differences associated with leases and decommissioning obligations. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The amendments are not expected to have a material impact on the Group’s financial statements. Classification of Liabilities as Current or Non-current The narrow-scope amendments to AASB 101 Presentation of Financial Statements clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the entity’s expectations or events after the reporting date (e.g. the receipt of a waver or a breach of covenant). The amendments also clarify what AASB 101 means when it refers to the ‘settlement’ of a liability. The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice. 116 G8 EDUCATION LIMITED 2022 ANNUAL REPORT In the Directors’ opinion: (a) the financial statements and notes set out on pages 63 to 115 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 2022 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. Pejman Okhovat Managing Director 21 February 2023 DIRECTORS' DECLARATION 117 SECTION 2 FINANCIAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 2022, 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 2022 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. 118 G8 EDUCATION LIMITED 2022 ANNUAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 and estimation by the Group. The Group’s impairment assessments are complex and involve judgements and estimation relating to occupancy, future childcare rate increases and revenues, anticipated costs (including the impacts of wage inflation and labour availability), growth rates, forecast capital expenditure, centres to be exited, and the discount rate applied. 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 14, 16 and 20 to the financial statements, which includes the key assumptions applied by the Group. Our audit procedures included an evaluation of the following judgements and assumptions used in the Group’s impairment assessment: ► Evaluated the Group’s identification of cash generating units (“CGU”) for non-current assets and CGUs 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) 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. ► 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 December 2022. ► Performed independent sensitivity analysis over the impairment model in relation to key assumptions including occupancy, growth rates, and discount rates. ► Considered the adequacy of disclosure in notes 14, 16 and 20 to the financial statements regarding the impairment testing approach, key assumptions and sensitivity analysis. 119 SECTION 2 FINANCIAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Employee remediation and other provisions Why significant How our audit addressed the key audit matter As detailed in Note 13 and 14 the Group has recorded provisions at 31 December 2022 for employee remediation and other matters. There is complexity in relation to the assessment of these matters and uncertainty as to the outcome and quantification of any future economic outflow. Australian Accounting Standards (“Accounting Standards”) provide criteria for the recognition of provisions and disclosure of contingent liabilities. The application of Accounting Standards requires significant judgement as to: ► Whether present obligations as a result of past events existed at balance date; ► Whether it is probable a future outflow will be required to settle those obligations; and ► Whether a reliable estimate can be made of the obligation. In determining its estimate of its obligations for employee remediation and other matters the Group used internal and external legal counsel and accounting experts. Accordingly, we consider this to be a key audit matter. In assessing the respective provisions, our procedures included the following: ► Evaluated the Group’s assessment as to whether a present obligation exists arising from past events based on the available facts and circumstances. In order to assess the facts and circumstances, we considered the underlying documentation prepared by the Group’s internal and external specialists and other relevant documents. ► Held discussions with management, reviewed Board of Directors and Board Committee minutes, reviewed correspondence with regulators and legal counsel (where applicable) and attended Audit Committee meetings to understand the status of key matters, the likelihood of payments being required and changes in these matters over the year. These matters providing a basis for Group’s estimate of the provisions at balance date. ► Inspected legal correspondence and legal opinions and considered their content together with the information we obtained from our other procedures. Where required we held inquiries with the Group’s internal and external legal counsel. ► Where the Group determined that a present obligation existed, we assessed the Group’s basis for reliable measurement of the provision in accordance with the Accounting Standards, including matters such as probability of outflows in differing scenarios, and amounts payable in differing scenarios. We considered the reasonableness of the Group’s provision estimates based on our understanding and information obtained from our audit procedures. ► Assessed the adequacy of the disclosures made in the financial statements including the significant judgements and estimates adopted by management. 120 G8 EDUCATION LIMITED 2022 ANNUAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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, for the Group for the financial year was $883 million. Customers are generally invoiced in advance, alongside 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 AASB 15 Revenue from contracts with customers (“AASB 15”). To do this, we: ► Assessed the Group’s identification of the performance obligations and revenue recognition under AASB 15. ► 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. ► 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. ► Assessed journal entries relating to revenue, in particular those near the year end. ► 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 2022 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. 121 SECTION 2 FINANCIAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. 122 G8 EDUCATION LIMITED 2022 ANNUAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ► 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. ► 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. 123 SECTION 2 FINANCIAL REPORT INDEPENDENT AUDITOR'S REPORT A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Report on the Audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 41 to 58 of the directors’ report for the year ended 31 December 2022. In our opinion, the Remuneration Report of G8 Education Limited for the year ended 31 December 2022, 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 Kellie McKenzie Partner Brisbane 21 February 2023 124 G8 EDUCATION LIMITED 2022 ANNUAL REPORT SHAREHOLDER INFORMATION The total issued capital of the Company as at 10 February 2023 is 809,506,134. The Shareholder information set out below was applicable as at 10 February 2023. (a) Distribution of equity securities Analysis of number of equity security holders by size of holding is listed below. Class of equity security Shares Holders % Issued Capital 100,001 and Over 667,894,589 187 82.51 50,001 to 100,000 25,239,944 349 3.12 10,001 to 50,000 68,596,010 3,248 8.47 5,001 - 10,000 24,023,049 3,119 2.97 1,001 - 5,000 20,948,822 7,555 2.59 1 - 1,000 2,803,720 5,608 0.35 809,506,134 20,066 100.00 As at 10 February 2023, the number of shareholders holding less than a marketable parcel of $500 worth of shares, based on the closing market price on that date of $1.235 per share, is 2,287. (b) Quoted equity security holders Twenty largest quoted equity security holders. NAME Quoted ordinary shares held % Percentage of issued shares Citicorp Nominees Pty Limited 201,619,815 24.91 HSBC Custody Nominees (Australia) Limited 190,823,953 23.57 J P Morgan Nominees Australia Pty Limited 96,270,407 11.89 National Nominees Limited 84,814,589 10.48 BNP Paribas Noms Pty Ltd 35,760,554 4.42 BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd 3,103,659 0.38 BNP Paribas Nominees Pty Ltd 2,661,630 0.33 RAP Investments Pty Limited 2,600,000 0.32 HSBC Custody Nominees (Australia) Limited 2,173,311 0.27 Citicorp Nominees Pty Limited 2,099,566 0.26 Triskelion Enterprises Pty Ltd 2,020,035 0.25 HSBC Custody Nominees (Australia) Limited 1,645,048 0.20 Est Mr Riccardo Pisaturo 1,400,000 0.17 Warbont Nominees Pty Ltd 1,215,490 0.15 Netwealth Investments Limited 1,193,680 0.15 IOOF Investment Services Limited 1,046,274 0.13 HSBC Custody Nominees (Australia) Limited 972,135 0.12 Shobra Pty Limited 933,788 0.12 Nulis Nominees (Australia) Limited 729,476 0.09 Netwealth Investments Limited 709,204 0.09 125 SECTION 3 SHAREHOLDER INFORMATION (c) Substantial holders Substantial holders as at 10 February 2023 in the Company are set out below: ORDINARY SHARES Number held Percentage1 Allan Gray 129,894,554 15.33% Tanarra Entities 99,612,242 11.76% Host-Plus Pty Limited as trustee of the Hostplus Pooled Superannuation Trust 64,378,330 7.60% Australian Retirement Trust Pty Ltd as trustee for Australian Retirement Trust 60,638,884 7.16% Yarra Management Nominees Pty Ltd, TA Universal Investment Holdings Ltd, Yarra Capital Management Ltd, Yarra Investment Management Ltd and Nikko AM Equities Australia Pty Ltd 56,579,659 6.68% (d) Voting rights The voting rights attached to each class of equity 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 There are no voting rights attached to the options. (iii) Unquoted securities There are no unquoted securities on issue. 1. Percentage disclosed by the substantial holder as at the date the substantial notice was given to the Company under the Corporations Act 2001. 126 G8 EDUCATION LIMITED 2022 ANNUAL REPORT CORPORATE DIRECTORY DIRECTORS D Foster, Chair P Okhovat, Managing Director and Chief Executive Officer Prof J Cogin, Non-Executive Director D Singh, Non-Executive Director A Thornton, 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 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. 127 SECTION 3 CORPORATE DIRECTORY www.G8education.edu.au G8 Education Limited (ABN 95 123 828 553)