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Asanko Gold Inc.Table of Contents Appendix 4E Preliminary Final Report Corporate Directory Chairman’s Letter Chief Executive Officer’s Message Director’s Report Auditor’s Independence Declaration Corporate Governance Statement Financial Report General information Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to financial statements Director’s declaration Independent auditor’s report of the members of Kip McGrath Education Centres Limited Shareholder information 1 2 3 4 15 16 23 23 24 25 26 27 28 56 57 62 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 McGrath Edu ucation Cent d tres Limited Kip M Appe Prelim ndix 4E minary final report 1. Com mpany deta ails Name ABN: Repo Previo e of entity: rting period: ous period: ucation Centr res Limited Kip M 73 00 For t For t McGrath Edu 03 415 889 he year ende he year ende ed 30 June 2 ed 30 June 2 2017 2016 2. Res sults for ann nouncemen nt to the mar rket Reve nues from or rdinary activi ities dow n 7.3% to Earni ngs Before I nterest, Tax, , Depreciatio on and Amort tisation (EBIT TDA) up 25.0% to $'00 00 13,507 2,635 Profit McGr from ordinar rath Educatio ry activities a on Centres L after tax attrib imited butable to th e owners of Kip for the year attributable to the owner rs of Kip McG Grath Educat tion res Limited ends Profit Centr Divide On 9 declar total d August 201 red and will b distribution w 7, a final div be paid on 2 will be $630,4 vidend for th 9 Septembe 480. up up 19.4% to 1,436 19.4% to 1,436 he year end er 2017 to tho ded 30 June ose shareho 2017 of 1.4 lders on the 4 cents per register at 7 ordinary sha 7pm on 15 Se are, unfranke eptember 20 ed, was 017. The Comm The p ments rofit for the c consolidated entity after p providing for income tax a amounted to o $1,436,000 (30 June 20 016: $1,203,0 000). Refer to Chairman n's report and d Chief Exec cutive Officer r's message for further co ommentary. The fo McGra ollowing tabl ath Educatio le summaris on Centres an es key reco nd EBITDA. nciling items s between st tatutory prof fit after tax a attributable to o the owners s of Kip Reve nue EBITD Less: Less: Add: DA Depreciatio Interest exp Interest inco n and amorti pense me isation Profit Incom before Incom me tax expen me tax expen nse nse Profit after income e tax expens se 3. Net t tangible as ssets Net ta angible asset ts per ordina ary security d onsolidated C 016 20 2017 7 000 $' 0 $'000 13 3,507 14,569 2 2,635 (773) (68) 1 1 ,795 (359) 1 ,436 2,107 (443) (69) 4 1,599 (396) 1,203 ing Report perio od s Cents vious Prev eriod pe ents Ce (0.12) ( (0.97) Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 McGrath Edu ucation Cent d tres Limited Kip M Appe Prelim ndix 4E minary final report 4. Con ntrol gained d over entitie es Not ap pplicable. 5. Los ss of contro ol over entiti ies Not ap pplicable. 6. Div vidend reinv vestment pla ans Not ap pplicable. Kip p McG Grath E Educat tion C entres s Limited ABN N 73 003 415 889 7. Det tails of asso ociates and joint ventur re entities Not ap pplicable. Ann nual R eport - - 30 Ju ne 201 7 8. For reign entitie es Detail ls of origin of f accounting standards us sed in compi iling the repo ort: Not ap pplicable. 9. Aud dit qualifica ation or revie ew or qualificat tion (if any): been audite ed and an un qualified opi nion has bee en issued. Detail ls of audit/rev view dispute The fi nancial state ements have 10. At ttachments Detail ls of attachm : ments (if any): The A Annual Repor rt of Kip McG Grath Educat tion Centres 11. Si igned Signe ed ________ ___________ __________ Kip M Chair Newc McGrath rman castle Limited for th he year ende ed 30 June 2 2017 is attac hed. Date e: 9 August 2 2017 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip p McG Grath E Educat tion C entres s Limited ABN N 73 003 415 889 Ann nual R eport - - 30 Ju ne 201 7 Kip M McGrath Edu ucation Cent tres Limited d Appe ndix 4E Prelim minary final report 4. Con ntrol gained d over entitie es Not ap pplicable. 5. Los ss of contro ol over entiti ies Not ap pplicable. 6. Div vidend reinv vestment pla ans Not ap pplicable. 7. Det tails of asso ociates and joint ventur re entities Not ap pplicable. 8. For reign entitie es Not ap pplicable. Detail ls of origin of f accounting standards us sed in compi iling the repo ort: 9. Aud dit qualifica ation or revie ew Detail ls of audit/rev view dispute or qualificat tion (if any): The fi nancial state ements have been audite ed and an un qualified opi nion has bee en issued. The A Annual Repor rt of Kip McG Grath Educat tion Centres Limited for th he year ende ed 30 June 2 2017 is attac hed. Signe ed ________ ___________ __________ Date e: 9 August 2 2017 10. At ttachments Detail ls of attachm ments (if any): : 11. Si igned Kip M McGrath Chair rman Newc castle Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 details of the e annual gen neral meeting g of Kip McG Grath Educa tion Centres s Limited :00 am (AES ST) Core f franchise rev venue has ag gain increase ed, as shown n in the table e below: Kip M Corpo 30 Ju McGrath Edu orate directo ne 2017 ucation Cent ory d tres Limited Direct tors Comp pany secreta ary airman) Kip M Ian C Trevo Diane McGrath (Cha Campbell or Folsom e Pass Brett Edwards Notice e of annual g general meet ting Regis stered office Share e register Audito or Banke ers The d are: 3/6 N Newc Frida Newcomen S castle, NSW ay 27 Octobe Street W 2300 er 2017 at 11 el 3 Leve 6 Ne Newc Head wcomen Stre castle, NSW d office telep eet W 2300 hone: 02 492 29 6711 Com 117 V West Shar putershare I Victoria Stree t End, QLD 4 reholders enq nvestor Serv et, 4101 quiries: 1300 0 787 272 vices Pty Lim mited PKF 755 H Newc Newcastle et Hunter Stree castle West, NSW 2302 tralia Ltd tional Towers s Sydney HSBC Towe Leve 100 B Sydn C Bank Aust er 1, Internat el 36 Barangaroo A ney NSW 200 Avenue 00 Stock k exchange li isting Kip M Exch McGrath Edu hange (ASX c ucation Centr code: KME) res Limited s shares are lis sted on the A Australian Se ecurities Webs site www w.kipmcgrath. .com 1 1 2 Kip M McGrath Edu ucation Cent tres Limited d Chair rman's letter r 30 Ju ne 2017 Dear S Shareholder s, The c company reco orded its 6th straight incr rease in net profit after ta ax to $1,436 6,000 for the full year, wh hich is an inc crease of 19.4% % over the pr evious year. In addition, EBITDA of $ $2,635,000 in ncreased by 25.1%. This r result is desp pite significa nt headwind s caused by y the strength hening Austr ralian dollar and the wea ak British Po ound. The declin ne in the pou und significa antly affected d earnings, i mpacting EB BITDA alone e by $470,00 00. This was s mitigated b by strong growth h in the franc chise busine ss in the Aus stralian, UK a and NZ mark kets. Reven ue from franc hise fees Reven ue from stude ent lesson fees s Direct costs of stude ent lessons Core r revenue from m franchise fe es 2017 $’000 9,206 6 2,382 2 (1,932 2) 9,656 6 2016 $’000 7,713 5,553 (4,496) 8,770 2015 $’000 6,492 5,783 (5,038) 7,237 Our n national adve ertising strat tegies are co ontributing s significantly t to the growt th in lesson numbers an nd we expe ct this to contin nue as we f further deve lop these s trategies in Australia, U UK and New w Zealand. Google AdW Words, socia al media, progra ammatic med dia and telev vision are wo orking in har rmony to pro oduce the res sults. This a bility to attra act students using the new m media directe ed to today’s s parents is n not only attra acting more s students but will indirectl y increase c entre numbe ers as we go for rward. next y year. Gold partner num mbers globally y continue to o rise, with a an increase of 33 (15%) ) to over 230 0 operationa al or about to o open in Austra alia and the United King gdom. Gold Partners, w here we pro ovide back o office suppor rt, generally do better th han other centre es resulting i n better run and more pr rofitable ope rations for th he franchisee es and the c ompany. The ere is scope for more Gold P Partners in U UK and we l ook forward to developin ng this type of centre in New Zealan d beginning in the secon nd half of Online e tutoring is still an excit ting opportun nity for the c company, wi th more inve estment bein ng made this s year. We s set out to provid de an at hom me solution to o tuition that t mirrored th e in-centre e experience a and could be e charged at the same ra ate as in- centre e tuition. Thi is is unique and we are e the only c company pro oviding such h a service. However, it hasn’t been n without challe enges, the bi ggest being the generall y low-level c computer spe ecifications i n many hom mes. We now w appear to b be on the cusp o of solving thi s with more advanced te echnology tha an when the project bega an. Growt th will contin nue to come e from the c core busines ss in centres s and increa asing online revenue, w with marketin ng efforts focuss sed on buildi ing lesson nu umbers in bo oth these are eas. The B Board has bu udgeted for a continuati on of increa ased profits i in the corpo rate plan co overing 2018 8-2020 with c cash and undra wn bank fac ilities at their r strongest. Today y the Board declared an n unfranked final dividen nd of 1.4 ce ents per sha re payable o on 29 Septe ember 2017 to those share holders on th he register a at 7pm on 15 5 September r 2017, takin g total divide ends for the 2017 year to o 2 cents (20 016 – 1.5 cents) ), an increas e of 33.3%. Kip M cGrath Chairm man 9 Aug gust 2017 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Chair 30 Ju ucation Cent McGrath Edu r rman's letter ne 2017 d tres Limited Dear S Shareholder s, The c 19.4% company reco % over the pr orded its 6th evious year. straight incr In addition, rease in net EBITDA of $ profit after ta $2,635,000 in ax to $1,436 ncreased by 25.1%. 6,000 for the full year, wh hich is an inc crease of This r declin growth result is desp ne in the pou h in the franc pite significa und significa chise busine nt headwind antly affected ss in the Aus s caused by d earnings, i stralian, UK a y the strength mpacting EB and NZ mark hening Austr BITDA alone kets. ralian dollar e by $470,00 and the wea 00. This was ak British Po s mitigated b ound. The by strong Core f franchise rev venue has ag gain increase ed, as shown n in the table e below: Reven Reven Direct Core r ue from franc ue from stude costs of stude revenue from hise fees s ent lesson fees ent lessons m franchise fe es 2017 $’000 9,206 6 2 2,382 (1,932 2) 6 9,656 2016 $’000 7,713 5,553 (4,496) 8,770 2015 $’000 6,492 5,783 (5,038) 7,237 Our n contin progra new m go for national adve nue as we f ammatic med media directe rward. ertising strat further deve dia and telev ed to today’s tegies are co lop these s vision are wo s parents is n ontributing s trategies in orking in har not only attra significantly t Australia, U rmony to pro acting more s to the growt UK and New oduce the res students but th in lesson w Zealand. sults. This a will indirectl numbers an Google AdW bility to attra y increase c nd we expe Words, socia act students entre numbe ct this to al media, using the ers as we Gold Austra centre Gold P next y partner num alia and the es resulting i Partners in U year. mbers globally United King n better run UK and we l y continue to gdom. Gold and more pr ook forward o rise, with a Partners, w rofitable ope to developin an increase here we pro rations for th ng this type of 33 (15%) ovide back o he franchisee of centre in ) to over 230 office suppor es and the c New Zealan 0 operationa rt, generally ompany. The d beginning al or about to do better th ere is scope in the secon o open in han other for more nd half of Online provid centre challe cusp o e tutoring is de an at hom e tuition. Thi enges, the bi of solving thi still an excit me solution to is is unique ggest being s with more ting opportun o tuition that and we are the generall advanced te nity for the c t mirrored th e the only c y low-level c echnology tha company, wi e in-centre e company pro computer spe an when the th more inve experience a oviding such ecifications i project bega estment bein and could be h a service. n many hom an. ng made this e charged at However, it mes. We now s year. We s the same ra hasn’t been w appear to b set out to ate as in- n without be on the Growt focuss th will contin sed on buildi nue to come ing lesson nu e from the c umbers in bo core busines oth these are ss in centres eas. s and increa asing online revenue, w with marketin ng efforts The B undra Board has bu wn bank fac udgeted for ilities at their a continuati r strongest. on of increa ased profits i in the corpo rate plan co overing 2018 8-2020 with c cash and Today share cents) y the Board holders on th ), an increas declared an he register a e of 33.3%. n unfranked at 7pm on 15 final dividen 5 September nd of 1.4 ce r 2017, takin ents per sha g total divide re payable o ends for the on 29 Septe 2017 year to ember 2017 o 2 cents (20 to those 016 – 1.5 Kip M Chairm 9 Aug cGrath man gust 2017 2 2 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Chief 30 Ju McGrath Edu Executive O ne 2017 ucation Cent Officer's me d tres Limited essage Kip M of the curren cGrath Educ e Australian ncy would ha cation Centre Dollar stren ave seen an es Limited h gthening ag increase of 4 as reported gainst the UK 47% over las a strong inc K pound aff st year. crease in EB fected this re ITDA to $2.6 esult by $47 6 million. Unf 70,000 so th fortunately, t he result on the effect constant Overv view of our m major initiative es: 1. . Gold Partn ner franchise ees We have 230 W uring the nex du ocus more on fo 0 Gold Partn xt half. Gold n the teachin ers which is Partner stud g side of the s an increas dent number eir business. e of 33 (15% rs on averag %) from last ge are highe t year with a r than Silver another twen r Partners as nty expected s the franchi d to open sees can 2. . Online Tu toring nline tutoring O (6 69% increase co ontinue to ed We are comm W rocess of bec pr g is continui e). We now ducate the m mitted to con coming a dow ng to grow s have our fir market our so tinually impr wnloadable A steadily, reac rst franchisee oftware allow rove our soft App to impro ching 1,000 e with over ws for small tware so the ove ease of d lessons per 100 online s group tuition e user exper distribution. r month, up f students whi n replicating rience is mo from an ave ch is a sign the current re rewarding rage of 590 ificant milest in-centre ex g and it is no last year tone. We perience. ow in the 3. . License S Sales he major co Th su uccess. Fou cu urrently seek equired to dir re sts associate r schools in king further rect some of ed with licen South Afric funding for their profits t nse sales ha ca have rece more schoo towards edu ave now end eived funding ols and fund cation. ded, and we g from the g ding from la remain con government rge business nfident we ca for Enrichm ses in Sout an achieve l ent Centres h Africa as ong term . We are they are 4. . National M Marketing C ad in in ampaigns in dvertising pa crease in stu crease the q n Australia, U aid for by Fra udent numbe quality of the UK and New anchisees an ers of 20% f leads. Initial w Zealand ha nd Head offi for the year. l testing is sh ave been ve ce. Tutoring We are now howing succe ery successf leads are u w trialling the ess. ful. We use p 75% via th e online book a combinati he website a king system on of TV an and this has which we be nd digitial led to an elieve will 5. . Technology y Developme ent W We have com so oftware whic ye ears of feedb oftware is int so uition and rev tu pleted our fi ch is now ca back from th tegrated onto verse if they rst year with lled iKip, and he network, a o the same p choose to do a complete d this is curr and we belie platform whic o so. in-house sof rently being eve this prod ch will allow ftware team. rolled out w duct puts us students to t . We have su worldwide. iK ahead of ou transition sm uccessfully re ip is the culm ur global com evamped ou mination of t mpetitors. Th face to face ur tutoring the last 7 he online to online moothly from Outloo ok We ex autom face to xpect revenu mation of the o face and o ue, profit and software as online tuition. d profit marg a service, o gins will cont our national a tinue to grow advertising c w through a c campaigns a combination nd the option of the ongo n for student ing developm ts to choose ment and between I wou emplo ld like to tha oyees for the ank the mast ir hard work ter franchise and support ees, area dev t throughout velopers, fra the year. anchise repre esentative co ouncil memb bers, franchis sees and The d irectors pres sent their rep port, together r with the fina ancial statem ments, on the e consolidate ed entity (refe erred to here eafter as the 'co onsolidated entity') cons sisting of Kip p McGrath E ducation Ce entres Limited d (referred t to hereafter as the 'comp pany' or 'paren nt entity') and d the entities it controlled at the end o of, or during, the year end ded 30 June 2017. The fo ollowing pers sons were di irectors of Ki ip McGrath E Education Ce entres Limite ed during the e whole of th he financial y year and up to t the date of th his report, un nless otherw wise stated: Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 Direct tors Kip M McGrath Ian C ampbell Trevo or Folsom Princ ipal activitie es Diane e Pass (appo ointed on 1 F February 201 7) The p principal acti ivities of the e consolidate ed entity du uring the cou urse of the financial ye ar continued d to be the sale of franch hises and pro oviding serv ices to franc chisees in th he education field. The c consolidated entity opera ates in Austra alia and overse eas, principa ally in the Un ited Kingdom m and New Z Zealand. Divide ends Divide ends paid du ring the finan ncial year we ere as follow ws: C onsolidated d 2017 7 $'000 0 20 016 $' 000 451 270 721 442 221 663 Final dividend for the year end ded 30 June 2016 of 1.0 cents (2015 : 1.0 cents) p per ordinary Interim m dividend fo or the year e ended 30 Jun ne 2017 of 0. .6 cents (201 16: 0.5 cents ) per ordinar ry share e share e On 9 August 201 7, a final div vidend for th he year end ded 30 June 2017 of 1.4 4 cents per ordinary sha are, unfranke ed, was declar red and will b be paid on 2 9 Septembe er 2017 to tho ose shareho lders on the register at 7 7pm on 15 Se eptember 20 017. The total d distribution w will be $630,4 480. Revie ew of operat tions The p rofit for the c consolidated entity after p providing for income tax a amounted to o $1,436,000 (30 June 20 016: $1,203,0 000). Reven nue was we eaker in the Australia m markets (2017 7: $7,351,00 00 versus 20 016 $8,792, 000) due to o a shift to r revenue prima rily from net franchise fee e contracts a as opposed t to older gros ss fee contra cts which ce eased being o offered at the e end of 2014. Revenue gr rowth in the UK market w was subdued d (2017: $5,1 190,000 vers sus $5,111,0 00 in 2016) due to the im mpact of the w weak British pound durin ng the year r. Revenue f from other markets inc reased (201 17: $965,000 0 versus $6 602,000) prima rily due to gr rowth from M Middle East o operations. The n umber of Go old Partners g grew to 101 in the Austra alian market (70% of tota al centres) an nd to 129 in t the UK mark ket (52% of tota al centres). O Overall centr re numbers g globally grew w slightly to 5 546 (2016: 5 538). Lesson n numbers on n the Insight t system contin nued to grow w, with total l esson numb bers for the f financial yea ar reaching 1 1,109,000 (co ompared to 845,000 in t the prior year). Year on yea ar lesson gro owth in Austr ralia has ave eraged 8% w while new Go old Partner, t the national m marketing ca ampaign and c changes to th he tax deduc ctibility of tut toring in the UK has ass sisted to driv ve lesson gr rowth to 20% %. Other key y growth marke ets include th he Middle Ea ast (up 109% %) New Zeala and (up 14%) ) and South A Africa (up 10 0%). The e arnings befo ore interest, t tax, deprecia ation and am ortisation ('E EBITDA') amo ounted to $2 2,635,000 (20 016: $2,107,0 000). The fo ollowing tabl e summarise es key recon nciling items between sta atutory profit t after tax att tributable to the shareho olders of Kip M cGrath Educ cation Centre es and EBITD DA. m McGrath Storm Chief Executive O Officer 9 Aug Newca gust 2017 astle 3 3 4 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited The d the 'co 'paren irectors pres onsolidated nt entity') and sent their rep entity') cons d the entities port, together sisting of Kip it controlled r with the fina p McGrath E at the end o ancial statem ducation Ce of, or during, ments, on the entres Limited the year end e consolidate d (referred t ded 30 June ed entity (refe to hereafter 2017. erred to here as the 'comp eafter as pany' or Direct The fo up to t tors ollowing pers the date of th sons were di his report, un irectors of Ki nless otherw wise stated: ip McGrath E Education Ce entres Limite ed during the e whole of th he financial y year and Kip M Ian C Trevo Diane McGrath ampbell or Folsom e Pass (appo ointed on 1 F February 201 7) Princ The p franch overse ipal activitie principal acti hises and pro eas, principa es ivities of the oviding serv ally in the Un e consolidate ices to franc ited Kingdom ed entity du chisees in th m and New Z uring the cou he education Zealand. urse of the field. The c financial ye consolidated ar continued entity opera d to be the ates in Austra sale of alia and Divide Divide ends ends paid du ring the finan ncial year we ere as follow ws: Final dividend for e share Interim m dividend fo e share the year end ded 30 June 2016 of 1.0 cents (2015 : 1.0 cents) p per ordinary or the year e ended 30 Jun ne 2017 of 0. .6 cents (201 16: 0.5 cents ) per ordinar ry d onsolidated C 016 20 2017 7 $' 0 $'000 000 451 270 721 442 221 663 On 9 declar total d August 201 red and will b distribution w 7, a final div be paid on 2 will be $630,4 vidend for th 9 Septembe 480. he year end er 2017 to tho ded 30 June ose shareho 2017 of 1.4 lders on the 4 cents per register at 7 ordinary sha 7pm on 15 Se are, unfranke eptember 20 ed, was 017. The Revie The p ew of operat rofit for the c tions consolidated entity after p providing for income tax a amounted to o $1,436,000 (30 June 20 016: $1,203,0 000). Reven prima 2014. the w prima nue was we rily from net Revenue gr weak British rily due to gr eaker in the franchise fee rowth in the pound durin rowth from M Australia m e contracts a UK market w ng the year Middle East o markets (2017 as opposed t was subdued r. Revenue f operations. 7: $7,351,00 to older gros d (2017: $5,1 from other 00 versus 20 ss fee contra 190,000 vers markets inc 016 $8,792, cts which ce sus $5,111,0 reased (201 000) due to eased being o 00 in 2016) 17: $965,000 o a shift to r offered at the due to the im 0 versus $6 revenue e end of mpact of 602,000) The n of tota contin year). and c marke umber of Go al centres). O nued to grow Year on yea changes to th ets include th old Partners g Overall centr w, with total l ar lesson gro he tax deduc he Middle Ea grew to 101 re numbers g esson numb owth in Austr ctibility of tut ast (up 109% in the Austra globally grew bers for the f ralia has ave toring in the %) New Zeala alian market w slightly to 5 financial yea eraged 8% w UK has ass and (up 14%) (70% of tota 546 (2016: 5 ar reaching 1 while new Go sisted to driv ) and South A al centres) an 538). Lesson 1,109,000 (co old Partner, t ve lesson gr Africa (up 10 nd to 129 in t n numbers on ompared to the national m rowth to 20% 0%). the UK mark n the Insight 845,000 in t marketing ca %. Other key ket (52% t system the prior ampaign y growth The e arnings befo ore interest, t tax, deprecia ation and am ortisation ('E EBITDA') amo ounted to $2 2,635,000 (20 016: $2,107,0 000). The fo Kip M ollowing tabl cGrath Educ e summarise cation Centre es key recon es and EBITD nciling items DA. between sta atutory profit t after tax att tributable to the shareho olders of 4 4 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Reve nue EBITD Less: Less: Add: DA Depreciatio Interest exp Interest inco n and amorti pense me isation Profit Incom before Incom me tax expen me tax expen nse nse Profit after income e tax expens se d onsolidated C 016 20 2017 7 $' 0 $'000 000 13 3,507 14,569 2 2,635 (773) (68) 1 1 ,795 (359) 1 ,436 2,107 (443) (69) 4 1,599 (396) 1,203 Signif There ficant chang e were no sig ges in the st gnificant chan tate of affair nges in the s rs state of affair s of the cons solidated ent tity during the e financial ye ear. Matte Apart has si the co ers subsequ from the div ignificantly a onsolidated e ent to the e vidend declar affected, or m entity's state nd of the fin red as discus may significan of affairs in f r nancial year ssed above, ntly affect th future financ no other ma e consolidate ial years. atter or circum ed entity's o mstance has perations, th s arisen sinc he results of e 30 June 20 those operat 017 that tions, or Likely The c both t expec increa y developme company has traditional tut cted online le ases. ents and ex s initiated a n toring servic esson numb pected resu number of n ces as well a ers will incre ults of opera ew marketin as the new o ease signific ations ng campaigns on-line produ antly as the s in the key ucts and exp number of f Australian a pects improv franchises tr and United K ved growth in rained in the Kingdom mar n both marke e upgraded s rkets for ets. It is software onmental re onsolidated egulation entity is not Envir The c law. subject to an ny significan nt environme ntal regulatio on under Aus stralian Com mmonwealth Intere ests in shares s: or State Name e: Title: Inform mation on d e: Name Title: Exper rience and e irectors xpertise: Other Forme Speci Intere Intere r current dire er directorsh ial responsib ests in shares ests in option ectorships: hips (last 3 ye bilities: s: ns: McGrath Kip M -Executive D Non- o-founder, K As co n-the-Traine "Trai None e ears): None e e None 27,499 ordin 16,22 e None irector and C Chairman cular respon Kip has partic . r" programs. sibility for st trategic plann ning and dev veloping ary shares (i including 11, ,227,499 dire ectly held) Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 Name e: Title: Qualif fications: Ian C Campbell Non- -Executive D irector FCA, , MAICD Exper rience and e xpertise: Ian jo oined the Bo oard on 25 A August 2009 a after a 32 ye ears career w with the inter rnational acco unting firm Ernst & You ung principa ally working with entrepr reneurial com mpanies and t the capital m markets. Ian is a Fellow o of Chartered Accountants s Australia a and New Zeala and and a member of the Austral ian Institute e of Compan ny Directors s. He is curre ently a non-e executive dir rector of CVC C Limited an nd Redox Pt ty Ltd and a a partner with the Board s earch practic ce of the All legis Group (formerly Ta alent2). His p previous non-e executive dir rector roles i included Glo oria Jean’s C Coffees Intern national Pty Limited, Gree en’s Foods H oldings Pty L Ltd and Youn ng Achievem ment Australia a Limited. Speci ial responsib bilities: Chai rman of the A Audit Comm ittee and Ch airman of the e Nomination n and Remu neration Other r current dire ectorships: CVC Ltd Forme er directorsh hips (last 3 ye ears): None e Intere ests in shares s: Intere ests in option ns: Name e: Title: Com mittee 500,0 000 ordinary y shares None e Trevo or Folsom Non- -Executive D irector Exper rience and e xpertise: Trevo or has exten nsive backgro ound and ex xperience an d is acknow ledged for h is ability to en ngage, invest t and advise growth com mpanies, part ticularly in th e technology y sector. He is s a successf ful entrepren eur in his ow wn right, dev veloping, from m start up, B Blueprint Mana agement, wh hich he sold in 2008. He e is currently y a Director o of Elevation Capital, an ea arly stage tec chnology inv vestment com mpany. Other r current dire ectorships: None e Forme er directorsh hips (last 3 ye ears): None e Speci ial responsib bilities: Mem mber of the A Audit Commi ittee and me ember of the e Nomination n and Remu neration Com mittee None e Diane e Pass Non- -Executive D irector Exper rience and e xpertise: Di is currently a Director of t the human r resources co onsultancy co ompany 360 0HR and the C Chair of the Advisory C Council of Sy ydney TAFE E Institute. D i has more than 20 years s local, natio onal and inte ernational ex xperience in n the recruitm ment and co onsulting indus stry. She is also accomp plished in cr eating and d delivering en ngaging profe essional deve elopment prog grams and le eading comp plex manage ment consul ting assignm ments. Di is als so a member r of the Austr ralian Institut te of Compan ny Directors. . Other r current dire ectorships: None e Forme er directorsh hips (last 3 ye ears): None e Speci ial responsib bilities: Intere ests in shares s: None e Mem mber of the No omination an nd Remunera ation Commi ittee 'Other r current dire ectorships' qu uoted above e are current directorship s for listed e entities only a and exclude s directorshi ps in all other types of enti ties, unless o otherwise sta ated. 'Form er directorsh hips (in the la ast 3 years)' quoted abov ve are directo orships held in the last 3 years for list ted entities o only and exclud des directors ships in all ot ther types of entities, unle ess otherwis e stated. Comp pany secreta ary Brett E Edwards is a a Fellow of C Chartered Acc countants Au ustralia and New Zealand d and a mem mber of the A Australian Ins stitute of Comp pany Directo rs. He has 29 years of experience in accounti ng and repo orting in a n number of m major Austral ian and intern ational busin nesses, inclu uding 10 yea rs with intern national acco ounting firm E Ernst & Youn ng. He was p previously a director of GM MAC Australia a LLC, a US company op perating in th he finance se egment in Au stralia. 5 5 6 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited e: Name Title: Qualif Exper fications: rience and e xpertise: Campbell Ian C -Executive D Non- , MAICD FCA, oined the Bo Ian jo unting firm acco the capital m and t and and a Zeala ently a non-e curre the Board s with executive dir non-e en’s Foods H Gree Ltd CVC e ears): None rman of the A Chai mittee Com 500,0 000 ordinary e None Trevo or Folsom Non- -Executive D Trevo or has exten to en ngage, invest He is s a successf Mana agement, wh arly stage tec an ea None e e ears): None mber of the A Mem mittee Com e None e Pass Diane -Executive D Non- Di is currently a the C Chair of the s local, natio years stry. She is indus elopment prog deve is als so a member None e e ears): None Mem mber of the No e None Other Forme Speci r current dire er directorsh ial responsib ectorships: hips (last 3 ye bilities: Intere Intere ests in shares ests in option s: ns: e: Name Title: Exper rience and e xpertise: Other Forme Speci r current dire er directorsh ial responsib ectorships: hips (last 3 ye bilities: Intere ests in shares s: e: Name Title: Exper rience and e xpertise: Other Forme Speci Intere r current dire er directorsh ial responsib ests in shares ectorships: hips (last 3 ye bilities: s: oard on 25 A Ernst & You markets. Ian member of executive dir earch practic rector roles i oldings Pty L August 2009 a ung principa is a Fellow o the Austral rector of CVC ce of the All included Glo Ltd and Youn after a 32 ye ally working of Chartered ian Institute C Limited an legis Group oria Jean’s C ng Achievem ears career w with entrepr Accountants e of Compan nd Redox Pt (formerly Ta Coffees Intern ment Australia with the inter reneurial com s Australia a ny Directors ty Ltd and a alent2). His p national Pty a Limited. rnational mpanies and New s. He is a partner previous Limited, Audit Comm ittee and Ch airman of the e Nomination n and Remu neration irector y shares irector nsive backgro t and advise ful entrepren hich he sold chnology inv ound and ex growth com eur in his ow in 2008. He vestment com xperience an mpanies, part wn right, dev e is currently mpany. d is acknow ticularly in th veloping, from y a Director o ledged for h e technology m start up, B of Elevation is ability y sector. Blueprint Capital, Audit Commi ittee and me ember of the e Nomination n and Remu neration irector Director of t Advisory C onal and inte also accomp grams and le r of the Austr the human r Council of Sy ernational ex plished in cr eading comp ralian Institut resources co ydney TAFE xperience in eating and d plex manage te of Compan ompany 360 onsultancy co i has more E Institute. D ment and co n the recruitm ngaging profe delivering en ting assignm ment consul . ny Directors. 0HR and than 20 onsulting essional ments. Di omination an nd Remunera ation Commi ittee 'Other other r current dire types of enti ectorships' qu ties, unless o uoted above otherwise sta e are current ated. directorship s for listed e entities only a and exclude s directorshi ps in all 'Form exclud er directorsh des directors hips (in the la ships in all ot ast 3 years)' ther types of quoted abov entities, unle ve are directo ess otherwis orships held e stated. in the last 3 years for list ted entities o only and Comp Brett E Comp intern of GM pany secreta Edwards is a pany Directo ational busin MAC Australia ary a Fellow of C rs. He has nesses, inclu a LLC, a US Chartered Acc 29 years of uding 10 yea company op countants Au experience rs with intern perating in th ustralia and in accounti national acco he finance se New Zealand ng and repo ounting firm E egment in Au d and a mem orting in a n Ernst & Youn stralia. mber of the A number of m ng. He was p Australian Ins major Austral previously a stitute of ian and director 6 6 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Meeti The n year e ngs of direc number of me ended 30 Jun ctors eetings of th ne 2017, and he company' d the number s Board of D r of meetings Directors ('th s attended by e Board') an y each direct nd of each B tor were: Board commi ittee held du uring the Full Board Attend ded Held H Nominat Remuneratio R Attended A tion and e on Committee Held Au Attend ee dit Committe Held H ed The c consolidated entity aims s to reward d KMP base ed on their position an nd responsib bility, with a a level and mix of remun neration, whi ch has both fixed and va ariable compo onents. Execu utive remune eration Kip M Ian C Trevo Diane McGrath ampbell or Folsom e Pass 7 7 7 3 7 7 7 3 1 1 1 - 1 1 1 - - 4 3 - represents t the number of meetings s held during g the time th he director h eld office or r was a mem mber of the Held: comm mittee. - 4 4 - relevant The K KMP remuner ration and re eward framew work has fou ur component ts: b base pay and d non-monet tary benefits; ; s short-term pe erformance i ncentives; s share-based payments; a and ● ● ● ● o other remune eration, such h as superan nuation and long service e leave. The c ombination o of these com mprises the K KMP's total re emuneration. Remu The r arrang Regul uneration re emuneration gements for ations. eport (audite n report, whi the consoli ed) ich has bee idated entity n audited, o y, in accorda outlines the ance with th director and he requireme d other key m ents of the managemen Corporation nt personnel s Act 2001 ('KMP') and its compa arable marke et remunerat tion. Fixed remuneratio on, consistin g of base sa alary, supera annuation an nd non-mone etary benefit s, are review wed annually y by the NRC, based on individual a and business s unit perfo ormance, the e overall pe erformance of the cons solidated ent tity and KMP activit are defined ties of the co as those w onsolidated e who have th entity. e authority a and respons sibility for pl anning, dire ecting and c ontrolling th e major where e it does not create any a additional cos sts to the con nsolidated en ntity and add ds additional value to the KMP. KMPs s can receive e their fixed r remuneration n in the form m of cash or o other fringe b benefits (for example mo otor vehicle b benefits) The re emuneration P Principles us ● D Details of rem ● S Service agre ● Share-based S ● Additional dis A ● report is set sed to determ muneration ements d compensat sclosures rel t out under th mine the natu he following ure and amou main headin unt of remun gs: neration ion lating to key managemen nt personnel Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 ASX l isting rules r requires that the aggrega ate non-exec utive directo rs' remunera ation be dete ermined perio odically by a general meetin ng. The mo st recent de etermination was at the Annual Ge neral Meetin ng held on 20 Novembe er 2015, wh here the share holders appr roved a max imum aggreg gate remune eration of $40 00,000. The s short-term in ncentives ('S STI') program m is designe ed to align t he targets o of the busine ess units wi ith the perfo ormance hurdle es of execut tives. STI pa ayments are granted to executives b based on sp pecific annua al targets an nd key perfo ormance indica ators ('KPI') being achiev ved. KPI’s f for the chief executive o officer are s et by the N RC and cur rrently focus s on the conso olidated entity y's financial performance e measured by reference e to annual a after-tax prof fit. The KPI's s of other exe ecutives are se et by the chie ef executive o officer and a are reviewed in consultati on with the c chair of the B Board. Long- term incentiv ves ('LTI') inc clude share o options and long service e leave. An e mployee sha are option pla an was appr roved by share holders in 2 2012, the ob bjective of w which is to a assist in the e recruitmen nt, reward, r retention and d motivation n of key emplo oyees and d irectors by f facilitating th he offering o of options ov ver ordinary shares, sub bject to perfo ormance and d loyalty hurdle es. The plan n aims to g ive selected d employees s and directo ors the opp ortunity to s share in the e future grow wth and profita ability of the company by y better align ning their inte erests with t those of sha reholders an nd provides g greater incen ntive for them t to work towa ards achievin ng the longer r term goals o of the compa any. Under r the plan, th he board has discretion to o decide whic ch full or par rt-time emplo oyees or dire ectors of the company (or r related body corporate) w will be invite d to acquire e options, the e number of f options to be offered, any vesting conditions s such as perfor rmance targe ets or minimu um vesting p periods, the a applicable ex xercise price e (which mus st be at least equal to the e market value of shares at the time of t the offer), an nd any other terms of issu ue. Conso olidated entit ty performan nce and link t to remunerat tion KMP remuneratio on is linked to the perfo ormance of t the consolid ated entity. Bonus and incentive p ayments are e at the During g the financia al year ende d 30 June 20 017, the com mpany did no ot engage the e use of remu uneration co nsultants. discre etion of the B Board. Use o of remunerati ion consultan nts Detail ls of remune eration Amou unts of remun neration follow wing tables. Detail s of the rem muneration of f the directo rs and other r KMP of Kip p McGrath E Education Ce entres Limite ed are set ou ut in the director and d executive director compa any did not r receive any s specific feedb back at the A AGM regardi ng its remun neration prac ctices. Voting g and comme ents made a t the compan ny's 2016 An nnual Genera al Meeting ('A AGM') At the e 2016 AGM, , 96% of the shareholder rs voted to a adopt the rem muneration r eport for the e year ended d 30 June 20 016. The The re and e comm remun emuneration establishes, mittee also a neration pack committee m reviews and assists the kage of the c makes recom d approves chief execu chief executiv mmendations remuneratio utive officer ve officer for s to the Boa on terms and in the rem r approval by rd in relation d the perfor muneration r y the Board. n to remuner rmance of t review of se ation of non- he chief exe enior execu -executive d ecutive offic tives and s irectors, cer. The sets the e and amoun executive re d. The fram areholders, a reward satis nt of remune eward framew ework align and it is cons sfies the follo eration work is to en s executive sidered to co owing key cri nsure reward reward with onform to ma teria for goo d for perform h the achiev arket best pra d reward gov mance is com vement of s actice for de vernance pra mpetitive strategic elivery of actices: iples used t Princ objective of t The o appropriate f and a tives and the object d. The Board reward c competitiven ● acceptability a ● p performance ● transparency t ● to determine he consolida for the resu e creation of d ensures tha ess and reas to sharehold linkage / alig y. e the nature ated entity's ults delivered value for sha at executive s; sonableness ders; gnment of K Non-e Fees directo advice in line directo incent executive dire and paymen ors. Non-exe e of independ e with the ma ors based on tives. ectors' remun nts to non-e ecutive direc dent remune arket. The fee n comparativ neration xecutive dire ctors' fees an eration consu es for the ch ve roles in th ectors reflec nd payments ultants to ens hair of the Bo he external m ct the deman s are review sure non-exe oard are dete market. Non-e nds which ar wed annually ecutive direc ermined inde executive dir re made on, y by the NRC tors' fees an ependently to rectors do no and the res C. The comm d payments o the fees of ot receive sh sponsibilities mittee may t are appropr other non-ex hare options s of, the take the iate and xecutive or other 7 7 8 The N arrang remun Nomination gements for neration philo and Remun r its KMP. osophy is to neration Com The perform attract, motiv mmittee ('N mance of th vate and reta RC') is res he consolida ain high perfo ponsible for ated entity d ormance and r determinin depends on d high quality g and revie n the quality y personnel. ewing remun y of its KM neration MP. The In acc remun cordance wit neration is se th best prac eparate. ctice corpora ate governan nce, the stru ucture of no on-executive MP compens sation; and Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited ASX l meetin share isting rules r ng. The mo holders appr requires that st recent de roved a max the aggrega etermination imum aggreg ate non-exec was at the gate remune utive directo Annual Ge eration of $40 rs' remunera neral Meetin 00,000. ation be dete ng held on ermined perio 20 Novembe odically by a er 2015, wh general here the Execu The c remun utive remune consolidated neration, whi eration entity aims ch has both s to reward fixed and va d KMP base ariable compo ed on their onents. position an nd responsib bility, with a a level and mix of The K KMP remuner base pay and b ● short-term pe s ● s share-based ● other remune o ● ration and re d non-monet erformance i payments; a eration, such eward framew work has fou ; tary benefits; ncentives; and h as superan nuation and ur component ts: long service e leave. The c ombination o of these com mprises the K KMP's total re emuneration. Fixed NRC, compa remuneratio based on arable marke on, consistin individual a et remunerat g of base sa and business tion. alary, supera s unit perfo annuation an ormance, the nd non-mone e overall pe etary benefit erformance s, are review of the cons wed annually solidated ent y by the tity and KMPs where s can receive e it does not e their fixed r create any a remuneration additional cos n in the form sts to the con m of cash or o nsolidated en other fringe b ntity and add benefits (for ds additional example mo value to the KMP. otor vehicle b benefits) The s hurdle indica conso are se short-term in es of execut ators ('KPI') olidated entity et by the chie ncentives ('S tives. STI pa being achiev y's financial ef executive o STI') program ayments are ved. KPI’s f performance officer and a m is designe granted to for the chief e measured are reviewed ed to align t executives b executive o by reference in consultati he targets o based on sp officer are s e to annual a on with the c of the busine pecific annua et by the N after-tax prof chair of the B ess units wi al targets an RC and cur fit. The KPI's Board. ith the perfo nd key perfo rrently focus s of other exe ormance ormance s on the ecutives Long- share emplo hurdle profita them t term incentiv holders in 2 oyees and d es. The plan ability of the to work towa ves ('LTI') inc 2012, the ob irectors by f n aims to g company by ards achievin clude share o bjective of w facilitating th ive selected y better align ng the longer options and which is to a he offering o d employees ning their inte r term goals o long service assist in the of options ov s and directo erests with t of the compa e leave. An e e recruitmen ver ordinary ors the opp those of sha any. mployee sha nt, reward, r shares, sub ortunity to s reholders an are option pla retention and bject to perfo share in the nd provides g an was appr d motivation ormance and e future grow greater incen roved by n of key d loyalty wth and ntive for Under body perfor value r the plan, th corporate) w rmance targe of shares at he board has will be invite ets or minimu the time of t discretion to d to acquire um vesting p the offer), an o decide whic e options, the periods, the a nd any other ch full or par e number of applicable ex terms of issu rt-time emplo f options to xercise price ue. oyees or dire be offered, e (which mus ectors of the any vesting st be at least company (or conditions s equal to the r related such as e market Conso KMP discre olidated entit remuneratio etion of the B ty performan on is linked Board. nce and link t to the perfo to remunerat ormance of t tion the consolid ated entity. Bonus and incentive p ayments are e at the Use o During of remunerati g the financia ion consultan al year ende nts d 30 June 20 017, the com mpany did no ot engage the e use of remu uneration co nsultants. Voting At the compa g and comme e 2016 AGM, any did not r ents made a , 96% of the receive any s t the compan shareholder specific feedb ny's 2016 An rs voted to a back at the A nnual Genera adopt the rem AGM regardi al Meeting ('A muneration r ng its remun AGM') eport for the neration prac e year ended ctices. d 30 June 20 016. The Detail ls of remune eration Amou Detail follow unts of remun s of the rem wing tables. neration muneration of f the directo rs and other r KMP of Kip p McGrath E Education Ce entres Limite ed are set ou ut in the 8 8 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited onsolidated entity consis sted of the d irectors of K Kip McGrath Education C Centres Limite ed and the fo ollowing KMP of the c The K ns: perso S Storm McGra ● J James Stree ● B Brett Edward ● Jackie Burrow J ● C Catherine Co ● J Julie Russell ● Peter Hepp - P ● xecutive Offi ath - Chief E ecutive Office t - Chief Exe y Secretary a ds - Compan xecutive Offi ws - Chief E Curriculum a ook - Global - Global Ma arketing Mana r - IT Manager icer and Inve er - Online (to and Chief Fi icer UK Busi and Training ager ns 6) cer estor Relation o 1 July 2016 nancial Offic ness Manager Short-term be S enefits Post t- ment employm fits benef Long-t bene term efits Sha bas paym are- sed ments Sh ba paym hare- ased ments ry Cash salar and fees $ Bonus $ Non- moneta ary Supe annuat er- tion $ $ ve Leav efits bene $ uity- Equ tled sett sha ares $ $ Eq set opt quity- ttled tions $ Total T $ 142,608 63,927 54,795 20,653 8 7 5 3 - - - - 2,1 2,1 2,1 1,0 58 58 58 079 7, 6, 5, 1, 808 073 205 962 273,83 65,95 177,924 143,230 138,104 123,139 115,589 1 1 4 0 4 9 9 1 1,319,75 - - 50 75 00 00 50 75 9,75 15,17 7,50 6,50 6,25 45,17 2,1 58 - 58 58 58 58 58 501 2,1 2,1 2,1 2,1 2,1 20,5 25, 16, 13, 11, 10, 99, 445 601 903 - 120 698 981 796 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 152,574 1 72,158 62,158 23,694 20,335 2 - 9,288 2,487 528 528 528 321,769 3 66,552 216,023 2 163,050 1 1 161,410 1 144,023 1 135,506 518,917 33,694 1,5 3 receives a $ $90,000 fee a as Non-exec cutive Chairm man plus add ditional remu neration for a agreed servi ces. 2017 Non-E Direct Kip M (Chai Ian C Trevo Diane Executive tors: McGrath rman) * ampbell or Folsom e Pass Other Mana Perso Storm Jame Brett Jackie Cathe Julie Peter r Key agement onnel: m McGrath es Street Edwards e Burrows erine Cook Russell r Hepp * Kip McGrath K 9 9 Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 S Short-term be enefits benef fits bene efits paym ments paym ments Post t- employm ment Long-t term Sha are- bas sed Sh hare- ba ased Cash salar ry and fees Non- Supe er- Bonus moneta ary annuat tion $ $ $ $ Equ uity- Eq quity- Leav ve bene efits $ sett tled sha ares $ $ set ttled opt tions $ Total T $ 129,184 4 63,926 6 54,794 4 287,318 8 164,384 4 173,62 1 148,536 6 31,963 3 27,046 6 28,275 5 - - - - - - 16,37 72 1,75 50 5,05 50 1,75 50 2,1 50 2,1 50 2,1 50 10, 203 6, 073 5, 205 2,1 50 2,1 50 2,1 50 2,1 50 2,1 50 2,1 50 2,1 50 27, 547 15, 616 16, 494 - 3, 470 2, 936 3, 070 90, 614 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8,472 3,624 2,041 280 1 141,537 72,149 62,149 3 325,487 1 185,774 1 194,306 1 167,338 39,333 37,182 35,245 1,109,047 7 24,92 22 21,5 500 1 14,417 1,2 260,500 * ** K Kip McGrath moved to a Non-Execut ive capacity in October 2 2015. R Remuneratio on from date of promotion n to KMP. The p roportion of remuneratio n linked to pe erformance a and the fixed d proportion a are as follow ws: Fixe ed remunera ation At risk k - STI A At risk - LTI 2017 7 2 2016 2017 2016 2017 7 20 016 - - - - - - 5% 9% 5% 5% 5% - - - - - - - 9% % 2% % 5% % 2% % - - - - 6% - 5% 2% - - - - - - - - - - - 3% 2% 1% 1 100% 1 100% 1 100% 1 100% 94% 1 100% 90% 89% 95% 95% 95% 100% 100% 100% - 97% 98% 99% 91% 98% 95% 98% 10 The p roportion of t the cash bon nus paid duri ing the year ended 30 Ju une 2017 is a as follows: Storm Mc cGrath has e entitlements t to performan nce incentive es of up to 1 15% of over budget perf formance ca apped at Jackie Bu rrows has en ntitlement to performance e incentives based on sa ales in the UK K market ($1 5,175 paid), and Other KM P have spec cific performa ance incentiv ves of up to 1 15% of salary y or $20,000 0 whichever is s higher. 2016 Non-E Executive Direct tors: Kip M McGrath (Chai rman) * Ian C ampbell Trevo or Folsom Other r Key Mana agement Perso onnel: Storm m McGrath Jame es Street Brett Edwards Jackie e Burrows Cathe erine Cook ** * Julie Russell ** Peter r Hepp ** Non-E Executive Dir rectors: Name e Kip M McGrath Ian C ampbell Trevo or Folsom Diane e Pass Perso onnel: Storm m McGrath Jame es Street Brett Edwards Jackie e Burrows Cathe erine Cook Julie Russell Peter r Hepp Other r Key Manag gement $300,000 (nil paid); Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Short-term be S enefits t- Post ment employm fits benef Long-t bene term efits Sha bas paym are- sed ments Sh ba paym hare- ased ments ry Cash salar and fees $ Bonus $ Non- moneta ary Supe annuat er- tion $ $ ve Leav efits bene $ Equ uity- tled sett sha ares $ $ Eq set opt quity- ttled tions $ Total T $ 2016 Non-E Direct Kip M (Chai Ian C Trevo Executive tors: McGrath rman) * ampbell or Folsom 129,184 63,926 54,794 4 6 4 - - - 2,1 2,1 2,1 50 50 50 10, 6, 5, 203 073 205 Other Mana Perso Storm Jame Brett Jackie Cathe Julie Peter r Key agement onnel: m McGrath es Street Edwards e Burrows * erine Cook ** Russell ** r Hepp ** 287,318 164,384 173,62 148,536 31,963 27,046 28,275 1,109,047 8 4 1 6 3 6 5 7 - - - 72 50 50 50 22 16,37 1,75 5,05 1,75 24,92 2,1 2,1 2,1 2,1 2,1 2,1 2,1 21,5 50 50 50 50 50 50 50 500 27, 15, 16, 3, 2, 3, 90, 547 616 494 - 470 936 070 614 * ** Kip McGrath K Remuneratio R moved to a on from date Non-Execut of promotion ive capacity n to KMP. in October 2 2015. - - - - - - - - - - - - - - - - - - - - - - - - - 141,537 1 72,149 62,149 8,472 3,624 2,041 280 - - - 14,417 1,2 1 325,487 3 1 185,774 1 194,306 167,338 1 39,333 37,182 35,245 260,500 The p roportion of remuneratio n linked to pe erformance a and the fixed d proportion a are as follow ws: e Name ation ed remunera Fixe 2016 2 7 2017 At risk k - STI 2017 2016 At risk - LTI A 7 2017 20 016 rectors: Non-E Kip M Ian C Trevo Diane Executive Dir McGrath ampbell or Folsom e Pass gement Other Perso Storm Jame Brett Jackie Cathe Julie Peter r Key Manag onnel: m McGrath es Street Edwards e Burrows erine Cook Russell r Hepp 100% 1 1 100% 1 100% 100% 1 94% 100% 1 90% 89% 95% 95% 95% 100% 100% 100% - 97% 98% 99% 91% 98% 95% 98% - - - - - - 5% 9% 5% 5% 5% - - - - - - - % 9% % 2% % 5% % 2% - - - - 6% - 5% 2% - - - - - - - 3% 2% 1% - - - - The p roportion of t the cash bon nus paid duri ing the year ended 30 Ju une 2017 is a as follows: Storm Mc $300,000 Jackie Bu Other KM cGrath has e (nil paid); rrows has en P have spec entitlements t to performan nce incentive es of up to 1 15% of over budget perf formance ca apped at ntitlement to cific performa performance ance incentiv e incentives ves of up to 1 based on sa 15% of salary ales in the UK y or $20,000 K market ($1 0 whichever is 5,175 paid), s higher. and 10 10 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Servic KMP misco notice ce agreeme have standa onduct. Term e. Some KMP ents ard contracts mination can P has entitlem of employm be made by ments to per ment that hav y either the rformance inc ve no entitlem consolidate centives as d ment to term d entity or t detailed belo ination paym the individua ow: ments in the e al subject to event of rem one to six moval for months’ Storm Mc $300,000 Jackie Bu Other KM cGrath has e (nil paid); rrows has en P have spec Share e-based com mpensation entitlements t to performan nce incentive es of up to 1 15% of over budget perf formance ca apped at ntitlement to cific performa performance ance incentiv e incentives ves of up to 1 based on sa 15% of salary ales in the UK y or $20,000 K market ($1 0 whichever is 5,175 paid), s higher. Issue Detail during year e of options s of options g the year, o ended 30 Jun over ordinar r that otherw ne 2017, are ry shares gra wise has affe e set out belo anted to direc ected the rem ow: ctors and oth muneration o her key man of directors a agement pe nd other key rsonnel as p y manageme part of compe ent personne ensation el for the and Addit tional disclo osures relati ing to key m management t personnel The n number of s shares in th e company held during g the financ cial year by each direct tor and othe er members of key mana gement pers sonnel of the consolidated d entity, inclu uding their p ersonally rel ated parties, , is set out be elow: Name e Storm Jame m McGrath es Street Brett Edwards Jackie e Burrows Peter Julie Cathe r Hepp Russell erine Cook Gra ant Date 21 28 20 28 20 19 28 19 19 19 19 Nov 2014 Feb 2014 Aug 2014 Feb 2014 Aug 2014 Aug 2016 Feb 2014 Aug 2016 Aug 2016 Aug 2016 Aug 2016 No. of option granted ns Exercise price No. of f options d during lapsed ear y 1,000,00 200,00 150,00 150,00 150,00 100,00 50,00 100,00 100,00 100,00 100,00 00 00 00 00 00 00 00 00 00 00 00 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 0.350 0.190 0.350 0.190 0.350 0.300 0.190 0.300 0.300 0.300 0.300 - 2 200,000 150,000 1 - - - - - - - - There e have been n no alteration to the terms s or condition ns of the opti ions granted since grant date. The te in this erms and co s financial ye nditions of e ar or future r each grant of reporting yea f options ove ars are as fol er ordinary sh llows: hares affecti ng remunera ation of direc ctors and oth her KMP Grant t date d No. granted Ves ting date Exercise Fair per o price at gra value option ant date 28 Fe 20 Au 21 No 19 Au eb 2014 ug 2014 ov 2014 ug 2016 200,000 150,000 1,000,000 500,000 28 F 31 D 31 D 31 D Feb 2018 Dec 2019 Dec 2019 Dec 2021 $0 $0 $0 $0 0.190 0.350 0.350 0.300 $0.223 $0.172 $0.172 $0.113 Option option transf option will ve circum emplo emplo death ordina ns granted c ns. Options erable excep ns will rank e est after all mstances ex oyment with oyment, the h , disablemen ary share in t carry no divid can only be pt in special equally with o specified ve xist, such as the compa holder has 6 nt or retirem the company dend or votin e exercised or approved other ordinar esting condit s in the eve any or wher 60 business ment, unless y. g rights. The once vested d circumstan ry shares an ions have b nt of a take e performan days to exe otherwise d ere were no a d in the rec ces and will d will be sub been met un eover. Unves nce targets rcise any ve etermined b amounts pai ipient and o not be listed bject to an a less determ sted options have not b ested options by the board d or payable on or prior t d on the ASX pplication fo ined otherw s will lapse been met pr s, or 6 month . On exercis e by recipient to expiry da X. Shares is r quotation o ise by the b immediately rior to expir hs if employ se, each opt ts on the gra te. Options ssued on exe on the ASX. board where y the holder ry. On cess ment ceases tion converts anting of are not ercise of Options special ceases ation of s due to s to one Vestin board ng of options which are lin s is subject t nked to cent to meeting a re number g a net profit b rowth, stude before tax hu ent number g urdle, meetin rowth and on ng annual pe n-line busine erformance i ess growth. ndicators se et by the 11 11 12 Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 Issue of shares Detail s of shares i issued to dir ectors and o other key ma anagement p ersonnel as part of comp pensation du uring the yea ar ended 30 Jun ne 2017 are set out below w: On 31 1 August 201 16, upon the exercise of o options, 500 0,000 ordinar ry shares we re granted to o Storm McG Grath at $0.0 075 for a total v value of $37, 500 and 350 0,000 ordinar ry shares we ere granted to o James Stre eet at $0.075 5 for a total v value of $26,2 250. Share eholding Ordin nary shares Kip M McGrath Storm m McGrath Ian C ampbell Jame es Street * Jackie e Burrows Option n holding Storm m McGrath Jame es Street Brett Edwards Jackie e Burrows Peter r Hepp Julie Russell Cathe erine Cook compa any. Optio ns over ordin nary shares * D Disposals/oth her represen nts shares he eld at resigna ation date. The n number of op ptions over ordinary sha ares in the c company he ld during the e financial y year by each h director an nd other memb bers of key managemen nt personnel of the cons solidated ent tity, including g their perso onally related d parties, is set out below w. Options ha ave not veste ed in the hold der unless ind dicated othe rwise. Bala ance at the s start of R Received a as part of the e year rem muneration Additions othe r Disposa als/ 16,2 227,499 8 833,959 4 446,469 9 995,464 150,000 500,000 350,000 53,53 31 - - - - (1,345 5,464) Bala ance at the e end of the year 16,2 227,499 1,3 333,959 5 500,000 - 1 150,000 18,6 653,391 850,000 53,53 31 (1,345 5,464) 18,2 211,458 Bala ance at the s start of the e year 1,5 500,000 7 700,000 3 300,000 50,000 - - - Granted Exercised Expire ed/ forfeite ed/ othe r Bala ance at the e end of the year (500,00 00) (350,00 00) (350 0,000) 100,000 100,000 100,000 100,000 100,000 500,000 - - - - - 1,0 000,000 - 4 400,000 1 150,000 1 100,000 1 100,000 1 100,000 2,5 550,000 (850,00 00) (350 0,000) 1,8 850,000 - - - - - - - - - - - - - - - Option ns do not e entitle the ho older to rece eive dividend ds or any d distributions or to partici pate in any share issue e of the This c concludes t the remuner ration report t, which has s been audit ted. Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Issue of shares Detail 30 Jun s of shares i ne 2017 are issued to dir set out below ectors and o w: other key ma anagement p ersonnel as part of comp pensation du uring the yea ar ended On 31 total v 1 August 201 value of $37, 16, upon the 500 and 350 exercise of o 0,000 ordinar options, 500 ry shares we 0,000 ordinar ere granted to ry shares we o James Stre re granted to eet at $0.075 o Storm McG 5 for a total v Grath at $0.0 value of $26,2 075 for a 250. Addit tional disclo osures relati ing to key m management t personnel Share The n mana eholding number of s gement pers shares in th sonnel of the e company consolidated held during d entity, inclu g the financ uding their p cial year by ersonally rel each direct ated parties, tor and othe , is set out be er members elow: of key Bala the s the ance at start of e year Received R a as part of muneration rem Additions Disposa als/ r othe Ordin Kip M Storm Ian C Jame Jackie nary shares McGrath m McGrath ampbell es Street * e Burrows 227,499 16,2 833,959 8 4 446,469 9 995,464 150,000 653,391 18,6 - 500,000 - 350,000 - 850,000 * D Disposals/oth her represen nts shares he eld at resigna ation date. 53,53 - - 31 - - 31 - - - 5,464) - 5,464) (1,345 53,53 (1,345 Bala the e the ance at end of year 227,499 16,2 333,959 1,3 500,000 5 - 1 150,000 211,458 18,2 Option The n memb below n holding number of op bers of key w. Options ha ptions over managemen ave not veste ordinary sha nt personnel ed in the hold ares in the c of the cons der unless ind company he solidated ent dicated othe ld during the tity, including rwise. e financial y g their perso year by each onally related h director an d parties, is nd other set out ns over ordin nary shares Optio Storm Jame Brett Jackie Peter Julie Cathe m McGrath es Street Edwards e Burrows r Hepp Russell erine Cook Bala the s the ance at start of e year 500,000 1,5 700,000 7 300,000 3 50,000 - - - 550,000 2,5 Granted Exercised Expire ed/ ed/ forfeite r othe Bala the e the ance at end of year - - 100,000 100,000 100,000 100,000 100,000 500,000 (500,00 (350,00 (350 00) 00) - - - - - 00) - 0,000) - - - - - 0,000) 1,0 000,000 - 4 400,000 1 150,000 1 100,000 1 100,000 100,000 1 850,000 1,8 (850,00 (350 Option compa ns do not e any. entitle the ho older to rece eive dividend ds or any d distributions or to partici pate in any share issue e of the This c concludes t the remuner ration report t, which has s been audit ted. 12 12 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited Share Uniss es under opt ued ordinary tion y shares of K Kip McGrath E Education C entres Limite ed under opt ion at the da ate of this rep port are as fo ollows: Grant t date 28 Fe 20 Au 21 No 2 Sep 4 ebruary 2014 ugust 2014 ovember 201 4 6 ptember 2016 Expiry d date 28 Febr 31 Dece 31 Dece 31 Dece ruary 2018 ember 2019 ember 2019 ember 2021 se Exerci price e Num mber r option under $0 $0 $0 $0 0.190 0.350 0.350 0.300 2 200,000 1 150,000 000,000 1,0 500,000 5 1,8 850,000 No pe the co erson entitled ompany or of d to exercise f any other b e the options ody corporat s had or has te. any right by y virtue of th he option to p participate in n any share Roun ding of amo ounts issue of The c ompany is o f a kind refer rred to in AS SIC Corporat ions (Round ing in Financ cial/Directors s’ Reports) In nstrument 20 016/191, issued d by the Aus stralian Secu urities and I nvestments Commission n, relating to o 'rounding-o off'. Amounts s in this repo ort have been rounded off in accordanc ce with that in nstrument to o the nearest thousand do ollars, or in c certain cases s, the neares st dollar. Share The fo and u es issued on ollowing ordi p to the date n the exercis nary shares e of this repo se of option of Kip McGr rt on the exe ns rath Educatio ercise of optio on Centres L Limited were : ons granted: issued durin ng the year e ended 30 Jun ne 2017 Kip M McGrath Edu ucation Cent tres Limited d Direct tors' report 30 Ju ne 2017 The d irectors are o of the opinio on that the se ervices as dis sclosed in no ote 22 to the financial sta atements do not comprom mise the extern nal auditor's independenc ce requireme ents of the C orporations A Act 2001 for the following g reasons: ● a all non-audit services hav ve been revi ewed and ap pproved to e nsure that th hey do not im mpact the inte egrity and ob bjectivity of the auditor o r; and ● n none of the s services und dermine the g general princ ciples relating g to auditor independenc ce as set out t in APES 11 10 Code of Ethics for o Professiona l Accountant ts issued by the Account ting Professi ional and Eth hical Standa ards Board, in ncluding reviewing or r auditing the e auditor's ow wn work, act ting in a man nagement or r decision-m aking capac city for the co ompany, acting as adv a vocate for the e company o or jointly sha ring econom mic risks and rewards. Office ers of the co ompany who o are former r partners o of PKF Newc castle There e are no office ers of the co ompany who are former p partners of P KF Newcast le. A cop py of the aud ditor's indepe endence dec claration as r required und er section 3 07C of the C Corporations s Act 2001 is s set out Audit tor's indepe ndence dec claration immed diately after t this directors s' report. PKF N Newcastle co ontinues in of ffice in accor rdance with s section 327 o of the Corpo orations Act 2 2001. This r report is ma de in accord dance with a a resolution of directors, , pursuant to o section 29 98(2)(a) of th he Corporati ons Act _____ __________ ___________ ____ Kip M McGrath Chair rman 9 Aug gust 2017 Newc castle During compa betwe g the financia any against a een amounts al year, the c a liability to t relating to th company pai the extent pe he insurance d a premium ermitted by th e against lega m in respect o he Corporati al costs and of a contract ons Act 200 those relatin to insure the 1. It is not po ng to other lia e directors a ossible to ap abilities. nd executive portion the p es of the premium se Exerci price e Num shares mber of s issued $0 0.075 850,000 8 Audit tor 2001. Indem The c or exe mnity and in ompany has ecutive, for w surance of indemnified which they ma officers the directors ay be held p Indem The c compa mnity and in company has any or any re surance of s not, during elated entity auditor or since the against a lia s and execut ersonally liab tives of the c ble, except w company for where there i costs incurre s a lack of g ed, in their ca ood faith. director On be ehalf of the d irectors e end of the ability incurre financial yea d by the aud ar, indemnifie ditor. Date options gran nted 31 Ma arch 2012 ed or agreed d to indemni fy the audito or of the apacity as a During or any g the financia y related enti al year, the c ity. company has s not paid a p premium in r respect of a c contract to in nsure the aud ditor of the c ompany Proce No pe behalf respo eedings on b erson has ap f of the com nsibility on b behalf of the pplied to the mpany, or to behalf of the c e company e Court unde intervene in company for er section 23 n any proce r all or part of 37 of the Co edings to w f those proce orporations A which the com eedings. Act 2001 for mpany is a r leave to br party for the ring proceed e purpose o dings on of taking Non-a Detail are ou audit service s of the amo utlined in not es ounts paid or te 22 to the f r payable to t inancial state the auditor fo ements. or non-audit services pro vided during g the financia al year by the e auditor The d perso the Co directors are n or firm on orporations A Act 2001. satisfied tha the auditor's at the provisi s behalf), is ion of non-a compatible udit services with the gen s during the neral standar financial yea rd of indepe ar, by the au ndence for a uditor (or by auditors impo another osed by 13 13 14 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Direct 30 Ju McGrath Edu tors' report ne 2017 ucation Cent d tres Limited irectors are o The d nal auditor's extern a all non-audit ● o of the auditor n none of the s of Ethics for o r reviewing or acting as adv a of the opinio independenc services hav r; and services und Professiona auditing the vocate for the ● on that the se ce requireme ve been revi ervices as dis ents of the C ewed and ap sclosed in no orporations A pproved to e ote 22 to the Act 2001 for nsure that th financial sta the following hey do not im atements do g reasons: mpact the inte not comprom mise the egrity and ob bjectivity dermine the g l Accountant e auditor's ow e company o general princ ts issued by wn work, act or jointly sha ciples relating the Account ting in a man ring econom g to auditor ting Professi nagement or mic risks and independenc ional and Eth r decision-m rewards. ce as set out hical Standa aking capac t in APES 11 ards Board, in city for the co 10 Code ncluding ompany, Office There ers of the co e are no office ompany who ers of the co o are former ompany who r partners o are former p of PKF Newc partners of P castle KF Newcast le. Roun The c issued been ding of amo ompany is o d by the Aus rounded off ounts f a kind refer stralian Secu in accordanc rred to in AS urities and I ce with that in SIC Corporat nvestments nstrument to ions (Round Commission o the nearest ing in Financ n, relating to thousand do cial/Directors o 'rounding-o ollars, or in c s’ Reports) In off'. Amounts certain cases nstrument 20 s in this repo s, the neares 016/191, ort have st dollar. Audit A cop immed tor's indepe py of the aud diately after t ndence dec ditor's indepe this directors claration endence dec s' report. claration as r required und er section 3 07C of the C Corporations s Act 2001 is s set out Audit PKF N tor Newcastle co ontinues in of ffice in accor rdance with s section 327 o of the Corpo orations Act 2 2001. report is ma de in accord dance with a a resolution This r 2001. of directors, , pursuant to o section 29 98(2)(a) of th he Corporati ons Act On be ehalf of the d irectors _____ Kip M Chair __________ McGrath rman ___________ ____ 9 Aug Newc gust 2017 castle 14 14 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip McGrath Education Centres Limited ACN: 003 415 889 Auditor’s Independence Declaration under section 307C of the Corporations Act 2001 In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Kip McGrath Education Centres Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) No contraventions of any applicable code of professional conduct in relation to the audit. PKF CHARTERED ACCOUNTANTS MARTIN MATTHEWS PARTNER 9 AUGUST 2017 NEWCASTLE, NSW PKF(NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 Liability limited by a scheme approved under Professional Standards Legislation Sydney Newcastle Level 8, 1 O’Connell Street Sydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 755 Hunter Street Newcastle West NSW 2302 Australia PO Box 2368 Dangar NSW 2309 p f +61 2 8346 6000 +61 2 8346 6099 p f +61 2 4962 2688 +61 2 4962 3245 PKF(NS) Audit & Assurance Limited Partnership is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For office locations visit www.pkf.com.au 15 15 Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 This C Corporate G overnance S Statement of f Kip McGra ath Education n Centres Li imited (the ‘c company’) h has been pre epared in accord dance with the 3rd Edit ion of the A Australian Se ecurities Ex change’s (‘A ASX’) Corpo orate Govern nance Princi ples and Recom mmendations s of the ASX X Corporate Governance e Council (‘A ASX Principle es and Reco mmendation ns’) and is in cluded in the co ompany’s An nnual Report t pursuant to o ASX Listin g Rule 4.10 .3. This listin ng rule requ ires the com mpany to disc close the extent t to which it h has followed the recomm mendations d uring the fina ancial year, i ncluding rea asons where the compan y has not follow wed a recomm mendation an nd any relate ed alternative e governance e practice ad dopted. Both t this Corporat te Governan nce Statemen nt and the AS SX Appendix x 4G have b een lodged w with the ASX X. This statem ment has been approved by y the compan ny’s Board of f Directors (‘B Board’) and i is current as at 25 Augus st 2017. The A ASX Princip ples and Re ecommendat tions and th he company y’s response e as to how w and whet ther it follow ws those recom mmendations are set out below. Princ iple 1: Lay s solid founda ations for m management t and oversig ght Recom mmendation 1.1 - A lis sted entity s should disclo ose: (a) the e respective roles and r responsibiliti ies of its bo oard and manag gement; and d (b) those m matters expre ssly reserve d to the boar rd and those e delegated to o manageme ent. The B Board is ultim mately accou untable for t the performa ance of the c company an nd provides l leadership a and sets the strategic object tives of the c company. It a appoints all s senior execu tives and ass sesses their performance e on at least an annual b basis. It is respo nsible for ov verseeing all corporate re eporting syst tems, remun neration fram meworks, gov vernance iss ues, and sta akeholder comm munications. D Decisions re served for th he Board rela ate to those that have a f fundamental impact on th he company y, such as mater rial acquisitio ons and take eovers, divid ends and bu uy-backs, m aterial profit s upgrades and downgr rades, and s significant Mana gement is re esponsible fo or implement ing Board st rategy, day-t to-day opera ational aspec cts, and ensu uring that all risks and perfor rmance issue es are broug ht to the Boa ards attentio n. They mus st operate wi thin the risk and authoris sation param meters set closur res. by the e Board. Recom mmendation 1.2 - A list ted entity sh hould: (a) un ndertake app propriate ch ecks before appointing a person, o or putting forwar rd to securi ity holders a a candidate for election n, as a dire ctor; and (b b) provide s security hold ders with all l material inform mation in its p possession re elevant to a decision on w whether or n not to elect or r re-elect a d director. The c ompany und dertakes com mprehensive reference ch hecks prior to o appointing a director, o or putting that t person forw ward as a candid date, to ensu ure that pers son is comp petent, exper rienced, and would not b be impaired in any way from underta aking the duties s of director. The compan ny provides relevant info ormation to s shareholders for their con nsideration a about the attr ributes of candid dates togeth er with whet her the Boar rd supports th he appointm ent or re-ele ection. Recom mmendation 1.3 - A liste ed entity sho ould have a w written agree ement with e each director r and senior executive se etting out the te rms of their a appointment t. The te erms of the a appointment of non-exec utive directo rs, executive e directors an nd senior exe ecutives are agreed upon n and set out in writing at the e time of app pointment. Recom mmendation 1.4 - The c company sec cretary of a l listed entity should be a accountable d directly to th he board, thr rough the chair, on all matte rs to do with the proper f functioning o of the board. The C Company Sec cretary repo rts directly to o the Board through the Chairman on n all matters to do with t he proper fu nctioning of the board and is s accessible to all directo ors. Recom mmendation 1.5 - A liste ed entity sh ould (a) hav ve a diversity ty policy whi ich includes requirement ts for the bo oard or a releva ant committe e of the boar rd to set mea asurable obj jectives for a achieving gen nder diversity y and to asse ess annually y both the object tives and the e entity’s pro ogress in ach hieving them; ; (b) disclose e that policy or a summa ary of it; and (c) disclose as at the end o of each repo orting period d the measu urable object tives for ach hieving gend der diversity y set by the board or a relevant comm mittee of the b board in acc cordance with h the entity’s s diversity po olicy and its p progress tow wards achiev ving them, an nd either: (1) th he respective e proportions s of men a nd women on the Boar rd, in senior r executive positions an nd across th he whole organ isation (inclu uding how th he entity has s defined “se enior executi ive” for these e purposes); ; or (2) if the e entity is a “relevant emplo oyer” under th he Workplac ce Gender Eq quality Act, t the entity’s m most recent “G Gender Equa ality Indicato ors”, as define ed in and publis shed under th hat Act. 16 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment This C accord Recom the co extent follow Corporate G dance with mmendations ompany’s An t to which it h wed a recomm overnance S the 3rd Edit s of the ASX nnual Report has followed mendation an Statement of ion of the A X Corporate t pursuant to the recomm nd any relate f Kip McGra Australian Se Governance o ASX Listin mendations d ed alternative ath Education ecurities Ex e Council (‘A g Rule 4.10 uring the fina e governance n Centres Li change’s (‘A ASX Principle .3. This listin ancial year, i e practice ad imited (the ‘c ASX’) Corpo es and Reco ng rule requ ncluding rea dopted. company’) h orate Govern mmendation ires the com asons where has been pre nance Princi ns’) and is in mpany to disc the compan epared in ples and cluded in close the y has not Both t been this Corporat approved by te Governan y the compan nce Statemen ny’s Board of nt and the AS f Directors (‘B SX Appendix Board’) and i x 4G have b is current as een lodged w at 25 Augus with the ASX st 2017. X. This statem ment has The A recom ASX Princip mmendations ples and Re are set out ecommendat below. tions and th he company y’s response e as to how w and whet ther it follow ws those Princ iple 1: Lay s solid founda ations for m management t and oversig ght Recom manag mmendation gement; and 1.1 - A lis d (b) those m sted entity s matters expre should disclo ssly reserve ose: (a) the d to the boar e respective rd and those roles and r e delegated to responsibiliti o manageme ies of its bo ent. oard and The B object respo comm mater closur Board is ultim tives of the c nsible for ov munications. D rial acquisitio res. mately accou company. It a verseeing all Decisions re ons and take untable for t appoints all s corporate re served for th eovers, divid the performa senior execu eporting syst he Board rela ends and bu ance of the c tives and ass tems, remun ate to those uy-backs, m company an sesses their neration fram that have a f aterial profit nd provides l performance meworks, gov fundamental s upgrades leadership a e on at least vernance iss impact on th and downgr and sets the an annual b ues, and sta he company rades, and s strategic basis. It is akeholder y, such as significant Mana perfor by the gement is re rmance issue e Board. esponsible fo es are broug or implement ht to the Boa ing Board st ards attentio rategy, day-t n. They mus to-day opera st operate wi ational aspec thin the risk cts, and ensu and authoris uring that all sation param risks and meters set Recom forwar inform mmendation rd to securi mation in its p 1.2 - A list ity holders a possession re ted entity sh a candidate elevant to a hould: (a) un for election decision on w ndertake app n, as a dire whether or n propriate ch ctor; and (b not to elect or ecks before b) provide s r re-elect a d appointing security hold director. a person, o ders with all or putting l material The c candid duties candid ompany und date, to ensu s of director. dates togeth dertakes com ure that pers The compan er with whet mprehensive son is comp ny provides her the Boar reference ch petent, exper relevant info rd supports th hecks prior to rienced, and ormation to s he appointm o appointing would not b shareholders ent or re-ele ection. a director, o be impaired for their con or putting that in any way nsideration a t person forw from underta about the attr ward as a aking the ributes of Recom the te mmendation rms of their a 1.3 - A liste ed entity sho t. appointment ould have a w written agree ement with e each director r and senior executive se etting out The te out in erms of the a writing at the appointment e time of app of non-exec pointment. utive directo rs, executive e directors an nd senior exe ecutives are agreed upon n and set Recom chair, mmendation on all matte 1.4 - The c rs to do with company sec the proper f cretary of a l functioning o listed entity of the board. should be a accountable d directly to th he board, thr rough the The C of the Company Sec board and is cretary repo s accessible rts directly to to all directo o the Board ors. through the Chairman on n all matters to do with t he proper fu nctioning Recom releva object end o comm (1) th organ emplo publis mmendation ant committe tives and the of each repo mittee of the b he respective isation (inclu oyer” under th shed under th 1.5 - A liste e of the boar e entity’s pro orting period board in acc e proportions uding how th he Workplac hat Act. ed entity sh rd to set mea ogress in ach d the measu cordance with s of men a he entity has ce Gender Eq ould (a) hav asurable obj hieving them; urable object h the entity’s nd women s defined “se quality Act, t ve a diversity jectives for a ; (b) disclose tives for ach s diversity po on the Boar enior executi the entity’s m ty policy whi achieving gen e that policy hieving gend olicy and its p rd, in senior ive” for these most recent “G ich includes nder diversity or a summa der diversity progress tow r executive e purposes); Gender Equa requirement y and to asse ary of it; and y set by the wards achiev positions an ; or (2) if the ality Indicato ts for the bo ess annually (c) disclose board or a ving them, an nd across th e entity is a ors”, as define oard or a y both the as at the relevant nd either: he whole “relevant ed in and 16 16 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment The c object achiev company has tives for ach ving them. s a diversity ieving divers policy appro sity, including oved by the g gender, an Board, whic nd to assess h includes re s annually bo equirements oth the objec for the Boa ctives and th ard to set me e entity’s pro easurable ogress in The c values comm company is c s, backgroun mitted to equa committed to nds and exp ality and resp o providing periences bri pect in all loc an inclusive ng to the co cations it ope workplace ompany. As erates. and recogni a global pro ses the valu ovider of edu ue individua ucation serv ls with diver ices, the com rse skills, mpany is Divers differe dimen sity is recogn ent skills, ex nsions such a nising and v xperiences a as lifestyle, e valuing the u and perspec education, ph unique contri ctives. Peop hysical ability bution peop le differ not y, age and fa le can make t just on the amily respons e because of e basis of r sibility. f their individ race and ge dual backgro ender, but a ound and lso other The B Senio to me Board’s meas r Executive r n was as foll surable obje roles and thi lows: ective about s objective is gender dive s being cont rsity is to pr inually review rogressively wed. As at th increase the he date of th e portion of w is report the women in B proportion o oard and of women On the In sen Acros e board nior executive s the whole e positions organisation Proportion women of Prop portion of men 25% 50% 79% 75% 50% 21% For th that a standi specia his purpose, ffect the who ing. This the alised profes the Board d ole or a subs erefore inclu ssionals. efines a sen stantial part udes all sen nior executive of the busin nior manage e as a perso ness or has t ment and s on who make the capacity senior execu es, or partici to affect sig utive designa pates in the gnificantly the ated position making of, d e company’s ns as well a decisions s financial as senior No en and th ntity within th herefore no G he consolidat Gender Equa ted entity is a ality Indicator a ‘relevant e rs to be discl mployer’ for losed. the purpose es of the Wor rkplace Gend der Equality Act 2012 Extern nal consultan nts may be b brought in w with specialis t knowledge e to address areas where e this is an a attribute defi iciency in Recom the B perfor mmendation Board, its co rmance evalu 1.6 - A liste ommittees a uation was u d entity shou nd individua undertaken in uld (a) have al directors; n the reportin and disclose and (b) dis ng period in a e a process sclose, in re accordance w for periodica elation to ea with that proc ally evaluatin ach reportin cess. ng the perform g period, w mance of whether a The c individ identif each B memb sugge company doe dual director fy general as Board memb bers, their ro estions for ind es not curre rs. The Boar spects of its ber. Such rev les on specif dividual deve ntly have a rd conducts performanc views therefo fic projects d elopment or formal proce an introspec ce that could ore encapsul during the fin performance ess for evalu ctive annual be improve late collectiv nancial year, e improveme uating the pe discussion d upon, and e discussion and where ent for the fut erformance of its perfor d such analys n around the relevant, how ture. of the Board rmance on a sis includes performance w their role c d, its commi a collective b the roles pla e of individua could be mod ttees or basis to ayed by al Board dified or Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 Princ iple 2: Struc cture the bo oard to add v value Recom mmendation 2.1 - The b board of a lis sted entity sh hould (a) ha ave a nomina ation commit ttee which: ( (1) has at le east three memb bers, a major rity of whom are indepen ndent directo rs; and (2) is s chaired by an independ dent director, , and disclos se: (3) the charte er of the com mmittee; (4) t the members s of the com mmittee; and (5) as at the e end of eac h reporting p period, the n number of times the committ tee met throu ughout the p eriod and th e individual a attendances of the mem bers at those e meetings; or (b) if it does n not have a n nomination co ommittee, dis isclose that f fact and the p processes it employs to a address Boa ard successio on issues and to o ensure tha at the board has the app propriate bala ance of skills s, knowledge e, experienc ce, independ dence and di iversity to enable e it to discha arge its duties s and respon nsibilities effe ectively. The B Board does n ot maintain a a Nomination n Committee e as it is cons sidered that t the current s size of the Bo oard does no ot warrant the fo ormal establis shment of a separate co ommittee. Th he Board the erefore perfo orms the fun nction of suc h a committ tee which includ es the ident ification of s kills and com mpetencies r required for t the Board an nd related co ommittees, a s well as no mination, select tion and perf formance eva aluation of n non-executive e directors. T The Board do oes not activ vely manage e succession planning and i nstead relie es upon the Board’s ex xtensive net tworking cap pabilities an d/or execut ive recruitm ment firms to o identify appro priate candid dates when a Board vac cancy occurs s or when a vacancy is o otherwise en nvisaged. Att tributes of ca andidates put fo rward will be e considered for ‘best-fit’ to the needs s of the Board d which are a assessed at the time of t the vacancy. Recom mmendation 2.2 - A listed d entity shou uld have and d disclose a b board skills m matrix setting g out the mix of skills and d diversity that th he board curr rrently has or r is looking to o achieve in i its members hip. The B Board does not maintain n a formal s kills matrix t that sets out t the mix of skills and d diversity that t the Board aims to achiev ve in its mem mbership. Th he current Bo oard membe ers represen t individuals that have e xtensive ind ustry experie ence as well a as professio nals that br ring to the Board their specific ski lls in order for the com mpany to ac chieve its st trategic, opera tional and co ompliance o bjectives. Th heir suitability y to the direc ctorship has therefore be een determin ned primarily y on the basis of their abilit ty to deliver outcomes in n accordance e with the co ompany’s sho ort and longe er term objec ctives and th herefore delive er value to sh hareholders. All Bo oard member rs are expect ted to be abl e to demons strate the foll owing attribu utes: the Bo oard. Boar rd member attrib butes Lead dership Rep resents the company po ositively amo ongst stakeho olders and e external part ies; decisive ely acts ensu uring that all pertinent fac cts are consi dered; leads s others to ac ction; proacti ve solution s seeker. Ethic cs and integr rity Awa areness of social, profe essional an d legal res sponsibilities at individu ual, compan ny and com munity leve el; ability to o identify i independenc ce conflicts; ; applies s sound profe ssional judg ement; iden tifies when external cou unsel should d be sought; upholds Bo oard confide ntiality; Com mmunication Effec ctive in work king within d efined corpo orate commu unications po olicies; make es constructi ve and prec cise contribut tion to the B Board both v verbally and in written fo orm; an effec ctive commu unicator resp pectful in eve ery situation. with executives. Nego otiation Corp porate gove ernance Neg otiation skills s which enge ender stakeh holder suppo rt for implem menting Board d decisions. Expe erienced dire ector that is s familiar wi th the mech hanisms, co ntrols and c channels to deliver effec ctive governa ance and ma anage risks. Recom mmendation 2.3 - A list ted entity sh hould disclo se: (a) the names of th he directors considered by the boa ard to be indepe endent direc ctors; (b) if a director has s an interest, , position, as ssociation or r relationship p of the type described in n Box 2.3 but th he board is o of the opinio on that it doe es not comp promise the independen ce of the dir rector, the n nature of the e interest, positio on, associati ion or relatio nship in que estion and an n explanation n of why the board is of that opinion; ; and (c) the length of servic ce of each dir rector. Recom its se under mmendation enior executi rtaken in the 1.7 - A liste ives; and (b reporting pe d entity shou b) disclose, eriod in accor uld (a) have in relation rdance with t e a process and disclose to each rep porting perio . that process. for periodica od, whether ally evaluatin r a performa ng the perform ance evalua mance of ation was The B the sta individ overa Board conduc art of the yea dual, the rev ll performanc cts an annua ar. The CEO view includes ce of the com al performan O undertakes s considerat mpany. The m ce assessm the same as tion of the s most recent ent of the C ssessments senior execu review was c EO against a of senior exe tive’s functio completed in agreed perfo ecutives. In on, individua n July 2017. ormance mea assessing th al targets, gr asures deter he performan roup targets, rmined at nce of the , and the 17 17 18 Until s such p such time as performance s the compan e evaluation i ny expands t s suitable fo to justify an e r the compan expansion of ny. f Board mem mbers, the Bo oard is of the e current op inion that Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 The c company has s a diversity policy appro oved by the Board, whic h includes re equirements for the Boa ard to set me easurable object tives for ach ieving divers sity, including g gender, an nd to assess s annually bo oth the objec ctives and th e entity’s pro ogress in achiev ving them. The c company is c committed to o providing an inclusive workplace and recogni ses the valu ue individua ls with diver rse skills, values s, backgroun nds and exp periences bri ng to the co ompany. As a global pro ovider of edu ucation serv ices, the com mpany is comm mitted to equa ality and resp pect in all loc cations it ope erates. Divers sity is recogn nising and v valuing the u unique contri bution peop le can make e because of f their individ dual backgro ound and differe ent skills, ex xperiences a and perspec ctives. Peop le differ not t just on the e basis of r race and ge ender, but a lso other dimen nsions such a as lifestyle, e education, ph hysical ability y, age and fa amily respons sibility. The B Board’s meas surable obje ective about gender dive rsity is to pr rogressively increase the e portion of w women in B oard and Senio r Executive r roles and thi s objective is s being cont inually review wed. As at th he date of th is report the proportion o of women to me n was as foll lows: On the e board In sen nior executive e positions Acros s the whole organisation Proportion of Prop portion of women 25% 50% 79% men 75% 50% 21% For th his purpose, the Board d efines a sen nior executive e as a perso on who make es, or partici pates in the making of, d decisions that a ffect the who ole or a subs stantial part of the busin ness or has t the capacity to affect sig gnificantly the e company’s s financial standi ing. This the erefore inclu udes all sen nior manage ment and s senior execu utive designa ated position ns as well a as senior specia alised profes ssionals. No en ntity within th he consolidat ted entity is a a ‘relevant e mployer’ for the purpose es of the Wor rkplace Gend der Equality Act 2012 and th herefore no G Gender Equa ality Indicator rs to be discl losed. Recom mmendation 1.6 - A liste d entity shou uld (a) have and disclose e a process for periodica ally evaluatin ng the perform mance of the B Board, its co ommittees a nd individua al directors; and (b) dis sclose, in re elation to ea ach reportin g period, w whether a perfor rmance evalu uation was u undertaken in n the reportin ng period in a accordance w with that proc cess. The c company doe es not curre ntly have a formal proce ess for evalu uating the pe erformance of the Board d, its commi ttees or individ dual director rs. The Boar rd conducts an introspec ctive annual discussion of its perfor rmance on a a collective b basis to identif fy general as spects of its performanc ce that could be improve d upon, and d such analys sis includes the roles pla ayed by each B Board memb ber. Such rev views therefo ore encapsul late collectiv e discussion n around the performance e of individua al Board memb bers, their ro les on specif fic projects d during the fin nancial year, and where relevant, how w their role c could be mod dified or sugge estions for ind dividual deve elopment or performance e improveme ent for the fut ture. Until s such time as s the compan ny expands t to justify an e expansion of f Board mem mbers, the Bo oard is of the e current op inion that such p performance e evaluation i s suitable fo r the compan ny. Recom mmendation 1.7 - A liste d entity shou uld (a) have and disclose e a process for periodica ally evaluatin ng the perform mance of its se enior executi ives; and (b b) disclose, in relation to each rep porting perio od, whether r a performa ance evalua ation was under rtaken in the reporting pe eriod in accor rdance with t that process. . The B Board conduc cts an annua al performan ce assessm ent of the C EO against a agreed perfo ormance mea asures deter rmined at the sta art of the yea ar. The CEO O undertakes the same as ssessments of senior exe ecutives. In assessing th he performan nce of the individ dual, the rev view includes s considerat tion of the s senior execu tive’s functio on, individua al targets, gr roup targets, , and the overa ll performanc ce of the com mpany. The m most recent review was c completed in n July 2017. Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment Princ iple 2: Struc cture the bo oard to add v value Recom memb charte times does n and to enable mmendation bers, a major er of the com the committ not have a n o ensure tha e it to discha 2.1 - The b rity of whom mmittee; (4) t tee met throu nomination co at the board arge its duties board of a lis are indepen the members ughout the p ommittee, dis has the app s and respon sted entity sh ndent directo s of the com eriod and th isclose that f propriate bala nsibilities effe hould (a) ha rs; and (2) is mmittee; and e individual a fact and the p ance of skills ectively. ave a nomina s chaired by (5) as at the attendances processes it s, knowledge ation commit an independ e end of eac of the mem employs to a e, experienc ttee which: ( dent director, h reporting p bers at those address Boa ce, independ (1) has at le , and disclos period, the n e meetings; ard successio dence and di east three se: (3) the number of or (b) if it on issues iversity to The B the fo includ select and i appro put fo Board does n ormal establis es the ident tion and perf nstead relie priate candid rward will be ot maintain a shment of a ification of s formance eva es upon the dates when e considered a Nomination separate co kills and com aluation of n Board’s ex a Board vac for ‘best-fit’ n Committee ommittee. Th mpetencies r non-executive xtensive net cancy occurs to the needs e as it is cons he Board the required for t e directors. T tworking cap s or when a s of the Board sidered that t erefore perfo the Board an The Board do pabilities an vacancy is o d which are a the current s orms the fun nd related co oes not activ d/or execut otherwise en assessed at size of the Bo nction of suc ommittees, a vely manage ive recruitm nvisaged. Att the time of t oard does no h a committ s well as no e succession ment firms to tributes of ca the vacancy. ot warrant tee which mination, planning o identify andidates Recom that th mmendation he board curr 2.2 - A listed rrently has or d entity shou r is looking to uld have and o achieve in i d disclose a b its members board skills m hip. matrix setting g out the mix of skills and d diversity The B achiev well a opera basis delive Board does ve in its mem as professio tional and co of their abilit er value to sh not maintain mbership. Th nals that br ompliance o ty to deliver hareholders. n a formal s he current Bo ring to the bjectives. Th outcomes in kills matrix t oard membe Board their heir suitability n accordance that sets out ers represen specific ski y to the direc e with the co t the mix of t individuals lls in order ctorship has ompany’s sho skills and d that have e for the com therefore be ort and longe diversity that xtensive ind mpany to ac een determin er term objec t the Board ustry experie chieve its st ned primarily ctives and th aims to ence as trategic, y on the herefore Extern the Bo nal consultan oard. nts may be b brought in w with specialis t knowledge e to address areas where e this is an a attribute defi iciency in All Bo oard member rs are expect ted to be abl e to demons strate the foll owing attribu utes: Boar attrib rd member butes Lead dership Ethic cs and integr rity Com mmunication Nego otiation Corp gove porate ernance Rep ensu resents the uring that all company po pertinent fac ositively amo cts are consi ongst stakeho dered; leads olders and e s others to ac external part ction; proacti ies; decisive ve solution s ely acts seeker. Awa com judg resp areness of munity leve ement; iden pectful in eve social, profe el; ability to tifies when ery situation. essional an o identify i external cou d legal res independenc unsel should sponsibilities ce conflicts; d be sought; at individu ; applies s upholds Bo ual, compan sound profe oard confide ny and ssional ntiality; Effec prec with ctive in work cise contribut executives. king within d tion to the B efined corpo Board both v orate commu verbally and unications po in written fo olicies; make orm; an effec es constructi ctive commu ve and unicator Neg otiation skills s which enge ender stakeh holder suppo rt for implem menting Board d decisions. Expe effec erienced dire ctive governa ector that is ance and ma s familiar wi anage risks. th the mech hanisms, co ntrols and c channels to deliver Recom indepe but th positio servic mmendation endent direc he board is o on, associati ce of each dir 2.3 - A list ctors; (b) if a of the opinio ion or relatio rector. ted entity sh director has on that it doe nship in que hould disclo s an interest, es not comp estion and an se: (a) the , position, as promise the n explanation names of th ssociation or independen n of why the he directors r relationship ce of the dir board is of considered p of the type rector, the n that opinion; by the boa described in nature of the ; and (c) the ard to be n Box 2.3 e interest, length of 17 18 18 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 vice at e Pass Appointmen Kip M Ian Ca Trevo Diane cGrath ampbell r Folsom 9 March 198 25 August 2 22 Septemb 1 February 2 Detail s of the Boa Direct tor’s name rd of director rs, their appo ointment date e, length of s service and i ndependenc ce status is a as follows: Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment t date Le ength of serv eporting date re 9 years 29 8 years ber 2014 3 years 6 2017 months 88 009 Independe ence status Direct tor’s name Execut ive status Inde ependence s status Non-Execu Independe Independe Independe utive Chairm ent Non-Exec ent Non-Exec ent Non-Exec an cutive cutive cutive The c Detail perce omposition o s of directors ived as impa of the Board s that the Bo airing indepe is structured oard has dec ndence, and d to ensure th clared as ind d the reason hat the Board dependent bu as to the Bo d has the ap ut which ma ard’s determ propriate mix intain an inte mination are a x of expertise erest or relat as follows: e and experi tionship that ence. could be Direct tor’s name Ian Ca ampbell Recom mmendation Deta ils of interest t or relations ship Bo ard reasonin ng why direct tor is indepen ndent 500,0 indire 000 ordinary ectly in supe d y shares held rfund Thi tho com is holding a ose of the s mpany. aligns the in shareholders nterests of s and is en the director couraged by r with y the sectio on of the Dire ectors’ report t. 2.4 - A majo ority of the bo oard of a liste ed entity sho ould be indep pendent direc ctors. Havin indepe g regard to endent. the respon nse to Reco mmendation n 2.3 above , the majori ty of the Bo oard at the reporting d ate were system m of risk man nagement an nd internal co ontrol which is operating effectively. Recom not be mmendation e the same p 2.5 - The C person as the hair of the b e CEO of the oard of a list e entity. ted entity sh ould be an in ndependent director and d, in particula ar, should Kip M indepe compa McGrath is C endent direc any. The CE hair of the B ctor the Boa EO is Storm M Board and do ard considers McGrath. oes not hold s him the m d the positio most suitable n of CEO of e director fo f the compan r the role d ny. Whilst K ue to being Kip McGrath a co-found is not an er of the Recom profes their r mmendation ssional deve role as direct 2.6 - A lis elopment opp tors effective sted entity s portunities fo ely. should have or directors t e a program to develop a m for induct nd maintain ting new dir the skills an rectors and nd knowledg provide ap ge needed to ppropriate o perform New d all rel ensur directors und evant aspec e that directo dertake an in cts of the co ors can enha duction prog ompany’s op ance their sk gram coordin perations an ills and rema ated by the C d backgroun ain abreast o Company Se nd. A directo of important d ecretary that or developm development ts. briefs and in ment program nforms the di m is also ava irector on ailable to Princ iple 3: Act e ethically and d responsib ly Recom and (b mmendation b) disclose th 3.1 - A listed hat code or a d entity shou a summary o uld: (a) have f it. a code of co onduct for its s directors, s senior execu tives and em mployees; The c requir the po compa company ma res that each owers of offic any’s assets aintains a co h person act ce in the bes s and informa ode of cond honestly, in t interests of ation; and no duct for its d good faith a f the compan ot undertake directors, se and in the be ny and not fo any action th enior executi est interests or personal g hat may jeop ves and em of the comp ain; declare pardise the re mployees. In pany; exercis any conflict eputation of c summary, se a duty of c of interest; s company. the code care; use safeguard Princ iple 4: Safeg guard integr rity in corpo orate report ing Recom memb an ind qualifi times does n the in the ro mmendation bers, all of w dependent d ications and the committ not have an tegrity of its tation of the 4.1 - The b whom are non director, who experience tee met throu audit comm corporate re audit engag board of a l n-executive d is not the ch of the memb ughout the p mittee, disclos eporting, incl ement partn listed entity directors and hair of the b bers of the c eriod and th se that fact a luding the pr er. should: (a) d a majority board, and di committee; a e individual a and the proc rocesses for have an au of whom are disclose: (3) t and (5) in rel attendances cesses it emp the appointm udit committe e independen the charter o lation to each of the mem ploys that ind ment and rem ee which: (1 nt directors; of the comm h reporting p bers at those dependently moval of the 1) has at le and (2) is ch mittee; (4) the period, the n e meetings; y verify and s e external au ast three haired by e relevant number of or (b) if it safeguard uditor and 19 19 20 Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 The B Board has an Audit Comm mittee, under r a formal Ch harter, the me embers of w hich are: Ian Ca ampbell – Ch hair Trevo r Folsom Non-Ex xecutive Dire ector Non-Ex xecutive Dire ector Inde ependent Inde ependent The C Committee c consists ent irely of non n-executive d directors, Ia n Campbell and Trevo r Folsom. T The chairper rson, Ian Camp pbell is not Board chair r and is an n independe nt director. Whilst the committee consists of less than t the three recom mmended me embers, the B Board is satis sfied the exp perience of th he two memb bers makes f for an effecti ve committe ee. The n umber of Co ommittee me eetings held a and attended d by each me ember is disc closed in the e ‘Meetings o of directors’ s section of the Di irectors’ Detail s of the qua alifications a nd experienc ce of the me embers of th he Committe ee is detailed d in the ‘Info ormation of directors’ Recom mmendation 4.2 - The bo oard of a list ted entity sho ould, before it approves t the entity’s fi financial state ements for a a financial period d, receive fro om its CEO and CFO a a declaration n that, in the eir opinion, t the financial records of the entity ha ave been prope rly maintaine ed and that t the financial statements c comply with the appropri iate accounti ing standard ds and give a a true and fair vie ew of the fina ancial positio on and perfo rmance of th he entity and d that the opin nion has bee en formed on n the basis of f a sound For th he financial y year ended 30 June 20 17 and the half-year en nded 31 Dec cember 2016 6, the compa any’s CEO a and CFO provid ded the Boar d with the re equired decla arations. Recom mmendation 4.3 - A list ted entity tha at has an A AGM should ensure that t its external l auditor atte ends its AGM M and is availa able to answe er questions from security y holders rel levant to the audit. The a udit engagem ment partner r attends the AGM and is s available to o answer sha areholder que estions relev vant to the au udit. Princ iple 5: Make e timely and d balanced d disclosure Recom mmendation 5.1 - A listed d entity shou uld (a) have a a written poli icy for compl lying with its continuous d disclosure ob bligations under r the Listing R Rules; and (b b) disclose th hat policy or a summary o of it. The c company mai intains a writ tten policy th hat outlines t the responsi bilities relatin ng to the dir ectors, office ers and emp ployees in compl lying with the e company’s s disclosure o obligations. W Where any s such person , is of any do oubt, as to w whether they y possess inform mation that co ould be clas ssified as ma arket sensitiv ve, they are required to n notify the Co ompany Sec cretary imme diately in the fir rst instance. The Compa any Secretar ry is require ed to consult t with the Ch hairman in r relation to m matters broug ght to his attent ion for poten ntial announc cement. Gen nerally, the C Chairman is u ultimately res sponsible fo r decisions r relating to the e making of ma rket announ cements. Th he Board is r required to a authorise ann nouncements s of significa ance to the c ompany. No o member of the company sh hall disclose market sens sitive informa ation to any p person unles ss they have e received ac cknowledgem ment from the AS SX that the in nformation h as been rele eased to the market. Princ iple 6: Resp pect the righ hts of securi ity holders Recom mmendation 6.1 - A listed d entity shou uld provide in nformation ab bout itself an nd its governa ance to inves stors via its w website. The c company ma intains inform mation in rel lation to the board of dir rectors, shar re registry, A ASX announ cements and d contact details s on the com mpany’s webs site. Recom mmendations s 6.2 and 6.3 3 invest tors (6.2). of sec curity holders s (6.3). A liste ed entity sho uld design a and implemen nt an investo or relations p program to fa acilitate effec ctive two-way y communica ation with A liste ed entity sho uld disclose the policies and process ses it has in p place to facil litate and en ncourage par rticipation at meetings Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 Detail s of the Boa rd of director rs, their appo ointment date e, length of s service and i ndependenc ce status is a as follows: Kip M cGrath Ian Ca ampbell Trevo r Folsom Diane e Pass 9 March 198 88 25 August 2 009 re eporting date 29 9 years 8 years 22 Septemb ber 2014 3 years 1 February 2 2017 6 months Non-Execu utive Chairm an Independe ent Non-Exec cutive Independe ent Non-Exec cutive Independe ent Non-Exec cutive The c omposition o of the Board is structured d to ensure th hat the Board d has the ap propriate mix x of expertise e and experi ence. Detail s of directors s that the Bo oard has dec clared as ind dependent bu ut which ma intain an inte erest or relat tionship that could be perce ived as impa airing indepe ndence, and d the reason as to the Bo ard’s determ mination are a as follows: Direct tor’s name Deta ils of interest t or relations ship Bo ard reasonin ng why direct tor is indepen ndent Ian Ca ampbell 500,0 000 ordinary y shares held d indire ectly in supe rfund Thi is holding a aligns the in nterests of the director r with tho ose of the s shareholders s and is en couraged by y the com mpany. Recom mmendation 2.4 - A majo ority of the bo oard of a liste ed entity sho ould be indep pendent direc ctors. Havin g regard to the respon nse to Reco mmendation n 2.3 above , the majori ty of the Bo oard at the reporting d ate were indepe endent. Recom mmendation 2.5 - The C hair of the b oard of a list ted entity sh ould be an in ndependent director and d, in particula ar, should not be e the same p person as the e CEO of the e entity. Kip M McGrath is C hair of the B Board and do oes not hold d the positio n of CEO of f the compan ny. Whilst K Kip McGrath is not an indepe endent direc ctor the Boa ard considers s him the m most suitable e director fo r the role d ue to being a co-found er of the compa any. The CE EO is Storm M McGrath. Recom mmendation 2.6 - A lis sted entity s should have e a program m for induct ting new dir rectors and provide ap ppropriate profes ssional deve elopment opp portunities fo or directors t to develop a nd maintain the skills an nd knowledg ge needed to o perform their r role as direct tors effective ely. New d directors und dertake an in duction prog gram coordin ated by the C Company Se ecretary that briefs and in nforms the di irector on all rel evant aspec cts of the co ompany’s op perations an d backgroun nd. A directo or developm ment program m is also ava ailable to ensur e that directo ors can enha ance their sk ills and rema ain abreast o of important d development ts. Princ iple 3: Act e ethically and d responsib ly Recom mmendation 3.1 - A listed d entity shou uld: (a) have a code of co onduct for its s directors, s senior execu tives and em mployees; and (b b) disclose th hat code or a a summary o f it. The c company ma aintains a co ode of cond duct for its d directors, se enior executi ves and em mployees. In summary, the code requir res that each h person act honestly, in good faith a and in the be est interests of the comp pany; exercis se a duty of c care; use the po owers of offic ce in the bes t interests of f the compan ny and not fo or personal g ain; declare any conflict of interest; s safeguard compa any’s assets s and informa ation; and no ot undertake any action th hat may jeop pardise the re eputation of c company. Princ iple 4: Safeg guard integr rity in corpo orate report ing Recom mmendation 4.1 - The b board of a l listed entity should: (a) have an au udit committe ee which: (1 1) has at le ast three memb bers, all of w whom are non n-executive d directors and d a majority of whom are e independen nt directors; and (2) is ch haired by an ind dependent d director, who is not the ch hair of the b board, and di disclose: (3) t the charter o of the comm mittee; (4) the e relevant qualifi ications and experience of the memb bers of the c committee; a and (5) in rel lation to each h reporting p period, the n number of times the committ tee met throu ughout the p eriod and th e individual a attendances of the mem bers at those e meetings; or (b) if it does n not have an audit comm mittee, disclos se that fact a and the proc cesses it emp ploys that ind dependently y verify and s safeguard the in tegrity of its corporate re eporting, incl luding the pr rocesses for the appointm ment and rem moval of the e external au uditor and the ro tation of the audit engag ement partn er. Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment The B Board has an Audit Comm mittee, under r a formal Ch harter, the me embers of w hich are: Direct tor’s name Appointmen t date Le ength of serv vice at Independe ence status Direct tor’s name Execut ive status Inde ependence s status Ian Ca Trevo ampbell – Ch r Folsom hair Non-Ex Non-Ex xecutive Dire xecutive Dire ector ector Inde Inde ependent ependent The C Camp recom Committee c pbell is not mmended me consists ent Board chair embers, the B irely of non r and is an Board is satis n-executive d n independe sfied the exp directors, Ia nt director. perience of th n Campbell Whilst the he two memb and Trevo committee bers makes f r Folsom. T consists of for an effecti The chairper less than t ve committe rson, Ian the three ee. The n the Di umber of Co irectors’ ommittee me eetings held a and attended d by each me ember is disc closed in the e ‘Meetings o of directors’ s section of Detail sectio s of the qua on of the Dire alifications a ectors’ report nd experienc t. ce of the me embers of th he Committe ee is detailed d in the ‘Info ormation of directors’ Recom period prope fair vie system mmendation d, receive fro rly maintaine ew of the fina m of risk man 4.2 - The bo om its CEO ed and that t ancial positio nagement an oard of a list and CFO a the financial on and perfo nd internal co ted entity sho a declaration statements c rmance of th ontrol which ould, before n that, in the comply with he entity and is operating it approves t eir opinion, t the appropri d that the opin effectively. the entity’s fi the financial iate accounti nion has bee financial state records of ing standard en formed on ements for a the entity ha ds and give a n the basis of a financial ave been a true and f a sound For th provid he financial y ded the Boar year ended d with the re 30 June 20 equired decla 17 and the arations. half-year en nded 31 Dec cember 2016 6, the compa any’s CEO a and CFO Recom availa mmendation able to answe 4.3 - A list er questions ted entity tha from security at has an A y holders rel AGM should levant to the ensure that audit. t its external l auditor atte ends its AGM M and is The a udit engagem ment partner r attends the AGM and is s available to o answer sha areholder que estions relev vant to the au udit. Princ iple 5: Make e timely and d balanced d disclosure Recom under mmendation r the Listing R 5.1 - A listed Rules; and (b d entity shou b) disclose th uld (a) have a hat policy or a written poli a summary o icy for compl of it. lying with its continuous d disclosure ob bligations The c compl inform the fir attent of ma of the the AS company mai lying with the mation that co rst instance. ion for poten rket announ company sh SX that the in intains a writ e company’s ould be clas The Compa ntial announc cements. Th hall disclose nformation h tten policy th s disclosure o ssified as ma any Secretar cement. Gen he Board is r market sens as been rele hat outlines t obligations. W arket sensitiv ry is require nerally, the C required to a sitive informa eased to the the responsi Where any s ve, they are ed to consult Chairman is u authorise ann ation to any p market. bilities relatin such person required to n t with the Ch ultimately res nouncements person unles ng to the dir , is of any do notify the Co hairman in r sponsible fo s of significa ss they have ectors, office oubt, as to w ompany Sec relation to m r decisions r ance to the c e received ac ers and emp whether they cretary imme matters broug relating to the ompany. No cknowledgem ployees in y possess diately in ght to his e making o member ment from Princ iple 6: Resp pect the righ hts of securi ity holders Recom mmendation 6.1 - A listed d entity shou uld provide in nformation ab bout itself an nd its governa ance to inves stors via its w website. The c details company ma s on the com intains inform mpany’s webs mation in rel site. lation to the Recom mmendations 3 s 6.2 and 6.3 board of dir rectors, shar re registry, A ASX announ cements and d contact A liste invest ed entity sho tors (6.2). uld design a and implemen nt an investo or relations p program to fa acilitate effec ctive two-way y communica ation with A liste of sec ed entity sho curity holders uld disclose s (6.3). the policies and process ses it has in p place to facil litate and en ncourage par rticipation at meetings 19 20 20 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment The c invest invest company doe tors at the A tors either via es not have AGM and res a email, surfa a formal inv pond to sha ace mail, and vestor relatio reholder enq d/or via mark ons program quiry on an a ket announce . The Board ad hoc basis ement. , CEO and s. Material co Company Se ommunicatio ecretary eng ons are dispa gage with atched to Recom comm mmendation munications to 6.4 - A liste o, the entity a ed entity sho and its secur ould give se rity registry e ecurity holder rs the option y. electronically n to receive communica tions from, a and send The c encou enviro electro company eng uraged to rec onmentally fr onically can gages its sh ceive corres riendly comm elect to do s are registry pondence fro munication so through th to manage t om the com mechanism e share regis the majority pany electro with shareh stry, Comput of commun onically, there holders. Sha tershare www ications with eby facilitatin areholders n w-au.compu ers. Shareho h shareholde effective, effic ng a more e receiving inf not already m. tershare.com olders are cient and formation Princ iple 7: Reco ognise and m k manage risk Recom mmendations s 7.1 & 7.2 The b memb charte times does overse board of a list bers, a major er of the com the committ not have a r eeing the en ted entity sho rity of whom mmittee; (4) t tee met throu risk committ ntity’s risk ma ould: (a) hav are indepen the members ughout the p tee or comm anagement fr ve a committe ndent directo s of the com eriod and th mittees that s ramework (7 ee or commi rs; and (2) is mmittee; and e individual a satisfy (a) ab 7.1). ittees to over s chaired by (5) as at the attendances bove, disclos rsee risk, ea an independ e end of eac of the mem se that fact a ch of which: dent director, h reporting p bers at those and the proc (1) has at le , and disclos period, the n e meetings; cesses it em east three se: (3) the number of or (b) if it mploys for The b itself t place oard or a co that it contin (7.2). mmittee of th nues to be so he board sho ound; and (b ould: (a) revi b) disclose, i ew the entity in relation to y’s risk mana each report agement fram ting period, w mework at lea whether such ast annually h a review h to satisfy has taken The c forma comm develo compa of the additio in pla compl ompany doe l establishm mittee which oping strateg any maintain e external au onal controls ce, and ens leted in Marc es not mainta ent of a sep includes se gies to mitig ns internal co udit, with the s. The CEO suring that a ch 2017. ain a Risk Co parate comm etting of corp gate such r ontrols which e auditor pro and CFO ar all regulatory ommittee as mittee. The B porate gove isk, monitor h assist in m oviding the B e responsibl and compli it is consider Board and Au rnance polic ing the risk managing ent Board with c e for monito ance obligat red that the c udit Committ cy and exer and the co terprise risk, commentary oring operatio tions of the current size o tee therefore rcising due c ompany’s ef and these a on their effe onal risk, ens company ar of the Board e performs th care and sk ffectiveness are reviewed ectiveness a suring all rel re satisfied. does not wa he function o kill in assess in managing d as part of t and the need evant insura The last rev arrant the of such a sing risk, g it. The he scope d for any ances are view was Recom and w evalua mmendation what role it p ating and con 7.3 - A liste performs; or ntinually imp ed entity sho (b) if it does proving the ef ould disclose s not have a ffectiveness : (a) if it has an internal a of its risk ma s an internal audit function anagement a audit functio n, that fact a and internal c on, how the and the proc control proce function is s cesses it em esses. structured mploys for The c lies w action contro ompany doe with both the n is taken to ols and opera es not have a CEO and C protect the ational efficie a dedicated i FO who con integrity of t encies, mitiga nternal audit ntinually mon the company ation of risks t function. Th nitor the com y’s books an s, and safegu he responsib mpany’s intern nd records th uard of the co ility for risk m nal and exte hrough desig ompany asse management ernal risk env gn and imple ets. t and interna vironment. N ementation o al controls Necessary of internal Recom social mmendation l sustainabilit 7.4 - A listed ty risks and, d entity shou if it does, ho uld disclose w ow it manage whether it ha es or intends as any mater to manage t rial exposure those risks. e to economi ic, environme ental and Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 Princ iple 8: Remu unerate fair rly and respo onsibly Recom mmendation 8.1 - The bo oard of a list ted entity sho ould: (a) hav ve a remuner ration comm mittee which: (1) has at le east three memb bers, a major rity of whom are indepen ndent directo rs; and (2) is s chaired by an independ dent director, , and disclos se: (3) the charte er of the com mmittee; (4) t the members s of the com mmittee; and (5) as at the e end of eac h reporting p period, the n number of times the committ tee met throu ughout the p eriod and th e individual a attendances of the mem bers at those e meetings; or (b) if it does not have a a remunerati ion committe ee, disclose that fact a and the proc cesses it em mploys for s setting the l level and compo osition of rem muneration fo for directors a and senior e executives an nd ensuring t that such rem muneration is s appropriate e and not exces ssive. The B Board mainta ins a Remun neration Com mmittee, who ose members s during the f financial yea r, were as fo ollows: Direct tor’s Name Execut ive Status Inde ependence S Status Ian Ca ampbell – Ch hair Trevo r Folsom Diane e Pass Non-Ex xecutive Cha airman Non-Ex xecutive Dire ector Non-Ex xecutive Dire ector Inde ependent Inde ependent Inde ependent The C Committee co onsists entire ely of non-ex xecutive direc ctors, Ian Ca ampbell, Dian ne Pass and Trevor Fols om. The cha airperson, Ian Ca ampbell is n ot Board cha air and is an n independen nt director. T The number o of Committe e meetings h held and atte ended by each m member is d isclosed in th he ‘Meetings s of directors ’ section of t he Directors ’ report. The B Board has est tablished the e committee under forma al Charter. Recom mmendation 8.2 - A liste ed entity sho ould separat tely disclose its policies and practice es regarding g the remune eration of non-e xecutive dire ectors and th he remunerat tion of execu utive directors rs and other s senior execu utives. The C Committee re eviews remun neration pac kages and p olicies applic cable to the CEO and se enior executiv ves. This ma ay include share schemes, i ncentive pe rformance p packages, su uperannuatio on entitlemen nts, retireme ent and term mination enti tlements, fringe benefit polic cies and prof fessional inde emnity and l iability insura ance policies s. External ad dvice is soug ght as approp priate. Furthe er details of f directors’ a and executiv ves’ remune ration, supe rannuation a and retireme ent payment ts are set o out in the remun neration repo ort which for rms part of t the directors s’ report. The e CEO is in vited to com mmittee meet tings, as req quired, to discus ss managem ment performa ance and rem muneration p packages. Non-e executive dir rectors do n ot receive in ncentive pay yments or re etirement be enefits (other r than statut tory superan nnuation). Equity y-based rem uneration is not a standa ard compone ent of execut tive remunera ation agreem ments. Any fu uture equity issued to execu utives or non- -executives a as remunera ation will be a approved at t the annual g eneral meeti ing of shareh holders. No se enior executiv ve is involved d directly in d deciding thei ir own remun neration. Recom mmendation 8.3 - A listed d entity whic ch has an equ uity-based re emuneration scheme sho ould: (a) hav ve a policy on n whether partici ipants are p permitted to e enter into tra ansactions ( (whether thro ough the use e of derivati ives or other rwise) which h limit the econo omic risk of p participating i in the schem me; and (b) di isclose that p policy or a su ummary of it The u use of deriva atives or othe er hedging a arrangement ts for unvest ted securities s of the com mpany or ves sted securiti es of the compa any which a are subject to escrow arrangemen ts is prohib bited. Where e a director or other se enior execut tive uses deriva atives or othe er hedging ar rrangements s over vested d securities o of the compa ny, this will b be disclosed . As at social mana the date of sustainabili gement fram mework. reporting th ty risks. Ref he company fer to comm does not co mentary at R onsider it has ecommenda s any mater ations 7.1 an rial exposure nd 7.2 for in es to econom formation on mic, environm n the compa mental or any’s risk 21 21 22 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Corpo orate govern nance state ment 30 Ju ne 2017 The c company doe es not have a formal inv vestor relatio ons program . The Board , CEO and Company Se ecretary eng gage with invest tors at the A AGM and res pond to sha reholder enq quiry on an a ad hoc basis s. Material co ommunicatio ons are dispa atched to invest tors either via a email, surfa ace mail, and d/or via mark ket announce ement. Recom mmendation 6.4 - A liste ed entity sho ould give se ecurity holder rs the option n to receive communica tions from, a and send comm munications to o, the entity a and its secur rity registry e electronically y. The c company eng gages its sh are registry to manage t the majority of commun ications with h shareholde ers. Shareho olders are encou uraged to rec ceive corres pondence fro om the com pany electro onically, there eby facilitatin ng a more e effective, effic cient and enviro onmentally fr riendly comm munication mechanism with shareh holders. Sha areholders n not already receiving inf formation electro onically can elect to do s so through th e share regis stry, Comput tershare www w-au.compu tershare.com m. Princ iple 7: Reco ognise and m manage risk k Recom mmendations s 7.1 & 7.2 The b board of a list ted entity sho ould: (a) hav ve a committe ee or commi ittees to over rsee risk, ea ch of which: (1) has at le east three memb bers, a major rity of whom are indepen ndent directo rs; and (2) is s chaired by an independ dent director, , and disclos se: (3) the charte er of the com mmittee; (4) t the members s of the com mmittee; and (5) as at the e end of eac h reporting p period, the n number of times the committ tee met throu ughout the p eriod and th e individual a attendances of the mem bers at those e meetings; or (b) if it does not have a r risk committ tee or comm mittees that s satisfy (a) ab bove, disclos se that fact a and the proc cesses it em mploys for overse eeing the en ntity’s risk ma anagement fr ramework (7 7.1). The b oard or a co mmittee of th he board sho ould: (a) revi ew the entity y’s risk mana agement fram mework at lea ast annually to satisfy itself t that it contin nues to be so ound; and (b b) disclose, i in relation to each report ting period, w whether such h a review h has taken place (7.2). The c ompany doe es not mainta ain a Risk Co ommittee as it is consider red that the c current size o of the Board does not wa arrant the forma l establishm ent of a sep parate comm mittee. The B Board and Au udit Committ tee therefore e performs th he function o of such a comm mittee which includes se etting of corp porate gove rnance polic cy and exer rcising due c care and sk kill in assess sing risk, develo oping strateg gies to mitig gate such r isk, monitor ing the risk and the co ompany’s ef ffectiveness in managing g it. The compa any maintain ns internal co ontrols which h assist in m managing ent terprise risk, and these a are reviewed d as part of t he scope of the e external au udit, with the e auditor pro oviding the B Board with c commentary on their effe ectiveness a and the need d for any additio onal controls s. The CEO and CFO ar e responsibl e for monito oring operatio onal risk, ens suring all rel evant insura ances are in pla ce, and ens suring that a all regulatory and compli ance obligat tions of the company ar re satisfied. The last rev view was compl leted in Marc ch 2017. Recom mmendation 7.3 - A liste ed entity sho ould disclose : (a) if it has s an internal audit functio on, how the function is s structured and w what role it p performs; or (b) if it does s not have a an internal a audit function n, that fact a and the proc cesses it em mploys for evalua ating and con ntinually imp proving the ef ffectiveness of its risk ma anagement a and internal c control proce esses. The c ompany doe es not have a a dedicated i nternal audit t function. Th he responsib ility for risk m management t and interna al controls lies w with both the CEO and C FO who con ntinually mon nitor the com mpany’s intern nal and exte ernal risk env vironment. N Necessary action n is taken to protect the integrity of t the company y’s books an nd records th hrough desig gn and imple ementation o of internal contro ols and opera ational efficie encies, mitiga ation of risks s, and safegu uard of the co ompany asse ets. Recom mmendation 7.4 - A listed d entity shou uld disclose w whether it ha as any mater rial exposure e to economi ic, environme ental and social l sustainabilit ty risks and, if it does, ho ow it manage es or intends to manage t those risks. As at the date of reporting th he company does not co onsider it has s any mater rial exposure es to econom mic, environm mental or social sustainabili ty risks. Ref fer to comm mentary at R ecommenda ations 7.1 an nd 7.2 for in formation on n the compa any’s risk mana gement fram mework. Kip M Corpo 30 Ju McGrath Edu orate govern ne 2017 ucation Cent nance state d tres Limited ment Princ iple 8: Remu unerate fair rly and respo onsibly Recom memb charte times does compo exces mmendation bers, a major er of the com the committ not have a osition of rem ssive. 8.1 - The bo rity of whom mmittee; (4) t tee met throu a remunerati muneration fo oard of a list are indepen the members ughout the p ion committe for directors a ted entity sho ndent directo s of the com eriod and th ee, disclose and senior e ould: (a) hav rs; and (2) is mmittee; and e individual a that fact a executives an ve a remuner s chaired by (5) as at the attendances and the proc nd ensuring t ration comm an independ e end of eac of the mem cesses it em that such rem mittee which: dent director, h reporting p bers at those mploys for s muneration is (1) has at le , and disclos period, the n e meetings; setting the l s appropriate east three se: (3) the number of or (b) if it level and e and not The B Board mainta ins a Remun neration Com mmittee, who ose members s during the f financial yea r, were as fo ollows: Direct tor’s Name Execut ive Status Inde ependence S Status ampbell – Ch r Folsom hair Ian Ca Trevo Diane e Pass Non-Ex Non-Ex Non-Ex xecutive Cha xecutive Dire xecutive Dire airman ector ector Inde Inde Inde ependent ependent ependent The C Ian Ca each m Committee co ampbell is n member is d onsists entire ot Board cha isclosed in th ely of non-ex air and is an he ‘Meetings xecutive direc n independen s of directors ctors, Ian Ca nt director. T ’ section of t ampbell, Dian The number o he Directors ne Pass and of Committe ’ report. Trevor Fols e meetings h om. The cha held and atte airperson, ended by The B Board has est tablished the e committee under forma al Charter. Recom non-e mmendation xecutive dire 8.2 - A liste ectors and th ed entity sho he remunerat ould separat tion of execu tely disclose utive directors its policies rs and other s and practice senior execu es regarding utives. g the remune eration of The C share fringe Committee re schemes, i benefit polic eviews remun ncentive pe cies and prof neration pac rformance p fessional inde kages and p packages, su emnity and l olicies applic uperannuatio iability insura cable to the on entitlemen ance policies CEO and se nts, retireme s. External ad enior executiv ent and term dvice is soug ves. This ma mination enti ght as approp ay include tlements, priate. Furthe remun discus er details of neration repo ss managem f directors’ a ort which for ment performa and executiv rms part of t ance and rem ves’ remune the directors muneration p ration, supe s’ report. The packages. rannuation a e CEO is in and retireme vited to com ent payment mmittee meet ts are set o tings, as req out in the quired, to Non-e Equity execu executive dir y-based rem utives or non- rectors do n uneration is -executives a ot receive in not a standa as remunera ncentive pay ard compone ation will be a yments or re ent of execut approved at t etirement be tive remunera the annual g enefits (other ation agreem eneral meeti r than statut ments. Any fu ing of shareh tory superan uture equity holders. nnuation). issued to No se enior executiv ve is involved d directly in d deciding thei ir own remun neration. Recom partici econo mmendation ipants are p omic risk of p 8.3 - A listed permitted to e participating i d entity whic enter into tra in the schem ch has an equ ansactions ( me; and (b) di uity-based re (whether thro isclose that p emuneration ough the use policy or a su scheme sho e of derivati ummary of it ould: (a) hav ives or other ve a policy on rwise) which n whether h limit the The u compa deriva use of deriva any which a atives or othe atives or othe are subject er hedging ar er hedging a to escrow rrangements arrangement arrangemen s over vested ts for unvest ts is prohib d securities o ted securities bited. Where of the compa s of the com e a director ny, this will b sted securiti mpany or ves or other se enior execut . be disclosed es of the tive uses 21 22 22 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 nts 24 25 26 27 28 56 57 62 other comp rehensive in come o the membe ers of Kip Mc cGrath Educa ation Centres s Limited Kip M Conte 30 Ju McGrath Edu ents ne 2017 ucation Cent d tres Limited Statem Statem Statem Statem Notes Direct Indep Share ment of profit ment of finan ment of chan ment of cash s to the financ tors' declarat endent audit eholder inform t or loss and ncial position y nges in equity h flows cial statemen tion tor's report to mation Kip M McGrath Edu ucation Cent tres Limited d Statem ment of pro ofit or loss a nd other co omprehensiv ve income For th he year ende ed 30 June 2 2017 Reve nue Expe nses Roya lties, commis ssions and o other direct ex xpenses Emplo oyee expens ses Marke eting expens ses Admin nistration exp penses Merch handising ex xpenses Depre eciation and amortisation n expense Net fo oreign excha ange losses Finan nce costs Profit t before inco ome tax exp pense Incom me tax expen nse Profit t after incom me tax expe nse for the y year attribu table to the owners of K Kip McGr rath Educati ion Centres Limited Other r comprehe nsive incom me Items s that may be e reclassified d subsequent tly to profit or r loss Foreig gn currency translation Other r comprehen sive income for the year, , net of tax Total comprehen nsive incom me for the ye ar attributab ble to the ow wners of Kip p McGr rath Educati ion Centres Limited Basic c earnings pe er share Dilute ed earnings p per share C onsolidated d Note e 2017 7 $'000 0 20 016 $'0 000 4 5 5 5 6 13 3,507 14,569 (5 ,030) (2 ,906) (910) (1 ,571) (326) (773) (128) (68) (7,035) (2,719) (506) (1,677) (382) (443) (139) (69) 1 ,795 1,599 (359) (396) 1 ,436 1,203 (101) (101) (93) (93) 1 ,335 1,110 Cents s Ce ents 29 29 3 3.199 3 3.069 2.723 2.574 Gene ral informat tion The fi Educa prese nancial state ation Centres nted in Austr ements cove s Limited an ralian dollars er Kip McGra nd the entitie s, which is Ki ath Education es it controll ip McGrath E n Centres Lim ed at the en Education Ce mited as a c nd of, or dur entres Limite onsolidated ring, the yea ed's functiona entity consis ar. The finan al and presen sting of Kip M ncial stateme ntation curre McGrath ents are ncy. Kip M Austra McGrath Edu alia. Its regis ucation Cent tered office a tres Limited and principa is a listed l place of bus public comp siness is: pany limited by shares, incorporate ed and dom iciled in 3 Level 6 New Newc wcomen Stre castle NSW 2 eet 2300 A des report scription of th t, which is no he nature of ot part of the f the consolid financial sta dated entity's atements. s operations s and its prin ncipal activiti es are includ ded in the d irectors' The fi directo inancial state ors have the ements were power to am e authorised mend and rei for issue, in ssue the fina n accordanc ancial statem e with a res ments. olution of di rectors, on 9 9 August 20 17. The 23 23 The above e statement o of profit or los ss and other r comprehens sive income should be re ead in conjun nction with th he acc companying notes 24 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Conte ents 30 Ju ne 2017 Statem ment of profit t or loss and other comp rehensive in come Statem ment of finan ncial position Statem ment of chan nges in equity y Statem ment of cash h flows Notes s to the financ cial statemen nts Direct tors' declarat tion Share eholder inform mation Gene ral informat tion Indep endent audit tor's report to o the membe ers of Kip Mc cGrath Educa ation Centres s Limited 24 25 26 27 28 56 57 62 The fi nancial state ements cove er Kip McGra ath Education n Centres Lim mited as a c onsolidated entity consis sting of Kip M McGrath Educa ation Centres s Limited an nd the entitie es it controll ed at the en nd of, or dur ring, the yea ar. The finan ncial stateme ents are prese nted in Austr ralian dollars s, which is Ki ip McGrath E Education Ce entres Limite ed's functiona al and presen ntation curre ncy. Kip M McGrath Edu ucation Cent tres Limited is a listed public comp pany limited by shares, incorporate ed and dom iciled in Austra alia. Its regis tered office a and principa l place of bus siness is: Level 3 6 New wcomen Stre eet Newc castle NSW 2 2300 A des scription of th he nature of f the consolid dated entity's s operations s and its prin ncipal activiti es are includ ded in the d irectors' report t, which is no ot part of the financial sta atements. The fi inancial state ements were e authorised for issue, in n accordanc e with a res olution of di rectors, on 9 9 August 20 17. The directo ors have the power to am mend and rei ssue the fina ancial statem ments. Kip M Statem For th McGrath Edu ment of pro he year ende ucation Cent ofit or loss a ed 30 June 2 d tres Limited omprehensiv nd other co 2017 ve income Reve nue other direct ex xpenses Expe Roya Emplo Marke Admin Merch Depre Net fo Finan nses lties, commis oyee expens eting expens nistration exp handising ex eciation and oreign excha nce costs ssions and o ses ses penses xpenses amortisation ange losses n expense Profit t before inco ome tax exp pense Incom me tax expen nse Profit McGr t after incom rath Educati me tax expe ion Centres nse for the y Limited year attribu table to the owners of K Kip Other r comprehe nsive incom me Items Foreig s that may be gn currency e reclassified translation d subsequent tly to profit or r loss Other r comprehen sive income for the year, , net of tax Note e d onsolidated C 016 20 2017 7 000 $'0 0 $'000 4 5 5 5 6 13 3,507 14,569 (5 (2 (1 ,030) ,906) (910) ,571) (326) (773) (128) (68) (7,035) (2,719) (506) (1,677) (382) (443) (139) (69) 1 ,795 1,599 (359) (396) 1 ,436 1,203 (101) (101) (93) (93) ar attributab ble to the ow p wners of Kip Total McGr comprehen rath Educati nsive incom ion Centres me for the ye Limited Basic Dilute c earnings pe ed earnings p er share per share 1 ,335 1,110 s Cents Ce ents 29 29 3 3.199 3.069 3 2.723 2.574 23 24 24 The above e statement o of profit or los ss and other acc r comprehens companying sive income notes should be re ead in conjun nction with th he Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Statem As at McGrath Edu ment of fina 30 June 20 ucation Cent ancial positi 17 d tres Limited on Asse ts Note e d onsolidated C 016 20 2017 7 000 $'0 0 $'000 Curre ent assets and cash eq Cash Trade e and other re r Other current asse Total ets quivalents eceivables Non-c Trade Prope Intang Defer Total current asse ets s e receivables t nd equipment erty, plant an gibles rred tax non-current assets Total assets Liabi lities Curre Trade Borro Incom Emplo Total s ent liabilities payables e and other p owings ble me tax payab s oyee benefits lities current liabil ilities Non-c Trade Borro Defer Total current liab e payables owings rred tax non-current liabilities Total liabilities Net a assets Equit Issue Rese Retai ty d capital rves ned profits Total equity 7 8 9 10 11 12 13 14 15 16 17 18 4,932 4 865 141 5,938 5 19 111 0,304 526 0,960 10 10 3,530 636 153 4,319 80 45 9,969 711 10,805 16 6,898 15,124 Cons solidated 3,976 3 750 37 364 5,127 5 - - ,522 ,522 1 1 6,649 6 10 0,249 8,838 8 598 813 10 0,249 3,259 350 - 297 3,906 40 300 1,339 1,679 5,585 9,539 8,774 667 98 9,539 The ab bove stateme ent of financi ial position sshould be rea ad in conjunc ction with the e accompany ying notes 25 25 Kip M McGrath Edu ucation Cent tres Limited d Statem ment of cha anges in equ uity For th he year ende ed 30 June 2 2017 Cons solidated Balan nce at 1 July 2015 Profit after income e tax expens se for the yea ar Other r comprehen sive income for the year, , net of tax Total comprehens sive income f for the year Trans sactions with owners in th heir capacity y as owners: Share e-based paym ments Divide ends paid (no ote 19) Balan nce at 30 Jun ne 2016 Balan nce at 1 July 2016 Profit after income e tax expens se for the yea ar Other r comprehen sive income for the year, , net of tax Total comprehens sive income f for the year Retain ned Reserves s $'000 profit ts $'000 0 Total equity $' 000 Issued capital $'000 8,774 8,774 98 9,539 Retain ned Reserves s $'000 profit ts $'000 0 Total equity $' 000 Issued capital $'000 8,774 73 38 - (9 93) (9 93) 2 22 - 66 67 66 67 - (10 01) (10 01) - 3 32 - (442) 1 ,203 1 ,203 (663) 98 1 ,436 1 ,436 (721) - - - - - 9,070 1,203 (93) 1,110 22 (663) 9,539 1,436 (101) 1,335 64 32 (721) - - - - - - - - - - Trans sactions with owners in th heir capacity y as owners: Contr ributions of e equity, net of transaction c costs (note 1 17) 64 Share e-based paym ments Divide ends paid (no ote 19) Balan nce at 30 Jun ne 2017 8,838 59 98 813 10,249 The ab bove stateme ent of change es in equity s should be rea ad in conjunc ction with the e accompany ying notes 26 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Statem ment of fina ancial positi on As at 30 June 20 17 Asse ts Curre ent assets Cash and cash eq quivalents Trade e and other re eceivables Other r Total current asse ets Non-c current asse ets Trade e receivables s Prope erty, plant an nd equipment t Intang gibles Defer rred tax Total non-current assets Total assets Liabi lities Curre ent liabilities s Trade e and other p payables Borro owings Incom me tax payab ble Emplo oyee benefits s Total current liabil lities Non-c current liab ilities Trade e payables Borro owings Defer rred tax Total non-current liabilities Total liabilities Net a assets Equit ty Issue d capital Rese rves Retai ned profits Total equity 7 8 9 10 11 12 13 14 15 16 17 18 4 4,932 865 141 5 5,938 19 111 10 0,304 526 10 0,960 3 3,976 750 37 364 5 5,127 - - 1 ,522 1 ,522 6 6,649 10 0,249 8 8,838 598 813 10 0,249 3,530 636 153 4,319 80 45 9,969 711 10,805 3,259 350 - 297 3,906 40 300 1,339 1,679 5,585 9,539 8,774 667 98 9,539 The ab bove stateme ent of financi ial position sshould be rea ad in conjunc ction with the e accompany ying notes 25 Kip M Statem For th McGrath Edu ment of cha he year ende ucation Cent anges in equ ed 30 June 2 d tres Limited uity 2017 C onsolidated d Note e 2017 7 $'000 0 20 016 $'0 000 Cons solidated Balan nce at 1 July 2015 Profit Other after income r comprehen e tax expens sive income se for the yea for the year, ar , net of tax Total comprehens sive income f for the year Trans Share Divide sactions with e-based paym ends paid (no owners in th ments ote 19) heir capacity y as owners: Balan nce at 30 Jun ne 2016 16 6,898 15,124 Cons solidated Balan nce at 1 July 2016 Profit Other after income r comprehen e tax expens sive income se for the yea for the year, ar , net of tax Total comprehens sive income f for the year Trans Contr Share Divide sactions with ributions of e e-based paym ends paid (no owners in th equity, net of ments ote 19) heir capacity transaction c y as owners: costs (note 1 17) Issued capital $'000 8,774 - - - - - 8,774 Issued capital $'000 8,774 - - - 64 - - Reserves $'000 s Retain ned profit ts 0 $'000 Total $' equity 000 73 38 - 93) (9 93) (9 22 2 - 66 67 (442) 1 ,203 - 1 ,203 - (663) 9,070 1,203 (93) 1,110 22 (663) 98 9,539 Reserves $'000 s Retain ned profit ts 0 $'000 66 67 - 01) (10 (10 01) - 32 3 - 98 1 ,436 - 1 ,436 - - (721) Total $' equity 000 9,539 1,436 (101) 1,335 64 32 (721) Balan nce at 30 Jun ne 2017 8,838 59 98 813 10,249 The ab bove stateme ent of change es in equity s should be rea ad in conjunc ction with the e accompany ying notes 26 26 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Statem For th McGrath Edu ment of cas he year ende ucation Cent sh flows ed 30 June 2 2017 d tres Limited Cash Rece Paym flows from ipts from cus ments to supp operating a stomers (incl pliers and em activities usive of GST mployees (inc T) clusive of GS ST) Intere Intere Incom est received est and other me taxes refu r finance cos unded ts paid Net ca ash from ope erating activi ities Cash Paym Paym flows from ments for prop ments for inta investing a perty, plant a ngibles activities and equipme ent Net ca ash used in investing act tivities Cash Proce Proce Divide Repa flows from eeds from iss eeds from bo ends paid yment of bor rrowings financing a activities s sue of shares orrowings Net ca ash used in f financing act tivities Net in Cash ncrease in ca and cash eq ash and cash quivalents at s h equivalents ng of the fina the beginnin ancial year Cash and cash eq quivalents at the end of th he financial y year Note e d onsolidated C 016 20 2017 7 000 $'0 0 $'000 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies 13 (10 3,930 ,730) 15,171 (12,888) ( 3,200 3 1 (68) - 3,133 3 (110) ,064) (1 2,283 4 (69) 16 2,234 (52) (976) (1 ,174) (1,028) Histor rical cost con nvention The fi nancial state ements have been prepa red under th e historical c cost conventi ion. 64 ,305 1 (721) ,205) (1 - - (663) (350) (557) (1,013) 1 ,402 3,530 3 4,932 4 193 3,337 3,530 28 10 17 19 7 The p principal acco ounting polic cies adopted in the prepa aration of the e financial st tatements ar re set out be elow. These policies have b been consist tently applied d to all the ye ears present ted, unless o otherwise sta ted. New o or amended d Accounting g Standards s and Interp retations ad dopted The c consolidated entity has a adopted all o of the new o r amended A Accounting S Standards an nd Interpreta ations issued d by the Austra alian Accoun nting Standar rds Board ('A AASB') that a are mandato ry for the cu rrent reportin ng period. Th he adoption o of these Accou unting Stand ards and Int terpretations did not hav ve any signif ficant impact t on the fina ncial perform mance or po sition of the co onsolidated e entity. Basis s of preparat tion Any n ew or amend ded Account ting Standard ds or Interpre etations that are not yet m mandatory h ave not been n early adopt ted. These e general pu rpose financ cial statemen nts have bee n prepared i n accordanc ce with Austr ralian Accoun nting Standa ards and Interp retations iss sued by the e Australian Accounting g Standards Board ('AA ASB') and t he Corporat tions Act 20 001, as appro priate for fo r-profit orien nted entities. These finan ncial statem ents also co omply with In nternational Financial Re eporting Stand dards as issu ed by the Int ternational A Accounting St tandards Bo ard ('IASB'). Critica al accounting g estimates The p preparation o of the financ cial stateme ents requires s the use of f certain crit tical accoun ting estimat tes. It also r requires mana gement to ex xercise its ju udgement in the process s of applying the consolid dated entity's s accounting policies. Th he areas involv ving a higher r degree of j judgement o or complexity y, or areas w where assum mptions and estimates a are significan nt to the financ cial statemen nts, are disclo osed in note 2. Paren nt entity info ormation In acc cordance wit th the Corpo orations Act 2001, these e financial st tatements pr resent the re esults of the e consolidate ed entity only. S Supplementa ary informatio on about the e parent entit ty is disclose d in note 26. . Princ iples of con nsolidation The c consolidated financial sta atements inc corporate the e assets and d liabilities o of all subsidia aries of Kip McGrath Ed ducation Centre es Limited ('c company' or 'parent entit ty') as at 30 J June 2017 a and the result ts of all subs sidiaries for t he year then n ended. Kip M McGrath Educ cation Centr res Limited a and its subsi diaries toget ther are refe erred to in th hese financia al statements s as the 'conso olidated entit ty'. Subsi diaries are a all those entit ties over wh ich the cons olidated enti ity has contro ol. The cons solidated ent ity controls a an entity when the consolid dated entity is exposed t to, or has rig ghts to, varia able returns f from its invo olvement with h the entity a and has the ab bility to affec ct those retur rns through its power to direct the a ctivities of th he entity. Su ubsidiaries ar re fully cons olidated from t the date on w which contro l is transferre ed to the con nsolidated en ntity. They ar re de-consol idated from the date that t control cease es. Interc ompany tran nsactions, ba alances and unrealised g gains on tran nsactions be etween entitie es in the con nsolidated en ntity are elimin nated. Unrea lised losses are also elim minated unle ess the trans saction provid des evidence e of the impa airment of th he asset transf erred. Acco unting polici es of subsid diaries have e been chan nged where necessary t to ensure c onsistency w with the policie es adopted b by the consol lidated entity y. The a cquisition of subsidiaries s is accounte ed for using t he acquisitio on method of f accounting. A change in n ownership interest, withou ut the loss o of control, is s accounted for as an e equity transa action, where e the differe ence betwee en the consid deration transf erred and t he book va lue of the s share of the e non-contro olling interes st acquired i is recognise ed directly in n equity attribu utable to the parent. Where e the consol idated entity y loses contro ol over a su bsidiary, it d erecognises the assets including go odwill, liabilit ties and non-c ontrolling int terest in the e subsidiary together wit th any cumu ulative transl ation differe nces recogn nised in equ uity. The conso olidated entit y recognises s the fair va lue of the co onsideration received an nd the fair va alue of any investment r retained togeth her with any gain or loss in profit or lo oss. The e above state ement of cas sh flows shou uld be read i in conjunction n with the ac ccompanying g notes 27 27 28 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Statem ment of cas sh flows For th he year ende ed 30 June 2 2017 Cash flows from operating a activities Rece ipts from cus stomers (incl usive of GST T) Paym ments to supp pliers and em mployees (inc clusive of GS ST) Intere est received Intere est and other r finance cos ts paid Incom me taxes refu unded Net ca ash from ope erating activi ities Cash flows from investing a activities Paym ments for prop perty, plant a and equipme ent Paym ments for inta ngibles Net ca ash used in investing act tivities Cash flows from financing a activities Proce eeds from iss sue of shares s Proce eeds from bo orrowings Divide ends paid Repa yment of bor rrowings Net ca ash used in f financing act tivities Net in ncrease in ca ash and cash h equivalents s Cash and cash eq quivalents at the beginnin ng of the fina ancial year Cash and cash eq quivalents at the end of th he financial y year C onsolidated d Note e 2017 7 $'000 0 20 016 $'0 000 13 3,930 (10 ,730) 15,171 ( (12,888) 3 3,200 1 (68) - 3 3,133 (110) (1 ,064) 64 1 ,305 (721) (1 ,205) 1 ,402 3 3,530 4 4,932 (1 ,174) (1,028) (557) (1,013) 2,283 4 (69) 16 2,234 (52) (976) - - (663) (350) 193 3,337 3,530 28 10 17 19 7 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies The p have b principal acco been consist ounting polic tently applied cies adopted d to all the ye in the prepa ears present aration of the ted, unless o e financial st otherwise sta tatements ar ted. re set out be elow. These policies New o The c Austra Accou the co or amended consolidated alian Accoun unting Stand onsolidated e d Accounting entity has a nting Standar ards and Int entity. g Standards adopted all o rds Board ('A terpretations s and Interp of the new o AASB') that a did not hav retations ad r amended A are mandato ve any signif dopted Accounting S ry for the cu ficant impact Standards an rrent reportin t on the fina nd Interpreta ng period. Th ncial perform ations issued he adoption o mance or po d by the of these sition of Any n ew or amend ded Account ting Standard ds or Interpre etations that are not yet m mandatory h ave not been n early adopt ted. Basis These Interp appro Stand s of preparat e general pu retations iss priate for fo dards as issu tion rpose financ sued by the r-profit orien ed by the Int cial statemen e Australian nted entities. ternational A nts have bee Accounting These finan Accounting St n prepared i g Standards ncial statem tandards Bo n accordanc Board ('AA ents also co ard ('IASB'). ce with Austr ASB') and t omply with In ralian Accoun he Corporat nternational nting Standa tions Act 20 Financial Re ards and 001, as eporting Histor The fi rical cost con nancial state nvention ements have been prepa red under th e historical c cost conventi ion. Critica The p mana involv financ al accounting preparation o gement to ex ving a higher cial statemen g estimates of the financ xercise its ju r degree of j nts, are disclo cial stateme udgement in judgement o osed in note 2. ents requires the process or complexity s the use of s of applying y, or areas w f certain crit the consolid where assum tical accoun dated entity's mptions and ting estimat s accounting estimates a tes. It also r policies. Th are significan requires he areas nt to the Paren In acc only. S nt entity info cordance wit Supplementa ormation th the Corpo ary informatio orations Act on about the 2001, these e parent entit e financial st ty is disclose tatements pr resent the re . d in note 26. esults of the e consolidate ed entity Princ The c Centre Kip M 'conso iples of con consolidated es Limited ('c McGrath Educ olidated entit nsolidation financial sta company' or cation Centr ty'. atements inc 'parent entit res Limited a corporate the ty') as at 30 J and its subsi e assets and June 2017 a diaries toget d liabilities o and the result ther are refe of all subsidia ts of all subs erred to in th aries of Kip sidiaries for t hese financia McGrath Ed he year then al statements ducation n ended. s as the Subsi when the ab from t cease diaries are a the consolid bility to affec the date on w es. all those entit dated entity ct those retur which contro ties over wh is exposed t rns through l is transferre ich the cons to, or has rig its power to ed to the con olidated enti ghts to, varia direct the a nsolidated en ity has contro able returns f ctivities of th ntity. They ar ol. The cons from its invo he entity. Su re de-consol solidated ent olvement with ubsidiaries ar idated from ity controls a h the entity a re fully cons the date that an entity and has olidated t control Interc elimin transf policie ompany tran nated. Unrea erred. Acco es adopted b nsactions, ba lised losses unting polici by the consol unrealised g alances and minated unle are also elim es of subsid diaries have y. lidated entity gains on tran ess the trans e been chan nsactions be saction provid nged where etween entitie des evidence necessary t es in the con e of the impa to ensure c nsolidated en airment of th onsistency w ntity are he asset with the The a withou transf attribu cquisition of ut the loss o erred and t utable to the subsidiaries of control, is he book va parent. s is accounte s accounted lue of the s ed for using t for as an e share of the he acquisitio equity transa e non-contro on method of action, where olling interes f accounting. e the differe st acquired i A change in ence betwee is recognise n ownership en the consid ed directly in interest, deration n equity Where non-c conso togeth e the consol ontrolling int olidated entit her with any idated entity terest in the y recognises gain or loss y loses contro e subsidiary s the fair va in profit or lo ol over a su together wit lue of the co oss. bsidiary, it d th any cumu onsideration erecognises ulative transl received an the assets ation differe nd the fair va including go nces recogn alue of any odwill, liabilit nised in equ investment r ties and uity. The retained The e above state ement of cas sh flows shou uld be read i in conjunction n with the ac ccompanying g notes 27 28 28 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 e the informa ('CODM'). T ation presen The CODM is nted is on th s responsible he same e for the Opera Opera basis alloca ating segme ating segmen as the intern ation of resou ents nts are pres nal reports p urces to oper sented using provided to th rating segme the 'manag he Chief Ope ents and asse gement appro erating Decis essing their oach', where sion Makers performance e. Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Foreig The fi and p gn currency nancial state resentation c n y translation presented in ements are p currency. Australian d dollars, whic h is Kip McG Grath Educat tion Centres Limited's fu unctional ● w when the tax xable tempo rary differen ce is associ ated with int terests in su ubsidiaries, a associates or r joint ventur res, and the timing of t f the reversa al can be co ontrolled and d it is probab ble that the temporary d difference wi ll not revers se in the Foreig Foreig transa transla recog gn currency t gn currency t actions. Fore ation at finan nised in prof transactions transactions eign exchan ncial year-en fit or loss. are translat nge gains a nd exchange ed into Aust and losses r e rates of m ralian dollars resulting fro onetary asse s using the e m the settle ets and liabi exchange rat ement of su lities denom tes prevailing uch transact minated in for g at the date tions and fr reign currenc es of the rom the cies are Foreig The a report excha differe s gn operations liabilities of assets and l he revenues ting date. Th which approx ange rates, w cognised in o ences are rec foreign oper and expens ximate the ra other compre rations are es of foreign tes at the da ehensive inc translated in n operations ates of the tra ome through nto Australia are translat ansactions, f h the foreign an dollars us ed into Aust for the period currency res sing the exc tralian dollars d. All resultin serve in equi change rates s using the a ng foreign ex ty. s at the average xchange The fo oreign curren ncy reserve i s recognised d in profit or l loss when th he foreign op eration or ne et investment t is disposed d of. Reven Reven can be nue recogni nue is recog e reliably me ition nised when easured. Rev it is probabl venue is mea le that the e asured at the conomic ben e fair value of nefit will flow f the conside w to the cons eration receiv solidated ent ved or receiv tity and the r vable. revenue Franc Reven on the chise fees nue from fra e underlying nchise fees contract with derived from h the franchis m franchise o see. operations a re recognise ed on a wee kly or month hly basis, de pending Stude Reven to a st es ent lesson fee udent lessons nue from stu olment agree tudent's enro s derived fro ement, which om franchise h is typically o operations a on a weekly are recognis basis. ed when the e services ar re provided p pursuant Sales Dome and tr shippe of master te estic sales an raining progra ed to the fran erritories and nd sales to ams. Overse nchisees. d franchise ce overseas ma eas franchise entres aster franch e sales are re isees are re ecognised w cognised on when educatio n satisfactory onal materia y completion als supplied b n of formal in by the franch nduction hisor are Direct Reven produ shippe t sales nue from the ct passes to ed. e sale of ed o the custom ducational m mer. This co aterials and ntrol will pas promotiona ss when the al products is e customer o s recognised orders the c d at the time urriculum or e the contro r other produ ol of the ucts are Intere Intere amort rate, w to the st st revenue is tised cost of which is the net carrying s recognised a financial a rate that exa g amount of t d as interest asset and al actly discoun he financial a accrues usi locating the nts estimated asset. ng the effec interest inco d future cash ctive interest ome over the h receipts thr method. Thi e relevant pe rough the ex is is a metho eriod using t xpected life o od of calcula the effective of the financi ating the interest al asset r revenue Other Other revenue is r recognised w when it is rec ceived or whe en the right to o receive pa yment is est ablished. Cash and cash e quivalents Incom The in applic tempo me tax ncome tax e cable income orary differen expense or e tax rate for nces, unused benefit for each jurisdic d tax losses a the period i ction, adjuste and the adjus is the tax p ed by the cha stment recog payable on t anges in def gnised for pr that period's ferred tax as rior periods, w taxable inc sets and liab where applic come based bilities attribu cable. on the utable to 29 29 30 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Deferr red tax asse ets and liabil ities are reco ognised for t temporary d ifferences at t the tax rate es expected to be applie ed when the as ssets are re covered or liabilities are e settled, ba ased on thos se tax rates that are en acted or sub bstantively e enacted, ● w when the def ferred incom me tax asset or liability ar rises from the e initial recog gnition of go oodwill or an asset or liab bility in a transaction t t hat is not a business co mbination an nd that, at th he time of th e transaction n, affects ne either the acc counting excep pt for: nor taxable p n profits; or foreseeable f f future. Deferr red tax asse ets are recog gnised for de eductible tem mporary diffe erences and unused tax losses only if it is proba able that future taxable amo ounts will be available to utilise those e temporary d differences a and losses. The c carrying amo ount of recog gnised and u unrecognised d deferred ta ax assets are e reviewed a at each repo orting date. D Deferred tax as ssets recogn ised are red uced to the extent that it t is no longe er probable th hat future tax xable profits will be avail lable for the ca arrying amou unt to be rec covered. Pre eviously unre ecognised de eferred tax a assets are re ecognised to the extent t that it is proba ble that there e are future t taxable profi ts available t to recover th he asset. Deferr red tax asse ets and liabi lities are off fset only wh ere there is a legally en nforceable ri ight to offse t current tax x assets agains st current ta ax liabilities a and deferred d tax assets against defe erred tax liab bilities; and they relate t to the same taxable autho rity on either r the same ta axable entity or different t taxable entiti ies which inte end to settle simultaneou usly. Kip M McGrath Educ cation Centr res Limited ( (the 'head e ntity') and its s wholly-own ned Australia an subsidiar ries have for rmed an incom me tax conso olidated gro up under th he tax conso olidation reg gime. The h ead entity a and each su ubsidiary in the tax conso olidated grou up continue t to account fo or their own current and deferred tax x amounts. T The tax con solidated gro oup has applie ed the 'sepa arate taxpaye er within gro oup' approa ch in determ mining the a appropriate amount of t taxes to allo ocate to memb bers of the ta ax consolidat ted group. In add dition to its ow wn current a and deferred tax amounts s, the head e entity also rec cognises the e current tax liabilities (or r assets) and th he deferred t ax assets ar rising from un nused tax los sses and unu used tax cred dits assumed d from each subsidiary in n the tax conso olidated grou p. Assets s or liabilitie es arising un nder tax fund ding agreem ments with th he tax conso olidated entit ties are reco ognised as a amounts receiv vable from o r payable to other entitie es in the tax x consolidate ed group. Th e tax funding g arrangeme ent ensures that the interco ompany cha rge equals th he current ta ax liability or benefit of ea ach tax conso olidated grou up member, r resulting in n neither a contrib bution by the e head entity y to the subsi idiaries nor a a distribution by the subs idiaries to th e head entity y. Curre ent and non- -current clas ssification Assets s and liabiliti es are prese ented in the s statement of financial pos sition based on current a and non-curre ent classifica ation. An as sset is class ified as curr rent when: it t is either ex xpected to b be realised o or intended to be sold o or consumed d in the conso olidated entit ty's normal o operating cyc cle; it is held d primarily f for the purpo ose of tradin ng; it is expe ected to be realised within 12 months a after the rep orting period d; or the asse et is cash or cash equiva alent unless restricted fro om being exc changed or use ed to settle a a liability for a at least 12 m onths after th he reporting period. All o other assets a are classified d as non-cur rent. A liab ility is classif fied as curre nt when: it is s either expe ected to be se ettled in the consolidated d entity's nor rmal operatin ng cycle; it is he eld primarily for the purpo ose of tradin g; it is due to o be settled w within 12 mo onths after th e reporting p period; or the ere is no uncon nditional right t to defer the e settlement of the liabilit ty for at leas t 12 months after the rep porting period d. All other l iabilities are cla assified as n non-current. Deferr red tax asset ts and liabilit ties are alwa ays classified d as non-curr rent. Cash and cash eq quivalents in cludes cash on hand, de eposits held at call with f financial inst titutions, othe er short-term m, highly liquid investments with origina l maturities o of three mont ths or less th hat are readi ly convertible e to known a amounts of c ash and which are subject to an insigni ficant risk of f changes in value. Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 rary differen al can be co ce is associ ontrolled and ated with int d it is probab terests in su ble that the ubsidiaries, a temporary d associates or difference wi r joint ventur ll not revers res, and se in the me tax asset business co or liability ar mbination an rises from the nd that, at th e initial recog he time of th gnition of go e transaction oodwill or an n, affects ne asset or liab either the acc bility in a counting ets and liabil covered or ities are reco liabilities are ognised for t e settled, ba temporary d ased on thos ifferences at se tax rates t the tax rate that are en es expected acted or sub to be applie bstantively e ed when enacted, Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Deferr red tax asse ssets are re the as pt for: excep when the def w ● t transaction t n nor taxable p w when the tax t the timing of foreseeable f f ● ferred incom hat is not a profits; or xable tempo f the reversa future. Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Opera ating segme ents Opera ating segmen nts are pres sented using the 'manag gement appro oach', where e the informa ation presen nted is on th he same basis as the intern nal reports p provided to th he Chief Ope erating Decis sion Makers ('CODM'). T The CODM is s responsible e for the alloca ation of resou urces to oper rating segme ents and asse essing their performance e. The fi nancial state ements are p presented in Australian d dollars, whic h is Kip McG Grath Educat tion Centres Limited's fu unctional Foreig gn currency t transactions are translat ed into Aust ralian dollars s using the e exchange rat tes prevailing g at the date es of the transa actions. Fore eign exchan nge gains a and losses r resulting fro m the settle ement of su uch transact tions and fr rom the transla ation at finan ncial year-en nd exchange e rates of m onetary asse ets and liabi lities denom minated in for reign currenc cies are Foreig gn currency y translation n and p resentation c currency. Foreig gn currency t transactions recog nised in prof fit or loss. Foreig gn operations s Reven nue recogni ition Franc chise fees Stude ent lesson fee es The a assets and l liabilities of foreign oper rations are translated in nto Australia an dollars us sing the exc change rates s at the report ting date. Th he revenues and expens es of foreign n operations are translat ed into Aust tralian dollars s using the a average excha ange rates, w which approx ximate the ra tes at the da ates of the tra ansactions, f for the period d. All resultin ng foreign ex xchange differe ences are rec cognised in o other compre ehensive inc ome through h the foreign currency res serve in equi ty. The fo oreign curren ncy reserve i s recognised d in profit or l loss when th he foreign op eration or ne et investment t is disposed d of. Reven nue is recog nised when it is probabl le that the e conomic ben nefit will flow w to the cons solidated ent tity and the r revenue can be e reliably me easured. Rev venue is mea asured at the e fair value of f the conside eration receiv ved or receiv vable. Reven nue from fra nchise fees derived from m franchise o operations a re recognise ed on a wee kly or month hly basis, de pending on the e underlying contract with h the franchis see. Reven nue from stu udent lessons s derived fro om franchise operations a are recognis ed when the e services ar re provided p pursuant to a st tudent's enro olment agree ement, which h is typically o on a weekly basis. Sales of master te erritories and d franchise ce entres Dome estic sales an nd sales to overseas ma aster franch isees are re cognised on n satisfactory y completion n of formal in nduction and tr raining progra ams. Overse eas franchise e sales are re ecognised w when educatio onal materia als supplied b by the franch hisor are shippe ed to the fran nchisees. Reven nue from the e sale of ed ducational m aterials and promotiona al products is s recognised d at the time e the contro ol of the produ ct passes to o the custom mer. This co ntrol will pas ss when the e customer o orders the c urriculum or r other produ ucts are Intere st revenue is s recognised d as interest accrues usi ng the effec ctive interest method. Thi is is a metho od of calcula ating the amort tised cost of a financial a asset and al locating the interest inco ome over the e relevant pe eriod using t the effective interest rate, w which is the rate that exa actly discoun nts estimated d future cash h receipts thr rough the ex xpected life o of the financi al asset to the net carrying g amount of t he financial a asset. Other revenue is r recognised w when it is rec ceived or whe en the right to o receive pa yment is est ablished. The in ncome tax e expense or benefit for the period i is the tax p payable on t that period's taxable inc come based on the applic cable income e tax rate for each jurisdic ction, adjuste ed by the cha anges in def ferred tax as sets and liab bilities attribu utable to tempo orary differen nces, unused d tax losses a and the adjus stment recog gnised for pr rior periods, w where applic cable. Direct t sales shippe ed. Intere st Other r revenue Incom me tax Deferr future red tax asse taxable amo ets are recog ounts will be gnised for de available to eductible tem utilise those mporary diffe e temporary d erences and differences a unused tax and losses. losses only if it is proba able that The c tax as the ca proba carrying amo ssets recogn arrying amou ble that there ount of recog ised are red unt to be rec e are future t gnised and u uced to the covered. Pre taxable profi unrecognised extent that it eviously unre ts available t d deferred ta t is no longe ecognised de to recover th ax assets are er probable th eferred tax a he asset. e reviewed a hat future tax assets are re at each repo xable profits ecognised to orting date. D will be avail the extent t Deferred lable for that it is Deferr agains autho red tax asse st current ta rity on either ets and liabi ax liabilities a r the same ta lities are off and deferred axable entity fset only wh d tax assets or different t ere there is against defe taxable entiti a legally en erred tax liab ies which inte nforceable ri bilities; and end to settle ight to offse they relate t simultaneou t current tax to the same usly. x assets taxable Kip M incom conso applie memb McGrath Educ me tax conso olidated grou ed the 'sepa bers of the ta cation Centr olidated gro up continue t arate taxpaye ax consolidat res Limited ( up under th to account fo er within gro ted group. (the 'head e he tax conso or their own oup' approa ntity') and its olidation reg current and ch in determ s wholly-own gime. The h deferred tax mining the a ned Australia ead entity a x amounts. T appropriate an subsidiar and each su The tax con amount of t ries have for ubsidiary in solidated gro taxes to allo rmed an the tax oup has ocate to In add and th conso dition to its ow he deferred t olidated grou wn current a ax assets ar p. and deferred rising from un tax amounts nused tax los s, the head e sses and unu entity also rec used tax cred cognises the dits assumed e current tax d from each liabilities (or subsidiary in r assets) n the tax Assets receiv interco contrib s or liabilitie vable from o ompany cha bution by the es arising un r payable to rge equals th e head entity nder tax fund other entitie he current ta y to the subsi ding agreem es in the tax ax liability or idiaries nor a ments with th x consolidate benefit of ea a distribution he tax conso ed group. Th ach tax conso by the subs olidated entit e tax funding olidated grou idiaries to th ties are reco g arrangeme up member, r e head entity ognised as a ent ensures resulting in n y. amounts that the neither a Curre Assets ent and non- s and liabiliti -current clas es are prese ssification ented in the s statement of financial pos sition based on current a and non-curre ent classifica ation. An as conso within or use sset is class olidated entit 12 months a ed to settle a ified as curr ty's normal o after the rep a liability for a rent when: it operating cyc orting period at least 12 m t is either ex cle; it is held d; or the asse onths after th xpected to b d primarily f et is cash or he reporting be realised o for the purpo cash equiva period. All o or intended ose of tradin alent unless other assets a to be sold o ng; it is expe restricted fro are classified or consumed ected to be om being exc d as non-cur d in the realised changed rent. A liab it is he uncon are cla ility is classif eld primarily nditional right assified as n fied as curre for the purpo t to defer the non-current. nt when: it is ose of tradin e settlement s either expe g; it is due to of the liabilit ected to be se o be settled w ty for at leas ettled in the within 12 mo t 12 months consolidated onths after th after the rep d entity's nor e reporting p porting period rmal operatin period; or the d. All other l ng cycle; ere is no iabilities Deferr red tax asset ts and liabilit ties are alwa ays classified d as non-curr rent. Cash Cash liquid which and cash e and cash eq investments are subject quivalents quivalents in with origina to an insigni cludes cash l maturities o ficant risk of on hand, de of three mont f changes in eposits held ths or less th value. at call with f hat are readi financial inst ly convertible titutions, othe e to known a er short-term amounts of c m, highly ash and 29 30 30 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Trade Trade interes e and other r e receivables st method, le receivables s are initially ess any prov recognised vision for imp at fair value pairment. Tra e and subse ade receivabl equently mea les are gene asured at am rally due for mortised cost settlement w t using the e within 30 day effective ys. Collec off by object the re reorga trade amou relatin ctability of tra y reducing th tive evidence eceivables. S anisation and receivable m nt and the p ng to short-te ade receivab he carrying e that the co Significant fin d default or may be impa present value erm receivab bles is review amount dire onsolidated e nancial diffic delinquency ired. The am e of estimate les are not d wed on an on ectly. A prov entity will not ulties of the y in paymen mount of the ed future cas discounted if ngoing basis vision for im be able to c debtor, prob ts (more tha impairment h flows, disc the effect of s. Debts whic mpairment of collect all am bability that an 60 days o allowance is counted at th discounting ch are known f trade recei mounts due a the debtor w overdue) are s the differen he original ef is immateria n to be unco ivables is ra according to will enter ban e considered nce between ffective intere al. ollectable are aised when the original t nkruptcy or f d indicators the asset's est rate. Cas e written there is terms of financial that the carrying sh flows Plant Plant expen and equipm and equipm nditure that is ment ment is stated s directly attr d at historica ributable to th al cost less he acquisitio accumulate n of the item ms. d depreciatio on and impa airment. Hist torical cost i includes Depre expec eciation is ca cted useful liv alculated on ves. Plant an a straight-lin nd equipmen ne basis to w t is currently write off the y not materia net cost of e l to the finan each item of cial stateme f plant and e nts. equipment ov ver their Lease The d requir and th es determination res an asses he arrangem n of whether ssment of wh ent conveys r an arrange hether the ful a right to us ment is or c lfilment of th se the asset. contains a le e arrangeme ase is based ent is depend d on the sub dent on the u bstance of th use of a spe he arrangem ecific asset o ment and r assets A dist risks a retains tinction is ma and benefits s substantial ade between s incidental t lly all such ri n finance lea o the owner sks and ben ases, which e rship of leas efits. effectively tra ed assets, a ansfer from and operatin the lessor to g leases, un o the lessee nder which th substantially he lessor eff y all the fectively Finan the pr lease ce leases ar resent value liability and t re capitalised e of minimum the finance c d. A lease as m lease paym costs, so as t sset and liab ments. Leas to achieve a ility are esta se payments constant rat ablished at th s are allocate te of interest he fair value ed between on the rema of the leased the principa aining balanc d assets, or al componen ce of the liab if lower, nt of the ility. Lease useful of the ed assets acq l life and the lease term. quired under lease term i r a finance le f there is no ease are dep reasonable preciated ove certainty tha er the asset's at the consol s useful life o idated entity or over the s will obtain o shorter of the ownership at e asset's the end Opera basis ating lease p over the term payments, ne m of the leas et of any inc se. centives rece eived from th he lessor, are e charged to o profit or los ss on a stra ight-line Intang Intang at the assets subse arising carryin Chang metho s gible assets acquired as gible assets acquisition. date of the mortised and s are not am asured at co equently mea erecognition g from the de of the intangi ng amount o xpected patte ges in the ex od or period. part of a bu Intangible as d are subseq ost less amo of intangible ible asset. T ern of consum siness comb ssets acquire quently mea ortisation and e assets are The method a mption or us bination, othe ed separatel sured at cos d any impair measured a and useful liv eful life are a er than good y are initially st less any rment. The as the differe ves of finite accounted fo dwill, are initi y recognised impairment. gains or los ence between life intangibl or prospective ially measure d at cost. Ind Finite life in ses recognis n net dispos e assets are ely by chang ed at their fa efinite life in ntangible ass sed in profit al proceeds e reviewed a ging the amo air value tangible sets are or loss and the annually. rtisation Intelle Intelle Dug M amort ectual proper ectual proper McGrath. Co tised as they rty rty primarily c osts in relati have an ind consists of th on to intelle efinite usefu he acquisitio ectual proper ul life. on costs for t rty are capit the system o talised as an of tuition deve n asset. The eloped by th ese costs ar he founders, re not subse Kip and equently 31 31 32 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Produ uct and overs seas develop pment costs Costs in relation to o product an d overseas d development t costs are ca apitalised as s an asset. T hese costs a are not subse equently amort tised where t they have an n indefinite u useful life. De efinite life co osts are writt en off over t their finite us seful life of u up to ten years . Franc chise territorie es Other r intangibles Existin ng franchise e territories th hat have be en acquired by the cons solidated ent tity are capit talised as an n asset and are not amort tised, but are e subject to a annual impair rment review ws based on student num mbers remain ing at the ac cquisition lev el. Other intangibles a are capitalise ed as an ass set and amor rtised, being their finite us seful life of fi ive years. Impai irment of no on-financial assets Intang gible assets that have an n indefinite u useful life are e not subject t to amortisa ation and are e tested annu ually for impa airment, or mo ore frequently y if events o r changes in n circumstan ces indicate that they m ight be impa aired. Other non-financia al assets are re eviewed for i mpairment w whenever ev vents or chan nges in circu umstances in ndicate that t the carrying amount may y not be recove erable. An impairment loss is reco ognised for the amoun nt by which the asset's s carrying a amount exce eeds its recove erable amou unt. Recov verable amo unt is the hig gher of an a asset's fair va alue less cos sts of dispos sal and value e-in-use. The e value-in-us se is the prese nt value of th he estimated d future cash h flows relati ng to the as set using a pre-tax disco ount rate spe ecific to the a asset or cash-g generating u unit to which the asset be elongs. Asse ets that do no ot have inde ependent cas sh flows are grouped tog gether to form a a cash-gener rating unit. Trade e and other p payables These e amounts r epresent lia bilities for g oods and se ervices prov vided to the consolidated d entity prio or to the end d of the financ cial year and d which are unpaid. Due e to their sh hort-term nat ture they are e measured at amortise ed cost and are not discou unted. The a mounts are unsecured a and are usua lly paid withi n 30 days of f recognition. . Borro owings Loans s and borrow wings are init ially recognis sed at the fa air value of th he considera ation received d, net of tran nsaction cost ts. They are su ubsequently measured at t amortised c cost using th e effective in nterest metho od. Where e there is an n uncondition nal right to d efer settleme ent of the lia ability for at l east 12 mon nths after the e reporting d date, the loans or borrowing gs are classif fied as non-c current. Finan ce costs attr ributable to q qualifying ass sets are cap pitalised as p part of the as sset. All othe er finance co osts are expe ensed in Finan nce costs the pe eriod in which h they are in curred. Emplo oyee benefi ts Short- -term employ yee benefits Liabili ties for wag ges and sala aries and ot her employe ee benefits e expected to be settled w wholly within n 12 months s of the report ting date are measured a at the amoun ts expected to be paid w when the liabi ilities are set ttled. Other r long-term em mployee ben nefits Emplo oyee benefits s not expecte ed to be sett tled within 12 2 months of the reporting g date are m measured as the present value of expec cted future p payments to be made in respect of s services pro ovided by em mployees up to the repo rting date us sing the projec cted unit cre dit method. Consideratio on is given t to expected future wage e and salary levels, expe erience of em mployee depar rtures and pe eriods of ser rvice. Expect ted future pa ayments are discounted using marke et yields at th he reporting date on corpo rate bonds w with terms to maturity and d currency th hat match, as s closely as p possible, the estimated fu uture cash o utflows. Define ed contributio on superann nuation expen nse Contri ibutions to de efined contri bution super rannuation p lans are exp pensed in the e period in wh hich they are e incurred. Share e-based paym ments Equity y-settled sha are-based co mpensation benefits are provided to employees. Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Trade e and other r receivables Trade e receivables s are initially recognised at fair value e and subse equently mea asured at am mortised cost t using the e effective interes st method, le ess any prov vision for imp pairment. Tra ade receivabl les are gene rally due for settlement w within 30 day ys. Collec ctability of tra ade receivab bles is review wed on an on ngoing basis s. Debts whic ch are known n to be unco ollectable are e written off by y reducing th he carrying amount dire ectly. A prov vision for im mpairment of f trade recei ivables is ra aised when there is object tive evidence e that the co onsolidated e entity will not be able to c collect all am mounts due a according to the original t terms of the re eceivables. S Significant fin nancial diffic ulties of the debtor, prob bability that the debtor w will enter ban nkruptcy or f financial reorga anisation and d default or delinquency y in paymen ts (more tha an 60 days o overdue) are e considered d indicators that the trade receivable m may be impa ired. The am mount of the impairment allowance is s the differen nce between the asset's carrying amou nt and the p present value e of estimate ed future cas h flows, disc counted at th he original ef ffective intere est rate. Cas sh flows relatin ng to short-te erm receivab les are not d discounted if the effect of discounting is immateria al. Plant and equipm ment Plant and equipm ment is stated d at historica al cost less accumulate d depreciatio on and impa airment. Hist torical cost i includes expen nditure that is s directly attr ributable to th he acquisitio n of the item ms. Depre eciation is ca alculated on a straight-lin ne basis to w write off the net cost of e each item of f plant and e equipment ov ver their expec cted useful liv ves. Plant an nd equipmen t is currently y not materia l to the finan cial stateme nts. Lease es The d determination n of whether r an arrange ment is or c contains a le ase is based d on the sub bstance of th he arrangem ment and requir res an asses ssment of wh hether the ful lfilment of th e arrangeme ent is depend dent on the u use of a spe ecific asset o r assets and th he arrangem ent conveys a right to us se the asset. A dist tinction is ma ade between n finance lea ases, which e effectively tra ansfer from the lessor to o the lessee substantially y all the risks a and benefits s incidental t o the owner rship of leas ed assets, a and operatin g leases, un nder which th he lessor eff fectively retains s substantial lly all such ri sks and ben efits. Finan ce leases ar re capitalised d. A lease as sset and liab ility are esta ablished at th he fair value of the leased d assets, or if lower, the pr resent value e of minimum m lease paym ments. Leas se payments s are allocate ed between the principa al componen nt of the lease liability and t the finance c costs, so as t to achieve a constant rat te of interest on the rema aining balanc ce of the liab ility. Lease ed assets acq quired under r a finance le ease are dep preciated ove er the asset's s useful life o or over the s shorter of the e asset's useful l life and the lease term i f there is no reasonable certainty tha at the consol idated entity will obtain o ownership at the end Opera ating lease p payments, ne et of any inc centives rece eived from th he lessor, are e charged to o profit or los ss on a stra ight-line of the lease term. basis over the term m of the leas se. Intang gible assets s Intang gible assets acquired as part of a bu siness comb bination, othe er than good dwill, are initi ially measure ed at their fa air value at the date of the acquisition. Intangible as ssets acquire ed separatel y are initially y recognised d at cost. Ind efinite life in tangible assets s are not am mortised and d are subseq quently mea sured at cos st less any impairment. Finite life in ntangible ass sets are subse equently mea asured at co ost less amo ortisation and d any impair rment. The gains or los ses recognis sed in profit or loss arising g from the de erecognition of intangible e assets are measured a as the differe ence between n net dispos al proceeds and the carryin ng amount o of the intangi ible asset. T The method a and useful liv ves of finite life intangibl e assets are e reviewed a annually. Chang ges in the ex xpected patte ern of consum mption or us eful life are a accounted fo or prospective ely by chang ging the amo rtisation metho od or period. Intelle ectual proper rty Intelle ectual proper rty primarily c consists of th he acquisitio on costs for t the system o of tuition deve eloped by th he founders, Kip and Dug M McGrath. Co osts in relati on to intelle ectual proper rty are capit talised as an n asset. The ese costs ar re not subse equently amort tised as they have an ind efinite usefu ul life. 31 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Produ uct and overs in relation to Costs amort tised where t . years seas develop o product an they have an pment costs d overseas d n indefinite u development useful life. De t costs are ca efinite life co apitalised as osts are writt s an asset. T en off over t hese costs a their finite us are not subse seful life of u equently up to ten Franc Existin amort chise territorie ng franchise tised, but are es e territories th e subject to a hat have be annual impair en acquired rment review by the cons ws based on solidated ent student num tity are capit mbers remain talised as an ing at the ac n asset and cquisition lev are not el. r intangibles Other Other intangibles a are capitalise ed as an ass set and amor rtised, being their finite us seful life of fi ive years. Impai Intang or mo are re recove recove irment of no gible assets ore frequently eviewed for i erable. An erable amou unt. on-financial that have an y if events o mpairment w impairment assets n indefinite u r changes in whenever ev loss is reco useful life are n circumstan vents or chan ognised for e not subject ces indicate nges in circu the amoun t to amortisa that they m umstances in nt by which ation and are ight be impa ndicate that t the asset's e tested annu aired. Other the carrying s carrying a ually for impa non-financia amount may amount exce airment, al assets y not be eeds its Recov prese cash-g form a verable amo nt value of th generating u a cash-gener unt is the hig he estimated unit to which rating unit. gher of an a d future cash the asset be asset's fair va h flows relati elongs. Asse alue less cos ng to the as ets that do no sts of dispos set using a ot have inde sal and value pre-tax disco ependent cas e-in-use. The ount rate spe sh flows are e value-in-us ecific to the a grouped tog se is the asset or gether to Trade These financ discou e and other p e amounts r cial year and unted. The a payables epresent lia d which are mounts are bilities for g unpaid. Due unsecured a oods and se e to their sh and are usua ervices prov hort-term nat lly paid withi vided to the ture they are n 30 days of d entity prio consolidated at amortise e measured . f recognition. or to the end ed cost and d of the are not Borro Loans are su owings s and borrow ubsequently wings are init measured at ially recognis t amortised c sed at the fa cost using th air value of th e effective in he considera nterest metho ation received od. d, net of tran nsaction cost ts. They Where loans e there is an or borrowing n uncondition gs are classif nal right to d fied as non-c efer settleme current. ent of the lia ability for at l east 12 mon nths after the e reporting d date, the Finan Finan the pe nce costs ce costs attr eriod in which ributable to q h they are in qualifying ass curred. sets are cap pitalised as p part of the as sset. All othe er finance co osts are expe ensed in Emplo oyee benefi ts Short- Liabili report -term employ ties for wag ting date are yee benefits ges and sala measured a aries and ot at the amoun her employe ts expected ee benefits e to be paid w expected to when the liabi be settled w ilities are set wholly within ttled. n 12 months s of the Other Emplo expec projec depar corpo r long-term em oyee benefits cted future p cted unit cre rtures and pe rate bonds w mployee ben s not expecte payments to dit method. eriods of ser with terms to nefits ed to be sett be made in Consideratio rvice. Expect maturity and tled within 12 respect of s on is given t ted future pa d currency th 2 months of services pro to expected ayments are hat match, as the reporting ovided by em future wage discounted s closely as p g date are m mployees up e and salary using marke possible, the measured as to the repo levels, expe et yields at th estimated fu the present rting date us erience of em he reporting uture cash o value of sing the mployee date on utflows. Define Contri ed contributio ibutions to de on superann efined contri nuation expen bution super nse rannuation p lans are exp pensed in the e period in wh hich they are e incurred. Share Equity e-based paym y-settled sha ments are-based co mpensation benefits are provided to employees. 32 32 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Equity the re y-settled tran ndering of se nsactions are ervices. e awards of shares, or o options over shares, that are provide d to employe ees in excha ange for The c using dilutio the ris conso vestin y-settled tran cost of equity les option pr Black-Schol e price at gra on, the share est rate for th sk free intere olidated entity y receives th . ng conditions nsactions are ricing model ant date and he term of th he services t e measured that takes in expected pr he option, tog that entitle th at fair value nto account ice volatility gether with n he employee e on grant d the exercise of the under non-vesting c es to receive ate. Fair val e price, the t rlying share, conditions th e payment. N ue is indepe term of the o the expected at do not de No account is endently dete option, the im d dividend y termine whe s taken of an ermined mpact of ield and ether the ny other The c vestin best e recog recog cost of equity ng period. Th estimate of t nised in prof nised in prev y-settled tran he cumulativ the number o fit or loss for vious periods nsactions ar e charge to of awards th r the period i s. re recognise profit or los hat are likely s the cumula d as an exp s is calculate y to vest and ative amount pense with a ed based on d the expired t calculated a a correspond n the grant d d portion of at each repo ding increase date fair valu the vesting orting date le e in equity o ue of the aw period. The ess amounts over the ward, the amount already Marke condit condit et conditions tions are con tions are sati s are taken nsidered to isfied. into consid vest irrespe deration in d ctive of whe determining ether or not fair value. that market Therefore, condition ha any awards as been met s subject to t, provided a market all other If equ An ad value ity-settled aw dditional exp of the share wards are m ense is reco -based comp modified, as a ognised, ove pensation be a minimum a er the remain enefit as at th an expense i ning vesting he date of mo is recognised period, for a odification. d as if the m any modifica modification h ation that inc has not been creases the t n made. total fair If the treate during award non-vesting d as a cance g the vesting d is forfeited. condition is ellation. If the period, any within the co e condition is remaining e ontrol of the s not within t xpense for th consolidated the control o he award is r d entity or em f the consoli recognised o mployee, the dated entity over the rem failure to sa or employee aining vestin atisfy the con e and is not s ng period, un ndition is satisfied nless the If equ expen new a uity-settled a nse is recogn award is treat awards are c nised immed ted as if they cancelled, it diately. If a n y were a mod is treated a ew replacem dification. as if it has v ment award is vested on th s substituted he date of c d for the can cancellation, celled award and any re d, the cance maining lled and Fair v When fair va betwe princip value measu n an asset or alue is based een market p pal market; o urement r liability, fina d on the price participants or in the abse ancial or non e that would at the meas ence of a pri n-financial, is be received surement da ncipal marke s measured to sell an as ate; and ass et, in the mos at fair value sset or paid t umes that th st advantage e for recogni to transfer a he transactio eous market. tion or disclo liability in an on will take osure purpos n orderly tran place either ses, the nsaction r: in the Fair v assum highes availa unobs value is mea ming they ac st and best able to meas servable inpu asured using ct in their eco use. Valuat sure fair valu uts. g the assum onomic best ion techniqu ue, are used mptions that t interests. F ues that are d, maximisin market part For non-finan appropriate g the use o ticipants wo ncial assets, in the circu f relevant ob uld use whe the fair valu umstances a bservable in en pricing th ue measurem nd for which puts and mi he asset or ment is base h sufficient d inimising the liability, ed on its data are e use of Issue Ordina d capital ary shares a are classified as equity. Increm from t mental costs s. the proceeds directly attri butable to th he issue of n new shares o or options are e shown in e equity as a d eduction, ne et of tax, Reven nues, expen ses and ass sets are reco ognised net of the amou unt of assoc ciated GST, unless the G GST incurre d is not recove erable from t the tax autho ority. In this case it is rec cognised as part of the c cost of the ac cquisition of the asset or r as part Good ds and Servi ces Tax ('GS ST') and oth her similar t axes Divide Divide ends ends are reco ognised whe en declared d during the fin nancial year a and no longe er at the disc cretion of the company. Busin The a instrum ness combin acquisition m ments or oth nations method of a her assets are accounting i e acquired. s used to a account for 33 33 business c combinations s regardless s of whether r equity Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) The c consideration n transferred is the sum of the acqu isition-date f fair values o of the assets s transferred , equity instr ruments issued d or liabilities s incurred by y the acquire r to former o owners of the e acquiree an nd the amou nt of any non n-controlling interest in the acquiree. Fo or each busi ness combin nation, the no on-controlling g interest in the acquiree e is measure d at either fa air value or at the proportio onate share of the acqu uiree's identif fiable net as ssets. All acq quisition cos sts are expe nsed as inc urred to profit or loss. On the e acquisition n of a busine ess, the cons solidated ent ity assesses s the financia al assets acq quired and lia abilities assu umed for appro priate classif fication and designation in accordanc ce with the c contractual te erms, econo mic conditio ns, the cons olidated entity' s operating o or accounting g policies an nd other perti inent conditio ons in existe nce at the ac cquisition-da ate. Where e the busine ess combina ation is achi eved in stag ges, the con nsolidated e ntity remeas sures its pre eviously held d equity interes st in the acq uiree at the a acquisition-d date fair value e and the dif fference betw ween the fair r value and th he previous carrying amou nt is recognis sed in profit or loss. Contin ngent consid deration to b be transferre ed by the ac cquirer is rec cognised at the acquisit ion-date fair r value. Subs sequent chang ges in the fa air value of th he contingen nt considerat tion classifie ed as an ass set or liability y is recognis sed in profit or loss. Contin ngent consid deration clas ssified as eq quity is not r remeasured and its sub bsequent set ttlement is a accounted fo or within equity y. The d difference be etween the a acquisition-d date fair valu ue of assets s acquired, liabilities as sumed and any non-co ntrolling interes st in the acq quiree and th he fair value of the consid deration tran nsferred and the fair valu e of any pre -existing inv estment in the acquiree is recognised a as goodwill. If the consid eration trans sferred and t he pre-existi ing fair value e is less than n the fair value of the ident ifiable net as ssets acquir ed, being a bargain purc chase to the e acquirer, th he difference e is recognis sed as a gain d directly in pro ofit or loss by y the acquire er on the acq quisition-date e, but only a after a reasse essment of th he identificat tion and measu urement of t the net asset ts acquired, the non-con ntrolling inter rest in the ac cquiree, if an ny, the consi ideration tran nsferred and th he acquirer's previously h held equity in nterest in the e acquirer. Busin ess combin ations are initially acco ounted for o on a provis sional basis. . The acqui irer retrospe ectively adju usts the provis sional amoun nts recognise ed and also recognises a additional as ssets or liabil lities during t the measure ement period d, based on ne ew informatio on obtained about the fa acts and circ cumstances that existed d at the acqu uisition-date . The measu urement period d ends on eit ther the earl ier of (i) 12 months from m the date of f the acquisit tion or (ii) wh hen the acqu uirer receives s all the inform mation possib ble to determ mine fair value e. Basic earnings pe er share is c alculated by dividing the e profit attribu utable to the e owners of Kip McGrath h Education Centres Limite ed, excluding g any costs o of servicing equity other than ordina ary shares, b by the weight ted average number of o ordinary shares s outstandin ng during the e financial ye ear, adjusted d for bonus elements in ordinary sh ares issued during the f financial Dilute d earnings p per share ad djusts the fig ures used in n the determ mination of ba asic earnings s per share t to take into account the af fter income t tax effect of interest and other financ cing costs as ssociated wi ith dilutive po otential ordin nary shares and the weigh hted average e number of shares assu umed to hav ve been issu ued for no c consideration n in relation to dilutive p potential Earni ngs per sha are Basic earnings pe er share year. Dilute d earnings p per share ordina ary shares. of the expense. financ cial position. Recei vables and payables ar re stated inc clusive of th e amount of f GST recei vable or pay yable. The n net amount of GST recove erable from, or payable to, the tax a authority is i included in o other receiva ables or othe er payables in the state ement of Cash flows are p presented on n a gross b asis. The G GST compon nents of cas sh flows aris sing from inv vesting or fi nancing activit ties which are e recoverabl e from, or pa ayable to the e tax authorit y, are presen nted as oper rating cash fl ows. 34 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Equity y-settled tran nsactions are e awards of shares, or o options over shares, that are provide d to employe ees in excha ange for the re ndering of se ervices. The c cost of equity y-settled tran nsactions are e measured at fair value e on grant d ate. Fair val ue is indepe endently dete ermined using Black-Schol les option pr ricing model that takes in nto account the exercise e price, the t term of the o option, the im mpact of dilutio on, the share e price at gra ant date and expected pr ice volatility of the under rlying share, the expected d dividend y ield and the ris sk free intere est rate for th he term of th he option, tog gether with n non-vesting c conditions th at do not de termine whe ether the conso olidated entity y receives th he services t that entitle th he employee es to receive e payment. N No account is s taken of an ny other vestin ng conditions . The c cost of equity y-settled tran nsactions ar re recognise d as an exp pense with a a correspond ding increase e in equity o over the vestin ng period. Th he cumulativ e charge to profit or los s is calculate ed based on n the grant d date fair valu ue of the aw ward, the best e estimate of t the number o of awards th hat are likely y to vest and d the expired d portion of the vesting period. The amount recog nised in prof fit or loss for r the period i s the cumula ative amount t calculated a at each repo orting date le ess amounts already recog nised in prev vious periods s. Marke et conditions s are taken into consid deration in d determining fair value. Therefore, any awards s subject to market condit tions are con nsidered to vest irrespe ctive of whe ether or not that market condition ha as been met t, provided a all other condit tions are sati isfied. If equ ity-settled aw wards are m modified, as a a minimum a an expense i is recognised d as if the m modification h has not been n made. An ad dditional exp ense is reco ognised, ove er the remain ning vesting period, for a any modifica ation that inc creases the t total fair value of the share -based comp pensation be enefit as at th he date of mo odification. If the non-vesting condition is within the co ontrol of the consolidated d entity or em mployee, the failure to sa atisfy the con ndition is treate d as a cance ellation. If the e condition is s not within t the control o f the consoli dated entity or employee e and is not s satisfied during g the vesting period, any remaining e xpense for th he award is r recognised o over the rem aining vestin ng period, un nless the award d is forfeited. If equ uity-settled a awards are c cancelled, it is treated a as if it has v vested on th he date of c cancellation, and any re maining expen nse is recogn nised immed diately. If a n ew replacem ment award is s substituted d for the can celled award d, the cance lled and new a award is treat ted as if they y were a mod dification. Fair v value measu urement When n an asset or r liability, fina ancial or non n-financial, is s measured at fair value e for recogni tion or disclo osure purpos ses, the fair va alue is based d on the price e that would be received to sell an as sset or paid t to transfer a liability in an n orderly tran nsaction betwe een market p participants at the meas surement da ate; and ass umes that th he transactio on will take place either r: in the princip pal market; o or in the abse ence of a pri ncipal marke et, in the mos st advantage eous market. Fair v value is mea asured using g the assum mptions that market part ticipants wo uld use whe en pricing th he asset or liability, assum ming they ac ct in their eco onomic best t interests. F For non-finan ncial assets, the fair valu ue measurem ment is base ed on its highes st and best use. Valuat ion techniqu ues that are appropriate in the circu umstances a nd for which h sufficient d data are availa able to meas sure fair valu ue, are used d, maximisin g the use o f relevant ob bservable in puts and mi inimising the e use of unobs servable inpu uts. Issue d capital Ordina ary shares a are classified as equity. from t the proceeds s. Divide ends Increm mental costs directly attri butable to th he issue of n new shares o or options are e shown in e equity as a d eduction, ne et of tax, Divide ends are reco ognised whe en declared d during the fin nancial year a and no longe er at the disc cretion of the company. The a acquisition m method of a accounting i s used to a account for business c combinations s regardless s of whether r equity Busin ness combin nations instrum ments or oth her assets are e acquired. Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) The c issued in the or at profit consideration d or liabilities acquiree. Fo the proportio or loss. n transferred s incurred by or each busi onate share is the sum y the acquire ness combin of the acqu of the acqu r to former o nation, the no uiree's identif isition-date f owners of the on-controlling fiable net as fair values o e acquiree an g interest in ssets. All acq of the assets nd the amou the acquiree quisition cos s transferred nt of any non e is measure sts are expe , equity instr n-controlling d at either fa nsed as inc ruments interest air value urred to On the appro entity' e acquisition priate classif s operating o n of a busine fication and or accounting ess, the cons designation g policies an solidated ent in accordanc nd other perti ity assesses ce with the c inent conditio s the financia contractual te ons in existe al assets acq erms, econo nce at the ac quired and lia mic conditio cquisition-da abilities assu ns, the cons ate. umed for olidated Where interes amou e the busine st in the acq nt is recognis ess combina uiree at the a sed in profit ation is achi acquisition-d or loss. eved in stag date fair value ges, the con e and the dif nsolidated e fference betw ntity remeas ween the fair sures its pre r value and th eviously held he previous d equity carrying ngent consid Contin ges in the fa chang Contin ngent consid y. equity deration to b air value of th deration clas be transferre he contingen ssified as eq ed by the ac nt considerat quity is not r cquirer is rec tion classifie remeasured cognised at ed as an ass and its sub the acquisit set or liability bsequent set ion-date fair y is recognis ttlement is a r value. Subs sed in profit accounted fo sequent or loss. or within The d interes in the value gain d measu and th difference be st in the acq acquiree is of the ident directly in pro urement of t he acquirer's etween the a quiree and th recognised a ifiable net as ofit or loss by the net asset previously h acquisition-d he fair value as goodwill. ssets acquir y the acquire ts acquired, held equity in date fair valu of the consid If the consid ed, being a er on the acq the non-con nterest in the ue of assets deration tran eration trans bargain purc quisition-date ntrolling inter e acquirer. s acquired, nsferred and sferred and t chase to the e, but only a rest in the ac liabilities as the fair valu he pre-existi e acquirer, th after a reasse cquiree, if an sumed and e of any pre ing fair value he difference essment of th ny, the consi any non-co -existing inv e is less than e is recognis he identificat ideration tran ntrolling estment n the fair sed as a tion and nsferred Busin provis on ne period inform ess combin sional amoun ew informatio d ends on eit mation possib ations are nts recognise on obtained ther the earl ble to determ initially acco ed and also about the fa ier of (i) 12 mine fair value ounted for o recognises a acts and circ months from e. on a provis additional as cumstances m the date of sional basis. ssets or liabil that existed f the acquisit . The acqui lities during t d at the acqu tion or (ii) wh irer retrospe the measure uisition-date hen the acqu ectively adju ement period . The measu uirer receives usts the d, based urement s all the Earni ngs per sha are earnings pe earnings pe ed, excluding s outstandin er share er share is c g any costs o ng during the Basic Basic Limite shares year. alculated by of servicing e financial ye dividing the equity other ear, adjusted e profit attribu than ordina d for bonus utable to the ary shares, b elements in e owners of by the weight ordinary sh Kip McGrath ted average ares issued h Education number of o during the f Centres ordinary financial Dilute Dilute the af weigh ordina d earnings p d earnings p fter income t hted average ary shares. per share per share ad tax effect of e number of djusts the fig interest and shares assu ures used in other financ umed to hav n the determ cing costs as ve been issu mination of ba ssociated wi ued for no c asic earnings ith dilutive po consideration s per share t otential ordin n in relation to take into nary shares to dilutive p account and the potential Good Reven recove of the ds and Servi nues, expen erable from t expense. ces Tax ('GS ses and ass the tax autho ST') and oth sets are reco ority. In this her similar t ognised net case it is rec axes of the amou cognised as unt of assoc part of the c ciated GST, cost of the ac unless the G cquisition of GST incurre the asset or d is not r as part Recei recove financ vables and erable from, cial position. payables ar or payable re stated inc to, the tax a clusive of th authority is i e amount of included in o f GST recei other receiva vable or pay ables or othe yable. The n er payables net amount in the state of GST ement of 33 34 34 Cash activit flows are p ties which are presented on e recoverabl n a gross b e from, or pa asis. The G ayable to the GST compon e tax authorit nents of cas y, are presen sh flows aris nted as oper sing from inv rating cash fl vesting or fi ows. nancing Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) Comm mitments and d contingenc ies are disclo osed net of t he amount o of GST recov verable from, or payable t to, the tax au uthority. Comp Certai paratives in reclassific ations have been made t to the prior y year to enhan nce compara ability in the s statement of financial pos sition. Roun The c issued been ding of amo ompany is o d by the Aus rounded off ounts f a kind refer stralian Secu in accordanc rred to in AS urities and I ce with that in SIC Corporat nvestments nstrument to ions (Round Commission o the nearest ing in Financ n, relating to thousand do cial/Directors o 'rounding-o ollars, or in c s’ Reports) In off'. Amounts certain cases nstrument 20 s in this repo s, the neares 016/191, ort have st dollar. New A Austra mand The c most r Accounting alian Accou atory, have consolidated relevant to th Standards nting Stand not been ea entity's asse he consolidat and Interpre ards and In arly adopted essment of t ted entity, ar etations not nterpretations by the cons the impact o re set out be t yet mandat s that have olidated enti f these new low. tory or early e recently b ity for the an or amended y adopted been issued nnual reporti d Accounting or amende ng period en g Standards ed but are nded 30 Jun and Interpre not yet ne 2017. etations, AASB This s previo Measu be me contra are to initial incom entity' accou the en Impair signifi new d the fin trade repay be me not im B 9 Financial standard is a ous versions urement'. AA easured at a actual cash f o be classifie recognition t me ('OCI'). Fo s own credi unting require ntity. New im rment will be cantly since disclosures. T nancial state receivables ment of prin easured at fa mpacted as th Instruments applicable to s of AASB 9 ASB 9 introd amortised co lows, which ed and meas to present g or financial it risk to be ements are in mpairment r e measured u initial recog The consolid ements on th that do not cipal, which ace value. Ot he group doe o annual repo 9 and comp uces new cla ost, if it is he arise on spe sured at fair ains and los liabilities, th presented ntended to m requirements under a 12-m nition in whi dated entity w he basis that t carry a sig in the case ther financia es not carry t orting period pletes the p assification a eld within a b ecified dates value throu sses on equit e standard in OCI (unle more closely s will use an month ECL m ch case the will adopt this t the main fi gnificant fina of trade rec al asset class them at fair v ds beginning project to re and measure business mo and solely p gh profit or ty instrumen requires the ess it would align the acc n 'expected method unles lifetime ECL s standard fr nancial asse ancing comp ceivables is t ses are not m value. g on or after place IAS 3 ement model del whose o rincipal and loss unless nts (that are portion of t create an counting trea credit loss' ss the credit L method is a rom 1 July 20 ets recognise onent and i he transactio material to th 1 January 2 39 'Financia ls for financi objective is to interest. All o the entity m not held-for- the change accounting atment with t ('ECL') mod risk on a fin adopted. The 018. It is not ed represent nvolve a sin on price. Bot he group. Fin 2018. The st l Instrument al assets. A o hold asset other financi akes an irre trading) in o in fair value mismatch). he risk mana del to recog nancial instru e standard in t expected to t cash and c ngle cash flo th asset clas nancial liabilit tandard repl ts: Recognit financial ass ts in order to al instrumen evocable elec other compre e that relates New simple agement acti gnise an allo ument has in ntroduces ad o significantly cash equival ow represen sses will con ties of the gr aces all ion and set shall o collect nt assets ction on ehensive s to the r hedge ivities of owance. creased dditional y impact ent and ting the ntinue to roup are AASB This s single the tra expec implie price, perfor appro Credit obliga satisfi obliga should statem betwe to ena those entity basis the sa B 15 Revenue standard is a e standard fo ansfer of pro cts to be entit ed) to be iden adjusted fo rmance oblig ach if no dis t risk will be ation would b ed when the ations satisfie d be recogni ment of finan een the entity able users to contracts; a will adopt th that most of atisfaction of e from Contr applicable to r revenue re omised good tled in excha ntified, toget or the time gations on a stinct observ e presented be satisfied w e service ha ed over time, ised as the p ncial positio y's performan o understand and any asse his standard f the group's the primary racts with Cu o annual rep ecognition. Th ds or service ange for thos ther with the value of mo a basis of re able prices e separately when the cus s been prov , an entity wo performance n as a cont nce and the d the contrac ets recognise from 1 July s revenue is performance ustomers porting period he core princ es to custom se goods or s separate pe oney exclud elative stand exist; and re as an expen stomer obtai vided, typical ould select a e obligation is tract liability, customer's p cts with custo ed from the c y 2018. It is recognised e obligation. ds beginning ciple of the s mers in an am services. The erformance o ing credit ris -alone sellin ecognition of nse rather t ins control o lly for promis an appropriat s satisfied. C , a contract payment. Su omers; the s costs to obta not expecte at the time o g on or after standard is th mount that re e standard w obligations w sk; allocatio ng price of e revenue wh han adjuste of the goods. ses to trans te measure o Contracts wit asset, or a ufficient quan significant jud ain or fulfil a d to significa of lessons be r 1 January hat an entity eflects the c will require: co within the con on of the tra each distinct hen each per d to revenu . For service fer services of progress t th customers a receivable, ntitative and q dgements m contract wit antly impact eing provide 2018. The s will recognis consideration ontracts (eith ntract; determ ansaction pr t good or se rformance ob e. For good es, the perfor to customer to determine s will be pres depending qualitative d made in apply th a custome the financia d to a stude standard pro se revenue t n to which th her written, v mine the tran ice to the s ervice, or es bligation is s ds, the perfo rmance oblig rs. For perfo e how much r sented in an on the rela isclosure is r ying the guid er. The cons al statements ent which rep ovides a o depict he entity verbal or nsaction separate timation satisfied. ormance gation is ormance revenue n entity's ationship required dance to olidated s on the presents 35 35 36 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) AASB B 16 Leases This s standard is a applicable to annual repo rting periods s beginning o on or after 1 January 201 19. The stand dard replace es AASB 117 ‘L Leases’ and f for lessees w will eliminate the classific cations of ope erating lease es and financ ce leases. Su ubject to exc ceptions, a ‘righ ht-of-use’ as sset will be capitalised in the state ment of fina ancial positio on, measure ed as the p resent value e of the unavo oidable future e lease pay yments to be e made over r the lease t term. The e xceptions re elate to shor rt-term lease es of 12 month hs or less a and leases of low-value e assets (su uch as pers sonal compu uters and sm mall office f furniture) wh here an accou unting policy choice exists s whereby ei ither a ‘right- -of-use’ asse et is recognis sed or lease payments ar re expensed to profit or los ss as incurr red. A liabil lity correspo onding to th he capitalise ed lease wi ll also be r recognised, adjusted fo or lease prepa yments, leas se incentives s received, i nitial direct c costs incurre ed and an es stimate of an ny future res storation, rem moval or disma antling costs . Straight-lin e operating lease expen nse recognit tion will be r replaced wit h a deprecia ation charge e for the leased d asset (incl uded in ope erating costs ) and an int erest expens se on the re ecognised le ase liability (included in finance costs) ). In the ear lier periods of the lease e, the expens ses associat ted with the lease unde r AASB 16 w will be highe er when compa ared to leas se expenses s under AAS SB 117. Ho owever, EBIT TDA (Earnin ngs Before I Interest, Tax x, Depreciat ion and Amort tisation) resu ults will be im mproved as t the operating g expense is s replaced by y interest ex xpense and d depreciation in profit or los s under AAS SB 16. For c classification n within the s statement of f cash flows , the lease p payments wi ill be separa ated into both a a principal (fi nancing activ vities) and in nterest (eithe er operating o or financing a activities) co mponent. Fo or lessor acc ounting, the st tandard doe s not substa antially chan nge how a l lessor accou unts for leas ses. The co nsolidated e entity will ad dopt this standa ard from 1 Ju uly 2019 but t the impact o of its adoptio on is not expe ected to mat terially affect t the consolid dated entity a as there are m inimal leases s. Note 2 2. Critical ac ccounting ju udgements, , estimates a and assump ptions The p preparation o of the financ ial statemen nts requires m managemen t to make ju udgements, e estimates an nd assumptio ons that affect the reported d amounts in the financia al statements s. Manageme ent continual ly evaluates its judgeme nts and estim mates in relatio on to assets , liabilities, c contingent lia abilities, reve enue and ex xpenses. Ma anagement b bases its jud dgements, es stimates and a assumptions s on historic cal experien nce and on other vario ous factors, , including expectations s of future events, mana gement belie eves to be re easonable un nder the circ cumstances. The resultin ng accounting g judgement ts and estima ates will seldom m equal the related actua al results. Th he judgemen nts, estimates s and assum mptions that h have a signif ficant risk of causing a mat terial adjustm ment to the carrying am mounts of as ssets and li abilities (refe er to the re spective not tes) within t the next financ cial year are discussed be elow. Intang gible assets w with indefinit te life Intelle ectual proper rty, franchise e territories a and certain p product and o overseas de velopment c costs are clas ssified as ha aving an indefin nite useful lif fe and not am mortised as managemen nt considers that there is no foreseea able limit to t he cash flow ws these assets s are genera ating. Such assets are s subject to an nnual impair rment review ws in accorda ance with th he accountin g policy stated d in note 1. The recover rable amoun nts of cash-g generating un nits to which h such asset ts relate hav ve been dete ermined based d on value-in n-use calcula ations which require the u use of assum mptions, inclu uding estima ated discount t rates based d on the curren nt cost of ca apital and gr owth rates o of the estima ated future c cash flows. E Estimates th hat managem ment has ma ade with respe ct to such ca alculations ar re disclosed in note 10. Finite life intangibl le assets The c consolidated entity determ mines the es stimated use eful lives and d related am ortisation ch harges for its s finite life in tangible assets s. The usef ful lives cou uld change significantly as a resul lt of technic cal innovatio ons or some e other eve ent. The amort tisation charg ge will increa ase where th he useful liv es are less than previou usly estimate ed lives. The e consolidate ed entity asses sses impairm ment of such assets at ea ach reporting date by eva aluating cond ditions specif fic to the con nsolidated en ntity, the cash g generating u unit to which the asset be elongs, and t to the particu ular asset th hat may lead to impairme ent. If an imp pairment trigge r exists, the recoverable amount of t he asset is d determined. This involves s estimating the asset’s fair value les ss costs of dis posal or val lue-in-use ca alculations w which incorpo orate a num mber of key estimates an nd assumpti ions. Estima ates that mana gement has made with re espect to suc ch calculatio ns are disclo osed in note 10. Share e-based paym ment transac ctions The c consolidated entity meas ures the cos st of equity-s settled transa actions with employees by reference e to the fair v value of the eq quity instrum ments at the d date at whic ch they are g granted. The fair value is s determined d by using ei ther the Bino omial or Black- -Scholes mo odel taking into accoun nt the terms s and condit tions upon which the i nstruments were grante ed. The accou unting estima ates and as sumptions r relating to eq quity-settled share-base ed payments s would have e no impact t on the carryin ng amounts of assets an d liabilities w within the nex xt annual rep porting period d but may im mpact profit o or loss and eq quity. Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 1. Significan nt accountin ng policies ( (continued) Comm mitments and d contingenc ies are disclo osed net of t he amount o of GST recov verable from, or payable t to, the tax au uthority. Certai in reclassific ations have been made t to the prior y year to enhan nce compara ability in the s statement of financial pos sition. Comp paratives Roun ding of amo ounts The c ompany is o f a kind refer rred to in AS SIC Corporat ions (Round ing in Financ cial/Directors s’ Reports) In nstrument 20 016/191, issued d by the Aus stralian Secu urities and I nvestments Commission n, relating to o 'rounding-o off'. Amounts s in this repo ort have been rounded off in accordanc ce with that in nstrument to o the nearest thousand do ollars, or in c certain cases s, the neares st dollar. New A Accounting Standards and Interpre etations not t yet mandat tory or early y adopted Austra alian Accou nting Stand ards and In nterpretations s that have e recently b been issued or amende ed but are not yet mand atory, have not been ea arly adopted by the cons olidated enti ity for the an nnual reporti ng period en nded 30 Jun ne 2017. The c consolidated entity's asse essment of t the impact o f these new or amended d Accounting g Standards and Interpre etations, most r relevant to th he consolidat ted entity, ar re set out be low. AASB B 9 Financial Instruments This s standard is a applicable to o annual repo orting period ds beginning g on or after 1 January 2 2018. The st tandard repl aces all previo ous versions s of AASB 9 9 and comp pletes the p project to re place IAS 3 39 'Financia l Instrument ts: Recognit ion and Measu urement'. AA ASB 9 introd uces new cla assification a and measure ement model ls for financi al assets. A financial ass set shall be me easured at a amortised co ost, if it is he eld within a b business mo del whose o objective is to o hold asset ts in order to o collect contra actual cash f lows, which arise on spe ecified dates and solely p rincipal and interest. All o other financi al instrumen nt assets are to o be classifie ed and meas sured at fair value throu gh profit or loss unless the entity m akes an irre evocable elec ction on initial recognition t to present g ains and los sses on equit ty instrumen nts (that are not held-for- trading) in o other compre ehensive incom me ('OCI'). Fo or financial liabilities, th e standard requires the portion of t the change in fair value e that relates s to the entity' s own credi it risk to be presented in OCI (unle ess it would create an accounting mismatch). New simple r hedge accou unting require ements are in ntended to m more closely align the acc counting trea atment with t he risk mana agement acti ivities of the en ntity. New im mpairment r requirements s will use an n 'expected credit loss' ('ECL') mod del to recog gnise an allo owance. Impair rment will be e measured u under a 12-m month ECL m method unles ss the credit risk on a fin nancial instru ument has in creased signifi cantly since initial recog nition in whi ch case the lifetime ECL L method is a adopted. The e standard in ntroduces ad dditional new d disclosures. T The consolid dated entity w will adopt this s standard fr rom 1 July 20 018. It is not t expected to o significantly y impact the fin nancial state ements on th he basis that t the main fi nancial asse ets recognise ed represent t cash and c cash equival ent and trade receivables that do not t carry a sig gnificant fina ancing comp onent and i nvolve a sin ngle cash flo ow represen ting the repay ment of prin cipal, which in the case of trade rec ceivables is t he transactio on price. Bot th asset clas sses will con ntinue to be me easured at fa ace value. Ot ther financia al asset class ses are not m material to th he group. Fin nancial liabilit ties of the gr roup are not im mpacted as th he group doe es not carry t them at fair v value. AASB B 15 Revenue e from Contr racts with Cu ustomers This s standard is a applicable to o annual rep porting period ds beginning g on or after r 1 January 2018. The s standard pro ovides a single e standard fo r revenue re ecognition. Th he core princ ciple of the s standard is th hat an entity will recognis se revenue t o depict the tra ansfer of pro omised good ds or service es to custom mers in an am mount that re eflects the c consideration n to which th he entity expec cts to be entit tled in excha ange for thos se goods or s services. The e standard w will require: co ontracts (eith her written, v verbal or implie ed) to be iden ntified, toget ther with the separate pe erformance o obligations w within the con ntract; determ mine the tran nsaction price, adjusted fo or the time value of mo oney exclud ing credit ris sk; allocatio on of the tra ansaction pr ice to the s separate perfor rmance oblig gations on a a basis of re elative stand -alone sellin ng price of e each distinct t good or se ervice, or es timation appro ach if no dis stinct observ able prices e exist; and re ecognition of revenue wh hen each per rformance ob bligation is s satisfied. Credit t risk will be e presented separately as an expen nse rather t han adjuste d to revenu e. For good ds, the perfo ormance obliga ation would b be satisfied w when the cus stomer obtai ins control o of the goods. . For service es, the perfor rmance oblig gation is satisfi ed when the e service ha s been prov vided, typical lly for promis ses to trans fer services to customer rs. For perfo ormance obliga ations satisfie ed over time, , an entity wo ould select a an appropriat te measure o of progress t to determine e how much r revenue should d be recogni ised as the p performance e obligation is s satisfied. C Contracts wit th customers s will be pres sented in an n entity's statem ment of finan ncial positio n as a cont tract liability, , a contract asset, or a a receivable, depending on the rela ationship betwe een the entity y's performan nce and the customer's p payment. Su ufficient quan ntitative and q qualitative d isclosure is r required to ena able users to o understand d the contrac cts with custo omers; the s significant jud dgements m made in apply ying the guid dance to those contracts; a and any asse ets recognise ed from the c costs to obta ain or fulfil a contract wit th a custome er. The cons olidated entity will adopt th his standard from 1 July y 2018. It is not expecte d to significa antly impact the financia al statements s on the basis that most of f the group's s revenue is recognised at the time o of lessons be eing provide d to a stude ent which rep presents the sa atisfaction of the primary performance e obligation. Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 1. Significan nt accountin ng policies ( (continued) AASB This s 117 ‘L a ‘righ unavo month accou or los prepa disma leased costs) compa Amort or los both a the st standa are m B 16 Leases standard is a Leases’ and f ht-of-use’ as oidable future hs or less a unting policy ss as incurr yments, leas antling costs d asset (incl ). In the ear ared to leas tisation) resu s under AAS a principal (fi tandard doe ard from 1 Ju inimal leases applicable to for lessees w sset will be e lease pay and leases choice exists red. A liabil se incentives . Straight-lin uded in ope lier periods se expenses ults will be im SB 16. For c nancing activ s not substa uly 2019 but s. annual repo will eliminate capitalised yments to be of low-value s whereby ei lity correspo s received, i e operating erating costs of the lease s under AAS mproved as t classification vities) and in antially chan t the impact o rting periods the classific in the state e made over e assets (su ither a ‘right- onding to th nitial direct c lease expen ) and an int e, the expens SB 117. Ho the operating n within the s nterest (eithe nge how a l of its adoptio s beginning o cations of ope ment of fina r the lease t uch as pers -of-use’ asse he capitalise costs incurre nse recognit erest expens ses associat owever, EBIT g expense is statement of er operating o lessor accou on is not expe on or after 1 erating lease ancial positio term. The e sonal compu et is recognis ed lease wi ed and an es tion will be r se on the re ted with the TDA (Earnin s replaced by f cash flows or financing a unts for leas ected to mat January 201 es and financ on, measure xceptions re uters and sm sed or lease ll also be r stimate of an replaced wit ecognised le lease unde ngs Before I y interest ex , the lease p activities) co ses. The co terially affect 19. The stand ce leases. Su ed as the p elate to shor mall office f payments ar recognised, ny future res h a deprecia ase liability r AASB 16 w Interest, Tax xpense and d payments wi mponent. Fo nsolidated e t the consolid dard replace ubject to exc resent value rt-term lease furniture) wh re expensed adjusted fo storation, rem ation charge (included in will be highe x, Depreciat depreciation ill be separa or lessor acc entity will ad dated entity a es AASB ceptions, e of the es of 12 here an to profit or lease moval or e for the finance er when ion and in profit ated into ounting, dopt this as there Note 2 2. Critical ac ccounting ju udgements, , estimates a and assump ptions The p affect relatio and a mana seldom a mat financ preparation o the reported on to assets assumptions gement belie m equal the terial adjustm cial year are of the financ d amounts in , liabilities, c s on historic eves to be re related actua ment to the discussed be elow. ial statemen the financia contingent lia cal experien easonable un al results. Th carrying am nts requires m al statements abilities, reve nce and on nder the circ he judgemen mounts of as managemen s. Manageme enue and ex other vario cumstances. nts, estimates ssets and li t to make ju ent continual xpenses. Ma ous factors, The resultin s and assum abilities (refe udgements, e ly evaluates anagement b , including ng accounting mptions that h er to the re estimates an its judgeme bases its jud expectations g judgement have a signif spective not nd assumptio nts and estim dgements, es s of future ts and estima ficant risk of tes) within t ons that mates in stimates events, ates will causing the next Intang Intelle indefin assets stated based curren respe gible assets w ectual proper nite useful lif s are genera d in note 1. d on value-in nt cost of ca ct to such ca with indefinit rty, franchise fe and not am ating. Such The recover n-use calcula apital and gr alculations ar te life e territories a mortised as assets are s rable amoun ations which owth rates o re disclosed and certain p managemen subject to an nts of cash-g require the u of the estima in note 10. product and o nt considers nnual impair generating un use of assum ated future c overseas de that there is rment review nits to which mptions, inclu cash flows. E velopment c no foreseea ws in accorda h such asset uding estima Estimates th costs are clas able limit to t ance with th ts relate hav ated discount hat managem ssified as ha he cash flow he accountin ve been dete t rates based ment has ma aving an ws these g policy ermined d on the ade with Finite The c assets amort asses cash g trigge of dis mana life intangibl consolidated s. The usef tisation charg sses impairm generating u r exists, the posal or val gement has le assets entity determ ful lives cou ge will increa ment of such unit to which recoverable lue-in-use ca made with re mines the es uld change ase where th assets at ea the asset be amount of t alculations w espect to suc stimated use significantly he useful liv ach reporting elongs, and t he asset is d which incorpo ch calculatio eful lives and as a resul es are less date by eva to the particu determined. orate a num ns are disclo d related am lt of technic than previou aluating cond ular asset th This involves mber of key osed in note ortisation ch cal innovatio usly estimate ditions specif hat may lead s estimating estimates an 10. harges for its ons or some ed lives. The fic to the con to impairme the asset’s nd assumpti s finite life in e other eve e consolidate nsolidated en ent. If an imp fair value les ions. Estima tangible ent. The ed entity ntity, the pairment ss costs ates that Share The c the eq Black- accou carryin e-based paym consolidated quity instrum -Scholes mo unting estima ng amounts ment transac entity meas ments at the d odel taking ates and as of assets an ctions ures the cos date at whic into accoun sumptions r d liabilities w st of equity-s ch they are g nt the terms relating to eq within the nex settled transa granted. The s and condit quity-settled xt annual rep actions with fair value is tions upon share-base porting period employees s determined which the i ed payments d but may im by reference d by using ei nstruments s would have mpact profit o e to the fair v ther the Bino were grante e no impact or loss and eq value of omial or ed. The t on the quity. 35 36 36 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 2. Critical ac ccounting ju udgements, , estimates a and assump ptions (cont tinued) Provis The p provis rates sion for impa provision for sion is asses and specific airment of rec impairment ssed by takin knowledge o ceivables of receivab ng into acco of the individ bles assessm ount the rece ual debtor's ment require ent sales exp financial pos s a degree perience, the sition. of estimatio e ageing of on and judge receivables, ement. The historical co level of ollection me tax Incom The c in det course anticip outcom provis onsolidated ermining the e of busines pated tax au me of these sions in the p entity is subj e provision fo ss for which udit issues b matters is d period in whic ject to incom or income ta the ultimate ased on the different from ch such dete me taxes in th x. There are tax determi e consolidate m the carrying ermination is he jurisdictio e many trans nation is un ed entity's cu g amounts, s made. ns in which i sactions and certain. The urrent unders such differen t operates. S calculations consolidate standing of t nces will imp Significant ju s undertaken ed entity reco the tax law. act the curre dgement is r n during the o ognises liabi Where the f ent and defe required ordinary lities for final tax erred tax Recov Deferr proba assets very of defer red tax asse ble that futu s are expecte rred tax asse ets are reco re taxable a ed to be reco ets ognised for d mounts will overed throu deductible te be available gh managem emporary dif e to utilise th ment’s foreca fferences on ose tempora ast taxable p nly if the con ary difference profits over th nsolidated e es and losse he next three entity conside es. The defe e years. ers it is erred tax Emplo As dis date a emplo increa oyee benefits scussed in n are recognis oyees at the ases through s provision note 1, the lia sed and mea e reporting d promotion a ability for em asured at the date. In dete and inflation mployee bene e present va ermining the have been ta efits expecte alue of the e present va aken into acc ed to be sett stimated fut lue of the li count. led more tha ure cash flow ability, estim an 12 month ws to be ma mates of attr s from the re ade in respe rition rates a eporting ect of all and pay Note 3 3. Operating g segments Identif The c Chief ('COD disclo fication of rep consolidated Executive O DM')) in asse sed througho portable ope entity has o Officer and essing perfor out these fin erating segm nly one oper the Board o mance and ancial statem ents rating segme of Directors in determinin ments. ent based on (collectively ng the alloca n the interna y referred to ation of resou al reports tha o as the Ch urces. The o at are review hief Operatin operating seg wed and used ng Decision gment inform d by the Makers mation is The in nformation re eported to the e CODM is o on at least a monthly bas sis. Geogr The g emplo raphical infor geographical oyment bene rmation information fits assets a of non-curre nd rights und ent assets b der insurance elow is excl e contracts. usive of fina ancial instrum ments, deferr red tax asse ets, post Geogr raphical infor rmation Sa les to extern 2017 $'000 ers nal custome 2016 $'000 Geograp phical non-c assets current 2017 7 0 $'000 20 $' 016 000 Austra United Overs alasia d Kingdom a seas other and Europe 7,351 5,190 965 8,79 5,11 60 92 1 02 9,723 9 711 - 9,383 711 - 13,506 14,50 05 10 0,434 10,094 37 37 38 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 4 4. Revenue Sales s revenue Franc chise fees Stude ent lesson fee es Sale o of franchisee e centres Direct t sales Other r revenue Intere est Other r revenue Reve nue Note 5. Expenses s Profit before incom me tax includ des the follow wing specific c expenses: Depre eciation Plant and equipm ent Amor rtisation Other r Total amortisation n Produ uct and overs seas develop pment costs Total depreciation n and amortis sation Royal lties, commis ssions and o other direct ex xpenses Direct t costs of stu udent lessons s Direct t costs of fra nchise fees Total royalties, co ommissions a and other dire ect expenses s Emplo oyee benefits ts Emplo oyee benefits s expense ex xcluding sup perannuation Define ed contributi on superann nuation expe nse Share e-based paym ment expens se Total employee be enefits Finan nce costs Intere est and financ ce charges p paid/payable e Renta al minimum le ease payme nts C onsolidated d 2017 7 $'000 0 20 016 $' 000 9 9,206 2 2,382 1 ,423 495 13 3,506 1 - 1 7,713 5,553 782 457 14,505 4 60 64 13 3,507 14,569 C onsolidated d 2017 7 $'000 0 20 016 $' 000 44 27 508 221 729 773 1 ,932 3 3,098 5 5,030 2 2,640 234 32 2 2,906 68 217 269 147 416 443 4,496 2,539 7,035 2,457 240 22 2,719 69 274 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 ucation Cent ncial statem ments d tres Limited Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 Note 2 2. Critical ac ccounting ju udgements, , estimates a and assump ptions (cont tinued) Note 4 4. Revenue Sales Franc Stude Sale o Direct s revenue chise fees ent lesson fee of franchisee t sales es e centres Other Intere Other r revenue est r revenue Reve nue Note s 5. Expenses Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Provis sion for impa airment of rec ceivables The p provision for impairment of receivab bles assessm ment require s a degree of estimatio on and judge ement. The level of provis sion is asses ssed by takin ng into acco ount the rece ent sales exp perience, the e ageing of receivables, historical co ollection rates and specific knowledge o of the individ ual debtor's financial pos sition. Incom me tax The c onsolidated entity is subj ject to incom me taxes in th he jurisdictio ns in which i t operates. S Significant ju dgement is r required in det ermining the e provision fo or income ta x. There are e many trans sactions and calculations s undertaken n during the o ordinary course e of busines ss for which the ultimate tax determi nation is un certain. The consolidate ed entity reco ognises liabi lities for anticip pated tax au udit issues b ased on the e consolidate ed entity's cu urrent unders standing of t the tax law. Where the f final tax outcom me of these matters is d different from m the carrying g amounts, s such differen nces will imp act the curre ent and defe erred tax provis sions in the p period in whic ch such dete ermination is made. Recov very of defer rred tax asse ets Deferr red tax asse ets are reco ognised for d deductible te emporary dif fferences on nly if the con nsolidated e entity conside ers it is proba ble that futu re taxable a mounts will be available e to utilise th ose tempora ary difference es and losse es. The defe erred tax assets s are expecte ed to be reco overed throu gh managem ment’s foreca ast taxable p profits over th he next three e years. Emplo oyee benefits s provision As dis scussed in n note 1, the lia ability for em mployee bene efits expecte ed to be sett led more tha an 12 month s from the re eporting date a are recognis sed and mea asured at the e present va alue of the e stimated fut ure cash flow ws to be ma ade in respe ect of all emplo oyees at the e reporting d date. In dete ermining the present va lue of the li ability, estim mates of attr rition rates a and pay increa ases through promotion a and inflation have been ta aken into acc count. Note 3 3. Operating g segments Identif fication of rep portable ope erating segm ents The c consolidated entity has o nly one oper rating segme ent based on n the interna al reports tha at are review wed and used d by the Chief Executive O Officer and the Board o of Directors (collectively y referred to o as the Ch hief Operatin ng Decision Makers ('COD DM')) in asse essing perfor mance and in determinin ng the alloca ation of resou urces. The o operating seg gment inform mation is disclo sed througho out these fin ancial statem ments. The in nformation re eported to the e CODM is o on at least a monthly bas sis. The g geographical information of non-curre ent assets b elow is excl usive of fina ancial instrum ments, deferr red tax asse ets, post emplo oyment bene fits assets a nd rights und der insurance e contracts. Geogr raphical infor rmation Geogr raphical infor rmation Austra alasia United d Kingdom a and Europe Overs seas other Geograp phical non-c current Sa les to extern nal custome ers assets 2017 $'000 2016 $'000 2017 7 $'000 0 20 016 $' 000 7,351 5,190 965 8,79 92 5,11 1 60 02 9 9,723 711 - 9,383 711 - 13,506 14,50 05 10 0,434 10,094 rtisation Amor uct and overs Produ r Other Depre Plant eciation and equipm ent lties, commis t costs of stu t costs of fra Emplo Emplo Define Share Royal Direct Direct Total amortisation n before incom employee be depreciation royalties, co enefits Profit Total Total Total me tax includ des the follow wing specific c expenses: seas develop pment costs n and amortis sation other direct ex ssions and o s udent lessons nchise fees xpenses ommissions a and other dire s ect expenses ts oyee benefits s expense ex oyee benefits on superann ed contributi ment expens e-based paym xcluding sup nuation expe se perannuation nse Finan Intere nce costs est and financ ce charges p e paid/payable Renta al minimum le ease payme nts 37 38 38 d onsolidated C 016 20 2017 7 000 $' 0 $'000 9 9,206 2,382 2 1 ,423 495 3,506 13 1 - 1 7,713 5,553 782 457 14,505 4 60 64 13 3,507 14,569 d onsolidated C 016 20 7 2017 $' 0 $'000 000 44 27 508 221 729 773 ,932 1 3,098 3 5,030 5 2,640 2 234 32 2,906 2 68 217 269 147 416 443 4,496 2,539 7,035 2,457 240 22 2,719 69 274 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 6. Income ta ax expense Incom Curre Defer me tax expen ent tax rred tax - orig nse gination and reversal of te emporary dif fferences Aggre egate income e tax expens se Defer Decre Increa rred tax inclu ease in defer ase in deferr uded in incom rred tax asse red tax liabilit me tax expen ets (note 11) ) ties (note 16 nse comprise es: Defer rred tax - orig gination and reversal of te emporary dif fferences Nume Profit erical reconc before incom ciliation of inc me tax expen come tax exp nse pense and ta ax at the statu utory rate Tax a at the statuto ry tax rate of f 30% effect amount Tax e rior year fore Pr undry items Su ts which are eign exchang ge items not deductib ble/(taxable) in calculating g taxable inc come: Incom me tax expen nse C d onsolidated 016 20 2017 7 000 $' 0 $'000 (9) 368 359 185 183 368 (45) 441 396 388 53 441 1 ,795 1,599 539 480 (169) (11) 359 - (84) 396 d onsolidated C 016 20 2017 7 $' 0 $'000 000 Tax lo Unuse osses not rec ed tax losses cognised s for which n no deferred ta ax asset has s been recog nised 1 ,269 1,269 Poten ntial tax bene efit @ 30% The a losses passe above potent s are capital ed, or failing t tial tax bene in nature an that, the sam efit for tax los nd can only b me business sses has no be utilised in test is passe ed. ot been reco the future to gnised in th o offset capit e statement tal gains if th of financial he continuity 381 381 position. Th of ownershi hese tax p test is Note 7. Current a assets - cash h and cash s equivalents Cash Restr at bank ricted cash onsolidated C d 016 20 2017 7 000 $' 0 $'000 ,697 1 3,235 3 4,932 4 1,209 2,321 3,530 Restri The c icted cash re orresponding epresents am g liability is re mounts held ecognised in on behalf of n other payab f franchisees bles and acc s and is not cruals at note available for e 12. r use by the consolidated d entity. 31-60 0 days overd ue 61-90 0 days overd ue 91-12 20 days overd due 39 39 40 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 8. Current a assets - trad de and other r receivables s Trade e receivables s Less: Provision fo or impairmen t of receivab bles The c consolidated entity has r recognised a a loss of $10 07,000 (2016 6: $94,000) in profit or l oss in respe ect of impair rment of Impair rment of rece eivables receiv vables for the e year ended d 30 June 20 17. The a geing of the impaired rec ceivables pro ovided for ab bove are as f follows: 31-60 0 days overd ue 61-90 0 days overd ue 91-12 20 days overd due Movem ments in the provision fo r impairment t of receivab les are as fo ollows: Open ing balance Additi ional provisio ons recognis sed Rece ivables writte en off during the year as uncollectabl e Closin ng balance Past d due but not im mpaired 2017 ($82,000 as at 30 June 2 2016). Custo omers with b alances pas st due but wi ithout provis ion for impa irment of rec ceivables am mount to $74 4,000 as at 3 30 June The c consolidated entity did n not consider r a credit ris sk on the a aggregate ba alances afte r reviewing the credit t erms of custom mers based on recent co ollection prac ctices. The a geing of the past due bu t not impaire ed receivable es are as follo ows: C onsolidated d 2017 7 $'000 0 20 016 $' 000 949 (84) 865 860 (224) 636 C onsolidated d 2017 7 $'000 0 20 016 $' 000 2 1 81 84 224 107 (247) 84 18 28 178 224 217 94 (87) 224 C onsolidated d 2017 7 $'000 0 20 016 $' 000 C onsolidated d 2017 7 $'000 0 20 016 $' 000 8 7 59 74 4 3 75 82 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 6. Income ta ax expense Defer rred tax - orig gination and reversal of te emporary dif fferences Incom me tax expen nse Curre ent tax Aggre egate income e tax expens se Defer rred tax inclu uded in incom me tax expen nse comprise es: Decre ease in defer rred tax asse ets (note 11) Increa ase in deferr red tax liabilit ties (note 16 ) Defer rred tax - orig gination and reversal of te emporary dif fferences Nume erical reconc ciliation of inc come tax exp pense and ta ax at the statu utory rate Tax e effect amount ts which are not deductib ble/(taxable) in calculating g taxable inc come: Profit before incom me tax expen nse Tax a at the statuto ry tax rate of f 30% Pr rior year fore eign exchang ge items Su undry items Incom me tax expen nse Tax lo osses not rec cognised Poten ntial tax bene efit @ 30% Cash at bank Restr ricted cash Unuse ed tax losses s for which n no deferred ta ax asset has s been recog nised 1 ,269 1,269 The a above potent tial tax bene efit for tax los sses has no ot been reco gnised in th e statement of financial position. Th hese tax losses s are capital in nature an nd can only b be utilised in the future to o offset capit tal gains if th he continuity of ownershi p test is passe ed, or failing t that, the sam me business test is passe ed. Note 7. Current a assets - cash h and cash equivalents s C onsolidated d 2017 7 $'000 0 20 016 $' 000 (9) 368 359 185 183 368 (45) 441 396 388 53 441 1 ,795 1,599 539 480 (169) (11) 359 - (84) 396 C onsolidated d 2017 7 $'000 0 20 016 $' 000 C onsolidated d 2017 7 $'000 0 20 016 $' 000 1 ,697 3 3,235 4 4,932 1,209 2,321 3,530 Restri icted cash re epresents am mounts held on behalf of f franchisees s and is not available for r use by the consolidated d entity. The c orresponding g liability is re ecognised in n other payab bles and acc cruals at note e 12. Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 8. Current a assets - trad de and other s r receivables Trade Less: s e receivables or impairmen Provision fo t of receivab bles d onsolidated C 016 20 2017 7 000 $' 0 $'000 949 (84) 865 860 (224) 636 Impair The c receiv rment of rece consolidated vables for the eivables entity has r e year ended recognised a d 30 June 20 a loss of $10 17. 07,000 (2016 6: $94,000) The a geing of the impaired rec ceivables pro ovided for ab bove are as f follows: 31-60 61-90 91-12 0 days overd 0 days overd 20 days overd ue ue due Movem ments in the provision fo r impairment t of receivab les are as fo ollows: Open Additi Rece ing balance ional provisio ivables writte ons recognis en off during sed the year as uncollectabl e 381 381 Closin ng balance in profit or l oss in respe ect of impair rment of d onsolidated C 016 20 2017 7 $' 0 $'000 000 2 1 81 84 d onsolidated C 016 20 2017 7 000 $' 0 $'000 224 107 (247) 84 18 28 178 224 217 94 (87) 224 Past d Custo 2017 due but not im omers with b ($82,000 as mpaired alances pas at 30 June 2 st due but wi 2016). ithout provis ion for impa irment of rec ceivables am mount to $74 4,000 as at 3 30 June The c custom consolidated mers based entity did n on recent co not consider ollection prac r a credit ris ctices. sk on the a aggregate ba alances afte r reviewing the credit t erms of The a geing of the past due bu t not impaire ed receivable es are as follo ows: 31-60 61-90 91-12 0 days overd 0 days overd 20 days overd ue ue due d onsolidated C 016 20 2017 7 $' 0 $'000 000 8 7 59 74 4 3 75 82 39 40 40 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 9 9. Current a er assets - othe Prepa Other ayments r deposits Note 10. Non-cur rrent assets - intangible es Intelle ectual proper rty - at cost Produ Less: uct and overs Accumulate seas develop ed amortisatio pment costs on Franc chise territori es Other Less: r intangible a Accumulate assets - at co ed amortisatio ost on Recon nciliations nciliations of Recon w: below f the written Cons solidated 2015 Balan Additi Excha Amor nce at 1 July ions ange differen rtisation expe nces ense Balan Additi Amor nce at 30 Jun ions rtisation expe ense ne 2016 Balan nce at 30 Jun ne 2017 d onsolidated C 016 20 2017 7 000 $' 0 $'000 141 - 141 147 6 153 d onsolidated C 016 20 7 2017 000 $' 0 $'000 4,012 4 4,012 7,130 7 (2 ,034) 5,096 5 711 1 ,154 (669) 485 6,369 (1,304) 5,065 711 657 (476) 181 10 0,304 9,969 c. For reign exchan ge rates con nsistent with current mark ket condition s. Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 10. Non-cur rrent assets - intangible es (continue ed) The in ntellectual p property and product an d overseas developmen nt costs are the primary y elements of the cons olidated entity’ ’s system of tutoring whic ch has been n developed and acquired d over a per iod exceedin ng 30 years by the found ders and the co onsolidated e entity. The fr ranchise terr ritories asset t consists of the buy-bac ck of the righ ht to operate the busines ss in the United d Kingdom. As there is no foreseea ble limit to t the cash flow ws these ass sets are gen nerating, the y are consid dered to have an indefinite e useful life a and not amo rtised. Instea ad they are subject to an nnual impair rment review ws. Other inta angibles includ e the contra actual rights s for certain territories w where KMEC C has termin nated an are ea develope rs contract and the liability y for these it tems are incl uded in paya ables. Impair rment tests f for indefinite life intangibl les Indefin nite life intan ngibles are a llocated to a single cash generating u unit ('CGU'). The re ecoverable a amount has b been determ ined by a va alue-in-use ca alculation us sing a discou unted cash flo ow model, b ased on a thre ee-year proje ection period d approved b by managem ment and extr rapolated fo r a further tw wo years us ing a growth h rate of 2.4% (2016: 2.4% ). There are no terminal values in the e calculation. . Key a ssumptions are those to which the re ecoverable a mount of an asset or cas sh-generating g units is mo ost sensitive. The fo ollowing key assumptions s were used in the discou unted cash fl low model: a. Pre e-tax discou nt rate 16.5 % (2016: 16 6.8%). The d discount rate e reflects m management’s s estimate o of the time v value of money y and the co onsolidated e entity’s weigh hted average e cost of cap pital, the risk free rate an d the volatilit ty of the sha are price relativ ve to market movements. . b. New w centre gro owth rate of 4 4% (2016: 6. .0%) over the e three-year projection p period, which reflects, a r renewed sale es push, an ex xpected mov ve towards l arger on-lin e based ce ntres and a a continued movement t towards perc centage of r revenue contra acts, which m management believe is re easonable giv ven the curre ent trading p performance of the conso olidated entity y. d. On- -line tutoring g services to be 4% (2016 6: 4%) of tot tal lessons o over the three e-year projec ction period, which mana agement believ ve is reasona able given cu urrent growth in the marke et segment. Based d on the abov ve, there wa s no impairm ment required d for the year r ended 30 J June 2017 (2 2016: $nil). As dis sclosed in no ote 2, the dire ectors have made judgem ments and es stimates in r respect of the e impairment t testing of in ndefinite life in tangibles. S hould these judgements s and estima ates not occ cur, the resu ulting indefin nite life intan ngibles may vary in The k key sensitivit ty is that cen ntre number s would nee ed to fall by 5% (2016: increase by 3%) before the CGU w would be impair red, with all o other assum ptions remai ning constan nt. Mana gement belie eves that oth her reasonab ble changes in the key a assumptions on which th he recoverab ble amount is s based would not cause th he cash gene erating unit’s s carrying am mount to exce eed its recov verable amou unt. cial year are e set out down values s at the begi nning and e nd of the cu rrent and pre evious financ roduct and Pr o overseas evelopment de costs $'000 llectual Intel operty pro '000 $ Franchise territories $'000 er Othe intangib bles 0 $'000 To $' otal 000 Sensi itivity carryin ng amount. 4,012 - - - 4,012 - - 4,012 4,358 976 - (269) 5,065 539 (508) 5,096 80 08 - 97) (9 - 71 1 - - 71 1 328 - - (147) 181 525 (221) 9,506 976 (97) (416) 9,969 1,064 (729) 485 10,304 41 41 42 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 ments d tres Limited ucation Cent ncial statem Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 C onsolidated d 2017 7 $'000 0 20 016 $' 000 141 - 141 147 6 153 C onsolidated d 2017 7 $'000 0 20 016 $' 000 7 7,130 (2 ,034) 5 5,096 711 1 ,154 (669) 485 6,369 (1,304) 5,065 711 657 (476) 181 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 9 9. Current a assets - othe er Prepa ayments Other r deposits Note 10. Non-cur rrent assets - intangible es Intelle ectual proper rty - at cost Produ uct and overs seas develop pment costs Less: Accumulate ed amortisatio on Franc chise territori es Other r intangible a assets - at co ost Less: Accumulate ed amortisatio on Recon nciliations below w: Cons solidated Balan nce at 1 July 2015 Additi ions Excha ange differen nces Amor rtisation expe ense Balan nce at 30 Jun ne 2016 Additi ions Amor rtisation expe ense Balan nce at 30 Jun ne 2017 Recon nciliations of f the written down values s at the begi nning and e nd of the cu rrent and pre evious financ cial year are e set out Pr roduct and o overseas Intel llectual de evelopment pro operty $ '000 costs $'000 Franchise territories $'000 Othe er intangib bles $'000 0 To otal $' 000 4,358 976 - (269) 5,065 539 (508) 5,096 80 08 (9 97) - - 71 1 - - 71 1 328 - - (147) 181 525 (221) 9,506 976 (97) (416) 9,969 1,064 (729) 485 10,304 4,012 - - - - - 4,012 4,012 41 Note 10. Non-cur rrent assets - intangible es (continue ed) The in entity’ the co United have includ liability ntellectual p ’s system of onsolidated e d Kingdom. an indefinite e the contra y for these it property and tutoring whic entity. The fr As there is e useful life a actual rights tems are incl product an ch has been ranchise terr no foreseea and not amo s for certain uded in paya d overseas n developed ritories asset ble limit to t rtised. Instea territories w ables. developmen and acquired t consists of the cash flow ad they are where KMEC nt costs are d over a per the buy-bac ws these ass subject to an C has termin the primary iod exceedin ck of the righ sets are gen nnual impair nated an are y elements ng 30 years ht to operate nerating, the rment review ea develope of the cons by the found the busines y are consid ws. Other inta rs contract olidated ders and ss in the dered to angibles and the Impair Indefin rment tests f nite life intan for indefinite ngibles are a life intangibl llocated to a les single cash generating u unit ('CGU'). The re a thre 2.4% ecoverable a ee-year proje (2016: 2.4% amount has b ection period ). There are been determ d approved b no terminal ined by a va by managem values in the alculation us alue-in-use ca rapolated fo ment and extr . e calculation. sing a discou r a further tw unted cash flo wo years us ow model, b ing a growth ased on h rate of 4 4,012 4,012 Key a ssumptions are those to which the re ecoverable a mount of an asset or cas sh-generating g units is mo ost sensitive. The fo ollowing key assumptions s were used in the discou unted cash fl low model: a. Pre money relativ e-tax discou y and the co ve to market % (2016: 16 nt rate 16.5 onsolidated e entity’s weigh . movements. 6.8%). The d hted average discount rate e cost of cap e reflects m pital, the risk management’s free rate an s estimate o d the volatilit of the time v ty of the sha value of are price b. New an ex contra w centre gro xpected mov acts, which m owth rate of 4 ve towards l management 4% (2016: 6. arger on-lin believe is re .0%) over the e based ce easonable giv e three-year ntres and a ven the curre projection p a continued ent trading p period, which movement t performance reflects, a r towards perc of the conso renewed sale centage of r olidated entity es push, revenue y. 10 0,304 9,969 c. For reign exchan ge rates con nsistent with current mark ket condition s. d. On- believ -line tutoring ve is reasona g services to able given cu be 4% (2016 urrent growth 6: 4%) of tot in the marke tal lessons o et segment. over the three e-year projec ction period, which mana agement Based d on the abov ve, there wa s no impairm ment required d for the year r ended 30 J June 2017 (2 2016: $nil). Sensi As dis life in carryin itivity sclosed in no tangibles. S ng amount. ote 2, the dire hould these ectors have judgements made judgem s and estima ments and es ates not occ stimates in r cur, the resu respect of the ulting indefin e impairment nite life intan t testing of in ngibles may ndefinite vary in The k impair key sensitivit red, with all o ty is that cen other assum ntre number ptions remai s would nee ning constan ed to fall by nt. 5% (2016: increase by 3%) before the CGU w would be Mana would gement belie not cause th eves that oth he cash gene her reasonab erating unit’s ble changes s carrying am in the key a mount to exce assumptions eed its recov on which th verable amou he recoverab unt. ble amount is s based 42 42 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 11. Non-cur rrent assets - deferred t tax Defer rred tax asse et comprises temporary d differences at o: ttributable to sed in profit o or loss: unts recognis Amou ax losses Ta mpairment of Im nrealised fore Un mployee ben Em ccrued expen Ac AX licence QA receivables eign exchan nefits nses ge movemen nts Amou Tr unts recognis ransaction co : sed in equity e issue osts on share Defer rred tax asse et Move Open Charg ements: ing balance ged to profit o or loss (note e 6) Closin ng balance Note 12. Current liabilities - t trade and ot ther payable es Trade Amou GST a Other e payables unts held on and other sim r payables an behalf of fran milar payable nd accruals nchisees es Refer to note 20 fo or further info ormation on financial inst truments. Note 13. Current liabilities - borrowings Bank loans d onsolidated C 016 20 2017 7 000 $' 0 $'000 56 25 71 112 68 194 526 - 526 711 (185) 526 266 69 - 91 63 215 704 7 711 1,099 (388) 711 d onsolidated C 016 20 7 2017 000 $' 0 $'000 444 3,235 3 9 288 3,976 3 435 2,321 35 468 3,259 d onsolidated C 016 20 2017 7 000 $' 0 $'000 750 350 Refer to note 15 fo or further info ormation on Refer to note 20 fo or further info ormation on assets pledg ged as secur rity and financing arrange ements. financial inst truments. 43 43 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 14. Current liabilities - e employee b benefits Annua al leave Long service leav e Amou unts not expe ected to be s ettled within the next 12 months The c current provis sion for emp ployee benef its includes a all unconditio onal entitlem ments where employees have comple eted the requir red period of service and also those w where emplo oyees are en titled to pro- rata paymen nts in certain circumstanc ces. The entire amount is presented a as current, since the c consolidated entity does s not have an uncondit tional right t to defer settlem ment. Howev ver, based o on past expe erience, the consolidate ed entity doe es not expec ct all employ yees to take the full amou nt of accrued d leave or re quire payme ent within the e next 12 mo nths. The fo ollowing amo ounts reflect leave that is not expecte d to be taken n within the n next 12 mont ths: C onsolidated d 2017 7 $'000 0 20 016 $' 000 173 191 364 146 151 297 C onsolidated d 2017 7 $'000 0 20 016 $' 000 215 172 C onsolidated d 2017 7 $'000 0 20 016 $' 000 - 300 C onsolidated d 2017 7 $'000 0 20 016 $' 000 750 650 Emplo oyee benefits s Note 15. Non-cur rrent liabiliti es - borrow wings Refer to note 20 fo or further info ormation on financial inst truments. Total secured liab ilities The to otal secured liabilities (cu urrent and no on-current) a re as follows s: Bank loans Bank loans 44 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 ments d tres Limited ettled within ployee benef ucation Cent ncial statem also those w as current, on past expe quire payme Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 onal entitlem titled to pro- entity does ed entity doe nths. ments where rata paymen s not have es not expec employees nts in certain an uncondit ct all employ have comple circumstanc tional right t yees to take eted the ces. The to defer the full the next 12 its includes a where emplo since the c erience, the ent within the months all unconditio oyees are en consolidated consolidate e next 12 mo Amou The c requir entire settlem amou unts not expe current provis red period of amount is ment. Howev nt of accrued ected to be s sion for emp service and presented a ver, based o d leave or re Defer rred tax asse et comprises temporary d differences at ttributable to o: Annua Long al leave service leav e d onsolidated C 016 20 2017 7 000 $' 0 $'000 173 191 364 146 151 297 Note 14. Current liabilities - e employee b benefits Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 11. Non-cur rrent assets - deferred t tax Amou unts recognis sed in profit o or loss: Ta ax losses Im mpairment of receivables Un nrealised fore eign exchan ge movemen nts Em mployee ben nefits Ac ccrued expen nses QA AX licence Amou unts recognis sed in equity : Tr ransaction co osts on share e issue Defer rred tax asse et Move ements: Open ing balance Closin ng balance Charg ged to profit o or loss (note e 6) Note 12. Current liabilities - t trade and ot ther payable es Trade e payables Amou unts held on behalf of fran nchisees GST a and other sim milar payable es Other r payables an nd accruals C onsolidated d 2017 7 $'000 0 20 016 $' 000 56 25 71 112 68 194 526 - 526 711 (185) 526 266 69 - 91 63 215 704 7 711 1,099 (388) 711 C onsolidated d 2017 7 $'000 0 20 016 $' 000 444 3 3,235 9 288 3 3,976 435 2,321 35 468 3,259 C onsolidated d 2017 7 $'000 0 20 016 $' 000 750 350 not expecte d to be taken n within the n next 12 mont ths: The fo ollowing amo ounts reflect leave that is Emplo s oyee benefits Note 15. Non-cur rrent liabiliti es - borrow wings Bank loans Refer to note 20 fo or further info ormation on financial inst truments. Total The to secured liab otal secured ilities liabilities (cu urrent and no on-current) a re as follows s: Refer to note 20 fo or further info ormation on financial inst truments. Note 13. Current liabilities - borrowings Bank loans Bank loans Refer to note 15 fo or further info ormation on assets pledg ged as secur rity and financing arrange ements. Refer to note 20 fo or further info ormation on financial inst truments. 43 44 44 onsolidated d C 2017 016 20 7 $' 0 $'000 000 215 172 d onsolidated C 016 20 2017 7 000 $' 0 $'000 - 300 d onsolidated C 016 20 2017 7 000 $' 0 $'000 750 650 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 15. Non-cur rrent liabiliti es - borrow wings (contin nued) Asset The b ts pledged as ank loans ar s security re secured by y fixed and f loating charg ges over the assets of the e consolidate ed entity. Finan Unres cing arrange stricted acces ements ss was availa able at the re eporting date e to the follow wing lines of credit: d onsolidated C 016 20 2017 7 $' 0 $'000 000 Total Ba Ba facilities t ank overdraft ank loans Used Ba Ba at the report ting date t ank overdraft ank loans Unuse Ba Ba ed at the rep porting date t ank overdraft ank loans Note 16. Non-cur rrent liabiliti es - deferre ed tax 1 ,750 750 2,500 2 - 750 750 1 1 ,750 - ,750 500 650 1,150 - 650 650 500 - 500 differences a attributable t to: d onsolidated C 016 20 2017 7 $' 0 $'000 000 1 ,239 283 1 ,522 1 ,339 183 1 ,522 1,235 104 1,339 1,286 53 1,339 Defer rred tax liabil lity comprise s temporary Amou Re Ov unts recognis esearch and verseas deve sed in profit o developmen elopment or loss: nt costs Defer rred tax liabil ity Move Open Charg ements: ing balance ged to profit o or loss (note e 6) Closin ng balance Note 17. Equity - issued cap ital Ordin ary shares - fully paid 45,034,331 4 44,184,33 31 8,838 8 8,774 The re eserve is us sed to recogn nise exchang ge difference es arising fro om the trans slation of the e financial st tatements of f foreign opera tions to Aust tralian dollar rs. It is also u used to reco ognise profits s and losses on hedges o of the net inv vestments in n foreign Cons solidated 2017 Shares 2016 Shares 2017 7 0 $'000 20 $' 016 000 45 45 46 Date Shares Issue p price $' '000 1 July 2015 44,184,33 31 30 June 201 16 31 August 2 2016 44,184,33 31 850,00 00 $0 0.075 30 June 201 17 45,034,33 31 8,774 8,774 64 8,838 Ordina ary shares e entitle the h holder to par rticipate in d dividends an nd the proce eeds on the winding up of the com mpany in propo rtion to the n number of an nd amounts p paid on the s shares held. The fully pai d ordinary sh hares have n no par value and the compa any does not t have a limit ted amount o of authorised d capital. On a show of han nds every me ember prese ent at a meet ting in perso on or by prox xy shall have e one vote a nd upon a p oll each Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 17. Equity - issued cap ital (continu ued) Movem ments in ord dinary share c capital Detai ls Balan nce Balan nce Balan nce Conve ersion of opt tions Ordina ary shares share shall have o one vote. Share e buy-back There e is no curren nt on-market share buy-b back. Capita al risk manag gement to red uce the cost t of capital. The c consolidated entity's obje ctives when managing c capital are to o safeguard i ts ability to c continue as a going conc cern, so that it can provide returns for s shareholders s and benefit s for other st takeholders and to maint tain an optim mum capital s structure Capita al is regarded d as total eq uity, as reco ognised in the e statement of financial p position, plus s net debt. N et debt is ca alculated as tota al borrowing s less cash a and cash equ uivalents. In ord der to mainta ain or adjust t the capital structure, th he consolida ated entity m may adjust th he amount o of dividends paid to share holders, retu urn capital to shareholder rs, issue new w shares or s sell assets to reduce debt t. The c apital risk ma anagement p policy remain ns unchange ed from the 3 30 June 2016 6 Annual Rep port. The c capital struct ure of the co onsolidated entity consis sts of net de ebt (borrowin ngs offset by y cash and bank balanc ces) and equity y of the conso olidated entit ty (comprisin ng issued cap pital, reserve es and accum mulated profi its). Note 18. Equity - reserves Foreig gn currency reserve Share e-based paym ments reserv ve Other r reserves Foreig gn currency r reserve opera tions. C onsolidated d 2017 7 $'000 0 20 016 $' 000 (233) 77 754 598 (132) 45 754 667 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Asset ts pledged as s security Finan cing arrange ements Total facilities Ba ank overdraft t Ba ank loans Used at the report ting date Ba ank overdraft t Ba ank loans Unuse ed at the rep porting date Ba ank overdraft t Ba ank loans Note 16. Non-cur rrent liabiliti es - deferre ed tax Amou unts recognis sed in profit o or loss: Re esearch and developmen nt costs Ov verseas deve elopment Defer rred tax liabil ity Move ements: Open ing balance Charg ged to profit o or loss (note e 6) Closin ng balance Note 17. Equity - issued cap ital Defer rred tax liabil lity comprise s temporary differences a attributable t to: C onsolidated d 2017 7 $'000 0 20 016 $' 000 1 ,750 750 2 2,500 - 750 750 1 ,750 - 1 ,750 1 ,239 283 1 ,522 1 ,339 183 1 ,522 500 650 1,150 - 650 650 500 - 500 1,235 104 1,339 1,286 53 1,339 C onsolidated d 2017 7 $'000 0 20 016 $' 000 Ordin ary shares - fully paid 4 45,034,331 44,184,33 31 8 8,838 8,774 Cons solidated 2017 Shares 2016 Shares 2017 7 $'000 0 20 016 $' 000 Note 15. Non-cur rrent liabiliti es - borrow wings (contin nued) Note 17. Equity - issued cap ital (continu ued) The b ank loans ar re secured by y fixed and f loating charg ges over the assets of the e consolidate ed entity. Unres stricted acces ss was availa able at the re eporting date e to the follow wing lines of credit: Detai ls Balan nce Balan Conve nce ersion of opt tions Movem ments in ord dinary share c capital Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Date Shares Issue p price $' '000 1 July 2015 44,184,33 31 30 June 201 31 August 2 16 2016 44,184,33 850,00 31 00 $0 0.075 8,774 8,774 64 8,838 Balan nce 30 June 201 17 45,034,33 31 Ordina Ordina propo compa ary shares ary shares e rtion to the n any does not entitle the h number of an t have a limit holder to par nd amounts p ted amount o rticipate in d paid on the s of authorised dividends an shares held. d capital. nd the proce The fully pai eeds on the d ordinary sh winding up hares have n of the com no par value mpany in and the On a share show of han shall have o nds every me one vote. ember prese ent at a meet ting in perso on or by prox xy shall have e one vote a nd upon a p oll each Share There e buy-back e is no curren nt on-market share buy-b back. Capita The c that it to red al risk manag consolidated can provide uce the cost gement entity's obje returns for s t of capital. ctives when shareholders managing c s and benefit capital are to s for other st o safeguard i takeholders ts ability to c and to maint continue as tain an optim a going conc mum capital s cern, so structure Capita as tota al is regarded al borrowing d as total eq s less cash a uity, as reco and cash equ ognised in the uivalents. e statement of financial p position, plus s net debt. N et debt is ca alculated In ord share der to mainta holders, retu ain or adjust urn capital to t the capital shareholder structure, th rs, issue new he consolida w shares or s ated entity m sell assets to may adjust th he amount o t. reduce debt of dividends paid to The c apital risk ma anagement p policy remain ns unchange ed from the 3 30 June 2016 6 Annual Rep port. The c equity capital struct y of the conso ure of the co olidated entit onsolidated ty (comprisin entity consis ng issued cap sts of net de pital, reserve ebt (borrowin es and accum ngs offset by mulated profi y cash and its). bank balanc ces) and Note 18. Equity - reserves Foreig Share Other gn currency e-based paym r reserves reserve ments reserv ve d onsolidated C 016 20 2017 7 000 $' 0 $'000 (233) 77 754 598 (132) 45 754 667 Foreig The re opera opera gn currency r eserve is us tions to Aust tions. reserve sed to recogn tralian dollar nise exchang rs. It is also u ge difference used to reco es arising fro ognise profits om the trans s and losses slation of the on hedges o e financial st of the net inv tatements of vestments in f foreign n foreign 45 46 46 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 18. Equity - reserves (c continued) Share The r remun e-based paym reserve is u neration, and ments reserv sed to reco d other partie ve ognise the v es as part of value of equ their compen uity benefits nsation for se provided to ervices. o employees s and directo ors as part of their Risk managemen nt is carried out by sen nior executiv ves ('finance e') under po olicies approv ved by the Board of D Directors ('Boar rd'). These p policies includ de identificat tion and ana alysis of the risk exposur re of the con nsolidated en ntity and app propriate proce dures, contro ols and risk limits. The c consolidated entity does not enter int to or trade in n financial ins struments, in ncluding deriva ative financia al instruments s, for specula ative purpos es. Finance reports to th e Board are on a monthly y basis. Other This r contro r reserves eserve is us olling interest ed to recogn ts. nise the incre ements and d decrements on changes in equity of t the parent on n acquisition n of non- Movem Movem ments in res ments in eac erves ch class of re eserve during g the current t and previou us financial y year are set o out below: Cons solidated Balan Foreig Share nce at 1 July gn currency e-based paym 2015 translation ments Balan Foreig Share nce at 30 Jun gn currency e-based paym ne 2016 translation ments Balan nce at 30 Jun ne 2017 Note 19. Equity - dividends Foreign currency c $'000 Share-base ed s payments $'000 er Othe 0 $'000 To $' otal 000 (39) (93) - (132) (101) - (233) 23 2 - 22 2 45 4 - 32 3 77 7 754 - - 754 - - 754 738 (93) 22 667 (101) 32 598 Divide ends paid du ring the finan ncial year we ere as follow ws: Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 20. Financia al instrumen nts (continu ed) Marke et risk Foreig gn currency r risk dollar . foreig n exchange risks. the re porting date were as follo ows: Cons solidated US do ollars Euros s Pound d Sterling New Z Zealand dolla ars Singa apore dollars South h African Ran nd Kenya an Shilling Hong Kong Dollar rs The c consolidated entity unde ertakes certa ain transact ions denom minated in fo oreign curren ncy and is exposed to foreign curren ncy risk throu ugh foreign e exchange rat te fluctuation ns. The cons olidated enti ty operates i international ly and is exp posed to foreig n exchange risk arising primarily fro om the Poun d Sterling, S Singapore do ollar, South A African Rand d and New Z Zealand Foreig gn exchange e risk arises from future commercial transactions s and recogn nised financi al assets an nd financial l iabilities denom minated in a currency th hat is not the e entity's fun nctional curre ency. The co onsolidated e entity presen ntly does no ot hedge The c carrying amo ount of the co onsolidated entity's forei ign currency y denominate ed financial a assets and f financial liab bilities at Ass sets 2017 $'000 2016 $'000 Liabilities 2017 7 $'000 0 20 016 $' 000 3,161 470 46 7 86 44 4 19 7 73 6 2,56 66 8 89 21 9 4 42 4 - 3 - 1 ,696 306 28 - - - 1,331 23 42 88 - - - - 3,837 2,99 99 2 2,033 1,484 The c consolidated entity had net assets d denominated d in foreign currencies o of $1,804,00 00 as at 30 June 2017 (assets $3,83 7,000 less lia abilities $2,0 033,000) (201 16: $1,515,0 00 (assets $ $2,999,000 le ess liabilities $1,484,000) )). Based on this net positio on, a 10% s trengthening g in the Aust tralian dollar from 30 Jun ne 2017 leve els may exp ose the con solidated en ntity to a $180, 000 foreign c currency loss s. The c onsolidated entity is not e exposed to a any significan nt price risk. Price risk Intere st rate risk The c consolidated entity's mai n interest ra ate risk arise es from shor rt-term and l long-term bo orrowings. B orrowings is ssued at variab ble rates exp ose the cons solidated ent tity to interes st rate risk. B Borrowings is ssued at fixe ed rates expo ose the cons olidated entity to fair value interest rate e risk. The c consolidated entity's obje ctive is to m aintain a ba lance betwee en continuity y of funding and flexibility y through the e use of bank l loans, relate d party loans s and financi ial leases. On 9 declar total d August 201 red and will b distribution w 7, a final div be paid on 2 will be $630,4 vidend for th 9 Septembe 480. he year end er 2017 to tho ded 30 June ose shareho 2017 of 1.4 lders on the 4 cents per register at 7 ordinary sha 7pm on 15 Se are, unfranke eptember 20 ed, was 017. The Note 2 20. Financia al instrumen nts Finan The c interes unpre conso uses d in the ncial risk ma consolidated st rate risk), dictability of olidated entity different met case of inter anagement o entity's activ credit risk a f financial ma y and to ens thods to mea rest rate, fore objectives vities expose and liquidity arkets and s sure that the asure differen eign exchang e it to a varie risk. The con seeks to min consolidated nt types of ri ge and other ety of financi nsolidated e nimise poten d entity is ab sk to which i r price risks a ial risks: ma ntity's overa tial adverse ble to finance it is exposed and ageing a rket risk (inc ll risk manag effects on t e its busines d. These met analysis for c cluding foreig gement prog the financial ss plans. The thods include credit risk. gn currency gram focuses performance e consolidate e sensitivity a risk and s on the e of the ed entity analysis 47 47 48 d onsolidated C 016 20 2017 7 $' 0 $'000 000 451 270 721 442 221 663 Final dividend for e share m dividend fo Interim e share or the year e ended 30 Jun ne 2017 of 0. .6 cents (201 16: 0.5 cents ) per ordinar ry the year end ded 30 June 2016 of 1.0 cents (2015 : 1.0 cents) p per ordinary Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 This r eserve is us ed to recogn nise the incre ements and d decrements on changes in equity of t the parent on n acquisition n of non- Marke et risk Risk ('Boar proce deriva managemen rd'). These p dures, contro ative financia nt is carried policies includ ols and risk al instruments out by sen de identificat limits. The c s, for specula nior executiv tion and ana consolidated ative purpos ves ('finance alysis of the entity does es. Finance e') under po risk exposur not enter int reports to th olicies approv re of the con to or trade in e Board are ved by the nsolidated en n financial ins on a monthly Board of D ntity and app struments, in y basis. Directors propriate ncluding Note 2 20. Financia al instrumen nts (continu ed) Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited risk Foreig gn currency r consolidated The c ncy risk throu curren foreig n exchange . dollar entity unde ugh foreign e risk arising ertakes certa exchange rat primarily fro ain transact te fluctuation om the Poun ions denom ns. The cons d Sterling, S minated in fo olidated enti Singapore do oreign curren ty operates i ollar, South A ncy and is international African Rand exposed to ly and is exp d and New Z foreign posed to Zealand Foreig denom foreig gn exchange minated in a n exchange e risk arises currency th risks. from future hat is not the commercial e entity's fun transactions nctional curre s and recogn ency. The co nised financi onsolidated e al assets an entity presen nd financial l ntly does no iabilities ot hedge The c the re carrying amo porting date ount of the co were as follo onsolidated ows: entity's forei ign currency y denominate ed financial a assets and f financial liab bilities at Cons solidated Ass sets 2017 $'000 2016 $'000 Liabilities 2017 7 0 $'000 20 $' 016 000 US do ollars s Euros d Sterling Pound Zealand dolla New Z apore dollars Singa h African Ran South an Shilling Kenya Kong Dollar Hong nd rs ars 46 7 3,161 470 86 44 4 19 3,837 73 7 6 66 2,56 89 8 21 9 42 4 4 - 1 3 - ,696 306 28 - - - 2,99 99 2,033 2 23 - 1,331 42 88 - - - 1,484 On 9 August 201 7, a final div vidend for th he year end ded 30 June 2017 of 1.4 4 cents per ordinary sha are, unfranke ed, was declar red and will b be paid on 2 9 Septembe er 2017 to tho ose shareho lders on the register at 7 7pm on 15 Se eptember 20 017. The Price The c risk onsolidated entity is not e exposed to a any significan nt price risk. The c $3,83 positio $180, consolidated 7,000 less lia on, a 10% s 000 foreign c entity had abilities $2,0 trengthening currency loss net assets d 033,000) (201 g in the Aust s. denominated 16: $1,515,0 tralian dollar d in foreign 00 (assets $ from 30 Jun currencies o $2,999,000 le ne 2017 leve of $1,804,00 ess liabilities els may exp 00 as at 30 $1,484,000) ose the con June 2017 )). Based on solidated en (assets this net ntity to a Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 18. Equity - reserves (c continued) Share e-based paym ments reserv ve Other r reserves contro olling interest ts. Movem ments in res erves Cons solidated Balan nce at 1 July 2015 Foreig gn currency translation Share e-based paym ments Balan nce at 30 Jun ne 2016 Foreig gn currency translation Share e-based paym ments Balan nce at 30 Jun ne 2017 Note 19. Equity - dividends The r reserve is u sed to reco ognise the v value of equ uity benefits provided to o employees s and directo ors as part of their remun neration, and d other partie es as part of their compen nsation for se ervices. Movem ments in eac ch class of re eserve during g the current t and previou us financial y year are set o out below: Foreign c currency $'000 Share-base ed payments s $'000 Othe er $'000 0 To otal $' 000 (39) (93) - - (132) (101) (233) 2 23 - 2 22 4 45 - 3 32 7 77 754 - - - - 754 754 451 270 721 738 (93) 22 667 (101) 32 598 442 221 663 C onsolidated d 2017 7 $'000 0 20 016 $' 000 Divide ends paid du ring the finan ncial year we ere as follow ws: Final dividend for the year end ded 30 June 2016 of 1.0 cents (2015 : 1.0 cents) p per ordinary Interim m dividend fo or the year e ended 30 Jun ne 2017 of 0. .6 cents (201 16: 0.5 cents ) per ordinar ry share e share e total d distribution w will be $630,4 480. Note 2 20. Financia al instrumen nts Finan ncial risk ma anagement o objectives The c consolidated entity's activ vities expose e it to a varie ety of financi ial risks: ma rket risk (inc cluding foreig gn currency risk and interes st rate risk), credit risk a and liquidity risk. The con nsolidated e ntity's overa ll risk manag gement prog gram focuses s on the unpre dictability of f financial ma arkets and s seeks to min nimise poten tial adverse effects on t the financial performance e of the conso olidated entity y and to ens sure that the consolidated d entity is ab ble to finance e its busines ss plans. The e consolidate ed entity uses d different met thods to mea asure differen nt types of ri sk to which i it is exposed d. These met thods include e sensitivity a analysis in the case of inter rest rate, fore eign exchang ge and other r price risks a and ageing a analysis for c credit risk. The c bank l consolidated loans, relate entity's obje d party loans ctive is to m s and financi aintain a ba ial leases. lance betwee en continuity y of funding and flexibility y through the e use of 47 48 48 ate risk arise tity to interes es from shor st rate risk. B rt-term and l Borrowings is long-term bo ssued at fixe orrowings. B ed rates expo orrowings is ose the cons ssued at olidated entity's mai ose the cons interest rate n interest ra solidated ent e risk. Intere The c variab entity st rate risk consolidated ble rates exp to fair value Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 20. Financia al instrumen nts (continu ed) As at the reporting g date, the co onsolidated e entity had the e following v variable rate borrowings a and term dep posits. Cons solidated Bank Cash overdrafts a at bank - ter and bank loan rm deposit ns Net e xposure to c cash flow inte k erest rate risk 20 17 2016 Weighted W average terest rate % int Weight averag interest ted ge rate % Balance $'000 Bal $' lance 000 4.05% 2.75% 6. 2. 13% 60% 50 75 49) (4 70 01 650 (46) 604 The fo ollowing table es detail the consolidate d entity's rem maining cont tractual matu urity for its fin nancial instru ument liabilit ies. The tables s have been drawn up ba ased on the u undiscounted d cash flows of financial l iabilities bas sed on the ea arliest date o on which the fin nancial liabil lities are req quired to be e paid. The tables includ de both inte erest and pri incipal cash flows disclo osed as remai ning contrac ctual maturit ties and the refore these e totals may y differ from their carryi ng amount in the state ment of financ cial position. Weigh ted avera ge interest rate 1 yea ar or less an nd 2 years and 5 years s Over 5 y years % $ '000 $'000 $'000 $'000 0 B Between 1 Between 2 2 Rem maining contr ractual mat urities $' 000 The c princip requir advers expec consolidated pal and inter red to service se/favourabl cted volatility entity has n rest paymen e the debt. A e effect on p of interest ra net bank loan nt loans. Ann An official inc profit before t ates using m ns and borro nually cash o crease/decre tax of $7,000 market data a owings outst outlays of ap ease in intere 0 (2016: $6,0 and analysis. tanding, tota pproximately est rates of 000) per ann alling $701,0 y $38,000 (2 100 (2016: 1 um. The per 00 (2016: $6 2016: $350,0 100) basis po rcentage cha 604,000), wh 000 per quar oints would h ange is based hich are rter) are have an d on the In Jun coven ne 2017 the nants are spe consolidate ecific annual ed entity ente reporting req ered into a quirements. new finance e facility with h HSBC Ban nk Australia Ltd. The ba ank loan Credi Credit conso All fra put in entity' conso deacti it risk t risk refers olidated entity anchisees are place to en s exposure olidated entit ivation of acc to the risk th y. The conso e subject to nsure that re to credit de ty's policy f cess to stude hat a counte olidated entit legal and cr eceivable bal efault is not for non-paym ent curriculum erparty will d ty has adopte redit checks lances are m significant. T ment of de m resources default on its ed a policy o prior to cont monitored on The consolid bt by contra . s contractual of dealing wit tracting with n an ongoing dated entity acted partne obligations th only recog the consolid g basis with does not ho ers within t resulting in gnised, credit dated entity. the result th old any colla the maximum financial los tworthy third Policies hav hat the cons ateral. Howe m 30-day t s to the parties. ve been olidated ver, the erms is Before e accepting a any new cus stomers, the c consolidated d entity asses sses the pote ential custom mer's credit q quality. In det the tra limited recog statem ermining the ade receivab d due to the nised financi ment of finan e recoverabil ble from the customer ba ial assets is cial position ity of a trade date credit w ase being la the carrying and notes to e receivable, was initially rge and unre amount, net o the financia the consolid granted up elated. The m t of any prov al statements dated entity c to the report maximum ex isions for imp s. considers an ting date. Th xposure to cr pairment of t ny change in he concentra redit risk at t those assets n the credit q ation of cred the reporting s, as disclose uality of it risk is g date to ed in the Liquid Vigilan equiva dity risk nt liquidity ris alents) and a sk managem available bor ment requires rrowing facilit s the consolid ties to be abl dated entity t le to pay deb to maintain s bts as and w sufficient liqu hen they bec uid assets (m come due an mainly cash a nd payable. nd cash The c contin onsolidated nuously moni entity manag itoring actua ges liquidity l and forecas risk by main st cash flows ntaining adeq s and matchin quate cash re ng the matur eserves and rity profiles o available bo of financial as orrowing fac ssets and lia ilities by bilities. Finan Unuse cing arrange ed borrowing ements g facilities at the reporting g date: Bank overdraft d onsolidated C 016 20 2017 7 000 $' 0 $'000 1 ,750 500 Short -term employ yee benefits Post-e employment t benefits Share e-based paym ments 49 49 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 20. Financia al instrumen nts (continu ed) Rema aining contrac ctual maturit ties Cons solidated - 2 017 Non-d derivatives Non-i interest beari ring Trade e payables Other r payables Intere est-bearing - fixed rate Bank loans Total non-derivativ ves Cons solidated - 2 016 Non-d derivatives Non-i interest beari ring Trade e payables Other r payables 4 .05% Weigh ted avera ge - - - - Intere est-bearing - variable Bank loans Total non-derivativ ves 6 .13% interest rate 1 yea ar or less an nd 2 years and 5 years s Over 5 y years % $ '000 $'000 $'000 $'000 0 B Between 1 Between 2 2 - - 152 152 - 40 300 340 - - 44 46 44 46 - - - - - - - - - - - - Rem maining contr ractual mat urities $' 000 444 3,532 750 4,726 435 2,864 650 3,949 The c cash flows in n the maturity y analysis a bove are no ot expected t to occur sign nificantly ear rlier than con ntractually di isclosed above e. Fair v value of fina ancial instru ments Unles s otherwise stated, the c carrying amo unts of finan cial instrume ents reflect th heir fair value e. Note 2 21. Key man nagement p personnel di sclosures Comp pensation entity is set out be elow: The a aggregate co ompensation made to di rectors and other memb bers of key m managemen nt personnel of the cons olidated C onsolidated d 2017 7 $ 20 016 $ 1,385 5,427 1,1 155,469 99 9,796 33 3,694 90,614 14,417 1,518 8,917 1,2 260,500 444 3,532 152 4,128 435 2,824 350 3,609 50 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 20. Financia al instrumen nts (continu ed) Cons solidated Bank overdrafts a and bank loan ns Cash at bank - ter rm deposit Net e xposure to c cash flow inte erest rate risk k As at the reporting g date, the co onsolidated e entity had the e following v variable rate borrowings a and term dep posits. 20 17 W Weighted average 2016 Weight ted averag ge int terest rate Balance interest rate Bal lance % $'000 % $' 000 4.05% 2.75% 6. 13% 2. 60% 75 50 (4 49) 70 01 650 (46) 604 The c consolidated entity has n net bank loan ns and borro owings outst tanding, tota alling $701,0 00 (2016: $6 604,000), wh hich are princip pal and inter rest paymen nt loans. Ann nually cash o outlays of ap pproximately y $38,000 (2 2016: $350,0 000 per quar rter) are requir red to service e the debt. A An official inc crease/decre ease in intere est rates of 100 (2016: 1 100) basis po oints would h have an advers se/favourabl e effect on p profit before t tax of $7,000 0 (2016: $6,0 000) per ann um. The per rcentage cha ange is based d on the expec cted volatility of interest ra ates using m market data a and analysis. In Jun ne 2017 the consolidate ed entity ente ered into a new finance e facility with h HSBC Ban nk Australia Ltd. The ba ank loan coven nants are spe ecific annual reporting req quirements. Credi it risk Credit t risk refers to the risk th hat a counte erparty will d default on its s contractual obligations resulting in financial los s to the conso olidated entity y. The conso olidated entit ty has adopte ed a policy o of dealing wit th only recog gnised, credit tworthy third parties. All fra anchisees are e subject to legal and cr redit checks prior to cont tracting with the consolid dated entity. Policies hav ve been put in place to en nsure that re eceivable bal lances are m monitored on n an ongoing g basis with the result th hat the cons olidated entity' s exposure to credit de efault is not significant. T The consolid dated entity does not ho old any colla ateral. Howe ver, the conso olidated entit ty's policy f for non-paym ment of de bt by contra acted partne ers within t the maximum m 30-day t erms is deacti ivation of acc cess to stude ent curriculum m resources . Before e accepting a any new cus stomers, the c consolidated d entity asses sses the pote ential custom mer's credit q quality. In det ermining the e recoverabil ity of a trade e receivable, the consolid dated entity c considers an ny change in n the credit q uality of the tra ade receivab ble from the date credit w was initially granted up to the report ting date. Th he concentra ation of cred it risk is limited d due to the customer ba ase being la rge and unre elated. The m maximum ex xposure to cr redit risk at t the reporting g date to recog nised financi ial assets is the carrying amount, net t of any prov isions for imp pairment of t those assets s, as disclose ed in the statem ment of finan cial position and notes to o the financia al statements s. Liquid dity risk Vigilan nt liquidity ris sk managem ment requires s the consolid dated entity t to maintain s sufficient liqu uid assets (m mainly cash a nd cash equiva alents) and a available bor rrowing facilit ties to be abl le to pay deb bts as and w hen they bec come due an nd payable. The c onsolidated entity manag ges liquidity risk by main ntaining adeq quate cash re eserves and available bo orrowing fac ilities by contin nuously moni itoring actua l and forecas st cash flows s and matchin ng the matur rity profiles o of financial as ssets and lia bilities. Finan cing arrange ements Unuse ed borrowing g facilities at the reporting g date: Bank overdraft C onsolidated d 2017 7 $'000 0 20 016 $' 000 1 ,750 500 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 20. Financia al instrumen nts (continu ed) ties Rema The fo tables the fin remai financ aining contrac ollowing table s have been nancial liabil ning contrac cial position. ctual maturit es detail the drawn up ba lities are req ctual maturit consolidate ased on the u quired to be ties and the d entity's rem undiscounted e paid. The refore these maining cont d cash flows tables includ e totals may tractual matu of financial l de both inte y differ from urity for its fin iabilities bas erest and pri their carryi nancial instru sed on the ea incipal cash ng amount ument liabilit arliest date o flows disclo in the state ies. The on which osed as ment of Cons solidated - 2 017 Weigh avera interest % ted ge ar or less rate 1 yea '000 $ Between 1 B nd 2 years an $'000 Between 2 2 s and 5 years $'000 years Over 5 y 0 $'000 Rem contr mat $' maining ractual urities 000 Non-d Non-i Trade Other derivatives interest beari e payables r payables ring est-bearing - fixed rate Intere Bank Total loans non-derivativ ves - - 4 .05% 444 3,532 152 4,128 - - 152 152 - - 44 44 46 46 - - - - 444 3,532 750 4,726 Cons solidated - 2 016 Weigh avera interest % ted ge ar or less rate 1 yea '000 $ Between 1 B nd 2 years an $'000 2 Between 2 s and 5 years $'000 years Over 5 y 0 $'000 Rem contr mat $' maining ractual urities 000 Non-d Non-i Trade Other derivatives interest beari e payables r payables ring Intere Bank Total est-bearing - variable loans non-derivativ ves - - 6 .13% 435 2,824 350 3,609 - 40 300 340 - - - - - - - - 435 2,864 650 3,949 The c above cash flows in e. n the maturity y analysis a bove are no ot expected t to occur sign nificantly ear rlier than con ntractually di isclosed Fair v Unles value of fina s otherwise ancial instru stated, the c ments carrying amo unts of finan Note 2 21. Key man nagement p personnel di sclosures cial instrume ents reflect th heir fair value e. Comp The a entity pensation aggregate co is set out be ompensation elow: made to di rectors and other memb bers of key m managemen nt personnel of the cons olidated Short Post-e Share -term employ employment e-based paym yee benefits t benefits ments d onsolidated C 20 016 7 2017 $ $ 1,385 99 33 5,427 9,796 3,694 1,1 155,469 90,614 14,417 1,518 8,917 1,2 260,500 49 50 50 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 22. Remune eration of au uditors During compa g the financia any, and unr al year the fo ollowing fees : related firms: s were paid o or payable fo or services pr rovided by P Audit Audit services - P or review of PKF Newcast the financia tle l statements Other Prepa r services - P aration of the PKF Newcas e tax return a tle and other tax x services KF Newcast Audit Audit services - un or review of ms nrelated firm the financia l statements Other Payro r services - u oll and tax se ms unrelated firm ervices Fees Educa of $21,656 ( ation United (2016: $26,6 Kingdom Lim 659) were pa mited. aid to Hazlew woods LLP, who are the e auditors of Note 2 23. Conting ent liabilitie es There e were no con ntingent liabi ilities at 30 J une 2017. the UK sub The c opera consolidated ting lease of entity has e f the head off entered into a fice premises arrangement s amounting ts to provide to $58,000 ( e a guarante (2016: $48,0 e to the con 000). nsolidated en Note 2 24. Commit ments PPE L Comm Within One t Lease comm mitted at the n one year to five years mitments - op reporting da perating ate but not re cognised as liability, pay yable: onsolidated d C 016 20 2017 7 000 $' 0 $'000 267 639 906 231 852 1,083 Opera opera escala ating lease c ting leases ation clauses commitments expiring wit s. On renewa s includes c thin one to al, the terms ontracted am five years w of the leases mounts for o with, in som s are renego offices and p me cases, op otiated. plant and eq ptions to ex quipment un tend. The le Note 2 25. Related party transa actions Paren Kip M nt entity cGrath Educ cation Centre es Limited is the parent e entity. or of the sidiary Kip M tle, the audito Disclo osures relatin ng to key m management personnel a are set out i n note 21 a and the remu uneration re port included d in the d onsolidated C 20 016 7 2017 $ $ During g the year a a child of Ca atherine Coo ok (KMP) w was paid $1,8 880 for und ertaking cur rriculum test ing services s for the 96 6,206 97,005 During g the year, th he company Importaurus s Pty Ltd, bec came a relate ed party to K Kip McGrath and holds 27 74,050 share es in the 6,430 6 23,917 Recei ivable from a and payable t to related pa arties There e were no tra de receivabl es from or tr rade payable es to related parties at the e current and d previous re eporting date e. 102 2,636 120,922 1 17 7,352 10,813 4,304 4 15,846 21 ,656 26,659 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 25. Related party transa actions (con ntinued) Key m management personnel directo ors' report. Trans sactions with related parti ies conso olidated entity y. paren t entity. Loans s to/from rela ated parties There e were no loa ans to or from m related par rties at the cu urrent and pr revious repo rting date. Terms s and conditi ions All tra nsactions we ere made on n normal com mmercial term ms and condi itions and at market rates s. Note 2 26. Parent e entity inform mation Set ou ut below is th he suppleme entary informa ation about t the parent en ntity. Statem ment of profi it or loss and d other compr rehensive in come Total current asse ets Total assets Total current liabil lities Total liabilities Equity y Iss sued capital Fo oreign curren ncy reserve Sh hare-based p payments res serve Ac ccumulated l osses Total equity Parent 2017 7 $'000 0 20 016 $' 000 1 ,091 1 ,091 1,164 1,164 Parent 2017 7 $'000 0 20 016 $' 000 8 8,632 6 6,257 2 2,557 4 4,058 8 8,838 (42) 77 (6 ,674) 4,965 5,582 2,060 3,837 8,774 (30) 45 (7,044) 2 2,199 1,745 over its Profit after income e tax Total comprehens sive income Statem ment of finan ncial position n der non-can eases have ncellable various ntity's lessor McGrath Subsi Intere idiaries sts in subsid diaries are se et out in note e 27. 51 51 52 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 During g the financia al year the fo ollowing fees s were paid o or payable fo or services pr rovided by P KF Newcast tle, the audito or of the compa any, and unr related firms: : Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 22. Remune eration of au uditors Audit services - P PKF Newcast tle Audit or review of the financia l statements Other r services - P PKF Newcas tle Prepa aration of the e tax return a and other tax x services Audit services - un nrelated firm ms Audit or review of the financia l statements Other r services - u unrelated firm ms Payro oll and tax se ervices Educa ation United Kingdom Lim mited. Note 2 23. Conting ent liabilitie es There e were no con ntingent liabi ilities at 30 J une 2017. C onsolidated d 2017 7 $ 20 016 $ 96 6,206 97,005 6 6,430 23,917 102 2,636 1 120,922 17 7,352 10,813 4 4,304 15,846 21 ,656 26,659 C onsolidated d 2017 7 $'000 0 20 016 $' 000 267 639 906 231 852 1,083 Fees of $21,656 ( (2016: $26,6 659) were pa aid to Hazlew woods LLP, who are the e auditors of the UK sub sidiary Kip M McGrath The c consolidated entity has e entered into a arrangement ts to provide e a guarante e to the con nsolidated en ntity's lessor over its opera ting lease of f the head off fice premises s amounting to $58,000 ( (2016: $48,0 000). Note 2 24. Commit ments PPE L Lease comm mitments - op perating Comm mitted at the reporting da ate but not re cognised as liability, pay yable: Within n one year One t to five years Opera ating lease c commitments s includes c ontracted am mounts for o offices and p plant and eq quipment un der non-can ncellable opera ting leases expiring wit thin one to five years w with, in som me cases, op ptions to ex tend. The le eases have various escala ation clauses s. On renewa al, the terms of the leases s are renego otiated. Note 2 25. Related party transa actions Kip M cGrath Educ cation Centre es Limited is the parent e entity. Paren nt entity Subsi idiaries Intere sts in subsid diaries are se et out in note e 27. 51 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 25. Related party transa actions (con ntinued) Key m Disclo directo management osures relatin ors' report. personnel ng to key m management personnel a are set out i n note 21 a and the remu uneration re port included d in the Trans During conso sactions with g the year a olidated entity related parti a child of Ca y. ies atherine Coo ok (KMP) w was paid $1,8 880 for und ertaking cur rriculum test ing services s for the During paren g the year, th t entity. he company Importaurus s Pty Ltd, bec came a relate ed party to K Kip McGrath and holds 27 74,050 share es in the Recei There ivable from a e were no tra and payable t de receivabl to related pa es from or tr arties rade payable es to related parties at the e current and d previous re eporting date e. Loans There s to/from rela e were no loa ated parties ans to or from m related par rties at the cu urrent and pr revious repo rting date. Terms All tra s and conditi nsactions we ions ere made on n normal com mmercial term ms and condi itions and at Note 2 26. Parent e entity inform mation Set ou ut below is th he suppleme entary informa ation about t the parent en ntity. Statem ment of profi it or loss and d other compr rehensive in come Profit after income e tax Total comprehens sive income Statem ment of finan n ncial position Total current asse ets Total assets Total current liabil lities Total liabilities Equity y sued capital Iss oreign curren Fo hare-based p Sh ccumulated l Ac ncy reserve payments res osses serve market rates s. Parent 2017 7 0 $'000 20 $' 016 000 1 ,091 1 ,091 1,164 1,164 Parent 2017 7 0 $'000 20 $' 016 000 8,632 8 6,257 6 2,557 2 4,058 4 8,838 8 (42) 77 ,674) (6 4,965 5,582 2,060 3,837 8,774 (30) 45 (7,044) Total equity 2,199 2 1,745 52 52 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 2 26. Parent e entity inform mation (cont tinued) Guara The p excep antees entere parent entity pt as disclose ed into by th had no gua ed in note 23 e parent enti arantees in r 3. ity in relation relation to th n to the debts he debts of i s of its subsid ts subsidiari diaries es as at 30 Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 29. Earning s per share June 2017 and 30 Jun e 2016, Contin The p es ngent liabilitie had no conti arent entity h ngent liabiliti ies as at 30 J June 2017 a nd 30 June 2 2016. Profit after income e tax attributa able to the o owners of Kip p McGrath Ed ducation Cen ntres Limited d 1 ,436 1,203 tity are cons sistent with t hose of the consolidated d entity, as disclosed in note 1, Weigh hted average e number of ordinary sha ares used in c calculating d diluted earnin ngs per share e 46,798 8,031 46,7 734,331 Limited. A letter of Weigh hted average e number of ordinary sha ares used in c calculating b basic earning gs per share 44,892 2,277 44,1 184,331 Adjus stments for ca alculation of diluted earn ings per sha are: Op ptions over o ordinary shar res Finan The p suppo cial support parent entity ort was also i has issued issued in the a financial l e prior year. letter of sup port to Kip M McGrath Edu ucation Unite ed Kingdom Signifi ficant accoun accounting p The a pt for the follo excep I nvestments ● Dividends re D ● s nting policies e parent ent olicies of the owing: in subsidiari ceived from es are accou subsidiaries unted for at c are recognis cost, less any sed as other y impairmen income by t t, in the pare he parent en ent entity. ntity. Note 2 27. Interests s in subsidi aries The c accord consolidated dance with th financial s he accountin tatements in ng policy des ncorporate t scribed in not the assets, te 1: liabilities an nd results o of the follow wing subsidi aries in Name e Kip M Kip M Kip M Kip M Kip M McGrath Educ McGrath Glob McGrath Direc McGrath Educ McGrath Educ cation Austra bal Pty Limite ct Pty Ltd cation United cation New Z alia Pty Ltd ed d Kingdom Lt Zealand Limi td ted Principal Country o place of bu of incorpora siness / ation Australia Australia Australia United Kin New Zeala ngdom and Note 2 28. Reconci iliation of pr rofit after in come tax to o net cash fr rom operatin s ng activities Profit after income e tax expens se for the yea ar Adjus Depre Share Foreig stments for: eciation and e-based paym gn exchange n amortisation ments e differences Chan De De De De Inc De Inc Inc ge in operati ecrease/(incr ecrease in in ecrease in de ecrease in pr crease in tra ecrease in pr crease in de crease in em ing assets an rease) in trad nventories - s eferred tax a repayments ade and othe rovision for in ferred tax lia mployee bene nd liabilities: de and other stores and ed assets r payables ncome tax abilities efits s r receivables materials ducational m Net ca ash from ope erating activi ities 53 53 rest nership inter Own 20 016 7 2017 % % 100. 100. 100. 100. 100. 00% 00% 00% 00% 00% 10 10 10 10 10 00.00% 00.00% 00.00% 00.00% 00.00% d onsolidated C 016 20 7 2017 $' 0 $'000 000 1 ,436 1,203 773 32 (101) 25 - 185 12 530 (9) 183 67 443 22 (21) (146) 36 388 81 190 (29) 53 14 3,133 3 2,234 C onsolidated d 2017 7 $'000 0 20 016 $' 000 Numb ber Num mber 1,905 5,754 2,5 550,000 Cents s Ce ents 3 3.199 3 3.069 2.723 2.574 Basic c earnings pe er share Dilute ed earnings p per share Note 3 30. Share-b ased payme ents On 9 March 2012 , shareholde ers approved the terms a and condition ns of the Kip McGrath Em mployee Sha are Option P lan ('the Plan') . The Plan is s designed to o provide lon ng-term incen ntives for em mployees to d deliver long-t term shareho older returns s. Under the Pl an the conso olidated entit ty may, at th he discretion of the Nomi nation and R Remuneratio n Committee e, grant optio ons over ordina ary shares in n the parent e entity to cert ain key man agement pe rsonnel. The e options are e issued for n nil considerat tion and only v vest if certain n conditions a are met. Option ns granted u under the pla an carry no d dividend or v oting rights. Shares issu ed under ex xercised optio ons will rank k equally with o ordinary shar es. On ex xercise each option conve erts to one s hare, except t in certain ci ircumstances s such as rig ghts issues o or bonus issu es. Set ou ut below are summaries o of options gr ranted under r the plan: 2017 Grant t date E Expiry date price e Granted Exercised Exerc ise Expire ed/ forfeite ed/ othe r Bala ance at the e end of the year 31/03 3/2012 28/02 2/2014 20/08 8/2014 21/11 /2014 02/09 9/2016 3 31/03/2022 2 28/02/2018 3 31/12/2019 3 31/12/2019 3 31/12/2021 $0 0.075 $0 0.190 $0 0.350 $0 0.350 $0 0.300 * O Other repres ents options s lapsed - - - - 500,000 500,000 (850,00 00) (150 0,000) (200 0,000) - - - - - - - (850,00 00) (350 0,000) - 2 250,000 1 100,000 1,0 000,000 5 500,000 1,8 850,000 Bala ance at the s start of the e year 8 850,000 4 400,000 3 300,000 1,0 000,000 - 2,5 550,000 54 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Guara antees entere ed into by th e parent enti ity in relation n to the debts s of its subsid diaries The p parent entity had no gua arantees in r relation to th he debts of i ts subsidiari es as at 30 June 2017 and 30 Jun e 2016, The p arent entity h had no conti ngent liabiliti ies as at 30 J June 2017 a nd 30 June 2 2016. Profit after income e tax attributa able to the o owners of Kip p McGrath Ed ducation Cen d ntres Limited Note 2 29. Earning s per share Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited hted average Weigh stments for ca Adjus ptions over o Op e number of alculation of ordinary shar ordinary sha diluted earn res ares used in c ings per sha calculating b are: basic earning gs per share d onsolidated C 016 20 2017 7 000 $' 0 $'000 1 ,436 1,203 Numb ber Num mber 44,892 2,277 44,1 184,331 1,905 5,754 2,5 550,000 The c consolidated financial s tatements in ncorporate t the assets, liabilities an nd results o of the follow wing subsidi aries in accord dance with th he accountin ng policy des scribed in not te 1: Note 3 30. Share-b ased payme ents On 9 Plan') the Pl ordina only v March 2012 . The Plan is an the conso ary shares in vest if certain , shareholde s designed to olidated entit n the parent e n conditions a ers approved o provide lon ty may, at th entity to cert are met. the terms a ng-term incen he discretion ain key man and condition ntives for em of the Nomi agement pe ns of the Kip mployees to d nation and R rsonnel. The McGrath Em deliver long-t Remuneratio e options are mployee Sha term shareho n Committee e issued for n are Option P older returns e, grant optio nil considerat lan ('the s. Under ons over tion and Basic Dilute c earnings pe ed earnings p er share per share s Cents Ce ents 3.199 3 3.069 3 2.723 2.574 Weigh hted average e number of ordinary sha ares used in c calculating d diluted earnin ngs per share e 46,798 8,031 46,7 734,331 Option with o ns granted u ordinary shar under the pla es. an carry no d dividend or v oting rights. Shares issu ed under ex xercised optio ons will rank k equally On ex xercise each option conve erts to one s hare, except t in certain ci ircumstances s such as rig ghts issues o or bonus issu es. Set ou ut below are 2017 summaries o of options gr ranted under r the plan: Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 2 26. Parent e entity inform mation (cont tinued) excep pt as disclose ed in note 23 3. Contin ngent liabilitie es Finan cial support suppo ort was also i issued in the e prior year. Signifi ficant accoun nting policies s excep pt for the follo owing: Note 2 27. Interests s in subsidi aries The p parent entity has issued a financial l letter of sup port to Kip M McGrath Edu ucation Unite ed Kingdom Limited. A letter of The a accounting p olicies of the e parent ent tity are cons sistent with t hose of the consolidated d entity, as disclosed in note 1, ● ● I nvestments in subsidiari es are accou unted for at c cost, less any y impairmen t, in the pare ent entity. D Dividends re ceived from subsidiaries are recognis sed as other income by t he parent en ntity. Name e Principal place of bu siness / Country o of incorpora ation Kip M McGrath Educ cation Austra alia Pty Ltd Kip M McGrath Glob bal Pty Limite ed Kip M McGrath Direc ct Pty Ltd Australia Australia Australia Kip M McGrath Educ cation United d Kingdom Lt td Kip M McGrath Educ cation New Z Zealand Limi ted United Kin ngdom New Zeala and Note 2 28. Reconci iliation of pr rofit after in come tax to o net cash fr rom operatin ng activities s Profit after income e tax expens se for the yea ar Adjus stments for: Depre eciation and amortisation n Share e-based paym ments Foreig gn exchange e differences Chan ge in operati ing assets an nd liabilities: De ecrease/(incr rease) in trad de and other r receivables s De ecrease in in nventories - s stores and ed ducational m materials De ecrease in de eferred tax a assets De ecrease in pr repayments Inc crease in tra ade and othe r payables De ecrease in pr rovision for in ncome tax Inc crease in de ferred tax lia abilities Inc crease in em mployee bene efits Own nership inter rest 2017 7 % 20 016 % 100. 00% 100. 00% 100. 00% 100. 00% 100. 00% 10 00.00% 10 00.00% 10 00.00% 10 00.00% 10 00.00% C onsolidated d 2017 7 $'000 0 20 016 $' 000 1 ,436 1,203 773 32 (101) 25 - 185 12 530 (9) 183 67 443 22 (21) (146) 36 388 81 190 (29) 53 14 Net ca ash from ope erating activi ities 3 3,133 2,234 * O Other repres ents options s lapsed 53 54 54 Exerc ise price e Bala the s the ance at start of e year Granted Exercised Expire ed/ forfeite ed/ r othe Bala the e the ance at end of year $0 $0 $0 $0 $0 0.075 0.190 0.350 0.350 0.300 850,000 8 400,000 4 3 300,000 000,000 1,0 - 550,000 2,5 - - - - 500,000 500,000 Grant t date Expiry date E 31/03 28/02 20/08 21/11 02/09 3/2012 2/2014 8/2014 /2014 9/2016 31/03/2022 3 28/02/2018 2 3 31/12/2019 3 31/12/2019 31/12/2021 3 (150 (200 - 0,000) 0,000) - - 0,000) - 250,000 2 1 100,000 000,000 1,0 5 500,000 850,000 1,8 00) - - - - 00) (850,00 (350 (850,00 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M McGrath Edu ucation Cent tres Limited d Direct tors' declara ation 30 Ju ne 2017 In the directors' op pinion: ● t the attached financial sta atements an nd notes com mply with the e Corporation ns Act 2001 , the Accoun nting Standa ards, the Corporations C s Regulations s 2001 and o other mandat tory professi onal reportin ng requireme ents; ● t the attached financial sta atements and d notes comp ply with Inter rnational Fin ancial Repo rting Standa rds as issue d by the I nternational Accounting Standards B Board as des cribed in not te 1 to the fin nancial statem ments; ● t the attached financial sta atements and d notes give a true and f fair view of t the consolida ated entity's financial pos sition as at 30 June 20 a 017 and of it ts performan ce for the fin nancial year e ended on tha at date; and ● t there are rea asonable gro ounds to belie eve that the company wi ll be able to pay its debts s as and whe en they beco ome due and payable. a . The d irectors have e been given n the declara tions require ed by section n 295A of the e Corporation ns Act 2001. Signe d in accorda ance with a re esolution of d directors ma de pursuant to section 29 95(5)(a) of th he Corporatio ons Act 2001 1. On be ehalf of the d irectors Kip M McGrath Chair rman 9 Aug gust 2017 Newc castle Kip M Notes 30 Ju McGrath Edu s to the finan ne 2017 ucation Cent ncial statem ments d tres Limited Note 3 30. Share-b ased payme ents (contin ued) 2016 Grant t date Expiry date E 31/03 28/02 20/08 21/11 3/2012 2/2014 8/2014 /2014 3 31/03/2022 2 28/02/2018 3 31/12/2019 31/12/2019 3 ise Exerc e price Bala the s the ance at start of e year Granted Exercised ed/ Expire forfeite ed/ r othe Bala the e the ance at end of year $0 $0 $0 $0 0.075 0.190 0.350 0.350 8 850,000 4 400,000 3 300,000 000,000 1,0 550,000 2,5 - - - - - - - - - - - - - - - 8 850,000 4 400,000 3 300,000 000,000 1,0 550,000 2,5 The o ptions issued d in the curre ent financial year have th he following v vesting cond itions: • Mee • The ting annual p employee re performance emains in em e indicators s mployment un et by the Bo ntil date of ve ard; and esting. The w weighted ave rage share p price was $0. .319 (2016: $ $0.233). The w (2016 weighted ave : 1.71 years) erage remain ). ning contrac tual life of o options outst tanding at th he end of the e financial y year was 1.8 83 years For th the fa he options gr ir value at th ranted during e grant date g the current , are as follo t financial ye ows: ear, the Black k-Scholes op ption pricing model input s used to de etermine _____ __________ ___________ ____ Grant t date Expiry date E Option p at grant price date ercise Exe price p E Expected volatility Dividend yield Risk-fr interest ree rate Fair at gra value ant date 19/08 8/2016 31/12/2021 3 $0 0.000 $0.300 51.00% 4.70% % 1. 75% $0.113 Total expen expenses ar nse were $32 rising from s 2,000 (2016: share-based $22,000). payment tra ansactions re ecognised du uring the per riod as part of employee e benefit Note 3 31. Events a after the rep porting perio od Apart that h opera from the div has significa tions, or the vidend declar antly affecte consolidated red as disclo d, or may d entity's stat osed in note significantly te of affairs i 19, no othe affect the n future fina r matter or c consolidated ncial years. circumstance d entity's op e has arisen perations, th since 30 Jun he results o ne 2017 of those 55 55 56 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 Grant t date E Expiry date price e Granted Exercised Exerc ise Bala ance at the s start of the e year 8 850,000 4 400,000 3 300,000 1,0 000,000 2,5 550,000 - - - - - Expire ed/ forfeite ed/ othe r Bala ance at the e end of the year - - - - - - - - - - 8 850,000 4 400,000 3 300,000 1,0 000,000 2,5 550,000 ● ● ● ● Kip M McGrath Edu ucation Cent tres Limited d Notes s to the finan ncial statem ments 30 Ju ne 2017 Note 3 30. Share-b ased payme ents (contin ued) 2016 31/03 3/2012 28/02 2/2014 20/08 8/2014 21/11 /2014 3 31/03/2022 2 28/02/2018 3 31/12/2019 3 31/12/2019 $0 0.075 $0 0.190 $0 0.350 $0 0.350 The o ptions issued d in the curre ent financial year have th he following v vesting cond itions: • Mee ting annual p performance e indicators s et by the Bo ard; and • The employee re emains in em mployment un ntil date of ve esting. The w weighted ave rage share p price was $0. .319 (2016: $ $0.233). The w weighted ave erage remain ning contrac tual life of o options outst tanding at th he end of the e financial y year was 1.8 83 years (2016 : 1.71 years) ). For th he options gr ranted during g the current t financial ye ear, the Black k-Scholes op ption pricing model input s used to de etermine the fa ir value at th e grant date , are as follo ows: Grant t date E Expiry date Option p price at grant date Exe ercise price p E Expected volatility Dividend Risk-fr ree Fair value yield interest rate at gra ant date 19/08 8/2016 3 31/12/2021 $0 0.000 $0.300 51.00% 4.70% % 1. 75% $0.113 Total expenses ar rising from s share-based payment tra ansactions re ecognised du uring the per riod as part of employee e benefit expen nse were $32 2,000 (2016: $22,000). Note 3 31. Events a after the rep porting perio od Apart from the div vidend declar red as disclo osed in note 19, no othe r matter or c circumstance e has arisen since 30 Jun ne 2017 that h has significa antly affecte d, or may significantly affect the consolidated d entity's op perations, th he results o of those opera tions, or the consolidated d entity's stat te of affairs i n future fina ncial years. Kip M Direct 30 Ju McGrath Edu tors' declara ne 2017 ucation Cent ation d tres Limited In the directors' op pinion: t the attached Corporations C financial sta s Regulations atements an s 2001 and o nd notes com other mandat mply with the tory professi e Corporation onal reportin ns Act 2001 ng requireme , the Accoun ents; nting Standa ards, the the attached t I nternational financial sta Accounting atements and Standards B d notes comp Board as des ply with Inter cribed in not rnational Fin te 1 to the fin ancial Repo nancial statem rting Standa ments; rds as issue d by the t the attached at 30 June 20 a financial sta 017 and of it atements and ts performan d notes give ce for the fin a true and f nancial year e fair view of t ended on tha the consolida at date; and ated entity's financial pos sition as t there are rea asonable gro . and payable. a ounds to belie eve that the company wi ll be able to pay its debts s as and whe en they beco ome due The d irectors have e been given n the declara tions require ed by section n 295A of the e Corporation ns Act 2001. Signe d in accorda ance with a re esolution of d directors ma de pursuant to section 29 95(5)(a) of th he Corporatio ons Act 2001 1. On be ehalf of the d irectors _____ Kip M Chair __________ McGrath rman ___________ ____ 9 Aug Newc gust 2017 castle 55 56 56 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KIP MCGRATH EDUCATION CENTRES LIMITED Report on the Financial Report Opinion We have audited the accompanying financial report of Kip McGrath Education Centres Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion, the financial report of Kip McGrath Education Centres Limited is in accordance with the Corporations Act 2001, including: a) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its 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. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s Responsibility section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the consolidated entity in accordance with 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 (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. PKF(NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 Liability limited by a scheme approved under Professional Standards Legislation Sydney Newcastle Level 8, 1 O’Connell Street Sydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 755 Hunter Street Newcastle West NSW 2302 Australia 57 PO Box 2368 Dangar NSW 2309 p f +61 2 8346 6000 +61 2 8346 6099 p f +61 2 4962 2688 +61 2 4962 3245 PKF(NS) Audit & Assurance Limited Partnership is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For office locations visit www.pkf.com.au 57 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and 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. 1. Impairment testing of intangible assets Why significant How our audit addressed the key audit matter As discussed in note 10, as at 30 June 2017, the As part of our procedures we assessed the Group’s Group has intangible assets of $10.304m. determination of Cash Generating Units (CGUs). The Group has determined there is one CGU, being the An annual impairment test for intangible assets is required under Australian Accounting Standard (AASB) whole Group. 136 Impairment of Assets. Our procedures included but were not limited to: The evaluation of the recoverable amount requires the • to assessing and challenging: group to exercise significant judgment in determining key assumptions, which include: • • 5 year cash flow forecast; Terminal growth factor; and • Discount rate. The outcome of the impairment assessment could vary if different assumptions were applied. As a result, the evaluation of the recoverable amount of intangible assets including goodwill is a key audit matter. o o the assumption of one cash generating unit is appropriate; the accuracy of the FY18 budget approved by the Board by comparing the budget to FY17 and FY16 actuals; o the assumptions used for the future growth rate by comparing normalised average growth rate from FY16 to FY17 to the growth rate adopted in the impairment model; o the key assumptions for long term growth in the forecast cash flows by comparing them to historical results and industry forecasts; and o the discount rate applied by comparing the weighted average cost of capital to industry benchmarks. • testing, on a sample basis, the mathematical accuracy of the cash flow models; • agreeing inputs in the cash flow models to relevant data including approved budgets and latest forecasts; • reviewing management’s sensitivity analysis in relation to key assumptions including discount rate, growth rate and terminal value; and • we assessed the appropriateness of the disclosures including those relating to sensitivities in the assumptions used, included in Note 10. 58 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KIP MCGRATH EDUCATION CENTRES LIMITED Report on the Financial Report Opinion We have audited the accompanying financial report of Kip McGrath Education Centres Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion, the financial report of Kip McGrath Education Centres Limited is in accordance with the Corporations Act 2001, including: a) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and b) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion report. opinion. Independence We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our We are independent of the consolidated entity in accordance with 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 (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. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and 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. 1. Impairment testing of intangible assets Why significant How our audit addressed the key audit matter As discussed in note 10, as at 30 June 2017, the Group has intangible assets of $10.304m. An annual impairment test for intangible assets is required under Australian Accounting Standard (AASB) 136 Impairment of Assets. The evaluation of the recoverable amount requires the group to exercise significant judgment in determining key assumptions, which include: • • 5 year cash flow forecast; Terminal growth factor; and • Discount rate. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s Responsibility section of our The outcome of the impairment assessment could vary if different assumptions were applied. As a result, the evaluation of the recoverable amount of intangible assets including goodwill is a key audit matter. As part of our procedures we assessed the Group’s determination of Cash Generating Units (CGUs). The Group has determined there is one CGU, being the whole Group. Our procedures included but were not limited to: • to assessing and challenging: o o o o o the assumption of one cash generating unit is appropriate; the accuracy of the FY18 budget approved by the Board by comparing the budget to FY17 and FY16 actuals; the assumptions used for the future growth rate by comparing normalised average growth rate from FY16 to FY17 to the growth rate adopted in the impairment model; the key assumptions for long term growth in the forecast cash flows by comparing them to historical results and industry forecasts; and the discount rate applied by comparing the weighted average cost of capital to industry benchmarks. • testing, on a sample basis, the mathematical accuracy of the cash flow models; • agreeing inputs in the cash flow models to relevant latest including approved budgets and data forecasts; • reviewing management’s sensitivity analysis in relation to key assumptions including discount rate, growth rate and terminal value; and • we assessed the appropriateness of the disclosures the including assumptions used, included in Note 10. to sensitivities those relating in PKF(NS) Audit & Assurance Limited Sydney Partnership ABN 91 850 861 839 Liability limited by a scheme approved under Professional Standards Legislation Level 8, 1 O’Connell Street Sydney NSW 2000 Australia Newcastle 755 Hunter Street Newcastle West NSW 2302 Australia GPO Box 5446 Sydney NSW 2001 PO Box 2368 Dangar NSW 2309 p f +61 2 8346 6000 +61 2 8346 6099 p f +61 2 4962 2688 +61 2 4962 3245 PKF(NS) Audit & Assurance Limited Partnership is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For office locations visit www.pkf.com.au 57 58 58 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 2. Area Developer Termination payments (one-off transaction) Why significant How our audit addressed the key audit matter During the year, KMEC entered into a confidential termination agreement with an Australian Area Developer ("AD”) which allows KMEC to regain the rights bestowed under this AD arrangement. For this right, KMEC agreed to pay an upfront payment in full and capitalised the purchase as an intangible asset at 15 December 2016. As at 30 June 2017 the written down value of this intangible asset has been included as a part of Note 10 in the financial statements under “Other intangible assets”. We reviewed the AD termination agreement and ensured the asset was capitalised appropriately, traced payment to bank and we recalculated the corresponding amortisation to ensure it was correct at 30 June 2017. We deemed management's decision to amortise the AD termination asset over five years as reasonable given the timeframe of expected future economic benefits and customer churn. Other Information Other information is financial and non-financial information in the annual report of the company which is provided in addition to the Financial Report and the Auditor’s Report. The directors are responsible for Other Information in the annual report. The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report. The remaining Other Information is expected to be made available to us after the date of the Auditor’s Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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. We are required to report if we conclude that there is a material misstatement of this Other Information in the Financial Report and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Directors’ Responsibilities 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 Note 1, the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using a going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do so. financial report. financial report. internal control. report. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. 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 and 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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individual or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the The procedures selected depend on the auditor’s judgement, including assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. 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 An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial We 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 consolidated entity’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 consolidated entity to cease to continue as a going concern. We 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. We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the consolidated entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. 59 59 60 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 2. Area Developer Termination payments (one-off transaction) Why significant How our audit addressed the key audit matter During the year, KMEC entered into a confidential We reviewed the AD termination agreement and termination agreement with an Australian Area ensured the asset was capitalised appropriately, Developer ("AD”) which allows KMEC to regain the rights traced payment to bank and we recalculated the bestowed under this AD arrangement. For this right, corresponding amortisation to ensure it was correct at KMEC agreed to pay an upfront payment in full and 30 June 2017. capitalised the purchase as an intangible asset at 15 December 2016. As at 30 June 2017 the written down value of this intangible asset has been included as a part of Note 10 in the financial statements under “Other intangible assets”. We deemed management's decision to amortise the AD termination asset over five years as reasonable given the timeframe of expected future economic benefits and customer churn. Other Information Other information is financial and non-financial information in the annual report of the company which is provided in addition to the Financial Report and the Auditor’s Report. The directors are responsible for Other Information in the annual report. The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report. The remaining Other Information is expected to be made available to us after the date of the Auditor’s Report. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. 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 and 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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individual or in 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 Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report. 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. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We are required to report if we conclude that there is a material misstatement of this Other Information in the Financial Report and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Directors’ Responsibilities 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 Note 1, the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using a going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do so. We 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 consolidated entity’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 consolidated entity to cease to continue as a going concern. We 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. We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the consolidated entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. 59 60 60 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 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. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. 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, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore 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. Report on the Remuneration Report Opinion We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Kip McGrath Education Centres Limited for the year ended 30 June 2017, 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. PKF CHARTERED ACCOUNTANTS MARTIN MATTHEWS PARTNER 9 AUGUST 2017 NEWCASTLE, NSW 61 61 Kip M McGrath Edu ucation Cent tres Limited d Share eholder info ormation 30 Ju ne 2017 The s hareholder in nformation s et out below w was applica able as at 24 July 2017. Distri bution of eq quitable sec curities Analys sis of numbe er of equitabl le security ho olders by siz ze of holding: : 1 to 1 ,000 1,001 to 5,000 5,001 to 10,000 10,00 01 to 100,000 0 100,0 001 and over r Holdin ng less than a marketabl e parcel Equity y security h holders Twent ty largest qu oted equity s security hold ders The n ames of the twenty large est security h holders of qu oted equity s securities are e listed below w: MR K KIP MCGRAT TH CITIC CORP NOMIN NEES PTY L LIMITED KMEC C SUPERAN NNUATION P PTY LTD (KM MEC SUPER RANNUATIO N FUND A/C C) J P M MORGAN NO OMINEES AU USTRALIA L IMITED MR S STORM KIP M MCGRATH KIP M MCGRATH IN NVESTMENT TS PTY LTD D (MCGRATH H FAMILY A/ /C) BNP PARIBAS NO OMINEES P PTY LTD (IB A AU NOMS R RETAILCLIEN NT DRP) BELS SOV PTY LTD D (TURNER R FAMILY S/F F A/C) ENSI STREET SU UPERANNUA ATION PTY LTD (ENSI S STREET RE ETIREMENT A/C) EMER RALD SHAR RES PTY LIM MITED (EME RALD UNIT A/C) MR M MATTHEW C CHARLES PE EEK HETA ALE PTY LIM MITED (EAGL LES NEST R RETIRE FUN ND A/C) MR P PETER SCAR RF + MRS ID DA SCARF (S SCARF SUP PER FUND A ACCOUNT) ENSI STREET SU UPERANNUA ATION PTY LTD (ENSI S STREET RE ETIREMENT A/C) WHIL LEY CLOSE INVESTMEN NTS PTY LT TD (SIMS FA MILY SUPE R FUND A/C C) MR B BRIAN STEP HAN SLEIG H MRS JENNIFER A ANNE BUCH HANAN MR R ROBERT LUN NDY (LUNDY Y SUPER FU UND A/C) ENSI TRADING C COMPANY P PTY LTD MR J UAN VAREL LA + MS ANN NE HENCHM MAN Unquo oted equity s securities There e are no unqu uoted equity securities, e except the op ptions as disc closed in Not te 30. 62 Numb ber of hold ers of ordin nary share es Num mber of ho olders of op ptions o ver ord inary sh ares Ord dinary share es % of f total sh ares iss sued 76 169 71 133 37 486 94 Number held 11,200 0,499 10,505 5,539 4,000 0,000 1,594 4,559 1,333 3,959 1,000 0,000 881 ,152 758 8,052 600 0,000 585 5,933 580 0,000 500 0,000 486 6,215 415 5,000 383 3,000 374 4,615 327 7,714 325 5,000 307 7,864 306 6,370 - - - - - 6 6 24.87 23.33 8.88 3.54 2.96 2.22 1.96 1.68 1.33 1.30 1.29 1.11 1.08 0.92 0.85 0.83 0.73 0.72 0.68 0.68 36,465 5,471 80.96 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889 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. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. 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, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore 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. Report on the Remuneration Report Opinion Responsibilities Standards. We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Kip McGrath Education Centres Limited for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. 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 PKF CHARTERED ACCOUNTANTS MARTIN MATTHEWS PARTNER 9 AUGUST 2017 NEWCASTLE, NSW 61 Kip M Share 30 Ju McGrath Edu eholder info ne 2017 ucation Cent ormation d tres Limited The s hareholder in nformation s et out below w was applica able as at 24 July 2017. Distri Analys bution of eq sis of numbe quitable sec er of equitabl curities le security ho olders by siz : ze of holding: 1 to 1 1,001 5,001 10,00 100,0 ,000 to 5,000 to 10,000 01 to 100,000 0 r 001 and over Holdin ng less than a marketabl e parcel ber Numb of hold ers of ordin nary es share mber Num olders of ho ptions of op ver o ord inary sh ares 76 169 71 133 37 486 94 - - - - 6 6 - Equity y security h holders Twent The n ty largest qu ames of the oted equity s twenty large security hold est security h ders holders of qu oted equity s securities are e listed below w: Ord dinary share % of sh iss es f total ares sued held Number 11,200 10,505 4,000 1,594 1,333 1,000 881 758 600 585 580 500 486 415 383 374 327 325 307 306 0,499 5,539 0,000 4,559 3,959 0,000 ,152 8,052 0,000 5,933 0,000 0,000 6,215 5,000 3,000 4,615 7,714 5,000 7,864 6,370 36,465 5,471 24.87 23.33 8.88 3.54 2.96 2.22 1.96 1.68 1.33 1.30 1.29 1.11 1.08 0.92 0.85 0.83 0.73 0.72 0.68 0.68 80.96 MR K CITIC KMEC J P M MR S KIP M BNP BELS ENSI EMER MR M HETA MR P ENSI MR B MRS WHIL MR R ENSI MR J KIP MCGRAT CORP NOMIN C SUPERAN MORGAN NO STORM KIP M MCGRATH IN PARIBAS NO SOV PTY LTD STREET SU RALD SHAR MATTHEW C ALE PTY LIM PETER SCAR STREET SU BRIAN STEP JENNIFER A LEY CLOSE ROBERT LUN TRADING C UAN VAREL LIMITED PTY LTD (KM USTRALIA L TH NEES PTY L NNUATION P OMINEES AU MCGRATH TS PTY LTD NVESTMENT PTY LTD (IB A OMINEES P R FAMILY S/F D (TURNER ATION PTY UPERANNUA MITED (EME RES PTY LIM EEK CHARLES PE LES NEST R MITED (EAGL DA SCARF (S RF + MRS ID UPERANNUA ATION PTY HAN SLEIG H HANAN ANNE BUCH NTS PTY LT INVESTMEN Y SUPER FU NDY (LUNDY PTY LTD COMPANY P NE HENCHM LA + MS ANN MEC SUPER IMITED D (MCGRATH AU NOMS R F A/C) LTD (ENSI S RALD UNIT RANNUATIO N FUND A/C C) H FAMILY A/ RETAILCLIEN /C) NT DRP) STREET RE A/C) ETIREMENT A/C) RETIRE FUN SCARF SUP LTD (ENSI S ND A/C) PER FUND A STREET RE ACCOUNT) ETIREMENT A/C) MILY SUPE R FUND A/C C) TD (SIMS FA UND A/C) MAN Unquo There oted equity s e are no unqu securities uoted equity securities, e except the op ptions as disc closed in Not te 30. 62 62 Kip McGrath Education Centres Limited ABN 73 003 415 889 | Annual Report 2017 Kip M Share 30 Ju McGrath Edu eholder info ne 2017 ucation Cent ormation d tres Limited Subst Subst tantial holde tantial holder ers rs in the com mpany are set t out below: MR K CITIC KMEC J P M KIP MCGRAT CORP NOMIN C SUPERAN MORGAN NO TH NEES PTY L NNUATION P OMINEES AU LIMITED PTY LTD (KM USTRALIA L MEC SUPER IMITED RANNUATIO Ord dinary share % of sh iss es f total ares sued held Number N FUND A/C C) 11,200 10,505 4,000 1,594 0,499 5,539 0,000 4,559 24.87 23.33 8.88 3.54 Votin The v g rights oting rights a attached to o ordinary shar res are set ou ut below: Ordina On a share ary shares show of han shall have o nds every me one vote. ember prese ent at a meet ting in perso on or by prox xy shall have e one vote a nd upon a p oll each There e are no othe r classes of equity secur rities. 63 63 Annual Report 2017 | Kip McGrath Education Centres Limited ABN 73 003 415 889
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