Kip McGrath Education Centres Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
Kip McGrath Education Centres Limited
73 003 415 889
For the year ended 30 June 2021
For the year ended 30 June 2020
2. Results for announcement to the market
Revenues from ordinary activities
up
12.6% to
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
down
3.1% to
$'000
19,278
5,119
Profit from ordinary activities after tax attributable to the owners of Kip
McGrath Education Centres Limited
Profit for the year attributable to the owners of Kip McGrath Education
Centres Limited
up
up
10.2%
to
1,733
10.2%
to
1,733
Dividends
An interim dividend for the year ended 30 June 2021 of 1.0 cents per ordinary share, 100% fully franked, was paid on 24
March 2021. The total distribution was $522,193.
On 24 August 2021, a final dividend for the year ended 30 June 2021 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 23 September 2021 to those shareholders on the register at 7p.m. on 9 September 2021.
The total distribution will be $522,193.
Comments
The profit for the consolidated entity after providing for income tax amounted to $1,733,000 (30 June 2020: $1,573,000).
With continuing lockdowns in all significant markets due to the COVID-19 pandemic, there continues to be a reduction in
revenue from traditional face to face lessons. This has been offset by increased usage of the online tutoring options
available on our software platform.
Refer to Chairman's letter and Chief Executive Officer's report for further commentary.
The earnings before interest, tax, depreciation and amortisation ('EBITDA') amounted to $5,119,000 (2020: $5,208,000).
The following table summarises key reconciling items between statutory profit after tax attributable to the owners of Kip
McGrath Education Centres and EBITDA.
Revenue
EBITDA
Less: Depreciation and amortisation
Less: Interest expense
Profit before Income tax expense
Income tax expense
Profit after income tax expense
Consolidated
2021
$'000
2020
$'000
19,265
17,123
5,119
(2,707)
(116)
2,296
(563)
5,208
(2,660)
(141)
2,407
(834)
1,733
1,573
Kip McGrath Education Centres Limited
Appendix 4E
Preliminary final report
3. Net tangible assets
Net tangible assets per ordinary security
Reporting
Previous
period
Cents
period
Cents
4.48
8.43
Right-of-use assets have not been treated as intangible assets for the purposes of the net tangible asset calculation.
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
6. Dividend reinvestment plans
Not applicable.
7. Details of associates and joint venture entities
Not applicable.
8. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
9. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unmodified opinion has been issued.
10. Attachments
Details of attachments (if any):
The Annual Report of Kip McGrath Education Centres Limited for the year ended 30 June 2021 is attached.
Kip McGrath Education Centres Limited
Appendix 4E
Preliminary final report
11. Signed
As authorised by the Board of Directors
Signed ___________________________
Date: 24 August 2021
Ian Campbell
Chairman
Sydney
Kip McGrath Education Centres Limited
ABN 73 003 415 889
Annual Report - 30 June 2021
Kip McGrath Education Centres Limited
Corporate directory
30 June 2021
Directors
Ian Campbell - Chairman
Storm McGrath
Trevor Folsom
Diane Pass
Company secretary
Brett Edwards
Notice of annual general meeting
The details of the annual general meeting of Kip McGrath Education Centres Limited
are:
Level 25, Tower 3,
300 Barangaroo Avenue
Sydney NSW 2000
Tuesday 16 November 2021 at 11:00 a.m. (AEST)
Registered office
Share register
Auditor
Bankers
Level 3
6 Newcomen Street
Newcastle, NSW 2300
Head office telephone: 02 4929 6711
Computershare Investor Services Pty Limited
117 Victoria Street,
West End, QLD 4101
Shareholders enquiries: 1300 787 272
PKF Newcastle
755 Hunter Street
Newcastle West, NSW 2302
HSBC Bank Australia Ltd
Tower 1, International Towers Sydney
Level 36
100 Barangaroo Avenue
Sydney NSW 2000
Stock exchange listing
Kip McGrath Education Centres Limited shares are listed on the Australian Securities
Exchange (ASX code: KME)
Website
www.kipmcgrath.com
Corporate Governance Statement
The directors and management are committed to conducting the business of Kip
McGrath Education Centres Limited in an ethical manner and in accordance with the
highest standards of corporate governance. Kip McGrath Education Centres Limited
has adopted and has substantially complied with the ASX Corporate Governance
Principles and Recommendations (Fourth Edition) ('Recommendations') to the extent
appropriate to the size and nature of its operations.
The consolidated entity’s Corporate Governance Statement, which sets out the
corporate governance practices that were in operation during the financial year and
identifies and explains any Recommendations that have not been followed and the
ASX Appendix 4G are released to the ASX on the same day the Annual Report is
released. The Corporate Governance Statement and Corporate Governance
Compliance Manual can be found on the Group’s website at
https://www.kipmcgrath.com/global/shareholder-information
1
Kip McGrath Education Centres Limited
Chairman's letter
30 June 2021
Dear Shareholders,
I am pleased to report the company’s revenue for the year increased 12.6% to $19.3M. The corporate centre and corporate
direct initiative has continued to grow well with a revenue increase to $3.7M from $1.4 last year (+164%). The franchise fee
revenue was very strong with a decrease of only 2% despite the UK, Africa, and part of Australia in and out of lockdown for
large parts of the year. The company’s EBITDA held steady at $5.1M, whilst profit after tax increased by 10.2% to $1.7M.
These results are impressive, considering the ‘once in a generation’ challenge we have all had to endure, which has
affected our health, lifestyle, relationships, and financial security.
The most immediate concerns at the outset of the pandemic were the protection of our students, franchisees, employees,
and of course our shareholders. Our business model has survived well, thanks to our early identification and acceptance
that a blended model of face-to-face tuition together with online learning, would eventually be the new normal….and now it
has come to be!
The Company achieved several notable outcomes during the year, despite the volatile and uncertain environment. These
included:
The strengthening of the executive team with the recruitment of a Chief Operating Officer for Australasia, a Chief
Technology Officer, and a Chief Product Officer. The team has a greater focus on strategy and growth which will be
reflected further in FY22. It has also reduced risk for succession
An increase in human capital to support our growth with staff numbers increasing to over 200 worldwide
Online tuition was 40% of overall lessons and will remain a large part of the business. Most of the franchisees have
now embraced the blended learning model
We now have corporate centres in Sydney, Melbourne, Brisbane, Perth, Newcastle, Canberra and our first centres
in New Zealand and the UK
Selection as a partner for the NSW Government tutoring program. This rollout is currently slow due to NSW
lockdowns. This is the first time in the company’s 45 year history we have been selected to provide tuition for
schools at a government level
The institutional placement in June 2020 of $5.9M was partly used to purchase 10 corporate centres and to
accelerate the technology upgrade currently underway
The administration software upgrade has been released and the enhanced learning software is expected to be
released globally before the end of this calendar year
The company continues to be a profitable, cash generative tutoring business with substantial growth over the last 10 years,
based on a tailored education method developed over the company’s 45-year history. We expect the business to continue to
focus on growth opportunities worldwide to increase our lesson numbers and to progress the corporate centres strategy to
increase revenue and profit. With lockdowns now a normal part of life we are ideally placed with blended learning.
Today, the Board declared a fully franked final dividend of 1 cent per share payable on 23 September 2021 to those
shareholders on the register at 7pm on 9 September 2021.
I thank all those who have contributed to the company’s success during this challenging year. To our shareholders, I hope
you can join us at this year’s Annual General Meeting on 16 November 2021 at 11am.
Ian Campbell
Chairman
24 August 2021
Sydney
2
Kip McGrath Education Centres Limited
Managing Director and CEO's report
30 June 2021
The company’s vision of online tutoring and blended lessons is the new normal. With Covid related lockdowns across the
world, flexibility of delivery and technology investment have helped the company record revenue of $19.3M. What was
particularly pleasing was the increase in Corporate outlets over the year from 5 to 17 using the funds from the Capital Raise
in June 2020. Revenue for Corporate was $3.7M - an increase of 164%.
Strengthening our executive team, has allowed us more time to invest on strategic organic growth and acquisitions. The
day to day running of Australasia is now managed by Scott Hillard with a focus on blended learning and growing the student
numbers. Daniel Pludek, our Chief Technology Officer has brought a new level of focus to the IT team, whilst Abby Clifton
as Chief Product Officer is delivering on an improved product offering for the student. Jackie Burrows, the Chief Executive
of our UK business continues to expand our services in that market.
Overview of our major initiatives:
1. Corporate Centres and Corporate online direct
We have had a successful year building corporate. During the year we purchased or opened 11 corporate centres
including one in New Zealand and another in the UK. Corporate centres and Corporate direct now sit at 2,500 students
and growing continually. We expect corporate revenue to increase by over 100% for FY22 with the opening and
purchase of another 10 centres in the pipeline. Corporate centres have allowed us to test and implement improved
systems to focus our business keeping up with growing expectations of both parent and student. A mix of both corporate
and franchised centres is good for all stakeholders.
2. Blended Tutoring
A large proportion of our students still prefer face to face tutoring. However, the ability to log in from anywhere is also
now a major selling point. We held steady at around 40% of our lessons delivered online, some because of
convenience, others not being able to make the centre as booked, and others for health reasons. We expect this will
fluctuate depending on lockdowns, but it is a permanent and progressive shift in our business model.
3. Gold Partner Franchisees
There are now 298 Gold Partner centres operating globally, including 110 in the Australian market, 180 in the UK
market and 8 in New Zealand. The Gold Partner contract is now our primary franchise product and continues to be our
main growth focus. Globally 537 centres are active.
4. Marketing
The company spends A$3.5M a year on marketing with most franchisees adding to additional marketing spend. Our
Customer Acquisition Cost has remained stable at A$200 for corporate centres made up of advertising and student
assessment. The initial ‘first stay’ value of the student across the group approximates at A$2,000, with lifetime value
higher as students return in subsequent years for additional assistance.
5. Technology Development
We released our management and administration software upgrade, Intuition, in June this year. We now have over 50%
of franchisees using it worldwide. Our next major development is the release of our upgraded learning software for
students, Kip Learn, which we are currently finalising for release to Corporate Centres for testing next month.
6. Acquisition of Master Franchise territories and Area Developers.
Last week we announced the purchase of the South Africa Master Franchise and the purchase of the Area Developer
territory for Scotland. These are now the final two Master purchases that can be successfully run by Head Office. These
purchases will add in excess of $100,000 to EBIT for FY22.
7. Government Tuition initiatives
Many governments throughout the world are allocating funds to decrease the learning gap created by Covid. We are
one of four providers in NSW for the Government Tutoring Program and have individual franchisees in the UK
developing relationships with schools to take advantage of the UK National Tutoring Program. The Education Tutoring
Industry will continue to benefit from Government outsourcing of tutoring requirements.
3
Kip McGrath Education Centres Limited
Managing Director and CEO's report
30 June 2021
Outlook
Whilst we have maintained our student numbers during Covid, in a post Covid world we expect revenue, profit and profit
margins to continue to grow through a combination of the ongoing development and automation of the software as a service,
our national advertising campaigns and the option for students to choose blended learning.
I would like to thank the Franchisees and employees for their hard work and support throughout the year. I would also like to
thank our dedicated and motivating teachers and the parents who continue to bring their children to Kip McGrath.
We are committed to our motto that ‘every child can learn, they just have to be taught well’, and we will continue to do this
for our current 40,000 students and the many thousands more who we’ll welcome into the Kip McGrath family in the future.
Storm McGrath
Managing Director
24 August 2021
Sydney
4
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Kip McGrath Education Centres Limited (referred to hereafter as the 'company' or
'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2021.
Directors
The following persons were directors of Kip McGrath Education Centres Limited during the whole of the financial year and
up to the date of this report, unless otherwise stated:
Ian Campbell (Chairman)
Storm McGrath
Trevor Folsom
Diane Pass
Principal activities
The principal activities of the consolidated entity during the course of the financial year continued to be the sale of
franchises and providing services to franchisees in the education field. The company is also increasing the number of
tutoring centres that are corporately owned. The consolidated entity operates in Australia and overseas, principally in the
United Kingdom and New Zealand.
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2020 of 2.0 cents (2019: 2.5 cents) per ordinary
share
Interim dividend for the year ended 30 June 2021 of 1.0 cents (2020: nil cents) per ordinary
share
Consolidated
2021
$'000
2020
$'000
1,036
1,131
522
-
1,558
1,131
On 24 August 2021, a final dividend for the year ended 30 June 2021 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 23 September 2021 to those shareholders on the register at 7p.m. on 9 September 2021.
The total distribution will be $522,193.
Review of operations
The profit for the consolidated entity after providing for income tax amounted to $1,733,000 (30 June 2020: $1,573,000).
With continuing lockdowns in all significant markets due to the COVID-19 pandemic, there continues to be a reduction in
revenue from traditional face to face lessons. This has been offset by increased usage of the online tutoring options
available on the consolidated entity's software platform.
Revenue has grown by 12.6% to $19,278,000, with growth in student lesson fees from corporate centres offsetting a fall in
franchise fees. Student lesson fees from corporate centres were up 139% to $3,661,000 following the acquisition of the
Centres in Sydney, Brisbane, Melbourne, Perth and New Zealand. Franchise fees fell 3% to $11,524,000 with COVID-19
continuing to impact all key markets throughout the financial year. Refer to note 4 for additional information.
Despite the pandemic significantly impacting multiple markets for the majority of the year, there was a 1% increase in
global attended lesson numbers from 1,425,000 in the prior year to 1,440,000 in the current financial year. The pandemic
fuelled the ongoing demand for online lessons, with 654,000 lessons delivered during the financial year, an increase
of 221% over the 295,000 lessons taught in prior year. Corporate Centre lessons in the Australasian market jumped 286%
from 22,600 lessons last financial year to 64,700 lessons in the current financial year. The Australasian markets grew by
7% to 579,000 lessons for the year, while the UK market grew by 6% to 751,000 attended lessons.
5
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
There are now 16 Corporate Centres operational, including centres in Brisbane (2), Newcastle (2), Sydney (4) Bathurst (1)
Canberra (1), Melbourne (2), Perth (2), England (1) and New Zealand (1). Gold Partner numbers in Australia have reduced
to 110, partly due to Corporate Centre acquisitions. Total centres in Australia remains at 144 (consistent with the prior
year). Similarly in the New Zealand market centre numbers have remained stable at 58 active centres, with 8 Gold
Partners. The Corporate Centre is located in Palmerston North on the North Island.
In the UK market, we have opened our first Corporate Centre in Gloucester, close to the UK Head Office. In the UK the
number of Gold Partners have been growing, now at 180 centres compared to 166 in the prior year. Overall there are 255
active UK centres, up from 247 in the prior year.
The South African and Middle East markets continued to see significant shut downs from the pandemic with revenues
falling by a further 37% to $521,000 although there are positive signs of recovery. With the retirement of the South African
Master Franchisee, we are working to convert 60 centres in that market across to head office contracts and expect the
majority will come across to the new contracts.
The earnings before interest, tax, depreciation and amortisation ('EBITDA') amounted to $5,119,000 (2020: $5,208,000).
The following table summarises key reconciling items between statutory profit after tax attributable to the shareholders of
Kip McGrath Education Centres and EBITDA.
Revenue
EBITDA
Less: Depreciation and amortisation
Less: Interest expense
Profit before Income tax expense
Income tax expense
Profit after income tax expense
Consolidated
2021
$'000
2020
$'000
19,265
17,123
5,119
(2,707)
(116)
2,296
(563)
5,208
(2,660)
(141)
2,407
(834)
1,733
1,573
The directors consider EBITDA to reflect the core earnings of the consolidated entity. EBITDA is a financial measure not
prescribed by Australian Accounting Standards ('AAS') and represents the profit under AAS adjusted for depreciation,
amortisation and interest expense. This financial measure has not been subject to specific audit or review procedures by
the company’s auditor, but has been extracted from the accompanying financial statements.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
The consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its impact on
the consolidated entity, if any, has been reflected in its published results to date. Whilst it would appear that control
measures and related government policies, including the roll out of the vaccine, have started to mitigate the risks caused
by COVID-19, it is not possible at this time to state that the pandemic will not subsequently impact the consolidated entity's
operations going forward. The consolidated entity now has experience in the swift implementation of business continuation
processes should future lockdowns of the population occur, and these processes continue to evolve to minimise any
operational disruption. Management continues to monitor the situation both locally and internationally.
On 12 July 2021, the company executed an agreement for the South African master franchisee to hand back the South
African territory, which includes approximately 60 operating centres. The total payment for the hand back is dependent on
the number of franchisees who execute new franchise agreements over the coming months and is expected to be in the
range of South African Rand 5,000,000 (approximately A$460,000).
On 28 July 2021, the company executed an agreement for £40,000 (approximately A$75,000) to acquire the Gloucester
North in England. This centre will be our first Corporate Centre Hub in the UK market, located close at our UK head office.
6
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
On 16 August 2021, the company purchased back the Scotland Area Developer for a capital payment of £250,000
(approximately A$470,000) payable over a 12-month period commencing October 2021. The territory has 32 active centres
and will now be fully serviced by the UK Head Office in Gloucester.
Apart from the dividend declared and the other items discussed above, no other matter or circumstance has arisen since
30 June 2021 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of
those operations, or the consolidated entity's state of affairs in future financial years.
Likely developments and expected results of operations
The company has commenced operating a number of corporately owned education centres in the Australian market as
part of a strategy to drive growth and greater franchisee engagement. More details are set out in the CEO’s Report. It is
expected that future growth will continue to be in line with recent experience.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Ian Campbell (appointed as Chairman on 5 August 2019)
Non-Executive Director and Chairman
FCA, MAICD
Ian joined the Board on 25 August 2009 after a 32 year career with the international
accounting firm Ernst & Young principally working with entrepreneurial companies
and the capital markets. Ian is a Fellow of Chartered Accountants Australia and New
Zealand and a member of the Australian Institute of Company Directors. He is
currently a non-executive director of CVC Limited, Redox Pty Ltd. His previous non-
executive director roles included Gloria Jean’s Coffees International Pty Limited,
Green’s Foods Holdings Pty Ltd and Young Achievement Australia Limited and he
was a partner with the Board search practice of the Allegis Group (formerly Talent2).
CVC Ltd
Chairman of the Audit Committee and member of the Remuneration Committee
500,000 ordinary shares
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Storm McGrath (appointed as Executive Director on 5 August 2019)
Executive Director, Chief Executive Officer and Investor Relations
Master of Business Administration
Storm is currently the CEO of Kip McGrath Education Centres Ltd. Storm first joined
the board in 1997 to advise on technology and strategy. At the time he had been
running two successful businesses of his own. He joined the executive team in 2000
and was employed to run the IT department and general operations and later went on
to be responsible for global franchise sales. In 2005 he was appointed joint managing
director and in 2007 he was appointed managing director. He is responsible for day to
day operations and strategic direction of the company.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
2,884,333 ordinary shares
Interests in shares:
1,500,000 options over ordinary shares
Interests in options:
7
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
Name:
Title:
Experience and expertise:
Trevor Folsom
Non-Executive Director
Trevor has extensive background and experience and is acknowledged for his ability
to engage, invest and advise growth companies, particularly in the technology sector.
He is a successful entrepreneur in his own right, developing, from start up, Blueprint
Management, which he sold in 2008. He is currently a Director of Investible, an early
stage technology investment company.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Member of the Audit Committee and member of the Remuneration Committee
165,000 ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Diane Pass
Non-Executive Director
MAICD
Diane is the Founder and Director of the human resources consultancy firm 360HR.
She has more than 26 years local, national and international experience in the
recruitment and consulting industry. She is accomplished in creating and delivering
engaging professional development programs, public speaking and leading complex
management consulting assignments. She currently sits on the Boards of Not-for-
Profit organisations, Wheelchair Sports NSW and Jobsupport (‘Employment for
People with Intellectual Disability). From 2001 to 2018 she was Chair of the Advisory
Council of Sydney Institute of TAFE NSW. Diane is also a member of the Australian
Institute of Company Directors.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Chairman of the Remuneration Committee and member of the Audit Committee
105,473 ordinary shares
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships in all
other types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships in all other types of entities, unless otherwise stated.
Company secretary
Brett Edwards is a Fellow of Chartered Accountants Australia and New Zealand and a member of the Australian Institute of
Company Directors. He has 31 years of experience in accounting and reporting in a number of major Australian and
international businesses, including 10 years with international accounting firm Ernst & Young. He was previously a director
of GMAC Australia LLC, a US company operating in the finance segment in Australia.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2021, and the number of meetings attended by each director were:
Full Board
Remuneration Committee
Audit Committee
Attended
Held
Attended
Held
Attended
Held
Ian Campbell
Storm McGrath
Trevor Folsom
Diane Pass
10
10
9
10
10
10
10
10
3
-
3
3
3
-
3
3
4
-
2
4
4
-
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and other key management personnel ('KMP')
arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its
Regulations.
8
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
KMP are defined as those who have the authority and responsibility for planning, directing and controlling the major
activities of the consolidated entity.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to KMP
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to market best practice for delivery of
reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of KMP compensation; and
transparency.
The Remuneration Committee ('RC') is responsible for determining and reviewing remuneration arrangements for its KMP.
The performance of the consolidated entity depends on the quality of its KMP. The remuneration philosophy is to attract,
motivate and retain high performance and high quality personnel.
The Remuneration Committee makes recommendations to the Board in relation to remuneration of non-executive
directors, and establishes, reviews and approves remuneration terms and the performance of the chief executive officer.
The committee also assists the chief executive officer in the remuneration review of senior executives and sets the
remuneration package of the chief executive officer for approval by the Board.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors' remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the
directors. Non-executive directors' fees and payments are reviewed annually by the RC. The RC may take the advice of
independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line
with the market. The fees for the chair of the Board are determined independently to the fees of other non-executive
directors based on comparative roles in the external market. Non-executive directors do not receive share options or other
incentives.
ASX listing rules requires that the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. The most recent determination was at the Annual General Meeting held on 20 November 2015, where the
shareholders approved a maximum aggregate remuneration of $400,000.
Executive remuneration
The consolidated entity aims to reward KMP based on their position and responsibility, with a level and mix of
remuneration, which has both fixed and variable components.
The KMP remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration, such as superannuation and long service leave.
The combination of these comprises the KMP's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
RC, based on individual and business unit performance, the overall performance of the consolidated entity and comparable
market remuneration.
9
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
KMPs can receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits)
where it does not create any additional costs to the consolidated entity and adds additional value to the KMP.
The short-term incentives ('STI') program is designed to align the targets of the business units with the performance
hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance
indicators ('KPI') being achieved. KPI’s for the chief executive officer are set by the RC and currently focus on the
consolidated entity's financial performance measured by reference to annual after-tax profit. The KPI's of other executives
are set by the chief executive officer and are reviewed in consultation with the Board.
Long-term incentives ('LTI') include share options and long service leave. The objective of the employee share option plan
is to assist in the recruitment, reward, retention and motivation of key employees and directors by facilitating the offering of
options over ordinary shares, subject to performance and loyalty hurdles. The plan aims to give selected employees and
directors the opportunity to share in the future growth and profitability of the company by better aligning their interests with
those of shareholders and provides greater incentive for them to work towards achieving the longer term goals of the
company.
Under the plan, the Board has discretion to decide which full or part-time employees or directors of the company (or related
body corporate) will be invited to acquire options, the number of options to be offered, any vesting conditions such as
performance targets or minimum vesting periods, the applicable exercise price (which must be at least equal to the market
value of shares at the time of the offer), and any other terms of issue.
Consolidated entity performance and link to remuneration
KMP remuneration is linked to the performance of the consolidated entity. Bonus and incentive payments are at the
discretion of the Board. Refer to the section 'Additional information' below for details of the earnings and total shareholders
return for the last five years.
Use of remuneration consultants
The consolidated entity did not engage the use of a remuneration consultant during the financial year ended 30 June 2021.
Voting and comments made at the company's 2020 Annual General Meeting ('AGM')
At the 2020 AGM, 99% of the shareholders voted to adopt the remuneration report for the year ended 30 June 2020. The
company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors and other KMP of Kip McGrath Education Centres Limited are set out in this
section.
The Board has reviewed those members of staff identified as KMP and has updated disclosures accordingly. The KMP of
the consolidated entity now consists of the directors of Kip McGrath Education Centres Limited and the following persons:
●
●
●
●
●
Brett Edwards - Company Secretary and Chief Financial Officer
Jackie Burrows - Chief Executive Officer UK Business
Daniel Pludek - Chief Technology Officer (commenced 31 August 2020)
Scott Hillard - Chief Commercial Officer (commenced 18 January 2021)
Abby Clifford - Chief Product Officer (commenced 15 February 2021)
10
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
Short-term
benefits
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Share-
based
payments
2021
Non-Executive
Directors:
Ian Campbell
(Chairman)
Trevor Folsom
Diane Pass
Executive
Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Daniel Pludek
Scott Hillard
Abby Clifford
Cash salary
and fees
$
Bonus
$
Non-
Leave
monetary * annuation benefits
Super-
$
$
$
Equity-
settled
shares
$
Equity-
settled
options
$
Total
$
127,326
71,127
84,831
467,346
282,613
246,394
186,059
88,462
76,077
1,630,235
-
-
-
-
-
-
-
-
-
-
5,626
5,626
5,626
11,712
6,757
8,059
5,626
46,773
5,626
5,626
4,688
2,344
2,344
43,132
27,798
31,813
17,676
8,404
6,942
165,934
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
144,664
83,510
98,516
-
519,745
316,037
-
283,833
-
208,423
-
99,210
-
-
85,363
- 1,839,301
*
Non-monetary benefits relate to proportional share of Director and Officer Insurance Premiums for the financial year.
Short-term
benefits
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Share-
based
payments
Cash salary
Leave
and fees Bonus ** monetary annuation benefits
Super-
Non-
2020
$
$
$
$
$
Equity-
settled
shares
$
Equity-
settled
options
$
Total
$
Non-Executive
Directors:
Ian Campbell
(Chairman)
Trevor Folsom
Diane Pass
Kip McGrath *
Executive
Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Catherine Cook
101,229
68,493
76,003
10,597
-
-
-
-
3,737
3,737
3,737
369
9,617
6,506
6,508
1,381
-
-
-
27,808
383,073
25,000
3,737
41,142
-
232,174
163,636
95,171
1,130,376
10,000
10,000
-
45,000
3,737
3,737
2,447
25,238
23,695
-
8,849
97,698
-
-
-
27,808
-
-
-
-
-
-
-
-
-
-
-
-
-
114,583
78,736
86,248
40,155
2,082
455,034
965
760
-
270,571
178,133
106,467
3,807 1,329,927
*
**
Includes remuneration from the beginning of the year to the date of resignation 5 August 2019. Kip McGrath received
consultancy fees of $61,673 following his resignation from the Board.
A cash incentive was paid to management in July 2020. The Board agreed a number of strategic operational targets
by which the execution of these targets would give rise to a short term incentive, payable at the Board's discretion. As
key operational targets were achieved for the FY2020, a proportional incentive was paid.
11
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Ian Campbell
Trevor Folsom
Diane Pass
Kip McGrath
Executive Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Daniel Pludek
Scott Hillard
Abby Clifford
Catherine Cook
Fixed remuneration
2020
2021
At risk - STI
At risk - LTI
2021
2020
2021
2020
100%
100%
100%
-
100%
100%
100%
100%
100%
93%
100%
100%
100%
100%
100%
-
95%
93%
-
-
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6%
4%
6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1%
1%
1%
-
-
-
-
The proportion of the cash bonus paid and forfeited is as follows:
Name
Executive Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Daniel Pludek
Scott Hillard
Abby Clifford
Cash bonus paid/payable
2021
2020
Cash bonus forfeited
2020
2021
-
-
-
-
-
-
36%
100%
64%
53%
43%
-
-
-
100%
100%
100%
100%
100%
47%
57%
-
-
-
Service agreements
KMP have standard contracts of employment that have no entitlement to termination payments in the event of removal for
misconduct. Termination can be made by either the consolidated entity or the individual subject to one to six months’
notice.
The KMP have short term performance incentives of up to 25% of base salary plus an additional incentive for over budget
performance as well as long term performance incentives in the form of options up to 15% of base salary.
12
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
Share-based compensation
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other KMP
in this financial year or future reporting years are as follows:
Name
Storm McGrath
Storm McGrath
Brett Edwards
Brett Edwards
Brett Edwards
Jackie Burrows
Jackie Burrows
Number of
options
granted
Grant date
Vesting date and
exercisable date
Expiry date
Exercise price at grant date
Fair value
per option
1,000,000 21/11/2014
500,000 29/10/2017
150,000 20/08/2014
100,000 19/08/2016
150,000 29/10/2017
100,000 19/08/2016
100,000 29/10/2017
17/08/2018
23/08/2019
17/08/2018
23/08/2019
23/08/2019
23/08/2019
23/08/2019
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
$0.350
$0.370
$0.350
$0.300
$0.370
$0.300
$0.370
$0.170
$0.100
$0.170
$0.110
$0.100
$0.110
$0.100
Issue of shares
There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2021.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below:
Sales revenue
EBITDA
Profit after income tax
2021
$'000
2020
$'000
2019
$'000
2018
$'000
2017
$'000
19,265
5,119
1,733
17,123
5,208
1,573
16,263
5,207
2,652
13,060
4,079
2,263
13,507
2,635
1,436
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
1.200
3.329
3.188
1.025
3.455
3.276
0.995
5.888
5.536
0.580
5.025
4.752
0.320
3.199
3.069
2021
2020
2019
2018
2017
Additional disclosures relating to KMP
Shareholding
The number of shares in the company held during the financial year by each director and other members of KMP of the
consolidated entity, including their personally related parties, is set out below:
Balance at Received
as part of
the start of
the year
remuneration Additions
Ordinary shares
Ian Campbell
Storm McGrath
Trevor Folsom
Diane Pass
Brett Edwards
Jackie Burrows
500,000
3,153,598
165,000
105,473
150,000
200,000
4,274,071
-
-
-
-
-
-
-
Balance at
the end of
the year
Sales/other
-
-
-
-
-
-
-
-
(269,265)
-
-
-
-
(269,265)
500,000
2,884,333
165,000
105,473
150,000
200,000
4,004,806
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of KMP of the consolidated entity, including their personally related parties, is set out below. Options have not
vested in the holder unless indicated otherwise.
13
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
Vested and
exercisable
Options over ordinary shares
Storm McGrath
Brett Edwards
Jackie Burrows
1,500,000
400,000
200,000
2,100,000
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
400,000
200,000
1,500,000
400,000
200,000
2,100,000
2,100,000
Options do not entitle the holder to receive dividends or any distributions or to participate in any share issue of the
company.
Loans to KMP and their related parties
There are no loans to KMP or their related parties.
Other transactions with KMP and their related parties
There are no other transactions with KMP and their related parties.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Kip McGrath Education Centres Limited under option at the date of this report are as follows:
Grant date
20 August 2014
21 November 2014
19 August 2016
9 October 2017
27 October 2017
Expiry date
31 December 2021
31 December 2021
31 December 2021
31 December 2021
31 December 2021
Exercise
price
Number
under option
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
300,000
400,000
450,000
2,300,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
The following ordinary shares of Kip McGrath Education Centres Limited were issued during the year ended 30 June 2021
and up to the date of this report on the exercise of options granted:
Date options granted
19 August 2016
9 October 2017
27 October 2017
Exercise
price
Number of
shares issued
$0.300
$0.370
$0.370
100,000
50,000
50,000
200,000
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. It is not possible to apportion the premium
between amounts relating to the insurance against legal costs and those relating to other liabilities.
14
Kip McGrath Education Centres Limited
Directors' report
30 June 2021
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 25 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional
and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or
decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and
rewards.
●
Officers of the company who are former partners of PKF Newcastle
There are no officers of the company who are former partners of PKF Newcastle.
Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have
been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Ian Campbell
Chairman
24 August 2021
Sydney
15
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 2021, 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
CLAYTON HICKEY
PARTNER
24 AUGUST 2021
NEWCASTLE, NSW
16
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.auSydneyLevel 8, 1 O’Connell StreetSydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 p +61 2 8346 6000 f +61 2 8346 6099PKF(NS) Audit & Assurance Limited PartnershipABN 91 850 861 839Liability limited by a scheme approved under Professional Standards LegislationNewcastle755 Hunter Street Newcastle West NSW 2302 Australia PO Box 2368 Dangar NSW 2309p +61 2 4962 2688 f +61 2 4962 3245 Kip McGrath Education Centres Limited
Contents
30 June 2021
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Kip McGrath Education Centres Limited
Shareholder information
General information
18
19
20
21
22
55
56
61
The financial statements cover Kip McGrath Education Centres Limited as a consolidated entity consisting of Kip McGrath
Education Centres Limited and the entities it controlled at the end of, or during, the year. The financial statements are
presented in Australian dollars, which is Kip McGrath Education Centres Limited's functional and presentation currency.
Kip McGrath Education Centres Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
Level 3
6 Newcomen Street
Newcastle NSW 2300
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 24 August 2021. The
directors have the power to amend and reissue the financial statements.
17
Kip McGrath Education Centres Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2021
Revenue
Other income
Interest revenue calculated using the effective interest method
Expenses
Royalties, commissions and other direct expenses
Employee expenses
Marketing expenses
Administration expenses
Merchandising expenses
Depreciation and amortisation expense
Recovery/(impairment) of receivables
Loss on sale of assets
Net foreign exchange losses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable to the owners of Kip
McGrath Education Centres Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of Kip
McGrath Education Centres Limited
Note
Consolidated
2021
$'000
2020
$'000
4
5
6
6
9
6
7
19,265
17,123
513
13
472
-
(1,282)
(7,160)
(3,489)
(1,938)
(719)
(2,707)
2
(5)
(81)
(116)
(1,307)
(5,521)
(2,775)
(1,661)
(935)
(2,660)
(93)
(28)
(67)
(141)
2,296
2,407
(563)
(834)
1,733
1,573
49
49
67
67
1,782
1,640
Cents
Cents
Basic earnings per share
Diluted earnings per share
33
33
3.329
3.188
3.455
3.276
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
18
Kip McGrath Education Centres Limited
Statement of financial position
As at 30 June 2021
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax refund due
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Income tax
Employee benefits
Total current liabilities
Non-current liabilities
Lease liabilities
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
Note
Consolidated
2021
$'000
2020
$'000
8
9
9
10
11
12
13
14
15
16
17
16
18
19
20
10,571
727
257
484
12,039
-
323
1,600
16,117
649
18,689
12,179
472
-
358
13,009
140
359
1,694
13,482
736
16,411
30,728
29,420
6,855
476
425
524
-
895
9,175
1,258
1,836
3,094
5,231
576
1,426
532
326
583
8,674
1,312
1,583
2,895
12,269
11,569
18,459
17,851
14,841
800
2,818
14,457
751
2,643
18,459
17,851
The above statement of financial position should be read in conjunction with the accompanying notes
19
Kip McGrath Education Centres Limited
Statement of changes in equity
For the year ended 30 June 2021
Consolidated
Balance at 1 July 2019
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 19)
Share-based payments (note 20)
Dividends paid (note 21)
Issued
capital
$'000
Retained
Reserves
$'000
profits
$'000
Total equity
$'000
8,876
690
2,201
11,767
-
-
-
5,581
-
-
-
67
67
-
(6)
-
1,573
-
1,573
67
1,573
1,640
-
-
(1,131)
5,581
(6)
(1,131)
Balance at 30 June 2020
14,457
751
2,643
17,851
Consolidated
Balance at 1 July 2020
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 19)
Conversion of options
Dividends paid (note 21)
Issued
capital
$'000
Retained
Reserves
$'000
profits
$'000
Total equity
$'000
14,457
751
2,643
17,851
-
-
-
317
67
-
-
49
49
-
-
-
1,733
-
1,733
49
1,733
1,782
-
-
(1,558)
317
67
(1,558)
Balance at 30 June 2021
14,841
800
2,818
18,459
The above statement of changes in equity should be read in conjunction with the accompanying notes
20
Kip McGrath Education Centres Limited
Statement of cash flows
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Government grants
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2021
$'000
2020
$'000
20,100
(13,577)
17,731
(13,846)
6,523
13
513
(116)
(770)
3,885
-
472
(141)
(893)
Net cash from operating activities
31
6,163
3,323
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Share issue transaction costs
Dividends paid
Repayment of borrowings
Repayment of leases
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
11
(158)
(4,634)
(170)
(3,128)
19
21
(4,792)
(3,298)
67
-
-
(1,558)
(651)
(487)
5,927
2,377
(346)
(1,131)
(1,751)
(325)
(2,629)
4,751
(1,258)
11,829
4,776
7,053
Cash and cash equivalents at the end of the financial year
8
10,571
11,829
The above statement of cash flows should be read in conjunction with the accompanying notes
21
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the consolidated entity.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The consolidated entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework
contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting
Standards, but it has not had a material impact on the consolidated entity's financial statements.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 29.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kip McGrath Education
Centres Limited ('company' or 'parent entity') as at 30 June 2021 and the results of all subsidiaries for the year then ended.
Kip McGrath Education Centres Limited and its subsidiaries together are referred to in these financial statements as the
'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
22
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Kip McGrath Education Centres Limited's functional
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into the company’s functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated
entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money; allocates the
transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a
manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable
consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate
refund liability.
Franchise fees
Revenue from franchise fees derived from franchise operations are recognised on a weekly or monthly basis, depending
on the underlying contract with the franchisee. The contractual obligations primarily include providing access to software
and franchisee systems on an ongoing basis through the life of the franchise contract as well as marketing, development
and administrative support services. The consideration is variable in nature depending on the contract with the franchisee
and the volume of lessons being provided.
23
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Sales of master territories and franchisee centres
Revenue from contracts for the sale of master franchise territories are recognised over time as services are provided to
establish the master territory during the first term of the contract. Revenue from contracts for the sale of new centres are
recognised over time as services are provided to establish the centre during the first term of the contract. Services to train
new franchisees are recognised at the time of satisfactory completion of formal induction and training programmes. The
contractual obligations over time primarily relate to the development, support and training required to assist a franchisee in
the establishment of a new centre in a territory and are typically discharged within the first period of the franchise contract
(over no more than five or six years depending on the country of operation). Typically the payment is received upfront and
the services are delivered over the contract term therefore giving rise to the recognition of a contract liability.
National advertising contributions ('NAC')
Revenue from national advertising contributions from franchisees is recognised on a weekly or monthly basis, depending
on the underlying contract with the franchisee and whether the marketing services and activities relating to the contribution
have been provided. The contractual obligations are to provide marketing activities through various channels in support of
the franchise network.
Direct sales
Direct sales revenue includes fees for the provision of payment gateway and ancillary franchise software services as well
as the sale of educational materials and promotional products. Revenue from payment gateway and ancillary franchise
software services is recognised on a weekly basis as the services are provided to franchises. Revenue from the sale of
educational materials and promotional products is recognised at the time the control of the product passes to the customer.
This control will pass when the customer orders the curriculum or other products are shipped.
Student lesson fees
Revenue from student lessons derived from tutoring operations are recognised when the services are provided pursuant to
a student's enrolment agreement, which is typically on a weekly basis during a set lesson time. These lessons are provided
directly by the consolidated entity and not through any franchised contract.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Government grants
Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be
received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and
recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
24
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Kip McGrath Education Centres Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax
consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged
or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash
and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the
statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within
30 days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days
overdue.
25
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their
expected useful lives of between 3 and 20 years.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Intellectual property
Intellectual property primarily consists of the acquisition costs for the system of tuition developed by the founders, Kip and
Dug McGrath. Costs in relation to intellectual property are capitalised as an asset. These costs are not subsequently
amortised as they have an indefinite useful life.
Product and overseas development costs
Costs in relation to product and overseas development costs are capitalised as an asset. These costs are not subsequently
amortised where they have an indefinite useful life. Definite life costs are written off over their finite useful life of up to ten
years for curriculum items and up to five years for other items.
Franchise and development territories
Existing franchise and development territories that have been acquired by the consolidated entity are capitalised as an
asset and are not amortised, but are subject to annual impairment reviews based on student numbers remaining at the
acquisition level.
Other intangibles
Other intangibles are capitalised as an asset and amortised, being their finite useful life of five years.
26
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or
services to the customer.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a
rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise
of the option is reasonably certain to occur, and any anticipated termination penalties.
The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are
incurred. Variable lease payments include rent concessions in the form of rent forgiveness or a waiver as a direct
consequence of COVID-19 and which relate to payments originally due on or before 30 June 2021.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries and other employee benefits expected to be settled wholly within 12 months of the
reporting date are measured at the amounts expected to be paid when the liabilities are settled.
27
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months of the reporting date are measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and
the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the
consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other
vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
28
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated
entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying
amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Kip McGrath Education Centres
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial
year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
29
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have
been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2021.
The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and
Interpretations.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
COVID-19
Judgement has been exercised in considering the impacts that COVID-19 has had, or may have, on the consolidated entity
based on known information. This consideration extends to the nature of the products and services offered, customers,
supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in
specific notes, there does not currently appear to be either any significant impact upon the financial statements or any
significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at
the reporting date or subsequently as a result of COVID-19.
Intangible assets with indefinite life
Intellectual property, franchise territories and certain product and overseas development costs are classified as having an
indefinite useful life and not amortised as management considers that there is no foreseeable limit to the cash flows these
assets are generating. Such assets are subject to annual impairment reviews in accordance with the accounting policy
stated in note 1. The recoverable amounts of cash-generating units to which such assets relate have been determined
based on value-in-use calculations which require the use of assumptions, including estimated discount rates based on the
current cost of capital and growth rates of the estimated future cash flows. Estimates that management has made with
respect to such calculations are disclosed in note 11.
Finite life intangible assets
The consolidated entity determines the estimated useful lives and related amortisation charges for its finite life intangible
assets. The useful lives could change significantly as a result of technical innovations or some other event. The
amortisation charge will increase where the useful lives are less than previously estimated lives. The consolidated entity
assesses impairment of such assets at each reporting date by evaluating conditions specific to the consolidated entity, the
cash generating unit to which the asset belongs, and to the particular asset that may lead to impairment. If an impairment
trigger exists, the recoverable amount of the asset is determined. This involves estimating the asset’s fair value less costs
of disposal or value-in-use calculations which incorporate a number of key estimates and assumptions. Estimates that
management has made with respect to such calculations are disclosed in note 11.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or
Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
30
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Determination of variable consideration for services transferred over time
Judgement is exercised in estimating variable consideration which is determined having regard to past experience with
respect to the goods returned to the consolidated entity where the customer maintains a right of return pursuant to the
customer contract or where services have a variable component. Revenue will only be recognised to the extent that it is
highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected
credit loss rate for each group. These assumptions include recent sales experience, historical collection rates, the impact
of COVID-19 and forward-looking information that is available. The allowance for expected credit losses, as disclosed in
note 9, is calculated based on the information available at the time of preparation. The actual credit losses in future years
may be higher or lower.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for
anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses. The deferred tax
assets are expected to be recovered through management’s forecast taxable profits over the next three years.
Employee benefits provision
As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting
date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all
employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay
increases through promotion and inflation have been taken into account.
Lease make good provision
A provision has been made for the present value of anticipated costs for future restoration of leased premises. The
provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires
assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically
reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs
for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the
provision that exceed the carrying amount of the asset will be recognised in profit or loss.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement
is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the
underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods
to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical
incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease
commencement date. Factors considered may include the importance of the asset to the consolidated entity's operations;
comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant
leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it
is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or
significant change in circumstances.
31
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such
a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary
to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
Management assumptions for lease extensions
There are specific estimates and judgements that were used as part of the calculation of right-of-use assets and lease
liabilities. These estimates include the lease terms, lease make good provisions and lease increases based on consumer
price index. Management used the best available estimate of these inputs in the calculations. In particular, management
has relied on the assumption that an option to extend the lease terms of 2 leased properties in Newcastle will be exercised,
thereby increasing the future lease payments and corresponding right of use asset by up to 3 years.
Management assumptions for non-lease components
Management have elected not to apply the available expedient to not separately account for non-lease components. As
such, the consolidated entity has separated any non-lease components from future lease payments and will continue to
account for these components as an expense over time as the non-lease components are provided. As such, there are no
future assets or obligations recognised in respect of non-lease components. For some leases, the identification of amounts
related to non-lease components must be estimated due to contracts not including an explicit break-up. In these cases,
management estimates the value of the non-lease component by reference to available market data. Where the estimate is
significant, management includes a note to detail the judgements made to arrive at the estimate.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity has only one operating segment based on the internal reports that are reviewed and used by the
Chief Executive Officer and the Board of Directors (collectively referred to as the Chief Operating Decision Makers
('CODM')) in assessing performance and in determining the allocation of resources. The operating segment information is
disclosed throughout these financial statements.
The information reported to the CODM is on at least a monthly basis.
Geographical information
The geographical information of non-current assets below is exclusive of financial instruments and deferred tax assets.
Geographical information
Australasia
United Kingdom and Europe
Overseas other
Sales to external customers
Geographical non-current
assets
2021
$'000
2020
$'000
2021
$'000
2020
$'000
9,883
8,838
521
8,083
8,172
838
17,264
776
-
14,742
793
-
19,242
17,093
18,040
15,535
32
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 4. Revenue
Revenue from contract with customers
Franchise fees
Sale of master territories and franchisee centres
National advertising contributions (NAC)
Direct sales
Student lessons
Other revenue
Other revenue
Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Timing of revenue recognition
Services and goods transferred at a point in time
Services transferred over time
Consolidated
2021
$'000
2020
$'000
11,524
481
1,825
1,751
3,661
19,242
11,990
585
1,863
1,125
1,530
17,093
23
30
19,265
17,123
Consolidated
2021
$'000
2020
$'000
19,017
225
16,743
350
19,242
17,093
The disaggregation of revenue by major product lines is disclosed at the top of revenue note and the geographical regions
is presented in note 3 - operating segments.
Note 5. Other income
Government grants *
Consolidated
2021
$'000
2020
$'000
513
472
* During the year the company received payments from the Australian Government amounting to $37,500 (2020: $50,000)
and $475,500 (2020: $422,000) as part of its ‘Boosting Cash Flow for Employers’ and 'JobKeeper' schemes, respectively,
in response to COVID-19. These non-tax amounts have been recognised as government grants and recognised as income
once there is reasonable assurance that the company will comply with any conditions attached.
33
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Land and buildings right-of-use assets
Total depreciation
Amortisation
Product and overseas development costs
Other intangibles
Total amortisation
Total depreciation and amortisation
Employee benefits
Employee benefits expense excluding superannuation
Defined contribution superannuation expense
Share-based payment expense
Total employee benefits
Finance costs
Interest and finance charges paid/payable on borrowings from financial institutions
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Leases
Variable lease payments - COVID-19 related rent concessions income
Consolidated
2021
$'000
2020
$'000
196
525
721
185
478
663
1,469
517
1,512
485
1,986
1,997
2,707
2,660
6,423
735
2
4,981
535
5
7,160
5,521
35
81
116
64
77
141
(85)
(23)
34
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (note 12)
Increase in deferred tax liabilities (note 18)
Deferred tax - origination and reversal of temporary differences
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 26% (2020: 27.5%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Other non-deductible expenses
Sundry items
Adjustment recognised for prior periods
Income tax expense
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 25% (2020: 26%)
Consolidated
2021
$'000
2020
$'000
223
340
-
563
87
253
340
662
3
169
834
(105)
108
3
2,296
2,407
597
662
(2)
(32)
563
-
563
(4)
7
665
169
834
Consolidated
2021
$'000
2020
$'000
1,269
1,269
317
330
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax
losses are capital in nature and can only be utilised in the future to offset capital gains if the continuity of ownership test is
passed, or failing that, the same business test is passed.
The corporate tax rate applicable to base rate entities reduces from 27.5% to 26% for the 2020-21 income year and further
reduces to 25% prospectively from the 2021-22 income year. The company qualifies as a base rate entity as it has a
turnover of less than $50 million and less than 80% of its assessable income is derived from base rate entity passive
income. The company has remeasured its deferred tax balances, and any unrecognised potential tax benefits arising from
carried forward tax losses, based on the effective tax rate that is expected to apply in the year the temporary differences
are expected to reverse or benefits from tax losses realised. The impact of the change in tax rate on deferred tax balances
has been recognised as tax expense in profit or loss or as an adjustment to equity to the extent to which the deferred tax
relates to items previously recognised outside profit or loss.
35
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 8. Cash and cash equivalents
Current assets
Cash at bank
Restricted cash
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the financial
year as shown in the statement of cash flows as follows:
Balances as above
Bank overdraft (note 15)
Balance as per statement of cash flows
Consolidated
2021
$'000
2020
$'000
5,038
5,533
7,817
4,362
10,571
12,179
10,571
-
12,179
(350)
10,571
11,829
Restricted cash represents amounts held on behalf of franchisees and is not available for use by the consolidated entity.
The corresponding liability is recognised in other payables and accruals at note 13.
Note 9. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Non-current assets
Other receivables
Consolidated
2021
$'000
2020
$'000
853
(126)
727
-
727
492
(169)
323
149
472
-
140
Allowance for expected credit losses
The consolidated entity has recognised a recovery of $2,000 (2020: loss of $93,000) in profit or loss in respect of expected
credit losses for the year ended 30 June 2021. The allowance is considered reasonable as all revenue has already been
received.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
0 to 3 months overdue
Over 3 months overdue
Expected credit loss rate
2021
%
2020
%
Carrying amount
2020
$'000
2021
$'000
Allowance for expected
credit losses
2021
$'000
2020
$'000
1%
16%
93%
1%
16%
93%
686
49
118
853
338
139
155
632
8
8
110
126
3
22
144
169
36
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 9. Trade and other receivables (continued)
The consolidated entity has increased its monitoring of debt recovery as there is an increased probability of franchisees
and customers delaying payment or being unable to pay, due to COVID-19. As a result, the calculation of expected credit
losses has been revised and rates have increased in each category up to 3 months overdue.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Amounts recovered during the year
Receivables written off during the year as uncollectable
Closing balance
Note 10. Right-of-use assets
Non-current assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Consolidated
2021
$'000
2020
$'000
169
6
(40)
(9)
126
110
93
(34)
-
169
Consolidated
2021
$'000
2020
$'000
2,601
(1,001)
2,169
(475)
1,600
1,694
The consolidated entity leases buildings for its offices and retail outlets under agreements of between 3 and 5 years, with
options to extend in some cases. The leases have various escalation clauses. On renewal, the terms of the leases are
renegotiated.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2019
Additions
Value on adoption of AASB 16
Exchange differences
Depreciation expense
Balance at 30 June 2020
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2021
37
Land and
buildings
$'000
-
539
1,649
(19)
(475)
1,694
863
(438)
6
(525)
1,600
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 10. Right-of-use assets (continued)
For other AASB 16 and lease related disclosures refer to the following:
●
●
●
●
note 6 for details of depreciation on right-of-use assets, interest on lease liabilities and other lease payments;
note 16 for lease liabilities at 30 June 2021;
note 22 maturities of lease liabilities; and
consolidated statement of cash flow for repayment of lease liabilities.
Note 11. Intangibles
Non-current assets
Intellectual property - at cost
Product and overseas development costs
Less: Accumulated amortisation
Franchise and development territories
Other intangible assets - at cost
Less: Accumulated amortisation
Consolidated
2021
$'000
2020
$'000
4,012
4,012
14,003
(6,988)
7,015
11,201
(5,519)
5,682
3,674
1,855
3,574
(2,158)
1,416
3,574
(1,641)
1,933
16,117
13,482
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2019
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2020
Additions
Exchange differences
Amortisation expense
Product and
overseas
development
costs
$'000
Franchise and
development
territories
$'000
Intellectual
property
$'000
Other
intangibles
$'000
Total
$'000
4,012
-
-
-
4,012
-
-
-
5,365
1,829
-
(1,512)
5,682
2,802
-
(1,469)
1,850
-
5
-
1,855
1,832
(13)
-
1,129
1,299
(10)
(485)
1,933
-
-
(517)
12,356
3,128
(5)
(1,997)
13,482
4,634
(13)
(1,986)
Balance at 30 June 2021
4,012
7,015
3,674
1,416
16,117
The intellectual property and product and overseas development costs are the primary elements of the consolidated
entity’s system of tutoring which has been developed and acquired over a period exceeding 30 years by the founders and
the consolidated entity. The franchise territories asset consists of the buy-back of the right to operate the business in the
United Kingdom and New Zealand. As there is no foreseeable limit to the cash flows these assets are generating, they are
considered to have an indefinite useful life and not amortised. Instead they are subject to annual impairment reviews. Other
intangibles include the contractual rights for certain territories where the consolidated entity has terminated an area
developers contract and the liability for these items are included in payables.
38
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 11. Intangibles (continued)
Impairment tests for indefinite life intangibles
Indefinite life intangibles are allocated to a single cash generating unit ('CGU').
The recoverable amount has been determined by a value-in-use calculation using a discounted cash flow model, based on
a three-year projection period approved by management and extrapolated for a further two years using a growth rate of
2.4% (2020: 2.4%). There are no terminal values in the calculation.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model:
a. Pre-tax discount rate 14.5% (2020: 14.7%). The discount rate reflects management’s estimate of the time value of
money and the consolidated entity’s weighted average cost of capital, the risk free rate and the volatility of the share
price relative to market movements.
b. Student lesson revenue growth rate of 12% (2020: 19%) over the five year projection period, which reflects additional
corporate centres, an expected move towards larger centres and a continued movement towards percentage of
revenue contracts, which management believe is reasonable given the current trading performance of the consolidated
entity.
c. Foreign exchange rates consistent with current market conditions.
Based on the above, there was no impairment required for the year ended 30 June 2021 (2020: $nil).
Sensitivity
As disclosed in note 2, the directors have made judgements and estimates in respect of the impairment testing of indefinite
life intangibles. Should these judgements and estimates not occur, the resulting indefinite life intangibles may vary in
carrying amount.
The key sensitivity is that student lesson revenue would need to fall by 7% (2020: fall by 24%) before the CGU would be
impaired, with all other assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount is based
would not cause the cash generating unit’s carrying amount to exceed its recoverable amount.
39
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 12. Deferred tax
Non-current assets
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Allowance for expected credit losses
Unrealised foreign exchange movements
Contract liabilities
Employee benefits
Leases
Accrued expenses
QAX licence
Other items
Deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss (note 7)
Closing balance
Note 13. Trade and other payables
Current liabilities
Trade payables
Amounts held on behalf of franchisees
GST and other similar payables
Other payables and accruals
Refer to note 22 for further information on financial instruments.
Note 14. Contract liabilities
Current liabilities
Contract liabilities on franchise sales
40
Consolidated
2021
$'000
2020
$'000
42
60
123
232
44
66
94
(12)
649
736
(87)
649
46
59
158
166
39
79
120
69
736
631
105
736
Consolidated
2021
$'000
2020
$'000
397
5,492
160
806
277
3,944
77
933
6,855
5,231
Consolidated
2021
$'000
2020
$'000
476
576
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 14. Contract liabilities (continued)
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of
the reporting period was $476,000 as at 30 June 2021 ($576,000 as at 30 June 2020) and is expected to be recognised as
revenue in future periods as follows:
Within 6 months
6 to 12 months
12 to 18 months
18 to 24 months
24 to 30 months
30 to 36 months
beyond 36 months
Note 15. Borrowings
Current liabilities
Bank overdraft
Bank loans
Consolidated
2021
$'000
2020
$'000
94
86
64
55
60
36
81
476
113
106
81
73
51
43
109
576
Consolidated
2021
$'000
2020
$'000
-
425
425
350
1,076
1,426
Refer to note 22 for further information on financial instruments.
Funds from additional GBP denominated borrowings were used to acquire area developer territories in the UK during prior
year.
Total secured liabilities
The total secured liabilities are as follows:
Bank overdraft
Bank loans
Consolidated
2021
$'000
2020
$'000
-
425
425
350
1,076
1,426
Assets pledged as security
The bank overdraft and loans are secured by a security interest over all property of the consolidated entity to HSBC Bank.
41
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 15. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft
Bank loans
Used at the reporting date
Bank overdraft
Bank loans
Unused at the reporting date
Bank overdraft
Bank loans
Note 16. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Refer to note 22 for information on the maturity analysis of lease liabilities.
Note 17. Employee benefits
Current liabilities
Annual leave
Long service leave
Consolidated
2021
$'000
2020
$'000
1,750
425
2,175
-
425
425
1,750
-
1,750
1,750
1,076
2,826
350
1,076
1,426
1,400
-
1,400
Consolidated
2021
$'000
2020
$'000
524
532
1,258
1,312
Consolidated
2021
$'000
2020
$'000
501
394
895
312
271
583
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer
settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full
amount of accrued leave or require payment within the next 12 months.
42
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 17. Employee benefits (continued)
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits
Note 18. Deferred tax
Non-current liabilities
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Research and development costs
Deferred tax liability
Movements:
Opening balance
Charged to profit or loss (note 7)
Closing balance
Note 19. Issued capital
Consolidated
2021
$'000
2020
$'000
533
358
Consolidated
2021
$'000
2020
$'000
1,836
1,583
1,836
1,583
1,583
253
1,475
108
1,836
1,583
Ordinary shares - fully paid
52,219,331 51,819,331
14,841
14,457
Consolidated
2021
Shares
2020
Shares
2021
$'000
2020
$'000
Movements in ordinary share capital
Details
Balance
Issue of shares
Transaction costs
Balance
Conversion of options
Conversion of options
Issue of shares *
Balance
Date
Shares
Issue price
$'000
1 July 2019
15 June 2020
45,234,331
6,585,000
-
30 June 2020
11 September 2020
11 September 2020
17 February 2021
51,819,331
100,000
100,000
200,000
30 June 2021
52,219,331
$0.900
$0.000
$0.300
$0.370
$1.600
8,876
5,927
(346)
14,457
30
37
317
14,841
*Issue of shares relates to consideration for the buy-back of a key franchise operation in Bossley Park, Sydney.
43
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 19. Issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders
should the company be wound up, in proportions that consider both the number of shares held and the extent to which
those shares are paid up. The fully paid ordinary shares have no par value and the company does not have a limited
amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure
to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The capital risk management policy remains unchanged from the 30 June 2020 Annual Report.
The capital structure of the consolidated entity consists of net debt (borrowings offset by cash and bank balances) and
equity of the consolidated entity (comprising issued capital, reserves and accumulated profits).
Note 20. Reserves
Foreign currency reserve
Share-based payments reserve
Other reserves
Consolidated
2021
$'000
2020
$'000
(199)
245
754
800
(248)
245
754
751
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise profits and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Other reserves
This reserve is used to recognise the increments and decrements on changes in equity of the parent on acquisition of non-
controlling interests.
44
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 20. Reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2019
Foreign currency translation
Share-based payments
Balance at 30 June 2020
Foreign currency translation
Balance at 30 June 2021
Note 21. Dividends
Dividends paid during the financial year were as follows:
Foreign
currency
$'000
Share-based
payments
$'000
Other
$'000
Total
$'000
(315)
67
-
(248)
49
(199)
251
-
(6)
245
-
245
754
-
-
754
-
754
690
67
(6)
751
49
800
Final dividend for the year ended 30 June 2020 of 2.0 cents (2019: 2.5 cents) per ordinary
share
Interim dividend for the year ended 30 June 2021 of 1.0 cents (2020: nil cents) per ordinary
share
Consolidated
2021
$'000
2020
$'000
1,036
1,131
522
-
1,558
1,131
On 24 August 2021, a final dividend for the year ended 30 June 2021 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 23 September 2021 to those shareholders on the register at 7p.m. on 9 September 2021.
The total distribution will be $522,193.
Note 22. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
consolidated entity and to ensure that the consolidated entity is able to finance its business plans. The consolidated entity
uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis
in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.
Risk management is carried out by senior executives ('finance') under policies approved by the Board of Directors
('Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. The consolidated entity does not enter into or trade in financial instruments, including
derivative financial instruments, for speculative purposes. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations. The consolidated entity operates internationally and is exposed to
foreign exchange risk arising primarily from the Pound Sterling, Singapore dollar, South African Rand and New Zealand
dollar.
45
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The consolidated entity presently does not hedge
foreign exchange risks, focusing on matching income and expenditure by currency where possible to reduce risk.
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at
the reporting date were as follows:
Consolidated
US dollars
Euros
Pound Sterling
New Zealand dollars
Singapore dollars
South African Rand
Hong Kong Dollars
Assets
Liabilities
2021
$'000
2020
$'000
2021
$'000
2020
$'000
130
12
6,794
1,336
4
18
-
117
1
3,819
221
3
63
5
-
-
3,964
172
-
-
-
-
-
2,484
119
-
-
-
8,294
4,229
4,136
2,603
The consolidated entity had net assets denominated in foreign currencies of $4,158,000 as at 30 June 2021 (assets
$8,294,000 less liabilities $4,136,000) (2020: $1,626,000 (assets $4,229,000 less liabilities $2,603,000)). Based on this net
position, a 10% strengthening in the Australian dollar from 30 June 2021 levels may expose the consolidated entity to a
$416,000 foreign currency loss.
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity's main interest rate risk arises from short-term and long-term borrowings. Borrowings issued at
variable rates expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated
entity to fair value interest rate risk.
The consolidated entity's objective is to maintain a balance between continuity of funding and flexibility through the use of
bank loans, related party loans and financial leases.
As at the reporting date, the consolidated entity had the following variable rate borrowings.
Consolidated
2021
2020
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
Bank overdrafts and bank loans
2.58%
Net exposure to cash flow interest rate risk
425
425
3.02%
1,426
1,426
The consolidated entity has net bank loans and borrowings outstanding, totalling $425,000 (2020: $1,426,000), which are
principal and interest payment loans. Quarterly cash outlays of approximately $130,000 (2020: $129,000 per quarter) are
required to service the debt. An official increase/decrease in interest rates of 100 (2020: 100) basis points would have an
adverse/favourable effect on profit before tax of $4,300 (2020: $14,300) per annum. The percentage change is based on
the expected volatility of interest rates using market data and analysis.
46
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted a policy of dealing with only recognised, creditworthy third parties.
All franchisees are subject to legal and credit checks prior to contracting with the consolidated entity. Policies have been
put in place to ensure that receivable balances are monitored on an ongoing basis with the result that the consolidated
entity's exposure to credit default is not significant. The consolidated entity does not hold any collateral. However, the
consolidated entity's policy for non-payment of debt by contracted partners within the maximum 30-day terms is
deactivation of access to student curriculum resources.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are
considered representative across all customers of the consolidated entity based on recent sales experience, historical
collection rates and forward-looking information that is available. As disclosed in note 9, due to COVID-19, the calculation
of expected credit losses has been revised and rates have increased in each category up to 3 months overdue.
Before accepting any new customers, the consolidated entity assesses the potential customer's credit quality.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
In determining the recoverability of a trade receivable, the consolidated entity considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is
limited due to the customer base being large and unrelated. The maximum exposure to credit risk at the reporting date to
recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to the financial statements.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank overdraft
Consolidated
2021
$'000
2020
$'000
1,750
1,400
A GBP denominated loan facility with the HSBC Bank was established to fund the acquisition of two area developer
territories in England in September 2019.
A letter of cross guarantee is in place between Kip McGrath Education Centres Ltd, Kip McGrath Education Australia Pty
Ltd, Kip McGrath Direct Pty Ltd and Kip McGrath Education Global Pty Ltd in relation to the HSBC banking facilities.
47
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as
remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of
financial position.
Consolidated - 2021
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Lease liability
Total non-derivatives
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank overdraft
Bank loans
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
2.58%
3.80%
397
6,458
425
524
7,804
-
-
-
476
476
-
-
-
781
781
-
-
-
-
-
397
6,458
425
1,781
9,061
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
-
2.68%
2.75%
3.80%
277
4,954
350
1,076
532
7,189
-
-
-
-
518
518
-
-
-
-
794
794
-
-
-
-
-
-
277
4,954
350
1,076
1,844
8,501
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 23. Fair value measurement
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of
trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-
term nature. The fair value of the consolidated entity’s non-current financial liabilities has been estimated as $1,183,000
(2020: $1,426,000) by discounting the remaining contractual maturities at current market interest rates for similar financial
instruments.
48
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 24. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of KMP of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Note 25. Remuneration of auditors
Consolidated
2021
$
2020
$
1,673,367
165,934
-
-
1,200,614
97,698
27,808
3,807
1,839,301
1,329,927
During the financial year the following fees were paid or payable for services provided by PKF Newcastle, the auditor of the
company, its network firms and unrelated firms:
Audit services - PKF Newcastle
Audit or review of the financial statements
Other services - PKF Newcastle
Preparation of the tax return and other tax services
Other services - network firms
Preparation of the tax return (NZ)
Audit services - unrelated firms
Audit or review of the financial statements
Other services - unrelated firms
Payroll and tax services
Consolidated
2021
$
2020
$
105,000
105,000
21,890
21,770
126,890
126,770
2,500
1,950
-
-
-
11,482
2,122
13,604
PKF is the current auditor of the UK subsidiary Kip McGrath Education United Kingdom Limited. Fees of $nil (2020:
$13,604) were paid to Hazlewoods LLP, who were the previous auditors of the UK subsidiary.
Note 26. Contingent liabilities
There were no contingent liabilities at 30 June 2021.
The consolidated entity has entered into arrangements to provide a guarantee to the lessor of the head office premises
amounting to $58,000 (2020: $58,000), and premises in Kotara of $51,000 (2020: $51,000) and in Kellyville of $21,000
(2020: $Nil)
49
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 27. Commitments
Capital commitments
Committed at the reporting date but not recognised as liability, payable:
Property, plant and equipment
Note 28. Related party transactions
Parent entity
Kip McGrath Education Centres Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Consolidated
2021
$'000
2020
$'000
35
18
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Parent
2021
$'000
2020
$'000
9,329
9,329
222
222
50
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 29. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Foreign currency reserve
Share-based payments reserve
Retained profits/(accumulated losses)
Total equity
Parent
2021
$'000
2020
$'000
4,811
8,343
21,410
15,046
3,486
5,679
5,506
7,336
14,841
42
245
776
14,457
3
245
(6,995)
15,904
7,710
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 and 30 June 2020,
except as disclosed in note 26.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2021 and 30 June 2020.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1,
except for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity.
Note 30. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name
Principal place of business /
Country of incorporation
Kip McGrath Education Australia Pty Ltd
Kip McGrath Global Pty Limited
Kip McGrath Direct Pty Ltd
Kip McGrath Education United Kingdom Ltd
Kip McGrath Education New Zealand Limited
Australia
Australia
Australia
United Kingdom
New Zealand
Ownership interest
2020
2021
%
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 31. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Foreign exchange differences
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in income tax refund due
Decrease/(increase) in deferred tax assets
Increase in prepayments
Increase/(decrease) in trade and other payables
Decrease in contract liabilities
Decrease in provision for income tax
Increase in deferred tax liabilities
Increase in employee benefits
Consolidated
2021
$'000
2020
$'000
1,733
1,573
2,707
-
54
(115)
(257)
87
(126)
1,905
(100)
(290)
253
312
2,660
(6)
72
144
-
(105)
(193)
(702)
(237)
(62)
108
71
Net cash from operating activities
6,163
3,323
Note 32. Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2019
Net cash from/(used in) financing activities
Acquisition of plant and equipment by means of leases
Acquisition of leases - adoption of new standard
Rent - concessions
Balance at 30 June 2020
Net cash used in financing activities
Acquisition of plant and equipment by means of leases
Lease handback
Bank
loans
$'000
Lease
liability
$'000
Total
$'000
450
626
-
-
-
1,076
(651)
-
-
-
(325)
539
1,653
(23)
1,844
(487)
863
(438)
450
301
539
1,653
(23)
2,920
(1,138)
863
(438)
Balance at 30 June 2021
425
1,782
2,207
52
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 33. Earnings per share
Consolidated
2021
$'000
2020
$'000
Profit after income tax attributable to the owners of Kip McGrath Education Centres Limited
1,733
1,573
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
52,053,303 45,522,200
Options over ordinary shares
2,300,000
2,500,000
Weighted average number of ordinary shares used in calculating diluted earnings per share 54,353,303 48,022,200
Number
Number
Basic earnings per share
Diluted earnings per share
Note 34. Share-based payments
Cents
Cents
3.329
3.188
3.455
3.276
On 9 March 2012, shareholders approved the terms and conditions of the Kip McGrath Employee Share Option Plan ('the
Plan'). The Plan is designed to provide long-term incentives for employees to deliver long-term shareholder returns. Under
the Plan the consolidated entity may, at the discretion of the Remuneration Committee, grant options over ordinary shares
in the parent entity to certain KMP. The options are issued for nil consideration and only vest if certain conditions are met.
Options granted under the plan carry no dividend or voting rights. Shares issued under exercised options will rank equally
with ordinary shares.
On exercise each option converts to one share, except in certain circumstances such as rights issues or bonus issues.
Set out below are summaries of options granted under the plan:
2021
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
20/08/2014
21/11/2014
02/09/2016
09/10/2017
27/10/2017
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
2020
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
400,000
450,000
500,000
2,500,000
Exercised
-
-
-
-
-
-
-
-
(100,000)
(50,000)
(50,000)
(200,000)
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
150,000
1,000,000
300,000
400,000
450,000
2,300,000
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
20/08/2014
21/11/2014
02/09/2016
09/10/2017
27/10/2017
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
400,000
450,000
500,000
2,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
1,000,000
400,000
450,000
500,000
2,500,000
53
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2021
Note 34. Share-based payments (continued)
The weighted average share price was $0.343 (2020: $0.364).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.5 years
(2020: 1.35 years).
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were $1,922 (2020: $5,333).
Note 35. Events after the reporting period
The consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its impact on
the consolidated entity, if any, has been reflected in its published results to date. Whilst it would appear that control
measures and related government policies, including the roll out of the vaccine, have started to mitigate the risks caused
by COVID-19, it is not possible at this time to state that the pandemic will not subsequently impact the consolidated entity's
operations going forward. The consolidated entity now has experience in the swift implementation of business continuation
processes should future lockdowns of the population occur, and these processes continue to evolve to minimise any
operational disruption. Management continues to monitor the situation both locally and internationally.
On 12 July 2021, the company executed an agreement for the South African master franchisee to hand back the South
African territory, which includes approximately 60 operating centres. The total payment for the hand back is dependent on
the number of franchisees who execute new franchise agreements over the coming months and is expected to be in the
range of South African Rand 5,000,000 (approximately A$460,000).
On 28 July 2021, the company executed an agreement for £40,000 (approximately A$75,000) to acquire the Gloucester
North in England. This centre will be our first Corporate Centre Hub in the UK market, located close at our UK head office.
On 16 August 2021, the company purchased back the Scotland Area Developer for a capital payment of £250,000
(approximately A$470,000) payable over a 12-month period commencing October 2021. The territory has 32 active centres
and will now be fully serviced by the UK Head Office in Gloucester.
Apart from the dividend declared as disclosed in note 21 and the other items discussed above, no other matter or
circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated
entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
54
Kip McGrath Education Centres Limited
Directors' declaration
30 June 2021
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as
at 30 June 2021 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Ian Campbell
Chairman
24 August 2021
Sydney
55
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 2021, 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 2021 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. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report.
We 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 auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (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.
56
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.auSydneyLevel 8, 1 O’Connell StreetSydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 p +61 2 8346 6000 f +61 2 8346 6099PKF(NS) Audit & Assurance Limited PartnershipABN 91 850 861 839Liability limited by a scheme approved under Professional Standards LegislationNewcastle755 Hunter Street Newcastle West NSW 2302 Australia PO Box 2368 Dangar NSW 2309p +61 2 4962 2688 f +61 2 4962 3245 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 disclosed in note 11, the Company
and its subsidiaries has intangible assets
of $16.117m as at 30 June 2021.
The Company has reviewed the disposition of how cash flows are
generated and determined there is one CGU, being the Company and its
subsidiaries. Our audit procedures included but were not limited to:
An annual impairment test for indefinite
useful life intangible assets is required
under Australian Accounting Standard
(AASB) 136 Impairment of Assets.
has
testing
Management’s
been
performed using a discounted cash flow
model (Impairment model) to estimate
the value-in-use of the Cash Generating
Unit (CGU) to which the intangible assets
have been allocated.
the
The evaluation of
recoverable
amount requires the group to exercise
judgment
key
in
assumptions, which include:
determining
• Preparation of a 5-year cash
flow forecast;
• Determination of a
growth factor; and
terminal
• Determination of a discount
rate.
of
outcome
impairment
The
the
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.
• Assessing and challenging:
o
o
o
o
the assumption of one cash generating unit being appropriate;
the reasonableness of the FY22 budget approved by the
Board by comparing the budget to FY21 actuals;
the key assumptions for the future growth rate used in the
model by comparing the average historical growth rates from
FY19 to FY21 and other 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;
testing, on a sample basis, the validity and accuracy of intangibles
capitalised during the financial year;
• considering management’s assessment of those with definite and
indefinite useful lives;
•
testing, on a sample basis, the validity and accuracy of amortisation
expense and accumulated amortisation where appropriate;
• 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
• assessing appropriateness of
financial statement disclosures
including sensitivities to assumptions used, included in Note 11.
57
Other Information
Those charged with governance are responsible for the other information. The other information comprises
the information included in the consolidated entity’s annual report for the year ended 30 June 2021, but
does not include the financial report and our auditor’s report thereon.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, 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 and,
in doing so, consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
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 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 the
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.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue 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. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the consolidated entity’s internal control.
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Auditor’s Responsibilities for the Audit of the Financial Report (cont’d)
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the 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.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the consolidated entity to express an opinion on the group financial report.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated 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 the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2021. In our opinion, the Remuneration Report of Kip McGrath Education Centres Limited for the year
ended 30 June 2021, complies with section 300A of the Corporations Act 2001.
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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
CLAYTON HICKEY
PARTNER
24 AUGUST 2021
NEWCASTLE, NSW
60
Kip McGrath Education Centres Limited
Shareholder information
30 June 2021
The shareholder information set out below was applicable as at 23 July 2021.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Ordinary shares
% of total
Options over ordinary
shares
% of total
Number
of holders
shares
issued
Number
of holders
shares
issued
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
479
976
266
227
38
0.58
5.11
3.88
12.14
78.28
1,986
99.99
Holding less than a marketable parcel
108
-
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
-
-
-
-
4
4
-
-
-
-
-
4.00
4.00
-
National Nominees Limited
Mr Kip McGrath
CS Third Nominees Pty Limited (HSBC Cust Nom AU Ltd 13 A/C)
Sandhurst Trustees Ltd (Endeavor Asset Mgmt MDA A/C)
Storm Superannuation Fund Pty Ltd (Storm Super Fund A/C)
KMEC Superannuation Pty Ltd (KMEC Superannuation Fund A/C)
J P Morgan Nominees Australia Pty Limited
Sandhurst Trustees Ltd (Cyan C3G Fund A/C)
Kip McGrath Investments Pty Ltd (McGrath Family A/C)
Mr Storm Kip McGrath
BNP Paribas Nominees Pty Ltd (IB AU Noms RetailClient DRP)
Rendina Pty Ltd (Rendina Super Fund A/C)
Mr Matthew Charles Peek
Emerald Shares Pty Limited (Emerald Unit A/C)
Hetale Pty Limited (Eagles Nest Retire Fund A/C)
Ms Snezana Bowden
Indweco Pty Limited
Scanlon Capital Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
Vanward Investments Limited (Equities A/C)
Unquoted equity securities
Options over ordinary shares issued
61
Ordinary shares
% of total
Number held
10,120,794
5,675,764
5,258,541
2,261,907
2,050,867
1,949,133
1,903,694
1,427,778
1,000,000
833,466
762,177
700,000
580,000
512,500
500,000
400,000
371,039
361,791
351,760
343,045
shares
issued
19.38
10.87
10.07
4.33
3.93
3.73
3.65
2.73
1.91
1.60
1.46
1.34
1.11
0.98
0.96
0.77
0.71
0.69
0.67
0.66
37,364,256
71.55
Number
on issue
Number
of holders
2,300,000
4
Kip McGrath Education Centres Limited
Shareholder information
30 June 2021
Substantial holders
Substantial holders in the company are set out below:
National Nominees Limited
Mr Kip McGrath
CS Third Nominees Pty Limited (HSBC Cust Nom AU Ltd 13 A/C)
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
Number held
10,120,794
5,675,764
5,258,541
shares
issued
19.38
10.87
10.07
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
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