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 2022
For the year ended 30 June 2021
2. Results for announcement to the market
Revenues from ordinary activities
Earnings Before Interest, Tax, Depreciation and Amortisation ('EBITDA')
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
$'000
27.9% to
24,648
21.4% to
6,200
8.4% to
8.4% to
1,878
1,878
up
up
up
up
Dividends
An interim dividend for the year ended 30 June 2022 of 1.0 cents per ordinary share, 100% fully franked, was paid on 24
March 2022. The total distribution was $565,000.
On 23 August 2022, a final dividend for the year ended 30 June 2022 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 22 September 2022 to those shareholders on the register at 7p.m. on 8 September 2022. The
total distribution will be $565,000.
Comments
The profit for the consolidated entity after providing for income tax amounted to $1,878,000 (30 June 2021: $1,733,000).
The first part of the financial year was impacted by continuing COVID-10 lockdowns, however appetite for face to face
lessons returned steadily throughout the year especially in the UK. This was boosted by the 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 $6,200,000 (2021: $5,106,000 ).
EBITDA is a financial measure which is not prescribed by the Australian Accounting Standards (‘AAS’) and represents the
profit under AAS adjusted for specific items. The directors consider EBITDA to be one of the core earnings measures of the
consolidated entity.
The following table summarises key reconciling items between statutory profit after tax attributable to the owners of Kip
McGrath Education Centres and EBITDA.
Kip McGrath Education Centres Limited
Appendix 4E
Preliminary final report
Revenue
EBITDA
Less: Depreciation and amortisation
Less: Interest expense
Add: Interest income
Profit before Income tax expense
Income tax expense
Profit after income tax expense
3. Net tangible assets
Net tangible assets per ordinary security
Consolidated
2022
$'000
2021
$'000
24,636
19,265
6,200
(3,522)
(122)
12
2,568
(690)
1,878
5,106
(2,707)
(116)
13
2,296
(563)
1,733
Reporting
period
Cents
Previous
period
Cents
(0.66)
4.48
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
Refer to note 30 to the financial statements for further details.
5. Loss of control over entities
Not applicable.
6. Dividend reinvestment plans
The following dividend or distribution plans are in operation:
The Board approved a Dividend Reinvestment Plan ('DRP') for eligible shareholders commencing with this dividend declared
on 23 August 2022 and, unless the Board determines otherwise, will continue for any subsequent dividends. Under the DRP
shareholders may elect to have dividends on some or all of their ordinary shares automatically reinvested in additional Kip
McGrath shares.
The election date
https://www.kipmcgrath.com/global/shareholder-information
for participation
the DRP
in
is 9 September 2022. The DRP booklet
is available on
7. Details of associates and joint venture entities
Not applicable.
Kip McGrath Education Centres Limited
Appendix 4E
Preliminary final report
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 2022 is attached.
11. Signed
As authorised by the Board of Directors
Signed ___________________________
Date: 23 August 2022
Ian Campbell
Chairman
Newcastle
Kip McGrath Education Centres Limited
ABN 73 003 415 889
Annual Report - 30 June 2022
Kip McGrath Education Centres Limited
Corporate directory
30 June 2022
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 22 November 2022 at 11:00 a.m. (AEST)
Registered office
Share register
Auditor
Bankers
7 Bond 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 2022
Dear Shareholders,
We have witnessed solid performance in FY22 with the company achieving 27.9% year-on-year revenue growth to $24.6M,
despite the overhanging impacts of COVID-19. The solid result was supported by government contract wins in Australia, the
United States and the Middle East.
We emerged from challenging market conditions with a strong financial performance with EBITDA at $6.2M up 21.4% and
NPAT of $1.9M up 8.4% on FY21.
Throughout the year, Kip McGrath remained focused on delivering on its growth strategy, aiming for online tutoring to
account for 35% of revenues. Encouragingly the blended learning mix of online and face-to-face tutoring has resulted in an
increase to our customer retention rate, with online students highlighting the benefits of being able to choose tutoring at
physical locations when needed.
We continue to be focused on our commitment to consistently grow and are investing in our online learning management
systems to ensure our technology capabilities are delivering a leading service to our customer base with increased analytics
to drive greater insights.
The TutorFly strategic acquisition expanded our geographic footprint into the United States, the largest tutoring market in the
world. The marketplace business that matches tutors and students is globally scalable and we can look to leverage this in
new geographies. As the company grows, we see TutorFly as a key area for growth for the business and have recently
appointed a Chief Academic Officer to drive growth in the US, with a focus on penetrating a greater number of schools over
the coming year. We believe the improvements we are making to TutorFly combined with the support of government funding
to help American students who are struggling after COVID-19, will propel further growth for Kip McGrath.
The growth achieved over the financial year would not have been achieved without the dedication of Kip McGrath’s staff and
management who have worked consistently to deliver tailored tutoring to our students and drive value for our shareholders. I
would like to thank the broader team for their efforts.
Today, the Board declared a final dividend of 1 cent per share to be paid on 22 September 2022 for those shareholders on
the register at 7pm on 8 September 2022, resulting in totally franked dividends for the year of 2 cents per share. The Board
also approved a Dividend Reinvestment Plan (DRP) for eligible shareholders commencing with this dividend and, unless the
Board determines otherwise, will continue for any subsequent dividends. The DRP booklet is available on
https://www.kipmcgrath.com/global/shareholder-information
As we look to the future, we continue to be focused on delivering top line growth while improving operational efficiencies in
our platform to generate greater margin expansion. We will focus on all regions of our business to further increase our
market share.
Delivering shareholder value remains imperative to our purpose and we appreciate your continued support. We look forward
to updating you throughout FY23.
_____________________
Ian Campbell
Chairman
23 August 2022
Sydney
2
Kip McGrath Education Centres Limited
Managing Director and Chief Executive Officer's report
30 June 2022
The business has remained steadfast in our pursuit of growth and offshore expansion, and I am delighted to report on the
growth in our revenue, profit, and global reach over the last year as our business returns to normal operations post the
challenges of COVID-19. We exceeded revenue guidance for the financial year delivering $24.6M, a significant increase of
27.9% on FY21, with strong contributions from our UK business and Corporate Centres. Pleasingly EBITDA grew 21.4%
and NPAT by 8.4% to $6.2M and $1.9M respectively.
We continued to be focused on growing the business and added to our global footprint with the acquisition of United States
based TutorFly.
During the year we have seen the global impact on children due to COVID-19 impact with significant learning loss. Most of
the governments in the regions where we trade are investing money to address this loss. In Australia we are one of four
organisations to win a NSW government tender. In the UK many of our franchisees are doing work for the local school they
have relationships with to provide tuition under the funding available from the UK government. In the Middle East our master
franchisee has secured tutoring for five schools. In the USA the Biden administration, alongside state governments has
pledged billions ensuring efforts are made to bridge their substantial learning disparities. Tutorfly was able to deliver tutoring
into schools in Phoenix Arizona which showed considerable growth in their educational performance. States like Arizona are
allocating every student eligible for public school up to $6,500 for private-school tuition, online curriculums, or tutors.
Government funding creates considerable opportunity for growth for our business globally.
Overview of our major initiatives
Master Franchise and Area Developer acquisitions
The company was able to finalise the purchase of the Scotland Area Developer and South Africa Master Franchisee. We
are now directly managing nearly every franchisee in the world from our two main offices, one in Newcastle NSW and the
other in Gloucester, Gloucestershire UK.
Corporate Centres and corporate online direct
Corporate centres achieved a 115% increase in lesson revenue aided by the opening of 9 new or purchased locations. This
area of the business now has 2,333 students. Our expectation is that it can deliver 25% growth in FY23, while providing
operational efficiencies for our platform, software, and management systems. The corporate centres have provided a sound
base to launch and test programs that can then be rolled out to our franchisees. Physical locations have proven to be a
strong advantage for us, as many parents and students want the option of a blended offering, face to face or online tutoring.
Technology development
We are persistently working towards deeper integrations and developments to our technology stack to ensure stronger
learning capabilities and greater analytics. In July 2022 we rolled out our advanced learning management software, with 800
students already using the system. The upgraded system is faster and has improved teaching tools, uniform reporting,
curriculum enhancements and is easier to use for both administrators and students. Implementation has seen small group
tutoring take place via an interactive whiteboard, whilst students have highlighted the ease of use and personal feedback as
areas which have encouraged their individual growth. The platform will also allow blended learning seamlessly, which is the
preferred model for our customers.
TutorFly
Improving the TutorFly offering is a key focus as we move into FY23. The establishment of a Chief Academic Officer
highlights our commitment to secure an additional six schools over the coming year. The benefits of our tutoring have been
seen throughout the year with only 5% of participating students who were tested prior to the academic year displaying skills
at grade level. Following Kip McGrath tutoring this increased to approximately 45% of students testing at grade level.
Additionally, we continue to see synergies with the acquisition and the sharing of Kip McGrath’s technology particularly the
newly deployed learning management system.
Government Initiatives
Increasingly governments are committing funds to bridge learning gaps exacerbated by the pandemic. Over the course of
the year Kip McGrath won an additional four government contracts including new regions such as the Middle East. The
Middle East contract delivers Kip McGrath’s tutoring to over 4,000 students within local schools. Our ability to continue to
win these contracts across a range of countries highlights our deep commitment to learning and our motto “every child can
learn, they just have to be taught well”, reinforcing the reputation we have built in education over the last 45 years of
operation.
3
Kip McGrath Education Centres Limited
Managing Director and Chief Executive Officer's report
30 June 2022
Gold Partner Franchisees
Our Gold Partner Franchisees continue to operate globally with 102 in Australia, 9 in New Zealand and 185 in the United
Kingdom. The UK Gold Partners delivered strong growth for the year with a 19% uplift delivering $7.6M of revenue. A key
focus for FY23 will be transitioning many of our Silver Partners to Gold Partnerships to deliver greater growth and stronger
margin performance.
Outlook
As we move into FY23, our focus remains on growing all areas of the business with specific attention to the corporate
centres and TutorFly. We have defined our roadmap for the first half of FY23 clearly determined to finalise our latest
software rollouts to deliver operational efficiencies and drive margin expansion.
The growth we continue to achieve wouldn’t be possible without the support and commitment of our teachers, children, and
franchisees. I would like to thank you all for your dedication to improving learning globally.
__________________
Storm McGrath
Managing Director & Chief Executive Officer
23 August 2022
Sydney
4
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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 2022.
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 2021 of 1.0 cents (2020: 2.0 cents) per ordinary
share
Interim dividend for the year ended 30 June 2022 of 1.0 cents (2021: 1.0 cents) per ordinary
share
Consolidated
2022
$'000
2021
$'000
522
565
1,036
522
1,087
1,558
On 23 August 2022, a final dividend for the year ended 30 June 2022 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 22 September 2022 to those shareholders on the register at 7p.m. on 8 September 2022. The
total distribution will be $565,000.
Review of operations
The profit for the consolidated entity after providing for income tax amounted to $1,878,000 (30 June 2021: $1,733,000).
Revenue has grown by 28.0% to $24,636,000, with significant growth in student lesson fees from corporate centres offsetting
a slight fall in direct sales. Student lesson fees were up 115.3% to $7,883,000 with new corporate centres acquired in
Brisbane, Sydney Newcastle and Tasmania along with new growth from the US operations. Franchise fees increased 12.5%
to $12,960,000 with the impact of COVID-19 beginning to show signs of recovery in most key markets. Refer to note 5 for
additional information.
In spite of the first part of the year being impacted by lockdowns in several markets, scheduled lessons numbers increased
by 13% to 1,894,000 while lesson attendance increased to 87% from 85% compared to the prior year. The appetite for face-
to-face lessons has also returned in some geographies, especially the UK, where in-person scheduled lessons have
increased by 77%, offset by a 32% contraction in online lessons.
Global Corporate Centre lessons scheduled have increased significantly from 68,000 in the prior year to 119,000 in the
current year, reflecting a 75% jump. Markets in Australasia grew by 5% from 648,000 scheduled lessons in FY21 to 678,000
in FY22, with the UK market increasing by 15%. Tutorfly in the US contributed a total of 71,000 lessons for the period since
acquisition, representing 3.7% of total scheduled lessons.
5
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
There are now 24 Corporate Centres operational, including centres in Brisbane (7), Newcastle (3), Sydney (5), Bathurst (1),
Canberra (1), Melbourne (2), Perth (2), Launceston (1), England (1) and New Zealand (1). Gold Partner numbers in Australia
have reduced to 102, partly due to Corporate Centre consolidation. Total centres in Australia remains at 140 (down from 144
in the prior year) . Similarly in the New Zealand market centre numbers have decreased slightly to 45 active centres, with 10
Gold Partners.
In the UK the number of Gold Partners have been growing, now at 185 centres compared to 180 in the prior year. Overall
there are 258 active UK centres, up from 255 in the prior year.
UK operations revenue saw a 13% increase to $10,026,000 compared to $8,838,000 in the prior year. Revenue for US
(Tutorfly) was $1,617,000. The South African business has transitioned well to the franchisor with revenues increasing by
61% to $574,000 despite being impacted by shutdowns earlier in the year. There are currently 56 operational centres in
South Africa.
The earnings before interest, tax, depreciation and amortisation ('EBITDA') amounted to $6,200,000 (2021: $5,106,000).
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
Add: Interest income
Profit before Income tax expense
Income tax expense
Profit after income tax expense
Consolidated
2022
$'000
2021
$'000
24,636
19,265
6,200
(3,522)
(122)
12
2,568
(690)
1,878
5,106
(2,707)
(116)
13
2,296
(563)
1,733
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
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 50 operating centres. The total payment for the hand back amounted to South
African Rand 5,100,000 (approximately A$460,000). These centres are now fully serviced by the UK Head Office in
Gloucester.
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 is now fully serviced by the UK Head Office in Gloucester.
On 1 September 2021, the company purchased a 70% stake in the US based business Tutorfly.com. ('Tutorfly') for an initial
payment of US$500,000 via its newly incorporated subsidiary, Tutorfly Holdings Inc. The company made a further payment
of US$500,000 in December 2021 when Tutorfly achieved US$20,000 per month net revenue targets. The company agreed
a final settlement of US$2,000,000 in February 2022 to purchase the remaining 30% stake in the business as it had achieved
the US$50,000 per month net revenue target prior to 31 December 2021. This settlement included 2,000,000 ordinary shares
in the company issued on 21 February 2022 as well as a cash payment of US$525,000.
In January 2022, the company purchased another 5 Corporate Centres, including 4 in Southern Queensland and 1 in
Tasmania for $770,000.
6
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
Matters subsequent to the end of the financial year
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2022 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.
Business risks
The following is a summary of material business risks that could adversely affect the consolidated entity's ('KMEC') financial
performance and growth potential in future years.
Information technology systems
KMEC’s business is dependent upon the development and maintenance of infrastructure to support the Information
Technology (IT) systems, which along with the internet, has experienced and is expected to continue to experience significant
growth and development. There can be no assurance that the IT systems or the internet's infrastructure will continue to be
able to support the demands placed upon it by the community or that the performance or reliability of the IT systems or
internet will not diminish. In particular, the reliability and performance of IT systems and the internet may be affected by
computer viruses and/or other deliberate acts of terrorism and sabotage. The introduction of new technologies for delivering
services, changes in perceptions of the industry, cultural shifts and changes in the demographic, all have the capability to
adversely impact the operating conditions of KMEC.
Competition
KMEC operates in a competitive market with competitors who may have greater resources, superior products and/or a lower
cost of capital and the ability to borrow money at lower rates than those at which KMEC can borrow money. There is no
assurance that competitors will not succeed in developing and offering services that are more effective, economically or
otherwise, or more attractive to the market than those being developed by KMEC, or which would render KMEC’s services
obsolete and/or otherwise uncompetitive. In addition, KMEC may not be able to compete successfully against current or
future competitors where aggressive pricing policies are employed to capture market share, which could materially and
adversely affect KMEC’s future business, operating results and financial position.
Acts of terrorism, pandemics or outbreak of international hostilities
An act of terrorism, significant pandemic or an outbreak of international hostilities could adversely affect consumer
confidence, customer spending and investment performance, which in turn could have an adverse impact on KMEC's
operating, financial and share value performance.
Reliance on key personnel
KMEC’s performance is significantly dependent on the talents and efforts of skilled individuals able to manage the business.
KMEC’s continued ability to operate effectively depends on its ability to retain and motivate existing employees as well as to
attract new employees. KMEC’s financial performance may be adversely affected if it is unable to recruit, retain and motivate
quality employees.
Funding risks
Depending on KMEC's ability to generate revenue from operations, KMEC may require further financing to support its
activities. Any additional equity financing could dilute share holdings, and debt financing, if available, may involve restrictions
on financing and operating activities. The unavailability of such funding, or the unavailability of such funding on commercially
favourable terms, may limit the extent and size of activity undertaken by KMEC, and adversely affect the financial
performance of KMEC as a consequence. In addition, debt funding will expose KMEC to the risk of movements in interest
rates.
Dependence on third party service providers
KMEC depends on a number of key arrangements (both contractual and non-contractual) with its business partners, that,
should they be lost or significantly compromised, could potentially adversely affect KMEC’s financial and operational
viability. In particular, KMEC is currently reliant on an ongoing key supplier relationship with Amazon, Microsoft and Google
and is likely to be reliant on these for some time. As a consequence of this reliance, there will be little scope to mitigate the
adverse effects on KMEC from either a poor performance of either one of these or a change in the relationship.
7
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
Foreign exchange risk
KMEC’s business currently sells services and purchases product in several currencies including [$USD (United States of
America), £GBP (United Kingdom), $NZD (New Zealand) and ZAR (South Africa)]. Accordingly, KMEC is exposed to foreign
currency exchange risk. KMEC does not have an active hedging policy in place, instead relying on natural hedges, and
accordingly movements in exchange rates may impact KMEC’s profitability.
Litigation and dispute risk
There are currently no outstanding claims involving KMEC. However KMEC is potentially exposed to the general risk of
disputes and litigation, which may arise from time to time in the course of KMEC’s business activities. There is a risk that
material or costly disputes or litigation could adversely affect financial performance. KMEC takes out insurance to cover
certain risks where it appears appropriate to do so. To the extent that any such claims are not covered by insurance, the
costs of responding to the claim and any adverse outcome from any claim may materially adversely affect KMEC financial
position.
Changes in legislation and government regulation
Regulatory changes, including changes to the laws impacting KMEC's operations, the taxation system or associated
government policy, may affect future earnings and the relative attractiveness of investing in KMEC.
Potential acquisitions
As part of its business strategy, KMEC may make acquisitions of, or significant investments in, complementary companies,
services, products or technologies, although no such acquisitions or investments are assured. Any such future transactions
would be accompanied by the risks commonly encountered in making acquisitions of companies, products and
technologies. No assurance can be made that any such investments would be profitable.
Intellectual property rights and brand names
KMEC regards brand names, trademarks, domain names, trade secrets and similar intellectual property as important to its
success. Should KMEC or any of its brand names be damaged in any way or lose market appeal, KMEC’s business could
be adversely impacted. KMEC relies on copyright law, trade secret protection and duties of confidence and licence
agreements with its employees, customers, contractors and others to protect its intellectual property rights. Whilst KMEC will
use all reasonable endeavours to protect these rights, unauthorised use or disclosure of its proprietary technology and
intellectual property may have an adverse effect on the operating, marketing and financial performance of KMEC. KMEC
could also be exposed if it breached any third party intellectual property rights.
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:
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Ian Campbell
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 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
8
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
Name:
Title:
Qualifications:
Experience and expertise:
Storm McGrath
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:
4,484,333 ordinary shares
Interests in shares:
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
600,000 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 27 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
156,179 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 32 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.
9
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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 2022, and the number of meetings attended by each director were:
Full Board
Attended
Held
Remuneration Committee
Attended
Held
Audit Committee
Attended
Held
Ian Campbell
Storm McGrath
Trevor Folsom
Diane Pass
10
10
10
10
10
10
10
10
2
-
2
2
2
-
2
2
4
-
4
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.
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.
10
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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.
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 2022.
Voting and comments made at the company's 2021 Annual General Meeting ('AGM')
At the 2021 AGM, 99% of the shareholders voted to adopt the remuneration report for the year ended 30 June 2021. 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.
11
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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
Scott Hillard - Chief Commercial Officer
Abby Clifford - Chief Product Officer
Short-term
benefits
Cash salary
and fees
$
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Bonus
$
Non-
monetary
$
Super-
annuation
$
Leave
benefits
$
Share-
based
payments
Equity-
settled
shares
$
Share-
based
payments
Equity-settl
ed
options
$
Total
$
113,122
68,493
75,001
-
-
-
414,511
23,000
273,972
256,641
225,000
200,000
200,000
1,826,740
22,500
25,664
12,375
11,000
-
94,539
-
-
-
-
-
-
-
-
-
-
11,878
6,849
7,499
41,451
27,397
34,678
22,500
20,000
20,000
192,252
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,000
75,342
82,500
478,962
323,869
316,983
259,875
231,000
220,000
2,113,531
2022
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
12
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
Short-term
benefits
Cash salary
and fees
$
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Bonus
$
Non-
monetary
$
Super-
annuation
$
Leave
benefits
$
Share-
based
payments
Equity-
settled
shares
$
Share-
based
payments
Equity-settl
ed
options
$
Total
$
127,326
71,127
84,831
467,346
282,613
246,394
88,462
186,059
76,077
1,630,235
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,712
6,757
8,059
46,773
27,798
31,813
8,404
17,676
6,942
165,934
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
139,038
77,884
92,890
514,119
310,411
278,207
96,866
203,735
83,019
1,796,169
2021
Non-Executive
Directors:
Ian Campbell
(Chairman)
Trevor Folsom
Diane Pass
Executive
Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Scott Hillard
Daniel Pludek
Abby Clifford
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Ian Campbell
Trevor Folsom
Diane Pass
Executive Directors:
Storm McGrath
Other KMP:
Brett Edwards
Jackie Burrows
Daniel Pludek
Scott Hillard
Abby Clifford
Fixed remuneration
2021
2022
At risk - STI
At risk - LTI
2022
2021
2022
2021
100%
100%
100%
100%
100%
100%
95%
100%
93%
92%
95%
95%
100%
100%
100%
100%
100%
100%
-
-
-
5%
7%
8%
5%
5%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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
2022
2021
Cash bonus forfeited
2021
2022
22%
33%
40%
22%
22%
-
-
-
-
-
-
-
78%
100%
67%
60%
78%
78%
100%
100%
100%
100%
100%
100%
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.
Share-based compensation
Issue of shares
There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2022.
Issue of options
There were no options over ordinary shares issued to directors and other KMP as part of compensation that were outstanding
as at 30 June 2022.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2022 are summarised below:
Sales revenue
EBITDA
Profit after income tax
2022
$'000
2021
$'000
2020
$'000
2019
$'000
2018
$'000
24,636
6,200
1,878
19,265
5,106
1,733
17,123
5,208
1,573
16,263
5,207
2,652
13,060
4,079
2,263
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
1.000
3.472
3.472
1.200
3.329
3.188
1.025
3.455
3.276
0.995
5.888
5.536
0.580
5.025
4.752
2022
2021
2020
2019
2018
14
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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:
Ordinary shares
Ian Campbell
Storm McGrath
Trevor Folsom
Diane Pass
Brett Edwards
Jackie Burrows
Balance at
the start of
the year
Received
as part of
remuneration
500,000
2,884,333
165,000
105,473
150,000
200,000
4,004,806
-
1,500,000
-
-
400,000
200,000
2,100,000
Additions
Sales/other
-
100,000
435,000
50,706
-
-
585,706
-
-
-
-
(118,000)
-
(118,000)
Balance at
the end of
the year
500,000
4,484,333
600,000
156,179
432,000
400,000
6,572,512
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.
Options over ordinary shares
Storm McGrath
Brett Edwards
Jackie Burrows
Balance at
the start of
the year
1,500,000
400,000
200,000
2,100,000
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
Vested and
exercisable
-
-
-
-
(1,500,000)
(400,000)
(200,000)
(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
Loans to KMP are as follows:
Storm McGrath
Brett Edwards
Jackie Burrows
%
2.59%
2.59%
2.59%
Balance at
start of the
year
Drawn down Repayments
Interest
Balance at
the end of the
year
-
-
-
-
535,000
257,605
67,000
-
(125,080)
-
6,820
1,809
854
541,820
134,334
67,854
859,605
(125,080)
9,483
744,008
The loans were granted for the conversion of options during a trading black out period. The loans have a market interest rate
with five year repayment terms with security over the underlying shares held by the relevant employees.
There are no other loans to KMP or their related parties
Other transactions with KMP and their related parties
A family member of Storm McGrath’s is employed by the company and received a wage of $9,818 during the year (2021:
Nil). There are no other transactions with KMP and their related parties.
This concludes the remuneration report, which has been audited.
15
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
Shares under option
There were no unissued ordinary shares of Kip McGrath Education Centres Limited under option at the date of this report.
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 2022
and up to the date of this report on the exercise of options granted:
Date options granted
20/08/2014
21/11/2014
19/08/2016
09/10/2017
27/10/2017
Exercise
price
Number of
shares issued
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
300,000
400,000
450,000
2,300,000
Coronavirus (COVID-19) pandemic
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 the results to date. Whilst it would appear that control measures and
related government policies, including the roll out of the vaccine and boosters, 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 directors and management continue to monitor the situation both locally and internationally.
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.
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.
16
Kip McGrath Education Centres Limited
Directors' report
30 June 2022
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 and Sydney
There are no officers of the company who are former partners of PKF Newcastle and Sydney.
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
23 August 2022
Sydney
17
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 2022, 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
MARTIN MATTHEWS
PARTNER
23 AUGUST 2022
NEWCASTLE, NSW
18
PKF (NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 Liability limited by a scheme approved under Professional Standards Legislation Sydney Level 8, 1 O'Connell Street Sydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 p +61 2 8346 6000 f +61 2 8346 6099 Newcastle 755 Hunter Street Newcastle West NSW 2302 Australia PO Box 2368 Dangar NSW 2309 p +61 2 4962 2688 f +61 2 4962 3245 PKF (NS) Audit & Assurance Limited Partnership is a member firm of the PKF International Limited family of separately owned firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For our office locations visit www.pkf.com.au Kip McGrath Education Centres Limited
Contents
30 June 2022
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
20
21
22
23
24
58
59
64
19
Kip McGrath Education Centres Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2022
Revenue
Government grants
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
(Impairment)/recovery of receivables
Loss on sale of assets
Net foreign exchange gain/(loss)
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
Consolidated
Note
2022
$'000
2021
$'000
5
6
6
9
6
7
24,636
19,265
-
12
513
13
(260)
(11,177)
(3,543)
(2,825)
(639)
(3,522)
(204)
-
212
(122)
(1,282)
(7,160)
(3,489)
(1,938)
(719)
(2,707)
2
(5)
(81)
(116)
2,568
2,296
(690)
(563)
1,878
1,733
(187)
(187)
49
49
1,691
1,782
Cents
Cents
Basic earnings per share
Diluted earnings per share
34
34
3.472
3.472
3.329
3.188
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
Kip McGrath Education Centres Limited
Statement of financial position
As at 30 June 2022
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax refund due
Prepayments
Total current assets
Non-current assets
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
Consolidated
Note
2022
$'000
2021
$'000
8
9
10
11
12
13
14
15
16
17
16
18
19
20
7,625
3,012
-
648
11,285
481
1,630
22,296
686
25,093
10,571
727
257
484
12,039
323
1,600
16,117
649
18,689
36,378
30,728
7,482
416
1,300
618
459
1,107
11,382
1,231
1,841
3,072
6,855
476
425
524
-
895
9,175
1,258
1,836
3,094
14,454
12,269
21,924
18,459
17,702
613
3,609
14,841
800
2,818
21,924
18,459
The above statement of financial position should be read in conjunction with the accompanying notes
21
Kip McGrath Education Centres Limited
Statement of changes in equity
For the year ended 30 June 2022
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
14,457
-
-
-
317
67
-
Reserves
$'000
Retained
profits
$'000
Total equity
$'000
751
-
49
49
-
-
-
2,643
1,733
-
1,733
-
-
(1,558)
17,851
1,733
49
1,782
317
67
(1,558)
Balance at 30 June 2021
14,841
800
2,818
18,459
Consolidated
Balance at 1 July 2021
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)
Dividends paid (note 21)
Issued
capital
$'000
14,841
-
-
-
Reserves
$'000
Retained
profits
$'000
Total equity
$'000
800
-
(187)
(187)
2,818
1,878
-
1,878
18,459
1,878
(187)
1,691
2,861
-
-
-
-
(1,087)
2,861
(1,087)
Balance at 30 June 2022
17,702
613
3,609
21,924
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
Kip McGrath Education Centres Limited
Statement of cash flows
For the year ended 30 June 2022
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Government grants received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for property, 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
Dividends paid
Repayment of borrowings
Repayment of lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Consolidated
Note
2022
$'000
2021
$'000
23,724
(18,087)
20,100
(13,577)
5,637
12
-
(122)
(473)
5,054
6,523
13
513
(116)
(770)
6,163
(2,178)
(398)
(4,379)
-
(158)
(4,634)
(6,955)
(4,792)
-
1,300
(1,087)
(425)
(833)
67
-
(1,558)
(651)
(487)
(1,045)
(2,629)
(2,946)
10,571
(1,258)
11,829
32
30
11
19
21
Cash and cash equivalents at the end of the financial year
8
7,625
10,571
The above statement of cash flows should be read in conjunction with the accompanying notes
23
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 1. General information
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:
7 Bond 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 23 August 2022. The
directors have the power to amend and reissue the financial statements.
Note 2. 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.
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 3.
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 2022 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.
24
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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.
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.
25
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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.
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.
26
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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.
●
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.
27
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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.
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.
Goodwill
Goodwill from acquisition primarily consists of the goodwill arising from the acquisition of operating franchises to be converted
to corporately managed centres. These costs are not subsequently amortised where they are deemed to have an indefinite
useful life and are subject to annual impairment reviews based on assessment of centre profitability.
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.
28
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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.
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
Trade and other payables 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.
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.
29
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. 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.
30
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. 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 additional shares that would have been outstanding assuming conversion of all 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.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
31
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 2. Significant accounting policies (continued)
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 2022. The consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
consolidated entity, are set out below.
Amending accounting standards issued are not considered to have a significant impact on the financial statements of the
consolidated entity as their amendments provide either clarification of existing accounting treatment or editorial amendments.
AASB 2020-1 Classification of liabilities as current or non-current
AASB 2020-1 was issued in March 2020 and is applicable to annual periods beginning on or after 1 January 2023, as
extended by AASB 2020-6. Early adoption is permitted. This standard amends AASB 101 ‘Presentation of Financial
Statements’ to clarify requirements for the presentation of liabilities in the statement of financial position as current or
noncurrent. The amendments clarify that a liability is classified as non-current if an entity has the right at the end of the
reporting period to defer settlement of the liability for at least 12 months after the reporting period. If the deferral right is
conditional, the right only exists if, at the end of the reporting period, those conditions have been complied with. Classification
of a liability as non-current is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability
for at least 12 months after the reporting date or even if the entity settles the liability prior to issue of the financial statements.
The meaning of settlement of a liability is also clarified.
Note 3. 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
Goodwill, 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 generate. Such assets are subject to annual impairment reviews in accordance with the accounting policy
stated in note 2. 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.
32
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 3. Critical accounting judgements, estimates and assumptions (continued)
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.
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 2, 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.
33
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact
on the assets and liabilities, depreciation and amortisation reported.
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.
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 4. 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.
34
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 4. Operating segments (continued)
Geographical information
Australasia
United States and North America
United Kingdom and Europe
Overseas other
Note 5. 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
Sales to external customers
Geographical non-current
assets
2022
$'000
2021
$'000
2022
$'000
2021
$'000
12,164
1,617
10,026
825
9,883
-
8,838
521
19,201
4,316
890
-
17,264
-
776
-
24,632
19,242
24,407
18,040
Consolidated
2022
$'000
2021
$'000
12,960
428
1,867
1,494
7,883
24,632
11,524
481
1,825
1,751
3,661
19,242
4
23
24,636
19,265
Consolidated
2022
$'000
2021
$'000
24,437
195
19,017
225
24,632
19,242
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
The disaggregation of revenue by major product lines is disclosed at the top of revenue note and the geographical regions
is presented in note 4 - operating segments.
35
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
Franchise and development territories
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
Consolidated
2022
$'000
2021
$'000
240
841
1,081
1,969
10
462
2,441
3,522
10,261
916
-
11,177
45
77
122
196
525
721
1,469
-
517
1,986
2,707
6,423
735
2
7,160
35
81
116
Leases
Variable lease payments - COVID-19 related rent concessions income
-
(85)
36
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
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 25% (2021: 26%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Other non-deductible expenses
Sundry items
Income tax expense
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 25%
Consolidated
2022
$'000
2021
$'000
722
(32)
690
(37)
5
(32)
223
340
563
87
253
340
2,568
2,296
642
597
(10)
58
690
(2)
(32)
563
Consolidated
2022
$'000
2021
$'000
1,269
1,269
317
317
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 26% to 25% for 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.
37
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 8. Cash and cash equivalents
Current assets
Cash at bank
Restricted cash
Consolidated
2022
$'000
2021
$'000
1,847
5,778
5,038
5,533
7,625
10,571
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 (note 13).
Note 9. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Loan to director (note 19 and 28)
Loan to employees (note 19 and 28) *
Other receivables
Consolidated
2022
$'000
2021
$'000
2,286
(244)
2,042
542
378
50
970
853
(126)
727
-
-
-
-
3,012
727
* Loans to employees of $378,000 include loans of $202,000 to key management personnel (see note 28)
Allowance for expected credit losses
The consolidated entity has recognised a loss of $204,000 (2021: recovery of $2,000 ) in profit or loss in respect of expected
credit losses for the year ended 30 June 2022. 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
2022
%
2021
%
Carrying amount
2021
$'000
2022
$'000
Allowance for expected
credit losses
2022
$'000
2021
$'000
2%
2%
86%
1%
16%
93%
930
1,121
235
2,286
686
49
118
853
19
23
202
244
8
8
110
126
The consolidated entity has increased its monitoring of debt recovery as there are being fluctuations with franchisees and
customers delaying payment. As a result, the calculation of the expected credit losses have been varied to accommodate
these changes.
38
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 9. Trade and other receivables (continued)
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
2022
$'000
2021
$'000
126
209
-
(91)
244
169
6
(40)
(9)
126
Consolidated
2022
$'000
2021
$'000
3,068
(1,438)
2,601
(1,001)
1,630
1,600
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 2020
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2021
Additions
Write off of assets
Depreciation expense
Balance at 30 June 2022
Land and
buildings
$'000
1,694
863
(438)
6
(525)
1,600
900
(29)
(841)
1,630
For other 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 2022;
note 22 for undiscounted future lease commitments; and
consolidated statement of cash flow for repayment of lease liabilities.
39
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 11. Intangibles
Non-current assets
Goodwill - at cost (note 30)
Intellectual property - at cost
Product and overseas development costs
Less: Accumulated amortisation
Franchise and development territories
Less: Accumulated amortisation
Other intangible assets - at cost
Less: Accumulated amortisation
Consolidated
2022
$'000
2021
$'000
4,241
4,012
16,347
(8,950)
7,397
6,114
(79)
6,035
3,231
(2,620)
611
-
4,012
14,003
(6,988)
7,015
3,674
-
3,674
3,574
(2,158)
1,416
22,296
16,117
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Goodwill
$'000
Intellectual
property
$'000
Product and
overseas
development
costs
$'000
Franchise and
development
territories
$'000
Other
intangibles
$'000
4,012
-
-
-
4,012
-
-
-
-
5,682
2,802
-
(1,469)
7,015
2,351
-
-
(1,969)
1,855
1,832
(13)
-
3,674
2,028
-
343
(10)
1,933
-
-
(517)
1,416
-
-
(343)
(462)
Total
$'000
13,482
4,634
(13)
(1,986)
16,117
4,379
4,241
-
(2,441)
Consolidated
Balance at 1 July 2020
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2021
Additions
Additions through business
combinations (note 30)
Transfers in/(out)
Amortisation expense
Balance at 30 June 2022
-
-
-
-
-
-
4,241
-
-
4,241
4,012
7,397
6,035
611
22,296
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, New Zealand and South Africa. As there is no foreseeable limit to the cash flows these assets generate, 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.
Impairment tests for indefinite life intangibles
Indefinite life intangibles are allocated to a single cash generating unit ('CGU').
40
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 11. Intangibles (continued)
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 2.5%
(2021: 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 15.2% (2021: 14.5%). 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 15% (2021: 12%) 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 2022 (2021: $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 grow by less than 3% (2021: fall by 7%) 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.
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
41
Consolidated
2022
$'000
2021
$'000
50
53
104
331
46
20
82
-
686
649
37
686
42
60
123
232
44
66
94
(12)
649
736
(87)
649
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and
previous financial year are set out below:
Opening balance
Payments received in advance
Transfer to revenue - included in the opening balance
Closing balance
Consolidated
2022
$'000
2021
$'000
742
5,679
236
825
7,482
397
5,492
160
806
6,855
Consolidated
2022
$'000
2021
$'000
416
476
476
66
(126)
416
576
123
(223)
476
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 $416,000 as at 30 June 2022 ($476,000 as at 30 June 2021) and is expected to be recognised as
revenue in future periods as follows:
Consolidated
2022
$'000
2021
$'000
81
72
77
52
37
31
66
94
86
64
55
60
36
81
416
476
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
42
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 15. Borrowings
Current liabilities
Bank loans
Refer to note 22 for further information on financial instruments.
Consolidated
2022
$'000
2021
$'000
1,300
425
Funds from GBP denominated borrowings were used to acquire area developer territories in the UK. These were fully repaid
during the year ended 30 June 2022. In June 2022 a new USD denominated borrowing facility of USD1,525,000 (AUD
$2,213,000) was completed with the HSBC. This facility has a 3 year term with quarterly repayments of USD76,250. The
facility was fully drawn down in July 2022 and the overdraft repaid at that time.
Total secured liabilities
The total secured liabilities are as follows:
Bank loans
Consolidated
2022
$'000
2021
$'000
1,300
425
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.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
2022
$'000
2021
$'000
1,750
-
2,213
3,963
1,300
-
-
1,300
450
-
2,213
2,663
1,750
425
-
2,175
-
425
-
425
1,750
-
-
1,750
Total facilities
Bank loans - AUD
Bank loans - GBP
Bank loans - USD
Used at the reporting date
Bank loans - AUD
Bank loans - GBP
Bank loans - USD
Unused at the reporting date
Bank loans - AUD
Bank loans - GBP
Bank loans - USD
43
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
2022
$'000
2021
$'000
618
524
1,231
1,258
Consolidated
2022
$'000
2021
$'000
677
430
1,107
501
394
895
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.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits
Consolidated
2022
$'000
2021
$'000
659
533
44
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
2022
$'000
2021
$'000
1,841
1,841
1,836
5
1,841
1,836
1,836
1,583
253
1,836
Consolidated
2022
Shares
2021
Shares
2022
$'000
2021
$'000
Ordinary shares - fully paid
56,519,331
52,219,331
17,702
14,841
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Conversion of options
Conversion of options
Issue of shares *
Balance
Conversion of options **
Conversion of options **
Conversion of options **
Issue of shares ***
Transaction costs
1 July 2020
11 September 2020
11 September 2020
17 February 2021
30 June 2021
29 December 2021
29 December 2021
29 December 2021
21 February 2022
51,819,331
100,000
100,000
200,000
52,219,331
300,000
850,000
1,150,000
2,000,000
$0.300
$0.370
$1.600
$0.300
$0.370
$0.350
$1.031
Balance
30 June 2022
56,519,331
14,457
30
37
317
14,841
90
315
402
2,063
(9)
17,702
Issue of shares relates to consideration for the buy-back of a key franchise operation in Bossley Park, Sydney.
*
** Due to share trading restrictions the conversion of options on 29 December 2021 was facilitated through the granting
of loans at commercial rates and terms to the directors and relevant employees (note 9).
Issue of shares relates to consideration for the buying out the minority interest in Tutorfly Inc. (note 30).
***
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.
45
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 19. Issued capital (continued)
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 2021 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
2022
$'000
2021
$'000
(386)
245
754
613
(199)
245
754
800
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.
46
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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 2020
Foreign currency translation
Balance at 30 June 2021
Foreign currency translation
Balance at 30 June 2022
Note 21. Dividends
Dividends paid during the financial year were as follows:
Foreign
currency
$'000
Share-based
payments
$'000
Other
$'000
Total
$'000
(248)
49
(199)
(187)
(386)
245
-
245
-
245
754
-
754
-
754
751
49
800
(187)
613
Final dividend for the year ended 30 June 2021 of 1.0 cents (2020: 2.0 cents) per ordinary
share
Interim dividend for the year ended 30 June 2022 of 1.0 cents (2021: 1.0 cents) per ordinary
share
Consolidated
2022
$'000
2021
$'000
522
565
1,036
522
1,087
1,558
On 23 August 2022, a final dividend for the year ended 30 June 2022 of 1.0 cents per ordinary share, 100% fully franked,
was determined to be paid on 22 September 2022 to those shareholders on the register at 7p.m. on 8 September 2022. The
total distribution will be $565,000.
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, US Dollar, South African Rand and New Zealand Dollar.
47
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
Assets
2022
$'000
2021
$'000
Liabilities
2022
$'000
2021
$'000
1,231
15
5,246
565
12
233
7,302
130
12
6,794
1,336
4
18
8,294
28
-
4,574
263
-
-
4,865
-
-
3,964
172
-
-
4,136
The consolidated entity had net assets denominated in foreign currencies of $2,437,000 as at 30 June 2022 (assets
$7,302,000 less liabilities $4,865,000) (2021: $4,158,000 (assets $8,294,000 less liabilities $4,136,000)). Based on this net
position, a 10% strengthening in the Australian dollar from 30 June 2022 levels may expose the consolidated entity to a
$244,000 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
Bank loans - GBP
Bank loans - AUD
Net exposure to cash flow interest rate risk
2022
2021
Weighted
average
interest rate
%
-
2.96%
Weighted
average
interest rate
%
2.58%
-
Balance
$'000
-
1,300
1,300
Balance
$'000
425
-
425
The consolidated entity has net bank loans and borrowings outstanding, totalling $1,300,000 (2021: $425,000), which are
principal and interest payment loans. Quarterly cash outlays of approximately $111,000 (2021: $130,000 per quarter) are
required to service the debt as of July 2022. An official increase/decrease in interest rates of 100 (2021: 100) basis points
would have an adverse/favourable effect on profit before tax of $13,000 (2021: $4,300) per annum. The percentage change
is based on the expected volatility of interest rates using market data and analysis.
48
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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 loans - AUD
Bank loans - USD
Consolidated
2022
$'000
2021
$'000
450
2,213
2,663
1,750
-
1,750
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. This was repaid during the year ended 30 June 2022.
In June 2022 a new USD denominated borrowing facility of USD1,525,000 (AUD $2,213,000) was completed with the
HSBC. This facility has a 3 year term with quarterly repayments of USD76,250. The facility was fully drawn down in July
2022 and the overdraft repaid at that time.
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, Kip McGrath Education Global Pty Ltd, Kip McGrath Education New Zealand Limited and
Tutorfly Holdings Inc. in relation to the HSBC banking facilities.
The bank loan covenants are specific annual reporting requirements. In June 2017 the consolidated entity entered into a
new finance facility with HSBC Bank Australia Ltd.
49
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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 - 2022
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans - AUD
Lease liability
Total non-derivatives
Consolidated - 2021
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
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 Over 5 years
$'000
$'000
-
-
2.96%
3.80%
742
6,740
1,300
618
9,400
-
-
-
556
556
-
-
-
675
675
-
-
-
-
-
Weighted
average
interest rate 1 year or less
%
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
742
6,740
1,300
1,849
10,631
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
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 $1,186,000 (2021:
$1,183,000) by discounting the remaining contractual maturities at current market interest rates for similar financial
instruments.
50
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
Note 25. Remuneration of auditors
Consolidated
2022
$
2021
$
1,921,323
192,208
1,630,235
165,934
2,113,531
1,796,169
During the financial year the following fees were paid or payable for services provided by PKF Newcastle and Sydney, the
auditor of the company, and its network firms:
Audit services - PKF Newcastle and Sydney
Audit or review of the financial statements
Other services - PKF Newcastle and Sydney
Preparation of the tax return and other tax services
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Preparation of the tax return (NZ)
Consolidated
2022
$
2021
$
105,650
105,000
3,000
21,890
108,650
126,890
17,264
-
2,485
19,749
2,500
2,500
Note 26. Contingent liabilities
There were no contingent liabilities at 30 June 2022 and 30 June 2021.
The consolidated entity has entered into arrangements to provide a guarantee to the lessor of the head office premises
amounting to $22,000 (2021: $58,000), and premises in Kotara of $51,000 (2021: $51,000) and in Kellyville of $21,000 (2021:
$21,000).
Note 27. Commitments
Capital commitments
Committed at the reporting date but not recognised as liability, payable:
Property, plant and equipment
51
Consolidated
2022
$'000
2021
$'000
-
35
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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 31.
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
A family member of Storm McGrath’s is employed by the company and received a wage of $9,818 during the year (2021:
Nil). There are no other transactions with KMP and their related parties.
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, except for the following loans to
certain KMP.
Loans
Storm McGrath
Brett Edwards
Jackie Burrows
Applicable
interest rate
Balance at
the start of
the year
Drawn down Repayments
Interest
Balance at
the of the
year
2.59%
2.59%
2.59%
-
-
-
-
525,000
257,605
67,000
-
(125,080)
-
6,820
1,809
854
531,820
134,334
67,854
849,605
(125,080)
9,483
734,008
The loans were granted for the conversion of options during a trading black out period. The loans have a market interest rate
with five year repayment terms with security over the underlying shares held by the relevant employees.
There are no other loans to KMP or their related parties.
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
2022
$'000
2021
$'000
2,357
2,357
9,329
9,329
52
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
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
Total equity
Parent
2022
$'000
2021
$'000
3,975
4,811
27,260
21,410
5,364
7,278
17,702
(11)
245
2,046
3,486
5,506
14,841
42
245
776
19,982
15,904
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 2022 and 30 June 2021, except
as disclosed in note 26.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, 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. Business combinations
On 1 September 2021, the company purchased a 70% stake in the US based business Tutorfly.com. ('Tutorfly') for an initial
payment of US$500,000 via its newly incorporated subsidiary, Tutorfly Holdings Inc. The company made a further payment
of US$500,000 in December 2021 when Tutorfly achieved US$20,000 per month net revenue targets.
The company agreed a final settlement of US$2,000,000 in February 2022 to purchase the remaining 30% stake in the
business as it had achieved the US$50,000 per month net revenue target prior to 31 December 2021. This settlement
included 2,000,000 ordinary shares in the company issued on 21 February 2022 as well as a cash payment of US$525,000.
The acquisition included the Tutorfly brand, the marketplace software, and the existing customer and tutor databases. The
total purchase price for the acquisition was $4,241,000. Tutorfly contributed nine months of revenue to the consolidated entity
after acquisition, amounting to $1,617,000 (5%) and net profit of $41,000 (2%). The values identified in relation to the
acquisition of Tutorfly are provisional as at 30 June 2022.
53
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 30. Business combinations (continued)
Details of the acquisition are as follows:
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Kip McGrath Education Centres Limited shares issued to vendor (note 19)
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by company as part of consideration
Net cash used
Note 31. Interests in subsidiaries
Fair value
$'000
4,241
4,241
2,178
2,063
4,241
4,241
(2,063)
2,178
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2:
Name
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
Tutorfly Holdings Inc.
Principal place of business /
Country of incorporation
Australia
Australia
Australia
United Kingdom
New Zealand
United States of America
Ownership interest
2021
2022
%
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
54
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 32. 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
Foreign exchange differences
Write off of plant and equipment
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease/(increase) in income tax refund due
Decrease/(increase) in deferred tax assets
Increase in prepayments
Increase in trade and other payables
Decrease in contract liabilities
Decrease in provision for income tax
Increase in deferred tax liabilities
Increase in employee benefits
Net cash from operating activities
Consolidated
2022
$'000
2021
$'000
1,878
1,733
3,522
(187)
29
(2,285)
257
(37)
(164)
1,892
(60)
(8)
5
212
5,054
2,707
54
-
(115)
(257)
87
(126)
1,905
(100)
(290)
253
312
6,163
Note 33. Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2020
Net cash used in financing activities
Acquisition of plant and equipment by means of leases
Lease handback
Balance at 30 June 2021
Net cash from/(used in) financing activities
Acquisition of plant and equipment by means of leases
Balance at 30 June 2022
Bank
loans
$'000
Lease
liability
$'000
Total
$'000
1,076
(651)
-
-
425
875
-
1,300
1,844
(487)
863
(438)
1,782
(833)
900
1,849
2,920
(1,138)
863
(438)
2,207
42
900
3,149
55
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 34. Earnings per share
Consolidated
2022
$'000
2021
$'000
Profit after income tax attributable to the owners of Kip McGrath Education Centres Limited
1,878
1,733
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Number
Number
54,091,113
52,053,303
-
2,300,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
54,091,113
54,353,303
Basic earnings per share
Diluted earnings per share
Note 35. Share-based payments
Cents
Cents
3.472
3.472
3.329
3.188
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:
2022
Grant date
Expiry date
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
2021
Grant date
Expiry date
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
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
(150,000)
(1,000,000)
(300,000)
(400,000)
(450,000)
(2,300,000)
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
Exercise
price
Balance at
the start of
the year
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
300,000
400,000
450,000
2,300,000
Exercise
price
Balance at
the start of
the year
Granted
$0.350
$0.350
$0.300
$0.370
$0.370
150,000
1,000,000
400,000
450,000
500,000
2,500,000
56
Kip McGrath Education Centres Limited
Notes to the financial statements
30 June 2022
Note 35. Share-based payments (continued)
The weighted average share price was $0.343 (2021: $0.343).
The weighted average remaining contractual life of options outstanding at the end of the financial year was nil years (2021:
0.5 years).
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were $nil (2021: $1,922).
Note 36. Events after the reporting period
Apart from the dividend declared as disclosed in note 21, no other matter or circumstance has arisen since 30 June 2022
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.
57
Kip McGrath Education Centres Limited
Directors' declaration
30 June 2022
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 2 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 2022 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
23 August 2022
Sydney
58
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 2022, 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 2022
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.
59
PKF (NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 Liability limited by a scheme approved under Professional Standards Legislation Sydney Level 8, 1 O'Connell Street Sydney NSW 2000 Australia GPO Box 5446 Sydney NSW 2001 p +61 2 8346 6000 f +61 2 8346 6099 Newcastle 755 Hunter Street Newcastle West NSW 2302 Australia PO Box 2368 Dangar NSW 2309 p +61 2 4962 2688 f +61 2 4962 3245 PKF (NS) Audit & Assurance Limited Partnership is a member firm of the PKF International Limited family of separately owned firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For our office locations visit www.pkf.com.au 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 2022.
An annual impairment test for indefinite
useful life intangible assets is required
under Australian Accounting Standard
(AASB) 136 Impairment of Assets.
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.
recoverable
The evaluation of
amount requires the group to exercise
judgment
key
in
assumptions, which include:
determining
testing
has
the
•
•
•
Preparation of a 5-year cash
flow forecast;
Determination of a
growth factor; and
Determination of a discount
rate.
outcome
terminal
of
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.
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:
• Assessing and challenging:
o
o
o
o
the assumption of one cash generating unit being
appropriate;
the reasonableness of the FY23 budget approved by
the Board by comparing the budget to FY22 actuals;
the key assumptions for the future growth rate used in
the model by comparing the average historical growth
rates 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.
60
Key Audit Matters (cont’d)
2. Acquisition of Tutorfly Holdings Inc
Why significant
How our audit addressed the key audit matter
During the financial year, the parent entity acquired
the shares of TutorFly Holdings Inc as detailed in
Note 30.
The total consideration paid by the parent entity was
$4.2m and was a combination of cash and equity that
was paid in three instalments throughout the financial
year.
As part of the transaction, goodwill of $4.2m was
provisionally recognised as at 30 June 2022 in
accordance with AASB 3 Business Combinations.
The accounting for the acquisition includes a number
of significant judgments as required by AASB 3
Business Combinations. In particular the valuation of
the consideration, and the allocation of goodwill.
Our work included, but was not limited to, the following
procedures:
• Obtained an understanding of the acquired
business;
• Reviewed key documentation including the sale
contract;
• Reviewed management’s provisional assessment of
the acquisition to ensure compliance with the AASB 3
Business Combinations;
• Assessed the fair value of the consideration paid
to supporting documentation including bank
statements and share issuances and considered
the effect of foreign exchange on the total
consideration paid;
In addition, we assessed the appropriateness of
the disclosures in relation to the intangible assets
and the business combination as included in Note
11 and Note 30.
•
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 2022, 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.
61
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.
•
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.
62
Auditor’s Responsibilities for the Audit of the Financial Report (cont’d)
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 2022. In our opinion, the Remuneration Report of Kip McGrath Education Centres Limited for
the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
PKF
MARTIN MATTHEWS
PARTNER
23 AUGUST 2022
NEWCASTLE, NSW
63
Kip McGrath Education Centres Limited
Shareholder information
30 June 2022
The shareholder information set out below was applicable as at 25 July 2022.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Ordinary shares
Options over ordinary
shares
Number
of holders
% of total
shares
issued
Number
of holders
% of total
shares
issued
466
898
273
255
38
0.53
4.42
3.68
11.88
79.49
1,930
100.00
122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
National Nominees Limited
CS Third Nominees Pty Limited (Hsbc Cust Nom AU Ltd 13 A/C)
Mr Kip McGrath
Mr Storm Kip McGrath
Storm Superannuation Fund Pty Ltd (Storm Super Fund A/C)
GoSchoolBox Inc
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)
BNP Paribas Nominees Pty Ltd (IB AU Noms RetailClient DRP)
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd (DRP A/C)
Rendina Pty Ltd (Rendina Super Fund A/C)
Moslof Services Pty Ltd (Moslof S/F A/C)
Mr Matthew Charles Peek
Emerald Shares Pty Limited (Emerald Unit A/C)
DMX Capital Partners Limited
Hetale Pty Limited (Eagles Nest Retire Fund A/C)
Brett Edwards
Ms Snezana Bowden
Unquoted equity securities
There are no unquoted equity securities, except the options as disclosed in Note 29.
64
Ordinary shares
Number held
% of total
shares
issued
11,173,041
6,006,470
5,675,764
2,433,466
2,050,867
2,000,000
1,641,480
1,589,088
1,203,022
1,000,000
912,668
878,182
700,000
600,000
580,000
525,000
519,334
500,000
432,000
400,000
40,820,382
19.77
10.63
10.04
4.31
3.63
3.54
2.90
2.81
2.13
1.77
1.61
1.55
1.24
1.06
1.03
0.93
0.92
0.88
0.76
0.71
72.22
Kip McGrath Education Centres Limited
Shareholder information
30 June 2022
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)
KMEC Superannuation Pty Ltd (KMEC Superannuation Fund A/C)
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
11,173,041
5,675,764
5,258,541
1,641,480
% of total
shares
issued
19.77
10.04
9.30
2.90
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.
65