Professional Documents
Culture Documents
Based on initial internal investigations by NZSCDT and discussions to date with the
investigating authorities, the Company considers the possibility of any improvement notice,
prohibition notice or prosecution to be very unlikely. In the most adverse scenario,
NZSCDTs reputation could be materially adversely affected, which could reduce student
demand for NZSCDTs courses.
If ADAS makes adverse findings against NZSCDT or its staff, ADAS could withdraw or
downgrade its accreditation and/or disallow NZSCDT from delivering some or all of its
courses. Based on initial internal investigations by NZSCDT and discussions to date with
the investigating authorities, the Company considers the possibility of any such action by
ADAS to be very unlikely.
IMPORTANT INFORMATION
Important Notice
This document ("Prospectus") relates to the Offer by Intueri Education Group Holdings
Limited (Offeror) of ordinary shares in Intueri Education Group Limited (Company"). A
description of the Offer and the Shares is set out in Section 7 Details of the Offer.
This document is a prospectus for the purposes of the Securities Act and the Securities
Regulations and is prepared as at, and dated, 15 April 2014 (as amended by an Instrument
to amend dated 6 May 2014). All references in this Prospectus to this Prospectus are to
be read as this Prospectus, as amended and all references in this Prospectus to the
Prospectus are to be read as the Prospectus, as amended.
This Prospectus is an important document and should be read carefully before deciding
whether or not to invest in the Company.
No person is authorised to give any information or make any representation in connection
with this Offer which is not contained in this Prospectus, the Investment Statement or in
other communications from the directors of the Issuers. Any information or representation
not so contained may not be relied upon as having been authorised by the directors of the
Issuers or any other person referred to in this Prospectus.
If you are in any doubt as to any aspect of the Offer you should consult your financial or
legal adviser or an NZX Firm.
You should seek your own taxation advice on the implications of an investment in the
Shares.
No Guarantee
No person guarantees the Shares offered under this Prospectus. No person warrants or
guarantees the performance of Intueri, the Shares, or the repayment of capital or any
return on any investments made pursuant to this Prospectus.
Selling Restrictions
The Broker Firm Offer is being made to members of the public in New Zealand, the
Executive Offer is being made to Key Executives of Intueri and the Institutional Offer is
being made to selected Institutional Investors in New Zealand, Australia and certain other
jurisdictions.
No person may offer, sell (including resell) or deliver or invite any other person to so offer,
sell (including resell) or deliver any Shares or distribute any documents (including this
Prospectus) in relation to the Shares to any person outside New Zealand except in
accordance with all of the legal requirements of the relevant jurisdiction.
Unless otherwise agreed with the Issuers, any person or entity subscribing for Shares in
the Offer shall, by virtue of such subscription, be deemed to represent that he, she or it is
not in a jurisdiction which does not permit the making to him, her or it of an offer or
invitation of the kind described in this Prospectus, and is not acting for the account or
benefit of a person within such jurisdiction. None of the Issuers, the Promoters, the Joint
Lead Managers, the Registrar or any of their respective directors, officers, employees,
consultants, agents, partners or advisers accepts any liability or responsibility to determine
whether a person is able to participate in the Offer.
Registration
A copy of this Prospectus duly signed by or on behalf of the directors of the Issuers,
Arowana and each director of Arowana, and having endorsed thereon or attached thereto
copies of the documents required by section 41 of the Securities Act, has been delivered to
the Registrar of Financial Service Providers for registration in accordance with section 42 of
the Securities Act.
The documents required by section 41 of the Securities Act to be attached to the copy of
this Prospectus delivered to the Registrar of Financial Service Providers for registration are:
1
the report of the Auditor in respect of certain financial information included in this
Prospectus, as set out in this Prospectus;
the signed consent of the Auditor to the Auditors Report appearing in this
Prospectus;
copies of the material contracts referred to under the heading Material Contracts in
Section 8 Statutory Information.
Consideration Period
Pursuant to section 43C of the Securities Act, the Financial Markets Authority will be
notified once this Prospectus is registered with the Registrar of Financial Service Providers.
The Financial Markets Authority will have the opportunity to consider whether the
Prospectus: (a) complies with the Securities Act and the Securities Regulations; (b)
contains any material misdescription or error or any material matter that is not clearly
legible; or (c) is false or misleading as to a material particular or omits any material
particular. Nothing in this section or in any other provision of the Securities Act limits the
Financial Markets Authority's power to consider or reconsider these matters at any time.
The nature and extent of the consideration (if any) that the Financial Markets Authority
gives to this Prospectus is at the Financial Markets Authority's discretion.
Pursuant to section 43D of the Securities Act, no allotment of Shares may be made and no
Applications or subscriptions for Shares may be accepted during the Financial Markets
Authority's consideration period. The consideration period commences on the date this
Prospectus is registered and ends at the close of five working days after the date of
registration. The Financial Markets Authority may shorten the consideration period, or
extend it by no more than five additional working days.
Forward Looking Statements
This Prospectus contains certain statements which relate to the future including, in
particular, the information set out in Section 5.3 Prospective Financial Information.
Forward looking statements should be read together with the other information in this
Prospectus, including the risk factors in Section 6 What are my Risks? and the assumptions
and sensitivity analysis set out in Section 5.3 Prospective Financial Information.
Such forward looking statements are not a guarantee of future performance and involve
known and unknown risks, uncertainties, assumptions and other important factors, many
of which are beyond the control of Intueri and which may cause actual results,
performance or achievements of Intueri to differ materially from those expressed or
implied by such statements.
The Issuers and the Promoters disclaim any responsibility to update any such risk factors
or publicly announce the results of any revisions to any of the forward looking statements
contained in this Prospectus to reflect developments or events, except to the extent
required by the Securities Act, the Securities Regulations, the NZX Listing Rules, the ASX
Listing Rules or the Financial Reporting Act.
Given these uncertainties, you are cautioned not to place undue reliance on any forward
looking statements contained in this Prospectus. Under no circumstances should you
regard the inclusion of forward looking statements as a representation or warranty by the
Issuers, the Promoters or their respective directors or officers or any other person referred
to in this Prospectus with respect to the achievement of the results set out in any such
statement, or that the underlying assumptions used will in fact be realised.
Questions about the Offer
If you have any queries about the risk or suitability of an investment in the Shares you
should consult your financial adviser. If you have questions about the Offer you can call
0800 888 726 (New Zealand only) during the Offer period or visit
www.intuerishares.co.nz. If you wish to apply for Shares you must receive the
Investment Statement and make your Application on the Application Form attached to, or
accompanying, the Investment Statement.
Definitions
Terms used in this Prospectus have the specific meaning given to them in Section 11
Glossary (including certain industry specific terms with which you may not be familiar). If
you do not understand the technical terms used in this Prospectus, please refer to the
Glossary at the back of this document or consult a financial adviser.
Unless otherwise indicated, $ or NZ$ refers to New Zealand Dollars, A$ refers to Australian
Dollars and all references to times and dates are to times and dates in New Zealand.
This Prospectus refers to various legislation in force in New Zealand as at the date of this
Prospectus. You can view free of charge copies of any such legislation online at
www.legislation.govt.nz.
TABLE OF CONTENTS
10
15
19
27
27
41
43
45
49
52
53
53
55
68
87
204
207
213
227
244
247
263
268
The Quantum Acquisition is scheduled to complete alongside the completion of the Offer. The Offer will
not proceed unless the Quantum Acquisition is completed. See Section 7 Details of the Offer for more
information.
Intueri's Colleges2
Further information concerning Intueris colleges can be found in Section 4.1 Business
Overview on page 27.
Enrolment numbers reflect Intueri Educations and Quantum Educations combined total number of
students for calendar 2013.
The pro forma (as defined in Section 11 Glossary) information presented in this
Prospectus assumes all of Intueri's colleges, including the recent acquisition of a 50%
shareholding in OCA and the Quantum Acquisition, were owned from 1 January 2011 in
order to show the performance of the combined business on a comparable basis.
Acquisition dates refer to the timing of the acquisition by associated parties of Arowana International.
Acquisition dates for each entity by the Company can be found on page 55.
This is an initial public offering of ordinary shares in the Company by the Offeror.
The Offer comprises the Broker Firm Offer, the Institutional Offer and the Executive Offer.
Your decision whether or not to invest in Shares should be based on your consideration of
this Prospectus taken as a whole (and the Investment Statement) and not just this section,
which provides an overview of the Offer.
As with any investment, there are risks associated with an investment in the Shares.
Therefore, in particular you should consider the risk factors that could affect Intueris
performance described in Section 6 What are my Risks?
As explained in Section 7 Details of the Offer, the Offer will not proceed to completion
unless the Quantum Acquisition proceeds and Arowana shareholder approval is obtained.
How is the Offer structured?
The Company is currently 100% owned by the Selling Shareholder, a wholly-owned
subsidiary of Arowana. The Offer is being made for the reasons set out above in Section
1.2 Intueri Snapshot and in Section 7 Details of the Offer.
The Offer is being made by the Offeror, which will:
be issued $62.0 million of new Shares by the Company; and
acquire a portion of the Selling Shareholders existing Shares in the Company. The
exact number of Shares the Selling Shareholder will sell will be determined
following the bookbuild, but the Selling Shareholder intends4 to retain 15% to
25% of the Shares after the Offer.
The Offeror will then sell those Shares to investors under the Offer.
For more details of the Offer see Section 7 Details of the Offer.
The percentage retained could fall outside this range, with the consent of the Joint Lead Managers.
10
Key dates
Prospectus registered
15 April 2014
Bookbuild
7 May 2014
7 May 2014
21 May 2014
22 May 2014
22 May 2014
22 May 2014
23 May 2014
26 May 2014
March 2015
This timetable is indicative only. The Issuers reserve the right to amend these dates at
their discretion with the agreement of the Joint Lead Managers. The Offer may also be
withdrawn by the Issuers at any time before the allotment of Shares, at the Issuers sole
discretion.
Key Offer Details and Statistics
The following table highlights key Offer statistics and gives examples of the results of the
Offer depending on the percentage of total Shares the Selling Shareholder decides to
retain. The percentages shown below are illustrative only.5
If the Selling
Shareholder holds
25%
If the Selling
Shareholder holds
15%
75 million
85 million
23 million to 28 million
47 million to 52
million
57 million to 62
million
Ranges within each retention level are shown based on the lower and upper values of the Indicative
Price Range.
The sum of new Shares issued by the Company to the Offeror and existing Shares sold by the Selling
Shareholder to the Offeror.
The Company will issue $62.0 million of new Shares to the Offeror, being 23 million to 28 million new
Shares based on the Indicative Price Range. The proceeds of the new Shares will be used to pay for the
Quantum Acquisition and associated transaction costs, fees for the Offer, and to repay related-party
loans, including those associated with the OCA Acquisition.
11
25 million
15 million
100 million
$18 million
The number of shares the Selling Shareholder will sell to the Offeror will depend on the Final Price and
the number of Shares in the Company that the Selling Shareholder decides to retain. Following the
determination of the Final Price but before the allotment by the Company to the Offeror of the new
Shares, the Company will undertake a Share split such that upon allotment by the Company to the
Offeror of the new Shares, the Company will have a total of 100 million Shares on issue.
The Indicative Price Range is indicative only and may be varied at any time by the Issuers without
further disclosure. The Final Price will be set on or about 7 May 2014 after the conclusion of the
bookbuild and may be within, above or below the Indicative Price Range.
10
Based on the Indicative Price Range and the total number of Shares sold by the Offeror.
11
The number of Shares in the Company that the Selling Shareholder decides to retain.
12
The implied market value of the equity of the Company, based on the Indicative Price Range.
13
The implied value of the Company, being the indicative market capitalisation and also prospective net
interest bearing debt.
12
FY2014PF
FY2015F
9.9x 11.9x
8.4x 10.1x
13.4x 16.4x
11.3x 13.9x
2.8% - 3.4%
4.7% - 5.7%
3.9% - 4.7%
6.5% - 8.0%
14
These metrics are shown based on the lower and upper values of the Indicative Price
Range.
Selected pro forma financial information
NZ$m, YE
FY2011PF
FY2012PF
Dec
FY2013PF
FY2014PF
FY2015F
Revenue
65.5
69.0
66.6
76.9
86.4
EBITA
18.7
20.6
21.5
25.4
30.1
EBITA after
Non
Controlling
Interest
18.8
20.6
21.3
24.6
28.8
NPATA
16.8
19.8
EPS (cps)
10.1
13.2
DPS (cps)
7.716
12.917
NPATA per
Share (cps)
16.8
19.8
14
15
Implied gross dividend yield calculated based on the declared dividend in each of FY2014PF and FY2015F
grossed up for imputation credits at the New Zealand corporate tax rate of 28%.
16
Dividend forecast to be paid in FY2015 in respect of the 7 month period ended 31 December 2014.
17
Dividend forecast to be paid in FY2015 and FY2016 in respect of the 12 month period ended 31
December 2015.
13
NPATA
NPAT comparisons
14
2,176
1,729
1,500
1,000
986
952
877
868
800
500
660
645
502
492
419
403
15
tuition funding for the PTE sector and increasing international student revenue,
illustrated in the charts below.
Refer to Section 3 Industry Overview for further discussion of the regulatory environment.
250
CAGR: 6.4%
400
350
343
303
311
200
250
NZ$m
NZ$m
300
200
150
100
150
100
50
132
156
185
198
209
204
2009
2010
2011
2012
50
0
0
2011
2012
2013
2007
2008
Intueri considers that its scale and track record of delivering successful academic
outcomes (demonstrated by its 88% course completion rate in 2012) put it in a strong
position to capture above average industry growth in the PTE sector for domestic
students. Following a decline in international student numbers due to changes in
government immigration policy, Intueris international student numbers have recovered
and are forecast to grow significantly in FY2014F and FY2015F. For more information
see page 71.
Intueris investment in OCA also gives it exposure to growing demand for vocational
training and online education in the Australian market.
Refer to Section 3 Industry Overview and Section 4 Business Overview for further
information.
Barriers to entry
The following regulatory factors make it difficult, in the Companys view, for new
entrants to become established in the PTE sector:
-
As an established education business with significant scale, Intueri has the following
competitive advantages:
Track record and reputation: Intueri has a strong track record and reputation with
government regulators, students and international student recruitment agents,
18
Represents Student Achievement Component funding only (does not include other TEC tuition funding,
such as Youth Guarantee funding). Part of the increase in funding in 2013 was due a Government
initiative to equalize funding between public and private PTEs, which will be phased in over the next four
years. Once this initiative has been introduced, Intueri expects funding growth will revert back towards
its longer-term trend.
16
which is very important in securing government funding and critical for marketing
to prospective students.
International student marketing platform: Intueris size provides significant
economies of scale in marketing, including the ability to support continued
investment in international student recruitment and brand awareness.
Intueri considers that these factors should enable it to benefit from continuing
consolidation in a fragmented sector. Between 2002 and 2012, the number of registered
PTEs in New Zealand fell from 890 to 626.
Refer to Section 3 Industry Overview for further discussion of the regulatory environment.
Capital-light business model with high visibility of cashflows
Intueri operates an efficient, capital-light business model. Capital expenditure is
generally limited to college fit outs, refurbishments and IT and system upgrades.
-
This low capital intensity model underpinned EBITA19 margins of 32.2% in 2013PF.
In New Zealand, tuition costs are paid upfront into the Public Trust system and
released progressively to Intueri in line with course delivery. As some of Intueris costs
are paid after course delivery this results in a favourable cash flow timing benefit.
As government funding is confirmed prior to the start of the academic and financial
year, and the peak enrolment period for students is in January, Intueri has a high
degree of earnings visibility early in the year.
-
For example, as at 31 March 2014, Intueri had secured almost 65% of its full year
revenue forecast for FY2014PF.
domestic
and international
student
revenue
growth
For more
For a reconciliation of the non-GAAP measure EBITA to GAAP measurements, please see page 67.
17
Direct experience of the Board encompasses operational expertise in the PTE sector,
insight into the New Zealand regulatory framework, specific experience in international
student recruitment, knowledge of international student policy and financial
management.
Full biographies are available in Section 4 Business Overview.
18
Description
Universities
Institutes of
Technology /
Polytechnics
("ITPs")
19
Provider Type
Description
Private training
establishments
("PTEs")
Wananga
Industry training
organisations
("ITO")
ITOs are public bodies that provide curriculum and accreditation within
specific industries such as building. While they do not provide training
themselves, they set skills standards and carry out assessments. In
2012 there were approximately 139,000 industry trainees (domestic
and international).
PTEs are diverse in terms of scale and education offering, ranging from one or two person
businesses to large multi-site operations with significant staff and student numbers. The
sector is highly fragmented, and Intueri is one of only two providers that have more than
5% market share in domestic students (on an EFTS basis).
Although PTE enrolments are predominantly domestic (approximately 82% of the total in
2012), the percentage of international students is higher in PTEs than for the tertiary
education sector as a whole. International students are primarily concentrated in a small
number of institutions, including Intueri, with 68% of the 167 PTEs (excluding English
20
language schools) that enrolled international students in 2012 enrolling fewer than 50
international EFTS.
PTE regulation
PTEs operate in a highly regulated sector and are subject to significant compliance
requirements. Effective regulation is critical to maintaining the reputation and integrity of
the qualifications achieved by students and to ensure that students receive an excellent
educational experience.
The New Zealand Qualifications Authority (NZQA) is responsible for the oversight of PTEs.
To offer a nationally recognised qualification, a PTE must be registered and accredited by
NZQA, and its qualifications and courses must be NZQA approved. Within the New Zealand
Qualifications Framework, PTEs typically offer courses and qualifications at levels 1-6.
New Zealand Qualifications Framework
Level
Qualification Type
Certificates
Certificates
Certificates
Certificates
Diplomas
Diplomas
Bachelor's Degree;
Graduate Diploma &
Certificate
Postgraduate Diploma
/ Certificate; Bachelor
Honour's Degree
Master's Degree
10
Doctoral Degree
Offered by Intueri
Source: NZQA
PTEs are subject to ongoing monitoring, through regular NZQA reviews that focus on
educational performance and self-assessment. NZQA rates PTEs on a category scale (from
21
Tertiary Education
Commission (TEC)
Student loan for course
fees
MSD Studylink
Direct
funding
Funded PTE
International
students
Domestic students
Tertiary
course fees
Unfunded PTE
Tertiary
course fees
22
Only a handful each year have been successful in doing so in recent years, and then
only to a limited amount;
Ongoing compliance requirements - both NZQA and TEC conduct regular compliance
checks. These include NZQAs regular audits and TECs annual funding review process.
Failure to meet compliance thresholds can result in removal of registration by NZQA
and/or loss of government funding from TEC;
Track record and reputation - a proven record of students achieving qualifications and
job outcomes is an important factor for PTEs in their domestic and international
marketing; and
International student marketing networks - strong relationships with international
student recruitment agencies are important for driving student numbers and in
Intueris experience are typically only developed over an extended period of time.
Key sector trends
Government policy settings
Government reform has been critical in shaping the PTE sector. PTE enrolments rose
significantly during the early 2000s following increased access to government funding and
light handed regulation. More recently, the policy focus has been on student outcomes
(course and qualification completion levels) across the tertiary sector as a whole. Relevant
reforms include:
The introduction of more stringent compliance requirements and the removal of
funding from poorly performing PTEs (the number of government funded PTEs fell from
335 to 309 between 2011 and 2013).
A shift towards greater equality and contestability of funding between providers, with
the intent of rewarding strongly performing PTEs (for example, approximately $70
million of SAC funding in respect of qualifications at levels one and two will be
contestable in 2015 and 2016).
An increase in funding for target demographics, for example Mori and Pasifika
students and those leaving school with limited qualifications.
International demand
Over the past decade, there has been a substantial rise in the global mobility of students.
New Zealand has benefited from this trend, and now attracts 1.7% (by enrolments) of the
global market for international tertiary education. In 2013, education was New Zealand's
fifth largest export industry, and the government has set a target of doubling the value of
the international student sector by 2025 (to $5 billion).
International demand reflects both the perceived quality of New Zealand PTE courses and
their relative affordability (influenced by factors including living costs, course costs and the
value of the New Zealand dollar). Intueris experience is that international students also
take into account immigration status, work rights, student support and safety when
deciding whether to travel to New Zealand for tertiary study.
Technological change
As the online delivery model has increasingly begun to rival traditional delivery channels,
education providers globally have been responding by moving to online engagement with
learners. Education providers that incorporate technology in their existing offerings should
have a competitive advantage in cutting costs and also expanding their revenue base by
attracting a more diverse clientele. Intueris investment in OCA will provide the technology
and capability to address this trend.
24
Commonwealth
Government
Direct
funding
course fees
e.g. VET FEE-HELP
Registered Training
Organisation
VET course
fees
VET students
25
26
27
3.6%
5.9%
24%
21.7%
11%
68.8%
65%
Domestic
Domestic
International
International
Online
Other
Online
Source: Intueri
Geographic presence
Intueri will have a presence throughout New Zealand and a strong focus on the Auckland
region. Intueri's focus on Auckland reflects the city's large share of New Zealands
population, and provides exposure to the fast growing Mori and Pasifika population.
Auckland is also an attractive destination for international students.
OCA is headquartered in Brisbane, Australia and operates as an online campus.
28
Kerikeri
Kaitaia
New Lynn
Whangarei
Albany
Auckland
7
Manurewa
Huntly
2
Hamilton
Tokoroa
Manukau
Tauranga
Rotorua
Napier
Whanganui
Hastings
Wellington
Christchurch
29
20
Courses
offered
(number)
Campuses
NZQA
Category20
2013
student
numbers
(enrolled)
Key competitors
Comments
Levels 3-6
9 courses
15 campuses
nationwide
4,628
99.0%
domestic
1.0%
international
Best Pacific
Institute of
Education
Avonmore Tertiary
Institute
Level 5
5 courses
Auckland (2)
898
5.0%
domestic
95.0%
international
NZMA, Cornell
Institute of
Business &
Technology
Levels 3-5
12 courses
Auckland
662
99.7%
domestic
0.3%
international
Servilles Academy
Levels 4-5
3 courses
Auckland (2)
Wellington
Hamilton
267
99.3%
domestic
International
College of Camille
For more information on PTE categories see the discussion on page 21.
30
College
Courses
offered
(number)
Campuses
NZQA
Category20
2013
student
numbers
(enrolled)
0.7%
international
Key competitors
Comments
31
College
Courses
offered
(number)
Campuses
NZQA
Category20
2013
student
numbers
(enrolled)
Key competitors
Levels 3-7
8 courses
Christchurch
Auckland
236
98.3%
domestic
1.7%
international
Yoobee School of
Design, Whitecliffe
College of Arts &
Design
230
71.7%
domestic
28.3%
international
No direct
competitor in New
Zealand
N/A
2,182
Open Colleges
Seek Learning
Levels 4-6
6 courses
182
courses
Huntly
Online
(headquarters
in Brisbane)
Comments
32
College
Courses
offered
(number)
Campuses
NZQA
Category20
2013
student
numbers
(enrolled)
Key competitors
Comments
33
Domestic Students
Historically, Intueris domestic student business has provided relatively consistent financial
performance due to the regulated caps on student numbers and fees (see Section 3
Industry Overview under the heading Direct Government Funding for more details).
Intueri sees opportunities to achieve continued growth in its domestic business.
Key drivers of the domestic student business are summarised below. A number of these
factors are inter-related.
Demand for courses: This is influenced by the demand for graduates in different
industry sectors and course relevance. Intueri's diversification of courses and campus
locations means changes in one sector of the economy will not necessarily have a
material impact on Intueri. In addition, Intueri's colleges service several industries with
high levels of turnover (e.g. hairdressing), which Intueri considers provides protection
against changes in demand for particular qualifications.
Marketing and track record: Student referrals are an important marketing tool for
Intueri's domestic student business and are driven by past student success and job
outcomes. Other forms of marketing include career expos and events, traditional media
and social media. Intueri actively monitors the success of former students in gaining
employment and is able to use this information when marketing its courses.
Student outcomes: Course completion rates are a key metric in relation to securing
direct government funding. Intueri's internal processes and continuous improvement
and investment programme provide a number of points of difference which Intueri
believes lead to better student outcomes.
Long established brand: Intueris domestic college brands have been established for a
number of years. The most recently established college is NSIA (founded 13 years ago)
while the longest established college, Elite, was founded over 40 years ago. In Intueris
experience, a long established educational brand is important for attracting domestic
students.
Securing additional government funding: There are increasing opportunities for
providers to secure additional funding through new funding pools and a reallocation of
funding from poor to high performing PTEs.
Intueris pro forma New Zealand domestic student numbers (enrolments)
8,000
7,000
6,000
5,000
4,000
3,000
5,775
5,828
5,950
FY2011PF
FY2012PF
FY2013PF
6,574
6,737
FY2014PF
FY2015F
2,000
1,000
0
34
Intueri's strong student outcomes have enabled it to secure additional funding in FY2014PF
of $1.2m, including an increase in Youth Guarantee funding for Cut Above and an increase
in SAC funding for D&A. As a result of these increases, and a managed return of D&As
student enrolment numbers to their pre-earthquake levels in Christchurch, Intueri
forecasts domestic student enrolments to increase by 10.5% in FY2014PF.
International Students
Intueri enrolled 971 international students in 2013, representing approximately 3% of New
Zealand's international PTE student market. The majority of these students came from
China, India and South East Asia.
All of Intueri's New Zealand colleges enrol international students, but NSIA (which enrols
over 85% of Intueris international students in FY2013PF) and NZSCDT (the New Zealand
School of Commercial Diver Training) have the strongest international focus. Intueri's
international student business is not subject to caps on student numbers or course fees,
but does not receive government funding.
Key influencers of the performance of the international student business are detailed
below:
Quality and relevance of courses: Intueri believes that the reputation and relevance of
Intueri's colleges in international markets contribute to its success.
Affordability: Intueris experience is that the competitiveness of course and living costs
in New Zealand provide an offset against the effect of fluctuations in the New Zealand
dollar on its international student business.
Safety: Intueri believes New Zealand is perceived as a safe destination when compared
to key competitors.
Regulatory factors: The ability of international students to achieve a New Zealand work
visa through Intueri's programmes is of critical importance.
Long established marketing and agent network: Intueri has established relationships
with student recruitment agents in New Zealand and offshore. These networks have
been developed over a number of years, and received significant investment in 2013,
with a particular focus on the Indian and South East Asian markets.
35
1,816
800
600
1,373
1,075
1,104
FY2011PF
FY2012PF
400
971
200
0
FY2013PF
FY2014PF
FY2015F
International student enrolments declined towards the end of 2012 and in 2013 due to two
policy changes: a change to NZQA English language approval requirements which impacted
NSIA (NSIA is no longer affected by this change, due to subsequent NZQA policy changes),
and a shift in visa policy by New Zealand Immigration which required students to study for
two years, rather than one year. The impact of these changes normalised in the second
half of 2013, and Intueri's enrolments were 33% higher than for the comparable period in
2012.
For discussion of forecast growth in international student numbers in 2014 and 2015, refer
to Section 5.3 Prospective Financial Information.
Online Students
Intueri provides an online offering through its 50% shareholding in OCA, which has two
Australian registered training organisations (RTOs), Online Courses Australia and Conwal
& Associates. Intueri has a controlling interest in OCA and through its board
representation, has an active influence on the strategy for the business in collaboration
with the founder shareholders. Conwal & Associates was established in 2005 as a
traditional fee for service training business with a strong presence in the government and
corporate sectors. In 2010, the emerging trend in online education led OCA to focus on
online course delivery. This included the development of more proprietary course content
and investment in customised student and learning management systems.
OCA's three key revenue channels are:
Accredited VET FEE-HELP courses: In September 2013, OCA received approval to
provide 12 courses that are eligible for VET FEE-HELP. These courses are all at the
diploma level or above, are longer and generate higher fees than fee for service
online courses. OCA has subsequently seen significantly increased uptake of these
course offerings, and expects them to generate most of OCAs revenue (estimated
to be 55% in FY2014).
Fee for service online courses: a diverse selection of offerings extending from
education support, fitness, counselling and resume writing, to basic computing
36
skills. The majority of these courses are owned by third parties and resold by
OCA.
Provision of services to other RTOs: OCA sells some courses to other RTOs and
provides content development and delivery platform licensing to TAFEs and other
RTOs.
Intueris pro forma online student numbers (enrolments)
3,500
3,000
2,500
2,000
1,500
2,846
1,000
1,491
1,837
3,113
2,182
500
0
FY2011PF
FY2012PF
FY2013PF
FY2014PF
FY2015F
Student outcomes
Intueri's average domestic student course completion rates in 2012 were 88%21. This
compares favourably to other New Zealand PTE providers. In addition to the quality of
Intueris course content and tutors, this reflects a focus on student management and
course design. Notably, Quantum Education achieved a 91% completion rate in 2012 from
a second chance learner student demographic that typically has worse than average
statistics, reflecting Quantum Educations sophisticated student management system and
supported distance learning model.
21
Averages in this section relate to 2012 and have been calculated on a weighted average basis, taking
into account number of students.
37
100%
91%
90%
88%
87%
80%
70%
60%
50%
40%
30%
20%
10%
0%
NZSCDT
Quantum
NSIA
Cut Above
D&A
Elite
Source: TEC
D&As 2012 completion rates were affected by the Christchurch earthquakes but are
beginning to recover and Intueri expects that this trend will continue.
Elite has recently implemented a number of measures to improve its course completion
rates, and is targeting an upgrade in its current category 3 NZQA status following a
scheduled review in June 2014.
Intueri's points of difference
Student management systems
Intueri employs a sophisticated proprietary "end-to-end" student management system at
its Quantum Education colleges. The system tracks a student's progression from initial
contact to final completion, and records tutor and administrative interactions, which assists
Intueri to monitor students and staff against key performance indicators, maximise course
and qualification completion rates and enhance the student learning experience. Intueri
believes the sophistication of this student management system is unique in the New
Zealand market.
OCAs student management system enables the business to track each students initial
contact, payment details and course progression. This system is used internally by OCA
and is also licensed to third parties.
Intueri intends to introduce these systems (or components of them) into its other colleges
where appropriate.
Supported distance learning model
Intueri also deploys a progressive distance learning model for students enrolled in
Quantum Educations courses. A combination of workshops and personalised one-on-one
tutoring allows students to learn at their own pace (within timeframe limits) and allows
tutors to focus on those students requiring the most attention (and is therefore particularly
suited to second chance learners) to increase course and qualification completion rates.
38
Intueri believes this model is also unique in the New Zealand market and intends to
replicate it within other colleges where appropriate.
Pathways to higher learning
Intueri has pathways in place to higher education for its students through partnerships
with degree-conferring tertiary education providers. Further pathways are currently being
developed. These pathways enable a student who has, for example, completed a diploma
at Intueri, to receive course credits for further study at a partner institution. Over the past
six months, Intueri has established pathway agreements with Auckland University of
Technology (AUT), Canberra University and the Blue Mountains Hotel School. Such
arrangements have the dual benefit of increasing the attractiveness of Intueri's courses for
students, while also providing a new potential revenue stream for Intueri through the
sharing of course fees.
Course development
Intueri owns the majority of the intellectual property in its core New Zealand curriculum.
In addition to reducing royalty costs payable to third party providers, a critical advantage
of this approach is the ability to move quickly to adapt course content to meet evolving
student and employer requirements, as well as shifts in government policy and funding
from time to time.
Growth strategy
Intueris management has identified the following key growth opportunities over the short
and medium-term.
Student enrolment growth
Domestic
The key levers that Intueri expects will drive growth in domestic student revenues include:
Increasing market share: Intueri expects high quality student outcomes will continue to
provide opportunities to secure contestable government funding (building on the
additional $1.2 million of funding gained in FY2014PF) and greater student numbers.
Internal 'staircasing': the combination of Quantum Education and Intueri Education
provides an opportunity to retain students within Intueri by 'staircasing' them from
lower level courses (typically offered by Quantum Education) to higher level courses in
other Intueri colleges.
Pathways to higher education: Intueri is working on additional higher education
pathways to enhance the appeal of its course portfolio to domestic students.
Improving yield and maximising course mix: Intueri is investigating the opportunity to
implement more sophisticated pricing strategies, such as introducing data analytical
tools and value based pricing to optimise yield and course mix.
While Intueri is confident that the levers above should allow it to grow its domestic student
business, prospective investors should have regard to the risk factors set out in Section 6
What are my Risks?
International
Intueri is implementing a number of strategies to grow international student enrolments,
such as hiring offshore recruiting staff in Indonesia and India, and running targeted
marketing campaigns. Intueri is also developing internationally recognised higher
education pathways and new courses specifically designed for international students. Most
colleges within the Group already offer two year level 5 courses, which are more attractive
to international students as they meet a key requirement of New Zealands visa regime.
39
Complementary acquisitions
The New Zealand PTE sector is highly fragmented. As New Zealand's largest PTE group
(by domestic EFTS), with access to capital from existing funding sources and through its
listing on the NZX Main Board and ASX, Intueri is well positioned to take advantage of
valuable consolidation opportunities.
Intueri will seek to acquire businesses that meet its internal qualification criteria and due
diligence processes. Intueri will focus on acquiring 100% or controlling positions in
businesses with leading brands that are complementary to Intueris current business
offering.
Online delivery
In addition to targeting strong organic growth in Australia, Intueri will investigate various
growth opportunities for OCA in the New Zealand market: offering OCAs current courses
to New Zealand residents who want to obtain an accredited Australian qualification;
possible replication of OCAs courses, systems and processes for New Zealand students
(subject to NZQA accreditation); possible use of OCAs online platform to allow Intueri to
offer it existing courses via a blend of online and face-to-face tuition; and the possible
development of online joint ventures with New Zealand universities who are yet to develop
credible online offerings.
Offshore partnerships
Over the longer term, Intueri believes that its high quality course offerings and
internationally recognised brands are capable of supporting an international presence.
Intueri intends to partner with or establish offshore campuses or feeder schools to expand
its addressable market by lowering the total cost for an international student to receive a
New Zealand education. Intueri is currently in the process of negotiating its first feeder
school agreement.
40
41
42
Chief Executive
Rob Facer
Rod Marvin
Janet Dalby
Cheryl Brookes
Finance
Campus
Campus
Directors
Managers
IT
43
44
45
Appointment of the Chief Executive and the senior management team and
determination of their terms and conditions, including remuneration;
Any matters in excess of discretions that it may have from time to time delegated to
the Chief Executive and management in relation to transactions, market risk limits
and expenditure;
Approvals of the budget and business plan, the acquisition, establishment, disposal
and cessation of any significant businesses of Intueri, and the issue of any securities
in Intueri; and
Review of Intueris performance against strategic objectives.
Board Charter
The Board has adopted a charter recording its commitment to achieving best-practice
corporate governance (Charter). The Charter describes the specific responsibilities,
values, principles and practices that underpin the role of Directors on the Board. The
Charter does not attempt to provide a complete record of all of the formal and informal
rules associated with the role of the Board and should be read in conjunction with the
Constitution and relevant laws, regulations, codes and guidelines.
Board Committees
The Board has 2 formally constituted committees. These committees will review and
analyse policies and strategies, usually developed by management, which are within their
terms of reference. They will examine proposals and, where appropriate, make
recommendations to the full Board. Committees will not take any action or make decisions
on behalf of the Board unless they are specifically mandated by prior Board authority to do
so.
The Audit and Risk Committee is chaired by James Turner and will be responsible for:
Assisting the Board in performing its oversight responsibilities in relation to financial
reporting and regulatory compliance;
Reviewing financial reporting processes, internal controls, the audit process and
Intueris process for monitoring legal and regulatory compliance; and
Assisting the Board in performing its oversight responsibilities in relation to the
identification, analysis and management of risks which may have a significant impact
on the performance of the company.
The audit committee also acts as a forum for communication between the Board and senior
financial management staff, and internal and external auditors where appropriate. It
meets with the external auditors as required during the year, and for at least part of that
meeting no employees will be present.
The current members of the Audit and Risk Committee are Chris Kelly and Craig McIntosh.
The Human Resources and Nominations Committee is chaired by James Turner and
will be responsible for:
Establishing the criteria for determining the suitability of potential Directors and
recommending persons suitable for appointment to the Board;
Considering all appointments at senior management level including contractual
conditions;
46
47
Intueri intends to pay an interim Dividend in September, targeting 40% to 50% of the total
expected Dividend for the year, with the balance paid in March. The split will vary
according to actual and forecast NPATA.
It is the Boards intention to attach imputation credits to Dividends to the extent they are
available.
The first Dividend following the Offer is expected to be paid in March 2015, in relation to
FY2014F.
Director Interests
Director Remuneration
With the exception of the Chief Executive (whose remuneration is detailed in Section 4.5
Executive Remuneration and Share Plans, no Director is entitled to any remuneration from
Intueri except for Directors' fees and reasonable travelling, accommodation and other
expenses incurredin the course of performing duties or exercising powersas Directors.
The Selling Shareholder, as the sole Shareholder of the Company pre-listing, has approved
annual fees of $65,000 for each Director, $120,000 forthe Chairman and an additional
aggregate allowance of $20,000 for Board committee work. These fees take effect from the
date on which the Company's Shares are quoted on NZX. Prior to this, the Selling
Shareholder, as the sole Shareholder of the Company, agreed to the payment by the
Company of additional fees of up to $180,000 in the year beginning 1 January 2014 to
compensate Directors for additional work required in preparation for this Offer. The Chief
Executive Officer does not receive any fee in his capacity as a Director.
Director Shareholdings
Directors may apply for Shares under the Broker Firm Offer, in the same manner as may
any New Zealand investor. To the extent that any Directors acquire Shares those
acquisitions must be disclosed to the market as required by law.
In addition the Chief Executive may indirectly acquire Shares through the Executive Offer,
as detailed in Section 7 Details of the Offer.
48
49
ability to perform his duties) and where it has followed due employment process. Where
the Company terminates the Chief Executives employment on notice, it must provide four
months notice of termination.
Mr Facer has also agreed to non-solicitation and non-inducement commitments (applying
to the Companys clients, suppliers, customers, employees, contractors and consultants)
for a period of six months after the termination of his employment.
Long-term performance incentives
Long-term performance incentives are at-risk benefits aligned to performance targets in
order to incentivise the enhancement of long-term shareholder value. The Company will
establish a Foundation Shares Scheme (Foundation Scheme) in conjunction with the
Offer and will, following listing, seek to establish an Annual Share Scheme (Annual
Scheme).
In the case of both the Foundation Scheme and, it is anticipated, the Annual Scheme
(following its implementation), where a Key Executive exercises a right to Shares under
the Foundation Scheme or the Annual Scheme, the trustee for the relevant scheme will
acquire the Shares on the Key Executives behalf and the Key Executive may elect to
receive an interest-free loan from Intueri to acquire the Shares. The loan must be repaid
within five years of the acquisition of the relevant Shares. Any outstanding balance of the
loan must be repaid immediately if the Key Executive ceases employment with the
Company (or its subsidiaries), or if the executive sells his or her Shares.
Each Key Executive will have the right to sell any Shares held on their behalf to the
Company at the original issue price, with those proceeds used to repay any loan.
Foundation Scheme
The Company will offer the Key Executives the right to purchase a total of $700,000 worth
of Shares at the Final Price (Founding Shares). If the right to purchase Founding Shares
is exercised by the Key Executives, these Shares will be purchased by the trustee of the
Foundation Scheme under the Executive Offer (a component of the Offer) and the trustee
will receive an allocation priority under the Offer for those Shares.
The Key Executives will be restricted from selling Founding Shares for a period of three
years following acquisition.
Annual Scheme
Following the establishment of the Annual Scheme after the Companys listing, it is
anticipated that, on an annual basis Key Executives will have a right (subject to the
overriding discretion of the Board) to acquire additional Shares (Annual Shares)
conditional on the satisfaction of pre-determined performance and service conditions.
If the right to purchase Annual Shares is exercised by a Key Executive, the Shares will be
acquired on the NZX by the trustee of the Annual Scheme.
The Key Executives will be restricted from selling Annual Shares acquired in the first year
of the Annual Scheme for a period of six months following acquisition.
The maximum dollar amount of Shares to be acquired to satisfy the Key Executives
entitlement in respect of the first year of the Annual Scheme (assuming the Key Executives
meet the service and performance conditions for that year) is $700,000. Those Shares and
the Founding Shares will represent less than 1% of the Shares on issue after this Offer.
The Annual Scheme will be reviewed on an annual basis by the Board.
50
The details of the Annual Scheme are, pending its implementation, subject to change.
Establishment of the Annual Scheme as currently formulated would require shareholder
approval or an NZX Listing Rules waiver, due to the fact that the Chief Executive is also a
Director.
51
22
The percentage retained could fall outside this range, with the consent of the Joint Lead Managers.
52
53
International Students
Revenue from international students is a function of enrolments and tuition fees, neither of
which are capped. Intueris ability to achieve tuition fee increases is subject to competitive
and economic dynamics. International student demand is influenced by various factors
including the quality of Intueri education and qualifications, the ability of these
qualifications to lead to employment and/or further study, as well as a range of political
and economic considerations such as student and post study New Zealand visa regulations
and the desirability of New Zealand as a study destination for international students.
International student fees are released by the Public Trust in line with course delivery.
Online and Australian students
Revenue from Intueris online business is a function of enrolments and course fees.
Intueris ability to increase course fees is not constrained by regulation but is subject to
competitive and economic dynamics. OCAs revenue is dependent on its government
recognition as an RTO and some of its courses being VET FEE-HELP accredited.
OCA receives tuition fees either up front or in line with course delivery (in relation to its
fee for service online courses), or on a monthly basis (in relation to VET FEE-HELP funding
received from the government).
54
Date
acquired/to
be acquired
by the
Company
Ownership
interest
Country of
Incorporatio
n
100%
NZ
22 February
2013
100%
NZ
8 February
2013
100%
NZ
8 February
2013
100%
NZ
12 February
2013
100%
NZ
28 March 2013
100%
NZ
18 October
2012(1)
100%
NZ
1 July 2013(2)
100%
NZ
13 February
2014
100%
NZ
31 May 2014(3)
100%
NZ
31 May 2014(3)
100%
NZ
31 May 2014(3)
50%
Australia
31 March 2014
50%
Australia
31 March 2014
50%
Australia
31 March 2014
50%
Australia
31 March 2014
(1) Incorporation date; acquired assets from CDT Partnership on 28 March 2013.
(2) Incorporation date.
(3) Expected date of completion.
55
The historical and FY2014PF operational and financial information is presented on a pro
forma basis assuming a year end of 31 December for Intueri. The Companys balance date
is currently 30 June, but will be changed (together with its subsidiaries) to 31 December as
soon as practicable following completion of the Offer. All the businesses in the Group,
including Quantum Education and OCA, are assumed to have been owned from 1 January
2011 to show comparable pro forma financial performance in all the financial periods. The
pro forma financial information has been compiled using statutory financial information
where this aligns to a 31 December year end, and management accounts where the yearend was not 31 December. The following table illustrates the differing basis used in the
preparation of the statutory and pro forma financial information presented in this section:
PRO FORMA
STATUTORY
Periods
FY2011PF to FY2014PF
Intueri Education
Quantum Education
Assume owned as at 1
January 2011
OCA
Assume owned as at 1
January 2011
The pro forma financial information has been normalised to ensure historical periods are
comparable to the forecast financial information. The forecasts for FY2014F (Statutory) and
FY2015F (Statutory) are shown on an unadjusted basis as this reflects the basis on which
the Group will report its results for that financial year. Financial information below EBITA is
not shown in respect of FY2011PF, FY2012PF and FY2013PF in the overview of financial
performance as the capital structure and amortisation of acquired intangibles following the
completion of the Offer will be different and will not be strictly comparable to the historical
period.
While Intueri owns 50% of the OCA business, 100% of the revenue, expenses, assets and
liabilities is accounted for in the Intueri financial statements (with the 50% non-controlling
interest also noted) because Intueri is deemed to exercise control of OCA through a casting
vote mechanism that operates in the event of a deadlock.
The Intueri financial information has been prepared by the Directors of the Company.
BDOs statutory auditors report and investigating accountants report are each set out in
Section 5 Financial Information.
23
Other pro forma adjustments includes normalisation and other adjustments in accordance with
ISAE3420.
56
This section should be read in conjunction with the risk factors set out in Section 6 What
are my Risks?, Section 5.3 Prospective Financial Information, and other information
contained in this document.
The Financial Information is presented in New Zealand dollars and is rounded to the
nearest thousand dollars, which may result in some discrepancies between the sum of the
components and totals within tables, and also in certain percentage calculations.
New Zealand Dollar / Australian dollar exchange rate
NZ$/A$
FY2011
FY2012
FY2013
FY2014
FY2015
Historical
Historical
Historical
Forecast
Forecast
0.77
0.78
0.85
0.93
0.93
FY2011
PF
FY2012
PF
FY2013
PF
FY2014
(Statuto
ry)
FY2014
PF
FY2015
(Statuto
ry)
Forecast
Forecast
Forecast
Historical
Historical
Historical
Domestic Revenue
43,145
45,244
45,798
39,027
49,193
52,354
International
Revenue
18,260
18,150
14,479
18,248
18,573
22,459
Online Revenue
1,360
3,209
3,928
6,171
7,336
9,659
Other Revenue
2,769
2,372
2,401
1,687
1,847
1,941
Total revenue
65,535
68,975
66,606
65,133
76,949
86,413
10,615
9,609
9,290
11,066
12,206
14,440
Admin Expenses
5,036
5,688
4,681
4,167
4,401
4,571
Marketing
Expenses
1,987
2,788
2,984
2,143
3,016
3,500
Occupancy
Expenses
6,739
7,730
6,545
6,434
7,166
7,452
20,625
20,756
20,123
19,172
22,681
23,958
Total expenses
45,002
46,571
43,624
42,983
49,470
53,922
EBITDA
20,533
22,404
22,983
22,151
27,479
32,491
1,805
1,754
1,506
1,787
2,095
2,395
18,728
20,650
21,477
20,364
25,384
30,096
28.6%
29.9%
32.2%
31.3%
33.0%
34.8%
(7,102)
(9,287)
(9,287)
(998)
(998)
(997)
12,264
15,099
19,812
Cost of Sales
Personnel
Expenses
Depreciation and
Amortisation
EBITA
EBITA margin %
Amortisation of
Identifiable
Intangible Assets
Net Interest
Expense
Net Profit before
Tax
57
12 months
ending 31
December
($000)
FY2011
PF
FY2012
PF
FY2013
PF
Tax
FY2014
(Statuto
ry)
FY2015
(Statuto
ry)
FY2014
PF
(3,929)
(4,587)
(5,969)
8,335
10,512
13,843
NPAT attributable
to Non-Controlling
Interest
(411)
(381)
(691)
7,924
10,131
13,152
7.9
13.2
13.0
19.8
24
12.925
EPS (cps)
NPATA per Share
(cps)
7.7
DPS (cps)
Summary of non-GAAP items
22,151
27,479
32,491
1,787
2,095
2,395
20,364
25,384
30,096
Non-Controlling
Interest relating to
OCA
(736)
(779)
(1,252)
19,628
24,605
28,844
(998)
(998)
(997)
(5,592)
13,037
(6,789)
16,817
(8,008)
19,838
EBITDA
Depreciation and
Amortisation
EBITA before
Non-Controlling
Interest
Net Interest
expense
Tax
NPATA
FY2011PF
FY2012PF
FY2013PF
FY2014P
F
Historical
Historical
Historical
Forecast
FY2015
(Statut
ory)
Forecast
Enrolments
24
Dividend forecast to be paid in FY2015 in respect of the 7 month period ended 31 December 2014.
25
Dividend forecast to be paid in FY2015 and FY2016 in respect of the 12 month period ended 31
December 2015.
58
12 months ending
31 December
FY2011PF
FY2012PF
FY2013PF
FY2014P
F
FY2015
(Statut
ory)
Domestic students
5,775
5,828
5,950
6,574
6,737
International
students
1,075
1,104
971
1,373
1,816
Online and
Australian students
1,491
1,837
2,182
2,846
3,113
Total
8,341
8,769
9,103
10,793
11,666
Domestic student
EFTS utilised
2,243
2,176
2,333
2,366
2,396
Domestic EFTS
capacity
2,331
2,332
2,355
2,418
2,418
96.2%
93.3%
99.1%
97.8%
99.1%
EFTS
% capacity usage
$m
30
25.4
25
20
18.7
20.6
21.5
FY2012PF
FY2013PF
15
10
5
FY2011PF
FY2014PF
FY2015F
Below is a discussion of Intueris year on year EBITA performance on a pro forma basis for
FY2011PF to FY2014PF and for FY2015F.
Overview of FY2012PF EBITA and comparison to FY2011PF EBITA
EBITA increased 10.3% from $18.7 million to $20.6 million, primarily due to an increase in
total revenue by 5.2%, partially offset by an increase in total expenses of 3.5%.
59
student visas and to the Graduate Job Search visa and Graduate Work Experience visa
(Study to Work visas) in April 2012, which adversely affected enrolments in the second
half of the year and resulted in a 3.7% decline in NSIA revenue. Prior to April 2012, a
student was able to acquire a student visa by providing evidence of available funds of
$10,000 per annum and a Study to Work visa by completing a one year NZQA qualification
course at levels 4 to 6. In April 2012 these requirements changed such that international
students were required to provide evidence of $15,000 of available funds per annum, and
upon approval were only eligible for a Study for Work visa after studying for two years at
course levels 4 to 6. The additional requirements and regulatory uncertainty had a
negative impact on international student appetite for study in New Zealand and particularly
impacted NSIAs performance which enrolled in excess of 90% of Intueris total
international students in FY2012PF.
EBITA margins expanded from 28.6% to 29.9% due to:
Intueris ability to leverage its existing cost base to drive a 56% EBITA margin on
additional revenue generated (revenue increased $3.4 million and EBITA increased
$1.9 million); and
lower cost of sales from international student commission payments.
Overview of FY2013PF EBITA and comparison to FY2012PF EBITA
EBITA increased 4.0% from $20.6 million to $21.5 million despite a 3.4% ($2.4 million) fall
in revenue.
The decline in total revenue reflected a 20.2% ($3.7 million) reduction in international
student revenue caused by the change in visa requirements within FY2012PF (enrolments
have a lagged effect on revenue due to revenue being recognised over the life of the
course) and changes to the NZQA English approval process. The NZQA changed the English
language testing process such that Category 2 PTEs (including NSIA) were no longer able
to conduct the testing internally. An internal testing process is attractive to international
students as it is more cost effective, and as a result many international students chose
Category 1 providers in preference to Intueri (whose main enroller of international
students, NSIA, is Category 2), or were deterred from commencing study in New Zealand.
Following industry-wide lobbying, NZQA reverted to the previous model, in August 2013,
which allows for qualified Category 2 PTEs (including NSIA) to undertake this testing
internally.
60
Domestic student revenue increasing by 7.4% from $45.8 million to $49.2 million
due to:
o
a 9.8% increase in total SAC and Youth Guarantee funding. For FY2014PF
this funding has been confirmed by TEC;
61
campus. D&A has had a strong start to 2014 with YTD February 2014
enrolments up 51.0% to 157 enrolments. The TECs commitment to
increase the D&A funding to pre-February earthquake level also contributes
to this growth;
o
74.0
72.0
0.6
1.5
2.2
70.0
68.0
76.9
3.4
78.0
66.6
1.2
66.0
64.0
62.0
60.0
FY2013PF
revenue
Increase in
TEC funding
Online
revenue
growth
Other impacts
FY2014PF
revenue
62
2.3
86.0
86.4
Other impacts
FY2015F
revenue
1.7
84.0
2.2
82.0
2.7
80.0
78.0
0.1
0.4
76.9
76.0
74.0
72.0
FY2014PF
revenue
Increase in
TEC funding
Online
revenue
growth
63
FY2013
31 May 14
(Completion)
FY2014F
FY2015F
Historical
Forecast
Forecast
Forecast
Total assets
63,838
149,748
156,045
145,986
Total liabilities
41,979
68,592
66,665
56,550
Net Assets
21,859
81,156
89,380
89,436
(16,474)
(21,311)
(7,788)
1,451
(16.5)
(21.3)
(7.8)
1.5
17,737
17,515
4,627
(3,980)
The balance sheet movement from FY2013PF to FY2014F reflects the forecast change in
Intueris assets, liabilities and equity following the Quantum Acquisition and the OCA
Acquisition. FY2013 is not presented on a pro forma basis, as pro forma comparisons are
not meaningful due to the revaluation of Quantum Education and OCA on acquisition. This
revaluation results in total acquisition intangibles attributable to OCA and Quantum
Education of $64.3 million (including tax assets) at the assumed completion date of 31 May
2014. In FY2014F and FY2015F, other changes in the balance sheet reflect the cash flows
generated by the business, capital expenditure, financing costs and Dividends as discussed
below, and amortisation of acquisition intangibles and associated deferred tax impacts. The
FY2014F and FY2015F net asset position reflects the assumption there is no impairment of
goodwill or intangibles.
Overview of consolidated Cash Flow
12 months ending 31 December ($000)
FY2014F
FY2015F
Statutory Forecast
Forecast
17,179
24,887
(65,043)
(1,479)
57,659
(24,837)
9,794
(1,430)
Net cash flow from operating activities generally reflects EBITDA less net interest and tax
payable for the year, with some movements in working capital. Net cash flow from
investing activities relates to spend on capital expenditure and performance related
64
payments in respect of the Quantum Acquisition and the OCA Acquisition. Net cash flow
from financing activities primarily relates to the raising of new equity and the repayment of
borrowings and Dividends.
Capital will be raised by the Company as part of the Offer in order to, among other things
fund the Quantum Acquisition, fees associated with the Offer and the Quantum Acquisition,
and the repayment of related-party loans (including those associated with the OCA
Acquisition). Capital raised under the Offer is expected to be $62.0 million. $0.9 million of
transaction fees will be recognised as expenses in FY2014F .
Dividends are forecast to be paid in March 2015 and September 2015 in respect of the
seven month period ending 31 December 2014 and the six month period ending 30 June
2015 respectively.
Pro forma Adjustments26
Detailed below are the Intueri pro forma adjustments that have been made to the pro
forma accounts.
12 months ending 31
December ($000)
FY2011PF
FY2012PF
FY2013PF
FY2014PF
Pro forma
Pro forma
Pro forma
Pro forma
22,501
21,370
19,978
26,562
(917)
(692)
(740)
(1,706)
142
993
(672)
(262)
413
1,346
1,987
2,306
(20)
(143)
33
Add:
Normalised Corporate and
Governance costs27
Discontinued schools, courses &
services28
Alignment of accounting policies
29
26
552
Pro forma adjustments includes normalisation and other adjustments in accordance with ISAE3420.
27
Reflects the costs required to operate the Intueri Group on a basis comparable to the corporate and
governance costs included in the PFI.
28
Costs, profit and losses, relating to operating schools, services and courses that are discontinued
activities.
29
Alignment of accounting policies for revenue recognition, bad debts, rental incentives and changes in
accounting policy treatment for course development costs to be consistent with the accounting policies in
the PFI.
30
Costs that were incurred by companies in the Intueri Group pre acquisition while under ownership of
the previous shareholders that are no longer required to be incurred post-acquisition.
31
32
65
12 months ending 31
December ($000)
FY2011PF
FY2012PF
FY2013PF
Employee incentives33
20,533
22,404
FY2014PF
365
22,983
27,479
33
Costs associated with management and employee incentive scheme on successful listing of Intueri.
66
Intueri believes that EBITA provides a better comparison of operating performance with
other businesses than do NZ GAAP measures which include a deduction for the
amortisation of identifiable intangible assets, although caution should be exercised as other
companies may calculate EBITA differently.
NPATA
NPATA represents Net Profit adjusted for the tax-effected amortisation of acquisition
related intangibles. Intueri believes that this measure provides a better comparable
measure of its operating performance against other companies, although caution should be
exercised as other companies may calculate NPATA differently. NPATA is unconsolidated for
the non-controlling interest in OCA.
Reconciliation
12 months ending 31 December ($000)
FY2014F
FY2014PF
FY2015F
Forecast
Forecast
Forecast
EBITDA
22,151
27,479
32,491
(1,787)
(2,095)
(2,395)
20,364
25,384
30,096
(736)
(779)
(1,252)
19,627
24,605
28,844
(998)
(998)
(997)
(5,592)
(6,789)
(8,009)
13,037
16,817
19,838
(5,113)
(6,686)
(6,686)
7,924
10,131
13,152
(1)
67
68
(with the 50% non-controlling interest also noted) due to Intueri having de facto control of
OCA through a casting vote mechanism that operates in the event of a deadlock.
The PFI, including the assumptions underlying it, has been prepared by management and
approved by the Board. It is based on the Boards assessment of events and conditions
existing at the date of this Prospectus and the accounting policies and best estimate
assumptions set out under the heading General and Specific Assumptions below.
PFI by its nature involves risks and uncertainties, many of which are beyond the control of
Intueri. The Board believes that the PFI has been prepared with due care and attention,
and consider the best estimate assumptions, when taken as a whole, to be reasonable at
the time of preparing this Prospectus.
Actual results are likely to vary from the information presented as anticipated events and
results may not occur as expected, and the variations may be material. Accordingly,
neither the Directors nor any other person can provide any assurance that the consolidated
PFI will be achieved and investors are cautioned not to place undue reliance on the PFI.
There is no present intention to update the PFI or to publish PFI in the future, other than
as required by accounting standards. Intueri will present a comparison of the PFI with
actual financial results when reported in accordance with NZ GAAP and Regulation 44 of
the Securities Regulations.
The PFI is presented in New Zealand dollars and is rounded to the nearest thousand, which
may result in some discrepancies between the sum of components and totals within tables,
and also in certain percentage calculations.
The PFI includes items considered non-GAAP financial information, including three profit
measures other than Net Profit, being EBITDA, EBITA and NPATA as has been used in
historical financial statements and explained in Section 5.2 Overview of Intueris Financial
Information. Where non-GAAP financial information is reported there is a reference to
further information to help you interpret those terms.
The Directors are responsible for and have authorised for issue the PFI on 15 April 2014 for
use in this Prospectus. It is not intended to update the PFI subsequent to its presentation
at this date.
Accounting policies
The significant accounting policies applied to the preparation of the consolidated PFI are
set out in Intueri Education Group Limiteds audited financial statements for the period
ended 30 June 2013, which are included in Section 5.4 Historical Financial Information.
Currently there are no anticipated changes to accounting standards under NZ GAAP that
are expected to materially affect Intueri during the period to 31 December 2015. However,
any changes to NZ GAAP could necessitate changes in the accounting policies currently
adopted and any new or amended accounting standards, or interpretation, may affect the
actual financial results or financial position.
General and specific assumptions
A description of the Boards best estimate general and specific assumptions upon which the
consolidated PFI is based are summarised below, and should be read in conjunction with
the information set out in Section 6 What are my Risks?
69
General Assumptions
An overview of the New Zealand and Australian vocational education sectors, including the
regulatory environment, is provided in Section 3 Industry Overview. Set out below are the
general assumptions that have been adopted by the Board in preparing the PFI:
Competitive, legislative and regulatory environment: there will be no material
change in Intueris competitive, legislative or regulatory environment, specifically:
o
FY2011PF
FY2012PF
FY2013PF
FY2014P
F
FY2015
F
Historical
Historical
Historical
Forecast
Forecast
Enrolments
Domestic students
5,775
5,828
5,950
6,574
6,737
International
students
1,075
1,104
971
1,373
1,816
Online and
Australian students
1,491
1,837
2,182
2,846
3,113
Total
8,341
8,769
9,103
10,793
11,666
EFTS
70
12 months ending
31 December
FY2011PF
FY2012PF
FY2013PF
FY2014P
F
FY2015
F
Domestic student
EFTS utilisation
2,243
2,176
2,333
2,366
2,396
Domestic EFTS
capacity
2,331
2,332
2,355
2,418
2,418
96.2%
93.3%
99.1%
97.8%
99.1%
% capacity usage
71
$m
40
30
49.6
13.3
20
10
18.1
Unearned income
TEC funding
Confirmed revenue
A summary of further factors that are material drivers of Intueris forecast revenue growth
in FY2014PF on a full year basis, when compared to FY2013PF, is outlined below.
Domestic
Domestic student revenue (which comprises 63.9% of total revenue forecast in
FY2014PF on a full year basis) is forecast to increase by 7.4%. This incorporates a
9.8% increase in total SAC and Youth Guarantee funding which has been confirmed
by TEC and course fee increases which are generally between 3% and 4%. While
these increases are accompanied by the increases in enrolments noted below, some
changes in course mix (to lower fee courses) lead to a lower overall percentage
increase in revenue.
Domestic enrolments are forecast to increase 10.5%, underpinned by strong
growth in D&A domestic student enrolments (47.8%). The D&A enrolment growth
reflects a forecast rebound in student enrolments at the Christchurch campus and
the additional capacity provided by the Auckland campus. The TECs commitment to
increase D&A funding to the pre-February earthquake level also contributes to this
growth.
Quantum Education student enrolments are forecast to increase by 10.1% following
higher revenue received per EFTS utilised, the establishment of a recruitment team
and implementation of new marketing initiatives. Quantum Education has had a
strong start to the year with February FY2014PF YTD enrolments up 20% on the
same period in FY2013PF.
Domestic EFTS capacity has increased by 2.7% as a result of additional EFTS and
Youth Guarantee provided to D&A and The Cut Above Academy while capacity
usage is forecast to reduce 1.2 percentage points to 97.8% as a result of forecast
changes to course mix which are aimed at increasing revenue per EFTS.
International
As discussed above, NSIA is the key driver of international revenue growth in
FY2014PF. The growth in student enrolments is due to the second year rollover
students and an increase in the number of new students. NSIAs rollover students
are forecasted to contribute approximately 64% of total international student
72
73
offsets the 23% reduction in forecast marketing expenses for NSIA, Elite, NZSCDT, Design
& Arts and Cut Above as part of a change to the marketing strategy to see a more focused
advertising spend directed away from the traditionally more expensive print and radio.
Occupancy
Occupancy expenses are forecast to increase by 9.5% to $7.2 million. The increase reflects
a combination of price increases and the leasing of additional premises and floor space.
The Design & Arts Christchurch campus on Oxford Street was subject to a 26% rent
increase in November 2013 and undertook a new lease to establish an additional facility on
Acheron Street. Elite and NSIA have also increased floor space to support the forecast
increase in student enrolments.
Personnel
Personnel expenses are forecast to increase 12.7% to $22.7 million, primarily due to the
increase in tutor costs required in certain schools to cater for the increase in forecast
student enrolments.
FY2015F revenue, operating expenses and EBITA
FY2015F EBITA is forecast to increase from FY2014PF EBITA by 18.6% to $30.1 million.
This increase is underpinned by 12.3% revenue growth, over the same period, which is
driven by continued forecast increases in international student enrolments. These
enrolments, which somewhat leverage the existing cost base, drive an increase in EBITA
margin from 33.0% to 34.8% (FY2014PF to FY2015F).
Revenue
Revenue in FY2015F is forecast to increase from FY2014PF EBITA by 12.3% to $86.4
million. This revenue growth is underpinned by similar growth drivers to FY2014PF forecast
revenue, with forecast growth in NSIA international student enrolments again a significant
factor.
International student enrolments are forecast to grow, from FY2014PF forecast levels, by
32.2% in FY2015F. This forecast growth is partially driven by the second year impact of
the two year qualification at NSIA which leverages international student growth achieved in
FY2014PF to provide a base in FY2015F. It also reflects forecast growth in new student
enrolments forecast for FY2015F compared to FY2014PF, although the number of new (first
year) students forecast for NSIA for FY2015F is still below the level achieved in FY2011PF.
Intueri has also built-up capacity to meet this forecast student growth through the
establishment of new kitchens and classrooms at NSIA.
A summary of further factors that are drivers of Intueris FY2015F revenue growth, when
compared to FY2014PF, is outlined below.
Domestic
Course fee growth of 3% to 4% is forecast for the majority of courses, together
with a 3% increase in SAC and Youth Guarantee funding.
Quantum Education domestic enrolments are forecast to increase by 2.8%, driven
by greater enrolments per EFTS utilised and continued investment in marketing
spend and refinement of current marketing initiatives. Recently implemented
initiatives such as radio advertisements and college open days have led to
74
75
Other expenses
Interest expense
Interest expense is forecast to be paid on outstanding debt balances at an average rate of
6.1% in FY2014PF and 6.9% in FY2015F, which is based on forecast three month bank bill
rates in the period and the margins included in Intueris banking facilities.
Foreign exchange
The New Zealand dollar to Australian dollar foreign exchange rate is assumed to be 0.93 in
FY2014PF and 0.93 in FY2015F.
Taxation
The income tax rate will be 28% and 30% on taxable profit in New Zealand and Australia
respectively, based on corporate tax rates.
Tax will be paid in the same financial year in which the profit is earned, with the exception
of some accruals in Intueri Education.
Dividends
Dividends will be declared and paid based on the current dividend policy. A detailed
description of Intueri's dividend policy is set out in Section 4.4 Corporate Governance.
Due to the timing of the Offer, no Dividends are forecast to be paid to shareholders in
FY2014F. Total Dividends paid to shareholders are forecast to be $13.8 million in FY2015,
comprised of $7.7 million in respect of the seven months to 31 December 2014 and $6.1
million in respect of the interim FY2015 period from 1 January 2015 to 30 June 2015.
Total Dividends declared for FY2014F are forecast to be $7.7 million (7.7 cents per Share),
in respect of the seven months to 31 December 2014. Due to the timing of the Offer there
will be no interim Dividend, and this amount will be paid as a final Dividend in March 2015.
Assuming a Dividend payout ratio of 65% of NPATA, total Dividends declared for FY2015
are forecast to be $12.9 million (12.9 cents per share). This is comprised of a 40-50%
interim Dividend payable in September 2015, with the balance paid as a final Dividend in
March 2016.
Dividends in the Prospective period are expected to carry full New Zealand imputation
credits and no Australian franking credits. Dividends may be subject to withholding tax at
the time of payment; this is not included in the above forecast. At the New Zealand
corporate tax rate of 28% (see Taxation above) the Dividends declared grossed up for
imputation credits are forecast to be $10.7 million (10.7 cents per share) for FY2014 and
$17.9 million (17.9 cents per share) for FY2015.
Capital expenditure, depreciation and amortisation
Maintenance capital expenditure is expected to be $1.1 million in FY2014PF and $1.5
million in FY2015F. These capital expenditure forecasts include OCA course development
costs of $0.2 million in FY2014PF and $0.2 million in FY2015F. An additional $2.0 million of
expansionary capital expenditure is to be borne in FY2014PF that includes capital
expenditure relating to the construction of a new barge for NZSCDT, and a new kitchen at
NSIA. This expansionary capital expenditure has been completed and fully paid for prior to
the Offer and is in addition to $0.9m of prepaid expansionary capital expenditure relating
to the barge and kitchen incurred in FY2013PF.
76
Historical rates of depreciation will apply to the asset base adjusted for forecast capital
expenditure. For kitchens and barges this assumes a 10 year life.
Acquisition related payments and funding
The total cost to Intueri of the Quantum Acquisition, the OCA Acquisition and the Offer,
including transaction fees, is expected to be $73.3 million (exact amount dependent on
performance of each business in relevant earn-out periods and fees incurred associated
with the transaction). Based on the Selling Shareholders maximum sell down,
approximately $9.0 million of this amount will be funded by the Selling Shareholder with
the remaining approximately $64.3 million attributable to Intueri. This cost will be partly
funded through capital raised as part of the Offer. $0.9 million of transaction fees will be
recognised as expenses.
Payments made related to acquisition activity in the FY2015F Prospective Statement of
Cashflow relate to the likely earn-out payment associated with the OCA Acquisition. This
payment is dependent on the FY2014 financial performance of OCA and the payment
included is based on the forecast performance of OCA within the PFI. This payment is
capped at $1.9 million.
Amortisation of intangibles
Acquired intangible assets have been recognised in accordance with NZ GAAP and includes
agent relationships, course materials, customer contracts, IT software, brand names, noncompete agreements, and intellectual property. Intangible assets, except for brand names
and goodwill, have been assessed as having a finite life. The cost of the finite life intangible
assets are amortised over the life of the assets on a straight line basis.
The average amortisation period is approximately seven years from the date of acquisition.
Intueri has forecast amortisation of $9.3 million for the FY2014PF and FY2015F years as a
result of the identified finite life intangible assets acquired through business combinations.
Cash and debt
Intueri is expected to have debt drawings of $18.9 million as at 31 May 2014. Intueris
debt facility is forecast to be voluntarily amortised reflecting forecast cash generation and
Intueris limited planned capital expenditure.
Intueri has an additional debt facility with undrawn capacity of approximately $20 million
which will be available to fund any capital expenditure opportunities which may arise and
which meet the investment criteria of the Board and management. Together with forecast
cash flow generation, Intueri believes that this provides capacity for acquisitions which
meet the Boards criteria of up to approximately a total of $30 million - $40 million.
Working capital items
Accrued income relates primarily to fee revenue held in a Public Trust account on behalf of
Intueri in respect of fees which have been paid in advance, but which have not yet been
earned. Similarly, deferred income is recognised as a liability in regard to these fees. These
items, by their nature, broadly offset one another.
Intueris New Zealand business is able to operate with negative working capital due to:
Government funding received in advance in equal monthly instalments
77
78
FY2014F
FY2014PF
FY2015F
Forecast
Forecast
Forecast
Domestic Revenue
39,027
49,193
52,354
International Revenue
18,248
18,573
22,459
Online Revenue
6,171
7,336
9,659
Other Revenue
1,687
1,847
1,941
Total revenue
65,133
76,949
86,413
11,066
12,206
14,440
Admin Expenses
4,167
4,401
4,571
Marketing Expenses
2,143
3,016
3,500
Occupancy Expenses
6,434
7,166
7,452
19,172
22,681
23,958
Total expenses
42,983
49,470
53,922
EBITDA
22,151
27,479
32,491
(1,787)
(2,095)
(2,395)
EBITA
20,364
25,384
30,096
31.3%
33.0%
34.8%
(7,102)
(9,287)
(9,287)
(998)
(998)
(997)
12,264
15,099
19,812
Tax
(3,929)
(4,587)
(5,969)
8,335
10,512
13,843
(411)
(381)
(691)
7,924
10,131
13,152
Cost of Sales
Personnel Expenses
EBITA margin %
Amortisation of Identifiable Intangible Assets
Net Interest Expense
EPS (cps)
NPATA per Share (cps)
DPS (cps)
7.9
13.2
13.0
7.734
19.8
12.935
22,151
27,479
32,491
(1,787)
(2,095)
(2,395)
(736)
(779)
(1,252)
19,628
24,605
28,844
(998)
(998)
(997)
Dividend forecast to be paid in FY2015 in respect of the 7 month period ended 31 December 2014.
35
Dividend forecast to be paid in FY2015 and FY2016 in respect of the 12 month period ended 31
December 2015.
79
FY2014F
Tax
FY2014PF
(5,592)
13,037
NPATA
FY2015F
(6,789)
16,817
(8,009)
19,838
FY2014F
FY2015F
Forecast
Forecast
21,859
89,380
8,335
13,843
8,335
13,843
61,987
(13,787)
(2,802)
89,380
89,436
31 May
2014
FY2014F
FY2015F
Completion
Forecast
Forecast
Current assets
2,516
1,400
12,310
10,881
51
1,171
1,815
1,087
11,689
29,965
30,447
32,537
4,158
2,169
2,169
2,169
18,414
34,705
46,742
46,674
7,091
12,575
12,134
11,327
38,309
54,494
24
47,973
49,195
47,973
40,012
47,973
45,424
115,043
109,303
99,312
Bank debt
3,150
3,125
3,106
3,106
Accounts payable
5,194
4,186
5,293
5,691
Unearned income
11,263
29,879
30,341
32,465
80
FY2013
31 May
2014
As at 31 December
FY2014F
FY2015F
514
514
514
514
20,121
37,705
39,254
41,776
17,103
15,790
13,831
3,795
4,756
15,097
13,580
10,979
21,858
30,887
27,411
14,774
Net Assets
21,859
81,156
89,380
89,436
80,734
88,615
87,980
422
765
1,456
21,859
81,156
89,380
89,436
Equity
Total equity
The balance sheet movement from FY2013 to FY2014 reflects the forecast change in
Intueris assets, liabilities and equity following the Quantum Acquisition and the OCA
Acquisition. FY2013 is not presented on a pro forma basis, as pro forma comparisons are
not meaningful due to the revaluation of Quantum Education and OCA on acquisition. This
revaluation results in intangibles and goodwill increasing to $102.4 million at the assumed
completion date of 31 May 2014. In FY2014F and FY2015F, other changes in the balance
sheet reflect the cash flows generated by the business, capital expenditure, financing costs
and Dividends as discussed below, and amortisation of the acquisition intangible and
associated deferred tax impacts. The FY2014F and FY2015F intangible asset and goodwill
position reflects the assumption there is no impairment of goodwill or intangibles.
Consolidated Prospective Statement of Cash Flow
12 months ending 31 December
FY2014F
FY2015F
Forecast
Forecast
71,822
95,460
1,783
1,991
(46,779)
(58,144)
(4,541)
(6,195)
(5,106)
(8,226)
17,179
24,887
(62,214)
(2,829)
(1,479)
(65,043)
(1,479)
61,987
81
FY2014F
FY2015F
Repayment of borrowings
(3,315)
(10,037)
Interest payments
(1,013)
(1,012)
(13,788)
57,659
(24,837)
9,794
(1,430)
2,516
12,310
12,310
10,881
Payment of dividend
Net cash flows from financing activities
Sensitivity analysis
PFI is inherently subject to uncertainty and accordingly actual results are likely to vary
from PFI and this variation could be material. You can find a full description of assumptions
relating to the prospective financial information for FY2014PF, FY2014F and FY2015F on
page 70, along with a description of risks in Section 6 What are my Risks?. The sensitivity
analysis below is provided to assist you with assessing the potential effects of variations in
certain key assumptions (defined as those most likely to materially affect results).
The sensitivity for each assumption is not intended to be indicative or predictive of the
possible range of outcomes. Each movement in an assumption is calculated and presented
in isolation from possible movements in other assumptions (i.e. when the assumption is
sensitised, all other things remain equal). In reality, it is more likely that more than one
assumption may move giving rise to compounding or offsetting effects. Furthermore the
sensitivity modelled does not take into account that management action will be taken
which may potentially mitigate effects. Therefore care should be taken in interpreting the
sensitivity analysis. Sensitivities have been modelled to show the effect on forecast EBITA
in pro forma FY2014 and FY2015 for the following key specific assumptions:
Change in domestic enrolments (+ /- 5% in FY2014PF) and (+ /- 10% in FY2015F)
Reflecting an unanticipated change in domestic enrolments compared to what is in
the forecast (note: impacts from changes in FY2014PF enrolments are carried
through to changes in FY2015F). Revenue is recognised over the life of the course
therefore the impact from changes to enrolments in FY2014PF also impact FY2015F
in addition to the FY2015F enrolment sensitivity.
Change in international enrolments (+ /- 5% in FY2014PF) and (+ /- 10% in
FY2015F)
Reflecting an unanticipated change in international enrolments compared to what is
in the forecast (note: impacts from changes in FY2014PF enrolments are carried
through to changes in FY2015F). Revenue is recognised over the life of the course
therefore the impact from changes to enrolments in FY2014PF also impact FY2015F
in addition to the FY2015F enrolment sensitivity.
Change in VET FEE-HELP enrolments (+ / - 5%)
82
Sensitivity
Sensitivity
applied in
FY2014PF
Sensitivity
applied in
FY2015F
FY2014PF
impact on
forecast
EBITA ($m)
FY2015F
impact on
forecast
EBITA ($m)
Change in domestic
enrolments
+/- 5%
+/- 10%
+/- 1.3
+/- 3.2
Change in international
enrolments
+/- 5%
+/- 10%
+/- 0.4
+/- 1.3
+/- 10%
+/- 10%
+/- 0.2
+/- 0.3
+/- 5%
+/- 5%
+/- 0.6
+/- 0.7
Change in employee
expenses
+/- 5%
+/- 5%
+/- 1.1
+/- 1.2
83
Level 8
BDO Tower
120 Albert Street
PO Box 2219
Auckland 1140
New Zealand
15 April 2014
The Directors
Intueri Education Group Limited
100 Symonds Street
Grafton
Auckland 1010
INVESTIGATING ACCOUNTANTS REPORT ON PROSPECTIVE FINANCIAL INFORMATION
1.
Introduction
We have prepared this Investigating Accountants Report (the Report) on the prospective financial
information of Intueri Education Group Limited (the Company) and its subsidiaries assuming the
completion of the Quantum acquisition and OCA acquisition (together, Intueri) for inclusion in the
prospectus (Prospectus) to be dated on or about 15 April 2014 and to be issued by the Company in
respect of the Initial Public Offering of ordinary shares in Intueri Education Group Limited.
Expressions defined in the Prospectus have the same meaning in this Report.
2.
Scope
BDO Auckland has been requested to prepare this Report to cover the prospective financial
information:
The prospective financial information as set out in pages 68 to 83 of the Prospectus comprises:
Consolidated Prospective statement of comprehensive income of Intueri for the years ending 31
December 2014 and 31 December 2015;
Consolidated Prospective statement of financial position of Intueri as at 31 December 2014 and
31 December 2015;
Consolidated Prospective statement of changes in equity of Intueri for the years ending 31
December 2014 and 31 December 2015;
Consolidated Prospective statements of cash flow of Intueri for the years ending 31 December
2014 and 31 December 2015; and
Notes and assumptions to these consolidated prospective statement of comprehensive income,
changes in equity, financial position and cash flow (the Prospective Financial Information).
The Prospective Financial Information is based on the assumptions as outlined on pages 70 to 83 of
the Prospectus.
We disclaim any assumption of responsibility for any reliance on this Report or on the Prospective
Financial Information to which this Report relates for any purposes other than the purpose for which
it was prepared. This Report should be read in conjunction with the Prospectus.
BDO New Zealand Ltd, a New Zealand limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms. BDO New Zealand is a national association of independent member firms which operate as separate legal
entities. For more info visit www.bdo.co.nz. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
84
3.
Page 2
The Directors of the Group have prepared and are responsible for the preparation and presentation
of the Prospective Financial Information. The Directors are also responsible for the determination
of the best-estimate assumptions as set out on pages 70 to 83 of the Prospectus.
4.
Our Responsibility
Our responsibility is to express a conclusion on the Prospective Financial Information based on our
review.
We have conducted an independent review of the Prospective Financial Information in order to
state whether on the basis of the procedures described, anything has come to our attention that
would cause us to believe that:
a. The Directors best-estimate assumptions do not provide a reasonable basis for the preparation
of the Prospective Financial Information;
b. The Prospective Financial Information was not prepared on the basis of the best-estimate
assumptions;
c. The Prospective Financial Information is not presented fairly in accordance with the recognition
and measurement principles prescribed in New Zealand Financial Reporting Standards and other
mandatory professional reporting requirements in New Zealand, and the accounting policies
adopted by the Group disclosed in the annual financial statements of Intueri Education Group
Limited as at and for the year ended 30 June 2013 on pages 102 to 139 of the Prospectus; and
d. The Prospective Financial Information is unreasonable.
The Prospective Financial Information has been prepared by the Directors to provide investors with
a guide to the Groups potential future financial performance based upon the achievement of
certain economic, operating, developmental and trading assumptions about future events and
actions that have not yet occurred and may not necessarily occur. There is a considerable degree
of subjective judgement involved in the preparation of the Prospective Financial Information.
Actual results may vary materially from this Prospective Financial Information and the variation may
be materially positive or negative. Accordingly, investors should have regard to the Risk Factors set
out in the What are my Risks? section of the Prospectus.
Our review of the best estimate assumptions underlying the Prospective Financial Information was
conducted in accordance with International Standard on Assurance Engagements (New Zealand)
3000, issued by the council of the New Zealand Institute of Chartered Accountants, applicable to
assurance engagements other than audits or reviews of historical financial information.
Our procedures consisted primarily of enquiry and comparison and other such analytical review
procedures we considered necessary so as to form the conclusion set out below.
These procedures do not provide all the evidence that would be required in an audit, thus the level
of assurance provided is less than that given in an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion on the Prospective Financial Information.
85
5.
Page 3
Based on our review of the Prospective Financial Information, which is not an audit, and based on
an investigation of the reasonableness of the Directors best-estimate assumptions giving rise to the
Prospective Financial Information, nothing has come to our attention which causes us to believe
that:
The Directors best-estimate assumptions do not provide a reasonable basis for the preparation
of the Prospective Financial Information;
The Prospective Financial Information was not prepared on the basis of the best-estimate
assumptions;
The Prospective Financial Information is not presented fairly in accordance with the recognition
and measurement principles prescribed in New Zealand Financial Reporting Standards and other
mandatory professional reporting requirements in New Zealand, and the accounting policies
adopted by the Group disclosed in the annual financial statements of Intueri Education Group
Limited as at and for the year ended 30 June 2013 on pages 102 to 139 of the Prospectus; and
The Prospective Financial Information is unreasonable.
The best-estimate assumptions, set out in pages 70 to 83 of the Prospectus, are subject to
significant uncertainties and contingencies often outside the control of the Group and the Directors.
If events do not occur as assumed, actual results achieved and distributions provided by the Group
may vary significantly from the Prospective Financial Information, as future events, by their very
nature, are not capable of independent substantiation.
6.
BDO Auckland does not have any pecuniary interests that could reasonably be regarded as being
capable of affecting its ability to give an unbiased conclusion in this matter. BDO Auckland,
provides audit and other services to the Group, and will receive a professional fee for the
preparation of this Report.
Yours faithfully
BDO Auckland
Simon Peacocke
Partner
86
Revenue
Operating profit before financing costs
Financing costs
Profit before tax
Income tax benefit
Profit for the period attributable to the owners
Other comprehensive income
Income tax on other comprehensive income
Total comprehensive income for the period
attributable to the owners
Period from
incorporation
date to 30
Jun 2013
Six months
ended 31
Dec 2013
14,259
839
(389)
451
41
491
-
17,088
712
(611)
100
94
194
-
491
194
Total
Total
Total
Total
Total
current assets
non-current assets
current liabilities
non-current liabilities
equity
As at 30 Jun
2013
As at 31
Dec 2013
19,641
47,431
21,977
24,002
21,093
17,542
46,295
20,694
21,856
21,287
87
Opening equity
Comprehensive income for the period
Shares issues
Total equity
Represented by:
Share capital
Retained earnings
Period from
incorporation
date to 30
Jun 2013
Six
months
ended 31
Dec 2013
491
20,602
21,093
21,093
194
21,287
20,602
491
21,093
20,602
685
21,287
Period from
incorporation
date to 30
Jun 2013
Six months
ended 31
Dec 2013
1,879
(38,590)
41,207
4,495
841
(1,390)
(1,430)
(1,979)
The summary financial statements are those of Intueri Education Group Limited and its
subsidiaries (together Intueri Group). There are no consolidated historical statements for
the Group (except for period ended 30 June 2013 and 31 December 2013) as the Company
was incorporated on 17 September 2012 and acquired various subsidiaries during February
and March 2013.
The financial statements for 9 months ended 30 June 2013 and 6 months ended 31
December 2013 were prepared in accordance with New Zealand Generally Accepted
Accounting Practice, as appropriate for profit-oriented entities. The financial statements to
30 June 2013 comply with New Zealand equivalents to International Financial Reporting
Standards and other applicable Financial Reporting Standards. The financial statements to
31 December 2013 are interim financial statements prepared under NZ IAS 34 Interim
Financial Reporting.
The full financial statements to 30 June 2013 and 31 December 2013 are included in this
Prospectus.
The table below summarises the following for the historical financial statements:
-
Auditor name
Nature of auditors opinion
Date authorised for issue
88
Period
Auditor name
Nature of
Auditors opinion
30 June 2013
BDO Auckland
Unqualified opinion
28 March 2014
31 December 2013
BDO Auckland
Unqualified opinion
28 March 2014
Revenue
Operating profit before financing costs
Financing costs
Profit before tax
Income tax expense
Profit for the period attributable to the
owners
Other comprehensive income
Income tax on other comprehensive
income
Total comprehensive income for the period
attributable to the owners
Six
months
ended 30
June
2013
7,886
1,146
(151)
995
(278)
7,751
653
(103)
550
(164)
8,316
978
(2)
976
(290)
4,233
996
(6)
990
(293)
717
-
387
-
686
-
697
-
717
387
686
697
As at 31 December
2010
2011
2012
As at 30
June
2013
Total
Total
Total
Total
Total
946
3,756
2,487
189
2,026
1,129
2,890
3,434
585
2,392
2,651
1,903
3,140
current assets
non-current assets
current liabilities
non-current liabilities
equity
1,270
3,494
2,276
75
2,413
89
Six
months
ended 30
June
2013
NZ$000
Opening equity
Comprehensive income for the
period
Shares issued
Dividend paid
Total equity
1,309
2,026
2,413
585
717
2,026
387
2,413
686
(2,514)
585
697
1,858
3,140
Represented by:
Share capital
Retained earnings
1
2,025
1
2,412
1
584
1,859
1,281
2,026
2,413
585
3,140
The financial statements of The Cut Above Academy Limited for year ended 31 December
2010, 31 December 2011 and 31 December 2012 and 6 month period ended 30 June 2013
have been prepared in accordance with NZ GAAP. They comply with approved financial
reporting standards (FRSs) and Statements of Standard Accounting Practices (SSAPs) as
appropriate for entities that qualify for and apply differential reporting concessions.
Cut Above qualifies for differential reporting exemptions as it has no public accountability
and is not large in terms of the criteria set out in the Differential Reporting Framework. All
available exemptions allowed under the Framework for Differential Reporting have been
adopted for year ended 31 December 2010, 31 December 2011 and 31 December 2012
and 6 month period ended 30 June 2013. From year ended 31 December 2012 onward,
Cut Above chose not to adopt the exemption relating to deferred tax. Cut Above is a
profit-oriented entity.
Due to reporting concessions available for the above years, Cut Above did not prepare
statements of cash flows.
With regard to the summary financial statements above for Cut Above, this Prospectus
does not contain summary financial statements for Cut Above for the accounting period
ended 31 December 2009 (the 2009 Summary Financials), as required under the
Securities Regulations.
The Issuers are exempted from this requirement by the Securities Act (Intueri Education
Group Limited) Exemption Notice 2014 (the Exemption Notice).
The 2009 Summary Financials are not available because, due to:
their age;
the fact that they were not audited or reviewed by independent accountants
at the time; and
90
the fact that Cut Above was not owned by the Company at the relevant time,
and the persons who were responsible for Cut Aboves management and
financial reporting at that time are unavailable,
the Companys view is that to include the 2009 Summary Financials would be potentially
misleading and, given their age, of limited relevance to investors.
Not including the 2009 Summary Financials will not have a material adverse effect on
subscribers for Shares.
The table below summarises the following for the historical financial statements:
-
Auditor name
Nature of auditors opinion
Date authorised for issue
Period
Auditor name
Nature of
Auditors opinion
31 December 2010
Qualified opinion
31 December 2011
Unqualified opinion
1 June 2012
31 December 2012
BDO Auckland
Unqualified opinion
20 March 2014
30 June 2013
Not applicable
Unaudited
(1)
(2)
28 March 2014
(1) The audit report in respect of 31 December 2010 financial statements was qualified
in respect of comparative financial statements for the year ended 31 December
2009, the opening balances as at 1 January 2010 and consequently the statement
of financial performance for year ended 31 December 2010.
(2) The financial results from acquisition on 22 February 2013 to 30 June 2013 were
consolidated in the Intueri Group financial statements to 30 June 2013 on which an
unqualified audit opinion was expressed by BDO Auckland. No audit opinion was
expressed on the individual financial statements.
Revenue
15
months
2012
ended 30
June
2013
12,330
15,356
15,802 19,355
2,988
3,999
3,626
3,447
4,473
(71)
2,917
474
4,473
899
4,525
933
4,379
244
4,717
(878)
(1,344)
(1,360) (1,229)
(1,322)
2,039
3,130
3,165
3,150
20,395
3,395
91
2,039
3,130
3,165
3,150
3,395
Statement of Financial
Position
NZ$000
Total
Total
Total
Total
Total
current assets
non-current assets
current liabilities
non-current liabilities
equity
2009
1,957
9,711
1,557
4,794
5,316
2012
As at 30
June
2013
2,833
17,593
3,881
5,567
10,978
6,919
2,255
3,597
2,267
3,310
9,184
1,420
9,261
1,343
2012
As at 31 March
2010
2011
3,815
9,863
2,263
3,602
7,813
Statement of Changes in
Equity
NZ$000
2009
15
months
ended 30
June
2013
Opening equity
Comprehensive income for the
period
Dividend paid
Total equity
3,278
5,316
7,813
10,978
3,310
2,039
5,316
3,130
(1,005)
7,813
3,165
10,978
3,150
(10,818)
3,310
3,395
(5,362)
1,343
Represented by:
Share capital
Retained earnings
75
5,241
75
7,738
75
10,903
75
3,235
75
1,268
5,316
7,813
10,978
3,310
1,343
The financial statements of Global Education Group Limited (GEG) for year ended 31
March 2009, 31 March 2010 and 31 March 2011 have been prepared in accordance with NZ
GAAP. They comply with approved Financial Reporting Standards (FRSs) and Statements
of Standard Accounting Practices (SSAPs) as appropriate for entities that qualify for and
apply differential reporting concessions. GEG qualifies for differential reporting exemptions
as it has no public accountability and there is no separation between the owners and the
governing body. All available exemptions allowed under the Framework for Differential
Reporting have been adopted for year ended 31 March 2009, 31 March 2010 and 31 March
2011.
The financial statements of GEG for the year ended 31 March 2012 and 15 month period
ended 30 June 2013 have been prepared in accordance with New Zealand Generally
Accepted Accounting Practice (NZ GAAP) and comply with the New Zealand equivalent to
92
International Financial Reporting Standards (NZ IFRS) and other applicable Financial
Reporting Standards, as appropriate for profit-oriented entities.
All available reporting exemptions allowed under the Framework for Differential Reporting
have been adopted.
Due to reporting concessions available for the above years, GEG did not prepare
statements of cash flows.
The table below summarises the following for the historical financial statements:
Auditor name
Nature of accountants/ auditors opinion
Date authorised for issue
Period
Auditor name
Nature of Accountants
/Auditors opinion
31 March 2009
James Murray
Unqualified
7 July 2009
31 March 2010
James Murray
Unqualified
29 June 2010
31 March 2011
James Murray
(1)
29 June 2011
31 March 2012
James Murray
(1)
17 August 2012
30 June 2013
Not applicable
Unaudited
(2)
28 March 2014
(1) The financial statements were prepared specifically for the purpose of reporting to
NZQA in accordance with the NZQA requirements for Private Training
Establishments. The Financial Statement were reviewed in accordance with the
Review Engagement Standards issued by the New Zealand Society of Accountants.
Review conclusion
Based on a review, nothing has come to my attention that causes me to believe that
the accompanying special purpose financial statements do not give a true and fair
view.
(2) The financial results from acquisition on 12 February 2013 to 30 June 2013 were
consolidated in the Intueri Group financial statements to 30 June 2013 on which an
unqualified audit opinion was expressed by BDO Auckland. No audit opinion was
expressed on the individual financial statements.
Adoption of NZ IFRS
Year ended 31 March 2012
The Company adopted NZ IFRS for the first time for year ended 31 March 2012. There
have been changes in accounting policies in that the Company has adopted the NZ IFRS for
the first time when preparing these financial statements, however, there was no
measurement impact disclosed from adjustments made as a result of adoption of NZ IFRS.
93
Statement of Comprehensive
Income
Elite International
2009
Elite Education
Holdings
Year ended 31 December
Six
2010
2011
2012
months
ended
30 June
2013
Revenue
Operating profit before financing
costs
Financing (costs)/income
5,691
6,328
6,032
5,638
2,958
1,399
(55)
1,959
(58)
1,369
11
891
(239)
443
(3)
1,343
(408)
1,901
(573)
1,380
(343)
653
(149)
440
(110)
936
1,328
1,037
503
329
936
1,328
1,037
503
329
NZ$000
Statement of Financial
Position
NZ$000
Elite International
2009
Total
Total
Total
Total
Total
current assets
non-current assets
current liabilities
non-current liabilities
equity
As at 31 December
2010
2011
831
2,776
1,804
1,035
767
1,081
2,548
2,186
882
561
1,267
2,371
1,339
(39)
2,338
Statement of Changes in
Equity
NZ$000
Elite International
Year ended 31 December
2009
2010
2011
Elite Education
Holdings
As at 30
June
2012
2013
1,458
8,021
6,454
3,025
2,812
8,097
3,000
164
7,745
Elite Education
Holdings
2012
Six
months
ended
30 June
2013
94
Opening equity
Comprehensive income for the
period
Shares issues
Dividend paid
Total equity
Represented by:
Share capital
Retained earnings
453
767
561
2,853
3,025
936
(621)
767
1,328
(1,534)
561
1,042
735
2,338
503
(332)
3,025
329
4,390
7,745
25
742
767
25
536
561
760
1,578
2,338
3,317
(292)
3,025
7,707
38
7,745
Elite International School of Beauty and Spa Therapies Limited (Elite International) was
acquired by Elite Education Holdings Limited (together Elite Group) on 1 June 2011.
Hence, the historical financial summaries are as under:
Period
Entities
The financial statements of Elite International for year ended 31 December 2009, 31
December 2010 and 31 December 2011 were prepared in accordance with NZ GAAP. They
comply with Financial Reporting Standards (FRSs) and Statements of Standard Accounting
Practices (SSAPs) as appropriate for entities that qualify for and apply differential reporting
concessions. Elite International is a profit-oriented entity.
Elite International qualifies for differential reporting exemptions as it has no public
accountability and is not large in terms of the criteria set out in the Differential Reporting
Framework. All available exemptions allowed under the Framework for Differential
Reporting have been adopted for years ended 31 December 2009, 31 December 2010 and
31 December 2011.
The financial statements of Elite Group for year ended 31 December 2012 and 6 month
period ended 30 June 2013 have been prepared in accordance with NZ GAAP and comply
with the NZ IFRS and other applicable Financial Reporting Standards, as appropriate for
profit-oriented entities.
For year ended 31 December 2012 and 6 month period ended 30 June 2013 all available
reporting exemptions allowed under the Framework for Differential Reporting have been
adopted, except for the exemptions relating to deferred tax and the exemption available in
NZ IAS 18 Revenue that permits qualifying entities to recognise revenue and expenses on
a GST inclusive basis.
Due to reporting concessions available for the above years, Elite International and Elite
Group did not prepare statements of cash flows.
95
The table below summarises the following for the historical financial statements:
-
Auditor name
Nature of auditors opinion
Date authorised for issue
Period
Auditor name
Nature of Auditors
opinion
31 December
2009
Gilligan
Sheppard
Unqualified opinion
10 March 2010
31 December
2010
Gilligan
Sheppard
Unqualified opinion
10 March 2011
31 December
2011
Not Applicable
Unaudited
(1)
28 March 2014
31 December
2012
BDO Auckland
Unqualified opinion
30 June 2013
Not applicable
Unaudited
20 March 2014
(2)
28 March 2014
1. The financial results from acquisition in April 2011 to 31 December 2011 were
consolidated into the consolidated Elite Holdings Limited financial statements on
which an unqualified audit opinion was expressed by BDO Auckland. No audit
opinion was expressed on the individual accounts.
2. The financial statements to 30 June 2013 were consolidated in the Intueri Group
financial statements to 30 June 2013 on which an unqualified audit opinion was
expressed by BDO Auckland. No audit opinion was expressed on the individual
financial statements.
Revenue
Operating profit before financing costs
Financing (costs)/income
Profit before tax
Income tax expense
Profit for the period attributable to the
owners
Other comprehensive income
Income tax on other comprehensive
income
2009
2013
29,443
3,337
(14)
3,323
(975)
24,249
2,916
(9)
2,906
(892)
27,030
3,158
(7)
3,476
(938)
27,585
3,190
(4)
3,187
(891)
28,018
3,060
3,060
(824)
2,348
-
2,015
-
2,538
-
2,296
-
2,236
-
96
2,348
2,015
2,538
2,296
2,236
Statement of Financial
Position
NZ$000
Total
Total
Total
Total
Total
current assets
non-current assets
current liabilities
non-current liabilities
equity
2009
As at 31 December
2010
2011
2012
4,501
5,526
6,601
32
3,394
3,803
6,680
5,074
5,409
2,754
7,597
2,404
7,947
2013
4,607
2,988
2,453
5,142
12,190
2,694
11,783
3,101
2013
Statement of Changes in
Equity
NZ$000
Opening equity
Comprehensive income for the
period
Dividend paid
Total equity
Represented by:
Share capital
Retained earnings
2009
4,935
3,394
5,409
7,947
5,511
2,348
(3,889)
3,394
2,015
5,409
2,538
7,947
2,296
(5,101)
5,142
2,236
(4,646)
3,101
2
3,392
2
5,407
2
7,945
2
5,140
2
3,099
3,394
5,409
7,947
5,142
3,101
The summary financial statements are those of Quantum Education Group Limited and its
subsidiaries (together Quantum Education Group). Quantum Education Group Limited
was formerly known as Auckland Business School (NSTC) Limited. The change of name
occurred on 3 August 2010.
Quantum Education Group comprises Quantum Education Group Limited and its
subsidiaries Quantum Education Group (QT) Limited (formerly Quantum Learnings (NZ)
Limited) and Quantum Education Group (ES) Limited (formerly EOS Computer Training
Limited).
The financial statements of Quantum Education Group for years ended 31 December 2009,
31 December 2010, 31 December 2011, 31 December 2012 and 31 December 2013 have
been prepared in accordance with New Zealand Generally Accepted Accounting Practice
(NZ GAAP) and comply with the New Zealand equivalent to International Financial
Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as
appropriate for profit-oriented entities. Quantum Education Group qualifies for differential
reporting as it is not publicly accountable and there is no separation between the owners
and the governing body. All available exemptions allowed under the framework for
97
Differential Reporting have been adopted except for the exemption available in NZ IAS 18
Revenue that permits qualifying entities to recognise revenue and expenses on a GST
inclusive basis.
Due to reporting concessions available for the above years, Quantum Education Group did
not prepare statements of cash flows.
The table below summarises the following for the historical financial statements:
-
Auditor name
Nature of accountants/auditors opinion
Date authorised for issue
Period
Auditor name
Nature of
Accountants/
Auditors opinion
31 December
2009
Hayes Knight
Emphasis of matter
(1), (2)
31 March 2010
31 December
2010
Hayes Knight
Emphasis of matter
(1), (3)
31 March 2011
31 December
2011
Hayes Knight
Emphasis of matter
(1), (4)
28 March 2012
31 December
2012
Hayes Knight
31 December
2013
BDO Auckland
(1),
28 March 2013
(5)
Unqualified opinion
28 March 2014
(1) The financial statements for the years ended 31 December 2009, 31 December
2010, 31 December 2011 and 31 December 2012 have been reviewed in
accordance with the Statement of Review Engagement Standards as issued by the
New Zealand Institute of Chartered Accountants.
(2) The Accountants have drawn attention to Note 11 in the financial statements which
indicates the uncertain conditions regarding the recoverability of the loan to Mogul
International that may cast doubt about the Groups ability to continue as a going
concern. Other than the above, nothing has come to the attention of the
Accountants that causes to believe that the financial statements do not give a true
and fair view.
(3) The Accountants have drawn attention to Note 11 in the financial statements which
indicates the uncertain conditions regarding the recoverability of the loan to Mogul
International. In addition Note 9 highlights that the shareholders do not intend to
require repayment of their current accounts until the company has sufficient cash
flows. If these circumstances were to change it may cast doubt about the Groups
ability to continue as a going concern. Other than the above, nothing has come to
the attention of the Accountants that causes to believe that the financial statements
do not give a true and fair view.
(4) The Accountants have drawn attention to Note 11 in the financial statements which
indicates the uncertain conditions regarding the recoverability of the loan to Mogul
International.
(5) Nothing has come to the attention of the Accountants that causes to believe that
the financial statements do not give a true and fair view.
98
NZ$000
2009
2013
Revenue
Operating profit before financing costs
Financing (costs)/income
16,255
11,576
127
9,835
6,805
58
6,954
4,213
113
9,254
6,061
85
9,582
6,034
95
11,703
(3,515)
6,863
(2,065)
4,326
(1,305)
6,146
(1,727)
6,129
(1,723)
8,188
4,798
3,021
4,419
4,406
8,188
4,798
3,021
4,419
4,406
2009
As at 31 March
2010
2011
2012
2013
6,075
1,696
4,446
3,325
94
3,419
5,616
647
2,479
3,784
(12)
3,772
3,945
542
947
3,540
3,540
2009
2013
2,130
3,272
3,877
4,000
619
1,717
2,902
(36)
2,866
4,483
584
2,015
3,052
(17)
3,035
Opening equity
3,784
2,902
99
8,188
(6,993)
94
3,419
4,798
(4,286)
(12)
3,772
3,021
(3,903)
(36)
2,866
4,419
(4,269)
(17)
3,035
4,406
(4,743)
3,540
Intueri has entered into a conditional sale and purchase agreement (SPA) to acquire the
business and certain assets/liabilities of Learntree Limited the Learntree Business.
The SPA defines the Learntree Business as the entire business of Learntree Limited and all
assets and liabilities except a minimal amount of fixed assets that are not required going
forward by Intueri (2013: $21,000) and any related party liabilities (2013: $3,000). The
above 2009-2012 financial summaries are based on the financial statements of Learntree
Limited and include an adjustment to reflect the excluded assets and liabilities and thus
illustrate the Learntree Business acquired.
The financial statements for 31 March 2013 are special purpose financial statements for
the Learntree Business. They were prepared in accordance with NZ GAAP. They comply
with Financial Reporting Standards (FRSs) and Statements of Standard Accounting
Practices (SSAPs) as appropriate for entities that qualify for and apply differential reporting
concessions.
The financial statements of Learntree Limited (formerly LearnKey NZ Limited) for years
ended 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012 were prepared
in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They
comply with Financial Reporting Standards (FRSs) and Statements of Standard Accounting
Practices (SSAPs) as appropriate for entities that qualify for and apply differential reporting
concessions.
With regard to the summary financial statements described above for the Learntree
Business, this Prospectus does not contain summary financial statements for the Learntree
Business for the accounting period ended 31 March 2014 (the 2014 Summary
Financials), as required under the Securities Regulations.
The Issuers are exempted from this requirement by the Securities Act (Intueri Education
Group Limited) Exemption Notice 2014 (the Exemption Notice).
The 2014 Summary Financials are not available because there has been insufficient time
between the end of the accounting period ended 31 March 2014, and the date of this
Prospectus (15 April 2014), to prepare the full year financial accounts needed to prepare
the 2014 Summary Financials.
In the absence of the 2014 Summary Financials, subscribers do not have the benefit of
summary financial statements for the Learntree Business for any period more recent than
the accounting period ended 31 March 2013. Subscribers are therefore not in a position to
assess the financial performance of the Learntree Business in the period since 31 March
2013 by reference to summary financial statements for the period after that date.
However, each of the Directors of the Company and the director of the Offeror confirm,
each in their opinion after due enquiry (including reviewing unaudited management
accounts), that none of:
the trading or profitability of the Learntree Business;
100
Auditor name
Nature of auditors opinion
Date authorised for issue
Period
Auditor name
31 March 2009
Not applicable
Unaudited
30 October 2009
31 March 2010
Not applicable
Unaudited
12 August 2010
31 March 2011
Not applicable
Unaudited
9 August 2011
31 March 2012
Not applicable
Unaudited
9 August 2012
31 March 2013
BDO Auckland
Unqualified opinion
28 March 2014
101
102
Content
Page No
Directors Declaration
104
Company Directory
105
106
108
110
111
112
113
103
Kien Kwan
..
Glen Dobbie
Director
Date: 28 March 2014
Director
Date: 28 March 2014
104
Directors
Company No:
4013538
Auditors
BDO Auckland
120 Albert Street, Auckland
Bankers
ANZ
Solicitors
Minter Ellison
Date of Formation
17 September 2012
Nature of Business
Shareholders
105
106
Opinion
In our opinion, the financial statements on pages 108 to 139:
comply with generally accepted accounting practice in New Zealand;
comply with International Financial Reporting Standards;
give a true and fair view of the financial position of Intueri Education Group Limited and the
Group as at 30 June 2013, and the financial performance of the Company and Group for the
period ended on that date.
Report on Other Legal and Regulatory Requirements
In accordance with the Financial Reporting Act 1993 we report that:
We have obtained all the information and explanations that we have required.
In our opinion, proper accounting records have been kept by Intueri Education Group Limited
as far as appears from our examination of those records.
BDO Auckland
28 March 2014
120 Albert Street
Auckland
New Zealand
107
Note
Revenue
Other income
Total revenue
Company
2013
9,606,486
4,652,388
14,258,874
928,193
928,193
(3,819,161)
(4,298,868)
(1,732,334)
(300,362)
(51,429)
(192,341)
(174,612)
(1,797,898)
(1,052,604)
(52,227)
(2,356)
(44,497)
(593,340)
839,265
235,773
45,666
(434,421)
(388,755)
34,093
(436,086)
(401,993)
450,510
40,975
491,485
(166,220)
(166,220)
491,485
(166,220)
Cost of sales
Employee expenses
Occupancy expenses
Marketing expenses
Insurance costs
IT and communication costs
Travel costs
Depreciation and amortisation expenses
Administrative expenses
5
6
Group
2013
7
7
7
7
8
8
10
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
108
Note
Profit / (loss) for the 9 month period attributable
to:
Owners of the Company
Profit / (loss) for the 9 month period
Total comprehensive income / (losses) for the
9 month period attributable to:
Owners of the Company
Total comprehensive income / (losses) for the
9 month period
Earnings per share attributable to the ordinary
equity holders of the parent
Basic (cents)
Diluted (cents)
13
13
Group
2013
Company
2013
491,485
491,485
(166,220)
(166,220)
491,485
(166,220)
491,485
(166,220)
4.67
4.67
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
109
Retained
earnings
Total
Equity
491,485
491,485
491,485
491,485
20,601,514
20,601,514
20,601,514
20,601,514
20,601,514
491,485
21,092,999
Share
Capital
Retained
earnings
Total
Equity
(166,220)
-
(166,220)
-
(166,220)
(166,220)
20,601,514
20,601,514
20,601,514
20,601,514
20,601,514
(166,220)
20,435,294
Group
Note
Parent
25
Note
25
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
110
Company
2013
14
15
16
4,495,411
12,077,619
3,067,673
19,640,703
2,092,721
6,285
4,100,964
6,199,970
17
18
19
20
6,934,604
40,346,704
149,868
47,431,176
67,071,879
40,516,791
40,516,791
46,716,761
21
22
23
24
18,636,186
641,557
2,362,500
336,704
21,976,947
5,251,013
(9,546)
2,362,500
7,603,967
23
20
18,677,500
5,324,433
24,001,933
45,978,880
18,677,500
18,677,500
26,281,467
25
20,601,514
491,485
21,092,999
67,071,879
20,601,514
(166,220)
20,435,294
46,716,761
Note
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant & equipment
Intangible assets
Investments
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current Liabilities
Trade and other payables
Income tax payable
Interest bearing loans
Employee benefits
Total current liabilities
Non-current liabilities
Interest bearing loans
Deferred tax liability
Total non-current liabilities
Total liabilities
Equity
Share capital
Retained earnings
Total equity
Total equity and liabilities
Approved for and on behalf of the board of directors.
________________________
Director
Date 28 March 2014
________________________
Director
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
111
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Payments to employees
Taxes paid
Interest received
Net cash inflow from operating activities
26
14
Group
2013
Company
2013
16,217,868
(10,349,696)
(3,503,362)
(531,736)
45,666
1,018,137
(389,040)
(52,227)
(59,507)
34,093
1,878,740
551,456
(83,276)
67,568
(38,574,714)
(38,590,422)
(39,736,928)
(39,736,928)
20,601,514
21,040,000
(434,421)
41,207,093
20,601,514
21,040,000
1,364,551
(1,291,786)
(436,086)
41,278,193
4,495,411
2,092,721
4,495,411
2,092,721
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
112
Basis of preparation
a.
Statement of compliance
The financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial
Reporting Standards and other applicable Financial Reporting Standards, as appropriate for profit oriented
entities.
b.
Basis of measurement
The financial statements are prepared on the historical cost basis. There are no material items in the
financial statements that are not measured on historical cost basis.
c.
Presentation currency
These financial statements are presented in New Zealand dollars ($) which is the Groups functional and
presentation currency, rounded to the nearest dollar.
d.
Use of estimates and judgements
The preparation of the financial statements in conformity with NZ IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reporting
amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates,
disclosed in the notes.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised and in any future periods affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are in relation to the fair value of intangible
assets identified as part of acquisitions made during the period. Details are given in note 4.
100092860/3201962.26
113
Basis of consolidation
i.
Business combination
Business combinations are accounted for using the acquisition method as at the acquisition date, which is
the date on which control is transferred to the Group. Control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group
takes into consideration potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts generally are recognised in profit or loss.
Transactions costs, other than those associated with the issue of debt or equity securities, that the Group
incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not re-measured and settlement is accounted for within
equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in
profit or loss.
ii.
Subsidiaries
Investments in subsidiaries held by the Parent are accounted for at cost less any impairment in the separate
financial statements of the Parent Entity.
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control commences until the date that control
ceases.
iii.
Loss of control
On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling interests and the other components of equity related to the subsidiary. Any surplus or deficit
arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value at the date that control is lost.
Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset
depending on the level of influence retained.
iv.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
114
b.
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional currency at the exchange rate at that
date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the
functional currency at the beginning of the year, adjusted for effective interest and payments during the
year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Non-monetary items in a foreign currency that are measured based on historical costs are translated using
the exchange rate at the date of the transaction.
c.
Revenue
Provision of services
Revenue from the provision of services is recognised when services have been rendered to the customers.
Sale of goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the
consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is
recognised when the significant risks and rewards of ownership have been transferred to the customer,
recovery of the consideration is probable, the associated costs and possible return of goods can be
estimated reliably, there is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably.
Government grants
Government grants are recognised initially as deferred income at fair value when there is reasonable
assurance that they will be received and the Group will comply with the conditions associated with the
grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of
the asset.
d.
Income tax
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss
except to the extent that it relates to a business combination, or items recognised directly in equity or in
other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect
of previous years. Current tax also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss,
temporary differences arising on the initial recognition of goodwill; and
temporary differences related to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future.
115
d.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax the Group takes into account the impact of
uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its
accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgements about future events. New information may become
available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities;
such changes to tax liabilities will impact tax expense in the period that such a determination is made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or
their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences,
to the extent that it is probable that future taxable profits will be available against which they can be
utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
e.
Office equipment
Leasehold improvements
Motor Vehicles
Computer Equipment
The depreciation methods, useful lives and residual values are reviewed at reporting date and adjusted if
appropriate.
116
f.
Intangible Assets
Goodwill
Goodwill represents amounts arising on acquisition of a business and is the difference between the cost of
acquisition and the fair value of the net identifiable assets acquired, see note 4.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to cash-generating
units and is not amortised but is reviewed at each balance date to determine whether there is any objective
evidence of impairment.
Research and development
Development activities involve a plan or design for the production of new or substantially improved
products and processes. Development expenditure is capitalised only if development costs can be
measured reliably, the product or process is technically and commercially feasible, future economic benefits
are probable, and the Group intends to and has sufficient resources to complete development and to use or
sell the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that
are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other
development expenditure is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite and indefinite useful lives are
measured at cost less accumulated amortisation and accumulated impairment losses. Other intangible
assets have been amortised over their estimated useful lives:
Agent relationships
3 4 years
Course materials
Non-compete
5 years
3 5 years
Brand names
Indefinite life
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure, including expenditure on internally generated
goodwill and brands, is recognised in profit or loss as incurred.
Amortisation
Except for goodwill and intangible assets that have indefinite lives or are not yet available for use,
intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives,
from the date that they are available for use.
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
117
g.
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the
lower of its fair value and the present value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the Groups statement of financial position.
h.
Financial Instruments
i)
Non-derivative financial assets
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial
assets (including assets designated at fair value through profit or loss) are recognised initially on the trade
date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred
financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to settle
on a net basis or to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair
value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale
financial assets.
Trade and other receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the
effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, trade and other receivables and loans to
subsidiaries and other related parties.
118
h.
ii)
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss)
are recognised initially on the trade date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or
expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the
effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Groups cash management
are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
iii)
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from equity, net of any tax effects.
i.
Impairment
i)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is
objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset, and that the loss event(s) had an impact on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of
borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of
an active market for a security. In addition, for an investment in an equity security, a significant or
prolonged decline in its fair value below its cost is objective evidence of impairment.
119
i.
Impairment (continued)
i)
Non-financial assets
The carrying amounts of the Groups non-financial assets, other than investment property and deferred tax
assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the assets recoverable amount is estimated. Goodwill and indefinite-lived
intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying
amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an
operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level
at which impairment testing is performed reflects the lowest level at which goodwill is monitored for
internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs
that are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and
then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
120
i.
Impairment (continued)
ii)
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed
only to the extent that the assets carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
j.
A number of the Groups accounting policies and disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair values have been determined for measurement
and / or disclosure purposes based on the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is the
estimates amount for which a property could be exchanged on the date of acquisition between a willing
buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had
each acted knowledgeably. The fair value of plant, equipment, fixtures and fittings is based on the market
approach and cost approaches using quoted market prices for similar items when available and depreciated
replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical
deterioration as well as functional and economic obsolescence.
k.
Employee benefits
Provision is made for the Companys liability for employee benefits arising from services rendered by
employees to balance date. Employee benefits that are expected to be settled within one year have been
measured at the amounts expected to be paid when the liability is settled, plus related on-costs are
measured at the amounts expected to be paid when the liabilities are settled.
l.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognised as a finance cost.
m.
These amounts represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. Trade and other payables are initially recognised at fair value plus directly
attributable transaction costs and subsequently measured at amortised cost using the effective interest
method.
121
n.
Expenses
All amounts are shown exclusive of Goods and Services Tax (GST), except for trade receivables and trade
payables that are stated inclusive of GST.
122
Business Combinations
As part of its growth strategy and in line with investment criteria the Company has acquired control of the
following private training establishments by acquiring 100% of the shares and voting rights on the following
dates:
Companies / Assets acquired
Elite Education Holdings Limited and its
controlled entities
D&A Education Holdings Limited and its
controlled entities
Global Education Group Limited
The Cut Above Academy Limited
NZSCDT Holdings Limited (Assets acquired from
CDT Partnership on 28 March 2013)
NZ School of Outdoor Studies Limited
Description
Acquisition date
8 February 2013
8 February 2013
12 February 2013
22 February 2013
28 March 2013
28 March 2013
The following summarises the major classes of consideration transferred, and the recognised amounts of
assets acquired and liabilities assumed for all the acquisition at their respective acquisition dates:
Total Consideration
Payable
Cash and cash equivalents
Elite
D&A
GEG
CA
NZSOS
NZSCDT
Holdings
Total
9,394,310
3,641,704
14,436,266
8,645,492
2,292,435
2,106,584
40,516,791
466,117
233,613
206,441
235,818
20,225
1,162,214
2,360,535
716,543
1,423,953
1,955,442
135,487
6,591,960
1,938,060
1,085,543
11,715,931
3,649,895
2,198,915
20,588,344
1,192,808
(227,254)
940,638
(275,166)
1,394,841
(582,363)
2,541,009
(134,705)
(6,905)
1,177,640
-
7,246,936
(1,226,393)
(2,888,187)
(1,782,975)
(1,611,457)
(2,377,416)
(680,372)
(9,340,407)
(542,657)
(303,952)
(3,252,460)
(1,021,971)
(615,696)
(5,736,736)
2,299,422
614,244
9,294,886
4,848,072
1,051,654
1,177,640
19,285,918
Goodwill on acquisition
7,094,888
3,027,460
5,141,380
3,797,420
1,240,781
928,944
21,230,873
Total intangibles
9,032,948
4,113,003
16,857,311
7,447,315
3,439,696
928,944
41,819,217
Other creditors
As of 30 June 2013, $779,863 of the consideration was still owing to the vendors (refer to Note 21).
123
All the assets and liabilities for the various companies acquired were measured under NZ IFRS at their
respective acquisition dates. Consolidation accounts are prepared under NZ IFRS and there is no impact on
the retained earnings on transition. Goodwill is tested for impairment at each reporting date. As the
Company was incorporated during the year and the acquisition done in the year; there are no comparatives
to be restated to NZ IFRS.
Goodwill represents that expected synergies from the merger of operations and intangible assets that do
not qualify for separate recognition e.g. assembled workforce.
A breakdown of various identifiable intangible assets and the key assumption used in estimated the fair
value of identifiable intangible assets are detailed at note 18.
The table below estimates the revenue and profit contribution of all of the acquisitions since their
respective acquisition dates and on the basis the all acquisitions occurred from the beginning of the
financial period.
Since
acquisition
Since beginning of
the financial period
14,297,977
28,121,203
2,076,006
4,102,902
Group
For 9 months
ended 30 June
2013
5.
Revenue
Tuition fees
6.
Company
For 9 months
ended 30 June
2013
Other income
TEC and Youth Guarantee Funding
Management fees
Insurance claim
Other income
9,606,486
9,606,486
3,055,853
798,013
798,522
4,652,388
925,164
3,029
928,193
124
7.
Group
For 9 months
ended 30 June
2013
Company
For 9 months
ended 30 June
2013
299,138
3,883,233
116,497
1,231
49,511
1,485
1,460,650
34,405
75,638
6,650
488,228
110,987
1,607
75,854
291
488,228
10,178
62,100
13,649
5,403
2,454
8,400
-
8.
325,385
1,472,513
45,666
(434,421)
(388,755)
34,093
(436,086)
(401,993)
125
Company
For 9 months
ended 30 June
2013
81,250
2,438
83,688
81,250
2,438
83,688
No long-term benefit plans were in place for key management personnel during period ended 30 June
2013.
10.
Income tax
a)
412,823
(453,798)
(40,975)
450,510
(166,220)
126,143
(165,500)
(1,618)
(40,975)
(46,542)
563
45,979
-
1,261,344
48,188
(39,321)
28,959
1,299,170
9,546
(8,831)
715
11.
Imputation Account
Opening balance
New Zealand tax payments, net of refunds
Resident withholding tax
Imputation debit due to breach of shareholder continuity
Other (debits)/credits
Closing balance
126
Segment information
In accordance with NZ IRFS 8 Operating Segments, the Company has determined that it satisfies the criteria
to allow the reporting of one operating segment. This is based on the information received by the Board of
Directors to make resource allocation decisions, and on the basis that each of Intueris business channels
has similar economic and regulatory characteristics and similar services are provided. Intueri sole operating
segment is education services in New Zealand.
Group
2013
13.
4.67
4.67
Numerator
Profit attributable to the ordinary equity holders of the Company
used in calculating basic and diluted earnings per share
491,485
Denominator
14.
10,528,445
10,528,445
15.
4,492,419
2,992
4,495,411
2,092,721
2,092,721
48,416
12,029,203
12,077,619
6,285
6,285
Funds held in Public Trust represent the unexpired portion of fees paid in advance by students that the
Group will receive over the duration of the course.
127
16.
Company
2013
134,003
63,183
2,800,000
70,487
3,067,673
6,135
1,291,786
2,800,000
3,043
4,100,964
(a)
Group
2013
Retention in trust relates to amounts held in trust by vendors solicitors towards the acquisition of The Global
Education Group Limited, The Cut Above Academy Limited and New Zealand School of Outdoor Studies Limited.
17.
Group
Leasehold
improvements
Plant &
equipment
Computer
equipment
Office
equipment
Furniture
&
fixtures
Motor
vehicles
Total
8,890,981
2,937,568
464,050
828,767
1,252,480
246,630
14,620,476
19,650
33,918
10,010
1,507
7,329
72,414
(58,755)
(58,755)
8,910,631
2,971,486
474,060
830,274
1,259,809
187,875
14,634,135
4,364,034
1,048,700
437,291
541,959
787,211
194,951
7,374,146
245,526
79,461
5,260
18,199
31,808
3,886
384,140
(58,755)
(58,755)
4,609,560
1,128,161
442,551
560,158
819,019
140,082
7,699,531
4,301,071
1,843,325
31,509
270,116
440,790
47,793
6,934,604
Cost
Opening balance
Acquired through
business combination
Additions
Disposals
Balance as at 30
June 2013
Accumulated depreciation
Opening balance
Acquired through
business combination
Depreciation during
the period
Depreciation reversal
during the period
Balance as at 30
June 2013
Net book value as
at 30 June 2013
The Company does not own any property, plant and equipment.
Security
As at 30 June 2013, fixed assets are subject to a first mortgage to secure the ANZ term debt.
128
Intangible assets
Group
Cost
Opening balance
Acquired through
business combinations
Balance as at 30 June
2013
Goodwill
Agents
relationships
Course
materials
Brand
names
Noncompete
Total
21,230,873
5,208,103
7,217,197
4,651,880
3,511,164
41,819,217
21,230,873
5,208,103
7,217,197
4,651,880
3,511,164
41,819,217
21,230,873
4,631,322
516,559
379,173
1,472,513
516,559
379,173
1,472,513
6,700,638
4,651,880
3,131,991
40,346,704
The goodwill has been stated at gross carrying value. Goodwill represents the consideration paid for
acquisition of various entities (as listed in note 4) in excess of their respective net assets and identified
intangible assets. Goodwill represents the expected synergies from the merger of operations and intangible
assets that do not qualify for separate recognition e.g. assembled workforce. There was no impairment of
goodwill from date of acquisition to 30 June 2013.
Brand names have been estimated to have an infinite life due to the following:
The colleges acquired have been in existence for a period ranging from 12 years to 21 years and have
historically displayed a strong brand name and presence in the market; and
Intueri intends to continue using individual brand names for the purpose of marketing
The fair value of agent relationships and non-compete agreements were calculated using the excess
earnings method. Whereas the relief from royalty method was utilised in calculating the fair value of
course materials and brand names.
The following were the key assumptions in estimating the fair value of intangible assets:
Discount rate in the range of 9% to 10%
Contributory asset charges (after tax) in the range of 0.5% to 2.0%
Royalty stream in the range of 5% to 7%
Non-compete period based on the relevant agreements
EBITDA growth rate in the range of 3% to 5% in the next 5 years
Terminal EBITDA growth rate of 3%
There are no intangible assets at a Company level.
129
19.
Group
2013
Company
2013
9,394,310
3,641,704
14,436,266
8,645,492
2,292,435
2,106,584
40,516,791
Investments
Investment in Elite Education (8 Feb 2013)
Investment in Design and Arts College (8 Feb 2013)
Investment in Global Education Group (12 Feb 2013)
Investment in The Cut Above Academy (22 Feb 2013)
Investment in NZSOS (28 Feb 2013)
Investment in NZSCDT Holdings (18 Oct 2012)
The Group acquired 100% of the shares in the above subsidiaries on the dates noted alongside each.
20.
Deferred tax
Opening balance
Balance brought forward from acquisitions
(5,736,736)
453,798
(5,174,565)
56,801
49,807
43,260
149,868
(5,324,433)
1,085,780
1,790,631
11,940,782
2,800,000
239,130
779,863
18,636,186
209,867
96,732
2,800,000
779,863
1,364,551
5,251,013
108,373
(a) Income received in advance relates to amounts in Public Trust account (refer note 15). These amounts
will be recognised as revenue over the duration of the courses.
(b) Retention payable relates to amounts held in trust by vendors solicitors towards the acquisition of The
Global Education Group Limited, The Cut Above Academy Limited and New Zealand School of Outdoor
Studies Limited (refer note 16). Retention amount (subject to any claims) is payable to the vendors at
the end of the retention period.
(c) Relates to a probable TEC clawback liability for Elite International for the year ended 31 December
2012.
130
22.
Company
2013
641,557
(9,546)
2,362,500
18,677,500
21,040,000
2,362,500
18,677,500
21,040,000
23.
Group
2013
Interest-bearing loan
Current
Non-current
Interest-bearing loan relates to the term debt with ANZ. The loan is secured by a fixed and floating charge
over the assets of Intueri Education Group Limited and its subsidiaries. The term debt has a floating interest
rate of 5.85% as at 30 June 2013. The term debt is repayable from 1 October 2013 on a monthly repayment
of $262,500. The debt expires on 30 May 2016.
24.
Employee benefits
Holiday pay
25.
336,704
20,601,514
20,601,514
Share capital
Ordinary shares
At 30 June 2013, share capital comprised 20,601,514 authorised and issued ordinary shares. All issued
shares are fully paid and have no par value.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company, and rank equally with regard to the Companys
residual assets on winding up.
131
26.
Group
2013
Company
2013
491,485
(166,220)
325,385
1,472,513
434,421
(562,171)
436,086
-
(48,416)
(12,029,203)
(134,003)
(2,933,670)
(3,974,232)
(6,285)
(6,135)
(2,803,043)
-
1,257,575
11,940,782
641,557
336,704
4,660,013
313,360
2,783,693
-
1,878,740
551,456
132
Financial instruments
Carrying amount
Group
Company
14
4,495,411
2,092,721
15
12,077,619
6,285
16,573,030
2,099,006
Total
133
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Groups approach to
management liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Groups reputation.
The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected
cash outflows on financial liabilities (other than trade payables) over the succeeding 60 days. The Group
also monitors the level of expected cash inflows on trade and other receivables together with expected
cash outflows on trade and other payables.
The following are the remaining contractual maturities as at 30 June 2013:
2 months or
less
2 12
months
1 3 years
More than 3
years
Total
(1,085,779)
Group
Trade debtors
Trade creditors
Term loan
(784,252)
(301,527)
(2,362,500)
(6,300,000)
(12,377,500)
(21,040,000)
(784,252)
(2,664,027)
(6,300,000)
(12,377,500)
(22,125,779)
(198,763)
(11,104)
(209,867)
(2,362,500)
(6,300,000)
(12,377,500)
(21,040,000)
(198,763)
(2,373,604)
(6,300,000)
(12,377,500)
(21,249,867)
Company
Trade debtors
Trade creditors
Term loan
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the Groups income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising returns.
Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a
currency other than the presentation currency of the Company. The Group has no investments or
134
Company
2,425,317
1,556,509
Financial liabilities
(21,040,000)
(21,040,000)
(18,614,683)
(19,483,491)
Company
(62,049)
(64,945)
62,049
64,945
Interest rate
Capital management
The Boards policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The Group manages its capital to ensure that
entities in the Group will be able to continue as going concerns will maximising the return to shareholders.
The Board of Directors monitors the return on capital as well as the level of dividends to ordinary
shareholders. The Company is not subject to any externally imposed capital requirements.
The Groups policies in respect of capital management are reviewed regularly by the Board of Directors.
135
16,544,589
Equity
20,601,514
80.3%
Group
Assets
Cash
Trade and other receivables
Other current assets
Total assets
Liabilities
Trade and other payables
Income tax payable
Provisions
Interest bearing loans
Deferred tax liability
Total liabilities
Company
Assets
Cash
Trade and other receivables
Other current assets
Total assets
Liabilities
Trade and other payables
Interest bearing loans
Total liabilities
Loans and
receivables
Liabilities at
amortised cost
Total carrying
amount
4,495,411
48,416
2,933,670
7,477,497
4,495,411
48,416
2,933,670
7,477,497
6,695,403
641,557
336,704
21,040,000
5,324,433
34,038,097
6,695,403
641,557
336,704
21,040,000
5,324,533
34,038,097
2,092,721
6,285
4,094,829
6,193,835
2,092,721
6,285
4,094,829
6,193,835
5,241,467
21,040,000
26,281,467
5,241,467
21,040,000
26,281,467
136
28.
Group
2013
Company
2013
4,030,065
12,255,295
4,083,574
20,368,934
Commitments
Operating leases
Non-cancellable operating leases are payable as follows:
Less than one year
Between one and five years
More than five years
During the period ended 30 June 2013, an amount of $1,468,094 was recognised as an expense in profit or
loss in respect of operating leases.
There are no other commitments.
29.
Contingent liabilities
30.
Subsequent events
a.
The Company incorporated a new subsidiary named Commercial Diver Training Limited on 1 July 2013.
b.
The Company incorporated a new subsidiary named Intueri Materials Limited on 13 February 2014.
c.
On 17 February 2014, Intueri signed a conditional agreement to purchase all the shares of Quantum
Education Group Limited and the business and assets of LearnTree Limited. The acquisition conditions
have different dates by which they must be satisfied for the acquisition to proceed, with the latest
being 30 June 2014. The price of the acquisition will be finalised via an earnings based formula and is
estimated to be in the range of $56m to $62m.
d.
On 3 March 2014, Intueri signed a conditional agreement to purchase a 50% controlling interest in
Online Courses Australia Pty Limited (OCA). The acquisition of OCA is expected to be completed by
31 March 2014 subject to fulfilment of number of conditions. The price of acquisition will be finalised
via an earnings based formula and will include an earnout component. The total acquisition price is
expected to be between A$2.25m and $4.0m. The upfront consideration will be A$2.25m while the
earnout component may be up to an additional A$1.75m.
137
Related parties
Parent and ultimate controlling entity
The immediate parent of Intueri Education Group Limited is Intueri Education Group Pty Limited, an
Australian privately owned entity. The ultimate controlling party is Arowana International Limited,
an Australian domiciled entity listed on the Australian Securities Exchange.
b.
c.
d.
On 12 February 2013 the Company acquired all the shares of Global Education Group Limited.
e.
On 22 February 2013 the Company acquired all the shares of The Cut Above Academy Limited.
f.
On 28 March 2013 the Company acquired all the shares of NZ School of Outdoor Studies Limited.
g.
Entity name
Intueri Education Group Pty Limited
Country of
incorporation
Australia
Australia
NZ
NZ
NZ
NZ
NZ
Relationship
Immediate
parent
Ultimate
Holding
Company
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
Activities
Funds received and advanced
Management fees
138
Total amounts receivable and payable to related parties are stated in notes 16 and 21 respectively. The
amounts outstanding are unsecured, and repayable on demand. No interest is payable or receivable on
amounts owing between the Company and its subsidiaries. No guarantees have been given or received.
Amounts owing between the NZ Group and its Australian parent and fellow company are commercial
transactions administered through Accounts Receivable and Payable sub-ledgers.
Transactions with related parties
Management fees of $488,228 were paid to Arowana International Limited (AWN). AWN invoiced
$24,106 towards expenses incurred by AWN on behalf of the Company. $184,690 was payable to AWN as at
30 June 2013.
The Company invoiced $3,226 to AWN towards expenses incurred by the Company on behalf of AWN.
$3,226 was receivable from AWN as at 30 June 2013.
Transactions with fellow subsidiaries
During the period, the Company raised invoices of $924,967 to fellow subsidiaries to recover operating
costs incurred by the Company. $3,059 was receivable by the Company from fellow subsidiaries as at 30
June 2013.
139
140
Content
Page No
Directors Declaration
142
Company Directory
143
144
146
147
149
150
151
141
In the opinion of the Directors of Intueri Education Group Limited (the Company), the financial statements
and notes, on pages 146 to 159:
comply with New Zealand generally accepted accounting practice and give a true and fair view of the
Consolidated Financial Position of the Company as at 31 December 2013 and the results of operations for
the six months ended on that date;
have been prepared using the appropriate accounting policies, which have been consistently applied and
supported by reasonable judgements and estimates.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy,
the determination of the Consolidated Financial Position of the Company and facilitate compliance of the
financial statements with IAS 34 Interim Financial Reporting.
The Directors consider that they have taken adequate steps to safeguard the assets of the Company and its
controlled entities, and to prevent and detect fraud and other irregularities. Internal control procedures are
also considered to be sufficient to provide reasonable assurance as to the integrity and reliability of the
financial statements.
The Board of Directors are pleased to present the condensed interim financial statements of Intueri Education
Group Limited and its controlled entities for six months ended 31 December 2013 and the independent
auditors report thereon.
Kien Kwan
..
Glen Dobbie
Director
Director
142
Registered Office
Directors
Company No:
4013538
Auditors
BDO Auckland
120 Albert Street, Auckland
Bankers
ANZ
Solicitors
Minter Ellison
Date of Formation
17 September 2012
Nature of Business
Shareholders
143
Biography
144
Opinion
In our opinion, the financial statements on pages 146 to 159:
comply with generally accepted accounting practice in New Zealand as it relates to interim
financial statements;
comply with IAS 34 Interim Financial Reporting; and
give a true and fair view of the matters to which they relate.
Biography
BDO Auckland
28 March 2014
120 Albert Street
Auckland
New Zealand
145
Note
Revenue
Other income
Total revenue
Cost of sales
Employee expenses
Occupancy expenses
Marketing expenses
Insurance costs
IT and communication costs
Travel costs
Depreciation and amortisation expenses
Administrative expenses
Operating profit before net finance costs
Finance income
Finance expense
Net finance cost
Profit / (loss) before income tax
Income tax benefit
Profit / (loss) for the period attributable
to the owners of the Company
Other comprehensive income
Other comprehensive income for the period, net of
tax
Total comprehensive income for the period
attributable to the owners of the Company
Earnings per share attributable to the
ordinary equity holders of the parent
Basic (cents)
Diluted (cents)
6
6
Group
For six months
ended 31 Dec
2013
Company
For six months
ended 31 Dec
2013
Company
For period
ended 31
Dec 2012
11,659,896
5,428,217
17,088,113
1,662,581
1,662,581
(3,186,560)
(5,656,220)
(2,354,272)
(419,564)
(78,918)
(222,808)
(337,954)
(2,398,901)
(1,721,384)
(367,089)
(109,145)
(7,114)
(197,602)
(662)
(1,287,219)
(169)
711,532
(306,250)
(169)
30,957
(642,342)
(611,385)
18,667
(632,667)
(614,000)
10,198
(3)
10,195
100,147
94,129
(920,250)
13,234
10,026
-
194,276
(907,016)
10,026
194,276
(907,016)
10,026
0.94
0.94
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
146
Retained
earnings
Total
Equity
20,601,514
491,485
21,092,999
194,276
194,276
194,276
194,276
20,601,514
685,761
21,287,275
Share
Capital
Retained
earnings
Total
Equity
20,601,514
(166,220)
20,435,294
(907,016)
-
(907,016)
-
(907,016)
(907,016)
20,601,514
(1,073,236)
19,528,278
Group
Note
Parent
Balance as at 1 July 2013
Comprehensive income for the period
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income/(loss) for the
period
Transactions with owners, recorded directly in
equity
Issue of shares
Total transactions with owners, recorded
directly in equity
Balance as at 31 December 2013
Note
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
147
Retained
earnings
Total
Equity
10,026
10,026
10,026
10,026
Parent
Note
20,601,514
20,601,514
20,601,514
20,601,514
20,601,514
10,026
20,611,540
148
Group
30 June 2013
Company
31 Dec 2013
Company
30 June 2013
2,515,980
11,741,407
3,284,643
17,542,030
4,495,411
12,077,619
3,067,673
19,640,703
875,290
1,703,717
4,431,283
7,010,290
2,092,721
6,285
4,100,964
6,199,970
9
10
11
7,963,667
38,308,985
22,196
46,294,848
63,836,878
6,934,604
40,346,704
149,868
47,431,176
67,071,879
13,333
40,516,792
13,234
40,543,359
47,553,649
40,516,791
40,516,791
46,716,761
12
17,092,130
(62,783)
18,636,186
641,557
7,685,303
(14,771)
5,251,013
(9,546)
13
3,150,000
513,884
20,693,231
2,362,500
336,704
21,976,947
3,150,000
102,339
10,922,871
2,362,500
7,603,967
13
14
17,102,500
4,753,872
21,856,372
42,549,603
18,677,500
5,324,433
24,001,933
45,978,880
17,102,500
17,102,500
28,025,371
18,677,500
18,677,500
26,281,467
15
20,601,514
685,761
21,287,275
63,836,878
20,601,514
491,485
21,092,999
67,071,879
20,601,514
(1,073,236)
19,528,278
47,553,649
20,601,514
(166,220)
20,435,294
46,716,761
Note
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant & equipment
Intangible assets
Investments
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current Liabilities
Trade and other payables
Income tax payable
Interest bearing loans
Employee benefits
Total current liabilities
Non-current liabilities
Interest bearing loans
Deferred tax liability
Total non-current liabilities
Total liabilities
Equity
Share capital
Retained earnings
Total equity
Total equity and liabilities
7
8
_______________
Director
Date: 28 March 2014
________________________
Director
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
149
Company
For six months
ended 31 Dec
2013
Company
For period
ended 31 Dec
2012
19,309,366
(10,249,987)
(5,943,630)
(1,053,100)
(1,252,614)
30,957
214,536
(2,128,906)
(264,750)
(5,226)
235,984
18,667
(169)
7,343
840,992
(1,929,695)
7,174
(1,494,733)
104,152
(1,390,581)
(13,995)
(13,995)
(787,500)
(642,342)
(787,500)
(293,876)
2,440,302
(632,667)
4,002,367
(3)
(1,429,842)
726,259
4,002,364
(1,979,431)
(1,217,431)
4,009,538
4,495,411
2,092,721
2,515,980
875,290
4,009,538
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Payments to employees
Income tax paid
Net GST paid
Interest received
Net cash inflow / (outflow) from operating
activities
Cash flows from investing activities
Purchase of property, plant & equipment
Sale of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Issue of shares
Repayment of borrowings
Loans to related parties
Loans from related parties
Interest paid
Net cash inflow / (outflow) from financing
activities
Cash increase / (decrease) in cash and cash
equivalents
The above statements should be read in conjunction with the notes to and forming part of the financial
statements
150
Group
For six months
ended 31 Dec
2013
4.
5.
Other income
TEC and Youth Guarantee Funding
Management fees
Other income
4,741,168
687,049
5,428,217
Company
For six months
ended 31 Dec
2013
Company
For period
ended 31 Dec
2012
1,591,787
70,794
1,662,581
Segment information
In accordance with NZ IRFS 8 Operating Segments, the Company has determined that it satisfies the
criteria to allow the reporting of one operating segment. This is based on the information received by
the Board of Directors to make resource allocation decisions, and on the basis that each of Intueris
151
7.
0.94
0.94
194,276
20,601,514
20,601,514
Group
31 Dec
2013
Group
30 June
2013
Company
31 Dec
2013
Company
30 June
2013
51,969
11,689,438
11,741,407
48,416
12,029,203
12,077,619
1,703,717
1,703,717
6,285
6,285
Funds held in Public Trust represent the unexpired portion of fees paid in advance by students that the
Group will receive over the duration of the course.
8.
277,323
2,800,000
207,320
3,284,643
134,003
63,183
2,800,000
70,487
3,067,673
32,543
1,585,662
2,800,000
13,078
4,431,283
6,135
1,291,786
2,800,000
3,043
4,100,964
(b) Retention in trust relates to amounts held in trust by vendors solicitors towards the acquisition of The Global
Education Group Limited, The Cut Above Academy Limited and New Zealand School of Outdoor Studies Limited.
9.
Security
152
Leasehold
improvements
Plant &
equipment
Computer
equipment
Office
equipment
Furniture
& fixtures
Motor
vehicle
Total
8,831,103
3,416,454
464,050
349,561
1,316,421
246,630
14,624,219
Reclassification
59,878
(478,886)
479,206
(63,941)
(3,743)
Additions
19,650
33,918
10,010
1,507
7,329
72,414
Cost
Opening balance
Acquired through business
combination
Disposals
(58,755)
(58,755)
As at 30 June 2013
8,910,631
2,971,486
474,060
830,274
1,259,809
187,875
14,634,135
As at 1 July 2013
8,910,631
117,389
2,971,486
1,023,171
474,060
220,898
830,274
13,521
1,259,809
38,356
187,875
4,778
14,634,135
1,418,113
(104,152)
(104,152)
9,028,020
3,994,657
694,958
843,795
1,298,165
88,501
15,948,096
4,324,036
1,292,451
437,291
296,289
832,265
194,951
7,377,283
39,998
(243,751)
245,670
(45,054)
(3,137)
245,526
79,461
5,260
18,199
31,808
3,886
384,140
(58,755)
(58,755)
As at 30 June 2013
4,609,560
1,128,161
442,551
560,158
819,019
140,082
7,699,531
As at 1 July 2013
Depreciation during
the period
Depreciation reversal
during the period
4,609,560
1,128,161
442,551
560,158
819,019
140,082
7,699,531
199,793
87,708
26,840
17,053
32,153
2,135
365,682
(80,785)
(80,785)
As at 31 Dec 2013
4,809,353
1,215,869
469,391
577,211
851,172
61,432
7,984,428
As at 30 June 2013
4,301,071
1,843,325
31,509
270,116
440,790
47,793
6,934,604
As at 31 Dec 2013
4,218,667
2,778,788
225,567
266,584
446,993
27,069
7,963,667
Additions
Disposals
As at 31 Dec 2013
Accumulated depreciation
Opening balance
Acquired through business
combination
Reclassification
Depreciation during the
period
Depreciation reversal
during the period
As at 31 December 2013, fixed assets are subject to a first mortgage to secure the ANZ term debt.
153
Company
Leasehold
improvements
Plant &
equipment
Computer
equipment
Office
equipment
Furniture
&
fixtures
Motor
vehicle
As at 1 July 2013
Additions
Disposals
As at 31 Dec 2013
As at 1 July 2013
Depreciation for
the period
Total
13,995
13,995
13,995
13,995
662
662
As at 31 Dec 2013
662
662
13,333
13,333
Cost
Accumulated depreciation
154
Intangible assets
Group
Goodwill
Agents
relationships
Course
materials
Brand
names
Noncompete
Total
21,230,873
5,208,103
7,217,197
4,651,880
3,511,164
41,819,217
21,230,873
5,208,103
7,217,197
4,651,880
3,511,164
41,819,217
21,230,873
21,230,873
5,208,103
5,208,103
7,217,197
7,217,197
4,651,880
4,651,880
3,511,164
3,511,164
41,819,217
41,819,217
576,781
576,781
516,559
516,559
379,173
379,173
1,472,513
1,472,513
576,781
780,468
1,357,249
516,559
717,569
1,234,128
379,173
539,682
918,855
1,472,513
2,037,719
3,510,232
21,230,873
21,230,873
4,631,322
3,850,854
6,700,638
5,983,069
4,651,880
4,651,880
3,131,991
2,592,309
40,346,704
38,308,985
Cost
Opening balance
Acquired through business
combinations
As at 30 June 2013
As at 1 July 2013
Additions
As at 31 Dec 2013
As at 1 July 2013
Amortisation for the period
Impairment
As at 31 Dec 2013
Net book value
As at 30 June 2013
As at 31 Dec 2013
The goodwill has been stated at gross carrying value. Goodwill represents the consideration paid for
acquisition of various entities in excess of their respective net assets and identified intangible assets. There
was no impairment of goodwill during 6 months ended 31 December 2013.
Brand names have been estimated to have an infinite life due to the following:
- The colleges acquired have been in existence for a period ranging from 12 years to 21 years and have
historically displayed a strong brand name and presence in the market; and
- Intueri intends to continue using individual brand names for the purpose of marketing
The fair value of agent relationships and non-compete agreements were calculated using the excess
earnings method. Whereas the relief from royalty method was utilised in calculating the fair value of course
materials and brand names.
The following were the key assumptions in estimating the fair value of intangible assets:
Discount rate in the range of 9% to 10%
Contributory asset charges (after tax) in the range of 0.5% to 2.0%
Royalty stream in the range of 5% to 7%
Non-compete period based on the relevant agreements
EBITDA growth rate in the range of 3% to 5% in the next 5 years
Terminal EBITDA growth rate of 3%
There are no intangible assets at a Company level for the current and prior period.
155
11.
Group
30 June
2013
Company
31 Dec
2013
Company
30 June
2013
9,394,310
9,394,310
3,641,704
3,641,704
14,436,266
14,436,266
8,645,492
8,645,492
2,292,435
2,292,435
2,106,584
2,106,584
40,516,792
40,516,791
1,473,362
1,317,032
11,262,606
2,800,000
239,130
17,092,130
1,085,780
1,790,631
11,940,782
2,800,000
239,130
779,863
18,636,186
767,872
312,578
2,800,000
3,804,853
7,685,303
209,867
96,732
2,800,000
779,863
1,364,551
5,251,013
Investments
Investment in Elite Education (acquisition
date: 8 Feb 2013)
Investment in Design and Arts College
(acquisition date: 8 Feb 2013)
Investment in Global Education Group
(acquisition date: 12 Feb 2013)
Investment in The Cut Above Academy
(acquisition date: 22 Feb 2013)
Investment in NZSOS (acquisition date: 28
March 2013)
Investment in NZSCDT Holdings
(incorporation date: 18 Oct 2012)
Investment in Commercial Diver Training
Limited (incorporation date: 1 July 2013)
12.
Group
31 Dec
2013
(a) Income received in advance relates to amounts in Public Trust account (refer note 7). These amounts will be
recognised as revenue over the duration of the courses.
(b) Retention payable relates to amounts held in trust by vendors solicitors towards the acquisition of The Global
Education Group Limited, The Cut Above Academy Limited and New Zealand School of Outdoor Studies Limited
(refer note 8). Retention amount (subject to any claims) is payable to the vendors at the end of the retention
period.
(c) Relates to a probable TEC clawback liability for Elite International for the year ended 31 December 2012.
156
13.
Group
31 Dec
2013
Group
30 June
2013
Company
31 Dec
2013
Company
30 June
2013
3,150,000
17,102,500
20,252,500
2,362,500
18,677,500
21,040,000
3,150,000
17,102,500
20,252,500
2,362,500
18,677,500
21,040,000
Interest-bearing loan
Current
Non-current
Interest-bearing loan relates to the term debt with ANZ. The loan is secured by a fixed and floating charge
over the assets of Intueri Education Group Limited and its subsidiaries. The term debt has a floating interest
rate of 5.85% as at 31 December 2013. The term debt is repaid on a monthly repayment of $262,500.
14.
5,324,433
(570,561)
4,753,872
5,324,433
5,324,433
Deferred tax liabilities are attributable to identified intangible assets. The reversal of deferred tax liability of
$570,561 relates to tax reversal on amortisation of identified intangible assets of $2,037,719.
15.
Share capital
Ordinary shares
20,601,514
20,601,514
20,601,514
20,601,514
At 31 December 2013, share capital comprised 20,601,514 authorised and issued ordinary shares. All
issued shares are fully paid and have no par value.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company, and rank equally with regard to the Companys
residual assets on winding up.
16.
Contingent liabilities
157
Related parties
a.
b.
c.
Entity name
Country of
incorporation
Australia
Australia
Relationship
Activities
Funds received and advanced
NZ
NZ
NZ
NZ
NZ
Immediate
parent
Ultimate Holding
Company
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
NZ
Subsidiary
Management fees
Funds received and advanced
Funds received and advanced
Funds received and advanced
Funds received and advanced
Funds received and advanced;
management fees
Funds received and advanced;
management fees
Funds received and advanced;
management fees
Funds received and advanced;
management fees
Funds received and advanced;
management fees
Total amounts receivable and payable to related parties are stated in notes 8 and 12 respectively. The
amounts outstanding are unsecured, and repayable on demand. No interest is payable or receivable on
amounts owing between the company and its subsidiaries. No guarantees have been given or received.
Amounts owing between the NZ Group and its Australian parent and fellow company are commercial
transactions administered through Accounts Receivable and Payable sub-ledgers.
Transactions with related parties
Management fees of $957,221 were paid to Arowana International Limited (AWN). AWN invoiced
$143,077 towards expenses incurred by AWN on behalf of the Company. $717,194 was payable to AWN as
at 31 December 2013 (30 June 2013 - $184,690).
The Company invoiced $29,991 to AWN towards expenses incurred by the Company on behalf of AWN.
$33,217 was receivable from AWN as at 31 December 2013 (30 June 2013 - $3,226).
Transactions with fellow subsidiaries
During the period, the Company raised invoices of $1,591,787 to fellow subsidiaries to recover operating
costs incurred by the Company. $1,670,500 was receivable by the Company from fellow subsidiaries as at
31 December 2013 (30 June 2013 - $3,059).
158
b.
On 17 February 2014, Intueri signed a conditional agreement to purchase all the shares of Quantum
Education Group Limited and the business and assets of LearnTree Limited. The acquisition
conditions have different dates by which they must be satisfied for the acquisition to proceed, with
the latest being 30 June 2014. The price of the acquisition will be finalised via an earnings based
formula and is estimated to be in the range of $56m to $62m.
c.
On 3 March 2014, Intueri signed a conditional agreement to purchase a 50% controlling interest in
Online Courses Australia Pty Limited (OCA). The acquisition of OCA is expected to be completed by
31 March 2014 subject to fulfilment of number of conditions. The price of acquisition will be finalised
via an earnings based formula and will include an earn-out component. The total acquisition price is
expected to be between A$2.25m and $4.0m. The upfront consideration will be A$2.25m while the
earn-out component may be up to an additional A$1.75m.
159
160
BUSINESS PROFILE
QUANTUM EDUCATION GROUP LIMITED
PAID UP CAPITAL:
REGISTERED OFFICE AND
BUSINESS ADDRESS:
2,000 shares
PRINCIPAL BUSINESS:
SHAREHOLDERS:
R Gordon
A J McLeod
L J W Day
J Clemons
C F Price
DIRECTORS:
R Gordon (Chairman)
A J McLeod
L J W Day
BANKERS:
SOLICITORS:
INDEPENDENT AUDITORS:
BDO Auckland
ACCOUNTANTS:
520 shares
520 shares
520 shares
340 shares
100 shares
161
DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2013
The Directors present their annual report including Financial Statements of the group for
the year ended 31 December 2013.
FINANCIAL RESULTS
GROUP
PARENT
2013
2012
2013
2012
$2,235,935
$2,512,679
$2,626,088
$2,840,321
The Directors consider the 12 months operations and the state of the companys affairs to
be satisfactory.
NATURE OF BUSINESS: The business of the company is training (computers, travel & tourism,
counselling, flight and culinary).
DIVIDENDS DECLARED: Net dividends of $4,645,793 were declared and paid to shareholder
current accounts for the year ended 31 December 2013. (2012: $3,400,848).
The shareholders have passed a resolution pursuant to section 211(3) of the Companies Act
1993 that the annual report of the company for the year ended 31 December 2013 need
not comply with any of paragraphs (a) and (e) to (j) of section 211(1) and 211(2) of the
Companies Act 1993.
AJ McLeod, R Gordon and LJW Day were the only Directors who held office during the year.
28,018,177
2012
NZ$
(Restated)
27,886,473
25,877,434
2012
NZ$
(Restated)
25,312,729
Cost of Sales
9,558,699
9,765,752
8,892,106
8,991,437
GROSS MARGIN
18,459,478
18,120,721
16,985,328
16,321,292
2,622,242
15,102
1,681,244
1,597,685
8,951,145
532,424
-
2,460,175
10,926
1,661,266
1,595,774
8,317,866
582,960
3,958
-
2,217,000
11,052
1,595,379
1,109,689
7,399,036
531,874
1,056,418
1,963,840
8,476
1,554,238
1,141,583
6,771,918
580,675
3,958
879,124
15,399,842
14,632,925
13,920,448
12,903,812
3,059,636
3,487,796
3,064,880
3,417,480
823,701
975,117
438,792
577,159
2,235,935
2,512,679
2,626,088
2,840,321
2,235,935
2,512,679
2,626,088
2,840,321
REVENUE
Admin Costs
Academic Costs
Marketing Costs
Occupancy Costs
Personnel Costs
Other Expenses
Finance Costs
Subvention Expense
TOTAL EXPENSES
COMPREHENSIVE INCOME
BEFORE TAXATION
2013
NZ$
PARENT
2013
NZ$
OTHER COMPREHENSIVE
INCOME
OTHER COMPREHENSIVE
INCOME NET OF TAX
TOTAL COMPREHENSIVE
INCOME ATTRIBUTABLE TO
EQUITY HOLDERS
163
NOTE
GROUP
2013
NZ$
PARENT
5,510,716
2012
NZ$
(Restated)
7,946,929
151,956
5,510,716
8,098,885
4,195,273
6,455,800
2,235,935
2,512,679
2,626,088
2,840,321
(4,645,793)
(5,100,848)
(4,645,791)
(5,100,848)
3,100,858
5,510,716
2,175,570
4,195,273
23
RESTATED EQUITY
DISTRIBUTIONS TO OWNERS
EQUITY AT THE END OF THE PERIOD
17(a)
2013
NZ$
4,195,273
2012
NZ$
(Restated)
6,314,939
140,861
164
TOTAL ASSETS
CURRENT LIABILITIES
Trade Creditors
Other Creditors
Provisions
Current Accounts
Income Tax Payable
6
7
8
12
3,657,517
8,216,444
263,761
52,623
12,190,345
2012
NZ$
(Restated)
4,317,933
10,546,823
481,763
15,346,519
2,491,234
2,276,756
1,857,201
1,751,701
10
15
202,992
-
229,831
-
202,992
100,881
229,831
100,881
2,694,226
2,506,587
2,161,074
2,082,413
14,884,571
17,853,106
12,929,614
15,059,438
834,519
7,771,576
626,245
2,452,462
98,911
11,783,713
1,446,856
9,953,862
619,459
24,540
297,673
12,342,390
812,512
7,550,525
626,245
1,764,762
10,754,044
1,428,408
8,666,652
619,549
149,556
10,864,165
11,783,713
12,342,390
10,754,044
10,864,165
3,100,858
5,510,716
2,175,570
4,195,273
2,000
3,098,858
3,100,858
2,000
5,508,716
5,510,716
2,000
2,173,570
2,175,570
2,000
4,193,273
4,195,273
13
14
12
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS FUNDS
Share Capital
Retained Earnings
TOTAL EQUITY
17
17(a)
2013
NZ$
PARENT
2013
NZ$
3,216,726
7,175,765
263,761
59,665
52,623
10,768,540
2012
NZ$
(Restated)
1,143,011
10,689,091
481,763
663,160
12,977,025
165
166
Consolidation
The Group financial statements are prepared by combining the financial
statements of all the entities that comprise the Group, being Quantum
Education Group Limited (the parent entity) and its subsidiaries Quantum
Education Group QT Limited and Quantum Education Group ES Limited.
Subsidiaries are entities over which the Group has the power to govern the
financial and operating policies so as to obtain benefits from their activities.
Consistent accounting policies are employed in the preparation and
presentation of the Group financial statements.
In preparing the Group financial statements, all intergroup transactions,
balances, income and expenses are eliminated in full. Investments in
subsidiaries are measured at cost less any impairment in the parent
company's financial statements.
(b)
(c)
Consistency of presentation
Except as detailed in note 23 below, these financial statements demonstrate
consistent presentation and classification for each annual reporting period.
Revenue Recognition
i. Operating Revenue
Revenue is recognised from student fees as the course progresses once the
student fee has been receipted by Public Trust.
Unearned income - Students who are not studying an NZQA course (mainly
Aviation students) can prepay fees directly to the group. These fees are not
required to be held within the student fee protection scheme. These fees
are shown as a Current Liability until the student begins their training.
Income is then apportioned to the amount of training the student has
completed and is recognised on this basis.
167
Rate(s)
11.4% - 48%
48%
14.4% - 60%
11.4% - 26%
9% - 48%
11.4% - 39.6%
9% - 39.6%
4%
Method
DV
DV
DV
DV
DV
DV
DV
DV
Borrowing costs
Borrowing costs are recognised as an expense using the effective interest
method.
(f)
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is
determined on a first-in, first-out basis and includes an appropriate portion
of fixed and variable overhead expenses. Net realisable value represents
the estimated selling price less all estimated costs of completion and costs
to be incurred in marketing, selling and distribution.
168
Financial Assets
Loans and receivables
All the companys financial instruments are initially recorded at cost and
subsequently carried at amortised cost using the effective interest method.
An estimate is made for doubtful debts based on a review of all outstanding
amounts at year-end. Bad debts are written off during the period in which
they are identified.
Cash and Cash Equivalents
Cash and cash equivalents are measured at their fair values.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are
assessed for indicators of impairment at each reporting date. Financial
assets are impaired where there is objective evidence that, as a result of one
or more events that occurred after the initial recognition of the financial
asset, the estimated future cash flows of the investment have been
impacted.
For financial assets carried at amortised cost, the amount of the impairment
is the difference between the asset's carrying amount and the present value
of the estimated future cash flows, discounted at the original effective
interest rate.
Impairment losses (and subsequent gains) for assets carried at amortised
cost excluding trade receivables are recognised through the profit and loss,
not exceeding the initial recognition value.
(h)
Income Tax
The taxes payable method has been adopted in accordance with differential
reporting. Income tax assessed for the current period is the amount
recognised as the income tax payable for the same period.
(i)
Leases
The company leases certain plant, office equipment, motor vehicles land &
buildings.
Operating lease payments, where the lessors effectively retain substantially
all the risks and benefits of ownership of the leased items, are included in
the determination of the operating results in equal instalments over the
lease term.
(j)
Intangibles
Intangibles are recorded at cost less accumulated amortisation and
impairment losses.
(k)
Investments
Investments are stated at cost less accumulated impairment losses.
169
(m)
Financial Instruments
Financial Instruments are recognised in the balance sheet when the
company becomes party to a financial contract. They include cash and
cash equivalents, creditors and intercompany balances.
All the companys financial instruments are initially recorded at cost and
subsequently carried at amortised cost using the effective interest method.
Due allowance is made for impaired receivables (doubtful debts).
(n)
Accounts Payable
Payables represent liabilities for goods and services received prior to the end
of the financial year which are unpaid. Accounts Payable are recorded at the
amount of cash required to settle those liabilities. The amounts are
unsecured and are usually paid within 30 days of recognition.
(o)
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, the future sacrifice of economic
benefits is probable and the amount of the provision can be measured
reliably. The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at reporting date,
taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash
flows.
170
REVENUE
GROUP
2013
NZ$
24,542,064
2,837,096
696
416,820
221,501
28,018,177
Operating Revenue
Government Funding
Dividend Income
Interest Income
Other Operating Revenue
TOTAL REVENUE
3.
PARENT
2012
NZ$
24,494,988
2,699,992
2,219
386,401
302,873
27,886,473
2013
NZ$
22,156,925
1,725,452
1,580,146
377,194
37,717
25,877,434
2012
NZ$
22,105,543
1,643,227
1,226,912
296,239
40,808
25,312,729
GROUP
2013
NZ$
PARENT
2012
NZ$
2013
NZ$
2012
NZ$
581,543
26,839
1,159,210
501,625
17,199
1,156,691
476,650
26,839
867,569
450,680
17,199
885,371
7,458,721
108,649
33,248
6,827,010
67,744
32,000
6,234,015
108,649
33,248
5,594,103
67,744
32,000
171
TAXATION
GROUP
PARENT
2013
NZ$
3,059,637
5,759
(47,281)
2012
NZ$
3,487,796
1,299
(4,220)
2013
NZ$
3,064,880
619,022
(47,281)
2012
NZ$
3,417,480
524,973
(4,220)
3,018,115
3,484,875
3,636,621
3,938,233
845,072
(541)
975,765
(647)
1,018,254
(579,462)
1,102,705
(525,547)
(20,830)
823,701
975,117
438,792
577,159
IMPUTATION ACCOUNT
GROUP
Opening Balance
Plus
Income Tax Paid
RWT on Interest & dividends received
DWT on dividends
Imputation credits on dividends
received
Other
Less
Income Tax refunded
Imputation credits converted to
losses/other
Imputation credits on dividends paid
Prior period adjustment
Closing Balance at 31 December
PARENT
2013
NZ$
1,737,569
2012
NZ$
3,448,268
2013
NZ$
1,164,899
2012
NZ$
2,265,685
1,002,703
129,369
97
541
791,202
116,077
94
647
530,875
117,192
48
614,616
557,500
87,615
47
525,547
98
108,984
271
259,599
1,003
85,417
-
2,420,928
-
2,186,078
172,137
1,806,697
2,186,078
-
340,096
1,737,569
620,933
1,164,899
172
Bank Deposits
Call Accounts
TOTAL CASH & CASH EQUIVALENTS
2013
NZ$
458,156
3,199,361
3,657,517
PARENT
2012
NZ$
1,664,040
2,653,893
4,317,933
2013
NZ$
20,671
3,196,055
3,216,726
2012
NZ$
537,084
605,927
1,143,011
At the request of the Company, ANZ Bank New Zealand Limited has provided a
Letter of Credit in favour of ASB Bank Limited for the sum of $300,000. This letter is
to cover monthly payroll processing by Datacom. (2012: Letter of credit was
provided in the same instance for the same value).
7.
Trade Receivables
Other Receivables
Intercompany Receivables
Prepayments
GROUP
2013
2012
NZ$
NZ$
4,677
82,139
8,129,480
10,350,425
82,287
111,259
PARENT
2013
2012
NZ$
NZ$
4,548
72,952
7,115,532
9,181,886
1,330,954
55,685
103,299
8,216,444
7,175,765 10,689,091
8.
10,546,823
FUNDING LOANS
GROUP
2013
NZ$
2,620
233,317
PARENT
2012
2013
NZ$
175
459,057
NZ$
2,620
233,317
2012
NZ$
175
459,057
27,824
22,531
27,824
22,531
263,761
481,763
263,761
481,763
173
GROUP
COST
ACCD DEPN BOOK VALUE
Land and Buildings
547,404
128,779
418,625
Classroom Equipment
449,436
437,849
11,587
Computers
2,022,026 1,643,409
378,617
Leasehold Improvements 1,283,042
714,577
568,465
Workshop Equipment
79,089
12,158
66,931
Office Equipment
327,245
243,311
83,934
Furniture & Fittings
510,311
344,333
165,978
Motor vehicles
1,623,111
826,014
797,097
6,841,664 4,350,429 2,491,234
PARENT
COST
Land and Buildings
330,575
Classroom Equipment
337,987
Computers
1,707,084
Leasehold Improvements
730,162
Workshop Equipment
7,931
Office Equipment
192,443
Furniture & Fittings
335,164
Motor vehicles
1,606,853
5,248,198
10.
2013
NZ$
ACCD DEPN BOOK VALUE
86,120
244,455
330,866
7,122
1,342,921
364,163
430,167
299,995
7,870
61
159,800
32,643
210,544
124,620
822,710
784,143
3,390,998 1,857,201
COST
473,807
449,436
1,738,206
1,268,732
7,931
300,592
472,477
1,586,911
6,298,091
2012
NZ$
ACCD DEPN BOOK VALUE
128,779
345,028
434,358
15,078
1,461,988
276,218
658,340
610,392
7,859
72
215,236
85,356
319,776
152,701
795,000
791,911
4,021,336
2,276,756
COST
330,574
337,987
1,430,038
698,989
7,931
184,973
305,306
1,570,653
4,866,451
2012
NZ$
ACCD DEPN BOOK VALUE
86,120
244,454
329,065
8,922
1,164,928
265,110
399,249
299,740
7,859
72
141,354
43,619
192,999
112,307
793,176
777,477
3,114,750
1,751,701
INTANGIBLES
2013
NZ$
COST
180,814
96,393
277,207
ACCD
AMORT
26,019
48,196
74,215
2012
NZ$
WDV
COST
154,795
48,197
202,992
180,814
96,393
277,207
ACCD
AMORT
8,819
38,557
47,376
WDV
171,995
57,836
229,831
The company has paid the Australian Institute of Professional Counsellors a fee to deliver
courses exclusively in New Zealand. This fee is being amortised over a period of 10 years
being the exclusivity period.
174
The company has developed a student web portal (Moodle) for accessing online learning
and progress. These costs are being amortised over a period of 10 years being the
expected life of the software.
175
Buildings
Classroom Equipment
Computers
Leasehold Improvements
Workshop Equipment
Office Equipment
Furniture & Fittings
Motor Vehicles
Aircraft Aviation Expense
TOTAL DEPRECIATION CHARGE
Moodle Intangible
AIPC
TOTAL AMORTISATION
12.
2013
NZ$
2012
NZ$
3,491
203,501
56,237
4,300
29,020
26,651
258,333
581,532
5,308
130,606
58,843
12
24,227
27,623
255,006
17,200
9,639
26,839
2013
NZ$
2012
NZ$
2,649
122,284
34,734
12
16,495
20,275
254,231
501,625
1,800
196,113
30,918
10
19,392
19,637
256,853
48,074
476,650
7,560
9,639
17,199
17,200
9,639
26,839
7,560
9,639
17,199
PARENT
2013
NZ$
(308,950)
4,199
(1,408,962)
(619,403)
(119,346)
687,700
(1,764,762)
2012
NZ$
59,106
5,994
(84,472)
(4,333)
(835)
687,700
663,160
450,680
CURRENT ACCOUNTS
John Clemons
Laurence Day
LCTL Ltd
Grange B Trust
Cheryl Price
QEG QT
TOTAL CURRENT ACCOUNTS
(LIABILITY)/ASSET
13.
PARENT
GROUP
2013
2012
NZ$
NZ$
(308,950)
59,106
4,199
5,994
(1,408,962)
(84,472)
(619,403)
(4,333)
(119,346)
(835)
(2,452,462)
(24,540)
Accrued Expenses
GST
Interco Payable
Group
2013
NZ$
21,084
253,731
-
2012
NZ$
119,476
162,837
-
Parent
2013
NZ$
14,183
175,204
840,603
2012
NZ$
29,529
91,242
-
176
Income in Advance
Total Other Payables
7,496,761
7,771,576
9,671,549
9,953,862
6,520,535
7,550,525
8,545,881
8,666,652
CURRENT PROVISIONS
Employee Benefits
15.
GROUP
2013
2012
NZ$
NZ$
626,245
619,459
PARENT
2013
2012
NZ$
NZ$
626,245
619,459
INVESTMENTS
The following subsidiaries are consolidated and have a 31 December 2013 balance
date and are 100% owned directly or indirectly.
ENTITY
Quantum Education Group ES Limited
Quantum Education Group QT Limited
NATURE
Training Service
Training Service
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
Non-trader
177
BALANCE AT
PAYABLE/
(RECEIVABLE)
YEAR END
$186,155
LCTL Ltd
Common shareholder/Directors
Management Fees
$358,800
th
TERMS
Payable on the 20 of the month following the date of invoice
$29,900
LCTL Ltd
Common Shareholder
Current Account
TERMS
Non-interest bearing and payable on demand
$1,408,962
Cheryl Price
Common Shareholder
Current Account
TERMS
Non-interest bearing and payable on demand
$119,346
John Clemons
Common Shareholder
Current Account
TERMS
Non-interest bearing and payable on demand
$308,950
Laurence Day
Common Shareholder
Current Account
TERMS
Non-interest bearing and payable on demand
$4,199
Grange B Trust
Common Shareholder
Current Account
TERMS
Non-interest bearing and payable on demand
$619,403
Geronimo Ltd
Common shareholder/Directors
Management Fees
$179,400
th
TERMS
Payable on the 20 of the month following the date of invoice
$14,950
TTT Ltd
Common shareholder/Directors
Management Fees
$102,000
TERMS
Payable on the 20th of the month following the date of invoice
$25,500
Quantum Corporate
Training Ltd
Common shareholder/Directors
ENTITY
RELATIONSHIP
Learntree Ltd
Common shareholder/Directors
TERMS
TERMS
Mogul International
Limited
($12,420)
($27,824)
Funding
($2,620)
Interest free and not repayable until the company reaches a profitable
position.
Common shareholder/Directors
TERMS
Management Fee
Common shareholder/Directors
TERMS
Australia Blue
Investments Ltd
NATURE OF TRANSACTION
Funding
($251,678)
($233,317)
178
SHARE CAPITAL
2,000 ordinary shares have been issued and paid up. All shares have equal voting
rights and share equally in dividends and any surplus on winding up.
Opening Balance
Prior Year Adjustment
Opening Balance
(Restated)
Dividends paid
Current year earnings
18.
PARENT
2013
NZ$
5,508,716
5,508,716
2012
NZ$
7,644,929
451,956
8,096,885
2013
NZ$
4,193,273
4,193,273
2012
NZ$
6,312,939
140,861
6,453,800
(4,645,793)
2,235,935
3,098,858
(5,100,848)
2,512,679
5,508,716
(4,645,791)
2,626,088
2,173,570
(5,100,848)
2,840,321
4,193,273
LEASE COMMITMENTS
GROUP
2013
NZ$
PARENT
2012
NZ$
2013
NZ$
2012
NZ$
435,268
423,952
668,514
735,903
258,313
202,759
476,464
309,693
859,220
1,404,417
461,072
786,157
19.
20.
REGISTERED SECURITIES
Leasing Solutions Limited and Konica Minolta Business Solutions are the secured
party over a number of printers/copiers and all accessories.
179
CAPITAL COMMITMENTS
The company had no capital commitments at reporting date. (2012: NIL).
22.
23.
a)
31 December
2012 Previously
Reported
NZ$
Adjustment
NZ$
31 December
2012
Restated
NZ$
9,671,549
9,671,549
9,671,549
9,671,549
8,545,881
8,545,881
8,545,881
8,545,881
PARENT
Statement of Financial Position
Unearned income
Income in advance
180
ii.
Restated the 2012 revenue and income tax expenses to reflect the
adjustment of under-recognition of revenue. The impact of this adjustment
was an increase in net profit after tax of $217,063 (Group) and $204,139
(Parent) in the Statement of Comprehensive Income and Changes in Equity.
iii.
31 December
2012 Previously
Reported
NZ$
Adjustment
NZ$
31 December
2012
Restated
NZ$
27,584,997
890,704
301,476
84,413
27,886,473
975,117
7,946,929
151,956
8,098,885
88,958
154,166
7,944,929
589,405
76,879
143,507
369,019
589,405
165,837
297,673
5,508,716
181
31 December
2012 Previously
Reported
NZ$
Adjustment
NZ$
31 December
2012
Restated
NZ$
25,029,202
497,711
283,527
79,388
25,312,729
577,159
6,314,939
140,861
6,455,800
19,366
15,479
3,848,273
551,042
71,875
134,167
345,000
551,042
91,241
149,646
4,193,273
24.
a)
FINANCIAL INSTRUMENTS
Capital Risk Management
The Group manages its capital to ensure that the entities in the Group will be able to
continue as a going concern while maximising the return to shareholders through
the optimisation of the debt and equity balance.
The Directors review the capital structure on a semi-annual basis. As part of this
review the Directors consider the cost of capital and the risks associated with each
class of capital. The Directors will balance the overall capital structure through the
payment of dividends, new share issues, and share buy backs as well as the issue of
new debt or the redemption of existing debt.
There are no externally imposed capital requirements on the Company or Group.
182
GROUP
As at 31 December 2013
Assets
Cash and cash equivalents
Trade and other receivables
Cash and
cash
equivalents
Financial
liabilities at
amortised cost
Loans and
receivables
3,657,517
3,657,517
TOTAL
3,657,517
82,373
82,373
82,373
3,739,890
Liabilities
Trade and other payables
834,519
834,519
Current account
2,452,462
2,452,462
3,286,981
3,286,981
As at 31 December 2012
Assets
Cash and cash equivalents
Trade and other receivables
4,317,933
4,317,933
4,317,933
177,610
177,610
177,610
4,495,543
Liabilities
Trade and other payables
1,446,856
1,446,856
Current account
24,540
24,540
1,471,396
1,471,396
183
PARENT
As at 31 December 2013
Assets
Cash and cash equivalents
Trade and other receivables
Cash and
cash
equivalents
3,216,726
3,216,726
Financial
liabilities at
amortised cost
Loans and
receivables
TOTAL
3,216,726
71,210
71,210
71,210
3,287,936
Liabilities
Trade and other payables
812,512
812,512
Current account
1,764,762
1,764,762
2,577,274
2,577,274
As at 31 December 2012
Assets
Cash and cash equivalents
1,143,011
157,915
157,915
Current Accounts
663,160
663,160
821,075
1,964,086
1,143,011
1,143,011
Liabilities
Trade and other payables
1,428,408
1,428,408
1,428,408
1,428,408
184
BDO Auckland
185
BDO Auckland
Opinion
In our opinion, the financial statements on pages 163 to 184:
comply with generally accepted accounting practice in New Zealand;
give a true and fair view of the financial position of Quantum Education Group Limited and
the Group as at 31 December 2013 and the financial performance of the Company and
Group for the year ended on that date.
Report on Other Legal and Regulatory Requirements
In accordance with the Financial Reporting Act 1993 we report that:
We have obtained all the information and explanations that we have required.
In our opinion, proper accounting records have been kept by the Group as far as appears
from our examination of those records.
BDO Auckland
28 March 2014
Auckland
New Zealand
186
Learntree
CONTENTS PAGE
SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
Page Number
Business Particulars
Special Purpose Statement of Financial Performance
188
189 - 191
192
193
194
204
100092860/3201962.26
187
Learntree
BUSINESS PARTICULARS
FOR THE YEAR ENDED 31 MARCH 2013
REGISTERED OFFICE:
31 Tongariro Street
Paraparaumu
NATURE OF BUSINESS:
SHAREHOLDERS:
Shares Held
Alan McLeod
Latavinia McLeod
Robert Gordon
Richard Gordon
Laurence Day
Katrina Day
Stoneleigh Investment Trust
R & R Gordon Family Trust
Grange B Family Trust
DIRECTORS:
Alan McLeod
Robert Gordon
Laurence Day
BANKERS:
National Bank
Coastlands
Paraparaumu
SOLICITORS:
Lloyd Collins
44 Queens Drive
Lower Hutt
ACCOUNTANTS:
Munro Benge
104 The Terrace
Wellington
1
1
1
200
1
1
398
199
398
188
Learntree
SPECIAL PURPOSE STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 MARCH 2013
NOTE
2013
$
2012
$
9,581,544
9,253,948
48,545
2,029,785
45,008
2,149,539
Closing inventories
2,078,330
(85,223)
2,194,547
(48,545)
1,993,107
2,146,002
Gross Profit
7,588,437
7,107,946
Income
Sales
189
Learntree
SPECIAL PURPOSE STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 MARCH 2013
NOTE
2013
$
Less Expenses
Accident compensation levy
Advertising
Bad debts
Bank charges
Computer maintenance
Consultancy
Depreciation
Entertainment - deductible
Entertainment non-deductible
Fringe benefit tax
General expenses
Insurance
Insurance replacement
IRD Penalties
Leasing costs
Legal fees deductible
Light and power
Loss/(profit) on disposal of assets
Motor vehicle expenses
Office & staff relocation
Office operating costs
Postage
Printing and stationery
Promotion and sponsorship
Rent
Rates
Repairs and maintenance
Salaries / Directors Fees
Staff expenses
Subscriptions
Telephone and tolls
Trade Shows & Conferences
Travel expenses
2012
$
2,215
5,806
0
1,470
10,702
4,367
19,329
6,924
7,952
6,684
6,298
12,125
15,807
0
12,200
0
7,323
0
23,363
0
3,224
727
9,312
7,603
0
5,238
5,018
1,323,774
14,385
2,488
13,422
9,280
17,760
2,738
12,604
0
1,493
12,583
0
37,619
8,106
9,289
6,843
8,684
10,469
12,776
0
18,109
0
8,632
(618)
23,333
0
3,270
2,124
6,610
6,397
0
4,926
3,829
771,595
11,602
2,364
16,552
8,546
36,720
1,554,796
1,047,195
6,033,641
6,060,751
0
94,704
0
86,632
6,128,345
6,147,383
190
Learntree
SPECIAL PURPOSE STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 MARCH 2013
NOTE
Taxation expense
Net surplus
2013
$
2012
$
24
892
24
892
6,128,321
6,146,491
1,722,583
1,727,195
4,405,738
4,419,296
191
Learntree
SPECIAL PURPOSE STATEMENT OF MOVEMENTS IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2013
NOTE
2013
$
2012
$
Net surplus
4,405,738
4,419,296
4,405,738
4,419,296
(4,743,486)
(4,263,433)
(337,748)
155,863
Opening equity
3,877,355
3,721,492
$ 3,539,607
$3,877,355
Distributions to owners
Closing equity
192
Learntree
SPECIAL PURPOSE STATEMENT OF FINANCIAL POSTION
AS AT 31 MARCH 2013
NOTE
2013
$
2012
$
2,078,865
1,780,759
85,223
2,333,450
1,874,877
48,545
3,944,847
4,256,872
542,009
555,186
542,009
555,186
4,486,856
4,812,058
468,536
478,713
582,586
352,117
947,249
934,703
TOTAL LIABILITIES
947,249
934,703
NET ASSETS
3,539,607
3,877,355
TOTAL EQUITY
3,539,607
3,877,355
CURRENT ASSETS
Cash and bank accounts
Receivables
Inventories
4
5
6
NON-CURRENT ASSETS
Property, plant and equipment
8
3
___________________________
Alan McLeod
Director
Robert Gordon
Director
193
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
194
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
48.0% - 60.0% DV
48.0% DV
10.7% - 24.0% DV
18.0% - 36.0% DV
15.6% - 67.0% DV
4.0% DV
195
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
Taxation
Income tax expense charged against the net surplus for the year is the estimated
total tax for the year, in accordance with the taxation return filed with the Inland
Revenue Department.
Employee Benefits
The provision for employee entitlements relates to employee benefits such as
accrued wages, bonuses, accrued holiday pay and long service leave.
Dividends
Dividends are recognised in the financial year in which they are authorised and
approved by the Board of Directors.
Operating Leases
Operating lease rentals are recognised evenly over the expected period of benefit
to the company.
Changes in Accounting Policies
There have been no changes in accounting policies during the year.
196
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
2013
$
2012
$
9,581,544
94,704
9,253,948
86,632
9,676,248
9,340,580
6,128,321
6,146,491
1,715,930
1,721,017
6,653
6,178
Taxation expense
1,722,583
1,727,195
1,722,583
1,727,195
1,190,555
0
1,581,418
14,569
(1,835,400)
1,065,975
0
1,910,000
13,496
(1,798,916)
951,142
1,190,555
TOTAL INCOME
Sales
Interest Received
TAXATION
Taxation expense
Net surplus before taxation
Closing balance
197
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
47,498
1,578,878
707,074
2,078,865
2,333,450
1,780,759
1,874,877
1,780,759
1,874,877
85,223
48,545
INVENTORIES
Stock on hand
7
64,347
1,286,110
728,408
RECEIVABLES
Trade receivables
2012
$
2013
$
Cost
$
Accum
Depn
$
2013
Book Value
$
Computer equipment
47,919
5,661
40,839
7,080
Computer software
13,742
2,277
11,271
2,471
84,203
5,910
48,504
35,699
33,875
5,082
22,804
11,071
566,985
398
81,296
485,689
746,724
19,329
204,715
542,009
Motor vehicle
Office equipment
31 Tongariro St
198
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
2012
Depn
$
Cost
$
Accum
Depn
$
2012
Book Value
$
Computer equipment
44,795
8,197
35,177
9,618
Computer software
10,711
1,790
8,994
1,717
84,203
6,981
42,594
41,609
33,876
7,832
17,722
16,155
566,985
12,820
80,898
486,087
740,570
37,619
185,384
555,186
Motor vehicle
Office equipment
31 Tongariro St
2012
$
337,384
20,587
32,158
0
78,407
406,475
91,800
13,705
0
70,606
468,536
582,586
2013
$
CAPITAL COMMITMENTS
199
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
2013
$
10
2012
$
CONTINGENT LIABILITIES
OPERATING COMMITMENTS
12
2013
$38,399
$38,399
$29,481
$Nil
2012
$38,399
$38,399
$67,879
$Nil
RELATED PARTIES
Related Party
Nature of
Relationship
Common Shareholder
John McLeod
Stoneleigh Investment Trust
Prime Learning PTY Ltd
TTT Inc
Shareholder
Shareholder
Common Director
Common Shareholder
Cherylprice.co.nz Ltd
Common Shareholder
Learnkey Inc
Common Shareholder
Transaction
Sales and product
and same provider
Sales
Sales
Sales
Product & Service
Provider
Product & Service
Provider
Product & Service
Provider
200
Learntree
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2013
2013
$
2012
$
______________________________________________________________________
13
SUBSEQUENT EVENTS
The shareholders of Learntree Limited have entered into a conditional agreement to sell
the business and assets of the company. If the contract becomes unconditional the
settlement will be May / June 2014.
The following dividends have been paid to shareholders:
26 July 2013
25 November 2013
24 March 2013
$600,000
$600,000
$650,000
Other than the foregoing there are no other significant events subsequent to the balance
date and up to the time of preparation of these financial statements that materially affect
the position as it existed at that date.
201
Learntree
BDO Auckland
202
Learntree
BDO Auckland
Opinion
In our opinion, the special purpose financial statements on pages 189 to 201:
comply with generally accepted accounting practice in New Zealand;
fairly present the financial position of the Business as at 31 March 2013, and its
financial performance for the year ended on that date.
Basis of accounting and restriction on distribution and use
Without modifying our opinion, we draw attention to the fact that the Special Purpose
Financial Statements are prepared for the purpose of reporting on the Learntree
Business of Learntree Limited as defined by the SPA. As a result, the Special Purpose
Financial Statements may not be suitable for another purpose. Our report is intended
solely for the shareholders of Learntree Limited and Intueri Materials Limited.
BDO Auckland
28 March 2014
Auckland
New Zealand
203
Level 8
BDO Tower
120 Albert Street
PO Box 2219
Auckland 1140
New Zealand
15 April 2014
The Directors
Intueri Education Group Limited and Intueri Education Group Holdings Limited
100 Symonds Street
Grafton
AUCKLAND
Dear Directors
This report is issued in respect of the public offer of ordinary shares in Intueri Education
Group Limited (the Company), in terms of the offer document dated 15 April 2014.
This report is made solely to the directors of the company (the directors), in accordance
with clause 28 of Schedule 1 to the Securities Regulations 2009 (Schedule 1). Our work has
been undertaken so that we might state to the directors those matters we are required to
state to them in a report from the auditor and for no other purpose. To the fullest extent
permitted by law and subject to Section 61 of the Securities Act 1978, we do not accept or
assume responsibility to anyone other than the directors for this report, or for the opinions
we have formed.
Directors Responsibilities
The directors are responsible for the preparation and presentation of:
(a) financial statements as required by clause 23 of Schedule 1. The financial statements
provide information about the past financial performance and cash flows of the Company
and its subsidiaries (the Group) for the period ended 30 June 2013 and the Groups
financial position as at that date;
(b) interim financial statements as per clause 24 of Schedule 1 for the period ended
31 December 2013;
(c) the summary of financial statements as required by clauses 9, 12(2) and 12(3) of
Schedule 1; and
(d) the statutory prospective financial information of the Group for the years ending 31
December 2014 and 31 December 2015, including the assumptions on which the statutory
prospective financial information is based, as required by clause 11 of Schedule 1. The
statutory prospective financial information comprises the prospective consolidated
statement of financial position of the Group as at 31 December 2014 and 31 December
2015 and the prospective consolidated statement of comprehensive income, prospective
consolidated statement of changes in equity and prospective consolidated statement of
cash flow for the years then ending.
Auditors Responsibilities
We are responsible for:
(a) expressing an independent opinion on the financial statements of the Company and
Group as at 30 June 2013 and for the period ended on that date, prepared and presented
by the directors, and reporting our opinion in accordance with clause 28(1) of Schedule
1;
BDO New Zealand Ltd, a New Zealand limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms
part of the international BDO network of independent member firms. BDO New Zealand is a national association of independent member firms which operate
as separate legal entities. For more info visit www.bdo.co.nz.
204
BDO Auckland
(b) expressing an independent audit opinion on the interim financial statements of the
Company and Group as at 31 December 2013 and for the period ended on that date,
prepared and presented by the directors;
(c) reporting, in accordance with clause 28(1)(h) of Schedule 1, on the amounts included in
the summary of financial statements; and
(d) reporting, in accordance with clause 28(2) of Schedule 1, on the statutory prospective
financial information for the years ending 31 December 2014 and 31 December 2015.
This report has been prepared for inclusion in the Offer Document for the purpose of meeting
the requirements of clause 28 of Schedule 1. We disclaim any assumption of responsibility for
reliance on this report or the amounts included in the financial statements, the interim
financial statements, the summary of financial statements and the prospective financial
information for any purpose other than that for which they were prepared. In addition, we
take no responsibility for, nor do we report on, any part of the Offer Document not
mentioned in this report.
Independence
In addition to the audits, we have carried out assurance and taxation services for the Group
and have acted as the investigating accountant in respect of this public offer. Other than
these matters and the audit, we have no relationship with or interests in the Company and
Group.
Basis of Opinion
Our audit of financial statements for the period ended 30 June 2013 and the interim financial
statements for the period ended 31 December 2013 included examining, on a test basis,
evidence relevant to the amounts and disclosures in the financial statements. It also included
assessing:
(a) the significant estimates and judgements made by the directors in the preparation of the
financial statements and the interim financial statements; and
(b) whether the accounting policies are appropriate to the circumstances of the Group,
consistently applied and adequately disclosed.
We have conducted our audit in accordance with generally accepted auditing standards in
New Zealand. We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with sufficient evidence to
give reasonable assurance that the financial statements and interim financial statements are
free from material misstatements, whether caused by fraud or error. In forming our opinion
we also evaluated the overall adequacy of the presentation of the information in the financial
statements and the interim financial statements.
We have also undertaken procedures to provide reasonable assurance that the amounts in the
summary of financial statements, pursuant to clause 9 of Schedule 1, have been correctly
taken from financial statements.
In addition, we have examined the prospective financial information to confirm that, so far as
the accounting policies and calculations are concerned, they have been properly compiled on
the footing of the assumptions made or adopted by the directors of the Group. The
assumptions relate to future events. However, we are not in a position to, and do not
express an opinion on, these assumptions on a stand-alone basis.
205
BDO Auckland
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion:
(a) proper accounting records have been kept by the Group as far as appears from our
examination of those records; and
(b) the financial statements on pages 108 to 139 that are provided pursuant to clause 23 of
Schedule 1, and that are required to be audited:
(i)
(ii) subject to the Securities Regulations 2009, comply with International Financial
Reporting Standards; and
(iii) give a true and fair view of the matters to which they relate;
(c) the interim financial statements on pages 146 to 159 that are provided pursuant to
clause 24 of Schedule 1:
(i)
BDO Auckland
Auckland
206
Intueris
Marketing risk: Intueri has achieved recent success in the marketing of its
courses to international students through investment and increased focus.
However, if existing and new marketing strategies are not effective, whether
through increased competition, poor execution or some other reason, Intueri
could fail to achieve its international student enrolment targets.
207
International competitiveness risk: The New Zealand dollar may rise to levels
that make New Zealand a less affordable and attractive education destination
compared with other countries (including Australia, Canada, Singapore, Japan,
the United Kingdom and the United States). In addition, other countries could
change regulations in ways which would make them relatively more attractive
to international students than New Zealand, or more international students
could elect to study in their home market, reflecting the development of
competing tertiary institutions in those markets.
New Zealand Government funding risk: A large proportion of the revenue forecast
to be received by Intueri will be dependent on funding from the New Zealand
Government. There is a risk that the New Zealand Government may change its funding
policies and provide less or different funding to Intueri, which could have a material
adverse impact on Intueris earnings and financial position. In particular:
o
TEC funding risk: TEC funding is renewed annually. There is no guarantee that
TEC will renew funding each year and TEC has discretion in relation to the PTEs
to which it will allocate funding and the amount of that funding. There is a risk
that some or all of such funding may not be renewed for the 2015 calendar year
(or subsequent years) including as a result of any changes to funding policy.
There is also a risk that one or more of the PTEs within Intueri may not achieve
the required performance or enrolment targets, or may otherwise fail to meet
funding conditions (in which case some or all of the TEC funding of that PTE
may need to be repaid).
The maximum number of student enrolments for PTEs that receive TEC funding
is regulated by TEC, and there is a risk that TEC may reduce the number of
approved enrolments (including approved levels of EFTS over and above those
that are SAC funded).
Student loan funding risk: Intueris earnings and financial position are highly
dependent on students who use a student loan to fund their course fees. There
is a risk that the eligibility criteria for student loans, or their current interest
free nature, may change so that students enrolled in Intueris courses are no
longer eligible for student loans or find the courses less attractive, and people
who would otherwise have chosen to fund their study by way of student loans
do not enrol in Intueris courses.
New Zealand regulatory risk: New Zealand Government bodies including the
Ministry of Education, Immigration New Zealand, NZQA and TEC may change existing
regulations or introduce new regulations that limit Intueris ability to deliver forecast
earnings, including regulations relating to course accreditation, and regulations which
adversely impact on the ability of international students to study in New Zealand, or
otherwise reduce the attractiveness of New Zealand as an education destination.
Local government authorities may also revoke or refuse to grant consents (such as
resource consents) necessary for the operation of Intueris courses. In this regard,
NZSCDT has consents in place from the Waikato District Council (as landowner) for the
208
operation of its diving courses on Lake Puketirini. The Company has been advised that
NZSCDTs operations on Lake Puketirini also require resource use consent from the
Waikato Regional Council under the Resource Management Act 1991. The Company
considers the risk of not obtaining the consent is low, but failure to obtain the consent
could have a material adverse effect on NZSCDTs business.
NZQA approval risk: One or more of the PTEs within Intueri might lose NZQA
approvals due to non-compliance with regulatory requirements. In particular, there is
a risk that the PTEs might not achieve the required performance standards. Where
performance is significantly below the required standards, NZQA could revoke the
relevant PTEs registration or its programme approval and/or its accreditation to deliver
a programme. As a publicly-listed company, the Company could also lose NZQA
approvals due to coming under the control of a shareholder whom NZQA did not regard
as a fit and proper person to operate PTEs. This could occur, for example, as a result
of a takeover offer for the Company, although it could reasonably be expected that any
such takeover offer would be conditional on NZQA approval. The loss of NZQA
approval for one or more of Intueris PTEs could have a material adverse effect on
Intueris financial performance.
Domestic student demand risk: While Intueris domestic student business is
historically more stable than other parts of Intueri's overall business, Intueris financial
performance is affected by its success in attracting domestic students to its courses.
Key factors that create risks around achieving the expected domestic student demand
for courses include:
o
Expansion risk: The online and VET FEE-HELP divisions of OCA are relatively
new initiatives, with a short track record of financial results and achievement
against key performance indicators. Any forecasts of growth in revenue and
profitability are therefore inherently more uncertain than those which can be
made for a mature business, and are subject to OCA being able to adequately
manage the expansion of its staff and operating capacity to cope with planned
growth.
209
Non-compliance risk:
Any non-compliance with ongoing conditions of
registration and any associated regulatory response may also have an adverse
impact on OCAs reputation, operations, future earnings and financial position.
Integration risk: Intueris future earnings are to some extent dependent on the
successful integration of the Quantum Education and OCA businesses with Intueris
existing business. This will involve a significant expansion of management
responsibilities and financial, operational and risk reporting functions. There is a risk
that integration may not proceed in accordance with expected timeframes, that the
costs of integration exceed expectations and/or that expected benefits, synergies or
cost savings are less than predicted.
Other Risks
Growth strategy execution risk: There is a risk that Intueri may not be able to
successfully execute some or all of the growth strategies outlined in Section 4.1
Business Overview. For example, Intueri may not be successful in achieving the
forecast growth in domestic or international student revenues, or expansion of the
online business. This risk may increase if Intueri fails to attract or retain the
qualified personnel required to execute the growth strategies.
Due diligence risk: Intueri and its advisors have performed certain pre-listing
due diligence in relation Intueri Education Group, Quantum Education Group and
OCA (and Intueri has the benefit of certain warranties and indemnities under the
agreements under which the individual businesses comprising Intueri were
acquired). There are risks that:
o
due diligence conducted has not identified issues that would have been
material to the decision by Intueri to acquire those businesses. A material
adverse issue which was not identified prior to completion of the relevant
acquisition could have an adverse impact on the financial performance or
operations of the relevant business and Intueri; and
in respect of the risks that were identified in due diligence that were
regarded as not sufficiently material or which could otherwise be mitigated,
the materiality of such risks may be higher than expected or the approach
taken by Intueri may be insufficient to mitigate such risks.
Personnel risk: Intueri relies to a significant extent on retaining certain key staff,
and on its ability to attract and retain skilled employees.
o
Loss of key executives: The loss of key executives, in particular the CEO
Rob Facer, the CFO Rod Marvin and the Quantum Education Group
Managing Director Janet Dalby, could have a material adverse effect on
Intueri.
210
211
the Shareholders. The sale of Shares by Arowana in the future could also adversely
affect the market price of the Shares. Refer to Section 4.6 Relationship between
Arowana and the Company for more information.
General economic conditions: The operating and financial performance of
Intueri is influenced by a variety of general economic and business conditions in
New Zealand and Australia and global economic conditions generally. For example,
prolonged deterioration in general economic conditions may result in a sustained
decrease in business confidence, which could impact the demand for Intueris
graduates or result in a decrease in government funding.
Force majeure events: Events may occur within or outside Australia and New
Zealand that could impact on the world economy, the operations of Intueri and the
price of the Shares. These events include war, acts of terrorism, civil disturbance,
political intervention and natural events such as earthquakes, floods, fires and poor
weather.
Tax changes: Any change to the current rate of income tax or other taxes
imposed on Intueri in any jurisdiction where Intueri operates will impact on
Shareholder returns. Any changes to the current rates of relevant taxes applying to
individuals and other Shareholders will similarly impact on Shareholder returns. In
addition, any change in tax rules and tax arrangements between Australia and New
Zealand could have an adverse impact on the level of Dividend imputation.
Consequences of Insolvency
In the event of the insolvency of the Company, you will not be liable to pay any money to
any person. All creditors (secured and unsecured) of the Company will rank ahead of your
claim as a Shareholder in the Company, if the Company is liquidated. After all such
creditors have been paid, any remaining assets will be available for distribution among all
Shareholders who rank equally. Any distribution made on liquidation of the Company may
be less than the amount of your investment or you may not receive any amount.
212
213
condition to completion was not satisfied or waived by that date. In that circumstance
Application monies would be refunded to Applicants within 7 Business Days, without
interest.
Arowana shareholder approval
Completion of the Offer requires the approval of Arowanas shareholders. Approval is
required under the ASX Listing Rules, as Arowanas interest in the Company makes up a
large majority of Arowanas total assets.
The Arowana shareholder meeting to vote to approve the Offer is to be held on 16 May
2014. Approval of the resolution approving the Offer requires approval by a simple
majority of votes cast by eligible shareholders at the meeting.
Arowanas independent directors have recommended to Arowanas shareholders that they
vote to approve the Offer.
If the Offer is not approved by Arowana shareholders, the Offer will be cancelled. In that
circumstance Application monies would be refunded to Applicants within 7 Business Days,
without interest.
Structure of the Offer
The Offer comprises:
the Broker Firm Offer, which is only available to New Zealand resident retail investors
who have received an allocation from their NZX Firm;
the Institutional Offer, which consists of an invitation to bid for shares made to
Institutional Investors in New Zealand, Australia and certain other jurisdictions, who
will participate through the bookbuild; and
the Executive offer, under which the trustee of the Executive LTI Plan, on behalf of
participating executives, will be offered up to a maximum dollar amount of $700,000 of
Shares (representing approximately 0.25-0.31% of the Shares on issue in the
Company36).
Members of the public wishing to subscribe for Shares must be allocated Shares by an NZX
Firm; there is no public pool under which you may subscribe for Shares.
Allocations of Shares among the offers comprising the Offer, and among the Institutional
Investors and NZX firms bidding into the Offer bookbuild, will be determined by the Issuers
and the Joint Lead Managers. These determinations are expected to be made following the
close of the bookbuild process.
Further details of the Broker Firm Offer, the Institutional Offer and the Executive Offer can
be found below under the headings Broker Firm Offer, Institutional Offer and Executive
Offer.
Size of the Offer
The Offer is an offer of:
$62.0 million of new Shares (being 23 million to 28 million Shares based on the
Indicative Price Range) which are to be issued by the Company to the Offeror; and
36
214
that number of Shares, which are to be transferred by the Selling Shareholder to the
Offeror, which will result in the Selling Shareholder holding the Final Percentage of the
Shares in the Company immediately following the completion of allotment of the
Shares under the Offer.
You can find more information on the determination of the Final Percentage below, under
the heading Determination of the Final Percentage.
The number of Shares that will be offered depends on the number of Shares the Selling
Shareholder transfers to the Offeror (for sale to investors). The Company will issue to the
Offeror that number of Shares which, when multiplied by the Final Price, equals (as nearly
as possible) $62.0 million. Following the determination of the Final Price (and therefore
the determination of the number of new Shares the Company will issue to the Offeror) but
before the allotment of the Shares, the Company will undertake a Share split of its existing
Shares such that upon allotment of the new Shares being issued by the Company to the
Offeror, the Company has a total of 100 million Shares on issue. The Selling Shareholder
will sell that number of Shares to the Offeror which will result in the Selling Shareholder
holding the Final Percentage (being the percentage of Shares the Selling Shareholder
decides to retain in the Company following completion of the Offer).
Based on there being $62 million of new Shares issued and the Selling Shareholder selling
down the range of Shares set out above at the Indicative Price Range, the gross proceeds
from the Offer will be $169 million to $234 million.
Determination of the Final Price
The Final Price for the Shares will be determined on or about 7 May 2014 following a
'bookbuild' managed by the Joint Lead Managers. The bookbuild is a process through which
information is collated about the demand for Shares by selected Institutional Investors
participating in the Institutional Offer, and NZX Firms seeking firm allocations in the Broker
Firm Offer, submitting bids for the number of Shares they wish to purchase or be allocated
at a range of prices. That information is then used to assist with the determination of the
pricing and allocation of Shares. The bookbuild will take place on 7 May 2014.
The Final Price will be determined by the Issuers in consultation with the Joint Lead
Managers and may be within, above or below the Indicative Price Range of $2.25 to $2.75
per Share. In determining the Final Price, consideration may be given to the following
factors (amongst others):
the level of demand for Shares in the bookbuild at various prices;
the desire for an orderly secondary market for the Shares; and
any other factors the Issuers consider relevant in meeting their objectives.
The Final Price is expected to be announced and posted on www.intuerishares.co.nz on or
about 7 May 2014.
Determination of the Final Percentage
Following the determination of the Final Price but before the allotment of the Shares, the
Company will undertake a Share split of its 21 million existing Shares such that upon
allotment of the new Shares to be issued by the Company to the Offeror, the Company will
have a total of 100 million Shares on issue.
215
The Selling Shareholder intends to retain between 15% and 25% of the total number of
Shares on issue following completion of the Offer, and will determine the percentage it will
retain following the bookbuild in conjunction with the Joint Lead Managers (the Final
Percentage). However the percentage retained could fall outside this range, with the
consent of the Joint Lead Managers.
The Selling Shareholder will sell between 47 million and 62 million Shares, on a post Share
split basis, to the Offeror (based on the Indicative Price Range).
By way of example (based on the Indicative Price Range):
Final Percentage
15%
57 million to 62 million
25%
47 million to 52 million
216
The Broker Firm Offer is open to New Zealand resident clients of NZX
Firms. Applicants who are offered a firm allocation by an NZX Firm can
apply for Shares in the Broker Firm Offer. There is no public pool under
which you may subscribe for Shares.
Allocations by NZX Firms under the Broker Firm Offer to their Applicant
clients will be determined by those NZX Firms. It will be a matter for the
NZX Firms to ensure that Applicant clients who have received an
allocation from them receive their shares.
How to apply
You may apply under the Broker Firm Offer by completing the Broker Firm
Offer Application Form at the back of the Investment Statement. By
making an Application, you declare that you were given a copy of the
Investment Statement, together with an Application Form.
How to pay
Broker Firm Offer Applicants should send their completed Application Form
and Application Monies to their broker in time to enable forwarding to the
Registrar by 12.00pm (noon) on the Closing Date.
217
The Broker Firm Offer opens at 9.00am on 8 May 2014 and is expected to
close at 12.00pm (noon) on 21 May 2014. The Issuers may elect to close
the Offer or any part of it early, extend the Offer or any part of it, or
accept late Applications either generally or in particular cases. The Offer
may be closed at any earlier date and time, without further notice. Your
broker may also impose an earlier closing date.
Please contact your broker for instructions. You may also obtain a copy of
the Investment Statement and Broker Firm Offer Application Form by:
downloading a copy at www.intuerishares.co.nz; or
requesting a copy from the Registrar, Computershare Investor
Services Limited by calling 0800 888 726.
While you may obtain a copy of the Investment Statement and Broker
Firm Offer Application Form as set out above, your Application will not be
accepted under the Broker Firm Offer if it is not lodged through your
Broker.
Institutional Offer
The Institutional Offer comprises two parts:
an invitation to New Zealand and Australian-resident Institutional Investors; and
an invitation to Institutional Investors resident in certain jurisdictions outside New
Zealand and Australia,
both made under this Prospectus.
The Bookbuild Process and Indicative Price Range
The Institutional Offer will be conducted using a bookbuild process. A 'bookbuild' is the
term used in initial public offerings to refer to the process of collating demand for shares at
various prices from Institutional Investors and NZX Firms, who bid for shares. The
bookbuild process collates the demand of the parties that want shares, how many shares
will be sold and the prices at which applicants bid for shares. The information collated in
the bookbuild is then used to assist with the determination of the pricing and allocation of
shares. NZX Firms bid into the bookbuild in order to obtain a firm allocation which they
can offer to their clients.
Full details of how to participate, including bidding instructions, will be provided by the
Joint Lead Managers to invited participants in due course. Participants can bid into the
book for Shares only through the Joint Lead Managers. They may bid for Shares at specific
price(s). Participants may bid above, within or below the Indicative Price Range of $2.25
to $2.75 per Share. The Indicative Price Range may be varied at any time by the Issuers.
All successful participants will pay the Final Price for each Share allocated to them.
Allocation Policy under the Bookbuild
The allocation policy for NZX Firms participating in the Institutional Offer will be outlined in
the bidding instructions, which will be provided by the Joint Lead Managers to invited
participants in due course.
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The Issuers and the Joint Lead Managers will agree the allocation of Shares among
Institutional Investors that have bid for Shares under the Institutional Offer and among
NZX Firms that have bid for Shares under the Broker Firm Offer. There is no assurance
that any Institutional Investor participating in the Institutional Offer or any NZX Firm
participating in the Broker Firm Offer will be allocated any Shares or the number of Shares
for which it has bid. The allocation policy will be influenced, but not constrained, by factors
such as the price and number of Shares bid for by particular participants, the timeliness of
the bid and any other factors that the Issuers and the Joint Lead Managers consider
appropriate.
In making allocations regard will be had to the requirement that any shareholder with a
controlling interest in the Company must be a fit and proper person, in order for the
Companys PTEs to maintain their NZQA approvals. For more information see page 209.
Executive Offer
The trustee of the Executive LTI Plan, on behalf of participating executives who wish to
take up Shares under the Executive LTI Plan, will be offered up to a maximum dollar
amount of $700,000 of Shares (representing approximately 0.25-0.31% of the Shares on
issue in the Company37). These Shares will, if purchased, be for the purposes of the
Foundation Scheme, a component of the Executive LTI Plan. For more information see
page 49 of this Prospectus.
Listing and Quotation of Shares
NZX
The Company has applied to NZX to list Intueri, and to quote its Shares, on the NZX Main
Board. All of NZXs requirements relating to the application for listing and quotation that
can be complied with on or before the date of this Prospectus have been complied with.
However, NZX accepts no responsibility for any statement in this Prospectus. The NZX
Main Board is a registered market operated by NZX, which is a registered exchange
regulated under the Securities Markets Act. The Company's NZX stock code is IQE.
Initial quotation of the Shares on the NZX Main Board is expected to occur on 23 May
2014.
It is the responsibility of each Applicant to confirm its holding before trading in
Shares. Applicants who sell Shares before they receive an initial statement of
holding do so at their own risk. Applicants will be able to confirm their holding by
contacting their broker upon commencement of trading of the Shares on the NZX
Main Board or ASX. None of the Offeror, the Company, Arowana, the Joint Lead
Managers, the Registrar or any of their respective directors, officers or employees
accepts any liability or responsibility should any person attempt to sell or
otherwise deal with the Shares before a statement confirming allotment of
Shares is received.
ASX
An application will be made to ASX after the Investment Statement and this Prospectus
have been lodged with ASIC for the Company to be admitted to the official list of the ASX
and for quotation of the Shares on the ASX. It is anticipated that the ASX stock code for
the Company's Shares will be 'IQE'.
ASX takes no responsibility for the contents of this Prospectus or for the merits of the
investment to which this Prospectus relates. The fact that ASX may admit the Company to
37
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the official list and quote the Shares on the ASX is not to be taken as an indication of the
merits, or as an endorsement by ASX, of Intueri or the Shares. The ASX is not a registered
market under the Securities Markets Act.
Failure to Achieve Listing
If admission to list on the NZX Main Board is denied or the Offer does not proceed for any
other reason, all Application amounts will be refunded in full without interest no later than
7 Business Days after announcement of the decision not to proceed. Failure to achieve
admission to list on the ASX will not, of itself, prevent the Offer from proceeding.
Offer Management Agreement
The Offeror, the Company, Arowana and the Joint Lead Managers have entered into an
Offer Management Agreement. Under the Offer Management Agreement, once the Final
Price has been determined, the Joint Lead Managers or their affiliates will be obliged,
subject to various terms and conditions, to provide settlement support in respect of
successful bids into the bookbuild under the Institutional Offer and the Broker Firm Offer in
respect of which Institutional Investors or NZX Firms have defaulted on their payment
obligations. The Offer Management Agreement sets out a number of circumstances under
which the Joint Lead Managers may terminate the Offer Management Agreement before
their settlement support obligations are triggered.
Escrow Arrangements
The Selling Shareholder has entered into an escrow arrangement with the Company under
which the Selling Shareholder has agreed not to sell or otherwise dispose of its existing
Shares which are not sold as part of the Offer until the first day after the Companys
preliminary announcement has been released to the market in respect of its financial
results for the period ending 31 December 2015, without the approval of the Directors who
are not interested in the decision (as that term is defined in the Companies Act), the
Company and NZX.
These restrictions do not apply, and therefore no approval is needed, for the Selling
Shareholder to grant a security interest in favour of a lender to the Selling Shareholder.
In addition: (a) the Selling Shareholder may transfer its escrowed shareholding to an
associated person (as that term is defined in the Listing Rules) with the consent of
Intueris Directors who are not interested in the decision (as that term is defined in the
Companies Act), provided that such associated person has agreed to be bound by the
escrow terms; and (b) the Selling Shareholder may accept any full or partial takeover offer
made in respect of its Shares under the Takeovers Code or similar scheme or arrangement.
An escrow is a restriction on sale, disposal, or encumbering of, or certain other dealings
in respect of, the securities concerned for the period of the escrow, subject to any
exceptions in the escrow arrangement concerned.
First right of refusal
Arowana has also agreed with the Company that if Arowana identifies a potential
opportunity to either establish, or acquire the shares in, or business of, a PTE in New
Zealand or an RTO in Australia, and Arowana wishes to pursue that opportunity, then until
the later of:
(a)
the date Arowana ceases to be the ultimate beneficial owner of not less than
15% of the total Shares in the Company; and
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(b)
the date the directors of the Company do not include an officer, employee,
contractor or nominee of Arowana,
Arowana must notify the Company of the opportunity. If the Company wishes to pursue
the opportunity then, subject to certain conditions, the Company will have a 20 or 30 day
period of exclusivity (with respect to Arowana) in which to pursue the opportunity.
Following the expiry of this exclusivity period, Arowana is entitled to pursue the
opportunity without restriction.
Brokerage
No brokerage, commission or stamp duty is payable by Applicants under the Offer.
Selling Restrictions
The Broker Firm Offer is being made to members of the public in New Zealand, the
Executive Offer is being made to Key Executives of Intueri and the Institutional Offer is
being made to selected Institutional Investors in New Zealand, Australia and certain other
jurisdictions (not including the United States).
No person may offer, sell (including resell) or deliver or invite any other person to so offer,
sell (including resell) or deliver any Shares or distribute any documents (including this
Prospectus) in relation to the Shares to any person outside New Zealand except in
accordance with all of the legal requirements of the relevant jurisdiction.
Unless otherwise agreed with the Issuers, any person or entity subscribing for Shares in
the Offer shall, by virtue of such subscription, be deemed to represent that he, she or it is
not in a jurisdiction which does not permit the making to him, her or it of an offer or
invitation of the kind described in this Prospectus, and is not acting for the account or
benefit of a person within such jurisdiction. None of the Issuers, the Promoters, the Joint
Lead Managers, the Registrar or any of their respective directors, officers, employees,
consultants, agents, partners or advisers accepts any liability or responsibility to determine
whether a person is able to participate in the Offer.
The Shares have not been, and will not be, registered under the US Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the
United States except in accordance with an exemption from, or in a transaction not subject
to, the registration requirements of the US Securities Act and any other applicable
securities laws.
Each Applicant in the Broker Firm Offer and the Executive Offer will be taken to have
represented, warranted and agreed as follows:
It understands that the Shares have not been, and will not be, registered under the
US Securities Act or the securities laws of any state of the United States and may not
be offered, sold or resold in the United States, except in a transaction exempt from,
or not subject to, registration under the US Securities Act and any other applicable
securities laws.
It is not in the United States and is not acting for the account or benefit of a person
in the United States.
It has not and will not send the Prospectus, the Investment Statement or any other
material relating to the Offer to any person in the United States.
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It will not offer or sell the Shares in the United States or in any other jurisdiction
outside New Zealand and Australia except in transactions exempt from, or not
subject to, registration under the US Securities Act and in compliance with all
applicable laws in the jurisdiction in which Shares are offered and sold.
Each successful bidder under the Institutional Offer will be required to make certain
representations, warranties and covenants set out in the confirmation of allocation letter
distributed to it.
Hong Kong
WARNING: This Prospectus has not been, and will not be, registered as a prospectus under
the Companies Ordinance (Cap. 32) of Hong Kong (the "Companies Ordinance"), nor has it
been authorised by the Securities and Futures Commission in Hong Kong pursuant to the
Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the "SFO"). No
action has been taken in Hong Kong to authorise or register this document or to permit the
distribution of this document or any documents issued in connection with it. Accordingly,
the Shares have not been and will not be offered or sold in Hong Kong other than to
"professional investors" (as defined in the SFO).
No advertisement, invitation or document relating to the Shares has been or will be issued,
or has been or will be in the possession of any person for the purpose of issue, in Hong
Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or
read by, the public of Hong Kong (except if permitted to do so under the securities laws of
Hong Kong) other than with respect to Shares that are or are intended to be disposed of
only to persons outside Hong Kong or only to professional investors (as defined in the SFO
and any rules made under that ordinance). No person allotted Shares may sell, or offer to
sell, such securities in circumstances that amount to an offer to the public in Hong Kong
within six months following the date of issue of such securities.
The contents of this Prospectus have not been reviewed by any Hong Kong regulatory
authority. You are advised to exercise caution in relation to the offer. If you are in doubt
about any contents of this document, you should obtain independent professional advice.
Singapore
This Prospectus and any other materials relating to the Shares have not been, and will not
be, lodged or registered as a prospectus in Singapore with the Monetary Authority of
Singapore. Accordingly, this document and any other document or materials in connection
with the offer or sale, or invitation for subscription or purchase, of Shares, may not be
issued, circulated or distributed, nor may the Shares be offered or sold, or be made the
subject of an invitation for subscription or purchase, whether directly or indirectly, to
persons in Singapore except pursuant to and in accordance with exemptions in Subdivision
(4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of Singapore (the
"SFA"), or as otherwise pursuant to, and in accordance with the conditions of any other
applicable provisions of the SFA.
This Prospectus has been given to you on the basis that you are (i) an "institutional
investor" (as defined in the SFA) or (ii) a "relevant person" (as defined in section 275(2) of
the SFA). In the event that you are not an investor falling within any of the categories set
out above, please return this document immediately. You may not forward or circulate this
document to any other person in Singapore.
Any offer is not made to you with a view to the Shares being subsequently offered for sale
to any other party. There are on-sale restrictions in Singapore that may be applicable to
222
investors who acquire Shares. As such, investors are advised to acquaint themselves with
the SFA provisions relating to resale restrictions in Singapore and comply accordingly.
European Economic Area - Belgium, Denmark, Germany, Liechtenstein,
Luxembourg, Netherlands and Spain
The information in the Prospectus and Investment Statement has each been prepared on
the basis that all offers of Shares will be made pursuant to an exemption under Directive
2003/71/EC (the "Prospectus Directive"), as amended and implemented in Member States
of the European Economic Area (each, a "Relevant Member State"), from the requirement
to produce a prospectus for offers of securities.
An offer to the public of the Shares has not been made, and may not be made, in a
Relevant Member State except pursuant to one of the following exemptions under the
Prospectus Directive as implemented in that Relevant Member State:
(a)
(b)
to any legal entity that satisfies two of the following three criteria: (i) balance
sheet total of at least 20,000,000; (ii) annual net turnover of at least
40,000,000 and (iii) own funds of at least 2,000,000 (as shown on its last
annual unconsolidated or consolidated financial statements);
(c)
France
This Prospectus is not being distributed in the context of a public offering of financial
securities (offre au public de titres financiers) in France within the meaning of Article
L.411-1 of the French Monetary and Financial Code (Code montaire et financier) and
Articles 211-1 et seq. of the General Regulation of the French Autorit des marchs
financiers ("AMF"). The Shares have not been offered or sold and will not be offered or
sold, directly or indirectly, to the public in France.
This Prospectus and any other offering material relating to the Shares have not been, and
will not be, submitted to the AMF for approval in France and, accordingly, may not be
distributed (directly or indirectly) to the public in France. Such offers, sales and
distributions have been and shall only be made in France to qualified investors
(investisseurs qualifis) acting for their own account, as defined in and in accordance with
Articles L.411-2-II-2, D.411-1, L.533-16, L.533-20, D.533-11, D.533-13, D.744-1, D.7541 and D.764-1 of the French Monetary and Financial Code and any implementing
regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are
informed that the Shares cannot be distributed (directly or indirectly) to the public by the
investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8
to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in the Prospectus and/or the Investment Statement does not constitute a
prospectus under any Irish laws or regulations and neither the Prospectus nor the
Investment Statement has been filed with or approved by any Irish regulatory authority as
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the information has not been prepared in the context of a public offering of securities in
Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations
2005, as amended (the "Prospectus Regulations"). The Shares have not been offered or
sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a
public offering, except to "qualified investors" as defined in Regulation 2(l1) of the
Prospectus Regulations.
Italy
The Offer in the Republic of Italy has not been registered with the Italian Securities and
Exchange Commission (the Commissione Nazionale per le Societ e la Borsa, or
"CONSOB") pursuant to the Italian securities legislation and, accordingly, no offering
material relating to the Shares may be distributed in Italy and the Shares may not be
offered or sold in Italy in a public offering within the meaning of Article 1.1(t) of Legislative
Decree No. 58 of 24 February 1998, as amended ("Decree No. 58"), other than:
(a)
(b)
in other circumstances that are exempt from the rules on public offering pursuant
to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971.
Any offer, sale or delivery of the Shares or distribution of any offer document relating to
the Shares in Italy (excluding placements where a qualified investor - as defined in
Regulation No. 11971 - solicits an offer from the issuer) under the paragraphs above must
be:
(c)
(d)
in compliance with all relevant Italian securities, tax and exchange controls and
any other applicable laws.
Any subsequent distribution of the Shares in Italy must be made in compliance with the
public offering and prospectus requirement rules provided under Decree No. 58 and the
Regulation No. 11971, unless an exception from those rules applies. Failure to comply with
such rules may result in the sale of such Shares being declared null and void and in the
liability of the entity transferring the Shares for any damages suffered by the investors.
Norway
Neither the Prospectus nor the Investment Statement has been approved by, or registered
with, any Norwegian securities regulator under the Norwegian Securities Trading Act of
June 29, 2007. Accordingly, neither the Prospectus nor the Investment Statement shall be
deemed to constitute an offer to the public in Norway within the meaning of the Norwegian
Securities Trading Act.
The Shares may not be offered or sold, directly or indirectly, in Norway except to
"professional clients" (as defined in Norwegian Securities Regulation of 29 June 2007 no.
876 and including non-professional clients having met the criteria for being deemed to be
professional and for which an investment firm has waived the protection as nonprofessional in accordance with the procedures in this regulation).
224
Switzerland
The Shares may not be publicly offered in Switzerland and will not be listed on the SIX
Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in
Switzerland. The Prospectus and the Investment Statement have been prepared without
regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156
of the Swiss Code of Obligations, the disclosure standards for listing prospectuses under
art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or
regulated trading facility in Switzerland.
Neither the Prospectus nor the Investment Statement nor any other offering or marketing
material relating to the Shares may be publicly distributed or otherwise made publicly
available in Switzerland. The Shares will only be offered to regulated financial
intermediaries such as banks, securities dealers, insurance institutions and fund
management companies as well as institutional investors with professional treasury
operations.
Neither the Prospectus nor the Investment Statement nor any other offering or marketing
material relating to the Shares have been or will be filed with or approved by any Swiss
regulatory authority. In particular, neither the Prospectus nor the Investment Statement
will be filed with, and the offer of Shares will not be supervised by, the Swiss Financial
Market Supervisory Authority ("FINMA").
The Prospectus and the Investment Statement are personal to the recipient only and not
for general circulation in Switzerland.
United Kingdom
Neither the information in this Prospectus nor any other document relating to the offer has
been delivered for approval to the Financial Conduct Authority in the United Kingdom and
no prospectus (within the meaning of section 85 of the Financial Services and Markets Act
2000, as amended ("FSMA")) has been published or is intended to be published in respect
of the Shares. This document is issued on a confidential basis to "qualified investors"
(within the meaning of section 86(7) of FSMA) in the United Kingdom, and the Shares may
not be offered or sold in the United Kingdom by means of this document, any
accompanying letter or any other document, except in circumstances which do not require
the publication of a prospectus pursuant to section 86(1) FSMA. This document should not
be distributed, published or reproduced, in whole or in part, nor may its contents be
disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of
section 21 of FSMA) received in connection with the issue or sale of the Shares has only
been communicated or caused to be communicated and will only be communicated or
caused to be communicated in the United Kingdom in circumstances in which section 21(1)
of FSMA does not apply to the Company or the Selling Shareholder.
In the United Kingdom, this Prospectus is being distributed only to, and is directed at,
persons (i) who have professional experience in matters relating to investments falling
within Article 19(5) (investment professionals) of the Financial Services and Markets Act
2000 (Financial Promotions) Order 2005 ("FPO"), (ii) who fall within the categories of
persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated
associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated
(together "relevant persons"). The investments to which this document relates are
available only to, and any invitation, offer or agreement to purchase will be engaged in
only with, relevant persons. Any person who is not a relevant person should not act or rely
on this document or any of its contents.
225
226
227
100%
100%
100%
100%
100%
228
100%
100%
50%
229
230
10
11
231
The source of finance required for these plans will be funds received from the issue
of new Shares pursuant to the Offer, operating cash flow, existing debt facilities,
working capital and other financial accommodation considered prudent and
appropriate by the Group during that 12 month period.
The proceeds of the Offer payable to the Company will be used to fund the Quantum
Acquisition, including associated transaction costs, fees for the Offer, and to repay
related-party loans, including those associated with the OCA Acquisition, to the
extent that existing cash cannot fund these repayments. The proceeds of the Offer
payable to the Selling Shareholder will be for the benefit of the Selling Shareholder
and will not be applied towards the Directors plans set out above.
A prospective statement of financial position, a prospective statement of financial
performance (referred to as a Statement of Comprehensive Income) and a
prospective statement of cash flows of the Group for the accounting periods ending
31 December 2014 and 31 December 2015 are set out in Section 5.3 Prospective
Financial Information.
For the purposes of section 37(2) of the Securities Act, the minimum amount that,
in the opinion of the Directors, must be raised in order to provide the sums required
to be provided in respect of:
the purchase price of any property which is to be defrayed in whole or in part
out of the proceeds of the Offer;
any preliminary expenses payable by the Company, and any commission payable
to any person in consideration of his or her agreeing to subscribe for, or his or
her procuring or agreeing to procure subscriptions for, Shares;
working capital; and
the repayment of any money borrowed by the Company in respect of any of the
foregoing matters,
is $62 million.
12
232
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14
15
16
Interested Persons
For the purposes of the information set out under this heading, specified person
means:
-
Except as described in Section 4.5 Executive Remuneration and Share Plans with
respect to the Chief Executive, Rob Facer, no specified person will be entitled to any
remuneration for services in respect of the Group or to recover expenses, other than
234
235
17
Material Contracts
Members of the Group have entered into the following material contracts (not being
contracts entered into in the ordinary course of business) in the two years preceding
15 April 2014:
Quantum Agreement
On 16 February 2014, the Company (as purchaser) entered into an Agreement for
sale & purchase of shares in Quantum Education Group Limited and Quantum
Corporate Training Limited with the shareholders of Quantum Education Group
Limited and Quantum Corporate Training Limited (as vendors), Arowana
International Limited (as purchasers guarantor) and Quantum Education Group
Limited.
Pursuant to this agreement, the Company agreed to purchase all of the shares in
Quantum Corporate Training Limited and Quantum Education Group Limited, subject
to the satisfaction of certain conditions precedent.
Learntree Agreement
On 16 February 2014, Intueri Materials Limited (as purchaser) entered into an
Agreement for Sale and Purchase of Business with Learntree Limited (as vendor),
Arowana International Limited (as purchasers guarantor) and certain shareholders
of Learntree Limited (as vendors guarantors).
Pursuant to this agreement, Intueri Materials Limited agreed to purchase the
business and assets (other than certain excluded assets which were personally used
by the shareholders of Learntree Limited) of Learntree Limited, subject to the
satisfaction of certain conditions precedent.
Elite Agreement
On or about 8 February 2013, Arowana International Advisors Pty Limited (as
purchaser) entered into a Share Sale Agreement with the shareholders of Elite
Education Holdings Limited (as vendors).
Pursuant to this agreement, Arowana International Advisors Pty Limited (or its
nominee) agreed to purchase all of the shares in Elite Education Holdings Limited,
subject to the satisfaction of various conditions precedent. Arowana International
Advisors Pty Limited nominated the Company to purchase the shares.
Cut Above Agreement
On or about 31 October 2012, Arowana International Advisors Pty Limited (as
purchaser) entered into a Share Sale Agreement relating to shares in The Cut
Above Academy Limited with the shareholders of The Cut Above Academy Limited
(as vendors).
Pursuant to this agreement, Arowana International Advisors Pty Limited (or its
nominee) agreed to purchase all of the shares in The Cut Above Academy Limited,
subject to the satisfaction of various conditions precedent. Arowana International
Advisors Pty Limited nominated the Company to purchase the shares.
Global Education Group Agreement
On or about 21 September 2012, Arowana International Advisors Pty Limited (as
purchaser) entered into a Share Sale Agreement relating to shares in Global
Education Group Limited with the shareholders of Global Education Group Limited
(as vendors).
236
Pursuant to this agreement, Arowana International Advisors Pty Limited (or its
nominee) agreed to purchase all of the shares in Global Education Group Limited,
subject to the satisfaction of various conditions precedent. Arowana International
Advisors Pty Limited nominated the Company to purchase the shares.
Offer Management Agreement
On 15 April 2014, the Company, the Offeror, Arowana and the Joint Lead Managers
entered into the Offer Management Agreement, which sets out the obligations of the
Joint Lead Managers in relation to the operation of the Offer bookbuild and also in
relation to the provision of settlement support in certain circumstances described
below.
Under the Offer Management Agreement, the Joint Lead Managers commit to
conduct the bookbuild for the Offer. Once the Final Price has been determined, the
Joint Lead Managers or their affiliates will be obliged, subject to various terms and
conditions, to provide settlement support in respect of successful bids into the Offer
bookbuild under the Institutional Offer and the Broker Firm Offer, so that if those
bids are not paid for in cleared funds the Offeror may require the Joint Lead
Managers to pay for and be allocated the Shares instead.
The Joint Lead Managers may terminate the Offer Management Agreement (and
their settlement support obligations) in certain circumstances including, for example,
if a material adverse change (or any event which is likely to give rise to a material
adverse change) occurs in Intueri (financially or otherwise), or if an event occurs
which makes it illegal for the Joint Lead Managers to comply with the Offer
Management Agreement or to market, promote or settle the Offer.
The obligations of the Joint Lead Managers under the Offer Management Agreement
are subject to certain conditions. These conditions include, for example:
receipt by the Joint Lead Managers of various legal and accounting advice,
reports, opinions, comfort letters and other sign-offs arising from the due
diligence processes followed in respect of the Offer;
registration of this Prospectus;
receipt of Arowana shareholder approval for the Offer; and
all necessary regulatory approvals being granted (or, in certain cases, an
indication from the relevant regulator, that they will be).
Pursuant to the Offer Management Agreement, the Company and the Offeror have
granted an indemnity to the Joint Lead Managers (and certain persons related to the
Joint Lead Managers) in relation to losses which relate to or arise from the Offer
Management Agreement or the Offer, including losses resulting from a breach by the
Company or the Offeror of their respective obligations under the Offer Management
Agreement, any representation or warranty made or given by the Company or the
Offeror under the Offer Management Agreement being untrue or incorrect, or any
unlawful, negligent, reckless or deliberately wrongful act or omission by the
Company or the Offeror in relation to the Offer.
The Offer Management Agreement also sets out a number of representations,
warranties and undertakings given by Arowana, the Company and the Offeror to the
237
Joint Lead Managers, and by the Joint Lead Managers to the Company and the
Offeror customary for an offering of this nature.
Arowana guarantees the obligations of the Company and the Offeror under the Offer
Management Agreement (including any obligations to pay money), and indemnifies
the Joint Lead Managers in relation to losses arising from and incurred in connection
with a breach by the Company or the Offeror of their obligations under the Offer
Management Agreement. This guarantee only applies to specified obligations that
fall due for performance by the Company on or before settlement of the Offer.
The Company has agreed that, subject to certain exceptions, during the
period of 180 days from the settlement of the Offer, it will not, without the
prior written consent of the Joint Lead Managers allot or issue, issue or
grant any right or option in respect of an issue of, create any debt
obligation which may be convertible or exchangeable into or redeemable
by, or otherwise enter into an agreement entitling a person to the allotment
and issue of, in each case, Shares or other equity securities of the
Company.
Restricted Security Agreement
On 15 April 2014 2014, the Company and the Selling Shareholder entered into a
Restricted Security Agreement that provides that, for the period from the date on
which the Shares are first quoted on the NZX Main Board until the first day after the
date of the announcement to NZX of the preliminary financial announcement of the
Companys financial results in respect of the year ended 31 December 2015, the
Selling Shareholder will not dispose of any of its Shares, other than:
with the prior written consent of the non-interested Directors (as that term is
defined in the Companies Act), the Company and the NZX;
to an affiliate who enters into a restricted security agreement with the Company
for the balance of restricted period;
in connection with a takeover offer under the Takeovers Code or similar scheme
or arrangement; or
pursuant to the grant of a security interest in favour of a bona fide lender to the
Selling Shareholder.
Multi-Company Facility Agreement
On or about 21 December 2012, the Company, as borrower, and Arowana
International Holdings Limited, as surety, entered into a Multi-Company Facility
Agreement (ANZ Facility) with ANZ Bank New Zealand Limited.
Under the ANZ Facility the Company was provided with borrowing facilities totalling
$21,840,000, for the purposes of assisting with the purchase of certain of the
Companys now-subsidiaries, and for working capital.
The ANZ Facility is repayable by the Company in equal monthly instalments, with a
final payment of $11,852,000 being due on 30 May 2016.
The ANZ Facility is secured by a guarantee and indemnity supplied by Arowana
International Holdings Limited, and first-ranking security granted by the Company.
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Pending Proceedings
Not applicable.
19
239
In addition, the Company will, at its sole discretion, pay an incentive fee of up to
0.625% of the aggregate proceeds of all Shares under the Offer to each Joint Lead
Manager.
Separately, Arowana has entered into an engagement agreement with UBS New
Zealand Ltd (UBS) (one of the Joint Lead Managers), under which UBS is entitled
to receive a fee of $500,000 in consideration for advice and services provided by
UBS in relation to the Offer.
The Company did not incur any preliminary expenses, in terms of clause 19(2) of
Schedule 1 to the Securities Regulations.
20
21
240
25
26
241
There are no other material matters relating to the Offer, other than those set out in
this Prospectus, the financial statements or in contracts entered into in the ordinary
course of business of a member of the Group
27
Directors Statement
The Directors of the Company, after due inquiry by them, are of the opinion that
none of the following have materially and adversely changed during the period
between 31 December 2013 and the date of registration of this Prospectus:
the trading or profitability of the Group;
the value of the Groups assets; or
the ability of the Group to pay its liabilities due within the next 12 months.
28
Auditors Report
The Auditors report required by clause 28 of Schedule 1 to the Securities
Regulations is set out in Section 5.5 Statutory Auditors Report. BDO Auckland has
a current transitional licence under the Auditor Regulation Act 2011 with registration
number AUD090. There are no restrictions or limitations on BDO Aucklands
registration.
242
29
243
244
Company dividend. The total amount included in your taxable income is referred to as the
gross Dividend. You will be able to use attached imputation credits and a credit for RWT
deducted to satisfy (or partially satisfy) your tax liability on the gross dividend. If the
attached imputation credits and RWT deducted exceed the amount of tax on the gross
dividend, your tax liability on other income you earn will be reduced as a result of receiving
the Company dividend.
Sale or disposal of Shares
Although New Zealand does not have a capital gains tax, there are instances where you
will be subject to New Zealand tax on gains you make on the sale or disposal of your
Shares. You must consider your individual circumstances to determine whether any gain
you make on the sale or disposal of your Shares is taxable. Generally, you will be subject
to tax on any gain arising from the sale or disposal of your Shares if you:
are in the business of dealing in shares;
acquire your Shares as part of a profit making undertaking or scheme; or
acquire your Shares with the dominant purpose of selling them.
If any of the above applies to you, your taxable gain (or tax deductible loss) will be the
difference between the cost of your Shares and the market value of the consideration you
receive for the Shares. If you have a taxable gain/(loss) you should include that gain/(loss)
in a tax return for the tax year in which the sale occurs and pay any tax owing in respect of
that gain at your marginal rate.
New Zealand tax implications for non-resident Shareholders
The following is a summary of the New Zealand tax implications of investing in the Shares
if you are not tax resident in New Zealand and hold less than 10% of the shares in the
Company.
Dividends you receive on your Shares
The Company will withhold non-resident withholding tax (NRWT) from dividends on your
Shares. A 15% rate of NRWT will apply:
to the extent the dividend is fully imputed; or
if you are resident in a country with which New Zealand has a Double Taxation
Agreement,
otherwise a 30% rate of NRWT will apply.
If the Company pays a fully imputed dividend, then the Company may pay you an
additional supplementary dividend to offset the NRWT on the dividend.
The NRWT withheld may entitle you to a tax credit in your home country.
Sale or disposal of Shares
Refer to the Sale or disposal of Shares section under the New Zealand tax implications
for New Zealand tax resident Shareholders heading above for a summary of the potential
application of New Zealand tax to any gain you derive on the sale or disposal of your
Shares.
New Zealand may not be entitled to tax any income you derive from the sale or disposal of
your Shares if you are resident in a country which has a Double Taxation Agreement with
New Zealand and do not have a permanent establishment in New Zealand.
245
246
Offer Document
The Institutional Offer in Australia is being made under this Prospectus and the
Investment Statement and by relying on trans-Tasman mutual recognition under
Chapter 8 of the Australian Corporations Act and the Corporations Regulations 2001
(Cth) of Australia (the Australian Corporations Regulations).
This Additional Australian Information contains disclosure relevant to Australian
Institutional Investors and to comply with requirements for a recognised offer
under Chapter 8 of the Australian Corporations Act and the Australian Corporations
Regulations.
This Prospectus and the Investment Statement have been prepared to comply with
New Zealand regulatory requirements, which differ in some respects from
Australian regulatory requirements for an offer of shares. This Prospectus and the
Investment Statement are not, and do not purport to be, a prospectus or document
containing disclosure to investors for the purposes of, and do not contain all
information that would be required for a prospectus, product disclosure statement
or other disclosure document, under Part 6D.2 or Part 7.9 of the Australian
Corporations Act.
247
New Zealand Securities Act 1978 and the Securities Regulations 2009 (New
Zealand) set out how the Offer must be made.
There are differences in how securities and financial products are regulated under
New Zealand, as opposed to Australian, law. For example, the disclosure of fees for
managed investment schemes is different under New Zealand law.
The rights, remedies and compensation arrangements available to Australian
investors in New Zealand securities and financial products may differ from the
rights, remedies and compensation arrangements for Australian securities and
financial products.
Both the Australian and New Zealand securities regulators have enforcement
responsibilities in relation to this Offer. If you need to make a complaint about this
Offer, please contact the Australian Securities and Investments Commission. The
Australian and New Zealand regulators will work together to settle your complaint.
The taxation treatment of New Zealand securities and financial products is not the
same as that for Australian securities and products.
If you are uncertain about whether this investment is appropriate for you, you
should seek the advice of an appropriately qualified financial advisor.
The Offer may involve a currency exchange risk. The currency for the security or
financial product is in dollars that are not Australian dollars. The value of the
security or financial product will go up and down according to changes in the
exchange rate between those dollars and Australian dollars. These changes may be
significant.
If you receive any payments in relation to the security or financial product that are
not in Australian dollars, you may incur significant fees in having the funds credited
to a bank account in Australia in Australian dollars.
If the security or financial product is able to be traded on a financial market and
you wish to trade the security or financial product through that market, you will
have to make arrangements for a participant in that market to sell the security or
financial product on your behalf. If the financial market is a foreign market that is
not licensed in Australia (such as a securities market operated by NZX Limited
(NZX)) the way in which the market operates, the regulation of participants in
that market and the information available to you about the security or financial
product and trading may differ from Australian licensed markets.
4
248
An application will also be made to ASX after this Prospectus and the Investment
Statement have been lodged with ASIC for the Company to be admitted to the
official list of ASX and for the Shares to be quoted on ASX. The ASX Code for
Intueri's Shares will be "IQE". If and when the Company is admitted to the official
list of ASX, the ASX Listing Rules will apply to the Company (subject to any waivers
or rulings given from time to time by ASX).
The Company has applied for waivers and confirmations from the ASX Listing Rules
that are customary for a New Zealand company listed on both the NZX Main Board
and the ASX.
The Company has also applied for a waiver from ASX Listing Rule 10.14 to allow the
Company to issue shares under its Executive LTI Plan to directors of the Company
or their associated people. Under NZX Listing Rule 7.3.6, the Company can issue
shares under its Executive LTI Plan to directors or their associates provided that
their participation in the Executive LTI Plan has been determined by reference to
criteria applying to employees of the Company generally. The exemption from ASX
Listing Rule 10.14 is sought so that the Company's Executive LTI Plan is acceptable
for the purposes of the ASX Listing Rules.
ASX takes no responsibility for the contents of this Prospectus or the Investment
Statement or for the merits of the investment to which this Prospectus and the
Investment Statement relate. Admission to the official list of ASX and quotation of
the Shares on ASX are not guaranteed and are not to be taken as an indication of
the merits, or as an endorsement by ASX, of the Company or the Shares.
In accordance with the requirements of the ASX Listing Rules, the Directors of the
Company confirm that Intueri has sufficient working capital to carry out its stated
objectives.
6
Continuous Disclosure
Intueri will need to comply with the continuous disclosure rules of both the NZX
Listing Rules and the ASX Listing Rules (including as modified by waivers, rulings or
exemptions applicable to the Company or the Shares).
All information provided to NZX and ASX in accordance with the NZX Listing Rules
and the ASX Listing Rules will be available on the NZX and ASX websites.
For more information in relation to Intueri's continuous disclosure process, refer to
Section 4.4 Corporate Governance.
Risks
There are risks that are common to all investments in shares, there are risks that
are specific to an investment in the Shares, and there are risks that are specific to
the Company and its operations. The risks described or referred to below do not
purport to be a comprehensive statement of the risks associated with an
investment in the Company.
You should refer to the information set out in Section 6 What are my Risks? of this
Prospectus for a more extensive list of risks applicable to all investors who choose
to invest in the Company.
These risks mean that on the sale of a Share at any time or on a winding up of the
Company, an investor may receive less than the amount paid in respect of that
Share.
249
Selling Restrictions
This Prospectus and the Investment Statement do not constitute an offer of Shares
or invitation in any place in which, or to any person to whom, it would be unlawful
to make such an offer or invitation. Refer to the section titled "Selling Restrictions"
in Section 7 Details of the Offer of the Prospectus.
Each successful bidder under the Institutional Offer will be required to make certain
representations, warranties and covenants set out in the confirmation of allocation
letter distributed to it.
This Is Not Investment Advice. You Should Seek Your Own Financial Advice
The information provided in this Prospectus and the Investment Statement is not
financial product advice and has been prepared without taking into account the
investment objectives, financial circumstances or particular needs of any investor.
Investors should read the whole of this Prospectus and the Investment Statement
and consider all of the risk factors that could affect the performance of the
Company and other information concerning the Shares in light of their own
particular investment objectives, financial circumstances and particular needs
(including financial and taxation issues) before deciding whether to invest in the
Company.
10
Trading On ASX
It is expected that the Final Price will be announced on 7 May 2014 on the basis of
a bookbuild process to be undertaken on 7 May 2014.
Notifications to successful Applicants of their allotments under the Offer are
expected to be issued on the Allotment Date.
Following the allotment of the Shares, Shareholders on the Australian Share
Register will be sent an initial statement of holding that sets out the number of
250
Shares that have been allocated to them and provides details of the holder's
Shareholder's Holder Identification Number (HIN) for CHESS holders or
Shareholder Reference Number (SRN) for Company sponsored holders.
Shareholders will subsequently receive statements showing any changes to their
holding in the Company.
Initial quotation of the Shares on the NZX Main Board and ASX is expected to occur
on or about 23 May 2014.
The Institutional Offer may be terminated by the Joint Lead Managers invoking their
termination rights under the Offer Management Agreement, in the event that NZX
and/or ASX refuse to agree to quote the Shares on the NZX Main Board and ASX
respectively, or if completion does not occur under the Offer Management
Agreement. The Institutional Offer is conditional on the conditions outlined under
the heading The Offer is conditional on the Quantum Acquisition becoming
unconditional and Arowana shareholder approval in Section 7 Details of the Offer.
These conditions are expected to be satisfied on or prior to the Allotment Date. If
these conditions are not satisfied, the contracts formed on acceptance of bids in the
Institutional Offer will automatically be cancelled.
Bidders under the Institutional Offer in Australia should not attempt to sell their
Shares until they know whether, and how many, Shares have been allocated to
them. None of the Company, the Joint Lead Managers, any other person named in
this Prospectus, nor any of their respective directors, officers or employees accepts
any liability or responsibility should any person attempt to sell or otherwise deal
with Shares before statements confirming allotments of Shares are received by the
successful bidders under the Institutional Offer.
11
12
251
All ongoing financial information prepared by the Company and provided directly to
Shareholders or to NZX or ASX will be prepared in accordance with the
requirements of NZ GAAP applicable at that time.
The Company has adopted certain accounting policies in connection with the
preparation of PFI in this Prospectus. Those policies are expected to be used in
future reporting periods and are described in Section 5.3 Prospective Financial
Information. To the extent that Australian generally accepted accounting principles
(Australian GAAP) would require different accounting policies, those differences
would not be material to the Company or its financial results.
There may be some presentation, disclosure and classification differences between
financial information prepared in accordance with NZ GAAP and financial
information prepared in accordance with Australian GAAP. For example, financial
information prepared in accordance with Australian GAAP might contain details of
director remuneration which would not be required under NZ GAAP. None of these
differences in presentation, disclosure or classification would be expected to change
the material financial results reported under NZ GAAP.
13
Applicable Law
Intueri Education Group Limited as a New Zealand company
The Company is a company incorporated in New Zealand and is principally
governed by New Zealand law, rather than Australian law. In Australia, it is
registered with ASIC as a foreign company. Its general corporate activities (apart
from any offering of securities in Australia) are not regulated by the Australian
Corporations Act or by ASIC but instead are regulated by the New Zealand
Companies Act, the New Zealand Financial Markets Authority, the Registrar of
Financial Service Providers and the Registrar of Companies.
Set out below is a table summarising key features of the laws that apply to the
Company as a New Zealand company (under New Zealand law, including as
modified by exemptions or waivers) compared with the laws that apply to
Australian publicly listed companies generally. It is important to note that this
summary does not purport to be a complete review of all matters of New Zealand
law applicable to the Company or all matters of Australian law applicable to
Australian publicly listed companies or to highlight all provisions that may differ
from the equivalent provisions in Australia.
Unless otherwise stated, the Australian Corporations Act provisions do not apply to
Intueri as a foreign company.
Transactions that
require shareholder
approval
New Zealand
Australia
adopting or altering
the constitution of the
company;
appointing or removing
252
New Zealand
a director or auditor;
in certain
circumstances, the
provision of financial
assistance for the
purpose of, or in
connection with, the
acquisition of shares;
major transactions
(being transactions
involving the
acquisition or
disposition of assets,
the acquisition of
rights or interests or
the incurring of
obligations or
liabilities, the value of
which is more than
half the value of the
company's total
assets);
amalgamations (other
than between the
company and its
wholly-owned
subsidiaries);
Australia
reductions). Although there is
no shareholder approval
requirement for major
transactions, certain related
party transactions require
shareholder approval.
Shareholder approval is
required under the ASX Listing
Rules for.
directors' termination
benefits in certain
circumstances;
if a company proposes
to make a significant
change to the nature or
scale of its activities or
proposes to dispose of
its main undertaking.
director remuneration;
certain transactions
with related parties;
certain issues of
shares;
in certain
circumstances, the
acquisition or
redemption of shares;
253
New Zealand
and
Shareholders' right to
request or requisition a
general meeting
Australia
certain acquisitions or
disposals of assets.
A special meeting of
shareholders must be called
by the board on the written
request of shareholders
holding shares carrying
together not less than 5% of
the voting rights entitled to be
exercised on the issue.
Shareholders' right to
appoint proxies to
attend and vote at
meetings on their
behalf
254
Shareholder protections
against oppressive
conduct
New Zealand
Australia
A shareholder or former
shareholder of a company (or
any other entitled person)
who considers that the affairs
of a company have been (or
are being, or are likely to be)
conducted in a manner that is
(or any act or acts of the
company have been, or are,
or are likely to be) oppressive,
unfairly discriminatory, or
unfairly prejudicial to him or
her in any capacity may apply
to the court for relief.
a special resolution
passed at a meeting for
a company with a share
capital of the class of
members holding shares
in the class; or
a written consent of
members with at least
75% of the votes in the
class.
255
New Zealand
company does not intend to
bring, diligently continue or
defend, or discontinue the
proceedings, or it is in the
interests of the company or
related company that the
conduct of the proceedings
should not be left to the
directors or to the
determination of the
shareholders as a whole.
No proceedings brought by a
shareholder or a director or in
which a shareholder or a
director intervenes with leave
of the court (as described
above) may be settled or
compromised or discontinued
without the approval of the
court.
Australia
or properly take
responsibility for them,
or for the steps in them;
if the applicant is
applying for leave to
bring proceedings, there
is a serious question to
be tried; and
Proceedings brought or
intervened in with leave must
not be discontinued,
compromised or settled without
the leave of the court.
"2 strikes" rule in
relation to
remuneration reports
256
Related party
transactions and
interests
New Zealand
Australia
In particular, shareholder
approval is required for
material transactions between
a listed company and a
"related party". The definition
of related party catches a
number of persons, for
example, a director of a listed
company, or the holder of a
relevant interest in 10% or
more of a class of securities of
a listed company. A related
party who is a party to or a
beneficiary of a material
transaction (and its
associates) are prohibited
from voting in favour of a
resolution to approve that
transaction.
the arrangement is on
arm's length terms;
the benefit is a
reasonable indemnity or
insurance premium
given to an officer or
employee of the
company;
257
New Zealand
register of the public issuer.
The Companies Act requires
companies to keep an
interests register, and this
register is often used for the
purposes of any disclosures by
directors or officers of any
such "relevant interests". The
companies' annual report
must state particulars of
entries in the interests
register made during the
accounting period.
Australia
not discriminate other
shareholders unfairly.
In addition, the Company will
be required to comply with ASX
Listing Rule requirements in
respect of related party
transactions. Unless an
exception applies, shareholder
approval is required for:
the acquisition of a
substantial asset from,
or disposal of a
substantial asset to,
among other persons, a
related party or a
person who, together
with their associates,
holds a relevant interest
in at least 10% of the
total votes attached to
the voting securities;
issuing or agreeing to
issue securities to
related parties;
certain directors'
termination benefits;
and
directors acquiring
securities under an
employee incentive
scheme.
258
Disclosure of
substantial holdings
New Zealand
Australia
New Zealand
Australia
regulation of takeovers.
annual financial
statements as an
issuer under the
Financial Reporting Act
including the
statement of financial
position, statement of
financial performance,
statement of
cashflows, statement
of movements in
equity, statement of
As a foreign registered
company, the Company has
limited filing obligations. It is
required to file annual accounts
with ASIC (including the
balance sheet, cash flow
statement and profit and loss
statement for the last financial
year, as well as any other
documents required to be
prepared under New Zealand
law). ASIC must also be notified
of certain changes (e.g., the
appointment or resignation of
directors or changes to the
Company 's constitution).
Filing obligations applicable to
260
New Zealand
accounting policies,
notes to the accounts
and an audit report);
and
Australia
Australian registered companies
will not apply to the Company
as a foreign company.
an annual return
required under the
Companies Act.
Where it is noted that New Zealand law contains comparable provisions to those existing
under Australian law, and vice versa, it is emphasised that the summary table only
attempts to provide general guidance, and that the detailed provisions may contain
differences and may also be subject to differing interpretation by Australian and New
Zealand courts.
14
Australian Taxation
You should seek your own taxation advice on the implications of an investment in
the securities offered under this Prospectus and the Investment Statement. The
Prospectus contains information on New Zealand tax implications for non-resident
Shareholders, in Section 9 New Zealand Taxation Implications.
15
Privacy
If you apply for Shares, you will be asked to provide personal information to the
Company, the Registrar and their respective agents who will collect and hold the
personal information provided by you in connection with your Application at their
respective addresses shown in the Directory.
Personal information provided by you will be collected and used for:
(a)
(b)
(c)
(d)
261
To do these things, the Company or the Registrar may disclose your personal
information to each other and their related companies, respective agents,
contractors or third party service providers to whom they outsource services such
as mailing and registry functions. For the avoidance of doubt, this includes
disclosures of your personal information to recipients located in New Zealand and
may include the Joint Lead Managers. The Company or the Registrar may also
disclose your personal information to ASX, NZX, other regulatory authorities, any
entities or persons acting on your behalf (such as your broker) or as otherwise
required by law.
If you become a Shareholder, your information may be used or disclosed from time
to time to facilitate dividend payments and corporate communications and for
compliance by the Company with legal and regulatory requirements.
Under the Australian Privacy Act 1988 (Cth), you may request access to your
personal information held by (or on behalf of) the Company, the Joint Lead
Managers and the Registrar. You can request access to your personal information
by telephoning or writing to the Company, the Joint Lead Managers, or the
Registrar using the details shown in the Directory of the Prospectus.
16
Definitions
Unless otherwise defined, capitalised terms in this Additional Australian Information
have the same meaning as in Section 11 Glossary.
17
Enquiries
If you have any questions about the Institutional Offer in Australia, you should
contact one of the Joint Lead Managers.
If you do not understand any part of this Prospectus or the Investment Statement,
or are in any doubt as to whether to invest in securities offered under this
Prospectus and the Investment Statement or not, it is recommended that you seek
professional guidance from your solicitor, accountant or other independent and
qualified professional adviser.
262
263
264
persons to whom offers or invitations can be made without the need for a registered
prospectus under the Securities Act, and includes an Arowana Sophisticated Investor.
Indicative Price Range means $2.25 to $2.75 per Share.
Intueri means the Company and its subsidiaries, assuming the completion of the
Quantum Acquisition at the relevant time.
Intueri Education means the business of the Company as of the date of this Prospectus
(i.e. not including Quantum Education, but including the Companys 50% shareholding in
OCA).
Investigating Accountant means BDO Auckland.
Investment Statement means the investment statement in respect of the Offer.
Issuers means the Company and the Offeror.
ITO means Industry Training Organisations.
ITPs means Institutes of Technology and Polytechnics.
Joint Lead Manager and Organising Participant means each of Macquarie
Securities (NZ) Limited and UBS New Zealand Limited.
Key Executives means the Companys Chief Executive and Chief Financial Officer, and
the Managing Director of Quantum Education Group.
Net Profit means NPAT.
NPAT means net profit after tax.
NPATA means NPAT adjusted for the tax-effected amortisation of acquisition related
intangibles.
NSIA means the North Shore International Academy.
NZQA means New Zealand Qualifications Authority.
NZSCDT means the New Zealand School of Commercial Diver Training.
NZX means NZX Limited, also known as the New Zealand Stock Exchange.
NZX Firm means an entity designated as an NZX Firm under the Participant Rules of
NZX.
NZ GAAP or GAAP means New Zealand generally accepted accounting practice.
NZ IFRS means New Zealand equivalents to International Financial Reporting Standards.
NZX Listing Rules means the listing rules applying to the NZX Main Board as amended
from time to time.
NZX Main Board means the main board equity security market, operated by NZX.
OCA means Online Courses Australia Group Pty Limited, Online Courses Australia Pty
Limited, Conwal & Associates Pty Limited and Platinum e-Learning Pty Limited.
265
OCA Acquisition means the acquisition by the Company of 50% of the shares in OCA,
which settled on 31 March 2014.
Offer means the offer of Shares under this Prospectus and the Investment Statement.
Offeror means Intueri Education Group Holdings Limited.
Offer Management Agreement means the agreement dated 15 April 2014 between
the Offeror, the Company, Arowana and the Joint Lead Managers, as described in Section 8
Statutory Information.
Opening Date means 8 May 2014.
PFI means the prospective financial information for Intueri set out in Section 5.3
Prospective Financial Information.
PTE means private training establishment.
pro forma means on a basis assuming the combination of Intueri Education and
Quantum Education, at the relevant time.
Promoters means Arowana and each director of Arowana.
Prospectus means this document, the prospectus in respect of the Offer.
Quantum Acquisition means the acquisition by the Company of all of the shares in
Quantum Education Group Limited and Quantum Corporate Training Limited and the
acquisition by IML of the business and assets of Learntree Limited.
Quantum Education means the business of Quantum Education Group and Learntree
Limited.
Quantum Education Group means Quantum Corporate Training Limited and Quantum
Education Group Limited and their respective subsidiaries.
Registrar means Computershare Investor Services Limited.
RTO means Registered Training Organisation.
SAC means Student Achievement Component.
Securities Act means the Securities Act 1978.
Securities Regulations means the Securities Regulations 2009.
Selling Shareholder means Intueri Education Holdings Pty Limited, a wholly-owned
indirect subsidiary of Arowana.
Share means an ordinary share of the Company.
Shareholder means a person for the time being entered on the register of the Company
either alone or jointly with others as the holder of a Share.
TAFE means a technical and further education institution.
TEC means Tertiary Education Commission.
266
The forecast value of current and noncurrent bank debt less cash and cash
equivalents as at 31 May 2014.
267
268
269