annual report 2016 - goodstart early learning

annual report2016

Goodstart Early Learning Ltd | ABN 69 139 967 794

Contents Annual Financial Report

4 A message from our Chair, Michael Traill

6 Who is Goodstart?

7 Our Vision and Purpose

8 A message from our CEO, Julia Davison

10 Charting our course for the next five years

12 Building financial sustainability for reinvestment

14 Providing high quality early learning and practice

16 Building capability

18 Embedding the evidence in our practice

20 Raising voices and influencing policy

22 Cultivating a sense of belonging

24 A culture of safety delivers dividends for children, families and educators

26 Goodstart Stories

Directors’ Report 32Directors 32

Company Secretaries 34

Directors’ meetings 34

Principal activities 34

Operating performance 35

Company objectives 35

Measurement of performance 35

Members’ liability 36

Lead auditor’s independence declaration 36

Rounding off 36

Subsequent events 36

Auditor’s Independence Declaration 37

Financial statements 38Directors’ declaration 62

Independent auditor’s report to the members of Goodstart Early Learning Limited 63

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Goodstart Early Learning | Annual Report 2016 Goodstart Early Learning | Annual Report 2016

I want to pay tribute to our executive team and all of Goodstart’s hard–working people for the remarkable contribution they have each made to what has been a very successful year. I also want to thank the families who use our centres, for their continuing support and confidence in us.

As an advocate for children in the broader community and a partner for families in our centres, Goodstart continues to work to give children the best possible start in life. As an organisation we have a great opportunity to amplify the early learning discussion in Australia and improve the lives of thousands of children and their families.

Michael TraillChair, Goodstart

A message from our Chair, Michael Traill

Goodstart’s Purpose is to ensure Australia’s children have the learning, development and wellbeing outcomes they need for school and life. As Australia’s largest provider of early learning and care, we have a big role to play in building better lives. Around a third of the children in our services come from low income families who are most at risk of being developmentally vulnerable. To this end Goodstart is expanding our investment in social inclusion programs to ensure children and their families receive the support they need to succeed.

We also have a significant role to play in trying to influence important policy debates about the affordability and accessibility of quality early learning. We think we have a great story to tell about early learning, and 2016 has been a great time to tell it.

The Federal Government’s commitment of $3.1 billion to make child care and early learning more affordable for families was a significant achievement. Goodstart and its sector partners have played a key role in the development of this important reform and we continue to advocate to improve the package to ensure that children who can benefit most from early learning are able to access it.

Goodstart has also been working with leading early learning experts to better inform both advocacy and practice. In 2015 and again in 2016 we hosted a group of thought leaders from five countries to discuss what practices make the most difference to children’s lives and we have worked to embed those findings into the Goodstart practice framework now in use across our centres.

As part of our next stage of advocacy we want to engage the business sector in the discussion on the importance of early learning in driving the future quality of our workforce and economy. To this end we are forging a partnership in concert with Australian Research Alliance for Children and Youth (ARACY) and Early Childhood Australia (ECA), with the US–based Ready Nation group, which has a 10–year history of fostering business advocates for this cause.

While evidence–building and advocacy are important, the work our educators are doing every day, delivering quality early learning programs for the 69,600 children who attend our centres, remains our core focus.

We know from the available evidence that investing in the first five years of a child’s life has a huge impact on their later learning and life outcomes. One in five of Australia’s children start school developmentally vulnerable and this can be reduced by giving more children access to quality early learning.

As an organisation we have a great opportunity to amplify the early learning discussion in Australia

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Goodstart Early Learning | Annual Report 2016

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A consortium of leading community sector organisations—The Benevolent Society, The Brotherhood of St Laurence, Mission Australia and Social Ventures Australia—came together to form Goodstart Early Learning. We now operate 645 early learning centres, caring for 69,600 children from 58,500 families and employ around 13,400 staff.

Goodstart is a social enterprise that operates with strong business disciplines and reinvests operating surpluses into quality and social inclusion initiatives.

Our Vision is for Australia’s children to have the best possible start in life.

Our Purpose is to ensure children have the learning development and wellbeing outcomes they need for school and life.

The following principles guide the organisation to achieve this Vision and Purpose:

1. Children are central to everything we do

2. Families are our primary partner

3. Being a valued part of each unique Community

Goodstart’s Board is committed to providing strategic direction for the organisation in line with this Vision and Purpose.

645centres

69,600children

58,500families

13,400staff

Our Vision and Purpose

Who is Goodstart?

Goodstart is Australia’s largest early learning provider. As a not–for–profit social enterprise, we exist purely to improve the lives of Australia’s children and their families.

Goodstart strives to ensure children become successful life–long learners, develop the skills they need to transition to formal schooling and provide them with the skills to navigate an ever–changing world. Our programs are delivered in a supportive and nurturing environment and our centres welcome every child, regardless of their background or the challenges they may face.

We partner with parents to help children reach their full potential and we tirelessly advocate to Government and the community to ensure children and families have continued access to affordable, high quality early learning and care.

Goodstart has a passionate network of dedicated, professional educators who deliver the best available care and teaching outcomes, underpinned by evidence–based best practice in early learning. Our centres aspire to become an integral part of the local community they serve.

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Goodstart has evolved into a sustainable, long–term social enterprise, allowing us to make significant investments in the professional development of our people, improved centre environments and our important social purpose and advocacy agendas.

This year we introduced The Goodstart Practice Guide, a resource for early learning professionals developed as a collaborative project with our educators. The Guide features Goodstart’s own practice framework, ISTEP, which provides our educators with a consistent structure to design quality learning experiences and assess the outcomes.

Our efforts to lift quality standards have been rewarded with more than 80 per cent of our centres meeting or exceeding the National Quality Standard, including nine centres receiving an Exceeding rating for all seven quality areas.

As we move into the next phase, it is important that we stay focussed on achieving the best outcomes for children and building our relationships with families. We are also committed to continuing to support vulnerable and disadvantaged children who can lead enhanced lives with access to quality early learning and care in their formative years. Crucially we must stay focussed on constantly improving safety standards for our children and employees.

To achieve our goals, we need to work hard to drive attendances at our centres so we have the financial capacity to deliver on our Vision. This is becoming increasingly challenging as competition in the sector looms larger and the cost of child care remains a major issue for many families.

To this end we are continuously working on ways to make our support functions more efficient so we can keep fee increases for families to an absolute minimum. We also continue to lobby the Federal Government to implement policies that make child care more affordable for families, particularly those with low incomes.

Our advocacy efforts reaped rewards in 2015–16 with our campaigns engaging tens of thousands of families and the issue of child care affordability attracting considerable attention during the federal election campaign.

Advocacy efforts during the year, in partnership with the broader sector, were also instrumental in the introduction of legislation for a $3.1 billion Child Care Package which remains a keystone of the government agenda for the new term. This package is an important initiative for Australia’s families and we will continue to lobby for its passage through both houses of parliament and for amendments to better serve the needs of vulnerable children.

A message from our CEO, Julia Davison

The 2015–16 financial year saw significant progress towards all six of Goodstart’s strategic goals with particular emphasis on lifting our quality, embedding state–of–the–art early learning practices and increasing our commitment to social inclusion programs.

Goodstart is now well placed to embrace the opportunity envisioned by our founders

Despite the competitive pressures, I am proud that we have again been able to double our investment in social inclusion initiatives and we invested $27 million on centre improvements. This included a large investment in new technologies to improve the efficiency of our frontline services and engage more deeply with our families. In 2015–16 we also invested more than $13 million in professional development initiatives for our people.

Nothing could be achieved without the hard work of our dedicated people. I would like to thank all of our teams for their unrelenting passion and commitment to constantly improving outcomes.

Goodstart is built on a powerful and ambitious notion of our nation’s future that we are pursuing with passion. We are now well placed to embrace the opportunity envisioned by our founders to energise Australia’s future and transform the way the nation views early learning and the first years of life.

Julia DavisonChief Executive Officer, Goodstart

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Charting our course for the next five years

This year we launched our Strategic Direction 2015–2020 adding three goals—Evidence, Influence and Great People. These new goals, together with our foundational goals—High Quality, Financial Sustainability and Inclusion will drive our strategic direction over the next five years bringing us closer to realising our Vision.

To see how we bring our plan to life, you can view our animation here: https://vimeo.com/goodstartel/strategic

Financial SustainabilityGenerate a surplus to reinvest in our

network, our people and our purpose.We aim for more than financial stability. Goodstart

will establish strong links between our financial objectives and our social purpose objectives. We

will utilise all of our resources, human and financial, to increase our social impact and deliver better

outcomes for all children.

Great PeopleBuild a capable, aligned, and engaged workforce.

We are committed to keeping our people safe and to creating a highly engaged workforce, united by our Vision, Purpose and Guiding Principles. We will

attract great people and channel their talents through effective leadership, employee recognition and

professional development. We will also strive to support workforce development across the sector.

InfluenceIncrease public commitment to high

quality early learning and care.As a social enterprise, we have a responsibility to

advocate for children and the importance of early learning. We will use our influence as Australia’s

largest early learning and care provider, and our achievements working with children, families and

communities to advocate for increased commitment to quality early learning.

High QualityEnsure all our centres deliver

high quality early learning and care in a safe environment.

Our ambition is to develop and embed Goodstart’s own unique approach to quality, based on what works

best for children. We will go beyond the standards set by the National Quality Framework, and build on the foundation of the Early Years Learning Framework

through Goodstart’s own Practice Guide.

EvidenceEmbed evidence–informed practice and strengthen the Australian evidence base.

We will contribute to research and evaluation to strengthen the Australian early childhood evidence

base. At a centre level, evidence will inform our practice, and our practice will add to the evidence

base. We will create an outcomes framework and pilot measures for improved quality practice.

InclusionEnhance outcomes for children in vulnerable circumstances.

We will improve access to quality early learning for children facing disadvantage, through targeted

programs and integrated services. We will also ensure our educators build the relevant expertise and

experience to produce better outcomes for vulnerable children and families.

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The strength of Goodstart’s underlying business continues to build as we invest in improving facilities, engaging more deeply with families and communities and placing an even–greater focus on offering quality, affordable early learning and care.

Despite growing competition in the sector and continuing pressure on family budgets, in 2015–16 the organisation was able to allocate more than $27 million towards capital investment in centres and more than $13 million on the professional development of our people.

Goodstart is now on a very solid path towards long–term sustainability and is already driving significant

surpluses for reinvestment into its important social inclusion work, in particular our support services for vulnerable and disadvantaged children.

This is being achieved at a time when attendances are under pressure as more operators enter the market and affordability remains an issue for many families.

In 2015–16 Goodstart achieved a statutory net surplus of $18.968

million compared with $15.867 million in 2014–15. On a like–for–like basis (removing the extra trading week in 2015–16), the organisation achieved a $17 million

surplus during the financial year, up 8 per cent on the previous year. Total 52 week revenue of around $900 million represented a 5 per cent annual increase.

The strong result at a time of challenging trading conditions comes off the back of a program of continuous improvement of our offer to families and increased efforts to drive efficiencies to help us keep fee increases to a minimum.

Through this process we were able to introduce the new National Quality Standard staff–child ratio requirements in January 2016 without a corresponding fee increase.

We are placing particular emphasis on improving our front–line services and ensuring centre–support functions are streamlined and highly responsive to the network’s needs. To this end, 448 centres now have administration support, empowering centre directors to spend more time engaging with families and teams.

Building financial sustainability for reinvestment

19%Rent & property expenses

4%Centre consumables

4%Other operating costs

4%Depreciation, amortisation,

impairment & financing

2%Surplus

67%Employee costs, staff training & professional development

Annual Operating Costs

Financial Sustainability

Financial Summary FY16 FY15$’000s

Underlying surplus from trading operations 45,078 40,438

(less) Strategic investments

Training & professional development1 (10,864) (6,553)

Early learning & research (4,128) (4,753)

Social inclusion (3,806) (1,611)

Goodstart Institute of Early Learning operation (2,205) (1,620)

Early Years Quality Fund (EYQF) Expenses2 – (7,548)

add/(less) non–cash accounting adjustments

Impairment of ABC brand & curriculum (2,954) –

Onerous contracts 102 338

Results from operating activities 21,223 18,691

(less) net finance costs (2,255) (2,824)

Statutory net surplus 18,968 15,867

1 Excludes spend in staff programming, previously disclosed as part of training & professional development.2 Includes $6m spend related to EYQF grant, and $1.54m is Goodstart’s contribution in FY15.

More than

$27 millioninvested in capital projects

including

$6.9 millioninvested in improved technology

Increase of

5 per centin revenue year–on–year

Goodstart is also improving our physical environments, investing in the best people and developing a deeper understanding of the needs of families so our services are genuinely aligned with their requirements.

Capital projects in 2015–16 included the investment of more than $9 million to upgrade play spaces and more than $4.5 million into significant building improvements. A further $6.5 million was spent on the improvement and maintenance of centres and close to $7 million was invested in upgraded technology and improved Wi–Fi capacity in centres.

The Goodstart footprint continues to grow with an additional six centres added to the network in 2015–16. This included two new purpose–built centres at Double Bay in New South Wales and Hobart West in Tasmania and four centres in South Australia and the Northern Territory acquired from another operator. Over the same period four Goodstart centres were on–sold to other operators and one centre was closed.

Goodstart enters the 2016–17 financial year well on track to meet its financial sustainability goals and committed to continuous improvement of the underlying business to allow even greater future investment in our social purpose agenda.

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The results put Goodstart in a leading position in the sector and reflect an unrelenting desire to set a high–quality standard for early learning and care.

In 2015–16, 168 centres were assessed against the NQS. Forty–four of our centres were rated as Exceeding the quality standards and nine of those received that rating for all seven quality areas of the NQS.

In total, 81 per cent of our centres assessed in 2015–16 are meeting or exceeding the NQS and we continue to work hard to ensure all of our centres provide the best–possible offering to maximise outcomes for children.

As an organisation, we have an unrelenting desire to continually improve high–quality standards for early learning and care, and are pleased to report our centres overall are tracking ahead of the sector average.

Goodstart’s commitment to continually improve the quality of our practice, learning programs and our environments was evident again with the majority of centres assessed in the financial year achieving a Meeting or Exceeding rating against the National Quality Standard (NQS).

Providing high quality early learning and practice

through trial and error. It equips them to be successful learners, to adapt to the school environment and their subsequent life journey.

As Australia’s largest early learning provider, we have access to the best–available early learning research and we can tap into the talent and experience of more than 13,000 dedicated staff across the country.

We are investing heavily in the professional development of our people and adopting recruitment strategies designed to attract the best–possible people to our centres and support offices.

Our early learning practice is supported by a strong commitment to capital investment, facilities, learning materials and maintenance to create the most conducive physical environments for child outcomes. We are also engaging more deeply with families and communities to ensure our commitment to best practice is fully aligned with their needs and aspirations.

High Quality

A total of

81% of centresassessed in 2015–16 rated as Meeting or Exceeding NQS

A total of

44 centres assessed in 2015–16 rated as Exceeding

The quality and consistency of our practice was greatly enhanced in 2015–16 with the implementation of The Goodstart Practice Guide developed by Goodstart drawing on the best international evidence and co–designed with our teams.

The Guide is based on the ISTEP framework – a simple but powerful tool to guide and review our early learning practices. ISTEP has five components:

• Interactions and relationships

• Space, resources and materials

• Time, routines and rituals

• Experiences for learning

• Planning, documentation and evaluation

Our educators use this structure to design quality learning experiences and assess whether we are achieving the best outcomes for children.

Goodstart centres aim for the right mix of fun, structured learning and physical activity. We employ more than 900 qualified teachers and we build safe and nurturing environments where the child’s experience is paramount. We also have 43 early learning consultants working directly with educators to constantly enhance our offering to families.

Our programs put a strong emphasis on building social and thinking skills, language and independence. Play–based learning allows children to explore new ideas and test their skills, thinking and knowledge

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We work hard to retain staff, resulting in one of the lowest staff turnover rates in the sector. During the financial year, our employee initiated churn rate has dropped to 11 per cent, and our employee engagement scores came in at the top end of results among large employers.

The declining employee turnover helped to ensure a stable staff environment at our centres, in line with the

desires of families and the best–outcome model for the children in our care.

Goodstart invested $13 million in professional development and training in 2015–16 and more than 800 educators took part in professional–learning days during the year.

The growing professionalism of our workforce was recognised with the acceptance of a new 2015–2018 Enterprise Agreement

providing a 3% initial pay rise for all centre employees and subsequent annual pay rises of 3 per cent and 2.4 per cent. As part of the same agreement, centre directors and early childhood teachers received an initial pay rise of 4.5 per cent followed by annual increases of 4.5 per cent and 4.2 per cent.

The new agreement places Goodstart in a strong position in the sector to continue to attract the best people and ensure they are suitably remunerated. In this context we continue to pursue the mantra of “the right person for the right role” and we have devoted considerable resources to performance–excellence programs, building team capability and ensuring roles are well designed for their purpose.

As part of this exercise, most centres have employed administration staff to free up centre directors to concentrate on the core aspects of their role and offering services and practice highly aligned to family needs.

Our professional–development programs are being evolved to ensure they are flexible and in line with the delivery requirements of a diverse and geographically–dispersed network. They are delivered through such platforms as webinars, online learning and workshops. Centre directors are also brought together to engage in the broader organisation strategy and to network with other directors through the five–day CD Welcome Induction Program, the CD Elevate program and the annual state conferences.

Goodstart places a very strong emphasis on building high–performing teams and attracting the best people. During 2015–16 significant progress was made in growing our people capacity and investing in training and professional development.

Building capability

Great People

More than

$13 million invested in professional development and training

Employee turnover reduced to

11%More than

3,000 staffsupported through the Professional Capability Program

We continue to invest in the employment of qualified teachers in our centres, with more than 900 now in place across the network. The quality of our early learning offering has also been improved through the implementation of Goodstart’s own practice framework which provides educators with a state–of–the–art guide to help structure high–quality learning steps for children.

We are continuing to research the wants and needs of our people and others in the sector so we can evolve our employee offering in line with the aspirations of early learning and associated professionals.

Goodstart is also continuing to explore ways to recognise the achievements of our people, including through expanded categories in our annual “Goodies” awards.

We are well placed to continue to build high quality professional teams who will ensure we can set the standard for early learning and care and provide children with the best–possible outcomes to equip them for school and life.

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Significant progress was also made in partnering with universities on research projects that will add to the early learning body of evidence, benefitting Goodstart and the wider early learning sector.

The introduction of The Goodstart Practice Guide as part of our broader practice framework marks the beginning of a game–changing approach to evidence–informed practice. The Guide has been greeted with enthusiasm by our educators and 15,000 copies of it were requested in the first wave of distribution.

The Goodstart Thought Leaders Program, an initiative designed to fully engage the organisation with the best early learning research and thinking from around the world, continued in 2015–16.

The thought leaders’ engagement involves bringing leading academics and sector leaders to Australia once a year for concentrated discussions on the best–available evidence and how it can most effectively be adopted.

The June 2015 sessions concentrated on how centre practices could make the most positive difference to a child’s life. This discussion provided much of the foundation thinking for the practice framework that was ultimately developed and implemented.

The Thought Leaders Program was repeated in 2016 with a greater emphasis on using the visiting experts to engage the sector, business and government and a specific focus on how evidence can drive policy change for the betterment of children and families.

Among the group hosted by Goodstart in 2016 were economists Professor Steve Barnett (USA) and Professor Gordon Cleveland (Canada), and CEO of the Education Endowment Foundation, Sir Kevan Collins (UK).

The group also included a stellar line–up of international early learning researchers including Professor Ted Melhuish (UK), Professor Jane Bertrand (Canada), Professor Iram Siraj (UK) and Professor Margaret Carr (NZ). They were joined by leading researchers and sector leaders from Australia.

Embedding the evidence in our practice

Evidence

Discussions with 12international thought leaders

Major research partnerships with

3 universities

Goodstart has forged a strong relationship with the University of Wollongong to partner on a series of research projects, including an evaluation of the learning environment, educator practice and implementation of the new practice framework.

The partnership also involves the Researching Effective Early Learning Study which explores the role of intensive professional development in enhancing child development through the practice framework.

Goodstart is a partner in two Australian Research Council Linkage Projects. The first of these is with the University of Sydney, evaluating parent perspectives on child care quality to help align the evidence around early learning and child care choice.

The second project with the Queensland University of Technology is designed to identify effective strategies to grow and sustain a professional early years workforce.

Goodstart continues to monitor other early learning research from around the world to ensure we are at the cutting edge of practice development and playing a leading role in championing evidence–based approaches.

As a large–scale provider, Goodstart is a “living laboratory” for early learning and will continue to make a powerful contribution to the body of evidence about how to ensure children have the learning, development and wellbeing outcomes they need for school and life.

Goodstart experienced a watershed year in 2015–16 in creating a quality early learning practice framework. Drawing from foundational information provided by leading international researchers and thought leaders, Goodstart co–designed with educators its own practice framework and guide to ensure adoption and relevance to the local communities where our centres are based.

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The past 12 months has been a particularly successful period for Goodstart advocacy activities. Goodstart, working with our sectoral partners, played a major role in influencing the shape of the Federal Government’s $3.1 billion childcare reform package and rallied Australia’s parents and their supporters to keep affordable early learning and care top of mind for policy makers.

While the introduction of the child care package was delayed by a federal election and difficulties achieving Senate support for other budget measures, it remains a key plank of the Federal Government’s legislative program. Goodstart is hopeful the measures will be implemented to help address child care affordability and early learning access issues for Australia’s families. To this end we will continue to lobby for federal representatives to support the package and for amendments to ensure it better meets the needs of Australia’s most vulnerable children.

Raising voices and influencing policy

Influence

Introduction of

$3.1 billionChild Care Package legislation

More than

25,000online supporters for the SmartStart campaign

Advocacy has been part of the Goodstart Vision and ambition from its inception. As a large not–for–profit social enterprise, the organisation is uniquely placed to exert influence on policy–makers on behalf of Australia’s children and families.

During 2015–16 the SmartStart campaign, established to help families influence governments on early learning and child care issues, achieved significant traction.

More than 25,000 people are registered in the SmartStart database and more than 32,000 visited the SmartStart website over 12 months. The campaign reached more than 500,000 Australians through social media and digital advertising and was instrumental in encouraging 180 submissions to a Senate inquiry into child care and employment impacts.

The campaign also attracted significant media coverage, with commissioned economic reports, detailed policy submissions, high profile events and surveys completed by more than 3000 SmartStart supporters on the influence of childcare affordability

on workforce participation. Dozens of federal and state parliamentarians visited our centres in the past year, seeing firsthand the impact that early learning has on children’s lives.

During 2015–16 Goodstart hosted 12 respected international researchers and leaders in early learning with a particular focus on influencing policy through quality evidence on the impact of early learning on child development. The results of these discussions will help inform the development of a long–term advocacy strategy for the organisation.

Goodstart is also an active participant in sector discussions that seek to identify common ground on policy issues and strengthen the impact of lobbying efforts on behalf of families and children, particularly through our membership of the Early Learning and Care Council.

Goodstart is committed to transforming the national narrative on the importance of early learning. This includes ensuring that vulnerable children, who benefit most from quality early learning and care, get the support they need in the first five years of life, to succeed in later life.

Over time we want to ensure that affordable, quality early learning and care is a national aspiration both for families and for government policy. We also want to work with business to increase understanding of the importance of the early years to Australia’s social and economic future.

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Cultivating a sense of belonging

Inclusion

More than

8,000 familiessupported to access financial support

Increase to

25 EChO centresoffering enhanced services

Goodstart doubled its investment in social inclusion initiatives in 2015–16 as it strived to develop and expand programs to help ensure disadvantaged and vulnerable children can have the best possible start in life.

During the year $3.7 million was invested in social inclusion activities and a further 10 of our centres in communities facing disadvantage became EChO (Enhancing Child Outcomes) centres. We now have 25 EChO centres offering children and families additional multi–disciplinary staffing and outreach to community services and allied health professionals.

Goodstart also welcomed 1,300 children with additional needs and supported more than 8,000 children and families to access financial support. Our partnership with the Woodside Development Fund provided support for around 2000 vulnerable children in Western Australia.

Our educators are highly engaged with Goodstart’s social inclusion goal with more than 450 completing the Family Connections Program, which is designed to improve the quality and effectiveness of partnerships and collaborations with children and families.

During 2015–16 we expanded our support for children and families from culturally and linguistically diverse backgrounds. This included work on our second Reconciliation Action Plan (RAP) which will define our commitment and actions towards reconciliation with Aboriginal and Torres Strait Islander peoples over the next four years. This year, we also welcomed fifteen Aboriginal trainees and three Aboriginal interns into the organisation.

We launched the Fitzroy Crossing Secondment Program, supporting eight educators to spend several months at the Baya Gawiy Buga yani Jandu yani u Centre in Western Australia, 400 kilometres east of Broome. The program helps ensure that children in that community have access to quality early learning and care, as well as helping educators to build their cultural understanding and experience.

Social inclusion is a fundamental part of Goodstart’s Purpose and Vision. International evidence unequivocally supports the view that ensuring disadvantaged children have access to high quality early learning and care can make a significant difference to their likelihood to be successful in school and life.

Inclusion is about belonging. When children belong, they feel safe, nurtured and cared for. In this environment they can learn and thrive. Goodstart is fully committed to growing such environments and ensuring that quality early learning and care is available to everyone regardless of their circumstances.

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A culture of safety delivers dividends for children, families and educators

More than

$2.6 million savings in retro–paid loss workers compensation premiums

More than

90% completion rateof monthly safety inspections

Our continued focus on safe environments and practices for our people and children is sector leading. In 2015–16 we saw evidence of increasing engagement by centres in hazard management and progressive savings in our overall workers compensation premiums based on improved return–to–work practices.

Goodstart has invested in developing the capability and accountability of our people on safety issues. Safety for us is not about ticking boxes. It is about

working with integrity and having a commitment to safe environments at every level of the organisation. Success will come with people understanding why it is important to be safe and believing everyone has the right to a safe workplace.

We have adopted innovative approaches to safety that have changed the way our people view their environments. This involves

applying a lens that is focussed on potential hazards and acting to mitigate them. This approach is called iSpy— a program in which we provide our educators

with pictures from our centres and they work together to identify the hazards and risks and then find solutions to resolve them.

Our Safe Work and Wellbeing team develops facilitator guides for our centre directors who work through the pictures with their teams. By making our learning approach to safety a little more fun, we have ignited the interest of our people in a topic that has traditionally struggled for engagement.

Goodstart has participated in the retro–paid loss workers compensation scheme in New South Wales and South Australia. Entry into these schemes gives us the opportunity to realise the benefits of our safety focus in a financial sense with the organisation netting a premium saving of $2.6 million dollars this year. This saving is based on the difference between our retro–paid loss premium and the amount we would have paid in the standard compensation scheme.

These savings can be reinvested back into our centres to create quality environments for our people and children. As we constantly learn and improve in our approach to safety and injury management, we are sharing these learnings with the rest of the early learning sector. This allows us to be instrumental in improving safety for everyone in the sector.

Safety is at the core of everything we do at Goodstart. We are building a culture in which our people create engaging and stimulating environments for children to safely experience and manage day–to–day risks as part of their play and learning.

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Goodstart is an organisation powered by thousands of stories about real people and the impact our centres and teams are able to have on their lives. It still takes a village to raise a child and our dedicated people are working hard to support those most in need. These are some of their stories.

Goodstart Stories

Charlie is a three–year–old boy attending a Goodstart centre. Goodstart was his first experience in the early learning environment and the educators noticed that he was having great difficulties settling in.

Specifically, he found it difficult to relate to other children, follow the daily routine and sit for lunch and during circle time. He often became overwhelmed in the large group, lashing out at other children. Educators at the centre felt like they did not know much about Charlie as his father would carry him in each day and leave immediately.

Charlie’s room leader and educators met with the occupational therapist working at the centre to talk about their

concerns for Charlie. It was identified that there was some sensory input (taste, touch, sight, sound, movement) that Charlie loved and some that he very actively avoided. Through workshops and mentoring from the occupational therapist, the educators were able to learn more about Charlie’s sensory preferences. They devised strategies to reduce the sensory input that irritated Charlie and increase sensory input that he enjoyed and found calming. They also provided more frequent small–group activities which were less overwhelming for him.

Educators let Charlie’s father know at drop–off and pick–up how they were supporting Charlie, celebrating and sharing what was working. This led to conversations with the father about the things that could also be done at home

so that everyone could work on shared strategies and goals.

Charlie’s father began to notice that Charlie was more engaged at the centre and started to understand the sensory strategies that were helping Charlie participate. After a few weeks he requested a meeting with the educators, centre director and occupational therapist to learn about what was working at the centre as they were having difficulties at home. This led to a referral to a paediatrician for additional support. Charlie went on to receive a diagnosis of autism and is now accessing early intervention therapists in conjunction with his participation at Goodstart. The family, educators and therapists have set up a diary to communicate common strategies, achievements and goals for Charlie.

Real names have not been used in these case studies. Real names have not been used in these case studies.

Charlie’s story

April was two years old when she arrived at a Goodstart Early Learning centre. She was living with her grandmother after the Department of Human Services removed her from her 17-year-old mother’s care. She attended Goodstart Early Learning in a full-time capacity.

The Goodstart centre director saw high levels of stress, anxiety and physical and verbal aggression in April’s behaviour and began holding six-weekly meetings with the Department of Human Services and April’s grandmother. The centre director

met with Goodstart’s national inclusive practices consultant and developed a functional behaviour assessment format.

Together with the other Goodstart educators, an emotional care plan was developed for April. The centre director identified many of April’s physical and emotional needs were not being met and April was eventually removed from her grandmother’s care and placed in three different successive foster care environments.

The department flagged removing April from her early learning centre to one closer to her foster carers. Her centre director identified the importance of April forming a secure, safe and predictable relationship with educators and as a result the department appointed

a driver for the one-hour return drive each day.

To try to encourage a stable, long-lasting relationship with her mother the Goodstart team began facilitating meetings at the centre three times a week for one hour, so the mother and her daughter could spend time together. April’s mother was pregnant at the time and was in a new stable relationship. She expressed a desire to have April returned to her care.

The centre director continued to advocate on April and the mother’s behalf. April is now five and a half years old and attends prep at the local primary school. She is living back with her mother and her new brother, and the centre receives positive updates often.

April’s story

27


Real names have not been used in these case studies.

The Wollert family moved to Mernda, Victoria leaving behind family and friends two years ago in search of affordable housing. They have two children, an 18–month–old daughter and a 5–year–old son, Daniel.

Shortly after Daniel commenced at the Jindi Kindergarten and Extended Care centre, educators identified that Daniel had significant learning and development challenges. Educators raised their concerns with Daniel’s parents and a range of early–intervention supports were put into place. A number of other learning strategies were identified that the parents could undertake at home.

Not long after it became evident that the family was struggling to maintain its child care payments. Based on relationships developed with the family, the centre was able to have an open discussion with them about their payments. It was discovered through those conversations that the family had experienced an unexpected interruption and subsequent change in employment status due to poor health.

This change in employment caused significant strain on the household budget. Financial commitments like rent, utilities, child care fees, credit card and other debts quickly fell behind. To support the family, the centre was able to provide information and referrals to community legal, housing and financial counselling services.

The centre was also able to implement a flexible payment plan for the family to help them manage their fees. Information and support about training and employment was provided to the mother who aspires to enter a more secure and skilled industry.

In 2016 Daniel started at a local primary school, something his parents did not think would have been possible a year ago. Integral to this was the centre’s focus on family engagement, early intervention and an integrated approach to supporting children and families. The mother continues to access support at the Jindi centre to progress her employment goals and aspirations.

The Wollert family’s story

Goodstart opened the Jindi Kindergarten and Extended Care centre last financial year in partnership with the Brotherhood of St Laurence and Whittlesea Council. It is an integrated centre providing early education and care in the context of a child and family centre. Additional services for families and children include allied health, playgroup, community outreach services, access to Maternal and Child Health and economic participation programs for parents.

Jai was one of the first parents to join Goodstart’s New Families Playgroup Initiative at the Jindi Kindergarten and Extended Care centre. She had newly arrived in Australia and did not know anyone in the community and was feeling isolated.

Jai’s daughter did not speak English and had not interacted with other children since leaving India. Through playgroup, Jai met other families and soon made friends, as did her daughter.

Centre staff had a number of conversations about work in Australia and Jai attended information sessions facilitated at the centre providing information on entering the workforce. Jai

decided on an early childhood certificate and started volunteering with the playgroup at the centre. Ultimately staff at the centre were able to assist her to obtain a placement there.

Since then Jai has been successful in gaining a casual position at Goodstart, her first work experience in Australia and a great motivation to continue with her studies and career.

Jai’s story

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28


Annual Financial Report

Goodstart Early Learning LimitedABN 69 139 967 794 30 June 2016

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6 Wendy McCarthy AOBA; Dip Ed; MAICDNon–executive Deputy ChairChair, Early Learning and Care Reference CommitteeAppointed 21 September 2010

Wendy McCarthy is an experienced manager and company director who began her career as a teacher. She moved out of the classroom into public life in 1968 and since then has worked for change across the public, private and community sectors.

She has held many significant leadership roles including eight years as Deputy Chair of the Australian Broadcasting Corporation, ten years as Chancellor of the University of Canberra, and 12 years of service to Plan Australia as Chair, with three years as Global Deputy Chair for Plan International. In June 2016 she completed eight years as Chair of headspace, the National Youth Mental Health Foundation.

Wendy currently chairs Circus Oz and is a Non–executive Director of IMF Bentham.

Wendy was appointed an Officer of the Order of Australia for outstanding contributions to community affairs, women’s affairs and the Bicentennial celebrations, and received a Centenary of Federation Medal for business leadership. Most recently she was the inaugural inductee to the Women’s Agenda Hall of Fame.

7 June McLoughlinNon–executive DirectorMember, Early Learning and Care Reference CommitteeAppointed 15 December 2015

June currently holds positions as Director Early Years and Community Engagement at the Colman Foundation, and Director of Family and Children’s Services at Doveton College. June has recently been appointed to the WA Early Childhood Development and Learning Collaboration Advisory Board hosted by Telethon Kids.

June has extensive experience in both policy and service development, research and practice in the early childhood, family support and children’s services fields, which has given her a broad and deep understanding of issues relevant to the needs of parents and their children.

June has managed many state and national projects designed to refocus early years services to provide more integrated support for families with young children with a particular interest in vulnerable children.

Directors’ ReportFor the year ended 30 June 2016

The directors present their report on the consolidated entity (the “Group”), consisting of the financial report of Goodstart Early Learning Ltd (“Goodstart” or the “Company”), and the entities it controlled for the financial year ended 30 June 2016 and the auditor’s report thereon.

DirectorsThe directors of the company at any time during or since the end of the financial year are set out below:

1 Michael Traill AMBA (Hons); MBANon–executive ChairMember, Audit and Risk CommitteeMember, Early Learning and Care Reference CommitteeChair, Remuneration and Nominations CommitteeAppointed 13 October 2009

Michael was Chief Executive of Social Ventures Australia (SVA) for 12 years from 2002 to 2014. Prior to that he spent 15 years as a co–founder and Executive Director of Macquarie Group’s private equity arm, Macquarie Direct Investment.

Michael is also Chair of the SVA Leadership Council, Assetic, and a director of MH Carnegie & Co, SunSuper, Australian Schools Plus, Australian Philanthropic Services and the National Museum of Australia.

In 2010 Michael was made a Member of the Order of Australia in recognition of his services to not–for–profit organisations.

2 Lynelle Briggs AONon–executive DirectorMember, Audit and Risk CommitteeAppointed 15 December 2015

Lynelle is the Chairperson of NSW’s Planning Assessment Commission. She is also a Councillor with the Royal Australian College of General Practice, an Independent Director with Maritime Super, and Independent Chairperson of the General Insurance Code Governance Committee.

Lynelle is a former Public Service Commissioner and former Chief Executive of Medicare Australia. She has extensive experience in the Australian Public Service, working in a wide range of fields, including social security, health and

community services, transport, external territories, employment and labour market support and veterans’ affairs.

Lynelle became an Officer in the General Division of the Order of Australia in 2013 for distinguished service to public administration, particularly through leadership in the development of public service performance and professionalism.

3 Julia DavisonBSc (Hons); MPA; MAICDDirector and Chief Executive OfficerAppointed 29 June 2011

Prior to joining Goodstart as its Chief Executive Officer in February 2011, Julia had extensive senior management experience in the human services sector in Australia and the UK.

Between 1999 and 2004 she was CEO at Flinders Medical Centre, a large teaching hospital in Adelaide. From 2004 to 2010 Julia was CEO of WorkCover SA, a statutory authority which manages the South Australian Workers Rehabilitation and Compensation Scheme, extending protection to 430,000 employees in SA.

Julia is on the Board of Cape York Girl Academy and has held a number of non–executive roles including Chair of Catherine House, a not–for–profit working to solve women’s homelessness, Director of Territory Insurance Office, NT and Director of Business SA.

4 Greg Hutchinson AMBA (Hons); MScNon–executive DirectorMember, Early Learning and Care Reference CommitteeMember, Remuneration and Nominations CommitteeAppointed 28 May 2010

Greg is an Advisory Partner and former Partner/Director at consultancy firm Bain & Company. He has 30 years’ experience leading major strategic and operational change programs for global corporations in Asia, Europe and North America.

Greg also became the founding Chief Executive of The Australian Charities Fund in 2000, building workplace giving in private and public sector employers. He transitioned to Deputy Chair in 2005. He is also a Director of Women’s Community Shelters, Centre for Social Impact and Bell Shakespeare.

In 2014 Greg was appointed a Member of the Order of Australia for service to the community, business and social enterprise.

5 Rob KoczkarB Eng (Hons)Non–executive DirectorChair, Audit and Risk CommitteeAppointed 28 May 2010

Rob Koczkar has extensive experience in investing and management consulting, along with a deep understanding of the social purpose sector. He joined SVA as CEO in October 2014.

Prior to joining SVA Rob was a Managing Director of Pacific Equity Partners from 2004–2014, and a Principal with Texas Pacific Group. He led investments in a number of companies including Energy Developments, Spotless, and Collins Foods. Rob also spent seven years with Bain & Company, advising clients on issues relating to strategy, mergers, and operating improvements in a wide range of industries.

He currently serves on the boards of Social Ventures Australia, and Spotless Group Holdings Limited. He has previously served as the Chairman of Energy Developments Limited.

8 Andrea StainesB Econ; MBANon–executive DirectorMember, Audit and Risk CommitteeMember, Remuneration and Nominations CommitteeAppointed 23 March 2011

Andrea Staines is a professional Non–executive Director and company advisor. She is currently a Director of QIC Limited, Sealink Travel Group, Uniting Care Qld and Tourism Australia. Andrea also advises small and medium–sized companies on implementing board governance, strategic planning, and risk management.

She is a former CEO of Australian Airlines, a Qantas subsidiary flying between Asia and Australia, which she co–launched in 2002. Prior to Qantas, Andrea worked in various financial roles with American Airlines at its Dallas headquarters.

Andrea is a Fellow of the Australian Institute of Company Directors, a member of CEW (Chief Executive Women) and an occasional MBA Guest Lecturer and CEO Mentor.

9 Lynne Wannan AMBA; Dip Ed; GAICDNon–executive DirectorMember, Early Learning and Care Reference CommitteeMember, Remuneration and Nominations CommitteeAppointed 21 September 2010

Lynne was most recently Director of the Office for the Community Sector, Department of Health and Human Services, Victoria. She has a background as a policy analyst and manager who has worked as a consultant and community leader and has been an adviser to government at local, state and national levels for more than 25 years.

Previous positions Lynne held include Chair of the Victorian Government’s Children’s Council, Adult Community and Further Education Board and the Community Support Fund Advisory Council. Lynne has also been a Commissioner on the Victorian Skills Commission and member of the Victorian Qualifications Authority.

Lynne has been inducted as a Fellow of the Institute of Public Administration (IPAA—Victoria). She was recognised with an Australia Day award in 2007 for her leadership in community services and education and is listed on the Victorian Women’s Honour Roll.

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Directors’ Report (continued)

Company SecretariesLois Aumuller AGIA was appointed to the position of Company Secretary on 23 August 2011. Lois is a corporate governance professional with over 20 years’ experience gained through company secretarial and governance administration positions in not–for–profit, publicly listed and government owned organisations both in Australia and the United Kingdom.

Gavin Bartlett LLB was appointed to the position of Company Secretary on 28 May 2010. Gavin is a solicitor admitted in the States of Queensland and Victoria and to the High Court of Australia, and has 17 years’ experience in leading Australian legal firms and in managing in–house legal teams across Australia and New Zealand.

Directors’ meetingsThe number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year ended 30 June 2016 were:

Board of Directors

Audit and Risk Committee

Remuneration and Nominations

Committee

Early Learning and Care Reference

Committee

A B A B A B A B

L Briggs* 5 4 3 3 – – – –

J Davison 7 7 – – – – – –

G Hutchinson 7 6 – – 3 3 3 1

R Koczkar 7 7 5 5 – – – –

W McCarthy*** 7 7 – – 0 0 3 3

J McLoughlin** 5 5 – – – – 1 1

A Staines*** 7 6 5 4 0 0 – –

M Traill 7 6 5 5 3 3 3 2

L Wannan 7 7 – – 3 3 3 2

A Number of meetings held during the year while the director was a member of the Board or Committee

B Number of meetings attended by the director during the year while the director was a member of the Board or Committee

* L Briggs was appointed to the Board with effect from 15 December 2015 and to the Audit and Risk Committee from 17 February 2016

** J McLoughlin was appointed to the Board with effect from 15 December 2015 and to the Early Learning and Care Reference Committee with effect from 17 February 2016

*** W McCarthy and A Staines were appointed to the Remuneration and Nominations Committee with effect from 17 February 2016

The Executive Director (CEO) attends the Audit and Risk Committee, Remuneration and Nominations Committee and Early Learning and Care Reference Committee at the invitation of those Committees.

There are no management representatives appointed as members of any Board Committee.

Principal activitiesGoodstart is a not–for–profit company incorporated on 13 October 2009. The principal activity of the Company is the provision of early learning and childcare services in a manner consistent with the achievement of our company objectives. There were no significant changes in the nature of the activities of the Company during the year.

Operating performanceThe directors are pleased to report that Goodstart has continued to deliver a net surplus whilst increasing investments towards our strategic goals. In the year ended 30 June 2016, a net surplus of $18.968 million (2015: $15.867 million) was achieved and net assets increased to $81.287 million (2015: $62.319 million).

Company objectivesGoodstart has set six goals that will drive the strategic direction of the organisation. They include:

High Quality ensure all our centres deliver high quality early learning and care in a safe environment

Inclusion enhance outcomes for children in vulnerable circumstances

Financial Stability generate a surplus to reinvest in our network, our people and our purpose

Great People build a capable, aligned and engaged workforce

Evidence embed evidence–informed practice and strengthen the Australian evidence base

Influence increase public commitment to quality early learning and care

Details of achievements and activities undertaken during the 2015/16 year are included on pages 12 to 24.

Measurement of performanceGoodstart is committed to measuring its impact on children’s lives. The following key performance indicators have been developed and are continually refined for each of Goodstart’s Strategic goals:

High Quality ensure all our centres deliver quality early learning and care in a safe environment

• % of centres assessed as at least meeting the National Quality Standards

• % of centres assessed as exceeding the National Quality Standards

• Number of reported child injuries per 10,000 attendances (goal is zero significant injuries)

• Lost time injury frequency rates per million hours worked

Inclusion enhance outcomes for children in vulnerable circumstances

• Number of EChO Centres

• Number of children assisted by fee relief (including Inclusion Support Subsidy, Special Child Care Benefit, Grandparent Child Care Benefit, Jobs Education and Training fee assistance, Special Child Care Benefit, and Early Learning Fund)

Financial Stability generate a surplus to reinvest in our network, our people and our purpose

• Social purpose reinvestment

• Families likelihood to recommend (current families)

• Improved child retention:

- Child retention—less than 6 months tenure

- Child retention—kindergarten eligible turnover

• Net increase in new centres opened since 30 June 2015

• Labour hours per attendance

• Configured occupancy

• EBITDA

Great People build a capable, aligned and engaged workforce

• Staff engagement score

• Employee initiated turnover

• Meet 2020 target for ECTs

Evidence embed evidence informed practice and strengthen the Australian evidence base

• % of centres using the Outcomes Framework to drive evidence informed practice in centres

• Number of large scale externally funded research projects

Influence increase public commitment to quality early learning and care

• Amount of public investment in early learning and care in Australia as a % of GDP

• National participation of 3 year olds in long day care.

These key performance indicators are measured at a centre, state or national level, as applicable and are reported to the Board on a quarterly basis.

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Directors’ Report (continued)Directors’ Report (continued)


Members’ liabilityIn the event of the Company being wound up, its Constitution states each member is required to contribute a maximum of $100 towards meeting any outstanding obligations of the company. At 30 June 2016 there were four members of Goodstart (The Benevolent Society, Brotherhood of St Laurence, Mission Australia and Social Ventures Australia Limited). The total of these guarantees was $400 as at 30 June 2016 (2015: $400).

Lead auditor’s independence declarationKPMG is Goodstart’s external auditor and its independence declaration is set out on page 37. This forms part of the Directors’ Report for the financial year ended 30 June 2016.

Rounding offThe Group is of a kind referred to in ASIC Corporation (Rounding in Financial/Directors’ Report) Instrument 2016/191 and in accordance with that instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

Subsequent eventsThe Group has entered into an agreement to sell its subsidiary ‘Mediasphere Holdings Pty Ltd’ for a nominal amount. Settlement of the sale is expected to take place subsequent to the end of the financial year.

Other than that as described above, there has not arisen in the interval between the end of the financial year and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

This report is made in accordance with a resolution of the Directors.

Michael Traill Chair

Dated at Brisbane this 24 August 2016

Auditor’s Independence Declaration under subdivision 60–C section 60–40 of Australian Charities and Not–for–profits Commission Act 2012

To: the directors of Goodstart Early Learning Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been:

a) no contraventions of the auditor independence requirements as set out in the Australian Charities and Not–for–profits Commission Act 2012 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

Jillian Richards Partner

Brisbane

24 August 2016

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

37


36

Directors’ Report (continued)


Consolidated statement of profit or loss and other comprehensive incomeFor the year ended 30 June 2016

Note 2016 2015

Revenue from early learning centres 6 903,848 843,467

Government grants 7 28,623 24,950

Other income 8 643 674

Total revenue 933,114 869,091

Employee costs 9 628,898 587,548

Rent and other property expenses 11 171,998 161,968

Depreciation and amortisation expense 17 & 18 30,847 28,255

Catering and consumables expenses 41,952 41,439

Travel and motor vehicle expenses 5,483 5,928

Technology and communication expenses 8,944 8,908

Marketing expenses 8,382 4,602

Legal and professional costs 4,916 5,132

Impairment of intangibles 18 2,954 –

Other expenses 12 7,517 6,620

Total expenses 911,891 850,400

Results from operating activities 21,223 18,691

Finance income 13 3,676 3,077

Finance costs 13 5,931 5,901

Net finance costs 2,255 2,824

Net surplus for the year 18,968 15,867

Total comprehensive income for the year 18,968 15,867

Financial statementsGoodstart Early Learning Limited

ABN 69 139 967 794

Note 2016 2015

Assets

Cash and cash equivalents 14 17,694 29,280

Trade and other receivables 15 29,895 20,922

Inventories 16 375 86

Financial assets 19 120,000 85,000

Total current assets 167,964 135,288

Deposits and security bonds 276 409

Property, plant and equipment 17 124,327 121,552

Intangible assets 18 10,297 15,248

Total non–current assets 134,900 137,209

Total assets 302,864 272,497

Liabilities

Trade and other payables 20 54,135 55,950

Loans and borrowings 21 21 –

Employee benefits 22 50,467 47,360

Provisions 23 4,553 5,922

Deferred income 6b 10,408 9,524

Total current liabilities 119,584 118,756

Trade and other payables 20 38,307 32,449

Loans and borrowings 21 16,828 16,828

Employee benefits 22 11,848 11,654

Provisions 23 35,010 30,491

Total non–current liabilities 101,993 91,422

Total liabilities 221,577 210,178

Net assets 81,287 62,319

Equity

Accumulated surplus 81,287 62,319

Total equity 81,287 62,319

Consolidated statement of financial positionAs at 30 June 2016

Goodstart Early Learning

All figures in thousands of AUD. The notes on pages 43 to 61 are an integral part of these consolidated financial statements.

All figures in thousands of AUD. The notes on pages 43 to 61 are an integral part of these consolidated financial statements. 3938


Consolidated statement of cash flowsFor the year ended 30 June 2016

Note 2016 2015

Cash flows from operating activities

Cash receipts from parents and guardians 476,270 449,040

Cash receipts from grants and government funding 461,698 423,600

Cash receipts from other income 912 495

Cash paid to suppliers and employees (887,074) (803,417)

Net cash from operating activities 51,806 69,718

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 18 592

Purchase of plant & equipment and intangible assets (27,624) (30,667)

Investments in term deposits (35,000) (50,000)

Interest received 3,676 3,077

Acquisition of centres (1,734) (3,270)

Net cash (used in) investing activities (60,664) (80,268)

Cash flows from financing activities

Repayment of borrowings – (6,731)

Interest paid (2,728) (3,696)

Net cash (used in) financing activities (2,728) (10,427)

Net (decrease) / increase in cash and cash equivalents (11,586) (20,977)

Cash and cash equivalents at 1 July 29,280 50,257

Cash and cash equivalents at 30 June 14 17,694 29,280

Consolidated statement of changes in equityFor the year ended 30 June 2016

Accumulated Surplus Total Equity

Balance at 30 June 2014 46,452 46,452

Total comprehensive income for the year

Net surplus 15,867 15,867

Balance at 30 June 2015 62,319 62,319

Total comprehensive income for the year

Net surplus 18,968 18,968

Balance at 30 June 2016 81,287 81,287



Goodstart Early LearningGoodstart Early Learning

4140


Index to notes to the consolidated financial statementsfor the year ended 30 June 2016

Note Page

1. Reporting entity 43

2. Basis of preparation 43

3. Significant accounting policies 43

4. New standards and interpretations not yet adopted 48

5. Business combination—acquisition of childcare centres 49

6. Revenue 49

7. Government grants 50

8. Other income 50

9. Employee costs 50

10. Early Years Quality Fund (EYQF) expense 50

11. Rent and other property expenses 50

12. Other expenses 51

13. Finance income and finance costs 51

14. Cash and cash equivalents 51

15. Trade and other receivables 51

16. Inventories 52

17. Property, plant and equipment 52

18. Intangible assets 53

19. Financial assets 54

20. Trade and other payables 54

21. Loans and borrowings 55

22. Employee benefits 56

23. Provisions 57

24. Operating lease commitments 58

25. Commitments 59

26. Contingencies 59

27. Related parties 59

28. Parent entity financial information 61

29. Events subsequent to reporting date 61

Notes to the consolidated financial statements for the year ended 30 June 2016

1. Reporting entityGoodstart Early Learning Limited (the “Company”), a not–for–profit entity, is a company limited by guarantee. The consolidated financial statements of the Company as at and for the year ended 30 June 2016 comprise the Company and its subsidiary (together referred to as the “Group”).

2. Basis of preparation

a. Statement of complianceThe consolidated financial statements are a Tier 2 general purpose financial report which has been prepared in accordance with Australian Accounting Standards—Reduced Disclosure Requirements adopted by the Australian Accounting Standards Board and the Australian Charities and Not–for–profits Commission Act 2012. These consolidated financial statements comply with Australian Accounting Standards—Reduced Disclosure Requirements.

The consolidated financial statements were authorised for issue by the Board of Directors on 24 August 2016. Details of the Group’s accounting policies, including changes during the year, are included in notes 3 and 4.

b. Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis.

c. Functional and presentation currencyThese consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.

The Group is of a kind referred to in ASIC Corporation (Rounding in Financial/Directors’ Report) Instrument 2016/191 and in accordance with that instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

d. Use of estimates and judgementsThe preparation of the consolidated financial statements in conformity with Australian Accounting Standards—Reduced Disclosure Requirements, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Information about critical judgements in applying accounting policies and assumptions and estimation uncertainties that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

Note 3 (i) ii)—Property, Plant & Equipment—Depreciation

Note 3 (l)—Leased assets

Note 18—Intangible assets

Note 23—Provisions

3. Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group. Certain comparative amounts have been reclassified to conform to the current year’s presentation.

Goodstart Early Learning

4342


a. Basis of consolidation

i. Business CombinationsThe Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre–existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured 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. SubsidiariesSubsidiaries are entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated from the date on which control commences until the date that control ceases.

Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are eliminated in preparing the consolidated financial statements. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

b. Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of discounts, refunds and amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group’s activities as described below.

Revenue is recognised for the major business activities as follows:

i. Revenue from early learning centresFees paid by the Government (Child Care Benefit) or parents and guardians are recognised as revenue as and when the early learning service is provided.

ii. Deferred incomeRevenue received in advance from parents and guardians and government is recognised as deferred income and classified as a current liability.

iii. Government grantsTraining incentives and employee education funding is recognised as revenue when there is reasonable assurance that the incentive will be received and when the relevant conditions have been met.

Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all conditions associated with the grant.

Income from non–reciprocal grants is recognised when the Group obtains control of the grant or the right to receive the grant; it is probable that the economic benefits comprising the grant will flow to the Group; and the amount of grant can be measured reliably. Income from such grants is therefore recognised on receipt as the revenue recognition criteria are met when the Group receives those grants.

Government grants which are reciprocal in nature i.e. those grants which are received on the condition that specified services are delivered or conditions are fulfilled and have to be returned if the Group fails to meet the attached conditions, are initially recognised as deferred revenue (liability) with revenue recognised as the services are performed or conditions are fulfilled.

Grants related to assets are government grants whose primary condition to qualifying for them, is that the Group should purchase, construct or otherwise acquire long–term assets. Other conditions may also be

3. Significant accounting policies (continued)

attached restricting the type or location of the assets or the periods during which they are to be acquired or held. These types of grant are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all conditions associated with the grant.

c. Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash at bank and short term deposits with original terms of 90 days or less. Restricted call deposits are pledged as cash security for the Group’s rental guarantees provided by NAB in favour of landlords of properties from which the Group operates its early learning centres and WorkCover authorities in states where the Group has entered into retro–paid loss premium arrangements.

d. Goods and services taxRevenue, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Australian Taxation Office (ATO) is included as a current asset or liability in the consolidated statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis where applicable. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

e. Trade and other receivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor and default or delinquency in payments (more than 60 days overdue) are considered objective evidence that the trade receivable is impaired.

The Group considers evidence of impairment for receivables on a collective basis, by grouping together receivables with similar risk characteristics and uses historical trends of the probability of default.

The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short–term receivables are not discounted if the effect of discounting is immaterial. The carrying amount of the receivable is deemed to reflect fair value.

The amount of the impairment loss is recognised in profit and loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit and loss.

f. Financial assets

i. Bank term deposits greater than three months to maturity/ Term DepositsBank term deposits greater than three months to maturity are those term deposits that do not meet the Group accounting policy in relation to cash and cash equivalents as set out in note 3(c). Bank term deposits are initially recognised at fair value. Subsequent to initial recognition the bank term deposits are measured at amortised cost using the effective interest method.

g. BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Subsequent to initial recognition, borrowings are measured at amortised cost using the effective interest rate method. Fees paid on the establishment of loan facilities are capitalised, offset against the liability and amortised over the period of the facility to which it relates.

Borrowings are removed from the consolidated statement of financial position when the contractual obligations are discharged or are cancelled or expire.

3. Significant accounting policies | b. Revenue recognition | iii. Government grants (continued)

4544

Goodstart Early LearningNotes to the consolidated financial statements for the year ended 30 June 2016 (continued)



h. Trade and other payablesThese amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

The carrying amount of trade and other payables is deemed to reflect fair value.

i. Property, plant and equipment

i. Recognition and measurementItems of property, plant and equipment include land, buildings, plant and equipment, leasehold improvements, computer equipment and motor vehicles. These are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed as they are incurred.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and is recognised net within other income /other expenses in profit or loss.

ii. DepreciationDepreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the straight–line basis over their estimated useful lives, and is recognised in profit or loss. Land is not depreciated.

The estimated useful lives of property, plant and equipment are as follows:

Building 40 years

Motor vehicles 4–7 years

Plant and equipment 3–10 years

Leasehold improvements 7–10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

iii. ImpairmentAn asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Refer to note 3(j) for further information.

j. Impairment of non–financial assetsThe carrying amounts of the Group’s non–financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the non–financial asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash–generating unit (“CGU”) is the greater of its value in use and its fair value less costs to sell. Depreciated replacement cost is used to determine value in use. Depreciated replacement cost is the current replacement cost of an item less accumulated depreciation to date. 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 group of assets (cash– generating units).

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amount of the assets in the CGU on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised.


k. Intangible assets

i. BrandBrands that are acquired by the Group have finite useful lives and are measured at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised in profit or loss on a straight–line basis over the estimated useful life of 4 years (2015: 4 years), from the date that they are available for use.

Amortisation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

ii. Operating processes and programsThe operating processes and programs have finite useful lives and are carried at cost less accumulated amortisation and impairment losses. Amortisation is recognised in profit or loss on a straight–line basis over their estimated useful lives of 8 years (2015: 8 years). Amortisation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

iii. IT development and softwareCosts incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised as software. Costs capitalised include external direct costs of materials and services plus direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight–line basis over 3–5 years.

iv. Subsequent expenditureSubsequent 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.

l. Leased assetsLeases in which substantially all of the risks and rewards of ownership are not transferred to the Group are classified as operating leases (note 24) and are not recognised in the consolidated statement of financial position. Payments made under operating leases (net of any incentives received from the lessor) are recognised in profit or loss on a straight line basis over the term of the lease, which reflects the pattern in which economic benefits from the leased asset are consumed. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

The Group has no finance lease obligations.

m. InventoriesInventories relate to staff uniforms and children’s welcome packs for distribution. These are measured at the lower of cost and current replacement cost. Any write down in the value of inventory due to obsolescence is booked as an expense when the inventory becomes obsolete. Current replacement cost is the cost the Group would incur to acquire or replace inventories held for distribution at balance date.

n. Employee benefits

i. Short–term employee benefitsLiabilities for wages and salaries, including non–monetary benefits, annual leave expected to be settled wholly within 12 months of the end of the reporting period and accumulating rostered days off and time off in lieu are measured on an undiscounted basis and are expensed as the related service is provided.

ii. Long–term employee benefitsThe liabilities for annual leave not expected to be settled wholly within 12 months of the end of the reporting period and long service leave are measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting date, plus related on–costs. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on high quality corporate bond rates with terms to maturity that match, as closely as possible, the estimated future cash outflows. All annual leave liabilities are presented as current liabilities.


4746




iii. Defined contributions plansThe Group pays contributions to certain defined contribution plans. Contributions are recognised in profit or loss in the periods during which services are rendered by employees.

o. ProvisionsA 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.

i. Lease obligation provision

1. Make good provisionsCosts required to return certain leased premises to their original condition as set out in the lease agreements are recognised as a provision in the financial statements. The provision has been calculated as an estimate of future costs and discounted to present value.

2. Repairs and maintenance provisionsEstimated costs required to repair and maintain leasehold improvements where the Group is required by the lessor to repair areas identified and notified in accordance with the lease agreement are recognised as a provision in the financial statements. The provision has been calculated as an estimate of future costs. All other repairs and maintenance costs are expensed when incurred.

ii. Onerous contracts provisionA provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

p. Finance income and finance costsFinance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings and unwinding of discounts on provisions. Borrowing costs are recognised in profit or loss using the effective interest method.

q. Income taxThe Group (excluding Mediasphere Holdings Pty Ltd and GS Admin Services No.1 Pty Ltd) is a charitable institution for the purposes of Australian Taxation Legislation and is therefore exempt from income tax. The Group as a charitable institution has access to charity concessions under the income tax, FBT and GST laws. A charitable institution is defined by the Australian Taxation Office.

Mediasphere is an Australian resident entity and is taxed as a single entity.

r. Parent entity financial informationThe financial information for the parent entity, Goodstart Early Learning Limited, disclosed in note 28 has been prepared on the same basis as the consolidated financial statements, except for investments in subsidiaries which are accounted for at cost in the financial statements of Goodstart Early Learning Limited.

4. New standards and interpretations not yet adoptedCertain new accounting standards, amendments and interpretations have been published that are not mandatory for 30 June 2016 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of those which may be relevant are set out below.

i. AASB 9 Financial Instruments (2014)AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from AASB 139.

3. Significant accounting policies | n. Employee benefits (continued)

AASB 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Group is assessing the potential impact on its financial statements resulting from the application of AASB 9.

ii. AASB 15 Revenue from Contracts with CustomersAASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and AASB Interpretation 13 Customer Loyalty Programmes.

AASB 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.


iii. AASB 16 LeasesAASB 16 removes the lease classification test for lessees and requires all the leases (including operating leases) to be brought onto the balance sheet. The definition of a lease is also amended and is now the new on/off balance sheet test for lessees.

AASB is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted where AASB 15 Revenue from Contracts with Customers is adopted at the same time.


5. Business combination—acquisition of childcare centresOn 8 April 2016 the Group acquired 4 childcare centres in Australia. The centres transitioned to the Group when the leases were assigned as at acquisition date.

The fair value of leasehold improvements, plant and equipment is based on depreciated replacement cost which is determined as the amount that it would cost to replace the asset acquired, taking into account the age of those assets. The fair value of leasehold improvements was based on an external independent assessment by a quantity surveyor.

If new information obtained within one year from the acquisition date, about facts and circumstances that existed at the acquisition date, identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the acquisition accounting will be revised.

6. Revenue

6a. Revenue from early learning centres2016 2015

Fees from parents and guardians 474,786 445,432

Government funding 429,062 398,035

Total revenue from early learning centres 903,848 843,467

6b. Deferred IncomeAt 30 June 2016 the Group has deferred revenue of $10.408 million (2015: $9.524 million), which represents the fair value of that portion of the consideration received or receivable in respect of parent fees received in advance.

4. New standards and interpretations not yet adopted | i. AASB 9 Financial Instruments (2014) (continued)

All figures in thousands of AUD. 4948




7. Government grants

Note 2016 2015

Recovered special needs funding 6,181 5,870

Recovered trainees funding 141 758

Adult education revenue 241 210

Kindergarten and associated funding 21,584 17,057

State and Federal training funding 476 1,055

Total recovered special needs funding 28,623 24,950

8. Other income2016 2015

Insurance recoveries 591 551

Sublease income 24 –

Other income 28 123

Total other income 643 674

9. Employee costs2016 2015

Wages and salaries 545,417 505,913

Other associated personnel expenses 32,086 31,149

Contributions to defined contribution plans 51,395 47,741

Early Years Quality Fund (EYQF) related 10 – 2,745

Total employee costs 628,898 587,548

10. Early Years Quality Fund (EYQF) expense2016 2015

Professional development phase

Wages and salaries – 2,745

Other professional development and training activities – 4,803

Total professional development phase – 7,548

11. Rent and other property expenses2016 2015

Rental expenses* 101,941 97,321

Repairs and maintenance 37,021 32,395

Other direct property expenses 33,138 32,590

Onerous contracts 23 (102) (338)

Total rent and other property expenses 171,998 161,968

* Elements of rental expenses are contingent upon factors such as CPI or fixed % increases (as contained in the lease agreement) and individual site turnover. Total rental expenses contain all elements of rent, including those that are contingent, to the extent known.

All figures in thousands of AUD.

12. Other expenses Note 2016 2015

Net loss on sale of property, plant and equipment 1,072 925

Impairment of property, plant and equipment 17 – 282

Insurance premiums expense 1,599 1,575

Bank charges – 408

Impairment loss on trade receivables 15 1,110 919

Other expenses 3,736 2,511

Total other expenses 7,517 6,620

13. Finance income and finance costs2016 2015

Interest income on bank deposits 3,676 3,077

Total finance income 3,676 3,077

Interest expense on financial liabilities measured at amortised cost 2,744 3,779

Unwind of discount of make good & onerous provisions 23 305 486

Changes in discount rates of make good provision 2,882 1,636

Total finance costs 5,931 5,901

Net finance costs recognised in profit or loss 2,255 2,824

14. Cash and cash equivalents2016 2015

Cash and cash equivalents 17,694 29,280

15. Trade and other receivables

2016 2015

Trade receivables 19,859 20,009

Allowance for impairment of receivables (2,999) (2,860)

Trade receivables net 16,860 17,149

Prepayments 9,777 1,346

Goods and services tax (GST) recoverable 3,241 2,427

Other receivables 17 –

Total trade and other receivables 29,895 20,922

All figures in thousands of AUD. 5150




Movements in the provision for impairment of receivables are as follows:

2016 2015

Balance at 1 July 2,860 3,463

Receivables written off during the year as uncollectible (971) (1,522)

Provision for impairment recognised during the year 1,110 919

Balance at 30 June 2,999 2,860

The creation and release of the provision for impaired receivables has been included in ‘other expenses’ in the statement of comprehensive income.

16. Inventories2016 2015

Uniforms & children welcome packs at cost 375 86

17. Property, plant and equipment

2016

Note Land & buildings

Plant & equipment

Leasehold improvements

Motor vehicles

Work in progress Total

Year ended 30 June 2016

Opening net book amount 4,006 29,581 77,672 2,857 7,436 121,552

Additions 1,508 6,357 10,569 – 10,053 28,487

Acquisition through business combination 5 – 177 188 35 – 400

Increase in make good asset – – 1,569 – – 1,569

Transfers – 954 5,282 – (6,728) (492)

Disposals – (195) (791) (104) – (1,090)

Work in progress expensed – – – – (266) (266)

Depreciation expense (129) (10,651) (14,628) (425) – (25,833)

Closing net book amount 5,385 26,223 79,861 2,363 10,495 124,327


Cost 5,553 56,104 155,242 5,050 10,495 232,444

Accumulated depreciation & impairment losses (168) (29,881) (75,381) (2,687) – (108,117)

Net book amount 5,385 26,223 79,861 2,363 10,495 124,327

15. Trade and other receivables (continued)

2015

Land & buildings

Plant & equipment

Leasehold improvements

Motor vehicles

Work in progress Total


Opening net book amount 266 19,627 87,113 4,035 10,900 121,941

Additions 3,765 7,201 9,216 – 7,412 27,594

Acquisition through business combination – 153 613 4 – 770

Increase in make good asset – – 1,315 – – 1,315

Transfers – 12,456 (4,496) – (10,635) (2,675)

Disposals – (279) (978) (609) – (1,866)

Work in progress expensed – – – – (241) (241)

Net impairment (loss) / reversal – (46) (236) – – (282)

Depreciation expense (25) (9,531) (14,875) (573) – (25,004)

Closing net book amount 4,006 29,581 77,672 2,857 7,436 121,552


Cost 4,044 49,421 139,372 5,313 7,436 205,586

Accumulated depreciation & impairment losses (38) (19,840) (61,700) (2,456) – (84,034)

Net book amount 4,006 29,581 77,672 2,857 7,436 121,552

Security Refer to note 21 for information on non–current assets pledged as security by the Group.

18. Intangible assets

2016

Note Software BrandOperating

processes & programs

Total


Opening net book amount 9,444 2,699 3,105 15,248

Other acquisitions—internally developed 2,525 – – 2,525

Transfers from work in progress 17 492 – – 492

Impairment loss – (931) (2,023) (2,954)

Amortisation charge (2,408) (1,524) (1,082) (5,014)

Closing net book amount 10,053 244 – 10,297


Cost 17,077 10,772 6,155 34,004

Accumulated amortisation and impairment (7,024) (10,528) (6,155) (23,707)

Net book amount 10,053 244 – 10,297

17. Property, plant and equipment (continued)

All figures in thousands of AUD.All figures in thousands of AUD. 5352




18. Intangible assets (continued)

2015

Note Software BrandOperating

processes & programs

Total


Opening net book amount 27 3,774 4,166 7,967

Acquisition through business combination – 400 – 400

Other acquisitions—internally developed 7,457 – – 7,457

Transfers from work in progress 17 2,675 – – 2,675

Amortisation charge (715) (1,475) (1,061) (3,251)

Closing net book amount 9,444 2,699 3,105 15,248


Cost 14,060 10,771 6,155 30,986

Accumulated amortisation and impairment (4,616) (8,072) (3,050) (15,738)

Net book amount 9,444 2,699 3,105 15,248

Impairment loss

During the year the Group re–assessed the carrying value and useful life of the “ABC Learning Centres” brand name and trademark. Its carrying value has been assessed as having nil value following the full implementation of the Goodstart brand and the reduced protective benefits of the Group retaining ownership of the brand. This assessment of the value of the brand has resulted in a full reduction of the carrying value with a corresponding recognition of an impairment loss.

The Group also re–assessed the useful life of the “ABC Learning Centres” curriculum, operating processes and programs following changes in regulations including NQF requirements and other internal changes to improve quality. This assessment has resulted in a full reduction of the carrying value with a corresponding recognition of an impairment loss.

19. Financial assets2016 2015

Current

Term deposits 120,000 85,000

The term deposits have maturity terms of less than one year and carry a weighted average fixed interest rate of 2.98% (2015: 3.08%). Due to their short–term nature their carrying value is assumed to approximate their fair value.

The Group has $50 million (2015: $40 million) in term deposits that have been pledged as security for the Group’s guarantees provided by NAB as set out in note 26.

20. Trade and other payables2016 2015

Current

Enrolment bonds payable 11,100 10,872

Other trade payables 7,454 8,610

Accrued expenses 35,581 36,468

Total trade and other payables 54,135 55,950

Non–current

Lease straight–line liability 38,307 32,449

21. Loans and borrowingsThis note provides information about the contractual terms of the Group’s interest–bearing loans and borrowings, which are measured at amortised cost.

2016 2015

CurrentUnsecured loans from related entities

Subordinated loan—accrued interest * 4 –

Deeply subordinated loan—accrued interest * 17 –

Total current unsecured loans from related entities 21 –

Non–currentUnsecured loans from related entities

Subordinated loan from founders (incl. capitalised interest) * 3,366 3,366

Deeply subordinated loan from founders (incl. capitalised interest) * 13,462 13,462

Total non–current unsecured loans from related entities 16,828 16,828

* Fixed interest rate, with the ability of interest to be capitalised

Further details on loans from related entities are set out in note 27.

Terms and debt repayment scheduleTerms and conditions of outstanding loans are as follows:

2016

Nominal interest rate

Year of maturity

Utilised Facility

Total Facility

Unsecured loans from related entities

Subordinated loan from founders * 15% 2019 2,500 2,500

Deeply subordinated loan from founders * 15% 2030 10,000 10,000

Total unsecured loans from related entities 12,500 12,500

2015

Nominal interest rate

Year of maturity

Utilised Facility

Total Facility

Unsecured loans from related entities

Subordinated loan from founders * 15% 2019 2,500 2,500

Deeply subordinated loan from founders * 15% 2030 10,000 10,000

Total unsecured loans from related entities 12,500 12,500

Secured Borrowings

The Group has access to a bank loan facility with NAB, which is not being utilised at 30 June 2016.

Terms and conditions secured borrowings:

The bank loan facility imposed certain covenants on the Group including, leverage ratio, fixed charged cover ratio, capital expenditure limits and occupancy rates which are customary to this type of loan.





Assets pledged as security

The bank loan facility of the Group is secured by:

• a fixed and floating charge over all assets and undertakings of the Group;

• real property mortgage over freehold property; and

• a mortgage or fixed charge over all rights in respect of any loans made between the Group.

The carrying amounts of assets pledged as security for current and non–current borrowings are:

Note 2016 2015

Current

Fixed and Floating charge

Cash and cash equivalents 14 17,694 29,280

Trade and other receivables 15 29,895 20,922

Inventories 16 375 86

Financial assets 19 120,000 85,000

Total current assets pledged as security 167,964 135,288

Non–current

Mortgage

Freehold land and buildings 17 5,385 4,006

Fixed and Floating charge

Deposits and security bonds 276 409

Property, plant and equipment 17 118,942 117,546

Intangibles 18 10,297 15,248

Total non–current assets pledged as security 134,900 137,209

Total assets pledged as security 302,864 272,497

22. Employee benefits

2016 2015

Current

Employee leave entitlements 50,467 47,360

Non–current

Employee leave entitlements 11,848 11,654

21. Loans and borrowings (continued)

23. Provisions

2016

NoteLease

obligation provision

Onerous contracts provision

Total

Consolidated

At 1 July 2015 31,317 5,096 36,413

Assumed in a business combination 5 86 – 86

Provisions made during the year 5,786 2,882 8,668

Provisions utilised during the year (2,051) (968) (3,019)

Provisions reversed during the year (875) (2,015) (2,890)

Unwinding of discount 127 178 305

Balance as at 30 June 2016 34,390 5,173 39,563

Current 3,819 734 4,553

Non–current 30,571 4,439 35,010

Total provisions 34,390 5,173 39,563

2015

NoteLease

obligation provision


Total

Consolidated

At 1 July 2014 23,111 5,223 28,334

Assumed in a business combination 5 38 – 38

Provisions made during the year 8,070 3,337 11,407

Provisions utilised during the year (79) (1,091) (1,170)

Provisions reversed during the year (98) (2,584) (2,682)

Unwinding of discount 275 211 486

Balance as at 30 June 2015 31,317 5,096 36,413

Current 4,986 936 5,922

Non–current 26,331 4,160 30,491

Total provisions 31,317 5,096 36,413

Lease obligation provision

Lease obligation provision comprises both provisions for make good and repairs & maintenance provisions.

The provision has been calculated using a discount rate of 2.224% (2015: 3.495%), being the 15–year bond yield rate. This is a rate that most closely approximates the remaining life of the leases for the calculation of the present value of future cash flows. The reduction in the discount rate has increased the provision by $4.365 million.

a. Make good provisions

Provision is made for the make–good in respect of restoring leased premises to their original condition when the premises are vacated either due to closure or relocation. A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements and reinstate the leased premises. This provision amounts to $10.988 million as at 30 June 2016 (2015: $9.462 million).





These costs have been capitalised as part of the leasehold improvements and amortised over the term of the lease. These estimates may vary from actual costs incurred as a result of conditions existing at the date the premises are vacated.

The remaining lease obligation provision includes lease redecorations which have been recognised for the present value of the required end of lease repairs for wear and tear of leasehold improvements. The Group has estimated the provision based on data in relation to current prices available. This provision amounts to $19.583 million as at 30 June 2016 (2015: $16.869 million).

b. Repairs and maintenance provisions

Provision is made for the repair and maintenance of leasehold improvements where the Group is required by the lessor to repair areas identified and notified in accordance with the lease agreements. Management has estimated the provision based on recent invoices received and history of costs to rectify. This provision amounts to $3.819 million as at 30 June 2016 (2015: $4.986 million).


The Group has a number of underperforming centres where the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received.

Provision is made for onerous contracts where the Group’s unavoidable costs of meeting the obligations exceed the economic benefits expected to be received under it. Management has estimated the provision based on the discounted future payments, net of expected cash inflows associated with the contracts. The economic benefits for each of the contracts have been assessed after taking into account the Group’s strategic goals of quality, inclusion and stability, as well as trading results.

The provision has been calculated using a discount rate of 2.224% (2015: 3.495%), being the 15–year bond yield rate. This is a rate that most closely approximates the remaining life of the leases for the calculation of the present value of future cash flows. The reduction in the discount rate has increased the provision by $0.218 million.

24. Operating lease commitmentsNon–cancellable operating lease rentals are payable as follows:

2016 2015

Less than one year 91,317 88,142

Between one and five years 368,047 358,500

More than five years 792,305 832,043

Total operating lease commitments 1,251,670 1,278,684

The Group leases 642 (2015: 642) childcare centres under operating leases. The leases typically run for a period of 10 years, then have one to three options. Each option enables the Group to renew the leases for a further 5 or 10 years. Included in these commitments are contingent payments, including escalation based on fixed dollar or percentage increases, as contained in the lease agreement.

Management has determined that all of the risk and rewards of ownership of these premises remain with the lessor and has therefore classified the leases as operating leases.

The Group leases 163 (2015: 157) motor vehicles under fully maintained operating leases. All leases are for a term of 36–48 months, commencing on delivery of the vehicle.

During the year ended 30 June 2016 $88.867 million (2015: $86.086 million) relating to lease rental payments was recognised as an expense in the statement of comprehensive income in respect of operating leases.

23. Provisions | a. Make good provisions (continued)

25. Commitments

a. Capital commitmentsCapital expenditure contracted for at the reporting date but not recognised as either assets or liabilities is as follows:

Note 2016 2015

Contracted but not yet provided for and payable:

Plant and equipment 2,814 5,052

b. Contractual commitmentsExpenditure contracted for at the reporting date but not recognised as liabilities is as follows:

2016 2015

Contracted but not yet provided for and payable:

Commitments for medium–term service contracts 2,637 1,595

26. Contingencies The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required.

2016 2015

Guarantees

Bank guarantees issued in support of various rental arrangements 36,118 35,579

Bank guarantees issued in support of other arrangements 5,662 4,045

Total guarantees 41,779 39,624

27. Related partiesKey management personnel compensation

in whole dollars of AUD 2016 2015

Directors' fees 493,453 229,109

Executive and Executive Director's remuneration 3,021,092 3,400,247

Total amount paid or payable to key management personnel 3,514,545 3,629,356

Parent and subsidiary information

Country of incorporation

Ownership interest 2016

Ownership interest 2015

Parent entity

Goodstart Early Learning Limited Australia 28 Parent Parent

Subsidiaries

Mediasphere Holdings Pty Limited Australia 80% 80%

GS Admin Services No.1 Pty Limited Australia 100% 100%

All figures in thousands of AUD except where stated.All figures in thousands of AUD. 5958




a. Related party informationThe Group has been formed by the following founding members with the following voting rights:

• Mission Australia 25%

• Benevolent Society 25%

• Brotherhood of St Laurence 25%

• Social Ventures Australia 25%

b. Outstanding balances and transactions with related parties The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

in whole dollars of AUD 2016 2015

(1) Unsecured loans from parties with significant influence over Goodstart Early Learning Limited

i. Subordinated loan from founders

Balance at 1 July 3,365,608 10,109,274

Loan repayments made – (6,731,217)

Interest charged 513,140 843,707

Interest paid (508,991) (856,156)

Balance at 30 June 3,369,758 3,365,608

The terms and conditions of each category are set out in note 21.

ii. Deeply subordinated loan from founders

Balance at 1 July 13,462,435 13,479,032

Interest charged 2,052,560 2,013,833

Interest paid (2,035,963) (2,030,430)

Balance at 30 June 13,479,033 13,462,435

The terms and conditions of each category are set out in note 21.

iii. Other related party payables

Amounts payable to founding members * 125,000 131,347

(2) Other related party transactions

i. Transaction values

Founding members—business combination ** 213,453 –

Founding members—purchase of goods and services 590,561 409,479

Founding members—funding for services received 585,641 42,584

Subsidiary—administrative services provided 706 12,370

Subsidiary—purchase of goods and services 58,845 46,115

Director related entities—purchase of goods and services 13,916 18,305

ii. Balance outstanding

Founding members—other receivables * 5,873 11,595

Founding members—payables related to business combination ** 100,000 –

Subsidiary—trade receivable * – 524

Subsidiary—trade payable * 429 –

Director related entities—trade payable * 4,180 –

* The payment terms and conditions are consistent with the accounting policies for trade receivables (note 3(e)) and trade payables (note 3(h)). These amounts are receivable/due as a result of transactions with related parties in the normal course of business.

** Refer to note 5 for information on acquisition of childcare centres by the Group.

27. Related parties (continued)

28. Parent entity financial informationThe individual financial statements for the parent entity show the following aggregate amounts:

2016 2015

a. Balance SheetCurrent assets 167,964 135,288

Total assets 302,864 272,497

Current liabilities 119,584 118,756

Total liabilities 221,577 210,178

Equity

Accumulated surplus 81,287 62,319

b. Total comprehensive incomeSurplus for the year 18,968 15,867

Total comprehensive income 18,968 15,867

c. Contingent liabilities of the parent entityRent guarantees 36,118 35,579

Other guarantees 5,662 4,045

Total contingent liabilities of the parent entity 41,779 39,624

d. Commitments of the parent entityCapital commitments for the acquisition of property, plant and equipment 2,814 5,052

Commitments for medium–term service contracts 2,637 1,595

Total commitments of the parent entity 5,451 6,648

29. Events subsequent to reporting dateThe Group has entered into an agreement to sell its subsidiary ‘Mediasphere Holdings Pty Ltd’ for a nominal amount. Settlement of the sale is expected to take place subsequent to the end of the financial year.

Other than that as described above, there has not arisen in the interval between the end of the financial year and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

All figures in thousands of AUD.All figures in thousands of AUD except where stated. 6160




Directors’ declarationIn the opinion of the directors of Goodstart Early Learning Limited (“the Company”):

a) the Company is not publicly accountable;

b) the consolidated financial statements and notes that are set out on pages 38 to 61 are in accordance with the Australian Charities and Not–for–profits Commission Act 2012, including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance, for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards—Reduced Disclosure Regime and the Australian Charities and Not–for–profits Commission Regulation 2013; and

c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors:

Dated at Brisbane 24th day of August 2016.

Michael Traill Chair

Independent auditor’s report to the members of Goodstart Early Learning Limited

We have audited the accompanying financial report of Goodstart Early Learning Limited (the Company), which comprises the consolidated statement of financial position as at 30 June 2016 and consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 29 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards—Reduced Disclosure Requirements and the Australian Charities and Not–for–profits Commission Act 2012 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report gives a true and fair view, in accordance with Australian Accounting Standards—Reduced Disclosure Requirements and the Australian Charities and Not–

for–profits Commission Act 2012 and, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Australian Charities and Not–for–profits Commission Act 2012.

Auditor’s opinion

In our opinion

a) the financial report of the Group is in accordance with the Australian Charities and Not–for–profits Commission Act 2012 including:

i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

ii) complying with Australian Accounting Standards—Reduced Disclosure Requirements and the Australian Charities and Not–for–profits Commission Regulation 2013.

KPMG

Jillian Richards Partner

Brisbane

24 August 2016

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

6362


Formed in 1813, The Benevolent Society is Australia’s first charity. It is a not-for-profit and non-religious organisation that helps people, families and communities achieve positive change through support and education.

Social Ventures Australia is a non-profit organisation established to improve the lives of people in need. It focuses on keys to overcoming disadvantage including great education, sustainable jobs, stable housing and appropriate health, disability and community services.

The Brotherhood is a not-for-profit organisation that works to alleviate and prevent poverty through research, services and advocacy. It is a non-government, community-based organisation that supports people experiencing disadvantage at all stages of life to build a better future for themselves and their families.

Mission Australia is a non-denominational Christian community service organisation that aims to reduce homelessness and strengthen communities across Australia. It works to help people secure jobs, receive an education, find housing and develop important life skills.

Behind GoodstartGoodstart was created by a partnership of organisations who saw the potential of early learning to transform Australia. They wanted to address one of the key sources of many future problems—poor early childhood experiences.

It made perfect sense for these groups to pool their energy and investment in early learning to fix the root cause of so many social problems.

Australian Federal GovernmentNew South Wales GovernmentNorthern Territory GovernmentQueensland Government

South Australia GovernmentTasmania GovernmentVictoria GovernmentWestern Australia Government

Goodstart would like to acknowledge the funding and support provided by:

annual report 2016 - goodstart early learning

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