Abc learning-annual-report-2006


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Abc learning-annual-report-2006

  1. 1. A.B.C. Learning Centres Limited Annual Report 2006A.B.C. Learning Centres Limited ABN 93 079 736 664 Annual Report 2006
  2. 2. Contents1 2006 Highlights2 Chairman’s Report4 CEO’s Report6 ABC’s four Building Blocks8 Review of Operations – Australia, New Zealand and United States – Education14 Board of Directors17 Financial Report Corporate Directory
  3. 3. Another record year has seen ABC grow its business exponentially and provide an increased return to shareholders. Revenue $631.5m +149.9% Operating profit after tax $81.1m +86.4% Earnings per share 27.7c +20.4%Business Highlights Growth in Childcare Places 112,179 2004–2006January 2006Acquisition ofLearning CareGroup, Inc. inthe United States 46,164June 2006 22,969Acquisition of KidsCampus Limited 2004 2005 2006Financial Highlights 2006 2005 % Change (AIFRS) (AIFRS) 2005/2006Revenue $631.5m $252.7m 149.9Operating profit after tax $81.1m $43.5m 86.4Earnings per share – basic 27.7 cents 23.0 cents 20.4Final dividend – fully franked 8.0 cents 6.0 cents 33.3Full year dividend – fully franked 15.0 cents 11.0 cents 36.4 1
  4. 4. Chairman’s Report The past 12 months have been a landmark year, a transforming year for the Company. With the acquisition of the US based Learning Care Group, Working closely with the existing Learning Care Group ABC became the world’s largest listed childcare provider. As and Children’s Courtyard senior management, ABC we stood on the threshold of this new stage of development can repeat its successful Australian and New Zealand this year, we took time to do what we have always done – formula of achieving high occupancy by lifting the standard pursue a program of well planned and well managed growth, of care and providing a world-class curriculum, quality staff underpinned by the highest quality of early childhood and a comprehensive program of renewal and renovation. education and care. Within Australia, the acquisition of Kids Campus in It was ABC’s foray into the US that gave us the most June 2006 further consolidated our position. ABC had exciting business headlines of the year. In November 2005, demonstrated its ability to integrate new centres with we announced our intention to acquire Learning Care, at a successful merger with the Peppercorn Management that time the third largest for-profit childcare provider in Group in 2004, and this continued with Kids Campus. North America. More recently, in August 2006, we agreed In July, we announced the acquisition of Hutchison’s to purchase Dallas-based Children’s Courtyard, the ninth Child Care Services. largest childcare provider in North America. Another exciting development this year was our expansion These acquisitions came out of our strong belief that the into corporate childcare, meaning parents have access to US provides exceptional opportunities for ABC. The US has centres either actually in or near their workplaces. I have a similar childcare market to Australia, with more mothers in visited two Westpac-ABC centres, a 75-place centre in the workforce and a greater demand for the highest quality Brisbane and a 50-place centre in Westpac’s new building education and care, but is served by a fragmented industry in Sydney, which have transformed those lucky families’ where no company holds more than three per cent of the lives. Arrangements with the Commonwealth Bank are also market. This has meant that the US industry has not yet underway, as part of the bank’s new staff wellbeing program. had the benefit of the capital injection we have achieved here. Corporate childcare has emerged as an important service We have always been aware that a move by an Australian that fits well into ABC’s strategy of managed growth. company into the US can be viewed as risky. But the Board and management have absolute confidence in our proven track record of good management and sound planning in a market that is similar to ours but 15 times larger.2
  5. 5. Right from the beginning, we have understood the importance not only of our families but also of our communities.An important aspect of this strategy is our continual review Revenue this year was $631 million, an increase of 150 per centand revision of our educational and developmental programs on last year, and our operating profit after tax was $81 million,to ensure they capture the latest research and are in line with an increase of 86 per cent.our approach to lifelong learning. You can read about these The increase in revenue is being passed on to shareholdersimportant programs later in this report. as a final dividend of 8 cents per share, fully franked, makingRight from the beginning, we have understood the importance a full year dividend of 15 cents per ordinary share fully frankednot only of our families but also of our communities. We have for the year.always been involved with the communities, large and small, In conclusion, it has been a year of progress on all fronts.that have been home to our centres. And we have relished It is the progress ABC has consistently shown since itthe opportunity to champion a number of causes, particularly started its first centre less than 20 years ago and listed fivethose with an emphasis on children, families and education. years ago on the Australian Stock Exchange. There haveSo this year ABC introduced SIDS and Kids Safe Sleeping been many people on that journey and many people whokits into our centres right across Australia and New Zealand continue to make it successful. I would like to congratulateand helped our children fundraise on Red Nose Day. Our and thank them has been as varied as the Australian Children’sMusic Foundation and the establishment of a Chair in Your Directors feel enormous confidence in the road ahead,Midwifery to be established by the Mater Mother’s Hospital and we thank you for joining us.and the Australian Catholic University.For you, our shareholders, the benefits of being part of adynamic, responsible company are equalled by our solidfinancial results. Sallyanne Atkinson AO Chairman 3
  6. 6. CEO’s Report ABC is now an international childcare provider with an increasingly strong financial and shareholder focus. During the year, we have repaid debt and funded acquisitions and further growth opportunities. Consolidation and International Expansion ABC has consolidated its position in the giant US market In the last 12 months, ABC has evolved into a substantially with the recent acquisition of Children’s Courtyard in Texas, different company. We are a significantly larger company giving us a total of 417 owned centres and 108 franchised and now also an international organisation. centres in the US. During the year, we commenced our expansion into the US, Our expansion into the US has been measured, with a gaining a substantial part of the largest childcare market in deliberate focus on strategic integration into our existing the world. business, enabling us to deliver shareholder value through an immediate return on invested capital. We cemented our position as the leading childcare provider in the Australian market through our acquisitions of Kids We see greater potential in the US market for further Campus and Hutchison’s Child Care Services and are acquisitions in addition to building new centres and now Australia’s leading provider of childcare services. acquiring franchised businesses. Our financial position has been strengthened with an Australian Acquisitions additional capital raising underpinning our acquisitions We have continued to build our leadership position in the and funding our future growth opportunities. Australian market through further acquisitions. Building on our merger with the Peppercorn Group, we acquired These initiatives have positioned ABC at the forefront of Kids Campus Limited and announced the acquisition of the childcare industry, enabling us to continue to provide Hutchison’s Child Care Services Limited. the highest quality of care for children and families in our centres and strategically positioning us to capitalise on These acquisitions give us benefits of scale and importantly these investments over the longer term. provide ABC with the opportunity to provide an enhanced choice of centres for our corporate partners. Expansion into the US One of the major initiatives we have undertaken in the past With the Peppercorn merger, ABC has demonstrated its year has been our expansion into the US. Our acquisition ability to manage and integrate acquisitions to enhance of the Learning Care Group, Inc. in January, with 460 owned shareholder value without compromising quality of care and franchised centres, gave ABC a significant position in or education. the US market. The successful integration of operational and administrative The US expansion was a logical progression for the functions also enables centre staff to spend more time on company. Our previous merger with Peppercorn Group what they do best – providing an exciting and challenging meant we were of sufficient scale to warrant international early learning environment for the children in their care. expansion and the Learning Care Group was a natural, Realising the benefits of these acquisitions is not an easy strategic fit for the Company. undertaking and we are fortunate to have dedicated staff We were able to bring the benefit of our management who are committed to ensuring the success of this program. experience to an existing provider with two respected The amalgamation of the various offices into one corporate operating subsidiaries, Tutor Time and Childtime, subsequently office has been a significant achievement and I would like to expanding our operations further, with Tutor Time acquiring extend my appreciation to our staff for making this happen. an additional 17 centres in southern California.4
  7. 7. Our expansion into the US has been measured, with a deliberate focus on strategic integration into our existing business, enabling us to deliver shareholder value through an immediate return on invested capital.Following the acquisition of the Hutchison centres, This has been the hallmark of our business successABC will have over 1000 centres in Australia and and continues to be the primary focus of management.New Zealand, or approximately 20 per cent of long day In the next financial year, as part of our commitment tocare centres nationally. raising standards across our industry, ABC will makeIn addition to growth by acquisition, we will continue to significant investments in centre staff training programs.selectively build new centres in the coming year. In addition, we will continue our corporate partnership program to develop childcare centres for entities suchCapital Management as the major banks.During the year, ABC has raised sufficient capital to repaydebt and fund acquisitions and further growth opportunities. In the past year, ABC has been transformed as we haveOur net debt position at the end of June was $29.3 million. significantly expanded the scope and size of our business,We can now feel comfortable in increasing the debt position while remaining true to our commitment to quality in allof the Company as we continue to grow. our centres.The breadth and scale of our operations now means that we The outlook for our business remains positive and we willhave also moved into the ASX Top 100 list of companies. The continue to selectively acquire and construct centres whereCompany and its operations are now attracting the attention they meet a community need and add to our business.of a new set of institutional shareholders and one of our We thank our dedicated staff for their help in building ABCpriorities is to engage with this market to build understanding into a prosperous international company.of our development strategy.Commitment to Training and QualityIn the past year the Company has experienced a significanttransformation in the size and composition of our businesswhile remaining firmly focused on the provision of qualityearly childhood care and education. Edmund S Groves CEO Operations (Global) 5
  8. 8. ABC’s four Building Blocks The best foundation for a child’s future ABC Learning Centres is committed to ensuring each child is loved, nurtured, educated and given the best possible chance in life. That is why we have specifically created the ‘Four Building Blocks’. Each one of these building blocks is a pathway to a child’s overall wellbeing and future development. We recognise that in order for young children to reach their full potential in a learning environment, they must each be viewed as an individual. At ABC, we recognise that each child is uniquely different. Our tailored learning curriculum focuses on each child’s unique style of learning that allows them to gain the most from these experiences. Literacy, numeracy, and computer skills are key elements of this building block. We offer specialised and fun programs to nurture a child’s nutritional and physical development. Our aim is to ensure children begin and continue to make healthy choices, as well as developing and enhancing their gross and fine motor skills. The programs and the activities offered in this building block are based on the individual child. Each child is able to develop skills according to their own unique abilities and special interests.6
  9. 9. ABC prides itself on the special learning environments it creates. Centre facilities are constantly upgraded, ensuring a safe and secure environment for all children. That’s why we have re-invested close to $100 million into our early learning centres over the last four years. Our extensive play and educational facilities are specifically designed with child safety and child development as the main priority. We are also the only company continuing to build centres in all areas where need exists across the country.ABC centre staff are early childhoodprofessionals, dedicated to the developmentof every individual child.All our staff training and assessment servicesare not only relevant to the real world but alsoincorporate holistic practices in child development.They undertake continuing levels of study toachieve their qualifications developed specificallyfor the care and education of children under sixyears of age. In Australia, centre staff qualificationsrange from Certificate level through to Diplomas,Advanced Diplomas and Bachelor of Education(Early Childhood). ABC centre staff are employedaccording to the Child Care Regulations andActs specific to each State/Territory. Real Mums. Real Stories.“My son attends an ABC childcare how to use a cup and baby eating centre one day a week, and has utensils and settling problems. done since 12 weeks of age. ABC staff and directors assisted It is on these days that we find me with post-natal depression, this he is most settled, he is happy assistance is given freely and is not when I arrive to pick him up. part of the school fees. This kind of He spends his days finger painting, care and attention to a little person, experiencing a myriad of toys that his growth and development no parent would be able to provide and his family’s overall wellbeing in such a variety or quantity. The is nothing short of a fantastic staff there assist parents in learning community service to all.” how best to cope with difficult moments, how to introduce solids, Mrs K Barry, ABC Grays Point 7
  10. 10. Review of Operations Australia, New Zealand and United States It was a year of unprecedented expansion, with ABC achieving a growth rate of 41 per cent in its number of childcare centres, moving into the US and New Zealand and significantly expanding the corporate care division. Summary Another significant acquisition was the six childcare centres Operations grew significantly through the year. The total managed by the Universal group in metropolitan Sydney. number of centres increased from 660 to 933 (905 in This acquisition comprised 421 existing places with a further Australia, 28 in New Zealand), a growth of 41 per cent. 960 places to be developed. More than half of the places are to be for children under three years of age. The Company continued to acquire high quality groups and excellent sites and centres in outstanding locations. A further 192 centres were acquired through the year in small A strengthening of our operational structure has enabled groups or individually. us to focus on and measure our quantitative and qualitative Delivery of Services performance indicators more effectively. Systems have The main focus of the delivery of services to our continued to improve and have reduced the administrative children and families continued to be on our high quality burden for our centre staff, enabling them to spend educational curriculum. additional time with the children. Our Corporate Care division has progressed markedly, securing further major Staff training continued as a key focal point with organisations. Marketing has been enhanced this year, with curriculum training and our Rewards Success Program a number of major campaigns boosting occupancies. featuring strongly. Acquisitions The acquisition of Kids Campus Limited (KDS) for $127.9 million was the most significant new initiative during the financial year. KDS has added 75 centres and an existing pipeline of 21 centres to the group, with 8,000 places in strategic locations. The transaction also included a further 4,000 places to be provided over three years. Real Parents. Real Stories. “Our daughter who is now or updated, and the systems and 26 months old has been going procedures have improved. to a local (privately-run) day care Our daughter (who originally attended centre for just on two years. In July one day and now attends three last year it was turned into an ABC full days per week) has grown and Centre, a move which my husband flourished and turned into a happy and I, being small business owners, healthy toddler under their care. were originally ambivalent about. ABC is the best thing that could However, what we have noticed have happened to our centre.” since the changeover is that, parents are now better informed, Lana and Craig White, every toy and piece of equipment ABC Jerraboombah in the centre has been replaced8
  11. 11. Northern Territory Queensland 15 335 Western Australia 78 Australian Capital Territory New South Wales 210 South Australia 8 Victoria 56 281 Tasmania New Zealand 11 28Our operational structure was strengthened by the addition Refurbishments were carried out at 212 centres throughof more than 40 area managers to the management team. the year and over 30,000 maintenance responsesThese managers were mostly senior Centre Directors were undertaken.promoted into the position but still retaining a strong Staff computers were provided to over 200 centresconnection to the centres. and there were over 6,000 IT&T responses in the year.Operations Central, a centralised support service staffed Systemsby senior early childhood personnel, was launched through Improved access by Centre Directors to centre relief staffthe year. Operations Central has provided centre staff and was achieved through our labour management system,families with much improved support and the Company Kronos. This system was also extended to our New Zealandwith essential feedback data on its operations. centres. We also commenced automated child attendancePerformance times in our New Zealand centres, improving our securityUnder the Commonwealth Quality Improvement and and management processes.Accreditation System, 213 of our centres were accredited A new rostering system was developed in our childcarethis year, 98 per cent achieving the highest level. centre systems as well as automatic direct debiting of feesAnd under our internal Quality Assurance Program, each and improved banking systems. These developments haveof our centres was visited once per quarter, resulting been instrumental in reducing office time for Centre 1,856 centre visits and the issuing of 4,937 quality Substantial work was undertaken on our intranetassurance certificates in the areas of Industry Compliance, throughout the year. All centre policies and procedures andEarly Childhood Learning Environment, Centre Presentation other essential centre information is now at the fingertips ofand Administration. the Centre Director. Online ordering of toys and equipmentCentre staff turnover continued at the low rate of 8.3 per cent. as well as purchasing of supplies for the centres has beenMuch of the turnover was for family or travel reasons. further developed. 9
  12. 12. Review of Operations Australia, New Zealand and United States Corporate Care Other campaigns through the year included the 2 Weeks The Corporate Care division commenced the management Free and “Guess Who” campaigns. New signage of the existing 19 Department of Defence childcare centres. turnaround times for acquired centres was also greatly A number of existing ABC centres were converted to reduced, enabling the centres to be identified with the Defence corporate care centres, increasing the total number ABC marketing campaigns. to 35 centres. Regional marketing information was amended to include the Other corporate partners who joined through the year local centre telephone number as well as the toll-free number included the Commonwealth Bank of Australia, Optus, (1800 222 543 in Australia, 0508 222 543 in New Zealand). Chisholm TAFE, Chandler Macleod and the Queensland Learning Care Group Institute of Medical Research. Joining the ABC Group has brought exciting opportunities Marketing for growth and development of the Learning Care Group It has always been ABC’s experience that word of mouth is in the US. Since the acquisition by ABC in January 2006, our best form of marketing. This year has been no different the Learning Care Group has made a strategic shift in in this regard and the constant stream of support letters its business strategy, which previously focused on growth that we receive from our excited families suggests that through the franchise market. the neighbourhood grapevine is hard at work. It is also a constant reminder that the Company must continually find improved ways to support and inspire those families. We bolstered our marketing efforts this year with a major re-enrolment campaign over the summer holiday period. The campaign included an extensive flyer distribution and TV advertisements which continued through the Commonwealth Games and local radio advertisements. Additional call centre staff were engaged and trained to respond to the huge influx of enquiries. Real Parents. Real Stories. “When I was pregnant with Miranda, for Miranda and not to worry about I struggled to find her an place in things, just enjoy the remainder childcare as all the places were of the pregnancy and impending full. My husband I and kept getting parenthood. This was very reassuring. knocked back. Originally, we The staff are all thrilled when we had avoided the larger corporate carry her in the door, and are centres such as ABC for fear of our genuinely concerned for her welfare. baby being treated as just another We are very thankful for the love customer. But we then phoned and care that our daughter has ABC and were surprised with the received, and would recommend response we got. We were invited ABC centres to any other parents.” to visit the centre and see how the kids enjoy their time there. We were Brad and Janelle McKenzie, told that a place would be found ABC Newtown10
  13. 13. East Midwest 91 128 West125 South 138Today, the company is driving growth by: As a result of these acquisitions, the Learning Care Group(a) acquiring other regional early education providers operates in nearly 500 locations in the United States who are known for their exceptional quality; of America.(b) purchasing franchised Tutor Time centres; and We are currently undergoing an extensive remodelling program(c) developing new centres to increase concentration and have budgeted approximately US$40 million to undertake in select key markets. these refurbishments at more than 180 of the Childtime centres across the country. These enhancements include anIn the eight months since the ABC acquisition, the Learning updated classroom environment that supports our new TheCare Group has been highly successful in executing Empowered Child™ curriculum. Early indications of recentlythis shift in business strategy by acquiring 23 previously completed remodels show an improvement in enrolment,franchised Tutor Time centres and contracting to purchase which is anticipated for all the centres involved throughoutChildren’s Courtyard, which operates 46 schools (comprised this process.of 74 centres) in Texas.The Children’s Courtyard acquisition was an ideal fit underLearning Care Group’s umbrella of brands, as they havea strong commitment to high quality early education andcare. The synergies among both companies will allowfor continued growth in the marketplace and will positionLearning Care Group as a leading early education providerin Texas. 11
  14. 14. Review of Operations Education Education is what we do. ABC’s National Institute of Early Childhood Education had steady growth through the year. Educational initiatives such as the ABC LifeSmart Curriculum have enhanced our programs for older children in our centres. College – Australia The ABC LifeSmart Curriculum provides children with The National Institute of Early Childhood Education (NIECE), the foundation learning skills they require to become has experienced steady yet significant growth over the confident lifelong learners. The curriculum gives children previous 12 months. the opportunities to explore and extend upon these skills through their participation in a wide range of experiences NIECE provides specialised training in Children’s Services in their early learning environment. qualifications to an average of 2,300 students at any given time, on a national basis. Over 1,000 students The experiences offered by the early learning environment, the have successfully graduated with Children’s Services daily routine and the interactions with educators all contribute qualifications in the previous year. to create a supportive, stimulating and challenging program. Trainers/assessors are based in nine locations around Within the environment a range of activities are offered Australia, delivering courses to full-time and external that actively engage children to enhance all areas of their students. NIECE’s unique delivery model allows external development, promote confidence and independence students to access regular workshops in metropolitan and and assist them in transitioning to their first year of regional locations as well as receive one-on-one mentoring. compulsory schooling. NIECE has been awarded DET-funded User Choice contracts The ABC LifeSmart Curriculum has a significant focus to deliver training services to trainees and apprentices in on literacy, numeracy and computer skills development. Queensland, New South Wales, Victoria, Tasmania, South It also includes: Australia, Western Australia and the Northern Territory. – Letterland – a phonemic awareness program to Trainees and apprentices equate to almost one-third of promote early literacy skills; enrolled students, the remainder being self-funded students who select NIECE as their provider of choice. – Broadlearn – a specialised program for children to develop computer skills using a digital library of over NIECE is firmly established as a nationally Recognised 300 learning activities; Training Organisation and is the largest private provider delivering the Certificate lll, Diploma and Advanced Diploma – Behavioural Learning – a special program for children in Children’s Services. to facilitate positive peer interactions and to assist children with self-regulation and behaviour management; ABC LifeSmart Curriculum – Australia/New Zealand This year, while experiencing exceptional growth both in the – Read for 10 – a reading program for families which has quantity and the types of early learning services we have been developed by the ABC Education Department in acquired, we have focused specific attention on improving conjunction with the Dymocks Literacy Foundation and our exciting and innovative programs and educational services. the National Institute of Early Childhood Education; and The introduction of the ABC LifeSmart Curriculum has been – Hold on Tight, Stay in Sight – a program developed by an educational initiative developed to further enhance the the ABC Education Department to encourage all children educational programs currently offered in the oldest age group and families to be conscious of car safety in driveways. classrooms at ABC Learning Centres. The curriculum meets and extends on the varying legislative requirements of each state and territory of Australia and the Te Whariki guidelines established by the New Zealand Ministry of Education.12
  15. 15. To help support each of these exciting new initiatives, the – Biometric access systems – fingerprint identityABC Education Department has launched its own site verification to provide our families with an added senseon the ABC Learning Centre’s intranet. This site provides of security;additional support for centre personnel with each of these – Next Generation Application data solution – whichnew programs and offers additional advice for program gives both parents and centre staff the ability toplanning and implementation. seamlessly interact over the internet;Each and every one of these projects is very special. – PeopleSoft – designed to improve internal supportEach project has been specifically developed to extend systems and provide up-to-date human resourcesthe educational opportunities for children and to increase functions, as well as serving as a portal for company-their learning outcomes. wide information; andABC has been developing and providing early childhood – Galileo educational software – helping teaching staffprograms for the past 18 years. The launch of our new ABC tailor their educational program to the unique needs ofLifeSmart Curriculum is a further example of our dedication the classroom and individual the ongoing development of educational programs for thechildren in our care. The proprietary curriculum at Learning Care Group is one of our key differentiators and strengths. The TutorEducation and Curriculum – United States Time LifeSmart™ and Childtime The Empowered Child™Learning Care Group is committed to providing our families educational offerings help inspire a lifelong love of learning.with the best care, staff and centres. To ensure we have We are currently in the process of providing all our teachingachieved all of these goals, we are taking steps that will staff with additional training on this curriculum, makinghelp our schools through the accreditation process, either this the first time that Learning Care Group has made theon a national or local level. These certifications may come financial commitment to bring teachers together from anfrom the National Association for the Education of Young entire area and train them using a professional resource.Children (NAEYC), the National Early Childhood ProgramAccreditation (NECPA) or other state governing agencies. Recently, we completed a pilot of the online lesson planning portion of our new Curriculum Embedded AssessmentThe government relations department at Learning Care System. The teachers were very receptive, reporting thatGroup has been very involved with the Early Care and lesson planning was more enjoyable and saved them time.Education Consortium, with one of our staff members Teachers will begin using this system company-wide inserving as the committee’s president. Our team continues strengthen its legislative relationships and raise awarenesson the issues affecting early education providers, ensuring Through extensive market research, Learning Care GroupLearning Care Group has a strong voice in the field. has seen more and more parents turn to online/web-based resources when considering an early education providerTo be a leader in the early education field, it is imperative for their child. We will continue to explore e-marketingto utilise state-of-the-art technology and to streamline opportunities to ensure that Learning Care Group and itsprocesses. We are currently in the process of testing and brands are providing our target web-based audience withinstalling a variety of technology enhancements, including: the information they need in a user-friendly format. 13
  16. 16. Board of Directors Mrs Sallyanne Atkinson AO Mr Edmund Groves Dr Le Neve Groves Mr Martin Kemp Chairman CEO Operations (Global) CEO Education Executive Director CEO Operations Sallyanne Atkinson is a Eddy Groves is co-founder Le Neve Groves is co- (Australia and former Lord Mayor of of ABC and was the founder of ABC, CEO of New Zealand) Brisbane, Australian Senior architect behind ABC’s Education and Principal Trade Commissioner to listing on the ASX in 2001. of the National Institute of Martin Kemp has 16 years’ Paris and Chairman of He is renowned as one Early Childhood Education experience in childcare and Queensland Tourism. of Australia’s business (formerly ABC Early has, in that time, co-founded She is a director of several leaders and brings over Childhood Training College). a number of childcare groups public companies and 18 years’ experience in the Le Neve holds several early including Premier Early associations, including childcare industry. Eddy childhood qualifications, Learning Centres. He has APN News & Media has primary responsibility including a Diploma of owned, managed, operated, Limited and The Australian for financial and operational Teaching Primary/Preschool, acquired or developed Ballet. She is chairman matters. He also provides Bachelor of Education, over 300 childcare centres of the Federal Ministerial industry acknowledged Master of Education and throughout Australia and Taskforce on Dementia skills in acquisition strategy, a PhD in Education. New Zealand. and of the Crawford Fund centre location and design, Le Neve assists in the Martin holds a Bachelor of (Qld). Sallyanne is also a business development and development of and Engineering (Hons) degree Special Representative for corporate strategic planning. oversees all early childhood and a Masters of Engineering Queensland, South East He is among Australia’s philosophies, policies and Science degree and is a Asia in the Queensland leading public speakers and practices in the ABC Group. member of the Institution State Government. regularly addresses a range Since the inception of ABC of Engineers Australia. of business and childcare Among Sallyanne’s many Developmental Learning He has extensive project industry forums and events. achievements, she has Centres, Le Neve has management experience in received several awards supported the design and multi-million dollar projects including Officer of the implementation of ABC’s around Australia. Order of Australia and high quality programs for Martin has been a member recently was awarded which we have received 17 of the Commonwealth Child an Honorary Doctorate industry awards. Le Neve Care Advisory Council, by the Australian Catholic is also the Chairman of President of the Queensland University. She is a Fellow ABC’s risk management Professional Child Care of the Australian Institute committee. Centres Association, of Management, Australian Le Neve, a member of President of the Australian Institute of Company the Stronger Families and Confederation of Child Care, Directors and Australian Communities Partnership President of the Queensland Institute of Planning. established in 2004 by Private Child Care Centres Sallyanne holds a Bachelor the Commonwealth Employers Organisation and of Arts degree from the Government, is also a Foundation Board Member University of Queensland. Queensland State Director of the Australian Childcare for Young Media Australia. Centres Association (federal employer organisation).14
  17. 17. Mr William Bessemer Mr David Ryan AO The Hon. Lawrence AnthonyNon-Executive Director Non-Executive Director Non-Executive DirectorBill Bessemer is currently David Ryan is the Chairman Larry Anthony is currently aChairman of Austock Group of Tooth & Co and other board member of LearningLimited and Australia Pacific Residual Assco Group Care Group, Inc, MacquarieExchange Limited and is a Limited group companies. Media Group, Indue Ltddirector of public company He is also a non-executive and the National ChairmanTimbercorp Limited. director of Transurban for the Duke of Edinburgh’s Group and Lend Lease Awards Australia.He has extensive experience Corporation Limited, asand practical corporate Larry has vast experience well as a member of theskills covering debt and in government sectors Advisory Board of Virginequity raisings, financial and finance including roles Management Asia-Pacificstructuring, mergers, with Merrill Lynch and Pty Ltd and a memberacquisitions and business Potter Warburg. He is a of the Advisory Board ofrecoveries. former Federal Minister for Caliburn Partnership. Children and Youth Affairs,Bill holds a Bachelor of David has extensive Community Services andEconomics degree from the business experience the Parliamentary SecretaryUniversity of Queensland, through his current and for Trade. He is also involveda Master of Business former roles which include with various charitiesAdministration degree from holding senior executive across Australia.the University of Melbourne management positions inand is a Certified Practising Larry holds a Bachelor public companies and beingAccountant. of Commerce degree from a member of a number of the University of New South public company boards. Wales, a diploma from David is well credentialed the Australian Institute to provide support to of Company Directors, a the ABC board as a diploma of Applied Finance Non-Executive Director. and Investment and is a Member of the Banking and Securities Institute of Australia and Australian Institute of Company Directors. 15
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  19. 19. A.B.C. Learning Centres LimitedAnnual Financial Report for the year ended 30 June 200618 Corporate Governance Statement23 Directors’ Report36 Auditors’ Independence Declaration37 Independent Audit Report39 Directors’ Declaration40 Income Statements41 Balance Sheets42 Statement of Changes in Equity44 Cash Flow Statements45 Notes to the Financial Statements98 Additional Stock Exchange Information 17
  20. 20. Corporate Governance Statement Corporate Governance 3. within the last three years has not been employed in an The Company is committed to implementing the highest executive capacity by the Company or another group standards of corporate governance. In determining what those member, or been a Director after ceasing to hold any such high standards should involve the Company has turned to the employment; ASX Corporate Governance Council’s Principles of Good 4. within the last three years has not been a principal of a Corporate Governance and Best Practice Recommendations. material professional adviser or a material consultant to the The Company is pleased to advise that the Company’s policies Company or another group member, or an employee are consistent with those ASX guidelines. materially associated with the service provided; Where the Company’s corporate governance practices do not 5. is not a material supplier or customer of the Company correlate with the practices recommended by the Council, the or another group member, or an officer of or otherwise Company is working towards compliance. associated directly or indirectly with a material supplier 1. Board of Directors or customer; 1.1 Role of the Board 6. has no material contractual relationship with the Company The Board’s role is to govern the Company rather than to or other group member other than as a Director of the manage it. In governing the Company, the Directors must act in Company; the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance 7. has not served on the Board for a period which could, or with the direction and delegations of the Board and the could reasonably be perceived to, materially interfere with responsibility of the Board to oversee the activities of the Director’s ability to act in the best interests of the management in carrying out these delegated duties. Company; and In carrying out its governance role, the main task of the Board is 8. is free from any interest and any business or other to drive the performance of the Company. The Board must also relationship which could, or could reasonably be perceived ensure that the Company complies with all of its contractual, to, materially interfere with the Director’s ability to act in the statutory and any other legal obligations, including the best interests of the Company. requirements of any regulatory body. The Board has the final A majority of the Board is not made up of independent responsibility for the successful operations of the Company. Directors. The Board currently has three independent Directors To assist the Board carry out its functions, it has a Code of and four non-independent Directors. Conduct to guide the Directors, the Chief Executive Officers, Mr William Bessemer is a Non-Executive Director of the the Chief Financial Officer and other key executives in the Company and is also the Chairman and shareholder of the performance of their roles. Austock Group Limited which owns the Company’s corporate 1.2 Composition of the Board advisors and as such does not meet the Company’s criteria for To add value to the Company the Board has been formed so independence. However, as one of the founding Directors of the that it has effective composition, size and commitment to Company, his experience and knowledge of the Company adequately discharge its responsibilities and duties. The names makes his contribution to the Board such that it is appropriate of the Directors and their qualifications and experience are for him to remain on the Board. stated on pages 25 to 27 along with the term of office held by As the Company is now a global operation, the Board needs to each of the Directors. Directors are appointed based on the carefully consider an appropriate and relevant Board structure specific governance skills required by the Company and on the for the future before it appoints further Directors. independence of their decision-making and judgement. 1.3 Responsibilities of the Board The Company recognises the importance of Non-Executive In general, the Board is responsible for, and has the authority Directors and the external perspective and advice that to determine, all matters relating to the policies, practices, Non-Executive Directors can offer. Mrs Sallyanne Atkinson management and operations of the Company. It is required to (Chairman), Mr William Bessemer, Mr David Ryan and the do all things that may be necessary to be done in order to carry Hon. Larry Anthony are all Non-Executive Directors. In addition out the objectives of the Company. to being Non-Executive Directors, Mrs Sallyanne Atkinson, Mr David Ryan and the Hon. Larry Anthony also meet the Without intending to limit this general role of the Board, the following criteria for independence adopted by the Company. principal functions and responsibilities of the Board include the following. An Independent Director: 1. Leadership of the Organisation: overseeing the Company 1. is a Non-Executive Director; and establishing codes that reflect the values of the 2. is not a substantial shareholder of the Company or an Company and guide the conduct of the Board, officer of, or otherwise associated directly with, a substantial management and employees. shareholder of the Company;18
  21. 21. 2. Strategy Formulation: working with senior management to 1.4.2 Commitments set and review the overall strategy and goals for the Each member of the Board is committed to spending sufficient Company and ensuring that there are policies in place to time to enable them to carry out their duties as a Director of govern the operation of the Company. the Company.3. Overseeing Planning Activities: overseeing the development 1.4.3 Confidentiality of the Company’s strategic plan and approving that plan as In accordance with legal requirements and agreed ethical well as the annual and long-term budgets. standards, Directors and key executives of the Company have agreed to keep confidential, information received in the4. Shareholder Liaison: promoting effective communications course of the exercise of their duties and will not disclose with shareholders through an appropriate communications non-public information except where disclosure is authorised policy and promoting participation at general meetings of or legally mandated. the Company. 1.4.4 Continuous Disclosure5. Monitoring, Compliance and Risk Management: overseeing The Board has designated the Company Secretary as the the Company’s risk management, compliance, control and person responsible for overseeing and coordinating disclosure accountability systems and monitoring and directing the of information to the ASX as well as communicating with the financial and operational performance of the Company. ASX. In accordance with the ASX Listing Rules the Company6. Company Finances: approving expenses in excess of those immediately notifies the ASX of information: approved in the annual budget and approving and monitoring 1. concerning the Company that a reasonable person would acquisitions, divestitures and financial and other reporting. expect to have a material effect on the price or value of the7. Human Resources: appointing, and, where appropriate, Company’s securities; and removing the Chief Executive Officers (CEOs) and 2. that would, or would be likely to, influence persons who Chief Financial Officer (CFO) as well as reviewing the commonly invest in securities in deciding whether to acquire performance of the CEOs and monitoring the performance or dispose of the Company’s securities. of senior management in their implementation of the Company’s strategy. 1.4.5 Education and Induction New Directors undergo an induction process in which they are8. Ensuring the Health, Safety and Well-Being of Employees: given a full briefing on the Company. This includes meetings in conjunction with the senior management team, with key executives, tours of the premises, an induction developing, overseeing and reviewing the effectiveness of package and presentations. Information conveyed to new the Company’s occupational health and safety systems to Directors include: promote the well-being of all employees. – details of the roles and responsibilities of a Director with an9. Delegation of Authority: delegating appropriate powers to outline of the qualities required to be a successful Director; the CEOs to ensure the effective day-to-day management of the Company and establishing and determining the – formal policies on Director appointment as well as conduct powers and functions of the Committees of the Board. and contribution expectations;Full details of the Board’s role and responsibilities are contained – details of all relevant legal requirements;in the Board Charter, a copy of which is available upon request. – a copy of the Board Charter;1.4 Board Policies – guidelines on how the Board processes function;1.4.1 Conflicts of InterestDirectors must: – details of past, recent and likely future developments relating to the Board including anticipated regulatory changes;– disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between – background information on and contact information for key the interests of the Director and the interests of any other people in the organisation including an outline of their roles parties in carrying out the activities of the Company; and and capabilities;– if requested by the Board, within seven days or such further – an analysis of the Company; period as may be permitted, take such necessary and – a synopsis of the current strategic direction of the Company reasonable steps to remove any conflict of interest. including a copy of the current strategic plan and annualIf a Director cannot or is unwilling to remove a conflict of budget; andinterest then the Director must, in accordance with the – a copy of the Constitution of the Company.Corporations Act, absent himself or herself from the room whendiscussion and/or voting occurs on matters about which theconflict relates. 19
  22. 22. Corporate Governance Statement In order to achieve continuing improvement in Board In addition, consistent with the law, designated officers are performance, all Directors are encouraged to undergo continual prohibited from trading in the Company’s securities while in the professional development. Specifically, Directors are provided possession of unpublished price sensitive information concerning with the resources and training to address skills gaps where the Company. Unpublished price sensitive information is they are identified. information regarding the Company, of which the market is not 1.4.6 Independent Professional Advice aware, that a reasonable person would expect to have a material The Board collectively and each Director has the right to seek effect on the price or value of the Company’s securities. independent professional advice at the Company’s expense, up Notice of an intention to trade must be given prior to trading in to specified limits, to assist them to carry out their the Company’s securities as well as a confirmation that the responsibilities. person is not in possession of any unpublished price sensitive 1.4.7 Related Party Transactions information. The completion of any such trade by a Director Related party transactions include any financial transaction must also be notified to the Company Secretary who in turn between a Director and the Company and will be reported in advises the ASX. writing to each Board meeting. Unless there is an exemption 1.4.10 Performance Review/Evaluation under the Corporations Act from the requirement to obtain Generally, it is the policy of the Board to conduct an evaluation shareholder approval for the related party transaction, the Board of its performance annually. The Board’s performance will be cannot approve the transaction. measured against both qualitative and quantitative indicators. 1.4.8 Shareholder Communication The objective of this evaluation is to provide best practice The Company respects the rights of its shareholders and to corporate governance to the Company. facilitate the effective exercise of those rights the Company is The Board is currently undergoing an independent review of its committed to: performance by external management consultants. 1. communicating effectively with shareholders through 1.4.11 Attestations by CEO and CFO releases to the market via ASX, the Company’s website, In accordance with the Board’s policy, the CEO and the CFO information mailed to shareholders and the general made the attestations recommended by the ASX Corporate meetings of the Company; Governance Council as to the Company’s financial condition 2. giving shareholders ready access to balanced and prior to the Board signing this Annual Report. understandable information about the Company and 2. Board Committees corporate proposals; 2.1 Audit Committee 3. making it easy for shareholders to participate in general Below is a summary of the role, composition and responsibilities meetings of the Company; and of the Audit Committee. Further details are contained in the Audit Committee’s Charter. 4. requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions 2.1.1 Role about the conduct of the audit and the preparation and The Audit Committee is responsible for reviewing the integrity of content of the auditor’s report. the Company’s financial reporting and overseeing the independence of the external auditors. The Company also makes available a telephone number and email address for shareholders to make enquiries of the 2.1.2 Composition Company. During the 2006 financial year, the Audit Committee consisted of three members. The Hon. Larry Anthony was appointed to the 1.4.9 Trading in Company Shares Audit Committee in August 2006. Members are appointed by The Company has a Share Trading Policy under which the Board from amongst the Non-Executive Directors, a majority Directors, members of senior management and other of whom are also independent. The current members of the employees likely to be in possession of unpublished price Audit Committee are Mr David Ryan (Chairman), Mrs Sallyanne sensitive information and their associates may not trade in the Atkinson, Mr William Bessemer and the Hon. Larry Anthony. All Company’s securities during the following “blackout periods” members can read and understand financial statements and are commencing: otherwise financially literate and Mr David Ryan, the Chairman, – 30 days prior to the release by the Company of its is a qualified accountant with experience in financial and half-yearly results to the ASX and concluding two days accounting matters. The details of the member’s qualifications after such release; and may be found in their Director Profiles on pages 25 to 27. – 30 days prior to the release by the Company of its The Audit Committee held two meetings throughout the year annual results to the ASX and concluding two days after and details of attendance of the members of the Audit such release. Committee are contained in the following table.20
  23. 23. August 2005 February 2006 2.2.4 Criteria for selection of DirectorsMr David Ryan ✓ ✓ Directors are appointed based on the specific governance skillsMrs Sallyanne Atkinson ✓ ✓ required by the Company. Given the size of the Company andMr William Bessemer ✓ ✓ the business it operates, the Company aims at all times to have at least one Director with experience in the childcare industry.2.1.3 Responsibilities In addition, Directors should have the relevant blend of personalThe Audit Committee reviews the audited annual and half-yearly experience in:financial statements and any reports which accompany – accounting and financial management;published financial statements before submission to the Boardand recommends their approval. – legal skills; andThe Audit Committee also recommends to the Board the – CEO-level business experience.appointment of the external auditor and each year, reviews the 2.2.5 Responsibilities in respect of Remunerationappointment of the external auditor, their independence, the The responsibilities of the Committee include setting policies foraudit fee, and any questions of resignation or dismissal. senior officers’ remuneration, setting the terms and conditions2.2 Nomination and Remuneration Committee of employment for the Chief Executive Officers, reviewing andBelow is a summary of the role, composition and responsibilities making recommendations to the Board on the Company’sof the Nomination and Remuneration Committee. Further details incentive schemes and superannuation arrangements, reviewingare contained in the Nomination and Remuneration Committee’s the remuneration of both Executive and Non-ExecutiveCharter. Directors and making recommendations to the Board on any proposed changes and undertaking an annual review of the2.2.1 Role Chief Executive Officers’ performance, including, setting withThe role of the Nomination and Remuneration Committee is to the Chief Executive Officers goals for the coming year andhelp achieve a structured Board that adds value to the reviewing progress in achieving these goals.Company by ensuring an appropriate mix of skills are present inDirectors on the Board at all time and to assist the Board in 2.2.6 Remuneration Policyfulfilling its responsibilities in respect of establishing appropriate Details of the Board’s policy on remuneration are set out onremuneration levels and incentive policies for employees. pages 27 to 34 of the Directors’ Report which incorporates the Company’s remuneration report.2.2.2 CompositionMrs Sallyanne Atkinson (Chairman), Mr Edmund Groves and 2.3 Risk Management CommitteeMr David Ryan are the current members of the Nomination and Below is a summary of the role, composition and responsibilitiesRemuneration Committee the majority of whom are of the Risk Committee. Further details are contained in the Riskindependent Directors. Committee’s Charter.The Nomination and Remuneration Committee held two 2.3.1 Rolemeetings throughout the year and details of attendance of the The role of the Risk Management Committee is to ensure thatmembers of the Committee are contained in the following table. the Company is able to manage a diverse and complex range of significant risks. The committee is also responsible for September 2005 June 2006 establishing policies on risk oversight and management.Mrs Sallyanne Atkinson ✓ ✓Mr Edmund Groves ✓ ✓ 2.3.2 Composition The members of the Risk Management Committee are:Mr David Ryan ✓ ✓ – Dr Le Neve Groves (Chairman);2.2.3 Responsibilities in respect of NominationsThe responsibilities for nominations include devising criteria for – Mr William Bessemer; andBoard membership, reviewing the need for various skills and – Mr Martin Kemp.experience on the Board and where appropriate identifyingspecific individuals for nomination as Directors for review by the The Risk Management Committee held five meeting during theBoard. The Committee also oversees management succession year and details of attendance of the members of theplans, including the CEO’s and evaluates the Board’s Committee are contained in the following table.performance and makes recommendations for the appointmentand removal of Directors. 21
  24. 24. Corporate Governance Statement September 2005 November 2005 February 2006 April 2006 June 2006 Dr Le Neve Groves ✓ ✓ ✓ ✓ ✓ Mr William Bessemer ✓ ✓ ✓ ✓ ✓ Mr Martin Kemp ✓ ✓ ✓ ✓ ✓ 2.3.3 Responsibilities for its part is committed to providing clients, customers and The duties and responsibilities of the Risk Management consumers with fair value. Committee include: Employment Practices (a) Assessing the internal processes for determining and The Company endeavours to provide a safe workplace in which managing key risk areas, particularly: there is equal opportunity for all employees at all levels of the (i) non-compliance with laws, regulations, standards and Company. The Company does not tolerate the offering or best practice guidelines, including environmental and acceptance of bribes or the misuse of Company assets or industrial relation laws; resources. (ii) litigation and claims; and Obligations Relative to Fair Trading and Dealing The Company aims to conduct its business fairly and to (iii) relevant business risks other than those that are dealt compete ethically and in accordance with relevant competition with by other specific Board committees. laws. The Company strives to deal fairly with the Company’s (b) Ensuring that the ABC Group has an effective risk customers, suppliers, competitors and other employees and management system and that major risks to the ABC Group encourages its employees to strive to do the same. are reported at least annually to the Board. Responsibilities to the Community (c) Receiving from management reports on all suspected and As part of the community the Company: actual frauds, thefts and breaches of laws. – is committed to conducting its business in accordance (d) Evaluating the process the ABC Group has in place for with applicable environmental laws and regulations and assessing and continuously improving internal controls, encourages all employees to have regard for the particularly those related to areas of significant risk. environment when carrying out their jobs; (e) Assessing whether management has controls in place for – encourages all employees to engage in activities beneficial unusual types of transactions and/or any potential to their local community; and transactions that may carry more than an acceptable – supports community charities. degree of risk. Responsibility to the Individual (f) Meeting periodically with key management, internal and The Company is committed to keeping private information from external auditors and compliance staff to understand and employees, clients, customers, consumers and investors discuss the ABC Group’s control environment. confidential and protected from uses other than those for which 3. Company Code of Conduct it was provided. As part of its commitment to recognising the legitimate interests Conflicts of Interest of stakeholders, the Company has a Code of Conduct to guide Employees and Directors must avoid conflicts as well as the compliance with legal and other obligations to legitimate appearance of conflicts between personal interests and the stakeholders. These stakeholders include shareholders, interests of the Company. employees, clients, customers, government authorities, creditors and the community as whole. The Code includes the following: How the Company Complies with Legislation Affecting its Operations Responsibilities to Shareholders and the Financial Within Australia, the Company strives to comply with the spirit Community Generally and the letter of all legislation affecting its operations. Outside The Company complies with the spirit as well as the letter of all Australia, the Company will abide by local laws in all countries in laws and regulations that govern shareholders’ rights. The which it operates. Where those laws are not as stringent as the Company has processes in place designed to ensure the Company’s operating policies, particularly in relation to the truthful and factual presentation of the Company’s financial environment, workplace practices, intellectual property and the position and prepares and maintains its accounts fairly and giving of “gifts”, Company policy will prevail. accurately in accordance with the generally accepted accounting and financial reporting standards. How the Company Monitors and Ensures Compliance with its Code Responsibilities to Clients, Customers and Consumers The Board, management and all employees of the Company Each employee has an obligation to use their best efforts to are committed to implementing this Code of Conduct and each deal in a fair and responsible manner with each of the individual is accountable for such compliance. Disciplinary Company’s clients, customers and consumers. The Company measures may be imposed for violating the Code.22
  25. 25. Directors’ ReportYour Directors present their Annual Report on the Company and its controlled entities (referred to hereafter as the Group) for thefinancial year ended 30 June 2006.DirectorsThe names of the Directors in office at any time during the year and to the date of this report are:Mrs Sallyanne Atkinson AOMr Edmund S GrovesDr Le Neve A GrovesMr William E BessemerMr Martin Vincent KempMr David John Ryan AOHon. Lawrence James AnthonyDirectors have been in office since the start of the financial year until the date of this report unless otherwise stated.Principal ActivitiesThe principal activities of the Group during the financial year were the provision of childcare services and education.Operating ResultsThe consolidated profit of the Group for the financial year after providing for income tax amounted to $81,110,000(2005: $43,534,000 AIFRS).Dividends Paid or RecommendedThe Directors have declared a fully franked final dividend of 8 cents per share ($31,451,724). The dividends will be franked at a rateof 30%. The final dividend will be paid on 29 September 2006. Dividend Date paid Dividend per share Total dividend Ordinary Shares – 29 September 2005 6 cents $15,036,962 Final dividend for the year ended 30 June 2005 franked to 100% Preference Shares – 30 November 2005 16.9212 cents $2,030,543 Final dividend for the year ended 30 June 2005 franked to 100% Ordinary Shares – 31 March 2006 7 cents $18,417,078 Interim dividend for the year ended 30 June 2006 franked to 100% Preference Shares – 31 May 2006 16.8288 cents $2,019,457 Interim dividend for the year ended 30 June 2006 franked to 100%Review of OperationsA Review of the Operations of the Group during the year ended 30 June 2006 and up to the date of this report appears in theseparate section “Review of Operations” on pages 8 –13.Significant Changes in State of AffairsThe following significant changes in the state of affairs of the Group occurred during the year:(i) On 13 September 2005, the Company issued 10,000,000 ordinary shares at $6.00 per share to raise capital to reduce debt and to fund the Company’s ongoing acquisition program;(ii) On 15 December 2005, the Company issued 37,200,000 ordinary shares at $7.00 to raise funds for the acquisition of the Learning Care Group, Inc. and to fund the Company’s ongoing acquisition program;(iii) On 11 January 2006, the Company acquired the Learning Care Group, Inc. for US$159,100,000;(iv) On 9 May 2006, the Company issued 44,104,239 ordinary shares at an issue price of $7.30 each to a range of institutional and professional investors to refinance the Company’s balance sheet to place the Company in a strong position to take advantage of global acquisition opportunities;(v) In May 2006, the Company acquired Kids Campus Limited for $127,897,000; and(vi) On 14 June 2006, the Company issued 38,087,542 ordinary shares at an issue price of $7.30 each to a range of institutional and professional investors to refinance ABC’s balance sheet to place the Company in a strong position to take advantage of global acquisition opportunities. 23
  26. 26. Directors’ Report Significant Events After Balance Date On 7 July 2006 the Company announced an off-market takeover bid of Hutchison’s Child Care Services Ltd for $1.50 per ordinary share. On 25 September 2006 the Company declared the takeover bid unconditional and commenced compulsory acquisition of the remaining shares. On 6 September 2006 the Company acquired 100% of The Children’s Courtyard LLP, the ninth largest childcare provider in the US for US$66 million. No other matter or circumstance has arisen since 30 June 2006 that has significantly affected, or may significantly affect: (a) the Group’s operations in future financial years; or (b) the results of those operations in future financial years; or (c) the Group’s state of affairs in future financial years. Future Developments The likely developments in the operations of the Group and the expected results of those operations in future financial year is the proposed acquisition of a number of childcare centres in locations throughout Australia, New Zealand and the United States of America. The Board expects that the above developments will provide a wider market penetration and enable the Group’s activities to be expanded. Environmental Issues The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Options Sign-on options were granted over ordinary shares during the financial year by the Company to the Learning Care Group, Inc. executives in accordance with their employment agreements. The options granted under the employment agreements were: 1. 1,083,000 sign-on options granted to William Davis at an option premium of $0.00 per option and an exercise price of $7.35 per option; 2. 375,145 sign-on options granted to Frank Jerneycic at an option premium of $0.00 per option and an exercise price of $7.35 per option; 3. 334,807 sign-on options granted to Kathy Myers at an option premium of $0.00 per option and an exercise price of $7.35 per option; and 4. 119,239 sign-on options granted to Scott Smith at an option premium of $0.00 per option and an exercise price of $7.35 per option. The options granted will vest at a rate of 20% per annum on each anniversary or at the end of the executives’ compensation period (if the employment agreement is not renewed through to 2011). Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate or in the interest of any other registered scheme. During and since the end of the financial year no options have been exercised.24