Announcement PDF ASX Announcement Nido 2023 Full Year Financial Results and Statutory Appendix 4E 20 February 2024 In accordance with ASX Listing Rule 4.3A, Nido Education Limited (NDO.ASX) enclose the 2023 Financial and Statutory Report (Full Year Report) including Appendix 4E. Mathew Edwards, Founder & Managing Director, Renee Bowman, Chief Executive Officer and Tom Herring Chief Financial Officer will host a conference call and Q&A session for investors at 12.00 pm AEDT on Wednesday 21 February 2024. Investors who wish to participate in the teleconference can register using this link: https://s1.c-conf.com/diamondpass/10036887-jfycq4.html Alternatively, if you would like to listen to the audio webcast, register using this link: https://loghic.eventsair.com/ndoannualresults/register/Site/Register Please note that you will not be able to ask questions in the webcast. Further information Investor & Media enquiries P: 02 9712 7444 E: ir@nido.edu.au About Nido Founded in 2021, Nido Education Limited is a national owner, operator and manager of long day early childhood education and care services, operating under the Nido Early School brand. Visit: www.nidoeducation.edu.au This announcement has been authorised for release by Board of Nido Education Limited —ENDS— ASX Announcement - Nido Education Limited ABN 12 650 967 703 Nido Education Limited Appendix 4E Appendix 4E Preliminary final report 1. Company details Name of entity: Nido Education Limited (ABN: 12 650 967 703) (ASX: NDO) Reporting period: For the year ending 31 December 2023 Previous period: For the year ending 31 December 2022 2. Results for announcement to the market Key information Up/Down Movement % 2023 $’000 2022 $’000 up 61.1% 93,372 57,944 down* – (2,658) 5,245 up* – 351 (4,174) Profit from ordinary activities after tax for the year down 167.2% (18,105) (6,775) Net profit for the year attributable to Nido Education Limited shareholders down 167.2% (18,105) (6,775) Revenue from ordinary activities Earnings before interest, tax, depreciation and amortisation (‘EBITDA’) Underlying EBITDA * The percentage increase from the prior period has not been included as the movement from profit to loss or loss to profit cannot be expressed as a percentage movement. Reconciliation of underlying EBITDA 2023 $’000 2022 $’000 EBITDA (2,658) 5,245 Lease rental expense (pre AASB 16) (12,783) (9,420) Add: Transaction costs 3,250 – Add: Share‑based payments 10,102 – Add: Other non‑underlying costs 2,440 – 351 (4,174) Non‑operating items EBITDA (underlying) Commentary on results Commentary on the results for the year is contained in the Review of Results and Operations section of accompanying 2023 Financial Report. This Report should be read in conjunction with the 2023 Financial Report and any public announcements made by the Company. Dividend information There were no dividends paid, recommended or declared during the current financial period. i Nido Education Limited Appendix 4E Appendix 4E (continued) 3. Net tangible assets per security Net tangible assets per share * 2023 Cents 2022 Cents (0.74) (9.07) The net tangible assets per ordinary share amount is calculated based on 225,858,700 ordinary shares on issue at 31 December 2023 and 84,419,812 ordinary shares that would have been in existence had the share reorganisation that occurred in 2023 occurred as at 31 December 2022. 4 Control gained over entities Refer to Note 29 and 30 to the financial statements in the annual report for details of entities over which control has been gained during the reporting period. 5. Dividend reinvestment plans Not Applicable. 6. Financial Information The financial statements were subject to an audit by the Group’s auditors and the audit report is attached as part of the Financial Report which can be found on our website: https://nidoeducation.edu.au/ 7. Other financial information required by Listing Rule 4.3A Other information requiring disclosure to comply with Listing Rule 4.3A is contained in the Group’s Financial Report which can be found on our website: https://nidoeducation.edu.au/ ii Financial Report 2023 Nido Education Limited Financial Report 2023 Nido Education is proud to present this financial report for the financial year ended 31 December 2023. Name Nido Education Limited ABN 12 650 967 703 Reporting period 1 January 2023 to 31 December 2023 ASX code NDO Contents Directors’ Report 1 Remuneration Report 14 Directors’ Declaration 25 Consolidated Statement of Financial Position 26 Consolidated Statement of Profit or Loss and Other Comprehensive Income 27 Consolidated Statement of Changes in Equity 28 Consolidated Statement of Cash Flow 29 Notes to the Consolidated Financial Statements 30 Lead Auditor’s Independence Declaration 70 Independent Auditor’s Report 71 Corporate Directory 76 Nido Education Limited Financial Report 2023 Directors’ Report The Directors present their report together with the consolidated financial statements of the Group comprising Nido Education Limited (hereafter ‘the Company’) and its controlled entities (hereafter ‘Nido Education’) for the financial year ended 31 December 2023 (referred to hereafter as the financial year) pursuant to the requirements of the Corporations Act 2001 (Cth) (Corporations Act). The shares of Nido Education Limited (formerly Nido Education Pty Limited) trade on the Australian Securities Exchange (ASX) (ASX code NDO). Directors The following persons were Directors of Nido Education during the whole financial year and up to the date of this report, unless otherwise stated: Continuing Directors Mathew Edwards Managing Director Member of Human Resources and Remuneration Committee New Directors Mark Kerr Independent Non‑Executive Chairperson appointed 2 June 2023 Member of Nomination and Remuneration Committee Member of Audit, Risk and Compliance Committee Joe Dicks Independent Non‑Executive Director appointed 2 June 2023 Chair of Audit, Risk and Compliance Committee Member of Nomination and Remuneration Committee Vanessa Porter Independent Non‑Executive Director appointed 2 June 2023 Chair of Nomination and Remuneration Committee Member of Audit, Risk and Compliance Committee 1 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Information on Directors Mark Kerr Title Chair and Independent Non‑Executive Director Term of Office Mark was appointed as Chair of Nido Education in June 2023. Qualifications Mark holds a Bachelor of Laws (LLB) from the University of Melbourne. Experience and expertise Mark has extensive experience as Chair, Non‑Executive Director and adviser across a range of publicly listed and private companies and across a diverse range of sectors. Mark was previously the Chair and a Non‑Executive Director of Think Childcare from its IPO and ASX listing in 2014 until its acquisition by scheme of arrangement in 2021 by Busy Bees. Mark is a Director of Berkeley Consultants Pty Ltd, which specialises in public and investor relations and reputation management consultancy. Mark was Managing Director of Hawthorn Resources Limited until December 2022. Mark’s community involvement currently extends to being a member of the Victorian Committee for the Juvenile Diabetes Research Foundation. He is also a committee member of the St Vincent’s Institute Charity Golf Day Committee. Other current directorship Cryosite Limited (ASX: CTE) Former directorships (last 3 years) Hawthorn Resources Limited (ASX: HAW) – Managing Director Think Childcare Limited (ASX: TNK) – Chair Special Responsibilities Member of Nomination and Remuneration Committee Member of Audit, Risk and Compliance Committee Interests in shares 1,983,866 NDO Ordinary Shares (escrowed 16/10/2025) Interests in premium options 745,099 Options expiring 12/07/2027 exercise price of $0.96 2 Nido Education Limited Financial Report 2023 Mathew Edwards Title Managing Director Term of Office Mathew was appointed as Managing Director of Nido Education on 11 June 2021. Experience and expertise Mathew founded Nido Education following the sale of Think Childcare to Busy Bees in 2021. Mathew has been involved in the early learning sector since 2001 and was the Founder, Managing Director and Chief Executive Officer of Think Childcare. Mathew was responsible for overseeing the growth of Think Childcare, taking it from 30 Centres at IPO to 88 Centres on the sale of the business in 2021. Prior to Think Childcare, Mathew was the former Managing Director of Learning and Education Australia Pty Ltd (“LEA”) from 2008, which at the time owned 12 Centres. Mathew has extensive management experience in retail and commercial property, and experience in strategy and management of multi‑site business operations. Other current directorships None Former directorships (last 3 years) Think Childcare Limited (ASX: TNK) – Managing Director Special Responsibilities Member of Nomination and Remuneration Committee Interests in shares 10,562,721 NDO Ordinary Shares 111,613,750 NDO Ordinary Shares (escrowed until 16/10/2025) Interests in premium options 1,192,160 Options expiring 12/07/2027 exercise price of $0.96 3 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Joe Dicks Title Independent Non‑Executive Director Term of Office Joe was appointed as an Independent Non‑Executive Director of Nido Education in June 2023. Qualifications Joe holds a Bachelor of Commerce and a Postgraduate Diploma in Accountancy from the University of Durban. Experience and expertise Joe was previously a Non‑Executive Director of Think Childcare, from April 2018 until its acquisition by scheme of arrangement in 2021 by Busy Bees. Joe has 20 years’ multi‑national experience as a Non‑Executive Director in a broad range of industries. He also has in‑depth experience in government funded and regulated industries, infrastructure and the education and aged care sectors. Joe currently chairs Campus Living Funds Management Limited as well as being a Non‑Executive Director of Qudos Bank Limited. Joe is also a director of the PPB Advisory legacy group of companies and is overseeing the wind down of this group. Other current directorships Campus Living Funds Management Limited Qudos Bank Limited Former directorships (last 3 years) Think Childcare Limited (ASX: TNK) – Non‑Executive Director Special Responsibilities Chair of Audit, Risk and Compliance Committee Member of Nomination and Remuneration Committee Interests in shares 100,000 NDO Ordinary Shares Interests in premium options 149,021 Options expiring 12/07/2027 exercise price of $0.96 4 Nido Education Limited Financial Report 2023 Vanessa Porter Title Independent Non‑Executive Director Term of Office Vanessa was appointed as an Independent Non‑Executive Director of Nido Education in June 2023. Qualifications Vanessa is a certified chair and an approved advisor. She also holds a Bachelor of Education (Adult Education) in Human Resource Development from the University of Technology Sydney. Experience and expertise Vanessa is a seasoned executive with over 30 years of experience in major global companies, across industries and markets. Previously, Vanessa served as the Director of Talent and Development, Divisional Lead (Australian, New Zealand and South Africa) and the Chief Executive Officer of the Registered Training Organisation (RTO) for McDonald’s Australia Limited. She also held the position of General Manager (Global) – Human Resources of Staging Connections Group Limited and was the CEO of their RTO. Vanessa has also previously held board member roles at Gearhouse Staging Connections and UnitingCare NSW/ACT. Vanessa started her own boutique consultancy (All Of You Pty Ltd) in 2015. Her reputation has been built on providing HR strategic advice and building people’s capability through designing and delivering immersive and sustainable learning environments. She is currently supporting leaders at GrowthOps, DKSH Smollan and Bai Communications to name a few. Other current directorships None Former directorships (last 3 years) None Special Responsibilities Chair of Nomination Remuneration Committee Member of Audit, Risk and Compliance Committee Interests in shares 50,000 NDO Ordinary Shares Interests in premium options 149,021 Options expiring 12/07/2027 exercise price of $0.96 5 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Principal activities Nido Education operates Early Childhood Education Services (Education Services) in Australia. The principal activities of the Company are summarised as follows: • • • Owns and operates purpose‑built Education Services under the “Nido” brand and operating model; Provides establishment and management services to clients and third‑party incubator partners; and Acquires high‑performing purpose‑built Education Services from third‑party incubators. Dividends There were no dividends paid, recommended, or declared during the current or previous financial year. Review and results of operations Nido Education currently owns and operates 52 Education Services under the brand Nido Early School. Additionally, Nido Education provides establishment and management services to partners, including NAED Holdings Pty Limited (NAED), its primary third‑party incubator partner. Nido’s strategy is to create an environment that supports teachers to rise and make a positive impact on the lives of children. Nido Education lays the foundation for delivering high quality education by supporting and nurturing its people. This leads to sustained demand and allows the Group to build a stable, predicable, and profitable business, delivering value and recurring earnings growth to security holders over the medium to long term. All Nido Education Services are purpose‑built and designed to Nido Education standards and specifications that allow Nido Education to provide quality education. The Group has actively chosen to locate its Education Services in suburban areas, supported by long‑term leases. On 10 October 2023, and as a result of the IPO that occurred on the 16 October 2023, the Group acquired 24 Education Services, taking the Nido Education portfolio to 52 owned and operated Education Services nationally. These Education Services are located across Western Australia (26 Education Services), South Australia (11 Education Services), Victoria (14 Education Services) and the Australian Capital Territory (1 Education Service). In addition to the 52 Education Services that Nido Education own and operate, Nido Education also manages 45 Education Services on behalf of third parties., This takes the total number of Nido Education owned, operated and managed Services to 97, with a total maximum capacity of 8,544 children per day that can be educated. Nido Education has a derisked model of growth which seeks to reduce, for Nido, the inherent Trade Up risk of opening a brand new Service. Nido Education has an agreement with NAED as the Group’s primary Incubator. NAED is 100% externally owned, with the Incubator receiving equity funding of $25.0 million from private investors through Alceon Private Equity and by Nido Education providing, under a loan agreement, an interest bearing loan facility of up to $25.0 million. Mathew Edwards is one of the three directors of NAED but he holds no equity interest in NAED. Nido’s Incubators target the development of 20 to 30 new Education Services per year, with the intent to provide Nido with a pipeline of new Education Services that Nido will have an exclusive call option to acquire when acquisition metrics are achieved. The Group has access to over 30 pipeline Education Services, which are at various stages of development and trade‑up. The acquired Education Services will be trading at an average occupancy rate over the last six months exceeding 80%, with proven profitability, and with the purchase price being at a known acquisition multiple of 4.5x EBIT. 6 Nido Education Limited Financial Report 2023 Financial overview Nido Education recorded a statutory net loss after tax (NPAT) of $18.1 million (2022: –$6.8 million). Nido Education’s underlying earnings before interest, tax, depreciation and amortisation EBITDA (statutory) loss of $2.7 million (2022: $5.2 million). The current year EBITDA of –$2.7 million was impacted by AASB 16 Leases, adjustments and other individually significant, or non‑recurring items follows: • AASB 16 Leases adjustments gave rise to a positive impact of $12.8 million (2022: $9.4 million) due to interest and depreciation being higher than actual lease payments for the year. • Share‑based payment expenses including associated on costs of $10.1 million. This comprised of $4.7 million performance bonus to Mathew Edwards, $5.4 million for Employee Share Option Plan (ESOP) and $1.7 million for tax exempt shares issued to employees. • Costs attributable to acquisitions and the IPO included transaction costs of $3.3 million and stamp duty of $1.8 million. • Other non recurring costs of $0.7 million. Adjusting for the impact of these items, the EBITDA (underlying) of $0.3 million (2022: –$4.2 million). EBITDA, EBITDA (underlying), NPAT (underlying) reflect the results of the ongoing business of the consolidated entity as determined by the Board and Management. They have been disclosed in accordance with ASIC’s Regulatory Guide 230 – Disclosing non‑IFRS financial information. These financial measures have not been audited by our external auditors; however, the adjustments to profit after tax have been extracted from the books and records that have been audited. EBITDA (underlying) and NPAT (underlying) is disclosed as a useful guide for investors to gain a better understanding of the Group’s financial results from normal operating activities. 7 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Operating results $’000 2023 Share‑ Based Underlying AASB 16* Payments Transaction costs 2022 Stamp duty Other Statutory Underlying AASB 16 Statutory Revenue 93,372 93,372 57,944 57,944 Other income 2,259 2,259 1,194 1,194 76,829 42,446 42,446 Expenses Employee benefits 66,727 10,102 Occupancy 17,596 (12,783) 4,813 12,578 Direct expense of providing services 6,714 6,714 6,085 6,085 Transaction costs – 3,250 – – 3,250 Other 4,243 EBITDA 351 12,783 (10,102) Depreciation and amortisation 630 6,136 (3,250) Finance cost 1,296 11,033 Loss before tax (1,575) (4,386) (10,102) (3,250) Income tax (1,793) 1,316 Loss for the period (3,368) (3,070) (9,994) (3,368) (3,070) (9,994) 108 (9,420) 3,158 1,790 650 6,683 2,204 (1,790) (650) (2,658) (4,175) 9,420 5,245 6,766 376 4,620 4,996 12,329 324 8,219 8,543 (650) (21,753) (4,875) (3,419) (8,294) 195 1,026 1,519 (35) (1,253) (455) (18,105) (4,382) (2,393) (6,775) (35) (1,253) (455) (18,105) (4,382) (2,393) (6,775) 3,285 (1,790) 2,204 537 3,648 493 Other comprehensive income for the period, net of tax Total comprehensive loss for the period * 8 AASB16 adjustment stated above excludes landlord contributions of $1.3 million which are included in lease payments in Note 25. Nido Education Limited Financial Report 2023 Capital management As at 31 December 2023 Nido Education • • held unrestricted cash of $7.3 million, and cash on term deposits of $0.8 million; • • held restricted cash of $10.0 million relating to rent bonds acquired; and held restricted cash of $17.5 million relating to a $17.5 million loan drawn in October 2023 to ensure that complied with the ASX listing requirement to have a minimum working capital surplus of $1.5 million; had drawn $10.4 million from a related party loan, with $4.6 million headroom available. On 2 January 2024, the Group used its restricted cash to repay the $17.5 million working capital loan. On 8 February 2024, the Group signed binding agreements to establish financing facilities comprising a corporate market loan with a $25 million facility limit, an accordian facility with a $30 million limit and bank guarantee facility with a $12 million facility limit. All three facilities have a 3 year term. Completion of the financing occurred on 16 February 2024. These new facilities will initially be used to repay the Group’s existing related party loan and provide the group with additional debt capacity to fund acquisitions. Going concern These financial statements have been prepared on a going concern basis, which contemplates the realisation of assets and settlement of liabilities in the normal course of business. The Group recognised a net loss after tax of $18.1 million for the year ended 31 December 2023 and, as at that date, current liabilities exceed current assets by $30.5 million which includes $18.8 million of current lease liabilities which will be settled through operating cash flows earned in the next 12 months. The Group is forecasting positive cash flows for at least the next 12 months after this report is issued. In addition, the Group has signed binding agreements for a loan facility of $25.0 million with a maturity date in 2027. Of the $25 million available $10.4 million will be used to repay the shareholder loan, leaving $14.6 million to be undrawn at its completion and available for use by the group. Based on these factors, management has a reasonable expectation that the Group has and will have adequate resources to operate and pay its debts as and when they fall due. Likely developments The Group is expected to continue to execute its business plan and strategy as outlined in its Initial Public Offering Prospectus dated 20 September 2023, including the acquisition of new Education Services and organic growth of its portfolio. Risks The Group identifies and manages risks which could adversely affect the achievement of the Group’s growth strategy through its Risk Management Framework. A summary of material risks and associated mitigation activities is shown below: Safety, health and well being The Group is required to maintain safe business environments and work practices to protect the wellbeing of children, team members, families, contractors and other people who visit our centres. The Group has a suite of policies that address various aspects of both team and child safety and health, including interactions with children, conduct, physical environments, procedures, recruitment and reporting. Incidents are categorised according to the severity of the incident and are reported to the Board on a monthly basis. 9 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Strategic execution The Group’s ability to achieve its objectives depends on the ability of its Directors and management team to implement the established business plan and to respond effectively and appropriately to unforeseen circumstances. Specific elements of the business plan which may impact the Groups operating results include: • • • • • • The ability to control the costs and organisational impacts of business growth; • • • The ability to secure additional funding if required; The ability to increase child care fees; The ability to achieve intended quality assessments; The ability to achieve intended occupancy rates; The ability to acquire Education Services from its Incubator partners as a result of operation or funding issues; The ability to attract and retain suitably qualified and experienced management and employees at service support office and at its Education Services; The ability to develop and maintain a reputation as a provider of quality Early Childhood Education Services; and The ability to respond appropriately to any changes in economic conditions that may adversely impact the Group’s profitability. Any changes in circumstances that impact on the above are immediately reported to the Board and strategies to address any adverse impacts agreed by the Board for implementation by management. Information systems and cyber security risk The Group relies on information technology, including third party software products and services, to deliver services to our customers. It has implemented industry standard measures to prevent or mitigate loss, damage or interruption to its network, systems and data. Through its ordinary course of business, the Group will collect information about its customers (which would usually include personal and confidential information). A cyber attack or incident may compromise the systems used to protect that information. Industry standard measures, including data integrity validation and security enforcement processes, have been put in place to prevent misuse or loss of, unauthorised access to, or unauthorised modification or disclosure of the information that it holds. Data integrity validation and security enforcement run concurrently within all scenarios. Industrial relations The Group is subject to risks which affect the labour market. Any labour reform which reduces the flexibility of the Group in relation to its employees may cause higher labour and compliance costs, industrial disputes and complications with compliance. Such changes may affect the ability to retain and attract quality employees. Failure to comply with relevant employment laws or awards can lead to potential regulatory investigations or enforcement actions or other civil or criminal fines or penalties. Training, support and supervision is in place around rostering work force planning and payroll compliance. Certain controls are embedded into our systems and policies and processes to ensure compliance. Changes to the regulatory environment Regulatory changes to the early learning sector may have an adverse impact on the way the Group manages and operate its services and financial performance. Such changes may include, but are not limited to, legislative changes that affect employee‑to‑child ratios and employment qualification criteria, the demand for Education Services and changes to government funding and subsidies. The sector continues to enjoy strong bipartisan Government support, and the Group maintains productive working relationships at both Federal and State Government levels providing early visibility of pending regulatory changes to allow timely preparation and an appropriate response. 10 Nido Education Limited Financial Report 2023 Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Indemnity and insurance of officers The company has indemnified the executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Proceedings on behalf of the company There are no proceedings brought or intervened in, or applications to bring or intervene in proceedings, on behalf of Nido Education by a member or other person entitled to do so under section 237 of the Corporations Act. Significant changes in the state of affairs Nido Education Limited listed on the Australian Securities Exchange (ASX) on 16 October 2023. On 10 Oct 2023, under an IPO Implementation Deed Nido Education Limited acquired 100% of the ordinary share capital of AE Early School Holdings Pty Limited (“AES”) and its subsidiaries which included gaining control over the 24 Education Services owned by AES prior to the acquisition (“AES Acquisition”). Immediately preceding the AES acquisition, AE Development Co Pty Ltd, a joint venture entity formed by Nido Education and AES acquired 13 third party Education Services through Business Sale Agreements with individual vendors which were added to the existing portfolio of 11 Education Services already owned by AES. There were no other significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year On 2 January 2024, the Company repaid the $17.5 million loan drawn prior to IPO and Listing to ensure that it is compliant with the ASX listing requirement to have a minimum working capital surplus of $1.5 million. The Group’s restricted cash was used to make the repayment. The loan had a facility limit of $17.5 million and a term of 18 months. On 8 February 2024, the Group signed binding agreements to establish financing facilities comprising of a corporate market loan with a $25 million facility limit and bank guarantee facility with a $12 million facility limit. Both facilities have a 3 year term. Completion of the financing occurred on 16 February 2024. These new facilities will be used to repay the Group’s existing related party loan and provide the group with additional debt capacity to fund acquisitions and for working capital requirements. Other than the above, no matter or circumstance has arisen since 31 December 2023 and up to the date of this report that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial periods. 11 Nido Education Limited Financial Report 2023 Directors’ Report (continued) Rounding of amounts The Group is of a kind referred to in ASIC Corporations Instrument (Rounding in Financial/Directors’ Reports) 2016/191, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dol